Prepared by MERRILL CORPORATION




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Exhibit 4.3  


NEITHER
THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE AND
WERE ISSUED IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES. 



	Warrant No. (Number)	 	Issue Date: November   , 2001
	

Warrant to Purchase

(Shares) Shares	
 	

 




 
 

FORM OF
  WARRANT TO PURCHASE COMMON STOCK
  OF
  CLICK2LEARN, INC.    
  


    THIS CERTIFIES that «WarrantHolder» or any subsequent holder hereof (the "Holder"), has
the right to purchase from Click2learn, Inc., a Delaware corporation (the "Company"), up to «Shares» fully paid and
nonassessable shares of the Company's Common Stock, par value $.01 per share (the "Common Stock"), subject to adjustment as provided herein, at a price
equal to the Exercise Price (as defined below), at any time beginning on the date on which this Warrant is issued (the "Issue Date") and
ending at 5:00 p.m., eastern time, on the date that is the seventh (7th) anniversary of the Issue Date (the "Expiration Date"). This Warrant is
issued, and all rights hereunder shall be, subject to all of the conditions, limitations and provisions set forth herein and in the Purchase Agreement, dated as of November 15, 2001, by and
among the Company and the Purchasers named therein (the "Purchase Agreement"). Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Purchase Agreement. 


    1.  Exercise.  



    (a)  Right to Exercise; Exercise Price.  The Holder shall have the right to exercise this Warrant at any
time and from time to time during the period beginning on the Issue Date and ending on the Expiration Date as to all or any part of the shares of Common Stock covered hereby (the
"Warrant Shares"). The "Exercise Price" payable by the Holder in connection with the exercise of this
Warrant shall be equal to $4.00 (subject to adjustment as provided herein). 


    (b)  Exercise Notice.  In order to exercise this Warrant, the Holder shall send by facsimile
transmission, at any time prior to 7:00 p.m., eastern time, on the Business Day (as defined below) on which the Holder wishes to effect such exercise (the "Exercise
Date"), to the Company a copy of the notice of exercise in the form attached hereto as Exhibit A (the "Exercise Notice")
stating the number of Warrant Shares as to which such exercise applies and the calculation therefor. As used herein, "Business Day" shall mean any day
on which the New York Stock Exchange (the "NYSE") and commercial banks in the city of New York are open for business. The Holder shall thereafter
deliver to the Company the original Exercise Notice, the original Warrant and the Exercise Price for the number of Warrant Shares with respect to which the Warrant is being 






 


exercised. In the case of a dispute as to the calculation of the Exercise Price or the number of Warrant Shares issuable hereunder (including without limitation the calculation of any adjustment to
the Exercise Price pursuant to Section 6 below), the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and shall submit the disputed calculations to
the Company's independent accountant within two (2) Business Days following the Exercise Date. The Company shall cause such accountant to calculate the Exercise Price and/or the number of
Warrant Shares issuable hereunder and to notify the Company and the Holder of the results in writing no later than two Business Days following the day on which such accountant received the disputed
calculations. Such accountant's calculation shall be deemed conclusive absent manifest error. The fees of any such accountant shall be borne by the party whose calculations were most at variance with
those of such accountant. 


    (c)  Cancellation of Warrant.  This Warrant shall be canceled upon its exercise and, if this Warrant is
exercised in part, the Company shall, at the time that it delivers Warrant Shares to the Holder pursuant to such exercise as provided herein, issue a new warrant, and deliver to the Holder a
certificate representing such new warrant, with terms identical in all respects to this Warrant (except that such
new warrant shall be exercisable into the number of shares of Common Stock with respect to which this Warrant shall remain unexercised); provided, however, that the Holder shall be entitled to
exercise any portion of such new warrant at any time following the time at which this Warrant is exercised, regardless of whether the Company has actually issued such new warrant or delivered to the
Holder a certificate therefor. 


    (d)  Expiration Upon Certain Events.  Commencing on the two-year anniversary of the Issue
Date, in the event that during any period of twenty (20) consecutive Business Days, the closing price of the Common Stock (as reported by Bloomberg L.P. at approximately 4:30 p.m. (New
York time for regular session trading) exceeds an amount equal to product of (i) the Exercise Price (subject to adjustment as provided herein) and (ii) two and one-half
(2.5), the Company may deliver to the Holder, as long as the Expiration Condition (as defined below) has been satisfied, a written notice to such effect (a "Cancellation
Notice") and this Warrant shall expire on the date which is fifteen (15) Trading Days following the Business Day on which such Cancellation Notice is delivered to the
Holder. The term "Expiration Condition" shall mean that either (A) the Registration Statement (as defined in the Registration Rights Agreement
between the Company and the Holder) has been declared effective and is available for the resale of all of the Warrant Shares into which this Warrant is exercisable at all times during the 20 Business
Day period and the notice period or (B) the Warrant Shares may be sold pursuant to Rule 144(k) under the Securities Act of 1933, as amended (the "Securities Act"). 




    2.  Delivery of Warrant Shares Upon Exercise.  Upon receipt of the facsimile transmission of an Exercise
Notice pursuant to paragraph 1 above, the Company shall, (A) in the case of a Cashless Exercise (as defined below), no later than the close of business on the third (3rd) Business Day
following the Exercise Date set forth in such Exercise Notice, (B) in the case of a Cash Exercise (as defined below) no later than the close of business on the later to occur of (i) the
third (3rd) Business Day following the Exercise Date set forth in such Exercise Notice and (ii) such later date on which the Company shall have received payment of the Exercise Price, and
(C) with respect to Warrant Shares which are disputed as described in paragraph 1 (b) above, and required to be delivered by the Company pursuant to the accountant's calculations
described therein, the close of business on the third (3rd) Business Day following the determination made pursuant to paragraph 1(b) (the "Delivery
Date"), issue and deliver or cause to be delivered to the Holder the number of Warrant Shares as shall be determined as provided herein. The Company shall effect delivery of
Warrant Shares to the Holder by, as long as the Company's designated transfer agent for the Common Stock (the "Transfer Agent") participates in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program ("FAST"), crediting the
account of the Holder or its nominee at DTC (as specified in the applicable 


2





 


Exercise Notice) with the number of Warrant Shares required to be delivered, no later than the close of business on such Delivery Date. In the event that the Transfer Agent is not a participant in
FAST, or if Warrant Shares are not otherwise eligible for delivery through FAST, or if the Holder so specifies in an Exercise Notice or otherwise in writing on or before the Exercise Date, the Company
shall effect delivery of Warrant Shares by delivering to the Holder or its nominee physical certificates representing such Warrant Shares, no later than the close of business on such Delivery Date.
Warrant Shares delivered to the Holder shall not contain any restrictive legend as long as the resale of such Warrant Shares is covered by an effective Registration Statement (as defined in the
Registration Rights Agreement) and such Holder represents in writing to the Company that such Warrant Shares (i) have
been or are being sold pursuant to such registration statement or pursuant to Rule 144 under the Securities Act, or (ii) may be made pursuant to Rule 144(k) under the Securities
Act, or any successor rule or provision. 


    3.  Failure to Deliver Warrant Shares.  



    (a)  Exercise Default.  In the event that, as a result of any action or failure to act on the part of the
Company (including without limitation a failure by the Company to have a sufficient number of shares of Common Stock authorized and reserved for issuance pursuant to exercise of the Warrants), the
Company does not deliver to a Holder certificates representing the number of Warrant Shares specified in the applicable Exercise Notice on or before the Delivery Date therefor and such failure
continues for one (1) Business Day (an "Exercise Default"), the Company shall pay to the Holder payments ("Exercise
Default Payments") in the amount of (i) (N/365) multiplied by (ii) the aggregate Exercise Price for the Warrant
Shares which are the subject of such Exercise Default multiplied by (iii) the lower of eighteen percent (18%) and the maximum rate permitted by
applicable law, where "N" equals the number of days elapsed between the original Delivery Date for such Warrant Shares and the date on which all of such
Warrant Shares are issued and delivered to the Holder. Amounts payable under this subparagraph 3(a) shall be paid to the Holder in immediately available funds on or before the fifth (5th) Business Day
of the calendar month immediately following the calendar month in which such amount has accrued. The Holder shall have the right to either (i) rescind the Exercise Notice at any time following
an Exercise Default or (ii) require delivery of Common Stock. 


    (b)  Buy-in.  Nothing herein shall limit a Holder's right to pursue actual damages for the
Company's failure to issue and deliver Warrant Shares in connection with an exercise on the applicable Delivery Date (including, without limitation, damages relating to any purchase of shares of
Common Stock by the Holder to make delivery on a sale effected in anticipation of receiving Warrant Shares upon exercise, such damages to be in an amount equal to (A) the aggregate amount paid
by the Holder for the shares of Common Stock so purchased (including broker and legal fees and commissions) minus (B) the aggregate amount of net proceeds, if any, received by the Holder from
the sale of the Warrant Shares issued by the Company pursuant to such exercise), and the Holder shall have the right to pursue all remedies available to it at law or in equity (including, without
limitation, a decree of specific performance and/or injunctive relief.) 


    (c)  Reduction of Exercise Price.  In the event that, as a result of any action or failure to act on the
part of the Company (including without limitation a failure by the Company to have a sufficient number of shares of Common Stock authorized and reserved for issuance pursuant to exercise of the
Warrants), a Holder has not received certificates representing the Warrant Shares by the fourth (4th) Business Day following an Exercise Default, the Holder may, upon written notice to the Company,
regain on such Business Day the rights of a Holder of this Warrant, or part thereof, with respect to the Warrant Shares that are the subject of such Exercise Default, and the Exercise Price for such
Warrant Shares shall be reduced by one half of one percent (0.5%) for each day beyond such fourth Business Day in which the Exercise Default continues. In such event, the Holder shall retain all of
the Holder's rights and remedies with respect to the Company's 



3





 


failure to deliver such Warrant Shares (including without limitation the right to receive the cash payments specified in subparagraph 3(a) above). 


    (d)  Holder of Record.  Each Holder shall, for all purposes, be deemed to have become the holder of
record of Warrant Shares on the Exercise Date of this Warrant, irrespective of the date of delivery of such Warrant Shares. Nothing in this Warrant shall be construed as conferring upon the Holder
hereof any rights as a stockholder of the Company prior to the Exercise Date. 




    4.  Payment of the Exercise Price.  The Holder may pay the Exercise Price in either of the following
forms or, at the election of Holder, a combination thereof: 



    (a)  Cash Exercise:  by delivery of immediately available funds. 



    (b)  Cashless Exercise:  by surrender of this Warrant to the Company together with a notice of cashless
exercise, in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows: 



	 	 	X	 	=	 	Y × (A-B)/A
	

where:	
 	

X	
 	

=	
 	

the number of Warrant Shares to be issued to the Holder;
	

 	
 	

Y	
 	

=	
 	

the number of Warrant Shares with respect to which this Warrant is being exercised;
	

 	
 	

A	
 	

=	
 	

the average of the closing prices of the Common Stock for the five (5) Trading Days immediately prior to (but not including) the Exercise Date; and
	

 	
 	

B	
 	

=	
 	

the Exercise Price;






provided, however, that the Holder may exercise this Warrant pursuant to a Cashless Exercise only if, on the Exercise Date, the resale of Warrant Shares
is not covered by an effective Registration Statement (as defined in the Registration Rights Agreement) that is available to the Holder on such date. 


    For
purposes of Rule 144 under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed
to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have been commenced, on the Issue Date. 



    5.  Anti-Dilution Adjustments, Distributions, Other Events.  The Exercise Price and the
number of Warrant Shares issuable hereunder shall be subject to adjustment from time to time as provided in this Section 5. In the event that any adjustment of the Exercise Price or number of
Warrant Shares as required herein results in a fraction of a cent or fraction of a share, as applicable, such exercise Price or number of Warrant Shares shall be rounded upon or down to the nearest
cent or share, as applicable. 


    (a)  Adjustment of Exercise Price and Number of Shares upon Issuance of Common Stock during the Issue
Period.  Except as otherwise provided in Section 5(d), in the event that, at any time during the one year period following the Issue Date (the
"Issue Period"), the Company issues, sells or agrees to sell, or in accordance with Section 5(c) hereof is deemed to have issued or sold
(i) any shares of Common Stock for no consideration (other than a stock split or stock dividend) or for a consideration per share less than $4.00 (such price, as adjusted for stock splits,
stock dividends and similar events, being referred to herein as the "Issue Price" and any such issuance or sale being referred to herein as a
"Below-Issue Price Issuance") and (ii) the aggregate gross purchase price in all such Below-Issue Price Issuance raised by the Company is equal
to or exceeds $2,500,000 (a "Ratchet Event"), then effective immediately upon such Ratchet Event, the the Exercise Price will be adjusted to a price
equal to the Effective Price (as defined below). The "Effective Price" of additional shares of Common Stock shall 


4





 


mean the quotient determined by dividing the total number of additional shares of Common Stock issued or sold in all such Below-Issue Price Issuances (or under
Section 5(c)(i)-(iv) deemed to have been issued or sold) into the aggregate consideration, calculated as set forth in Section 5(c)(v) hereof, raised by the Company in all
such Below-Issue Price Issuances. 


    (b)  Adjustment of Exercise Price and Number of Shares upon Issuance of Common Stock.  Except as
otherwise provided in Section 5(a) and Section 5(d) hereof, if and whenever after the initial issuance of this Warrant, the Company issues or sells, or in accordance with
Section 5(c) hereof 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
Exercise Price (as then in effect) (a "Dilutive
Issuance"), then effective immediately upon such Dilutive Issuance, the Exercise Price will be adjusted in accordance with the following formula: 



	E'	 	=	 	(E)(O+P/E
 (CSDO)






	where:	 	E'	 	=	 	the adjusted Exercise Price;
	

 	
 	

E	
 	

=	
 	

the then current Exercise 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 5(c) hereof, received by the Company upon such Dilutive Issuance; and
	

 	
 	

CSDO	
 	

=	
 	

the total number of shares of Common Stock Deemed Outstanding (as herein defined) immediately after the Dilutive Issuance.






    (c)  Effect on Exercise Price of Certain Events.  For purposes of determining the adjusted Exercise Price
under Section 5(a) and Section 5(b) hereof, the following will apply: 



    (i)  Issuance of Rights, Options or Convertible Securities.  Subject to
Section 5(c)(ii) below, if, after the date hereof, the Company in any manner 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 Exercise Price (as then in effect) on the date of issuance of such Option or
direct stock grant ("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 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 




5





 



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 Exercise 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.  


    (A) If
the Company in any manner issues, sells or agrees to sell 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 5(c)(ii)(B) if
applicable) is less than the Exercise 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
Exercise Price will be made upon the actual issuances of such Common Stock upon exercise, conversion or exchange of such Convertible Securities. 



    (B) If
the Company in any manner issues, sells or agrees to sell any Convertible Securities with a fluctuating or re-setting conversion or exercise price or
exchange ratio (a "Variable Rate Convertible Security"), then the price per share for which Common Stock is issuable upon such exercise, conversion or
exchange for purposes of the calculation contemplated by Section 5(c)(ii)(A) shall be deemed to be
the lowest price per share which would be applicable assuming that all holding period and other conditions to any discounts contained in such Convertible Security have been satisfied. 


    (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 Exercise Price in effect at such time shall be adjusted to the Exercise 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 the rights to exercise such
Option or to exercise, convert or exchange such Convertible Securities shall have expired or terminated, the Exercise Price then in effect will be readjusted to the Exercise Price which would have
been in effect at the time of such expiration or termination 




6





 



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. 




    (d)  Exceptions to Adjustment of Exercise Price.  No adjustment to the Exercise Price or the number of
Warrant Shares issuable pursuant to this Warrant will be made under paragraph 5(a) or Section 5(b) 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. 


    (e)  Subdivision or Combination of Common Stock.  If the Company, at any time after the initial issuance
of this Warrant, subdivides (by any stock split, stock dividend, recapitalization, reorganization, reclassification or otherwise) its shares of Common Stock into a greater number of shares, then after
the date of record for effecting such subdivision, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company, at any time after the initial
issuance of this Warrant, combines (by reverse stock split, recapitalization, reorganization, reclassification or otherwise) its shares of Common Stock into a smaller number of shares, then, after the
date of record for effecting such combination, the Exercise Price in effect immediately prior to such combination will be proportionally increased. In the event of any adjustment to the Exercise Price
arising from an event specified in this subparagraph (e), the number of shares of Common Stock into which this Warrant is exercisable will be proportionately increased or reduced, as the case may be. 



7





 


    (f)  Distributions.  If the Company or any of its subsidiaries shall at any time distribute to holders of
Common Stock (or to a holder, other than the Company, of the common stock of any such subsidiary) cash, evidences of indebtedness or other securities or assets (other than cash dividends or
distributions payable out of earned surplus or net profits for the current or the immediately preceding year) including any dividend or distribution in shares of capital stock of a subsidiary of the
Company (collectively, a "Distribution") then, in any such case, the Holder of this Warrant shall be entitled to receive, at the same time as such
assets are received by a holder of such stock, an amount and type of such Distribution as though such Holder were a holder on the record date therefor of a number of shares of Common Stock into which
this Warrant is exercisable as of such record date (such number of shares to be determined at the Exercise Price then in effect and without regard to any limitation on exercise of this Warrant that
may exist pursuant to the terms hereof or otherwise). 


    (g)  Notice of Consolidation or Merger.  In the event of a merger, consolidation, business combination,
tender offer, exchange of shares, recapitalization, reorganization, redemption or other similar event, as
a result of which shares of Common Stock of the Company shall be changed into the same or a different number of shares of the same or another class or classes of stock or securities or other assets of
the Company or another entity or there is a sale of all or substantially all the Company's assets (a "Corporate Change"), then (i) this Warrant
shall be exercisable into such class and type of securities or other assets as the Holder would have received had the Holder exercised this Warrant immediately prior to such Corporate Change and,
(ii) at the Holder's request, any successor to the Company or surviving entity in such Corporate Change shall issue to the Holder a new warrant consistent with the foregoing provisions and
evidencing the Holder's right to purchase the same number of shares issuable upon exercise of this Warrant for the aggregate Exercise Price upon exercise thereof; provided, however, that Company may
not effect any Corporate Change unless (i) it (or, in the case of a tender offer, the offering party) first shall have given twenty (20) days' notice to the Holder hereof of any
Corporate Change and makes a public announcement of such event before or at the same time that it gives such notice (it being understood that the filing by the Company of a Form 8-K
for the purpose of disclosing the anticipated consummation of the Corporate Change shall constitute such a notice for purposes of this provision) and (ii) it requires the resulting successor or
acquiring entity (if not the Company) to assume by written instrument the obligations of the Company hereunder and under the Purchase Agreement and the Registration Rights Agreement. 


    (h)  Adjustments, Additional Shares, Securities or Assets.  In the event that at any time, as a result of
an adjustment made pursuant to this Section 5, the Holder of this Warrant shall, upon exercise of this Warrant, become entitled to receive securities or assets (other than Common Stock) then,
wherever appropriate, all references herein to shares of Common Stock shall be deemed to refer to and include such shares and/or other securities or assets; and thereafter the number of such shares
and/or other securities or assets shall be subject to adjustment from time to time in a manner and upon terms as nearly equivalent as practicable to the provisions of this Section 5. 


    (i)  Limitation on Exercise.  



    (x) Notwithstanding
anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the Holder 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 Holder and its Affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act) under 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 




8





 



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 Notice hereunder will constitute a representation by the Holder 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 Notice is permitted under this paragraph. By written notice to the Company, the Holder may waive the provisions of this
Section but (i) any such waiver or increase 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 Holder and not to any other holder of Warrants. 


    (y) Notwithstanding
anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the Holder 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 Holder and its Affiliates under 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 Notice hereunder will constitute a representation by the Holder 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 Notice is permitted under this paragraph. By written notice to the Company, the Holder may waive the
provisions of this Section but (i) any such waiver or increase 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 Holder and not to any other holder of Warrants. 





    6.  Fractional Interests.  No fractional shares or scrip representing fractional shares shall be issuable
upon the exercise of this Warrant, but on exercise of this Warrant, the Holder hereof may purchase only a whole number of shares of Common Stock. If, on exercise of this Warrant, the Holder hereof
would be entitled to a fractional share of Common Stock or a right to acquire a fractional share of Common Stock, such fractional share shall be disregarded and the number of shares of Common Stock
issuable upon exercise shall be rounded up or down to the nearest whole number of shares of Common Stock. 


    7.  Transfer of this Warrant.  The Holder may sell, transfer, assign, pledge or otherwise dispose of this
Warrant, in whole or in part, as long as such sale or other disposition is made pursuant to an effective registration statement or an exemption to the registration requirements of the Securities Act,
and applicable state laws. Upon such transfer or other disposition, the Holder shall deliver a written notice to Company, substantially in the form of the Transfer Notice attached hereto as
Exhibit B (the "Transfer Notice"), indicating the person or persons to whom this Warrant shall be transferred and, if less than all of this
Warrant is transferred or this Warrant is transferred in parts, the number of Warrant Shares to be covered by the part of this Warrant to be transferred to each such person. Within three
(3) Business Days of receiving a Transfer Notice and the original of this Warrant, the Company shall deliver to each transferee designated by the Holder a Warrant or Warrants of like tenor and
terms for the appropriate number of Warrant Shares. 


    8.  Benefits of this Warrant.  Nothing in this Warrant shall be construed to confer upon any person other
than the Holder of this Warrant any legal or equitable right, remedy or claim under this Warrant and this Warrant shall be for the sole and exclusive benefit of the Holder of this Warrant. 


    9.  Loss, theft, destruction or mutilation of Warrant.  Upon receipt by the Company of evidence of the
loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) 


9





 


of indemnity or security reasonably satisfactory to the Company, and upon surrender of this Warrant, if mutilated, the Company shall execute and deliver a new Warrant of like tenor and date. 


    10.  Notice or Demands.  Except as otherwise provided herein, any notice, demand or request required or
permitted to be given pursuant to the terms of this Warrant shall be in writing and shall be deemed given (i) when delivered personally or by verifiable facsimile transmission (with an original
to follow) on or before 5:00 p.m., eastern time, on a Business Day or, if such day is not a Business Day, on the next succeeding Business Day, (ii) on the next Business Day after timely
delivery to a nationally-recognized overnight courier and (iii) on the Business Day actually received if deposited in the U.S. mail (certified or registered mail, return receipt requested,
postage prepaid), addressed as follows: 


    If
to the Company: 





Click2learn, Inc.

110 110th Avenue NE

Bellevue, WA 98008

Attn: General Counsel

Tel: 425-637-5829

Fax: 425-637-1540 






    with
a copy to: 





Scott
L. Gelband, Esq.

Perkins Coie LLP

1201 Third Avenue, Suite 4800

Seattle, WA 98104

Tel: 206-583-8888

Fax: 206-583-8500 






and
if to the Holder, to such address as shall be designated by the Holder in writing to the Company. 


    11.  Applicable Law.  All questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Warrants (whether brought against a party hereto or its respective
affiliates,
directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan. Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or
with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Warrant), and hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper. Each party hereto hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto (including its affiliates, agents, officers, directors and employees)
hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Warrant or the transactions
contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Warrant, then the prevailing party in such action or proceeding shall be reimbursed by the
other party for its attorneys fees and other 


10





 


costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. 


    12.  Successors and Assigns.  This Warrant shall be binding on and inure to the benefit of the parties
hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any entity or person other than the Company and the Holder
any legal or equitable right, remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder and their successors and assigns. 


[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK] 


11





 


    IN WITNESS WHEREOF, the undersigned has executed this Warrant as of
the                            day of November, 2001. 



	 	 	CLICK2LEARN, INC.
	

 	
 	

By:	
 	


	

 	
 	

Name:

Title:

Warrant No. (Number)






12






  



 
 

EXHIBIT A to WARRANT
  
    EXERCISE NOTICE    
  


    The undersigned Holder hereby exercises the right to purchase                of the shares of Common Stock
("Warrant Shares") of CLICK2LEARN, INC. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in
the warrant issued to the Holder by the Company on November   , 2001. Unless otherwise specified in writing to the Company, the undersigned represents to the Company that the
shares of Common Stock covered by this notice have been or will be sold pursuant to the terms of an effective registration statement, or pursuant to an exemption from the registration requirements of
the Securities Act of 1933, as amended. 


	1.
	Form
of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as: 



                       
a Cash Exercise with respect to                              Warrant Shares; and/or 


                       
a Cashless Exercise with respect to Warrant Shares. 


	2.
	Payment
of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holder shall
pay the sum of $               to the Company in accordance with the terms of the Warrant, which sum represents the aggregate Exercise Price for the number of shares
of Common Stock to which this Exercise Notice relates.



	3.
	Delivery
of Warrant Shares. The Company shall deliver to the Holder                              Warrant Shares
in accordance with the terms of the Warrant.



	4.
	The
undersigned agrees with and represents to the Company that it is an "accredited investor" as such term is defined in Rule 501 of Regulation D under the Securities
Act of 1933, as amended (the "Securities Act,") and that the Warrant Shares are acquired for the account of the undersigned for investment and not with a view to, or for sale in connection with, any
distribution or public offering within the meaning of the Securities Act.



	5.
	By
its delivery of this Form of Election To Purchase, the Holder represents and warrants to the Company that in giving effect to the exercise evidenced hereby the Holder will not
beneficially own in excess of the number of shares of Common Stock (determined in accordance with Section 13(d) of the Securities Exchange Act of 1934) permitted to be owned under
Section 5(h) of this Warrant to which this notice relates. 






	Date:	 	
	 	 
	

 	
 	

 Name of Registered Holder	
 	

 





	By:	 	 	 
	 	
 Name:

Title:

	 	 




A–1






  



 
 

EXHIBIT B to WARRANT
  
    TRANSFER NOTICE    
  


FOR
VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells, assigns and transfers unto the person or persons named below the right to purchase
               shares of the Common Stock of CLICK2LEARN, INC. evidenced by the attached Warrant. 



	Date:	 	
	 	 
	

 	
 	

 Name of Registered Holder	
 	

 





	By:	 	 	 
	 	
 Name:

Title:	 	 
	

Transferee Name and Address:	
 	

 
	

	
 	

 
	

	
 	

 
	

	
 	

 




B–1









QuickLinks


FORM OF WARRANT TO PURCHASE COMMON STOCK OF CLICK2LEARN, INC.


EXHIBIT A to WARRANT EXERCISE NOTICE


EXHIBIT B to WARRANT TRANSFER NOTICE