EXHIBIT 10.7
THE
SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY
TRANSFEREE OF THIS WARRANT SHOULD CAREFULLY REVIEW THE TERMS OF
THIS WARRANT, INCLUDING SECTION 2(f) HEREOF. THE SECURITIES
REPRESENTED BY THIS WARRANT MAY BE LESS THAN THE NUMBER SET FORTH
ON THE FACE HEREOF PURSUANT TO SECTION 2(f) HEREOF.
BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Warrant To Purchase
Common Stock
| |
|
|
|
|
|
Warrant No.:
E-1
|
|
Number of Shares:
61,273,835 |
|
Date of Issuance:
September 26, 2007
|
|
|
|
|
Brookside Technology Holdings Corp., a Florida corporation (the
“ Company ”), hereby certifies that, for Ten
United States Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Hilco Financial, LLC, a Delaware limited liability
company, the registered holder hereof or its permitted assigns (the
“ Holder ”), is entitled, subject to the terms
set forth below, to purchase from the Company upon surrender of
this Warrant (if required by Section 2(f) ), at any
time or times on or after the date hereof, but not after
11:59 P.M. New York City time on the Expiration Date (as
defined in Section 1(b) below) sixty-one million two
hundred seventy-three thousand eight hundred thirty-five
(61,273,835) fully paid nonassessable shares of Common Stock (as
defined in Section 1(b) below) of the Company (the
“ Warrant Shares ”) at the Warrant Exercise
Price (as defined in Section 1(b) below);
provided , however , that in no event shall the
Holder be entitled or required to exercise this Warrant for a
number of Warrant Shares in excess of that number of Warrant Shares
that, upon giving effect to such exercise, would cause the
aggregate number of shares of Common Stock beneficially owned by
the Holder and its affiliates to exceed 9.99% of the outstanding
shares of the Common Stock following such exercise. For purposes of
the foregoing proviso, the aggregate number of shares of Common
Stock beneficially owned by the Holder and its affiliates shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which the determination of such
proviso is being made, but shall exclude shares of Common Stock
that would be issuable upon (i) exercise of the remaining,
unexercised portion of this Warrant and (ii) exercise, conversion
or exchange of the unexercised, unconverted or unexchanged portion
of any other securities of the Company beneficially owned by the
Holder
and its
affiliates, subject to a limitation on conversion, exercise or
exchange analogous to the limitation contained herein. Except as
set forth in the preceding sentence, for purposes of this
paragraph, beneficial ownership shall be calculated in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as
amended. For purposes of this Warrant, in determining the number of
outstanding shares of Common Stock the Holder may rely on the
number of outstanding shares of Common Stock as reflected in
(1) the Company’s most recent Form 10-QSB or Form 10-Q
or Form 10-KSB or Form 10-K, as the case may be, (2) a more
recent public announcement by the Company or (3) any other
written (including e-mail) notice by the Company or its transfer
agent setting forth the number of shares of Common Stock
outstanding. Upon the written request of the Holder, the Company
shall promptly, but in no event later than two (2) Business
Days following the receipt of such request, confirm in writing to
the Holder the number of shares of Common Stock then outstanding.
In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion, exercise or
exchange of securities of the Company, including this Warrant, if
any, by the Holder and its affiliates, since the date as of which
such number of outstanding shares of Common Stock was
reported.
Section 1.
(a)
Credit Agreement . This Warrant was issued in connection
with that certain Credit Agreement, dated as of even date herewith,
among the Company and Hilco Financial, LLC (as such agreement may
be amended from time to time as provided in such agreement, the
“ Credit Agreement ”) or issued in exchange or
substitution therefor or replacement thereof. Each capitalized term
used, and not otherwise defined herein, shall have the meaning
ascribed thereto in the Credit Agreement.
(b)
Definitions . The following words and terms as used in this
Warrant shall have the following meanings:
(i) “
Common Stock ” means (i) the Company’s
common stock, $0.001 par value per share, and (ii) any capital
stock into which such Common Stock shall have been changed or any
capital stock resulting from a reclassification of such Common
Stock.
(ii) “
Convertible Securities ” means any stock or securities
(other than Options) directly or indirectly convertible into or
exchangeable or exercisable for Common Stock.
(iii) “
Delivery Date ” means the date of receipt by the
Company of a Put Notice.
(iv) “
Expiration Date ” means the date that is five
(5) years after the Warrant Date (as defined in
Section 13 ) or, if such date does not fall on a
Business Day, then the next Business Day.
(v) “
Fair Market Value ” means the fair market value of the
Company’s entire equity, on a fully-diluted basis, determined
on a going concern basis as between a willing buyer and a willing
seller and taking into account all relevant factors
-2-
determinative of value without giving effect to any discount for
any lack of liquidity attributable to a lack of a public market for
such security, any block discount or discount attributable to the
size of any Person’s holdings of such security, any minority
interest or any voting rights thereof or lack thereof, plus (to the
extent not otherwise taken into consideration in the determination
of fair market value of the Company’s entire common equity)
the aggregate amount of cash or property payable or to be
surrendered to the Company upon exercise or conversion of Options
and Convertible Securities, and the principal amount of any debt
constituting Convertible Securities, which are then exercisable and
“in-the-money.” The Company and the Holder will use
reasonable efforts to determine Fair Market Value, but if such
parties are unable to agree on Fair Market Value within ten
(10) days after meeting for the purpose of determining the
Fair Market Value, the Company and the Holder shall, within ten
(10) days after such initial 10-day period, mutually select an
appraiser to make a determination of the Fair Market Value (who
shall make such determination within thirty (30) days after
selection); provided that if the parties are unable to agree upon
the selection of an appraiser within such 10-day period, the Fair
Market Value shall be determined as follows: the Company and the
Holder, shall, within five (5) days after their failure to
agree upon the selection of an appraiser, each select their own
appraiser to determine the “Fair Market Value.” Each
such appraiser shall make a determination of the “Fair Market
Value” within thirty (30) days after the date of
selection. If the “Fair Market Value” as determined by
one appraiser is within ten percent (10%) of the “Fair Market
Value” determined by the other appraiser, then the Fair
Market Value shall be the average of the “Fair Market
Values” determined by the two appraisers. If the “Fair
Market Value” determined by one appraiser is not within ten
percent (10%) of the “Fair Market Value” of the other
appraiser, then such two appraisers shall promptly select a third
appraiser, which appraiser shall make a determination of the
“Fair Market Value” as promptly as possible but, in any
event, within seventy-five (75) days after the Delivery Date,
and the Fair Market Value shall be the median of the “Fair
Market Values” determined by the three appraisers. The
determination of the Fair Market Value pursuant to the preceding
sentences shall be final and binding upon the Company and the
Holder of Underlying Warrant Stock. All fees and expenses of the
appraisers determining the Fair Market Value of the Company shall
be borne by the Company.
(vi) “
Person ” means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization or a government or any department or
agency thereof or any other legal entity.
(vii) “
Principal Market ” means, with respect to the Common
Stock or any other security, the principal securities exchange or
trading market for the Common Stock or such other security.
(viii) “
Put Price ” shall equal, with respect to each share of
Underlying Warrant Stock, the quotient obtained by dividing
(i) the Fair Market Value of the Company as of the Delivery
Date by (ii) the sum of the total number of shares of Common
Stock outstanding as of the Delivery Date plus the number of shares
of Common Stock issuable upon exercise or conversion of any Options
or Convertible Securities as of the Delivery Date, in each case
only to the extent such Options and Convertible Securities are
exercisable and “in-the-money” on the Delivery Date.
The expenses of determining the Put Price shall be borne by the
Company.
-3-
(ix) “
Registration Rights Agreement ” means that certain
Registration Rights Agreement, dated as of even date herewith,
between the Company and Hilco Financial, LLC, as such agreement may
be amended, restated or modified and in effect from time to
time.
(x) “
Securities Act ” means the Securities Act of 1933, as
amended.
(xi) “
Trading Day ” means any day on which the Common Stock
is traded on the Principal Market; provided that “Trading
Day” shall not include any day on which the Common Stock is
scheduled to trade, or actually trades, on such exchange or market
for less than 4.5 hours.
(xii) “
Underlying Warrant Stock ” means (i) the shares
of Common Stock issued or issuable upon exercise of this Warrant
assuming this Warrant were exercised in full immediately prior to
the date of the consummation of the Change in Control, without
giving effect to any limitations on exercise hereof and
(ii) any shares of Common Stock issued or issuable with
respect to the securities referred to in clause (i) above by
way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or
other reorganization.
(xiii) “
Warrant ” means this Warrant and all Warrants issued
in exchange, transfer or replacement thereof pursuant to the terms
of this Warrant.
(xiv) “
Warrant Exercise Price ” shall be equal to, with
respect to any Warrant Share, $0.1370, subject to adjustment as
hereinafter provided.
(xv) “
Weighted Average Price ” means, for any security as of
any date, the dollar volume-weighted average price for such
security on its Principal Market during the period beginning at
9:30 a.m. New York City time (or such other time as its Principal
Market publicly announces is the official open of trading) and
ending at 4:00 p.m. New York City time (or such other time as its
Principal Market publicly announces is the official close of
trading) as reported by Bloomberg Financial Markets (or any
successor thereto) (“ Bloomberg ”) through its
“Volume at Price” functions, or if the foregoing does
not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin
board for such security during the period beginning at 9:30 a.m.
New York City time (or such other time as such over-the-counter
market publicly announces is the official open of trading), and
ending at 4:00 p.m. New York City time (or such other time as such
over-the-counter market publicly announces is the official close of
trading) as reported by Bloomberg, or, if no dollar volume-weighted
average price is reported for such security by Bloomberg for such
hours, the average of the highest closing bid price and the lowest
closing ask price of any of the market makers for such security as
reported in the “pink sheets” by the National Quotation
Bureau, Inc. If the Weighted Average Price cannot be calculated for
such security on such date on any of the foregoing bases, the
Weighted Average Price of such security on such date shall be the
fair market value as mutually determined by the Company and the
Holder. If the Company and the Holder are unable to agree upon the
fair market value of the Common Stock, then such dispute shall be
resolved pursuant to Section 2(a) . All such
determinations shall be appropriately adjusted for any stock
dividend, stock split, stock combination or other similar
transaction during any period during which the Weighted Average
Price is being determined.
-4-
Section 2. Exercise of
Warrant .
(a) Subject
to the terms and conditions hereof, this Warrant may be exercised
by the Holder hereof then registered on the books of the Company,
in whole or in part, at any time on any Business Day on or after
the opening of business on the date hereof and prior to
11:59 P.M. New York City time on the Expiration Date by
(i) delivery of a written notice, in the form of the exercise
notice attached as Exhibit A hereto (the “
Exercise Notice ”), of the Holder’s election to
exercise this Warrant, which notice shall specify the number of
Warrant Shares to be purchased, (ii) (A) payment to the
Company of an amount equal to the Warrant Exercise Price multiplied
by the number of Warrant Shares as to which this Warrant is being
exercised (the “ Aggregate Exercise Price ”) by
wire transfer of immediately available funds (or by check if the
Company has not provided the Holder with wire transfer instructions
for such payment) or (B) by notifying the Company that this
Warrant is being exercised pursuant to a Cashless Exercise (as
defined in Section 2(e) ), and (iii) if required
by Section 2(f) or unless the Holder has previously
delivered this Warrant to the Company and it or a new replacement
Warrant has not yet been delivered to the Holder, the surrender to
a common carrier for overnight delivery to the Company as soon as
practicable following such date, of this Warrant (or an
indemnification undertaking, in customary form, with respect to
this Warrant in the case of its loss, theft or destruction pursuant
to Section 10 ); provided , that if such Warrant
Shares are to be issued in any name other than that of the
registered Holder of this Warrant, such issuance shall be deemed a
transfer and the provisions of Section 7 shall be
applicable. In the event of any exercise of the rights represented
by this Warrant in compliance with this Section 2(a) , on
the second (2 nd ) Business Day
(the “ Warrant Share Delivery Date ”) following
the date of its receipt of the Exercise Notice, the Aggregate
Exercise Price (or notice of Cashless Exercise) and if required by
Section 2(f) (or unless the Holder has previously
delivered this Warrant to the Company and it or a new replacement
Warrant has not yet been delivered to the Holder), this Warrant (or
an indemnification undertaking, in customary form, with respect to
this Warrant in the case of its loss, theft or destruction pursuant
to Section 10 ) (the “ Exercise Delivery
Documents ”), (A) provided that the transfer agent
is participating in The Depository Trust Company (“
DTC ”) Fast Automated Securities Transfer Program and
provided that the Holder is eligible to receive shares through DTC,
the Company shall credit such aggregate number of shares of Common
Stock to which the Holder shall be entitled to the Holder’s
or its designee’s balance account with DTC through its
Deposit Withdrawal Agent Commission system or (B) the Company
shall issue and deliver to the address specified in the Exercise
Notice, a certificate, registered in the name of the Holder or its
designee, for the number of shares of Common Stock to which the
Holder shall be entitled. Upon the later of the date of delivery of
(x) the Exercise Notice and (y) the Aggregate Exercise
Price referred to in clause (ii)(A) above or notification to the
Company of a Cashless Exercise referred to in
Section 2(e) , the Holder shall be deemed for all
purposes to have become the Holder of record of the Warrant Shares
with respect to which this Warrant has been exercised (the date
thereof being referred to as the “ Deemed Issuance
Date ”), irrespective of the date of delivery of this
Warrant as required by clause (iii) above or the certificates
evidencing such Warrant Shares. In the case of a dispute as to the
determination of the Warrant Exercise Price, the Weighted Average
Price of a security or the arithmetic calculation of the number of
Warrant Shares, the Company shall promptly issue to the Holder the
number of shares of Common Stock that is not disputed and shall
submit the disputed determinations or arithmetic calculations to
the Holder via facsimile within two (2) Business Days after
receipt of the Holder’s Exercise Notice. If the Holder and
the Company are unable to agree upon the determination of the
Warrant
-5-
Exercise
Price, the Weighted Average Price or arithmetic calculation of the
number of Warrant Shares within three (3) Business Days of
such disputed determination or arithmetic calculation being
submitted to the Holder, then the Company shall immediately submit
via facsimile (i) the disputed determination of the Warrant
Exercise Price or the Weighted Average Price to an independent,
reputable investment banking firm agreed to by the Company and the
Holder or (ii) the disputed arithmetic calculation of the
number of Warrant Shares to its independent, outside public
accountant. The Company shall cause the investment banking firm or
the accountant, as the case may be, to perform the determinations
or calculations and notify the Company and the Holder of the
results no later than three (3) Business Days after the time
it receives the disputed determinations or calculations. Such
investment banking firm’s or accountant’s determination
or calculation, as the case may be, shall be deemed conclusive
absent error.
(b) If
this Warrant is submitted for exercise, as may be required by
Section 2(f) , and unless the rights represented by
this Warrant shall have expired or shall have been fully exercised,
the Company shall, as soon as practicable and in no event later
than three (3) Business Days after receipt of this Warrant
(the “ Warrant Delivery Date ”) and at its own
expense, issue a new Warrant identical in all respects to this
Warrant exercised except it shall represent rights to purchase the
number of Warrant Shares purchasable immediately prior to such
exercise under this Warrant, less the number of Warrant Shares with
respect to which such Warrant is exercised (together with, in the
case of a Cashless Exercise, the number of Warrant Shares
surrendered in lieu of payment of the Exercise Price).
(c) No
fractional shares of Common Stock are to be issued upon the
exercise of this Warrant, but rather the number of shares of Common
Stock issued upon exercise of this Warrant shall be rounded up or
down to the nearest whole number (with 0.5 rounded up).
(d) If
the Company shall fail for any reason or for no reason (x) to
issue and deliver to the Holder within three (3) Business Days
of receipt of the Exercise Delivery Documents a certificate for the
number of shares of Common Stock to which the Holder is entitled or
to credit the Holder’s balance account with DTC for such
number of shares of Common Stock to which the Holder is entitled
upon the Holder’s exercise of this Warrant or (y) to
issue and deliver to the Holder on the Warrant Delivery Date a new
Warrant for the number of shares of Common Stock to which the
Holder is entitled pursuant to Section 2(b) hereof, if
any, then the Company shall, in addition to any other remedies
under this Warrant or the Credit Agreement or otherwise available
to the Holder, pay as additional damages in cash to the Holder on
each day after such third (3rd) Business Day that such shares of
Common Stock are not issued and delivered to the Holder, in the
case of clause (x) above, or such third (3rd) Business Day
that such Warrant is not delivered, in the case of clause
(y) above, an amount equal to the sum of (i) 0.5% of the
product of (A) the number of shares of Common Stock not issued
to the Holder on or prior to the Warrant Share Delivery Date and
(B) the Weighted Average Price of the Common Stock on the
Warrant Share Delivery Date, in the case of the failure to deliver
Common Stock, and (ii) if the Company has failed to deliver a
Warrant to the Holder on or prior to the Warrant Delivery Date,
0.5% of the product of (x) the number of shares of Common
Stock issuable upon exercise of the Warrant as of the Warrant
Delivery Date, and (y) the Weighted Average Price of the
Common Stock on the Warrant Delivery Date; provided that in no
event shall cash damages accrue pursuant to this
Section 2(d) during the period, if any, in which any
Warrant Shares are the subject of a bona fide dispute that is
subject to and being resolved
-6-
pursuant
to, and in compliance with the time periods and other provisions
of, the dispute resolution provisions of Section 2(a) .
Alternatively, subject to the dispute resolution provisions of
Section 2(a) , at the election of the Holder made in the
Holder’s sole discretion, the Company shall pay to the
Holder, in lieu of the additional damages referred to in the
preceding sentence (but in addition to all other available remedies
that the Holder may pursue hereunder and under the Credit
Agreement), 110% of the amount that (A) the Holder’s
total purchase price (including brokerage commissions, if any) for
shares of Common Stock purchased to make delivery in satisfaction
of a sale by the Holder of the shares of Common Stock to which the
Holder is entitled but has not received upon an exercise, exceeds
(B) the net proceeds received by the Holder from the sale of
the shares of Common Stock to which the Holder is entitled but has
not received upon such exercise.
(e) Notwithstanding anything
contained herein to the contrary, the Holder may at any time prior
to the Expiration Date, at its election exercised in its sole
discretion, exercise this Warrant in whole or in part and, in lieu
of making the cash payment otherwise contemplated to be made to the
Company upon such exercise in payment of the Aggregate Exercise
Price, elect instead to receive upon such exercise the “Net
Number” of shares of Common Stock determined according to the
following formula (a “ Cashless Exercise
”):
Net Number = (A x B) — (A x
C)
B
For
purposes of the foregoing formula:
A= the total
number of shares with respect to which this Warrant is then being
exercised;
B= the
arithmetic average of the Weighted Average Price of the Common
Stock on each of the ten (10) consecutive Trading Days immediately
preceding the date of the delivery of the Exercise Notice;
and
C= the Warrant
Exercise Price then in effect for the applicable Warrant Shares at
the time of such exercise.
(f)
Book-Entry . Notwithstanding anything to the contrary set
forth herein, upon exercise of this Warrant in accordance with the
terms hereof, the Holder shall not be required to physically
surrender this Warrant to the Company unless it is being exercised
for all of the Warrant Shares represented by the Warrant. The
Holder and the Company shall maintain records showing the number of
Warrant Shares exercised and issued and the dates of such exercises
or shall use such other method, reasonably satisfactory to the
Holder and the Company, so as not to require physical surrender of
this Warrant upon each such exercise. In the event of any dispute
or discrepancy, such records of the Company establishing the number
of Warrant Shares to which the Holder is entitled shall be
controlling and determinative in the absence of demonstrable error.
Notwithstanding the foregoing, if this Warrant is exercised as
aforesaid, the Holder may not transfer this Warrant unless the
Holder first physically surrenders this Warrant to the Company,
whereupon the Company will forthwith issue and deliver upon the
order of the
-7-
Holder a
new Warrant of like tenor, registered as the Holder may request,
representing in the aggregate the remaining number of Warrant
Shares represented by this Warrant. The Holder and any assignee, by
acceptance of this Warrant, acknowledge and agree that, by reason
of the provisions of this paragraph, following exercise of any
portion of this Warrant, the number of Warrant Shares represented
by this Warrant may be less than the number stated on the face
hereof. Each Warrant shall bear the following legend:
ANY TRANSFEREE
OF THIS WARRANT SHOULD CAREFULLY REVIEW THE TERMS OF THIS WARRANT,
INCLUDING SECTION 2(f) HEREOF. THE SECURITIES REPRESENTED BY THIS
WARRANT MAY BE LESS THAN THE NUMBER SET FORTH ON THE FACE HEREOF
PURSUANT TO SECTION 2(f) HEREOF.
Section 3. Covenants as to
Common Stock . The Company hereby covenants and agrees as
follows:
(a) This
Warrant is, and any Warrants issued in substitution for or
replacement of this Warrant will upon issuance be, duly authorized
and validly issued.
(b) All
Warrant Shares that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance and receipt of
payment therefor from the Holder (including pursuant to a Cashless
Exercise, as applicable), be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with
respect to the issue thereof.
(c) During
the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and
reserved at least 150% of the number of shares of Common Stock
needed to provide for the exercise of the rights then represented
by this Warrant.
(d) If,
and so long as, any shares of Common Stock shall be listed on any
securities exchange or quoted on the OTC Bulletin Board or other
quotation system or trading market, the shares of Common Stock
issuable upon exercise of this Warrant shall be so listed or
quoted; and the Company shall so list (or cause to be quoted) on
such exchange, quotation system or market, and shall maintain such
listing or quotation of, any other shares of capital stock of the
Company issuable upon the exercise of this
|