Exhibit 4.2
WARRANT NO.: __________________
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR APPLICABLE STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE EXERCISED UNLESS
THE HOLDER THEREOF PROVIDES THE COMPANY WITH A WRITTEN CERTIFICATION THAT THIS
WARRANT IS NOT BEING EXERCISED BY OR ON BEHALF OF ANY "U.S. PERSON" AS SUCH TERM
IS DEFINED IN RULE 902 OF REGULATION S UNDER THE SECURITIES ACT, OR PROVIDES A
WRITTEN OPINION OF UNITED STATES COUNSEL OF RECOGNIZED STANDING, IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER, TO THE EFFECT THAT THIS WARRANT AND THE
SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT AND REGISTERED OR QUALIFIED UNDER APPLICABLE SECURITIES LAWS OF
ANY STATE OR OTHER JURISDICTION, OR ARE EXEMPT FROM SUCH REGISTRATION OR
QUALIFICATION. THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF, EXCEPT IN ACCORDANCE WITH
THE PROVISIONS OF REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO
REGISTRATION UNDER THE SECURITIES ACT AND REGISTRATION OR QUALIFICATION UNDER
APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, OR PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION. HEDGING TRANSACTIONS,
INCLUDING, BUT NOT LIMITED TO, SHORT SALES, SWAPS OR DERIVATIVE SECURITIES
TRANSACTIONS, INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE SECURITIES LAWS OF ANY STATE
OR OTHER JURISDICTION. NO TRANSFER OF THE SECURITIES REPRESENTED HEREBY MAY BE
MADE IN THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION UNLESS THERE SHALL
HAVE BEEN DELIVERED TO THE ISSUER A WRITTEN OPINION OF UNITED STATES COUNSEL OF
RECOGNIZED STANDING, IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, TO THE
EFFECT THAT SUCH TRANSFER MAY BE MADE WITHOUT REGISTRATION OF SUCH SECURITIES
UNDER THE SECURITIES ACT AND REGISTRATION OR QUALIFICATION UNDER APPLICABLE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION.
WARRANT TO PURCHASE
COMMON STOCK OF
TOUCHSTONE RESOURCES USA, INC.
Void after 5:00 p.m. Eastern Standard Time on [________________]
This warrant ("Warrant") is to verify that, FOR VALUE RECEIVED,
[______________________________________] ("Holder") is entitled to purchase,
subject to the terms and conditions hereof, from TOUCHSTONE RESOURCES USA, INC.,
a Delaware corporation (the "Company"), [__________________] shares of common
stock, $.001 par value per share, of the Company (the "Common Stock"), at any
time during the period commencing on the date hereof (the "Commencement Date")
and ending at 5:00 p.m. Eastern Standard Time on the third anniversary of the
Commencement Date (the "Termination Date"), at an exercise price (the "Exercise
Price") of $1.50 per share of Common Stock. The number of shares of Common Stock
purchasable upon exercise of this Warrant and the Exercise Price per share shall
be subject to adjustment from time to time upon the occurrence of certain events
as set forth below.
This Warrant has been issued in connection with the offering of units
comprised of convertible preferred stock and warrants being offered by the
Company pursuant to the Securities Purchase Agreement by and between the Company
and the Holder (the "SPA").
The shares of Common Stock or any other shares or other units of stock or
other securities or property, or any combination thereof, then receivable upon
exercise of this Warrant, as adjusted from time to time, are sometimes referred
to hereinafter as "Exercise Shares". The exercise price per share as from time
to time in effect is referred to hereinafter as the "Exercise Price".
1. Exercise of Warrant; Issuance of Exercise Shares.
(a) Exercise of Warrant. Subject to the terms hereof, the purchase
rights represented by this Warrant are exercisable by the Holder in whole or in
part, at any time, or from time to time, by the surrender of this Warrant and
the Notice of Exercise annexed hereto duly completed and executed on behalf of
the Holder, at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company) accompanied by payment of the
Exercise Price in full either: (i) in cash or by bank or certified check for the
Exercise Shares with respect to which this Warrant is exercised; (ii) by
delivery to the Company of shares of the Company's Common Stock having a Fair
Market Value (as defined below) equal to the aggregate Exercise Price of the
Exercise Shares being purchased that Holder is the record and beneficial owner
of and that have been held by the Holder for at least six (6) months; (iii)
provided that the sale of the Exercise Shares are covered by an effective
registration statement, by delivering to the Company a Notice of Exercise
together with an irrevocable direction to a broker-dealer registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to sell a
sufficient portion of the Exercise Shares and deliver the sales proceeds
directly to the Company to pay the Exercise Price; or (iv) by any combination of
the procedures set forth in subsections (i), (ii) and (iii) of this Section
1(a). For the purposes of this Section 1(a), "Fair Market Value" shall be an
amount equal to the average of the Current Market Value (as defined below) for
the ten (10) days preceding the Company's receipt of the duly executed Notice of
Exercise form attached hereto as Appendix A.
In the event that this Warrant shall be duly exercised in part prior to
the Termination Date, the Company shall issue a new Warrant or Warrants of like
tenor evidencing the rights of the Holder thereof to purchase the balance of the
Exercise Shares purchasable under the Warrant so surrendered that shall not have
been purchased.
(b) Issuance of Exercise Shares: Delivery of Warrant Certificate.
The Company shall, within ten (10) business days or as soon thereafter as is
practicable of the exercise of this Warrant, issue in the name of and cause to
be delivered to the Holder one or more certificates representing the Exercise
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Shares to which the Holder shall be entitled upon such exercise under the terms
hereof. Such certificate or certificates shall be deemed to have been issued and
the Holder shall be deemed to have become the record holder of the Exercise
Shares as of the date of the due exercise of this Warrant.
(c) Exercise Shares Fully Paid and Non-Assessable. The Company
agrees and covenants that all Exercise Shares issuable upon the due exercise of
the Warrant represented by this Warrant certificate ("Warrant Certificate")
will, upon issuance and payment therefor in accordance with the terms hereof, be
duly authorized, validly issued, fully paid and non-assessable and free and
clear of all taxes (other than taxes which, pursuant to Section 2 hereof, the
Company shall not be obligated to pay) or liens, charges, and security interests
created by the Company with respect to the issuance thereof.
(d) Reservation of Exercise Shares. The Company covenants that
during the term this Warrant is exercisable, the Company will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of the Exercise Shares upon the exercise of this Warrant, and
from time to time will take all steps necessary to amend its Articles of
Incorporation to provide sufficient reserves of shares of Common Stock issuable
upon the exercise of the Warrant.
(e) Fractional Shares. The Company shall not be required to issue
fractional shares of capital stock upon the exercise of this Warrant or to
deliver Warrant Certificates that evidence fractional shares of capital stock.
In the event that any fraction of an Exercise Share would, except for the
provisions of this subsection (e), be issuable upon the exercise of this
Warrant, the Company shall pay to the Holder exercising the Warrant an amount in
cash equal to such fraction multiplied by the Current Market Value of the
Exercise Share on the last business day prior to the date on which this Warrant
is exercised. For purposes of this subsection (e), the "Current Market Value"
for any day shall be determined as follows:
(i) If the Common Stock is admitted to quotation on the
National Association of Securities Dealers Automated Quotation System
("NASDAQ"), the Fair Market Value on any given date shall be the average of the
highest bid and lowest asked prices of the Common Stock as reported for such
date or, if no bid and asked prices were reported for such date, for the last
day preceding such date for which such prices were reported;
(ii) If the Common Stock is admitted to trading on a United
States securities exchange or the NASDAQ National Market System, the Fair Market
Value on any date shall be the closing price reported for the Common Stock on
such exchange or system for such date or, if no sales were reported for such
date, for the last day preceding such date for which a sale was reported;
(iii) If the Common Stock is traded in the over-the-counter
market and not on NASDAQ, the NASDAQ National Market System or any national
securities exchange, the Fair Market Value shall be the average of the mean
between the last bid and ask prices per share as reported by the National
Quotation Bureau, Inc. or an equivalent generally accepted reporting service, or
if not so reported, the average of the closing bid and asked prices of the
Common Stock as furnished to the Company by any member of the National
Association of Securities Dealers, Inc., selected by the Company for that
purpose; or
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(iv) If the Fair Market Value of the Common Stock cannot be
determined on the basis previously set forth in this definition on the date that
the Fair Market Value is to be determined, the Board of Directors of the Company
shall in good faith determine the Fair Market Value of the Common Stock on such
date.
2. Payment of Taxes.
(a) The Company will pay all documentary stamp taxes, if any,
attributable to the initial issuance of Exercise Shares upon the exercise of
this Warrant; provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issue of any Warrant Certificates or any certificates for Exercise Shares in a
name other than that of the Holder of a Warrant Certificate surrendered upon the
exercise of a Warrant, and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(b) Upon exercise of this Warrant, the Company shall have the
right (but only to the extent that the Company is required by law to withhold
any federal, state and local taxes) to require the Holder to remit to the
Company an amount sufficient to satisfy federal, state and local tax withholding
requirements prior to the delivery of any certificate for Exercise Shares
issuable pursuant to the exercise of such Warrant.
(c) A Holder who is obligated to pay the Company an amount
required to be withheld under applicable tax withholding requirements may pay
such amount: (i) in cash; (ii) in the discretion of the Company's Chief
Executive Officer, through the delivery to the Company of previously-owned
shares of common stock of the Company having an aggregate current market value
equal to the tax obligation, provided that the previously owned shares delivered
in satisfaction of the withholding obligations must have been held by the Holder
for at least six (6) months; (iii) in the discretion of the Company's Chief
Executive Officer, through the withholding of shares of common stock of the
Company otherwise issuable to the Holder in connection with the exercise of a
Warrant; or (iv) in the discretion of the Company's Chief Executive Officer,
through a combination of the procedures set forth in clauses (i), (ii) and (iii)
of this Section 2(c).
3. Mutilated or Missing Warrant Certificates. In case any Warrant shall
be mutilated, lost, stolen or destroyed, the Company may in its discretion
issue, in exchange and substitution for and upon cancellation of the mutilated
Warrant, or in lieu of and in substitution for the Warrant lost, stolen or
destroyed, a new Warrant or Warrants of like tenor and in the same aggregate
denomination, but only: (i) in the case of loss, theft or destruction, upon
receipt of evidence satisfactory to the Company of such loss, theft or
destruction of such Warrant and indemnity or bond, if requested, also
satisfactory to the Company, and (ii) in the case of mutilation, upon surrender
of the mutilated Warrant. Applicants for such substitute Warrants shall also
comply with such other reasonable regulations and pay such other reasonable
charges as the Company or its counsel may prescribe.
4. Rights of Holder. The Holder shall not, by virtue of anything
contained in this Warrant or otherwise, be entitled to any right whatsoever,
either in law or equity, of a stockholder of the Company, including without
limitation, the right to receive dividends or to vote or to consent or to
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receive notice as a shareholder in respect of the meetings of shareholders or
the election of directors of the Company or any other matter.
5. Registration of Transfers and Exchanges. The Warrant shall be
transferable, subject to the provisions of Section 7 hereof, only upon the books
of the Company, if any, to be maintained by it for that purpose, upon surrender
of the Warrant Certificate to the Company at its principal office accompanied
(if so required by the Company) by a written instrument or instruments of
transfer in form satisfactory to the Company and duly executed by the Holder
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. In all cases of transfer by an
attorney, the original letter of attorney, duly approved, or an official copy
thereof, duly certified, shall be deposited and remain with the Company. In case
of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and remain with the Company in its
discretion. Upon any such registration of transfer, a new Warrant shall be
issued to the transferee named in such instrument of transfer, and the
surrendered Warrant shall be canceled by the Company.
Any Warrant may be exchanged, at the option of the Holder thereof and
without charge, when surrendered to the Company at its principal office, or at
the office of its transfer agent, if any, for another Warrant or other Warrants
of like tenor and representing in the aggregate the right to purchase from the
Company a like number and kind of Exercise Shares as the Warrant surrendered for
exchange or transfer, and the Warrant so surrendered shall be canceled by the
Company or transfer agent, as the case may be.
6. Adjustment of Exercise Price and Number of Shares. The number of and
kind of securities purchasable upon exercise of this Warrant and the Exercise
Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances. If the Company
shall at any time prior to the expiration of this Warrant subdivide its Common
Stock, by split-up or otherwise, or combine its Common Stock, or issue
additional shares of its Common Stock or any preferred stock as a dividend with
respect to any shares of its Common Stock, then the number of Exercise Shares
issuable on the exercise of this Warrant shall forthwith be proportionately
increased in the case of a subdivision or stock dividend, or proportionately
decreased in the case of a combination. Appropriate adjustments shall also be
made to the Exercise Price, but the aggregate purchase price payable for the
total number of Exercise Shares purchasable under this Warrant (as adjusted)
shall remain the same. Any adjustment under this Section 6.2(a) shall become
effective at the close of business on the date the subdivision or combination
becomes effective, or as of the record date of such dividend, or in the event
that no record date is fixed, upon the making of such dividend.
(b) Capital Reclassifications, Reorganizations or Consolidations.
In the case of any capital reclassification, reorganization or consolidation, or
other change, in the Common Stock of the Company (other than as a result of a
subdivision, combination or stock dividend described in Section 6.2(a) above or
as a result of any "Fundamental Transaction" described in Section 6(c) below),
then, as a condition of such reclassification, reorganization or change, lawful
provision shall be made, and duly executed documents evidencing the same from
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the Company or its successor shall be delivered to the Holder, so that the
Holder shall have the right at any time prior to the expiration of this Warrant
to purchase, at a total price equal to that payable upon the exercise of this
Warrant, the kind and amount of shares of stock and other securities and
property receivable in connection with such reclassification, reorganization,
consolidation or change by a holder of the same number of shares of Common Stock
as were purchasable by the Holder immediately prior to such reclassification,
reorganization, consolidation or change. In any such case, appropriate
provisions shall be made with respect to the rights and interest of the Holder
so that the provisions hereof shall thereafter be applicable with respect to any
shares of stock or other securities and property deliverable upon exercise
hereof, and appropriate adjustments shall be made to the Exercise Price payable
hereunder, provided the aggregate purchase price shall remain the same.
(c) Corporate Reorganizations, Consolidations or Mergers. In the
event of: (i) any consolidation or merger of the Company with or into another
entity (other than a merger in which the Company is the successor entity that
does not result in any capital reclassification, reorganization or
consolidation, or other change, in the Common Stock of the Company, or a
consolidation or merger between the Company and a wholly-owned subsidiary of the
Company) (ii) any sale, lease, transfer or conveyance to another entity of all
or substantially all of the property and assets of the Company (other than a
transfer to a wholly-owned subsidiary of the Company), or (iii) a liquidation or
dissolution of the Company (the events in subsections (i), (ii) and (iii)
collectively, a "Fundamental Transaction"), unless provision is made in
connection with such Fundamental Transaction for the assumption of this Warrant
or for the substitution of new like-kind warrants by the successor entity as a
result of such Fundamental Transaction, with appropriate adjustment as to the
number and kind of shares issuable upon exercise of the Warrant, and, if
appropriate, the per share exercise price, so as to enable the Holder after such
Fundamental Transaction to purchase the kind and amount of shares of stock and
other securities and property (including cash) receivable upon such
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock that would have been received upon exercise or exchange of this
Warrant immediately prior to such Fundamental Transaction, this Warrant shall,
upon no less than fifteen (15) days written notice, terminate upon the closing
of any such Fundamental Transaction.
(d) Issuance of Additional Options or Warrants. Notwithstanding
any other provision of this Section 6, if, prior to June 30, 2005, the Company
issues or sells any options or warrants that are Covered Securities (as defined
in Section 6(f)) with an exercise price per share less than the Exercise Price
in effect immediately prior to such issuance or sale, then, immediately after
such issuance or sale, the Exercise Price shall be reduced to such lower
exercise price per share. No further modification of the issuance terms shall be
made upon the actual issuance of the underlying shares of Common Stock upon
exercise of such options or warrants. If there is a change at any time in the
exercise price provided for in such options or warrants, then immediately after
such change, the Exercise Price shall be adjusted to the Exercise Price that
would have been in effect at such time had such options or warrants still
outstanding provided for such changed exercise price at the time initially
issued or sold; provided, however, that if such adjustment would result in an
increase in the Exercise Price and such Exercise Price, as adjusted, would
exceed the initial Exercise Price on the date hereof, the Exercise Price shall
be increased to the price that is equal to the initial Exercise Price on the
date hereof. In no event shall the Exercise Price exceed the initial Exercise
Price on the date hereof. However, upon the expiration of any such options or
warrants, the issuance of which resulted in an adjustment in the Exercise Price
pursuant to this Section 6(d), if all or any portion of any such options or
warrants shall not have been exercised, the value of such options or warrants
shall be deducted from the Offering Proceeds (as defined in Section 6(f)) for
the purpose of determining whether such options or warrants are Covered
Securities.
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(e) Notice of Adjustment. When any adjustment is required to be
made in the number or kind of shares purchasable upon exercise of this Warrant,
or in the Exercise Price, the Company shall promptly notify the Holder of such
event and of the number of shares of Common Stock or other securities or
property thereafter purchasable upon exercise of this Warrant.
(f) Covered Securities. "Covered Securities" shall mean options or
warrants issued by the Company in a private offering for the purpose of raising
capital for the Company; provided, however, that the aggregate net proceeds
received by the Company in such offering (the "Offering Proceeds") exceeds fifty
percent (50%) of the aggregate net proceeds received by the Company in the
offering of units comprised of convertible preferred stock and warrants being
offered by the Company pursuant to the SPA. Such term specifically excludes any
other type of security issued by the Company for any purpose whatsoever, and
specifically excludes warrants not issued by the Company in a private offering
for the purpose of raising capital, including, but not limited to, warrants (and
any underlying securities issuable upon the exercise thereof) offered or issued:
(A) to the public pursuant to a registration statement filed under the
Securities Act of 1933, as amended, (B) in connection with a bona fide
investment in or by the Company, any acquisition of another corporation or
entity by the Company, whether by merger, consolidation, purchase of all or
substantially all of the assets of such corporation or entity, share exchange or
reorganization, any acquisition of any interests, rights or other assets of
another corporation or entity by the Company, or any similar transaction, (C)
pursuant to equipment leases or debt financings, (D) to employees, directors,
consultants, suppliers, customers or other business or joint venture partners
for the primary purpose of soliciting or retaining their services or
compensating them for their services, (E) pursuant to the exercise or conversion
of exercisable or convertible securities that are outstanding on the date
hereof, or (F) in connection with any stock split or combination, stock dividend
or distribution, reclassification or recapitalization, or similar action by the
Company.
(g) No Impairment. The Company and the Holder will not, by any
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company or the Holder,
respectively, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 6 and in the taking of all such action as may
be necessary or appropriate in order to protect the rights or the Company and
the Holder against impairment.
7. Investment Intent, Exercise Restrictions and Transfer Restrictions.
(a) The Holder of this Warrant, by acceptance hereof, acknowledges
that this Warrant and the Exercise Shares to be issued upon exercise hereof
(collectively, the "Securities") are being acquired for the Holder's own account
for investment purposes only and not with a view to, or with any present
intention of, distributing or reselling any of such Securities. The Holder
acknowledges and agrees that the Securities have not been registered under the
Securities Act or under any state securities laws, and that the Securities may
not be, directly or indirectly, sold, transferred, offered for sale, pledged,
hypothecated or otherwise disposed of without registration under the Securities
Act and applicable state securities laws, except pursuant to an available
exemption from such registration. The Holder also acknowledges and agrees that
this Warrant many not be exercised unless the Holder provides the Company with a
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written certification that this Warrant is not being exercised by or on behalf
of any "U.S. Person" as such term is defined in Rule 902 of Regulations S under
the Securities Act, or provides a written opinion of United States counsel of
recognized standing, in for and substance satisfactory to the Company, to the
effect that this Warrant and the Securities to be issued upon its exercise have
been registered under the Securities Act and registered or qualified under
applicable securities laws of any state or other jurisdiction, or are exempt
from such registration or qualification. The Holder further acknowledges and
agrees that neither the Securities and Exchange Commission ("SEC") nor any
securities commission or other governmental authority has: (i) approved the
transfer of the Securities or passed upon or endorsed the merits of the transfer
of the Securities; or (ii) confirmed the accuracy of, determined the adequacy
of, or reviewed this Warrant. The Holder has such knowledge, sophistication and
experience in financial, tax and business matters in general, and investments in
securities in particular, that it is capable of evaluating the merits and risks
of this investment in the Securities, and the Holder has made such
investigations in connection herewith as it deemed necessary or desirable so as
to make an informed investment decision without relying upon the Company for
legal or tax advice related to this investment.
(b) The certificates evidencing any Exercise Shares issued upon
the exercise of this Warrant shall have endorsed thereon (except to the extent
that the restrictions described in any such legend are no longer applicable) the
following legend, appropriate notations thereof will be made in the Company's
stock transfer books, and stop transfer instructions reflecting these
restrictions on transfer will be placed with the transfer agent of the Exercise
Shares.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR APPLICABLE
STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF
REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO REGISTRATION UNDER THE
SECURITIES ACT AND REGISTRATION OR QUALIFICATION UNDER APPLICABLE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, OR PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION. HEDGING TRANSACTIONS,
INCLUDING, BUT NOT LIMITED TO, SHORT SALES, SWAPS OR DERIVATIVE SECURITIES
TRANSACTIONS, INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE SECURITIES LAWS OF ANY
STATE OR OTHER JURISDICTION. NO TRANSFER OF THE SECURITIES REPRESENTED
HEREBY MAY BE MADE IN THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION
UNLESS THERE SHALL HAVE BEEN DELIVERED TO THE ISSUER A WRITTEN OPINION OF
UNITED STATES COUNSEL OF RECOGNIZED STANDING, IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER, TO THE EFFECT THAT SUCH TRANSFER MAY BE MADE
WITHOUT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND
REGISTRATION OR QUALIFICATION UNDER APPLICABLE SECURITIES LAWS OF ANY
STATE OR OTHER JURISDICTION.
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8. Indemnification. Holder agrees to indemnify, defend and hold
harmless the Company and its respective affiliates and agents from and against
any and all demands, claims, actions or causes of action, judgments,
assessments, losses, liabilities, damages or penalties and reasonable attorneys'
fees and related disbursements incurred by the Company that arise out of or
result from a breach of any representations, warranties, covenants or agreements
made by Holder herein, and Xxxxxx agrees that in the event of any breach of any
representations, warranties, covenants or agreements made by Holder herein, the
Company may, at its option, forthwith rescind the issuance of this Warrant to
Holder.
9. Registration Rights. The Holder shall be entitled to the rights and
subject to the obligations set forth in the registration rights contained in
Exhibit D to the SPA.
10. Right to Call Warrant.
(a) If the volume weighted average Closing Price (as defined in
Section 10(b)) for the shares of Common Stock has been equal to or greater than
150% of the Exercise Price during 20 consecutive Trading Days (as defined in
Section 10(c))) during the period commencing on the first Trading Day after the
SEC declares effective a registration statement filed by the Company with the
SEC permitting the public sale of all of the shares of Common Stock issuable
upon exercise of this Warrant, the Company may call all or any portion of this
Warrant. In the event the Company exercises its call right hereunder, the
Company shall provide Holder with written notice of its election to call all or
a portion of the Warrant to the address of Holder set forth in the Securities
Purchase Agreement dated on or about the date hereof between the Company and
Holder. Holder shall have 15 business days (the "Notice Period") from the date
such notice is sent by the Company to Holder to decide whether to exercise this
Warrant in whole or in part at the Exercise Price in accordance with the terms
hereof. If this Warrant or any part thereof is not so exercised during the
Notice Period, such Warrant or part thereof shall be forfeited by the Holder
upon the expiration of the Notice Period. It shall be an absolute condition to
the Company's right to call this Warrant that such registration statement shall
be effective, with no stop-order, and with no suspensions of resales thereunder,
during the entire 20 Trading Day period described above.
(b) "Closing Price" for any day, means: (i) the last reported
sales price regular way of the Common Stock on such day on the principal
securities exchange on which the Common Stock is then listed or admitted to
trading or on Nasdaq, as applicable, (ii) if no sale takes place on such day on
any such securities exchange or system, the average of the closing bid and asked
prices, regular way, on such day for the Common Stock as officially quoted on
any such securities exchange or system, (iii) if on such day such shares of
Common Stock are not then listed or admitted to trading on any securities
exchange or system, the last reported sale price, regular way, on such day for
the Common Stock in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any other successor organization, or
(iv) if no sale takes place on such day, the average of the high and low bid
price of the Common Stock on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any other successor
organization, or (v) if no bid and asked prices are reported for the Common
Stock by the National Quotation Bureau, Incorporated or any other successor
organization for such day, the average of the high and low bid and asked price
of any of the market makers for the Common Stock as reported in the "pink
sheets" by the Pink Sheets LLC. If at any time such shares of Common Stock are
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not listed on any domestic exchange or quoted in the NASDAQ System or the
domestic over-the-counter market or reported in the "pink sheets," the Closing
Price shall be the fair market value thereof determined by the Board of
Directors of the Company in good faith.
(c) "Trading Day" means a day on which the securities exchange,
association, or quotation system on which shares of Common Stock are listed for
trading shall be open for business or, if the shares of Common Stock shall not
be listed on such exchange, association, or quotation system for such day, a day
with respect to which trades in the United States domestic over-the-counter
market shall be reported.
11. Notices. All notices or other communications under this Warrant
shall be in writing and shall be deemed to have been given on the day of
delivery if delivered by hand, on the fifth day after deposit in the mail if
mailed by certified mail, postage prepaid, return receipt requested, or on the
next business day after mailing if sent by a nationally recognized overnight
courier such as federal express, addressed as follows:
If to the Company:
Touchstone Resources USA, Inc.
000 Xxxxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxx Xxxxxx, XX 00000
Attention: Chief Executive Officer
with a copy to:
Xxxxx Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention : Xxxxxxx X. Xxxxxx, Esquire
and to the Holder at the address of the Holder appearing on the
books of the Company or the Company's transfer agent, if any.
Either of the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Section 11.
12. Amendment and Waiver. This Warrant may not be amended, modified or
supplemented except by an instrument or instruments in writing signed by the
party against whom enforcement of any such amendment, modification or supplement
is sought. The parties hereto entitled to the benefits of a term or provision
may waive compliance with any obligation, covenant, agreement or condition
contained herein. Any agreement on the part of a party to any such waiver shall
be valid only if set forth in an instrument or instruments in writing signed by
the party against whom enforcement of any such waiver is sought. No failure or
delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty, covenant or agreement contained
herein.
10
13. Headings; Definitions. The Section headings contained in this
Warrant are inserted for convenience of reference only and will not affect the
meaning or interpretation of this Warrant. All references to Sections contained
herein mean Sections of this Warrant unless otherwise stated. All capitalized
terms defined herein are equally applicable to both the singular and plural
forms of such terms.
14. Successors and Assigns. This Warrant shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, provided, however, that no party hereto may assign its rights or
delegate its obligations under this Warrant without the express prior written
consent of the other party hereto. Nothing in this Warrant is intended to confer
upon any person not a party hereto (and their successors and assigns) any
rights, remedies, obligations or liabilities under or by reason of this Warrant
15. Severability. If any provision of this Warrant or the application
thereof to any person or circumstance is held to be invalid or unenforceable to
any extent, the remainder of this Warrant shall remain in full force and effect
and shall be reformed to render the Warrant valid and enforceable while
reflecting to the greatest extent permissible the intent of the parties.
16. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, without regard to
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
17. Arbitration. If a dispute arises as to the interpretation of this
Warrant, it shall be decided in an arbitration proceeding conforming to the
Rules of the American Arbitration Association applicable to commercial
arbitration then in effect at the time of the dispute. The arbitration shall
take place in the Commonwealth of Pennsylvania. The decision of the arbitrators
shall be conclusively binding upon the parties and final, and such decision
shall be enforceable as a judgment in any court of competent jurisdiction. The
parties shall share equally the costs of the arbitration.
18. Counterparts. This Warrant may be executed and delivered by
facsimile in two or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same agreement.
[Remainder of page intentionally left blank]
11
IN WITNESS WHEREOF, the Company has caused these presents to be duly
executed as of the [____] day of [___________], 2005.
TOUCHSTONE RESOURCES USA, INC.
By: [________________________________]
Name:
Title:
12
APPENDIX A
NOTICE OF EXERCISE
To: Touchstone Resources USA, Inc.
000 Xxxxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxx Xxxxxx, XX 00000
Attention: Chief Executive Officer
(1) The undersigned hereby elects to purchase ____________ shares of
Common Stock of TOUCHSTONE RESOURCES USA, INC. pursuant to the terms of the
attached Warrant, and tenders herewith payment of the Exercise Price for such
shares in full in accordance with the terms of the Warrant in the following
manner (please check one or more of the following choices):
[ ] In cash;
[ ] Cashless exercise through a broker; or
[ ] Delivery of previously owned shares of Common Stock.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock to be issued upon conversion hereof
are being acquired solely for the account of the undersigned, not as a nominee
for any other party, and for investment purposes only (unless such shares are
subject to resale pursuant to an effective registration statement), and that the
undersigned will not offer, sell or otherwise dispose of any such shares of
Common Stock except under circumstances that will not result in a violation of
the Securities Act of 1933, as amended, or any state securities laws.
(3) Terms not otherwise defined in this Notice of Exercise shall have
the meanings ascribed to such terms in the attached Warrant.
(4) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned.
HOLDER
-------------------------- ----------------------------------------
(Date) (Signature)
