Fill and Sign the Bridge Financing Warrant Form

17.10 Bridge Financing Warrant IntroductionThe form of warrant set forth in the following Section is for use in a bridge financing in which the bridge investors are making a bridge loan to the company and receiving convertible notes and warrants. The form of warrant below reflects the terms for the warrants set forth in the note and warrant purchase agreement appended to this Chapter. The warrant provides for several events subsequent to the bridge financing that fix the number of shares and exercise price for the warrant. Those events would be specified in the term sheet negotiated among the parties to the bridge financing, and corresponding provisions in the warrant will need to be selected from the variations included in the form below. The foregoing chapter should be reviewed if further information on these provisions is desired. Form of Bridge Financing Warrant "THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTION ON THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE (OR INSTRUMENT) TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY." XYZ, INC. WARRANT TO PURCHASE SHARES OF [PREFERRED] [COMMON] STOCK Warrant Number __ Issue Date: [date] Expiration Date [date] 1. Number and Price of Shares Subject to Warrant. Subject to the terms and conditions set forth herein, [Investor] ("Investor") is entitled to purchase from XYZ, Inc., a [state] corporation (the "Company"), at any time after the date hereof and on or before the date of termination of this Warrant provided for in Section 2 hereof, that number of shares of fully paid and nonassessable shares of [Preferred Stock] [Common Stock] of the Company (the "Warrant Stock") equal to __% of the Investor's principal amount of the Loan made in connection with the Note and Warrant Purchase Agreement, dated [date], (the "Purchase Agreement") divided by the price per share of the securities issued in the Next Equity Financing (as defined below). If there is a Liquidity Event (as defined in the Purchase Agreement) [or an IPO] or the Notes [as defined in the Purchase Agreement] are not converted in a Next Equity Financing at any time after the date hereof and on or before the date of termination of this Warrant, [the Warrants shall [terminate] [be exercisable for a number of shares of Common Stock of the company equal to __ percent (__%) of the Investor's principal amount of the Loan divided by $___. The exercise price per share of the Warrant in such event will be equal to the lower of the fair market value of the Common Stock as determined in good faith by the Board of Directors at the time of such event or $___ per share.]. Upon a Next Equity Financing, the exercise price per share subject to this Warrant is equal to the price of the series and class of Preferred Stock issued in the Next Equity Financing. This Warrant is one of a series of warrants (collectively, the "Warrants") having substantially similar terms and issued in connection with the issuance of the Notes, which issuance and sale were made pursuant to Purchase Agreement. 2. Termination. This Warrant (and the right to purchase securities upon exercise hereof) shall terminate upon the earliest of (i) ___ years after issuance; or (ii) the closing of an acquisition of all or substantially all of the assets or capital stock of the Company by another entity [for cash.]; [or (iii) the initial public offering of the Company's securities; or (iv) immediately prior to the closing of a merger or consolidation of the Company in which the stockholders of the Company immediately before such transaction would own less than 50% of the voting power of the surviving entity immediately after such transaction.] The Company shall give the holder of this Warrant written notice of such sale, merger, consolidation or public offering at least twenty (20), but no more than sixty (60), days prior to the closing of any such transaction. 3. No Fractional Shares. No fractional shares of Warrant Stock will be issued in connection with any subscription hereunder. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Warrant Stock on the date of exercise, as determined in good faith by the Company's Board of Directors. 4. No Stockholder Rights. This Warrant shall not entitle its holder to any of the rights of a stockholder of the Company. 5. Reservation of Stock. The Company covenants that during the period this Warrant is exercisable, the Company will reserve from its authorized and unissued Stock a sufficient number of shares to provide for the issuance of Warrant Stock upon the exercise of this Warrant. 6. Exercise of Warrant.(a) Procedure for Exercise. This Warrant may be exercised by the registered holder or its registered assigns, in whole or in part, by the surrender of this Warrant at the principal office of the Company, accompanied by payment in full of the Warrant Price in cash or by check or by the cancellation of any present or future indebtedness from the Company to the holder hereof, and delivery of an exercise notice in the form of Exhibit A hereto. Upon partial exercise hereof, a new warrant or warrants containing the same date and provisions as this Warrant shall be issued by the Company to the registered holder for the number of shares of Warrant Stock with respect to which this Warrant shall not have been exercised. A Warrant shall be deemed to have been exercised on the close of business on the date of its receipt by the Company upon surrender for exercise as provided above, and the person entitled to receive the shares of Warrant Stock issuable upon such exercise shall be treated for all purposes as the holder of such shares of record as of the close of business on such date; provided that the transfer books of the Company shall not have been closed. If the transfer books have been closed, the person shall be deemed to be a holder of shares of record as of the close of business on the first day that the transfer books reopen. As promptly as practicable on or after such date, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of full shares of Warrant Stock issuable upon such exercise, together with cash in lieu of any fraction of a share as provided above.(b) Net Exercise Rights. Notwithstanding the payment provisions set forth in this Section 6, the holder may elect to receive shares of Warrant Stock equal to the value (as determined below) of this Warrant by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the holder the number of shares of Common Stock determined by use of the following formula: X = Y(A - B)_______ A Where: X = the number of shares of Common Stock to be issued to the holder. Y = the number of shares of Warrant Stock subject to this Warrant. A = the Fair Market Value (as defined below) of one (1) share of Warrant Stock. B = Exercise price per share of Warrant Stock. For purposes of this Section 6, fair market value of a share as of a particular date shall mean: (i) If the Company's Stock is registered under the Securities and Exchange Act of 1933, as amended, and traded on a securities exchange or electronic trading network, then the fair market value of a share shall be the closing price (the last reported sales price, if not so reported, the average of the last reported bid and asked prices) of the Company's stock as of the last business day immediately prior to the exercise of this Warrant. (ii) If the Company's Common Stock is not so registered, then the fair market value of a share of Common Stock shall be determined in good faith by the Company's Board of Directors upon a review of relevant factors. 7. Adjustment of Warrant Price and Number of Shares. The number and kind of securities issuable upon the exercise of this Warrant shall be subject to adjustment from time to time, and the Company agrees to provide notice upon the happening of certain events as follows: (a) Adjustment for Dividends in Stock. In case at any time or from time to time during the term of this Warrant the holders of the Common Stock of the Company (or any shares of stock or other securities at the time receivable upon the exercise of this Warrant) shall have received, or, on or after the record date fixed for the determination of eligible stockholders, shall have become entitled to receive, without payment therefor, other or additional securities or other property of the Company by way of dividend or distribution, then and in each case, the holder of this Warrant shall, upon the exercise hereof, be entitled to receive, in addition to the number of shares of Common Stock receivable thereupon, and without payment of any additional consideration therefor, the amount of such other or additional securities or other property of the Company which such holder would hold on the date of such exercise had it been the holder of record of such Common Stock on the date hereof and had thereafter, during the period from the date hereof to and including the date of such exercise, retained such shares and/or all other additional securities or other property receivable by it as aforesaid during such period, giving effect to all adjustments called for during such period by this Section 7.(b) Adjustment for Reclassification. In case of any reclassification of the outstanding Common Stock of the Company during the term of this Warrant (other than a transaction terminating this Warrant under Section 2), then the holder of this Warrant, upon the exercise hereof at 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 if such holder had exercised this Warrant immediately prior thereto. The terms of this Section 7 shall similarly apply to successive reclassifications. (c) Stock Splits and Reverse Stock Splits. If at any time during the term of this Warrant the Company shall subdivide its outstanding shares of Common Stock into a greater number of shares, the Warrant Price in effect immediately prior to such subdivision shall thereby be proportionately reduced and the number of shares receivable upon exercise of the Warrant shall thereby be proportionately increased. Conversely, if at any time on or after the date hereof the outstanding number of shares of Common Stock shall be combined into a smaller number of shares, the Warrant Price in effect immediately prior to such combination shall thereby be proportionately increased and the number of shares receivable upon exercise of this Warrant shall thereby be proportionately decreased. 8. Transfer of Warrant. This Warrant or the Warrant Stock may not be transferred or assigned, in whole or in part, by the holder hereof (except to any affiliate hereof) without compliance with applicable federal and state securities laws. The rights and obligations of the Company and the holders of this Warrant shall be binding upon and benefit the successors, assignors, heirs, administrators and transferees of the parties. Any transferee hereof agrees to be bound by the restrictions set forth herein and in the Note and Warrant Purchase Agreement. For any transfer, the holder hereof must deliver this Warrant to the Company and a notice of transfer signed by the holder in the form of Exhibit B below. 9. Governing Law. This Agreement shall be governed in all respects by the internal laws of the State of ______________. [Any and all disputes arising out of or related to this Agreement shall be adjudicated exclusively in the state or federal courts located in [county] [state]]. 10. Waiver and Amendment. Amendment or Waiver of any term of this Warrant shall be conducted pursuant to the terms of the Purchase Agreement. 11. Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto. 12. Notices. All notices and other communications shall be made and delivered as prescribed in the Purchase Agreement. ISSUED this __th day of _________, 20__. XYZ, INC. By:_______________________ Title: ________________________ EXHIBIT A NOTICE OF EXERCISE TO: [COMPANY] _________________________ _________________________ Attention: President 1. The undersigned hereby elects to purchase __________ shares of _____________ pursuant to the terms of the attached Warrant. 2. Method of Exercise (Please initial the applicable Section): ___ The undersigned elects to exercise the attached Warrant by means of a cash payment, and tenders herewith payment in full for the purchase price of the shares being purchased, together with all applicable transfer taxes, if any. ___ The undersigned elects to exercise the attached Warrant by means of the net exercise provisions of Section 6 of the Warrant. 3. Please issue a certificate or certificates representing said Shares in the name of the undersigned or in such other name as is specified below: _________________________________(Name) _________________________________ _________________________________ (Address) 4. The undersigned hereby represents and warrants that the aforesaid Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with, the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares. ________________________(Signature) ________________________ (Name) ________________________ ___________________ (Date) (Title) EXHIBIT B FORM OF TRANSFER (To be signed only upon transfer of Warrant) FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _______________________________________________ the right represented by the attached Warrant to purchase ____________ shares of ________________________ of [COMPANY] to which the attached Warrant relates, and appoints ______________ attorney to transfer such right on the books of __________, with full power of substitution in the premises. Dated: ____________________ ___________________________ (Signature must conform in all respects to name of Holder as specified on the face of the Warrant.) Address: _______________________ _______________________ _______________________ Signed in the presence of: _______________________