EXHIBIT 10.12
[FORM OF INVESTOR WARRANT]
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED
OR OTHERWISE ASSIGNED UNLESS SO REGISTERED OR AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT IS AVAILABLE. NEITHER THIS WARRANT NOR THE SECURITIES
ISSUABLE UPON EXERCISE HEREOF ARE TRANSFERABLE EXCEPT AS EXPRESSLY SET FORTH
XXXXX. THIS LEGEND SHALL BE ENDORSED UPON ANY WARRANT ISSUED IN EXCHANGE FOR
THIS WARRANT.
WARRANT AGREEMENT
FOR COMMON STOCK OF
ADVANCE NANOTECH, INC.
Warrant No. ____ Warrant to purchase an aggregate of
Date of Issuance: [FEBRUARY __,] 2005 __________ shares of Common Stock
THIS CERTIFIES that, for value received, [_________________________],
or his/her/its permitted transferees, successors or assigns (collectively, the
"Holder"), is entitled to purchase from ADVANCE NANOTECH, INC., a Colorado
corporation (the "Company"), at any time, and from time to time, during the
exercise period referred to in Section 1 hereof, [__________________________]
([____________]) fully paid, validly issued and nonassessable shares (the
"Warrant Shares") of common stock of the Company, par value $0.00l per share
(the "Common Stock"), at the exercise price of Three Dollars ($3.00) per share
(the "Warrant Share Price"). Securities issuable upon exercise of this Warrant
and the Warrant Share Price payable therefor are subject to adjustment from time
to time as hereinafter set forth. As used herein, the term "Warrant" shall
include any warrant or warrants hereafter issued in consequence of the exercise
of this Warrant Agreement in part or transfer of this Warrant in whole or in
part. Capitalized terms used herein and not defined have the respective meanings
given to them in that certain Securities Purchase Agreement, dated the date
hereof, by and among the Company and the other parties named therein. As used
herein, the term "Holders" shall include holders of all Warrants.
The Company shall register this Warrant, upon records to be maintained
by the Company for that purpose (the "Warrant Register"), in the name of the
record Holder hereof from time to time. The Company may deem and treat the
registered Holder of this Warrant as the absolute owner hereof for the purpose
of any exercise hereof or any distribution to the Holder, and for all other
purposes, and the Company shall not be affected by notice to the contrary.
Subject to Section 4 of this Warrant and the applicable provisions of
the Securities Purchase Agreement and applicable law, the Company shall register
any permitted transfer of any portion of this Warrant in the Warrant Register,
upon surrender of this Warrant, with the Form of Assignment attached hereto duly
completed and signed, to the Transfer Agent (as defined herein) or to the
Company. Upon any such registration or permitted transfer, a new warrant to
purchase Common Stock, in substantially the form of this Warrant (any such new
warrant, a "New Warrant"), evidencing the portion of this Warrant so transferred
shall be issued to the permitted transferee and a New Warrant evidencing the
remaining portion of this Warrant not so transferred, if any, shall be issued to
the transferring Holder. The acceptance of the New Warrant by the permitted
transferee thereof shall be deemed the acceptance by such permitted transferee
of all of the rights and obligations of a holder of a Warrant. Any permitted
transfer or assignment of this Warrant and Warrant Shares obtained by the Holder
in exercise of this Warrant is subject to any applicable restrictions under the
Securities Purchase Agreement, if any, and the requirements that such securities
be registered under the Securities Act and applicable state securities laws or
exempt from registration under such laws, and the provisions of Section 5 of
this Warrant.
1. EXERCISE; PAYMENT FOR OWNERSHIP INTEREST.
(a) Upon the terms and subject to the conditions set forth herein, this
Warrant may be exercised in whole or in part by the Holder hereof at any time,
or from time to time, on or after the date hereof and on or prior to the earlier
to occur of (i) the "Early Expiration Date," as such term is hereinafter
defined, and (ii) 5:00:00 p.m. New York local time on [February __, 2008] (the
"Expiration Date"), by presentation and surrender of this Warrant to the
principal offices of the Company, or at the office of its Transfer Agent, if
any, together with the Purchase Form annexed hereto, duly executed, and
accompanied by payment to the Company of an amount equal to the Warrant Share
Price multiplied by the number of Warrant Shares as to which this Warrant is
then being exercised in immediately available funds in U.S. dollars by certified
or official bank check or wire transfer of the cash purchase price; provided,
however, that in each case, the minimum number of Warrant Shares as to which
this Warrant is being exercised shall be the lesser of (i) 5,000 Warrant Shares
or (ii) all Warrant Shares then held by the Holder on an as exercised basis;
provided, further, that in the event of any merger, consolidation or sale, lease
or transfer of all or substantially all of the assets of the Company, prior to
the Expiration Date, the Holder shall have the right to exercise this Warrant
commencing at such time through the Expiration Date into the kind and amount of
shares of stock and other securities and property (including cash) receivable by
a holder of the number of shares of Common Stock into which this Warrant might
have been exercisable immediately prior thereto. Any transfer of Warrant Shares
obtained by the Holder in exercise of this Warrant is subject to the requirement
that such transfer be in compliance with the applicable provisions of the
Securities Purchase Agreement, if any, and that such securities be registered
under the Securities Act, and applicable state securities laws or exempt from
registration under such laws. The Holder of this Warrant shall be deemed to be a
stockholder of the Warrant Shares as to which this Warrant is exercised in
accordance herewith effective immediately after the close of business on the
date on which the Holder shall have delivered to the Company this Warrant in
proper form for exercise and payment in U.S. dollars by certified or official
bank check or wire transfer of immediately available funds of the cash purchase
price for the number of Warrant Shares as to which the exercise is being made,
notwithstanding that the stock transfer books of the Company shall be then
closed or that certificates representing such Warrant Shares shall not then be
physically delivered to the Holder. The Company shall not enter into any merger,
consolidation or sale, lease or transfer of all or substantially all of the
assets of the Company unless effective provision shall be made so as to give
effect to the provisions set forth in this subsection (a).
(i) As used herein, "Early Expiration Date" means ten (10)
business days after delivery of written notice by the Company to the
Holder that during the preceding thirty (30) consecutive trading days
(x) the Market Price (as defined herein) for a share of Common Stock
was equal to or greater than Three Hundred Fifty Percent (350%) of the
then-applicable Warrant Share Price, and (y) the average trading volume
of the Common Stock was at least 100,000 shares per day.
(ii) As used herein, "Market Price" means, with respect to any
applicable security as of any applicable date, (i) the last closing
trade price of such security on whichever national securities exchange
or trading market (including, without limitation, the Nasdaq and the
OTC Bulletin Board) is the principal trading market where such security
is listed by the Company for trading (the "Principal Market"), as
reported by Bloomberg, or (ii) if the Principal Market should operate
on an extended hours basis and does not designate the closing trade
price, then the last trade price of such security prior to the
commencement of extended trading hours on the applicable date, but in
no event later than 4:30:00 p.m., New York local time, as reported by
Bloomberg, or (iii) if no last trade price is reported for such
security by Bloomberg, the average of the bid prices, on the one hand,
and the ask prices, on the other hand, of all market makers for such
security as reported in the "pink sheets" by Pink Sheets LLC (formerly
the National Quotation Bureau, Inc.). The applicable trading market for
such calculation, whether it is the Principal Market or the "pink
sheets", is hereafter referred to as the "Trading Market". The Company
shall make all determinations pursuant to this paragraph in good faith.
In the absence of any available public quotations for the Common Stock,
the Board shall determine in good faith the fair value of the Common
Stock, which determination shall be set forth in a certificate by the
Secretary of the Company.
(iii) As used herein, "Trading Day" means a day on which the
Trading Market with respect to the Common Stock is open for the
transaction of business.
(b) If this Warrant shall be exercised in part only, the Company, upon
surrender of this Warrant for cancellation, shall execute and deliver, promptly
(but in no event more than ten business days after such surrender), a new
Warrant evidencing the rights of the Holder thereof to purchase the balance of
the Warrant Shares purchasable hereunder as to which the Warrant has not been
exercised. If this Warrant is exercised in part, such exercise shall be for a
whole number of Warrant Shares. Upon any exercise and surrender of this Warrant,
the Company (i) will issue and deliver to the Holder a certificate or
certificates in the name of the Holder for the largest whole number of Warrant
Shares to which the Holder shall be entitled and, if this Warrant is exercised
in whole, in lieu of any fractional Warrant Share to which the Holder otherwise
might be entitled, cash in an amount equal to the fair value of such fractional
Warrant Share (determined in such reasonable and equitable manner as the Board
of Directors of the Company (the "Board") shall in good faith determine), and
(ii) will deliver promptly thereafter (but in no event more than ten business
days thereafter) to the Holder such other securities, properties and cash which
the Holder may be entitled to receive upon such exercise, or the proportionate
part thereof if this Warrant is exercised in part, pursuant to the provisions of
this Warrant.
2. ANTI-DILUTION PROVISIONS. The Warrant Share Price in effect at any
time and the number and kind of securities issuable upon exercise of this
Warrant shall be subject to adjustment from time to time upon the happening of
certain events as follows:
2.1 ADJUSTMENTs.
(a) DEFINITION OF ADDITIONAL STOCK. The term "Additional Shares of
Common Stock" includes all shares of Common Stock issued by the Company after
the Date of Issuance, other than:
(i) Shares of Common Stock (subject to appropriate adjustment
for any stock dividend, stock split, combination or other similar
recapitalization affecting such shares) issuable or issued to the
Company's employees, directors or consultants pursuant to a stock
option plan or restricted stock plan or other compensation plan
approved by the Board;
(ii) Shares of Common Stock issued or issuable pursuant to
securities outstanding at the Date of Issuance or agreements to issue
such securities or underlying shares of Common Stock which agreements
are outstanding at the Date of Issuance;
(iii) Shares of Common Stock issued or issuable pursuant to
subsection 2.1(b)(iv) below; and
(iv) Shares of Common Stock issuable upon exercise of options
or warrants, or upon conversion of convertible securities or other
rights, outstanding as of the Date of Issuance.
(b) DIVIDEND, SUBDIVISION, COMBINATION OR RECLASSIFICATION OF COMMON
STOCK. In the event that the Company shall at any time or from time to time
after the issuance of this Warrant but prior to the exercise hereof:
(i) make a dividend or distribution on the
outstanding shares of Common Stock payable in capital stock;
(ii) subdivide or reclassify or reorganize its
outstanding shares of Common Stock into a greater number of
shares;
(iii) combine or reclassify or reorganize its
outstanding shares of Common Stock into a smaller number of
shares; or
(iv) issue, by reclassification of its Common Stock
or other reorganization, any Additional Shares of Common
Stock;
then the number and kind of Warrant Shares purchasable upon exercise of this
Warrant shall be adjusted so that the Holder upon exercise hereof shall be
entitled to receive the kind and number of Warrant Shares or other securities of
the Company that the Holder would have owned or have been entitled to receive
after the happening of any of the events described above had this Warrant been
exercised immediately prior to the happening of such event or any record date
with respect thereto. Whenever the number of Warrant Shares purchasable upon
exercise hereof is adjusted as herein provided, the Warrant Price shall be
adjusted by multiplying the Warrant Price by a fraction, the numerator of which
is equal to the number of shares of Common Stock purchasable prior to the
adjustment and the denominator of which is equal to the number of shares of
Common Stock purchasable after the adjustment. An adjustment made pursuant to
this Section 2.1(b) shall become effective immediately after the record date in
the case of a dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or issuance.
If, as a result of an adjustment made pursuant to this Section 2.1(b), the
Holder of this Warrant thereafter surrendered for exercise shall become entitled
to receive shares of two or more classes of capital stock or shares of Common
Stock and any other class of capital stock of the Company, the Board (whose good
faith determination shall be applied fairly and ratably to all Holders of
Warrants and shall be conclusive and shall be described in a written notice to
all Holders of Warrants promptly after such adjustment) shall determine in good
faith the allocation of the adjusted Warrant Share Price between or among the
shares of such classes of capital stock or shares of Common Stock and such other
class of capital stock.
The adjustment to the number of Warrant Shares purchasable upon the
exercise of this Warrant described in this Section 2.1(b) shall be made each
time any event listed in paragraphs (i) through (iv) of this Section 2.1(b)
occurs.
(c) ISSUANCE OF COMMON STOCK BELOW WARRANT SHARE PRICE. If the Company
shall issue any Additional Shares of Common Stock after the date hereof
(excluding any such issuance for which an adjustment is made under the foregoing
subsection (b)), for no consideration or for a consideration per share less than
the Warrant Share Price in effect on the date of and immediately prior to such
issue, then in such event, the Warrant Share Price shall be reduced,
concurrently with such issue, to a price equal to the quotient obtained by
dividing:
(A) an amount equal to (x) the total number of shares of
Common Stock outstanding immediately prior to such issuance or sale
multiplied by the Warrant Share Price in effect immediately prior to
such issuance or sale, plus (y) the aggregate consideration (before
deduction of transaction expenses or commission or underwriting
discounts or allowances in connection therewith) received or deemed to
be received by the Company, if any, upon such issuance or sale, by
(B) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
(d) ISSUANCE OF OPTIONS AND CONVERTIBLE SECURITIES DEEMED ISSUANCE OF
ADDITIONAL SHARES OF COMMON Stock. If the Company, at any time or from time to
time after the Date of Issuance, shall issue any options, warrants or other
rights to purchase Common Stock (collectively, "Options") or securities that, by
their terms, directly or indirectly, are convertible into or exchangeable for
shares of Common Stock ("Convertible Securities") or shall fix a record date for
the determination of holders of any class of securities entitled to receive any
such Options or Convertible Securities, then the maximum number of shares of
Common Stock (as set forth in the instrument relating thereto without regard to
any provision contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date, provided that in any such case in
which Additional Shares of Common Stock are deemed to be issued pursuant to this
Section 2.1(d):
(i) no further adjustment in the Warrant Share Price shall be
made upon the subsequent issue of Convertible Securities or shares of
Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities and, upon the expiration of any
such Option or the termination of any such right to convert or exchange
such Convertible Securities, the Warrant Share Price then in effect
hereunder shall forthwith be increased to the Warrant Share Price which
would have been in effect at the time of such expiration or termination
had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination, never been issued,
and the Common Stock issuable thereunder shall no longer be deemed to
be outstanding;
(ii) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Warrant Share Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon any
such increase or decrease becoming effective, be recomputed to reflect
such increase or decrease insofar as it affects such Options or the
rights of conversion or exchange under such Convertible Securities,
provided that no readjustment pursuant to this clause (ii) shall have
the effect of increasing the Warrant Share Price to an amount which
exceeds the lower of (A) the Warrant Share Price on the original
adjustment date, or (B) the Warrant Share Price that would have
resulted from any issuance of Additional Shares of Common Stock between
the original adjustment date and such readjustment date;
(iii) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any decrease in the
consideration payable to the Company, or increase in the number of
shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Warrant Share Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon any
such decrease or increase becoming effective, be recomputed to reflect
such decrease or increase insofar as it affects such Options or the
rights of conversion or exchange under such Convertible Securities,
provided that no readjustment pursuant to this clause (iii) shall have
the effect of decreasing the Warrant Share Price to an amount which
exceeds the lower of (A) the Warrant Share Price on the original
adjustment date, or (B) the Warrant Share Price that would have
resulted from any issuance of Additional Shares of Common Stock between
the original adjustment date and such readjustment date; and
(iv) if such Options or Convertible Securities cover shares
which are excluded from the definition of Additional Shares of Common
Stock by Section 2.1(a), then this Section 2.1(d) shall not apply to
those underlying shares.
(e) DETERMINATION OF CONSIDERATION. For purposes of Subsections 2.1(c)
and 2.1(d), the consideration received by the Company for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(A) CASH AND PROPERTY: Such consideration shall:
(1) insofar as it consists of cash, be
computed at the aggregate of cash
received by the Company, excluding
amounts paid or payable for accrued
interest or accrued dividends;
(2) insofar as it consists of property
other than cash, be computed at the
fair market value thereof at the
time of such issue, as determined in
good faith by the Board; and
in the event Additional Shares of Common Stock are issued together with other
shares or securities or other assets of the Company for consideration which
covers both, be the proportion of such consideration so received, computed as
provided in clauses (1) and (2) above, as determined in good faith by the Board.
(B) Options and Convertible Securities. The consideration per
share received by the Company for Additional Shares of Common Stock
deemed to have been issued pursuant to Subsection 2.1(d), relating to
Options and Convertible Securities, shall be determined by dividing
(1) the total amount, if any, received
or receivable by the Company as
consideration for the issue of such
Options or Convertible Securities,
plus the minimum aggregate amount of
additional consideration (as set
forth in the instruments relating
thereto, without regard to any
provision contained therein for a
subsequent adjustment of such
consideration) payable to the
Company upon the exercise of such
Options or the conversion or
exchange of such Convertible
Securities, or in the case of
Options for Convertible Securities,
the exercise of such Options for
Convertible Securities and the
conversion or exchange of such
Convertible Securities, by
(2) the maximum number of shares of
Common Stock (as set forth in the
instruments relating thereto,
without regard to any provision
contained therein for a subsequent
adjustment of such number) issuable
upon the exercise of such Options or
the conversion or exchange of such
Convertible Securities.
In the event that at any time, as a result of an adjustment made
pursuant to this Section 2.1, the Holder of this Warrant thereafter shall become
entitled to receive any shares of the Company, other than Common Stock,
thereafter the number of such other shares so receivable upon exercise of this
Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained herein.
(f) Extraordinary Distributions. In case the Company shall at any time
or from time to time, after the issuance of the Warrant but prior to the
exercise hereof, distribute to all holders of its Common Stock (including any
such distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation and the Common Stock is not
changed or exchanged) cash, evidences of indebtedness, securities or other
property or assets (excluding any such event for which adjustment is made under
Section 2) or rights or warrants to subscribe for or purchase any of the
foregoing, then, and in each such case, the Holder shall be entitled to
participate in any such distribution based on the number of shares of Common
Stock it would have been entitled to receive had the Warrant been exercised
immediately prior to the occurrence of such distribution, as if the Holder were
the owner of such shares of Common Stock at the time of such distribution.
Notwithstanding the foregoing, this Section 2.1(f) shall be of no force or
effect until and unless such time as the Company shall grant a similar right to
holders of warrants issued after the date hereof, at which time the Holders
shall be entitled to the same protection for extraordinary dividends as granted
to such future holders of warrants, if any.
2.2 OTHER ACTION AFFECTING WARRANT SHARES. If the Company takes any
action affecting its shares of Common Stock after the date hereof, that would be
covered by Section 2.1 but for the manner in which such action is taken or
structured, which would in any way diminish the value of this Warrant, then the
Warrant Share Price shall be adjusted in such manner as the Board shall in good
faith determine to be equitable under the circumstances.
2.3 NOTICE OF ADJUSTMENTS. Upon the occurrence of each adjustment or
readjustment of the Warrant Share Price pursuant to this Section 2, the Company
at its expense will as promptly as possible, but in any event within ten (10)
business days, compute such adjustment or readjustment in accordance with the
terms of this Warrant and prepare a certificate setting forth such adjustment or
readjustment, including a statement of the adjusted Warrant Share Price or
adjusted number of shares of Common Stock, if any, issuable upon exercise of
each Warrant, describing in reasonable detail the transaction giving rise to
such adjustments and showing in detail the facts upon which such adjustment or
readjustment is based. The Company will forthwith mail, by first class mail,
postage prepaid, a copy of each such certificate to the Holder of this Warrant
at the address of such Holder as shown on the books of the Company, and to its
Transfer Agent.
2.4 OTHER NOTICES. If at any time:
(a) the Company shall (i) offer for subscription pro rata to the
holders of shares of the Common Stock any additional equity in the Company or
other rights; or (ii) pay a dividend in additional shares of the Common Stock or
distribute securities or other property or assets to the holders of shares of
the Common Stock (including, without limitation, cash, evidences of indebtedness
and equity and debt securities);
(b) there shall be any capital reorganization or reclassification or
consolidation or merger of the Company with, or sale, transfer or lease of all
or substantially all of its assets to, another entity; or
(c) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, to the Holder of this Warrant at the address of such
Holder as shown on the books of the Company, (x) at least 10 days' prior written
notice of the date on which the books of the Company shall close or a record
shall be taken for such subscription rights, dividend, distribution or issuance;
provided that such ten (10) day period shall be increased to thirty (30) days in
the case of Section 2.4(a)(ii), and (y) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, at least 10 days' prior written notice of the date when the same
shall take place if no stockholder vote is required and at least 10 days' prior
written notice of the record date for stockholders entitled to vote upon such
matter if a stockholder vote is required. Such notice in accordance with the
foregoing clause (x) shall also specify, in the case of any such subscription
rights, the date on which the holders of shares of Common Stock shall be
entitled to exercise their rights with respect thereto, and such notice in
accordance with the foregoing clause (y) shall also specify the date on which
the holders of shares of Common Stock shall be entitled to exchange their shares
of Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be.
2.5 ADJUSTMENT CALCULATIONS. No adjustment in the Warrant Share Price
shall be required unless such adjustment would require an increase or decrease
of at least one cent ($0.01) in such price; provided, however, that any
adjustments which by reason of this Section 2.5 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment
required to be made hereunder. All calculations under this Section 2 shall be
made to the nearest cent or to the nearest one-hundredth of a share, as the case
may be.
2.6 Appraisal. If a majority in interest of the Holders reasonably
disagrees with any of the Board's determinations referred to in this Section 2
(each, a "Determination"), and such majority of Holders shall notify the Company
of its disagreement by furnishing to the Company a written notice setting forth
in reasonable detail the fact of such dispute, the basis for such dispute, and
such Holders' alternative calculation (such notice, a "Determination Dispute
Notice"), and such Determination Dispute Notice is received by the Company
within seven (7) days of the Company having given notice of the Determination to
the Holders, then the Company and a majority in interest of such Holders (the
"Warrant Representative") shall resolve such Determination Dispute in accordance
with the terms and provisions of this Section 2.6. The Holders agree that this
Section 2.6 sets forth the exclusive mechanism for the Holders to make any such
dispute and to resolve the same, and shall not be entitled to make any such
dispute in any other manner. The Company and the Warrant Representative shall
use good faith efforts to mutually agree upon the designation of a single
Qualified Appraiser (as defined below) within seven (7) business days of the
receipt by the Company of a valid Determination Dispute Notice received by the
Company in within the time period set forth above in this Section 2.6. If such a
single Qualified Appraiser is designated, that person shall make a
Determination. If the Company and the Warrant Representative do not so agree
upon the designation of a single Qualified Appraiser within such period, then
within five (5) business days following the end of such period, each of the
Company and the Warrant Representative by written notice to the other shall
designate a Qualified Appraiser (or if any party fails to so select a Qualified
Appraiser within the time period specified, the Person selected by the other
party shall be the Qualified Appraiser) and the two Qualified Appraisers so
designated shall within ten (10) business days of their designation jointly
designate a third Qualified Appraiser, and such third Qualified Appraiser so
designated, solely, shall independently make a Determination. The parties may
submit the basis for their respective views to the Appraiser in writing. In such
event, each party shall furnish its submission to the other party at the same
time as the submission is furnished to the Qualified Appraiser, and the other
party shall have two (2) business days within which to furnish a single rebuttal
to such original submission. The Qualified Appraiser may consider such
submissions in reaching the Determination. If there is only a single Qualified
Appraiser, the fees and expenses of the Qualified Appraiser shall be paid
equally by the Company and the Warrant Representative. If three Qualified
Appraisers are appointed, the Company shall pay the fees and expenses of the
Qualified Appraiser which it appoints, the Warrant Representative shall pay the
fees and expenses of the Qualified Appraiser which it appoints, and the fees and
expenses of the third Qualified Appraiser shall be shared equally by the Company
and the Warrant Representative. The designated Qualified Appraiser shall make
the Determination not later than ten (10) business days following the
appointment of the Qualified Appraiser making the Determination. The
Determination made by the applicable Qualified Appraiser shall be final,
conclusive and binding on the parties hereto. None of the Qualified Appraisers
shall be affiliated with any of the Company, the Warrant Representative or
another Qualified Appraiser. For the purposes of this Agreement, "Qualified
Appraiser" shall mean an individual who is engaged on a regular basis (although
not necessarily full time) in valuing securities or arrangements similar to this
Agreement, as the case may be, and may include (but shall not be limited to)
professional business appraisers, investment bankers or accountants.
3. NO VOTING RIGHTS AS STOCKHOLDERS OR LIABILITIES. Except as otherwise
provided herein, this Warrant shall not be deemed to confer upon the Holder any
right to vote or to consent to or receive notice as a stockholder of the
Company, as such, in respect of any matters whatsoever, or any other rights or
liabilities as a stockholder, prior to the exercise hereof. Nothing contained in
this Warrant shall be deemed as imposing any liabilities on the Holder to
purchase any securities whether such liabilities are asserted by the Company or
by creditors or stockholders of the Company or otherwise.
4. WARRANTS AND WARRANT SHARES NOT TRANSFERABLE EXCEPT AS EXPRESSLY
PROVIDED IN THIS SECTION. This Warrant and the underlying shares of Common Stock
may not be offered, sold or transferred except in compliance with the applicable
terms of the Securities Purchase Agreement, if any, and the Securities Act, and
any applicable state securities laws, or an exception therefrom, and then only
against receipt of an agreement of the person to whom such offer or sale or
transfer is made to comply with the provisions of this Warrant with respect to
any resale or other disposition of such securities; provided that no such
agreement shall be required from any person purchasing this Warrant or the
underlying shares of Common Stock pursuant to a registration statement effective
under the Securities Act. No such disposition shall occur without an opinion of
such Holder's counsel, which opinion shall be reasonably satisfactory to the
Company's counsel. Notwithstanding the foregoing, Also, this Warrant shall not
be transferable..
5. WARRANTS EXCHANGEABLE; ASSIGNMENT; LOSS, THEFT, DESTRUCTION, ETC.
This Warrant is exchangeable, without expense, upon surrender hereof by the
Holder hereof at the principal offices of the Company, or at the office of its
Transfer Agent, if any, for new Warrants of like tenor representing in the
aggregate the right to subscribe for and purchase the Warrant Shares which may
be subscribed for and purchased hereunder, each such new Warrant to represent
the right to subscribe for and purchase such Warrant Shares as shall be
designated by such Holder hereof at the time of such surrender. Upon surrender
of this Warrant to the Company at its principal office, or at the office of its
Transfer Agent, if any, with an instrument of assignment duly executed and funds
sufficient to pay any transfer tax, the Company shall, without charge, execute
and deliver a new Warrant in the name of the assignee named in such instrument
of assignment and this Warrant shall promptly be cancelled; provided, that no
such assignment shall be effected except in accordance with the terms and
conditions of the Securities Purchase Agreement and Section 4 of this Warrant.
This Warrant may be divided or combined with other warrants which carry the same
rights upon presentation hereof at the principal office of the Company, or at
the office of its Transfer Agent, if any, together with a written notice
specifying the names and denominations in which new Warrants are to be issued
and signed by the Holder hereof; provided, that no such assignment, transfer or
other disposition of this Warrant shall be effected except in accordance with
the terms and conditions of the Securities Purchase Agreement and Section 4 of
this Warrant. The term "Warrant" as used herein includes any Warrants into which
this Warrant may be divided or exchanged. Upon 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, upon
delivery of indemnity reasonably satisfactory to the Company, or, in the case of
any such mutilation, upon surrender or cancellation of this Warrant, the Company
will issue to the Holder hereof a new Warrant of like tenor, in lieu of this
Warrant, representing the right to subscribe for and purchase the Warrant Shares
which may be subscribed for and purchased hereunder. Any such new Warrant
executed and delivered shall constitute an additional contractual obligation of
the Company, whether or not this Warrant so lost, stolen, destroyed, or
mutilated shall be at any time enforceable by anyone.
6. LEGENDS; INVESTMENT REPRESENTATIONS. Any certificate evidencing the
securities issued upon exercise of this Warrant shall bear a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
OTHER SECURITIES LAWS, AND SUCH SECURITIES MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED UNLESS SO REGISTERED OR
AN EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY OTHER APPLICABLE
SECURITIES LAWS IS AVAILABLE.
7. MODIFICATIONS AND WAIVERS. The Holder of this Warrant acknowledges
and agrees that the terms of this Warrant may be amended, modified or waived
only by the written agreement between the Holder and the Company.
8. EXPENSES. The Company shall pay all expenses and other charges
payable in connection with the preparation, issuance and delivery of this
Warrant and all substitute Warrants. The Holder shall pay all taxes in
connection with any sale, assignment or other transfer of this Warrant.
9. BOOKS. The Company shall maintain, at the office or agency of the
Company maintained by the Company, books for the registration and transfer of
the Warrant.
10. RESERVATION OF WARRANT SHARES. The Company covenants and agrees
that it will at all times reserve and keep available, free from preemptive
rights, out of the aggregate of its authorized but unissued Common Stock or its
authorized and issued Common Stock held in its treasury, solely for the purpose
of enabling it to satisfy any obligation to issue Warrant Shares upon exercise
of this Warrant, the maximum number of shares of Common Stock which may then be
deliverable upon the exercise of this Warrant. The Company or, if appointed, the
transfer agent for the Common Stock (the "Transfer Agent"), and every subsequent
transfer agent for any shares of the Company's capital stock issuable upon the
exercise of any of the rights of purchase aforesaid will be irrevocably
authorized and directed at all times to reserve such number of authorized shares
as shall be required for such purpose. The Company will keep a copy of this
Warrant on file with the Transfer Agent and with every subsequent transfer agent
for any shares of the Company's capital stock issuable upon the exercise of the
rights of purchase represented by this Warrant. The Company will furnish such
Transfer Agent a copy of all notices of adjustments and certificates related
thereto transmitted to the Holder pursuant to Section 2 hereof. The Company
covenants that all Warrant Shares which may be issued upon exercise of this
Warrant will, upon issue, be validly issued, fully paid and nonassessable, not
subject to any preemptive rights, and free from all taxes, liens, security
interests, charges, and other encumbrances with respect to the issuance thereof.
11. REGISTRATION. Pursuant to a certain Registration Rights Agreement
of even date herewith between the Company and the Holder, among other parties,
the Company is required to register under the Securities Act the Warrant Shares
which may be acquired by such Holder. Any permitted transferee must become a
party to said Registration Rights Agreement in order to have the benefit of the
same.
12. LISTING ON SECURITIES EXCHANGES; REGISTRATION. If, and so long as,
any class of the Company's Common Stock shall be listed on any national
securities exchange (as defined in the Exchange Act) or NASDAQ or the OTC
Bulletin Board, the Company shall use its reasonable best efforts to, at its
expense, obtain and maintain the approval for listing upon official notice of
issuance of all Warrant Shares and maintain the listing of Warrant Shares after
their issuance; and the Company will so list on such national securities
exchange or NASDAQ or the OTC Bulletin Board, if applicable, will register under
the Exchange Act (or any similar statute then in effect), and will maintain such
listing of, any other securities that at any time are issuable upon exercise of
this Warrant if and at the time any securities of the same class shall be listed
on such national securities exchange or NASDAQ or OTC Bulletin Board by the
Company.
13. NO DILUTION OR IMPAIRMENT. The Company will not act for the purpose
of avoiding or seeking to avoid the observance or performance of any of the
terms of this Warrant, by amendment of its certificate or articles of
incorporation or other organizational documents or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other action, but will, at all times, in good faith, assist in
the carrying out of all such terms. Without limiting the generality of the
foregoing, the Company will not increase the par value of any shares of stock
receivable on the exercise of this Warrant above the amount payable therefor on
such exercise.
14. MISCELLANEOUS.
14.1 NOTICES. All notices and other communications shall be mailed by
first-class certified or registered mail, postage prepaid, sent by reputable
overnight delivery, delivered by hand or sent by facsimile as follows:
If to the Company:
Advance Nanotech, Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Executive Officer
Telephone: ((000) 000 0000
Facsimile: (000) 000 0000
If to the Holder:
The address and/or facsimile furnished to the Company
in writing by the last registered Holder of this
Warrant who shall have furnished an address and/or
facsimile to the Company in writing;
except that any of the foregoing may from time to time by written notice to the
other designate another address which shall thereupon become its effective
address for the purposes of this paragraph. Any notices, requests or consents
hereunder shall be deemed given, and any instruments delivered, five days after
they have been mailed by first-class certified or registered mail U.S. Mail,
postage prepaid, or upon receipt if delivered by a reputable overnight courier
or if delivered personally or by facsimile transmission.
14.2 ENTIRE AGREEMENT. This Warrant, including the exhibits and
documents referred to herein which are a part hereof, contain the entire
understanding of the parties hereto with respect to the subject matter and may
be amended only by a written instrument executed by the parties hereto or their
successors or assigns. Any paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Warrant.
14.3 GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York with respect to contracts made
and to be fully performed therein, without regard to the conflicts of laws
principles thereof. The parties hereto hereby agree that any suit or proceeding
arising under this Warrant, or in connection with the consummation of the
transactions contemplated hereby, shall be brought solely in a federal or state
court located in the County of New York and State of New York. By its execution
hereof, both the Company and the undersigned hereby consent and irrevocably
submit to the in personam jurisdiction of the federal and state courts located
in the County of New York and State of New York and agree that any process in
any suit or proceeding commenced in such courts under this Warrant may be served
upon it personally or by certified or registered mail, return receipt requested,
or by Federal Express or other courier service, with the same force and effect
as if personally served upon the applicable party in New York and in the city or
county in which such other court is located. The parties hereto each waive any
claim that any such jurisdiction is not a convenient forum for any such suit or
proceeding and any defense of lack of in personam jurisdiction with respect
thereto.
14.4 Headings. The headings of this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.
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IN WITNESS WHEREOF, this Warrant Agreement has been executed as of the
date first written above.
ADVANCE NANOTECH, INC.
By:
------------------------
Name:
Title:
PURCHASE FORM
Dated: __________
The undersigned hereby irrevocably elects to exercise the within Warrant to the
extent of purchasing _____ Warrant Shares and hereby makes full cash payment of
$_____________ in payment of the exercise price thereof. The undersigned has had
the opportunity to ask questions of and receive answers from the officers of
Advance Nanotech, Inc. (the "Company") regarding the affairs of the Company and
related matters, and has had the opportunity to obtain additional information
necessary to verify the accuracy of all information so obtained. [The
undersigned understands that the shares have not been registered under the
Securities Act of 1933, as amended, or the securities laws of any other
jurisdiction, and hereby represents to the Company that the undersigned is
acquiring the shares for its own account, for investment, and not with a view
to, or for sale in connection with, the distribution of any such shares.] [This
may not apply depending upon whether a registration statement is effective.]
(Signature)
(Print or type name)
(Address)
NOTICE: The signature of this Purchase Form must correspond with the name as
written upon the face of the within Warrant, or upon the assignment thereof, if
applicable, in every particular, without alteration, enlargement or any change
whatsoever.
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______________________ the right represented by the within Warrant to
purchase ________ shares of Common Stock of _____________ to which the within
Warrant relates and appoints _____________ attorney to transfer said right on
the books of ___________________ with full power of substitution in the
premises.
Dated: __________________ ___, 200__
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant)
Address of Transferee:
In the presence of:
CONSENT OF ASSIGNEE
I HEREBY CONSENT to abide by the terms and conditions of the within
Warrant.
Dated:
(Signature of Assignee)
(Print or type name)
