THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK
ISSUABLE UPON EXERCISE OF 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 SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
INCENTRA SOLUTIONS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase up to 417,857 Shares of Common Stock of
Incentra Solutions, Inc.
(subject to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. _________________ Issue Date: March 31, 2006
INCENTRA SOLUTIONS, INC., a corporation organized under the laws of the
State of Nevada ("ICNS"), hereby certifies that, for value received, LAURUS
MASTER FUND, LTD., or assigns (the "Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company (as defined herein) from and after
the Issue Date of this Warrant and at any time or from time to time before 5:00
p.m., New York time, through the close of business March 31, 2026 (the
"Expiration Date"), up to 417,857 fully paid and nonassessable shares of Common
Stock (as hereinafter defined), at the applicable Exercise Price (as defined
below) per share. The number and character of such shares of Common Stock and
the applicable Exercise Price per share are subject to adjustment as provided
herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include ICNS and any corporation which
shall succeed, or assume the obligations of, ICNS hereunder.
(b) The term "Common Stock" includes (i) the Company's Common Stock,
par value $0.001 per share; and (ii) any other securities into which or
for which any of the securities described in (a) may be converted or
exchanged pursuant to a plan of recapitalization, reorganization, merger,
sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person
(corporate or otherwise) which the Holder of this Warrant at any time
shall be entitled to receive, or shall have received, on the exercise of
the Warrant, in lieu of or in addition to Common Stock, or
which at any time shall be issuable or shall have been issued in exchange
for or in replacement of Common Stock or Other Securities pursuant to
Section 4 or otherwise.
(d) The "Exercise Price" applicable under this Warrant shall be
$0.001.
1. EXERCISE OF WARRANT.
1.1 NUMBER OF SHARES ISSUABLE UPON EXERCISE. From and after the date
hereof, the Holder shall be entitled to receive, upon exercise of this Warrant
in whole or in part, by delivery of an original or fax copy of an exercise
notice in the form attached hereto as Exhibit A (the "Exercise Notice") up to
417,857 shares of Common Stock of the Company, subject to adjustment pursuant to
Section 4.
1.2 FAIR MARKET VALUE. For purposes hereof, the "Fair Market Value"
of a share of Common Stock as of a particular date (the "Determination Date")
shall mean:
(a) If the Company's Common Stock is traded on the American Stock
Exchange or another national exchange or is quoted on the National or
SmallCap Market of The Nasdaq Stock Market, Inc. ("Nasdaq"), then the
closing or last sale price, respectively, reported for the last business
day immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on the American
Stock Exchange or another national exchange or on the Nasdaq but is traded
on the National Association of Securities Dealers, Inc. Over-the-Counter
Bulletin Board, then the mean of the average of the closing bid and asked
prices reported for the last business day immediately preceding the
Determination Date.
(c) Except as provided in clause (d) below, if the Company's Common
Stock is not publicly traded, then as the Holder and the Company agree or
in the absence of agreement by arbitration in accordance with the rules
then in effect of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided.
(d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company's charter, then all
amounts to be payable per share to holders of the Common Stock pursuant to
the charter in the event of such liquidation, dissolution or winding up,
plus all other amounts to be payable per share in respect of the Common
Stock in liquidation under the charter, assuming for the purposes of this
clause (d) that all of the shares of Common Stock then issuable upon
exercise of the Warrant are outstanding at the Determination Date.
1.3 COMPANY ACKNOWLEDGMENT. The Company will, at the time of the
exercise of this Warrant, upon the request of the Holder hereof, acknowledge in
writing its continuing obligation to afford to such Holder any rights to which
such Holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the Holder
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shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to such Holder any such rights.
1.4 TRUSTEE FOR WARRANT HOLDERS. In the event that a bank or trust
company shall have been appointed as trustee for the Holder of this Warrant
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and duties of an Warrant agent (as hereinafter described) and shall accept, in
its own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.
2. PROCEDURE FOR EXERCISE.
2.1 DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares in accordance herewith. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within three (3) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder, or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such Holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such Holder
is entitled upon such exercise pursuant to Section 1 or otherwise.
2.2 EXERCISE. (a) Payment may be made either (i) in cash or by
certified or official bank check payable to the order of the Company equal to
the applicable aggregate Exercise Price, (ii) by delivery of this Warrant, or
shares of Common Stock and/or Common Stock receivable upon exercise of this
Warrant in accordance with Section (b) below, or (iii) by a combination of any
of the foregoing methods, for the number of Common Shares specified in such
Exercise Notice (as such exercise number shall be adjusted to reflect any
adjustment in the total number of shares of Common Stock issuable to the Holder
per the terms of this Warrant); provided, however, that if at the time of
delivery of an Exercise Notice the shares of Common Stock to be issued upon
payment of the Exercise Price have been registered under the Securities Act of
1933, as amended (the "Securities Act"), and are covered by an effective
registration statement under the Securities Act, payment of the Exercise Price
may only be made pursuant to clause (i) above and may not be made pursuant to
clause (ii) or (iii) above. Upon receipt by the Company of an Exercise Notice
and proper payment of the aggregate Exercise Price, the Holder shall thereupon
be entitled to receive the number of duly authorized, validly issued, fully-paid
and non-assessable shares of Common Stock (or Other Securities) determined as
provided herein.
(b) Notwithstanding any provisions herein to the contrary, if the Fair
Market Value of one share of Common Stock is greater than the Exercise Price (at
the date of calculation as set
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forth below), in lieu of exercising this Warrant for cash, the Holder may elect
to receive shares equal to the value (as determined below) of this Warrant (or
the portion thereof being exercised) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Exercise
Notice, in which event the Company shall issue to the Holder a number of shares
of Common Stock computed using the following formula:
X=Y (A-B)
-----
A
Where X = the number of shares of Common Stock to be issued to the Holder
Y = the number of shares of Common Stock purchasable under this
Warrant or, if only a portion of this Warrant is being
exercised, the portion of this Warrant being exercised (at the
date of such calculation)
A = the Fair Market Value of one share of the Company's Common Stock
(at the date of such calculation)
B = the Exercise Price (as adjusted to the date of such calculation)
3. EFFECT OF REORGANIZATION, ETC.; ADJUSTMENT OF EXERCISE PRICE.
3.1 REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case at any time
or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.
3.2 DISSOLUTION. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, concurrently with any distributions made to holders of its Common
Stock, shall at its expense deliver or cause to be delivered to the Holder the
stock and other securities and property (including cash, where applicable)
receivable by the Holder of this Warrant pursuant to Section 3.1, or, if the
Holder shall so instruct the Company, to a bank or trust company specified by
the Holder and having its principal office in New York, NY as trustee for the
Holder of this Warrant (the "Trustee").
3.3 CONTINUATION OF TERMS. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of
4
stock and other securities and property receivable on the exercise of this
Warrant after the consummation of such reorganization, consolidation or merger
or the effective date of dissolution following any such transfer, as the case
may be, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether or
not such person shall have expressly assumed the terms of this Warrant as
provided in Section 4. In the event this Warrant does not continue in full force
and effect after the consummation of the transactions described in this Section
3, then the Company's securities and property (including cash, where applicable)
receivable by the Holders of the Warrant will be delivered to Holder or the
Trustee as contemplated by Section 3.2.
4. EXTRAORDINARY EVENTS REGARDING COMMON STOCK. In the event that the Company
shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock or any preferred stock
issued by the Company, (b) subdivide its outstanding shares of Common
Stock, or (c) combine its outstanding shares of the Common Stock into a
smaller number of shares of the Common Stock (each of the preceding
clauses (a) through (c), inclusive, an "Event"), then, in each such event,
the number of shares of Common Stock that the Holder shall thereafter, on
the exercise hereof as provided in Section 1, be entitled to receive shall
be increased or decreased to a number determined by multiplying the number
of shares of Common Stock that would, immediately prior to such Event, be
issuable upon the exercise of this Warrant by a fraction of which (a) the
numerator is the number of issued and outstanding shares of Common Stock
immediately after such Event, and (b) the denominator is the number of
issued and outstanding shares of Common Stock immediately prior to such
Event.
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or readjustment
in the shares of Common Stock (or Other Securities) issuable on the
exercise of this Warrant, the Company at its expense will promptly cause
its Chief Financial Officer or other appropriate designee to compute such
adjustment or readjustment in accordance with the terms of this Warrant
and prepare a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment
is based, including a statement of (a) the consideration received or
receivable by the Company for any additional shares of Common Stock (or
Other Securities) issued or sold or deemed to have been issued or sold,
(b) the number of shares of Common Stock (or Other Securities) outstanding
or deemed to be outstanding, and (c) the Exercise Price and the number of
shares of Common Stock to be received upon exercise of this Warrant, in
effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will
forthwith mail a copy of each such certificate to the Holder of this
Warrant and any Warrant agent of the Company (appointed pursuant to
Section 11 hereof).
6. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANT. The Company will
at all times reserve and keep available, solely for issuance and delivery
on the exercise of this Warrant, shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of this Warrant.
5
7. ASSIGNMENT; EXCHANGE OF WARRANT. Subject to compliance with applicable
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") in whole or
in part. On the surrender for exchange of this Warrant, with the
Transferor's endorsement in the form of Exhibit B attached hereto (the
"Transferor Endorsement Form") and together with evidence reasonably
satisfactory to the Company demonstrating compliance with applicable
securities laws, which shall include, without limitation, the provision of
a legal opinion from the Transferor's counsel that such transfer is exempt
from the registration requirements of applicable securities laws, and with
payment by the Transferor of any applicable transfer taxes) will issue and
deliver to or on the order of the Transferor thereof a new Warrant of like
tenor, in the name of the Transferor and/or the transferee(s) specified in
such Transferor Endorsement Form (each a "Transferee"), calling in the
aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant so surrendered by the
Transferor.
8. REPLACEMENT OF WARRANT. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and,
in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of this Warrant, the Company at its expense
will execute and deliver, in lieu thereof, a new Warrant of like tenor.
9. REGISTRATION RIGHTS. The Holder of this Warrant has been granted certain
registration rights by the Company. These registration rights are set
forth in the Registration Rights Agreement dated as of March 31, 2006
entered into by the Company and the initial Holder of this Warrant, as
amended, modified or supplemented from time to time.
10. MAXIMUM EXERCISE. Notwithstanding anything herein to the contrary, in no
event shall the Holder be entitled to exercise any portion of this Warrant
in excess of that portion of this Warrant upon exercise of which the sum
of (1) the number of shares of Common Stock beneficially owned by the
Holder and its Affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unexercised portion
of the Warrant or the unexercised or unconverted portion of any other
security of the Holder subject to a limitation on conversion analogous to
the limitations contained herein) and (2) the number of shares of Common
Stock issuable upon the exercise of the portion of this Warrant with
respect to which the determination of this proviso is being made, would
result in beneficial ownership by the Holder and its Affiliates of any
amount greater than 4.99% of the then outstanding shares of Common Stock
(whether or not, at the time of such exercise, the Holder and its
Affiliates beneficially own more than 4.99% of the then outstanding shares
of Common Stock). As used herein, the term "Affiliate" means any person or
entity that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a person or
entity, as such terms are used in and construed under Rule 144 under the
Securities Act. For purposes of the proviso to the second preceding
sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and
Regulations 13D-G thereunder, except as otherwise provided in clause (1)
of such proviso. The limitations set forth herein (x) may be waived by the
Holder upon provision
6
of no less than sixty-one (61) days prior notice to the Company and (y)
shall automatically become null and void following notice to the Company
upon the occurrence and during the continuance of an Event of Default (as
defined in either Note referred to in the Purchase Agreement dated as of
the date hereof among the Holder and the Company (as amended, modified,
restated and/or supplemented from time to time, the "Purchase
Agreement")).
11. RESTRICTION. Notwithstanding anything to the contrary contained
herein, the Holder hereby agrees that during the period on and after the Issue
Date and prior to the date that is the one year anniversary of the Issue Date,
it shall not sell any Common Stock acquired upon exercise of this Warrant..
12. WARRANT AGENT. The Company may, by written notice to the Holder of this
Warrant, appoint an agent for the purpose of issuing Common Stock (or
Other Securities) on the exercise of this Warrant pursuant to Section 1,
exchanging this Warrant pursuant to Section 7, and replacing this Warrant
pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
13. TRANSFER ON THE COMPANY'S BOOKS. Until this Warrant is transferred on the
books of the Company, the Company may treat the registered Holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice
to the contrary.
14. NOTICES, ETC. All notices and other communications from the Company to the
Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been
furnished to the Company in writing by such Holder or, until any such
Holder furnishes to the Company an address, then to, and at the address
of, the last Holder of this Warrant who has so furnished an address to the
Company.
15. MISCELLANEOUS. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or
termination is sought. This Warrant shall be governed by and construed in
accordance with the laws of State of New York without regard to principles
of conflicts of laws. Any action brought concerning the transactions
contemplated by this Warrant shall be brought only in the state courts of
New York or in the federal courts located in the state of New York;
provided, however, that the Holder may choose to waive this provision and
bring an action outside the State of New York. The individuals executing
this Warrant on behalf of the Company agree to submit to the jurisdiction
of such courts and waive trial by jury. In the event that any provision of
this Warrant is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any such provision which may prove
invalid or unenforceable under any law shall not affect the validity or
enforceability of any other provision of this Warrant. The headings in
this Warrant are for purposes of reference only, and shall not limit or
otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the
validity or enforceability of any other provision hereof. The Company
7
acknowledges that legal counsel participated in the preparation of this
Warrant and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be
applied in the interpretation of this Warrant to favor any party against
the other party.
16. PROXY. For good and valuable consideration, receipt of which is hereby
acknowledged, Laurus Master Fund, Ltd., hereby appoints the Company (the
"Proxy Holder"), with a mailing address at 0000 Xxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxx 00000, with full power of substitution, as proxy, to vote all
shares of Common Stock of the Company, now or in the future owned by
Laurus Master Fund, Ltd., but solely to the extent issuable upon exercise
of this Warrant (the "Shares").
This proxy is irrevocable and coupled with an interest. Upon the
sale or other transfer of the Shares, in whole or in part, or the
assignment of this Warrant, this proxy shall automatically terminate (x)
with respect to such sold or transferred Shares at the time of such sale
and/or transfer, or (y) with respect to all Shares in the case of an
assignment of this Warrant, at the time of such assignment, in each case,
without any further action required by any person.
Laurus Master Fund, Ltd. shall use its best efforts to forward to
Proxy Holder within two (2) business days following Laurus Master Fund,
Ltd.'s receipt thereof, at the address for Proxy Holder set forth above,
copies of all materials received by Laurus Master Fund, Ltd. relating, in
each case, to the solicitation of the vote of shareholders of the Company.
This proxy shall remain in effect with respect to the Shares of the
Company during the period commencing on the date hereof and continuing
until the payment in full of all obligations and liabilities owing by the
Company to Laurus Master Fund, Ltd. (as the same may be amended, restated,
extended or modified from time to time).
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IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.
INCENTRA SOLUTIONS, INC.
WITNESS:
By: /s/ Xxxxxx X. Xxxxxxx III
-------------------------------
Name: Xxxxxx X. Xxxxxxx III
-------------------------------
Title: Chief Executive Officer
--------------------------------- -------------------------------
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