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EXHIBIT 5
WARRANT
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THE SECURITIES REPRESENTED BY THIS WARRANT AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND
MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR IN RELIANCE ON AN AVAILABLE
EXEMPTION FROM THE ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 2.
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KAFUS INDUSTRIES LTD.
Common Stock Purchase Warrant
Representing Right To Purchase Shares of
Common Stock
of
Kafus Industries Ltd.
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FOR VALUE RECEIVED, KAFUS INDUSTRIES LTD., a British Columbia
corporation (the "Company"), hereby certifies that Sundance Assets, L.P., a
Delaware limited partnership, (the "Holder"), is entitled to purchase from the
Company at any time or from time to time during the period (the "Exercise
Period") commencing on the date hereof, and ending on 5:00 p.m. (Toronto,
Ontario time) on July 31, 2008 (the "Expiration Date"), 250,000 shares of Common
Stock of the Company (the Common Stock of the Company being referred to herein
as the "Common Stock" and such number of shares of Common Stock as adjusted
pursuant to the terms hereof, being the "Warrant Shares"), at a price per share
equal to the weighted average closing price of Common Stock for the 15 trading
days immediately prior to commencement of the Exercise Period, but with a
minimum price of U.S. $3.50 and a maximum price of U.S. $4.00 (as such price may
be adjusted pursuant to the terms hereof, the "Exercise Price"). This Warrant
was issued to the Holder (together with such other warrants as may be issued in
exchange, transfer, or replacement of this Warrant, the "Warrants") in
connection with the U.S. $12,500,000 Promissory Note dated as of August 18, 1998
(the "Note"), made by the Company and payable to the order of the Holder, and
entitles the Holder to purchase the Warrant Shares and to exercise the other
rights, powers, and privileges hereinafter provided.
Section 1. Exercise of Warrant; Cancellations of Warrant. This Warrant
may be exercised in whole or in part, at any time or from time to time, during
the Exercise Period, by presentation to the Company at its principal office at
the address set forth in Section 9 of (a) this Warrant, with the Purchase Form
annexed hereto as Exhibit A duly executed and (b) a certified bank check equal
to the Exercise Price for the Warrant Shares for which this Warrant is being
exercised (the date of such delivery referred to herein as the "Exercise Date").
Within five business days after payment of the Exercise Price, the Company shall
execute and deliver to the Holder a certificate or certificates for the total
number of Warrant Shares for which this Warrant is being exercised, in such
names and denominations as requested in writing by the Holder. The Company shall
pay any and all documentary stamp or similar issue taxes payable in respect of
the issue of the Warrant Shares. If this Warrant is exercised in part only, the
Company shall, upon surrender of this Warrant, execute and deliver a new Warrant
evidencing the rights of the Holder thereof to purchase the balance of the
Warrant Shares issuable hereunder.
Section 2. Exchange, Transfer, Assignment, or Loss of Warrant. Upon
surrender of this Warrant to the Company, with the Assignment Form annexed
hereto as Exhibit B duly executed and funds sufficient to pay any transfer tax,
the Company shall, without charge, execute and deliver a new Warrant or Warrants
in the name of the assignee or assignees named in such Assignment Form and, if
the Holder's entire interest is not being assigned, in the name of the Holder,
and this Warrant shall promptly be canceled. This Warrant may be divided or
combined with other Warrants that carry the same rights upon presentation
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hereof at the office of the Company, together with a written notice specifying
the names and denominations in which new Warrants are to be issued and signed by
the Holder hereof. Upon receipt by the Company of evidence satisfactory to it of
the loss, theft, destruction, or mutilation of this Warrant, and (in the case of
loss, theft, or destruction) of reasonably satisfactory indemnification
(including, if required in the reasonable judgment of the Company, a statement
of net worth of such Holder that is at a level reasonably satisfactory to the
Company), and upon surrender and cancellation of this Warrant, if mutilated, the
Company shall execute and deliver a new Warrant of like tenor and date.
Section 3. Antidilutive Adjustments. The shares of Common Stock
purchasable on exercise of this Warrant are shares of Common Stock of the
Company as constituted as of the date of issuance hereof. The number and kind of
securities purchasable on the exercise of this Warrant shall be subject to
adjustment from time to time upon the happening of certain events, as follows:
(a) Mergers, Consolidations, and Reclassifications. In case of
any reclassification or change of outstanding securities issuable upon exercise
of this Warrant at any time (other than a change in par value, or from par value
to no par value, or from no par value to par value or as a result of a
subdivision or combination to which subsection 3(b) applies), or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is the surviving
corporation and which does not result in any reclassification or change (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination to which
subsection 3(b) applies) of outstanding securities issuable upon exercise of
this Warrant), the Holder shall have, and the Company, or such successor
corporation or other entity, shall covenant in the constituent documents
effecting any of the foregoing transactions that such holder does have, the
right to obtain upon the exercise hereof, in lieu of the shares of Common Stock,
other securities, money, or other property theretofore issuable upon exercise of
this Warrant, the kind and amount of shares of stock, other securities, money,
or other property receivable upon such reclassification, change, consolidation,
or merger by a holder of the shares of Common Stock, other securities, money, or
other property issuable upon exercise hereof had this Warrant been exercised
immediately prior to such reclassification, change, consolidation, or merger.
The constituent documents effecting any such reclassification, change,
consolidation, or merger shall provide for any adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided in this
subsection 3(a). The provisions of this subsection 3(a) shall similarly apply to
successive reclassifications, changes, consolidations, or mergers.
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(b) Subdivisions and Combinations. If the Company at any time
during the Exercise Period shall subdivide its shares of Common Stock into a
greater number of shares, the number of shares of Common Stock purchasable upon
exercise of this Warrant shall be proportionately increased and the Exercise
Price shall be proportionately decreased, as at the effective date of such
subdivision, or if the Company shall take a record of holders of its Common
Stock for the purpose of so subdividing, as at such record date, whichever is
earlier. If the Company, at any time during the Exercise Period, shall combine
its shares of Common Stock into a smaller number of shares, the number of shares
of Common Stock purchasable upon exercise hereof shall be proportionately
reduced and the Exercise Price shall be proportionately increased, as at the
effective date of such combination, or if the Company shall take a record of
holders of its Common Stock for purposes of such combination, as at such record
date, whichever is earlier.
(c) Dividends and Distributions. If the Company at any time
shall declare a dividend on its Common Stock payable in stock or other
securities of the Company or of any other corporation or other entity, or in
property or otherwise than in cash, to the holders of its Common Stock, the
Holder shall, without additional cost, be entitled to receive upon any exercise
hereof, in addition to the Common Stock to which the Holder would otherwise be
entitled upon such exercise, the number of shares of stock or other securities
or property which the Holder would have been entitled to receive if the Holder
had been a holder immediately prior to the record date for such dividend (or, if
no record date shall have been established, the payment date for such dividend)
of the number of shares of Common Stock purchasable on exercise of this Warrant
immediately prior to such record date or payment date, as the case may be.
(d) Upon any increase or decrease in the number of Warrant
Shares purchasable upon the exercise of this Warrant, the Company shall, within
30 days thereafter, deliver written notice thereof to the Holder, which notice
shall state the increased or decreased number of Warrant Shares purchasable upon
the exercise of this Warrant and the revised Exercise Price thereof, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculations are based.
Section 4. Notification by the Company. In case at any time while this
Warrant remains outstanding:
(a) the Company shall declare any dividend or make any
distribution upon its Common Stock or any other class of its capital stock; or
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(b) the Company shall offer for subscription pro rata to the
holders of its Common Stock or any other class of its capital stock any
additional shares of stock of any class or any other securities convertible into
or exchangeable for shares of stock or any rights or options to subscribe
thereto; or
(c) the Board of Directors of the Company shall authorize any
capital reorganization, reclassification, or similar transaction involving the
capital stock of the Company, or a sale or conveyance of all or a substantial
part of the assets of the Company, or a consolidation, merger, or business
combination of the Company; or
(d) actions or proceedings shall be authorized or commenced
for a voluntary or involuntary dissolution, liquidation, or winding-up of the
Company;
then, in any one or more of such cases, the Company shall give written notice to
the Holder, at the earliest time legally practicable (and not less than 20 days
before any record date or other date set for definitive action) of the date on
which (i) the books of the Company shall close or a record shall be taken for
such dividend, distribution, or subscription rights or options or (ii) such
reorganization, reclassification, sale, conveyance, consolidation, merger,
dissolution, liquidation, or winding-up shall take place or be voted on by
shareholders of the Company, as the case may be. Such notice shall also specify
the date as of which the holders of the Common Stock of record shall participate
in said dividend, distribution, subscription rights, or options or shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, sale, conveyance,
consolidation, merger, dissolution, liquidation, or winding-up, as the case may
be. If the action in question or the record date is subject to the effectiveness
of a registration statement under the Securities Act or to a favorable vote of
shareholders, the notice required by this Section 4 shall so state.
Section 5. No Voting Rights: Limitations of Liability. Prior to
exercise, this Warrant will not entitle the Holder to any voting rights or other
rights as a stockholder of the Company. No provision hereof, in the absence of
affirmative action by the Holder to exercise this Warrant, and no enumeration
herein of the rights or privileges of the Holder, shall give rise to any
liability of the Holder for the purchase price of the Warrant Shares pursuant to
the exercise hereof.
Section 6. Amendment and Waiver.
(a) No failure or delay of the Holder in exercising any power
or right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of such right or
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power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Holder are cumulative and
not exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified, or waived with (and only
with) the written consent of the Company and the Holder.
(b) No notice or demand on the Company in any case shall
entitle the Company to any other or further notice or demand in similar or other
circumstances.
Section 7. No Fractional Warrant Shares. The Company shall not be
required to issue stock certificates representing fractions of Warrant Shares,
but shall in respect of any fraction of a Warrant Share make a payment in cash
based on the Value of the Common Stock after giving effect to the full exercise
or conversion of the Warrants.
Section 8. Validity of Warrant Shares. The Company shall reserve and
keep available at all times, free from preemptive rights, a sufficient number of
Warrant Shares to satisfy the requirements of this Warrant. The Warrant Shares:
(i) will be upon issuance, free and clear of any liens, claims, or other
encumbrances ("Liens") created by the Company or, to the Company's knowledge,
any other Person; (ii) have been duly and validly authorized and when issued and
paid for in accordance with the terms of the Warrants will be duly and validly
issued, fully paid, and non-assessable; (iii) will not have been issued or sold
in violation of any preemptive or similar rights; and (iv) will not subject the
holder thereof to personal liability by reason of being such holders.
Section 9. Notices. Unless otherwise specified, all notices and other
communications provided for between the Company and the Holder in this Warrant
shall be in writing, including telecopy, and delivered or transmitted to the
addresses set forth below, or to such other address as shall be designated by
the Company or the Holder in written notice to the other party. Notice sent by
telecopy shall be deemed to be given and received when receipt of such
transmission is acknowledged, and delivered notice shall be deemed to be given
and received when receipted for by, or actually received by, an authorized
officer of the Company or the Holder, as the case may be.
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If to the Company:
Kafus Industries Ltd.
000 Xxxxxx Xxxxxx
Xxxxxx XX 00000
Attn: Xx. Xxxxxxx X. XxXxxx
telephone: 000-000-0000
telecopier: 000-000-0000
With copies to:
Kafus Industries Ltd.
000-000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X0X0
Attn: Xx. Xxx Xxxxxxxxx
telephone: 000-000-0000
telecopier: 604-685-2426
If to the Holder:
Enron North America Corp.
Attn: Xxxxx XxXxxxxxxx
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
telephone: 000-000-0000
telecopier: 000-000-0000
With copies to:
Enron North America Corp.
Attn: Xxxxx Xxxxx
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
telephone: 000-000-0000
telecopier: 000-000-0000
and
Enron Capital Management
Attn: Xxx Xxxxxx
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
telephone: 000-000-0000
telecopier: 000-000-0000
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Section 10. Section and Other Headings. The headings contained in this
Warrant are for reference purposes only and will not affect in any way the
meaning or interpretation of this Warrant.
Section 11. Governing Law. THIS WARRANT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF BRITISH COLUMBIA AND THE APPLICABLE
LAWS OF CANADA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW WHICH WOULD
SELECT ANOTHER LAW.
Section 12. Binding Effect. The terms and provisions of this Warrant
shall inure to the benefit of the Holder and its successors and assigns and
shall be binding upon the Company and its successors and assigns, including,
without limitation, any successor to the Company by merger, consolidation, or
acquisition of all or substantially all of the Company's assets.
Section 13. Arbitration. Disputes arising under this Warrant shall be
settled by one arbitrator pursuant to the rules of the American Arbitration
Association (the "AAA") for Commercial Arbitration (the "Rules"). Such
arbitration shall be held in New York, New York, or at such other location as
mutually agreed to by the parties to the dispute. Subject to any applicable
limitations contained in this Warrant, arbitration may be commenced at any time
by any party giving notice to the other party that a dispute has been referred
to arbitration under this Section. The arbitrator shall be selected by the joint
agreement of the parties hereto, but if they do not so agree within twenty (20)
days after the date of the notice referred to above, the selection shall be made
pursuant to the Rules from the panel of arbitrators maintained by the AAA. Any
award of the arbitrator shall be accompanied by a written opinion giving the
reasons for the award. The expense of the arbitration shall be borne by the
parties in the manner determined in writing by the arbitrator. This arbitration
provision shall be specifically enforceable by the parties. The determination of
the arbitrator pursuant to this Section shall be final and binding on the
parties and may be entered for enforcement before any court of competent
jurisdiction.
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IN WITNESS WHEREOF, the seal of the Company and the signature of its
duly authorized officer have been affixed hereto as of August 18, 1998.
[SEAL] KAFUS INDUSTRIES LTD.
Attest: By:
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Name:
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Title:
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EXHIBIT A
TO
WARRANT
PURCHASE FORM
To Be Executed by the Holder
Desiring to Exercise a Warrant of
Kafus Environmental Industries Ltd.
The undersigned holder hereby exercises the right to purchase _______
shares of Common Stock covered by the within Warrant, according to the
conditions thereof, and herewith undertakes to make payment in full of the
Exercise Price of such shares or to withdraw this notice of exercise, in
accordance with the terms of the Warrant.
Name of Holder:
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Signature:
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Title:
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Address:
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Dated: , .
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EXHIBIT B
TO
WARRANT
ASSIGNMENT FORM
To Be Executed by the Holder
Desiring to Transfer a Warrant of
Kafus Environmental Industries Ltd.
FOR VALUE RECEIVED, the undersigned holder hereby sells, assigns, and
transfers unto __________ the right to purchase __________ shares of Common
Stock covered by the within Warrant, and does hereby irrevocably constitute and
appoint _________________ Attorney to transfer the said Warrant on the books of
the Company (as defined in such Warrant), with full power of substitution.
Name of Holder:
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Signature:
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Title:
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Address:
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Dated: , .
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In the presence of
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NOTICE:
The signature to the foregoing Assignment Form must correspond to the name as
written upon the face of the within Warrant in every detail, without alteration
or enlargement or any change whatsoever.
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