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WARRANT AGREEMENT

Warrant Agreement

WARRANT AGREEMENT | Document Parties: WIDEPOINT CORP You are currently viewing:
This Warrant Agreement involves

WIDEPOINT CORP

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Title: WARRANT AGREEMENT
Governing Law: Maryland     Date: 5/14/2004
Industry: Computer Services     Sector: Technology

WARRANT AGREEMENT, Parties: widepoint corp
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WARRANT AGREEMENT

THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS IN RELIANCE ON EXEMPTIONS FROM REGISTRATION REQUIREMENTS UNDER SAID LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.

THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.

WIDEPOINT CORPORATION

Warrant for the Purchase of up to 1,814,658 Shares ofCommon
Stock, par value $0.001 per share

 

 

No. W-_1___

1,814,658 Shares 

        THIS CERTIFIES that, for value received, Mark C. Fuller with an address at 9722 Meyer Point Drive, Potomac, Maryland 20854 (including any transferee, the “Holder”), is entitled to subscribe for and purchase from Widepoint Corporation, a Delaware corporation (the “Company”), upon the terms and conditions set forth herein, at any time or from time to time before 5:00 P.M., New York time, December 31, 2009 (the “Exercise Period”), up to 1,814,658shares of the Common Stock at an initial exercise price per share equal to $0.235, subject to adjustment pursuant to the terms hereof (the “Exercise Price”). As used herein, the term “this Warrant” shall mean and include this Warrant and any Warrant or Warrants hereafter issued as a consequence of the exercise or transfer of this Warrant in whole or in part.

        The number of shares of Common Stock issuable upon exercise of this Warrant (the “Warrant Shares”) and the Exercise Price may be adjusted from time to time as hereinafter set forth.




        1.      (a) This Warrant may be exercised during the Exercise Period as to all or a lesser number of whole Warrant Shares by the surrender of this Warrant (with the Exercise Form attached hereto duly executed) to the Company at One Lincoln Centre, 18W140 Butterfield Road, Suite 1100, Oakbrook Terrace, IL 60181, Attention: Secretary, or at such other place as is designated in writing by the Company, together with a certified or bank cashier’s check payable to the order of the Company in an amount equal to the Exercise Price multiplied by the number of Warrant Shares for which this Warrant is being exercised; provided, however, that the Holder may pay the Exercise Price by authorizing the Company to withhold and subtract from the number of Warrant Shares being then purchased by the Holder a portion of such Warrant Shares in a amount which the Company and the Holder mutually agree will satisfy the total amount of the Exercise Price then due from the Holder to the Company; provided, however, that the Holder may not pay the Exercise Price in this manner unless and until the Holder has first provided to the Company evidence which is satisfactory to the Company which proves that the Holder has paid all tax liabilities, including withholding obligations of the Company, of the Holder as a result of each such exercise of this Warrant.

                  (b)      This Warrant shall vest and become exercisable in accordance with the following schedule:

 

        (i)       this Warrant shall not vest nor become exercisable whatsoever unless and until the Company actually receives, as determined by the completed audits of Widepoint for the years ended December 31, 2004, 2005 and 2006, a sufficient combined amount of Chesapeake Sourced Revenues and Chesapeake Assisted Revenues to cause the full and complete release of Escrowed Shares as defined under the Escrow Release Formula of the Merger Agreement, dated March 24, 2004, by and between the Company; Chesapeake Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of Widepoint Corporation; Chesapeake Government Technologies, Inc., a Delaware corporation; and Mark C. Fuller, John D. Crowley and Jay O. Wright (the “Merger Agreement”).



 

        (ii)       upon the satisfaction of the condition precedent as contained above in Section 1.(b)(i) of this Agreement, then the Escrow Agent shall release (A) one-twentieth (1/20) of the Warrant Shares to the Shareholders for each One Million Dollars ($1,000,000.00) of Chesapeake Sourced Revenues actually received by Widepoint during the Exercise Period in an amount greater than such Revenues utilized in the Escrow Release Formula calculation to release the Escrowed Shares, and (B) one-fortieth (1/40) of the Warrant Shares to the Shareholders for each One Million Dollars ($1,000,000.00) of Chesapeake Assisted Revenues actually received by Widepoint during the Exercise Period in an amount greater than such Revenues utilized in the Escrow Release Formula calculation to release the Escrowed Shares; and



 

        (iii)       notwithstanding anything contained in this Agreement to the contrary, in the event any portion of this Warrant has not been exercised by the Holder prior to the expiration of the Exercise Period, then such portion of the Warrant shall expire and no longer be exercisable in any manner whatsoever (the “Expired Portion”).




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        (iv)       In the event that Widepoint executes the Sale of a Chesapeake Sourced or Chesapeake Assisted Sourced Acquisition during the term of the escrow period then the parties mutually agree to equitably adjust the vesting formula of the Escrow Release. To the extent that the Escrow Release Formula does not account for declines in Widepoint Illinois revenues, the Parties mutually agree to equitably adjust the vesting formula of the escrow release.



        2.      Upon each exercise of the Holder’s rights to purchase Warrant Shares, the Holder shall be deemed to be the holder of record of the Warrant Shares issued to the Holder upon such exercise. As soon as practicable after each such exercise of this Warrant (but in no event more than 20 days thereafter), the Company shall issue and deliver to the Holder a certificate or certificates for the Warrant Shares issuable upon such exercise, registered in the name of the Holder. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the Warrant Shares (or portions thereof) subject to purchase hereunder.

        3.      (a)       Any new Warrants issued to the Holder upon the exercise in part of this Warrant shall be numbered and shall be registered in a Warrant Register as they are issued. The Company shall be entitled to treat the registered holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person. This Warrant is not transferable in any manner whatsoever.

                  (b)      The Holder acknowledges that he has been advised by the Company that neither this Warrant nor the Warrant Shares have been registered under the Securities Act of 1933, as amended (the “Act”), and the rules and regulations thereunder, that this Warrant is being or has been issued and the Warrant Shares may be issued on the basis of the statutory exemption provided by Section 4(2) of the Act or Rule 506 of Regulation D promulgated thereunder, or both, relating to transactions by an issuer not involving any public offering, and that the Company’s reliance thereon is based in part upon certain representations to be made by the Holder to the Company prior to the issuance of any Warrant Shares to the Holder. The Holder acknowledges that he has been informed by the Company of, or is otherwise familiar with, the nature of the limitations imposed by the Act and the rules and regulations thereunder on the transfer of securities. In particular, the Holder agrees that no sale, assignment, pledge, hypothecation or transfer of this Warrant shall be valid or effective in any manner whatsoever. The Holder further agrees that no sale, assignment, pledge, hypothecation or transfer of the Warrant Shares issuable upon exercise of this Warrant shall be valid or effective, and the Company shall not be required to give any effect to any such sale, assignment, pledge, hypothecation or transfer of the Warrant Shares, unless (i) the sale, assignment or transfer of such Warrant Shares is registered under the Act, it being understood that neither this Warrant nor such Warrant Shares are currently registered for sale and that the Company has no obligation or intention to so register this Warrant or such Warrant Shares, or (ii) the Warrant Shares are sold, assigned or transferred in accordance with all the requirements and limitations of Rule 144 under the Act, it being understood that Rule 144 is not available at the time of the original issuance of this Warrant for the sale of the Warrant Shares and that there can be no assurance that Rule 144 sales will be available at any subsequent time, or (iii) such sale, assignment, or transfer is otherwise exempt from registration under the Act in the opinion of counsel reasonably acceptable to the Company.

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        4.      The Company shall at all times reserve and keep available out its authorized and unissued Common Stock, solely for the purpose of providing for the exercise of the rights to purchase all Warrant Shares granted pursuant to the Warrants, such number of shares of Common Stock as shall, from time to time, be sufficient therefor. The Company covenants that all shares of Common Stock issued upon exercise of this Warrant, upon receipt by the Company of the full Exercise Price therefor, shall be validly issued, fully paid, non-assessable, and free of preemptive rights.

        5.      (a)       In case the Company shall at any time after the date this Warrant was first issued (i) declare a dividend on the outstanding Common Stock payable in shares of its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock by reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then, in each case, the Exercise Price, and the number of Warrant Shares issuable upon exercise of this Warrant , in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination, or reclassification, shall be proportionately adjusted so that the Holder after such time shall be entitled to receive the aggregate number and kind of shares which, if such Warrant had been exercised immediately prior to such time, he would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination, or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur.

                  (b)      In case the Company shall issue (or fix a record date for the issuance to all holders of Common Stock of rights, options, or warrants to subscribe for or purchase) Common Stock (or securities convertible into or exchangeable for Common Stock) at a price per share (or having a conversion or exchange price per share, if a security convertible into or exchangeable for Common Stock) less than the then applicable Exercise Price per share on such record date, then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so to be offered (or the aggregate initial conversion or exchange price of the convertible or exchangeable securities so to be offered) would purchase at such Exercise Price and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock to be offered for subscription or purchase (or into which the convertible or exchangeable securities so to be offered are initially convertible or exchangeable). Such adjustment shall become effective at the close of business on such record date; provided, however, that, to the extent the shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) are not delivered, the Exercise Price shall be readjusted after the expiration of such rights, options, or warrants (but only with respect to warrants exercised after such expiration), to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights, options, or warrants been made upon the basis of delivery of only the number of shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) actually issued. In case any subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the board of directors of the Company, whose determination shall be conclusive.

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                  (c)      In case the Company shall distribute to all holders of Common Stock (including any such distribution made to the stockholders of the Company in connection with a consolidation or merger in which the Company is the continuing corporation) evidences of its indebtedness, cash (other than any cash dividend which, together with any cash dividends paid within the 12 months prior to the record date for such distribution, does not exceed 5% of the then applicable Exercise Price at the record date for such distribution) or assets (other than distributions and dividends payable in shares of Common Stock), or rights, options, or warrants to subscribe for or purchase Common Stock, or securities convertible into or exchangeable for shares of Common Stock (excluding those with respect to the issuance of which an adjustment of the Exercise Price is provided pursuant to Section 5(b) hereof), then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date for the determination of stockholders entitled to receive such distribution by a fraction, the numerator of which shall be the then applicable Exercise Price per share of Common Stock on such record date, less the fair market value (as determined in good faith by the board of directors of the Company, whose determination shall be conclusive absent manifest error) of the portion of the evidences of indebtedness or assets so to be distributed, or of such rights, options, or warrants or convertible or exchangeable securities, or the amount of such cash, applicable to one share, and the denominator of which shall be such Exercise Price per share of Common Stock. Such adjustment shall become effective at the close of business on such record date.

                  (d)      No adjustment in the Exercise Price shall be required if such adjustment is less than One half of One Cent ($.005); provided, however, that any adjustments which by reason of this Section 5 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 5 shall be made to the nearest half cent or to the nearest one-thousandth of a share, as the case may be.

                  (e)      In any case in which this Section 5 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer, until the occurrence of such event, issuing to the Holder, if the Holder exercised this Warrant after such record date, the shares of Common Stock, if any, issuable upon such exercise over and above the shares of Common Stock, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided, however, that the Company shall deliver to the Holder a due bill or other appropriate instrument evidencing the Holder’s right to receive such additional shares upon the occurrence of the event requiring such adjustment.





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                  (f)      Upon each adjustment of the Exercise Price as a result of the calculations made in Sections


 
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