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EXHIBIT 4.2
THIS WARRANT AND THE SHARES ISSUABLE
HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT"), AS
AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS, AND MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION THEREOF UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED. NEITHER THE
OFFERING OF THESE SECURITIES NOR ANY
OFFERING MATERIALS HAVE BEEN REVIEWED BY
ANY ADMINISTRATOR UNDER THE ACT OR ANY
APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE COMMON STOCK
Company: Community IQ.Com, Inc.,a
Washington corporation
Issue Date: ________,2001
Expiration Date: Fifth Anniversary of the
Issue Date (Subject to Section 6(a))
THIS
WARRANT CERTIFIES THAT, in consideration for the extension of a
loan
evidenced by Company's convertible
promissory note of even date (the "NOTE"),
_______ or permitted assignee ("HOLDER"),
is entitled to purchase the number
provided below of fully paid and
nonassessable Common Shares of Community
IQ.Com, Inc. (the "COMPANY") at the initial
exercise price per share (the
"WARRANT PRICE") provided below, subject to
the provisions and upon the terms
and conditions set forth in this
Warrant.
Number of
Common Shares: This Warrant entitles the Holder to purchase,
for
each 10 Preferred Shares into which the
Note is converted pursuant to its terms
(or would have been converted, had the Note
still been outstanding but had
stopped accruing interest as of the date of
its repayment in full) in the
Company's next round of equity financing
yielding proceeds to the Company of at
least Five Million Dollars ($5,000,000)
(the "NEXT EQUITY FINANCING"), a total
of 4 of the companies Common Stock. This
Warrant also entitles the Holder to
purchase shares of the companies Common
Stock equal to the Value of the Note
divided by $500,000 (Note holders Pro Rata
share) times ten percent of the
number of fully diluted outstanding shares
after the conversion of the Note and
the effect of an associated Next Equity
Financing.
Warrant
Price: Holder shall be entitled to purchase such Common Shares
at
a price of $0.001 per share.
The Common
Shares purchasable upon exercise of this Warrant (the "SHARES")
and the purchase price per share (the
"WARRANT PRICE") shall be adjusted from
time to time pursuant to the provisions of
this Warrant.
1.
EXERCISE.
(a) METHOD OF
EXERCISE.
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(i) The Holder shall exercise this Warrant, in whole or in
part, at any time and from time to time, at
or prior to its expiration, by
surrendering it at the principal offices of
the Company, together with either
(i) a duly executed and completed
subscription in substantially the form of the
Subscription Notice attached hereto as
Exhibit A, and a check payable to the
Company in the amount equal to the
aggregate Warrant Price for the number of
Shares being purchased, or (ii) a duly
executed and completed Conversion Notice
in the form attached hereto as Exhibit B.
Upon exercise through a conversion
(without payment by the Holder of the
Warrant Price and with Company retaining
out of this Warrant a sufficient number of
Shares to pay for the relevant
Warrant Price), the Holder shall be
entitled to receive that number of Warrant
Shares equal to the quotient obtained by
dividing ((A-B) x C) by A, where:
A = The Fair Market Value of one (1) Share on the date of
exercise of the Warrant;
B = The per share Warrant Price; and
C = The total number of Shares subject to purchase upon
exercise of the Warrant.
If the above calculation results in a
number less than one (1), then no Shares
shall be issuable or issued pursuant to a
conversion.
(ii) For purposes of the foregoing, the term "Fair Market
Value" of a Warrant Share shall be as
determined in good faith by the Board of
Directors of the Company.
(b) DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after
Holder
exercises this Warrant, the Company shall
deliver to Holder certificates for the
Shares acquired and, if this Warrant has
not been fully exercised and has not
expired, a new Warrant representing the
Shares not so acquired.
(c) REPLACEMENT OF WARRANTS. On receipt of
evidence reasonably satisfactory to
the Company of the loss, theft, destruction
or mutilation of this Warrant and,
in the case of loss, theft or destruction,
on delivery of an indemnity agreement
reasonably satisfactory in form and amount
to the Company, the Company at its
expense shall execute and deliver, in lieu
of this Warrant, a new warrant of
like tenor.
2.
ADJUSTMENTS TO THE SHARES.
(a) STOCK SPLITS AND DIVIDENDS. If outstanding Shares shall be
subdivided into a greater number of shares
or a dividend of Shares shall be
paid, the Warrant Price in effect
immediately prior to such subdivision or at
the record date of such dividend shall
simultaneously with the effectiveness of
such subdivision or immediately after the
record date of such dividend be
proportionately reduced. If outstanding
Shares shall be combined into a smaller
number of shares, the Warrant Price in
effect immediately prior to such
combination shall, simultaneously with the
effectiveness of such combination, be
proportionately increased. When any
adjustment is required to be made in the
Warrant Price, the Shares purchasable upon
the exercise of this Warrant shall be
changed to the number determined by
dividing (i) an amount equal to the number
of shares issuable upon the exercise of
this Warrant immediately prior to such
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adjustment, multiplied by the Warrant Price
in effect immediately prior to such
adjustment, by (ii) the Warrant Price in
effect immediately after such
adjustment.
(c) RECLASSIFICATION, ETC. In case there occurs any
reclassification
or change of the outstanding securities of
the Company or any reorganization of
the Company (or any other corporation the
stock or securities of which are at
the time receivable upon the exercise of
this Warrant) or any similar corporate
reorganization on or after the date hereof,
then and in each such case the
Holder, upon the exercise hereof any time
after the consummation of such
reclassification, change, or reorganization
shall be entitled to receive, in
lieu of the stock or other securities and
property receivable upon the exercise
hereof prior to such consummation, the
stock or other securities or property to
which such Holder would have been entitled
upon such consummation is such Holder
had exercised this Warrant immediately
prior thereto, all subject to further
adjustment pursuant to the provisions of
this Section 2.
(d) ADJUSTMENT CERTIFICATION. When any adjustment is required to
be
made in the Shares or the Warrant Price
pursuant to this Section 2, the Company
shall promptly mail to the Holder a
certificate setting forth (i) a brief
statement of the facts requiring such
adjustment, (ii) the Warrant Price after
such adjustment and (iii) the kind and
amount of stock or other securities or
property into which this Warrant shall be
exercisable after such adjustment.
(e) ACKNOWLEDGMENT. In order to avoid doubt, it is acknowledged
that
the Holder shall be entitled to the benefit
of all adjustments in the number of
shares of Common Stock of the Company
issuable upon conversion of the Preferred
Shares of the Company which occur prior to
the exercise of this Warrant,
including without limitation, any increase
in the number of shares of Common
Stock issuable upon conversion as a result
of a dilutive issuance of capital
stock.
(f) NO IMPAIRMENT. The Company shall not, by amendment of its
Articles of Incorporation or through a
reorganization, transfer of assets,
consolidation, merger, dissolution, issue,
or sale of securities or any other
voluntary action, avoid or seek to avoid
the observance or performance of any of
the terms to be observed or performed under
this Warrant by the Company, but
shall at all times in good faith assist in
carrying out all the provisions of
this Section 2 and in taking all such
action as may be necessary or appropriate
to protect Holder's rights under this
Section against impairment.
3.
REPRESENTATIONS AND COVENANTS OF THE COMPANY.
(a) REPRESENTATIONS AND WARRANTIES. The Company hereby
represents
and warrants to the Holder that:
(i) Organization. The Company is a corporation duly organized,
validly existing under the laws of the
State of Washington and has all requisite
corporate power and authority to own and
operate its properties and assets and
to carry on its business as now conducted
and as presently proposed to be
conducted, to execute and deliver this
Warrant, to issue and sell the Common
Stock to carry out the provisions of this
Warrant.
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(ii) Authorization. All corporate action on the part of the
Company, its officers, directors and
stockholders necessary for the
authorization, execution and delivery of
this Warrant, the performance of all
obligations of the Company hereunder and
the authorization, issuance (or
reservation for issuance), sale, and
delivery of the Common Shares issuable upon
exercise of this Warrant subject to the
required approval by the Company's Board
of Directors and the filing with the
Secretary of State of the State of
Washington of amended and/or restated
articles of incorporation that designate
the rights and preferences of this Warrant,
when executed and delivered, will
constitute valid and legally binding
obligation of the Company, enforceable in
accordance with its terms except (i) as
limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and
other laws of general application
affecting enforcement of creditors' rights
generally, (ii) as limited by laws
relating to the availability of specific
performance.
(iii) Shares. All Shares that may be issued upon the exercise
of this Warrant, and all securities, if
any, issuable upon conversion of the
Shares, shall, upon payment of the Warrant
price and issuanc
