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
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No.
W-_1___
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1,814,658
Shares
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THIS
CERTIFIES that, for value received, Jay O. Wright with an address
at 9621 Trailridge Terrace, 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 1,814,658 shares 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:
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(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”).
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(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
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(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.
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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 Section