1. What is the Cash Exercise Model?
2. What is the "Net Exercise" or "Cashless Exercise" Method?
3. How does the "Cashless Exercise" Method Work?
4. How do I exercise my Warrant?
5. What happens if I do not exercise my Warrant before it expires?
6. Will I receive PPT (Unrestricted) or PPTR (Reg S) shares when I exercise my Warrant?
7. Are there any tax consequences from the exercise of Warrants by either method?
8. Are there any other costs involved in the exercise of Warrant?
9. What do I do if I have lost my original Warrant Agreement, or if I am not sure what rights I may have?
1. What is the Cash Exercise Model? Top of Page
Under the “cash exercise method”, you must pay the purchase price of the shares you wish to buy in cash, at the same time as you exercise the Warrant. You may calculate your purchase price by multiplying the number of shares you wish to purchase by the applicable Exercise Price, which you will find in Section 1 of your Warrant Agreement. The number of shares available under each Warrant Agreement is listed on the signature page.
2. What is the “Net Exercise” or “Cashless Exercise” Method? Top of Page
The “cashless exercise” method enables you to buy shares under your warrant without having to pay the purchase price in cash. This method is only available to you if the fair market value (”FMV”) of Common Shares of the Company is more than the Exercise Price of your Warrant on the date your Exercise Form is received. The FMV is calculated by averaging the closing price of Common Shares on the AIM market for the five (5) trading days ending three days before the date on which the FMV is determined. You can check the recent closing prices of the Company’s Common Shares in the Investor Relations section of the Company’s website at www.planetpayment.com (Click on “Stock Quote”), or on other popular financial search engines (Warrant holders looking up the stock quote on a financial website outside of the United Kingdom may have to enter the stock symbol “PPT.L” or “PPTR.L”, or otherwise select the London Stock Exchange when searching for the quote).
3. How does the “Cashless Exercise” Method Work? Top of Page
If the FMV is in excess of your Warrant’s Exercise Price then under the “cashless exercise” method, you may purchase your shares without having to make a cash payment. You can do this by, in effect, giving up that portion of your share entitlement under the Warrant that has a value equal to the purchase price for the net number of shares you will be issued. This method has the same effect as if you exercised all of the shares under the Warrant and simultaneously sold just enough shares at the FMV, in order to pay for all of the shares but is more convenient because you do not have to lay out any money.
For example if you wish to exercise a Warrant for 1,000 shares and the Exercise Price is $2.00 and the FMV is $4.00 on the date of exercise, the calculation of the number of shares you will receive is as follows:
(a) Deduct the Exercise Price ($2.00) from the FMV ($4.00), resulting in a difference of $2.00.
(b) Divide that sum ($2.00), by the FMV, $4.00 and multiply the result (0.5 or 50%) by the total number of warrants to be exercised (1,000), yielding you a net share purchase of 500 shares, without the need for you to make any payment.
4. How do I to exercise my Warrant? Top of Page
In order to exercise a Warrant you must complete the Exercise Form (Schedule 1 of your Warrant). In addition to signing and dating the Exercise Form you will need to enter your name and address, as well as the number of shares you wish to purchase. If you have more than one Warrant, you must submit a separate Exercise Form for each Warrant you wish to exercise. You should then mail your complete original Warrant Agreement, including the completed original Exercise Form to the Company at:
Graham Arad, General Counsel
Planet Payment, Inc.
670 Long Beach Blvd
Long Beach, NY 11561
United States of America
Cash Exercise: If you are using the cash exercise method, you must submit payment by check or wire transfer, at the same time as you submit your Exercise Form as follows:
You can pay the purchase price by either sending a check drawn on a US bank account made payable to “Planet Payment, Inc.” to the address below, or by sending a wire transfer to our account. Please contact the Company for wire transfer instructions
If you are exercising more than one Warrant at the same time, you can send a single payment for the purchase price of all the shares you wish to buy.
Net or Cashless Exercise: Simply write “Cashless Exercise” on the Exercise Form before you mail it. Do not send any money.
Following receipt of the documents and verification that the Exercise Form is properly completed and the full purchase price is paid (if applicable) the Company will forward a confirmation of Exercise. Approximately 14 days thereafter, the Company’s Registrar will mail you your Stock Certificate at the address you put on the Exercise Form.
5. What happens if I do not exercise my Warrant before it expires? Top of Page
Generally, Warrants issued by the Company have an automatic net exercise feature, if the Warrant has not been fully exercised by the Warrant holder on the date the Exercise Period expires and the FMV is more than the Exercise Price on that date. For example, if your Exercise Period expires on 28th February 2007 and you have not exercised your Warrants before that date but the FMV on 28th February 2007 is greater than the Exercise Price, an automatic net exercise would occur. In that case and you would receive notice from the Company informing you of the number of shares you are entitled to be issued. However, you would only be issued those shares following your return to the Company of your original Warrant Agreement. Please check your Warrant to see if it has this feature.
If the FMV is less than the Exercise Price then your Warrant will lapse if not exercised before the Expiration Date. You can find the Expiration Date in Section 2 of your Warrant.
6. Will I receive PPT (Unrestricted) or PPTR (Reg S) shares when I exercise my Warrant? Top of Page
If you have held your Warrant for less than 2 years on the date you exercise it, you will always receive PPTR shares. If you have held your Warrant for more than 2 years and you exercise it by a cash payment you will receive PPTR shares.
If, however, you have held the Warrant for more than 2 years and you use the “cashless exercise” method you will receive PPT shares. All Warrants, which are “automatically” exercised will result in the issuance of PPT shares.
Warrantholders who are “affiliates” of the Company, including directors and officers and other persons who hold securities (e.g. shares and Warrants) representing 10% of the Company’s outstanding stock would normally receive PPTR shares. If you think you may be in this category you should contact the Company for clarification before any exercise.
7. Are there any tax consequences from the exercise of Warrants by either method? Top of Page
Unless you received your Warrant as compensation for services or the sale value of property, under current U.S. federal tax law, the exercise of a Warrant using the cash method is not a taxable event. Also for U.S. federal tax purposes, your holding period for the purpose of determining whether you have a long-term or short-term capital gain when you eventually sell your shares, will commence on the date on which your Warrant is exercised.
Please consult your tax advisor for the tax consequences of using the cashless exercise method.
NOTE: Different tax effects are likely to apply to warrantholders living outside of the USA. Wherever you live, before you exercise a Warrant you should consult with your own tax, legal or financial advisors to determine the tax implications of a Warrant exercise.
8. Are there any other costs involved in the exercise of Warrant? Top of Page
The Company does not charge any fees or commissions for the exercise of Warrants. However, if you choose to use a broker or financial advisor to exercise a Warrant on your behalf, you will need to check with them to determine if any fees or commissions will be charged you their service.
9. What do I do if I have lost my original Warrant Agreement, or if I am not sure what rights I may have? Top of Page
If you have lost your original Warrant Agreement, you may obtain a replacement from the Company by completing an Affidavit and Indemnity for Lost Certificate. In that case, or if you have any other questions regarding your Warrants, please write to the Company at the following address:
Graham N. Arad, General Counsel
Planet Payment, Inc.
670 Long Beach Blvd
Long Beach, NY 11561
United States of America
garad@planetpayment.com
Please take the time now to review each of your Warrants in order to protect your rights. The Company is not responsible if you fail to properly exercise your rights in a timely manner, in which case you may lose your rights without any recourse to the Company.
NOTE: These FAQ’s are provided for information purposes only and are not intended, nor are they to be relied upon as tax or legal advice given by the Company, or any of its officers, directors, employees, or advisors. Different tax effects are likely to apply to warrantholders living outside of the USA. Before you exercise a Warrant you should consult with your own tax, legal, or financial advisors to determine the tax and legal implications of a Warrant exercise.