WARRANT AGREEMENT dated as of June , 1996 by and between Phase-Out of
America, Inc., a Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxxxxx
(the "Purchaser").
WITNESSETH:
WHEREAS, the Company proposes to issue to Purchaser a warrant (the
"Warrant") to purchase shares (the "Warrant Shares") of the Company's Common
Stock, par value $.0003 per share (the "Common Stock"); and
NOW, THEREFORE, in consideration of the premises, the agreements
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Grant. On the terms and subject to the conditions set forth herein,
and unless this agreement is terminated prior to exercise in accordance with
Section 15 hereof, Purchaser is hereby granted the right to purchase, at any
time from June , 1996 until 5:00 P.M., New York time, on June , 2001 (the
"Warrant Exercise Term"), up to 9,778,975 Warrant Shares at an exercise price
per share (subject to adjustment as provided in Article 7 hereof) equal to $.05
per share.
2. Warrant Certificate. The warrant certificate (the "Warrant
Certificate") delivered and to be delivered pursuant to this Agreement shall be
in the form set forth in Exhibit A attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions and other variations as
required or permitted by this Agreement.
3. Exercise of Warrant. The Warrant is exercisable with respect to
some or all of the Warrant Shares (but not as to any fractional shares) by
payment of the applicable Exercise Price per share on the date of exercise in
cash or by check to the order of the Company, or any combination of cash or
check. Upon surrender of the Warrant Certificate with the annexed Form of
Election to Purchase duly executed, together with payment of the Exercise Price
(as hereinafter defined) for the Warrant Shares purchased, at the Company's
principal offices (currently located at 000 Xxxxxxxx, Xxxxxxxx, Xxx Xxxx 11563)
Purchaser (or other registered holder of the Warrant Certificate) (the "Holder")
shall be entitled to receive a certificate or certificates for the Warrant
Shares so purchased. The purchase rights represented by each Warrant Certificate
are exercisable at the option of the Holder, in whole or in part (but not as to
fractional Warrant Shares). In the case of the purchase of less than all the
Warrant Shares purchasable under any Warrant Certificate, the Company shall
cancel said Warrant Certificate upon the surrender thereof and
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shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the Warrant Shares purchasable thereunder.
4. Issuance of Certificates.
Upon the exercise of the Warrants, the issuance of certificates for
the Warrant Shares purchased shall be made forthwith (and in any event within
five business days thereafter) without charge to the Holder thereof including,
without limitations any tax which may be payable in respect of the issuance
thereof, and such certificates shall (subject to the provisions of Article 5
hereof) be issued in the name of, or in such names as may be directed by, the
Holder thereof; provided, however, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificates in a name other than that of the Holder
and the Company shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
The Warrant Certificate and the certificates representing the Warrant
Shares shall be executed on behalf of the Company by the manual or facsimile
signature of the present or any future Chairman or Vice Chairman of the Board of
Directors of President or Vice President of the Company under its corporate seal
reproduced thereon, attested to by the manual or facsimile signature of the
present or any future Secretary or Assistant Secretary of the Company. The
Warrant Certificate and certificates representing the Warrant Shares shall be
dated the date of execution by the Company upon initial issuance, division,
exchange, substitution or transfer.
Upon exercise, in part or in whole, of the Warrants, certificates
representing the Warrant Shares shall bear a legend substantially similar to the
following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
and may not be offered or sold except (i) pursuant to an effective
registration statement under the Act, (ii) to the extent applicable,
pursuant to Rule 144 under the Act (or any similar rule under such Act
relating to the disposition of securities), or (iii) upon the delivery
by the holder to the Company of an opinion of counsel, reasonably
satisfactory to counsel to the issuer, stating that an exemption from
registration under such Act is available."
5. Restrictions on Transfer of warrants and Warrant Shares.
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(a) Purchaser, by his acceptance thereof, covenants and agrees
that the Warrant is being acquired as an investment and not with a view to the
distribution thereof.
(b) The Company agrees on request at its expense to register
the Warrants and the Warrant Shares in a registration statement filed under the
Securities Act of 1933, as amended (the "Act"). The Company shall also provide
the holder(s) of the Warrants and the Warrant Shares the opportunity to include
these Warrants and Warrant Shares in a registration statement under the Act.
6. Price.
6.1 Initial and Adjusted Exercise Price. The initial exercise price of
the Warrant shall be equal to five cents ($.05) per share. The adjusted exercise
price shall be the price which may result from time to time from any and all
adjustments of the initial exercise price in accordance with the provisions of
Article 7 hereof, if any such adjustments are required by Article 7.
6.2 Exercise Price. The term "Exercise Price" herein shall mean the
initial exercise price or the adjusted exercise price.
7. Adjustments of Exercise Price and Number of Warrant Shares.
7.1 Adjustment in Number of Warrant Shares. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Article 7, the number of
Warrant Shares issuable upon the exercise of the Warrant shall be adjusted to
the nearest full Warrant Share by multiplying a number equal to the Exercise
Price in effect immediately prior to such adjustment by the number of Warrant
Shares issuable upon exercise of the Warrant immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.
7.2 Subdivision and Combination. In case the Company shall at any time
subdivide or combine the outstanding shares of Common Stock, the Exercise Price
shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
7.3 Reclassification; Consolidation. Merger. etc. In case of any
reclassification or change of the outstanding shares of Common Stock (other than
a change in par value to no par value, or form no par value to par value, or as
a result of a subdivision or combination), or in the case of any consolidation
of the Company with, or merger of the Company into, another corporation (other
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than a consolidation or merger in which the Company is the surviving corporation
and which does not result in any reclassification or change of the outstanding
shares of Common Stock, except a change as a result of a subdivision or
combination of such shares or a change in par value, as aforesaid), or the case
of a sale or conveyance to another corporation of the property of the Company as
an entirety, the Holders shall thereafter have the right to purchase the kind
and number of shares of stock and other securities and property receivable upon
such reclassification, change, consolidation, merger, sale or conveyance as if
the Holders were the owners of the Warrant Shares underlying the Warrant at a
price equal to the product of (x) the number of shares of Common Stock issuable
upon conversion of the Warrant Shares and (y) the Exercise Price prior to the
record date for such reclassification, change, consolidation, merger, sale or
conveyance as if such Holders had exercised the Warrant.
7.4 Redemption of Warrant; Redemption of Warrant Shares.
Notwithstanding anything to the contrary contained in the Warrant to elsewhere,
the Warrant cannot be redeemed by the Company under any circumstances.
7.5 Dividends and Other Distributions with Respect to Outstanding
Securities. In the event that the Company shall at any time prior to the
exercise of the Warrant declare a dividend (other than a dividend consisting
solely of shares of Common Stock or a cash dividend or distribution payable out
of current or retained earnings) or otherwise distribute to its shareholders any
monies, assets, property, rights, evidences of indebtedness, securities (other
than shares of Common Stock), whether issued by the Company or by another person
or entity, or any other thing of value, the Holder of the Warrant shall
thereafter be entitled, in addition to the securities receivable upon the
exercise thereof, to receive, upon the exercise of such Warrant, the same
monies, property, assets, rights, evidences of indebtedness, securities or any
other thing of value that he would have been entitled to receive at the time of
such dividend or distribution. At the time of any such dividend or distribution,
the Company shall make appropriate reserves to ensure the timely performance of
the provisions of this Subsection 7.5.
7.6 Subscription Rights for Shares of Common Stock or Other
Securities. In the case that the Company or an affiliate of the Company shall at
any time after the date hereof and prior to the exercise of the Warrant issue
any rights to subscribe for shares of Common Stock or any other securities of
the Company or of such affiliate to all the shareholders of the Company, the
Holder of the unexercised Warrant shall be entitled, in addition to the
securities receivable upon the exercise of the Warrant, to receive such rights
at the time such rights are distributed to the other shareholders of the
Company.
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7.7 Additional Adjustment. In the event that during the term of this
Warrant the Company raises additional funds through the issuance of equity
(other than through an offering registered under the Securities Act of 1933, as
amended) the number of shares of-Common Stock acquired upon issuance of this
Warrant shall be increased by 9% of the number of additional shares of Common
Stock of the Company being issued in such financing.
8. Exchange and Replacement of Warrant Certificates.
The Warrant Certificate is exchangeable without expense, upon the
surrender hereof by the registered Holder at the principal executive office of
the Company, for a new Warrant Certificate of like tenor and date representing
in the aggregate the right to purchase the same number of Warrant Shares in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to if
of the loss, theft, destruction or mutilation of the Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expense
incidental thereto, and upon surrender and cancellation of the Warrant, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
9. Elimination of Fractional Interests.
The Company shall not be required to issue certificates representing
fractions of Warrant Shares upon the exercise of the Warrant, nor shall it be
required to issue scrip or pay cash in lieu of fractional interests, it being
the intent of the parties that all fractional interests shall be eliminated by
rounding any fraction up to the nearest whole number of Warrant Shares.
10. Reservation and Listing of Securities.
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of the Warrant, such number of shares of Common Stock as shall be
issuable upon such exercise. The Company covenants and agrees that, upon
exercise of the Warrant and payment of the Exercise Price therefor, all shares
of Common Stock issuable upon such exercise shall be duly and validly issued,
fully paid, non-assessable and not subject to the preemptive rights of any
shareholder. The Company shall take all actions within its control to cause all
Warrant Shares to be listed on or quoted by NASDAQ or listed on such national
securities exchanges as the Company's Common Stock is listed.
11. Notices to Warrant Holder.
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Nothing contained in this Agreement shall be construed as conferring
upon the Holder the right to vote or to consent or to receive notice as a
shareholder in respect of any meetings of shareholders for the election of
directors or any other matter, or archiving any rights whatsoever as a
shareholder of the Company. If, however, at any time prior to the expiration of
the Warrants and their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current or
retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital
stock of the Company, or any option, right or warrant to subscribe
therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property, assets and business as an
entirety shall be proposed;
then, in any one or more of said events, the Company shall give
written notice to the Holder of such event at least fifteen (15) days prior to
the date fixed as a record date or the date of closing the transfer books for
the determination of the shareholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, options or
warrants, or entitled to vote on such proposed dissolution, liquidation, winding
up or sale. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be. Failure to give such notice or any
defect therein shall not affect the validity of any action taken in connection
with the declaration or payment of any such dividend or distribution, or the
issuance of any convertible or exchangeable securities or subscription rights,
options, or warrants, or any proposed dissolution, liquidation, winding up or
sale.
12. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made when delivered,
or mailed by registered or certified mail, return receipt requested:
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(a) If to the registered Holder of the Warrant, to the
address of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3
of this Agreement or to such other address as the Company may
designate by notice to the Holder.
13. Supplements and Amendments.
The Company and Purchaser may from time to time supplement or amend
this Agreement without the approval of any Holder of the Warrant and/or
securities underlying the Warrant in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or inconsistent
with any provisions herein, or to make any other provisions in regard to matters
of questions arising hereunder which the Company and Purchaser may deem
necessary or desirable and which the Company and Purchaser not to adversely
affect the interests of the Holder of the Warrant.
14. Successors.
All the covenants and provisions of this Agreement by or for the
benefit of the Company and the Holder inure to the benefit of their respective
successors and assigns hereunder.
15. Termination.
This Agreement shall terminate at the close of business on June ,
2001. Notwithstanding the foregoing, this Agreement will terminate on any
earlier date when the Warrant has been exercised and all securities underlying
the Warrant have been resold to the public.
16. Governing Law.
This Agreement and the Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of New York and for all
purposes shall be construed in accordance with the laws of said State.
17. Benefits of This Agreement.
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company and Purchaser and any other registered Holder
of the Warrant or any securities underlying the Warrant any legal or equitable
right, remedy or claim under this Agreement; and this Agreement shall be for the
sole and exclusive benefit of the Company and Purchaser and any such other
Holder.
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18. Counterparts.
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and
such counterparts shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year above written.
Phase-Out of America, Inc.
By------------------------
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Xxxxxxx X. Xxxxxxxx
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