Contract
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO CHINA AGRI-BUSINESS, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.
CHINA
AGRI-BUSINESS INC.
COMMON
STOCK PURCHASE WARRANT
FOR VALUE RECEIVED, Legend Merchant
Group, Inc. (“Holder”), is entitled
to purchase, subject to the provisions of this Warrant, from China
Agri-Business, Inc., a Maryland corporation (“Company”), at an
exercise price per share equal to $1.00 (the exercise price in effect being
herein called the “Exercise Price”), up
to 80,000 shares (“Warrant Shares”) of
the Company’s Common Stock, par value $0.001 per share (“Common Stock”). The
number of Warrant Shares purchasable upon exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time as described
herein.
This Warrant is being issued pursuant
to the Private Placement Memorandum, dated September 8, 2008, as supplemented
(the “PPM”),
among the Company and the initial holders of the Company Warrants (as defined
below). Capitalized terms used herein have the respective meanings
ascribed thereto in the PPM unless otherwise defined herein.
Section
1. Term. The term of
this Warrant shall commence on the issue date indicated above and shall expire
on the third anniversary thereof (the “Expiration Date”)
(such period being the "Term"), unless terminated earlier under Section 5
below.
Section
2. Registration and
Transfers. The Company shall maintain books for the transfer
and registration of the Warrant. Upon the initial issuance of this
Warrant, the Company shall issue and register the Warrant in the name of the
Holder. Subject to the restrictions set forth in Section 12, the Company shall
transfer this Warrant from time to time upon the books to be maintained by the
Company for that purpose, upon surrender hereof for transfer, properly endorsed
or accompanied by appropriate instructions for transfer and such other documents
as may be reasonably required by the Company, including, if required by the
Company, an opinion of its counsel to the effect that such transfer is exempt
from the registration requirements of the Securities Act, to establish that such
transfer is being made in accordance with the terms hereof, and a new Warrant
shall be issued to the transferee and the surrendered Warrant shall be canceled
by the Company.
Section
3. Exercise of
Warrant.
(a) Method of Exercise.
Subject to the provisions hereof, the Holder may exercise this Warrant, in whole
or in part, at any time prior to its expiration upon surrender of the Warrant,
together with delivery of a duly executed Warrant exercise form, in the form
attached hereto as Appendix A (the
“Exercise
Agreement”) and payment by cash, certified check or wire transfer of
funds of the aggregate Exercise Price for
that number of Warrant Shares then being purchased, to the Company during normal
business hours on any business day at the Company’s principal executive offices
(or such other office or agency of the Company as it may designate by notice to
the Holder).
(b) Issuance of
Certificates. Certificates for the Warrant Shares so purchased shall be
delivered to the Holder within a reasonable time, not exceeding ten (10)
business days, after this Warrant shall have been so exercised. The
certificates so delivered shall be in such denominations as may be requested by
the Holder and shall be registered in the name of the Holder or such other name
as shall be designated by the Holder, as specified in the Exercise
Agreement. If this Warrant shall have been exercised only in part,
then, unless this Warrant has expired, the Company shall, at its expense, at the
time of delivery of such certificates, deliver to the Holder a new Warrant
representing the right to purchase the number of shares with respect to which
this Warrant shall not then have been exercised. As used herein,
“business day” means a day, other than a Saturday or Sunday, on which banks in
New York City are open for the general transaction of business. Each
exercise hereof shall constitute the re-affirmation by the Holder that the
representations and warranties contained in the Subscription Agreement are true
and correct in all material respects with respect to the Holder as of the time
of such exercise. Upon partial exercise of this Warrant, a new Warrant
containing the same date and provisions of this Warrant shall, at the request of
the Holder, be issued by the Company to the Holder for the remaining portion of
this Warrant which shall not have been exercised.
Section
4. Ownership Limitation.
Notwithstanding anything to the contrary set forth herein, at no time may the
Holder exercise all or a portion of this Warrant if the number of Warrant Shares
to be issued pursuant to such exercise would result in the Holder beneficially
owning (as determined in accordance with Section 13(d) of the Exchange Act and
the rules thereunder) more than 9.99% of all of the Common Stock outstanding at
such time. Notwithstanding anything to the contrary contained herein,
the limitation on exercise of this Warrant may be waived by written agreement
between the Holder and the Company; provided, however, such waiver
may not be effective less than sixty-one (61) days from the date
thereof.
Section
5. Call Provision. Upon
completion of a subsequent financing by the Company for gross proceeds of not
less than seven million five hundred thousand dollars ($7,500,000), the Company
may, at any time during the Term, call for the termination of all or any
unexercised portion of this Warrant ("Call"). To exercise this right, the
Company must deliver to the Holder, registered on the books of the Company, a
written notice (a "Call Notice") indicating that this Company is making a Call
and that all Holders have thirty (30) days to exercise any unexercised portion
of their Warrants. If the conditions set forth above for such Call are satisfied
from the period from the date of the Call Notice through and including the Call
Date (as defined below), then any portion of this Warrant subject to such Call
Notice for which a notice of exercise shall not have been received by the Call
Date will be cancelled at 6:30 p.m. (New York City time) on the thirtieth
calendar day after the date of the Call Notice (the "Call
Date").
Section
6. Payment of
Taxes. The Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issuance
or delivery of any certificates for Warrant Shares in a name other than that of
the Holder in respect of which such shares are issued, and in such case, the
Company shall not be required to issue or deliver any certificate for Warrant
Shares or any Warrant until the person requesting the same has paid to the
Company the amount of such tax or has established to the Company’s reasonable
satisfaction that such tax has been paid. The Holder shall be
responsible for income taxes due under federal, state or other law, if any such
tax is due.
Section
7. Mutilated or Missing
Warrants. In case this Warrant shall be mutilated, lost,
stolen, or destroyed, the Company shall issue in exchange and substitution of
and upon surrender and cancellation of the mutilated Warrant, or in lieu of and
substitution for the Warrant lost, stolen or destroyed, a new Warrant of like
tenor and for the purchase of a like number of Warrant Shares, but only upon
receipt of evidence reasonably satisfactory to the Company of such loss, theft
or destruction of the Warrant, and with respect to a lost, stolen or destroyed
Warrant, reasonable indemnity or bond with respect thereto, if requested by the
Company.
Section
8. Reservation of Common
Stock. The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of providing for the exercise of the Company Warrants, such number
of shares of Common Stock as shall from time to time equal the number of shares
sufficient to permit the exercise of the Company Warrants (as defined below) in
accordance with their respective terms. The Company agrees that all
Warrant Shares issued upon due exercise of the Warrant shall be, at the time of
delivery of the certificates for such Warrant Shares, duly authorized, validly
issued, fully paid and non-assessable shares of Common Stock of the
Company.
Section
9. Adjustments. Subject
and pursuant to the provisions of this Section, the Exercise Price and number of
Warrant Shares subject to this Warrant shall be subject to adjustment from time
to time as set forth hereinafter.
(a) Reorganization,
Consolidation, Merger, etc. In case at any time or from time to
time, the Company shall effect any merger, reorganization, restructuring,
reverse stock split, consolidation, sale of all or substantially all of the
Company’s assets or any similar transaction or related transactions (each such
transaction, a “Fundamental Change”),
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, on the exercise hereof, at any time after the
consummation of such Fundamental Change, shall receive, in lieu of the Warrant
Shares 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 of a Fundamental Change
if such Holder had so exercised this Warrant, immediately prior thereto, all
subject to further adjustment thereafter as provided herein.
If the Company at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes that may be issued or
outstanding, this Warrant, as to the unpaid principal portion thereof and
accrued interest thereon, shall thereafter be deemed to evidence the right to
purchase an adjusted number of such securities and kind of securities as would
have been issuable as the result of such change with respect to the Common Stock
immediately prior to such reclassification or other change.
(b) Dissolution. In
the event of any dissolution of the Company following the transfer of all or
substantially all of its properties or assets, the Company, prior to such
dissolution, shall at its expense deliver or cause to be delivered the stock and
other securities and property (including cash, where applicable) receivable by
the Holder of this Warrant after the effective date of such dissolution pursuant
to this Section to a bank or trust company (a “Trustee”) as trustee
for the Holder of this Warrant.
(c) Continuation of
Terms. Upon any Fundamental Change or transfer (and any dissolution
following any transfer) referred to in this Section, this Warrant shall continue
in full force and effect and the terms hereof shall be applicable to any other
securities and property receivable on the exercise of this Warrant after the
consummation of such Fundamental Change or transfer or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any 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 9(d). In the event this
Warrant does not continue in full force and effect after the consummation of the
transaction described in this Section, then only in such event will the
Company’s securities and property (including cash, where applicable) receivable
by the Holder of the Warrants be delivered to the Trustee as contemplated by
Section 9(b).
(d) Extraordinary Events
Regarding Common Stock. In the event that the Company shall (a)
issue additional shares of 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 Exercise Price
shall, simultaneously with the happening of such event, be adjusted by
multiplying the then Exercise 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 Exercise Price then in effect. The Exercise Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described in this Section. The number of Warrant
Shares that the Holder of this Warrant shall thereafter, on the exercise hereof,
be entitled to receive shall be adjusted to a number determined by multiplying
the number of Warrant Shares that would otherwise (but for the provisions of
this Section) be issuable on such exercise by a fraction of which (a) the
numerator is the Exercise Price that would otherwise (but for the provisions of
this Section) be in effect, and (b) the denominator is the Exercise Price in
effect on the date of such exercise.
(e) Subsequent Offerings.
If the Company shall, at any time prior to the second anniversary of the Issue
Date, issue any shares of its Common Stock at a price per share less than the
Exercise Price (the “Subsequent Offering Price”), the Exercise Price shall be
lowered to a price equal to the Subsequent Offering Price. Notwithstanding the
foregoing, no adjustment in the Exercise Price shall be made for shares of
Common Stock issued, or warrants or options to purchase shares Common Stock
granted in connection with any of the following: (a) any stock option plan or
other benefit plan for directors, officers, employees, advisors or consultants
of the Company, (b) payment of interest on any outstanding notes, (c) full or
partial consideration in connection with a strategic merger, consolidation or
purchase of substantially all of the securities or assets of a corporation or
other entity, or (d) full or partial consideration in connection with strategic
licensing agreements or other partnering arrangements.
(f) Effectiveness of
Adjustment. An adjustment to the Exercise Price shall become effective
immediately after the payment date in the case of each dividend or distribution
and immediately after the effective date of each other event which requires an
adjustment.
(g) Notice of Adjustment.
Upon the happening of any event requiring an adjustment of the Exercise Price,
the Company shall promptly give written notice thereof to the Holder at the
address appearing in the records of the Company, stating the adjustments
resulting from such event and setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is
based. Failure to give such notice to the Holder or any defect
therein shall not affect the legality or validity of the subject
adjustment.
Section
10. Benefits. Nothing
in this Warrant shall be construed to give any person, firm or corporation
(other than the Company and the Holder) any legal or equitable right, remedy or
claim, it being agreed that this Warrant shall be for the sole and exclusive
benefit of the Company and the Holder.
Section
11. No Rights as
Stockholder. Prior to the exercise of this Warrant, the Holder
shall not have or exercise any rights as a stockholder of the Company by virtue
of its ownership of this Warrant.
Section
12. Compliance with Securities
Laws. The Holder of this Warrant, by acceptance hereof, acknowledges that
this Warrant is being acquired solely for the Holder's own account and not as a
nominee for any other party, and for investment, and that the Holder will not
offer, sell or otherwise dispose this Warrant or any Warrant Shares to be issued
upon exercise hereof except pursuant to an effective registration statement, or
an exemption from registration, under the Securities Act and any applicable
state securities laws.
Section
13. Notices. Unless
otherwise provided, any notice required or permitted under this Warrant shall be
given in writing and shall be deemed effectively given as hereinafter described
(i) if given by personal delivery, then such notice shall be deemed given upon
such delivery, (ii) if given by telex or facsimile, then such notice shall be
deemed given upon receipt of confirmation of complete transmittal, (iii) if
given by mail, then such notice shall be deemed given upon the earlier of (A)
receipt of such notice by the recipient or (B) three days after such notice is
deposited in first class mail, postage prepaid, and (iv) if given by an
internationally recognized overnight air courier, then such notice shall be
deemed given one business day after delivery to such carrier. All
notices shall be addressed as follows: if to the Holder, at its address as set
forth in the subscription agreement pertaining to the PPM, if to the Company, at
the address as follows, or at such other address as the Holder or the Company
may designate by ten days’ advance written notice to the other: China
Agri-Business, Inc., 00 Xxxx 00xx Xxxxxx, Xxxxx 00 X, Xxx Xxxx, XX 00000 Attn:
Xxxxxxx Xxxxx, telecopier number: (000) 000-0000, with a copy by telecopier only
to: Xxxxxxx Xxxx, LLP, 0000 Xxxxxxxx, 00xx Xxxxx,
Xxx Xxxx, XX 00000, Attn.: Xxxxxxx X. Xxxxx, Esq., telecopier number: (000)
000-0000.
Section
14. Assignability. This
Warrant shall be binding upon the Company and its successors and assigns, and
shall inure to the benefit of the Holder and its successors and
assigns.
Section
15. Governing Law; Consent to
Jurisdiction. This Warrant shall be governed by and construed
in accordance with the laws of the State of New York. Any action
brought by either party against the other concerning 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. Both parties agree to submit to the
jurisdiction of such courts. The prevailing party shall be entitled
to recover from the other party its reasonable attorney’s fees and
costs.
Section
16. Amendment;
Waiver. This Warrant is one of a series of Warrants of like
tenor issued by the Company pursuant to the PPM (collectively, the “Company
Warrants”). Any term of this Warrant may be amended or waived
(including the adjustment provisions included in Section 9 of this Warrant) upon
the written consent of the Company and the holders of Company Warrants
representing over 50% of the number of shares of Common Stock then subject to
all outstanding Company Warrants (the “Majority Holders”);
provided, that
(x) any such amendment or waiver must apply to all Company Warrants; and (y) the
number of Warrant Shares subject to this Warrant, the Exercise Price and the
Expiration Date may not be amended, and the right to exercise this Warrant may
not be altered or waived in any manner adverse to the Holder, without the
written consent of the Holder.
Section
17. Section
Headings. The section headings in this Warrant are for the
convenience of the Company and the Holder and in no way alter, modify, amend,
limit or restrict the provisions hereof.
Section
18. Entire
Agreement. This Warrant, the PPM, and any other transaction
documents executed in connection therewith (including all schedules and exhibits
thereto) constitute the entire agreement among the parties hereto with respect
to the subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Warrant and the PPM supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed, as of
the date first written above.
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By:
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Title:
Chief Executive
Officer
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