UNDERWRITER'S WARRANT AGREEMENT dated as of _______, 1997 between EPI
Technologies, Inc., a Delaware corporation (the "Company"), and Duke & Co., Inc.
(the "Underwriter").
W I T N E S S E T H:
WHEREAS, the Underwriter has agreed, pursuant to the underwriting agreement
(the "Underwriting Agreement") dated _______, 1997 between the Underwriter and
the Company, to act as the underwriter in connection with the Company's proposed
public offering (the "Public Offering") of 1,250,000 shares of common stock, par
value $0.01 per share ("Common Stock"), and 1,250,000 redeemable Common Stock
purchase warrants ("Redeemable Warrants"), plus up to an additional 187,500
shares of Common Stock and 187,500 Redeemable Warrants pursuant to the
Underwriter's over-allotment option, which securities are included in a
registration statement on Form S-1 (File No. 333-_____) (hereinafter, the
"Public Offering Registration Statement"); and
WHEREAS, the Company proposes to issue to the Underwriter warrants, one for
the purchase of up to 125,000 shares of Common Stock and the other for the
purchase of up to 125,000 Redeemable Warrants; and
WHEREAS, the warrants issued pursuant to this Agreement are being issued by
the Company to the Underwriter or officers and partners of the Underwriter and
members of the selling group (the "Selling Group") and/or their officers or
partners, in consideration for, and as part of the Underwriter's compensation in
connection with, the Underwriter acting as the underwriter pursuant to the
Underwriting Agreement;
NOW, THEREFORE, in consideration of the foregoing premises, the payment by
the Underwriter to the Company of an aggregate of $250, the receipt of which is
hereby acknowledged by the Company, the agreements herein set forth and other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. GRANT. Subject to the terms and conditions of this Agreement, the
Underwriter, and/or its designees who are officers or partners of the
Underwriter or members of the Selling Group in connection with the Public
Offering, are hereby granted the right to purchase, at any time from ______ ,
1998 until 5:00 P.M., New York City time, on _______, 2002 (the "Warrant
Exercise Term"), up to (i) 125,000 shares of Common Stock (the "Shares") at an
initial exercise price (subject to adjustment as provided in Article 8 hereof)
of $5.50 per Share and (ii) 125,000 Redeemable Warrants at an initial exercise
price of $0.11 per Redeemable Warrant. The right to purchase Shares as
described in (i) above is hereinafter
referred to as "Warrant No. 1" and the right to purchase Redeemable Warrants as
described in (ii) above is hereinafter referred to as "Warrant No. 2". Warrant
No. 1 and Warrant No. 2 are hereinafter referred to collectively as the
"Warrants". Except as specifically otherwise provided herein, the Shares and the
Redeemable Warrants issued pursuant to Warrant No. 1 and Warrant No. 2,
respectively, shall bear the same terms and conditions as described under the
caption "Description of Securities" in the Public Offering Registration
Statement. In addition, the Redeemable Warrants shall be governed by the terms
of the Warrant Agreement dated as of _______, 1997, executed in connection with
the Public Offering (the "Public Warrant Agreement"), and except that the holder
shall have registration rights under the Securities Act of 1933, as amended (the
"Act"), with respect to the Warrants, the Shares and the Redeemable Warrants
subject thereto and the shares of Common Stock unde rlying the Redeemable
Warrants issuable upon exercise of Warrant No. 2, which registration rights are
more fully described in paragraph 7 of this Warrant Agreement. In the event of
any adjustments to the exercise price of and the number of shares of Common
Stock purchasable under the Redeemable Warrants pursuant to the Public Warrant
Agreement, the same chages to the Redeemable Warrants subject to Warrant No. 2
shall be simultaneously effected.
2. WARRANT CERTIFICATES. The warrant certificates (the "Warrant
Certificates") for Warrant No. 1 and Warrant No. 2 to be delivered pursuant to
this Agreement shall be in the forms set forth as Exhibit A and Exhibit B
attached hereto, respectively, and made a part hereof, with such appropriate
insertions, omissions, substitutions and other variations as required or
permitted by this Agreement.
3. EXERCISE OF WARRANTS.
3.1 CASH EXERCISE. The exercise price of the respective Warrants shall be
payable in cash or by certified or official bank check to the order of the
Company, or any combination of cash or check. Upon surrender of the applicable
Warrant Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the applicable exercise price for the Shares and/or
Redeemable Warrants purchased, at the Company's principal offices, currently
located at 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxx 00000, the registered holder of a
Warrant Certificate ("Holder" or "Holders") shall be entitled to receive a
certificate or certificates for the Shares and/or Redeemable Warrants so
purchased. The purchase rights represented by each Warrant Certificate are
exercisable at the option of the Holder thereof, in whole or in part (but not as
to fractional Shares or fractional Redeemable Warrants). In the case of the
purchase of less than all the Shares or Redeemable Warrants, as the case may be,
purchasable under any Warrant Certificate, the Company shall cancel said Warrant
Certificate upon the surrender thereof and shall execute and deliver a new
Warrant
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Certificate of like tenor for the balance of the Shares or Redeemable Warrants,
as the case may be, purchasable thereunder.
3.2 CASHLESS EXERCISE FOR WARRANT NO. 1. At any time during the Warrant
Exercise Term, the Holder may, at its option, exchange Warrant No. 1, in whole
or in part (a "Warrant Exchange"), into the number of Shares determined in
accordance with this Section 3.2, by surrendering the Warrant Certificate
representing Warrant No. 1 at the principal office of the Company, accompanied
by a notice stating (i) such Holder's intent to effect such exchange, (ii) the
number of Shares subject to Warrant No. 1 as to which the exchange is to be
effected and (iii) the date on which the Holder requests that such Warrant
Exchange occur (the "Notice of Exchange"). The Warrant Exchange shall take
place on the date specified in the Notice of Exchange or if the date the Notice
of Exchange is received by the Company is later than the date specified in the
Notice of Exchange, such later date (the "Exchange Date"). Certificates for the
Shares issuable upon such Warrant Exchange and, if applicable, a new warrant of
like tenor evidencing the balance of the Shares remaining subject to this
Warrant, shall be issued as of the Exchange Date and delivered to the Holder
within three (3) business days following the Exchange Date. In connection with
any Warrant Exchange, Warrant No. 1 shall represent the right to subscribe for
and acquire the number of Shares (rounded to the next highest integer) equal to
(i) the number of Shares specified by the Holder in its Notice of Exchange (the
"Total Number") less (ii) the number of Shares equal to the quotient obtained by
dividing (A) the product of the Total Number and the existing exercise price of
Warrant No. 1 by (B) the market price of a share of Common Stock on the Exchange
Date; and, in the case of any Warrant Exchange for less than all of the Shares
purchasable under Warrant No. 1, the Company shall execute and deliver a new
Warrant Certificate of like tenor for the balance of the Shares purchasable
thereunder. By way of example, if the holder of Warrant No. 1 submits a Notice
of Exchange relating to 62,500 of the 125,000 Shares subjct to Warrant No. 1 and
the current market price of a share of Common Stock on the Exchange Date is
$10.00, the holder will be entitled to receive 28,125 shares of Common Stock,
along with a new Warrant Certificate entitling the holder to purchase 62,500
Shares.
4. ISSUANCE OF CERTIFICATES.
4.1. ISSUANCE. Upon exercise of the Warrants, the issuance of certificates
for the Shares and/or Redeemable Warrants, as applicable shall be made forthwith
(and in any event within three (3) business days thereafter) without charge to
the Holder thereof including, without limitation, any tax which may be payable
in respect of the issuance thereof, and such certificates shall (subject to the
provisions of Article 5 hereof) be issued in the name of, or in such names as
may be directed by, the Holder thereof; provided, however, that the Company
shall not be required
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to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificates in a name other than that of the
Holder, and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
4.2. FORMS OF CERTIFICATES. The Warrant Certificates and certificates
representing the Shares and/or Redeemable Warrants shall be executed on behalf
of the Company by the manual or facsimile signature of the present or any future
Chairman or Vice Chairman of the Board of Directors or President or Vice
President of the Company under its corporate seal reproduced thereon, attested
to by the manual or facsimile signature of the present or any future Secretary
or Assistant Secretary of the Company. Warrant Certificates shall be dated the
date of execution by the Company upon initial issuance, division, exchange,
substitution or transfer. The Warrant Certificates and, upon exercise of the
Warrants, in part or in whole, certificates representing the Shares and/or
Redeemable Warrants shall bear a legend substantially similar to the following:
"The securities represented by this certificate have not been
under the Securities Act of 1933, as amended (the "Act"), and may not
be offered or sold except (i) pursuant to an effective registration
statement under the Act, (ii) to the extent applicable, pursuant to
Rule 144 under the Act (or any similar rule under such Act relating
to the disposition of securities), or (iii) upon the delivery by the
holder to the Company of an opinion of counsel, reasonably
satisfactory to counsel to the Company, stating that an exemption
from registration under such Act is available."
5. RESTRICTION ON TRANSFER OF WARRANTS. The Holder of a Warrant
Certificate, by acceptance thereof, covenants and agrees that the Warrant is
being acquired as an investment and not with a view to the distribution thereof,
and that the Warrant may not be sold, transferred, assigned, hypothecated or
otherwise disposed of, in whole or in part, for a period of one (1) year from
the date hereof, except to officers or partners of the Underwriter or to any
member of the Selling Group participating in the distribution to the public of
the Common Stock and Redeemable Warrants, and/or their respective officers or
partners.
6. PRICE.
6.1 INITIAL AND ADJUSTED EXERCISE PRICES. The initial exercise price of
Warrant No. 1 shall be $5.50 per Share and the initial exercise price of Warrant
No. 2 shall be $.11 per Redeemable Warrant. The adjusted exercise price shall be
the price
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which shall result from time to time from any and all adjustments of the initial
exercise price in accordance with the provisions of Article 8 hereof.
6.2 EXERCISE PRICE. The term "exercise price" herein shall mean the
initial exercise price of Warrant No. 1 or Warrant No. 2, as the case may be, or
the adjusted exercise price, depending upon the context.
7. REGISTRATION RIGHTS.
7.1 REGISTRATION UNDER THE SECURITIES ACT OF 1933. None of the Warrants,
the Shares, the Redeemable Warrants and the Common Stock issuable upon exercise
of the Redeemable Warrants (the "Underlying Shares") have been registered for
purposes of public distribution under the Securities Act of 1933, as amended
(the "Act").
7.2 REGISTRABLE SECURITIES. As used herein the term "Registrable
Securities" means the Warrants, the Shares issuable upon exercise of Warrant No.
1, the Redeemable Warrants issuable upon exercise of Warrant No. 2, the
Underlying Shares and any securities issued upon any stock split or stock
dividend in respect of any of the foregoing; provided, however, any of such
securities shall cease to be Registrable Securities when, as of the date of
determination, (i) it has been effectively registered under the Act and disposed
of pursuant thereto, (ii) registration under the Act is no longer required for
the subsequent public distribution of such securities or (iii) it has ceased to
be outstanding. In the event of any merger, reorganization, consolidation,
recapitalization or other change in corporate structure affecting the Common
Stock, such adjustment shall be made in the definition of "Registrable
Securities" as is appropriate in order to prevent any dilution or enlargement of
the rights granted pursuant to this Article 7.
7.3 PIGGYBACK REGISTRATION. If, at any time during the four years
following the date of this Agreement, the Company proposes to prepare and file
one or more post-effective amendments to the Public Offering Registration
Statement filed in connection with the Public Offering or any new registration
statement or post-effective amendments thereto covering equity or debt
securities of the Company, or any such securities of the Company held by its
shareholders (other than pursuant to a Form S-4 relating to a merger or
acquisition or pursuant to a Form S-8 or successor form) (for purposes of this
Article 7, collectively, a "Registration Statement"), it will give written
notice of its intention to do so by registered mail ("Notice"), at least thirty
(30) days prior to the filing of each such Registration Statement, to all
holders of the Registrable Securities. Upon the written request of such a
holder (a "Requesting Holder"), made within twenty (20) business days after
receipt of the Notice, that the Company include any of
5
the Requesting Holder's Registrable Securities in the proposed Registration
Statement, the Company shall, as to each such Requesting Holder, use its best
efforts to effect the registration under the Act of the Registrable Securities
which it has been so requested to register ("Piggyback Registration"), at the
Company's sole cost and expense and at no cost or expense to the Requesting
Holders (other than underwriting discounts and commissions applicable to the
sale of such Registrable Securities and the fees and disbursements, if any, of
counsel to the Requesting Holders); provided, however, that the Company shall in
any event be entitled to withdraw such Registration Statement prior to its
effectiveness if such Registration Statement is withdrawn as to all securities
proposed to be registered thereunder.
7.4 DEMAND REGISTRATION.
(a) At any time during the Warrant Exercise Term, any "Demand Holder" (as
such term is defined in Section 7.4(d) below) of the Registrable Securities
shall have the right (which right is in addition to the piggyback registration
rights provided for under Section 7.3 hereof), exercisable by written notice to
the Company (the "Demand Registration Request"), to have the Company prepare and
file with the Securities and Exchange Commission (the "Commission"), on one
occasion, at the sole expense of the Company (except as provided in Section
7.5(b) hereof), a Registration Statement and such other documents, including a
prospectus, as may be necessary (in the opinion of both counsel for the Company
and counsel for such Demand Holder), in order to comply with the provisions of
the Act, so as to permit a public offering and sale of the Registrable
Securities by the holders thereof. The Company shall use its best efforts to
cause the Registration Statement to become effective under the Act, so as to
permit a public offering and sale of the Registrable Securities by the holders
thereof. Once effective, the Company will use its best efforts to maintain the
effectiveness of the Registration Statement until the earlier of (i) the date
that all of the Registrable Securities have been sold or (ii) the date which is
nine months after the effective date of such Registration Statement.
(b) The Company covenants and agrees to give written notice of any Demand
Registration Request to all holders of the Registrable Securities within ten
(10) business days from the date of the Company's receipt of any such Demand
Registration Request. After receiving notice from the Company as provided in
this Section 7.4(b), holders of Registrable Securities may request the Company
to include their Registrable Securities in the Registration Statement to be
filed pursuant to Section 7.4(a) hereof by notifying the Company of their
decision to have such securities included within ten (10) days of their receipt
of the Company's notice.
6
(c) In addition to the registration rights provided for under Section 7.3
hereof and subsection (a) of this Section 7.4, at any time during the Warrant
Exercise Term, any Demand Holder (as defined below in Section 7.4(d)) of
Registrable Securities shall have the right, exercisable by written request to
the Company, to have the Company prepare and file with the Commission, on one
occasion in respect of all holders of Registrable Securities, a Registration
Statement so as to permit a public offering and sale of such Registrable
Securities until the earlier of (i) the date that all of the Registrable
Securities have been sold or (ii) the date which is nine months after the
effective date of such Registration Statement; provided, however, that all costs
incident thereto shall be at the expense of the holders of the Registrable
Securities included in such Registration Statement (including the costs of any
special audit which may be required). If a Demand Holder shall give notice to
the Company at any time of its or their desire to exercise the registration
right granted pursuant to this Section 7.4(c), then within ten (10) days after
the Company's receipt of such notice, the Company shall give notice to the other
holders of Registrable Securities advising them that the Company is proceeding
with such registration and offering to include therein the Registrable
Securities of such holders, provided they furnish the Company with such
appropriate information in connection therewith as the Company shall reasonably
request in writing.
(d) The term "Demand Holder" as used in this Section 7.4 shall mean any
holder or any combination of holders of Registrable Securities, if included in
such holders' Registrable Securities are that aggregate number of shares of
Common Stock (including Shares already issued and not disposed of in a public
offering and/or Shares issuable pursuant to the exercise of Warrant No. 1 and
Underlying Shares already issued and not disposed of in a public offering and/or
Underlying Shares issuable pursuant to the exercise of Redeemable Warrants
issued and not disposed of in a public offering or issuable pursuant to exercise
of Warrant No. 2 (the "Total Common Shares")) as would constitute 50% or more of
the aggregate number of such Total Common Shares.
7.5 COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. The Company
covenants and agrees as follows:
(a) In connection with any registration under Section 7.4 hereof, the
Company shall file the Registration Statement as expeditiously as possible, but
in no event later than twenty (20) days following receipt of any demand therefor
(unless delayed by the failure of a holder of Registrable Securities to promptly
furnish such information necessary to complete such registration statement),
shall use its best efforts to have any such Registration Statement declared
effective at the earliest possible time, and shall furnish each holder of
Registrable Securities such number of prospectuses as shall reasonably be
requested.
7
(b) The Company shall pay all costs, fees and expenses in connection with
all Registration Statements filed pursuant to Sections 7.3 and 7.4(a) hereof
(excluding any underwriting discounts and commissions which may be incurred in
connection with the sale of any Registrable Securities and excluding any fees
and expenses of counsel for any Requesting Holder or Demand Holder), including,
without limitation, the Company's legal and accounting fees, printing expenses,
and blue sky fees and expenses. The holders of Registrable Securities included
in any Registration Statement filed pursuant to Section 7.4(c) hereof will pay
all costs, fees and expenses in connection with such Registration Statement,
including their own legal fees and expenses, if any.
(c) The Company will take all necessary action which may be required in
qualifying or registering the Registrable Securities included in a Registration
Statement for offering and sale under the securities or blue sky laws of such
states as are reasonably requested by the holders of such securities.
(d) The Company shall indemnify any holder of the Registrable Securities
to be sold pursuant to any Registration Statement and each person, if any, who
controls such holder within the meaning of Section 15 of the Act or Section
20(a) of the Securities Exchange Act of 1934, as amended ("Exchange Act"),
against all loss, claim, damage, expense or liability (including all expenses
reasonably incurred in investigating, preparing or defending against any claim
whatsoever) to which any of them may become subject under the Act, the Exchange
Act or otherwise, arising from such Registration Statement to the same extent
and with the same effect as the provisions pursuant to which the Company has
agreed to indemnify the Underwriter contained in Section 6 of the Underwriting
Agreement and to provide for just and equitable contribution as set forth in
Section 7 of the Underwriting Agreement.
(e) Each holder of Registrable Securities to be sold pursuant to a
Registration Statement will furnish to the Company such information as may be
reasonably be requested by the Company for inclusion in the Registration
Statement. Any holder of Registrable Securities to be sold pursuant to a
Registration Statement, and its successors and assigns, shall severally, and not
jointly, indemnify, the Company, its officers and directors and each person, if
any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from information
furnished in writing by or on behalf of such holder, or its successors or
assigns, for specific inclusion in such Registration Statement to the same
extent and with the same effect as the provisions contained in Section 6 of the
Underwriting
8
Agreement pursuant to which the Underwriter has agreed to indemnify the Company
and to provide for just and equitable contribution as set forth in Section 7 of
the Underwriting Agreement.
(f) Nothing contained in this Agreement shall be construed as requiring
any Holder to exercise his Warrants prior to the initial filing of any
Registration Statement or the effectiveness thereof.
(g) If the Company shall fail to comply with the provisions of this
Article 7, the Company shall, in addition to any other equitable or other relief
available to the holders of Registrable Securities, be liable for any or all
actual damages (but not punitive or consequential damages) sustained by the
holders of Registrable Securities, requesting registration of their Registrable
Securities.
(h) The Company shall not permit the inclusion of any securities other
than the Registrable Securities to be included in any Registration Statement
filed pursuant to Section 7.4 hereof, without the prior written consent of the
Demand Holders, which consent shall not be unreasonably withheld.
(i) The Company shall deliver promptly to each holder of Registrable
Securities whose securities are included in a Registration Statement copies of
all correspondence between the Commission and the Company, its counsel or
auditors and all memoranda relating to discussions with the Commission or its
staff with respect to the Registration Statement and permit each holder of
Registrable Securities and underwriters to do such investigation, upon
reasonable advance notice, with respect to information contained in or omitted
from the Registration Statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such holder of Registrable Securities
or underwriter shall reasonably request.
(j) If, in connection with a registration which includes Registrable
Securities pursuant to this Article 7, the Company shall enter into an
underwriting agreement with one or more underwriters selected for such
underwriting, such agreement shall contain such representations, warranties and
covenants by the Company and such other terms as are customarily contained in
agreements of that type used by the underwriters. The holders of Registrable
Securities shall be parties to any underwriting agreement relating to an
underwritten sale of their Registrable Securities and may, at their option,
require that any or all the representations and warranties of the Company to or
for the benefit
9
of such underwriters shall, to the extent that they may be applicable, also be
made to and for the benefit of such holders of Registrable Securities. Such
holders of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters except as they may relate to such holders of Registrable Securities
and their intended methods of distribution.
8. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF SHARES.
8.1 STOCK DIVIDEND, SPLIT, ETC.. In case the Company shall (i) declare a
dividend or make a distribution on its outstanding shares of Common Stock in
shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of
Common Stock into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the exercise
price under Warrant No. 1 in effect at the time of the record date for such
dividend or distribution or of the effective date of such subdivision,
combination or reclassification shall be adjusted so that it shall equal the
price determined by multiplying the exercise price by a fraction, the
denominator of which shall be the number of shares or Common Stock outstanding
after giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
8.2 RIGHTS OR WARRANTS. In the case the Company shall fix a record date
for the issuance of rights or warrants to all holders of its Common Stock
entitling them to subscribe for or purchase shares of Common Stock (or
securities convertible into Common Stock) at a price (the "Subscription Price")
(or having a conversion price per share) less than the current market price of
the Common Stock (as defined in Section 8.5 below) on such record date, the
exercise price of Warrant No. 1 shall be adjusted so that it shall thereafter
equal the price determined by multiplying (i) the exercise price in effect
immediately prior to the date of such issuance and (ii) a fraction, the
numerator of which shall be the sum of the number of shares of Common Stock
outstanding on such record date and the number of additional shares of Common
Stock which the aggregate offering price of the total number of shares of Common
Stock so offered for subscription or purchase (or the aggregate conversion price
of the convertible securities so offered) would purchase at such current market
price per share of the Common Stock, and the denominator of which shall be the
sum of the number of shares of Common Stock outstanding on such record date and
the number of additional shares of Common Stock offered for subscription or
purchase (or into which the convertible securities so offered are convertible).
Such adjustment shall be made successively whenever such rights or warrants are
issued and shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or warrants; and
to the extent that shares of Common Stock are not
10
delivered (or securities convertible into Common Stock are not delivered) after
the expiration of such rights or warrants the exercise price shall be readjusted
to the exercise price which would then be in effect had the adjustments made
upon the issuance of such rights or warrants been made upon the basis of
delivery of only the number of shares of Common Stock (or securities convertible
int Common Stock) actually delivered.
8.3 EVIDENCES OF INDEBTEDNESS OR ASSETS. In case the Company shall
hereafter distribute to the holders of its Common Stock evidences of its
indebtedness or assets (excluding cash dividends or distributions of securities
of the type referred to in Section 8.1 above) or subscription rights or warrants
(excluding those referred to in Section 8.2 above), then in each such case the
exercise price of Warrant No. 1 in effect thereafter shall be determined by
multiplying (i) the exercise price in effect immediately prior thereto and (ii)
a fraction, the numerator of which shall be the total number of shares of Common
Stock outstanding multiplied by the current market price per share of Common
Stock (as defined in Section 8.5 below), less the fair market value (as
determined by the Company's Board of Directors) of said assets or evidences of
indebtedness so distributed or of such rights or warrants, and the denominator
of which shall be the total number of shares of Common Stock outstanding
multiplied by such current market price per share of Common Stock. Such
adjustment shall be made successively whenever such a record date is fixed.
Such adjustment shall be made whenever any such distribution is made and shall
become effectively immediately after the record date for the determination of
shareholders entitled to receive such distribution.
8.4 ADJUSTMENT OF NUMBER OF SHARES. Whenever the Exercise Price payable
upon exercise of Warrant No. 1 is adjusted pursuant to Sections 8.1, 8.2 or 8.3
above, the number of Shares purchasable upon exercise of Warrant No. 1 shall
simultaneously be adjusted by multiplying the number of Shares initially
issuable upon exercise of Warrant No. 1 by the exercise price in effect on the
date hereof and dividing the product so obtained by the exercise price, as
adjusted.
8.5 DETERMINATION OF CURRENT MARKET PRICE. For the purpose of any
computation under Sections 8.2 and 8.3 above, the current market price per share
of Common Stock at any date shall be deemed to be the average of the daily
closing prices for twenty (20) consecutive business days before such date. The
closing price for each day shall be the last sale price regular way or, in case
no such reported sale takes place on such day, the average of the last reported
bid and asked prices regular way, in either case on the principal national
securities exchange on which the Common Stock is admitted to trading or listed,
or as reported by National Association of Securities Dealers, Inc. Automatic
Quotation System ("NASDAQ") or other similar organization if NASDAQ is no longer
11
reporting such information, or if not so available, the fair market price as
determined by the Board of Directors.
8.6 NO ADJUSTMENT FOR DE MINIMUS ADJUSTMENT. No adjustment in the
Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least ten cents ($0.10) in such price; provided,
however, that any adjustments which by reason of this Section 8.6 are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment required to be made hereunder. All calculations under
this Article 8 shall be made to the nearest cent or to the nearest one-hundredth
of a share, as the case may be. Anything in this Article 8 to the contrary
notwithstanding, the Company shall be entitled, but shall not be required, to
make such changes in the exercise price, in addition to those required by this
Article 8, as it shall determine, in its sole discretion, to be advisable in
order that any dividend or distribution in shares of Common Stock, or any
subdivision, reclassification or combination of Common Stock, hereafter made by
the Company shall not result in any Federal income tax liability to the holders
of Common Stock or securities convertible into Common Stock (including
Redeemable Warrants issuable upon exercise of Warrant No. 2).
8.7 NOTICE. Whenever an exercise price is adjusted, as herein provided,
the Company shall promptly, but no later than 10 days after any request for such
an adjustment by the Holder, cause a notice setting forth the adjusted exercise
price and adjusted number of Shares and/or Warrants issuable upon exercise of
the Warrants and, if requested, information describing the transactions giving
rise to such adjustments, to be mailed to the Holder, at the address set forth
herein, and shall cause a certified copy thereof to be mailed to its transfer
agent, if any. The Company may retain a firm of independent certified public
accountants selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation required by this
Section 8, and a certificate signed by such firm shall be conclusive evidence of
the correctness of such adjustment.
8.8 OTHER SECURITIES. In the event that at any time, as a result of any
adjustment made pursuant to this Article 8, the Holder thereafter shall become
entitled to receive any securities of the Company other than Common Stock and
Redeemable Warrants, thereafter the number of such other securities receivable
upon exercise of the Warrants shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as practicable to the provisions
with respect to the Common Stock and Redeemable Warrants contained in Sections
8.1 to 8.6, inclusive above.
12
9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES.
9.1 EXCHANGE. Each Warrant Certificate is exchangeable without expense,
upon the surrender hereof by the registered Holder at the principal executive
office of the Company, for a new Warrant Certificate of like tenor and date
representing in the aggregate the right to purchase the same number of Shares or
Redeemable Warrants, as the case may be, in such denominations as shall be
designated by the Holder thereof at the time of such surrender.
9.2 REPLACEMENT. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
any Warrants, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
10. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
or Redeemable Warrants and shall not be required to issue scrip or pay cash in
lieu of fractional interests, it being the intent of the parties that all
fractional interests shall be eliminated by rounding any fraction up to the
nearest whole number of shares of Common Stock or Redeemable Warrants, as the
case may be.
11. RESERVATION AND LISTING OF SECURITIES. The Company shall at all times
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issuance upon the exercise of Warrant No. 1 and the exercise
of the Redeemable Warrants subject to Warrant No. 2, such number of shares of
Common Stock as shall be issuable upon the exercise thereof. The Company
covenants and agrees that, upon exercise of Warrant No. 1 and payment of the
exercise price therefor, all shares of Common Stock issuable upon such exercise
shall be duly and validly issued, fully paid, non-assessable and not subject to
the preemptive rights of any shareholder, and that, upon exercise of Warrant No.
2 and payment of the exercise price therefor, the Redeemable Warrants will be
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms. As long as the Warrants shall be outstanding, the
Company shall use its best efforts to cause all shares of Common Stock and all
Redeemable Warrants issuable upon the exercise of the Warrants, as well as the
Underlying Shares, to be listed on or quoted by NASDAQ or listed on such
national securities exchanges as the Company's Common Stock is then listed.
12. NOTICES TO WARRANT HOLDERS. Nothing contained in this Agreement shall
be construed as conferring upon the Holder or
13
Holders the right to vote or to consent or to receive notice as a shareholder in
respect of any meetings of shareholders for the election of directors or any
other matter, or as having any rights whatsoever as a shareholder of the
Company. If, however, at any time prior to the expiration of the Warrants and
their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its shares of
Common Stock and/or Redeemable Warrants for the purpose of entitling
them to receive a dividend or distribution payable otherwise than in
cash, or a cash dividend or distribution payable otherwise than out of
current or retained earnings, as indicated by the accounting treatment
of such dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its Common Stock and/or
Redeemable Warrants any additional shares of capital stock of the
Company or securities convertible into or exchangeable for shares of
capital stock of the Company, or any option, right or warrant to
subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other than in
connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety
shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
shareholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or warrants, or entitled
to vote on such proposed dissolution, liquidation, winding up or sale. Such
notice shall specify such record date or the date of closing of the transfer
books, as the case may be. Failure to give such notice or any defect therein
shall not affect the validity of any action taken in connection with the
declaration or payment of any such dividend or distribution, or the issuance of
any convertible or exchangeable securities or subscription rights, options or
warrants, or any proposed dissolution, liquidation, winding up or sale.
13. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
14
(a) If to a registered Holder of the Warrants, to the address of such
Holder as shown on the books of the Company; or
(b) If to the Company, to 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxx 00000, Attn:
President, or to such other address as the Company may designate by notice to
the Holders.
14. SUPPLEMENTS AND AMENDMENTS. The Company and the Underwriter may from
time to time supplement or amend this Agreement without the approval of any
Holders of Warrant Certificates in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or inconsistent
with any provisions herein, or to make any other provisions in regard to matters
or questions arising hereunder which the Company and the Underwriter may deem
necessary or desirable and which the Company and the Underwriter deem not to
adversely affect the interests of the Holders of Warrant Certificates.
15. SUCCESSORS. All the covenants and provisions of this Agreement by or
for the benefit of the Company and the Holders inure to the benefit of their
respective successors and assigns hereunder.
16. TERMINATION. This Agreement shall terminate at the close of business
on _______, 2005. Notwithstanding the foregoing, this Agreement will terminate
on any earlier date when all Warrants have been exercised and all the Shares
issuable upon exercise of Warrant No. 1 and all the Redeemable Warrants issuable
upon exercise of Warrant No. 2 (or the Underlying Shares) have been resold to
the public; provided, however, that the provisions of Section 7.5 shall survive
such termination until the close of business on _______, 2008.
17. GOVERNING LAW. This Agreement and each Warrant Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of
New York and for all purposes shall be construed in accordance with the laws of
said State.
18. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Underwriter and any other registered holder or holders of the Warrant
Certificates, Warrants or the underlying securities any legal or equitable
right, remedy or claim under this Agreement; and this Agreement shall be for the
sole and exclusive benefit of the Company and the Underwriter and any other
holder or holders of the Warrant Certificates, Warrants or the underlying
securities.
19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all
15
purposes be deemed to be an original, and such counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
EPI TECHNOLOGIES, INC.
By:
-------------------------
Name:
Title:
Attest:
By:
------------------------
Name:
Title
DUKE & CO., INC.
By:
-------------------------
Name:
Title:
Attest:
By:
------------------------
Name:
Title
16
EXHIBIT A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES
ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE
EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE
UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE
DELIVERY BY THE HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO COUNSEL FOR THE COMPANY, STATING THAT AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE 5:00 P.M., NEW YORK TIME, ________, 2002.
No. WW-1 125,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that or registered assigns is the
registered holder of 125,000 Warrants to purchase, at any time from _______,
1998 until 5:00 P.M. New York City time on _______, 2002 ("Expiration Date"), up
to 125,000 shares ("Shares") of fully-paid and nonassessable preferred stock,
par value $.001 per share ("Common Stock"), of EPI Technologies, Inc., a
Delaware corporation (the "Company"), at the initial exercise price, subject to
adjustment in certain events (the "Exercise Price"), of $5.50 per Share upon
surrender of this Warrant Certificate and payment of the Exercise Price at an
office or agency of the Company, but subject to the conditions set forth herein
and in the Warrant Agreement dated as of _______, 1997 between the Company and
Duke & Co., Inc. (the "Warrant Agreement"). Payment of the Exercise Price may be
made in cash, or by certified or official bank check in New York Clearing House
funds payable to the order of the Company, or any combination of cash or check.
No Warrant may be exercised after 5:00 P.M., New York City time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
17
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to in a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain events,
the Exercise Price and/or number of the Company's securities issuable thereupon
may, subject to certain conditions, be adjusted. In such event, the Company
will, at the request of the holder, issue a new Warrant Certificate evidencing
the adjustment in the Exercise Price and the number and/or type of securities
issuable upon the exercise of the Warrants; provided, however, that the failure
of the Company to issue such new Warrant Certificates shall not in any way
change, alter, or otherwise impair, the rights of the holder as set forth in the
Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax, or other governmental charge
imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
18
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed as of the date below.
Dated: _______, 1997 EPI TECHNOLOGIES, INC.
By:
-------------------------
Name:
Title:
Attest:
By:
------------------------
Name:
Title
19
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase Shares and herewith
tenders in payment for such Shares cash or a certified or official bank check
payable in New York Clearing House Funds to the order of in the amount of $ ,
all in accordance with the terms hereof. The undersigned requests that a
certificate for such Shares be registered in the name of , whose address is and
that such Certificate be delivered to whose address is.
Dated:__________, 1997 Signature:
---------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
---------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
20
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Warrant Certificate.)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint, Attorney, to transfer the
within Warrant Certificate on the books of the within-named Company, with full
power of substitution.
Dated:__________, 1997 Signature:
-----------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate)
-----------------------------
(Insert Social Security or
Other Identifying Number of
Assignee)
21
EXHIBIT B
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE 5:00 P.M., NEW YORK TIME, _______, 2002
No. WW-2 125,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that or registered assigns is the
registered holder of 125,000 Warrants to purchase, at any time from _______,
1998 until 5:00 P.M. New York City time on , 2002 ("Expiration Date"), up to
125,000 Redeemable Common Stock Purchase Warrants ("Redeemable Warrants"), of
EPI Technologies, Inc., a Delaware corporation (the "Company"), at the exercise
price (the "Exercise Price"), of $.11 per Redeemable Warrant upon surrender of
this Warrant Certificate and payment of the Exercise Price at an office or
agency of the Company, but subject to the conditions set forth herein and in the
Warrant Agreement dated as of ________, 1997 between the Company and Duke & Co.,
Inc. (the "Warrant Agreement"). Payment of the Exercise Price may be made in
cash, or by certified or official bank check in New York Clearing House funds
payable to the order of the Company, or any combination of cash or check.
No Warrant may be exercised after 5:00 P.M., New York City time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to in a description of the rights, limitation
of rights,
22
obligations, duties and immunities thereunder of the Company and the holders
(the words "holders" or "holder" meaning the registered holders or registered
holder) of the Warrants.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax, or other governmental charge
imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated: ________, 1997
EPI TECHNOLOGIES, INC.
---------------------------------------
By:
Name:
Title:
Attest:
Name:
Title
23
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase Redeemable Warrants and
herewith tenders in payment for such Redeemable Warrants cash or a certified or
official bank check payable in New York Clearing House Funds to the order of
_______________ in the amount of $_______, all in accordance with the terms
hereof. The undersigned requests that a certificate for such Redeemable
Warrants be registered in the name of___________, whose address is ________
__________________________ and that such Certificate be delivered to whose
address is _____________________________________.
Dated: _________, 1997 Signature:
-----------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
-----------------------------
(Insert Social Security or
Other Identifying Number of
Holder)
24
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Warrant Certificate.)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
_____________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint, Attorney, to transfer the
within Warrant Certificate on the books of the within-named Company, with full
power of substitution.
Dated: ________, 1997 Signature:
-----------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate)
-----------------------------
(Insert Social Security or
Other Identifying Number of
Assignee)
25
