EXHIBIT 5
[Execution Version]
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 ENVIRONMENTAL INDUSTRIES LTD.
Common Stock Purchase Warrant
Representing Right To Purchase Shares of
Common Stock
of
Kafus Environmental Industries Ltd.
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FOR VALUE RECEIVED, KAFUS ENVIRONMENTAL INDUSTRIES LTD., a British Columbia
corporation (the "Company"), hereby certifies that ECT Merchant Investments
Corp., a Delaware corporation (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 of this Warrant, and ending on 5:00 p.m.
(Toronto, Ontario time) on January 31, 2009 (the "Expiration Date"), 487,500
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 U.S. $5.00 (as such price may be adjusted pursuant to
the terms hereof, the "Exercise Price"). This Warrant is 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.
$7,500,000 Convertible Promissory Note (Advancing Credit Facility) dated as of
March 11, 1999 (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
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presentation 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 Issue. 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
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right or 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 Environmental 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 Environmental Industries Ltd.
000-000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X0X0
Attn: Xx. Xxx Xxxxxxxxx
telephone: 000-000-0000
telecopier: 604-685-2426
If to the Holder:
ECT Merchant Investments Corp.
Attn: Xxxx X. Xxxxxxxxx
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
telephone: 000-000-0000
telecopier: 000-000-0000
With copies to:
Enron Capital & Trade Resources Corp.
Attn: Xxxxx Xxxxx
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
telephone: 000-000-0000
telecopier: 000-000-0000
and
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Enron Capital Management
Attn: Xxx Xxxxxx
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
telephone: 000-000-0000
telecopier: 000-000-0000
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 March 11, 1999.
[SEAL] KAFUS ENVIRONMENTAL INDUSTRIES LTD.
Attest: By:
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Name:
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Title:
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[487,500 Share Warrant]
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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