WARRANT AGREEMENT
AMONG
AZUREL LTD.
a Delaware corporation,
NETWORK 1 FINANCIAL SECURITIES, INC.
and
NORTH AMERICAN TRANSFER CO.
TABLE OF CONTENTS
Section Page
------- ----
1. APPOINTMENT OF WARRANT AGENT.......................................2
2. FORM OF WARRANT....................................................2
3. COUNTERSIGNATURE AND REGISTRATION..................................4
4. TRANSFERS AND EXCHANGES............................................4
5. EXERCISE OF WARRANTS; PAYMENT OF WARRANT SOLICITATION
FEE...............................................................5
6. PAYMENT OF TAXES...................................................9
7. MUTILATED OR MISSING WARRANTS......................................9
8. RESERVATION OF COMMON STOCK.......................................10
9. ADJUSTMENTS OF WARRANT PRICE AND NUMBER OF SECURITIES.............11
10. FRACTIONAL INTERESTS..............................................22
11. NOTICES TO WARRANTHOLDERS.........................................22
12. DISPOSITION OF PROCEEDS ON EXERCISE OF WARRANTS...................24
13. REDEMPTION OF WARRANTS............................................24
14. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT
AGENT.............................................................25
15. DUTIES OF WARRANT AGENT...........................................26
16. CHANGE OF WARRANT AGENT...........................................29
17. IDENTITY OF TRANSFER AGENT........................................30
18. NOTICES...........................................................30
19. SUPPLEMENTS AND AMENDMENTS........................................31
20. NEW YORK CONTRACT.................................................32
21. BENEFITS OF THIS AGREEMENT........................................32
22. SUCCESSORS........................................................32
i
WARRANT AGREEMENT, dated as of __________ ___, 1997, among Azurel Ltd.,
a Delaware corporation (the "Company"), Network 1 Financial Securities, Inc.
(the "Underwriter") and North American Stock Transfer Co., as warrant agent (the
"Warrant Agent").
The Company proposes to issue and sell through an initial public
offering (the "IPO") underwritten by the Underwriter, an aggregate of 1,000,000
shares of common stock, par value $.001 per share (the "Common Stock"), and
1,000,000 redeemable Common Stock purchase warrants ("Warrants") and, pursuant
to the Underwriter's over-allotment option (the "Over-allotment Option"), an
additional 150,000 shares of Common Stock and 150,000 Warrants.
In connection with the IPO the Company proposes to sell to the
Underwriter warrants (the "Underwriter's Warrants") to purchase 100,000 shares
of Common Stock and 100,000 Warrants.
The Company has issued and sold warrants to purchase an aggregate of
500,000 shares of Common Stock (the "Bridge Warrants") in private placements of
its securities. The Bridge Warrants automatically will be converted into
Warrants having terms identical to the Warrants being offered in the IPO on the
date the Company's registration statement under the Securities Act of 1933
registering the securities to be offered in the IPO is declared effective by
the Securities and Exchange Commission.
Each Warrant will entitle the holder to purchase one share of Common
Stock.
The Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance, registration, transfer, exchange and exercise of the Warrants.
THEREFORE, the parties hereto agree as follows:
Section 1. APPOINTMENT OF WARRANT AGENT. The Company hereby
appoints the Warrant Agent to act as Warrant Agent for the Company in accordance
with the instructions hereinafter set forth in this Agreement, and the Warrant
Agent hereby accepts such appointment.
Upon the execution of this Agreement, certificates representing
1,000,000 Warrants to purchase an aggregate of 1,000,000 shares of Common Stock
(subject to modification and adjustment as provided in Section 9 hereof) shall
be executed by the Company and delivered to the Warrant Agent.
Upon the exercise of the Over-allotment Option, certificates
representing up to 150,000 Warrants to purchase an aggregate of 150,000 shares
of Common Stock (subject to adjustment as provided in Section 9 hereof) shall be
executed by the Company and delivered to the Warrant Agent.
Upon exercise of the Underwriters' Warrant as provided therein,
certificates representing 100,000 Warrants to purchase an aggregate of 100,000
shares of Common Stock (subject to adjustment as provided in Section 9 hereof)
shall be executed by the Company and delivered to the Warrant Agent.
Section 2. FORM OF WARRANT. The text of the Warrants and the form of
election to purchase Common Stock to be printed on the reverse thereof shall be
substantially as set forth in Exhibit A attached hereto (the provisions of which
are hereby incorporated herein). All of the certificates for the Warrants may
have such letters, numbers or other marks of identification or designation and
such legends, summaries or endorsements printed, lithographed or engraved
thereon as the Company may deem appropriate and as are not
2
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. Each Warrant shall initially entitle the
registered holder thereof to purchase one share of Common Stock at a purchase
price of ____ dollars and _____ cents ($___) [120% of the IPO price of
the shares of Common Stock issued in the IPO ] (as adjusted as hereinafter
provided, the "Warrant Price"), at any time during the period (the "Exercise
Period") commencing on __________ __ 1998 [the first anniversary of the date of
the Company's prospectus (the "Prospectus") pursuant to which the Warrants are
being sold in the IPO] and expiring at 5:00 p.m. New York time, on __________
__, 2002 [the fifth anniversary of the date of the Prospectus]. The Warrant
Price and the number of shares of Common Stock issuable upon exercise of the
Warrants are subject to adjustment upon the occurrence of certain events, all as
hereinafter provided. The Warrants shall be executed on behalf of the Company by
the manual or facsimile signature of the present or any future Chairman of the
Board or Vice Chairman, Chief Executive Officer, President or Vice President of
the Company, and attested to by the manual or facsimile signature of the present
or any future Secretary or Assistant Secretary of the Company.
Warrants shall be dated as of the date of issuance by the Warrant Agent
either upon initial issuance or upon transfer or exchange.
In the event the aforesaid expiration date of the Warrants falls on a
day that is not a business day, then the Warrants shall expire at 5:00 p.m. New
York time on the next succeeding business day. For purposes hereof, the term
"business day" shall mean any day
3
other than a Saturday, Sunday or a day on which banking institutions in
New York City, New York, are authorized or obligated by law to be closed.
Section 3. COUNTERSIGNATURE AND REGISTRATION. The Warrant Agent shall
maintain books for the transfer and registration of the Warrants. Upon the
initial issuance of the Warrants, the Warrant Agent shall issue and register the
Warrants in the names of the respective holders thereof. The Warrants shall be
countersigned manually or by facsimile by the Warrant Agent (or by any successor
to the Warrant Agent then acting as warrant agent under this Agreement) and
shall not be valid for any purpose unless so countersigned. The Warrants may,
however, be so countersigned by the Warrant Agent (or by its successor as
Warrant Agent) and be delivered by the Warrant Agent, notwithstanding that the
persons whose manual or facsimile signatures appear thereon as proper officers
of the Company shall have ceased to be such officers at the time of such
countersignature or delivery.
Section 4. TRANSFERS AND EXCHANGES. The Warrant Agent shall transfer,
from time to time, any outstanding Warrants upon the books to be maintained by
the Warrant Agent for that purpose, upon surrender thereof for transfer properly
endorsed or accompanied by appropriate instructions for transfer. Upon any such
transfer, a new Warrant shall be issued to the transferee and the surrendered
Warrant shall be cancelled by the Warrant Agent. Warrants so cancelled shall be
delivered by the Warrant Agent to the Company from time to time upon request.
Warrants may be exchanged at the option of the holder thereof, when surrendered
at the office of the Warrant Agent, for another Warrant, or other Warrants of
different denominations of like tenor and representing in the aggregate the
right to purchase
4
a like number of shares of Common Stock. No certificates for Warrants shall be
issued except for (i) Warrants initially issued hereunder in accordance with
Section 1 hereof, (ii) Warrants issued upon any transfer or exchange of
Warrants, (iii) Warrants issued in replacement of lost, stolen, destroyed or
mutilated certificates for Warrants pursuant to Section 7 hereof, and (iv) at
the option of the Board of Directors of the Company, Warrants in such form as
may be approved by its Board of Directors, to reflect any adjustment or change
in the Warrant Price or the number of shares of Common Stock purchasable upon
exercise of the Warrants made pursuant to Section 9 hereof.
Section 5. EXERCISE OF WARRANTS; PAYMENT OF WARRANT SOLICITATION FEE.
Subject to the provisions of this Agreement, each registered holder of Warrants
shall have the right, at any time during the Exercise Period, to exercise such
Warrants and purchase the number of fully paid and non-assessable shares of
Common Stock specified in such Warrants upon presentation and surrender of such
Warrants to the Company at the corporate office of the Warrant Agent, with the
exercise form on the reverse thereof duly executed, and upon payment to the
Company of the Warrant Price, determined in accordance with the provisions of
Sections 2, 9 and 10 of this Agreement, for the number of shares of Common Stock
in respect of which such Warrants are then exercised. Payment of such Warrant
Price shall be made in cash or by certified or bank check payable to the
Company. Subject to Section 6 hereof, upon such surrender of Warrants and
payment of the Warrant Price, the Warrant Agent on behalf of the Company shall
cause to be issued and delivered with all reasonable dispatch to or upon the
written order of the registered holder of such Warrants and in such name or
names as such registered holder may designate, a certificate or certificates for
5
the number of full shares of Common Stock so purchased upon the exercise of such
Warrants. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a holder of record of such shares of Common Stock immediately prior to the close
of business on the date of the surrender of such Warrants and payment of the
Warrant Price as aforesaid. The rights of purchase represented by the Warrants
shall be exercisable during the Exercise Period, at the election of the
registered holders thereof, either as an entirety or from time to time for a
portion of the shares specified therein and, in the event that any Warrant is
exercised in respect of less than all of the shares of Common Stock specified
therein at any time prior to the date of expiration of the Warrants, a new
Warrant or Warrants will be issued to the registered holder for the remaining
number of shares of Common Stock specified in the Warrant so surrendered, and
the Warrant Agent is hereby irrevocably authorized to countersign and to deliver
the required new Warrants pursuant to the provisions of this Section and of
Section 3 of this Agreement and the Company, whenever requested by the Warrant
Agent, will supply the Warrant Agent with Warrants duly executed on behalf of
the Company for such purpose. Upon the exercise of any one or more Warrants, the
Warrant Agent shall promptly notify the Company in writing of such fact and of
the number of securities delivered upon such exercise and, subject to the
provisions below, shall cause all payments of an amount, in cash or by check
made payable to the order of the Company, equal to the aggregate Warrant Price
for such Warrants, less any amounts payable to the Underwriters, as provided
below, to be deposited promptly in the Company's bank account. The Company
and Warrant Agent shall
6
determine, in their sole and absolute discretion, whether a Warrant
certificate has been properly completed for exercise by the registered holder
thereof.
Anything in the foregoing to the contrary notwithstanding, no Warrant
will be exercisable and the Company shall not be obligated to deliver any
securities pursuant to the exercise of any warrant unless at the time of
exercise the Company has filed with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933, as amended (the "Act"),
covering the securities issuable upon exercise of such Warrant and such
registration statement shall have been declared and shall remain effective and
shall be current, and such shares have been registered or qualified or be exempt
under the securities laws of the state or other jurisdiction of residence of the
holder of such Warrant and the exercise of such Warrant in any such state or
other jurisdiction shall not otherwise be unlawful. During the Exercise Period,
the Company shall use its best efforts to have a current registration statement
on file with the Securities and Exchange Commission covering the issuance of
Common Stock underlying the Warrants so as to permit the Company to deliver to
each person exercising a Warrant a prospectus meeting the requirements of
Section 10(a) (3) of the Act and otherwise complying therewith, and will deliver
such prospectus to each such person. During the Exercise Period, the Company
shall also use its best efforts to effect appropriate qualifications of the
Common Stock underlying the Warrants under the laws and regulations of the
states and other jurisdictions in which the Common Stock and Warrants are sold
by the Underwriters in the IPO in order to comply with applicable laws in
connection with the exercise of the Warrants.
7
(a) If at the time of exercise of any Warrant (i) the market
price of the Common Stock is equal to or greater than the then exercise price of
the Warrant, (ii) the exercise of the Warrant is solicited by the Underwriter at
such time as it is a member of the National Association of Securities Dealers,
Inc. ("NASD") , (iii) the Warrant is not held in a discretionary account, (iv)
disclosure of the compensation arrangement is made in documents provided to the
holders of the Warrants, and (v) the solicitation of the exercise of the Warrant
is not in violation of Rule 10b-6 (as such rule or any successor rule may be in
effect as of such time of exercise) promulgated under the Securities Exchange
Act of 1934, as amended, then the Underwriter shall be entitled to receive from
the Company following exercise of each of the Warrants so exercised a fee of
five percent (5%) of the aggregate exercise price of the Warrants so exercised
(the "Exercise Fee") The procedures for payment of the Exercise Fee are set
forth in Section 5(b) below.
(b) (i) Within five (5) days after the last day of each month
commencing with __________ ___, 1998, the Warrant Agent will notify the
Underwriters of each Warrant certificate which has been properly completed for
exercise by holders of Warrants during the last month. The Warrant Agent will
provide the Underwriter with such information, in connection with the exercise
of each Warrant, as the Underwriter shall reasonably request.
(ii) The Company hereby authorizes and instructs
the Warrant Agent to deliver to the Underwriter the Exercise Fee, if payable,
in respect of each exercise of Warrants, promptly after receipt by the Warrant
Agent from the Company of a check payable to the order of the Underwriter in
the amount of such Exercise Fee. In the event that an Exercise Fee is paid to
the Underwriter with respect to a Warrant which the Company or the
8
Warrant Agent determines is not properly completed for exercise or in respect
of which the Underwriter is not entitled to an Exercise Fee, the Underwriter
will return such Exercise Fee to the Warrant Agent which shall forthwith
return such fee to the Company.
The Underwriters and the Company may at any time during business hours
examine the records of the Warrant Agent, including its ledger of original
Warrant certificates returned to the Warrant Agent upon exercise of Warrants.
Notwithstanding any provision to the contrary, the provisions of paragraph 5 (a)
and 5 (b) may not be modified, amended or deleted without the prior written
consent of the Underwriter.
Section 6. PAYMENT OF TAXES. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Common Stock issuable upon the
exercise of Warrants; provided, however, that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance or delivery of any certificates for shares of Common Stock in a name
other than that of the registered holder of Warrants in respect of which such
shares are issued, and in such case neither the Company nor the Warrant Agent
shall be required to issue or deliver any certificate for shares of Common Stock
or any Warrant until the person requesting the same has paid to the Company the
amount of such tax or has established to the Company's satisfaction that such
tax has been paid or that no such tax is required to be paid.
Section 7. MUTILATED OR MISSING WARRANTS. In case any of the Warrants
shall be mutilated, lost, stolen or destroyed, the Company may, in its
discretion, issue and the Warrant Agent shall countersign and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant, or
in lieu of and in substitution for the Warrant
9
lost, stolen or destroyed, a new Warrant of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence satisfactory
to the Company and the Warrant Agent of such loss, theft or destruction and,
in case of a lost, stolen or destroyed Warrant, indemnity or bond, if
requested, also satisfactory to them. Applicants for such substitute Warrants
shall also comply with such other reasonable regulations and pay such
reasonable charges as the Company or the Warrant Agent may prescribe.
Section 8. RESERVATION OF COMMON STOCK. There have been reserved, and
the Company shall at all times keep reserved, out of its authorized shares of
Common Stock, a number of shares of Common Stock sufficient to provide for the
exercise of the rights of purchase represented by the Warrants, and the transfer
agent for the shares of Common Stock and every subsequent transfer agent for any
shares of Common Stock issuable upon the exercise of any of the aforesaid rights
of purchase are irrevocably authorized and directed at all times to reserve such
number of authorized shares of Common Stock as shall be required for such
purpose. The Company agrees that all shares of Common Stock issued upon exercise
of the Warrants shall be, at the time of delivery of the certificates for such
shares against payment of the Warrant Price therefor, validly issued, fully paid
and nonassessable and listed on any national securities exchange or included in
any interdealer automated quotation system upon or in which the other shares
of outstanding Common Stock are then listed or included. The Company will keep a
copy of this Agreement on file with the transfer agent for the shares of Common
Stock (which may be the Warrant Agent) and with every subsequent transfer agent
for any shares of Common Stock issuable upon the exercise of the rights of
purchase represented by the Warrants. The Warrant Agent is irrevocably
authorized to
10
requisition from time to time from such transfer agent stock
certificates required to honor outstanding Warrants. The Company will supply
such transfer agent with duly executed stock certificates for that purpose. All
Warrants surrendered in the exercise of the rights thereby evidenced shall be
cancelled by the Warrant Agent and shall thereafter be delivered to the Company,
and such cancelled Warrants shall constitute sufficient evidence of the number
of shares of Common Stock which have been issued upon the exercise of such
Warrants. Promptly after the date of expiration of the Warrants, the Warrant
Agent shall certify to the Company the total aggregate amount of Warrants then
outstanding, and thereafter no shares of Common Stock shall be subject to
reservation in respect of such Warrants which shall have expired.
Section 9. ADJUSTMENTS OF WARRANT PRICE AND NUMBER OF
SECURITIES.
(a) Computation of Adjusted Price. Except as hereinafter
provided, in case the Company shall, at any time after the date of closing of
the sale of securities pursuant to the IPO (the "Closing Date"), issue or sell
any shares of Common Stock (other than the issuances or sales referred to in
Section 9 (f) hereof), including shares held in the Company's treasury and
shares of Common Stock issued upon the exercise of any options, rights or
warrants to subscribe for shares of Common Stock (other than the issuances or
sales of Common Stock pursuant to rights to subscribe for such Common Stock
distributed pursuant to Section 9(h) hereof) and shares of Common Stock issued
upon the direct or indirect conversion or exchange of securities for shares of
Common Stock, for a consideration per share less than both the "Market Price"
(as defined in Section 9(a)(vi) hereof) per share of Common Stock on the
11
trading day immediately preceding such issuance or sale and the Warrant Price
in effect immediately prior to such issuance or sale, or without consideration,
then forthwith upon such issuance or sale, the Warrant Price shall (until
another such issuance or sale) be reduced to the price (calculated to the
nearest full cent) determined by multiplying the Warrant Price in effect
immediately prior to such issuance or sale by a fraction, the numerator of
which shall be the sum of (1) the number of shares of Common Stock outstanding
immediately prior to such issuance or sale multiplied by the Warrant Price
immediately prior to such issuance or sale plus (2) the consideration received
by the Company upon such issuance or sale, and the denominator of which shall
be the product of (x) the total number of shares of Common Stock outstanding
immediately after such issuance or sale, multiplied by (y) the Warrant Price
immediately prior to such issuance or sale; provided, however, that in no event
shall the Warrant Price be adjusted pursuant to this computation to an amount
in excess of the Warrant Price in effect immediately prior to such computation,
except in the case of a combination of outstanding shares of Common Stock, as
provided by Section 9(c) hereof.
For the purposes of any computation to be made in accordance with this
Section 9(a), the following provisions shall be applicable:
(i) In case of the issuance or sale of shares
of Common Stock for a consideration part or all of which shall be cash, the
amount of the cash consideration therefor shall be deemed to be the amount of
cash received by the Company for such shares (or, if shares of Common Stock are
offered by the Company for subscription, the subscription price, or, if such
securities shall be sold to underwriters or dealers for public offering without
a subscription offering, the public offering price) before deducting therefrom
any compensation
12
paid or discount allowed in the sale, underwriting or purchase thereof by
underwriters or dealers or others performing similar services, or any expenses
incurred in connection therewith.
(ii) In case of the issuance or sale (otherwise
than as a dividend or other distribution on any stock of the Company) of
shares of Common Stock for a consideration part or all of which shall be other
than cash, the amount of the consideration therefor other than cash shall be
deemed to be the value of such consideration as determined in good faith by the
Board of Directors of the Company.
(iii) Shares of Common Stock issuable by way of
dividend or other distribution on any stock of the Company shall be deemed to
have been issued immediately after the opening of business on the day following
the record date for the determination of shareholders entitled to receive such
dividend or other distribution and shall be deemed to have been issued without
consideration.
(iv) The reclassification of securities of the
Company other than shares of Common Stock into securities including shares of
Common Stock shall be deemed to involve the issuance of such shares of Common
Stock for a consideration other than cash immediately prior to the close of
business on the date fixed for the determination of security holders entitled
to receive such shares, and the value of the consideration allocable to such
shares of Common Stock shall be determined as provided in subsection (ii) of
this Section 9(a).
(v) The number of shares of Common Stock at
any one time outstanding shall include the aggregate number of shares issued
or issuable upon the exercise
13
of options, warrants or rights and upon the conversion or exchange of
convertible or exchangeable securities.
(vi) As used herein, the phrase "Market Price"
at any date shall be deemed to be the average of the last reported sale price,
or, in case no such reported sale takes place on such day, the average of the
last reported sale prices for the last three trading days, in either case as
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading or as reported in the Nasdaq Stock
Market, or, if the Common Stock is not listed or admitted to trading on any
national securities exchange or quoted on the Nasdaq Stock Market, the closing
bid quotation as furnished by the National Association of Securities Dealers,
Inc. through Nasdaq or a similar organization if Nasdaq is no longer reporting
such information, or if the Common Stock is not quoted on Nasdaq, as determined
in good faith by resolution of the Board of Directors of the Company, based on
the best information available to it for the day immediately preceding such
issuance or sale, the day of such issuance or sale and the day immediately
after such issuance or sale. If the Common Stock is listed or admitted to
trading on a national securities exchange and also quoted on the Nasdaq Stock
Market, the Market Price shall be determined as hereinabove provided by
reference to the prices reported in the Nasdaq Stock Market; provided that if
the Common Stock is listed or admitted to trading on the New York Stock
Exchange, the Market Price shall be determined as hereinabove provided by
reference to the prices reported by such exchange.
(b) Options, Rights, Warrants and Convertible and Exchangeable
Securities. Except in the case of the Company issuing rights to subscribe for
shares of
14
Common Stock distributed pursuant to Section 9(h) hereof, if the
Company shall at any time after the Closing Date issue options, rights or
warrants to subscribe for shares of Common Stock, or issue any securities
convertible into or exchangeable for shares of Common Stock, in each case other
than the issuances or sales referred to in section 9 (f) hereof, (i) for a
consideration per share less than the lesser of (a) the Warrant Price in effect
immediately prior to the issuance of such options, rights or warrants, or such
convertible or exchangeable securities, and (b) the Market Price on the trading
day immediately preceding such issuance, or (ii) without consideration, the
Warrant Price in effect immediately prior to the issuance of such options,
rights or warrants, or such convertible or exchangeable securities, as the case
may be, shall be reduced to a price determined by making a computation in
accordance with the provisions of Section 9(a) hereof; provided that:
(i) The aggregate maximum number of shares of
Common Stock, as the case may be, issuable under all the outstanding options,
rights or warrants shall be deemed to be issued and outstanding at the time all
the outstanding options, rights or warrants were issued, and for a consideration
equal to the minimum purchase price per share provided for in the options,
rights or warrants at the time of issuance, plus the consideration (determined
in the same manner as consideration received on the issue or sale of shares in
accordance with the terms of Section 9(a)), if any, received by the Company for
the options, rights or warrants, and if no minimum purchase price is provided
in the options, rights or warrants, then the minimum purchase price shall be
equal to zero; provided, however, that upon the expiration or other termination
of the options, rights or warrants, if any thereof shall not have been
exercised, the number of shares of Common Stock deemed to be issued and
outstanding
15
pursuant to this subsection (b) (and for the purposes of subsection
(v) of Section 9(a) hereof) shall be reduced by such number of shares as to
which options, warrants or rights shall have expired or terminated unexercised,
and such number of shares shall no longer be deemed to be issued and
outstanding, and the Warrant Price then in effect shall forthwith be readjusted
and thereafter be the price which it would have been had adjustment been made
on the basis of the issuance only of shares actually issued or issuable upon
the exercise of those options, rights or warrants as to which the exercise
rights shall not have expired or terminated unexercised.
(ii) The aggregate maximum number of shares of
Common Stock issuable upon conversion or exchange of any convertible or
exchangeable securities shall be deemed to be issued and outstanding at the
time of issuance of such securities, and for a consideration equal to the
consideration (determined in the same manner as consideration received on the
issue or sale of shares of Common Stock in accordance with the terms of
Section 9 (a)) received by the Company for such securities, plus the minimum
consideration, if any, receivable by the Company upon the conversion or
exchange thereof; provided, however, that upon the expiration or other
termination of the right to convert or exchange such convertible or
exchangeable securities (whether by reason of redemption or otherwise), the
number of shares deemed to be issued and outstanding pursuant to this
subsection (ii) (and for the purpose of subsection (v) of Section 9(a)
hereof) shall be reduced by such number of shares as to which the conversion
or exchange rights shall have expired or terminated unexercised, and such
number of shares shall no longer be deemed to be issued and outstanding, and
the Warrant Price then in effect shall forthwith be readjusted and thereafter
16
be the price which it would have been had adjustment been made on the basis of
the issuance only of the shares actually issued or issuable upon the
conversion or exchange of those convertible or exchangeable securities as to
which the conversion or exchange rights shall not have expired or terminated
unexercised. No adjustment will be made pursuant to this subsection (ii) upon
the issuance by the Company of any convertible or exchangeable securities
pursuant to the exercise of any option, right or warrant exercisable therefor,
to the extent that adjustments in respect of such options, rights or warrants
were previously made pursuant to the provisions of subsection (i) of this
subsection 9 (b) .
(iii) If any change shall occur in the price per
share provided for in any of the options, rights or warrants referred to in
subsection (i) of this Section 9 (b), or in the price per share at which the
securities referred to in subsection (ii) of this Section 9(b) are convertible
or exchangeable, or if any such options, rights or warrants are exercised at a
price greater than the minimum purchase price provided for in such options,
rights or warrants, or any such securities are converted or exercised for more
than the minimum consideration receivable by the Company upon such conversion or
exchange, the options, rights or warrants or conversion or exchange rights, as
the case may be, shall be deemed to have expired or terminated on the date when
such price change became effective in respect of shares not theretofore issued
pursuant to the exercise or conversion or exchange thereof, and the Company
shall be deemed to have issued upon such date new options, rights or warrants or
convertible or exchangeable securities at the new price in respect of the number
of shares issuable upon the exercise of such options, rights or warrants or the
conversion or exchange of such convertible or exchangeable securities; provided,
however, that no adjustment shall
17
be made pursuant to this subsection (iii) with respect to any change in the
price per share provided for in any of the options, rights or warrants referred
to in subsection (b) (i) of this Section 9 (b), or in the price per share at
which the securities referred to in subsection (b) (ii) of this Section 9(b)
are convertible or exchangeable, which change results from the application of
the anti-dilution provisions thereof in connection with an event for which,
subject to subsection (iv) of this Section 9(f), an adjustment to the Warrant
Price and the number of securities issuable upon exercise of the Warrants will
be required to be made pursuant to this Section 9.
(c) Subdivision and Combination. In case the Company shall at
any time after the Closing Date subdivide or combine the outstanding shares of
Common Stock, the Warrant Price shall forthwith be proportionately decreased in
the case of subdivision or increased in the case of combination.
(d) Adjustment in Number of Shares. Upon each adjustment
of the Warrant Price pursuant to the provisions of this Section 9, the number
of shares of Common Stock issuable upon the exercise of the Warrants shall be
adjusted to the nearest full whole number by multiplying a number equal to the
Warrant Price in effect immediately prior to such adjustment by the number of
shares of Common Stock issuable upon exercise of the Warrants immediately prior
to such adjustment and dividing the product so obtained by the adjusted Warrant
Price.
(e) Reclassification, Consolidation, Merger, etc. In case of
any reclassification or change of the outstanding shares of Common Stock (other
than a change in par value to no par value, or from no par value to par value,
or as a result of a subdivision or
18
combination), or in the case of any consolidation of the Company with, or merger
of the Company into, another corporation (other than a consolidation or merger
which does not result in any reclassification or change of the outstanding
shares of Common Stock, except a change as a result of a subdivision or
combination of such shares or a change in par value, as aforesaid), or in the
case of a sale or conveyance to another corporation of the property of the
Company as an entirety, the Holder shall thereafter have the right to purchase
the kind and number of shares of stock and other securities and property
receivable upon such reclassification, change, consolidation, merger, sale or
conveyance as if the Holder were the owner of the shares of Common Stock
underlying the Warrants immediately prior to any such events at a price equal
to the product of (x) the number of shares issuable upon exercise of the
Warrants and (y) the Warrant Price in effect immediately prior to the record
date for such reclassification, change, consolidation, merger, sale or
conveyance as if such Holder had exercised the Warrant.
(f) No Adjustment of Warrant Price in Certain Cases.
Notwithstanding anything herein to the contrary, no adjustment of the Warrant
Price shall be made:
(i) Upon the issuance or sale of the
Underwriters' Warrant, the shares of Common Stock or Warrants issuable upon the
exercise of the Underwriters' Warrant or the shares of Common Stock issuable
upon exercise of the Warrants underlying the Underwriters' Warrant; or
(ii) Upon the issuance or sale of (A) the
shares of Common Stock or Warrants issued by the Company in the IPO (including
pursuant to the Over-allotment Option) or other shares of Common Stock or
warrants issued by the Company upon
19
consummation of the IPO or, (B) the shares of Common Stock (or other
securities) issuable upon exercise of Warrants; or
(iii) Upon (i) the issuance of options pursuant to
the Company's stock option plan in effect on the date hereof or as hereafter
amended in accordance with the terms thereof or any other employee or executive
stock option plan approved by stockholders of the Company or the sale by the
Company of any shares of Common Stock pursuant to the exercise of any such
options, or (ii) the sale by the Company of any shares of Common Stock pursuant
to the exercise of any options or warrants issued and outstanding on the date of
closing of the sale of Common Stock and Warrants pursuant to the IPO or (iii)
the issuance or sale by the Company of any shares of Common Stock in connection
with any merger, acquisition or other business combination, the terms of which
have been approved in writing by the Underwriter; or
(iv) If the amount of said adjustment shall be
less than five cents (5(cent)) per share of Common Stock.
(g) Dividends and Other Distributions with Respect to
Outstanding Securities. In the event that the Company shall at any time after
the Closing Date and prior to the exercise or expiration of all Warrants declare
a dividend (other than a dividend consisting solely of shares of Common Stock or
a cash dividend or distribution payable out of current or retained earnings) or
otherwise distribute to the holders of Common Stock any monies, assets,
property, rights, evidences of indebtedness, securities (other than such a cash
dividend or distribution or dividend consisting solely of shares of Common
Stock), whether issued by the Company or by another person or entity, or any
other thing of value, the Holders
20
of the unexercised Warrants shall thereafter be entitled, in addition to the
shares of Common Stock or other securities receivable upon the exercise
thereof, to receive, upon the exercise of such Warrants, the same monies,
property, assets, rights, evidences of indebtedness, securities or any other
thing of value that they would have been entitled to receive at the time of
such dividend or distribution as if the Holders were the owners of the shares
of Common Stock underlying such Warrants. At the time of any such dividend or
distribution, the Company shall make appropriate reserves to ensure the timely
performance of the provisions of this Section 9(g).
(h) Subscription Rights for Shares of Common Stock or
Other Securities. In case the Company or an affiliate of the Company shall at
anytime after the date hereof and prior to the exercise of all the Warrants
issue any rights to subscribe for shares of Common Stock or any other
securities of the Company or of such affiliate to all the holders of Common
Stock, the Holders of the unexercised Warrants shall be entitled, in addition
to the shares of Common Stock or other securities receivable upon the exercise
of the Warrants, to receive such rights at the time such rights are
distributed to the other stockholders of the Company but only to the extent of
the number of shares of Common Stock, if any, for which the Warrants remain
exercisable.
(i) Notice in Event of Dissolution. In case of the
dissolution, liquidation or winding-up of the Company, all rights under the
Warrants shall terminate on a date fixed by the Company, such date to be no
earlier than ten (10) days prior to the effectiveness of such dissolution,
liquidation or winding-up and not later than five (5) days prior to such
effectiveness. Notice of such termination of purchase rights shall be given to
each registered
21
holder of the Warrants, as the same shall appear on the books of
the Company maintained by the Warrant Agent, by registered mail at least thirty
(30) days prior to such termination date.
(j) Computations. The Company may retain a firm of independent
public accountants (who may be any such firm regularly employed by the Company)
to make any computation required under this Section 9, and any certificate
setting forth such computation signed by such firm shall be conclusive evidence
of the correctness of any computation made under this Section 9.
Section 10. FRACTIONAL INTERESTS. The Warrants may only be
exercised to purchase full shares of Common Stock and the Company shall not be
required to issue fractions of shares of Common Stock on the exercise of
Warrants. However, if a Warrant holder exercises all Warrants then owned of
record by him and such exercise would result in the issuance of a
fractional share, the Company will pay to such Warrantholder, in lieu of the
issuance of any fractional share otherwise issuable, an amount of cash based
on the Market Price on the last trading day prior to the exercise date.
Section 11. NOTICES TO WARRANTHOLDERS.
(a) Upon any adjustment of the Warrant Price and the number of
shares of Common Stock issuable upon exercise of a Warrant, then and in each
such case, the Company shall give written notice thereof to the Warrant Agent,
which notice shall state the Warrant Price resulting from such adjustment and
the increase or decrease, if any, in the number of shares purchasable at such
price upon the exercise of a Warrant, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based. The
Company shall also mail such notice to the holders of the Warrants at their
respective
22
addresses appearing in the Warrant register. Failure to give or mail
such notice, or any defect therein, shall not affect the validity of the
adjustments.
(b) In case at any time after the Closing Date:
(i) the Company shall pay dividends payable in
stock upon its Common Stock or make any distribution (other than regular cash
dividends) to the holders of Common Stock; or
(ii) the Company shall offer for subscription
pro rata to all of the holders of Common Stock any additional shares of stock
of any class or other rights; or
(iii) there shall be any capital reorganization
or reclassification of the capital stock of the Company, or consolidation or
merger of the Company with, or sale of substantially all of its assets to
another corporation; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company; then in any one or more
of such cases, the Company shall give written notice to the Warrant Agent and
the holders of the Warrants in the manner set forth in Section 11(a) of the date
on which (A) a record shall be taken for such dividend, distribution or
subscription rights, or (B) such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up shall take
place, as the case may be. Such notice shall also specify the date as of which
the holders of Common Stock of record shall participate in such dividend,
distribution or subscription rights, or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, as the case may be. Such notice shall be given at
least ten (10) days prior to the action in question and
23
not less than ten (10) days prior to the record date in respect thereof.
Failure to give such notice, or any defect therein, shall not affect the
legality or validity of any of the matters set forth in this Section 11(b).
(c) The Company shall cause copies of all financial statements
and reports, proxy statements and other documents that are sent to its
stockholders to be sent by an identical class of mail, postage prepaid, on the
date of mailing to such stockholders, to each registered holder of Warrants at
his address appearing in the Warrant register as of the record date for the
determination of the stockholders entitled to such documents.
Section 12. DISPOSITION OF PROCEEDS ON EXERCISE OF WARRANTS.
(a) The Warrant Agent shall promptly forward to the Company
all monies received by the Warrant Agent for the purchase of shares of Common
Stock through the exercise of these Warrants.
(b) The Warrant Agent shall keep copies of this Agreement
available for inspection by holders of Warrants during normal business hours.
Section 13. REDEMPTION OF WARRANTS. The Warrants are redeemable by the
Company commencing on the first anniversary the date of the Prospectus, in whole
or in part, on not less than thirty (30) days' prior written notice at a
redemption price of $.10 per Warrant, provided the average closing bid quotation
of the Common Stock as reported on the Nasdaq Stock Market, if traded thereon,
or if not traded thereon, the average closing sale price if listed on a national
securities exchange (or other reporting system that provides last sale prices),
has been in excess of 150% of the Exercise Price for a period of 20 trading days
in any 30 trading day period ending not more than 15 days prior to the date on
which the Company
24
gives notice of redemption. Any redemption in part shall be made
pro rata to all Warrant holders. The redemption notice shall be mailed to
the holders of the Warrants at their respective addresses appearing in the
Warrant register. Any such notice mailed in the manner provided herein shall be
conclusively presumed to have been duly given in accordance with this Agreement
whether or not the registered holder receives such notice. No failure to mail
such notice nor any defect therein or in the mailing thereof shall affect the
validity of the proceedings for such redemption except as to a registered holder
of a Warrant (i) to whom notice was not mailed or (ii) whose notice was
defective. An affidavit of the Warrant Agent or the Secretary or
Assistant Secretary of the Company that notice of redemption has been mailed
shall, in the absence of fraud, be prima facie evidence of the facts stated
therein. Holders of the Warrants will have exercise rights until the close of
business on the day immediately preceding the date fixed for redemption.
Section 14. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT.
Any corporation or company which may succeed to the corporate trust business of
the Warrant Agent by any merger or consolidation or otherwise shall be the
successor to the Warrant Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto; provided,
that such corporation would be eligible for appointment as a successor Warrant
Agent under the provisions of Section 16 of this Agreement. In case at the time
such successor to the Warrant Agent shall succeed to the agency created by this
Agreement any of the Warrants shall have been countersigned but not delivered,
any such successor to the Warrant Agent may adopt the countersignature of the
original Warrant Agent and deliver such Warrants so countersigned.
25
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrants shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignature under its prior name
and deliver Warrants so countersigned. In all such cases such Warrants shall
have the full force provided in the Warrants and in this Agreement.
Section 15. DUTIES OF WARRANT AGENT. The Warrant Agent undertakes
the duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Company and the holders of Warrants, by
their acceptance thereof, shall be bound:
(a) The statements of fact and recitals contained herein and
in the Warrants shall be taken as statements of the Company, and the Warrant
Agent assumes no responsibility for the correctness of any of the same except as
such describe the Warrant Agent or action taken or to be taken by it. The
Warrant Agent assumes no responsibility with respect to the distribution of the
Warrants except as herein expressly provided.
(b) The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the covenants in this Agreement or in the
Warrants to be complied with by the Company.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder of
any Warrant in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion or the advice of such counsel.
26
(d) The Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant for any action
taken in reliance on any notice, resolution, waiver, consent, order, certificate
or other instrument believed by it to be genuine and to have been signed, sent
or presented by the proper party or parties.
(e) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges incurred by the Warrant Agent in the
execution of this Agreement and to indemnify the Warrant Agent and save it
harmless against any and all liabilities, including judgments, costs and
reasonable counsel fees, for anything done or omitted by the Warrant Agent in
the execution of this Agreement except as a result of the Warrant Agent's
negligence, willful misconduct or bad faith.
(f) The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other action
likely to involve expenses unless the Company or one or more registered holders
of Warrants shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as the
Warrant Agent may consider proper, whether with or without any such security or
indemnity. All rights of action under this Agreement or under any of the
Warrants may be enforced by the Warrant Agent without the possession of any of
the Warrants or the production thereof at any trial or other proceeding. Any
such action, suit or proceeding instituted by the Warrant Agent shall be brought
in its name as Warrant Agent, and any recovery of judgment shall be for the
27
ratable benefit of the registered holders of the Warrants, as their respective
rights and interests may appear.
(g) The Warrant Agent and any stockholder, director, officer,
partner or employee of the Warrant Agent may buy, sell or deal in any of the
Warrants or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to or otherwise act as fully and freely as though it were not the Warrant
Agent under this Agreement. Nothing herein shall preclude the Warrant Agent
from acting in any other capacity for the Company or for any other legal
entity.
(h) The Warrant Agent shall act hereunder solely as agent and
its duties shall be determined solely by the provisions hereof.
(i) The Warrant Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys, agents or employees, and the Warrant Agent shall
not be answerable or accountable for any such attorneys, agents or employees or
for any loss to the Company resulting from such neglect or misconduct, provided
reasonable care had been exercised in the selection and continued employment
thereof.
(j) Any request, direction, election, order or demand of the
Company shall be sufficiently evidenced by an instrument signed in the name of
the Company by its President or a Vice President or its Secretary or an
Assistant Secretary or its Treasurer or an Assistant Treasurer (unless other
evidence in respect thereof be herein specifically prescribed); and any
28
resolution of the Board of Directors may be evidenced to the Warrant Agent by a
copy thereof certified by the Secretary or an Assistant Secretary of the
Company.
Section 16. CHANGE OF WARRANT AGENT. The Warrant Agent may
resign and be discharged from its duties under this Agreement by giving to the
Company notice in writing, and to the holders of the Warrants notice by mailing
such notice to the holders at their respective addresses appearing on the
Warrant register, of such resignation, specifying a date when such resignation
shall take effect. The Warrant Agent may be removed by like notice to the
Warrant Agent from the Company and the like mailing of notice to the holders
of the Warrants. If the Warrant Agent shall resign or be removed or shall
otherwise become incapable of action, the Company shall appoint a successor to
the Warrant Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Warrant Agent or after the Company has received such notice from a registered
holder of a Warrant (who shall, with such notice, submit his Warrant for
inspection by the Company), then the registered holder of any Warrant may
apply to any court of competent jurisdiction for the appointment of a successor
to the Warrant Agent. Any successor Warrant Agent, whether appointed by the
Company or by such a court, shall be a bank or trust company, in good standing,
incorporated under New York or federal law. After appointment, the successor
Warrant Agent shall be vested with the same powers, rights, duties and
responsibility as if it had been originally named as Warrant Agent without
further act or deed and the former Warrant Agent shall deliver and transfer to
the successor Warrant Agent all canceled Warrants, records and property at the
time held by it hereunder, and execute and
29
deliver any further assurance or conveyance necessary for this purpose. Failure
to file or mail any notice provided for in this Section, however, or any defect
therein, shall not affect the validity of the resignation or removal of the
Warrant Agent or the appointment of the successor Warrant Agent, as the case
may be.
Section 17. IDENTITY OF TRANSFER AGENT. Forthwith upon the
appointment of any transfer agent (other than North American Transfer Co.) for
the shares of Common Stock or of any subsequent transfer agent for the shares
of Common Stock, the Company will file with the Warrant Agent a statement
setting forth the name and address of such transfer agent.
Section 18. NOTICES. Any notice pursuant to this Agreement to be given
by the Warrant Agent or the registered holder of any Warrant to the Company,
shall be sufficiently given if sent by first-class mail, postage prepaid,
addressed (until another is filed in writing by the Company with the Warrant
Agent) as follows:
AZUREL, LTD.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx, Chief Executive Officer
and a copy thereof to:
Gersten, Kaplowitz, Xxxxxxxxxx & Xxxxxx, LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxxxxxx, Esq.
Any notice pursuant to this Agreement to be given by the Company or the
registered holder of any Warrant to the Warrant Agent shall be sufficiently
given if sent by first-class
30
mail, postage prepaid, addressed (until another address is filed in writing by
the Warrant Agent with the Company) as follows:
North American Transfer Co.
000 X. Xxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxxx
Any notice pursuant to this Agreement to be given by the Warrant Agent
or the Company to the Underwriter shall be sufficiently given if sent by
first-class mail, postage prepaid, addressed (until another address is filed
in writing with the Warrant Agent) as follows:
Network 1 Financial Securities, Inc.
One Financial Galleria
0 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxxxx 00000
Attn: Xxxxxxxx Xxxxxxx, Esq.
and a copy thereof to:
Snow Xxxxxx Xxxxxx, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxx Xxxxxx, Esq.
Section 19. SUPPLEMENTS AND AMENDMENTS. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement in order to cure
any ambiguity or to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall
not be inconsistent with the provisions of the Warrants and which shall not
materially adversely affect the interest of the holders of
31
Warrants; and in addition the Company and the Warrant Agent may modify,
supplement or alter this Agreement with the consent in writing of the
registered holders of the Warrants representing not less than a majority of the
Warrants then outstanding.
Section 20. NEW YORK CONTRACT. This Agreement and each Warrant
issued hereunder shall be deemed to be a contract made under the laws of the
State of New York and shall be construed in accordance with the laws of New
York without regard to the conflicts of law principles thereof.
Section 21. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company,
the Warrant Agent and the registered holders of the Warrants any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Warrant Agent and the
registered holders of the Warrants.
Section 22. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
32
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
AZUREL LTD.
By: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
NORTH AMERICAN TRANSFER CO.
By: ________________________________
Name:
Title:
NETWORK 1 FINANCIAL
SECURITIES, INC.
By: ________________________________
Name:
Title:
33
No. W_______________________ VOID AFTER_____________, 2002
WARRANTS
REDEEMABLE WARRANT CERTIFICATE TO
PURCHASE ONE SHARE OF COMMON STOCK
AZUREL LTD.
CUSIP [ ]
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the
number of Redeemable Warrants (the "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 nonassessable share of Common Stock,
par value $.001 per share (the "Common Stock"), of Azurel Ltd., a Delaware
corporation (the "Company"), at any time from _________ __, 1998 (the "Initial
Warrant Exercise Date") , 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 North American Transfer Co., 000 Xxxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx 00000, as
Warrant Agent, or its successor (the "Warrant Agent"), accompanied by payment of
$____, subject to adjustment (the "Exercise Price"), in lawful money of the
United States of America in cash or by certified or bank check made payable to
the Company.
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, dated as of ___________ ___, 1997 (the "Warrant
Agreement"), among the Company, Network 1 Financial Securities, Inc. (the
"Underwriter") and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Exercise Price and 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 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_________ ___, 2002 [the date which is the fifth anniversary of the Initial
Warrant Exercise Date]; provided, that if such date is not a business day, it
shall mean 5:00 p.m., New York City time, on the next following business day.
For purposes hereof, the term "business day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in New York City, New
York, are authorized or obligated by law to be closed.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of the Warrants represented hereby unless at the time of
exercise the Company has filed with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933, as amended (the "Act"),
covering the securities issuable upon exercise of the Warrants represented
hereby and such registration statement has been declared and shall remain
effective and shall be current, and such securities have been registered or
qualified or be exempt under the securities laws of the state or other
jurisdiction of residence of the Registered Holder and the exercise of the
Warrants represented hereby in any such state or other jurisdiction shall not
otherwise be unlawful.
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 the presentment and payment of any tax or other
charge imposed in connection therewith or incident thereto 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, as such, shall not be entitled to any 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.
Subject to the provisions of the Warrant Agreement, this Warrant may be
redeemed at the option of the Company, at a redemption price of $.10 per
Warrant, at any time commencing __________ ___, 1998 [the first anniversary of
the date of the Prospectus], provided that the average closing bid quotation of
the Common Stock as reported on The Nasdaq Stock Market, if traded thereon, or
if not traded thereon, the average closing sale price if listed on national
exchange (or other reporting system that provides last sale prices), shall have
for a period of 20 trading days in any 30 day period ending nor more than 15
days prior to the date on which the Company gives the Notice of Redemption (as
defined below) exceeded 150% of the Exercise Price. Notice of redemption (the
"Notice of Redemption") shall be given by the Company no less than thirty days
2
before the date fixed for redemption, all as provided in the Warrant
Agreement. On and after the date fixed for redemption, the Registered Holder
shall have no right with respect to this Warrant except to receive the $0.10
per Warrant upon surrender of this Certificate.
Under certain circumstances described in the Warrant Agreement, the
Underwriter shall be entitled to receive as a solicitation fee an aggregate of
five percent (5%) of the Exercise Price of the Warrants represented hereby.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent 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 or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary, except as provided in the
Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York without regard to the
conflicts of law principles thereof.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated __________ ___, 1997
SEAL AZUREL LTD.
By: /s/ Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
Chief Executive Officer
By: ____________________________________
Xxx Xxxxxxxxxx
Secretary
COUNTERSIGNED:
NORTH AMERICAN TRANSFER CO.,
as Warrant Agent
By: __________________________________________________
Authorized Officer
3
EXERCISE FORM
To Be Executed by the Registered Holder
in order to Exercise Warrant
The undersigned Registered Holder hereby irrevocably elects to exercise
_________ Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
--------------------------
--------------------------
--------------------------
(please print or type name and address)
and be delivered to
--------------------------
--------------------------
--------------------------
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
IMPORTANT: PLEASE COMPLETE THE FOLLOWING:
1. If the exercise of this Warrant was solicited by Network 1
Financial Securities, Inc., please check the following box. [ ]
2. The exercise of this warrant was solicited by
---------------------------------------------------------------
4
3. If the exercise of this Warrant was not solicited, please check
the following box. [ ]
Dated: _____________________________ X__________________________________
______________________________________
______________________________________
Address
______________________________________
Social Security or Taxpayer
Identification Number
______________________________________
Signature Guaranteed
5
ASSIGNMENT
To be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, ____________________________, hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
-------------------------
-------------------------
-------------------------
(please print or type name and address)
________________________ of the Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
______________________________________ as its/his/her attorney-in-fact to
transfer this Warrant Certificate on the books of the Company, with full power
of substitution in the premises.
Dated: ______________________ x_______________________________
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE EXERCISE FORM MUST CORRESPOND TO THE NAME
AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE
GUARANTEED BY A BANK, BROKER, DEALER, CREDIT UNION, SAVINGS ASSOCIATION OR OTHER
ENTITY WHICH IS A MEMBER IN GOOD STANDING OF THE SECURITIES TRANSFER AGENTS
MEDALLION PROGRAM.
6
