Contract
Exhibit 4.3
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES
ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC.
No.: W-07-
|
Number of Shares: | |
Date of Issuance: October 29, 2007 |
FOR VALUE RECEIVED, the undersigned, Advanced Environmental Recycling Technologies, Inc., a
Delaware corporation (together with its successors and assigns, the “Issuer”), hereby
certifies that or its registered assigns is entitled to subscribe
for and purchase, during the Term (as hereinafter defined), up to
( ) shares (subject to adjustment as hereinafter
provided) of the duly authorized, validly issued, fully paid and non-assessable Common Stock of the
Issuer, at an exercise price per share equal to the Warrant Price then in effect, subject, however,
to the provisions and upon the terms and conditions hereinafter set forth. Capitalized terms used
in this Warrant and not otherwise defined herein shall have the respective meanings specified in
Section 9 hereof.
1. Term. The term of this Warrant shall commence on October 29, 2007 and shall expire
at 6:00 p.m., Eastern Time, on October 29, 2012; provided, however, in the event a
registration statement providing for the resale of all of the Warrant Stock issuable upon exercise
of this Warrant is not effective by the date that is six (6) months following the Original Issue
Date (the “Effectiveness Deadline”), the term of this Warrant shall be extended one day for
each day following the Effectiveness Deadline until such registration statement providing for the
resale of all of the Warrant Stock is declared effective (such period being the “Term”).
| 2. | Method of Exercise; Payment; Issuance of New Warrant; Transfer and Exchange. |
(a) Time of Exercise. The purchase rights represented by this Warrant may be
exercised in whole or in part during the Term.
-1-
(b) Method of Exercise. The Holder hereof may exercise this Warrant, in whole or in
part, by the surrender of this Warrant (with the exercise form attached hereto duly executed) at
the principal office of the Issuer, and by the payment to the Issuer of an amount of consideration
therefor equal to the Warrant Price in effect on the date of such exercise multiplied by the number
of shares of Warrant Stock with respect to which this Warrant is then being exercised, payable at
such Holder’s election (i) by certified or official bank check or by wire transfer to an account
designated by the Issuer, (ii) by “cashless exercise” in accordance with the provisions of
subsection (c) of this Section 2, but only when a registration statement under the Securities Act
providing for the resale of the Warrant Stock is not then in effect, or (iii) by a combination of
the foregoing methods of payment selected by the Holder of this Warrant.
(c) Cashless Exercise. Notwithstanding any provisions herein to the contrary and
commencing upon the earlier of one (1) year following the Original Issue Date and the date the
Warrant Stock becomes eligible for resale pursuant to Rule 144 under the Securities Act, if (i) the
Per Share Market Value of one share of Common Stock is greater than the Warrant Price (at the date
of calculation as set forth below) and (ii) a registration statement under the Securities Act
providing for the resale of the Warrant Stock is not then in effect, or not effective at any time
during the Effectiveness Period (as defined in the Registration Rights Agreement) in accordance
with the terms of the Registration Rights Agreement, unless the registration statement is not
effective as a result of the Issuer exercising its rights under Section 3(n) of the Registration
Rights Agreement, in lieu of exercising this Warrant by payment of cash, the Holder may exercise
this Warrant by a cashless exercise and shall receive the number of shares of Common Stock equal to
an amount (as determined below) by surrender of this Warrant at the principal office of the Issuer
together with the properly endorsed Notice of Exercise in which event the Issuer shall issue to the
Holder a number of shares of Common Stock computed using the following formula:
| X = | Y - (A)(Y) | |||
| B | ||||
Where
|
X = | the number of shares of Common Stock to be issued to the Holder. | ||
| Y = | the number of shares of Common Stock purchasable upon exercise of all of the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised. | |||
| A = | the Warrant Price. | |||
| B = | the Per Share Market Value of one share of Common Stock. |
(d) Issuance of Stock Certificates. In the event of any exercise of this Warrant in
accordance with and subject to the terms and conditions hereof, certificates for the shares of
Warrant Stock so purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days after such exercise (the
“Delivery Date”) or, at the request of the Holder (provided that a registration statement
under the Securities Act providing for the resale of the Warrant Stock is then in effect), issued
and
-2-
delivered to the Depository Trust Company (“DTC”) account on the Holder’s behalf via
the Deposit Withdrawal Agent Commission System (“DWAC”) within a reasonable time, not
exceeding three (3) Trading Days after such exercise, and the Holder hereof shall be deemed for all
purposes to be the holder of the shares of Warrant Stock so purchased as of the date of such
exercise. Notwithstanding the foregoing to the contrary, the Issuer or its transfer agent shall
only be obligated to issue and deliver the shares to the DTC on a holder’s behalf via DWAC if (i)
such exercise is in connection with a sale, (ii) such shares may be issued without restrictive
legends and (iii) the Issuer and the transfer agent are participating in DTC through the DWAC
system. If all of the conditions set forth in clauses (i), (ii) and (iii) above are not satisfied,
the transfer agent shall deliver physical certificates representing the shares of Warrant Stock to
such Holder. The Holder shall deliver this original Warrant, or an indemnification undertaking
with respect to such Warrant in the case of its loss, theft or destruction, at such time that this
Warrant is fully exercised. With respect to partial exercises of this Warrant, the Issuer shall
keep written records for the Holder of the number of shares of Warrant Stock exercised as of each
date of exercise.
(e) Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise.
In addition to any other rights available to the Holder, if the Issuer fails to cause its transfer
agent to transmit to the Holder a certificate or certificates representing the Warrant Stock
pursuant to an exercise on or before the Delivery Date, and if after such date the Holder is
required by its broker to purchase (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the Warrant Stock which the Holder
anticipated receiving upon such exercise (a “Buy-In”), then the Issuer shall (1) pay in
cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of shares of Warrant Stock that the Issuer was required to deliver to
the Holder in connection with the exercise at issue times (B) the price at which the sell order
giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either
reinstate the portion of the Warrant and equivalent number of shares of Warrant Stock for which
such exercise was not honored or deliver to the Holder the number of shares of Common Stock that
would have been issued had the Issuer timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an
aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) of the
immediately preceding sentence the Issuer shall be required to pay the Holder $1,000. The Holder
shall provide the Issuer written notice indicating the amounts payable to the Holder in respect of
the Buy-In, together with applicable confirmations and other evidence reasonably requested by the
Issuer. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of specific performance
and/or injunctive relief with respect to the Issuer’s failure to timely deliver certificates
representing shares of Common Stock upon exercise of this Warrant as required pursuant to the terms
hereof.
(f) Transferability of Warrant. Subject to Section 2(h) hereof, this Warrant may be
transferred by a Holder, in whole or in part, but in denominations of at least 50,000 shares,
without the consent of the Issuer; provided, however, this Warrant may not be transferred in whole
or in part to a Person known to be a competitor of the Issuer with respect to the
-3-
manufacture of composite wood-plastic decking or other composite wood-plastic construction
materials. If transferred pursuant to this paragraph, this Warrant may be transferred on the books
of the Issuer by the Holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant at the principal office of the Issuer, properly endorsed (by the Holder executing an
assignment in the form attached hereto) and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. This Warrant is exchangeable at the principal
office of the Issuer for Warrants to purchase the same aggregate number of shares of Warrant Stock,
each new Warrant to represent the right to purchase such number of shares of Warrant Stock as the
Holder hereof shall designate at the time of such exchange. All Warrants issued on transfers or
exchanges shall be dated the Original Issue Date and shall be identical with this Warrant except as
to the number of shares of Warrant Stock issuable pursuant thereto.
(g) Continuing Rights of Holder. The Issuer will, at the time of or at any time after
each exercise of this Warrant, upon the request of the Holder hereof, acknowledge in writing the
extent, if any, of its continuing obligation to afford to such Holder all rights to which such
Holder shall continue to be entitled after such exercise in accordance with the terms of this
Warrant, provided that if any such Holder shall fail to make any such request, the failure
shall not affect the continuing obligation of the Issuer to afford such rights to such Holder.
(h) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant
and the shares of Warrant Stock to be issued upon exercise hereof are being acquired solely
for the Holder’s own account and not as a nominee for any other party, and for investment,
and that the Holder will not offer, sell or otherwise dispose of this Warrant or any shares
of Warrant Stock to be issued upon exercise hereof except pursuant to an effective
registration statement, or an exemption from registration, under the Securities Act and any
applicable state securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant and all certificates
representing shares of Warrant Stock issued upon exercise hereof shall be stamped or
imprinted with a legend in substantially the following form:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS
OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES
UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED.
-4-
(iii) The Issuer agrees to reissue this Warrant or certificates representing any of the
Warrant Stock, without the legend set forth above if at such time, prior to making any
transfer of any such securities, the Holder shall give written notice to the Issuer
describing the manner and terms of such transfer. Such proposed transfer will not be
effected until: (a) either (i) the Issuer has received an opinion of counsel reasonably
satisfactory to the Issuer, to the effect that the registration of such securities under the
Securities Act is not required in connection with such proposed transfer, (ii) a
registration statement under the Securities Act covering such proposed disposition has been
filed by the Issuer with the Securities and Exchange Commission and has become effective
under the Securities Act, (iii) the Issuer has received other evidence reasonably
satisfactory to the Issuer that such registration and qualification under the Securities Act
and state securities laws are not required, or (iv) the Holder provides the Issuer with
reasonable assurances that such security can be sold pursuant to Rule 144 under the
Securities Act; and (b) either (i) the Issuer has received an opinion of counsel reasonably
satisfactory to the Issuer, to the effect that registration or qualification under the
securities or “blue sky” laws of any state is not required in connection with such proposed
disposition, or (ii) compliance with applicable state securities or “blue sky” laws has been
effected or a valid exemption exists with respect thereto. The Issuer will respond to any
such notice from a holder within three (3) Trading Days. In the case of any proposed
transfer under this Section 2(h), the Issuer will use reasonable efforts to comply with any
such applicable state securities or “blue sky” laws, but shall in no event be required, (x)
to qualify to do business in any state where it is not then qualified, (y) to take any
action that would subject it to tax or to the general service of process in any state where
it is not then subject, or (z) to comply with state securities or “blue sky” laws of any
state for which registration by coordination is unavailable to the Issuer. The restrictions
on transfer contained in this Section 2(h) shall be in addition to, and not by way of
limitation of, any other restrictions on transfer contained in any other section of this
Warrant. Whenever a certificate representing the Warrant Stock is required to be issued to
a the Holder without a legend, in lieu of delivering physical certificates representing the
Warrant Stock, the Issuer shall cause its transfer agent to electronically transmit the
Warrant Stock to the Holder by crediting the account of the Holder’s Prime Broker with DTC
through its DWAC system.
(i) Accredited Investor Status. In no event may the Holder exercise this Warrant in
whole or in part unless the Holder is an “accredited investor” as defined in Regulation D under the
Securities Act.
-5-
3. Stock Fully Paid; Reservation and Listing of Shares; Covenants.
(a) Stock Fully Paid. The Issuer represents, warrants, covenants and agrees that all
shares of Warrant Stock which may be issued upon the exercise of this Warrant or otherwise
hereunder will, when issued in accordance with the terms of this Warrant, be duly authorized,
validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by
or through the Issuer. The Issuer further covenants and agrees that during the period within which
this Warrant may be exercised, the Issuer will at all times have authorized and reserved for the
purpose of issuance upon exercise of this Warrant a number of shares of Common Stock equal to at
least one hundred twenty percent (120%) of the aggregate number of shares of Common Stock to
provide for the exercise of this Warrant.
(b) Reservation. If any shares of Common Stock required to be reserved for issuance
upon exercise of this Warrant or as otherwise provided hereunder require registration or
qualification with any Governmental Authority under any federal or state law before such shares may
be so issued, the Issuer will in good faith use its best efforts as expeditiously as possible at
its expense to cause such shares to be duly registered or qualified. If the Issuer shall list any
shares of Common Stock on any securities exchange or market it will, at its expense, list thereon,
maintain and increase when necessary such listing, of, all shares of Warrant Stock from time to
time issued upon exercise of this Warrant or as otherwise provided hereunder (provided that such
Warrant Stock has been registered pursuant to a registration statement under the Securities Act
then in effect), and, to the extent permissible under the applicable securities exchange rules, all
unissued shares of Warrant Stock which are at any time issuable hereunder, so long as any shares of
Common Stock shall be so listed. The Issuer will also so list on each securities exchange or
market, and will maintain such listing of, any other securities which the Holder of this Warrant
shall be entitled to receive upon the exercise of this Warrant if at the time any securities of the
same class shall be listed on such securities exchange or market by the Issuer.
(c) Covenants. The Issuer shall not by any action including, without limitation,
amending the Certificate of Incorporation or the by-laws of the Issuer, or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities
or any other action, avoid or seek to avoid the observance or performance of any of the terms of
this Warrant, but will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such actions as may be necessary or appropriate to protect the rights of the
Holder hereof against dilution (to the extent specifically provided herein) or impairment. Without
limiting the generality of the foregoing, the Issuer will (i) not permit the par value, if any, of
its Common Stock to exceed the then effective Warrant Price, (ii) not amend or modify any provision
of the Certificate of Incorporation or by-laws of the Issuer in any manner that would adversely
affect the rights of the Holders of the Warrants, (iii) take all such action as may be reasonably
necessary in order that the Issuer may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, claims, encumbrances and restrictions (other
than as provided herein) upon the exercise of this Warrant, and (iv) use its best efforts to obtain
all such authorizations, exemptions or consents from any public regulatory body having jurisdiction
thereof as may be reasonably necessary to enable the Issuer to perform its obligations under this
Warrant.
-6-
(d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence satisfactory to
the Issuer of the ownership of and the loss, theft, destruction or mutilation of any Warrant and,
in the case of any such loss, theft or destruction, upon receipt of indemnity or security
satisfactory to the Issuer or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Issuer will make and deliver, in lieu of such lost, stolen, destroyed or
mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same
number of shares of Common Stock.
4. Adjustment of Warrant Price and Number of Shares Issuable Upon Exercise. The
Warrant Price and the Warrant Share Number shall be subject to adjustment from time to time as set
forth in this Section 4. The Issuer shall give the Holder notice of any event described below which
requires an adjustment pursuant to this Section 4 in accordance with the notice provisions set
forth in Section 5.
(a) Recapitalization, Reorganization, Reclassification, Consolidation, Merger or Sale.
(i) In case the Issuer after the Original Issue Date shall do any of the following
(each, a “Triggering Event”): (A) consolidate or merge with or into any other Person
and the Issuer shall not be the continuing or surviving corporation of such consolidation or
merger, or (B) permit any other Person to consolidate with or merge into the Issuer and the
Issuer shall be the continuing or surviving Person but, in connection with such
consolidation or merger, any Capital Stock of the Issuer shall be changed into or exchanged
for Securities of any other Person or cash or any other property, or (C) transfer all or
substantially all of its properties or assets to any other Person, or (D) effect a capital
reorganization or reclassification of its Capital Stock, then, and in the case of each such
Triggering Event, proper provision shall be made to the Warrant Price and the number of
shares of Warrant Stock that may be purchased upon exercise of this Warrant so that, upon
the basis and the terms and in the manner provided in this Warrant, the Holder of this
Warrant shall be entitled upon the exercise hereof at any time after the consummation of
such Triggering Event, to the extent this Warrant is not exercised prior to such Triggering
Event, to receive at the Warrant Price as adjusted to take into account the consummation of
such Triggering Event, in lieu of the Common Stock issuable upon such exercise of this
Warrant prior to such Triggering Event, the Securities, cash and property to which such
Holder would have been entitled upon the consummation of such Triggering Event if such
Holder had exercised the rights represented by this Warrant immediately prior thereto
(including the right of a shareholder to elect the type of consideration it will receive
upon a Triggering Event), subject to adjustments (subsequent to such corporate action) as
nearly equivalent as possible to the adjustments provided for elsewhere in this Section 4;
provided, however, the Holder at its option may elect to receive, or the
Issuer at its option may require the Holder to receive, an amount of cash equal to the value
of this Warrant as determined in accordance with the Black Scholes Option Pricing Model
obtained from the “OV” function on Bloomberg L.P. using (1) a price per share of Common
Stock equal to the VWAP of the Common Stock for the Trading Day immediately preceding the
date of consummation of the applicable Triggering Event, (2) a risk-free interest rate
corresponding to the U.S. Treasury rate for a period equal to the remaining term of this
Warrant as of the date of consummation of the applicable Triggering Event and (3) an
expected volatility equal to the 100 day volatility
-7-
obtained from the “HVT” function on Bloomberg L.P. determined as of the Trading Day
immediately following the public announcement of the applicable Triggering Event.
Immediately upon the occurrence of a Triggering Event, the Issuer shall notify the Holder in
writing of such Triggering Event and provide the calculations in determining the number of shares of Warrant Stock issuable upon exercise of the new warrant and the adjusted Warrant
Price. Upon the Holder’s request, the continuing or surviving corporation as a result of
such Triggering Event shall issue to the Holder a new warrant of like tenor evidencing the
right to purchase the adjusted number of shares of Warrant Stock and the adjusted Warrant
Price pursuant to the terms and provisions of this Section 4(a)(i). Notwithstanding the
foregoing to the contrary, this Section 4(a)(i) shall only apply if the surviving entity
pursuant to any such Triggering Event is a company that has a class of equity securities
registered pursuant to the Securities Exchange Act of 1934, as amended, and its common stock
is listed or quoted on a national securities exchange, national automated quotation system
or the OTC Bulletin Board. In the event that the surviving entity pursuant to any such
Triggering Event is not a public company that is registered pursuant to the Securities
Exchange Act of 1934, as amended, or its common stock is not listed or quoted on a national
securities exchange, national automated quotation system or the OTC Bulletin Board, then the
Holder shall have the right to demand that the Issuer pay to the Holder an amount in cash
equal to the value of this Warrant calculated in accordance with the Black-Scholes formula
as stated above.
(ii) In the event that the Holder has elected not to exercise this Warrant prior to the
consummation of a Triggering Event and has also elected not to receive an amount in cash
equal to the value of this Warrant calculated in accordance with the Black-Scholes formula
pursuant to the provisions of Section 4(a)(i) above, so long as the surviving entity
pursuant to any Triggering Event is a company that has a class of equity securities
registered pursuant to the Securities Exchange Act of 1934, as amended, and its common stock
is listed or quoted on a national securities exchange, national automated quotation system
or the OTC Bulletin Board, the surviving entity and/or each Person (other than the Issuer)
which may be required to deliver any Securities, cash or property upon the exercise of this
Warrant as provided herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer under this
Warrant (and if the Issuer shall survive the consummation of such Triggering Event, such
assumption shall be in addition to, and shall not release the Issuer from, any continuing
obligations of the Issuer under this Warrant) and (B) the obligation to deliver to such
Holder such Securities, cash or property as, in accordance with the foregoing provisions of
this subsection (a), such Holder shall be entitled to receive, and the surviving entity
and/or each such Person shall have similarly delivered to such Holder an opinion of counsel
for the surviving entity and/or each such Person, which counsel shall be reasonably
satisfactory to such Holder, or in the alternative, a written acknowledgement executed by
the President or Chief Financial Officer of the Issuer, stating that this Warrant shall
thereafter continue in full force and effect and the terms hereof (including, without
limitation, all of the provisions of this subsection (a)) shall be applicable to the
Securities, cash or property which the surviving entity and/or each such Person may be
required to deliver upon any exercise of this Warrant or the exercise of any rights pursuant
hereto.
-8-
(b) Stock Dividends, Subdivisions and Combinations. If at any time the Issuer shall:
(i) make or issue or set a record date for the holders of the Common Stock for the
purpose of entitling them to receive a dividend payable in, or other distribution of, shares
of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a larger number of shares of
Common Stock, or
(iii) combine its outstanding shares of Common Stock into a smaller number of shares of
Common Stock,
then (1) the number of shares of Common Stock for which this Warrant is exercisable immediately
after the occurrence of any such event shall be adjusted to equal the number of shares of Common
Stock which a record holder of the same number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the occurrence of such event would own or be entitled to receive
after the happening of such event, and (2) the Warrant Price then in effect shall be adjusted to
equal (A) the Warrant Price then in effect multiplied by the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of
shares of Common Stock for which this Warrant is exercisable immediately after such adjustment.
(c) Certain Other Distributions. If at any time the Issuer shall make or issue or set
a record date for the holders of the Common Stock for the purpose of entitling them to receive any
dividend or other distribution of:
(i) cash,
(ii) any evidences of its indebtedness, any shares of stock of any class or any other
securities or property of any nature whatsoever (other than cash, Common Stock Equivalents
or Additional Shares of Common Stock), or
(iii) any warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or property of any
nature whatsoever (other than cash, Common Stock Equivalents or Additional Shares of Common
Stock),
then (1) the number of shares of Common Stock for which this Warrant is exercisable shall be
adjusted to equal the product of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such adjustment multiplied by a fraction (A) the numerator of
which shall be the Per Share Market Value of Common Stock at the date of taking such record and (B)
the denominator of which shall be such Per Share Market Value minus the amount allocable to one
share of Common Stock of any such cash so distributable and of the fair value (as determined in
good faith by the Board and supported by an opinion from an investment banking firm mutually agreed
upon by the Issuer and the Holder) of any and all such evidences of indebtedness, shares of stock,
other securities or property or warrants or other subscription or purchase rights so distributable,
and (2) the Warrant Price then in effect shall be adjusted to
-9-
equal (A) the Warrant Price then in effect multiplied by the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of
shares of Common Stock for which this Warrant is exercisable immediately after such adjustment. A
reclassification of the Common Stock (other than a change in par value, or from par value to no par
value or from no par value to par value) into shares of Common Stock and shares of any other class
of stock shall be deemed a distribution by the Issuer to the holders of its Common Stock of such
shares of such other class of stock within the meaning of this Section 4(c) and, if the outstanding
shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock
as a part of such reclassification, such change shall be deemed a subdivision or combination, as
the case may be, of the outstanding shares of Common Stock within the meaning of Section 4(b).
(d) Issuance of Additional Shares of Common Stock.
(i) Commencing on the Original Issue Date and for a period of two (2) years thereafter, in the
event the Issuer shall issue any Additional Shares of Common Stock (otherwise than as provided in
the foregoing subsections (a) through (c) of this Section 4), at a price per share less than the
Warrant Price then in effect or without consideration, then the Warrant Price upon each such
issuance shall be adjusted to the price equal to the consideration per share paid for such
Additional Shares of Common Stock.
(ii) Commencing on the date that is two (2) years and one (1) day following the Original Issue
Date, in the event the Issuer shall issue any Additional Shares of Common Stock (otherwise than as
provided in the foregoing subsections (a) through (c) of this Section 4), at a price per share less
than the Warrant Price then in effect or without consideration, then the Warrant Price upon each
such issuance shall be adjusted to that price determined by multiplying the Warrant Price then in
effect by a fraction:
(A) the numerator of which shall be equal to the sum of (x) the number of
shares of Outstanding Common Stock immediately prior to the issuance of such
Additional Shares of Common Stock plus (y) the number of shares of Common
Stock (rounded to the nearest whole share) which the aggregate consideration for the
total number of such Additional Shares of Common Stock so issued would purchase at a
price per share equal to the Warrant Price then in effect, and
(B) the denominator of which shall be equal to the number of shares of
Outstanding Common Stock immediately after the issuance of such Additional Shares of
Common Stock.
(iii) No adjustment of the number of shares of Common Stock for which this Warrant shall be
exercisable shall be made under paragraphs (i) and (ii) of Section 4(d) upon the issuance of any
Additional Shares of Common Stock which are issued pursuant to the exercise of any Common Stock
Equivalents, if any such adjustment shall previously have been made upon the issuance of such
Common Stock Equivalents (or upon the issuance of any warrant or other rights therefor) pursuant to
Section 4(e).
-10-
(e) Issuance of Common Stock Equivalents. In the event the Issuer shall at any time
following the Original Issue Date take a record of the holders of its Common Stock for the purpose
of entitling them to receive a distribution of, or shall in any manner (whether directly or by
assumption in a merger in which the Issuer is the surviving corporation) issue or sell, any Common
Stock Equivalents, whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the Warrant Price in effect immediately prior to the time of such issue
or sale, or if, after any such issuance of Common Stock Equivalents, the price per share for which
Additional Shares of Common Stock may be issuable thereafter is amended or adjusted, and such price
as so amended shall be less than the Warrant Price in effect at the time of such amendment or
adjustment, then the Warrant Price then in effect shall be adjusted as provided in Section 4(d).
No further adjustments of the number of shares of Common Stock for which this Warrant is
exercisable and the Warrant Price then in effect shall be made upon the actual issue of such Common
Stock upon conversion or exchange of such Common Stock Equivalents.
(f) Shareholder Approval. Unless Shareholder Approval (as defined in the Purchase
Agreement) has been obtained and deemed effective, neither the Issuer nor any subsidiary shall make
any issuance whatsoever of Additional Shares of Common Stock or Common Stock Equivalents which
would cause any adjustment of the Warrant Price. The Holder shall be entitled to obtain injunctive
relief against the Issuer to preclude any such issuance, which remedy shall be in addition to any
right to collect damages.
(g) Other Provisions applicable to Adjustments under this Section. The following
provisions shall be applicable to the making of adjustments of the number of shares of Common Stock
for which this Warrant is exercisable and the Warrant Price then in effect provided for in this
Section 4:
(i) Computation of Consideration. To the extent that any Additional Shares of
Common Stock or any Common Stock Equivalents (or any warrants or other rights therefor)
shall be issued for cash consideration, the consideration received by the Issuer therefor
shall be the amount of the cash received by the Issuer therefor, or, if such Additional
Shares of Common Stock or Common Stock Equivalents are offered by the Issuer for
subscription, the subscription price, or, if such Additional Shares of Common Stock or
Common Stock Equivalents are sold to underwriters or dealers for public offering without a
subscription offering, the initial public offering price (in any such case subtracting any
amounts paid or receivable for accrued interest or accrued dividends and without taking into
account any compensation, discounts or expenses paid or incurred by the Issuer for and in
the underwriting of, or otherwise in connection with, the issuance thereof). In connection
with any merger or consolidation in which the Issuer is the surviving corporation (other
than any consolidation or merger in which the previously outstanding shares of Common Stock
of the Issuer shall be changed to or exchanged for the stock or other securities of another
corporation), the amount of consideration therefor shall be deemed to be the fair value, as
determined reasonably and in good faith by the Board, of such portion of the assets and
business of the nonsurviving corporation as the Board may determine to be attributable to
such shares of Common Stock or Common Stock Equivalents, as the case may be. The
consideration for any Additional Shares of
-11-
Common Stock issuable pursuant to any warrants or other rights to subscribe for or purchase
the same shall be the consideration received by the Issuer for issuing such warrants or
other rights plus the additional consideration payable to the Issuer upon exercise of such
warrants or other rights. The consideration for any Additional Shares of Common Stock
issuable pursuant to the terms of any Common Stock Equivalents shall be the consideration
received by the Issuer for issuing warrants or other rights to subscribe for or purchase
such Common Stock Equivalents, plus the consideration paid or payable to the Issuer in
respect of the subscription for or purchase of such Common Stock Equivalents, plus the
additional consideration, if any, payable to the Issuer upon the exercise of the right of
conversion or exchange in such Common Stock Equivalents. In the event of any consolidation
or merger of the Issuer in which the Issuer is not the surviving corporation or in which the
previously outstanding shares of Common Stock of the Issuer shall be changed into or
exchanged for the stock or other securities of another corporation, or in the event of any
sale of all or substantially all of the assets of the Issuer for stock or other securities
of any corporation, the Issuer shall be deemed to have issued a number of shares of its
Common Stock for stock or securities or other property of the other corporation computed on
the basis of the actual exchange ratio on which the transaction was predicated, and for a
consideration equal to the fair market value on the date of such transaction of all such
stock or securities or other property of the other corporation. In the event any
consideration received by the Issuer for any securities consists of property other than
cash, the fair market value thereof at the time of issuance or as otherwise applicable shall
be as determined in good faith by the Board. In the event Common Stock is issued with other
shares or securities or other assets of the Issuer for consideration which covers both, the
consideration computed as provided in this Section 4(g)(i) shall be allocated among such
securities and assets as determined in good faith by the Board.
(ii) When Adjustments to Be Made. The adjustments required by this Section 4
shall be made whenever and as often as any specified event requiring an adjustment shall
occur, except that any adjustment of the number of shares of Common Stock for which this
Warrant is exercisable that would otherwise be required may be postponed (except in the case
of a subdivision or combination of shares of the Common Stock, as provided for in Section
4(b)) up to, but not beyond the date of exercise if such adjustment either by itself or with
other adjustments not previously made adds or subtracts less than one percent (1%) of the
shares of Common Stock for which this Warrant is exercisable immediately prior to the making
of such adjustment. Any adjustment representing a change of less than such minimum amount
(except as aforesaid) which is postponed shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Section 4 and not previously
made, would result in a minimum adjustment or on the date of exercise. For the purpose of
any adjustment, any specified event shall be deemed to have occurred at the close of
business on the date of its occurrence.
(iii) Fractional Interests. In computing adjustments under this Section 4,
fractional interests in Common Stock shall be taken into account to the nearest one
one-hundredth (1/100th) of a share.
-12-
(iv) When Adjustment Not Required. If the Issuer shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a dividend or
distribution or subscription or purchase rights and shall, thereafter and before the
distribution to stockholders thereof, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then thereafter no adjustment shall
be required by reason of the taking of such record and any such adjustment previously made
in respect thereof shall be rescinded and annulled.
(h) Form of Warrant after Adjustments. The form of this Warrant need not be changed
because of any adjustments in the Warrant Price or the number and kind of Securities purchasable
upon the exercise of this Warrant.
(i) Escrow of Warrant Stock. If after any property becomes distributable pursuant to
this Section 4 by reason of the taking of any record of the holders of Common Stock, but prior to
the occurrence of the event for which such record is taken, and the Holder exercises this Warrant,
any shares of Common Stock issuable upon exercise by reason of such adjustment shall be deemed the
last shares of Common Stock for which this Warrant is exercised (notwithstanding any other
provision to the contrary herein) and such shares or other property shall be held in escrow for the
Holder by the Issuer to be issued to the Holder upon and to the extent that the event actually
takes place, upon payment of the current Warrant Price. Notwithstanding any other provision to the
contrary herein, if the event for which such record was taken fails to occur or is rescinded, then
such escrowed shares shall be cancelled by the Issuer and escrowed property returned.
5. Notice of Adjustments; Dispute Resolution. Whenever the Warrant Price or Warrant
Share Number shall be adjusted pursuant to Section 4 hereof (for purposes of this Section 5, each
an “adjustment”), the Issuer shall cause its Chief Financial Officer to prepare and execute
a certificate setting forth, in reasonable detail, the event requiring the adjustment, the amount
of the adjustment, the method by which such adjustment was calculated (including a description of
the basis on which the Board made any determination hereunder), and the Warrant Price and Warrant
Share Number after giving effect to such adjustment, and shall cause copies of such certificate to
be delivered to the Holder of this Warrant promptly after each adjustment. Any dispute between the
Issuer and the Holder of this Warrant with respect to the matters set forth in such certificate may
at the option of the Holder of this Warrant be submitted to a national or regional accounting firm
reasonably acceptable to the Issuer and the Holder, provided that the Issuer shall have
three (3) business days after receipt of notice from such Holder of its selection of such firm to
object thereto, in which case such Holder shall select another such firm and the Issuer shall have
no such right of objection. The firm selected by the Holder of this Warrant as provided in the
preceding sentence shall be instructed to deliver a written opinion as to such matters to the
Issuer and such Holder within ten (10) days after submission to it of such dispute. Such opinion
shall be final and binding on the parties hereto. The costs and expenses of the initial accounting
firm shall be paid equally by the Issuer and the Holder and, in the case of an objection by the
Issuer, the costs and expenses of the subsequent accounting firm shall be paid in full by the
Issuer. Notwithstanding the foregoing to the contrary, the Issuer shall cause its transfer agent
to promptly issue to the Holder the number of shares of Warrant Stock that is not disputed in
accordance with the terms of this Section 5.
-13-
6. Fractional Shares. No fractional shares of Warrant Stock will be issued in
connection with any exercise hereof, but in lieu of such fractional shares, the Issuer shall round
the number of shares to be issued upon exercise up to the nearest whole number of shares.
7. Ownership Cap and Exercise Restriction. Notwithstanding anything to the contrary
set forth in this Warrant, at no time may a Holder of this Warrant exercise this Warrant if the
number of shares of Common Stock to be issued pursuant to such exercise would exceed, when
aggregated with all other shares of Common Stock owned by such Holder and its affiliates at such
time, the number of shares of Common Stock which would result in such Holder and its affiliates
beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the
rules thereunder) in excess of 4.99% of the then issued and outstanding shares of Common Stock;
provided, however, that upon a holder of this Warrant providing the Issuer with
sixty-one (61) days notice (pursuant to Section 13 hereof) (the “Waiver Notice”) that such
Holder would like to waive this Section 7 with regard to any or all shares of Common Stock issuable
upon exercise of this Warrant, this Section 7 will be of no force or effect with regard to all or a
portion of the Warrant referenced in the Waiver Notice; provided, further, that
this provision shall be of no further force or effect during the sixty-one (61) days immediately
preceding the expiration of the term of this Warrant.
8. Registration Rights. The Holder of this Warrant is entitled to the benefit of
certain registration rights with respect to the shares of Warrant Stock issuable upon the exercise
of this Warrant pursuant to that certain Registration Rights Agreement, of even date herewith, by
and among the Issuer and Persons listed on Schedule I thereto (the “Registration Rights
Agreement”) and the registration rights with respect to the shares of Warrant Stock issuable
upon the exercise of this Warrant by any subsequent Holder may only be assigned in accordance with
the terms and provisions of the Registrations Rights Agreement.
9. Definitions. For the purposes of this Warrant, the following terms have the
following meanings:
“Additional Shares of Common Stock” means all shares of Common Stock issued by
the Issuer after the Original Issue Date, and all shares of Other Common, if any, issued by
the Issuer after the Original Issue Date, except: (i) securities issued (other than for
cash) in connection with a merger, acquisition, or consolidation, (ii) securities issued
pursuant to the conversion or exercise of convertible or exercisable securities issued or
outstanding on or prior to the Original Issue Date (so long as the conversion or exercise
price in such securities are not amended to lower such price and/or adversely affect the
Holders), (iii) the Warrant Stock, (iv) securities issued in connection with bona fide
strategic license agreements or other partnering arrangements so long as such issuances are
not for the purpose of raising capital, (v) Common Stock issued or the issuance or grants of
options to purchase Common Stock pursuant to the Issuer’s stock option plans and employee
stock purchase plans outstanding as they exist on the date of the Purchase Agreement, (vi)
securities issued as payment of dividends on the Series D Convertible Preferred Stock issued
pursuant to the Purchase Agreement, and (vii) any warrants issued to the placement agent and
its designees for the transactions contemplated by the Purchase Agreement.
-14-
“Board” shall mean the Board of Directors of the Issuer.
“Capital Stock” means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated) corporate stock,
including, without limitation, shares of preferred or preference stock, (ii) all partnership
interests (whether general or limited) in any Person which is a partnership, (iii) all
membership interests or limited liability company interests in any limited liability
company, and (iv) all equity or ownership interests in any Person of any other type.
“Certificate of Incorporation” means the Certificate of Incorporation of the
Issuer as in effect on the Original Issue Date, and as hereafter from time to time amended,
modified, supplemented or restated in accordance with the terms hereof and thereof and
pursuant to applicable law.
“Common Stock” means the Class A Common Stock, $0.01 par value per share, of
the Issuer and any other Capital Stock into which such stock may hereafter be changed.
“Common Stock Equivalent” means any Convertible Security (including the Class B
Common Stock) or warrant, option or other right to subscribe for or purchase any Additional
Shares of Common Stock or any Convertible Security.
“Convertible Securities” means evidences of Indebtedness, shares of Capital
Stock or other Securities which are or may be at any time convertible into or exchangeable
for Additional Shares of Common Stock. The term “Convertible Security” means one of the
Convertible Securities.
“Governmental Authority” means any governmental, regulatory or self-regulatory
entity, department, body, official, authority, commission, board, agency or instrumentality,
whether federal, state or local, and whether domestic or foreign.
“Holders” mean the Persons who shall from time to time own any Warrant. The
term “Holder” means one of the Holders.
“Independent Appraiser” means a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial statements of the
Issuer) that is regularly engaged in the business of appraising the Capital Stock or assets
of corporations or other entities as going concerns, and which is not affiliated with either
the Issuer or the Holder of any Warrant.
“Issuer” means Advanced Environmental Recycling Technologies, Inc., a Delaware
corporation, and its successors.
“Majority Holders” means at any time the Holders of Warrants exercisable for a
majority of the shares of Warrant Stock issuable under the Warrants at the time outstanding.
-15-
“Nasdaq” means the Nasdaq Capital Market.
“Original Issue Date” means October 29, 2007.
“OTC Bulletin Board” means the over-the-counter electronic bulletin board.
“Other Common” means any other Capital Stock of the Issuer of any class which
shall be authorized at any time after the date of this Warrant (other than Common Stock) and
which shall have the right to participate in the distribution of earnings and assets of the
Issuer without limitation as to amount.
“Outstanding Common Stock” means, at any given time, the aggregate amount of
outstanding shares of Common Stock, assuming full exercise, conversion or exchange (as
applicable) of all options, warrants and other Securities which are convertible into or
exercisable or exchangeable for, and any right to subscribe for, shares of Common Stock that
are outstanding at such time.
“Person” means an individual, corporation, limited liability company,
partnership, joint stock company, trust, unincorporated organization, joint venture,
Governmental Authority or other entity of whatever nature.
“Per Share Market Value” means on any particular date (a) the closing bid price
per share of the Common Stock on such date on Nasdaq or another registered national stock
exchange on which the Common Stock is then listed, or if there is no such price on such
date, then the closing bid price on such exchange or quotation system on the date nearest
preceding such date, or (b) if the Common Stock is not listed then on Nasdaq or any
registered national stock exchange, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the OTC Bulletin Board or in the National Quotation
Bureau Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the Common Stock is not
then reported by the OTC Bulletin Board or the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions of reporting prices), then the
average of the “Pink Sheet” quotes for the five days preceding such date of determination,
or (d) if the Common Stock is not then publicly traded the fair market value of a share of
Common Stock as determined by an Independent Appraiser selected in good faith by the
Majority Holders; provided, however, that the Issuer, after receipt of the
determination by such Independent Appraiser, shall have the right to select an additional
Independent Appraiser, in which case, the fair market value shall be equal to the average of
the determinations by each such Independent Appraiser; and provided, further
that all determinations of the Per Share Market Value shall be appropriately adjusted for
any stock dividends, stock splits or other similar transactions during such period. The
determination of fair market value by an Independent Appraiser shall be based upon the fair
market value of the Issuer determined on a going concern basis as between a willing buyer
and a willing seller and taking into account all relevant factors determinative of value,
and shall be final and binding on all parties. In determining the fair market value of any
shares of Common Stock, no consideration shall
-16-
be given to any restrictions on transfer of the Common Stock imposed by agreement or by
federal or state securities laws, or to the existence or absence of, or any limitations on,
voting rights.
“Purchase Agreement” means the Series D Convertible Preferred Stock Purchase
Agreement dated as of October 29, 2007, among the Issuer and the Purchasers.
“Purchasers” means the purchasers of the Series D Convertible Preferred Stock
and the Warrants issued by the Issuer pursuant to the Purchase Agreement.
“Securities” means any debt or equity securities of the Issuer, whether now or
hereafter authorized, any instrument convertible into or exchangeable for Securities or a
Security, and any option, warrant or other right to purchase or acquire any Security.
“Security” means one of the Securities.
“Securities Act” means the Securities Act of 1933, as amended, or any similar
federal statute then in effect.
“Subsidiary” means any corporation at least 50% of whose outstanding Voting
Stock shall at the time be owned directly or indirectly by the Issuer or by one or more of
its Subsidiaries, or by the Issuer and one or more of its Subsidiaries.
“Term” has the meaning specified in Section 1 hereof.
“Trading Day” means (a) a day on which the Common Stock is traded on Nasdaq, or
(b) if the Common Stock is not listed on Nasdaq, a day on which the Common Stock is traded
on any other registered national stock exchange, or (c) if the Common Stock is not traded on
any other registered national stock exchange, a day on which the Common Stock is traded on
the OTC Bulletin Board, or (d) if the Common Stock is not traded on the OTC Bulletin Board,
a day on which the Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency succeeding its
functions of reporting prices); provided, however, that in the event that
the Common Stock is not listed or quoted as set forth in (a), (b), (c) or (d) hereof, then
Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal
holiday or a day on which banking institutions in the State of New York are authorized or
required by law or other government action to close.
“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the American Stock Exchange,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board.
“Voting Stock” means, as applied to the Capital Stock of any corporation,
Capital Stock of any class or classes (however designated) having ordinary voting power for
the election of a majority of the members of the Board (or other governing body) of such
corporation, other than Capital Stock having such power only by reason of the happening
of a contingency.
-17-
“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed or quoted as
reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to
4:02 p.m. (New York City time); (b) if the OTC Bulletin Board is not a Trading Market, the
volume weighted average price of the Common Stock for such date (or the nearest preceding
date) on the OTC Bulletin Board; (c) if the Common Stock is not then quoted for trading on
the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink
Sheets” published by Pink Sheets, LLC (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of the Common Stock so
reported; or (d) in all other cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by the Majority Holders and
reasonably acceptable to the Company.
“Warrants” means the Warrants issued and sold pursuant to the Purchase
Agreement, including, without limitation, this Warrant, and any other warrants of like tenor
issued in substitution or exchange for any thereof pursuant to the provisions of Section
2(c), 2(d) or 2(e) hereof or of any of such other Warrants.
“Warrant Price” initially means $1.38, as such price may be adjusted from time
to time as shall result from the adjustments specified in this Warrant, including Section 4
hereto.
“Warrant Share Number” means at any time the aggregate number of shares of
Warrant Stock which may at such time be purchased upon exercise of this Warrant, after
giving effect to all prior adjustments and increases to such number made or required to be
made under the terms hereof.
“Warrant Stock” means Common Stock issuable upon exercise of any Warrant or
Warrants or otherwise issuable pursuant to any Warrant or Warrants.
10. Other Notices. In case at any time:
| (A) | the Issuer shall make any distributions to the holders of Common Stock; or | ||
| (B) | the Issuer shall authorize the granting to all holders of its Common Stock of rights to subscribe for or purchase any shares of Capital Stock of any class or other rights; or | ||
| (C) | there shall be any reclassification of the Capital Stock of the Issuer; or |
-18-
| (D) | there shall be any capital reorganization by the Issuer; or | ||
| (E) | there shall be any (i) consolidation or merger involving the Issuer or (ii) sale, transfer or other disposition of all or substantially all of the Issuer’s property, assets or business (except a merger or other reorganization in which the Issuer shall be the surviving corporation and its shares of Capital Stock shall continue to be outstanding and unchanged and except a consolidation, merger, sale, transfer or other disposition involving a wholly-owned Subsidiary); or | ||
| (F) | there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Issuer or any partial liquidation of the Issuer or distribution to holders of Common Stock; |
then, in each of such cases, the Issuer shall give written notice to the Holder of the date on
which (i) the books of the Issuer shall close or a record shall be taken for such dividend,
distribution or subscription rights or (ii) such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock of record shall
participate in such dividend, distribution or subscription rights, or shall be entitled to exchange
their certificates for Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, disposition, dissolution, liquidation or
winding-up, as the case may be. Such notice shall be given at least twenty (20) days prior to the
action in question and not less than ten (10) days prior to the record date or the date on which
the Issuer’s transfer books are closed in respect thereto. This Warrant entitles the Holder to
receive copies of all financial and other information distributed or required to be distributed to
the holders of the Common Stock.
11. Amendment and Waiver. Any term, covenant, agreement or condition in this Warrant
may be amended, or compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), by a written instrument or written instruments executed
by the Issuer and at least sixty-six and two-thirds percent (662/3%) of the Warrants then
outstanding; provided, however, that no such amendment or waiver shall reduce the
Warrant Share Number, increase the Warrant Price, shorten the period during which this Warrant may
be exercised or modify any provision of this Section 11 without the consent of the Holder of this
Warrant. No consideration shall be offered or paid to any person to amend or consent to a waiver
or modification of any provision of this Warrant unless the same consideration is also offered to
all holders of the Warrants.
12. Governing Law; Jurisdiction. This Warrant shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving effect to any of the
conflicts of law principles which would result in the application of the substantive law of another
jurisdiction. This Warrant shall not be interpreted or construed with any presumption against the
party causing this Warrant to be drafted. The Issuer and the Holder agree that venue for any
-19-
dispute arising under this Warrant will lie exclusively in the state or federal courts located
in New York County, New York, and the parties irrevocably waive any right to raise forum non
conveniens or any other argument that New York is not the proper venue. The Issuer and the Holder
irrevocably consent to personal jurisdiction in the state and federal courts of the state of New
York. The Issuer and the Holder consent to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for notices to it under
this Warrant and agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing in this Section 12 shall affect or limit any right to serve process in
any other manner permitted by law. The Issuer and the Holder hereby agree that the prevailing
party in any suit, action or proceeding arising out of or relating to this Warrant or the Purchase
Agreement, shall be entitled to reimbursement for reasonable legal fees from the non-prevailing
party. The parties hereby waive all rights to a trial by jury.
13. Notices. Any notice, demand, request, waiver or other communication required or
permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery
by telecopy, e-mail or facsimile at the address or number designated below (if delivered on a
business day during normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second business day following the
date of mailing by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for such communications
shall be:
If to the Issuer:
|
Advanced Environmental Recycling Technologies, Inc. | |
| 000 X Xxxxxxxxx Xxxxxx | ||
| Post Office Box 1237 | ||
| Springdale, Arkansas 72765 | ||
| Attention: Chief Executive Officer | ||
| Tel. No.: (000) 000-0000 | ||
| Fax No.: (000) 000-0000 | ||
with copies (which copies shall not constitute notice) to: |
Akin Gump Xxxxxxx Xxxxx & Xxxx LLP | |
| 000 Xxxxxxx Xxxxxx | ||
| Xxxxx 0000 | ||
| Xxx Xxxxxxx, Xxxxx 00000-0000 | ||
| Attention: J. Xxxxxxx Xxxx | ||
| Tel. No.: (000) 000-0000 | ||
| Fax No.: (000) 000-0000 | ||
If to any Holder:
|
At the address of such Holder set forth on Exhibit A to the Purchase Agreement or as specified in writing by such Holder with copies to: |
-20-
with copies (which copies shall not constitute notice) to: |
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP | |
| 0000 Xxxxxx xx xxx Xxxxxxxx | ||
| Xxx Xxxx, Xxx Xxxx 00000 | ||
| Attention: Xxxxxxxxxxx X. Xxxxxxx | ||
| Tel. No.: (000) 000-0000 | ||
| Fax No.: (000) 000-0000 |
Any party hereto may from time to time change its address for notices by giving written notice
of such changed address to the other party hereto.
14. Warrant Agent. The Issuer may, by written notice to each Holder of this Warrant,
appoint an agent having an office in New York, New York for the purpose of issuing shares of
Warrant Stock on the exercise of this Warrant pursuant to subsection (b) of Section 2 hereof,
exchanging this Warrant pursuant to subsection (d) of Section 2 hereof or replacing this Warrant
pursuant to subsection (d) of Section 3 hereof, 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.
15. Remedies. The Issuer stipulates that the remedies at law of the Holder of this
Warrant in the event of any default or threatened default by the Issuer in the performance of or
compliance with any of the terms of this Warrant are not and will not be adequate and that, to the
fullest extent permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction against a violation of
any of the terms hereof or otherwise.
16. Successors and Assigns. This Warrant and the rights evidenced hereby shall inure
to the benefit of and be binding upon the successors and assigns of the Issuer, the Holder hereof
and (to the extent provided herein) the Holders of Warrant Stock issued pursuant hereto, and shall
be enforceable by any such Holder or Holder of Warrant Stock.
17. Modification and Severability. If, in any action before any court or agency
legally empowered to enforce any provision contained herein, any provision hereof is found to be
unenforceable, then such provision shall be deemed modified to the extent necessary to make it
enforceable by such court or agency. If any such provision is not enforceable as set forth in the
preceding sentence, the unenforceability of such provision shall not affect the other provisions of
this Warrant, but this Warrant shall be construed as if such unenforceable provision had never been
contained herein.
18. Headings. The headings of the Sections of this Warrant are for convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-21-
IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day and year first above
written.
| ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC. |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
-22-
EXERCISE FORM
WARRANT
WARRANT
ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC.
The undersigned , pursuant to the provisions of the within Warrant, hereby elects to
purchase shares of Common Stock of Advanced Environmental Recycling Technologies, Inc.
covered by the within Warrant.
Dated:
|
|
Signature |
|
|||||||
| Address | ||||||||||
Number of shares of Common Stock beneficially owned or deemed beneficially owned by the Holder on
the date of Exercise:
The undersigned is an “accredited investor” as defined in Regulation D under the Securities Act of
1933, as amended.
The undersigned intends that payment of the Warrant Price shall be made as (check one):
Cash Exercise
Cashless Exercise
If the Holder has elected a Cash Exercise, the Holder shall pay the sum of $ by certified
or official bank check (or via wire transfer) to the Issuer in accordance with the terms of the
Warrant.
If the Holder has elected a Cashless Exercise, a certificate shall be issued to the Holder for the
number of shares equal to the whole number portion of the product of the calculation set forth
below, which is . The Issuer shall pay a cash adjustment in respect of the fractional
portion of the product of the calculation set forth below in an amount equal to the product of the
fractional portion of such product and the Per Share Market Value on the date of exercise, which
product is .
| X = | Y - (A)(Y) | |||
| B |
Where:
The number of shares of Common Stock to be issued to the Holder (“X”).
The number of shares of Common Stock purchasable upon exercise of all of the Warrant or, if only a
portion of the Warrant is being exercised, the portion of the Warrant being exercised
-23-
(“Y”).
The Warrant Price (“A”).
The Per Share Market Value of one share of Common Stock (“B”).
ASSIGNMENT
FOR VALUE RECEIVED, hereby sells, assigns and transfers unto
the within Warrant and all rights evidenced thereby and does irrevocably constitute and appoint
, attorney, to transfer the said Warrant on the books of the within named corporation.
Dated: |
|
Signature Address |
|
|||||||
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED,
hereby sells, assigns and transfers unto
the right to purchase
shares of Warrant Stock evidenced by the within Warrant together
with all rights therein, and does irrevocably constitute and appoint , attorney,
to transfer that part of the said Warrant on the books of the within named corporation.
Dated: |
|
Signature Address |
|
|||||||
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-___canceled (or transferred or exchanged) this day of ,
,
shares of Common Stock issued therefor in the name of , Warrant No. W-___issued
for ___shares of Common Stock in the name of .
-24-
