Contract
THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED
(THE “ACT”)
OR
UNDER THE SECURITIES LAWS OF ANY STATE OR JURISDICTION AND MAY NOT BE SOLD,
OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED
UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES
AN
OPINION, IN REASONABLY ACCEPTABLE FORM AND SCOPE, OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY, THAT REGISTRATION, QUALIFICATION OR OTHER SUCH
ACTIONS ARE NOT REQUIRED UNDER ANY SUCH LAWS.
XXXXXXX
INDUSTRIES, INC.
WARRANT
TO PURCHASE SHARES OF COMMON STOCK
(Expires
February 29, 2012)
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Warrant
No. CV-2
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500,000
Shares of Common Stock
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FOR
VALUE
RECEIVED, subject to the provisions set forth below, the undersigned, XXXXXXX
INDUSTRIES, INC., a Delaware corporation (the “Company”),
hereby certifies that ComVest Capital, LLC, a Delaware limited liability
company, or its registered assigns (the “Holder”),
is
entitled to purchase from the Company up to five hundred thousand (500,000)
fully paid and nonassessable shares (the “Warrant
Shares”)
of the
Company’s common stock, $.01 par value per share (the “Common
Shares”),
for
cash at a price of $0.77 per share (the “Exercise Price”) at any time and from
time to time from and after the date hereof and until 5:00 p.m. (Central
time)
on February 29, 2012 (the “Expiration
Date”)
upon
surrender to the Company at its principal office (or at such other location
as
the Company may advise the Holder in writing) of this Warrant properly endorsed
with the Notice of Exercise attached hereto duly filled in and signed and,
if
applicable, upon payment in cash or by check of the aggregate Exercise Price
for
the number of shares for which this Warrant is being exercised determined
in
accordance with the provisions hereof. The Exercise Price and the number
of
shares purchasable hereunder are subject to adjustment as provided in
Section 3 of this Warrant.
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1.
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Exercise
of Warrant.
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1.1. Exercise. This
Warrant shall be exercisable from the date hereof until the Expiration Date,
and
this Warrant shall expire on the Expiration Date. Upon exercise of this Warrant,
the Exercise Price shall be payable in cash or by check. This Warrant may
be
exercised in whole or in part so long as any exercise in part hereof would
not
involve the issuance of fractional Warrant Shares. If exercised in part,
the
Company shall deliver to the Holder a new Warrant, identical in form to this
Warrant, in the name of the Holder, evidencing the right to purchase the
number
of Warrant Shares as to which this Warrant has not been exercised, which
new
Warrant shall be signed by an appropriate officer of the Company. The term
“Warrant” as used herein shall include any subsequent Warrant issued as provided
herein.
1.2. Exercise
Procedures; Delivery of Certificate. Upon
surrender of this
Warrant with a duly executed Notice of Exercise in the form of Annex A
attached
hereto, together with payment of the Exercise Price for the Warrant Shares
purchased, at the Company’s principal executive offices (the “Designated
Office”),
the
Holder shall be entitled to receive a certificate or certificates for the
Warrant Shares so purchased. The Company agrees that the Warrant Shares shall
be
deemed to have been issued to the Holder as of the close of business on the
date
on which this Warrant shall have been surrendered together with the Notice
of
Exercise and payment for such Warrant Shares.
1.3. Cashless
Exercise. In
connection with any exercise of this Warrant, in lieu of payment of the Exercise
Price, the Holder may exercise this Warrant, in whole or in part, by
presentation and surrender of this Warrant to the Company, together with
a
Cashless Exercise Form in the form attached hereto as Annex B
(or a
reasonable facsimile thereof) duly executed (a “Cashless
Exercise”).
Acceptance by the Company of such presentation and surrender shall be deemed
a
waiver of the Holder's obligation to pay all or any portion of the Exercise
Price, as the case may be. In the event of a Cashless Exercise, the Holder
shall
exchange this Warrant for that number of Common Shares determined by multiplying
the number of Common Shares for which this Warrant is being exercised by
a
fraction, (a) the numerator of which shall be the difference between (i)
the
then current market price per Common Share, and (ii) the Exercise Price,
and (b)
the denominator of which shall be the then current market price per Common
Share. For purposes of any computation under this Section l.3, the then current
market price per Common Share at any date shall be deemed to be the average
of
the daily trading price for the ten (10) consecutive trading days immediately
prior to the Cashless Exercise. If, during such measuring period, there shall
occur any event which gives rise to any adjustment of the Exercise Price,
then a
corresponding adjustment shall be made with respect to the closing prices
of the
Common Shares for the days prior to the Effective Date of such adjustment
event.
As used herein, the term “trading price” on any relevant date means (A) if the
Common Stock is listed for trading on the New York Stock Exchange, the American
Stock Exchange, the NASDAQ National Market, or the NASDAQ Capital Market,
the
closing sale price (or, if no closing sale price is reported, the last reported
sale price) of the Common Stock (regular way), or (B) if the Common Stock
is not
so listed but quotations for the Common Stock are reported on the OTC Bulletin
Board, the most recent closing price as reported on the OTC Bulletin
Board.
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2.
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Transfer;
Issuance of Stock Certificates; Restrictive
Legends
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2.1. Transfer. Each
transfer of this Warrant and all rights hereunder, in whole or in part, shall
be
registered on the books of the Company to be maintained for such purpose,
upon
surrender of this Warrant at the Designated Office, together with a written
assignment of this Warrant in the form of Annex C
attached
hereto duly executed by the Holder or its agent or attorney. Upon such surrender
and delivery, the Company shall execute and deliver a new Warrant or Warrants
in
the name of the assignee or assignees and in the denominations specified
in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, if any. A Warrant
may be
exercised by the new Holder for the purchase of Warrant Shares without having
a
new Warrant issued. Prior to due presentment for registration of transfer
thereof, the Company may deem and treat the registered Holder of this Warrant
as
the absolute owner hereof (notwithstanding any notations of ownership or
writing
thereon 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. All
Warrants issued upon any assignment of Warrants shall be the valid obligations
of the Company, evidencing the same rights and entitled to the same benefits
as
the Warrants surrendered upon such registration of transfer or
exchange.
2.2. Stock
Certificates. Certificates
for the Warrant Shares shall be delivered to the Holder within five (5) business
days after the rights represented by this Warrant shall have been exercised
pursuant to Section 1, and a new Warrant representing the right to purchase
the
Common Shares, if any, with respect to which this Warrant shall not then
have
been exercised shall also be issued to the Holder within such time. The issuance
of certificates for Warrant Shares upon the exercise of this Warrant shall
be
made without charge to the Holder hereof including, without limitation, any
documentary, stamp or similar tax that may be payable in respect thereof;
provided,
however,
that
the Company shall not be required to pay any income tax to which the Holder
hereof may be subject in connection with the issuance of this Warrant or
the
Warrant Shares.
2.3. Restrictive
Legend. Except
as
otherwise provided in this Section 2, each certificate for Warrant Shares
initially issued upon the exercise of this Warrant and each certificate for
Warrant Shares issued to any subsequent transferee of any such certificate,
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
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“THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE
SECURITIES UNDER SUCH ACT OR AN OPINION IN FORM AND FROM COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT
REQUIRED.”
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Notwithstanding
the foregoing, the legend requirements of this Section 2.3 shall terminate
as to
any particular Warrant Shares when (i) such Warrant Shares are transferred
pursuant to an effective resale registration statement, as contemplated in
the
Registration Rights Agreement between the Company and the Holder of even
date
herewith, or (ii) the Company shall have received from the Holder thereof
an opinion of counsel in form and substance reasonably acceptable to the
Company
that such legend is not required in order to ensure compliance with the
Securities Act. Whenever the restrictions imposed by this Section 2.3 shall
terminate, the Holder or subsequent transferee, as the case may be, shall
be
entitled to receive from the Company without cost to such Holder or transferee
a
certificate for the Warrant Shares without such restrictive legend.
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3.
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Adjustment
of Number of Shares; Exercise Price; Nature of Securities Issuable
Upon
Exercise of Warrants.
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3.1. Exercise
Price; Adjustment of Number of Shares. The
Exercise Price and the number of shares purchasable hereunder shall be subject
to adjustment from time to time as hereinafter provided; provided,
however,
that,
notwithstanding the below, in no case shall the Exercise Price be reduced
to
below the par value per share of the class of stock for which this Warrant
is
exercisable at such time.
3.2. Adjustments
Upon Distribution, Subdivision or Combination. If
the Company, at any
time or from time to time after the issuance of this Warrant, shall
(a) make a dividend or distribution on its Common Shares payable in Common
Shares, (b) subdivide or reclassify the outstanding Common Shares into a
greater number of shares, or (c) combine or reclassify the outstanding
Common Shares into a smaller number of shares, the Exercise Price in effect
at
that time and the number of Warrant Shares into which the Warrant is exercisable
at that time shall be proportionately adjusted effective as of the record
date
for the dividend or distribution or the effective date of the subdivision,
combination or reclassification.
2
3.3. Adjustment
Upon Other Distributions. If
the Company, at any
time or from time to time after the issuance of this Warrant, makes a
distribution to the holders of Common Shares which is payable in securities
of
the Company other than Common Shares, then, in each such event, provision
shall
be made so that the Holder shall receive upon exercise of this Warrant, in
addition to the number of Warrant Shares, the amount of such securities of
the
Company which would have been received if the portion of the Warrant so
exercised had been exercised for Warrant Shares on the date of such event,
subject to adjustments subsequent to the date of such event with respect
to such
distributed securities which shall be on terms as nearly equivalent as
practicable to the adjustments provided in this Section 3 and all other
adjustments under this Section 3.
3.4. Adjustment
Upon Merger, Consolidation or Exchange. If
at any time or from
time to time after the issuance of this Warrant there occurs any merger,
consolidation, arrangement or statutory share exchange of the Company with
or
into any other person or company, then, in each such event, provision shall
be
made so that the Holder shall receive upon exercise of this Warrant the kind
and
amount of shares and other securities and property (including cash) which
would
have been received upon such merger, consolidation, arrangement or statutory
share exchange by the Holder if the portion of this Warrant so exercised
had
been exercised for Warrant Shares immediately prior to such merger,
consolidation, arrangement or statutory share exchange, subject to adjustments
for events subsequent to the effective date of such merger, consolidation,
arrangement or statutory share exchange with respect to such shares and other
securities which shall be on terms as nearly equivalent as practicable to
the
adjustments provided in this Section 3 and all other adjustments under this
Section 3.
3.5. Adjustments
for Recapitalization or Reclassification. If,
at any time or from
time to time after the issuance of this Warrant, the Warrant Shares issuable
upon exercise of this Warrant are changed into the same or a different number
of
securities of any class of the Company, whether by recapitalization,
reclassification or otherwise (other than a merger, consolidation, arrangement
or statutory share exchange provided for elsewhere in this Section 3),
then, in each such event, provision shall be made so that the Holder shall
receive upon exercise of this Warrant the kind and amount of securities or
other
property which would have been received in connection with such
recapitalization, reclassification or other change by the Holder if the portion
of this Warrant so exercised had been exercised immediately prior to such
recapitalization, reclassification or change, subject to adjustments for
events
subsequent to the effective date of such recapitalization, reclassification
or
other change with respect to such securities which shall be on terms as nearly
equivalent as practicable to the adjustments provided in this Section 3 and
all other adjustments under this Section 3.
3.6. Extraordinary
Dividends or Distributions. If,
at any time or from
time to time after the issuance of this Warrant, the Company shall declare
a
dividend or any other distribution upon the Common Shares payable otherwise
than
out of current earnings, retained earnings or earned surplus and otherwise
than
in Common Shares, then the Exercise Price in effect immediately prior to
such
declaration shall be reduced by an amount equal, in the case of a dividend
or
distribution in cash, to the amount thereof payable per Common Share or,
in the
case of any other dividend or distribution, to the value thereof per Common
Share at the time such dividend or distribution was declared, as determined
by
the Board of Directors of the Company in good faith. Such reductions shall
take
effect as of the date on which a record is taken for the purposes of the
subject
dividend or distribution, or, if a record is not taken, the date as of which
the
holders of record of Common Shares entitled to such dividend or distribution
are
to be determined.
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3.7
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Adjustment
Upon Certain Issuances of Common
Stock.
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3
(b) In
the
event that the exercise price, conversion price, purchase price or other
price
at which Common Shares are purchasable pursuant to any options, warrants,
convertible securities or other rights to purchase or acquire Common Shares
is
reduced at any time or from time to time (other than under or by reason of
provisions designed to protect against dilution), then, upon such reduction
becoming effective, the Exercise Price then in effect hereunder shall forthwith
be decreased to such Exercise Price as would have been obtained had the
adjustments made and required under this Section 3.7 upon the issuance of
such
options, warrants, convertible securities or other rights been made upon
the
basis of (and the total consideration received therefor) (i) the issuance
of the
number of Common Shares theretofore actually delivered upon the exercise,
conversion or exchange of such options, warrants, convertible securities
or
other rights, (ii) the issuance of all of the Common Shares and all other
options, warrants, convertible securities and other rights to purchase or
acquire Common Shares issued after the issuance of the modified options,
warrants, convertible securities or other rights, and (iii) the original
issuance at the time of the reduction of any such options, warrants, convertible
securities or other rights then still outstanding.
(c) In
no
event shall an adjustment under this Section 3.7 be made if it would result
in an increase in the then applicable Exercise Price.
3.8. Certificate
of Adjustment. Whenever
the Exercise
Price and/or the number of Warrant Shares receivable upon exercise of this
Warrant is adjusted, the Company shall promptly deliver to the Holder a
certificate of adjustment, setting forth the Exercise Price and/or Warrant
Shares issuable after adjustment, a brief statement of the facts requiring
the
adjustment and the computation by which the adjustment was made. The certificate
of adjustment shall be prima facie evidence of the correctness of the
adjustment.
3.9. Successive
Adjustments. The
provisions of this
Section 3 shall be applicable successively to each event described herein
which
may occur subsequent to the issuance of this Warrant and prior to the exercise
in full of this Warrant.
4. Registration;
Exchange and Replacement of Warrant; Reservation of Shares. The
Company shall keep at the Designated Office a register in which the Company
shall provide for the registration, transfer and exchange of this Warrant.
The
Company shall not at any time, except upon the dissolution, liquidation or
winding-up of the Company, close such register so as to result in preventing
or
delaying the exercise or transfer of this Warrant.
The
Company may deem and treat the person in whose name this Warrant is registered
as the Holder and owner hereof for all purposes and shall not be affected
by any
notice to the contrary, until presentation of this Warrant for registration
or
transfer as provided in this Section 4.
Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant and (in case of loss, theft
or
destruction) of the Holder’s indemnity in form satisfactory to the Company, and
(in the case of mutilation) upon surrender and cancellation of this Warrant,
the
Company will (in the absence of notice to the Company that the Warrant has
been
acquired by a bona fide purchaser) make and deliver a new Warrant of like
tenor
in lieu of this Warrant, without requiring the posting of any bond or the
giving
of any security.
4
The
Company shall at all times reserve and keep available out of its authorized
shares of capital stock, solely for the purpose of issuance upon the exercise
of
this Warrant, such number of Common Shares as shall be issuable upon the
exercise hereof. The Company covenants and agrees that, upon exercise of
this
Warrant and payment of the Exercise Price therefor, if applicable, all Warrant
Shares issuable upon such exercise shall be duly and validly authorized and
issued, fully paid and non-assessable.
5. Investment
Representations. The
Holder, by accepting this Warrant, covenants and agrees that, at the time
of
exercise of this Warrant, if the Warrant Shares shall not then be the subject
of
an effective registration statement under the Act, the securities acquired
by
the Holder upon exercise hereof are for the account of the Holder or are
being
acquired for its own account for investment and are not acquired with a view
to,
or for sale in connection with, any distribution thereof (or any portion
thereof) and with no present intention (at such time) of offering and
distributing such securities (or any portion thereof), except in compliance
with
applicable federal and state securities laws.
6. Fractional
Warrants and Fractional Shares. If
the
number of Warrant Shares purchasable upon the exercise of this Warrant is
adjusted pursuant to Section 3 hereof, the Company shall nevertheless not
be
required to issue fractions of shares upon exercise of this Warrant 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 a Common Share (determined in
accordance with the last sentence of Section 1.3).
7. Warrant
Holders Not Deemed Stockholders. No
Holder of this Warrant
shall, as such, be entitled to vote or to receive dividends or be deemed
the
holder of Warrant Shares that may at any time be issuable upon exercise of
this
Warrant, nor shall anything contained herein be construed to confer upon
the
Holder of this Warrant, 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 subscription rights, until such Holder shall have exercised
this
Warrant and been issued Warrant Shares or deemed to have been issued Warrant
Shares in accordance with the provisions hereof.
8. Notices. Any
notice which is
required to be given by this Warrant must be in writing, and shall be given
or
served, unless otherwise expressly provided herein, by depositing the same
in
the United States Mail, postpaid and certified and addressed to the party
to be
notified, with return receipt requested, or by delivering the same by courier
or
in person to such party (or, if the party or parties to be notified be
incorporated, to an officer of such party). Notice deposited in the mail,
postpaid and certified with return receipt requested, shall be deemed received
and effective upon the deposit in a proper United States depository. Notice
given in any other manner shall be effective only if and when received by
the
party to be notified. For the purposes of notice, the addresses of the parties
for the receipt of notice hereunder are:
If
to
the Company:
LaPolla
Industries, Inc.
00000
Xxxxxxx Xxxxxxx Xxxx, Xxxxx 000
Houston,
Texas 77032
Telephone:
(000) 000-0000
Fax:
(000) 000-0000
Attention:
Xxxxxxx X. Xxxxx, EVP and Secretary
If
to
the Holder:
ComVest
Capital, LLC
Xxx
Xxxxx
Xxxxxxxx, Xxxxx 000
West
Palm
Beach, Florida 33401
Attention:
Chief Financial Officer
Telephone:
(000) 000-0000
e-mail:
xxxxxx@xxxxxxx.xxx
Any
party
shall have the right from time to time, and at any time, to change its address
for the receipt of notice by giving at least five (5) days’ prior written notice
of the change of its address to the other parties in the manner specified
herein.
9. Successors. All
the
covenants, agreements, representations and warranties contained in this Warrant
shall bind the parties hereto and their respective heirs, executors,
administrators, distributees, successors, assigns and
transferees.
5
10. Law
Governing. THIS
WARRANT SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
11. Entire
Agreement; Amendments and Waivers. This
Warrant, together with the Registration Rights Agreement of even date herewith
executed by the Company for the benefit of the Holder, sets forth the entire
understanding of the parties with respect to the subject matter hereof. The
failure of any party to seek redress for the violation or to insist upon
the
strict performance of any term of this Warrant shall not constitute a waiver
of
such term and such party shall be entitled to enforce such term without regard
to such forbearance. This Warrant may be amended, and any breach of or
compliance with any covenant, agreement, warranty or representation may be
waived, only if the Company has obtained the written consent or written waiver
of the Holder, and then such consent or waiver shall be effective only in
the
specific instance and for the specific purpose for which given.
12. Severability;
Headings. If
any
term of this Warrant as applied to any person or to any circumstance is
prohibited, void, invalid or unenforceable in any jurisdiction, such term
shall,
as to such jurisdiction, be ineffective to the extent of such prohibition
or
invalidity without in any way affecting any other term of this Warrant or
affecting the validity or enforceability of this Warrant or of such provision
in
any other jurisdiction. The Section headings in this Warrant have been inserted
for purposes of convenience only and shall have no substantive
effect.
IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
as of
the 21st
day of
February, 2007.
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XXXXXXX
INDUSTRIES, INC.
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By:
/s/ Xxxxxxx X. Xxxxx, EVP
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Name:
Xxxxxxx X. Xxxxx
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Title:
Executive Vice President
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6
ANNEX A
NOTICE
OF EXERCISE
(To
be executed upon partial or full
exercise
of the within Warrant)
The
undersigned hereby irrevocably elects to exercise the right to purchase
__________ shares of Common Stock of XxXxxxx Industries, Inc. covered by
the
within Warrant according to the conditions hereof and herewith makes payment
of
the Exercise Price of such shares in full in the amount of
$______________.
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By:
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(Signature
of Registered Holder)
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Dated:
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ANNEX
B
CASHLESS
EXERCISE FORM
(To
be executed upon partial or full
exercise
of Warrants pursuant to Section 1.3 of the Warrant)
The
undersigned hereby irrevocably elects to surrender ____________ shares of
Common
Stock of XxXxxxx Industries, Inc. purchasable under the Warrants for such
shares
of Common Stock issuable in exchange therefor pursuant to the Cashless Exercise
provisions of the within Warrants, as provided for in Section 1.3 of such
Warrant.
Please
issue a certificate or certificates for such Common Stock in the name of,
and
pay cash for fractional shares in the name of:
(Please
print name, address, and social security number/tax identification
number:)
and,
if
said number of shares of Common Stock shall not be all the shares of Common
Stock purchasable thereunder, that a new Warrant for the balance remaining
of
the shares of Common Stock purchasable under the within Warrants be registered
in the name of the undersigned Holder or its transferee as below indicated
and
delivered to the address stated below.
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Dated:
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Name
of Warrant Holder
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or
transferee:
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(Please
print)
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Address:
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Signature:
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NOTICE:
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The
signature on this form must correspond with the name as written
upon the
face of this Warrant in every particular, without alteration or
enlargement or any change
whatsoever.
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ANNEX C
ASSIGNMENT
FORM
FOR
VALUE
RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns
and transfers unto the Assignee named below all of the rights of the undersigned
under this Warrant, with respect to the number of shares of Common Stock
set
forth below:
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Name
and Address of Assignee
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No.
of Shares of
Common
Stock
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and
does
hereby irrevocably constitute and appoint _______________________
attorney-in-fact to register such transfer onto the books of XxXxxxx Industries,
Inc. maintained for the purpose, with full power of substitution in the
premises.
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Dated:
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Print
Name:
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Signature:
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Witness:
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NOTICE:
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The
signature on this assignment must correspond with the name as written
upon
the face of this Warrant in every particular, without alteration
or
enlargement or any change
whatsoever.
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