Exhibit 10.3
WARRANT
AGREEMENT
This Warrant Agreement (this
“Agreement”) is dated as of June 16, 2008 among
Answers Corporation, a Delaware corporation (the
“Company”), and Redpoint Omega, L.P. and
Redpoint Omega Associates, LLC (each a “Holder” and
collectively, the “Holders”).
WHEREAS, pursuant
to the Securities Purchase Agreement, dated of even date herewith,
between the Company and the Holders (“Purchase
Agreement”), the Holders have agreed to purchase
Series A Preferred Stock with a Stated Value equal to
$6,000,000 and Warrants; and
WHEREAS, the
Company, concurrently with the purchase of the Series A
Preferred Stock and Warrants, has agreed to issue certificates as
set forth on Exhibit A attached hereto (“Warrant
Certificates”) evidencing warrants (the “Unit
Warrants”) to purchase a Unit (as defined herein) to the
Holders for an investment of up to $7,000,000 hereunder;
NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained
herein, the Company and the Holders hereby agree as
follows:
1.
Definitions . Capitalized terms used and not otherwise
defined herein that are defined in the Purchase Agreement shall
have the meanings given such terms in the Purchase Agreement.
2.
Exercise of Warrant .
(a)
Each Unit Warrant shall entitle the Holder to purchase for $100
(the “Exercise Price”) a unit (“Unit”)
consisting of (i) one share of the Company’s
Series B Convertible Preferred Stock, par value $0.01 per
share (“Series B Preferred Stock”), and
(ii) one Common Stock Purchase Warrant attached hereto as
Exhibit B (the “Common Stock Purchase Warrant”),
each Common Stock Purchase Warrant entitling the holder thereof to
purchase up to a number of shares of Common Stock equal to 50% of
the number of shares of Common Stock issuable upon conversion of
the Series B Preferred Stock purchased hereunder and issued in
accordance with the terms of the Certificate of Designation,
Number, Voting Powers, Preferences and Rights of Series B
Convertible Preferred Stock (in substantially the form attached
hereto as Exhibit C) (“Series B Certificate of
Designation”), with an exercise price equal to $6.05 per
share, subject to adjustment as set forth herein. The shares
of Common Stock issuable upon conversion of the Series B
Preferred Stock and exercise of the Common Stock Purchase Warrant
are hereinafter referred to as the “Series B Underlying
Shares” and the Warrant Certificates, Series B Preferred
Stock, the Common Stock Purchase Warrants and the Series B
Underlying Shares are hereinafter collectively referred to as the
“Warrant Securities”. The Holders shall be
entitled to purchase Units for an aggregate purchase price of up to
$7,000,000 pursuant to this Agreement.
(b)
Exercise of the purchase rights represented by the Unit Warrant may
be made, in whole or in part, at any time between the date hereof
and June 16, 2009 (“Expiry Time”) by delivery to
the principal office of the Company of a duly executed copy of the
Notice of Exercise
annexed hereto (or to such other office
or agency of the Company as it may designate by notice in writing
to the registered Holder at the address of such Holder appearing on
the books of the Company). If the Warrant Certificate evidencing
the Unit Warrants is exercised in full, the Holder shall have
surrendered the Warrant Certificate to the Company and the Company
shall have received payment of the aggregate Exercise Price of the
Units thereby purchased by wire transfer or cashier’s check
drawn on a United States bank. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender the Warrant Certificate to the Company until
the Holder has purchased all of the Units available hereunder and
the Warrant Certificate has been exercised in full. Partial
exercises of the Warrant Certificate resulting in purchases of a
portion of the total number of the Units available hereunder shall
have the effect of lowering the outstanding number of Units
purchasable hereunder in an amount equal to the applicable number
of Units purchased. If any Unit Warrant should be exercised
in part only, the Company shall, upon surrender of the Warrant
Certificates for cancellation and presentment of the Exercise Form,
execute and deliver new a Warrant Certificate or Certificates, as
the case may be, evidencing the rights of the Holder thereof to
purchase the balance of the shares purchasable thereunder.
(c)
The Holder shall, at least one (1) business day prior to the
delivery of the Notice of Exercise, deliver to the Company written
notice of its intention to exercise, in whole or in part, the Unit
Warrant (the “Intent Notice”). Notwithstanding
anything herein to the contrary, within one (1) business day
of receipt of the Intent Notice, the Company shall file with the
State of Delaware the Series B Certificate of
Designations.
(d)
Upon any exercise of a Unit Warrant pursuant to Section 2(a),
no Common Stock Purchase Warrant shall be issued exercisable for
fractional shares of Common Stock. The aggregate number of
shares of Common Stock issued upon exercise of such Common Stock
Purchase Warrant shall be rounded down to the nearest whole share
and any fractional shares of Common Stock that are not required to
be issued by reason of this Section 2(d) shall be carried
forward and shall be taken into account in the subsequent exercise
of a Unit Warrant. Whether or not Common Stock Purchase
Warrants exercisable for fractional shares of Common Stock would be
issuable upon any exercise of a Unit Warrant shall be determined on
the basis of the total number of Unit Warrants being exercised at
the time and the aggregate number of Common Stock Purchase Warrants
issuable upon such exercise.
(e)
Notwithstanding anything herein to the contrary, the Company shall
not issue to any Holder any Units, including pursuant to any rights
herein, including, without limitation, any exercise rights, to the
extent such shares comprising such Unit, when added to the number
of shares of Common Stock issued (A) upon conversion of any
shares of Series A Preferred Stock and Series B
Preferred Stock and (B) upon exercise of the Common Stock
Purchase Warrants issued hereunder or pursuant to the Purchase
Agreement, as applicable, would cause the total number of shares of
Common Stock then beneficially owned by such Holder and any Persons
whose beneficial ownership of Common Stock would be aggregated with
such Holder for purposes of Section 13(d) of the
Securities Exchange Act to exceed 19.999% of the total number of
outstanding shares of Common Stock of the Company at the time of
such issuance, or such greater number of shares of Common Stock
permitted pursuant to the corporate governance rules of the
Trading Market that is at the time the principal trading exchange
or market for the Common Stock, based upon share volume, as
confirmed in writing by counsel to the Company
(the “Maximum Aggregate Share
Amount”), unless and until the Company obtains Stockholder
Approval (as defined below). For purposes of this
Section 2(e), beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act and the
rules and regulations promulgated
thereunder. If on any attempted exercise of a
Unit Warrant, the issuance of Units would exceed the Maximum
Aggregate Share Amount and the Company shall not have previously
obtained Stockholder Approval at the time of exercise, then the
Company shall issue to the Holder requesting a Unit Warrant
exercise such number of Units as may be issued below the Maximum
Aggregate Share Amount and, with respect to the remainder of the
aggregate number of Units, this Unit Warrant shall not be
exercisable until and unless Stockholder Approval has been
obtained.
3.
Representations and Warranties . The Company hereby
represents and warrants to each Holder that, except as set forth on
the disclosure schedules delivered to each Holder on the date
hereof or on each date of a Notice of Exercise hereunder (each, an
“Exercise Date”), as applicable, each of the
representations and warranties made by the Company in the Purchase
Agreement will be true and correct as of the date hereof and as of
each Exercise Date unless a different time is expressly provided in
such paragraph; provided, for purposes of this Section 3, that
references to the “Underlying Shares” in such
representations and warranties in the Purchase Agreement shall
instead refer to the Warrant Securities with respect to the
representations and warranties made pursuant to this
Section 3.
4.
Closing Deliveries . On or prior to each Exercise
Date, the Company shall deliver or cause to be delivered to each
Purchaser the following:
(a)
a certificate, dated as of such Exercise Date, duly executed by an
officer of the Company to the effect that the conditions specified
in Sections 5(b)(i) and 5(b)(ii) have been
satisfied;
(b)
a legal opinion of Company Counsel, substantially in the form of
Exhibit D to the Purchase Agreement;
(c)
the Series B Preferred Stock and the Common Stock Purchase
Warrants included in the Units purchased as a result of the
exercise of the Unit Warrant pursuant to Section 2 hereof
registered in the name of the Holder;
(d)
evidence of filing of the Series B Certificate of Designation
in form and substance reasonably satisfactory to each Holder;
and
(e)
the Indemnification Agreement in favor of the Series B
Director (as defined in the Registration Rights Agreement), to the
extent that the Holder or its affiliates have the right to appoint
the Series B Director, duly executed by the Company, unless
such agreement is already in full force and effect with respect to
the Series B Director.
5.
Closing Conditions .
(a)
The obligations of the Company hereunder in connection with each
exercise of the Unit Warrant pursuant to Section 2 hereof is
subject to the following conditions being met, any or all of which
may be waived by the Company:
(i)
the accuracy in all material respects on each Exercise Date of the
representations and warranties of the Holder contained in the
Purchase Agreement; and
(ii)
the delivery by the Holder to the Company of the aggregate Exercise
Price of the Units thereby purchased.
(b)
The obligations of the Holder hereunder in connection with each
exercise of the Unit Warrant pursuant to Section 2 hereof is
subject to the following conditions being met, any or all of which
may be waived by such Holder in writing:
(i)
the accuracy in all material respects on each Exercise Date of the
representations and warranties of the Company contained in the
Purchase Agreement (which are incorporated by reference herein and
modified as set forth in Section 3 above);
(ii)
all obligations, covenants and agreements of the Company required
to be performed in connection with such exercise of the Unit
Warrant shall have been performed;
(iii)
there shall have been no Material Adverse Effect with respect to
the Company since the date hereof;
(iv)
as of each Exercise Date, the Transaction Documents shall be in
full force and effect;
(v)
the Series B Certificate of Designation shall have been duly
filed by the Company with the Secretary of State of the State of
Delaware in accordance with the General Corporation Law of the
State of Delaware; and
(vi)
as of each Exercise Date, trading in the Common Stock shall not
have been suspended by the Commission or the Company’s
principal Trading Market (except for any suspension of trading of
limited duration agreed to by the Company, which suspension shall
be terminated prior to each Exercise Date), and, at any time prior
to each Exercise Date, trading in securities generally as reported
by Bloomberg Financial Markets shall not have been suspended or
limited, or minimum prices shall not have been established on
securities whose trades are reported by such service, or on any
Trading Market, nor shall a banking moratorium have been declared
either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of
hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, the
financial markets which, in each case, makes it impracticable or
inadvisable to purchase the Series B Preferred Stock and the
Common Stock Purchase Warrants.
6.
Stockholder Approval . The Company shall provide each
stockholder entitled to vote at a special meeting of stockholders
of the Company (the “Stockholder Meeting”), which shall
be promptly called and held not later than 90 calendar days from
the date hereof, a proxy
statement meeting the requirements of
Section 14 of the Exchange Act and the related rules and
regulations thereunder promulgated by the Commission (“Proxy
Statement”) soliciting each such stockholder’s
affirmative vote at the Stockholder Meeting for approval of
resolutions approving the Company’s issuance of the Warrant
Securities and any shares of Common Stock issued or issuable upon
conversion of the Series A Preferred Stock and exercise of the
Common Stock Purchase Warrants and any other securities issuable
pursuant to the Certificate of Designation and the Series B
Certificate of Designation and all the other transactions
contemplated by the Transaction Documents and this Agreement
(including, without limitation, increase in the size of the Board
of Directors as necessary to elect the Series B Director (as
defined in the Registration Rights Agreement)) (the
“Stockholder Approval”) in accordance with law and the
rules and regulations of the Nasdaq Global Market (or any
other applicable Trading Market) and the Delaware General
Corporation Law, and the Company shall use its reasonable best
efforts to solicit its stockholders’ approval of such
resolutions and to cause the Board of Directors of the Company to
recommend to the stockholders that they approve such
resolutions. The Proxy Statement shall be in a form
reasonably acceptable to the Holders and accordingly, the Company
shall provide the Legal Counsel (as defined in the Registration
Rights Agreement) with reasonable opportunity to review and comment
on the Proxy Statement.
The
Company shall keep the Holders apprised of the status of matters
relating to the Proxy Statement and the Stockholder Meeting,
including promptly furnishing the Holders and their counsel with
copies of notices or other communications related to the Proxy
Statement, the Stockholder Meeting or the transactions contemplated
hereby received by the Company from the Commission or the Nasdaq
Global Market.
7.
Operation of Business . During the period from the
date of this Agreement until the Expiry Time, except as
contemplated by this Agreement and the Transaction Documents, the
Company shall carry on its business in the ordinary course in
substantially the same manner as heretofore conducted and, to the
extent consistent with such business, use its commercially
reasonable efforts consistent with past practice and policies to
preserve intact its present business organizations, keep available
the services of its present officers, consultants and employees and
preserve its relationships with customers, suppliers and others
having business dealings with it.
8.
Non-Solicitation .
(a)
During the period from the date of this Agreement until the first
day following the Stockholder Meeting in which a vote of the
stockholders of the Company takes place for the Stockholder
Approval, without the consent of each of the Holders, the Company
shall not take, cause or permit (and shall use its best efforts to
ensure that none of its officers, directors, agents or
representatives takes, causes or permits) any person to take,
directly or indirectly, any of the following actions with any third
party: (i) solicit, knowingly encourage, initiate or
participate in any negotiations, inquiries or discussions with
respect to any offer or proposal (including, without limitation,
from any third parties) to acquire any capital stock of the Company
(including any securities convertible into or exercisable or
exchangeable for such capital stock) for capital raising purposes
(an “Alternative Proposal”), (ii) disclose, in
connection with an Alternative Proposal, any nonpublic information
concerning Company’s business or properties or afford to any
third party access to its properties, books or records, except in
the ordinary course of business and as required by law or pursuant
to a governmental request for information, (iii) enter
into or execute any agreement provi
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