WARRANT AGREEMENT
AGREEMENT, dated as of this ___th day of _________ 1998, by and between
FIBERCHEM, INC., a Delaware corporation (the "Company"), and CORPORATE STOCK
TRANSFER, INC., as Warrant Agent (the "Warrant Agent").
W I T N E S S E T H:
WHEREAS, in connection with (i) an offering of up to 8,976,962 rights
("Rights"), each Right entitling the holder thereof to purchase for $.22 a
Unit consisting of one share of Common Stock and one Class E Common Stock
Purchase Warrant (the "Warrants") exercisable at $.25 per share through
October __, 1999; $.35 per share from October __, 1999 through October __,
2000; $.50 per share from October __, 2000 through October __, 2001; $.70 per
share from October __, 2001 through October __, 2002; and $.90 per share from
October __, 2002 through October __, 2003 and (ii) the issuance to
Privatbank Vermag AG ("Privatbank") of an additional 130,000 Units in
consideration of credit extended by it; the Company is issuing up to an
aggregate of 9,106,962 Units; and
WHEREAS, THE Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange and redemption of the Warrants, the
issuance of certificates representing the Warrants, the exercise of the
Warrants, and the rights of the holders thereof.
NOW THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and provisions
of the Warrants and the certificates representing the Warrants and the
respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the Warrant Agent, the parties hereto
agree as follows.
SECTION 1. DEFINITIONS. As used herein, the following terms shall have
the following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean stock of the Company of any class, whether
now or hereafter authorized, which has the right to participate in the
distribution of earnings and assets of the Company without limit as to amount or
percentage, which at the date hereof consists of 150,000,000 shares of Common
Stock, $.0001 par value, authorized.
(b) "Corporate Office" shall mean the office of the Warrant Agent (or
its successor) at which at any particular time its principal business shall be
administered, which office is located at the date hereof at 000 00xx Xxxxxx,
Xxxxxxxx Xxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000.
(c) "Exercise Date" shall mean the date of which the Warrant Agent shall
have received both (a) the Warrant Certificate representing such Warrant, with
the exercise form thereon duly executed by the Registered Holder thereof or his
attorney duly authorized in writing, and (b) payment in cash, or by official
bank or certified check made payable to the Company, of an amount in lawful
money of the United States of America equal to the applicable Purchase Price.
(d) "Initial Warrant Exercise Date" shall mean the effective date of
the registration statement registering the Warrants.
(e) "Purchase Price" shall mean the purchase price to be paid upon
exercise of each Warrant in accordance with the terms hereof, which price
shall be $.25 per share through October __, 1999; $.35 per share from October
__, 1999 through October __, 2000; $.50 per share from October __, 2000
through October __, 2001; $.70 per share from October __, 2001 through
October __, 2002; and $.90 per share from October __, 2002 through October
__, 2003, subject to adjustment from time to time pursuant to the provisions
of Section 8 hereof.
(f) "Registered Holder" shall mean the person in whose name any
certificate representing Warrants shall be registered on the books maintained by
the Warrant Agent pursuant to Section 6.
(g) "Transfer Agent" shall mean Corporate Stock Transfer, Inc., as the
Company's transfer agent, or its authorized successor, as such.
(h) "Warrant Expiration Date" shall mean 5:00 P.M. (Denver, Colorado
time) on October __, 2003, provided that if such date shall in the State of
Colorado be a holiday or a day on which banks are authorized to close, then 5:00
P.M. (Denver, Colorado time) on the next following day which in the State of
Colorado is not a holiday or a day on which banks are authorized to close. Upon
notice to the warrantholders, the Company shall have the right to extend the
warrant expiration date of the Warrants.
SECTION 2. WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES.
(a) A Warrant shall initially entitle the Registered Holder of the Warrant
Certificate representing such Warrant to purchase one share of Common Stock upon
the exercise thereof, in accordance with the terms hereof, subject to
modification and adjustment as provided in Section 8.
(b) Upon execution of this Agreement, Warrant Certificates representing
the number of Warrants sold shall be executed by the Company and delivered to
the Warrant Agent. Upon written order of the Company signed by its President or
Chairman or a Vice President and by its Secretary or an Assistant Secretary, the
Warrant Certificates shall be countersigned, issued and delivered by the Warrant
Agent pursuant to this Agreement.
(c) From time to time, up to the Warrant Expiration Dates, the Transfer
Agent shall countersign and deliver stock certificates in required whole number
denominations representing up to an aggregate of 9,106,962 shares of Common
Stock, subject to adjustment as described herein, upon the exercise of the
Warrants in accordance with this Agreement.
(d) From time to time, up to the applicable Warrant Expiration Date, the
Warrant Agent shall countersign and deliver Warrant Certificates in required
whole number denominations to the persons entitled thereto in connection with
any transfer or exchange permitted under this Agreement; provided that no
Warrant Certificates shall be issued except (i) those initially issued
hereunder, (ii) those issued on or after the Initial Warrant Exercise Date,
upon the exercise of fewer than all Warrants represented by the respective
Warrant Certificate, to evidence any unexercised Warrants held by the exercising
Registered Holder, (iii) those issued upon any transfer or exchange pursuant to
Section 6; (iv) those issued in replacement of lost, stolen, destroyed or
mutilated Warrant Certificates pursuant to Section 7; and (v) at the option of
the Company, in such form as may be
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approved by its Board of Directors, to reflect any adjustment or change in the
Purchase Price, or the number of shares of Common Stock purchasable upon
exercise of the Warrants.
SECTION 3. FORM AND EXECUTION OF WARRANT CERTIFICATES.
(a) The Warrant Certificates shall be substantially in the form annexed
hereto as Exhibit A (the provisions of which are hereby incorporated herein) and
may have such letters, numbers or other marks of identification or designation
and such legends, summaries or endorsements printed, lithographed or engraved
thereon as the Company may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Warrants may be listed, or to conform to
usage. The Warrant Certificates shall be dated the date of issuance thereof
(whether upon initial issuance, transfer, exchange or in lieu of mutilated,
lost, stolen, or destroyed Warrant Certificates) and issued in registered form.
Warrants shall be numbered serially with the letters WE.
(b) Warrant Certificates shall be executed on behalf of the Company by
its Chairman of the Board, President or any Vice President and by its
Secretary or an Assistant Secretary, by manual signatures or by facsimile
signatures printed thereon, and shall have imprinted thereon a facsimile of
the Company's seal. Warrant Certificates shall be manually countersigned by
the Warrant Agent and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any
of the Warrant Certificates shall cease to be such officer of the Company
before the date of issuance of the Warrant Certificates or before
countersignature by the Warrant Agent, such Warrant Certificate may be issued
and delivered with the same force and effect as though the person who signed
such Warrant Certificates had not ceased to be such officer of the Company.
After countersignature by the Warrant Agent, Warrant Certificates shall be
delivered by the Warrant Agent to the Registered Holder without further
action by the Company, except as otherwise provided by Section 4 hereof.
SECTION 4. EXERCISE.
Each Warrant may be exercised by the Registered Holder thereof at any time
on or after the Initial Exercise Date, but not after the Warrant Expiration
Date, upon the terms and subject to the conditions set forth herein and in the
Warrant Certificate. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the Exercise Date and the person
entitled to receive the securities deliverable upon such exercise shall be
treated for all purposes as the holder upon exercise thereof as of the close of
business on the Exercise Date. As soon as practicable on or after the Exercise
Date, the Warrant Agent shall deposit the proceeds received from the exercise of
a Warrant and shall notify the Company in writing, by mail or by telecopy of the
exercise of the Warrants. Promptly following, and in any event within five days
after the date of such notice from the Warrant Agent, the Warrant Agent, on
behalf of the Company, shall cause to be issued and delivered by the Transfer
Agent, to the person or persons entitled to receive the same, a certificate or
certificates for the securities deliverable upon such exercise, (plus a
certificate for any remaining unexercised Warrants of the Registered Holder)
unless within 24 hours of the receipt of the notice, the Company shall instruct
the Warrant Agent by telecopy to refrain from causing such issuance
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of certificates pending clearance of checks received in payment of the Purchase
Price pursuant to such Warrants. Upon the exercise of any Warrant and clearance
of the funds received, the Warrant Agent shall promptly remit the payment
received for the Warrant to the Company or as the Company may direct in writing.
SECTION 5. RESERVATION OF SHARES; LISTING; PAYMENT OF TAXES; ETC.
(a) The Company's Certificate of Incorporation, as amended, authorizes
the issuance of 150,000,000 shares of Common Stock. As of October 12, 1998,
the Company had outstanding 26,441,207 shares of Common Stock and an
additional 12,776,697 shares reserved for issuance upon conversion of the
Preferred Stock and the exercise of Warrants and options. The Company
covenants that it will at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issue upon exercise of
Warrants, such number of shares of Common Stock as shall be issuable upon the
exercise of all outstanding Warrants. The Company covenants that all shares
of Common Stock which shall be issuable upon exercise of the Warrants shall,
at the time of delivery, be duly and validly issued, fully paid,
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof (other than those which the Company shall promptly pay or
discharge); and that upon issuance, such shares shall be listed on each
national securities exchange, if any, on which the other shares of
outstanding Common Stock of the Company are then listed.
(b) The Company covenants that if any securities to be reserved for the
purpose of exercise of Warrants hereunder require registration with, or
approval of, any governmental authority under any Federal securities law
before such securities may be validly issued or delivered upon such exercise,
then the Company will in good faith and as expeditiously as reasonably
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possible, endeavor to secure such registration or approval. The Company will
use reasonable efforts to obtain appropriate approvals or registrations under
state "blue sky" securities laws. With respect to any such securities
however, Warrants may not be exercised by, or shares of Common Stock issued
to, any Registered Holder in any state in which such exercise would be
unlawful. The Warrant Agent will not have any duty or responsibility for
determining if the registration would be unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes and
other governmental charges that may be imposed with respect to the issuance of
Warrants, or the issuance, or delivery of any shares upon exercise of the
Warrants; provided, however, that if the shares of Common Stock are to be
delivered in a name other than the name of the Registered Holder of the Warrant
Certificate representing any Warrant being exercised, then no such delivery
shall be made unless the person requesting the same has paid to the Warrant
Agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized to requisition the
Company's Transfer Agent from time to time for certificates representing shares
of Common Stock required upon exercise of the Warrants, and the Company will
authorize the Transfer Agent to comply with all such proper requisitions. The
Company will file with the Warrant Agent a statement setting forth the name and
address of the Transfer Agent of the Company for shares of Common Stock issuable
upon exercise of the Warrants.
SECTION 6. EXCHANGE AND REGISTRATION OF TRANSFER.
(a) Warrant Certificates may be exchanged for other Warrant Certificates
representing an equal aggregate number of Warrants of the same class or may be
transferred in whole or in part. Warrant Certificates to be exchanged shall be
surrendered to the Warrant Agent at its corporate office, and upon satisfaction
of the terms and provisions hereof, the Company shall execute and the Warrant
Agent shall countersign, issue and deliver in exchange therefor the Warrant
Certificate or Certificates which the Registered Holder making the exchange
shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which, subject to
such reasonable regulations as it may prescribe, it shall register Warrant
Certificates and the transfer thereof in accordance with its regular practice.
Upon due presentment for registration or transfer of any Warrant Certificate at
such office, the Company shall execute and the Warrant Agent shall issue and
deliver to the transferee or transferees a new Warrant Certificate or
Certificates representing an equal aggregate number of Warrants of the same
class.
(c) With respect to all Warrant Certificates presented for registration or
transfer, or for exchange or exercise, the subscription form on the reverse
thereof shall be duly endorsed, or be accompanied by a written instrument or
instruments of transfer and subscription, in form satisfactory to the Company
and the Warrant Agent, duly executed by the Registered Holder or his
attorney-in-fact duly authorized in writing.
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(d) A service charge may be imposed by the Warrant Agent for
registration or transfer or for exchange of Warrant Certificates. In
addition, the Company may require payment by such holder of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange in case of mutilated Warrant Certificates shall be promptly
canceled by the Warrant Agent and thereafter retained by the Warrant
Agent until termination of this Agreement or resignation as Warrant
Agent, or, disposed of or destroyed, at the direction of the Company,
within the retention guidelines prescribed by any Federal, State or
banking regulatory authority.
(f) Prior to due presentment for registration or transfer thereof,
the Company and the Warrant Agent may deem and treat the Registered
Holder of any Warrant Certificate as the absolute owner thereof and of
each Warrant represented thereby (notwithstanding any notations of
ownership or writing thereon made by anyone other than a duly authorized
officer of the Company or the Warrant Agent) for all purposes and shall
not be affected by any notice to the contrary.
SECTION 7. LOSS OR MUTILATION. Upon receipt by the Company and
the Warrant Agent of evidence satisfactory to them of the ownership of
and loss, theft, destruction or mutilation of any Warrant Certificate
and (in case of loss, theft or destruction) of indemnity satisfactory to
them, and (in the case of mutilation) upon surrender and cancellation
thereof, the Company shall execute and the Warrant Agent shall (in the
absence of notice to the Company and/or Warrant Agent that the Warrant
Certificate has been acquired by a bonafide purchaser) countersign and
deliver to the Registered Holder in lieu thereof a new Warrant
Certificate of like tenor representing an equal aggregate number of
Warrants of that same Class. Applicants for a substitute Warrant
Certificate shall comply with such other reasonable regulations and pay
such other reasonable charges as the Warrant Agent may prescribe.
SECTION 8. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES OF
COMMON STOCK OR WARRANTS.
(a) Subject to the exceptions referred to in Section 8(g) below,
in the event the Company shall, at any time or from time to time after
the date hereof, sell any shares of Common Stock for a consideration
consisting solely of cash in an amount per share less than the lesser of
the "Market Price" (as defined in this Section 8) or the Purchase
Price or issue any shares of Common Stock as a stock dividend to the
holders of Common Stock, or subdivide or combine the outstanding shares
of Common Stock into a greater or lesser number of shares (any such
sale, issuance, subdivision or combination being herein called a
"Change of Shares"), then, and thereafter upon each further Change of
Shares, the Purchase Price in effect immediately prior to such Change of
Shares shall be changed to a price (including any applicable fraction of
a cent) determined by dividing (i) the sum of (a) the total number of
shares of Common Stock outstanding immediately prior to such Change of
Shares, multiplied by the Purchase Price in effect immediately prior to
such Change of Shares, and (b) the consideration, if any, received by
the Company upon such sale, issuance, subdivision or combination by (ii)
the total number of shares of Common Stock outstanding immediately after
such Change of Shares.
(i) As used herein, the phrase "Market Price" at any date shall
be deemed to be the average of the last reported sale price, or, in case
no such reported sale takes place on such day, the average of the last
reported sale prices for the last three trading days, in either case as
officially reported by the principal securities exchange on which the
Common Stock is listed or admitted to trading or as reported by the
Nasdaq Stock Market, Inc. ("Nasdaq") or, if the Common Stock is not
listed or admitted to trading on any national securities exchange or
quoted on the Nasdaq National Market, but is quoted on The Nasdaq
SmallCap Market or the NASD's Electronic Bulletin Board, the closing bid
quotation as reported by Nasdaq or the National Quotation Bureau
Incorporated or a similar organization, or if the Common Stock is not
quoted on Nasdaq or the Electronic Bulletin Board, as determined in good
faith by resolution of the Board of Directors of the Company, based on
the best information available to it for the day immediately preceding
such issuance or sale, the day of such issuance or sale and the day
immediately after such issuance or sale. If the Common Stock is listed
or admitted to trading on a national securities exchange and also quoted
on the Nasdaq National Market, the Market Price shall be determined as
hereinabove provided by reference to the prices reported in the Nasdaq
National Market; provided that if the Common Stock is listed or admitted
to trading on the New York Stock Exchange, the Market Price shall be
determined as hereinabove provided by reference to the prices reported
by such exchange.
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(b) The Company may elect, upon any adjustment of the Purchase
Price hereunder, to adjust the number of Warrants of each or any Class
outstanding, in lieu of the adjustment in the number of shares of Common
Stock purchasable upon the exercise of each Warrant as hereinabove
provided, so that each Warrant outstanding after such adjustment shall
represent the right to purchase one share of Common Stock. Each Warrant
held of record prior to such adjustment of the number of Warrants of
each or any Class shall become that number of Warrants (calculated to
the nearest tenth) determined by multiplying the number one by a
fraction, the numerator of which shall be the Purchase Price in effect
immediately prior to such adjustment and the denominator of which shall
be the Purchase Price in effect immediately after such adjustment. Upon
each adjustment of the number of Warrants pursuant to this Section 8,
the Company shall, as promptly as practicable, cause to be distributed
to each Registered Holder of Warrant Certificates on the date of such
adjustment Warrant Certificates evidencing, subject to Section 9 hereof,
the number of additional Warrants of each Class to which such Holder
shall be entitled as a result of such adjustment or, at the option of
the Company, cause to be distributed to such Holder in substitution and
replacement for the Warrant Certificates held by him prior to the date
of adjustment (and upon surrender thereof, if required by the Company)
new Warrant Certificates evidencing the number of Warrants of each Class
to which such Holder shall be entitled after such adjustment.
(c) In case of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock, or in case of any
consolidation or merger of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the
continuing corporation and which does not result in any
reclassification, capital reorganization or other change of outstanding
shares of Common Stock), or in case of any sale or conveyance to another
corporation of the property of the Company as, or substantially as, an
entirety (other than a sale/leaseback, mortgage or other financing
transaction), the Company shall cause effective provision to be made so
that:
(i) each holder of a Warrant then outstanding shall have the right
thereafter, by exercising such Warrant, to purchase the kind and number
of shares of stock or other securities or property (including cash)
receivable upon such reclassification, capital reorganization or other
change, consolidation, merger, sale or conveyance by a holder of the
number of shares of Common Stock that might have been purchased upon
exercise of such Warrant immediately prior to such reclassification,
capital reorganization or other change, consolidation, merger, sale or
conveyance. Any such provision shall include provision for adjustments
that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 8; and
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(ii) new Management of the Company will be obligated to maintain a
current prospectus with respect to the Warrants until the Warrant
Expiration Date.
The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and other changes of
outstanding shares of Common Stock and to successive consolidations,
mergers, sales or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase
Price or the number of shares of Common Stock purchasable upon exercise
of the Warrants, the Warrant Certificates theretofore and thereafter
issued shall, unless the Company shall exercise its option to issue new
Warrant Certificates pursuant to Section 2(d) hereof, continue to
express the Purchase Price per share, and the number of shares
purchasable thereunder in the Warrant Certificates when the same were
originally issued.
(e) After each adjustment of the Purchase Price pursuant to this
Section 8, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary, of the Company setting forth:
(i) the Purchase Price as so adjusted, (ii) the number of shares of
Common Stock purchasable upon exercise of each Warrant after such
adjustment, and, if the Company shall have elected to adjust the number
of Warrants, the number of Warrants to which the Registered Holder of
each Warrant shall then be entitled, and (iii) a brief statement of the
facts accounting for such adjustment. The Company will promptly file
such certificate with the Warrant Agent and cause a brief summary
thereof to be sent by ordinary first class mail to each registered
holder of Warrants at his last address as it shall appear on the
registry books of the Warrant Agent. No failure to mail such notice nor
any defect therein or in the mailing thereof shall affect the validity
thereof except as to the holder to whom the Company failed to mail such
notice, or except as to the holder whose notice was defective. The
affidavit of an officer of the Warrant Agent or the Secretary or an
Assistant Secretary of the Company that such notice has been mailed
shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
(f) For purposes of Section 8(a) hereof, the following provisions (A)
to (E) shall also be applicable:
(A) The number of shares of Common Stock outstanding at any
given time shall include shares of Common Stock owned or held by or for
the account of the Company and the sale or issuance of such treasury
shares or the distribution of any such treasury shares shall not be
considered a Change of Shares for purposes of said sections.
(B) In case of (1) the sale by the Company solely for cash of
any rights or warrants to subscribe for or purchase, or any options for
the purchase of, Common Stock or any securities convertible into or
exchangeable for Common Stock without the payment of any further
consideration other than cash, if any (such convertible or exchangeable
securities being herein called "Convertible Securities"), or (2) the
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issuance by the Company, without the receipt by the Company of any
consideration therefor, of any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or
Convertible Securities, in each case, if (and only if) the consideration
payable to the Company upon the exercise of such rights, warrants or
options shall consist solely of cash, whether or not such rights,
warrants or options, or the right to convert or exchange such
Convertible Securities, are immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such
rights, warrants or options or upon the conversion or exchange of such
Convertible Securities (determined by dividing (x) the minimum aggregate
consideration payable to the Company upon the exercise of such rights,
warrants or options, plus the consideration received by the Company for
the issuance or sale of such rights, warrants or options, plus, in the
case of such Convertible Securities, the minimum aggregate amount of
additional consideration, if any, other than such Convertible Securities
payable upon the conversion or exchange thereof, by (y) the total
maximum number of shares of Common Stock issuable upon the exercise of
such rights, warrants or options or upon the conversion or exchange of
such Convertible Securities issuable upon the exercise of such rights,
warrants or options) is less than the Purchase Price in effect
immediately prior to the date of the issuance or sale of such rights,
warrants or options, then the total maximum number of shares of Common
Stock issuable upon the exercise of such rights, warrants or options or
upon the conversion or exchange of such Convertible Securities (as of
the date of the issuance or sale of such rights, warrants or options)
shall be deemed to be outstanding shares of Common Stock for purposes of
Section 8 hereof and shall be deemed to have been sold for cash in an
amount equal to such price per share.
(C) In case of the sale by the Company solely for cash of any
Convertible Securities, whether or not the right of conversion or
exchange thereunder is immediately exercisable, and the price per share
for which Common Stock is issuable upon the conversion or exchange of
such Convertible Securities (determined by dividing (x) the total amount
of consideration received by the Company for the sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, other than such Convertible Securities, payable
upon the conversion or exchange thereof, by (y) the total maximum number
of shares of Common Stock issuable upon the conversion or exchange of
such Convertible Securities) is less than the Purchase Price in effect
immediately prior to the date of the sale of such Convertible
Securities, then the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of such Convertible Securities
(as of the date of the sale of such Convertible Securities) shall be
deemed to be outstanding shares of Common Stock for purposes of Sections
8(a) and 8(b) hereof and shall be deemed to have been sold for cash in
an amount equal to such price per share.
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(D) If the exercise or purchase price provided for in any right,
warrant or option referred to in (B) above, or that rate at which any
Convertible Securities referred to in (C) above are convertible into or
exchangeable for Common Stock, shall change at any time (other than under
or by reason of provisions designed to protect against dilution),
the Purchase Price then in effect hereunder shall forthwith be
readjusted to such Purchase Price as would have obtained (1) had the
adjustments made upon the issuance or sale of such rights, warrants,
options or Convertible Securities been made upon the basis of the
issuance of only the number of shares of Common Stock theretofore
actually delivered (and the total consideration received therefor) upon
the exercise of such rights, warrants or options or upon the conversion
or exchange of such Convertible Securities, (2) had adjustments been
made on the basis of the Purchase Price as adjusted under clause (1) for
all transactions (which would have affected such adjusted Purchase
Price) made after the issuance or sale of such rights, warrants, options
or Convertible Securities, and (3) had any such rights, warrants,
options or Convertible Securities then still outstanding been originally
issued or sold at the time of such change. On the expiration of any
such right, warrant or option or the termination of any such right to
convert or exchange any such Convertible Securities, the Purchase Price
then in effect hereunder shall forthwith be readjusted to such Purchase
Price as would have obtained (a) had the adjustments made upon the
issuance or sale of such rights, warrants, options or Convertible
Securities been made upon the basis of the issuance of only the number
of shares of Common Stock theretofore actually delivered (and the total
consideration received therefor) upon the exercise of such rights,
warrants or options or upon the conversion or exchange of such
Convertible Securities and (b) had adjustments been made on the basis of
the Purchase Price as adjusted under clause (a) for all transactions
(which would have affected such adjusted Purchase Price) made after the
issuance or sale of such rights, warrants, options or Convertible
Securities.
(E) In case of the sale for cash of any shares of Common Stock,
any Convertible Securities, any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or
Convertible Securities, the consideration received by the Company
therefore shall be deemed to be the gross sales price therefor without
deducting therefrom any expense paid or incurred by the Company or any
underwriting discounts or commissions or concessions paid or allowed
by the Company in connection therewith.
(g) No adjustment to the Purchase Price of the Warrants or to the
number of shares of Common Stock purchasable upon the exercise of each
Warrant will be made, however,
(i) upon the exercise of any of the options presently outstanding under
any stock option plan (the "Plan") for officers, directors and certain other
key personnel of the Company; or
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(ii) upon the grant or exercise of any other options which may
hereafter be granted or exercised under the Plan or under any other employee
benefit plan of the Company; or
(iii) upon the sale or exercise of the Warrants; or
(iv) upon the issuance or sale of Common Stock upon conversion or
exchange of any Convertible Securities, whether or not any adjustment in the
Purchase Price was made or required to be made upon the issuance or sale of such
Convertible Securities and whether or not such Convertible Securities were
outstanding on the date of the original sale of the Warrants or were thereafter
issued or sold; or
(v) upon any amendment to or change in the terms of any rights or
warrants to subscribe for or purchase, or options for the purchase of, Common
Stock or Convertible Securities or in the terms of any Convertible Securities,
including, but not limited to, any extension of any expiration date of any such
right, warrant or option, any change in any exercise or purchase price provided
for in any such right, warrant or option, any extension of any date through
which any Convertible Securities are convertible into or exchangeable for Common
Stock or any change in the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock (other than rights, warrants,
options or Convertible Securities issued or sold after the close of business on
the date of the original issuance of the Units (i) for which an adjustment in
the Purchase Price then in effect was theretofore made or required to be made,
upon the issuance or sale thereof, or (ii) for which such an adjustment would
have been required had the exercise or purchase price of such rights, warrants
or options at the time of the issuance or sale thereof or the rate of conversion
or exchange of such Convertible Securities, at the time of the sale of such
Convertible Securities, or the issuance or sale of rights or warrants to
subscribe for or purchase, or options for the purchase of, such Convertible
Securities, been the price or rate as changed, in which case the provisions of
Sections 8(f)(E) hereof shall be applicable if, but only if, the exercise or
purchase price thereof, as changed, or the rate of conversion or exchange
thereof, as changed, if any, consists solely of cash or requires the payment of
additional consideration, if any, consisting solely of cash and the Company did
not receive any consideration other than cash, if any, in connection with such
change).
(h) As used in this Section 8, the term "Common Stock" shall
mean and include the Company's Common Stock authorized on the date of the
original issue of the Rights and shall also include any capital stock of any
class of the Company thereafter authorized which shall not be limited to a
fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends and in the distribution of assets upon the voluntary
liquidation, dissolution or winding up of the Company; provided, however,
that the shares issuable upon exercise of the Warrants shall include only
shares of such class designated in the Company's Certificate of Incorporation
as Common Stock on the date of the original issue of the Rights or (i), in
the case of any reclassification, change, consolidation, merger, sale or
conveyance of the character referred to in Section 8(c) hereof, the stock,
securities or property provided for in such section or (ii), in the case of
any reclassification or change in the outstanding shares of Common Stock
issuable upon exercise of the Warrants as a result of a subdivision or
combination or consisting of a change in par value,
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or from par value to no par value, or from no par value to par value, such
shares of Common Stock as so reclassified or changed.
(i) Any determination as to whether an adjustment in the
Purchase Price in effect hereunder is required pursuant to Section 8, or as
to the amount of any such adjustment, if required, shall be binding upon the
holders of the Warrants and the Company if made in good faith by the Board of
Directors of the Company.
(j) If and whenever the Company shall grant to the holders of
Common Stock, as such, rights or warrants to subscribe for or to purchase, or
any options for the purchase of, Common Stock or securities convertible into
or exchangeable for or carrying a right, warrant or option to purchase Common
Stock, the Company shall concurrently therewith grant to each of the then
Registered Holders of the Warrants all of such rights, warrants or options to
which each such holder would have been entitled if, on the date of
determination of stockholders entitled to the rights, warrants or options
being granted by the Company, such holder were the holder of record of the
number of whole shares of Common Stock then issuable upon exercise (assuming,
for purposes of this Section 8(j), that exercise of Warrants is permissible
during periods prior to the Initial Warrant Exercise Date) of his Warrants.
Such grant by the Company to the holders of the Warrants shall be in lieu of
any adjustment which otherwise might be called for pursuant to this Section 8.
(k) The Warrant Agent assumes no responsibility for any
determination under this Section and will act only in accordance with the
written directions of the Company and its counsel.
SECTION 9. FRACTIONAL WARRANTS AND FRACTIONAL SHARES.
(a) If the number of shares of Common Stock purchasable upon
the exercise of each Warrant is adjusted pursuant to Section 8 hereof, the
Company shall nevertheless not be required to issue fractions of shares, upon
exercise of the Warrants or otherwise, or to distribute certificates that
evidence fractional shares. With respect to any fraction of a share called
for upon any exercise hereof, the Company shall pay to the Holder an amount
in cash equal to such fraction multiplied by the current market value of such
fractional share, determined as follows:
(1) If the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such
exchange or listed for trading on the NASDAQ Stock Market, the
current value shall be the last reported sale price of the Common
Stock on such exchange on the last business day prior to the date
of exercise of this Warrant or if no such sale is made on such day,
the average closing bid and asked prices for such day on such
exchange; or
(2) If the Common Stock is not listed or admitted to
unlisted trading privileges, the current value shall be the mean
of the last reported bid and asked prices reported by the
National Quotation Bureau, Inc. on the last business day prior to
the date of the exercise of this Warrant; or
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(3) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so
reported, the current value shall be an amount determined in such
reasonable manner as may be prescribed by the Board of Directors
of the Company.
SECTION 10. REDEMPTION OF WARRANTS. The Warrants are redeemable
by the Company, in whole or in part, on not less than thirty (30) days' prior
written notice at a redemption price of $.05 per Warrant, provided the last
reported sale price of the Common Stock as reported on the Over-The-Counter
Electronic Bulletin Board ("OTCBB"), if traded thereon, or if not traded
thereon, the closing sale price if listed on a national securities exchange or
the Nasdaq SmallCap Market or National Market (or other reporting system that
provides last sale prices), has been at least 200% of the then current
Warrant exercise price for 30 trading days ending 15 days prior to the date
on which the Company gives notice of redemption, subject to the right of the
holder to exercise such Warrants prior to redemption. Any redemption in part
shall be made pro rata to all Warrant holders. The redemption notice shall
be mailed to the holders of the Warrants at their respective addresses
appearing in the Warrant register. Any such notice mailed in the manner
provided herein shall be conclusively presumed to have been duly given in
accordance with this Agreement whether or not the registered holder receives
such notice. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity of the proceedings for such
redemption except as to a registered holder of a Warrant (i) to whom notice
was not mailed or (ii) whose notice was defective. An affidavit of the
Warrant Agent or the Secretary or Assistant Secretary of the Company that
notice of redemption has been mailed shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. Holders of the Warrants will
have exercise rights until the close of business on the day immediately
preceding the date fixed for redemption.
SECTION 11. WARRANT HOLDERS NOT DEEMED STOCKHOLDERS. No holder
of Warrants shall, as such, be entitled to vote or to receive dividends or be
deemed the holder of Common Stock that may at any time be issuable upon
exercise of such Warrants for any purpose whatsoever, nor shall anything
contained herein be construed to confer upon the holder of Warrants, as such,
any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issue or reclassification of stock, change
of par value or change of stock to no par value, consolidation, merger or
conveyance or otherwise), or to receive notice of meetings, or to receive
dividends or subscription rights, until such Holder shall have exercised such
Warrants and been issued shares of Common Stock in accordance with the
provisions hereof.
SECTION 12. RIGHTS OF ACTION. All rights of action with respect
to this Agreement are vested in the respective Registered Holders of the
Warrants, and any Registered Holder of a Warrant, without consent of the
Warrant Agent or of the holder of any other Warrant, may, in his own behalf
and for his own benefit, enforce against the Company his right to exercise
his Warrants for the purchase of shares of Common Stock in the manner
provided in the Warrant Certificate and this Agreement.
SECTION 13. AGREEMENT OF WARRANT HOLDERS. Every holder of a
Warrant, by his acceptance thereof, consents and agrees with the Company, the
Warrant Agent and every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books of
the Warrant Agent by the Registered Holder thereof in person or by his
attorney duly authorized in writing and only if the Warrant Certificates
representing such Warrants are surrendered at the office of the Warrant
Agent, duly endorsed or accompanied by a proper instrument of transfer
satisfactory to the Warrant Agent and the Company in their sole discretion,
together with payment of any applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the
person in whose name the Warrant Certificate is registered as the holder and
as the absolute, true and lawful owner of the Warrants represented thereby
for all purposes, and neither the Company nor the Warrant Agent shall be
affected by any notice or knowledge to the contrary, except as otherwise
expressly provided in Section 6 hereof.
SECTION 14. CANCELLATION OF WARRANT CERTIFICATES. If the Company
shall purchase or acquire any Warrant or Warrants, the Warrant Certificate or
Warrant Certificates evidencing the
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same shall thereupon be delivered to the Warrant Agent and canceled by it
and retired. The Warrant Agent shall also cancel Common Stock following
exercise of any or all of the Warrants represented thereby or delivered to it
for transfer, split-up, combination or exchange.
SECTION 15. CONCERNING THE WARRANT AGENT. The Warrant Agent
shall act hereunder as agent and in a ministerial capacity for the Company,
and its duties shall be determined solely by the provisions hereof. The
Warrant Agent shall not, by issuing and delivering Warrant Certificates or by
any other act hereunder be deemed to make any representations as to the
validity, value or authorization of the Warrant Certificates or the Warrants
represented thereby or of any securities or other property delivered upon
exercise of any Warrant or whether any stock issued upon exercise of any
Warrant is fully paid and nonassessable.
The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be
made any adjustment of the Purchase Price provided in this Agreement, or to
determine whether any fact exists which may require any such adjustments, or
with respect to the nature or extent of any such adjustment, when made, or
with respect to the method employed in making the same. It shall not (i) be
liable for any recital or statement of facts contained herein or for any
action taken, suffered or omitted by it in reliance on any Warrant
Certificate or other document or instrument believed by it in good faith to
be genuine and to have been signed or presented by the proper party or
parties, (ii) be responsible for any failure on the part of the Company to
comply with any of its covenants and obligations contained in this Agreement
or in any Warrant Certificate, or (iii) be liable for any act or omission in
connection with this Agreement except for its own negligence or wilful
misconduct.
The Warrant Agent may at any time consult with counsel
satisfactory to it (who may be counsel for the Company) and shall incur no
liability or responsibility for any action taken, suffered or omitted by it
in good faith in accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order or
demand of the Company shall be sufficiently evidenced by an instrument signed
by the Chairman of the Board, President, any Vice President, its Secretary,
or Assistant Secretary (unless other evidence in respect thereof is herein
specifically prescribed). The Warrant Agent shall not be liable for any
action taken, suffered or omitted by it in accordance with such notice,
statement, instruction, request, direction, order or demand believed by it to
be genuine.
The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse it for its
reasonable expenses hereunder; it further agrees to indemnify the Warrant
Agent and save it harmless against any and all losses, expenses and
liabilities, including judgments, costs and counsel fees, for anything done
or omitted by the Warrant Agent in the execution of its duties and powers
hereunder except losses, expenses and liabilities arising as a result of the
Warrant Agent's negligence or wilful misconduct.
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The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a
result of the Warrant Agent's own negligence or wilful misconduct), after
giving 30 days' prior written notice to the Company. At least 15 days prior
to the date such resignation is to become effective, the Warrant Agent shall
cause a copy of such notice of resignation to be mailed to the Registered
Holder of each Warrant Certificate at the Company's expense. Upon such
resignation, or any inability of the Warrant Agent to act as such hereunder,
the Company shall appoint a new warrant agent in writing. If the Company
shall fail to make such appointment within a period of 15 days after it has
been notified in writing of such resignation by the resigning Warrant Agent,
then the Registered Holder of any Warrant Certificate may apply to any court
of competent jurisdiction for the appointment of a new warrant agent. Any
new Warrant Agent, whether appointed by the Company or by such a court, shall
be a bank or trust company having a capital and surplus, as shown by its last
published report to its stockholders, of not less than $10,000,000 or a stock
transfer company. After acceptance in writing of such appointment by the
new warrant agent is received by the Company, such new warrant agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; but if for any reason it shall be
necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the resigning
Warrant Agent. Not later than the effective date of any such appointment the
Company shall file notice thereof with the resigning Warrant Agent and shall
forthwith cause a copy of such notice to be mailed to the Registered Holder
of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant
agent may be converted or merged or any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be a
party or any corporation succeeding to the trust business of the Warrant
Agent shall be a successor warrant agent under this Agreement without any
further act, provided that such corporation is eligible for appointment as
successor to the Warrant Agent under the provisions of the preceding
paragraph. Any such successor warrant agent shall promptly cause notice of
its succession as warrant agent to be mailed to the Company and to the
Registered Holder of each Warrant Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of its
or their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same
manner and to the same extent and with like effects as though it were not
Warrant Agent. Nothing herein shall preclude the Warrant Agent from acting
in any other capacity for the Company or for any other legal entity.
SECTION 16. MODIFICATION OF AGREEMENT. The Warrant Agent and the
Company may by supplemental agreement make any changes or corrections in this
Agreement (i) that they shall deem it appropriate to cure any ambiguity or to
correct any defective or inconsistent provision or manifest mistake or error
herein contained; or (ii) that they may deem necessary or desirable and which
shall not adversely affect the interests of
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the holders of Warrant Certificates; PROVIDED, HOWEVER, that this Agreement
shall not otherwise be modified, supplemented or altered in any respect
except with the consent in writing of the Registered Holders of Warrant
Certificates representing not less than 50% of the Warrants of each Class
then outstanding; and PROVIDED, FURTHER, that no change in the number or
nature of the securities purchasable upon the exercise of any Warrant, or the
Purchase Price therefor, or the acceleration of the Warrant Expiration Date,
shall be made without the consent in writing of the Registered Holder of the
Warrant Certificate representing such Warrant, other than such changes as are
specifically prescribed by this Agreement as originally executed.
SECTION 17. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail,
postage prepaid as follows: if to the Registered Holder of a Warrant
Certificate, at the address of such holder as shown on the registry books
maintained by the Warrant Agent; if to the Company, at 0000 Xxxxx Xxxxx,
Xxxxx X, Xxx Xxxxx, Xxxxxx 00000, attention: Xxxxxx X. Xxxxxx, or at such
other address as may have been furnished to the Warrant Agent in writing by
the Company; if to the Warrant Agent, at its corporate office.
SECTION 18. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Nevada, without
reference to principles of conflict of laws.
SECTION 19. BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of the Company and, the Warrant Agent and their
respective successors and assigns, and the holders from time to time of
Warrant Certificates. Nothing in this Agreement is intended or shall be
construed to confer upon any other person any right, remedy or claim, in
equity or at law, or to impose upon any other person any duty, liability or
obligation.
SECTION 20. TERMINATION. This Agreement shall terminate at the
close of business on the Expiration Date of the Warrant or such earlier date
upon which all Warrants have been exercised, except that the Warrant Agent
shall account to the Company for cash held by it and the provisions of
Section 14 hereof shall survive such termination.
SECTION 21. COUNTERPARTS. This Agreement may be executed in
several counterparts, which taken together shall constitute a single document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date first above written.
FIBERCHEM, INC.
By:
--------------------------
Xxxxxxxx Xxxxxx, President
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CORPORATE STOCK TRANSFER, INC.
By:
--------------------------
Authorized Officer
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