AMERICAN SECURITY RESOURCES CORPORATION WARRANT AGREEMENT
AMERICAN
SECURITY RESOURCES CORPORATION
AMERICAN
SECURITY RESOURCES CORPORATION, a Nevada corporation (the "Company") (formerly
known as Computer Automation Systems, Inc.), for value received, hereby agrees
to issue a Class A warrant entitling you to purchase the shares of the Company's
common stock (the "Common Stock") set forth on the signature page hereof
(each
such instrument being hereinafter referred to as a "Warrant, "Warrants: or
"Warrant Agreement"). The Warrants will be issued in consideration of an
investment in the Company by you. The number of shares of Common Stock
purchasable upon exercise of the Warrants is subject to adjustment as provided
in Section 5 below. The Warrants will be exercisable by each you or any other
Warrant holder (as defined below) as to all or any lesser number of shares
of
Common Stock covered thereby, at an initial Purchase Price of $.30 per share,
subject to adjustment as provided in Section 5 below, for the exercise period
defined in Section 3(a) below. The term "Warrant holder" refers to each person
whose name appears on the signature page of this agreement and any transferee
or
transferees of any of them permitted by Section 2(a) below. Such term, when
used
in this Warrant Agreement in reference to or in the context of a person who
holds or owns shares of Common Stock issued upon exercise of a Warrant, refers
where appropriate to such person who holds or owns such shares of Common
Stock.
1.
Representations and Warranties.
The
Company represents and warrants to you as follows:
(a)
Corporate and Other Action. The Company has all requisite power and authority
(corporate and other), and has taken all necessary corporate action, to
authorize, execute, deliver and perform this Warrant Agreement, to execute,
issue, sell and deliver the Warrants and a certificate or certificates
evidencing the Warrants, to authorize and reserve for issue and, upon payment
from time to time of the Purchase Price, to issue, sell and deliver, the
shares
of the Common Stock issuable upon exercise of the Warrants (the "Shares"),
and
to perform all of its obligations under this Warrant Agreement and the Warrants.
The Shares, when issued in accordance with this Agreement, will be duly
authorized and validly issued and outstanding, fully paid and nonassessable
and
free of all liens, claims, encumbrances and preemptive rights. This Warrant
Agreement and, when issued, each Warrant issued pursuant hereto, has been
or
will be duly executed and delivered by the Company and is or will be a legal,
valid and binding agreement of the Company, enforceable in accordance with
its
terms. No authorization, approval, consent or other order of any governmental
entity, regulatory authority or other third party is required for such
authorization, execution, delivery, performance, issue or sale.
(b)
No
Violation. The execution and delivery of this Warrant Agreement, the
consummation of the transactions herein contemplated and the compliance with
the
terms and provisions of this Warrant Agreement and of the Warrants will not
conflict with, or result in a breach of, or constitute a default or an event
permitting acceleration under, any statute, the Certificate of Incorporation
or
Bylaws of the Company or any indenture, mortgage, deed of trust, note, bank
loan, credit agreement, franchise, license, lease, permit, or any other
agreement, understanding, instrument, judgment, decree, order, statute, rule
or
regulation to which the Company is a party or by which it is or may be
bound.
2.
Transfer.
(a)
Transferability of Warrants. You agree that the Warrants are being acquired
as
an investment and not with a view to distribution thereof and that the Warrants
may not be transferred, sold, assigned or hypothecated except as provided
herein
and in compliance with all applicable securities and other
laws.
(b)
Registration of Shares. You agree not to make any sale or other disposition
of
the Shares except pursuant to a registration statement which has become
effective under the Securities Act of 1933, as amended (the "Act"), setting
forth the terms of such offering, the underwriting discount and commissions
and
any other pertinent data with respect thereto, unless you have provided the
Company with an opinion of counsel reasonably acceptable to the Company that
such registration is not required. Certificates representing the Shares,
which
are not registered as provided in Section 2, shall bear an appropriate legend
and be subject to a "stop-transfer" order.
3.
Exercise of Warrants; Partial Exercise; Redemption.
(a)
Exercise Period. This Warrant is exercisable from the date hereof and expires
on
December 31, 2006. The Board of Directors reserves the right to extend the
Exercise Period for up to 12 months.
(b)
Exercise in Full. Subject to Section 3(a), Warrants may be exercised in full
by
the Warrant holder by surrender of the Warrants, with the form of subscription
at the end thereof duly executed by such Warrant holder, to the Company at
its
principal office, accompanied by payment, in cash or by certified or bank
cashier's check payable to the order of the Company, in the amount obtained
by
multiplying the number of shares of the Common Stock represented by the
respective Warrant or Warrants by the Purchase Price per share (after giving
effect to any adjustments as provided in Section 5 below).
(c)
Partial Exercise. Subject to Section 3(a), each Warrant may be exercised
in part
by the Warrant holder by surrender of the Warrant, with the form of subscription
at the end thereof duly executed by such Warrant holder, in the manner and
at
the place provided in Section 3(b) above, accompanied by payment, in cash
or by
certified or bank cashier's check payable to the order of the Company, in
amount
obtained by multiplying the number of shares of the Common Stock designated
by
the Warrant holder in the form of subscription attached to the Warrant by
the
Purchase Price per share (after giving effect to any adjustments as provided
in
Section 5 below). Upon any such partial exercise, the Company at its expense
will forthwith issue and deliver to or upon the order of the Warrant holder
a
new Warrant of like tenor, in the name of the Warrant holder thereof or as
the
Warrant holder (upon payment by such Warrant holder of any applicable transfer
taxes) may request, subject to Section 2(a), calling in the aggregate for
the
purchase of the number of shares of the Common Stock equal to the number
of such
shares called for on the face of the respective Warrant (after giving effect
to
any adjustment herein as provided in Section 5 below) minus the number of
such
shares designated by the Warrant holder in the aforementioned form of
subscription.
(d)
Company to Reaffirm Obligations. The Company will, at the time of any exercise
of any Warrant, upon the request of the Warrant holder, acknowledge in writing
its continuing obligation to afford to such Warrant holder any rights to
which
such Warrant holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant Agreement; provided, however,
that if the Warrant holder shall fail to make any such request, such failure
shall not affect the continuing obligation of the Company to afford to such
Warrant holder any such right.
(e)
Method of Redemption. If the closing bid price of the Common Stock shall
have
equaled or exceeded 200% of the Purchase Price, as adjusted, for a period
of at
least twenty (20) of the last thirty trading days at any time during the
term
hereof, the Company may, in its sole discretion, redeem the Warrants by paying
Warrant holders $.01 per Warrant, provided such notice is mailed to all Warrant
holders not later than thirty (30) days after the end of such period and
prescribes a redemption date at least thirty (30) days but not more than
sixty
(60) days thereafter. Warrant holders will be entitled to exercise Warrants
at
any time up to the business day next preceding the redemption date.
4.
Delivery of Stock Certificates on Exercise.
Any
exercise of the Warrants pursuant to Section 3 shall be deemed to have been
effected immediately prior to the close of business on the date on which
the
Warrants together with the subscription form and the payment for the aggregate
Purchase Price shall have been received by the Company. At such time, the
person
or persons in whose name or names any certificate or certificates representing
the Shares or Other Securities (as defined below) shall be issuable upon
such
exercise shall be deemed to have become the holder or holders of record of
the
Shares or Other Securities so purchased. As soon as practicable after the
exercise of any Warrant in full or in part, and in any event within 10 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 purchasing Warrant holder, a certificate or certificates representing
the
number of fully paid and non-assessable shares of Common Stock or Other
Securities to which such Warrant holder shall be entitled upon such exercise,
plus in lieu of any fractional share to which such Warrant holder would
otherwise be entitled, cash in an amount determined pursuant to Section 6(h),
together with any other stock or other securities and property (including
cash,
where applicable). The term "Other Securities" refers to any stock (other
than
Common Stock), other securities or assets (including cash) of the Company
or any
other person (corporate or otherwise) which the holders of the Warrants at
any
time shall be entitled to receive, or shall have received, upon the exercise
of
the Warrants, 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 5 below or
otherwise.
5.
Adjustment of Purchase Price and Number of Shares Purchasable.
The
Purchase Price and the number of Shares are subject to adjustment
from
time
to time as set forth in this Section 5.
(a)
In
case the Company shall at any time after the date of this Agreement
(i)
declare a
dividend on the Common Stock in shares of its capital stock,
(ii)
subdivide the outstanding Shares,
(iii)
combine
the outstanding Common Stock into a smaller number of Common Stock, or (iv)
issue any shares of its capital stock by reclassification of the Common Stock
(including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing corporation),
then in each case the Purchase Price, and the number and kind of Shares
receivable upon exercise, in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination, or
reclassification shall be proportionately adjusted so that the holder of
any
Warrant exercised after such time shall be entitled to receive the aggregate
number and kind of Shares which, if such Warrant had been exercised immediately
prior to such time, he would have owned upon such exercise and been entitled
to
receive by virtue of such dividend, subdivision, combination, or
reclassification. Such adjustment shall be made successively whenever any
event
listed above shall occur.
(b)
No
adjustment in the Purchase Price shall be required if such adjustment is
less
than $.05; provided, however, that any adjustments which by reason of this
subsection (h) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
5
shall be made to the nearest cent or to the nearest one-thousandth of a share,
as the case may be.
(c)
Upon
each adjustment of the Purchase Price as a result of the calculations made
in
any of subsection (a) of this Section 5, each Warrant outstanding prior to
the
making of the adjustment in the Purchase Price shall thereafter evidence
the
right to purchase, at the adjusted Purchase Price, that number of Shares
(calculated to the nearest thousandth) obtained by (i) multiplying the number
of
Shares purchasable upon exercise of a Warrant immediately prior to adjustment
of
the number of Shares by the Purchase Price in effect prior to adjustment
of the
Purchase Price and (ii) dividing the product so obtained by the Purchase
Price
in effect immediately after such adjustment of the Purchase Price.
(d)
In
case of any capital reorganization of the Company, or of any reclassification
of
the Common Stock (other than a reclassification of the Common Stock referred
to
in subsection (a) of this Section 5), or in the case of the consolidation
of the
Company with or the merger of the Company into any other corporation or of
the
sale, transfer, or lease of the properties and assets of the Company as,
or
substantially as, an entirety to any other corporation, each Warrant shall
after
such capital reorganization, reclassification of the Common Stock,
consolidation, merger, sale, transfer, or lease be exercisable, upon the
terms
and conditions specified in this Agreement, for the number of shares of stock
or
other securities, assets, or cash to which a holder of the number of shares
of
Common Stock purchasable (at the time of such capital reorganization,
reclassification of shares, consolidation, merger, sale, transfer, or lease)
upon exercise of such Warrant would have been entitled upon such capital
reorganization, reclassification of the Common Stock, consolidation, merger,
sale, transfer, or lease; and in any such case, if necessary, the provisions
set
forth in this Section 5 with respect to the rights and interests thereafter
of
the holders of the Warrants shall be appropriately adjusted so as to be
applicable, as nearly as may reasonably be, to any shares of stock or other
securities, assets, or cash thereafter deliverable upon the exercise of the
Warrants. The subdivision or combination of the Common Stock at any time
outstanding into a greater or lesser number of shares shall not be deemed
to be
a reclassification of the Common Stock for the purposes of this paragraph.
The
Company shall not effect any such consolidation, merger, transfer, or lease,
unless prior to or simultaneously with the consummation thereof, the successor
corporation (if other than the Company) resulting from such consolidation
or
merger or the corporation purchasing, receiving, or leasing such assets or
other
appropriate corporation or entity shall assume, by written instrument executed
and delivered to the Warrant holder, the obligation to deliver to the Warrant
holder such shares of stock, securities, or assets as, in accordance with
the
foregoing provisions, such holders may be entitled to purchase, and to perform
the other obligations of the Company under this Warrant Agreement.
6.
Further Covenants of the Company.
(a)
Dilution or Impairments. The Company will not, by amendment of its certificate
or 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 the Warrants or of this Warrant Agreement, but will at all times
in
good faith assist in the carrying out of all such terms and in the taking
of all
such action as may be necessary or appropriate in order to protect the rights
of
the Warrant holders against dilution or other impairment. Without limiting
the
generality of the foregoing, the Company:
(i)
shall
at all times reserve and keep available, solely for issuance and delivery
upon
the exercise of the Warrants, all shares of Common Stock (or Other Securities)
from time to time issuable upon the exercise of the Warrants and shall take
all
necessary actions to ensure that the par value per share, if any, of the
Common
Stock (or Other Securities) is at all times equal to or less than the then
effective Purchase Price per share;
(ii)
will
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 or Other Securities upon the exercise of the Warrants from time
to
time outstanding;
(iii)
will not issue any capital stock of any class which is preferred as to dividends
or as to the distribution of assets upon voluntary or involuntary dissolution,
liquidation or winding-up, unless the rights of the holders thereof shall
be
limited to a fixed sum or percentage of par value in respect of participation
in
dividends and in any such distribution of assets; and
(iv)
will
not transfer all or substantially all of its properties and assets to any
person
(corporate or otherwise), or consolidate with or merge into any other person
or
permit any such person to consolidate with or merge into the Company (if
the
Company is not the surviving corporation), unless such other person shall
expressly assume in writing and will be bound by all the terms of this Warrant
Agreement and the Warrants.
(b)
Title
to Stock. All shares of Common Stock delivered upon the exercise of the Warrants
shall be validly issued, fully paid and nonassessable; each Warrant holder
shall, upon such delivery, receive good and marketable title to the Shares,
free
and clear of all voting and other trust arrangements, liens, encumbrances,
equities and claims whatsoever; and the Company shall have paid all taxes,
if
any, in respect of the issuance thereof.
(c)
Remedies. The Company stipulates that the remedies at law of the Warrant
holder
or any holder of Shares in the event of any default or threatened default
by the
Company in the performance of or compliance with any of the terms of this
Warrant Agreement or the Warrants are not and will not be adequate and that
such
terms may be specifically enforced by a decree for the specific performance
of
any agreement contained herein or in the Warrants or by an injunction against
a
violation of any of the terms hereof or thereof or otherwise.
(d)
Exchange of Warrants. Subject to Section 2(a) hereof, upon surrender for
exchange of any Warrant to the Company, the Company at its expense will promptly
issue and deliver to or upon the order of the holder thereof a new Warrant
or
like tenor, in the name of such holder or as such holder (upon payment by
such
Warrant holder of any applicable transfer taxes) may direct, calling in the
aggregate for the purchase of the number of shares of the Common Stock called
for on the face or faces of the Warrant or Warrants so surrendered. The Warrants
and all rights thereunder are transferable in whole or in part upon the books
of
the Company by the registered holder thereof, subject to the provisions of
Section 2(a), in person or by duly authorized attorney, upon surrender of
the
Warrant, duly endorsed, at the principal office of the Company.
(e)
Replacement of Warrants. Upon receipt of evidence reasonably satisfactory
to the
Company of the loss, theft, destruction or mutilation of any Warrant and,
in the
case of any such loss, theft or destruction, upon delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in
the
case of any such mutilation, upon surrender and cancellation of such Warrant,
the Company, at the expense of the Warrant holder, will execute and deliver,
in
lieu thereof, a new Warrant of like tenor.
(f)
Reporting by the Company. The Company agrees that during the term of the
Warrants it will use its best efforts to keep current in the filing of all
forms
and other materials, if any, which it may be required to file with the
appropriate regulatory authority pursuant to the Securities Exchange Act
of
1934, as amended (the "Exchange Act"), and all other forms and reports required
to be filed with any regulatory authority having jurisdiction over the
Company.
(g)
Fractional Shares. No fractional Shares are to be issued upon the exercise
of
any Warrant, but the Company shall pay a cash adjustment in respect of any
fraction of a share which would otherwise be issuable in an amount equal
to such
fraction multiplied by the closing price which shall be the last reported
sales
price regular way or, in case no such reported sales takes place on such
day,
the average of the closing bid and asked prices regular way, on the principal
national securities exchange in the United States on which the Common Stock
is
listed or admitted to trading, or if the Common Stock is not listed or admitted
to trading on any such national securities exchange, the average of the highest
reported bid and lowest reported asked price as furnished by the National
Association of Securities Dealers, Inc. through its automated quotation system
("Nasdaq") or a similar organization if Nasdaq is no longer reporting such
information.
7.
Other
Warrant Holders: Holders of Shares. The Warrants are issued upon the following
terms, to all of which each Warrant holder by the taking thereof consents
and
agrees: (a) any person who shall become a transferee, within the limitations
on
transfer imposed by Section 2(a) hereof, of a Warrant properly endorsed shall
take such Warrant subject to the provisions of Section 2(a) hereof and thereupon
shall be authorized to represent himself as absolute owner thereof and, subject
to the restrictions contained in this Warrant Agreement, shall be empowered
to
transfer absolute title by endorsement and delivery thereof to a permitted
bona
fide purchaser for value; (b) any person who shall become a holder or owner
of
Shares shall take such shares subject to the provisions of Section 2(b) hereof;
(c) each prior taker or owner waives and renounces all of his equities or
rights
in such Warrant in favor of each such permitted bona fide purchaser, and
each
such permitted bona fide purchaser shall acquire absolute title thereto and
to
all rights presented thereby; and (d) until such time as the respective Warrant
is transferred on the books of the Company, the Company may treat the registered
holder thereof as the absolute owner thereof for all purposes, notwithstanding
any notice to the contrary.
8.
Miscellaneous.
All
notices, certificates and other communications from or at the request of
the
Company to any Warrant holder shall be mailed by first class, registered
or
certified mail, postage prepaid, to such address as may have been furnished
to
the Company in writing by such Warrant holder, or, until an address is so
furnished, to the address of the last holder of such Warrant who has so
furnished an address to the Company, except as otherwise provided herein.
This
Warrant Agreement and any of the terms 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 Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Texas. The headings in this Warrant
Agreement are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. This Warrant Agreement, together with the
forms
of instruments annexed hereto as exhibits, constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof.
IN
WITNESS WHEREOF, the Company has caused this Warrant Agreement to be executed
in
Houston, Texas, by its proper corporate officers, thereunto duly authorized
as
of the date set forth below.
AMERICAN
SECURITY RESOURCES CORPORATION
By:
___________________________________
L.
XXXXXX
XXXXXX CEO
Dated:_________________________________
The
above
Warrant Agreement is confirmed as of the date hereof.
(to
be
Witnesses by AMERICAN SECURITY RESOURCES CORPORATION)
By:_________________________________
Printed
Name: ________________________
Title:________________________________
