MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is made and entered into as
of this 23rd day of December, 1999 between Bion Environmental Technologies,
Inc. (the "Company"), a Colorado corporation, having its principal address at
000 00xx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000 and D2 Co., LLC, a
Delaware limited liability company ("D2"), having its principal address at 0
Xxxx 00xx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000.
W I T N E S S E T H:
WHEREAS, the Company is the sole shareholder of Bion Technologies, Inc.,
a Colorado corporation, Bion Soil, Inc., a Colorado corporation and two
inactive corporations, Bion Municipal, Inc., a Colorado corporation, and Bion
International, Inc., a Colorado corporation (all of which are collectively
referred to herein as the "Subsidiaries"); and
WHEREAS, the Company desires the benefit of the experience, supervision
and services of D2 and desires to employ it upon the terms and conditions
hereinafter set forth, and D2 is willing and able to accept such employment on
such terms and conditions;
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained, the Company and D2 agree as follows:
1. Employment. The Company agrees to employ, and D2 agrees to serve the
Company, in the management capacity and upon the other terms and conditions
hereinafter set forth.
2. Term. The employment of D2 shall continue for a period of three
years, unless terminated sooner, as hereinafter provided (the "Term"). The
Term shall be automatically extended for additional one-year periods unless
either the company or D2 shall give written notice of non-renewal at least 60
days prior to the end of the initial or any renewed Term.
3. Termination for Cause.
(a) The Company may terminate this Agreement for Cause. For
purposes of this Agreement, termination for "Cause" shall mean (i) D2 or the
persons referred to in Section 4(a) personally engaging in illegal conduct
that is materially detrimental to the Company; (ii) D2 or the person referred
to in Section 4(a)(i) (the "D2 Designee") being convicted of a felony; or
(iii) D2 's or the D2 Designee's willful and continued failure to use
reasonable business efforts to attempt to substantially perform their
respective duties hereunder (other than such failure resulting from incapacity
due to a physical or mental illness) after demand for substantial performance
is delivered by the Company in writing that specifically identifies the manner
in which the Company believes any of D2 or the D2 Designee has not used
reasonable business efforts to attempt to substantially perform its or his
duties. In the event the D2 Designee becomes incapacitated due to a physical
or mental illness and after due notice from the Company D2 has failed to
appoint a successor "D2 Designee," then the Company shall be entitled to
appoint a designee to fill such position until such failure has been cured by
D2. For purposes of this Section 3(a), in addition to the other legal
requirements to be "willful," no act, or failure to act, shall be considered
"willful" unless committed in bad faith and without a reasonable belief that
the act or omission was in the best interests of the Company. In addition, no
action or inaction shall give rise to a right of the Company to terminate this
Agreement for Cause unless the Company has delivered to D2 a copy of a
resolution duly adopted by a majority of the members of the Board of Directors
(other then the three members designated by D2) at a meeting of the Board
called and held for such purpose (after reasonable (but in no event less than
thirty (30) days) notice to D2 an opportunity for D2, together with its
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board, D2 or the D2 Designee were guilty of any conduct set forth above
and specifying the particulars thereof in detail. This Section 3(a) shall not
prevent D2 from challenging in any court of competent jurisdiction the Board's
determination that Cause exists or that D2 or the D2 Designee has failed to
cure any act (or failure to act) that purportedly formed the basis for the
Board's determination. If the Company reasonably determines that D2 has
violated the terms of this Agreement, it shall give written notice thereof
describing the default and granting thirty (30) days in which to cure the
default. If D2 fails or refuses to cure the default within thirty (30) days of
the receipt of such notice, the Company may terminate this Agreement at the
end of the thirty (30) day period.
(b) D2 may terminate this Agreement if the Company fails to pay
amounts owing to D2. If D2 reasonably determines that the Company has failed
to pay amounts owing under this Agreement, it shall give written notice
thereof describing the amount owing and granting thirty (30) days in which to
cure such failure. If the Company fails or refuses to pay amounts owing to D2
within thirty (30) days of the receipt of such notice, D2 may terminate this
Agreement at the end of the thirty (30) day period.
4. Duties. D2 shall perform (or supervise the performance of) certain
executive and administrative activities relating to the internal operation of
the Company and its Subsidiaries, subject always to the general control and
direction of the Board of Directors of the Company. D2's duties shall consist
of the following:
(a) D2 shall provide (i) certain executive level employee services
to the Company and its Subsidiaries, initially consisting of the provision of
the services of Mr. Xxxxx Xxxxxxxx (or his successor in office) as Chief
Executive Officer and Chairman of the Executive Committee and (ii) the
services of Summerwind Restructuring, Inc. (or its successor) as a consultant
to the Company. Notwithstanding anything in this Agreement to the contrary,
D2 shall not be obligated to provide executive level services to the Company
in the nature of those generally performed by a Chief Financial Officer and/or
Controller;
(b) D2 shall provide (or supervise the provision by a third party
hired at the Company's expense) certain financial advisory, research and
consulting services in the nature of those generally provided by investment
banking firms and management consulting firms;
(c) D2 shall supervise office systems, filing systems, accounting
systems, and bookkeeping systems for the Company and its Subsidiaries;
(d) D2 shall consult with and advise the other officers, directors,
agents and employees of either the Company, regarding the internal operations
of the Company or the Subsidiaries;
(e) D2 shall assist the Company to prepare a business plan and
annual operating budgets for the Company and its Subsidiaries; and
(f) The Board of Directors shall periodically review the
performance of the D2 Designee based on the plans and projections relating to
the Company developed by him.
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In the event that D2 provides services to the Company or its
Subsidiaries that exceed those described above (including but not limited to
consultation, negotiation, review and analysis in connection with joint
ventures, mergers and acquisitions or bank financings involving or
transactions with respect to the sale or disposition of, the Company or any
of its Subsidiaries), D2 shall be entitled to negotiate with the Company for
the receipt of additional fees.
5. Powers. So that it may properly perform its duties, D2, through the
D2 Designee in his capacity as an executive officer of the Company, shall have
the power to take all action and do all things necessary and proper to bring
about the efficient operation of the Company and its Subsidiaries, subject to
the overall direction and control of the Board of Directors of the Company.
D2, through the D2 Designee in his capacity as an executive officer of the
Company, shall have the power to employ, supervise and discharge all employees
of the Company and its Subsidiaries and to fix their compensation, subject to
the overall direction and control of the Board of Directors of the Company.
6. Directors. (a) For the Term, D2 shall be entitled to designate
three of the seven Directors of the Company. If necessary, the Directors of
the Company will elect each such person to the Board of Directors of the
Company by creating a new position on the Board of Directors promptly
following such person's nomination by D2 and shall nominate such person for
election in connection with any shareholder vote for Directors, and the
Company will use its best efforts to ensure that the shareholders of the
Company agree to vote all their securities in favor of such person's election.
The Company agrees to vote all voting securities for which the Company holds
proxies, granting it voting discretion, or is otherwise entitled to vote, in
favor of, and to use its best efforts in all respect to cause, the election of
each such individual proposed by D2. In the event that a vacancy is created
on the Board of Directors at any time by the death, disability, resignation or
removal (with or without cause) of any such individual proposed and nominated
by D2, pursuant to this Agreement, the Company will, and will use its best
efforts to ensure that the shareholders of the Company, vote all its voting
securities to elect each individual proposed by D2 and approved by the Company
and nominated for election by D2 to fill such vacancy and serve as a voting
Director.
(b) Upon the successful competition of the funding set forth in the
Company's interim Business Plan, which is estimated to be $3,000,000, D2 shall
have the right to nominate for election at the next annual meeting one
additional Director out of the seven Directors, who shall be "independent" and
not affiliated with either the Company or D2,the Company agrees that it will
not unreasonably withhold or deny its vote (of all voting securities for which
the Company holds proxies granting it voting discretion, or is otherwise
entitled to vote) in favor of the election of each such individual proposed by
D2.
(c) If D2 gives notice to the Company that it desires to remove a
Director proposed by it pursuant to Subsection 6(a) of this Agreement, the
Company shall, and shall use its best effort to ensure that the shareholders
of the Company shall, vote all its voting securities in favor of removing such
Director if a vote of holders of such securities shall be required to remove
the Director, and the Company agrees to take any action necessary to
facilitate such removal.
(d) Each Director nominated by D2 shall be entitled to the same
type and an amount of compensation at least equal to the highest amount
payable to any other Director for serving in such capacity.
(e) Concurrently herewith, if requested by D2, but in no event
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later than January 30, 2000, the Company shall have caused the appointment of
the initial Directors nominated by D2 to its Board of Directors in accordance
with the provisions of this Section 6, which individuals shall be identified
in writing to the Company by such time.
(f) At any time that a designee or designees of D2 serve on the
Company's Board of Directors, D2 shall be entitled to representation on any
committee of the Board of Directors proportionate with their representation of
the Board as a whole.
(g) The Company shall promptly reimburse each director of the
Company designated by D2 who is not an employee of the Company for all of his
reasonable expenses incurred in attending each meeting of the Board of
Directors of the Company or any committee thereof.
(h) The Company shall at all times maintain provisions in its
By-laws and/or Certificate of Incorporation indemnifying all directors against
liability and absolving all directors from liability to the Company and its
shareholders to the maximum extent permitted under the laws of the State of
Colorado.
(i) The By-laws of the Company shall always contain provisions
consistent with the provisions of this Section 6.
(j) The Company shall use its best efforts to assist the Executives
in procuring and maintaining, for so long as any designee of D2 is a director
of the Company, Director and Officer Liability Insurance on terms and
conditions reasonably satisfactory to D2.
7. Liabilities and Expenses. All reasonable costs, expenses, losses,
and damages incurred by D2 in the provision of the services to the Company or
its Subsidiaries provided for hereunder shall be paid by the Company, or if
paid for by D2, shall be reimbursed by the Company upon provision of a written
record of said costs. However, D2 shall not be reimbursed for, and shall
itself pay for the cost of its offices, equipment, management personnel
(either employees or independent contractors, including the Executives) and
facilities and supplies necessary to enable it to fully perform the management
duties to be performed by it hereunder.
8. Compensation.
(a) As compensation for its' services performed hereunder, D2 shall
be entitled to the following compensation from the Company:
(i) a $240,000 annual base fee (the "Fee"), payable by the
Company in monthly installments on the first day of each calendar month,
commencing January 2, 2000. Until January 1, 2002, all or a portion of the
Fee may be paid in shares of the Common Stock of the Company. The number of
shares to be issued in payment of the Fee shall be equal to the portion of the
Fee to be paid in Common Stock, divided by the average Closing Bid Price of
the Common Stock over the 30 days prior to the date on which an installment
shall be paid. For purposes hereof, the "Closing Bid Price" for each trading
day shall be the reported per share closing bid price of the Common Stock
regular way on the Stock Market on such trading day, and "Stock Market" shall
mean the principal national securities exchange on which the Common Stock is
listed or admitted to trading or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, shall mean NASDAQ or,
if the Common Stock is not quoted on Nasdaq, shall mean the OTC Bulletin Board
or, if the Common Stock is not quoted on the OTC Bulletin Board, shall mean
the over-the-counter market as furnished by any NASD member firm selected from
time to time by the Company for that purpose.
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(ii) in addition, the Company shall, on January 1, 2000,
issue to D2 warrants to purchase 2,500,000 shares of its Common Stock, no par
value per share ("Common Stock"), all of which shall be immediately
exercisable at a price of $2.50 per share and which shall expire on June 30,
2004.
9. Covenant of D2. D2 covenants and agrees that it will maintain (or
will otherwise have available to it) facilities and staff necessary and
adequate in all material respects to perform properly its obligations
hereunder.
10. Notices. All notices and other communications required or permitted
to be given hereunder shall be in writing and shall be deemed to have been
duly given if delivered or mailed first class mail postage prepaid to the
address of the Company and D2 set forth above.
11. Construction. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
12. Benefit. This Agreement shall bind and inure to the benefit of the
parties and their legal representatives, successors and assigns, including,
without limitation, a successor by merger.
13. Assignment. No party hereto may assign or transfer its rights or
obligations arising under this Agreement without the prior written consent of
the other party hereto, which consent shall not be unreasonably withheld.
14. Entire Agreement. The parties hereto agree that this Agreement
constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements and understandings
between them as to such subject matter; and there are no restrictions,
agreements, arrangements, oral or written, between the parties relating to the
subject matter hereof which are not fully expressed or referred to herein.
15. Waivers and Further Agreements. Any waiver of any terms or
conditions of this Agreement shall not operate as a waiver of any other breach
of such terms or conditions or any other term or condition, nor shall any
failure to enforce any provision hereof operate as a waiver of such provision
or of any other provision hereof; provided, however, that no such waiver
unless it by its own terms explicitly provides as to the contrary, shall be
construed to effect a continuing waiver of the provision being waived and no
such waiver in any instance shall constitute a waiver in any other instance or
for any other purpose or impair the right of the party against whom such
waiver is claimed in all other instances or for all other purposes to require
full compliance with such provision. Each of the parties hereto agrees to
execute all such further instruments and documents and to take all such
further action as the other party may reasonably require in order to
effectuate the terms and purposes of this Agreement.
16. Amendments. This Agreement may not be amended nor shall any waiver,
change, modification, consent or discharge be effected except by an instrument
in writing executed by or on behalf of the party or parties against whom
enforcement of any amendment, waiver, change, modification, consent or
discharge is sought, subject to the terms of any outstanding loans of the
Company.
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17. Severability. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, invalid, inoperative or unenforceable as
applied to any particular case in any jurisdiction or jurisdictions, or in all
jurisdictions or in all cases, because of the conflict of any provision with
any constitution or statute or rule of public policy or for any other reason,
such circumstance shall not have the effect of rendering the provision or
provisions in question, invalid, inoperative or unenforceable in any other
jurisdiction or in any other case or circumstance or of rendering any other
provision or provisions herein contained invalid, inoperative or unenforceable
to the extent that such other provisions are not themselves actually in
conflict with such constitution, statute or rule of public policy, but this
Agreement shall be reformed and construed in any such jurisdiction or case as
if such invalid, inoperative or unenforceable provision had never been
contained herein and such provision reformed so that it would be valid,
operative and enforceable to the maximum extent permitted in such jurisdiction
or in such case.
18. Section Headings. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
BION ENVIRONMENTAL TECHNOLOGIES, INC., a
Colorado corporation
By: /s/ Xxx Xxxxxxxx
Title: CEO
D2 CO., LLC, a Delaware limited liability
company
By: /s/ Xxxxx X. Xxxxxxxx
Title: President
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THIS WARRANT HAS BEEN ISSUED IN RELIANCE UPON THE REPRESENTATION OF THE HOLDER
THAT IT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARDS
THE RESALE OR OTHER DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR THE SHARES
ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
BION ENVIRONMENTAL TECHNOLOGIES, INC.
Warrant
Warrant to Subscribe January 1, 2000
for 2,500,000 shares
Void After June 30, 2004
THIS CERTIFIES that, for value received, D2 Co., LLC, a Delaware limited
liability company, or its registered assigns ("D2"), is entitled to subscribe
for and purchase from Bion Environmental Technologies, Inc., a Colorado
corporation (hereinafter called the "Company"), at the price of $2.50 per
share (such price as from time to time adjusted as hereinafter provided being
hereinafter called the "Warrant Price"), at any time prior to June 30, 2004
(the "Warrant Expiration Date"), up to 2,500,000 (subject to adjustment as
hereinafter provided) fully paid and nonassessable shares of Common Stock, no
par value per share, of the Company (hereinafter called the "Common Stock"),
subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. This Warrant was issued pursuant to a certain
Management Agreement, dated as of December 23, 1999 (the "Management
Agreement"), between the Company and D2 and the rights and benefits contained
therein shall inure to the benefit of all subsequent holders of this Warrant.
The Warrants issued pursuant to the Management Agreement and any warrant or
warrants subsequently issued upon exchange or transfer thereof are hereinafter
collectively called the "Warrants." "Registered Holder" shall mean, as to any
Warrant and as of any particular date the person in whose name the certificate
representing the Warrant shall be registered on that date on the books
maintained by the Company pursuant to Section 3(b).
Section 1. Exercise of Warrant.
(a) Method of Exercise. The rights represented by this Warrant
may be exercised by the holder hereof, in whole at any time or from time to
time in part, but not as to a fractional share of Common Stock, by the
surrender of this Warrant (properly endorsed) at the office of the Company as
it may designate by notice in writing to the holder hereof at the address of
such holder appearing on the books of the Company, and as further provided
below in this Section 1 by payment to the Company of the Warrant Price in cash
or by certified or official bank check, for each share being purchased.
(b) Delivery of Certificates. Etc. In the event of any exercise
of the rights represented by this Warrant, a certificate or certificates for
the shares of Common Stock so purchased, registered in the name of the holder,
shall be delivered to the holder hereof within a reasonable time, not
exceeding ten days, after the rights represented by this Warrant shall have
been so exercised; and, unless this Warrant has expired, a new Warrant
representing the number of shares (except a remaining fractional share), if
any, with respect to which this Warrant shall not then have been exercised
shall also be issued to the holder hereof within such time. The person in
whose name any certificate for shares of Common Stock is issued upon exercise
of this Warrant shall for all purposes be deemed to have become the holder of
record of such shares on the date on which the Warrant was surrendered and
payment of the Warrant Price and any applicable taxes was made, except that,
if the date of such surrender and payment is a date on which the stock
transfer books of the Company are closed, such person shall be deemed to have
become the holder of such shares at the close of business on the next
succeeding date on which the stock transfer books are open.
2. Reservation of Shares; Listing; Payment of Taxes; etc.
(a) The Company covenants that it will at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose of
issue upon exercise of Warrant, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrant. The Company
covenants that all shares of Common Stock which shall be issuable upon
exercise of the Warrant shall, at the time of delivery (assuming full payment
of the purchase price thereof), be duly and validly issued, fully paid,
nonassessable and free from all issuance taxes, liens and charges with respect
to the issue thereof including, without limitation, adverse claims whatsoever
(with the exception of claims arising through the acts of the Registered
Holders themselves and except as arising from applicable Federal and state
securities laws), that the Company shall have paid all taxes, if any, in
respect of the original issuance thereof and that upon issuance such shares,
to the extent applicable, shall be listed on, or included in, the Stock
Market. As used herein, "Stock Market" shall mean the principal national
securities exchange on which the Common Stock is listed or admitted to trading
or, if the Common Stock is not listed or admitted to trading on any national
securities exchange, shall mean NASDAQ or, if the Common Stock is not quoted
on Nasdaq, shall mean the OTC Bulletin Board or, if the Common Stock is not
quoted on the OTC Bulletin Board, shall mean the over-the-counter market as
furnished by any NASD member firm selected from time to time by the Company
for that purpose.
(b) The Company covenants that if any securities to be reserved for
the purpose of exercise of the Warrant hereunder require registration with, or
the approval of, any governmental authority under any federal securities law
before such securities may be validly issued or delivered upon such exercise,
then the Company will in good faith and as expeditiously as reasonably
possible, endeavor to secure such registration or approval. The Company will
use reasonable efforts to obtain appropriate approvals or registrations under
state "blue sky" securities laws; provided, that the Company shall not be
required to qualify as a foreign corporation or file a general or limited
consent to service of process in any such jurisdictions or make any changes in
its capital structure or any other aspects of its business or enter into any
agreements with blue sky commissions, including any agreement to escrow shares
of its capital stock. With respect to any such securities, however, Warrants
may not be exercised by, or shares of Common Stock issued to, any Registered
Holder in any state in which such exercise would be unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes
and other similar governmental charges that may be imposed with respect to the
issuance of Warrants, or the issuance or delivery of any shares upon exercise
of the Warrants; provided, however, that if the shares of Common Stock are to
be delivered in a name other than the name of the Registered Holder on any
Warrant being exercised, then no such delivery shall be made unless the person
requesting the same has paid to the Company the amount of transfer taxes or
charges incident thereto, if any.
3. Exchange and Registration of Transfer.
(a) This Warrant may be exchanged for another Warrant representing
an equal aggregate number of Warrants of the same class or may be transferred
in whole or in part, by surrendering it to the Company at its corporate
office. Upon satisfaction of the terms and provisions hereof, the Company
shall execute, and the Company shall sign, issue and deliver in exchange
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therefor, such new Warrant or Warrants that the Registered Holder making the
exchange shall be entitled to receive.
(b) The Company shall keep at its office books in which, subject to
such reasonable regulations as it may prescribe, it shall register Warrants
and any transfers thereof in accordance with its regular practice. Upon due
presentment for registration of transfer of any Warrant at such office, the
Company shall execute and the Company shall issue and deliver to the
transferee or transferees a new Warrant or Warrants representing an equal
aggregate number of Warrants.
(c) With respect to all Warrants presented for registration or
transfer, or for exchange or exercise, the subscription form attached hereto
shall be duly endorsed, or be accompanied by a written instrument or
instruments of transfer and subscription, in form satisfactory to the Company,
duly executed by the Registered Holder or his attorney-in-fact duly authorized
in writing.
(d) Prior to due presentment for registration of transfer thereof,
the Company may deem and treat the Registered Holder of any Warrant as the
absolute owner thereof (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Company)
for all purposes and shall not be affected by any notice to the contrary.
4. Loss or Mutilation. Upon receipt by the Company of evidence
satisfactory to it of the ownership of and loss, theft, destruction or
mutilation of any Warrant and (in case of loss, theft or destruction) of
indemnity satisfactory to it, and (in the case of mutilation) upon surrender
and cancellation thereof, the Company shall execute, sign and deliver to the
Registered Holder in lieu thereof a new Warrant of like tenor representing an
equal aggregate number of Warrants.
5. Adjustment of Warrant Price and Number of Shares of Common Stock or
Warrants. Upon each adjustment of the Warrant Price pursuant to this Section
5, the total number of shares of Common Stock purchasable upon the exercise of
each Warrant shall (subject to the provisions contained in Subsection 5(c)) be
such number of shares (calculated to the nearest tenth) purchasable at the
Warrant Price in effect immediately prior to such adjustment multiplied by a
fraction, the numerator of which shall be the Warrant Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Warrant Price in effect immediately after such adjustment.
(a) Except as otherwise provided herein, in the event the Company
shall, at any time or from time to time after the date hereof, (i) sell or
issue any shares of Common Stock for a consideration per share less than the
Warrant Price in effect on the date of such sale or issuance, (ii) issue any
shares of Common Stock as a stock dividend to the holders of Common Stock, or
(iii) subdivide or combine the outstanding shares of Common Stock into a
greater or fewer number of shares (any such sale, issuance, subdivision or
combination being herein called a "Change of Shares"), then, and thereafter
upon each further Change of Shares, the Warrant Price in effect immediately
prior to such Change of Shares shall be changed to a price (rounded to the
nearest cent) determined by multiplying the Warrant Price in effect
immediately prior thereto by a fraction, the numerator of which shall be (x)
the sum of (A) the number of shares of Common Stock outstanding immediately
prior to the sale or issuance of such additional shares or such subdivision or
combination plus (B) the number of shares of Common Stock that the aggregate
consideration received (determined as provided in Paragraph 5(g)(v)) for the
issuance of such additional shares would purchase at the Warrant Price in
effect on the date of such issuance and the denominator of which shall be (y)
the number of shares of Common Stock outstanding immediately after the sale or
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issuance of such additional shares or such subdivision or combination. Such
adjustment shall be made successively whenever any such issuance is made.
(b) In case of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock, or in case of any
consolidation or merger of the Company with or into another entity (other than
a consolidation or merger in which the Company is the continuing entity and
which does not result in any reclassification, capital reorganization or other
change of outstanding shares of Common Stock other than the number thereof),
or in case of any sale or conveyance to another entity of the property of the
Company as, or substantially as, an entirety (other than a sale/leaseback,
mortgage or other financing transaction), the Company shall cause effective
provision to be made so that each holder of a Warrant then outstanding shall
have the right thereafter, by exercising such Warrant, upon the terms and
conditions specified in the Warrant and in lieu of the shares of Common Stock
immediately theretofore purchasable upon exercise of the Warrant, to purchase
the kind and number of shares of stock or other securities or property
(including cash) receivable upon such reclassification, capital reorganization
or other change, consolidation, merger, sale or conveyance by a holder of the
number of shares of Common Stock that might have been purchased upon exercise
of such Warrant immediately prior to such reclassification, capital
reorganization or other change, consolidation, merger, sale or conveyance.
Any such provision shall include provision for adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in
this Section 5. The Company shall not effect any such consolidation, merger
or sale unless prior to, or simultaneously with, the consummation thereof the
successor (if other than the Company) resulting from such consolidation or
merger or the entity purchasing assets or other appropriate entity shall
assume, by written instrument executed and delivered to the Company, the
obligation to deliver to the holder of each Warrant such shares of stock,
securities or assets s, in accordance with the foregoing provisions, such
holders may be entitled to purchase and the other obligations under this
Warrant. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and other changes of outstanding
shares of Common Stock and to successive consolidations, mergers, sales or
conveyances.
(c) If, at any time or from time to time, the Company shall issue
or distribute to the holders of shares of Common Stock evidence of its
indebtedness, any other securities of the Company or any cash, property or
other assets (excluding an issuance or distribution governed by one of the
preceding Subsections of this Section 5 and also excluding cash dividends or
cash distributions paid out of net profits legally available therefor in the
full amount thereof (any such non-excluded event being herein called a
"Special Dividend")), then in each case the Registered Holders of the Warrants
shall be entitled to a proportionate share of any such Special Dividend as
though they were the holders of the number of shares of Common Stock of the
Company for which their Warrants are exercisable as of the record date fixed
for the determination of the holders of Common Stock of the Company entitled
to receive such Special Dividend.
(d) The Company may elect, upon any adjustment of the Warrant Price
hereunder, to adjust the number of Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the
exercise of each Warrant as hereinabove provided, so that each Warrant
outstanding after such adjustment shall represent the right to purchase one
share of Common Stock. Each Warrant held of record prior to such adjustment
of the number of Warrants shall become that number of Warrants (calculated to
the nearest tenth) determined by multiplying the number one by a fraction, the
numerator of which shall be the Warrant Price in effect immediately prior to
such adjustment and the denominator of which shall be the Warrant Price in
4
effect immediately after such adjustment. Upon each adjustment of the number
of Warrants pursuant to this Section 5, the Company shall, as promptly as
practicable, cause to be distributed to each Registered Holder of Warrants on
the date of such adjustment Warrants evidencing, subject to Section 6, the
number of additional Warrants to which such Holder shall be entitled as a
result of such adjustment or, at the option of the Company, cause to be
distributed to such Holder in substitution and replacement for the Warrants
held by him prior to the date of adjustment (and upon surrender thereof, if
required by the Company) new Warrants evidencing the number of Warrants to
which such Holder shall be entitled after such adjustment.
(e) Irrespective of any adjustments or changes in the Warrant Price
or the number of shares of Common Stock purchasable upon exercise of the
Warrants, the Warrants theretofore and thereafter issued shall, unless the
Company shall exercise its option to issue new Warrants pursuant to Subsection
3(a), continue to express the same Warrant Price per share, number of shares
purchasable thereunder and Redemption Price therefor as when the same were
originally issued.
(f) After each adjustment of the Warrant Price pursuant to this
Section 5, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (i) the
Warrant Price as so adjusted, (ii) the number of shares of Common Stock
purchasable upon exercise of each Warrant after such adjustment, and, if the
Company shall have elected to adjust the number of Warrants pursuant to
Subsection 5(d), the number of Warrants to which the registered holder of each
Warrant shall then be entitled, and the adjustment in Redemption Price
resulting therefrom, and (iii) a brief statement of the facts accounting for
such adjustment. The Company will cause a brief summary thereof to be sent by
ordinary first class mail to each Registered Holder of Warrants at his or her
last address as it shall appear on the registry books. No failure to mail
such notice nor any defect therein or in the mailing thereof shall affect the
validity of such adjustment. The affidavit the Secretary or an Assistant
Secretary of the Company that such notice has been mailed shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
(g) For purposes of Subsections 5(a) and 5(d), the following
provisions (i) to (v) shall also be applicable:
(i) the number of shares of Common Stock deemed outstanding at
any given time shall include all shares of capital stock convertible into, or
exchangeable for, Common Stock (on an as converted basis) as well as all
shares of Common Stock issuable upon the exercise of (x) any convertible debt,
(y) warrants outstanding on the date hereof and (z) options outstanding on the
date hereof.
(ii) No adjustment of the Warrant Price shall be made unless
such adjustment would require an increase or decrease of at least $.01 in such
price; provided that any adjustments which by reason of this Paragraph (ii)
are not required to be made shall be carried forward and shall be made at the
time of and together with the next subsequent adjustment which, together with
adjustments so carried forward, shall require an increase or decrease of at
least $.01 in the Warrant Price then in effect hereunder.
(iii) In case of (1) the sale by the Company (including as a
component of a unit) of any rights or warrants to subscribe for or purchase,
or any options for the purchase of, Common Stock or any securities convertible
into or exchangeable for Common Stock (such securities convertible,
exercisable or exchangeable into Common Stock being herein called "Convertible
Securities"), or (2) the issuance by the Company, without the receipt by the
5
Company of any consideration therefor, of any rights or warrants to subscribe
for or purchase, or any options for the purchase of, Common Stock or
Convertible Securities, whether or not such rights, warrants or options, or
the right to convert or exchange such Convertible Securities, are immediately
exercisable, and the consideration per share for which Common Stock is
issuable upon the exercise of such rights, warrants or options or upon the
conversion or exchange of such Convertible Securities (determined by dividing
(x) the minimum aggregate consideration, as set forth in the instrument
relating thereto without regard to any antidilution or similar provisions
contained therein for a subsequent adjustment of such amount, payable to the
Company upon the exercise of such rights, warrants or options, plus the
consideration received by the Company for the issuance or sale of such rights,
warrants or options, plus, in the case of such Convertible Securities, the
minimum aggregate amount, as set forth in the instrument relating thereto
without regard to any antidilution or similar provisions contained therein for
a subsequent adjustment of such amount, of additional consideration, if any,
other than such Convertible Securities, payable upon the conversion or
exchange thereof, by (y) the total maximum number, as set forth in the
instrument relating thereto without regard to any antidilution or similar
provisions contained therein for a subsequent adjustment of such amount, of
shares of Common Stock issuable upon the exercise of such rights, warrants or
options or upon the conversion or exchage of such Convertible Securities
issuable upon the exercise of such rights, warrants or options) is less than
the Warrant Price of the Common Stock as of the date of the issuance or sale
of such rights, warrants or options, then such total maximum number of shares
of Common Stock issuable upon the exercise of such rights, warrants or options
or upon the conversion or exchange of such Convertible Securities (as of the
date of the issuance or sale of such rights, warrants or options) shall be
deemed to be "Common Stock" for purposes of Subsections 5(a) and 5(d) and
shall be deemed to have been sold for an amount equal to such consideration
per share and shall cause an adjustment to be made in accordance with
Subsections 5(a) and 5(d).
(iv) In case of the sale or other issuance by the Company of
any Convertible Securities, whether or not the right of conversion or exchange
thereunder is immediately exercisable, and the price per share for which
Common Stock is issuable upon the conversion or exchange of such Convertible
Securities (determined by dividing (x) the total amount of consideration
received by the Company for the sale of such Convertible Securities, plus the
minimum aggregate amount, as set forth in the instrument relating thereto
without regard to any antidilution or similar provisions contained therein for
a subsequent adjustment of such amount, of additional consideration, if any,
other than such Convertible Securities, payable upon the conversion or
exchange thereof, by (y) the total maximum number, as set forth in the
instrument relating thereto without regard to any antidilution or similar
provisions contained therein for a subsequent adjustment of such amount, of
shares of Common Stock issuable upon the conversion or exchange of such
Convertible Securities) is less than the Warrant Price of the Common Stock as
of the date of the sale of such Convertible Securities, then such total
maximum number of shares of Common Stock issuable upon the conversion or
exchange of such Convertible Securities (as of the date of the sale of such
Convertible Securities) shall be deemed to be "Common Stock" for purposes of
Subsections 5(a) and 5(d) and shall be deemed to have been sold for an amount
equal to such consideration per share and shall cause an adjustment to be made
in accordance with Subsections 5(a) and 5(d).
(v) In case the Company shall modify the rights of conversion,
exchange or exercise of any of the securities referred to in Paragraphs (iii)
or (iv) of this Subsection 5(g) or any other securities of the Company
convertible, exchangeable or exercisable for shares of Common Stock, for any
reason other than an event that would require adjustment to prevent dilution,
6
so that the consideration per share received by the Company after such
modification is less than the Warrant Price as of the date prior to such
modification, then such securities, to the extent not theretofore exercised,
converted or exchanged, shall be deemed to have expired or terminated
immediately prior to the date of such modification and the Company shall be
deemed, for purposes of calculating any adjustments pursuant to this Section
5, to have issued such new securities upon such new terms on the date of
modification. Such adjustment shall become effective as of the date upon
which such modification shall take effect. On the expiration or cancellation
of any such right, warrant or option or the termination or cancellation of any
such right to convert or exchange any such Convertible Securities, the Warrant
Price then in effect hereunder shall forthwith be readjusted to such Warrant
Price as would have obtained (a) had the adjustments made upon the issuance or
sale of such rights, warrants, options or Convertible Securities been made
upon the basis of the issuance of only the number of shares of Common Stock
theretofore actually delivered (and the total consideration received therefor)
upon the exercise of such rights, warrants or options or upon the conversion
or exchange of such Convertible Securities and (b) had adjustments been made
on the basis of the Warrant Price as adjusted under clause (a) of this
sentence for all transactions (which would have affected such adjusted Warrant
Price) made after the issuance or sale of such rights, warrants, options or
Convertible Securities.
(vi) In case of the sale of any shares of Common Stock, any
Convertible Securities, any rights or warrants to subscribe for or purchase,
or any options for the purchase of, Common Stock or Convertible Securities,
the consideration received by the Company therefor shall be deemed to be the
gross sales price therefor without deducting therefrom any expense paid or
incurred by the Company or any underwriting discounts or commissions or
concessions paid or allowed by the Company in connection therewith. In the
event that any securities shall be issued in connection with any other
securities of the Company, together comprising one integral transaction in
which no specific consideration is allocated among the securities, then each
of such securities shall be deemed to have been issued for such consideration
as the Board of Directors of the Company determines in good faith; provided,
however that if holders of more than of 10% of the then outstanding Warrants
disagree with such determination, the Company shall retain an independent
investment banking firm for the purpose of obtaining an appraisal.
(h) Notwithstanding any other provision hereof, no adjustment to
the Warrant Price of the Warrants or to the number of shares of Common Stock
purchasable upon the exercise of each Warrant will be made:
(i) upon the exercise of any of the options outstanding on the
date hereof under the Company's existing stock option plans; or
(ii) upon the issuance or exercise of options which may
hereafter be granted with the approval of the Board of Directors, or
exercised, under any employee benefit plan of the Company to officers,
directors, consultants or employees, but only with respect to such options as
are exercisable at prices no lower than the Closing Bid Price (or, if the
price referenced in the definition of Closing Bid Price cannot be determined,
the Fair Market Value (as defined below)) of the Common Stock as of the date
of grant thereof; or
(iii) upon issuance or exercise of the warrants issued to D2
in connection with the Management Agreement between D2 Co., LLC and the
Company, dated December 23, 1999 or upon the conversion of the notes or the
exercise of the warrants included in the units issued pursuant to a bridge
financing of the Company being effected concurrently herewith; or
7
(iv) upon the issuance or sale of Common Stock or Convertible
Securities pursuant to the exercise of any rights, options or warrants to
receive, subscribe for or purchase, or any options for the purchase of, Common
Stock or Convertible Securities, whether or not such rights, warrants or
options were outstanding on the date of the original sale of the Warrants or
were thereafter issued or sold, provided that an adjustment was either made or
not required to be made in accordance with Subsections 5(a) and 5(d) in
connection with the issuance or sale of such securities or any modification of
the terms thereof; or
(v) upon the issuance or sale of Common Stock upon conversion
or exchange of any Convertible Securities, provided that any adjustments
required to be made upon the issuance or sale of such Convertible Securities
or any modification of the terms thereof were so made, and whether or not such
Convertible Securities were outstanding on the date of the original sale of
the Warrants or were thereafter issued or sold.
Paragraph 5(g)(v) shall nevertheless apply to any modification of the rights
of conversion, exchange or exercise of any of the securities referred to in
Paragraphs (i), (ii) and (iii) of this Subsection 5(h). For purposes hereof,
"Fair Market Value" shall mean the average Closing Bid Price for twenty (20)
consecutive trading days, ending with the trading day prior to the date as of
which the Fair Market Value is being determined, (with appropriate adjustments
for subdivisions or combinations of shares effected during such period)
provided that if the prices referred to in the definition of Closing Bid Price
cannot be determined for such period, "Fair Market Value" shall be the fair
market value as determined by the Board of Directors in good faith.
(i) As used in this Section 5, the term "Common Stock" shall mean
and include the Company's Common Stock authorized on the date of the original
issue of the Warrants and shall also include any capital stock of any class of
the Company thereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary liquidation,
dissolution or winding up of the Company; provided, however, that the shares
issuable upon exercise of the Warrants shall include only shares of such class
designated in the Company's Certificate of Incorporation, as amended, as
Common Stock on the date of the original issue of the Warrants or (i), in the
case of any reclassification, change, consolidation, merger, sale or
conveyance of the character referred to in Subsection 5(c), the stock,
securities or property provided for in such section or (ii), in the case of
any reclassification or change in the outstanding shares of Common Stock
issuable upon exercise of the Warrants as a result of a subdivision or
combination or consisting of a change in par value, or from par value to no
par value, or from no par value to par value, such shares of Common Stock as
so reclassified or changed.
(j) Any determination as to whether an adjustment in the Warrant
Price in effect hereunder is required pursuant to Section 5, or as to the
amount of any such adjustment, if required, shall be binding upon the holders
of the Warrants and the Company if made in good faith by the Board of
Directors of the Company.
(k) If and whenever the Company shall grant to the holders of
Common Stock, as such, rights or warrants to subscribe for or to purchase, or
any options for the purchase of, Common Stock or securities convertible into
or exchangeable for or carrying a right, warrant or option to purchase Common
Stock, the Company may at its option elect concurrently therewith to grant to
each Registered Holder as of the record date for such transaction of the
Warrants then outstanding, the rights, warrants or options to which each
Registered Holder would have been entitled if, on the record date used to
8
determine the shareholders entitled to the rights, warrants or options being
granted by the Company, the Registered Holder were the holder of record of the
number of whole shares of Common Stock then issuable upon exercise of his or
her Warrant. If the Company shall so elect under this Subsection 5(k), then
such grant by the Company to the holders of the Warrants shall be in lieu of
any adjustment which otherwise might be called for pursuant to this Section 5.
6. Fractional Warrants and Fractional Shares. If the number of shares
of Common Stock purchasable upon the exercise of each Warrant is adjusted
pursuant to Section 5, the Company nevertheless shall not be required to issue
fractions of shares, upon exercise of the Warrant or otherwise, nor to
distribute certificates that evidence fractional shares. With respect to any
fraction of a share called for upon any exercise hereof, the Company shall pay
to the Registered Holder an amount in cash equal to such fraction multiplied
by the Fair Market Value of one share of Common Stock as of the date of
exercise.
7. Warrant Holders Not Deemed Shareholders. No holder of Warrants
shall, as such, be entitled to vote or to receive dividends or be deemed the
holder of Common Stock that may at any time be issuable upon exercise of such
Warrants for any purpose whatsoever, nor shall anything contained herein be
construed to confer upon the holder of Warrants, as such, any of the rights of
a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such Holder shall have exercised such Warrants and
been issued shares of Common Stock in accordance with the provisions hereof.
8. Rights of Action. All rights of action with respect to this
Agreement are vested in the respective Registered Holders of the Warrants, and
any Registered Holder of a Warrant, without consent of the holder of any
other Warrant, may, in his own behalf and for his own benefit, enforce against
the Company his right to exercise his Warrant for the purchase of shares of
Common Stock in the manner provided herein.
9. Agreement of Warrant Holders. Every holder of any Warrant, by his
acceptance thereof, consents and agrees with the Company and every other
holder of any Warrant that:
(i) The Warrants are transferable only on the registry books
of the Company by the Registered Holder thereof in person or by his or her
attorney duly authorized in writing and only if such Warrants are surrendered
at the office of the Company, duly endorsed or accompanied by a proper
instrument of transfer satisfactory to the Company, in its sole discretion,
together with payment of any applicable transfer taxes; and
(ii) The Company may deem and treat the person in whose name
the Warrant is registered as the holder and as the absolute, true and lawful
owner thereof for all purposes, and the Company shall not be affected by any
notice or knowledge to the contrary, except as otherwise expressly provided in
Section 3.
10. Investment Representation and Legend. The holder, by acceptance of
the Warrants, represents and warrants to the Company that it is acquiring the
Warrants and the shares of Common Stock (or other securities) issuable upon
the exercise hereof for investment purposes only and not with a view towards
the resale or other distribution thereof and agrees that the Company may affix
upon this Warrant the following legend:
9
"This Warrant has been issued in reliance upon the representation of
the holder that it has been acquired for investment purposes and not
with a view towards the resale or other distribution thereof.
Neither this Warrant nor the shares issuable upon the exercise of
this Warrant have been registered under the Securities Act of 1933,
as amended."
The holder, by acceptance of this Warrant, further agrees that the Company may
affix the following legend to certificates for shares of Common Stock issued
upon exercise of this Warrant:
"The securities represented by this certificate have been issued in
reliance upon the representation of the holder that they have been
acquired for investment and not with a view toward the resale or other
distribution thereof, and have not been registered under the Securities
Act of 1933, as amended. Neither the securities evidenced hereby, nor
any interest therein, may be offered, sold, transferred, encumbered or
otherwise disposed of unless either (i) there is an effective
registration statement under said Act relating thereto or (ii) the
Company has received an opinion of counsel, reasonably satisfactory in
form and substance to the Company, stating that such registration is not
required."
11. Cancellation of Warrants. If the Company shall purchase or acquire
any Warrant or Warrants, by redemption or otherwise, each such Warrant shall
thereupon be and canceled by it and retired. The Company shall also cancel
the Warrant or Warrants following exercise of any or all thereof or delivered
to it for transfer, split up, combination or exchange.
12. Modification of Warrant. The terms of the Warrants shall not be
modified, supplemented or altered in any respect except with the consent in
writing of the Registered Holders representing at least a majority of the
Warrants then outstanding; provided, that, no change in the number or nature
of the securities purchasable upon the exercise of any Warrant, or the Warrant
Price therefor, or the acceleration of the Warrant Expiration Date, shall be
made without the consent in writing of the Registered Holder of the Warrant,
and in compliance with applicable law.
13. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been made when
delivered or mailed by means of first class registered or certified mail,
postage prepaid as follows: if to the Registered Holder of a Warrant, at the
address of such holder as shown on the registry books maintained by the
Company; if to the Company, at 000 00xx Xx., Xxxxx 0000, Xxxxxx, XX 00000, or
at such other address as may have been furnished to the Registered Holder in
writing by the Company.
14. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, without reference to
principles of conflict of laws.
15. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Company, the Registered Holder and their respective
successors and assigns, and the holders from time to time of the Warrants.
Nothing in this Warrant is intended nor shall be construed to confer upon any
other person any right, remedy or claim, in equity or at law, or to impose
upon any other person any duty, liability or obligation.
16. Registration Rights. The rights of the holder hereof with respect to
the registration under the Securities Act of 1933, as amended, of the shares
of Common Stock issuable upon the exercise of this Warrant are set forth in
10
that Warrant Purchase Agreement dated December 23, 1999, between the Company
and D2.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the date first above written.
BION ENVIRONMENTAL TECHNOLOGIES, INC.
By: /s/ Xxx Xxxxxxxx
Authorized Officer
11
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrant
The undersigned Registered Holder hereby irrevocably elects to exercise
__________ Warrants represented by this certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
[please print or type name and address]
and be delivered to
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
[please print or type name and address]
and if such number of Warrants shall not be all the Warrants evidenced by
this Warrant Certificate, that a new Warrant for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
The undersigned represents that the exercise of the within Warrant was
solicited by a member of the National Association of Securities Dealers, Inc.
If not solicited by an NASD member, please write "unsolicited" in the space
below.
(Name of NASD Member)
Dated: ______________________ X _______________________________________
_______________________________________
_______________________________________
Address
_______________________________________
Taxpayer Identification Number
_______________________________________
Signature Guaranteed
12
ASSIGNMENT
To Be Executed by the Registered Holder
In Order to Assign Warrant
FOR VALUE RECEIVED, ______________________________________ hereby sells,
assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
[please print or type name and address]
___________________________ of the Warrants represented hereby, and
hereby irrevocably constitutes and appoints
________________________________________________________________________
Attorney to transfer this Warrant on the books of the Company, with full
power of substitution in the premises.
Dated: _________________________ X_______________________________________
Signature Guaranteed
_______________________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO
THE NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND
MUST BE GUARANTEED BY A MEMBER OF THE MEDALLION STAND PROGRAM.
13
