EXHIBIT 10.6.2
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE
SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE
UPON AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO A
TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO,
SUCH REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS
THE BENEFICIARY OF CERTAIN OBLIGATIONS OF THE
COMPANY SET FORTH IN A PRIVATE EQUITY LINE OF CREDIT
AGREEMENT BETWEEN BOROUGH CORPORATION AND
PRIMA CAPTIAL GROWTH FUND, INC. DATED AS OF THE
SUBSCRIPTION DATE. A COPY OF THE PORTION OF THE
AFORESAID AGREEMENT EVIDENCING SUCH OBLIGATIONS
MAY BE OBTAINED FROM THE COMPANY'S EXECUTIVE
OFFICES.
Right to Purchase 1,098,000
Shares of Common Stock of
Borough Corporation (subject to
adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
(Equity Line)
W-PRIMA2
Issue Date: June 3, 2002
Borough Corporation, a corporation organized under the laws of
the State of Delaware (the "Company"), hereby certifies that, for value
received, Prima Capital Growth Fund LLC, a New York limited liability
corporation, or assigns, is entitled, subject to the terms set forth below,
to purchase from the Company from and after the Vesting Date (as
hereafter defined) and at any time or from time to time before 5:00 p.m.,
Florida time, through five (5) years after Vesting Date (the "Expiration
Date"), up to 1,098,000 fully paid and nonassessable shares of Common
Stock (as hereinafter defined), of the Company, at a per share purchase
price of $1.09 (such purchase price per share as adjusted from time to
time as herein provided is referred to herein as the "Purchase Price"). The
number and character of such shares of Common Stock and the Purchase
Price are subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include Borough Corporation
and any corporation which shall succeed or assume the obligations of
Borough hereunder.
(b) The term "Common Stock" includes (a) the Company's
Common Stock as defined in the Private Equity Line of Credit
Agreement referred to in Section 9 hereof, (b) any other capital stock of
any class or classes (however designated) of the Company, authorized on
or after such date, the holders of which shall have the right, without
limitation, as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference, and the
holders of which shall ordinarily, in the absence of contingencies, be
entitled to vote for the election of a majority of directors of the Company
(even if the right so to vote has been suspended by the happening of such
a contingency) and (c) any other securities into which or for which any of
the securities described in (a) or (b) may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of
assets or otherwise.
(c) The term "Other Securities" refers to any stock (other
than Common Stock) and other securities of the Company or any other
person (corporate or otherwise) which the holder of the Warrant at any
time shall be entitled to receive, or shall have received, on the exercise of
the Warrant, in lieu of or in addition to Common Stock, or which at any
time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 4
or otherwise.
(D) The term "Vesting Date" refers to such dates, as the
warrants shall vest, as described in section 1.1 hereof
1. Exercise of Warrant.
1.1. Number of Shares Issuable upon Exercise. From
and after the date hereof through and including the Expiration Date, the
holder hereof shall be entitled to receive, upon exercise of this Warrant in
whole in accordance with the terms of subsection 1.3 or upon exercise of
this Warrant in part in accordance with subsection 1.3, shares of
Common Stock of the Company, subject to adjustment pursuant to
Section 4.
1.2 Vesting of Warrants. The Warrants shall vest as follows:
1.2.1 Warrants to purchase up to 91,500 shares of
common stock on the date hereof; and
1.2.2 Warrants to purchase up to additional 91,500
shares of Common Stock on the first date of each
calendar quarter thereafter, until such time as all
Warrants share have vested
1.3. Full Exercise. This Warrant may be exercised in
full by the holder hereof by delivery of an original or fax copy of the form
of subscription attached as Exhibit A hereto (the "Subscription Form")
duly executed by such holder, and surrender of the original Warrant
within seven (7) days of exercise to the Company at its principal office or
at the office of its Warrant agent (as provided hereinafter), accompanied
by payment, in cash or by certified or official bank check payable to the
order of the Company, in the amount obtained by multiplying the number
of shares of Common Stock for which this Warrant is then exercisable by
the Purchase Price (as hereinafter defined) then in effect.
1.4. Partial Exercise. This Warrant may be exercised in
part (but not for a fractional share) by surrender of this Warrant in the
manner and at the place provided in subsection 1.2 except that the
amount payable by the holder on such partial exercise shall be the amount
obtained by multiplying (a) the number of shares of Common Stock
designated by the holder in the Subscription Form by (b) the Purchase
Price then in effect. On any such partial exercise, the Company, at its
expense, will forthwith issue and deliver to or upon the order of the
holder hereof a new Warrant of like tenor, in the name of the holder
hereof or as such holder (upon payment by such holder of any applicable
transfer taxes) may request, the number of shares of Common Stock for
which such Warrant may still be exercised.
1.5. Fair Market Value. Fair Market Value of a share
of Common Stock as of a particular date (the "Determination Date") for
each share of Common Stock as of a Determination Date shall mean:
(a) If the Company's Common Stock is traded
on an exchange or is quoted on the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") National Market
System or the NASDAQ SmallCap Market, then the closing or last sale
price, respectively, reported for the last business day immediately
preceding the Determination Date.
(b) If the Company's Common Stock is not
traded on an exchange or on the NASDAQ National Market System or
the NASDAQ SmallCap Market but is traded on the over-the-counter
market, then the mean of the closing bid and asked prices reported for
the last business day immediately preceding the Determination Date.
(c) Except as provided in clause (d) below, if
the Company's Common Stock is not publicly traded, then as the Holder
and the Company agree or in the absence of agreement by arbitration in
accordance with the rules then standing of the American Arbitration
Association, before a single arbitrator to be chosen from a panel of
persons qualified by education and training to pass on the matter to be
decided.
(d) If the Determination Date is the date of a
liquidation, dissolution or winding up, or any event deemed to be a
liquidation, dissolution or winding up pursuant to the Company's charter,
then all amounts to be payable per share to holders of the Common Stock
pursuant to the charter in the event of such liquidation, dissolution or
winding up, plus all other amounts to be payable per share in respect of
the Common Stock in liquidation under the charter, assuming for the
purposes of this clause (d) that all of the shares of Common Stock then
issuable upon exercise of all of the Warrants are outstanding at the
Determination Date.
1.6. Company Acknowledgment. The Company will,
at the time of the exercise of the Warrant, upon the request of the holder
hereof acknowledge in writing its continuing obligation to afford to such
holder any rights to which such holder shall continue to be entitled after
such exercise in accordance with the provisions of this Warrant. If the
holder shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to such holder any such
rights.
1.7. Trustee for Warrant Holders. In the event that a
bank or trust company shall have been appointed as trustee for the
holders of the Warrants pursuant to Subsection 3.2, such bank or trust
company shall have all the powers and duties of a warrant agent (as
hereinafter described) and shall accept, in its own name for the account
of the Company or such successor person as may be entitled thereto, all
amounts otherwise payable to the Company or such successor, as the
case may be, on exercise of this Warrant pursuant to this Section 1.
2. Delivery of Stock Certificates, etc. on Exercise. The
Company agrees that the shares of Common Stock purchased upon
exercise of this Warrant shall be deemed to be issued to the holder hereof
as the record owner of such shares as of the close of business on the date
on which this Warrant shall have been surrendered and payment made for
such shares as aforesaid. As soon as practicable after the exercise of this
Warrant in full or in part, and in any event within seven (7) days
thereafter, the Company, at its expense, (including the payment by it of
any applicable issue taxes), will cause to be issued in the name of and
delivered to the holder hereof, or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct in compliance with
applicable Securities Laws, a certificate or certificates for the number of
duly and validly issued, fully paid and nonassessable shares of Common
Stock (or Other Securities) to which such holder shall be entitled on such
exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then
Fair Market Value of one full share, together with any other stock or
other securities and property (including cash, where applicable) to which
such holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
3. Adjustment for Reorganization, Consolidation, Merger, etc.
3.1. Reorganization, Consolidation, Merger, etc. In
case at any time or from time to time, the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person, or
(c) transfer all or substantially all of its properties or assets to any other
person under any plan or arrangement contemplating the dissolution of
the Company, then, in each such case, as a condition to the
consummation of such a transaction, proper and adequate provision shall
be made by the Company whereby the holder of this Warrant, on the
exercise hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or the
effective date of such dissolution, as the case may be, shall receive, in lieu
of the Common Stock (or Other Securities) issuable on such exercise
prior to such consummation or such effective date, the stock and other
securities and property (including cash) to which such holder would have
been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised this
Warrant, immediately prior thereto, all subject to further adjustment
thereafter as provided in Section 4.
3.2. 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 holders of
the Warrants after the effective date of such dissolution pursuant to this
Section 3 to a bank or trust company having its principal office in
Florida, NY, as trustee for the holder or holders of the Warrants.
3.3. Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any
transfer) referred to in this Section 3, this Warrant shall continue in full
force and effect and the terms hereof shall be applicable to the shares of
stock and other securities and property receivable on the exercise of this
Warrant after the consummation of such reorganization, consolidation or
merger or the effective date of dissolution following any such transfer, as
the case may be, and shall be binding upon the issuer of any such stock or
other securities, including, in the case of any such transfer, the person
acquiring all or substantially all of the properties or assets of the
Company, whether or not such person shall have expressly assumed the
terms of this Warrant as provided in Section 4. In the event this Warrant
does not continue in full force and effect after the consummation of the
transaction described in this Section 3, then only in such event will the
Company's securities and property (including cash, where applicable)
receivable by the holders of the Warrants be delivered to the Trustee as
contemplated by Section 3.2.
4. Extraordinary Events Regarding Common Stock. In the
event that the Company shall (a) issue additional shares of the Common
Stock as a dividend or other distribution on outstanding Common Stock,
(b) subdivide its outstanding shares of Common Stock, or (c) combine its
outstanding shares of the Common Stock into a smaller number of shares
of the Common Stock, then, in each such event, the Purchase Price shall,
simultaneously with the happening of such event, be adjusted by
multiplying the then Purchase Price by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of
shares of Common Stock outstanding immediately after such event, and
the product so obtained shall thereafter be the Purchase Price then in
effect. The Purchase Price, as so adjusted, shall be readjusted in the same
manner upon the happening of any successive event or events described
herein in this Section 4. The number of shares of Common Stock that the
holder of this Warrant shall thereafter, on the exercise hereof as provided
in Section 1, be entitled to receive shall be increased to a number
determined by multiplying the number of shares of Common Stock that
would otherwise (but for the provisions of this Section 4) be issuable on
such exercise by a fraction of which (a) the numerator is the Purchase
Price that would otherwise (but for the provisions of this Section 4) be in
effect, and (b) the denominator is the Purchase Price in effect on the date
of such exercise.
5. Certificate as to Adjustments. In each case of any
adjustment or readjustment in the shares of Common Stock (or Other
Securities) issuable on the exercise of the Warrants, the Company at its
expense will promptly cause its Chief Financial Officer or other
appropriate designee to compute such adjustment or readjustment in
accordance with the terms of the Warrant and prepare a certificate setting
forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company
for any additional shares of Common Stock (or Other Securities) issued
or sold or deemed to have been issued or sold, (b) the number of shares
of Common Stock (or Other Securities) outstanding or deemed to be
outstanding, and (c) the Purchase Price and the number of shares of
Common Stock to be received upon exercise of this Warrant, in effect
immediately prior to such adjustment or readjustment and as adjusted or
readjusted as provided in this Warrant. The Company will forthwith mail
a copy of each such certificate to the holder of the Warrant and any
Warrant agent of the Company (appointed pursuant to Section 11
hereof).
6. Reservation of Stock, etc. Issuable on Exercise of
Warrant; Financial Statements. The Company will at all times reserve
and keep available, solely for issuance and delivery on the exercise of the
Warrants, all shares of Common Stock (or Other Securities) from time to
time issuable on the exercise of the Warrant. This Warrant entitles the
holder hereof to receive copies of all financial and other information
distributed or required to be distributed to the holders of the Company's
Common Stock.
7. Assignment; Exchange of Warrant. Subject to compliance
with applicable Securities laws, this Warrant, and the rights evidenced
hereby, may be transferred by any registered holder hereof (a
"Transferor") with respect to any or all of the Shares. On the surrender
for exchange of this Warrant, with the Transferor's endorsement in the
form of Exhibit B attached hereto (the "Transferor Endorsement Form")
and together with evidence reasonably satisfactory to the Company
demonstrating compliance with applicable securities laws, the Company
at its expense (but with payment by the Transferor of any applicable
transfer taxes) will issue and deliver to or on the order of the Transferor
thereof a new Warrant or Warrants of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor
Endorsement Form (each a "Transferee"), calling in the aggregate on the
face or faces thereof for the number of shares of Common Stock called
for on the face or faces of the Warrant so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement or
security reasonably satisfactory in form and amount to the Company or,
in the case of any such mutilation, on surrender and cancellation of this
Warrant, the Company, at its expense, will execute and deliver, in lieu
thereof, a new Warrant of like tenor.
9. Registration Rights. This Warrant is issued pursuant to a
Private Equity Line of Credit Agreement and Registration Rights
Agreement dated at or about June 3, 2002. The terms of the Private
Equity Line of Credit Agreement is incorporated herein by this reference.
10. INTENTIONALLY LEFT BLANK.
11. Warrant Agent. The Company may, by written notice to
the each holder of the Warrant, appoint an agent for the purpose of
issuing Common Stock (or Other Securities) on the exercise of this
Warrant pursuant to Section 1, exchanging this Warrant pursuant to
Section 7, and replacing this Warrant pursuant to Section 8, or any of the
foregoing, and thereafter any such issuance, exchange or replacement, as
the case may be, shall be made at such office by such agent.
12. Transfer on the Company's Books. Until this Warrant is
transferred on the books of the Company, the Company may treat the
registered holder hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
13. Notices, etc. All notices and other communications from
the Company to the holder of this Warrant shall be mailed by first class
registered or certified mail, postage prepaid, at such address as may have
been furnished to the Company in writing by such holder or, until any
such holder furnishes to the Company an address, then to, and at the
address of, the last holder of this Warrant who has so furnished an
address to the Company.
14. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of such change,
waiver, discharge or termination is sought. This Warrant shall be
construed and enforced in accordance with and governed by the laws of
Florida. Any dispute relating to this Warrant shall be adjudicated in
Florida State. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
IN WITNESS WHEREOF, the Company has executed this
Warrant under seal as of the date first written above.
BOROUCH CORPORATION
By:_________________________
Xxxxx X. Xxxxxxx, Xx.
Witness:
______________________________
Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: ___________________
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No.____), hereby irrevocably elects to purchase (check
applicable box):
___ ________ shares of the Common Stock covered by such Warrant;
or
The undersigned herewith makes payment of the full purchase price for
such shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box
or boxes):
___ $__________ in lawful money of the United States; and/or
___ the cancellation of such portion of the attached Warrant as is
exercisable for a total of _______ shares of Common Stock (using a Fair
Market Value of $_______ per share for purposes of this calculation);
and/or
The undersigned requests that the certificates for such shares be issued in
the name of, and delivered to ____________________ whose
address is _______________________________________________
____________________________________ .
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant
shall be made pursuant to registration of the Common Stock under the
Securities Act of 1933, as amended (the "Securities Act") or pursuant to
an exemption from registration under the Securities Act.
Dated:___________________
_____________________________________________
(Signature must conform to
name of holder as specified
on the face of the Warrant)
__________________
___________________
(Address)
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns,
and transfers unto the person(s) named below under the heading
"Transferees" the right represented by the within Warrant to purchase the
percentage and number of shares of Common Stock of
___________________ to which the within Warrant relates specified
under the headings "Percentage Transferred" and "Number Transferred,"
respectively, opposite the name(s) of such person(s) and appoints each
such person Attorney to transfer its respective right on the books of
___________________ with full power of substitution in the premises.
Transferees
Percentage
Transferred
Number
Transferred
Dated: , __ ___
_______________________________
(Signature must conform to
name of holder as specified
on the face of the warrant)
Signed in the presence of:
_______________________________ ______________________________
(Name) (address)
______________________ ________
ACCEPTED AND AGREED: (address)
[TRANSFEREE]
_________________________________
(Name)
