EXHIBIT 10.2
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
("THE ACT") OR UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY STATE (THE
"LAWS"). THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION AND QUALIFICATION OF THESE
SECURITIES UNDER THE ACT AND THE LAWS OR AN OPINION OF COUNSEL SATISFACTORY
TO THE ISSUER THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED
UNDER THE ACT AND THE LAWS.
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "AGREEMENT") is entered into and effective
as of October 31, 2003 (the "EFFECTIVE DATE"), by and between MicroIslet, Inc.,
a Nevada corporation (the "COMPANY"), and _______________________________
("WARRANTHOLDER").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, the Company and the Warrantholder certify and agree
as follows:
1. GRANT OF THE RIGHT TO PURCHASE COMMON STOCK. For value received, the
adequacy of which is hereby acknowledged, the Company hereby grants to
Warrantholder, and Warrantholder is entitled to, upon the terms and subject to
the conditions set forth in this Agreement, a warrant (the "WARRANT") to
subscribe for and purchase from the Company a number of shares (the "SHARES") of
the Company's common stock, $0.001 par value (the "COMMON STOCK") equal to
____________________ (__________) Shares(1) of the Common Stock at a purchase
price of One Dollar ($1.00) per Share (the "EXERCISE PRICE"). This Warrant is
being issued pursuant to the Amended and Restated Securities Purchase Agreement
dated October 31, 2003, among the Company, the Warrantholder and other
Purchasers named therein (the "Purchase Agreement"). Notwithstanding anything to
the contrary in this Agreement, the rights under this Warrant are subject to the
limitations stated in the Purchase Agreement.
2. EXPIRATION. The Warrant shall expire and cease to be exercisable at
5:00 p.m. Pacific time on October 31, 2006.(2)
3. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF SHARES.
3.1 Subject to Section 2 hereof, the purchase right
represented by the Warrant may be exercised by the Warrantholder, in whole or in
part, by tendering to the Company a duly executed Notice of Exercise in the form
attached as APPENDIX A at the principal office of the Company and by payment to
the Company, by check, of an amount equal to the then applicable Exercise Price
multiplied by the number of shares then being purchased. In the event of any
exercise of the rights represented by this Agreement, certificates for the
_____________
(1) 40% of number of Shares purchased under Amended and Restated Securities
Purchase Agreement.
(2) The last business day before the third anniversary of the Initial Closing,
as defined in the Purchase Agreement.
shares of stock so purchased shall be in the name of, and delivered to,
Warrantholder, or as Warrantholder may direct (subject to the terms of transfer
contained herein). Such delivery shall be made within thirty (30) days after
exercise and at the Company's expense. The shares so issued upon exercise of the
rights represented by this Agreement shall be duly authorized, validly issued,
fully paid and non-assessable.
3.2 If, but only if, at any time after one year from the date
of this Agreement there is no effective Registration Statement (as defined in
the Purchase Agreement) registering the resale of the Shares by the
Warrantholder, the Warrant may also be exercised at such time by means of a
"cashless exercise" in which the Warrantholder shall be entitled to receive a
certificate for the number of Shares equal to the quotient obtained by dividing
[(A-B) (X)] by (A), where:
(A) = the VWAP (as defined below) on the last day of
trading of the Common Stock preceding the date of such
election;
(B) = the Exercise Price, as adjusted; and
(X) = the number of Warrant Shares issuable upon exercise
of the Warrant in accordance with the terms of this
Agreement.
3.3 "VWAP" means, for any date, the price determined by the
first of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on the American Stock Exchange, the New York Stock Exchange,
the Nasdaq National Market or the Nasdaq SmallCap Market, the daily volume
weighted average price of the Common Stock for such date (or the nearest
preceding date) on the primary trading market on which the Common Stock is then
listed or quoted as reported by Bloomberg Financial L.P. (based on a trading day
from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time) using the VAP function;
(b) if the Common Stock is not then listed or quoted on one of the trading
markets named above, and if prices for the Common Stock are then quoted on the
OTC Bulletin Board, the volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the
Common Stock is not then listed or quoted on the OTC Bulletin Board and if
prices for the Common Stock are then reported in the "Pink Sheets" published by
the National Quotation Bureau Incorporated (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported; or (d) in all other cases, the fair
market value of a share of Common Stock as determined by the Company's Board of
Directors in good faith.
4. RESERVATION OF SHARES. The Company shall at all times have
authorized and reserved a sufficient number of shares of its Common Stock to
provide for the exercise of the rights to purchase the Shares as provided in
this Agreement.
5. NO RIGHTS AS STOCKHOLDER. This Agreement does not entitle
Warrantholder to any voting rights or other rights as a stockholder of the
Company prior to the purchase of the Shares as provided in this Agreement.
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6. ADJUSTMENT RIGHTS. The Exercise Price and the number of Shares
purchasable hereunder are subject to adjustment from time to time as follows:
6.1 MERGER AND SALE OF ASSETS. If at any time there shall be
(i) a reorganization of the shares of the Common Stock (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), or a merger or consolidation of the Company with or into
another corporation where the Company is not the surviving corporation, or a
reverse triangular merger in which the Company is the surviving entity but the
shares of the Company's capital stock outstanding immediately prior to the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash, or otherwise, or (iii) the sale of all or
substantially all of the Company's properties and assets to any other person,
then, as a part of such reorganization, merger, consolidation or sale, whether
for stock, cash, or other consideration, lawful provision shall be made so that
Warrantholder shall thereafter be entitled to receive upon exercise of its
Warrants the number of shares of Common Stock or other securities of the
successor corporation resulting from such merger or consolidation to which
Warrantholder would have been entitled if the Warrants had been exercised
immediately prior to such capital reorganization, merger, consolidation or sale.
In any such case, appropriate adjustment (as determined in good faith by the
Company's Board of Directors) shall be made in the application of the provisions
of this Warrant Agreement with respect to the rights and interest of
Warrantholder after such reorganization, merger, consolidation or sale so that
the provisions of this Agreement (including adjustments of the Exercise Price
and the number of Shares issuable pursuant to the terms and conditions of this
Agreement) shall be applicable after such event, as near as reasonably may be,
in relation to any shares deliverable after that event upon the exercise of the
Warrants.
6.2 RECLASSIFICATION OF SHARES. If the Company at any time
shall, by combination, reclassification, exchange or subdivision of securities
or otherwise, change all of the outstanding shares of Common Stock into the same
or a different number of securities of any other class or classes, this
Agreement shall thereafter represent the right to acquire such number and kind
of securities as would have been issuable hereunder had the Warrantholder
exercised its rights with respect to all of the shares then represented by this
Agreement immediately prior to such combination, reclassification, exchange,
subdivision or other change.
6.3 SUBDIVISION OR COMBINATION OF SHARES. If the Company at
any time shall combine or subdivide its Common Stock, the Exercise Price shall
be proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
6.4 STOCK DIVIDENDS. If the Company at any time shall pay a
dividend payable in the Common Stock, then the Exercise Price shall be adjusted,
from and after the date of determination of shareholders entitled to receive
such dividend, to a price determined by multiplying the Exercise Price in effect
immediately prior to such date of determination by a fraction (i) the numerator
of which shall be the total number of all shares of the Common Stock outstanding
immediately prior to such dividend (assuming all convertible securities are then
converted into Common Stock) and (ii) the denominator of which shall be the
total number of all shares of the Common Stock outstanding immediately after
such dividend (assuming all convertible securities are then converted into
Common Stock). Warrantholder shall thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of shares of Common
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Stock (calculated to the nearest whole share) obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
shares of Common Stock issuable upon the exercise hereof immediately prior to
such adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
7. WARRANT NONTRANSFERABLE. The Warrant may not be sold, pledged,
assigned or transferred in any manner without the written consent of the
Company.
8. RESTRICTED SHARES/LEGEND. Warrantholder understands that the Shares
issuable upon the exercise of the Warrant under this Agreement shall be
"restricted securities" as that term is defined in Rule 144 promulgated under
the Securities Act of 1933, as amended, and shall bear a legend in the form
substantially as follows:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT") OR UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY STATE
(THE "LAWS"). THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION AND
QUALIFICATION OF THESE SECURITIES UNDER THE ACT AND THE LAWS OR AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION
AND QUALIFICATION ARE NOT REQUIRED UNDER THE ACT AND THE LAWS.
9. MISCELLANEOUS.
9.1 GOVERNING LAW. This Agreement is entered into in San
Diego, California, shall be performed in California, and shall be interpreted,
enforced and adjudicated in San Diego, California under the internal laws of the
State of California without regard to California's conflict-of-law provisions.
9.2 ENTIRE AGREEMENT. This Agreement and the Purchase
Agreement constitute the final, complete and exclusive agreement between the
parties pertaining to the subject of this Agreement, and supersede all prior and
contemporaneous agreements. This Agreement represents the Warrant required to be
delivered pursuant to the Purchase Agreement. None of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver. No
waiver shall be binding unless executed in writing by the party making the
waiver. Any changes or supplements to this Agreement must be in writing and
signed by the Company and the Warrantholder.
9.3 ASSIGNMENT. Not in derogation of Section 7 hereof, this
Agreement shall be binding on, and shall inure to the benefit of, the parties
and their respective heirs, legal representatives, successors and assigns.
9.4 NOTICES, ETC. All notices, requests, demands or other
communications that are required or permitted under this Agreement shall be
given in accordance with Section 18 of the Purchase Agreement, and shall be
deemed received as set forth therein.
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9.5 SEVERABILITY. In the event that any one or more of the
provisions contained in this Agreement or in any other document referenced in
this Agreement, shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement or any other such
document.
9.6 TIME IS OF THE ESSENCE. Time is absolutely of the essence
in construing each provision of this Agreement.
9.7 INTERPRETATION. The headings set forth in this Agreement
are for convenience only and shall not be used in interpreting this Agreement.
9.8 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument. A faxed signature
shall be as valid as an originally executed signature.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the Effective Date.
MICROISLET, INC.,
a Nevada corporation
By:
------------------------------------------
Xxxx X. Steel IV, Chief Executive Officer
[WARRANT SIGNATURE PAGE]
Appendix A
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Notice of Exercise
------------------
To: Chief Financial Officer
MicroIslet, Inc.
1. The undersigned hereby elects to purchase ________ Warrant Shares of
MicroIslet, Inc. pursuant to the terms of the attached Warrant
Agreement dated October 31, 2003, and tenders herewith payment of the
exercise price in full, together with all applicable transfer taxes.
2. Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] the cancellation of such number of Shares as is necessary, in
accordance with the formula set forth in Section 3.2, to exercise the
Warrant with respect to the maximum number of Shares purchasable
pursuant to the cashless exercise procedure set forth in Section 3.2
(available only to the extent specified in Section 3.2).
3. The Warrantholder is an "accredited investor" as defined in Regulation
D promulgated under the Securities Act of 1933, as amended.
4. Please issue a certificate representing the shares of the Common Stock
in the name of the undersigned or in such other name as is specified
below:
Name: ________________________________________
Address: ________________________________________
________________________________________
Taxpayer I.D No.: _______________________________
WARRANTHOLDER
By: ________________________________________
Name:___________________________________
Title:__________________________________
Date:_______________________________________
