EXHIBIT 10.39
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAW AND NEITHER MAY BE SOLD OR OTHERWISE
TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT
AND SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH
REGARD THERETO, OR (II) THE COMPANY SHALL HAVE RECEIVED A WRITTEN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER
SUCH SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER.
COMPOSITECH LTD.
ATTACHED REPRICING WARRANT
Warrant No. RPW-1 ____,000 shares
Original Issue Date: March 16, 1999
THIS CERTIFIES THAT, FOR VALUE RECEIVED, SOVCAP EQUITY PARTNERS, LTD. or
its assigns (the "Holder") is entitled to purchase, on the terms and conditions
hereinafter set forth, at any time or from time to time during the Exercise
Period, but not thereafter, a number of shares of the Common Stock, par value
$.01 (the "Common Stock"), of COMPOSITECH LTD., a Delaware corporation (the
"Company"), determined in accordance with Section 2 hereof, at a price of $.01
per share (the "Exercise Price"). Each share of Common Stock as to which this
Repricing Warrant is exercisable is a "Repricing Share" and all such shares are
collectively referred to as the "Repricing Shares." This Repricing Warrant shall
remain attached to the Series 1 Bridge Financing Note issued to Holder on the
Original Issue Date (the "Bridge Note"), until conversion of the Bridge Note, at
which time it shall automatically detach.
Section 1. Definitions.
The following capitalized terms are not defined elsewhere in this Repricing
Warrant, and are used herein with the meanings thereafter ascribed:
"Average Market Price" means, the arithmetic mean of the Closing Bid
Prices of the Common Stock for each trading day in a ten (10) trading day
period which ends on the Exercise Date.
"Closing Bid Price" means, the last closing bid price of the Common
Stock on the NASDAQ National Market (the "NASDAQ-NM") as reported by
Bloomberg Financial Markets ("Bloomberg"), or, if the NASDAQ-NM is not the
principal trading market for the Common Stock, the last closing bid price
of the Common Stock on the principal securities exchange or trading market
where the Common Stock is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing bid price of the Common Stock
in the over-the-counter market on the pink sheets or bulletin board for the
Common Stock as reported by Bloomberg, or, if no closing bid price is
reported for the Common Stock by Bloomberg, the last closing trade price of
the Common Stock as reported by Bloomberg. If the Closing Bid Price cannot
be calculated for the Common Stock on such date on any of the foregoing
bases, the Closing Bid Price of the Common Stock on such date shall be the
fair market value as reasonably determined in good faith by the Board of
Directors of the Company (all as appropriately adjusted for any stock
dividend, stock split, or other similar transaction during such period);
"Conversion Date" means the date Bridge Note is converted into Common
Stock.
"Conversion Price" means $2.34, the conversion price of the Bridge
Note.
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"Conversion Shares" means the number of shares of Common Stock issued
upon conversion of the Bridge Note.
"Exercise Period" means a period which commences on the Conversion
Date and ends at 5:00 p.m. (Eastern Time) on the Expiration Date.
"Expiration Date" means the ninetieth (90th) day after the Conversion
Date, provided however, that the Expiration Date shall accelerate to the
twenty-first (21st) trading day after the Conversion Date, if and only if
the average Closing Bid Price of the Common Stock over a period of twenty
(20) trading days commencing on the Conversion Date is at least 120% of the
Conversion Price.
Section 2. Determination of Number of Repricing Shares. The number of
Repricing Shares issuable upon exercise of this Repricing Warrant shall be
determined on the Exercise Date. The number of Repricing Shares shall be equal
to: the number of Conversion Shares multiplied by a fraction, (a) the numerator
of which is 120% of the Conversion Price minus the Average Market Price and (b)
the denominator of which is the Average Market Price. In the case of a dispute
as to the determination of the Average Market Price or the arithmetic
calculation of the Exercise Price, the Company shall promptly issue to such
Holder(s) the number of shares of Common Stock that is not disputed and shall
submit the disputed determinations or arithmetic calculations to the holder via
facsimile within three (3) business days of receipt of such holder's Conversion
Notice. If such Holder(s) and the Company are unable to agree upon the
determination of the Average Market Price or arithmetic calculation of the
Exercise Price within two (2) business days of such disputed determination or
arithmetic calculation being submitted to the holder, then the Company shall
within one (1) business day submit via facsimile (A) the disputed determination
of the Average Market Price to an independent, reputable investment bank or (B)
the disputed arithmetic calculation of the Exercise Price to its independent,
outside accountant. The Company shall cause the investment bank or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and such Holders of the results no later than forty-eight
(48) hours from the time it receives the disputed determinations or
calculations. Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties absent
manifest error.
Section 3. Exercise of Warrant; Conversion of Warrant; Election to Pay
Cash.
(a) This Warrant may, at the option of the Holder, be exercised in whole or
in part from time to time by delivery to the Company at its office at 000
Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxx 00000, Attention: President, or to any
transfer agent for the Common Stock, on or before 5:00 p.m., Eastern Time, on
the Expiration Date, (i) a written notice of such registered Holder's election
to exercise this Warrant (the "Exercise Notice"), which notice may be in the
form of the Notice of Exercise attached hereto, properly executed and completed
by the registered Holder or an authorized officer thereof, (ii) a check payable
to the order of the Corporation, in an amount equal to the product of the
Exercise Price multiplied by the number of Repricing Shares specified in the
Exercise Notice, and (iii) this Warrant (the items specified in (i), (ii), and
(iii) are collectively the "Exercise Materials").
(b) This Warrant may, at the option of the Holder, be converted into Common
Stock in whole but not in part, if and only if the Value of one share of Common
Stock on the Exercise Date (as defined in Section 1(c) hereof) is greater than
the Exercise Price, by delivery to the Company at the address designated in
Section 1(a) above or to any transfer agent for the Common Stock, on or before
5:00 p.m. Eastern Time on the Expiration Date, (i) a written notice of Holder's
election to convert this Warrant (the "Conversion Notice"), properly executed
and
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completed by the registered Holder or an authorized officer thereof, and (ii)
this Warrant (the items specified in (i) and (ii) are collectively the
"Conversion Materials"). The number of shares of Common Stock issuable upon
conversion of this Warrant is equal to the quotient of (x) the product of the
number of Repricing Shares then issuable upon exercise of this Warrant (assuming
an exercise for cash) multiplied by the difference between (A) the Average
Market Price minus (B) the then effective Exercise Price divided by (y) the
Average Market Price. Any fraction resulting from the calculation of the number
of Repricing Shares then issuable in a conversion of this Repricing Warrant
shall be truncated;
(c) Upon timely receipt of the Exercise Materials or Conversion Materials
(whichever is applicable), the Company shall, as promptly as practicable, and in
any event within five (5) business days after its receipt of the Exercise
Materials or Conversion Materials, execute or cause to be executed and delivered
to Holder a certificate or certificates representing the number of Repricing
Shares specified in the Exercise Notice or if Holder delivered a Conversion
Notice, the number of shares of Common Stock issuable upon conversion of this
Warrant (whichever is applicable), together with cash in lieu of any fraction of
a share, and, (x) if the Warrant is exercised in full, a copy of this Warrant
marked "Exercised," or (y) if the Warrant is partially exercised, a copy of this
Warrant marked "Partially Exercised" together with a new Warrant on the same
terms for the unexercised balance of the Repricing Shares, or (z) if the Warrant
is converted, a copy of this Warrant marked "Converted." The stock certificate
or certificates shall be registered in the name of the registered Holder of this
Warrant or such other name or names as shall be designated in the Exercise
Notice or Conversion Notice. The date on which the Warrant shall be deemed to
have been exercised or converted (the "Exercise Date"), and the date the person
in whose name any certificate evidencing the Common Stock issued upon the
exercise or conversion hereof is issued shall be deemed to have become the
holder of record of such shares, shall be the date the Corporation receives the
Exercise Materials or Conversion Materials, irrespective of the date of delivery
of a certificate or certificates evidencing the Common Stock issued upon the
exercise or conversion hereof, except that, if the date on which the Exercise
Materials or Conversion Materials are received by the Company is a date on which
the stock transfer books of the Company are closed, the Exercise Date shall be
the date the Company receives the Exercise Materials or Conversion Materials,
and the date such person shall be deemed to have become the holder of the Common
Stock issued upon the exercise or conversion hereof shall be the next succeeding
date on which the stock transfer books are open. All shares of Common Stock
issued upon the exercise or conversion of this Warrant will, upon issuance, be
fully paid and nonassessable and free from all taxes, liens, and charges with
respect thereto.
(d) If the Company shall fail to issue to Holder within five (5) business
days following the date of receipt by the Company or the Transfer Agent of the
Exercise Materials or the Conversion Materials, a certificate for the number of
shares of Common Stock to which such holder is entitled upon such holder's
exercise or conversion of this Warrant, in addition to all other available
remedies which such holder may pursue hereunder and under this Warrant and the
Series 1 Bridge Note Purchase and Security Agreement dated March 16, 1999
between the Company and the initial holder of this Warrant (the "Securities
Purchase Agreement") including indemnification pursuant to Section 7.18 thereof,
the Company shall pay additional damages to such holder on each day after the
Exercise Date, an amount equal to 1.0% of the product of (A) the number of
Repricing Shares not issued to Holder and to which Holder is entitled multiplied
by (B) the Closing Bid Price of the Common Stock on the Exercise Date. Such
damages shall be computed daily and are due and payable daily. Additionally,
notwithstanding anything in this Section 3 to the contrary, Holder may withdraw
an Exercise
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Notice at any time prior to Holder's receipt of certificates evidencing the
Conversion Shares if Holder has otherwise complied with the requirements of this
Section 3.
(e) The Company may, in lieu of issuing the Repricing Shares pay Holder an
amount equal to the number of Repricing Shares issuable on the Exercise Date
multiplied by the Average Market Price (the "Payment Amount"). In such event,
the Company shall be obligated to deliver the Payment Amount to Holder within
five (5) business days following the Exercise Date. If the Company shall fail to
deliver the Payment Amount within five (5) business days after the Exercise
Date, in addition to all other available remedies which Holder may pursue at law
or equity, including indemnification pursuant to Section 7.18 of the Securities
Purchase Agreement, the Company shall pay additional damages to Holder on each
day after the Exercise Date, until the Payment Amount has been paid, an amount
equal to 1.0% of the Payment Amount. Such damages shall be computed daily and
are due and payable daily.
Section 4. Adjustments to Repricing Shares. The number of Repricing Shares
issuable upon the exercise hereof shall be subject to adjustment as follows:
(a) In the event the Company is a party to a consolidation, share
exchange, or merger, or the sale of all or substantially all of the assets
of the Company to, any person, or in the case of any consolidation or
merger of another corporation into the Company in which the Company is the
surviving corporation, and in which there is a reclassification or change
of the shares of Common Stock of the Company, this Warrant shall after such
consolidation, share exchange, merger, or sale be exercisable for the kind
and number of securities or amount and kind of property of the Company or
the corporation or other entity resulting from such share exchange, merger,
or consolidation, or to which such sale shall be made, as the case may be
(the "Successor Company"), to which a holder of the number of shares of
Common Stock deliverable upon the exercise (immediately prior to the time
of such consolidation, share exchange, merger, or sale) of this Warrant
would have been entitled upon such consolidation, share exchange, merger,
or sale; and in any such case appropriate adjustments shall be made in the
application of the provisions set forth herein with respect to the rights
and interests of the registered Holder of this Warrant, such that the
provisions set forth herein shall thereafter correspondingly be made
applicable, as nearly as may reasonably be, in relation to the number and
kind of securities or the type and amount of property thereafter
deliverable upon the exercise of this Warrant. The above provisions shall
similarly apply to successive consolidations, share exchanges, mergers, and
sales. Any adjustment required by this Section 2 (a) because of a
consolidation, share exchange, merger, or sale shall be set forth in an
undertaking delivered to the registered Holder of this Warrant and executed
by the Successor Company which provides that the Holder of this Warrant
shall have the right to exercise this Warrant for the kind and number of
securities or amount and kind of property of the Successor Company or to
which the holder of a number of shares of Common Stock deliverable upon
exercise (immediately prior to the time of such consolidation, share
exchange, merger, or sale) of this Warrant would have been entitled upon
such consolidation, share exchange, merger, or sale. Such undertaking shall
also provide for future adjustments to the number of Repricing Shares and
the Exercise Price in accordance with the provisions set forth in Section 2
hereof.
(b) In the event the Company should at any time, or from time to time
after the Original Issue Date, fix a record date for the effectuation of a
stock split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or
other distribution payable in additional shares of Common Stock, or
securities or rights convertible into, or entitling the holder thereof to
receive directly or
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indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such
holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
exercise or exercise thereof), then, as of such record date (or the date of
such dividend, distribution, split, or subdivision if no record date is
fixed), the number of Repricing Shares issuable upon the exercise hereof
shall be proportionately increased and the Exercise Price shall be
appropriately decreased by the same proportion as the increase in the
number of outstanding Common Stock Equivalents of the Company resulting
from the dividend, distribution, split, or subdivision. Notwithstanding the
preceding sentence, no adjustment shall be made to decrease the Exercise
Price below $.01 per Share.
(c) In the event the Company should at any time or from time to time
after the Original Issue Date, fix a record date for the effectuation of a
reverse stock split, or a transaction having a similar effect on the number
of outstanding shares of Common Stock of the Company, then, as of such
record date (or the date of such reverse stock split or similar transaction
if no record date is fixed), the number of Repricing Shares issuable upon
the exercise hereof shall be proportionately decreased and the Exercise
Price shall be appropriately increased by the same proportion as the
decrease of the number of outstanding Common Stock Equivalents resulting
from the reverse stock split or similar transaction.
(d) In the event the Company should at any time or from time to time
after the Original Issue Date, fix a record date for a reclassification of
its Common Stock, then, as of such record date (or the date of the
reclassification if no record date is set), this Warrant shall thereafter
be convertible into such number and kind of securities as would have been
issuable as the result of such reclassification to a holder of a number of
shares of Common Stock equal to the number of Repricing Shares issuable
upon exercise of this Warrant immediately prior to such reclassification,
and the Exercise Price shall be unchanged.
(e) The Company will not, by amendment of its Certificate of
Incorporation or through reorganization, consolidation, merger,
dissolution, issue, or sale of securities, sale of assets or any other
voluntary action, void or seek to avoid the observance or performance of
any of the terms of the 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 in order to protect the rights of the
Holder against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (x) will not create a par value of
any share of stock receivable upon the exercise of the Warrant above the
amount payable therefor upon such exercise, and (y) will take all such
action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and non-assessable shares upon the
exercise of the Warrant.
(f) When any adjustment is required to be made in the number or kind
of shares purchasable upon exercise of the Warrant, or in the Exercise
Price, the Company shall promptly notify the Holder of such event and of
the number of shares of Common Stock or other securities or property
thereafter purchasable upon exercise of the Warrants and of the Exercise
Price, together with the computation resulting in such adjustment.
(g) The Company covenants and agrees that all Repricing Shares which
may be issued will, upon issuance, be validly issued, fully paid, and
non-assessable. The Company further covenants and agrees that the Company
will at all times have authorized and reserved, free from preemptive
rights, a sufficient number of shares of its Common Stock to provide for
the exercise of the Warrant in full.
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Section 5. No Stockholder Rights. This Warrant shall not entitle the Holder
hereof to any voting rights or other rights as a stockholder of the Company.
Section 6. Transfer of Securities.
(a) This Warrant and the Repricing Shares and any shares of capital stock
received in respect thereof, whether by reason of a stock split or share
reclassification thereof, a stock dividend thereon, or otherwise, shall not be
transferable except upon compliance with the provisions of the Securities Act of
1933, as amended (the "Securities Act") and applicable state securities laws
with respect to the transfer of such securities. The Holder of this Warrant, by
acceptance of this Warrant, agrees to be bound by the provisions of Section 4
hereof and to indemnify and hold harmless the Company against any loss or
liability arising from the disposition of this Warrant or the Repricing Shares
issuable upon exercise hereof or any interest in either thereof in violation of
the provisions of this Warrant.
(b) Each certificate for the Repricing Shares and any shares of capital
stock received in respect thereof, whether by reason of a stock split or share
reclassification thereof, a stock dividend thereon or otherwise, and each
certificate for any such securities issued to subsequent transferees of any such
certificate shall (unless otherwise permitted by the provisions hereof) be
stamped or otherwise imprinted with a legend in substantially the following
form:
Legend for Repricing Shares or other shares of capital stock:
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAW AND NEITHER MAY BE SOLD OR OTHERWISE
TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT
AND SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH
REGARD THERETO, OR (II) THE COMPANY SHALL HAVE RECEIVED A WRITTEN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER
SUCH SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER.
Section 7. Miscellaneous.
(a) The terms of this Warrant shall be binding upon and shall inure to the
benefit of any successors or assigns of the Company and of the holder or holders
hereof and of the Common Stock issued or issuable upon the exercise hereof.
(b) Except as otherwise provided herein, this Warrant and all rights
hereunder are transferable by the registered holder hereof in person or by duly
authorized attorney on the books of the Company upon surrender of this Warrant,
properly endorsed, to the Company. The Company may deem and treat the registered
holder of this Warrant at any time as the absolute owner hereof for all purposes
and shall not be affected by any notice to the contrary.
(c) Notwithstanding any provision herein to the contrary, Holder hereof may
not exercise, sell, transfer, or otherwise assign this Warrant unless the
Company is provided with an opinion of counsel satisfactory in form and
substance to the Company, to the effect that such exercise, sale, transfer, or
assignment would not violate the Securities Act or applicable state securities
laws.
(d) This Warrant may be divided into separate Warrants covering one share
of Common Stock or any whole multiple thereof, for the total number of shares of
Common Stock
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then subject to this Warrant at any time, or from time to time, upon the request
of the registered holder of this Warrant and the surrender of the same to the
Company for such purpose. Such subdivided Warrants shall be issued promptly by
the Company following any such request and shall be of the same form and tenor
as this Warrant, except for any requested change in the name of the registered
holder stated herein.
(e) All notices, requests, demands, and other communications required or
permitted under this Warrant and the transactions contemplated herein shall be
in writing and shall be deemed to have been duly given, made, and received when
personally delivered the day after deposited with a recognized national
overnight delivery service prior to its dead-line for receiving packages for
next day delivery or upon the fifth day after deposited in the United States
registered or certified mail with postage prepaid, return receipt requested, in
each case addressed as set forth below:
If to the Company:
Compositech Ltd.
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
If to the Holder hereof, to the address of such Holder appearing on the
books of the Company.
(f) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, irrespective of the choice of law provisions
thereof. The parties agree that any appropriate state court located in New
Castle County, Delaware, or any federal Court located in Wilmington, Delaware,
including without limitation to the United States District Court of Delaware,
shall have exclusive jurisdiction of any case or controversy arising under or in
connection with this Agreement and shall be a proper forum in which to
adjudicate such case or controversy. The parties consent to the jurisdiction of
such courts.
[Signatures on the following page]
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SIGNATURE PAGE
TO
ATTACHED REPRICING WARRANT
IN WITNESS WHEREOF, the Company, has caused this Warrant to be executed in
its name by its duly authorized officers under its corporate seal, and to be
dated as of the date first above written.
COMPOSITECH LTD.
By:
-----------------------------------------
Xxxxxx X. Xxxxx, Executive Vice President
ATTEST:
------------------------
Secretary
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ASSIGNMENT
(To be Executed by the Registered Holder to effect a Transfer of the
foregoing Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, and assigns and transfers
unto ___________________________________________________________________________
the foregoing Warrant and the rights represented thereto to purchase shares of
Common Stock of Compositech Ltd. in accordance with terms and conditions
thereof, and does hereby irrevocably constitute and appoint ________________
Attorney to transfer the said Warrant on the books of the Company, with full
power of substitution.
Holder:
_______________________________
_______________________________
Address
Dated: __________________, 19__
In the presence of:
_______________________________
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FORM OF NOTICE OF EXERCISE or conversion
[To be signed only upon exercise of Warrant]
To: COMPOSITECH LTD.
The undersigned registered Holder of the attached Warrant hereby
irrevocably elects to exercise the Warrant for, and to purchase thereunder,
_____ shares of Common Stock of Compositech Ltd., issuable upon exercise of said
Warrant and hereby surrenders said Warrant.
Choose One:
The Holder herewith delivers to Compositech Ltd., a check in the amount of
$______ representing the Exercise Price for such shares.
or
The Holder elects a cashless exercise pursuant to Section 2(b) of the
Warrant. The Average Market Price as of _______ was $_____.
The undersigned herewith requests that the certificates for such shares be
issued in the name of, and delivered to the undersigned, whose address is
________________________________.
Dated: ___________________
Holder:
_______________________________
_______________________________
By:____________________________
__________
NOTICE
The signature above 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.
