THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO XXXXXX, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.
Right to Purchase 140,000 Shares of Common Stock of Xxxxxx, Inc.
(subject to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. 2003-1 Issue Date: July 31, 2003
XXXXXX, INC., a corporation organized under the laws of the State of
Delaware (the "Company"), hereby certifies that, for value received, LAURUS
MASTER FUND, LTD., or assigns (the "Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company from and after the Issue Date of
this Warrant and at any time or from time to time before 5:00 p.m., New York
time, through five (5) years after such date (the "Expiration Date"), up to
140,000 fully paid and nonassessable shares of Common Stock (as hereinafter
defined), $.01 par value per share, of the Company, at the Purchase Price (as
defined below). The number and character of such shares of Common Stock and the
Purchase Price are subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include Xxxxxx, Inc. and any corporation
which shall succeed or assume the obligations of Xxxxxx, Inc.
hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock, $.01
par value per share, as authorized on the date of the Securities
Purchase Agreement referred to in Section 9 hereof, and (b) any other
securities into which or for which any of the securities described in
(a) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person
(corporate or otherwise) which the holder of the Warrant at any time
shall be entitled to receive, or shall have received, on the exercise
of the Warrant, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for
or in replacement of Common Stock or Other Securities pursuant to
Section 4 or otherwise.
The term "Purchase Price" shall be
a. 83,000 shares at 115% of the Fixed Conversion Price per share.
b. 33,000 shares at 125% of the Fixed Conversion Price per share.
c. 24,000 shares at 145% of the Fixed Conversion Price per share.
1
1. Exercise of Warrant.
1.1. Number of Shares Issuable upon Exercise. From and after the date hereof
through and including the Expiration Date, the holder hereof shall be
entitled to receive, upon exercise of this Warrant in whole in accordance
with the terms of subsection 1.2 or upon exercise of this Warrant in part
in accordance with subsection 1.3, shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4.
1.2. Full Exercise. This Warrant may be exercised in full by the holder hereof
by delivery of an original or fax copy of the form of subscription attached
as Exhibit A hereto (the "Subscription Form") duly executed by such Holder,
to the Company at its principal office or at the office of its warrant
agent (as provided hereinafter), accompanied by payment, in cash, wire
transfer, or by certified or official bank check payable to the order of
the Company, in the amount obtained by multiplying the number of shares of
Common Stock for which this Warrant is then exercisable by the Purchase
Price (as hereinafter defined) then in effect.
1.3. Partial Exercise. This Warrant may be exercised in part (but not for a
fractional share) by surrender of this Warrant in the manner and at the
place provided in subsection 1.2 except that the amount payable by the
holder on such partial exercise shall be the amount obtained by multiplying
(a) the number of shares of Common Stock designated by the holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such
partial exercise, the Company, at its expense, will forthwith issue and
deliver to or upon the order of the holder hereof a new Warrant of like
tenor, in the name of the holder hereof or as such holder (upon payment by
such holder of any applicable transfer taxes) may request, the number of
shares of Common Stock for which such Warrant may still be exercised.
1.4. Fair Market Value. Fair Market Value of a share of Common Stock as of a
particular date (the "Determination Date") shall mean:
(a) If the Company's Common Stock is traded on an exchange or is quoted on
the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") National Market System or the NASDAQ SmallCap
Market, then the average closing or last sale price, respectively,
reported for the ten business days immediately preceding the
Determination Date.
(b) If the Company's Common Stock is not traded on an exchange or on the
NASDAQ National Market System or the NASDAQ SmallCap Market but is
traded on the NASD OTC Bulletin Board, then the mean of the average of
the closing bid and asked prices reported for the ten business days
immediately preceding the Determination Date.
(c) If the Company's Common Stock is not publicly traded, then as the
Holder and the Company agree or in the absence of agreement by
arbitration in accordance with the rules then standing of the American
Arbitration Association, before a single arbitrator to be chosen from
a panel of persons qualified by education and training to pass on the
matter to be decided.
1.5. Company Acknowledgment. The Company will, at the time of the exercise of
the Warrant, upon the request of the holder hereof acknowledge in writing
its continuing obligation to afford to such holder any rights to which such
holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the
Company to afford to such holder any such rights.
1.6. Trustee for Warrant Holders. In the event that a bank or trust company
shall have been appointed as trustee for the Company pursuant to Subsection
3.2, such bank or trust company shall have all the powers and duties of a
2
warrant agent (as hereinafter described) and shall accept, in its own name
for the account of the Company or such successor person as may be entitled
thereto, all amounts otherwise payable to the Company or such successor, as
the case may be, on exercise of this Warrant pursuant to this Section 1.
2.1 Delivery of Stock Certificates, etc. on Exercise. The Company agrees that
the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the holder hereof as the record owner of such shares
as of the close of business on the date on which this Warrant shall have
been surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in
any event within 7 days thereafter, the Company at its expense (including
the payment by it of any applicable issue taxes) will cause to be issued in
the name of and delivered to the holder hereof, or as such holder (upon
payment by such holder of any applicable transfer taxes) may direct in
compliance with applicable Securities Laws, a certificate or certificates
for the number of duly and validly issued, fully paid and nonassessable
shares of Common Stock (or Other Securities) to which such holder shall be
entitled on such exercise, plus, in lieu of any fractional share to which
such holder would otherwise be entitled, cash equal to such fraction
multiplied by the then Fair Market Value of one full share, together with
any other stock or other securities and property (including cash, where
applicable) to which such holder is entitled upon such exercise pursuant to
Section 1 or otherwise.
2.2. Payment of Purchase Price.
(a) Payment may be made either in (i) cash or by certified or official
bank check payable to the order of the Company equal to the applicable
aggregate Purchase Price, (ii) by delivery of the Warrant, Common
Stock and/or Common Stock receivable upon exercise of the Warrant in
accordance with Section (b) below, or (iii) by a combination of any of
the foregoing methods, for the number of Common Shares specified in
such form (as such exercise number shall be adjusted to reflect any
adjustment in the total number of shares of Common Stock issuable to
the holder per the terms of this Warrant) and the holder shall
thereupon be entitled to receive the number of duly authorized,
validly issued, fully-paid and non-assessable shares of Common Stock
(or Other Securities) determined as provided herein.
(b) Notwithstanding any provisions herein to the contrary, if the Fair
Market Value of one share of Common Stock is greater than the Purchase
Price (at the date of calculation as set forth below), in lieu of
exercising this Warrant for cash, the holder may elect to receive
shares equal to the value (as determined below) of this Warrant (or
the portion thereof being cancelled) by surrender of this Warrant at
the principal office of the Company together with the properly
endorsed Subscription Form in which event the Company shall issue to
the holder a number of shares of Common Stock computed using the
following formula:
X=Y (A-B)
---
A
Where X= the number of shares of Common Stock to be issued to
the holder
Y= the number of shares of Common Stock purchasable under
the Warrant or, if only a portion of the Warrant is
being exercised, the portion of the Warrant being
exercised (at the date of such calculation)
A= the Fair Market Value of one share of the Company's
Common Stock (at the date of such calculation)
B= Purchase Price (as adjusted to the date of such
calculation)
3
3. Adjustment for Reorganization, Consolidation, Merger, etc.
3.1. Reorganization, Consolidation, Merger, etc. In case at any time or from
time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any
plan or arrangement contemplating the dissolution of the Company, then, in
each such case, as a condition to the consummation of such a transaction,
proper and adequate provision shall be made by the Company whereby the
holder of this Warrant, upon the exercise hereof as provided in Section 1
at any time after the consummation of such reorganization, consolidation or
merger or the effective date of such dissolution, as the case may be, shall
receive, in lieu of the Common Stock (or Other Securities) issuable on such
exercise prior to such consummation or such effective date, the stock and
other securities and property (including cash) to which such holder would
have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised this
Warrant, immediately prior thereto, all subject to further adjustment
thereafter as provided in Section 4.
3.2. Continuation of Terms. Upon any reorganization, consolidation, merger or
transfer (and any dissolution following any transfer) referred to in this
Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the exercise of this Warrant after
the consummation of such reorganization, consolidation or merger or the
effective date of dissolution following any such transfer, as the case may
be, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the person
acquiring all or substantially all of the properties or assets of the
Company, whether or not such person shall have expressly assumed the terms
of this Warrant as provided in Section 4.
4. Extraordinary Events Regarding Common Stock. In the event that the Company
shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its
outstanding shares of Common Stock, or (c) combine its outstanding shares
of the Common Stock into a smaller number of shares of the Common Stock,
then, in each such event, the Purchase Price shall, simultaneously with the
happening of such event, be adjusted by multiplying the then Purchase Price
by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of Common Stock
outstanding immediately after such event, and the product so obtained shall
thereafter be the Purchase Price then in effect. The Purchase Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 4. The number
of shares of Common Stock that the holder of this Warrant shall thereafter,
on the exercise hereof as provided in Section 1, be entitled to receive
shall be increased or decreased to a number determined by multiplying the
number of shares of Common Stock that would otherwise (but for the
provisions of this Section 4) be issuable on such exercise by a fraction of
which (a) the numerator is the Purchase Price that would otherwise (but for
the provisions of this Section 4) be in effect, and (b) the denominator is
the Purchase Price in effect on the date of such exercise.
5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable
on the exercise of the Warrant, the Company at its expense will promptly
cause its Chief Financial Officer or other appropriate designee to compute
such adjustment or readjustment in accordance with the terms of the Warrant
and prepare a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration received or
receivable by the Company for any additional shares of Common Stock (or
Other Securities) issued or sold or deemed to have been issued or sold, (b)
the number of shares of Common Stock (or Other Securities) outstanding or
4
deemed to be outstanding, and (c) the Purchase Price and the number of
shares of Common Stock to be received upon exercise of this Warrant, in
effect immediately prior to such adjustment or readjustment and as adjusted
or readjusted as provided in this Warrant. The Company will forthwith mail
a copy of each such certificate to the holder of the Warrant and any
Warrant agent of the Company (appointed pursuant to Section 11 hereof).
6. Reservation of Stock, etc. Issuable on Exercise of Warrant; Financial
Statements. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrant, all shares
of Common Stock (or Other Securities) from time to time issuable on the
exercise of the Warrant. This Warrant entitles the holder hereof to receive
copies of all financial and other information distributed or required to be
distributed to the holders of the Company's Common Stock.
7. Assignment; Exchange of Warrant. Subject to compliance with applicable
Securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") with respect
to any or all of the Shares. On the surrender for exchange of this Warrant,
with the Transferor's endorsement in the form of Exhibit B attached hereto
(the "Transferor Endorsement Form") and together with evidence reasonably
satisfactory to the Company demonstrating compliance with applicable
Securities Laws, which shall include, without limitation, a legal opinion
from the Transferor's counsel that such transfer is exempt from the
registration requirements of federal securities laws, the Company at its
expense but with payment by the Transferor of any applicable transfer
taxes) will issue and deliver to or on the order of the Transferor thereof
a new Warrant of like tenor, in the name of the Transferor and/or the
transferee(s) specified in such Transferor Endorsement Form (each a
"Transferee"), calling in the aggregate on the face or faces thereof for
the number of shares of Common Stock called for on the face or faces of the
Warrant so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of this Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
9. Registration Rights. The Holder of this Warrant has been granted certain
registration rights by the Company. These registration rights are set forth
in a Securities Purchase Agreement entered into by the Company and the
Holder.
10. Maximum Exercise. The Holder shall not be entitled to exercise this Warrant
on an exercise date, in connection with that number of shares of Common
Stock which would be in excess of the sum of (i) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates on an
exercise date, and (ii) the number of shares of Common Stock issuable upon
the exercise of this Warrant with respect to which the determination of
this proviso is being made on an exercise date, which would result in
beneficial ownership by the Holder and its affiliates of more than 4.9% of
the outstanding shares of Common Stock of the Company on such date. For the
purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder. Subject to the foregoing, the Holder shall not be limited to
aggregate exercises which would result in the issuance of more than 4.9%.
The restriction described in this paragraph is automatically null and void
upon an Event of Default under the Note..
11. Warrant Agent. The Company may, by written notice to the each holder of the
Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1,
exchanging this Warrant pursuant to Section 7, and replacing this Warrant
5
pursuant to Section 8, 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.
12. Transfer on the Company's Books. Until this Warrant is transferred on the
books of the Company, the Company may treat the registered holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to
the contrary.
13. Notices, etc. All notices and other communications from the Company to the
holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished
to the Company in writing by such holder or, until any such holder
furnishes to the Company an address, then to, and at the address of, the
last holder of this Warrant who has so furnished an address to the Company.
14. Voluntary Adjustment by the Company. The Company may at any time during the
term of this Warrant reduce the then current Exercise Price to any amount
and for any period of time deemed appropriate by the Board of Directors of
the Company.
15. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or
termination is sought. This Warrant shall be governed by and construed in
accordance with the laws of State of New York without regard to principles
of conflicts of laws. Any action brought concerning the transactions
contemplated by this Warrant shall be brought only in the state courts of
New York or in the federal courts located in the state of New York. The
individuals executing this Warrant on behalf of the Company agree to submit
to the jurisdiction of such courts and waive trial by jury. The prevailing
party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Warrant
is invalid or unenforceable under any applicable statute or rule of law,
then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability
of any other provision of this Warrant. The headings in this Warrant are
for purposes of reference only, and shall not limit or otherwise affect any
of the terms hereof. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision. The Company acknowledges that legal counsel participated in the
preparation of this Warrant and, therefore, stipulates that the rule of
construction that ambiguities are to be resolved against the drafting party
shall not be applied in the interpretation of this Warrant to favor any
party against the other party.
[THIS SPACE INTENTIONALLY LEFT BLANK]
6
IN WITNESS WHEREOF, the Company has executed this Warrant under seal as of
the date first written above.
XXXXXX, INC.
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------
Xxxxx X. Xxxxxxx
Executive Vice President - CFO
Witness:
/s/ Xxxx Xxx Xxxxxx
------------------------------
7
Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Xxxxxx, Inc.
The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):
___ ________ shares of the Common Stock covered by such Warrant; or
___ the maximum number of shares of Common Stock covered by such Warrant
pursuant to the cashless exercise procedure set forth in Section 2.
The undersigned herewith makes payment of the full purchase price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):
___ $__________ in lawful money of the United States; and/or
___ the cancellation of such portion of the attached Warrant as is exercisable
for a total of _______ shares of Common Stock (using a Fair Market Value of
$_______ per share for purposes of this calculation); and/or
___ the cancellation of such number of shares of Common Stock as is necessary,
in accordance with the formula set forth in Section 2, to exercise this Warrant
with respect to the maximum number of shares of Common Stock purchaseable
pursuant to the cashless exercise procedure set forth in Section 2.
The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to ____________________ whose address is
__________________________________________________________________________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated:___________________ _______________________________________
(Signature must conform to name of
holder as specified on the face of
the Warrant)
_______________________________________
(Address)
8
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto the person(s) named below under the heading "Transferees" the right
represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Xxxxxx, Inc. to which the within Warrant relates
specified under the headings "Percentage Transferred" and "Number Transferred,"
respectively, opposite the name(s) of such person(s) and appoints each such
person Attorney to transfer its respective right on the books of Xxxxxx, Inc.
with full power of substitution in the premises.
================================== ================== =================
Transferees Percentage Number
-----------
Transferred Transferred
---------------------------------- ------------------ -----------------
---------------------------------- ------------------ -----------------
---------------------------------- ------------------ -----------------
---------------------------------- ------------------ -----------------
---------------------------------- ------------------ -----------------
---------------------------------- ------------------ -----------------
================================== ================== =================
Dated:
-----------------, ---- ------------------------------------
(Signature must conform to name
of holder as specified on the
face of the warrant)
Signed in the presence of:
------------------------------- ------------------------------------
(Name) (address)
------------------------------------
ACCEPTED AND AGREED:
[TRANSFEREE]
------------------------------- ------------------------------------
(Name) (address)
------------------------------------
9
