EXHIBIT 10.11
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD,
ASSIGNED OR TRANSFERRED, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION UNDER SAID ACT IS NOT
REQUIRED.
Warrant No. WA-34
COMMON STOCK PURCHASE WARRANT
To Purchase 48,000 Shares of Common Stock of
NATIONAL COAL CORP.
THIS IS TO CERTIFY THAT CD Investments Partners, Ltd., or registered
assigns (the "Holder"), is entitled, during the Exercise Period (as hereinafter
defined), to purchase from National Coal Corp., a Florida corporation (the
"Company"), the Warrant Stock (as hereinafter defined and subject to adjustment
as provided herein), in whole or in part, at a purchase price of $2.10 per
share, all on and subject to the terms and conditions hereinafter set forth.
1. DEFINITIONS. As used in this Warrant, the following terms have
the respective meanings set forth below:
"ADDITIONAL SHARES OF COMMON STOCK" means any shares of Common Stock
issued by the Company after the Closing Date other than: (i) Warrant Stock; (ii)
shares issued or issuable pursuant to anti-dilution provisions of the Preferred
Stock; (iii) shares issued or issuable upon the conversion of the Preferred
Stock; (iv) shares issued or issuable upon the exercise of any warrants or
options outstanding as of the Closing Date; (v) shares of Common Stock or Common
Stock Equivalents issued in connection with a bona-fide strategic transaction;
(vii) shares of Common Stock or Common Stock Equivalents issued in connection
with any stock-based compensation plans of the Company approved by the Board of
Directors of the Company including all (which shall be at least three)
Independent Directors (as defined in the Purchase Agreement), the number of such
shares of Common Stock (or, in the case of Common Stock Equivalents, the number
of shares of Common Stock acquirable pursuant thereto) not to exceed 5 million
(as adjusted for stock splits, stock dividends, and the like) and the value
assigned upon grant not to be less than 85% of the Current Market Price; (viii)
shares issuable upon the exercise of any warrants that are issuable pursuant to
the terms of the Purchase Agreement; or (ix) shares issuable upon the exercise
of any warrants that are issued in connection with the Contemporaneous Offering
(as defined in the Purchase Agreement).
"AFFILIATE" means any person or entity that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with a person or entity, as such terms are used in and construed
under Rule 144 under the Securities Act. With respect to a Holder of Warrants,
any investment fund or managed account that is managed on a discretionary basis
by the same investment manager as such Holder will be deemed to be an Affiliate
of such Holder.
"APPRAISED VALUE" means, in respect of any share of Common Stock on any
date herein specified, the fair saleable value of such share of Common Stock
(determined without giving effect to the discount for (i) a minority interest or
(ii) any lack of liquidity of the Common Stock or to the fact that the Company
may have no class of equity registered under the Exchange Act) as of the last
day of the most recent fiscal month ending prior to such date specified, based
on the value of the Company on a fully-diluted basis, as determined by a
nationally recognized investment banking firm selected by the Company's Board of
Directors and having no prior relationship with the Company.
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in Tennessee
generally are authorized or required by law or other government actions to
close.
"CHANGE OF CONTROL" means the (i) acquisition by an individual or legal
entity or group (as set forth in Section 13(d) of the Exchange Act) of more than
one-half of the voting rights or equity interests in the Company; or (ii) sale,
conveyance, or other disposition of all or substantially all of the assets,
property or business of the Company or its subsidiaries (whether in a single
transaction or series of related transactions) or the merger into or
consolidation with any other corporation (other than a wholly owned subsidiary
corporation) or effectuation of any transaction or series of related
transactions where holders of the Company's voting securities prior to such
transaction or series of transactions fail to continue to hold at least 50% of
the voting power of the Company.
"CLOSING DATE" means August 31, 2004.
"COMMISSION" means the Securities and Exchange Commission or any other
federal agency then administering the Securities Act and other federal
securities laws.
"COMMON STOCK" means (except where the context otherwise indicates) the
common stock, $0.0001 par value per share, of the Company as constituted on the
Closing Date, and any capital stock into which such Common Stock may thereafter
be changed or converted, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets on liquidation over any other class of stock
of the Company and which is not subject to redemption and (ii) shares of common
stock of any successor or acquiring corporation received by or distributed to
the holders of Common Stock of the Company in the circumstances contemplated by
Section 4.7.
"COMMON STOCK EQUIVALENTS" has the meaning set forth in Section 4.4.
"CURRENT MARKET PRICE" means, in respect of any share of Common Stock
on any date herein specified,
(1) if there shall not then be a public market for the Common
Stock, the higher of
(a) the book value per share of Common Stock at such date, and
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(b) the Appraised Value per share of Common Stock at such
date,
or
(2) if there shall then be a public market for the Common Stock,
the higher of (x) the book value per share of Common Stock at such date, and (y)
the average of the daily market prices for the 5 consecutive trading days
immediately before such date. The daily market price for each such trading day
shall be (i) the closing price on such day on the principal stock exchange
(including Nasdaq) on which such Common Stock is then listed or admitted to
trading, or quoted, as applicable, (ii) if no sale takes place on such day on
any such exchange, the last reported closing price on such day as officially
quoted on any such exchange (including Nasdaq), (iii) if the Common Stock is not
then listed or admitted to trading on any stock exchange, the last reported
closing bid price on such day in the over-the-counter market, as furnished by
the National Association of Securities Dealers Automatic Quotation System or the
National Quotation Bureau, Inc., (iv) if neither such corporation at the time is
engaged in the business of reporting such prices, as furnished by any similar
firm then engaged in such business, or (v) if there is no such firm, as
furnished by any member of the National Association of Securities Dealers, Inc.
(the "NASD") selected mutually by the holder of this Warrant and the Company or,
if they cannot agree upon such selection, as selected by two such members of the
NASD, one of which shall be selected by holder of this Warrant and one of which
shall be selected by the Company.
"CURRENT WARRANT PRICE" means, in respect of a share of Common Stock at
any date herein specified, the price at which a share of Common Stock may be
purchased pursuant to this Warrant on such date. Until the Current Warrant Price
is adjusted pursuant to the terms herein, the initial Current Warrant Price
shall be $2.10 per share of Common Stock.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"EXERCISE PERIOD" means the period during which this Warrant is
exercisable pursuant to Section 2.1.
"EXPIRATION DATE" means August 31, 2006.
"GAAP" means generally accepted accounting principles in the United
States of America as from time to time in effect.
"NASD" means the National Association of Securities Dealers, Inc., or
any successor corporation thereto. ----
"OTHER PROPERTY" has the meaning set forth in Section 4.7.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, incorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
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"PREFERRED STOCK" shall mean the Company's Series A Cumulative
Convertible Preferred Stock, par value $0.0001 per share.
"PURCHASE AGREEMENT" means that certain Preferred Stock and Warrant
Purchase Agreement dated as of August 31, 2004 between the Company and CD
Investment Partners, Ltd., pursuant to which this Warrant was originally issued.
"RESTRICTED COMMON STOCK" means shares of Common Stock which are, or
which upon their issuance upon the exercise of any Warrant would be required to
be, evidenced by a certificate bearing the restrictive legend set forth in
Section 3.2.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"TRADING DAY" means any day on which the primary market on which
shares of Common Stock are listed is open for trading.
"TRANSFER" means any disposition of any Warrant or Warrant Stock or of
any interest in either thereof, which would constitute a sale thereof within the
meaning of the Securities Act.
"WARRANTS" means this Warrant and all warrants issued upon transfer,
division or combination of, or in substitution for, any thereof. All Warrants
shall at all times be identical as to terms and conditions and date, except as
to the number of shares of Common Stock for which they may be exercised.
"WARRANT PRICE" means an amount equal to (i) the number of shares of
Common Stock being purchased upon exercise of this Warrant pursuant to Section
2.1, multiplied by (ii) the Current Warrant Price.
"WARRANT STOCK" means the 48,000 shares of Common Stock to be purchased
upon the exercise hereof, subject to adjustment as provided herein.
2. EXERCISE OF WARRANT.
2.1. MANNER OF EXERCISE. From and after the Closing Date, and until
5:00 P.M., New York time, on the Expiration Date (the "Exercise Period"), the
Holder may exercise this Warrant, on any Business Day, for all or any part of
the number of shares of Warrant Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, the Holder
shall deliver to the Company at its principal office or at the office or agency
designated by the Company pursuant to Section 12, (i) a written notice of
Holder's election to exercise this Warrant, which notice shall specify the
number of shares of Warrant Stock to be purchased, (ii) payment of the Warrant
Price as provided herein, and (iii) this Warrant. Such notice shall be
substantially in the form of the subscription form appearing at the end of this
Warrant as EXHIBIT A, duly executed by the Holder
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or its agent or attorney. Upon receipt thereof, the Company shall, as promptly
as practicable, and in any event within three Business Days thereafter, execute
or cause to be executed and deliver or cause to be delivered to the Holder a
certificate or certificates representing the aggregate number of full shares of
Warrant Stock issuable upon such exercise, together with cash in lieu of any
fraction of a share, as hereinafter provided. The stock certificate or
certificates so delivered shall be, to the extent possible, in such denomination
or denominations as the Holder shall request in the notice and shall be
registered in the name of the Holder or such other name as shall be designated
in the notice. This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other Person so designated to be named therein shall be deemed to have
become a Holder of record of such shares for all purposes, as of the date when
the notice, together with the payment of the Warrant Price and this Warrant, is
received by the Company as described above. If this Warrant shall have been
exercised in part, the Company shall, at the time of delivery of the certificate
or certificates representing Warrant Stock, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant, or at the request of the Holder, appropriate
notation may be made on this Warrant and the same returned to the Holder.
If the Company intentionally and willfully fails to deliver to the
holder such certificate or certificates pursuant to this Section 2.1 (free of
any restrictions on transfer or legends, if such shares have been registered) in
accordance herewith, prior to the seventh trading day after the receipt by the
Company of (i) a written notice of the Holder's election to exercise this
Warrant, which notice shall specify the number of shares of Warrant Stock to be
purchased, (ii) payment of the Warrant Price as provided herein, and (iii) this
Warrant (the "Date of Receipt"), the Company shall pay to such Holder, in cash,
on a per diem basis, an amount equal to 2% of the value of the undelivered
Warrant Stock (based on the Current Market Price of the Common Stock on the Date
of Receipt) per month until such delivery takes place.
Payment of the Warrant Price may be made at the option of the Holder
by: (i) certified or official bank check payable to the order of the Company,
(ii) wire transfer to the account of the Company or (iii) at any time after
January 28, 2005 if, at any time and from time to time, the Warrant Stock is not
registered for resale pursuant to an effective registration statement pursuant
to which sales may be made, the surrender and cancellation of a portion of
shares of Common Stock then held by the Holder or issuable upon such exercise of
this Warrant, which shall be valued and credited toward the total Warrant Price
due the Company for the exercise of the Warrant based upon the Current Market
Price of the Common Stock. All shares of Common Stock issuable upon the exercise
of this Warrant pursuant to the terms hereof shall be validly issued and, upon
payment of the Warrant Price, shall be fully paid and nonassessable and not
subject to any preemptive rights.
2.2. FRACTIONAL SHARES. The Company shall not be required to issue
a fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay an amount in cash equal to
the Current Market Price per share of Common Stock on the date of exercise
multiplied by such fraction.
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2.3. CONTINUED VALIDITY. A Holder of shares of Common Stock issued
upon the exercise of this Warrant, in whole or in part (other than a Holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the Securities Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as the Holder under Sections 10 and
13 of this Warrant.
2.4. RESTRICTIONS ON EXERCISE AMOUNT.
(i) The Holder may not acquire a number of shares of Warrant
Stock, and the Company shall not effect any exercise of this Warrant, to the
extent that, upon such exercise, the number of shares of Common Stock then
beneficially owned by the Holder and its Affiliates and any other persons or
entities whose beneficial ownership of Common Stock would be aggregated with the
Holder's for purposes of Section 13(d) of the Exchange Act (including shares
held by any "group" of which the holder is a member, but excluding shares
beneficially owned by virtue of the ownership of securities or rights to acquire
securities that have limitations on the right to convert, exercise or purchase
similar to the limitation set forth herein), exceeds 4.99% of the total number
of shares of Common Stock of the Company then issued and outstanding. For
purposes hereof, "group" has the meaning set forth in Section 13(d) of the
Exchange Act and applicable rules and regulations of the Securities and Exchange
Commission, and the percentage held by the holder shall be determined in a
manner consistent with the provisions of Section 13(d) of the Exchange Act and
applicable rules and regulations of the SEC. Each delivery of a notice of
exercise by a Holder will constitute a representation by such Holder that it has
evaluated the limitation set forth in this paragraph and determined, based on
the most recent public filings by the Company with the Commission, that the
issuance of the full number of shares of Warrant Stock requested in such notice
of exercise is permitted under this paragraph. The provisions of this paragraph
shall be implemented in a manner otherwise than in strict conformity with the
terms of this Section 2.4(i) to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended 4.99% beneficial
ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such 4.99% limitation. The
limitations contained in this paragraph shall apply to a successor holder of
this Warrant. The holders of Common Stock of the Company shall be third party
beneficiaries of this Section 2.4(i) and the Company may not waive this Section
2.4(i) without the consent of holders of a majority of its Common Stock.
(ii) In the event the Company is prohibited from issuing shares of
Warrant Stock as a result of any restrictions or prohibitions under applicable
law or the rules or regulations of any stock exchange, interdealer quotation
system or other self-regulatory organization, the Company shall as soon as
possible seek the approval of its stockholders and take such other action to
authorize the issuance of the full number of shares of Common Stock issuable
upon exercise of this Warrant.
3. TRANSFER, DIVISION AND COMBINATION.
3.1. TRANSFER. The Warrants and the Warrant Stock shall be freely
transferable, subject to compliance with all applicable laws, including, but not
limited to the Securities Act. If, at the time of the surrender of this Warrant
in connection with any transfer of this Warrant or the resale
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of the Warrant Stock, this Warrant or the Warrant Stock, as applicable, shall
not be registered under the Securities Act, the Company may require, as a
condition of allowing such transfer (i) that the Holder or transferee of this
Warrant or the Warrant Stock as the case may be, furnish to the Company a
written opinion of counsel that is reasonably acceptable to the Company to the
effect that such transfer may be made without registration under the Securities
Act, (ii) that the Holder or transferee execute and deliver to the Company an
investment letter in form and substance acceptable to the Company and
substantially in the form attached as EXHIBIT C hereto and (iii) that the
transferee be an "accredited investor" as defined in Rule 501(a) promulgated
under the Securities Act. Transfer of this Warrant and all rights hereunder, in
whole or in part, in accordance with the foregoing provisions, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company referred to in
Section 2.1 or the office or agency designated by the Company pursuant to
Section 12, together with a written assignment of this Warrant substantially in
the form of EXHIBIT B hereto duly executed by the Holder or its agent or
attorney and funds sufficient to pay any transfer taxes payable upon the making
of such transfer. Upon such surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the portion
of this Warrant not so assigned, and this Warrant shall promptly be cancelled.
Following a transfer that complies with the requirements of this Section 3.1,
the Warrant may be exercised by a new Holder for the purchase of shares of
Common Stock regardless of whether the Company issued or registered a new
Warrant on the books of the Company.
3.2. RESTRICTIVE LEGEND. Each certificate for Warrant Stock
initially issued upon the exercise of this Warrant, and each certificate for
Warrant Stock issued to any subsequent transferee of any such certificate, shall
be stamped or otherwise imprinted with a legend in substantially the following
form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AS AMENDED, AND MAY NOT BE OFFERED, SOLD, ASSIGNED OR
TRANSFERRED, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT REGISTRATION UNDER SAID ACT IS NOT REQUIRED."
3.3. DIVISION AND COMBINATION; EXPENSES; BOOKS. This Warrant may be
divided or combined with other Warrants upon presentation hereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney. Subject to compliance with
Section 3.1 as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice. The Company shall prepare, issue and deliver at its own
expense the new Warrant or Warrants under this Section 3. The Company agrees to
maintain, at its aforesaid office or agency, books for the registration and the
registration of transfer of the Warrants.
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4. ADJUSTMENTS. 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 4. The Company shall give the Holder notice of any
event described below which requires an adjustment pursuant to this Section 4 in
accordance with Sections 5.1 and 5.2.
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time
while this Warrant is outstanding the Company shall:
(i) declare a dividend or make a distribution on its
outstanding shares of Common Stock in shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into
a larger number of shares of Common Stock, or
(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 acquirable upon exercise
of this Warrant 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 that would have been acquirable under
this Warrant immediately prior to the record date for such dividend or
distribution or the effective date of such subdivision or combination would own
or be entitled to receive after such record date or the effective date of such
subdivision or combination, as applicable, and
(2) the Current Warrant Price shall be adjusted to equal:
(A) the Current Warrant Price in effect at the time of
the record date for such dividend or distribution or of the effective
date of such subdivision or combination, multiplied by the number of
shares of Common Stock into which this Warrant is exercisable
immediately prior to the adjustment, divided by
(B) the number of shares of Common Stock into which this
Warrant is exercisable immediately after such adjustment.
Any adjustment made pursuant to clause (i) of this paragraph shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution, and any
adjustment pursuant to clauses (ii) or (iii) of this paragraph shall become
effective immediately after the effective date of such subdivision or
combination.
4.2. CERTAIN OTHER DISTRIBUTIONS. If at any time while this Warrant
is outstanding the Company shall cause the holders of its Common Stock to be
entitled to receive any dividend or other distribution of:
(i) cash,
(ii) any evidences of its indebtedness, any shares of
stock of any class or any
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other securities or property or assets of any nature whatsoever (other
than cash or additional shares of Common Stock as provided in Section
4.1 hereof), or
(iii) any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of stock of any
class or any other securities or property or assets of any nature
whatsoever, then:
(1) the number of shares of Common Stock acquirable upon
exercise of this Warrant shall be adjusted to equal the product of the
number of shares of Common Stock acquirable upon exercise of this
Warrant immediately prior to the record date for such dividend or
distribution, multiplied by a fraction (x) the numerator of which shall
be the Current Warrant Price per share of Common Stock at the date of
taking such record and (y) the denominator of which shall be such
Current Warrant Price minus the amount allocable to one share of Common
Stock of any such cash so distributable and of the fair value (as
determined in good faith by the Board of Directors of the Company) of
any and all such evidences of indebtedness, shares of stock, other
securities or property or warrants or other subscription or purchase
rights so distributable; and
(2) the Current Warrant Price in effect immediately prior
to the record date fixed for determination of stockholders entitled to
receive such distribution shall be adjusted to equal (x) the Current
Warrant Price multiplied by the number of shares of Common Stock
acquirable upon exercise of this Warrant immediately prior to the
adjustment, divided by (y) the number of shares of Common Stock
acquirable upon exercise of this Warrant immediately after such
adjustment. A reclassification of the Common Stock (other than a change
in par value, or from par value to no par value or from no par value to
par value) into shares of Common Stock and shares of any other class of
stock shall be deemed a distribution by the Company to the holders of
its Common Stock of such shares of such other class of stock within the
meaning of this Section 4.2 and, if the outstanding shares of Common
Stock shall be changed into a larger or smaller number of shares of
Common Stock as a part of such reclassification, such change shall be
deemed a subdivision or combination, as the case may be, of the
outstanding shares of Common Stock within the meaning of Section 4.1.
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK.
(i) If at any time while this Warrant is outstanding the
Company shall issue or sell any Additional Shares of Common Stock in
exchange for consideration in an amount per Additional Share of Common
Stock less than $1.50 (as adjusted for stock splits, stock dividends
and the like) at the time the additional shares of Common Stock are
issued or sold, then:
(A) the Current Warrant Price immediately prior to such
issue or sale shall be reduced to a price determined by dividing
(1) an amount equal to the sum of (a) the number
of shares of Common Stock outstanding immediately prior to such issue
or sale multiplied by the then existing Current Warrant Price, plus (b)
the consideration, if any, received by the Company upon such issue or
sale, by
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(2) the total number of shares of Common Stock
outstanding immediately after such issue or sale; and
(B) the number of shares of Common Stock acquirable upon
exercise of this Warrant shall be adjusted to equal the amount obtained
by
(1) multiplying the Current Warrant Price in
effect immediately prior to such issue or sale by the number of shares
of Common Stock acquirable upon exercise of this Warrant immediately
prior to such issue or sale and
(2) dividing the product thereof by the Current
Warrant Price resulting from the adjustment made pursuant to clause
(A).
(ii) The provisions of paragraph 4.3(i) shall not apply to
any issuance of additional shares of Common Stock for which an adjustment is
provided under Section 4.1 or 4.2. No adjustment of the number of shares of
Common Stock acquirable upon exercise of this Warrant shall be made under
paragraph 4.3(i) upon the issuance of any additional shares of Common Stock
which are issued pursuant to the exercise of any warrants or other subscription
or purchase rights or pursuant to the exercise of any conversion or exchange
rights in any convertible securities, if any such adjustment shall previously
have been made upon the issuance of such warrants or other rights or upon the
issuance of such convertible securities (or upon the issuance of any warrant or
other rights therefor) pursuant to Section 4.4.
4.4. ISSUANCE OF COMMON STOCK EQUIVALENTS. If at any time while
this Warrant is outstanding the Company shall issue or sell any warrants or
other rights to subscribe for or purchase any additional shares of Common Stock
or any securities convertible into shares of Common Stock (other than the
Additional Shares of Common Stock) (collectively, "Common Stock Equivalents"),
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the effective price per share for which Common Stock is
issuable upon the exercise, exchange or conversion of such Common Stock
Equivalents shall be less than the Current Warrant Price in effect immediately
prior to the time of such issue or sale, then the number of shares of Warrant
Stock acquirable upon the exercise of this Warrant and the Current Warrant Price
shall be adjusted as provided in Section 4.3 on the basis that the maximum
number of additional shares of Common Stock issuable pursuant to all such Common
Stock Equivalents shall be deemed to have been issued and outstanding and the
Company shall have received all of the consideration payable therefor, if any,
as of the date of the actual issuance of such Common Stock Equivalents. No
further adjustments to the current Warrant Price shall be made under this
Section 4.4 upon the actual issue of such Common Stock upon the exercise,
conversion or exchange of such Common Stock Equivalents.
4.5. SUPERSEDING ADJUSTMENT.
(i) If, at any time after any adjustment of the number of
shares of Common Stock into which this Warrant is exercisable and the Current
Warrant Price shall have been made pursuant to Section 4.4 as the result of any
issuance of Common Stock Equivalents, (x) the right to exercise, convert or
exchange all or a portion of such Common Stock Equivalents shall expire
unexercised, or (y) the conversion rate or consideration per share for which
shares of Common
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Stock are issuable pursuant to such Common Stock Equivalents shall be increased
solely by virtue of provisions therein contained for an automatic increase in
such conversion rate or consideration per share upon the occurrence of a
specified date or event, then any such previous adjustments to the Current
Warrant Price and the number of shares of Common Stock for which this Warrant is
exercisable shall be rescinded and annulled and the additional shares of Common
Stock which were deemed to have been issued by virtue of the computation made in
connection with the adjustment so rescinded and annulled shall no longer be
deemed to have been issued by virtue of such computation.
(ii) Upon the occurrence of an event set forth in Section
4.5(i) above there shall be a recomputation made of the effect of such Common
Stock Equivalents on the basis of: (i) treating the number of additional shares
of Common Stock or other property, if any, theretofore actually issued or
issuable pursuant to the previous exercise, conversion or exchange of such
Common Stock Equivalents, as having been issued on the date or dates of any such
exercise, conversion or exchange and for the consideration actually received and
receivable therefor, and (ii) treating any such Common Stock Equivalents which
then remain outstanding as having been granted or issued immediately after the
time of such increase of the conversion rate or consideration per share for
which shares of Common Stock or other property are issuable under such Common
Stock Equivalents; whereupon a new adjustment to the number of shares of Common
Stock for which this Warrant is exercisable and the Current Warrant Price shall
be made, which new adjustment shall supersede the previous adjustment so
rescinded and annulled.
4.6. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS. The following
provisions shall be applicable to the making of adjustments of the number of
shares of Common Stock into which this Warrant is exercisable and the Current
Warrant Price provided for in Section 4:
(a) WHEN ADJUSTMENTS TO BE MADE. The adjustments required
by Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur, except that any that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 4.1) up to, but not
beyond, the date of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than 1% of the shares of
Common Stock into which this Warrant is exercisable immediately prior to the
making of such adjustment. Any adjustment representing a change of less than
such minimum amount (except as aforesaid) which is postponed shall be carried
forward and made as soon as such adjustment, together with other adjustments
required by this Section 4 and not previously made, would result in a minimum
adjustment or on the date of exercise. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(b) FRACTIONAL INTERESTS. In computing adjustments under
this Section 4, fractional interests in Common Stock shall be taken into account
to the nearest 1/100th of a share.
(c) WHEN ADJUSTMENT NOT REQUIRED. If the Company
undertakes a transaction contemplated under this Section 4 and as a result takes
a record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights or other
benefits contemplated under this Section 4 and shall, thereafter and before the
distribution to stockholders thereof, legally abandon its plan to pay or deliver
such
11
dividend, distribution, subscription or purchase rights or other benefits
contemplated under this Section 4, then thereafter no adjustment shall be
required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.
(d) ESCROW OF STOCK. If after any property becomes
distributable pursuant to Section 4 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, the Holder of this Warrant exercises the Warrant during such
time, then the Holder shall continue to be entitled to receive any shares of
Common Stock issuable upon exercise hereunder by reason of such adjustment and
such shares or other property shall be held in escrow for the Holder of this
Warrant by the Company to be issued to the Holder of this Warrant upon and to
the extent that the event actually takes place. 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 canceled by
the Company and escrowed property returned to the Company.
4.7. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS.
(a) If there shall occur a Change of Control and if
pursuant to the terms of such Change of Control, shares of common stock of the
successor or acquiring corporation, or any cash, shares of stock or other
securities or property of any nature whatsoever (including warrants or other
subscription or purchase rights) in addition to or in lieu of common stock of
the successor or acquiring corporation ("Other Property"), are to be received by
or distributed to the holders of Common Stock of the Company, then the Holder of
this Warrant shall have the right thereafter to receive, upon the exercise of
the Warrant, the number of shares of common stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and the Other
Property receivable upon or as a result of such Change of Control by a holder of
the number of shares of Common Stock into which this Warrant is exercisable
immediately prior to such event.
(b) In case of any such Change of Control described
above, the successor or acquiring corporation (if other than the Company) and,
if an entity different from the successor or surviving entity, the entity whose
capital stock or assets the holders of Common Stock of the Company are entitled
to receive as a result of such transaction, shall expressly assume the due and
punctual observance and performance of each and every covenant and condition
contained in this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined by resolution of the Board of Directors of
the Company) in order to provide for adjustments of shares of the Common Stock
into which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in Section 4. For purposes of
Section 4, common stock of the successor or acquiring corporation shall include
stock of such corporation of any class which is not preferred as to dividends or
assets on liquidation over any other class of stock of such corporation and
which is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 4 shall similarly apply to successive Change of Control
transactions.
12
4.8. OTHER ACTION AFFECTING COMMON STOCK. In case at any time or
from time to time the Company shall take any action in respect of its Common
Stock, other than the payment of dividends permitted by Section 4 or any other
action described in Section 4, then, unless such action will not have an adverse
effect upon the rights of the holder of this Warrant, the number of shares of
Common Stock or other stock into which this Warrant is exercisable and/or the
purchase price thereof shall be adjusted in such manner as may be equitable in
the circumstances.
4.9. CERTAIN LIMITATIONS. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction which, by reason
of any adjustment hereunder, would cause the Current Warrant Price to be less
than the par value per share of Common Stock.
4.10. STOCK TRANSFER TAXES. The issue of stock certificates upon
exercise of this Warrant shall be made without charge to the Holder for any tax
in respect of such issue. The Company shall not, however, be required to pay any
tax which may be payable in respect of any transfer involved in the issue and
delivery of shares in any name other than that of the Holder of this Warrant,
and the Company shall not be required to issue or deliver any such stock
certificate unless and until the person or persons requesting the issue thereof
shall have paid to the Company the amount of such tax or shall have established
to the satisfaction of the Company that such tax has been paid.
5. NOTICES TO WARRANT HOLDERS.
5.1. CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Current Warrant Price, the Company, at its
expense, shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to the Holder of this Warrant a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Company
shall, upon the written request at any time of the Holder of this Warrant,
furnish or cause to be furnished to the Holder a like certificate setting forth
(i) such adjustments and readjustments, (ii) the Current Warrant Price at the
time in effect and (iii) the number of shares of Common Stock and the amount, if
any, or other property which at the time would be received upon the exercise of
Warrants owned by the Holder.
5.2. NOTICE OF CORPORATE ACTION. If at any time:
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend (other than
a cash dividend payable out of earnings or earned surplus legally available for
the payment of dividends under the laws of the jurisdiction of incorporation of
the Company) or other distribution, or any right to subscribe for or purchase
any evidences of its indebtedness, any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) there shall be any capital reorganization of the
Company, any reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger of the Company with, or any sale,
transfer or other disposition of all or substantially all the property, assets
or business of the Company to, another corporation, or
(c) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
13
then, in any one or more of such cases, the Company shall give to the Holder (i)
at least 20 days' prior written notice of the date on which a record date shall
be selected for such dividend, distribution or right or for determining rights
to vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 20 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to the
Holder at the last address of the Holder appearing on the books of the Company
and delivered in accordance with Section 16.2.
5.3. NO RIGHTS AS STOCKHOLDER. This Warrant does not entitle the
Holder to any voting or other rights as a stockholder of the Company prior to
exercise and payment of the Warrant Price in accordance with the terms hereof.
6. NO IMPAIRMENT. The Company shall not by any action, including,
without limitation, amending its articles of incorporation or through any
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 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 against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant, and (c) use its best efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant. Upon the request of the
Holder, the Company will at any time during the period this Warrant is
outstanding acknowledge in writing, in form satisfactory to the Holder, the
continuing validity of this Warrant and the obligations of the Company
hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION
WITH APPROVAL OF ANY GOVERNMENTAL AUTHORITY. From and after the Closing Date,
the Company shall at all times reserve and keep available for issue upon the
exercise of Warrants such number of its authorized but unissued shares of Common
Stock as will be sufficient to permit the exercise in full of all
14
outstanding Warrants (without regard to any ownership limitations provided in
Section 2.4(i)). All shares of Common Stock which shall be so issuable, when
issued upon exercise of any Warrant and payment therefor in accordance with the
terms of such Warrant, shall be duly and validly issued and fully paid and
nonassessable, and not subject to preemptive rights. Before taking any action
which would cause an adjustment reducing the Current Warrant Price below the
then par value, if any, of the shares of Common Stock issuable upon exercise of
the Warrants, the Company shall take any corporate action which may be necessary
in order that the Company may validly and legally issue fully paid and
non-assessable shares of such Common Stock at such adjusted Current Warrant
Price. Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof. If any shares of Common
Stock required to be reserved for issuance upon exercise of Warrants require
registration or qualification with any governmental authority under any federal
or state law before such shares may be so issued (other than as a result of a
prior or contemplated distribution by the Holder of this Warrant), the Company
will in good faith and as expeditiously as possible and at its expense endeavor
to cause such shares to be duly registered.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS. In the
case of all dividends or other distributions by the Company to the holders of
its Common Stock with respect to which any provision of Section 4 refers to the
taking of a record of such holders, the Company will in each such case take such
a record and will take such record as of the close of business on a Business
Day. The Company will not at any time, except upon dissolution, liquidation or
winding up of the Company, close its stock transfer books or Warrant transfer
books so as to result in preventing or delaying the exercise or transfer of any
Warrant.
9. REGISTRATION RIGHTS. The resale of the Warrant Stock shall be
registered in accordance with the terms and conditions contained in that certain
Investor Rights Agreement dated of even date hereof, between CD Investment
Partners, Ltd. and the Company (the "Investor Rights Agreement"). The Holder
acknowledges that pursuant to the Investor Rights Agreement, the Company has the
right to request that the Holder furnish information regarding such Holder and
the distribution of the Warrant Stock as is required by law or the Commission to
be disclosed in the Registration Statement (as such term is defined in the
Investor Rights Agreement), and the Company may exclude from such registration
the shares of Warrant Stock acquirable hereunder if the Holder fails to furnish
such information within a reasonable time prior to the filing of each
Registration Statement, supplemented prospectus included therein and/or amended
Registration Statement.
10. SUPPLYING INFORMATION. Upon any default by the Company of its
obligations hereunder or under the Investor Rights Agreement, the Company shall
cooperate with the Holder in supplying such information as may be reasonably
necessary for the Holder to complete and file any information reporting forms
presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any Warrant
or Restricted Common Stock.
11. LOSS OR MUTILATION. Upon receipt by the Company from the
Holder of evidence
15
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity or security reasonably
satisfactory to it and reimbursement to the Company of all reasonable expenses
incidental thereto and in case of mutilation upon surrender and cancellation
hereof, the Company will execute and deliver in lieu hereof a new Warrant of
like tenor to the Holder; provided, however, that in the case of mutilation, no
indemnity shall be required if this Warrant in identifiable form is surrendered
to the Company for cancellation.
12. OFFICE OF THE COMPANY. As long as any of the Warrants remain
outstanding, the Company shall maintain an office or agency (which may be the
principal executive offices of the Company) where the Warrants may be presented
for exercise, registration of transfer, division or combination as provided in
this Warrant.
13. FINANCIAL AND BUSINESS INFORMATION.
13.1. QUARTERLY INFORMATION. The Company will deliver to the Holder,
as soon as available and in any event within 45 days after the end of each of
the first three quarters of each fiscal year of the Company, one copy of an
unaudited consolidated balance sheet of the Company and its subsidiaries as at
the end of such quarter, and the related unaudited consolidated statements of
income, retained earnings and cash flow of the Company and its subsidiaries for
such quarter and, in the case of the second and third quarters, for the portion
of the fiscal year ending with such quarter, setting forth in each case in
comparative form the figures for the corresponding periods in the previous
fiscal year. Such financial statements shall be prepared by the Company in
accordance with GAAP and accompanied by the certification of the Company's chief
executive officer or chief financial officer that such financial statements
present fairly the consolidated financial position, results of operations and
cash flow of the Company and its subsidiaries as at the end of such quarter and
for such year-to-date period, as the case may be; provided, however, that the
Company shall have no obligation to deliver such quarterly information under
this Section 13.1 to the extent it is publicly available; and provided further,
that if such information contains material non-public information, the Company
shall so notify the Holder prior to delivery thereof and the Holder shall have
the right to refuse delivery of such information.
13.2. ANNUAL INFORMATION. The Company will deliver to the Holder as
soon as available and in any event within 90 days after the end of each fiscal
year of the Company, one copy of an audited consolidated balance sheet of the
Company and its subsidiaries as at the end of such year, and audited
consolidated statements of income, retained earnings and cash flow of the
Company and its subsidiaries for such year; setting forth in each case in
comparative form the figures for the corresponding periods in the previous
fiscal year; all prepared in accordance with GAAP, and which audited financial
statements shall be accompanied by an opinion thereon of the independent
certified public accountants regularly retained by the Company, or any other
firm of independent certified public accountants of recognized national standing
selected by the Company; provided, however, that the Company shall have no
obligation to deliver such annual information under this Section 13.2 to the
extent it is publicly available; and provided further, that if such information
contains material non-public information, the Company shall so notify the Holder
prior to delivery thereof and the Holder shall have the right to refuse delivery
of such information.
16
13.3. FILINGS. The Company will file on or before the required date
all regular or periodic reports (pursuant to the Exchange Act) with the
Commission and will deliver to the Holder promptly upon their becoming available
one copy of each report, notice or proxy statement sent by the Company to its
stockholders generally.
14. LIMITATION OF LIABILITY. No provision hereof, in the absence
of affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of the Holder for the purchase price of any Common Stock,
whether such liability is asserted by the Company or by creditors of the
Company.
15. REDEMPTION AT COMPANY'S ELECTION.
15.1. The Company may at the option of the Board of Directors of the
Company redeem this Warrant, in whole or in part, at any time after March 1,
2006 provided that (i) the Current Market Price (as determined by paragraph (2)
of such definition) is greater than $4.20 (as adjusted for stock splits, reverse
splits, stock dividends and the like) for ten consecutive trading days and (ii)
all of the Warrant Stock underlying the Warrants to be redeemed (x) is then
registered under an effective registration statement in accordance with the
terms and conditions of the Investor Rights Agreement and the Company is in
compliance in all material respects with the Investor Rights Agreement or (y)
may be sold without restriction pursuant to Rule 144(k) promulgated by the
Commission under the Securities Act. The amount payable in redemption of the
rights to purchase the Warrant Stock pursuant to this Section 15.1 shall be cash
equal to $0.01 multiplied by the number of Warrant Shares that would be issuable
upon exercise of the Warrants being redeemed (the "Redemption Price").
15.2. The Company shall effect a redemption as follows:
(i) The number of warrants subject to redemption
(including the Warrants) shall be allocated pro rata among the holders of all of
the Warrants (collectively, the "Redemption Warrants"), based upon the number of
Redemption Warrants then outstanding that are held by each such holder.
(ii) The Company shall pay the Redemption Price in cash
for the Redemption Warrants to be redeemed.
(iii) At least 15 but no more than 60 days prior to the
date fixed for any redemption of any Redemption Warrants (the "Redemption
Date"), written notice shall be given to each holder of record of Redemption
Warrants to be redeemed, notifying such holder of the redemption to be effected,
specifying the Redemption Date, the Redemption Price, the place at which payment
may be obtained and calling upon such holder to surrender to the Company, in the
manner and at the place designated, its certificate or certificates representing
the Redemption Warrants to be redeemed (the "Redemption Notice"). On or after
the Redemption Date, each holder of Redemption Warrants to be redeemed shall
surrender to the Company the certificate or certificates representing such
warrants, in the manner and at the place designated in the Redemption Notice,
and thereupon the Redemption Price therefor shall be paid to the person whose
name appears on such certificate or certificates as the owner thereof, and upon
such
17
payment, each surrendered certificate shall be canceled. In the event less
than all the warrants represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed warrants. For avoidance
of doubt, the Holder may exercise the Warrant at any time prior to the
redemption of the Warrant pursuant to this Section 15.
16. MISCELLANEOUS.
16.1. NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder shall operate
as a waiver of such right or otherwise prejudice the Holder's rights, powers or
remedies. If the Company fails to make, when due, any payments provided for
hereunder, or fails to comply with any other provision of this Warrant, the
Company shall pay to the Holder such amounts as shall be sufficient to cover any
third party costs and expenses including, but not limited to, reasonable
attorneys' fees, including those of appellate proceedings, incurred by the
Holder in collecting any amounts due pursuant hereto or in otherwise enforcing
any of its rights, powers or remedies hereunder.
16.2. NOTICE GENERALLY. All notices, requests, demands or other
communications provided for herein shall be in writing and shall be given in the
manner and to the addresses set forth in the Purchase Agreement.
16.3. SUCCESSORS AND ASSIGNS. Subject to compliance with the
provisions of Section 3.1, this Warrant and the rights evidenced hereby shall
inure to the benefit of and be binding upon the successors of the Company and
the successors and assigns of the Holder. The provisions of this Warrant are
intended to be for the benefit of all holders from time to time of this Warrant,
and shall be enforceable by any such holder.
16.4. AMENDMENT. This Warrant may be modified or amended or the
provisions of this Warrant waived with the written consent of both the Company
and the Holder.
16.5. SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be modified to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
16.6. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
16.7. GOVERNING LAW. This Warrant and the transactions contemplated
hereby shall be deemed to be consummated in the State of New York and shall be
governed by and interpreted in accordance with the local laws of the State of
New York without regard to the provisions thereof relating to conflicts of laws.
The Company hereby irrevocably consents to the exclusive jurisdiction of the
State and Federal courts located in New York City, New York in connection with
any action or proceeding arising out of or relating to this Warrant. In any such
litigation the Company agrees that the service thereof may be made by certified
or registered mail directed to the Company pursuant to Section 16.2.
[Signature Page Follows]
18
IN WITNESS WHEREOF, National Coal Corp. has caused this Warrant to be
executed by its duly authorized officer and attested by its Secretary.
Dated: August 31, 2004
NATIONAL COAL CORP.
By: /S/ XXX X. XXX
-----------------------------
Name: Xxx X. Xxx
Title: Chief Executive Officer
Attest:
By: /S/ XXXXXX XXXXX XXX
----------------------------
Name: Xxxxxx Xxxxx Xxx
Title: Secretary
19
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
1. The undersigned hereby elects to purchase shares of the Common Stock
of National Coal Corp. pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full.
2. The undersigned hereby elects to convert the attached Warrant into
Common Stock of National Coal Corp. through "cashless exercise" in the manner
specified in the Warrant. This conversion is exercised with respect to
_____________________ of the shares covered by the Warrant.
3. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
-------------------------
(Name)
-------------------------
-------------------------
-------------------------
(Address)
[and, if such shares of Common Stock shall not include all of the
shares of Common Stock issuable as provided in this Warrant, that a new Warrant
of like tenor and date for the balance of the shares of Common Stock issuable
hereunder be delivered to the undersigned.]
-------------------------------------
(Name of Registered Owner)
-------------------------------------
(Signature of Registered Owner)
-------------------------------------
(Street Address)
-------------------------------------
(State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the Warrant in every particular, without alteration or
enlargement or any change whatsoever.
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant for the
purchase of shares of common stock of National Coal Corp. hereby sells, assigns
and transfers unto the Assignee named below all of the rights of the undersigned
under this Warrant, with respect to the number of shares of common stock set
forth below:
---------------------------------------
---------------------------------------
---------------------------------------
(Name and Address of Assignee)
---------------------------------------
(Number of Shares of Common Stock)
and does hereby irrevocably constitute and appoint ____________ attorney-in-fact
to register such transfer on the books of the Company, maintained for the
purpose, with full power of substitution in the premises.
Dated:________________________________
--------------------------------------
(Print Name and Title)
--------------------------------------
(Signature)
--------------------------------------
(Witness)
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the Warrant in every particular, without alteration or
enlargement or any change whatsoever.
EXHIBIT C
FORM OF INVESTMENT REPRESENTATION LETTER
In connection with the acquisition of [warrants (the "Warrants") to purchase
____ shares of common stock of National Coal Corp. (the "Company"), par value
$0.0001 per share (the "Common Stock")][___ shares of common stock of National
Coal Corp. (the "Company"), par value $0.0001 per share (the "Common Stock")
upon the exercise of warrants by ________], by _______________ (the "Holder")
from -------------, the Holder hereby represents and warrants to the Company as
follows:
The Holder (i) is an "Accredited Investor" as that term is defined in Rule 501
of Regulation D promulgated under the Securities Act of 1933, as amended (the
"Act"); and (ii) has the ability to bear the economic risks of such Holder's
prospective investment, including a complete loss of Holder's investment in the
Warrants and the shares of Common Stock issuable upon the exercise thereof
(collectively, the "Securities").
The Holder, by acceptance of the Warrants, represents and warrants to the
Company that the Warrants and all securities acquired upon any and all exercises
of the Warrants are purchased for the Holder's own account, and not with view to
distribution of either the Warrants or any securities purchasable upon exercise
thereof in violation of applicable securities laws.
The Holder acknowledges that (i) the Securities have not been registered under
the Act, (ii) the Securities are "restricted securities" and the certificate(s)
representing the Securities shall bear the following legend, or a similar legend
to the same effect, until (i) in the case of the shares of Common Stock
underlying the Warrants, such shares shall have been registered for resale by
the Holder under the Act and effectively been disposed of in accordance with a
registration statement that has been declared effective; or (ii) in the opinion
of counsel for the Company such Securities may be sold without registration
under the Act:
"[NEITHER] THE SECURITIES REPRESENTED BY THIS CERTIFICATE [NOR THE SECURITIES
INTO WHICH THEY ARE EXERCISABLE] HAVE [NOT] BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND ALL SUCH SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AS SET FORTH IN THIS CERTIFICATE. [NEITHER] THE
SECURITIES REPRESENTED HEREBY [NOR THE SECURITIES INTO WHICH THEY ARE
EXERCISABLE] MAY [NOT] BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF
COUNSEL, REASONABLY ACCEPTABLE TO COUNSEL FOR THE COMPANY, TO THE EFFECT THAT
THE PROPOSED SALE, TRANSFER, OR DISPOSITION MAY BE EFFECTUATED WITHOUT
REGISTRATION UNDER THE ACT."
IN WITNESS WHEREOF, the Holder has caused this Investment Representation Letter
to be executed in its corporate name by its duly authorized officer this __ day
of __________ 200_.
[Name]
By:______________________________
Name:
Title:
