Exhibit 4.3


 


THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I)
SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF
1933, AS AMENDED, (II) SUCH SECURITIES ARE SOLD PURSUANT TO RULE 144(K), OR
(III) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT
SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES
ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.


 


SUBJECT TO THE
PROVISIONS OF SECTION 10 HEREOF, THIS WARRANT SHALL BE VOID AFTER 5:00 P.M.
EASTERN TIME ON JUNE 20, 2008 (THE “EXPIRATION DATE”).


 


	
  Warrant No. CH-«No»

  	
   

  	
  Number of Shares:

  
	
  «Warrants»

  	
   

  	
   

  



 


CLICK2LEARN, INC.


 


WARRANT TO PURCHASE


COMMON STOCK


 


For value
received, «Name» (“Warrantholder”), is entitled to purchase, subject to
the provisions of this Warrant, from Click2learn, Inc., a Delaware corporation
(“Company”), at any time beginning on December 20, 2003 and not later
than 5:00 P.M., Eastern time, on the Expiration Date (as defined above), at an
exercise price per share equal to $1.90 (the exercise price in effect being
herein called the “Warrant Price”), «Warrants» shares (“Warrant
Shares”) of the Company’s Common Stock, par value $0.01 per share (“Common
Stock”).  The number of Warrant
Shares purchasable upon exercise of this Warrant and the Warrant Price shall be
subject to adjustment from time to time as described herein.


 


Section 1.                                            Registration.  The Company shall maintain books for the
transfer and registration of the Warrant. 
Upon the initial issuance of this Warrant, the Company shall issue and
register the Warrant in the name of the Warrantholder.


 


Section 2.                                            Transfers.  As provided herein, this Warrant may be
transferred only pursuant to a registration statement filed under the Securities
Act of 1933, as amended (“Securities Act”), or an exemption from such
registration.  Subject to such
restrictions, the Company shall transfer this Warrant from time to time upon
the books to be maintained by the Company for that purpose, upon surrender
thereof for transfer properly endorsed or 
accompanied by appropriate instructions for transfer and such other
documents as may be reasonably required by the Company, including, if required
by the Company, an opinion of its counsel to the effect that such transfer is
exempt from the registration requirements of the Securities Act, to establish
that such transfer is being made in accordance with the terms hereof, and a new
Warrant shall be issued to the transferee and the surrendered Warrant shall be
canceled by the Company.


 

















 


Section 3.                                            Exercise
of Warrant.


 


(a)                                  Subject
to the provisions hereof, the Warrantholder may exercise this Warrant in whole
or in part at any time after December 20, 2003 and prior to its expiration upon
surrender of the Warrant, together with delivery of the duly executed Warrant
exercise form attached hereto as Appendix A (the “Exercise Agreement”)
and payment by cash, certified check or wire transfer of funds for the
aggregate Warrant Price for that number of Warrant Shares then being purchased,
to the Company during normal business hours on any business day at the
Company’s principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof).  The Warrant Shares so purchased shall be
deemed to be issued to the holder hereof or such holder’s designee, as the
record owner of such shares, as of the close of business on the date on which
this Warrant shall have been surrendered (or evidence of loss, theft or
destruction thereof and security or indemnity satisfactory to the Company), the
Warrant Price shall have been paid and the completed Exercise Agreement shall
have been delivered.  Certificates for
the Warrant Shares so purchased, representing the aggregate number of shares specified
in the Exercise Agreement, shall be delivered to the holder hereof within a
reasonable time, not exceeding three (3) business days, after the date this
Warrant shall have been so exercised. 
The certificates so delivered shall be in such denominations as may be
requested by the holder hereof and shall be registered in the name of such
holder or such other name as shall be designated by such holder.  If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the holder a
new Warrant representing the number of shares with respect to which this
Warrant shall not then have been exercised. 
As used herein, “business day” means a day, other than a Saturday
or Sunday, on which banks in New York City are open for the general transaction
of business.  Each exercise hereof shall
constitute the re-affirmation by the Warrantholder that the representations and
warranties contained in Section 5 of the Purchase Agreement (as defined below)
are true and correct in all material respects with respect to the Warrantholder
as of the time of such exercise.


 


(b)                                 If by the third business day after a date of
exercise the Company fails to deliver the required number of Warrant Shares in
the manner required pursuant to Section 3(a), then the Warrantholder will have
the right to rescind such exercise. If by the third business day after a date
of exercise the Company fails to deliver the required number of Warrant Shares
in the manner required pursuant to Section 3(a), and if after such third
business day and prior to the receipt of such Warrant Shares, the Warrantholder
purchases (in an open market transaction or otherwise) shares of Common Stock
to deliver in satisfaction of a sale by the Warrantholder of the Warrant Shares
which the Warrantholder anticipated receiving upon such exercise (a “Buy In”),
then the Company shall (1) pay in cash to the Warrantholder the amount by which
(x) the Warrantholder’s total purchase price (including brokerage commissions,
if any) for the shares of Common Stock so purchased exceeds (y) the amount
obtained by multiplying (A) the number of Warrant Shares that the Company was
required to deliver to the Warrantholder in connection with the exercise at
issue by (B) the closing bid price of the Common Stock on the date on which the
Warrantholder delivered the Exercise Agreement and (2) at the option of the
Warrantholder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored or deliver to
the Warrantholder the number of shares of Common


 


2

















 


Stock
that would have been issued had the Company timely complied with its exercise
and delivery obligations hereunder.  The
Warrantholder shall provide the Company written notice indicating the amounts
payable to the Warrantholder in respect of the Buy In. The Company’s
obligations to issue and deliver Warrant Shares in accordance with the terms
hereof are absolute and unconditional, irrespective of any action or inaction
by the Warrantholder to enforce the same, any waiver or consent with respect to
any provision hereof, the recovery of any judgment against any person or any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Warrantholder or any
other person of any obligation to the Company or any violation or alleged
violation of law by the Warrantholder or any other person, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to the Warrantholder in connection with the issuance of Warrant Shares.
Nothing herein shall limit a Warrantholder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with respect to the
Company’s failure to timely deliver certificates representing shares of Common
Stock upon exercise of the Warrant  as
required pursuant to the terms hereof.


 


Section 4.                                            Compliance
with the Securities Act of 1933. The Company may cause the legend set forth
on the first page of this Warrant to be set forth on each Warrant or similar
legend on any security issued or issuable upon exercise of this Warrant, unless
counsel for the Company is of the opinion as to any such security that such
legend is unnecessary.


 


Section 5.                                            Payment
of Taxes.  The Company will pay any
documentary stamp taxes attributable to the initial issuance of Warrant Shares
issuable upon the exercise of the Warrant; provided, however, that the Company
shall not be required to pay any tax or taxes which may be payable in respect
of any transfer involved in the issuance or delivery of any certificates for
Warrant Shares in a name other than that of the registered holder of this
Warrant in respect of which such shares are issued, and in such case, the
Company shall not be required to issue or deliver any certificate for Warrant
Shares or any Warrant until the person requesting the same has paid to the
Company the amount of such tax or has established to the Company’s reasonable
satisfaction that such tax has been paid. 
The holder shall be responsible for income taxes due under federal,
state or other law, if any such tax is due.


 


Section 6.                                            Mutilated
or Missing Warrants.  In case this
Warrant shall be mutilated, lost, stolen, or destroyed, the Company shall issue
in exchange and substitution of and upon cancellation of the mutilated Warrant,
or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new
Warrant of like tenor and for the purchase of a like number of Warrant Shares,
but only upon receipt of evidence reasonably satisfactory to the Company of
such loss, theft or destruction of the Warrant, and with respect to a lost,
stolen or destroyed Warrant, reasonable indemnity or bond with respect thereto,
if requested by the Company.


 


Section 7.                                            Reservation
of Common Stock.  The Company hereby
represents and warrants that there have been reserved, and the Company shall at
all applicable times keep reserved until issued (if necessary) as contemplated
by this Section 7, out of the authorized and unissued shares of Common Stock,
sufficient shares to provide for the exercise of the rights of purchase
represented by this Warrant.  The
Company agrees that all Warrant Shares issued upon


 


3

















 


due exercise of the Warrant
shall be, at the time of delivery of the certificates for such Warrant Shares,
duly authorized, validly issued, fully paid and non-assessable shares of Common
Stock of the Company.


 


Section 8.                                            Adjustments.  Subject and pursuant to the provisions of
this Section 8, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter.


 


(a)                                  If
the Company shall, at any time or from time to time while this Warrant is
outstanding, pay a dividend or make a distribution on its Common Stock in
shares of Common Stock, subdivide its outstanding shares of Common Stock into a
greater number of shares or combine its outstanding shares of Common Stock into
a smaller number of shares or issue by reclassification of its outstanding shares
of Common Stock any shares of its capital stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then the number of Warrant Shares
purchasable upon exercise of the Warrant and the Warrant Price in effect
immediately prior to the date upon which such change shall become effective,
shall be adjusted by the Company so that the Warrantholder thereafter
exercising the Warrant shall be entitled to receive the number of shares of
Common Stock or other capital stock which the Warrantholder would have received
if the Warrant had been exercised immediately prior to such event upon payment
of a Warrant Price that has been adjusted to reflect a fair allocation of the
economics of such event to the Warrantholder. 
Such adjustments shall be made successively whenever any event listed
above shall occur.


 


(b)                                 If
any capital reorganization, reclassification of the capital stock of the
Company, consolidation or merger of the Company with another corporation in
which the Company is not the survivor, or sale, transfer or other disposition
of all or substantially all of the Company’s assets to another corporation
shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition,
lawful and adequate provision shall be made whereby each Warrantholder shall
thereafter have the right to purchase and receive upon the basis and upon the
terms and conditions herein specified and in lieu of the Warrant Shares
immediately theretofore issuable upon exercise of the Warrant, such shares of
stock, securities or assets as would have been issuable or payable with respect
to or in exchange for a number of Warrant Shares equal to the number of Warrant
Shares immediately theretofore issuable upon exercise of the Warrant, had such
reorganization, reclassification, consolidation, merger, sale, transfer or
other disposition not taken place, and in any such case appropriate provision
shall be made with respect to the rights and interests of each Warrantholder to
the end that the provisions hereof (including, without limitation, provision
for adjustment of the Warrant Price) shall thereafter be applicable, as nearly
equivalent as may be practicable in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise thereof.  The Company shall not effect any such
consolidation, merger, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor corporation (if
other than the Company) resulting from such consolidation or merger, or the
corporation purchasing or otherwise acquiring such assets or other appropriate
corporation or entity shall assume the obligation to deliver to the holder of
the Warrant, at the last address of such holder appearing on the books of the
Company, such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to purchase, and the


 


4

















 


other obligations under this
Warrant.  The provisions of this
paragraph (b) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales, transfers or other
dispositions.


 


(c)                                  In
case the Company shall fix a payment date for the making of a distribution to
all holders of Common Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness or assets (other than cash dividends
or cash distributions payable out of consolidated earnings or earned surplus or
dividends or distributions referred to in Section 8(a)), or subscription rights
or warrants, the Warrant Price to be in effect after such payment date shall be
determined by multiplying the Warrant Price in effect immediately prior to such
payment date by a fraction, the numerator of which shall be the total number of
shares of Common Stock outstanding multiplied by the Market Price (as defined
below) per share of Common Stock immediately prior to such payment date, less
the fair market value (as determined by the Company’s Board of Directors in
good faith) of said assets or evidences of indebtedness so distributed, or of
such subscription rights or warrants, and the denominator of which shall be the
total number of shares of Common Stock outstanding multiplied by such Market
Price per share of Common Stock immediately prior to such payment date.  “Market Price” as of a particular
date (the “Valuation Date”) shall mean the following: (a) if the Common
Stock is then listed on a national stock exchange, the closing sale price of
one share of Common Stock on such exchange on the last trading day prior to the
Valuation Date; (b) if the Common Stock is then quoted on The Nasdaq Stock
Market, Inc. (“Nasdaq”), the closing sale price of one share of Common
Stock on Nasdaq on the last trading day prior to the Valuation Date or, if no
such closing sale price is available, the average of the high bid and the low
asked price quoted on Nasdaq on the last trading day prior to the Valuation
Date; or (c) if the Common Stock is not then listed on a national stock
exchange or quoted on Nasdaq, the fair market value of one share of Common Stock
as of the Valuation Date, shall be determined in good faith by the Board of
Directors of the Company and the Warrantholder.  The Board of Directors of the Company shall respond promptly, in
writing, to an inquiry by the Warrantholder prior to the exercise hereunder as
to the Market Price of a share of Common Stock as determined by the Board of
Directors of the Company.  In the event
that the Board of Directors of the Company and the Warrantholder are unable to
agree upon the Market Price in respect of subpart (c) hereof, the Company and
the Warrantholder shall jointly select an appraiser, who is experienced in such
matters.  The decision of such appraiser
shall be final and conclusive, and the cost of such appraiser shall be borne
evenly by the Company and the Warrantholder. 
Such adjustment shall be made successively whenever such a payment date
is fixed.


 


(d)                                 For
the term of this Warrant, in addition to the provisions contained above, the
Warrant Price shall be subject to adjustment as provided below. An adjustment
to the Warrant Price shall become effective immediately after the payment date
in the case of each dividend or distribution and immediately after the
effective date of each other event which requires an adjustment.


 


(e)                                  In
the event that, as a result of an adjustment made pursuant to this Section 8,
the holder of this Warrant shall become entitled to receive any shares of
capital stock of the Company other than shares of Common Stock, the number of
such other shares so receivable


 


5

















 


upon exercise of this Warrant shall be
subject thereafter to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Warrant
Shares contained in this Warrant.


 


(f)                                    Except
as otherwise provided in Section 8(g) hereof, if prior to the Expiration Date,
the Company issues or sells, or in accordance with Section 8(g) is deemed
to have issued or sold, any shares of Common Stock for no consideration (other
than a stock split or stock dividend) or for a consideration per share less
than the Warrant Price (as then in effect) (a “Dilutive Issuance”), then
effective immediately upon such Dilutive Issuance, the Warrant Price will be
adjusted in accordance with the following formula:


 




	
  W’

  	
  =

  	
  (W)(O+P/W)
  (CSDO)

  






 


	
   

  	
  W’

  	
  =

  	
  the adjusted
  Warrant Price;

  
	
  where:

  	
  W

  	
  =

  	
  the then
  current Warrant Price;

  
	
   

  	
  O

  	
  =

  	
  the number
  of shares of Common Stock outstanding immediately prior to the Dilutive
  Issuance;

  
	
   

  	
  P

  	
  =

  	
  the
  aggregate consideration, calculated as set forth in Section 8(g), received by
  the Company upon such Dilutive Issuance; and

  
	
   

  	
  CSDO

  	
  =

  	
  the total
  number of shares of Common Stock deemed outstanding immediately after the
  Dilutive Issuance which shall include the actual number of shares outstanding
  plus all shares issuable upon the conversion or exercise of all outstanding
  convertible securities, warrants and options

  



 


(g)                                 Effect
on Exercise Price of Certain Events. 
For purposes of determining the adjusted Exercise Price under Section
8(f), the following will apply:


 


(i)                                     Issuance
of Rights, Options or Convertible Securities.  Subject to Section 8(g)(ii) below, if, after the date hereof, the
Company issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities exercisable, convertible into or exchangeable for Common Stock (“Convertible
Securities”) (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as “Options”), and
the price per share for which Common Stock is purchasable or issuable upon the
exercise of such Options is less than the Warrant Price (as then in effect) on
the date of issuance of such Option or direct stock grant (collectively, “Below
Market Options”), then the maximum total number of shares of Common Stock
issuable upon the exercise of all such Below Market Options (assuming full
exercise, conversion or exchange of Convertible Securities, if applicable)
will, as of the date of the issuance or grant of such Below Market Options, be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share.  For purposes of
the preceding sentence, the price per share for which Common Stock is issuable
upon the exercise of such Below Market Options is determined by dividing
(i) the total amount, if any, received or


 


6

















 


receivable by the Company as consideration
for the issuance or sale of all such Below Market Options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the exercise of all such Below Market Options, plus, in the case of
Convertible Securities issuable upon the exercise of such Below Market Options,
the minimum aggregate amount of additional consideration payable upon the
exercise, conversion or exchange thereof at the time such Convertible
Securities first become exercisable, convertible or exchangeable, by
(ii) the maximum total number of shares of Common Stock issuable upon the
exercise of all such Below Market Options (assuming full conversion of
Convertible Securities, if applicable). No further adjustment to the Warrant
Price will be made upon the exercise of such Below Market Options or upon the
exercise, conversion or exchange of Convertible Securities issuable upon
exercise of such Below Market Options.


 


(ii)                                  Issuance
of Convertible Securities.


 


If the Company
issues or sells any Convertible Securities, whether or not immediately convertible
(other than where the same are issuable upon the exercise of Options) and the
price per share for which Common Stock is issuable upon such exercise,
conversion or exchange (as determined pursuant to Section 8(g)(ii)(B) if
applicable) is less than the Warrant Price (as then in effect) on the date of
issuance of such Convertible Security, then the maximum total number of shares
of Common Stock issuable upon the exercise, conversion or exchange of all such
Convertible Securities will, as of the date of the issuance of such Convertible
Securities, be deemed to be outstanding and to have been issued and sold by the
Company for such price per share.  For
the purposes of the preceding sentence, the price per share for which Common
Stock is issuable upon such exercise, conversion or exchange is determined by
dividing (i) the total amount, if any, received or receivable by the
Company as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the exercise, conversion or exchange thereof
at the time such Convertible Securities first become exercisable, convertible
or exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise, conversion or exchange of all such Convertible
Securities. No further adjustment to the Warrant Price will be made upon the
actual issuances of such Common Stock upon exercise, conversion or exchange of
such Convertible Securities.


 


(iii)                               Change
in Option Price or Conversion Rate. 
If there is a change at any time in (i) the amount of additional
consideration payable to the Company upon the exercise of any Options;
(ii) the amount of additional consideration, if any, payable to the Company
upon the exercise, conversion or exchange of any Convertible Securities, or
(iii) the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock (other than under or by reason of provisions
designed to protect against dilution), the Warrant Price in effect at such time
shall be adjusted to the Warrant Price which would have been in effect had such
Options or Convertible Securities still outstanding provided for such changed
additional consideration or changed conversion rate, as the case may be, at the
time initially granted, issued or sold.


 


(iv)                              Treatment
of Expired Options and Unexercised Convertible Securities.  If, in any case, the total number of shares
of Common Stock issuable upon exercise of any Options or upon exercise,
conversion or exchange of any Convertible Securities is not, in fact, issued
and


 


7

















 


the rights to exercise such
Option or to exercise, convert or exchange such Convertible Securities shall
have expired or terminated, the Warrant Price then in effect will be readjusted
to the Warrant Price which would have been in effect at the time of such
expiration or termination had such Options or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination (other
than in respect of the actual number of shares of Common Stock issued upon
exercise or conversion thereof), never been issued.


 


(v)                                 Calculation
of Consideration Received.  If any
Common Stock, Options or Convertible Securities are issued, granted or sold for
cash, the consideration received therefor for purposes of this Warrant will be
the amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or
sale.  In case any Common Stock, Options
or Convertible Securities are issued or sold for a consideration part or all of
which shall be other than cash, the amount of the consideration other than cash
received by the Company will be the fair market value of such consideration
except where such consideration consists of freely-tradable securities, in
which case the amount of consideration received by the Company will be the
Market Price thereof as of the date of receipt.  The fair market value of any consideration other than cash or
securities will be determined in the good faith reasonable business judgment of
the Board of Directors.


 


(h)                                 Exceptions
to Adjustment of Exercise Price.  No
adjustment to the Warrant Price or the number of Warrant Shares issuable
pursuant to this Warrant will be made under Section 8(f) above as a result of
the issuance of any securities of the Company issued pursuant to (i) the grant
or exercise of any stock or options which may hereafter be granted or exercised
under any employee, consultant or director benefit plan of the Company now
existing or implemented in the future, so long as the issuance of such stock or
options is approved by a majority of the non-employee members of the Company’s
Board of Directors or a majority of the members of a committee of non-employee
directors established for such purpose, (ii) any options, warrant,
convertible securities or rights or agreements to purchase securities of the
Company (not including equity lines of credit) outstanding on the date hereof;
(iii) any underwritten public offerings of equity securities securities
(other than equity lines of credit and similar transactions); (iv) any equity
securities issued for consideration other than cash pursuant to a merger,
consolidation, acquisition or similar business combination; (v) shares of
Common Stock issued in connection with any stock split, stock dividend or
recapitalization by the Company; (vi) shares of Common Stock issued upon
exercise of the Warrants; (vii) any equity securities issued pursuant to
any equipment leasing arrangement or debt financing from a bank or similar
financial institution whose primary business is lending money and not investing
in securities; or (viii) any equity securities (other than equity lines of
credit) issued in connection with strategic transactions involving the Company
and other entities, including (A) joint ventures, manufacturing, marketing
or distribution arrangements, (B) technology transfer or development
arrangements; provided, that the primary purpose of such transaction is not the
raising of capital; or (ix) an agreement to issue securities which does not
close.


 


Section 9.                                            Fractional
Interest.  The Company shall not be
required to issue fractions of Warrant Shares upon the exercise of this
Warrant.  If any fractional share of
Common Stock would, except for the provisions of the first sentence of this
Section 9, be deliverable upon such exercise, the Company, in lieu of
delivering such fractional share, shall pay to the exercising


 


8

















 


holder of this Warrant an
amount in cash equal to the Market Price of such fractional share of Common
Stock on the date of exercise.


 


Section 10.                                      Extension
of Expiration Date.  If the Company
fails to cause any Registration Statement covering Registrable Securities
(unless otherwise defined herein, capitalized terms are as defined in the
Registration Rights Agreement relating to the Warrant Shares (the “Registration
Rights Agreement”)) to be declared effective prior to the applicable dates
set forth therein, or if any of the events specified in Section 2(c)(ii) of the
Registration Rights Agreement occurs, and the Blackout Period (whether alone,
or in combination with any other Blackout Period) continues for more than 60
days in any 12 month period, or for more than a total of 90 days, then the
Expiration Date of this Warrant shall be extended one day for each day beyond
the 60-day or 90-day limits, as the case may be, that the Blackout Period
continues.


 


Section 11.                                      Benefits.  Nothing in this Warrant shall be construed
to give any person, firm or corporation (other than the Company and the
Warrantholder) any legal or equitable right, remedy or claim, it being agreed
that this Warrant shall be for the sole and exclusive benefit of the Company
and the Warrantholder.


 


Section 12.                                      Notices
to Warrantholder.  Upon the
happening of any event requiring an adjustment of the Warrant Price, the
Company shall promptly give written notice thereof to the Warrantholder at the
address appearing in the records of the Company, stating the adjusted Warrant
Price and the adjusted number of Warrant Shares resulting from such event and
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based. 
Failure to give such notice to the Warrantholder or any defect therein
shall not affect the legality or validity of the subject adjustment.


 


Section 13.                                      Identity
of Transfer Agent.  The Transfer
Agent for the Common Stock is Mellon Shareholder Services.  Upon the appointment of any subsequent
transfer agent for the Common Stock or other shares of the Company’s capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrant, the Company will mail to the Warrantholder a statement setting forth
the name and address of such transfer agent.


 


Section 14.                                      Notices.  Unless otherwise provided, any notice
required or permitted under this Warrant shall be given in writing and shall be
deemed effectively given as hereinafter described (i) if given by personal
delivery, then such notice shall be deemed given upon such delivery, (ii) if
given by telex or facsimile, then such notice shall be deemed given upon
receipt of confirmation of complete transmittal, (iii) if given by mail, then
such notice shall be deemed given upon the earlier of (A) receipt of such
notice by the recipient or (B) three days after such notice is deposited in
first class mail, postage prepaid, and (iv) if given by an internationally
recognized overnight air courier, then such notice shall be deemed given one
day after delivery to such carrier.  All
notices shall be addressed as follows: if to the Warrantholder, at its address
as set forth in the Company’s books and records and, if to the Company, at the
address as follows, or at such other address as the Warrantholder or the
Company may designate by ten days’ advance written notice to the other:


 


9

















 


	
   

  	
  If to the Company:

  
	
   

  	
   

  
	
   

  	
  Click2learn, Inc.

  
	
   

  	
  110-110th Avenue N.E., Suite 700

  
	
   

  	
  Bellevue, WA  98004-5840

  
	
   

  	
  Attention: 
  General Counsel

  
	
   

  	
  Fax: 425.637.1540

  
	
   

  	
   

  
	
   

  	
  With a copy to:

  
	
   

  	
   

  
	
   

  	
  Perkins Coie LLP

  
	
   

  	
  505 Fifth Avenue South, Suite 620

  
	
   

  	
  Seattle, WA 98104-3846

  
	
   

  	
  Attention: 
  Scott Gelband

  
	
   

  	
  Fax: 
  206.583.8500

  



 


Section 15.                                      Registration
Rights.  The initial holder of this
Warrant is entitled to the benefit of certain registration rights with respect
to the shares of Common Stock issuable upon the exercise of this Warrant as
provided in the Registration Rights Agreement, and any subsequent holder hereof
may be entitled to such rights.


 


Section 16.                                      
Successors.  All the covenants and
provisions hereof by or for the benefit of the Warrantholder shall bind and
inure to the benefit of its respective successors and assigns hereunder.


 


Section 17.                                      Governing
Law.  This Warrant shall be governed
by, and construed in accordance with, the internal laws of the State of New
York, without reference to the choice of law provisions thereof.  The Company and, by accepting this Warrant,
the Warrantholder, each irrevocably submits to the exclusive jurisdiction of
the courts of the State of New York located in New York County and the United
States District Court for the Southern District of New York for the purpose of
any suit, action, proceeding or judgment relating to or arising out of this
Warrant and the transactions contemplated hereby.  Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same
methods as are specified for the giving of notices under this Warrant.  The Company and, by accepting this Warrant,
the Warrantholder, each irrevocably consents to the jurisdiction of any such
court in any such suit, action or proceeding and to the laying of venue in such
court.  The Company and, by accepting
this Warrant, the Warrantholder, each irrevocably waives any objection to the
laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.


 


Section 18.                                      Cashless
Exercise.


 


Net Issue Election.  If the Common Stock issuable upon exercise
of this Warrant is not registered pursuant to a currently effective
Registration Statement and may not be sold pursuant to Rule 144(k), the
Warrantholder may elect to receive, without the payment by the


 


10

















 


Warrantholder of the aggregate
Warrant Price in respect of the shares of Common Stock to be acquired, shares
of Common Stock equal to the value of this Warrant or any portion hereof by the
surrender of this Warrant (or such portion of this Warrant being so exercised)
together with the Net Issue Election Notice annexed hereto as Appendix B duly
executed, at the office of the Company. 
Thereupon, the Company shall issue to the Warrantholder such number of
fully paid, validly issued and nonassessable shares of Common Stock as is
computed using the following formula:


 


X = Y (A - B)


A


 


where


 


X =                             the
number of shares of Common Stock which the Warrantholder has then requested be
issued to the Warrantholder;


 


Y =                              the
total number of shares of Common Stock covered by this Warrant which the
Warrantholder has surrendered at such time for cash-less exercise (including
both shares to be issued to the Warrantholder and shares to be canceled as
payment therefor);


 


A =                            the
“Market Price” of one share of Common Stock as at the time the net issue
election is made; and


 


B =                              the
Warrant Price in effect under this Warrant at the time the net issue election
is made.


 


Section 19.                                      Call
Provision.  Notwithstanding any
other provision contained herein to the contrary, at any time commencing after
December 20, 2005, in the event that the closing bid price of a share of Common
Stock as traded on the Nasdaq (or such other exchange or stock market on which
the Common Stock may then be listed or quoted) equals or exceeds an amount
equal to 200% of the Warrant Price (appropriately adjusted for any stock split,
reverse stock split, stock dividend or other reclassification or combination of
the Common Stock occurring after the date hereof) for any twenty (20)
consecutive trading days (which such twenty (20) trading day period shall have
commenced after December 20, 2005)  and all of the shares of Common Stock
issuable hereunder either (i) are registered pursuant to an effective
Registration Statement (as defined in the Registration Rights Agreement) which
has not been suspended and for which no stop order is in effect, and pursuant
to which the Warrantholder is able to sell such shares of Common Stock during
the Notice Period (as defined below) or (ii) no longer constitute Registrable
Securities (as defined in the Registration Rights Agreement), the Company,
within three (3) days of such twenty (20) trading day period may demand that
the Warrantholder exercise its rights hereunder, and the Warrantholder must
exercise its rights prior to the end of the ten (10) days period after
effectiveness of such notice (the “Notice Period”), if such exercise is
not made or if only a partial exercise is made, any and all rights to further
exercise rights hereunder shall cease upon the expiration of the Notice Period,
provided, however, that if such Warrantholder elected to exercise pursuant to
Section 18 hereof, the Company consented to such


 


11

















 


exercise.  Notice given pursuant to this Section 19
shall be given by facsimile and 
internationally recognized overnight air courier, return receipt
requested.


 


Section 20.                                      Limitation on Exercise.


 


(a)                                  Notwithstanding anything to the contrary
contained herein, the number of shares of Common Stock that may be acquired by
the Warrantholder upon any exercise of this Warrant (or otherwise in respect
hereof) shall be limited to the extent necessary to insure that, following such
exercise (or other issuance), the total number of shares of Common Stock then
beneficially owned by such Warrantholder and its affiliates and any other
persons whose beneficial ownership of Common Stock would be aggregated with the
Warrantholder’s for purposes of Section 13(d) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), does not exceed 4.999% of the total
number of issued and outstanding shares of Common Stock (including for such
purpose the shares of Common Stock issuable upon such exercise). For such
purposes, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder.  Each delivery of an
Exercise Agreement hereunder will constitute a representation by the
Warrantholder that it has evaluated the 
limitation set forth in this paragraph and determined that issuance of
the full number of Warrant Shares requested in such Exercise Agreement is
permitted under this paragraph.  By
written notice to the Company, the Warrantholder may waive the provisions of
this Section but (i) any such waiver will not be effective until the 61st day
after such notice is delivered to the Company and (ii) any such waiver will
apply only to the Warrantholder and not to any other holder of Warrants. This
provision shall not restrict the number of shares of Common Stock which a
Warrantholder may receive or beneficially own in order to determine the amount
of securities or other consideration that such Warrantholder may receive in the
event of a merger or other business combination or reclassification involving
the Company as contemplated in Section 8(b) of this Warrant.


 


(b)                                 Notwithstanding anything to the contrary
contained herein, the number of  shares
of Common Stock that may be acquired by the Warrantholder upon any exercise of
this Warrant (or otherwise in respect hereof) shall be limited to the extent
necessary to insure that, following such exercise (or other issuance), the
total number of shares of Common Stock then beneficially owned by such
Warrantholder and its affiliates and any other persons whose beneficial
ownership of Common Stock would be aggregated with the Warrantholder’s for
purposes of Section 13(d) of the Exchange Act, does not exceed 9.999% of the
total number of issued and outstanding shares of Common Stock (including for
such purpose the shares of Common Stock issuable upon such exercise).  For such purposes, beneficial ownership
shall be determined in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder.  Each delivery of an Exercise Agreement hereunder will constitute
a representation by the Warrantholder that it has evaluated the limitation set
forth in this paragraph and determined that issuance of the full number of
Warrant Shares requested in such Exercise Agreement is permitted under this
paragraph.    This provision shall not
restrict the number of shares of Common Stock which a Warrantholder may receive
or beneficially own in order to determine the amount of securities or other
consideration that such Warrantholder may receive in the event of a merger or
other business combination or reclassification involving the Company as
contemplated in Section 8(b) of this Warrant.


 


12

















 


Section 20.                                      No
Rights as Stockholder.  Prior to the
exercise of this Warrant, the Warrantholder shall not have or exercise any
rights as a stockholder of the Company by virtue of its ownership of this
Warrant.


 


Section 21.                                      Amendment;
Waiver.  This Warrant is one of a
series of Warrants of like tenor issued by the Company pursuant to the Purchase
Agreement and initially covering an aggregate of 2,611,225 shares of Common
Stock (collectively, the “Company Warrants”).  Any term of this Warrant may be amended or waived (including the
adjustment provisions included in Section 8 of this Warrant) upon the written
consent of the Company and the holders of Company Warrants representing at
least 50% of the number of shares of Common Stock then subject to all
outstanding Company Warrants (the “Majority Holders”); provided,
that (x) any such amendment or waiver must apply to all Company Warrants; and
(y) the number of Warrant Shares subject to this Warrant, the Warrant Price and
the Expiration Date may not be amended, and the right to exercise this Warrant
may not be altered or waived, without the written consent of the Warrantholder.


 


Section 22.                                      Section
Headings.  The section headings in
this Warrant are for the convenience of the Company and the Warrantholder and
in no way alter, modify, amend, limit or restrict the provisions hereof.


 


IN WITNESS WHEREOF,
the Company has caused this Warrant to be duly executed, as of the 20th day of
June, 2003.


 


	
   

  	
  CLICK2LEARN, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: 
  Steven Esau

  
	
   

  	
  Title: 
  Senior Vice President, General Counsel

  



 


13

















 


APPENDIX A


CLICK2LEARN, INC.


WARRANT EXERCISE FORM


 


To: CLICK2LEARN, INC.:


 


The
undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant (“Warrant”) for, and to purchase thereunder
by the payment of the Warrant Price and surrender of the Warrant,
                             
shares of Common Stock (“Warrant Shares”) provided for therein, and requests
that certificates for the Warrant Shares be issued as follows:


 


	
   

  	
   

  	
   

  
	
   

  	
  Name

  
	
   

  	
   

  	
   

  
	
   

  	
  Address

  
	
   

  	
   

  	
   

  
	
   

  	
  Federal Tax ID or Social Security No.

  



 


and delivered
by (certified mail to the above address, or (electronically (provide DWAC
Instructions:                         ),
or (other (specify):
                                                           ).


 


and, if the number of Warrant Shares shall not be all the Warrant
Shares purchasable upon exercise of the Warrant, that a new Warrant for the
balance of the Warrant Shares purchasable upon exercise of this Warrant be
registered in the name of the undersigned Warrantholder or the undersigned’s
Assignee as below indicated and delivered to the address stated below.


 


The undersigned represents that he, she or it (as the case may be) is
an “accredited investor” as such term is defined in Rule 501(a) of the Securities
Act of 1933.


 


	
  Dated:

  	
                                    

  	
  ,

  	
            

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Note: 
  The signature must correspond with

  	
   

  	
   

  
	
   

  	
  Signature:

  	
   

  	
   

  
	
  the name of the registered holder as
  written

  	
   

  	
   

  
	
  on the first page of the Warrant in every

  	
   

  	
   

  	
   

  
	
  particular, without alteration or
  enlargement

  	
   

  	
  Name (please print)

  
	
  or any change whatever, unless the Warrant

  	
   

  	
   

  
	
  has been assigned.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Federal Identification or

  Social Security No.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Assignee:

  
	
   

  	
   

  	
   

  	
   

  
											



 

















 


APPENDIX
B


 


Net Issue Election Notice


 


	
  To: CLICK2LEARN, INC.

  
	
   

  
	
  Date:

  	
   

  	
   

  



 


The
undersigned hereby elects under Section 18 of this Warrant to surrender the
right to purchase
                   
shares of Common Stock pursuant to this Warrant and hereby requests the
issuance of
                        
shares of Common Stock.  The undersigned
represents that he, she or it (as the case may be) is an “accredited investor”
as such term is defined in Rule 501(a) of the Securities Act of 1933.  The certificate(s) for the shares issuable
upon such net issue election shall be issued in the name of the undersigned or
as otherwise indicated below.


 


 


	
   

  	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name for Registration

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Mailing
  Address