Contract
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”). THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE HEREOF
MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION ACT, OR AN OPINION OF COUNSEL, WHICH
OPINION IS SATISFACTORY IN FORM AND SUBSTANCE TO THE CORPORATION, TO THE EFFECT
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OR SUCH
TRANSACTION COMPLIES WITH RULES PROMULGATED BY THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OR UNLESS SOLD PURSUANT TO RULE 144 OF
SUCH
ACT.
VOID
AFTER 8/5/ 2013
To
Purchase Shares of Common Stock of
THIS
CERTIFIES that, for value received, Xxxx
X. Mustafoglu
(“Holder”) is entitled, upon the terms and subject to the conditions hereinafter
set forth, to subscribe for and purchase, from Emvelco Corp., a Delaware
corporation (the “Company”), 10,000,000 fully paid and non-assessable shares of
the Company’s Common Stock (“Stock”) at a purchase price equal to the lesser of
$0.50 per share or 50% of the average market price of the Common Stock of the
Company over the 20-day period prior to exercise (the “Exercise Price”). The
Exercise Price and the number and kind of Stock purchasable under this warrant
(“Warrant”) are subject to adjustments as provided herein.
1. Term
of Warrant. Subject
to the terms and restrictions set forth herein, this Warrant may be exercised
at
any time, or from time to time, in whole or in part during the term commencing
on the day following the issuance of this Warrant and ending on the earlier
of:
(a) 5:00p.x.
Xxxx Coast time on the date five years after the date of issuance of this
Warrant; or
(b) the
effective date of the merger of the Company with and into, the consolidation
of
the Company with, or the sale by the Company of all or substantially all of
its
assets to, another corporation (other than such a transaction wherein the
shareholders of the Company retain or obtain a majority of the voting capital
stock of the surviving, resulting or purchasing corporation); provided that
the
Company shall notify the registered Holder of this Warrant of the proposed
effective date of the merger, consolidation or sale at least thirty (30) days
prior to the effectiveness thereof; and provided further that no less than
five
(5), nor more than ten (10), days before the actual effective date of the
merger, consolidation or sale, the Company shall give further notice to such
holder by advising it of such actual date.
1
In
the
event that any transaction of which the Company shall have given notice pursuant
to sub-paragraph (c) hereof does not come on approximately the date specified
by
the Company, unless otherwise elected by the Holder, any exercise of the Warrant
subsequent to the giving of such notice shall be rescinded and the Warrant
shall
again be exercisable until terminated in accordance with this paragraph
1.
2. Transfer
of Warrant. The
Stock
issued upon exercise hereof may not be transferred or assigned without
compliance with applicable federal and state securities laws by the transferor
and the transferee (including the delivery of investment representation letters
and legal opinions reasonably satisfactory to the Company, if requested by
the
Company).
3. Regular
Exercise of Warrant. Subject
to the vesting limitations set forth in Section 3(b) of the Employment Agreement
executed August 19, 2008 and effective July 1, 2008 by and between the Holder
and the Company, the rights represented by this Warrant may be exercised by
Holder, in whole or in part, at any time or from time to time, during the term
hereof as described in Section 1 above, by the surrender of this Warrant and
the
Notice of Exercise annexed hereto duly executed on behalf of Holder, at the
office of the Company, in 00000
Xxxxxxxx Xxxx., Xxxxx 0000, Xxx Xxxxxxx, XX 00000
(or such
other office or agency of the Company as it may designate by notice in writing
to Holder at its address appearing on the books of the Company), and upon
payment of the Exercise Price of the Stock thereby purchased by cash, certified
check or wire transfer whereupon Holder shall be entitled to receive a
certificate for the number of shares of Stock so purchased. The Company agrees
that the shares so purchased shall be issued to Holder as the record owner
of
such shares as of the close of business on the date on which this Warrant shall
have been exercised.
Certificates
for shares purchased hereunder shall be delivered to Holder within a reasonable
time after the date on which this Warrant shall have been exercised. Unless
this
Warrant has expired, a new Warrant representing the number of shares, if any,
with respect to which this Warrant shall not then have been exercised shall
also
be issued to Holder. Such certificates shall bear any restrictive legends
required by United States or California securities law.
The
Company covenants and warrants that all shares of Stock which may be issued
upon
the exercise of this Warrant will, upon exercise of the rights represented
by
this Warrant, be duly authorized, validly issued, fully paid and
nonassessable.
4. Right
to Convert Warrant Net Issuance.
(a) Right
to Convert. In
addition to and without limiting the rights of the Holder under the terms of
this Warrant, the Holder shall have the right to convert this Warrant or any
portion thereof (the “Conversion Right”) into shares of Stock as provided in
this Section 4 at any time or from time to time during the term of this Warrant.
Upon exercise of the Conversion Right with respect to a particular number of
shares of Stock subject to this Warrant (“Converted Warrant Shares”), the
Company shall deliver to the Holder (without payment by the Holder of any
Exercise Price or any cash or other consideration) (X) that number of shares
of
fully paid and nonassessable Stock equal to the quotient obtained by dividing
the value of this Warrant (or the specified portion hereof) on the Conversion
Date (as defined in Section 4(b), which value shall be determined by subtracting
(A) the aggregate Exercise Price of the Converted Warrant Shares immediately
prior to the exercise of this Warrant (or the specified portion hereof) on
the
Conversion Date (as herein defined) by (Y) the fair market value of one share
of
Stock on the Conversion Date (as herein defined).
2
Expressed
as a formula, such conversion shall be computed as follows:
X
=
B
- A
Y
|
Where:
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X
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=
|
the
number of shares of Stock that may be issued to the
Holder
|
|
|
Y
|
=
|
the
fair market value (FMV) of one share of Stock
|
||
|
A
|
=
|
the
aggregate Exercise Price (i.e., Converted Warrant Shares x Exercise
Price)
|
||
|
B
|
=
|
the
aggregate FMV (i.e., FMV x Converted Warrant
Shares)
|
||
No
fractional shares shall be issuable upon exercise of the Conversion Right,
and,
if the number of shares to be issued determined in accordance with the foregoing
formula is other than a whole number, the Company shall pay to the Holder an
amount in cash equal to the fair market value of the resulting fractional share
on the Conversion Date (as hereinafter defined). For purposes of this Section
4,
shares issued pursuant to the Conversion Right shall be treated as if they
were
issued upon the exercise of this Warrant.
(b) Method
of Exercise. The
Conversion Right may be exercised by the Holder by the surrender of this Warrant
at the principal office of the Company together with a written statement
specifying that the Holder thereby intends to exercise the Conversion Right
and
indicating the number of shares of Stock subject to this Warrant which are
being
surrendered (referred to in Section 4(a) hereof as the Converted Warrant Shares)
in exercise of the Conversion Right. Such conversion shall be effective upon
receipt by the Company of this Warrant together with the aforesaid written
statement, or on such later date as is specified therein (the “Conversion
Date”). Certificates for the shares issuable upon exercise of the Conversion
Right and , if applicable, a new warrant evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Conversation Date
and shall be delivered to the Holder within fourteen (14) days following the
Conversion Date.
3
(c) Determination
of Fair Market Value. For
purposes of this Section 4, “fair market value” of a share of Stock as of the
Conversion Date shall mean:
(A) If
the
Common Stock is traded on a securities exchange, the Nasdaq Small-Cap Market,
the fair market value per share of the Common Stock shall be deemed to be the
product of (i) the average of the closing prices of the Common Stock on such
exchange or market over the thirty (30) day period ending five (5) business
days
prior to the Conversion Date and (ii) the number of shares of Common Stock
into
which each share of Stock under this Warrant is convertible at the time of
such
conversion;
(B) If
the
Common Stock is traded over-the-counter but not on the Nasdaq National Market
or
the Nasdaq Small-Cap Market, the fair market value per share of the Stock shall
be deemed t be the product of (i) the average of the closing bid prices of
the
Common Stock over the thirty (30) day period ending five (5) business days
prior
to the Conversion Date and (ii) the number of shares of Stock for which the
Warrant may be exercised at the time of such conversion; and
(C) If
there
is no public market for the Common Stock, then the fair market value shall
be
determined by the Company’s Board of Directors in good faith.
5. No
Fractional Shares or Scrip. No
fractional shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant.
6. Charges,
Taxes and Expenses. Issuance
of certificates for shares of Stock upon the exercise of this Warrant shall
be
made without charge to Holder for any United States or state of United States
documentary stamp tax or other incidental expense in respect of the issuance
of
such certificate, all of which taxes and expenses shall be paid by the Company,
and such certificates shall be issued in the name of Holder.
7. Transfer
Rights; Rights as Stockholders; Registration Rights. This
Warrant is fully assignable by Holder, without limitation, to any party it
so
chooses. The rights and obligations of the parties hereunder shall inure to
the
benefit of, and be binding upon, their respective successors, assigns and legal
representatives. This Warrant does not entitle the Holder hereto to any voting
rights or other rights as a stockholder of the Company prior to the exercise
hereof. The Stock subject to this Warrant is subject to that certain Investors’
Rights Agreement of even date herewith entered into by and among the Company,
the Holders and certain other parties.
8. Exchange
and Registry of Warrant. This
Warrant is exchangeable, upon the surrender hereof by the registered holder
at
the above-mentioned office or agency of the Company, for a new Warrant in such
denominations as may be requested, but otherwise of like tenor and dated as
of
such exchange.
4
The
Company shall maintain a registry showing the name and address of the registered
holder of this Warrant. This Warrant may be surrendered for exchange or
exercise, in accordance with its terms, at such office or agency of the Company,
and the Company shall be entitled to rely in all respects, prior to written
notice to the contrary, upon such registry.
9. Loss,
Theft, Destruction or Mutilation of Warrant. Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, and in case of loss, theft
or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto,
and
upon surrender and cancellation of this Warrant, if mutilated, the Company
will
make and deliver a new Warrant of like tenor and dated as of such cancellation,
in lieu of this Warrant.
10. Adjustments. The
terms
of this Warrant, the Exercise Price per share and the number of shares
purchasable hereunder are subject to adjustment from time to time as
follows:
(a) Merger,
Sale of Assets, etc. If
at any
time while this Warrant, or any portion thereof, is outstanding and unexpired
there shall be (i) a reorganization (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein), (ii) a merger
or consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, 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) a sale or transfer of the Company’s properties and assets as
, or substantially as, an entirety to any other person, then, as a part of
such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the Holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Exercise Price then if effect, the number of shares of
stock
or other securities or property of the successor corporation resulting from
such
reorganization, merger, consolidation, sale or transfer that a holder of shares
deliverable upon exercise of this Warrant would have been entitled to receive
in
such reorganization, consolidation, merger, sale or transfer if this Warrant
had
been exercised immediately before such reorganization, merger, consolidation,
sale or transfer, all subject to further adjustment as provided in this Section
10. The foregoing provisions of this Section 10(a) shall similarly apply to
successive reorganizations, consolidations, mergers, sales and transfers and
to
the stock or securities of any other corporation that are at the time receivable
upon the exercise of this Warrant. If the per-share consideration payable to
the
Holder hereof for shares in connection with any such transaction is in a form
other than cash or marketable securities, then the value of such consideration
shall be determined in good faith by the Company’s Board of Directors. In all
events, appropriate adjustment (as determined in good faith by the Company’s
Board of Directors) shall be made in the application of the provisions of the
Warrant with respect to the rights and interests of the Holder after the
transaction, to the end that the provisions of this Warrant shall be applicable
after that event, as near as reasonably may be, in relation to any shares or
other property deliverable after that event upon exercise of this
Warrant.
5
(b) Reclassification,
etc. If
the
Company, at any time while this Warrant, or any portion thereof, remains
outstanding and unexpired by reclassification of securities or otherwise, shall
change any of the securities as to which purchase rights under this Warrant
exist into the same or a different number of securities of any other class
or
classes, this Warrant shall thereafter represent the right to acquire such
number and kind of securities as would have been issuable as the result of
such
change with respect to the securities that were subject to the purchase rights
under this Warrant immediately prior to such reclassification or other change
and the Exercise Price therefor shall be appropriately adjusted, all subject
to
further adjustment as provided in this Section 10.
(c) Split,
Subdivision or Combination of Shares. If
the
Company at any time while this Warrant, or any portion thereof, remains
outstanding and unexpired shall split, subdivide or combine the securities
as to
which purchase rights under this Warrant exist, into a different number of
securities of the same class, the Exercise Price for such securities shall
be
proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
(d) Adjustments
for Dividends in Stock or Other Securities or Property. If
while
this Warrant, or any portion hereof, remains outstanding and unexpired the
holders of the securities as to which purchase rights under this Warrant exist
at the time shall have received, or, on or after the record date fixed for
the
determination of eligible stockholders, shall have become entitled to receive,
without payment therefor, other or additional stock or other securities or
property (other than cash) of the Company by way of dividend, then and in each
case, to the number of shares of the security receivable upon exercise of this
Warrant, and without payment of any additional stock or other securities or
property (other than cash) of the Company that such holder would hold on the
date of such exercise had it been the holder of record of the security
receivable upon exercise of this Warrant on the date hereof and had thereafter,
during the period from the date to and including the date of such exercise,
retained such shares and/or all other additional stock available by it as
aforesaid during such period, giving effect to all adjustments called for during
such period by the provisions of this Section 10.
(e) Certificate
as to Adjustments. Upon
the
occurrence of each adjustment or readjustment pursuant to this Section 10,
the
Company at its expense shall promptly compute such adjustment or readjustment
in
accordance with the terms hereof and furnish to each Holder of this Warrant
a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Company
shall, upon the written request, at any time, of any such Holder, furnish or
cause to be furnished to such Holder a like certificate setting forth: (i)
such
adjustments and readjustments; (ii) the Exercise Price at the time in effect;
and (iii) the number of shares and the amount, if any, of other property that
at
the time would be received upon the exercise of the Warrant.
6
11. Authorized
Shares. The
Company covenants that during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of
the
Company’s Common Stock upon the exercise of the rights under this
Warrant.
12. Miscellaneous.
(a) Issue
Date. The
provisions of this Warrant shall be construed and shall be given effect in
all
respect as if it had been issued and delivered by the Company on the date
hereof.
(b) Successors. This
Warrant shall be binding upon any successors or assigns of the
Company.
(c) Governing
Law. This
Warrant shall be governed by and construed in accordance with the laws of the
State of California.
(d) Headings. The
headings used in this Warrant are used for convenience only and are not to
be
considered in construing or interpreting this Agreement.
(e) Notices. Unless
otherwise provided, any notice required or permitted under this Warrant shall
be
given in writing and shall be deemed effectively given upon personal delivery to
the party to be notified or three (3) days after being sent via air courier,
in
all cases addressed to the party to be notified at the address indicated for
such party on the signature page hereof, or at such other address as such party
may designate by ten (10) days advance written notice to the other
party.
(f) Saturdays,
Sundays, Holidays. If
the
last or appointed day for the taking of any action or the expiration of any
right required or granted herein shall be a Saturday or a Sunday or shall be
a
legal holiday in the State of California, then such action may be taken or
such
right may be exercised on the next succeeding day not a legal
holiday.
(g) Attorney’s
Fees. In
the
event that any dispute among the parties to this Agreement should result in
litigation, the prevailing party in such dispute shall be entitled to recover
from the losing party all fees, costs and expenses of enforcing any right of
such prevailing party under or with respect to this Agreement, including without
limitation, such reasonable fees and expenses of attorneys and accountants,
which shall include, without limitation, all fees, costs and expenses of
appeals.
7
IN
WITNESS WHEREOF, Emvelco Corp. has caused this Warrant to be executed by its
officer thereunto duly authorized.
Dated:
August 19, 2008
| EMVELCO CORP. | ||
|
By:
|
/s/
Xxxxx Xxxxx
|
|
|
Xxxxx
Xxxxx
|
||
|
Its:
|
Chief
Executive
Officer
|
|
Address
of Holder
0000
Xxxxxxx Xxxx Xxxxxx, Xx. 000
Xxx
Xxx,
XX 00000
8
Notice
of Exercise
Pursuant
to the terms of the Common Stock Purchase Warrant of Emvelco Corp. Dated as
of
August __, 2008 (the “Warrant”), the undersigned registered holder of the
Warrant hereby elects to purchase _________ shares of Common Stock of EMVELCO
CORP. at a price of $_______ per share (the “Exercise Price”). Payment of the
Exercise Price is hereby made by [indicate which]:
|
________
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Cash
in the amount of $__________________.
|
|
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________
|
Certified
check made payable to the Company in the amount of $_______________.
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|
|
________
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Wire
transfer to the Company’s account in the amount of $_______________.
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________
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Cancellation
of the following indebtedness of the Company to Holder in the
amount of
$________________.
|
|
|
________
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Net
Exercise for _______________________
shares.
|
IN
WITNESS WHEREOF, ____________________________ (“Holder”) has caused this Notice
of Exercise to be executed by its officers thereunto duly
authorized.
Dated:
___________________, 200 ___
|
|
||
|
(Name
of Holder)
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| By: | ||
| Its: |
9
