EXHIBIT 7
THIS WARRANT AND THE SHARES OF COMMON STOCK UNDERLYING THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER APPLICABLE STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS WARRANT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT
TO THE PROVISIONS OF RULE 144 OF THE ACT.
THIS WARRANT IS SUBJECT TO THE PROVISIONS OF A SECURITIES PURCHASE AGREEMENT,
DATED AS OF SEPTEMBER 4, 1998, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF EXCEPT AS THEREIN PROVIDED.
[FORM OF]
WARRANT TO ACQUIRE SHARES OF
COMMON STOCK OF
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
Warrant No. __ ____________, 1998
THIS CERTIFIES THAT XXXXXX, XXXXXXX STRATEGIC PARTNERS FUND, L.P. (the
"Holder"), for value received, or its registered assigns, is entitled to
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purchase, on the terms and subject to the conditions hereinafter set forth, from
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC., a Delaware corporation (the
"Company"), at any time after the Effective Date (as defined below in Section
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2.3) of this Warrant and on or before the Termination Date (as defined below in
Section 2.7) of this Warrant (the "Exercise Period"), that number of shares (the
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"Warrant Shares") of common stock, par value $.0001 per share, of the Company
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(the "Common Stock"), as set forth in Section 2.1 hereof. The Company issued
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this Warrant with three other Warrants (each, along with this Warrant, a
"Warrant" and, collectively, the "Warrants") and a debenture (the "Debenture"),
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to the Holder pursuant to a Securities Purchase Agreement, dated as of September
4, 1998, by and between the Company and the Holder (the "Securities Purchase
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Agreement"). Capitalized words not defined herein shall have the meanings set
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forth in the Securities Purchase Agreement.
SECTION 1
Exercise Price
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The exercise price at which this Warrant may be exercised shall be $0.35
per share of Common Stock (the "Exercise Price"), subject to any adjustment
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pursuant to Section 3.3.
SECTION 2
Exercise of Warrant, Etc.
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2.1 Number of Shares for Which Warrant is Exercisable. This Warrant shall
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be exercisable to purchase [________] shares of Common Stock, which represents
[______] percent (__%) of the Company's issued and outstanding capital stock on
a fully diluted basis at the date of issuance, subject to any adjustment
pursuant to Section 3.3.
2.2 Procedure for Exercise of Warrant. The Warrant may be exercised in
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whole or in part during the Exercise Period by surrendering this Warrant, with
the purchase form provided for herein duly executed by the Holder or by the
Holder's duly authorized attorney-in-fact, at the principal office of the
Company or at such other office or agency in the United States as the Company
may designate by notice in writing to the Holder accompanied by payment in full,
in cash, bank cashier's check or certified check payable to the order of the
Company, in an amount equal to the product of (i) the Exercise Price multiplied
by (ii) the number of Warrant Shares being purchased. In addition to payments
of the Exercise Price by cash or said checks, payment of the Exercise Price with
respect to the Warrant(s) being exercised may be made, at the option of the
Holder, by the reduction in the principal amount of the Debenture issued to the
Holder pursuant to the Securities Purchase Agreement (or forgiveness of any
accrued and unpaid interest thereon, even during a period in which an Event of
Default (as defined in the Securities Purchase Agreement) has occurred and is
continuing under such Debenture, in an amount equal to the Exercise Price with
respect to the number of Warrant Shares being purchased; and in such a case,
this Warrant shall be accompanied by said Debenture (with the purchase form duly
executed) which shall be substituted and replaced by a new Debenture identical
in form and content to the original Debenture except that principal amount shall
be appropriately reduced to reflect the reduction in the principal amount
applicable to the payment of the Exercise Price with respect to the Warrant
being exercised. If fewer than all of the Warrant Shares are being exercised,
the Company shall, upon exercise prior to the end of the Expiration Period,
execute and deliver to the Holder a new certificate (dated the date hereof)
evidencing the balance of the Warrant Shares that remain exercisable.
2.3 Effective Date; Conversion.
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(a) The "Effective Date" of this Warrant shall be the earlier of:
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(i) [the date hereof / the eighteen (18) month anniversary date
of the Closing Date]; or
(ii) upon the occurrence or existence of an Event of Default (as
defined in the Securities Purchase Agreement).
(b) Beginning on the Effective Date, this Warrant shall
immediately become exercisable for that number of shares of Common Stock
issuable upon exercise of this Warrant (subject to adjustment under Section
3.3) and this Warrant shall remain exercisable for such number of shares
(subject to adjustment under Section 3.3) until the Termination Date.
(c) If prior to the Effective Date, the Company satisfies all
obligations under the Securities Purchase Agreement and the Debenture
(including without limitation paying in full all principal and interest
thereunder), this Warrant shall terminate and be null and void ab initio.
Satisfaction of all obligations under the Debenture and Securities Purchase
Agreement by the Company on or after the Effective Date shall not affect
this Warrant, which shall remain in full force and effect until the
Termination Date
2.4 Transfer Restriction Legend. Each certificate for Warrant Shares
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initially issued upon exercise of this Warrant, unless at the time of exercise
such Warrant Shares are registered under the Act, shall bear the following
legend (and any additional legend required by any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof:
"These securities have not been registered under the Securities Act of
1933, as amended, or under any state securities laws and may be offered,
sold or transferred only if registered pursuant to the provisions of such
laws, or if in the opinion of counsel satisfactory to the Company, an
exemption from such registration is available."
2.5 Acknowledgment of Continuing Obligation. The Company will, if the
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Holder exercises this Warrant in part, upon request of the Holder, acknowledge
in writing the Company's continuing obligation to the Holder in respect of any
rights to which the Holder shall continue to be entitled after such exercise in
accordance with this Warrant, provided, that the failure of the Holder to make
any such request shall not affect the continuing obligation of the Company to
the Holder in respect of such rights.
2.6 Termination of Warrant. Unless the parties otherwise agree in writing
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to extend or modify the Exercise Period, this Warrant, or the unexercised
portion of this Warrant, shall terminate and be null and void on the date five
years from the Effective Date (the "Termination Date").
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SECTION 3
Ownership of this Warrant.
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3.1 Deemed Holder. The Company may deem and treat the person in whose
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name this Warrant is registered as the Holder and owner hereof (notwithstanding
any notations of ownership or writing hereon made by anyone other than the
Company) for all purposes and shall
not be affected by any notice to the contrary, until presentation of this
Warrant for registration of transfer as provided in this Section 3.
3.2 Exchange, Transfer and Replacement. This Warrant is non-detachable
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from the Debenture and may not be transferred, assigned, sold, pledged or
otherwise hypothecated ("Transferred") except with the Debenture, and if so
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Transferred, then only as permitted under the terms and conditions of the
Debenture and the Securities Purchase Agreement. This Warrant and all rights
hereunder are transferable in whole or in part upon the books of the Company by
the Holder in person or by duly authorized attorney, and a new Warrant shall be
made and delivered by the Company, of the same tenor as this Warrant but
registered in the name of the transferee, upon surrender of this Warrant duly
endorsed at said office or agency of the Company. Upon receipt by the Company
of evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and, in case of loss, theft or destruction, or
indemnity or security reasonably satisfactory to it, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will make and deliver a
new Warrant of like tenor, in lieu of this Warrant, provided, however, that if
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the Holder of this Warrant is the original Holder, an affidavit of lost Warrant
shall be sufficient for all purposes of this Section 3.2. This Warrant shall be
promptly canceled by the Company upon the surrender hereof in connection with
any exchange, transfer or replacement. The Company shall pay all reasonable
expenses, taxes (other than stock transfer taxes and income taxes) and other
charges payable by it in connection with the preparation, execution and delivery
of Warrant Shares pursuant to this Section 3.2.
3.3 Antidilution.
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(a) If at any time while all or any portion of this Warrant remains
outstanding all or any portion of this Warrant shall be exercised
subsequent to (i) any sales of shares of Common Stock of the Company at a
price per share less than the Exercise Price per share then applicable to
this Warrant, or (ii) any issuance of any security convertible into shares
of Common Stock of the Company with a conversion price per share less than
the Exercise Price per share then applicable to this Warrant, or (iii) any
issuance of any option, warrant or other right to purchase shares of Common
Stock of the Company at any exercise price per share less than the Exercise
Price per share then applicable to this Warrant (except, in each case,
pursuant to an employee or director stock option plan or similar
compensation plan approved by the Board of Directors); then in any and
every such event the Exercise Price per share for this Warrant shall be
reduced and shall be equal to such lower sales, conversion or exercise
price per share.
(b) If all or any portion of this Warrant shall be exercised
subsequent to any stock dividend, split-up, recapitalization, merger,
consolidation, combination or exchange of shares, reorganization or
liquidation of the Company occurring after the date hereof, as a result of
which such shares of any class shall be issued in respect of outstanding
shares of Common Stock of the Company (or shall be issuable in respect of
securities convertible into shares of Common Stock) or upon exercise of
rights (other than this Warrant) to purchase shares of Common Stock or
shares of such Common Stock shall be changed into the same or a different
number of shares of the same or another class or classes, the Holder
exercising this Warrant shall receive the aggregate number and class
of shares which such Holder would have received if this Warrant had been
exercised immediately before such stock dividend, split-up,
recapitalization, merger, consolidation, combination or exchange of shares,
reorganization or liquidation.
SECTION 4
Special Agreements of the Company
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The Company covenants and agrees that:
4.1 The Company will reserve and set apart and have at all times, free
from preemptive rights, a number of shares of authorized but unissued Common
Stock deliverable upon the exercise of this Warrant or of any other rights or
privileges provided for herein sufficient to enable the Company at any time to
fulfill all its obligations hereunder.
4.2 This Warrant shall be binding upon any corporation or entity
succeeding to the Company by merger, consolidation or acquisition of all or
substantially all of the Company's assets.
SECTION 5
Notices
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Any notice or other document required or permitted to be given or delivered
to the Holder or the Company shall be delivered, or sent by certified or
registered mail, to the Holder or the Company at the address as set forth in the
Securities Purchase Agreement.
SECTION 6
Governing Law
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This Warrant shall be governed by, and construed and enforced in accordance
with, the internal laws of the State of New York, without giving effect to its
conflicts of laws provisions.
SECTION 7
Assignment
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Notwithstanding any provision of this Warrant which may be construed to the
contrary, this Warrant and any rights hereunder shall not be assignable by the
Holder except in accordance with the provisions governing assignments hereof set
forth in the Securities Purchase Agreement
and any attempt by the Holder to assign this Warrant or any rights hereunder
other than in accordance therewith shall be void and of no force and effect.
This Warrant is non-detachable from the Debenture and may not be transferred
except with the Debenture.
[Balance of Page Left Blank Intentionally -- Signature Page Follows]
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer under its corporate seal, attested by its duly
authorized officer, and to be dated as of the date first hereinabove set forth.
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
By: _____________________________________
Name: Xxxxxx X. Xxxxx
Title: President and Chief Executive Officer
ATTEST:
______________________________ [SEAL]
Name:
Title: Secretary
ASSIGNMENT
TO BE EXECUTED BY THE REGISTERED HOLDER IF IT DESIRES AND IS PERMITTED TO
TRANSFER THE WARRANT OF
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
FOR VALUE RECEIVED ___________________________________ hereby sells,
assigns and transfers unto __________________________ the right to purchase
[______%] of the number of 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 said Warrant) with full power
of substitution.
The undersigned represents and warrants to the Company that this assignment
has been effected in compliance with all applicable provisions of said Warrant
and any applicable provisions of the Securities Purchase Agreement referred to
in such Warrant.
Signature: __________________________(SEAL)
Address: ________________________________
Dated:___________________199__
In the presence of
______________________________ By: _____________________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
WARRANT CERTIFICATE
TO BE EXECUTED BY THE REGISTERED HOLDER
IF IT DESIRES TO EXERCISE THE WARRANT OF
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
The undersigned hereby exercises the right to purchase shares of Common
Stock obtainable by exercise of [_____%] of the within Warrant, according to the
conditions thereof and makes payment of the Exercise Price for such shares in
full by the enclosed payment and/or by reduction in the principal amount of the
Debenture (as defined in the Warrant) as more specifically set forth below:
Signature: __________________________(SEAL)
Address: ________________________________
