EXHIBIT 10.114
HIENERGY TECHNOLOGIES, INC.
DEBT CONVERSION AGREEMENT
THIS DEBT CONVERSION AGREEMENT (the "Agreement") is made and entered into as of
the 15th day of July, 2005, by and between HIENERGY TECHNOLOGIES, INC., a
corporation organized and existing under the laws of the State of Delaware (the
"Company") and Xxxxx, Xxxxxxxx & Xxxxxx LLP (the "Payee").
RECITALS
WHEREAS, the Payee provided and invoiced for legal services that have been
carried by Payee from invoice date to date in order to assist the Company during
a period of financial need, as evidenced by the payables accrual recorded by the
Company in the amount of Twenty-Three Thousand One Hundred Seventy Dollars and
56/100 ($23,170.56) (collectively, the "Payables");
WHEREAS, inasmuch as the Company is unable to repay the Payables in cash
at this time, the Payee has agreed to accept in lieu thereof 50,370 shares of
the Company's common stock having a par value of $0.001 per share (the "Shares")
and warrants to purchase Twenty-Five Thousand One Hundred Eighty-Five (25,185)
additional shares of the Company's common stock at $0.65 per share (the
"Warrants"), such Warrants to be evidenced by a Warrant Certificate in the form
of Exhibit A attached hereto; and the Company's Board of Directors has agreed to
issue such securities to the Payee in full satisfaction of such Payables, in
each case, subject to the terms of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, and the mutual
promises and covenants contained in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
1. Company Obligations. On and as of the date on which both parties execute
this Agreement (the "Effective Date"), the Company will issue to the Payee
the following: (a) a stock certificate evidencing the Payee's ownership of
Fifty Thousand Three Hundred Seventy (50,370) Shares, at a purchase price
of Forty-Six Cents ($0.46) per Share in full satisfaction and discharge of
all indebtedness owed to the Payee as set forth in the Payables; and (b)
Warrants to purchase an additional Twenty-Five Thousand One Hundred
Eighty-Five (25,185) shares of the Company's common stock at an exercise
price of Sixty-Five ($0.65) per share (the "Warrant Shares"). The term of
the Warrants shall be six (6) years from the date of this Agreement.
2. Payee Obligations. In consideration and payment in full for the issuance
and delivery of the Shares and the Warrants to the Payee pursuant to
Section 1 above, the Payee hereby agrees:
(a) to submit to the Company, as full and complete payment for the
Securities, a receipt as to the Payables marked "cancelled"; and
(b) to release and discharge the Company and its respective successors
and assigns from any and all further liability in respect of the
Payables except as otherwise set out in this Agreement.
3. Representations and Warranties of the Payee. The Payee hereby represents
and warrants to the Company, as of the Effective Date, as follows:
(a) the Payee is an "Accredited Investor" as such term is defined in
Rule 501 of Regulation D, and is familiar with the character,
integrity and business acumen of the principals of the Company;
(b) the Payee: (A) has no need for liquidity in this investment; and (B)
is able to bear the economic risks of an investment in the Shares
and the Warrants (collectively, the "Securities") for an indefinite
period of time, and could afford to lose the entire amount of such
investment;
(c) the Payee understands and acknowledges that a purchaser of the
Securities must be prepared to bear the economic risk of such
investment for an indefinite period because of: (A) the heightened
nature of the risks associated with an investment in the Company due
to its status as a development stage company; (B) illiquidity of the
Securities due to the fact that the Securities have not been
registered under the Securities Act of 1933, as amended, or any of
the rules and regulations promulgated thereunder (collectively, the
"Act") or any state securities act (nor passed upon by the SEC or
any state securities commission), and the Securities have not been
registered or qualified by the Payee under federal or state
securities laws solely in reliance upon an available exemption from
such registration or qualification, and hence such Securities cannot
be sold unless they are subsequently so registered or qualified, or
are otherwise subject to any applicable exemption from such
registration requirements; and (C) substantial restrictions on the
transfer of the Securities, as set forth in, among other documents,
this Agreement and the Warrant Certificate, and by legend on the
face or reverse side of every certificate evidencing the ownership
of any Securities;
(d) the Payee understands and acknowledges that an investment in the
Securities is speculative in nature, and involves certain risks;
(e) the Payee is not a member of the National Association of Securities
Dealers, or of any other self-regulatory agency which would require
approval prior to any purchase of the Securities;
(f) the Payee is acquiring the Securities for its own investment, and
not with a view toward the subdivision, resale, distribution, or
fractionalization thereof; the Payee has no contract, undertaking,
arrangement or obligation with or to any person to sell, transfer,
or otherwise dispose of the Securities (or any portion thereof
hereby subscribed for), and has no present intention to enter into
any such contract, undertaking, agreement or arrangement, except to
its partners in private transactions, who in connection therewith
will furnish the Company representations to the same effect as those
in this Section with only such changes as are reflective of the
changed transaction;
(g) the offering of Securities was made only through direct, personal
communication between the Payee (or a representative thereof) and
the Company; the subscription for Securities by the Payee is not the
result of any form of general solicitation or general advertising
including, but not limited to, the following: (i) any advertisement,
article, notice or other communication published in any newspaper,
magazine, or other written communication, or broadcast over
television, radio or any other medium; or (ii) any seminar or
meeting to which the attendees had been invited by any general
solicitation or general advertising;
(h) the Payee has been advised to consult with an attorney regarding
legal matters concerning the purchase and ownership of the
Securities, and with a tax advisor regarding the tax consequences of
purchasing such Securities;
(i) the Payee is [an individual] [partnership] which was not organized
for the specific purpose of acquiring the Securities and has other
investments or business activities besides investing in the Company;
and
(j) this Agreement, once executed and delivered to the Company by the
Payee, constitutes the valid and legally binding obligation of the
Payee, enforceable against such Payee in accordance with its terms.
4. Execution of Agreement. At such time as the Company has executed this
Agreement, this Agreement shall be the valid and legally binding
obligation of the Company, enforceable against the Company in accordance
with its terms.
5. Registration Rights. The Company shall use its reasonable best efforts to
cause a Registration Statement on Form SB-2 (or other similar form) which
includes the Shares and the Warrant Shares, and remains effective to
December 31, 2005 or any earlier date when all the Shares and the shares
of Common Stock issuable upon conversion of the Warrant are or may be sold
under Rule 144.
6. Miscellaneous.
(a) The Payee agrees that, once executed by it, the Payee may not
cancel, terminate or revoke this Agreement, or any Agreement in
respect of the Securities which it may make hereunder or pursuant
hereto, and that this Agreement shall survive the death, permanent
or temporary disability, dissolution, winding up or liquidation (as
applicable) of the Payee, and that this Agreement shall be binding
upon, and inure to the benefit of such Payee's heirs, executors,
administrators, successors in interest and permitted assigns.
(b) All notices, requests, demands and other communications to be given
shall be in writing and shall be deemed to have been duly given on
the date of personal service or transmission by fax if such
transmission is received during the normal business hours of the
addressee, or on the first business day after sending the same by
overnight courier service or by telegram, or on the third business
day after mailing the same by first class mail, or on the day of
receipt if sent by certified or registered mail, addressed as set
forth following the signature of such party at the end of this
document, or at such other address as any party may hereafter
indicate by notice delivered as set forth in this Section 6(b).
(c) This Agreement shall constitute the binding agreement of the
parties, enforceable against each of them in accordance with its
terms. This Agreement may not be assigned by the Payee, whether by
contract or by operation of law, without the prior written consent
of the Company, which consent may be given or denied as the Company,
in its sole and exclusive discretion, may deem appropriate.
(d) This Agreement, together with its exhibits, constitute the entire
and final agreement and understanding between the Payee and the
Company with respect to the agreement of the Payee to accept the
Securities in full and complete satisfaction of the Payables, and
the issuance and cancellation, as applicable, thereof, and
supersedes any and all prior oral or written agreements, statements,
representations, warranties or understandings by any party, all of
which are merged herein and superseded by this Agreement.
(e) The headings provided are for convenience only and shall have no
force or effect upon the construction or interpretation of any
provision of the Agreement. Furthermore, in interpreting this
Agreement, the reader shall adopt the plural form of any word
written in the singular, and the feminine form of any word written
in the masculine, whenever the context or circumstances of such
provision so require.
(f) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute but one and the same instrument.
(g) Each party agrees to execute such other and further documents and to
perform such other and further acts as may be reasonably necessary
to carry out the purposes and provisions of this Agreement.
(h) This Agreement shall be governed by and construed in accordance with
the internal laws of the State of California applicable to the
performance and enforcement of contracts made within such state,
without giving effect to the law of conflicts of laws applied
thereby. In the event that any dispute shall occur between the
parties arising out of or resulting from the construction,
interpretation, enforcement or any other aspect of this Agreement,
the parties hereby agree to accept the exclusive jurisdiction of the
Courts of the State of California sitting in and for the County of
Orange. In the event either party shall be forced to bring any legal
action to protect or defend its rights hereunder, then the
prevailing party in such proceeding shall be entitled to
reimbursement from the non-prevailing party of all fees, costs and
other expenses (including, without limitation, the reasonable
expenses of its attorneys) in bringing or defending against such
action.
(i) The provisions of this Agreement are severable, and if any one or
more provisions is determined to be illegal, indefinite, invalid or
otherwise unenforceable, in whole or in part, by any court of
competent jurisdiction, then the remaining provisions of this
Agreement and any partially unenforceable provisions to the extent
enforceable in the pertinent jurisdiction shall continue in full
force and effect and shall be binding and enforceable on the
parties.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first written above.
THE CORPORATION:
HIENERGY TECHNOLOGIES, INC. ATTEST:
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxx Xxxxxxxx
--------------------- ------------------
Xxxxxx X. Xxxxxxx Acting Corporate Secretary
THE INVESTOR:
[PAYEE] WITNESS:
Xxxxx, Xxxxxxx & Xxxxxx LLP
By: /s/ Xxxxx X. Xxxxx By: __________________________
------------------
Xxxxx X. Xxxxx __________________________
HIENERGY TECHNOLOGIES, INC
PARTIAL ASSIGNMENT FORM
FOR VALUE RECEIVED, _________________ hereby assigns and transfers unto
__________________ Shares converted in connection with the Debt Conversion
Agreement dated July 15, 2005 between the Company and _____________ with all
rights therein, and does irrevocably authorize the Company to assign and
transfer said Shares.
Dated: ________________
Assignor Name: ______________________________
Signature: ______________________________
Address: ______________________________
______________________________
Tax ID. No.: ______________________________
Assignee Name: ______________________________
Address: ______________________________
______________________________
Tax ID. No.: ______________________________
EXHIBIT A
TO DEBT CONVERSION AGREEMENT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS, OR HIENERGY TECHNOLOGIES, INC. SHALL HAVE
RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
HIENERGY TECHNOLOGIES, INC.
Expires: July 15, 2011
Holder: [Name]
Warrant No.: W-___
Number of Warrant Shares: ______
Exercise Price: $0.65 per Warrant Share
Original Issue Date: July 15, 2004
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, HiEnergy Technologies, Inc., a Delaware corporation (together with
its successors and assigns, the "Issuer"), hereby certifies that the Holder or
its registered assign or assigns (individually or collectively referred to as
the "Holder") is entitled to subscribe for and purchase, during the period
defined below in this Warrant as the Term, the number of Warrant Shares
indicated above shares (subject to adjustment as hereinafter provided) of the
duly authorized, validly issued, fully paid and non-assessable shares of the
Issuer's Common Stock, as defined below in this Warrant, at an exercise price
per share equal to the Warrant Price then in effect, subject, however, to the
provisions and upon the terms and conditions hereinafter set forth.
1. Definitions. For the purposes of this Warrant, the following terms have the
following meanings:
"Board" means the Board of Directors of the Issuer.
"Business Day" means any day except a Saturday, Sunday or any day on which
commercial banks in Irvine, California or New York, New York are authorized or
required by law or other government action to close.
"Capital Stock" means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (ii) all partnership interests (whether general or limited) in
any Person which is a partnership, (iii) all membership interests or limited
liability company interests in any limited liability company, and (iv) all
equity or ownership interests in any Person of any other type.
"Certificate of Incorporation" means the Certificate of Incorporation of
the Issuer as in effect on the Original Issue Date, and as hereafter from time
to time amended, modified, supplemented or restated in accordance with the terms
hereof and thereof and pursuant to applicable law.
"Common Stock" means the Common Stock, par value $0.001 per share, of the
Issuer and any other Capital Stock into which such stock may hereafter be
changed.
"Debt Conversion Agreement" means the Debt Conversion Agreement dated as
of July 15, 2005, between the Issuer and the investors party thereto.
"Effectiveness Date" means the date that the Registration Statement as
described in Section 5 of the Debt Conversion Agreement becomes effective with
respect to the Warrant Shares to be issued upon the exercise of this Warrant by
the Holder.
"Exercise Date" means the date that the amount payable under Section 3(b)
is received in full by the Issuer in immediately available U.S. dollar
denominated funds in the account of the Issuer at a financial institution
designated from time to time by the Issuer pursuant to the Debt Conversion
Agreement.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority, commission,
board, agency or instrumentality, whether federal, state or local, and whether
domestic or foreign.
"Holders" mean the Persons who shall from time to time own any Warrant.
The term "Holder" means one of the Holders.
"Independent Appraiser" means a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements of the Issuer) that is regularly engaged in the business of
appraising the Capital Stock or assets of corporations or other entities as
going concerns, and which is not affiliated with either the Issuer or the Holder
of any Warrant.
"Issuer" means HiEnergy Technologies, Inc., a Delaware corporation, and
its successors.
"Majority Holders" means at any time the Holders of Warrants exercisable
for a majority of the Warrant Shares issuable under the Warrants at the time
outstanding.
"Original Issue Date" means the date of the Closing as defined in the Debt
Conversion Agreement.
"OTC Bulletin Board" means the over-the-counter electronic bulletin board.
"Other Common" means any other Capital Stock of the Issuer of any class
which shall be authorized at any time after the date of this Warrant (other than
Common Stock) and which shall have the right to participate in the distribution
of earnings and assets of the Issuer without limitation as to amount.
"Person" means an individual, corporation, limited liability company,
partnership, joint stock company, trust, unincorporated organization, joint
venture, Governmental Authority or other entity of whatever nature.
"Per Share Market Value" means on any particular date (a) the closing sale
price for a share of Common Stock in the over-the-counter market, as reported by
the OTC Bulletin Board or in the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions of reporting prices),
or as reported by such other senior United States trading facility as the Issuer
may elect, at the close of business on such date, or (b) if the Common Stock is
not then reported by the OTC Bulletin Board or the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices) or by such other senior United States trading facility as the
Issuer may elect, then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the Board, or (c) if the
Common Stock is not then publicly traded the fair market value of a share of
Common Stock as determined by the Board in good faith; provided, however, that
the Majority Holders, after receipt of the determination by the Board, shall
have the right to select, jointly with the Issuer, an Independent Appraiser, in
which case, the fair market value shall be the determination by such Independent
Appraiser; and provided, further that all determinations of the Per Share Market
Value shall be appropriately adjusted for any stock dividends, stock splits or
other similar transactions during such period. The determination of fair market
value shall be based upon the fair market value of the Issuer determined on a
going concern basis as between a willing buyer and a willing seller and taking
into account all relevant factors determinative of value, and shall be final and
binding on all parties. In determining the fair market value of any shares of
Common Stock, no consideration shall be given to any restrictions on transfer of
the Common Stock imposed by agreement or by federal or state securities laws, or
to the existence or absence of, or any limitations on, voting rights.
"Registration Statement" means the registration statement on Form SB-2 or
another available form registering the Warrant Shares as described in Section 5
of the Debt Conversion Agreement.
"Securities" means any debt or equity securities of the Issuer, whether
now or hereafter authorized, any instrument convertible into or exchangeable for
Securities or a Security, and any option, warrant or other right to purchase or
acquire any Security. "Security" means one of the Securities.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute then in effect.
"Subsidiary" means any corporation at least 50% of whose outstanding
Voting Stock shall at the time be owned directly or indirectly by the Issuer or
by one or more of its Subsidiaries, or by the Issuer and one or more of its
Subsidiaries.
"Term" has the meaning specified in Section 2 hereof.
"Trading Day" means (a) a day on which the Common Stock is traded on the
OTC Bulletin Board, or (b) if the Common Stock is not traded on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices) or such
other senior United States trading facility as in the issuer may elect;
provided, however, that in the event that the Common Stock is not listed or
quoted as set forth in (a) or (b) hereof, then Trading Day shall mean any day
except Saturday, Sunday and any day which shall be a legal holiday or a day on
which banking institutions in the State of New York are authorized or required
by law or other government action to close.
"Voting Stock" means, as applied to the Capital Stock of any corporation,
Capital Stock of any class or classes (however designated) having ordinary
voting power for the election of a majority of the members of the Board of
Directors (or other governing body) of such corporation, other than Capital
Stock having such power only by reason of the happening of a contingency.
"Warrants" means the Warrants issued and sold pursuant to the Debt
Conversion Agreement, including, without limitation, this Warrant, and any other
warrants of like tenor issued in substitution or exchange for any thereof
pursuant to the provisions of Section 3(c), 3(d) or 3(e) hereof or of any of
such other Warrants.
"Warrant Price" initially means U.S. $0.65, as such price may be adjusted
from time to time as shall result from the adjustments specified in this
Warrant, including Section 5 hereto.
"Warrant Share Number" means at any time the aggregate number of Warrant
Shares which may at such time be purchased upon exercise of this Warrant, after
giving effect to all prior adjustments to such number made or required to be
made under the terms hereof.
"Warrant Shares" means shares of Common Stock issuable upon exercise of
any Warrant or Warrants or otherwise issuable pursuant to any Warrant or
Warrants.
2. Term. The right to subscribe for and purchase Warrant Shares represented
hereby shall commence on July 15, 2005 and shall expire at 5:00 pm, Eastern
Time, July 15, 2011 (such period sometimes herein called the "Term").
3. Method of Exercise and Payment; Issuance of New Warrant Certificates;
Transfer and Exchange.
(a) Time of Exercise. The purchase rights represented by this Warrant may
be exercised in whole or in part at any time and from time to time during the
Term, and this Warrant shall be considered exercised on the date (the "Exercise
Date") that the amount payable under Section 3(b) is received in full by the
Issuer in immediately available U.S. dollar denominated funds in the account of
the Issuer at a financial institution designated from time to time by the Issuer
pursuant to the Debt Conversion Agreement.
(b) Method of Exercise. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment in full to the Issuer of an amount of consideration therefore equal to
the Warrant Price in effect on the Exercise Date multiplied by the number of
Warrant Shares with respect to which this Warrant is then being exercised,
payable in immediately available U.S. dollar denominated funds to the account of
the Issuer at a financial institution designated from time to time by the Issuer
pursuant to the Debt Conversion Agreement
(c) Issuance of Stock Certificates. In the event of any exercise of the
rights represented by this Warrant in accordance with and subject to the terms
and conditions hereof, (i) certificates for the Warrant Shares so purchased
shall be dated as of the Exercise Date and delivered to the Holder hereof within
a reasonable time, not exceeding three (3) Trading Days after the Exercise Date,
and the Holder hereof shall be deemed for all purposes to be the Holder of the
Warrant Shares so purchased as of the Exercise Date and (ii) unless this Warrant
has expired, a new Warrant representing the number of Warrant Shares, if any,
with respect to which this Warrant shall not then have been exercised (less any
amount thereof which shall have been canceled in payment or partial payment of
the Warrant Price as hereinabove provided) shall also be issued to the Holder
hereof at the Issuer's expense within such time.
(d) Transferability of Warrant. Subject to Section 3(f), this Warrant may
be transferred by a Holder without the consent of the Issuer. If transferred
pursuant to this paragraph and subject to the provisions of subsection (f) of
this Section 3, this Warrant may be transferred on the books of the Issuer by
the Holder hereof in person or by duly authorized attorney, upon surrender of
this Warrant at the principal office of the Issuer, properly endorsed (by the
Holder executing an assignment in the form attached hereto) and upon payment of
any necessary transfer tax or other governmental charge imposed upon such
transfer. This Warrant is exchangeable at the principal office of the Issuer for
Warrants for the purchase of the same aggregate number of Warrant Shares, each
new Warrant to represent the right to purchase such number of Warrant Shares as
the Holder hereof shall designate at the time of such exchange. All Warrants
issued on transfers or exchanges shall be dated the Original Issue Date and
shall be identical with this Warrant except as to the number of Warrant Shares
issuable pursuant hereto.
(e) Continuing Rights of Holder. The Issuer will, at the time of or at any
time after each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing the extent, if any, of its continuing obligation to
afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.
(f) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof, acknowledges
that this Warrant or the Warrant Shares to be issued upon exercise hereof
are being acquired solely for the Holder's own account and not as a
nominee for any other party, and for investment, and that the Holder will
not offer, sell or otherwise dispose of this Warrant or any Warrant Shares
to be issued upon exercise hereof except pursuant to an effective
registration statement, or an exemption from registration, under the
Securities Act and any applicable state securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant and
all certificates representing Warrant Shares issued upon exercise hereof
shall be stamped or imprinted with a legend in substantially the following
form:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS
OR HIENERGY TECHNOLOGIES, INC. SHALL HAVE RECEIVED AN OPINION OF ITS
COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED.
(iii) The restrictions imposed by this subsection (f) upon the
transfer of this Warrant or the Warrant Shares to be purchased upon
exercise hereof shall terminate (A) when such securities shall have been
resold pursuant to an effective registration statement under the
Securities Act, (B) upon the Issuer's receipt of an opinion of counsel, in
form and substance reasonably satisfactory to the Issuer, addressed to the
Issuer to the effect that such restrictions are no longer required to
ensure compliance with the Securities Act and state securities laws or (C)
upon the Issuer's receipt of other evidence reasonably satisfactory to the
Issuer that such registration and qualification under the Securities Act
and state securities laws are not required. Whenever such restrictions
shall cease and terminate as to any such securities, the Holder thereof
shall be entitled to receive from the Issuer (or its transfer agent and
registrar), without expense (other than applicable transfer taxes, if
any), new Warrants (or, in the case of Warrant Shares, new stock
certificates) of like tenor not bearing the applicable legend required by
paragraph (ii) above relating to the Securities Act and state securities
laws.
4. Stock Fully Paid; Reservation and Listing of Shares; Covenants.
(a) Stock Fully Paid. The Issuer represents, warrants, covenants and
agrees that all Warrant Shares which may be issued upon the exercise of this
Warrant or any shares of capital stock otherwise issuable hereunder will, upon
issuance, be duly authorized, validly issued, fully paid and non-assessable and
free from all taxes, liens and charges created by, through or under Issuer,
other than resale restrictions under the federal or state securities laws.
(b) Reservation. The Issuer covenants and agrees that during the period
within which this Warrant may be exercised, the Issuer will at all times have
authorized and reserved for the purpose of the issue upon exercise of this
Warrant a sufficient number of shares of Common Stock to provide for the
exercise of this Warrant. If any shares of Common Stock required to be reserved
for issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will, upon
notice from the Holder of such requirement, in good faith use its best efforts
as expeditiously as possible at its expense to cause such shares to be duly
registered or qualified. If the Issuer shall list any shares of Common Stock on
any securities exchange or market it will, at its expense, list thereon,
maintain and increase when necessary such listing, of, all Warrant Shares from
time to time issued upon exercise of this Warrant or as otherwise provided
hereunder, and, to the extent permissible under the applicable securities
exchange rules, all unissued Warrant Shares which are at any time issuable
hereunder, so long as any shares of Common Stock shall be so listed. The Issuer
will also so list on each securities exchange or market, and will maintain such
listing of, any other securities which the Holder of this Warrant shall be
entitled to receive upon the exercise of this Warrant if at the time any
securities of the same class shall be listed on such securities exchange or
market by the Issuer.
(c) Covenants. The Issuer shall not by any action, including, without
limitation, amending the Certificate of Incorporation or the by-laws of the
Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder hereof against dilution (to the extent
specifically provided herein) or impairment. Without limiting the generality of
the foregoing, the Issuer will (i) not permit the par value, if any, of its
Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the Certificate of Incorporation or by-laws of the
Issuer in any manner that would adversely affect the rights of the Holders of
the Warrants, (iii) take all such action as may be reasonably necessary in order
that the Issuer may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, claims, encumbrances and
restrictions (other than as provided herein) upon the exercise of this Warrant,
and (iv) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
reasonably necessary to enable the Issuer to perform its obligations under this
Warrant.
(d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
5. Adjustment of Warrant Price and Warrant Share Number. The number of shares of
Common Stock for which this Warrant is exercisable, and the price at which such
shares may be purchased upon exercise of this Warrant, shall be subject to
adjustment from time to time as set forth in this Section 5. The Issuer shall
give the Holder notice of any event described below which requires an adjustment
pursuant to this Section 5 in accordance with Section 6.
(a) Recapitalization, Reorganization, Reclassification, Consolidation,
Merger or Sale.
(i) In case the Issuer after the Original Issue Date shall do any of
the following (each, a "Triggering Event"): (a) consolidate with or merge
into any other Person and the Issuer shall not be the continuing or
surviving corporation of such consolidation or merger, or (b) permit any
other Person to consolidate with or merge into the Issuer and the Issuer
shall be the continuing or surviving Person but, in connection with such
consolidation or merger, any Capital Stock of the Issuer shall be changed
into or exchanged for Securities of any other Person or cash or any other
property, or (c) transfer all or substantially all of its properties or
assets to any other Person, or (d) effect a capital reorganization or
reclassification of its Capital Stock, then, and in the case of each such
Triggering Event, proper provision shall be made so that, upon the basis
and the terms and in the manner provided in this Warrant, the Holder of
this Warrant shall be entitled upon the exercise hereof at any time after
the consummation of such Triggering Event, to the extent this Warrant is
not exercised prior to such Triggering Event, to receive at the Warrant
Price in effect at the time immediately prior to the consummation of such
Triggering Event in lieu of the Common Stock issuable upon such exercise
of this Warrant prior to such Triggering Event, the Securities, cash and
property to which such Holder would have been entitled upon the
consummation of such Triggering Event if such Holder had exercised the
rights represented by this Warrant immediately prior thereto, subject to
adjustments (subsequent to such corporate action) as nearly equivalent as
possible to the adjustments provided for elsewhere in this Section 5.
(ii) Notwithstanding anything contained in this Warrant to the
contrary, the Issuer will not effect any Triggering Event if, prior to the
consummation thereof, each Person (other than the Issuer) which may be
required to deliver any Securities, cash or property upon the exercise of
this Warrant as provided herein shall assume, by written instrument
delivered to, and reasonably satisfactory to, the Holder of this Warrant,
(A) the obligations of the Issuer under this Warrant (and if the Issuer
shall survive the consummation of such Triggering Event, such assumption
shall be in addition to, and shall not release the Issuer from, any
continuing obligations of the Issuer under this Warrant) and (B) the
obligation to deliver to such Holder such shares of Securities, cash or
property as, in accordance with the foregoing provisions of this
subsection (a), such Holder shall be entitled to receive, and such Person
shall have similarly delivered to such Holder an opinion of counsel for
such Person, which counsel shall be reasonably satisfactory to such
Holder, stating that this Warrant shall thereafter continue in full force
and effect and the terms hereof (including, without limitation, all of the
provisions of this subsection (a)) shall be applicable to the Securities,
cash or property which such Person may be required to deliver upon any
exercise of this Warrant or the exercise of any rights pursuant hereto.
(b) Stock Dividends, Subdivisions and Combinations. If at any time the
Issuer shall:
(i) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of, shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(iii) (iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, then (1) the number of shares of
Common Stock for which this Warrant is exercisable immediately after the
occurrence of any such event shall be adjusted to equal the number of
shares of Common Stock which a record holder of the same number of shares
of Common Stock for which this Warrant is exercisable immediately prior to
the occurrence of such event would own or be entitled to receive after the
happening of such event, and (2) the Warrant Price then in effect shall be
adjusted to equal (A) the Warrant Price then in effect multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares of
Common Stock for which this Warrant is exercisable immediately after such
adjustment.
(c) Form of Warrant after Adjustments. The form of this Warrant need not
be changed because of any adjustments in the Warrant Price or the number and
kind of Securities purchasable upon the exercise of this Warrant.
(d) Escrow of Warrant Shares. If after any property becomes distributable
pursuant to this Section 5 by reason of the taking of any record of the holders
of Common Stock, but prior to the occurrence of the event for which such record
is taken, and the Holder exercises this Warrant, any shares of Common Stock
issuable upon exercise by reason of such adjustment shall be deemed the last
shares of Common Stock for which this Warrant is exercised (notwithstanding any
other provision to the contrary herein) and such shares or other property shall
be held in escrow for the Holder by the Issuer to be issued to the Holder upon
and to the extent that the event actually takes place, upon payment of the
current Warrant Price. Notwithstanding any other provision to the contrary
herein, if the event for which such record was taken fails to occur or is
rescinded, then such escrowed shares shall be cancelled by the Issuer and
escrowed property returned.
6. Notice of Adjustments. Whenever the Warrant Price or Warrant Share Number
shall be adjusted pursuant to Section 5 hereof (for purposes of this Section 6,
each an "adjustment"), the Issuer shall cause its Chief Financial Officer to
prepare and execute a certificate setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated (including a description of the basis on which the
Board made any determination hereunder), and the Warrant Price and Warrant Share
Number after giving effect to such adjustment, and shall cause copies of such
certificate to be delivered to the Holder of this Warrant promptly after each
adjustment. Any dispute between the Issuer and the Holder of this Warrant with
respect to the matters set forth in such certificate may at the option of the
Holder of this Warrant be submitted to one of the national accounting firms
currently known as the "big five" selected by the Holder, provided that the
Issuer shall have ten (10) days after receipt of notice from such Holder of its
selection of such firm to object thereto, in which case such Holder shall select
another such firm and the Issuer shall have no such right of objection. The firm
selected by the Holder of this Warrant as provided in the preceding sentence
shall be instructed to deliver a written opinion as to such matters to the
Issuer and such Holder within thirty (30) days after submission to it of such
dispute. Such opinion shall be final and binding on the parties hereto.
7. Fractional Shares. No fractional Warrant Shares will be issued in connection
with and exercise hereof, but in lieu of such fractional shares, the Issuer
shall make a cash payment therefore equal in amount to the product of the
applicable fraction multiplied by the Per Share Market Value then in effect.
8. Call. Notwithstanding anything herein to the contrary, commencing any time
during the effectiveness of the registration statement registering the Warrant
Shares, the Issuer, at its option, may call up to one hundred percent (100%) of
this Warrant if the Per Share Market Value of the Common Stock has been equal to
or greater than $2.50 per share for a period of five (5) consecutive Trading
Days immediately prior to the date of delivery of the Call Notice (a "Call
Notice Period") by providing the Holder of this Warrant written notice pursuant
to Section 13 (the "Call Notice"). The rights and privileges granted pursuant to
this Warrant with respect to the Warrant Shares subject to the Call Notice (the
"Called Warrant Shares") shall expire on the twentieth (20th) day after the
Holder receives the Call Notice (the "Early Termination Date") if this Warrant
is not exercised with respect to such Called Warrant Shares prior to such Early
Termination Date. In the event this Warrant is not exercised with respect to the
Called Warrant Shares, the Issuer shall remit to the Holder of this Warrant (i)
$.01 per Called Warrant Share and (ii) a new Warrant representing the number of
Warrant Shares, if any, which shall not have been subject to the Call Notice
upon the Holder tendering to the Issuer the applicable Warrant certificate.
9. Registration Rights. The Issuer shall cause within a reasonable time, the
preparation and filing of a Registration Statement on Form SB-2 (as amended
herein called the "Registration Statement") that includes the shares of Common
Stock issuable upon exercise of each Warrant.
10. Other Notices. In case at any time:
(a) the Issuer shall make any distributions to the holders of Common
Stock; or
(b) the Issuer shall authorize the granting to all holders of its Common
Stock of rights to subscribe for or purchase any shares of Capital Stock of any
class or other rights; or
(c) there shall be any reclassification of the Capital Stock of the
Issuer; or
(d) there shall be any capital reorganization by the Issuer; or
(e) there shall be any (i) consolidation or merger involving the Issuer or
(ii) sale, transfer or other disposition of all or substantially all of the
Issuer's property, assets or business (except a merger or other reorganization
in which the Issuer shall be the surviving corporation and its shares of Capital
Stock shall continue to be outstanding and unchanged and except a consolidation,
merger, sale, transfer or other disposition involving a wholly-owned
Subsidiary); or
(f) there shall be a voluntary or involuntary dissolution, liquidation or
winding-up of the Issuer or any partial liquidation of the Issuer or
distribution to holders of Common Stock; then, in each of such cases, the Issuer
shall give written notice to the Holder of the date on which (i) the books of
the Issuer shall close or a record shall be taken for such dividend,
distribution or subscription rights or (ii) such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be, shall take place. Such notice also shall
specify the date as of which the holders of Common Stock of record shall
participate in such dividend, distribution or subscription rights, or shall be
entitled to exchange their certificates for Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding-up, as the case may be.
Such notice shall be given at least twenty (20) days prior to the action in
question and not less than twenty (20) days prior to the record date or the date
on which the Issuer's transfer books are closed in respect thereto. The Holder
shall have the right to send two (2) representatives selected by it to each
meeting, who shall be permitted to attend, but not vote at, such meeting and any
adjournments thereof. This Warrant entitles the Holder to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Common Stock.
11. Amendment and Waiver. Any term, covenant, agreement or condition in this
Warrant may be amended, or compliance therewith may be waived (either generally
or in a particular instance and either retroactively or prospectively), by a
written instrument or written instruments executed by the Issuer and the
Majority Holders; provided, however, that no such amendment or waiver shall
reduce the Warrant Share Number, increase the Warrant Price, shorten the period
during which this Warrant may be exercised or modify any provision of this
Section 11 except with the consent of the Holder of this Warrant or pursuant to
this Warrant Agreement.
12. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW.
13. Notices. All notices, requests, consents or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earlier of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice prior to 5:00 p.m., eastern
time, on a Business Day, or if not, then on the next Business Day, (ii) the
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service specifying next-day delivery with verification of
delivery or (iii) actual receipt by the party to whom such notice is required to
be given. The addresses for such communications shall be at the relevant
Holder's last known address or facsimile number appearing on the books of the
Issuer maintained for such purposes, or with respect to the Issuer, addressed
to:
HiEnergy Technologies, Inc.
0000X Xxxxx Xxxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Corporate Secretary
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Copies of notices to the Holder shall be sent to the attorney indicated in the
signature pages to this Warrant. Any party hereto may from time to time change
its or its attorney's address for notices by giving at least ten (10) days
written notice of such changed address to the other party hereto.
14. Warrant Transfer Agent. The Issuer may, by written notice to each Holder of
this Warrant, appoint an agent or more than one agent having an office in New
York, New York for the purpose of being directly involved with Holder in respect
to issuing Warrant Shares upon the exercise of this Warrant pursuant to
subsection (b) of Section 3 hereof, transferring or exchanging this Warrant or
any Warrant Certificate pursuant to subsection (d) of Section 3 hereof or
replacing this Warrant or any Warrant Certificate pursuant to subsection (d) of
Section 4 hereof, or any of the foregoing, and thereafter any such issuance,
exchange or replacement, as the case may be, shall be made at such office by
such agent or agents, as designated from time to time by the Issuer.
15. Remedies. The Issuer stipulates that the remedies at law of the Holder of
this Warrant in the event of any default or threatened default by the Issuer in
the performance of or compliance with any of the terms of this Warrant, and the
Holder likewise stipulates that the remedies at law of the Issuer, are not and
will not be adequate and that, to the fullest extent permitted by law, such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained herein, interim relief, or by an injunction for
performance or against a violation of any of the terms hereof. This Warrant is
acquired by the Holder pursuant to and subject to the terms of the Debt
Conversion Agreement.
16. Successors and Assigns. All respective rights, powers and privileges and
respective obligations evidenced by this Warrant shall inure to the benefit of
and be binding upon the Issuer and only the registered successors and registered
assigns of the Holder hereof and (to the extent provided herein) the Holders of
Warrant Shares issued pursuant hereto, and shall be enforceable by any such
Holder or Holder of Warrant Shares.
17. Modification and Severability. If, in any action before any court or agency
legally empowered to enforce any provision contained herein, any provision
hereof is found to be unenforceable, then such provision shall be deemed
modified to the extent necessary to make it enforceable by such court or agency.
If any such provision is not enforceable as set forth in the preceding sentence,
the unenforceability of such provision shall not affect the other provisions of
this Warrant, but this Warrant shall be construed as if such unenforceable
provision had never been contained herein.
18. Headings. The headings of the Sections of this Warrant are for convenience
of reference only and shall not, for any purpose, be deemed to modify any other
term or provision of this Agreement.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Issuer has executed this Warrant to Purchase
Shares of Common Stock of HiEnergy Technologies, Inc., Warrant No. W-___, as of
the date first above written.
HIENERGY TECHNOLOGIES, INC.
By:
----------------------------------------
Name: Xx. Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
Schedule A
(Accurate only as of the date of the date first set forth above, and subject to
future changes in the registered Holder as listed above and successors and
assigns registered pursuant to the Warrant.)
Registered Holder Copy To
HIENERGY TECHNOLOGIES, INC.
EXERCISE FORM
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase ___________ shares of Common Stock of
HiEnergy Technologies, Inc. covered by the within Warrant (W-164).
Dated: _________________
Signature: ___________________________
Address: ___________________________
___________________________
Tax ID. No.: ___________________________
HIENERGY TECHNOLOGIES, INC.
ASSIGNMENT FORM
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _________________, attorney, to transfer the
said Warrant (W-164) on the books of the within named corporation.
Dated: ________________
Assignor Name: ______________________________
Signature: ______________________________
Address: ______________________________
______________________________
Tax ID. No.: ______________________________
Assignee Name: ______________________________
Address: ______________________________
______________________________
Tax ID. No.: ______________________________
HIENERGY TECHNOLOGIES, INC
PARTIAL ASSIGNMENT FORM
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ Warrant Shares evidenced by
the within Warrant together with all rights therein, and does irrevocably
constitute and appoint ___________________, attorney, to transfer that part of
the said Warrant (W-164) on the books of the within named corporation.
Dated: ________________
Assignor Name: ______________________________
Signature: ______________________________
Address: ______________________________
______________________________
Tax ID. No.: ______________________________
Assignee Name: ______________________________
Address: ______________________________
______________________________
Tax ID. No.: ______________________________
