WARRANT AGREEMENT
Exhibit
4.2
WARRANT
AGREEMENT, dated as of this 13th
day of
December, 2004, by and among MAGNETECH INDUSTRIAL SERVICES, INC., an Indiana
corporation (“MIS”), MAGNETECH INTEGRATED SERVICES CORP., an Indiana corporation
newly formed to own 100% of MIS (the “Company”) and STRASBOURGER XXXXXXX TULCIN
XXXXX INCORPORATED, a New York corporation (the “Placement
Agent”).
WITNESSETH
WHEREAS,
in connection with the Financings of Series A Stock and Common Stock (the
“Warrants”),
the
Company may cause to be issued up to 4,500,000 Warrants to purchase shares
of
common stock in the Company; and
WHEREAS,
the Company will act as warrant agent in connection with the issuance,
registration, transfer and exchange of the Warrants, the issuance of
certificates representing the Warrants, the exercise of the Warrants, and
the
rights of the holders thereof (in such capacity, the Company or any successor
warrant agent being referred to herein as the “Warrant
Agent”);
NOW
THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and provisions
of the Warrants and the certificates representing the Warrants and the
respective rights and obligations thereunder of the Company, the holders
of
certificates representing the Warrants and the Warrant Agent, the parties
hereto
agree as follows:
SECTION
1. DEFINITIONS.
As
used
herein, the following terms shall have the following meanings, unless the
context shall otherwise require:
(a) “Common
Stock”
shall
mean stock of the Company of any class, whether now or hereafter authorized,
which has the right to participate in the distributions of earnings and
assets
of the Company without limit as to amount or percentage, which at the date
of
the formation of the Company consists of 200,000,000 authorized shares
of Common
Stock.
(b) “Corporate
Office”
shall
mean the office of the Warrant Agent (or its successor) at which at any
particular time its principal business shall be administered, which office
is
located at 0000 X. Xxxxxx Xx., Xxxxx Xxxx, Xxxxxxx 00000.
(c) “Exercise
Date”
shall
mean, as to any Warrant, the date on which the Warrant Agent shall have
received
both (a) the certificate representing such Warrant (the “Warrant Certificate”),
with the exercise form thereon duly executed by the Registered Holder thereof
or
his attorney duly authorized in writing, and (b) if payment is to be made
in
cash, cash or an official bank or certified check made payable to the Company,
of an amount in lawful money of the United States of America equal to the
Exercise Price.
(d) “Exercise
Price”
shall
mean the purchase price to be paid upon exercise of each War-rant in accordance
with the terms hereof, which price shall be 0.0001 cents per share, subject
to
adjustment from time to time pursuant to the provisions of Section 8 hereof
and
subject further to the Company’s right to reduce the Exercise Price upon notice
to all Registered Holders.
(e) “Financings”
shall
mean the bridge financing from the sale of shares of Series A Stock and
the
subsequent private placement offering.
(f) “Initial
Warrant Exercise Date”
shall
mean December 13, 2004.
(g) “Registered
Holder”
shall
mean the person in whose name any certificate representing Warrants shall
be
registered on the books maintained by the Warrant Agent pursuant to Section
6.
(h) “Series
A Stock”
shall
mean the Series A Convertible Redeemable Preferred Stock issued by
MIS.
(i) “Transfer
Agent”
shall
mean the Company or any authorized successor transfer agent, as
such.
(j) “Warrant
Expiration Date”
shall
mean 5.00 P.M. (New York time) on December 13, 2014; provided that if such
date
shall in the State of New York be a holiday or a day on which banks are
authorized to close, then 5:00 P.M. (New York time) on the next following
day
which in the State of New York is not a holiday or a day on which banks
are
authorized to close. Upon notice to all warrantholders the Company shall
have
the right to extend the Warrant Expiration Date.
(k) “Warrant
Shares”
shall
mean the shares of Common Stock deliverable upon exercise of the Warrants,
as
adjusted from time to time.
SECTION
2. WARRANTS
AND ISSUANCE OF WARRANT CERTIFICATES.
(a) A
Warrant
shall initially entitle the Registered Holder of the Warrant Certificate
representing such Warrant to purchase one share of Common Stock upon the
exercise thereof, in accordance with the terms hereof, subject to modification
and adjustment as provided in Section 8.
(b) From
time
to time, up to the Warrant Expiration Date, the Transfer Agent shall execute
and
deliver stock certificates in required whole number denominations representing
up to an aggregate of 4,500,000 shares of Common Stock, subject to adjustment
as
described in Section 8 hereof, upon the exercise of Warrants in accordance
with
this Agreement.
(c) From
time
to time, up to the Warrant Expiration Date, the Warrant Agent shall execute
and
deliver Warrant Certificates in required whole number denominations to
the
persons entitled thereto in connection with any transfer or exchange permitted
under this Agreement; provided that no Warrant Certificates shall be issued
except (i) those initially issued hereunder, (ii) those issued on or after
the
Initial Warrant Exercise Date, upon the exercise of fewer than all Warrants
represented by any Warrant Certificate, to evidence any unexercised Warrants
held by the exercising Registered Holder, (iii) those issued upon any transfer
or exchange pursuant to Section 6; (iv) those issued in replacement of
lost,
stolen, destroyed or mutilated Warrant Certificates pursuant to Section
7; and
(v) at the option of the Company, in such form as may be approved by the
its
Board of Directors, to reflect (a) any adjustment or change in the Exercise
Price or the number of shares of Common Stock purchasable upon exercise
of the
Warrants, made pursuant to Section 8 hereof and (b) other modifications
approved
in accordance with Section 15 hereof.
SECTION
3. FORM
AND EXECUTION OF WARRANT CERTIFICATES.
(a) The
Warrant Certificates shall be substantially in the folio annexed hereto
as
Exhibit A (the provisions of which are hereby incorporated herein) and
may have
such letters, numbers or other marks of identification or designation and
such
legends, summaries or endorsements printed, lithographed, engraved or typed
thereon as the Company may deem appropriate and as are not inconsistent
with the
provisions of this Agreement, or as may be required to comply with any
law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Warrants may be listed, or to conform
to
usage. The Warrant Certificates shall be dated the date of issuance thereof
(whether upon initial issuance, transfer, exchange or in lieu of mutilated,
lost, stolen, or destroyed Warrant Certificates) and issued in registered
form.
Warrants shall be numbered serially with the letters MIH.
(b) Warrant
Certificates shall be executed on behalf of the Company by its Chairman
of the
Board, Chief Executive Officer, President or any Vice President and by
its Chief
Financial Officer, Secretary or an Assistant Secretary, by manual signatures
or
by facsimile signatures printed thereon. In case any officer of the Company
who
shall have signed any of the Warrant Certificates shall cease to be such
officer
of the Company before the date of issuance of the Warrant Certificates
and issue
and delivery thereof, such Warrant Certificates may nevertheless be issued
and
delivered with the same force and effect as though the person who signed
such
Warrant Certificates had not ceased to be such officer of the Company.
After
execution by the Company, Warrant Certificates shall be delivered by the
Warrant
Agent to the Registered Holder.
SECTION
4. EXERCISE.
(a) Each
Warrant may be exercised by the Registered Holder thereof at any time on
or
after the Initial Warrant Exercise Date, but not after the Warrant Expiration
Date, upon the terms and subject to the conditions set forth herein and
in the
applicable Warrant Certificate. A Warrant shall be deemed to have been
exercised
immediately prior to the close of business on the Exercise Date and the
person
entitled to receive the securities deliverable upon such exercise shall
be
treated for all purposes as the holder upon exercise thereof as of the
close of
business on the Exercise Date. As soon as practicable on or after the Exercise
Date the Warrant Agent shall deposit the proceeds received from the exercise
of
a Warrant, and promptly after clearance of checks received in payment of
the
Exercise Price pursuant to such Warrants, cause to be issued and delivered
by
the Transfer Agent, to the person or persons entitled to receive the same,
a
certificate or certificates for the securities deliverable upon such exercise
(plus a certificate for any remaining unexercised Warrants of the Registered
Holder).
Notwithstanding
the foregoing, in the case of payment made in the form of a check drawn
on an
account of the Placement Agent or such other investment banks and brokerage
houses as the Company shall approve, certificates shall immediately be
issued
without any delay. Upon the exercise of any Warrant and clearance of the
funds
received, the Warrant Agent shall promptly remit the payment received for
the
Warrant to the Company or as the Company may direct in writing.
(b) The
Registered Holder may, at its option, exchange this Warrant on a cashless
basis,
in whole or in part (a “Warrant
Exchange”),
into
the number of Warrant Shares determined in accordance with this Section
(4)(b),
by surrendering the Warrant Certificate at the principal office of the
Company
or at the office of its stock transfer agent, accompanied by an irrevocable
notice stating such Registered Holder’s intent to effect such exchange; the
number of Warrant Shares to be exchanged and the date of the notice of
such
intent to exchange (the “Notice
of Exchange”).
The
Registered Holder may send a Notice of Exchange to the Company prior to
the
Initial Warrant Exercise Date. The Warrant Exchange shall take place on
the date
specified in the Notice of Exchange or, if later, the date the Notice of
Exchange is received by the Company (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 such Warrant, shall be issued as of the Exchange Date
and
delivered to the Registered Holder as soon as is reasonably practicable
following the Exchange Date. In connection with any Warrant Exchange, a
Warrant
shall represent the right to subscribe for and acquire the number of Warrant
Shares (rounded to the next highest integer) equal to (i) the number of
Warrant
Shares specified by the Registered Holder in its Notice of Exchange (the
“Total
Number”)
less
(ii) the number of Warrant Shares equal to the quotient obtained by dividing
(A)
the product of the Total Number and the existing Exercise Price by (B)
the
current market value of a share of Common Stock. Current market value shall
have
the meaning set forth Section (8)(i) hereof, except that for purposes hereof,
the date of exercise, as used in such Section (8)(i) hereof, shall mean
the date
of the Notice of Exchange.
(c) The
holders of the Notes may at any time prior to the Maturity Date present
the
Notes to the Company in payment of the Exercise Price of all or any portion
of
the Warrants.
SECTION
5. RESERVATION
OF SHARES; LISTING; PAYMENT OF TAXES; ETC.
(a) The
Company covenants that it will at all times reserve and keep available
out of
its authorized Common Stock, solely for the purpose of issue upon exercise
of
Warrants, such number of shares of Common Stock as shall then be issuable
upon
the exercise of all outstanding Warrants. The Company covenants that all
shares
of Common Stock which shall be issuable upon exercise of the Warrants and
payment of the Exercise Price shall, at the time of delivery, be duly and
validly issued, fully paid, nonassessable and free from all taxes, liens
and
charges with respect to the issue thereof (other than those which the Company
shall promptly pay or discharge).
(b) The
Company will use reasonable efforts to obtain appropriate approvals or
registrations under state “blue sky” securities laws with respect to the
exercise of the Warrants; provided, however, that the Company shall not
be
obligated to file any general consent to service of process or qualify
as a
foreign corporation in any jurisdiction. With respect to any such securities
laws, however, Warrants may not be exercised by, or shares of Common Stock
issued to, any Registered Holder in any state in which such exercise would
be
unlawful.
(c) The
Company shall pay all documentary, stamp or similar taxes and other governmental
charges that may be imposed with respect to the issuance of Warrants, or
the
issuance or delivery of any shares upon exercise of the Warrants; provided,
however, that if the shares of Common Stock are to be delivered in a name
other
than the name of the Registered Holder of the Warrant Certificate representing
any Warrant being exercised, then no such delivery shall be made unless
the
person requesting the same has paid to the Warrant Agent the amount of
transfer
taxes or charges incident thereto, if any.
(d) The
Warrant Agent is hereby irrevocably authorized to requisition the Company’s
Transfer Agent from time to time for certificates representing shares of
Common
Stock required upon exercise of the Warrants, and the Company will authorize
the
Transfer Agent to comply with all such proper requisitions.
SECTION
6. EXCHANGE
AND REGISTRATION OF TRANSFER.
Subject
to the restrictions on transfer contained in the Warrant Certificates and
the
Stock Purchase Agreements between the Company and the investors in the
pre-bridge and bridge financings:
(a) Warrant
Certificates may be exchanged for other Warrant Certificates representing
an
equal aggregate number of Warrants of the same class or may be transferred
in
whole or in part. Warrant Certificates to be exchanged shall be surrendered
to
the Warrant Agent at its Corporate Office, and upon satisfaction of the
terms
and provisions hereof, the Company shall execute, and the Warrant Agent
shall
countersign, issue and deliver in exchange therefor the Warrant Certificate
or
Certificates which the Registered Holder making the exchange shall be entitled
to receive.
(b) The
Warrant Agent shall keep at its office books in which, subject to such
reasonable regulations as it may prescribe, it shall register Warrant
Certificates and the transfer thereof in accordance with its regular practice.
Upon due presentment for registration of transfer of any Warrant Certificate
at
its office, the Company shall execute and the Warrant Agent shall issue
and
deliver to the transferee or transferees a new Warrant Certificate or
Certificates representing an equal aggregate number of Warrants.
(c) With
respect to all Warrant Certificates presented for registration of transfer,
or
for exchange or exercise, the exercise form on the reverse thereof shall
be duly
endorsed, or be accompanied by a written instrument or instruments of transfer
and subscription, in form satisfactory to the Company, duly executed by
the
Registered Holder or his attorney-in-fact duly authorized in
writing.
(d) The
Company may require payment by such holder of a sum sufficient to cover
any tax
or other governmental charge that may be imposed in connection
therewith.
(e) All
Warrant Certificates surrendered for exercise or for exchange in case of
mutilated Warrant Certificates shall be promptly canceled by the Warrant
Agent
and thereafter retained by the Warrant Agent until termination of this
Agreement
or resignation of the Warrant Agent, or disposed of or destroyed, at the
direction of the Company.
(f) Prior
to
due presentment for registration of transfer thereof, the Company and the
Warrant Agent may deem and treat the Registered Holder of any Warrant
Certificate as the absolute owner thereof and of each Warrant represented
thereby (notwithstanding any notations of ownership or writing thereon
made by
anyone other than a duly authorized officer of the Company or the Warrant
Agent)
for all purposes and shall not be affected by any notice to the
contrary.
SECTION
7. LOSS
OR MUTILATION.
Upon
receipt by the Company and the Warrant Agent of evidence satisfactory to
them of
the ownership of and loss, theft, destruction or mutilation of any Warrant
Certificate and (in case of loss, theft or destruction) of indemnity
satisfactory to them, and (in the case of mutilation) upon surrender and
cancellation thereof, the Company shall execute and the Warrant Agent shall
(in
the absence of notice to the Company and/or Warrant Agent that the Warrant
Certificate has been acquired by a bona fide purchaser) countersign and
deliver
to the Registered Holder in lieu thereof a new Warrant Certificate of like
tenor
representing an equal aggregate number of Warrants. Applicants for a substitute
Warrant Certificate shall comply with such other reasonable regulations
and pay
such other reasonable charges as the Warrant Agent may prescribe.
SECTION
8. ANTI-DILUTION
PROVISIONS.
The
Exercise Price in effect at any time and the number and kind of securities
purchasable upon the exercise of the Warrants shall be subject to adjustment
from time to time upon the happening of certain events as follows:
(a) In
case
the Company shall hereafter (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 in effect at the time
of
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 of 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.
Such adjustment shall be made successively whenever any event listed above
shall
occur.
(b) Subject
to the provisions of Subsection (k) below, in 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
on such
record date or less than the Exercise Price on such record date, the Exercise
Price shall be adjusted so that the same shall equal the lower of (i) the
price
determined by multiplying the Exercise Price in effect immediately prior
to the
date of such issuance by a fraction, the numerator of which shall be the
sum of
(x) the number of Common Stock Equivalents Outstanding (as defined below)
on the
record date mentioned below and (y) the number of additional shares of
Common
Stock which the aggregate offering price of the total number of shares
of Common
Stock so offered (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 (x)
the
number of Common Stock Equivalents Outstanding on such record date and
(y) the
number of additional shares of Common Stock offered for subscription or
purchase
(or into which the convertible securities so offered are convertible) or
(ii) in
the event the Subscription Price is equal to or higher than the current
market
price but is less than the Exercise Price, the price determined by multiplying
the Exercise Price in effect immediately prior to the date of issuance
by a
fraction, the numerator of which shall be the sum of the (x) number of
Common
Stock Equivalents Outstanding on the record date mentioned below and (y)
the
number of additional shares of Common Stock which the aggregate offering
price
of the total number of shares of Common Stock so offered (or the aggregate
conversion price of the convertible securities so offered) would purchase
at the
Exercise Price in effect immediately prior to the date of such issuance,
and the
denominator of which shall be the sum of (x) the number of Common Stock
Equivalents Outstanding on the record date mentioned below and (y) the
number of
additional shares of Common Stock offered for subscription or purchase
(or into
which the convertible securities so offered are convertible). For purposes
of
this Section 8, “Common
Stock Equivalents Outstanding”
shall
mean the number of shares of Common Stock that is equal to the sum of (1)
all
shares of Common Stock of the Company that are outstanding at the time
in
question, plus (2) all shares of Common Stock of the Company issuable,
directly
or indirectly, upon conversion of all shares of preferred stock or other
stock
or other securities convertible into or exchangeable, directly or indirectly,
for shares of Common Stock without the payment of additional consideration
(“Convertible
Securities”)
that
are outstanding at the time in question. 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 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 into Common Stock) actually
delivered.
(c) 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 and dividends or distributions referred to in Subsection
(a)
above) or subscription rights or warrants (excluding those referred to
in
Subsection (b) above), then in each such case the Exercise Price in effect
thereafter shall be determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, the numerator of which shall be
(x) the
total number of Common Stock Equivalents Outstanding multiplied by the
current
market price per share of Common Stock, less (y) 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 Common Stock Equivalents 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
effective immediately after the record date for the determination of
shareholders entitled to receive such distribution.
(d) Subject
to the provisions of Subsection (k) below, in case the Company shall hereafter
issue shares of its Common Stock (excluding shares (i) issued in any of
the
transactions described in Subsections (a), (b) or (e), (ii) issued to
shareholders of any corporation which merges into the Company in proportion
to
their stock holdings of such corporation immediately prior to such merger,
upon
such merger, (iii) issued in a bona fide public offering pursuant to a
firm
commitment underwriting, (iv) issued in connection with an acquisition
of a
business or technology which has been approved by a majority of the Company’s
non-employee directors, (v) issued in connection with the payment of interest
or
dividends with respect to any securities issued to investors or placement
agents
and/or their designees in connection with the Financings or upon conversion
or
exercise of such securities, or (vi) issued upon exercise of options, warrants,
convertible securities and convertible debentures) for a consideration
per share
(the “Offering
Price”)
less
than either the current market price or less than the Exercise Price, the
Exercise Price shall be adjusted immediately thereafter so that it shall
equal
the lower of (i) the price determined by multiplying the Exercise Price
in
effect immediately prior thereto by a fraction, the numerator of which
shall be
the sum of (x) the number of Common Stock Equivalents Outstanding immediately
prior to the issuance of such additional shares and (y) the number of shares
of
Common Stock which the aggregate consideration received for the issuance
of such
additional shares would purchase at such current market price per share
of
Common Stock, and the denominator of which shall be the number of Common
Stock
Equivalents Outstanding immediately after the issuance of such additional
shares
or (ii) in the event the Offering Price is equal to or higher than the
current
market price per share but less than the Exercise Price, the price determined
by
multiplying the Exercise Price in effect immediately prior to the date
of
issuance by a fraction, the numerator of which shall be (x) the number
of Common
Stock Equivalents Outstanding immediately prior to the issuance of such
additional shares and (y) the number of shares of Common Stock which the
aggregate consideration received (determined as provided in Subsection
(h)
below) for the issuance of such additional shares would purchase at the
Exercise
Price in effect immediately prior to the date of such issuance, and the
denominator of which shall be the number of Common Stock Equivalents Outstanding
immediately after the issuance of such additional shares. Such adjustment
shall
be made successively whenever such an issuance is made, and too the extent
that
shares of Common Stock (or securities convertible into Common Stock), expire,
are cancelled or are redeemed after their issuance, the Conversion Price
shall
be readjusted to the Conversion Price that would then be in effect had
the
adjustments made upon the issuance of convertible securities been made
upon the
basis of delivery of only the number of shares of Common Stock (or securities
convertible into Common Stock) actually issued.
(e) Subject
to the provisions of Subsection (k) below, in case the Company shall hereafter
issue any securities convertible into or exercisable or exchangeable for
its
Common Stock (excluding (1) securities issued in transactions described
in
Subsections (b), (c) and (d)(i) through (vii), (ii) options granted to
the
Company’s officers, directors, employees and consultants under a plan or plans
adopted by the Company’s Board of Directors, if such options would otherwise be
included in this Subsection (e) (but only to the extent that the aggregate
number of shares issuable upon exercise of the options excluded hereby
and
issued after the date hereof, shall not exceed 10% of the Company’s Common Stock
outstanding, on a fully diluted basis, at the time of any issuance unless
such
excess issuances are approved by the non-employee members of the Company’s Board
of Directors or by a committee comprised of a majority of non-employee
directors) and (iii) options, warrants, convertible securities and convertible
debentures outstanding as of the date hereof or upon issuance, or subsequent
exercise or conversion of, or in connection with the payment of in kind
interest
or dividends with respect to, any securities issued to investors or the
placement agents and/or their designees in connection with the Bridge or
upon
conversion or exercise of such securities) for a consideration per share
of
Common Stock (the “Exchange
Price”)
initially deliverable upon conversion, exercise or exchange of such securities
(determined as provided in Subsection (h) below) less than the current
market
price or less than the Exercise Price, the Exercise Price shall be adjusted
immediately thereafter so that it shall equal the lower of (i) the price
determined by multiplying the Exercise Price in effect immediately prior
thereto
by a fraction, the numerator of which shall be the sum of (x) the number
of
Common Stock Equivalents Outstanding immediately prior to the issuance
of such
securities and (y) the number of shares of Common Stock which the aggregate
consideration paid for such securities (plus the aggregate exercise price
if
such convertible securities are options or warrants) would purchase at
such
current market price per share of Common Stock, and the denominator of
which
shall be the sum of (x) the number of Common Stock Equivalents Outstanding
immediately prior to such issuance and (y) the maximum number of shares
of
Common Stock of the Company deliverable upon conversion, exercise or exchange
of
such securities at the initial Exchange Price or (ii) in the event the
Exchange
Price is equal to or higher than the current market price per share but
less
than the Exercise Price, the price determined by multiplying the Exercise
Price
in effect immediately prior to the date of issuance by a fraction, the
numerator
of which shall be the sum of (x) the number of Common Stock Equivalents
Outstanding immediately prior to the issuance of such securities and (y)
the
number of shares of Common Stock which the aggregate consideration received
(determined as provided in Subsection (h) below) for such securities would
purchase at the Exercise Price in effect immediately prior to the date
of such
issuance, and the denominator of which shall be the sum of (x) the number
of
Common Stock Equivalents Outstanding immediately prior to the issuance
of such
securities and (y) the maximum number of shares of Common Stock of the
Company
deliverable upon conversion of or in exchange for such securities at the
initial
conversion or exchange price or rate. Such adjustment shall be made successively
whenever such an issuance is made; and to the extent that shares of Common
Stock
are not delivered after the expiration of such securities 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 securities been made upon the
basis
of delivery of only the number of shares of Common Stock actually
delivered.
(f) Whenever
the Exercise Price payable upon exercise of each Warrant is adjusted pursuant
to
Subsections (a), (b), (c), (d) and (e) above or (k) below, the number of
shares
of Common Stock purchasable upon exercise of this Warrant shall simultaneously
be adjusted by multiplying the number of shares of Common Stock initially
issuable upon exercise of this Warrant by the Exercise Price in effect
immediately prior to the adjustment and dividing the product so obtained
by the
Exercise Price, as adjusted.
(g) No
adjustment in the Exercise Price shall be required unless such adjustment
would
require an increase or decrease of at least one cents ($0.01) in such price;
provided, however, that any adjustments which by reason of this Section
8 are
not required to be made shall be carried forward and taken into account
in any
subsequent adjustment required to be made hereunder;
(h) For
purposes of any computation respecting consideration received pursuant
to
Subsections (d) and (e) above, the following shall apply:
(A) in
the
case of the issuance of shares of Common Stock for cash, the consideration
shall
be the amount of such cash, provided that in no case shall any deduction
be made
for any commissions, discounts or other expenses incurred by the Company
for any
underwriting of the issue or otherwise in connection therewith;
(B) in
the
case of the issuance of shares of Common Stock for a consideration in whole
or
in part other than cash, the consideration other than cash shall be deemed
to be
the fair market value thereof as determined in good faith by the Board
of
Directors of the Company (irrespective of the accounting treatment thereof),
whose determination shall be conclusive; and
(C) in
the
case of the issuance of securities convertible into or exchangeable for
shares
of Common Stock, the aggregate consideration received therefor shall be
deemed
to be the consideration received by the Company for the issuance of such
securities plus the additional minimum consideration, if any, to be received
by
the Company upon the conversion or exchange thereof (the consideration
in each
case to be determined in the same manner as provided in clauses (A) and
(B) of
this Subsection (h)).
(i) For
the
purpose of any computation under Subsections (b), (c), (d) and (e) above,
the
current market price per share of Common Stock at any date shall be deemed
to be
the higher of (i) the average of the prices for thirty (30) consecutive
business
days before such date, or (ii) the average of the prices for five (5)
consecutive business days immediately preceding such date determined as
follows:
(A) If
the
Common Stock is listed on a national securities exchange or admitted to
unlisted
trading privileges on such exchange or listed for trading on the Nasdaq
Stock
Market (“Nasdaq”), the current market value shall be the last reported sale
price of the Common Stock on such exchange or market on such trading day
or if
no such sale is made on such day, the average closing bid and asked prices
for
such day on such exchange or market;
(B) If
the
Common Stock is not so listed or admitted to unlisted trading privileges,
but is
traded in the over-the-counter market, the current market value shall be
the
mean of the average of the last reported bid and asked prices reported
by the
National Quotation Bureau, Inc. for such trading day; or
(C) If
the
Common Stock is not so listed or admitted to unlisted trading privileges
and bid
and asked prices are not so reported, the current market value shall be
an
amount determined in such reasonable manner as may be prescribed by the
Board of
Directors of the Company.
(j) All
calculations under this Section 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
Section 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 Section 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
the notes issued in the Financings and the Warrants).
(k) Notwithstanding
the provisions of this Section 8, in the event that the Company shall at
any
time prior to the first anniversary of the Initial Warrant Exercise Date
issue
securities under Subsections (b), (d) or (e) (but subject to the exemptions
specified therein other than clause (iii) of Subsection (d) having an Offering
Price, Subscription Price or Conversion Price less than the Exercise Price
(whether initially or due to provisions in such securities requiring price
reductions as a result of anti-dilution adjustments, the passage of time,
“discount to market” or similar provisions), then the Exercise Price shall be
immediately reset to equal such lower Offering Price, Subscription Price
or
Conversion Price.
(l) In
the
event that at any time, as a result of an adjustment made pursuant to Subsection
(a) above, the Holder of this Warrant thereafter shall become entitled
to
receive any shares of the Company, other than Common Stock, thereafter
the
number of such other shares so receivable upon exercise of this Warrant
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
contained in Subsections (a) to (k), inclusive above.
(m) In
case
of any reclassification or capital reorganization, or in case of any
consolidation or merger of the Company with or into another corporation
(other
than a merger with a subsidiary in which merger the Company is the continuing
corporation and which does not result in any reclassification or capital
reorganization) or in case of any sale, lease or conveyance to another
corporation of the property of the Company as an entirety, the Company
shall, as
a condition precedent to such transaction, cause effective provisions to
be made
so that the holder of this Warrant shall have the right thereafter upon
conversion of this Warrant in accordance with the provisions of this Section
8,
to purchase the kind and amount of shares of stock and other securities
and
property receivable upon such reclassification, capital reorganization,
consolidation, merger, sale or conveyance by a holder of the number of
shares of
Common Stock which might have been received upon conversion of this Warrant
immediately prior to such reclassification, consolidation, merger, sale
or
conveyance. Any such provision shall include provision for adjustments
which
shall be as nearly equivalent as may be practicable to the adjustments
provided
for in this Warrant. The Company shall not effect any such consolidation,
merger, sale, transfer or other disposition, unless prior to or simultaneously
with the consummation thereof the successor corporation (if other than
the
Company) resulting from such consolidation or merger or the corporation
purchasing or otherwise acquiring such properties shall assume, by written
instrument executed and mailed or delivered to the holder of this Warrant
at the
last address of such holder appearing on the books of the Company, the
obligation to deliver to such holder such shares of stock, securities,
cash or
properties as, in accordance with the foregoing provisions, such holder
may be
entitled to acquire. The above provisions of this paragraph shall similarly
apply to successive reorganizations, reclassifications, consolidations,
mergers,
sales, transfers or other dispositions.
(n) The
Company shall promptly give written notice of any adjustment under this
Section
8 to the Warrant Agent (if other than the Company), the Placement Agent
and each
Registered Holder of the Warrants.
SECTION
9. REGISTRATION
UNDER THE SECURITIES ACT OF 1933.
The
Company agrees to register the Warrant Shares for resale under the Securities
Act on the terms and subject to the conditions set forth in Section 1.2
of the
Registration Rights Agreement between the Company and each of the investors
in
the Private Placement Offering.
SECTION
10. FRACTIONAL
WARRANTS AND FRACTIONAL SHARES.
If
the
number of shares of Common Stock purchasable upon the exercise of each
Warrant
is adjusted pursuant to Section 8 hereof, the Company shall nevertheless
not be
required to issue fractions of shares, upon exercise of the Warrants or
otherwise, or to distribute certificates that evidence fractional shares.
With
respect to any fraction of a share called for upon any exercise hereof,
the
Company shall pay to the Holder an, amount in cash equal to such fraction
multiplied by the current market value of such fractional share, determined
as
follows:
(a) If
the
Common Stock is listed on a national securities exchange or admitted to
unlisted
trading privileges on such exchange or listed for trading on Nasdaq, the
current
market value shall be the average of the last reported sale prices of the
Common
Stock on such exchange for the 10 trading days prior to the date of exercise
of
this Warrant; provided that if no such sale is made on a day within such
period
or no closing sale price is quoted, that day’s market value shall be the average
of the closing bid and asked prices for such day on such exchange or system;
or
(b) If
the
Common Stock is listed in the over-the-counter market (other than on Nasdaq)
or
admitted to unlisted trading privileges, the current market value shall
be the
mean of the last reported bid and asked prices reported by the National
Quotation Bureau, Inc. for the 10 trading days prior to the date of the
exercise
of this Warrant; or
(c) If
the
Common Stock is not so listed or admitted to unlisted trading privileges
and bid
and asked prices are not so reported, the current market value shall be
an
amount determined in a reasonable manner by the Board of Directors of the
Company.
SECTION
11. WARRANT
HOLDERS NOT DEEMED STOCKHOLDERS.
No
holder
of Warrants shall, as such, be entitled to vote or to receive dividends
or be
deemed the holder of Common Stock that may at any time be issuable upon
exercise
of such Warrants for any purpose whatsoever, nor shall anything contained
herein
be construed to confer upon the holder of Warrants, as such, any of the
rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issue or reclassification of stock, change of par value
or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such Holder shall have exercised such Warrants
and
been issued shares of Common Stock in accordance with the provisions
hereof.
SECTION
12. RIGHTS
OF ACTION.
All
rights of action with respect to this Agreement are vested in the respective
Registered Holders of the Warrants, and any Registered Holder of a Warrant,
without consent of the Warrant Agent or of the holder of any other Warrant,
may,
on his own behalf and for his own benefit, enforce against the Company
his right
to exercise his Warrants for the purchase of shares of Common Stock in
the
manner provided in the Warrant Certificate and this Agreement.
SECTION
13. AGREEMENT
OF WARRANT HOLDERS.
Every
holder of a Warrant, by his acceptance thereof, consents and agrees with
the
Company, the Warrant Agent and every other holder of a Warrant
that:
(a) The
Warrants are transferable only on the registry books of the Warrant Agent
by the
Registered Holder thereof in person or by his attorney duly authorized
in
writing and only if the Warrant Certificates representing such Warrants
are
surrendered at the office of the Warrant Agent, duly endorsed or accompanied
by
a proper instrument of transfer satisfactory to the Warrant Agent and the
Company in their sole discretion, together with payment of any applicable
transfer taxes; and
(b) The
Company may deem and treat the person in whose name the Warrant Certificate
is
registered as the holder and as the absolute, true and lawful owner of
the
Warrants represented thereby for all purposes, and the Company shall not
be
affected by any notice or knowledge to the contrary, except as otherwise
expressly provided in Section 7 hereof.
SECTION
14. CANCELLATION
OF WARRANT CERTIFICATES.
If
the
Company shall purchase or acquire any Warrant or Warrants, the Warrant
Certificate or Warrant Certificates evidencing the same shall thereupon
be
canceled by it and retired. The Warrant Agent shall also cancel Common
Stock
following exercise of any or all of the Warrants represented thereby or
delivered to it for transfer, splitup, combination or exchange.
SECTION
15. MODIFICATION
OF AGREEMENT.
The
parties hereto may by supplemental agreement make any changes or corrections
in
this Agreement (i) that it shall deem appropriate to cure any ambiguity
or to
correct any defective or inconsistent provision or manifest mistake or
error
herein contained; (ii) to reflect an increase in the number of Warrants
which
are to be governed by this Agreement resulting from an increase in the
size of
the Financings; or (iii) that it may deem necessary or desirable and which
shall
not materially adversely affect the interests of the holders of Warrant
Certificates; provided, however, that this Agreement shall not otherwise
be
modified, supplemented or altered in any material respect except with the
consent in writing of the Company, the Placement Agent and the holders
of at
least a majority of the outstanding Warrants except that nothing shall
prevent
the Company and a Registered Holder from consenting to modifications to
this
Agreement which affect or are applicable to such Registered Holder
only.
SECTION
16. NOTICES.
All
notices, requests, consents and other communications hereunder shall be
in
writing and shall be deemed to have been made when delivered or mailed
first
class registered or certified mail, postage prepaid as follows: if to the
Registered Holder of a Warrant Certificate, at the address of such holder
as
shown on the registry books maintained by the Warrant Agent; if to the
Company,
at 1100 X. Xxxxxx Xx, Xxxxx Xxxx, Xxxxxxx 00000, Attention: Xxxx Xxxxxxx;
if to
the Warrant Agent, at its Corporate Office and if to the Placement Agent,
at 33
Xxxxxxxxx Xxxxxx, 17’ Flxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention-
SECTION
17. GOVERNING
LAW.
This
Agreement shall be governed by and construed in accordance with the laws
of the
State of New York.
SECTION
18. BINDING
EFFECT.
This
Agreement shall be binding upon and inure to the benefit of the Company
and the
Warrant Agent (and their respective successors and assigns) and the holders
from
time to time of Warrant Certificates. Nothing in this Agreement is intended
or
shall be construed to confer upon any other person any right, remedy or
claim,
in equity or at law, or to impose upon any other person any duty, liability
or
obligation.
SECTION
19. TERMINATION.
This
Agreement shall terminate on the earlier to occur of (i) the close of business
on the second day following the Warrant Expiration Date; or (ii) the date
upon
which all Warrants have been exercised.
SECTION
20. COUNTERPARTS.
This
Agreement may be executed in several counterparts, which taken together
shall
constitute a single document.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
|
MAGNETECH
INDUSTRIAL SERVICES, INC.
|
||
|
By:
|
/s/
Xxxx X. Xxxxxxx
|
|
|
Name:
|
Xxxx
X. Xxxxxxx
|
|
|
Title:
|
President
|
|
|
MAGNETECH
INTEGRATED SERVICES, CORP.
|
||
|
By:
|
/s/
Xxxx X. Xxxxxxx
|
|
|
Name:
|
Xxxx
X. Xxxxxxx
|
|
|
Title:
|
President
and Chief Executive Officer
|
|
|
STRASBOURGER
XXXXXXX TULCIN XXXXX INCORPORATED
|
||
|
By:
|
/s/
Xxxxxxx Xxxxxxxxxx
|
|
|
Name:
|
Xxxxxxx
Xxxxxxxxxx
|
|
|
Title:
|
Presidnet
|
|
NEITHER
THIS WARRANT NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE
BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED UNTIL
(1) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (THE
“SECURITIES ACT”) SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO, OR
(2) RECEIPT BY THE ISSUER OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO THE ISSUER TO THE EFFECT THAT REGISTRATION UNDER THE SECURITIES ACT IS
NOT
REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS SUCH TRANSFER IN
VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS.
THE
WARRANTS ARE SUBJECT TO REDEMPTION BY THE COMPANY UNDER CERTAIN CIRCUMSTANCES
DESCRIBED IN THE WARRANT AGREEMENT.
|
No.
MH ______
|
__________
Warrants
|
VOID
AFTER DECEMBER 13, 2014
WARRANT
CERTIFICATE FOR PURCHASE OF COMMON STOCK
MAGNETECH
INTEGRATED SERVICES CORP.
This
certifies that FOR VALUE RECEIVED Strasbourger Xxxxxxx Tulcin Xxxxx Inc.,
or
registered assigns (the “Registered Holder”) is the owner of the number of
Warrants (“Warrants”)
specified above. Each Warrant initially entitles the Registered Holder to
purchase, subject to the terms and conditions set forth in this Certificate
and
the Warrant Agreement (as hereinafter defined), one fully paid and no assessable
share of common stock (“Common
Stock”)
of
Magnetech Industrial Holdings, Inc., an Indiana corporation (the “Company”),
at
any time commencing on the Initial Exercise Date (as defined in the Warrant
Agreement) and prior to the Expiration Date (as hereinafter defined), upon
the
presentation and surrender of this Warrant Certificate with the Exercise
Form on
the reverse hereof duly executed, at the corporate office of the Company,
as
warrant agent, or its successor (the “Warrant
Agent”),
accompanied by payment of an amount equal to 0.01 cents per share for each
Warrant (the “Exercise
Price”)
in
lawful money of the United States of America in cash or by official bank
or
certified check made payable to Magnetech Integrated Services Corp. The Company
may, at its election, reduce the Exercise Price.
This
Warrant Certificate and each Warrant represented hereby are issued pursuant
to
and are subject in all respects to the terms and conditions set forth in
the
Warrant Agreement (the “Warrant
Agreement”),
dated
December 13, 2004 between the Company and Strasbourger Xxxxxxx Tulcin Xxxxx
Incorporated.
In
the
event of certain contingencies provided for in the Warrant Agreement, the
Exercise Price or the number of shares of Common Stock subject to purchase
upon
the exercise of each Warrant represented hereby are subject to modification
or
adjustment.
Each
Warrant represented hereby is exercisable at the option of the Registered
Holder, but no fractional shares of Common Stock will be issued. In the case
of
the exercise of less than all the Warrants represented hereby, the Company
shall
cancel this Warrant Certificate upon the
surrender
hereof and shall execute and deliver a new Warrant Certificate or Warrant
Certificates of like tenor, which the Warrant Agent shall countersign, for
the
balance of such Warrants.
The
term
“Expiration Date” shall mean 5:00 P.M. (New York time) on December 13, 2014. If
such date shall in the State of New York be a holiday or a day on which the
banks are authorized to close, then the Expiration Date shall mean 5:00 P.M.
(New York time) the next following day which in the Sate of New York is not
a
holiday or a day on which banks are authorized to close. The Company may,
at its
election, extend the Expiration Date.
This
Warrant Certificate is exchangeable, upon the surrender hereof by the Registered
Holder at the corporate office of the Warrant Agent, for a new Warrant
Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder
at the
time of such surrender. Upon due presentment with any tax or other governmental
charge imposed in connection therewith, for registration of transfer of this
Warrant Certificate at such office, a new Warrant Certificate or Warrant
Certificates representing an equal aggregate number of Warrants will be issued
to the transferee in exchange therefor, subject to the limitations provided
in
the Warrant Agreement.
Prior
to
the exercise of any Warrant represented hereby, the Registered Holder shall
not
be entitled to any of the rights of a stockholder of the Company, including,
without limitation, the right to vote or to receive dividends or other
distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
Prior
to
due presentment for registration of transfer hereof, the Company may deem
and
treat the Registered Holder as the absolute owner hereof and of each Warrant
represented hereby (notwithstanding any notations of ownership or writing
hereon
made by anyone other than a duly authorized officer of the Company) for all
purposes and shall not be affected by any notice to the contrary.
This
Warrant Certificate shall be governed by and construed in accordance with
the
laws of the State of New York.
IN
WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly
executed as of the date set forth above.
|
MAGNETECH
INTEGRATED SERVICES CORP.
|
||||
|
Dated:
|
December 13, 2005 | |||
|
By:
|
/s/ Xxxx X. Xxxxxxx | |||
|
Name:
|
Xxxx
X. Xxxxxxx
|
|||
|
Title:
|
President
and Chief Executive Officer
|
|||
JOINDER
AGREEMENT
for
WARRANT
AGREEMENT
THIS
JOINDER AGREEMENT (“Agreement”) is entered into as of December 13, 2004 (the
“Effective Date”) by and among the transferees (the “Transferees”) set forth on
the signature page hereto, Magnetech Industrial Services, Inc. (“MIS”) and
Magnetech Integrated Services Corp. (the “Company”).
WHEREAS,
the Warrant Agreement among Strasbourger Xxxxxxx Tulcin Xxxxx Inc. (the
“Placement Agent”) and MIS and the Company sets forth and describes the rights
and obligations with respect to, among other things, the issuance of
common
stock purchase warrants (“Warrants”) to the Placement Agent; and
WHEREAS,
in connection with the transfer and reissuance of such common stock purchase
warrants to the Transferees, all of the parties desire the Transferees
to become
parties to the Warrant Agreement;
NOW
THEREFORE, in consideration of the foregoing and of the representations,
warranties and covenants set forth in the Warrant Agreement and for other
good
and valuable consideration, the receipt and sufficiency of which are
hereby
acknowledged, the parties hereby agree as follows:
1. Joinder
.
The
Transferees are hereby added as, and each of them shall be deemed a party
to,
the Warrant Agreement, bound by all the provisions thereof, subject to
all the
obligations therein imposed on the Placement Agent, and entitled to all
the
rights therein granted to the Placement Agent.
2. Successors
and Assigns
.
This
Agreement shall be binding upon and inure to the benefit of the parties
hereto
and their respective successors and permitted assigns.
3. Notices
.
All
notices, requests, demands and other communications required or permitted
to be
given to be given under the Warrant Agreement shall be given to the Transferees
at the addresses set forth in their respective Investor Questionnaires
previously delivered to the Company.
4. Governing
Law
.
This
Agreement shall be construed, and the rights and liabilities of the parties
hereto determined, in accordance with the internal laws of the State
of New
York.
5. Captions,
Definitions
.
The
captions to this Agreement are for convenience of reference only and
in no way
define, limit or describe the scope or intent of this Agreement or any
part
hereof, nor in any way affect this Agreement or any part hereof. Capitalized
terms not defined herein shall have the meanings given to them in the
Warrant
Agreement.
6. Effective
Date
.
This
Agreement shall be effective as of the Effective Date.
7. Counterparts
.
This
Agreement may be executed in several counterparts, which together shall
constitute a single document.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the
Effective Date.
|
Magnatech
Industrial Services, Inc.
|
|
|
By:
/s/ Xxxx X. Xxxxxxx
|
|
|
Name: Xxxx
X. Xxxxxxx
|
|
|
Title: President
and Chief Executive
Officer
|
|
|
By: Signatories
[see attached Exhibit 1]
|
|
|
Name:
|
|
|
Title:
|
|
|
Magnatech
Integrated Services Corp.
|
|
|
By: /s/
Xxxx X. Xxxxxxx
|
|
|
Name: Xxxx
X. Xxxxxxx
|
|
|
Title: President
and Chief Executive
Officer
|
Exhibit
1
Schedule
to Form of Warrant Certificate
and
Joinder Agreement
Recipients
of Warrants
|
Certificate
Number
|
Date
|
Recipient
|
Number
of Warrants
|
|
1
|
12/13/04
|
Xxx
Moeschetta
|
600,000
|
|
2
|
12/13/04
|
Xxxx
Xxxxxxx
|
600,000
|
|
3
|
12/13/04
|
P.
Xxxx Xxxxxxxx
|
600,000
|
|
4
|
12/13/04
|
Xxxxx
X. Xxxxx
|
750,000
|
|
5
|
12/13/04
|
Phoenix
Holdings Inc.
|
1,950,000
|
|
Total
|
4,500,000
|
