EXHIBIT 10.5
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED
BY SUCH SECURITIES.
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
WARRANT
Warrant No. PICTET1 Original Issue Date: June 8, 2005
FLEXIBLE SOLUTIONS INTERNATIONAL, INC., a Nevada corporation (the
"COMPANY"), hereby certifies that, for value received, PICTET ET CIE, GENEVA or
its registered assigns (the "HOLDER"), is entitled to purchase from the Company
up to a total of 87,400 shares of Common Stock (each such share, a "WARRANT
SHARE" and all such shares, the "WARRANT SHARES"), at any time and from time to
time from and after the Original Issue Date and through and including June 8,
2009 (the "EXPIRATION DATE"), and subject to the following terms and conditions:
1. Definitions. As used in this Warrant, the following terms shall have the
respective definitions set forth in this Section 1. Capitalized terms that are
used and not defined in this Warrant that are defined in the Purchase Agreement
(as defined below) shall have the respective definitions set forth in the
Purchase Agreement.
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
is a federal legal holiday or a day on which banking institutions in the State
of New York or Victoria, British Columbia are authorized or required by law or
other governmental action to close.
"COMMON STOCK" means the common stock of the Company, par value $.001
per share, and any securities into which such common stock may hereafter be
reclassified.
"EXERCISE PRICE" means $4.50, subject to adjustment in accordance with
Section 9.
"FUNDAMENTAL TRANSACTION" means any of the following: (1) the Company
effects any merger or consolidation of the Company with or into another Person,
(2) the Company effects any sale of all or substantially all of its assets in
one or a series of related transactions, (3) any tender offer or exchange offer
(whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, or (4) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property.
"ORIGINAL ISSUE DATE" means the Original Issue Date first set forth on
the first page of this Warrant.
"NEW YORK COURTS" means the state and federal courts sitting in the
City of New York, Borough of Manhattan.
"PURCHASE AGREEMENT" means the Subscription Agreement, dated May 24,
2005, to which the Company and the original Holder are parties.
"TRADING DAY" means (i) a day on which the Common Stock is traded on a
Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock
is not listed on a Trading Market (other than the OTC Bulletin Board), a day on
which the Common Stock is traded in the over-the-counter market, as reported by
the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on any
Trading Market, 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 to its functions
of reporting prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day
shall mean a Business Day.
2. Registration of Warrant. The Company shall register this Warrant upon records
to be maintained by the Company for that purpose (the "WARRANT REGISTER"), in
the name of the record Holder hereof from time to time. The Company may deem and
treat the registered Holder of this Warrant as the absolute owner hereof for the
purpose of any exercise hereof or any distribution to the Holder, and for all
other purposes, absent actual notice to the contrary.
3. Registration of Transfers. The Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed, to the
Company at its address specified herein. Upon any such registration or transfer,
a new Warrant to purchase Common Stock, in substantially the form of this
Warrant (any such new Warrant, a "NEW Warrant"), evidencing the portion of this
Warrant so transferred shall be issued to the transferee and a New Warrant
evidencing the remaining portion of this Warrant not so transferred, if any,
shall be issued to the transferring Holder. The acceptance of the New Warrant by
the transferee thereof shall be deemed the acceptance by such transferee of all
of the rights and obligations of a holder of a Warrant.
4. Exercise and Duration of Warrants. This Warrant shall be exercisable by the
registered Holder at any time and from time to time on or after the Original
Issue Date and through and including the Expiration Date. At 6:30 p.m., New York
City time on the Expiration Date, the portion of this Warrant not exercised
prior thereto shall be and become void and of no value. The Company may not call
or redeem any portion of this Warrant without the prior written consent of the
affected Holder.
5. Delivery of Warrant Shares.
(a) To effect exercises hereunder, the Holder shall not be required to
physically surrender this Warrant unless the aggregate Warrant Shares
represented by this Warrant is being exercised. Upon delivery of the Exercise
Notice (in the form attached hereto) to the Company (with the attached Warrant
Shares Exercise Log) at its address for notice set forth herein and upon payment
of the Exercise Price multiplied by the number of Warrant Shares that the Holder
intends to purchase hereunder, the Company shall promptly (but in no event later
than three Trading Days after the Date of Exercise (as defined herein)) issue
and deliver to the Holder, a certificate for the Warrant Shares issuable upon
such exercise, which, unless otherwise required by the Purchase Agreement, shall
be free of restrictive legends. The Company shall, upon request of the Holder
and subsequent to the date on which a registration statement covering the resale
of the Warrant Shares has been declared effective by the Securities and Exchange
Commission, use its reasonable best efforts to deliver Warrant Shares hereunder
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions, if available, provided, that,
the Company may, but will not be required to, change its procedures now in
effect. A "DATE OF EXERCISE" means the date on which the Holder shall have
delivered to the Company: (i) the Exercise Notice (with the Warrant Exercise Log
attached to it), appropriately completed and duly signed and (ii) if such Holder
is not utilizing the cashless exercise provisions set forth in this Warrant,
payment of the Exercise Price for the number of Warrant Shares so indicated by
the Holder to be purchased.
(b) If by the third Trading Day after a Date of Exercise the Company fails to
deliver the required number of Warrant Shares in the manner required pursuant to
Section 5(a), then the Holder will have the right to rescind such exercise.
(c) If by the seventh Trading Day after a Date of Exercise the Company fails to
deliver the required number of Warrant Shares in the manner required pursuant to
Section 5(a), and if after such seventh Trading Day and prior to the receipt of
such Warrant Shares, the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares which the Holder anticipated receiving upon such
exercise (a "BUY-IN"), then the Company 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 Warrant Shares that the Company
was required to deliver to the Holder in connection with the exercise at issue
by (B) the closing bid price of the Common Stock on the Date of Exercise and (2)
at the option of the Holder, either reinstate the portion of the Warrant and
equivalent number of Warrant Shares 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 Company timely complied with its exercise and delivery
obligations hereunder. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In.
(d) If this Warrant is exercised in accordance with Section 10(a), upon receipt
of immediately available funds from the Holder, the Company's obligations to
issue and deliver Warrant Shares in accordance with the terms hereof are
absolute and unconditional, irrespective of any action or inaction by the Holder
to enforce the same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action to enforce the
same, or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any obligation to
the Company or any violation or alleged violation of law by the Holder or any
other Person, and irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in connection with the
issuance of Warrant Shares. Nothing herein shall limit a Xxxxxx'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 Company's failure to timely deliver
certificates representing Warrant Shares upon exercise of the Warrant as
required pursuant to the terms hereof.
6. Charges, Taxes and Expenses. Issuance and delivery of Warrant Shares upon
exercise of this Warrant shall be made without charge to the Holder for any
issue or transfer tax, withholding tax, transfer agent fee or other incidental
tax or expense in respect of the issuance of such certificates, all of which
taxes and expenses shall be paid by the Company; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the registration of any certificates for Warrant Shares
or Warrants in a name other than that of the Holder. The Holder shall be
responsible for all other tax liability that may arise as a result of holding or
transferring this Warrant or receiving Warrant Shares upon exercise hereof.
7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity (which shall not include a surety bond), if requested.
Applicants for a New Warrant under such circumstances shall also comply with
such other reasonable regulations and procedures and pay such other reasonable
third-party costs as the Company may prescribe. If a New Warrant is requested as
a result of a mutilation of this Warrant, then the Holder shall deliver such
mutilated Warrant to the Company as a condition precedent to the Company's
obligation to issue the New Warrant.
8. Reservation of Warrant Shares. The Company covenants that it will at all
times reserve and keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant as herein
provided, the number of Warrant Shares which are then issuable and deliverable
upon the exercise of this entire Warrant, free from preemptive rights or any
other contingent purchase rights of Persons other than the Holder (taking into
account the adjustments and restrictions of Section 9). The Company covenants
that all Warrant Shares so issuable and deliverable shall, upon issuance and the
payment of the applicable Exercise Price in accordance with the terms hereof, be
duly and validly authorized, issued and fully paid and nonassessable.
9. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable
upon exercise of this Warrant are subject to adjustment from time to time as set
forth in this Section 9.
(a) Stock Dividends and Splits. If the Company, at any time while this Warrant
is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes
a distribution on any class of capital stock that is payable in shares of Common
Stock, (ii) subdivides outstanding shares of Common Stock into a larger number
of shares, or (iii) combines outstanding shares of Common Stock into a smaller
number of shares, then in each such case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding immediately before such event and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such
event. Any adjustment made pursuant to clause (i) of this paragraph shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution, and any
adjustment pursuant to clause (ii) or (iii) of this paragraph shall become
effective immediately after the effective date of such subdivision or
combination.
(b) Fundamental Transactions. If, at any time while this Warrant is outstanding
there is a Fundamental Transaction, then the Holder shall have the right
thereafter to receive, upon exercise of this Warrant, the same amount and kind
of securities, cash or property as it would have been entitled to receive upon
the occurrence of such Fundamental Transaction if it had been, immediately prior
to such Fundamental Transaction, the holder of the number of Warrant Shares then
issuable upon exercise in full of this Warrant (the "ALTERNATE CONSIDERATION").
For purposes of any such exercise, the determination of the Exercise Price shall
be appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such Fundamental
Transaction. At the Holder's option and request, any successor to the Company or
surviving entity in such Fundamental Transaction shall, either (1) issue to the
Holder a new warrant substantially in the form of this Warrant and consistent
with the foregoing provisions and evidencing the Holder's right to purchase the
Alternate Consideration for the aggregate Exercise Price upon exercise thereof,
or (2) purchase the Warrant from the Holder for a purchase price, payable in
cash within five Trading Days after such request (or, if later, on the effective
date of the Fundamental Transaction), equal to the Black Scholes value of the
remaining unexercised portion of this Warrant on the date of such request. The
terms of any agreement pursuant to which a Fundamental Transaction is effected
shall include terms requiring any such successor or surviving entity to comply
with the provisions of this paragraph (c) and insuring that the Warrant (or any
such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.
(c) Subsequent Equity Sales.
(i) If the Company or any subsidiary thereof, as applicable, shall at any time
issue shares of Common Stock or Common Stock Equivalents entitling any Person to
acquire shares of Common Stock, at a price per share less than the Threshold
Price (if the holder of the Common Stock or Common Stock Equivalent so issued
shall at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights issued in connection with such issuance, be
entitled to receive shares of Common Stock at a price less than the Threshold
Price, such issuance shall be deemed to have occurred for less than the
Threshold Price), then, (A) if such issuance occurs prior to the one-year
anniversary of the Closing Date, the Exercise Price shall be reduced to equal
such lower price, and (B) if such issuance occurs subsequent to the one year
anniversary of the Closing Date, the Exercise Price shall be multiplied by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such shares of Common Stock or
such Common Stock Equivalents plus the number of shares of Common Stock which
the offering price for such shares of Common Stock or Common Stock Equivalents
would purchase at the closing price of the Common Stock on the Closing Date, and
the denominator of which shall be the sum of the number of shares of Common
Stock outstanding immediately prior to such issuance plus the number of shares
of Common Stock so issued or issuable. Such adjustment shall be made whenever
such Common Stock or Common Stock Equivalents are issued. The Company shall
notify the Holder in writing, no later than the Trading Day following the
issuance of any Common Stock or Common Stock Equivalent subject to this section,
indicating therein the applicable issuance price, or of applicable reset price,
exchange price, conversion price and other pricing terms. If prior to the
one-year anniversary of the Closing Date, the Company enters into any
understanding or agreement to issue or sell securities, or otherwise engages in
discussions with any Person in connection with a potential issuance or sale of
securities that would trigger an adjustment to the Exercise Price, then
notwithstanding the fact that such actual issuance of Common Stock or Common
Stock Equivalents occurs after the one-year anniversary of the Closing Date,
such issuance will be treated as if it had occurred prior to the one-year
anniversary of the Closing Date.
(ii) For purposes of this subsection 9(c), the following subsections (c)(ii)(l)
to (c)(ii)(6) shall also be applicable:
(1) Issuance of Rights or Options. In case at any time the Company shall in any
manner grant (directly and not by assumption in a merger or otherwise) any
warrants or other rights to subscribe for or to purchase, or any options for the
purchase of, Common Stock or any stock or security convertible into or
exchangeable for Common Stock (such warrants, rights or options being called
"OPTIONS" and such convertible or exchangeable stock or securities being called
"CONVERTIBLE SECURITIES") whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately exercisable, and the
price per share for which Common Stock is issuable upon the exercise of such
Options or upon the conversion or exchange of such Convertible Securities
(determined by dividing (i) the sum (which sum shall constitute the applicable
consideration) of (x) the total amount, if any, received or receivable by the
Company as consideration for the granting of such Options, plus (y) the
aggregate amount of additional consideration payable to the Company upon the
exercise of all such Options, plus (z), in the case of such Options which relate
to Convertible Securities, the aggregate amount of additional consideration, if
any, payable upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the exercise of
such Options) shall be less than the Threshold Price in effect immediately prior
to the time of the granting of such Options, then the total number of shares of
Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of the total amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to have been issued for such price per
share as of the date of granting of such Options or the issuance of such
Convertible Securities and thereafter shall be deemed to be outstanding for
purposes of adjusting the Exercise Price. Except as otherwise provided in
subsection 9(c)(ii)(3), no adjustment of the Exercise Price shall be made upon
the actual issue of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
(2) Issuance of Convertible Securities. In case the Company shall in any manner
issue (directly and not by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert any
such Convertible Securities are immediately exercisable, and the price per share
for which Common Stock is issuable upon such conversion or exchange (determined
by dividing (i) the sum (which sum shall constitute the applicable
consideration) of (x) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities, plus (y) the
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof, by (ii) the total number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities) shall be less than the Threshold Price in effect immediately prior
to the time of such issue or sale, then the total maximum number of shares of
Common Stock issuable upon conversion or exchange of all such Convertible
Securities shall be deemed to have been issued for such price per share as of
the date of the issue or sale of such Convertible Securities and thereafter
shall be deemed to be outstanding for purposes of adjusting the Exercise Price,
provided that (a) except as otherwise provided in subsection 9(c)(ii)(3), no
adjustment of the Exercise Price shall be made upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible Securities and (b)
no further adjustment of the Exercise Price shall be made by reason of the issue
or sale of Convertible Securities upon exercise of any Options to purchase any
such Convertible Securities for which adjustments of the Exercise Price have
been made pursuant to the other provisions of subsection 9(c).
(3) Change in Option Price or Conversion Rate. Upon the happening of any of the
following events, namely, if the purchase price provided for in any Option
referred to in subsection 9(c)(ii)(l) hereof, the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities
referred to in subsections 9(c)(ii)(l) or 9(c)(ii)(2), or the rate at which
Convertible Securities referred to in subsections 9(c)(ii)(l) or 9(c)(ii)(2) are
convertible into or exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Exercise Price in effect at the time
of such event shall forthwith be readjusted to the Exercise Price which would
have been in effect at such time had such Options or Convertible Securities
still outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time initially
granted, issued or sold. On the termination of any Option for which any
adjustment was made pursuant to this subsection 9(c) or any right to convert or
exchange Convertible Securities for which any adjustment was made pursuant to
this subsection 9(c) (including without limitation upon the redemption or
purchase for consideration of such Convertible Securities by the Company), the
Exercise Price then in effect hereunder shall forthwith be changed to the
Exercise Price which would have been in effect at the time of such termination
had such Option or Convertible Securities, to the extent outstanding immediately
prior to such termination, never been issued.
(4) Stock Dividends. Subject to the provisions of this Section 9(c), in case the
Company shall declare a dividend or make any other distribution upon any stock
of the Company (other than the Common Stock) payable in Common Stock, Options or
Convertible Securities, then any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.
(5) Consideration for Stock. In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for cash, the consideration
received therefor shall be deemed to be the net amount received by the Company
therefor, after deduction therefrom of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in connection
therewith. In case any shares of Common Stock, Options or Convertible Securities
shall be issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company shall be deemed to be the
fair value of such consideration as determined in good faith by the Board of
Directors of the Company, after deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in
connection therewith. In case any Options shall be issued in connection with the
issue and sale of other securities of the Company, together comprising one
integral transaction in which no specific consideration is allocated to such
Options by the parties thereto, such Options shall be deemed to have been issued
for such consideration as determined in good faith by the Board of Directors of
the Company. If Common Stock, Options or Convertible Securities shall be issued
or sold by the Company and, in connection therewith, other Options or
Convertible Securities (the "ADDITIONAL RIGHTS") are issued, then the
consideration received or deemed to be received by the Company shall be reduced
by the fair market value of the Additional Rights (as determined using the
Black-Scholes option pricing model or another method mutually agreed to by the
Company and the Holder). The Board of Directors of the Company shall respond
promptly, in writing, to an inquiry by the Holders as to the fair market value
of the Additional Rights. In the event that the Board of Directors of the
Company and the Holders are unable to agree upon the fair market value of the
Additional Rights, the Company and the Holders shall jointly select an
appraiser, who is experienced in such matters. The decision of such appraiser
shall be final and conclusive, and the cost of such appraiser shall be borne
evenly by the Company and the Holder.
(6) Record Date. In case the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them (i) to receive a dividend or
other distribution payable in Common Stock, Options or Convertible Securities or
(ii) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
(iii) Notwithstanding the foregoing, no adjustment will be made under this
paragraph (c) in respect of: (i) the issuance of securities upon the exercise or
conversion of any Common Stock or Common Stock Equivalents issued by the Company
prior to the date hereof (but will apply to any amendments, modifications and
reissuances thereof), (ii) the grant of options, warrants or other Common Stock
Equivalents under any duly authorized Company stock option, restricted stock
plan or stock purchase plan whether now existing or hereafter approved by the
Company and its stockholders in the future (but not as to any amendments or
other modifications to the amount of Common Stock issuable thereunder, the terms
set forth therein, or the exercise price set forth therein) and the issuance of
Common Stock in respect thereof, or (iii) up to an aggregate of [20% of the
outstanding Common Stock prior to such acquisition] shares of Common Stock
issued as consideration for the acquisition of another company or business in
which the shareholders of the Company do not have an ownership interest, which
acquisition has been approved by the Board of Directors of the Company.
(d) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise
Price pursuant to this Section 9, the number of Warrant Shares that may be
purchased upon exercise of this Warrant shall be increased or decreased
proportionately, so that after such adjustment the aggregate Exercise Price
payable hereunder for the adjusted number of Warrant Shares shall be the same as
the aggregate Exercise Price in effect immediately prior to such adjustment.
(e) Calculations. All calculations under this Section 9 shall be made to the
nearest cent or the nearest 1/100th of a share, as applicable. The number of
shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock.
(f) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to
this Section 9, the Company at its expense will promptly compute such adjustment
in accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment, including a statement of the adjusted Exercise Price and
adjusted number or type of Warrant Shares or other securities issuable upon
exercise of this Warrant (as applicable), describing the transactions giving
rise to such adjustments and showing in detail the facts upon which such
adjustment is based. Upon written request, the Company will promptly deliver a
copy of each such certificate to the Holder and to the Company's Transfer Agent.
(g) Notice of Corporate Events. If the Company (i) declares a dividend or any
other distribution of cash, securities or other property in respect of its
Common Stock, including without limitation any granting of rights or warrants to
subscribe for or purchase any capital stock of the Company or any Subsidiary,
(ii) authorizes or approves, enters into any agreement contemplating or solicits
stockholder approval for any Fundamental Transaction or (iii) authorizes the
voluntary dissolution, liquidation or winding up of the affairs of the Company,
then the Company shall deliver to the Holder a notice describing the material
terms and conditions of such transaction (but only to the extent such disclosure
would not result in the dissemination of material, non-public information to the
Holder) at least 10 calendar days prior to the applicable record or effective
date on which a Person would need to hold Common Stock in order to participate
in or vote with respect to such transaction, and the Company will take all steps
reasonably necessary in order to insure that the Holder is given the practical
opportunity to exercise this Warrant prior to such time so as to participate in
or vote with respect to such transaction; provided, however, that the failure to
deliver such notice or any defect therein shall not affect the validity of the
corporate action required to be described in such notice.
10. Payment of Exercise Price. The Holder may pay the Exercise Price in one of
the following manners:
(a) Cash Exercise. The Holder may deliver immediately available funds; or
(b) Cashless Exercise. After the earlier to occur of (i) 90 days following the
Closing Date and (ii) the Effectiveness Date (as defined in the Registration
Rights Agreement) of the Registration Statement, if an Exercise Notice is
delivered at a time when a registration statement permitting the Holder to
resell the Warrant Shares is not then effective or the prospectus forming a part
thereof is not then available to the Holder for the resale of the Warrant
Shares, then the Holder may notify the Company in an Exercise Notice of its
election to utilize cashless exercise, in which event the Company shall issue to
the Holder the number of Warrant Shares determined as follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be
issued to the Holder. Y = the number of
Warrant Shares with respect to which this
Warrant is being exercised.
A = the average of the closing prices for
the five Trading Days immediately prior to
(but not including) the Exercise Date.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have commenced, on
the date this Warrant was originally issued.
11. Limitations on Exercise.
(a) Notwithstanding anything to the contrary contained herein, the number of
Warrant Shares that may be acquired by the Holder upon any exercise of this
Warrant (or otherwise in respect hereof) shall be limited to the extent
necessary to insure that, following such exercise (or other issuance), the total
number of shares of Common Stock then beneficially owned by such Holder and its
Affiliates and any other Persons whose beneficial ownership of Common Stock
would be aggregated with the Holder's for purposes of Section 13(d) of the
Exchange Act, does not exceed 4.999% of the total number of issued and
outstanding shares of Common Stock (including for such purpose the shares of
Common Stock issuable upon such exercise). For such purposes, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. This provision shall
not restrict the number of shares of Common Stock which a Holder may receive or
beneficially own in order to determine the amount of securities or other
consideration that such Holder may receive in the event of a Fundamental
Transaction as contemplated in Section 9 of this Warrant. By written notice to
the Company, an Investor may waive the provisions of this Section 11(a) as to
itself but any such waiver will not be effective until the 61st day after
delivery thereof and such waiver shall have no effect on any other Investor.
(b) Notwithstanding anything to the contrary contained herein, the number of
Warrant Shares that may be acquired by the Holder upon any exercise of this
Warrant (or otherwise in respect hereof) shall be limited to the extent
necessary to insure that, following such exercise (or other issuance), the total
number of shares of Common Stock then beneficially owned by such Holder and its
Affiliates and any other Persons whose beneficial ownership of Common Stock
would be aggregated with the Holder's for purposes of Section 13(d) of the
Exchange Act, does not exceed 9.999% of the total number of issued and
outstanding shares of Common Stock (including for such purpose the shares of
Common Stock issuable upon such exercise). For such purposes, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. This provision shall
not restrict the number of shares of Common Stock which a Holder may receive or
beneficially own in order to determine the amount of securities or other
consideration that such Holder may receive in the event of a Fundamental
Transaction as contemplated in Section 9 of this Warrant. This restriction may
not be waived.
(c) Notwithstanding anything to the contrary in this Warrant, if the Company has
not previously obtained Stockholder Approval, then the Company may not issue
shares of Common Stock in excess of the Issuable Maximum upon exercises of this
Warrant. The "Issuable Maximum" means, as of any date, a number of shares of
Common Stock equal to [20% of the issued and outstanding Common Stock]. Each
Investor shall be entitled to a portion of the Issuable Maximum equal to the
quotient obtained by dividing: (x) the number of Shares issued and sold to such
Investor on the Closing Date plus any Additional Shares issued to such Investor
thereafter by (y) the aggregate number of Shares issued and sold by the Company
on the Closing Date plus any Additional Shares issued to any Investor
thereafter. If any Investor shall no longer hold Warrants, then such Investor's
remaining portion of the Issuable Maximum shall be allocated pro-rata among the
remaining Investors, giving effect to the Company's desire to allocate this
limitation among the class of securities known as the Warrants. If on any
Exercise Date, or at such time as an Investor shall notify the Company that the
condition in (A) following this clause shall be in effect: (A) the aggregate
number of shares of Common Stock that would then be issuable upon exercise in
full of all then outstanding Warrants would exceed the Issuable Maximum on such
date, and (B) the Company shall not have previously obtained the vote of
shareholders, as may be required by the applicable rules and regulations of the
American Stock Exchange (or any successor entity or any other Trading Market on
which the Company's securities then trade), applicable to approve the issuance
of shares of Common Stock in excess of the Issuable Maximum pursuant to the
terms hereof (the "STOCKHOLDER APPROVAL"), then, the Company shall issue to the
Investor a number of shares of Common Stock equal to the Issuable Maximum and,
with respect to the remainder of the aggregate Warrants then held by the
Investors for which an exercise would result in an issuance of shares of Common
Stock in excess of the Issuable Maximum, the Company must use its best efforts
to seek and obtain Stockholder Approval as soon as possible, but in any event
not later than the 90th day following such Exercise Date or the date of such
request. The Company and the Holder understand and agree that Warrant Shares
issued to and then held by the Holder as a result of exercises of Warrants shall
not be entitled to cast votes on any resolution to obtain Stockholder Approval
pursuant hereto.
12. No Fractional Shares. No fractional shares of Warrant Shares will be issued
in connection with any exercise of this Warrant. In lieu of any fractional
shares which would, otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the closing price of one Warrant
Share as reported by the applicable Trading Market on the date of exercise.
13. Notices. Any and all notices or other communications or deliveries hereunder
(including, without limitation, any Exercise Notice) shall be in writing and
shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 5:30 p.m. (New York City
time) on a Trading Day, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a Trading Day or
later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the Trading
Day following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The addresses for such communications shall be: (i) if to
the Company, to Flexible Solutions International, Inc., 000 Xxxxxxxxx Xxxxxx,
Xxxxxxxx, X.X., X0X 0X0, Xxxxxx, Attn: Xxx X'Xxxxx, or to FACSIMILE NO.:
250.477.9912 (or such other address as the Company shall indicate in writing in
accordance with this Section), or (ii) if to the Holder, to the address or
facsimile number appearing on the Warrant Register or such other address or
facsimile number as the Holder may provide to the Company in accordance with
this Section.
14. Warrant Agent. The Company shall serve as warrant agent under this Warrant.
Upon 10 days' notice to the Holder, the Company may appoint a new warrant agent.
Any corporation into which the Company or any new warrant agent may be merged or
any corporation resulting from any consolidation to which the Company or any new
warrant agent shall be a party or any corporation to which the Company or any
new warrant agent transfers substantially all of its corporate trust or
shareholders services business shall be a successor warrant agent under this
Warrant without any further act. Any such successor warrant agent shall promptly
cause notice of its succession as warrant agent to be mailed (by first class
mail, postage prepaid) to the Holder at the Holder's last address as shown on
the Warrant Register.
15. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit of the parties
hereto and their respective successors and assigns. Subject to the preceding
sentence, nothing in this Warrant shall be construed to give to any Person other
than the Company and the Holder any legal or equitable right, remedy or cause of
action under this Warrant. This Warrant may be amended only in writing signed by
the Company and the Holder and their successors and assigns.
(b) All questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York (except for
matters governed by corporate law in the State of Nevada), without regard to the
principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of this
Warrant and the transactions herein contemplated ("PROCEEDINGS") (whether
brought against a party hereto or its respective Affiliates, employees or
agents) shall be commenced exclusively in the New York Courts. Each party hereto
hereby irrevocably submits to the exclusive jurisdiction of the New York Courts
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any New York Court, or that such
Proceeding has been commenced in an improper or inconvenient forum. Each party
hereto hereby irrevocably waives personal service of process and consents to
process being served in any such Proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
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 contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law. Each party hereto
hereby irrevocably waives, to the fullest extent permitted by applicable law,
any and all right to trial by jury in any legal proceeding arising out of or
relating to this Warrant or the transactions contemplated hereby. If either
party shall commence a Proceeding to enforce any provisions of this Warrant,
then the prevailing party in such Proceeding shall be reimbursed by the other
party for its attorney's fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.
(c) The headings herein are for convenience only, do not constitute a part of
this Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
(d) In case any one or more of the provisions of this Warrant shall be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
(e) Prior to exercise of this Warrant, the Holder hereof shall not, by reason of
being a Holder, be entitled to any rights of a stockholder with respect to the
Warrant Shares.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
By:
--------------------------
Name: Xxx X'Xxxxx
Title: CEO, President
EXERCISE NOTICE
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
WARRANT DATED JUNE 8, 2005
The undersigned Holder hereby irrevocably elects to purchase _____________
shares of Common Stock pursuant to the above referenced Warrant. Capitalized
terms used herein and not otherwise defined have the respective meanings set
forth in the Warrant.
(1) The undersigned Holder hereby exercises its right to purchase
_________________ Warrant Shares pursuant to the Warrant.
(2) The Holder intends that payment of the Exercise Price shall be made as
(check one):
____"Cash Exercise" under Section 10
____"Cashless Exercise" under Section 10
(3) If the holder has elected a Cash Exercise, the holder shall pay the sum of
$____________ to the Company in accordance with the terms of the Warrant.
(4) Pursuant to this Exercise Notice, the Company shall deliver to the holder
_______________ Warrant Shares in accordance with the terms of the Warrant.
(5) By its delivery of this Exercise Notice, the undersigned represents and
warrants to the Company that in giving effect to the exercise evidenced hereby
the Holder will not beneficially own in excess of the number of shares of Common
Stock (determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934) permitted to be owned under Section 11 of this Warrant to which
this notice relates.
Dated: , Name of Holder:
--------------------- -------
Pictet et Cie, Geneva
By:
Name:
Title:
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant)
Warrant Shares Exercise Log
---- ------------------------- ------------------------ ---------------------
Date Number of Warrant Shares Number of Warrant Shares Number of Warrant
Available to be Exercised Exercised Shares Remaining to
be Exercised
---- ------------------------- ------------------------ ---------------------
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
WARRANT ORIGINALLY ISSUED JUNE 8, 2005
WARRANT NO. PICTET1
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the
above-captioned Warrant to purchase ____________ shares of Common Stock to which
such Warrant relates and appoints ________________ attorney to transfer said
right on the books of the Company with full power of substitution in the
premises.
Dated: _______________, ____
-------------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant)
-------------------------------------
Address of Transferee
-------------------------------------
-------------------------------------
In the presence of:
--------------------------
