Document:

Exhibit 4.6

 

THIS WARRANT AND THE SHARES ISSUABLE
HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.

 

WARRANT TO PURCHASE STOCK

 

	
  Corporation:

  	
   

  	
  Metastorm Inc., a Maryland
  Corporation

  
	
  Number of Shares:

  	
   

  	
  88,889

  
	
  Class of Stock:

  	
   

  	
  Common Stock

  
	
  Initial Exercise Price:

  	
   

  	
  $1.35 per share

  
	
  Issue Date:

  	
   

  	
  February 21, 2002

  
	
  Expiration Date:

  	
   

  	
  February 21, 2009
  (Subject to Section 4.1)

  

 

THIS WARRANT CERTIFIES THAT, for good and valuable
consideration, the receipt of which is hereby acknowledged, COMERICA BANK -
CALIFORNIA or its assignee (“Holder”) is entitled to purchase the number of
fully paid and nonassessable shares of the class of securities (the “Shares”)
of the corporation (the “Company”) at the initial exercise price per Share (the
“Warrant Price”) all as set forth above and as adjusted pursuant to Article 2
of this warrant, subject to the provisions and upon the terms and conditions
set forth in this warrant.

 

ARTICLE 1.                                EXERCISE.

 

1.1                                 Method of Exercise.  Holder
may exercise this warrant by delivering this warrant and a duly executed Notice
of Exercise in substantially the form attached as Appendix 1 to the
principal office of the Company.  Unless
Holder is exercising the conversion right set forth in Section 1.2, Holder
shall also deliver to the Company a check for the aggregate Warrant Price for
the Shares being purchased.

 

1.2                                 Conversion Right.  In
lieu of exercising this warrant as specified in Section 1.1, Holder may
from time to time convert this warrant, in whole or in part, into a number of
Shares determined by dividing (a) the aggregate fair market value of the
Shares or other securities otherwise issuable upon exercise of this warrant
minus the aggregate Warrant Price of such Shares by (b) the fair market
value of one Share.  The fair market
value of the Shares shall be determined pursuant to Section 1.4.

 

1.3                                 Agreement to be Bound by Stockholders
Agreement.  Exercise of this Warrant pursuant to either Section 1.1
or 1.2 shall be contingent on Holder’s agreement to be bound by the terms and
conditions of that certain Second Amended and Restated Stockholders Agreement
dated as of May 7, 2001, by and among the Company, the Purchasers, the
holders of Series A Preferred Stock, and the other holders of Common Stock
(each as defined therein) listed on Schedule 1 thereto, as amended and/or
restated from time to time (the “Stockholders Agreement”).

 

1.4                                 Fair Market Value.  If
the Shares are traded regularly in a public market, the fair market value of
the Shares shall be the closing price of the Shares (or the closing price of
the Company’s stock into which the Shares are convertible) reported for the
business day immediately before Holder delivers its Notice of Exercise to the
Company.  If the Shares are not regularly
traded in a public market, the Board of Directors of the Company shall
determine fair market value in its reasonable good faith judgment.

 

 

1.5                                 Delivery of Certificate and New Warrant.  Promptly
after Holder exercises or converts this warrant, the Company shall deliver to
Holder certificates for the Shares acquired and, if this warrant has not been
fully exercised or converted and has not expired, a new warrant representing
the Shares not so acquired.

 

1.6                                 Replacement of Warrants.  On
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this warrant and, in the case of loss, theft or
destruction, on delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company or, in the case of mutilation, on surrender and
cancellation of this warrant, the Company at its expense shall execute and
deliver, in lieu of this warrant, a new warrant of like tenor.

 

1.7                                 Repurchase on Sale, Merger, or Consolidation
of the Company.

 

1.7.1                        “Acquisition.”  For the purpose of this warrant, “Acquisition”
means any sale, license, or other disposition of all or substantially all of
the assets (including intellectual property) of the Company, or any
reorganization, consolidation, or merger of the Company where the holders of
the Company’s securities before the transaction beneficially own less than 50%
of the outstanding voting securities of the surviving entity after the
transaction.

 

1.7.2                        Assumption of Warrant.  If
upon the closing of any Acquisition the successor entity assumes the
obligations of this warrant, then this warrant shall be exercisable for the
same securities, cash, and property as would be payable for the Shares issuable
upon exercise of the unexercised portion of this warrant as if such Shares were
outstanding on the record date for the Acquisition and subsequent closing.  The Warrant Price shall be adjusted
accordingly.  The Company shall use
reasonable efforts to cause the surviving corporation to assume the obligations
of this warrant.

 

1.7.3                        Nonassumption.  If
upon the closing of any Acquisition the successor entity does not assume the
obligations of this warrant and Holder has not otherwise exercised this warrant
in full, then Holder shall have the option either to (a) deem this warrant
to have been automatically converted pursuant to Section 1.2 and
thereafter Holder shall participate in the Acquisition on the same terms as
other holders of the same class of securities of the Company; or (b) require
the Company to purchase this warrant for cash upon the closing of the
Acquisition for an amount per Share equal to three (3) times the Warrant
Price.

 

1.8                                 Success Fee.  The Company, at Holder’s
discretion, shall pay a $50,000 success fee (the “Success Fee”) in lieu of this
Warrant, payable upon the earlier of the fifth (5th) anniversary of
the effective date of that certain Loan and Security Agreement (the “Agreement”)
dated concurrently herewith, or the completion of a Liquidity Event.  Notwithstanding the foregoing, payment of the
Success Fee shall be contingent on Holder’s surrender and cancellation of this
Warrant.  Liquidity Event is defined as:

 

1.                                       The closing of any underwritten public
offering (“Public Offering”) involving the sale of the Borrower’s debt or
equity securities for net cash proceeds of at least $5,000,000;

 

2.                                       The sale of all or a substantial part of the
assets of the Borrower; or

 

3.                                       The completion of any other transaction (e.g.
a merger, consolidation, issue of capital stock, sale of capital stock by
shareholders) resulting in a change of control of the Borrower.

 

2

 

ARTICLE 2.                                ADJUSTMENTS TO THE SHARES.

 

2.1                                 Stock Dividends, Splits, Etc.  If
the Company declares or pays a dividend on its common stock payable in common
stock, or other securities, subdivides the outstanding common stock into a
greater amount of common stock, then upon exercise of this warrant, for each
Share acquired, Holder shall receive, without cost to Holder, the total number
and kind of securities to which Holder would have been entitled had Holder
owned the Shares of record as of the date the dividend or subdivision occurred.

 

2.2                                 Reclassification, Exchange, or Substitution.  Upon
any reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this warrant, Holder shall be entitled to receive, upon exercise
or conversion of this warrant, the number and kind of securities and property
that Holder would have received for the Shares if this warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event.  Such an event shall include
any automatic conversion of the outstanding or issuable securities of the
Company of the same class or series as the Shares to common stock pursuant to
the terms of the Company’s Articles of Incorporation upon the closing of a
registered public offering of the Company’s common stock.  The Company or its successor shall promptly
issue to Holder a new warrant for such new securities or other property.  The new warrant shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article 2 including, without limitation, adjustments
to the Warrant Price and to the number of securities or property issuable upon
exercise of the new warrant.  The
provisions of this Section 2.2 shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events.

 

2.3                                 Adjustments for Combinations, Etc.  If
the outstanding Shares are combined or consolidated, by reclassification or
otherwise, into a lesser number of shares, the Warrant Price shall be
proportionately increased.  If the
outstanding Shares are combined or consolidated, by reclassification or
otherwise, into a greater number of shares, the Warrant Price shall be
proportionately decreased.

 

2.4                                 Adjustments for Diluting Issuances.  The
Warrant Price and the number of Shares issuable upon exercise of this warrant
shall be subject to adjustment, from time to time, in the manner set forth on Exhibit A,
if attached, in the event of Diluting Issuances (as defined on Exhibit A).

 

2.5                                 No Impairment.  The
Company shall not, by amendment of its Articles of Incorporation or through a
reorganization, transfer of assets, consolidation, merger, dissolution, issue,
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed under
this warrant by the Company, but shall at all times in good faith assist in
carrying out all the provisions of this Article 2 and in taking all such
action as may be necessary or appropriate to protect Holder’s rights under this
Article against impairment.

 

2.6                                 Certificate as to Adjustments.  Upon
each adjustment of the Warrant Price, the Company at its expense shall promptly
compute such adjustment, and furnish Holder with a certificate of its Chief
Financial Officer setting forth such adjustment and the facts upon which such
adjustment is based.  The Company shall,
upon written request, furnish Holder a certificate setting forth the Warrant
Price in effect upon the date thereof and the series of adjustments leading to
such Warrant Price.

 

ARTICLE 3.                                REPRESENTATIONS AND COVENANTS OF THE COMPANY.

 

3.1                                 Representations and Warranties.  The
Company hereby represents and warrants to the Holder as follows:

 

3

 

(a)                                  The initial Warrant Price referenced on the
first page of this warrant is not greater than the fair market value of
the Shares as of the date of this warrant.

 

(b)                                 All Shares which may be issued upon the
exercise of the purchase right represented by this warrant, and all securities,
if any, issuable upon conversion of the Shares, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws.

 

(c)                                  The Company’s capitalization table attached
to this warrant is true and complete as of the Issue Date.

 

3.2                                 Notice of Certain Events.  If
the Company proposes at any time (a) to declare any dividend or
distribution upon its common stock, whether in cash, property, stock, or other
securities and whether or not a regular cash dividend; (b) to offer for
subscription pro rata to the holders of any class or series of its stock any
additional shares of stock of any class or series or other rights; (c) to
effect any reclassification or recapitalization of common stock; or (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up, then, in connection with each such event, the Company
shall give Holder (1) at least 20 days prior written notice of the date on
which a record will be taken for such dividend, distribution, or subscription
rights (and specifying the date on which the holders of common stock will be
entitled thereto) or for determining rights to vote, if any, in respect of the
matters referred to in (a) and (b) above; and (2) in the case of
the matters referred to in (c) and (d) above at least 20 days prior
written notice of the date when the same will take place (and specifying the
date on which the holders of common stock will be entitled to exchange their
common stock for securities or other property deliverable upon the occurrence
of such event).

 

3.3                                 Information Rights.  So
long as the Holder holds this warrant and/or any of the Shares, the Company
shall deliver to the Holder (a) promptly after mailing, copies of all
communiqués to the shareholders of the Company, (b) within ninety (90)
days after the end of each fiscal year of the Company, the annual audited
financial statements of the Company certified by independent public
accountants of recognized standing and (c) within forty-five (45) days
after the end of each of the first three quarters of each fiscal year, the
Company’s quarterly, unaudited financial statements.

 

3.4                                 Market Stand-Off Agreement.  Holder hereby agrees that, in connection with
the Company’s initial Public Offering, it shall not, to the extent requested by
the underwriters managing any underwritten offering of securities of the
Company, sell, make any short sale of, loan, grant any option for the purchase
of, or otherwise dispose of (other than to donees who agree to be similarly
bound) any Shares (other than those included in the registration, if any)
without the prior written consent of such underwriters, for such period of time
(not to exceed one hundred eighty (180) days) following the effective date of a
registration statement of the Company filed under the Securities Act of 1933 as
may be requested by the underwriters; provided, however, that such agreement
shall be applicable only to the first such registration statement of the
Company which covers shares (or securities) to be sold on its behalf to the
public in a Public Offering and that the officers and directors of the Company
who own stock of the Company, together with all holders of one percent (1%) or
more of the Company’s outstanding stock, also agree to such restrictions.  In order to enforce the foregoing covenant,
the Company may impose stop-transfer instructions with respect to the Shares
(and the shares or securities of every other person subject to the foregoing
restriction).  Notwithstanding the
foregoing, Holder shall only be bound to the provisions of this Section 3.4
if the underwriters agree that any early release from any market stand-off
agreement for any person in connection with a Public Offering shall be pro-rata
among such person and the other holders of securities subject to the market
stand-off agreement.

 

4

 

3.5                                 Registration Under Securities Act of 1933, as
Amended.  The Company agrees that the Shares or, if the
Shares are convertible into common stock of the Company, such common stock,
shall be subject to the registration rights set forth on Exhibit B, if
attached.

 

ARTICLE 4.                                MISCELLANEOUS.

 

4.1                                 Term: Notice of Expiration.  This
warrant is exercisable in whole or in part, at any time and from time to time
on or before the Expiration Date set forth above; provided, however, that if
the Company completes its initial public offering within the three-year period
immediately prior to the Expiration Date, the Expiration Date shall
automatically be extended until the third anniversary of the effective date of
the Company’s initial public offering.  If
this warrant has not been exercised prior to the Expiration Date, this warrant
shall be deemed to have been automatically exercised on the Expiration Date by “cashless”
conversion pursuant to Section 1.2.

 

4.2                                 Legends.  This warrant and the Shares
(and the securities issuable, directly or indirectly, upon conversion of the
Shares, if any) shall be imprinted with a legend in substantially the following
form:

 

THIS SECURITY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

 

4.3                                 Compliance with Securities Laws on Transfer.  This
warrant and the Shares issuable upon exercise of this warrant (and the
securities issuable, directly or indirectly, upon conversion of the Shares, if
any) may not be transferred or assigned in whole or in part without (i) compliance
with applicable federal and state securities laws by the transferor and the
transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company) and (ii) the transferee’s agreement to be bound by the
Stockholders Agreement.  The Company
shall not require Holder to provide an opinion of counsel if the transfer is to
an affiliate of Holder or if there is no material question as to the
availability of current information as referenced in Rule 144(c), Holder
represents that it has complied with Rule 144(d) and (e) in
reasonable detail, the selling broker represents that it has complied with Rule 144(f),
the Company is provided with a copy of Holder’s notice of proposed sale.

 

4.4                                 Transfer Procedure.  Subject
to the provisions of Section 4.3, Holder may transfer all or part of this
warrant or the Shares issuable upon exercise of this warrant (or the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) by
giving the Company notice of the portion of the warrant being transferred
setting forth the name, address and taxpayer identification number of the
transferee and surrendering this warrant to the Company for reissuance to the
transferee(s) (and Holder, if applicable); provided, however,
that so long as the transferee affiliate agrees to be bound by the Stockholders
Agreement, Holder may transfer all or part of this warrant to its affiliates,
including, without limitation, Comerica Incorporated, at any time without
notice to the Company, and such affiliate shall then be entitled to all the
rights of Holder under this warrant and any related agreements, and the Company
shall cooperate fully in ensuring that any stock issued upon exercise of this
warrant is issued in the name of the affiliate that exercises the warrant.  The terms and conditions of this warrant shall
inure to the benefit of, and be binding upon, the Company and the holders
hereof and their respective permitted successors and assigns.  The Company shall have the right to refuse to
transfer any portion of this warrant to any person who directly competes with
the Company, unless the Company is filing financial information with the SEC
pursuant to the Securities Exchange Act of 1934.

 

5

 

4.5                                 Notices.  All notices and other
communications from the Company to the Holder, or vice versa, shall be deemed
delivered and effective when given personally or mailed by first-class
registered or certified mail, postage prepaid, at such address as may have been
furnished to the Company or the Holder, as the case may be, in writing by the
Company or such Holder from time to time.  All notices to the Holder shall be addressed
as follows:

 

Comerica Bank – California

Attn:  Warrant Administrator

Technology and Life Sciences Division

P.O. Box 7279

San Francisco, CA  94120-7279

 

4.6                                 Waiver.  This warrant and any term
hereof may be changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of such change,
waiver, discharge or termination is sought.

 

4.7                                 Attorneys’ Fees.  In
the event of any dispute between the parties concerning the terms and
provisions of this warrant, the party prevailing in such dispute shall be
entitled to collect from the other party all costs incurred in such dispute,
including reasonable attorneys’ fees.

 

4.8                                 Governing Law.  This
warrant shall be governed by and construed in accordance with the laws of the
State of California, without giving effect to its principles regarding
conflicts of law.

 

	
   

  	
  Metastorm Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Avi Hoffer

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Avi
  Hoffer

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Chris Desautelle

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Chris
  Desautelle

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  CFO

  
						

 

Authorized signatories under Corporate
Resolutions to Borrow or an authorized signer(s) under a resolution
covering warrants must sign the warrant.

 

6

 

APPENDIX 1

 

NOTICE OF EXERCISE

 

1.                                       The undersigned hereby elects to purchase                         
shares of the common stock of Metastorm Inc.
pursuant to the terms of the attached warrant, and tenders herewith payment of
the purchase price of such shares in full.

 

1.                                       The undersigned hereby elects to convert the
attached warrant into shares in the manner specified in the warrant.  This conversion is exercised with respect to                         
of the shares covered by the warrant.

 

[Strike paragraph that does
not apply.]

 

2.                                       Please issue a certificate or certificates representing
said shares in the name of the undersigned or in such other name as is
specified below:

 

Comerica Bank – California

Attn: Warrant Administrator

Technology and Life Sciences Division

P.O. Box 7279

San Francisco, CA  94120-7279

 

3.                                       The undersigned represents it is acquiring
the shares solely for its own account and not as a nominee for any other party
and not with a view toward the resale or distribution thereof except in compliance
with applicable securities laws.

 

	
  COMERICA BANK – CALIFORNIA or

  	
   

  
	
  Registered Assignee

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (Signature)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (Date)

  	
   

  

 

 

EXHIBIT A

 

COMERICA BANK – CALIFORNIA

ANTI-DILUTION AGREEMENT

(for Common Stock Warrants)

 

This Anti-dilution Agreement is entered into as of February 21, 2002, by and between Comerica Bank – California
(“Purchaser”) and Metastorm Inc.
(“the Company”).

 

RECITALS

 

A.                                   Concurrently with the execution of this
Anti-dilution Agreement, the Purchaser is purchasing from the Company a Warrant
to Purchase Stock (the “Warrant”) pursuant to which Purchaser has the right to
acquire from the Company the Shares (as defined in the Warrant).

 

B.                                     By this Anti-dilution Agreement, the
Purchaser and the Company desire to set forth the adjustment in the number of
Shares issuable upon exercise of the Warrant as a result of a Diluting Issuance
(as defined below).

 

C.                                     Capitalized terms used herein shall have the
same meaning as set forth in the Warrant.

 

NOW, THEREFORE, in consideration of the mutual
promises, covenants and conditions hereinafter set forth, the parties hereto
mutually agree as follows:

 

1.                                       Definitions.  As used in this Anti-dilution
Agreement, the following terms have the following respective meanings:

 

(a)                                  “Option” means any right, option or warrant
to subscribe for, purchase or otherwise acquire common stock or Convertible
Securities.

 

(b)                                 “Convertible Securities” means any evidences
of indebtedness, shares of stock or other securities directly or indirectly
convertible into or exchangeable for common stock.

 

(c)                                  “Issue” means to grant, issue, sell, assume
or fix a record date for determining persons entitled to receive any security
(including Options), whichever of the foregoing is the first to occur.

 

(d)                                 “Additional Common Shares” means all shares
of common stock Issued (or, deemed to be Issued) by the Company after the date
hereof, other than (a) shares of common stock Issued or Issuable upon the
conversion of shares of the preferred stock outstanding on the date hereof (“Preferred
Stock”); (b) shares of common stock Issued or Issuable to employees, directors
or consultants of the Company pursuant to a plan or arrangement approved by the
Board of Directors of the Company (the “Board”) (provided that the Board shall
also approve the grant of shares of common stock or other securities
exercisable for such shares of common stock in connection therewith); (c) shares
of common stock Issued pursuant to a merger or consolidation of the Company
with or into any other corporation or corporations approved in accordance with
the articles of incorporation of the Company, as amended and/or restated, from
time to time (the “Charter”); (d) shares of common stock Issued in
connection with an acquisition approved in accordance with the Charter; (e) shares
of common stock Issued or Issuable to commercial banking or equipment lease
financing entities in connection with banking or lease financing transactions
approved by the Board; (f) shares of common stock and or Preferred Stock
issued pursuant to Section 6.7 of the Stock Purchase Agreement by and
among the Company and the purchasers of Series B 

 

 

Preferred Stock listed on
Schedule 1 thereto, dated as of May 7, 2001; (g) Options(s) Issued
to Riggs Capital Partners, LLC (“Riggs”) to purchase Series A Preferred
Stock up to that number of shares of Series A Preferred Stock (subject to
appropriate adjustment for any Recapitalization Event (as defined in the
Charter)) owned by Riggs on the Series B Original Issue Date (as defined
in the Charter) in exchange for the transfer to the Company by Riggs of a
number of shares of Series A Preferred Stock equal to or greater than that
number of shares for which such Option(s) is (are) exercisable, provided
that such Option(s) shall not be exercisable under any circumstance by
Riggs (but only by a transferee thereof); or (h) Option(s) Issued to
Riggs to purchase up to that number of shares of common stock equal to the
number of shares of common stock for which the warrant to purchase common stock
owned by Riggs on the Series B Original Issue Date transferred to the
Company by Riggs is exercisable immediately prior to such transfer, provided
that such Option(s) shall not be exercisable under any circumstance by
Riggs (but only by a transferee thereof).

 

2.                                       Deemed Issuance of Additional Common Shares.  The
shares of common stock ultimately Issuable upon exercise of an Option
(including the shares of common stock ultimately Issuable upon conversion or
exercise of a Convertible Security Issuable pursuant to an Option) are deemed
to be Issued when the Option is Issued, provided  that, if the
Company fixes a record date for the determination of holders of any class of
securities entitled to receive any such Options, then shares of common stock
ultimately Issuable upon exercise of an Option shall be deemed Issued as of the
close of business on such record date, provided  further that in
no event shall Additional Common Shares be deemed to be Issued if the
consideration per share of such Additional Common Shares would be less than the
Warrant Price in effect on the date of and immediately prior to such issuance,
or the record date.  The shares of common
stock ultimately Issuable upon conversion or exercise of a Convertible Security
(other than a Convertible Security Issued pursuant to an Option) shall be
deemed Issued upon Issuance of the Convertible Security provided that, if the
Company fixes a record date for the determination of holders of any class of
securities entitled to receive any such Convertible Securities, then shares of
common stock ultimately Issuable upon the conversion or exchange of such Convertible
Securities, shall be deemed to be Issued as of the close of business on such
record date, provided  further, that no Additional Common Shares
shall be deemed to have been Issued unless the consideration per share of such
Additional Common Shares would be less than the Warrant Price in effect on the
date of and immediately prior to such issuance, or the record date.  The maximum amount of common stock Issuable is
determined without regard to any future adjustments permitted under the
instrument creating the Options or Convertible Securities.

 

3.                                       Adjustment of Warrant Price for Diluting
Issuances.

 

3.1                                 Weighted Average Adjustment.  If
the Company issues Additional Common Shares after the date of the Warrant and
the consideration per Additional Common Share (determined pursuant to Section 9)
is less than the Warrant Price in effect immediately before such Issue (a “Diluting
Issuance”), the Warrant Price in effect immediately before such Issue shall be
reduced, concurrently with such Issue, to a price (calculated to the nearest
hundredth of a cent) determined by multiplying the Warrant Price by a fraction:

 

(a)                                  the numerator of which is the amount of
common stock outstanding immediately before such Issue plus the amount of
common stock that the aggregate consideration received by Company for the
Additional Common Shares would purchase at the Warrant Price in effect
immediately before such Issue, and

 

(b)                                 the denominator of which is the amount of
common stock outstanding immediately before such Issue plus the number of such
Additional Common Shares.

 

9

 

3.2                                 Adjustment of Number of Shares.  Upon
each adjustment of the Warrant Price, the number of Shares Issuable upon
exercise of the Warrant shall be increased to equal the quotient obtained by
dividing (a) the product resulting from multiplying (i) the number of
Shares Issuable upon exercise of the Warrant and (ii) the Warrant Price,
in each case as in effect immediately before such adjustment, by (b) the
adjusted Warrant Price.

 

3.3                                 Securities Deemed Outstanding.  For
the purpose of this Section 3, all securities Issuable upon exercise of
any outstanding Convertible Securities or Options, Warrants, or other rights to
acquire securities of the Company shall be deemed to be outstanding.

 

4.                                       No Adjustment for Issuances Following Deemed
Issuances.  No adjustment to the Warrant Price shall be
made upon the exercise of Options or conversion of Convertible Securities.

 

5.                                       Adjustment Following Changes in Terms of Options
or Convertible Securities.  If the consideration payable to, or the amount
of common stock Issuable by, the Company increases or decreases, respectively,
pursuant to the terms of any outstanding Options or Convertible Securities,
upon the exercise, conversion or exchange thereof, the Warrant Price shall be
recomputed to reflect such increase or decrease insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities.  Any changes in the Warrant
Price that occurred after such Issuance because other Additional Common Shares
were Issued or deemed Issued shall also be recomputed.

 

6.                                       Recomputation Upon Expiration of Options or
Convertible Securities.  The Warrant Price computed upon the original
Issue of any Options or Convertible Securities, and any subsequent adjustments
based thereon, shall be recomputed when any Options or rights of conversion
under Convertible Securities expire without having been exercised.  In the case of Convertible Securities or
Options for common stock, the Warrant Price shall be recomputed as if the only
Additional Common Shares Issued were the shares of common stock actually Issued
upon the exercise of such securities, if any, and as if the only consideration
received therefor was the consideration actually received upon the Issue,
exercise or conversion of the Options or Convertible Securities.  In the case of Options for Convertible
Securities, the Warrant Price shall be recomputed as if the only Convertible
Securities Issued were the Convertible Securities actually Issued upon the
exercise thereof, if any, and as if the only consideration received therefor
was the consideration actually received by the Company (determined pursuant to Section 9),
if any, upon the Issue of the Options for the Convertible Securities.

 

7.                                       Limit on Readjustments.  No
readjustment of the Warrant Price pursuant to Sections 5 or 6 shall increase
the Warrant Price more than the amount of any decrease made in respect of the
Issue of any Options or Convertible Securities.

 

8.                                       30 Day Options.  In
the case of any Options that expire by their terms not more than 30 days after
the date of Issue thereof, no adjustment of the Warrant Price shall be made
until the expiration or exercise of all such Options.

 

9.                                       Computation of Consideration.  The
consideration received by the Company for the Issue of any Additional Common
Shares shall be computed as follows:

 

(a)                                  Cash shall be valued at the amount of cash received by the Corporation,
excluding amounts paid or payable for accrued interest or accrued dividends.

 

(b)                                 Property.  Property, other than cash,
shall be computed at the fair market value thereof at the time of the Issue as
determined in good faith by the Board of Directors of the Company.

 

10

 

(c)                                  Mixed Consideration.  The
consideration for Additional Common Shares Issued together with other property
of the Company for consideration that covers both shall be determined in good
faith by the Board of Directors.

 

(d)                                 Options and Convertible Securities.  The
consideration per share received by the Company for Options and Convertible
Securities, shall be determined by dividing:

 

(i)                                     the total amount, if any, received or
receivable by the Company as consideration for the issuance of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Company upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such Convertible
Securities, by

 

(ii)                                  the maximum number of shares of common stock
(as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number)
Issuable upon the exercise of such Options or the conversion or exchange of
such Convertible Securities.

 

10.                                 General.

 

10.1                           Governing Law.  This
Anti-dilution Agreement shall be governed in all respects by the laws of the
State of California as such laws are applied to agreements between California
residents entered into and to be performed entirely within California.

 

10.2                           Successors and Assigns.  Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.

 

10.3                           Entire Agreement.  Except
as set forth below, this Anti-dilution Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.

 

10.4                           Notices, etc.  All
notices and other communications required or permitted hereunder shall be in
writing and shall be mailed by first class mail, postage prepaid, certified or
registered mail, return receipt requested, addressed (a) if to Purchaser
at Purchaser’s address as set forth below, or at such other address as
Purchaser shall have furnished to the Company in writing, or (b) if to the
Company, at the Company’s address set forth below, or at such other address as
the Company shall have furnished to the Purchaser in writing.

 

10.5                           Severability.  In
case any provision of this Anti-dilution Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions of this Anti-dilution Agreement shall not in any way be affected or
impaired thereby.

 

10.6                           Titles and Subtitles.  The
titles of the sections and subsections of this Agreement are for convenience of
reference only and are not to be considered in construing this Anti-dilution
Agreement.

 

10.7                           Counterparts.  This
Anti-dilution Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.

 

11

 

	
  PURCHASER

  	
  ISSUER

  
	
   

  	
   

  
	
  COMERICA BANK - CALIFORNIA

  	
  METASTORM INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/ Joseph R. Crayton

  	
   

  	
  By:

  	
  /s/ Avi Hoffer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Joseph R. Crayton

  	
   

  	
  Name:

  	
  Avi Hoffer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Assistant Vice President

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  11921 Freedom Drive

  	
   

  	
  Address:

  	
   

  
	
   

  	
  Suite 920

  	
   

  	
   

  	
   

  
	
   

  	
  Reston, VA 20190

  	
   

  	
   

  	
   

  
											

 

12

 

EXHIBIT B

 

Registration Rights

 

The Shares (if common stock), or the common stock
issuable upon conversion of the Shares, shall be deemed “registrable securities”
or otherwise entitled to “piggy back” registration rights in accordance with
the terms of the following agreement (the “Agreement”) between the Company and
its investor(s):

 

Amended and Restated Registration Rights Agreement dated May 7,
2001, by and among the Company and the Investors named therein, as amended.

 

The Company agrees that no amendments will be made
to the Agreement which would have an adverse impact on Holder’s registration rights
thereunder without the consent of Holder.  By acceptance of the Warrant to which this Exhibit B
is attached, Holder shall be deemed to be a party to the Agreement subject to
the terms and provisions thereof.Exhibit 4.7

 

THE
WARRANTS EVIDENCED HEREBY WERE ISSUED IN A TRANSACTION THAT WAS NOT REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY
STATE OR OTHER SECURITIES LAW. THE HOLDER HEREOF, BY ACQUIRING THIS INSTRUMENT,
AGREES FOR THE BENEFIT OF METASTORM, INC. (THE “COMPANY”) THAT THE WARRANTS
EVIDENCED HEREBY MAY BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) (1) PURSUANT
TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, OR (2) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND (B) PURSUANT
TO AN AVAILABLE EXEMPTION OR EFFECTIVE REGISTRATION UNDER ANY APPLICABLE STATE
OR OTHER SECURITIES LAW.

 

THE
WARRANTS EVIDENCED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE THEREOF ARE
SUBJECT TO A WARRANT PURCHASE AGREEMENT DATED OCTOBER 27, 2000 BETWEEN THE
COMPANY AND PNC BANK, NATIONAL ASSOCIATION (AS THE SAME MAY BE
SUPPLEMENTED, MODIFIED, AMENDED OR RESTATED FROM TIME TO TIME, THE “WARRANT
AGREEMENT”). A COPY OF THE WARRANT AGREEMENT IS AVAILABLE FOR REVIEW AT THE
PRINCIPAL OFFICE OF THE COMPANY.

 

COMMON STOCK PURCHASE WARRANTS

 

No.W.-      

Date of Issuance: October 27, 2000

 

Capitalized
terms used and not otherwise defined in this instrument shall have the meanings
assigned to them in the Warrant Agreement. The Company certifies that PNC Bank,
National Association is the Holder of 7,716 warrants (the “Warrants”)
to purchase validly issued, fully paid and nonassessable shares of the common
stock of the Company, par value $.001 per share (the “Common Stock”),
upon the terms and subject to the provisions of the Warrant Agreement and this
instrument (the “Warrant Certificate”). The
Exercise Price per share of the Common Stock will be as provided in the Warrant
Agreement and each Warrant shall be exercisable for one share of Common Stock.
The Exercise Price and the number of Warrants evidenced hereby shall be subject
to adjustment as provided in the Warrant Agreement. The Warrants evidenced
hereby shall be exercisable at any time and from time to time until the close
of business on the Final Expiration Date.

 

1.                                       Exercise of Warrants.

 

1.1                                 Each Warrant evidenced hereby may be
exercised by the Holder of this Warrant Certificate at any time by surrender
hereof to the Company, together with the Exercise Form, in the form attached
hereto as Annex 1 (the “Exercise Form”),
duly completed and executed and payment of an amount equal to the Exercise
Price multiplied by the number of Warrants being exercised. At the option of
the Holder hereof, payment of the Exercise Price may be made by either (i) cash,
(ii) a certified or cashier’s check payable to the order of the Company, (iii) exercise
of the net issuance option pursuant to Section 1.4 hereof, or (iv) any
combination of the foregoing methods. Upon the Company’s receipt of this
Warrant Certificate, the duly 

 

 

completed and
executed Exercise Form and the requisite payment, the Company shall issue
and deliver (or cause to be delivered) stock certificates representing the
aggregate number of shares of Common Stock being purchased. In the event that
less than all of the Warrants evidenced hereby are being exercised, the Company
shall issue and deliver (or cause to be delivered) a new Warrant Certificate or
Certificates at the same time such stock certificates are delivered. That new
Warrant Certificate or those new Warrant Certificates shall entitle the persons
in whose names they are registered to exercise in the aggregate the number of
Warrants not exercised in that partial exercise and shall otherwise have the
same terms and provisions as this Warrant Certificate.

 

1.2                                 In the event that the Holder of this
Warrant Certificate desires that any or all of the stock certificates to be
issued upon the exercise of any Warrants evidenced hereby be registered in a
name or names other than that of such Holder, such Holder must so request in
writing at the time of exercise. In addition, such Holder must remit to the
Company funds sufficient to pay all transfer taxes (if any) payable in
connection with such delivery of such stock certificates or prove, to the
reasonable satisfaction of the Company, that no such taxes are payable in
connection with such transaction.

 

1.3                                 Upon due exercise by the Holder hereof of
any Warrants evidenced hereby, whether in whole or in part, such Holder (or any
other person to whom a stock certificate is to be issued) shall be deemed for
all purposes to have become the holder of record of the shares of Common Stock
for which those Warrants have been so exercised effective immediately prior to
the close of business on the day this Warrant Certificate, the duly completed
and executed Exercise Form and the requisite payment are duly delivered to
the Company, irrespective of the date of actual delivery of the stock
certificates representing such shares of Common Stock.

 

1.4                                 Notwithstanding anything to the contrary
set forth herein, if the current market value of a share of Common Stock
(determined in accordance with Section 7(b) of the Warrant Agreement)
is greater than the Exercise Price on the Date of Determination, in lieu of
exercising Warrants evidenced hereby for cash, the Holder hereof may elect to
receive shares of Common Stock equal to the value (determined in the manner set
forth below) of a designated number of such Warrants by surrender of this
Warrant Certificate at the principal office of the Company together with a duly
completed and executed Exercise Form. The “Date of Determination”
is the business day immediately preceding the day on which this Warrant
Certificate is being delivered to the Company pursuant to this Section 1.
In such event, the Company shall issue to the Holder hereof a number of shares
of Common Stock computed using the following formula:

 

Y =  X (A-B)

                                                A

 

Where:

 

A =                            the current market value of a share of Common
Stock on the Date of Determination;

 

B =                              the Exercise Price as of the close of
business on the Date of Determination;

 

X =                             the number of shares of Common Stock
purchasable upon exercise of the Warrants being       cancelled
if such Warrants were being exercised instead of being cancelled; and

 

2

 

Y =                              the number of shares of Common Stock to
be issued to such Holder.

 

2.                                       Surrender of Warrants; Expenses.

 

2.1                                 Whether in connection with the exercise,
transfer, split-up, combination, exchange or replacement of this Warrant
Certificate or any Warrants evidenced hereby, surrender of this Warrant
Certificate shall be made to the Company during normal business hours on a
business day (unless the Company otherwise permits) at the principal office of
the Company located at 836 Ritchie Highway, Suite 14, Severna Park, MD
21146 or to such other office or to any duly authorized representative of the
Company as from time to time may be designated by the Company by written notice
given to the Holders of the Warrants.

 

2.2                                 The Company shall pay all costs and
expenses incurred in connection with the exercise, transfer, split-up,
combination, exchange or replacement of this Warrant Certificate or any
Warrants evidenced hereby, including the costs of preparation, execution and
delivery of Warrant Certificates and stock certificates, and shall pay all
taxes (other than any taxes measured by the income of any person other than the
Company) and other charges imposed by law payable in connection with the
transfer, split-up, combination, exchange or replacement of this Warrant
Certificate or any Warrants evidenced hereby except as otherwise provided in Section 5(c) of
the Warrant Agreement.

 

3.                                       Warrant Register; Exchange; Transfer;
Loss.

 

3.1                                 The Company shall, at all times, maintain
at its principal office an open register for the Warrants, in which the Company
shall record the name and address of each Holder to whom Warrants have been
issued or transferred.

 

3.2                                 Subject to applicable law and the
provisions of the Warrant Agreement, this Warrant Certificate may be exchanged
for two or more Warrant Certificates entitling the Holder hereof to exercise
the same aggregate number of Warrants at the same Exercise Price and otherwise
having the same terms and provisions as this Warrant Certificate. The Holder
hereof may request such an exchange by surrendering this Warrant Certificate to
the Company, together with a written request specifying the desired number of
Warrant Certificates and the allocation among them of the Warrants evidenced
hereby.

 

3.3                                 Subject to applicable law and the
provisions of the Warrant Agreement, this Warrant Certificate and the Warrants
evidenced hereby may be transferred, in whole or in part, by the Holder hereof.
A transfer shall be effected by surrendering this Warrant Certificate to the
Company, together with an Assignment Form, in the form attached hereto as Annex
2 (the “Assignment Form”), duly completed
and executed. As soon as practicable, but in no event later than fifteen
business days after the Company’s receipt of this Warrant Certificate and the
Assignment Form so completed and executed, the Company shall issue and
deliver to each transferee a new Warrant Certificate evidencing the number of
Warrants being transferred to such person and otherwise having the same
Exercise Price and other terms and provisions of this Warrant Certificate,
which the Company will register in such new Holder’s name. To the extent
applicable, the Company shall issue to the Holder hereof a new Warrant
Certificate evidencing 

 

3

 

the Warrants not
being transferred to any person and otherwise having the same Exercise Price
and other terms and provisions of this Warrant Certificate.

 

3.4                                 In the event of the loss, theft or
destruction of this Warrant Certificate, the Company shall execute and deliver
an identical Warrant Certificate to the Holder hereof in substitution herefor
upon the Company’s receipt of (i) evidence reasonably satisfactory to the
Company of such event (with the affidavit of an institutional Holder being such
sufficient evidence), and (ii) if requested by the Company, an indemnity
agreement from any institutional Holder or an indemnity bond from any other
Holder reasonably satisfactory in form and amount to the Company.

 

4.                                       Rights
and Obligations of the Company and the Warrant Holder. The Company and the
Holder of this Warrant Certificate are entitled to the rights and bound by the
obligations set forth in the Warrant Agreement, all of which rights and
obligations are hereby incorporated by reference herein. This Warrant
Certificate shall not entitle its Holder to any rights as a stockholder of the
Company (other than as set forth in Section 1.3).

 

4

 

IN
WITNESS WHEREOF, the Company has caused this Warrant Certificate to be executed
by its duly authorized representative and attested to by its Secretary or an
Assistant Secretary.

 

	
  ATTEST:

  	
  METASTORM, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Chris Desautelle

  	
   

  	
  By:

  	
  /s/ Avi Hoffer

  
	
  Name:

  	
  Chris Desautelle

  	
   

  	
  Name:

  	
  Avi Hoffer

  
	
  Title:

  	
  CFO

  	
   

  	
  Title:

  	
  CEO

  
									

 

 

Annex 1

 

EXERCISE FORM

 

The
undersigned Holder hereby irrevocably elects to exercise                           Warrants
to purchase fully paid and nonassessable shares of the common stock, par value         
per share, of MetaStorm, Inc. (the “Company”) and/or such other securities
or property as are purchasable upon exercise of such Warrants, and hereby
tenders payment for such shares and/or other securities or property by:

 

(i) enclosing cash and/or a certified or cashier’s check payable
to the order of the Company in the aggregate amount of $                 ;
and/or

 

(ii) hereby authorizing the cancellation of                     Warrants.

 

Instructions for registering the securities on the stock transfer books
of the Company:

 

	
  Name of Holder:

  	
   

  	
   

  
	
  State of Organization (if applicable):

  	
   

  	
   

  
	
  Federal Tax Identification or

  	
   

  
	
  Social
  Security Number:

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
									

 

If
this exercise of Warrants evidenced by the attached Warrant Certificate is not
an exercise in full thereof, then the undersigned Holder hereby requests that a
new Warrant Certificate of like tenor (exercisable for the balance of the
Warrants evidenced by the attached Warrant Certificate) be issued in the name
of and delivered to the undersigned Holder at the address on the Warrant
register of the Company.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
  (Name of Holder -
  Please Print)

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  (Signature
  of Holder or

  
	
   

  	
  of
  Duly Authorized Signatory)

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
						

 

 

Annex 2

 

ASSIGNMENT FORM

 

For
value received, the undersigned Holder hereby sells, assigns and transfers to
the person whose name and address are set forth below all of the rights of the
undersigned Holder with respect to                Warrants
evidenced by the attached Warrant Certificate.

 

	
  Name of Transferee:

  	
   

  	
   

  
	
  State of Organization (if applicable):

  	
   

  	
   

  
	
  Federal Tax Identification or

  	
   

  
	
  Social
  Security Number:

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
									

 

If this transfer is not a transfer of all the Warrants
evidenced by the attached Warrant Certificate, then the undersigned Holder
hereby requests that a new Warrant Certificate of like tenor evidencing the
Warrants not being transferred pursuant hereto be issued in the name of and
delivered to the undersigned Holder at the address on the Warrant register of                                     .

 

The
undersigned Holder hereby irrevocably constitutes and appoints                         as
his/her/its attorney to register the foregoing transfer on the books of                                 maintained
for that purpose, with full power of substitution in the premises.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
  (Name of Holder - Please Print)

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  (Signature
  of Holder or

  
	
   

  	
  of
  Duly Authorized Signatory)

  
	
   

  	
   

  
	
   

  	
  Title:

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