WARRANT TO PURCHASE COMMON STOCK
THIS
WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE BEEN ACQUIRED FOR INVESTMENT
AND
NOT FOR DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF
1933, AS AMENDED AND NEITHER THE WARRANT NOR THE SHARES MAY BE SOLD, PLEDGED,
OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH
ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THIS WARRANT
MUST BE SURRENDERED TO THE COMPANY OR ITS TRANSFER AGENT AS A CONDITION
PRECEDENT TO THE SALE, PLEDGE OR OTHER TRANSFER OF ANY INTEREST IN THIS WARRANT
OR THE SHARES ISSUABLE HEREUNDER.
Issuer:
3DIcon Corporation
Class
of
Stock: Common Stock
Issue
Date: November 3, 2006
Expiration
Date: November 3, 2011
THIS
WARRANT TO PURCHASE COMMON STOCK is
being
issued by 3DIcon Corporation, an Oklahoma corporation (the “Company”), to Golden
Gate Investors, Inc. (“Holder”).
ARTICLE
1
DESCRIPTION
OF WARRANTS
1.1 Warrants.The
Company hereby grants to Holder the right to purchase 1,000,000 shares of the
Company’s Common Stock (the “Shares” or “Warrant Shares”) at a price per share
equal to the Exercise Price set forth in section 2.4 below. The Company is
simultaneously issuing to Holder a 6.25% Convertible Debenture in the original
principal amount of $100,000 (the “Debenture”). Whenever Holder exercises its
conversion privileges under the Debenture, Holder will simultaneously exercise
a
percentage of this Warrant that is equal to the percentage of the Debenture
being converted. The date that the Holder issues a Conversion Notice under
the
Debenture is hereafter referred to as the “Conversion Date.” Defined terms not
defined herein shall have the meanings ascribed to them in the Debenture.
Beginning
one year from the Issue Date, Holder shall submit Debenture conversion notices
and related Warrant exercise notices in an amount such that Holder receives
a
total of 1% of the outstanding shares of the Company every calendar quarter
for
a period of one year, provided that Holder is able to sell the shares under
Rule
144. Beginning two years from the Closing Date, Holder shall convert $3,000
of
the Debenture and exercise 30,000 Warrant Shares each calendar month, provided
that Holder is able to sell the shares under Rule 144(k). If Holder converts
more that such minimum amounts, the excess shall be credited against the next
period’s minimum. In the event Holder does not convert and exercise the minimum
amounts set forth in the first two sentences of this paragraph, the Company’s
remedy shall be limited to Holder not being entitled to collect interest on
the
Debenture for that calendar quarter or calendar month, as
applicable.
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1.2 Expiration
of Warrants. This
Warrant shall expire and Holder shall no longer be able to purchase the Warrant
Shares on the earlier of: (a) the Expiration Date, or (b) the redemption of
the
Debenture by the Company in accordance with Section 2.5 of the
Debenture.
ARTICLE
2
EXERCISE
2.1 Method
of Exercise.
Holder
may exercise this Warrant by delivering a duly executed Warrant Notice of
Exercise in substantially the form attached as Appendix
1
to the
principal office of the Company.
2.2 Delivery
of Certificate and New Warrant.
As
promptly as practicable after the receipt of the Warrant Notice of Exercise,
but
in any event not more than two (2) Business Days after the Company’s receipt of
the Warrant Notice of Exercise, the Company shall issue the Shares and cause
to
be mailed for delivery by overnight courier to Holder a certificate representing
the Shares acquired and, if this Warrant has not been fully exercised and has
not expired, a new Warrant substantially in the form of this Warrant
representing the right to acquire the portion of the Shares not so acquired.
2.3 Replacement
of Warrants.
On
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of loss, theft or
destruction, on delivery of an indemnity agreement reasonably satisfactory
in
form and amount to the Company or, in the case of mutilation, or surrender
and
cancellation of this Warrant, the Company at its expense shall execute and
deliver, in lieu of this Warrant, a new warrant of like tenor.
2.4 Exercise
Price.
The
Exercise Price of this Warrant shall be $10.90 per Share.
2.5 Certain
Exercise Limits. For
a
period of one year after the Closing Date, if and to the extent that, on any
date, the holding by the Holder of this Warrant would result in the Holder’s
being deemed the beneficial owner of more than 9.99% of the then Outstanding
shares of Common Stock, then the Holder shall not have the right, and the
Company shall not have the obligation, to exercise any portion of this Warrant
as shall cause Holder to be deemed the beneficial owner of more than 9.99%
of
the then Outstanding shares of Common Stock.
ARTICLE
3
ADJUSTMENT
TO THE SHARES
The
number of Shares purchasable upon the exercise of this Warrant and the Exercise
Price shall be subject to adjustment from time to time upon the occurrence
of
certain events, as follows:
3.1 Reclassification.
In case
of any reclassification or change of outstanding securities of the class
issuable upon exercise of this Warrant then, and in any such case, the Holder,
upon the exercise hereof at any time after the consummation of such
reclassification or change, shall be entitled to receive in lieu of each Share
theretofore issuable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money and/or property received upon such
reclassification or change by a holder of one Share. The provisions of this
Section 3.1 shall similarly apply to successive reclassifications or
changes.
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3.2 Subdivision
or Combination of Shares.
If the
Company at any time while this Warrant remains outstanding and unexpired shall
subdivide or combine its Shares, the Exercise Price shall be proportionately
decreased in the case of a subdivision or increased in the case of a
combination.
3.3 Stock
Dividends.
If the
Company, at any time while this Warrant is outstanding shall pay a dividend
with
respect to its Shares payable in Shares, or make any other distribution of
Shares with respect to Shares (except any distribution specifically provided
for
in Section 3.1 and Section 3.2 above), then the Exercise Price shall be
adjusted, effective from and after the date of determination of shareholders
entitled to received such dividend or distribution, to that price determined
by
multiplying the Exercise Price in effect immediately prior to such date of
determination by a fraction, (a) the numerator of which shall be the total
number of Shares outstanding immediately prior to such dividend or distribution,
and (b) the denominator of which shall be the total number of Shares outstanding
immediately after such dividend or distribution.
3.4 Non-Cash
Dividends.
If the
Company at any time while this Warrant is outstanding shall pay a dividend
with
respect to Shares payable in securities other than Shares or other non-cash
property, or make any other distribution of such securities or property with
respect to Shares (except any distribution specifically provided for in Section
3.1 and Section 3.2 above), then this Warrant shall represent the right to
acquire upon exercise of this Warrant such securities or property which a holder
of Shares would have been entitled to receive upon such dividend or
distribution, without the payment by the Holder of any additional consideration
for such securities or property.
3.5 Effect
of Reorganization and Asset Sales.
If any
(i) reorganization or reclassification of the Common Stock (ii) consolidation
or
merger of the Company with or into another corporation, or (iii) sale or all
or
substantially all of the Company’s operating assets to another corporation
followed by a liquidation of the Company (any such transaction shall be referred
to herein as an “Event”), is effected in such a way that holders of common Stock
are entitled to receive securities and/or assets as a result of their Common
Stock ownership, the Holder, upon exercise of this Warrant, shall be entitled
to
receive such shares of stock securities or assets which the Holder would have
received had it fully exercised this Warrant on or prior the record date for
such Event. The Company shall not merge into or consolidate with another
corporation or sell all of its assets to another corporation for a consideration
consisting primarily of securities of such corporation, unless the successor
or
acquiring corporation, as the case may be, shall expressly assume the due and
punctual observance and performance of each and every covenant and condition
of
this Warrant to be performed or observed by the Company and all of the
obligations and liabilities hereunder, subject to such modification as shall
be
necessary to provide for adjustments which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 2. The foregoing
provisions shall similarly apply to successive mergers, consolidations or sales
of assets.
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3.6 Adjustment
of Number of Shares.
Upon
each adjustment in the Exercise Price, the number of Shares shall be adjusted,
to the nearest whole share, to the product obtained by multiplying the number
of
Shares, purchasable immediately prior to such adjustment by a fraction, the
numerator of which shall be the Exercise Price immediately prior to such
adjustment and the denominator of which shall be the Exercise Price immediately
thereafter.
3.7 No
Impairment.
The
Company shall not, by amendment of its articles of incorporation or through
a
reorganization, transfer of assets, consolidation, merger, dissolution, issue,
or sale of securities or any other voluntary action, avoid or seek to avoid
the
observance or performance of any of the terms to be observed or performed under
this Warrant by the Company, but shall at all times in good faith assist in
carrying out all of the provisions of this Warrant and in taking all such action
as may be reasonably necessary or appropriate to protect Holder’s rights
hereunder against impairment. If the Company takes any action affecting its
Common Stock other than as described above that adversely affects Holder’s
rights under this Warrant, the Exercise Price shall be adjusted downward and
the
number of Shares issuable upon exercise of this Warrant shall be adjusted upward
in such a manner that the aggregate Exercise Price of this Warrant is
unchanged.
3.8 Fractional
Shares.
No
fractional Shares shall be issuable upon the exercise of this Warrant, and
the
number of Shares to be issued shall be rounded down to the nearest whole
Share.
3.9 Certificate
as to Adjustments.
Upon
any adjustment of the Exercise Price, the Company, at its expense, shall compute
such adjustment and furnish Holder with a certificate of its Chief Financial
Officer setting forth such adjustment and the facts upon which such adjustment
is based. The Company shall, upon written request, furnish Holder a certificate
setting forth the Exercise Price in effect upon the date thereof and the series
of adjustments leading to such Exercise Price.
3.10 No
Rights of Shareholders.
This
Warrant does not entitle Holder to any voting rights or any other rights as
a
shareholder of the Company prior to the exercise of Holder’s right to purchase
Shares as provided herein.
ARTICLE
4
REPRESENTATIONS
AND COVENANTS OF THE COMPANY
4.1 Representations
and Warranties.
The
Company hereby represents and warrants to Holder that all Shares which may
be
issued upon the exercise of the purchase right represented by this Warrant,
shall, upon issuance, be duly authorized, validly issued, fully paid and
nonasessable, and free of any liens and encumbrances.
4.2 Notice
of Certain Events.
If the
Company proposes at any time (a) to declare any dividend or distribution
upon its Common Stock, whether in cash, property, stock, or other securities
and
whether or not a regular cash dividend; (b) to offer for subscription pro rata
to the holders of any class or series of its stock any additional shares of
stock of any class or series or other rights; (c) to effect any reclassification
or recapitalization of Common Stock; or (d) to merge or consolidate with or
into
any other corporation, or sell, lease, license, or convey all or substantially
all of its assets, or to liquidate, dissolve or wind up, then, in connection
with each such event, the Company shall give Holder (1) at least 20 days prior
written notice of the date on which a record will be taken for such dividend,
distribution, or subscription rights (and specifying the date on which the
holders of Common Stock will be entitled thereto) or for determining rights
to
vote, if any, in respect of the matters referred to in (c) and (d) above; and
(2) in the case of the matters referred to in (c) and (d) above at least 20
days
prior written notice of the date when the same will take place (and specifying
the date on which the holders of Common Stock will be entitled to exchange
their
Common Stock for securities or other property deliverable upon the occurrence
of
such event).
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4.3 Information
Rights.
So long
as Holder holds this Warrant and/or any of the Shares, the Company shall deliver
to Holder (a) promptly after mailing, copies of all notices or other written
communications to the shareholders of the Company, (b) within ninety (90)
days of their availability, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing,
and
(c) within forty-five (45) days after the end of each fiscal quarter or
each fiscal year, the Company’s quarterly, unaudited financial
statements.
4.4 Reservation
of Warrant Shares.
The
Company has reserved and will keep available, out of the authorized and unissued
shares of Common Stock, the full number of shares sufficient to provide for
the
exercise of the rights of purchase represented by this Warrant.
ARTICLE
5
REPRESENTATIONS
AND COVENANTS OF THE HOLDER
5.1 Private
Issue.
Holder
understands (i) that the Shares issuable upon exercise of Holder’s rights
contained in the Warrant are not registered under the Act or qualified under
applicable state securities laws on the ground that the issuance contemplated
by
the Warrant will be exempt from the registration and qualifications requirements
thereof, and (ii) that the Company’s reliance on such exemption is predicated on
Holder’s representations set forth in this Article 5.
5.2 Financial
Risk.
Holder
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of its investment and has the ability
to bear the economic risks of its investment.
5.3 Risk
of No Registration.
Holder
understands that if the Company does not register with the Securities and
Exchange Commission pursuant to Section 12 of the Act, or file reports pursuant
to Section 15(d), of the Securities Exchange Act of 1934 (the “1934 Act”), or if
a registration statement covering the securities under the Act is not in effect
when it desires to sell (i) the right to purchase Shares pursuant to the
Warrant, or (ii) the Shares issuable upon exercise of the right to purchase,
it
may be required to hold such securities for an indefinite period.
5.4 Accredited
Investor.
Holder
is an “accredited investor,” as such term is defined in Regulation D promulgated
pursuant to the Act.
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ARTICLE
6
MISCELLANEOUS
6.1 Term.
This
Warrant is exercisable, in whole or in part, at any time and from time to time
on or after the Issue Date and on or before the Expiration Date set forth
above.
6.2 Compliance
with Securities Laws on Transfer.
This
Warrant may not be transferred or assigned in whole or in part without
compliance with applicable federal and state securities laws by the transferor
and the transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, as reasonably requested by the Company). The Company shall not require
Holder to provide an opinion of counsel if the transfer is to an affiliate
of
Holder.
6.3 Transfer
Procedure.
Holder
shall have the right without the consent of the Company to transfer or assign
in
whole or in part this Warrant and the Shares issuable upon exercise of this
Warrant. Holder agrees that unless there is in effect a registration statement
under the Act covering the proposed transfer of all or part of this Warrant,
prior to any such proposed transfer the Holder shall give written notice thereof
to the Company (a “Transfer Notice”). Each Transfer Notice shall describe the
manner and circumstances of the proposed transfer in reasonable detail and,
if
the company so requests, shall be accompanied by an opinion of legal counsel,
in
a form reasonably satisfactory to the Company, to the effect that the proposed
transfer may be effected without registration under the Act; provided that
the
Company will not require opinions of counsel for transactions involving
transfers to affiliates or pursuant to Rule 144 promulgated by the
Securities and Exchange Commission under the act, except in unusual
circumstances.
6.4 Notices,
etc.
All
notices and other communications required or permitted hereunder shall be in
writing and shall be delivered personally, or sent by telecopier machine or
by a
nationally recognized overnight courier service, and shall be deemed given
when
so delivered personally, or by telecopier machine or overnight courier service
as follows:
If
to the
Company, to:
3DIcon
Corporation
0000
Xxxxxxxx Xxx.
Xxxxx,
Xxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
With
a
copy to:
Xxxx
X.
X’Xxxxxx, Esq.
Xxxxxx,
X’Xxxxxx, Xxxxxx & Xxxxxxx
00
X.
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxx,
Xxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 918-587-0102
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If
to the
Holder, to:
Golden
Gate Investors, Inc.
0000
Xxxxxxxx Xxxxxx, Xxxxx 000
Xx
Xxxxx,
XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
or
at
such other address as the Company shall have furnished to the Holder. Each
such
notice or other communication shall for all purposes of this agreement be
treated as effective or having been given when delivered if delivered
personally, or, if sent by mail, at the earlier of its receipt or five days
after the same has been deposited in a regularly maintained receptacle for
the
deposit of the United States mail, addressed and mailed as
aforesaid.
6.5 Counterparts.
This
agreement may be executed in any number of counterparts, each of which shall
be
enforceable against the parties actually executing such counterparts, and all
of
which together shall constitute one instrument. Facsimile execution shall be
deemed originals.
6.6 Waiver.
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.
6.7 Attorneys
Fees.
In the
event of any dispute between the parties concerning the terms and provisions
of
this Warrant, the party prevailing in such dispute shall be entitled to collect
from the other party all costs incurred in such dispute, including reasonable
attorneys fees.
6.8 Governing
Law; Jurisdiction.
This
Warrant shall be governed by and construed in accordance with the laws of the
State of California, without giving effect to its principles regarding conflicts
of law. Each of the parties hereto consents to the jurisdiction of the federal
courts whose districts encompass any part of the City of San Diego or the state
courts of the State of California sitting in the City of San Diego in connection
with any dispute arising under this Warrant and hereby waives, to the maximum
extent permitted by law, any objection including any objection based on forum
non conveniens, to the bringing of any such proceeding in such
jurisdictions.
6.9 Remedies. The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to the Holder, by vitiating the intent and purpose of the
transactions hereby. Accordingly, the Company acknowledges that the remedy
at
law for a breach of its obligations under this Warrant will be inadequate and
agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Warrant, that the Holder shall be entitled, in addition
to
all other available remedies at law or in equity, and in addition to the
penalties assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Warrant and to enforce specifically
the
terms and provisions hereof, without the necessity of showing economic loss
and
without any bond or other security being required.
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IN
WITNESS WHEREOF, the parties hereto have duly caused this Warrant to Purchase
Common Stock to be executed and delivered on the date first above
written.
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APPENDIX
1
WARRANT
NOTICE OF EXERCISE
1. The
undersigned hereby elects to purchase _____ shares of the Common Stock of
3DIcon Corporation pursuant to the terms of the Warrant to Purchase Common
Stock
issued to Golden Gate Investors, Inc. on November ___, 2006.
2. Please
issue a certificate or certificates representing said shares in the name of
the
undersigned or in such other name as is specified below:
Golden
Gate Investors, Inc.
0000
Xxxxxxxx Xxx., Xxxxx 000
Xx
Xxxxx,
Xxxxxxxxxx 00000
3. The
undersigned makes the representations and covenants set forth in Article 5
of the Warrant to Purchase Common Stock.
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