WARRANT AGREEMENT
This
WARRANT AGREEMENT (this “Agreement”), dated as of
August, 2009, is between MDI, INC., a Delaware corporation (the “Company”), and MDI
Investments, LLC (“Holder”).
W I T N E S S E T H:
WHEREAS,
the Company desires to grant to Holder this Warrant Agreement (this “Warrant”) to purchase
4,000,000 shares (the “Shares”) of Common Stock of
the Company.
NOW,
THEREFORE, in consideration of the premises, the agreements set forth herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Grant. Subject
to the terms and conditions hereof, Holder is hereby granted this Warrant by
which Holder has the right to purchase, at any time prior to August __, 2016
(the “Expiration Date”),
at 5:00 p.m., San Antonio, Texas time on such date, the Shares.
2. Exercise of
Warrant.
2.1 This
Warrant is exercisable at $0.60 per Share payable by certified or official bank
check, bank draft payable to the order of the Company or any combination
thereof, subject to adjustment as provided in Section 8 hereof. The
purchase rights represented are exercisable at the option of the Holder thereof,
in whole or part (but not as to fractional shares of the Common
Stock).
2.2 In lieu
of exercising this Warrant by payment of cash or check or bank draft payable to
the order of the Company pursuant to Section 2.1 above, the Holder may
elect to receive Shares equal to the value of this Warrant (or the portion
thereof being exercised), at any time after the date hereof and before the close
of business on the Expiration Date, by surrender of this Warrant at the
principal executive office of the Company, together with the Notice of
Conversion annexed hereto, in which event the Company will issue to the Holder,
Shares in accordance with the following formula:
X = Y(A-B)
A
Where, X = The
number of Shares to be issued to Holder;
Y = The
number of Shares for which the Warrant is being exercised;
A = The
fair market value of one Share; and
B = The
Exercise Price.
(i) For
purposes of this Section 2.2, the fair market value of a Share is defined as the
average of the closing bid prices over the thirty (30) day period ending three
(3) days prior to the date of the Notice of Conversion.
3. Issuance of
Certificates. Upon the exercise of this Warrant, the issuance
of certificates for shares of Common Stock (the “Warrant Certificates”) shall
be made forthwith (and in any event within fifteen (15) business days
thereafter) without charge to the Holder thereof, and such certificates shall be
issued in the name of, or in such names as may be directed by, the Holder
thereof; 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 and
delivery of any such certificates in a name other than that of the Holder and
the Company shall not be required to issue or deliver such certificates unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
3. Restriction On Transfer of
Warrant. The Holder, by its acceptance thereof, covenants and
agrees that this Warrant is being acquired as an investment and not with a view
to the distribution thereof in violation of the Securities Act (as defined
below). This Agreement is binding upon any Holder(s) and their
respective heirs, successors, and permitted assigns. The Holder may
assign interests granted by this Agreement, provided that the transferee agrees
to be bound by the terms of this Agreement as if such transferee were a Holder
and, provided further, that the assignment is made pursuant to an effective
registration statement under the Securities Act or a valid exemption from
registration under the Securities Act of 1933, as amended (the “Securities
Act”). If requested by the Company, the Holder must also
furnish to the Company an opinion of counsel reasonably satisfactory to the
Company to such effect.
4. Exercise
Price.
4.1 Initial and Adjusted
Exercise Price. Except as otherwise provided in Section 8
hereof, the initial exercise price of each Warrant shall be $0.60 per
Share. The adjusted exercise price shall be the price which shall
result from time to time from any and all adjustments of the initial exercise
price in accordance with the provisions of Section 8 hereof.
4.2 Exercise
Price. The term “Exercise Price” herein shall
mean the initial exercise price or the adjusted exercise price, depending upon
the context.
5. Restrictive
Legends. Any certificates representing the Shares underlying
this Warrant and any of the other securities issuable upon exercise of this
Warrant shall bear substantially the following restrictive legend:
The
securities represented by this certificate have not been registered under the
Securities Act of 1933, as amended (the “Act”), and may not be offered or sold
except pursuant to (i) an effective registration statement under the Act, (ii)
to the extent applicable, Rule 144 under the Act (or any similar rule under such
Act relating to the disposition of securities), or (iii) an opinion of counsel,
if such opinion shall be reasonably satisfactory to counsel to the issuer, that
an exemption from registration under such Act is available.
6. Adjustments to Exercise
Price and Number of Securities.
6.1 Adjustments for Change in
Capital Stock. If at any time after the date of this Agreement, the
Company:
(a) pays a
dividend or makes a distribution on its Common Stock exclusively in shares of
its Common Stock;
(b) subdivides
its outstanding shares of Common Stock into a greater number of
shares;
(c) combines
its outstanding shares of Common Stock into a smaller number of
shares;
(d) pays a
dividend or makes a distribution on its Common Stock in shares of its capital
stock other than Common Stock; or
(e) issues by
reclassification of its Common Stock any shares of its capital
stock;
then the
Holder of the unexercised Warrant shall thereafter be entitled to receive, upon
the exercise of such Warrant, the same shares of Common Stock and other
securities that they would have owned or been entitled to receive immediately
after such event as if this Warrant had been exercised immediately prior to such
event. The adjustment pursuant to this Section 8.1 shall be made
successively each time that any event listed in this Section 8.1 above
shall occur. Upon each adjustment in the number of shares for which a
Warrant is exercisable pursuant to this Section 8.1, the Exercise Price for
such Warrant shall be adjusted to equal an amount per share of Common Stock
equal to the Exercise Price before such adjustment multiplied by a fraction, of
which the numerator is the number of shares of Common Stock for which a Warrant
is exercisable immediately before giving effect to such adjustment, and the
denominator of which is the number of shares of Common Stock for which a Warrant
is exercisable immediately after giving effect to such adjustment.
6.2 Definition of Common
Stock. For the purpose of this Agreement, the term “Common Stock” shall mean (i)
the class of stock designated as Common Stock in the Certificate of
Incorporation of the Company as amended as of the date hereof, or (ii) any other
class of stock resulting from successive changes or reclassifications of such
Common Stock consisting solely of changes in par value, or from par value to no
par value, or from no par value to par value.
6.3 Merger or
Consolidation. In case of any consolidation of the Company
with, or merger 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 Common Stock), the corporation
formed by such consolidation or merger shall execute and deliver to the Holder a
supplemental warrant agreement providing that the holder of each Warrant then
outstanding or to be outstanding shall have the right thereafter (until the
expiration of such Warrant) to receive, upon exercise of such Warrant, the kind
and amount of shares of stock and other securities and property receivable upon
such consolidation or merger, by a holder of the number of shares of Common
Stock of the Company for which such Warrant might have been exercised
immediately prior to such consolidation, merger, sale or
transfer. Such supplemental warrant agreement shall provide for
adjustments which shall be identical to the adjustments provided in
Section 8. The above provision of this subsection shall
similarly apply to successive consolidations or mergers.
6.4 No Adjustment of Exercise
Price in Certain Cases. Notwithstanding anything to the
contrary herein, no adjustment of the Exercise Price or number of shares of
Common Stock shall be made if the Exercise Price would be less than the
$0.01.
6.5 Statement on
Certificate. Irrespective of any adjustments in the Exercise
Price or the number or kind of shares purchasable upon the exercise of this
Warrant, the certificates issued may continue to express the same price and
number and kind of shares as are stated in this Warrant initially issuable
pursuant to this Agreement.
7. Elimination of Fractional
Interests. The Company shall not be required to issue
fractional shares of Common Stock upon the exercise of
Warrant. Warrant may only be exercised in such multiples as are
required to permit the issuance by the Company of one or more whole shares of
Common Stock
8. Reservation of
Securities. The Company shall at all times reserve and keep
available out of its authorized shares of Common Stock, solely for the purpose
of issuance upon the exercise of this Warrant, such number of shares of Common
Stock or other securities, properties or rights as shall be issuable upon the
exercise thereof. The Company covenants and agrees that, upon
exercise of this Warrant and payment of the Exercise Price therefor, all shares
of Common Stock and other securities issuable upon such exercise shall be duly
and validly issued, fully paid, non-assessable and not subject to the preemptive
rights of any stockholder.
9. Notices. All
notices, requests, consents and other communications required or permitted
hereunder shall be given in accordance with that certain Stock Purchase
Agreement entered into by and between the Company and the Holder of even date
herewith (the “Stock Purchase
Agreement”).
10. Successors. All
the covenants and provisions of this Agreement shall be binding upon and inure
to the benefit of the Company, the Holder and their respective successors and
assigns hereunder.
11. Governing Law; Submission to
Jurisdiction. This Agreement and each Warrant Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Texas and for all purposes shall be construed in accordance with the
laws of such State without giving effect to the rules of such State governing
the conflicts of laws.
12. Entire Agreement;
Modification. This Agreement and the Stock Purchase Agreement
contains the entire understanding between the parties hereto with respect to the
subject matter hereof and may not be modified or amended except by a writing
duly signed by the party against whom enforcement of the modification or
amendment is sought.
13. Severability. If
any provision of this Agreement shall be held to be invalid or unenforceable,
such invalidity or unenforceability shall not affect any other provision of this
Agreement.
14. Captions. The
caption headings of the Sections of this Agreement are for convenience of
reference only and are not intended, nor shall they be construed as, a part of
this Agreement and shall be given no substantive effect.
15. Benefits of this
Agreement. Nothing in this Agreement shall be construed to
give to any person or corporation other than the Company and Holder and any
other registered holders of the Warrant Certificates or Shares any legal or
equitable right, remedy or claim under this Agreement; and this Agreement shall
be for the sole benefit of the Company and Holder and any other registered
holders of Warrant Certificates or Shares.
16. Counterparts. This
Agreement may be executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original, and such
counterparts shall together constitute but one and the same
instrument.
17. Representations and
Warranties. The Company represents and warrants as of the date
hereof as follows: (i) the Company and each of its material subsidiaries (a) is
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation or organization, (b) has all requisite
corporate or other power and authority to own its properties and carry on its
business as now being and as proposed to be conducted, and (c) is qualified to
do business in all jurisdictions in which the nature of its business or the
ownership of its assets makes such qualification necessary and where the failure
to be so qualified would have a material adverse effect; (ii) the Company has
the power and authority and legal right to execute, deliver and perform its
respective obligations under this Agreement; and (iii) the execution, delivery,
and performance by the Company of this Agreement and compliance with the terms
and provisions hereof has been duly authorized by all requisite corporate action
on the part of the Company and does not and will not violate or conflict with,
or result in a breach (whether through notice or lapse of time) of or require
any consent under the Certificate of Incorporation or bylaws of the Company or
any amendments to any of the foregoing.
18. Loss, Theft, Destruction or
Mutilation of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company shall execute and deliver, in lieu of this Warrant, a new Warrant
executed in the same manner as this Warrant and of like tenor and
amount.
19. Delays or
Omissions. No delay or omission to exercise any right, power,
or remedy accruing to the Holder, upon any breach or default of the Company
under this Warrant shall impair any such right, power, or remedy of the Holder
nor shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default therefore or thereafter
occurring. Any waiver, permit, consent, or approval of any kind or
character on the part of the Holder of any breach or default under this Warrant
or any waiver on the part of the Holder of any provisions or conditions of this
Warrant must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under
this Warrant or by law or otherwise afforded to the Holder, shall be cumulative
and not alternative.
[Signature
Page Follows]
AUS:619095.3
IN
WITNESS WHEREOF, the parties hereto have caused this Warrant to be duly
executed, as of the day and year first above written.
________________
By: X.
Xxxxxxx Xxxxxx
Its: CEO
and President
HOLDER
MDI
INVESTMENTS, LLC
_________________
By: _________________
Its:
_________________
AUS:619095.3
NOTICE OF
EXERCISE
TO: MDI,
Inc.
00000
Xxxxxxx Xxxx., Xxxxx 000
Xxx
Xxxxxxx, XX 00000
ATTN: Secretary
|
1.
|
The
undersigned hereby elects to purchase ______________ shares (the “Shares”)
of the Common Stock of MDI, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price in
full.
|
|
2.
|
Please
issue a certificate or certificates representing the Shares in the name of
the undersigned or in such other name as is specified
below:
|
(Print Name)
Address:
|
3.
|
The
undersigned confirms that the undersigned is an “accredited investor”, and
that the Shares are being acquired for the account of the undersigned for
investment only and not with a view to, or for resale in connection with,
the distribution thereof, and that the undersigned has no present
intention of distributing or selling the
Shares.
|
(Date)
By:
Name:Title:
AUS:619095.3
NOTICE OF
CONVERSION
TO: MDI,
Inc.
00000
Xxxxxxx Xxxx., Xxxxx 000
Xxx
Xxxxxxx, XX 00000
ATTN: Secretary
|
1.
|
The
undersigned hereby elects to convert the attached Warrant into __________
shares (the “Shares”)
of the Common Stock of MDI, Inc. pursuant to Section 1.2 of
such Warrant, which conversion shall be effected pursuant to the terms of
the attached Warrant.
|
|
2.
|
Please
issue a certificate or certificates representing the Shares in the name of
the undersigned or in such other name as is specified
below:
|
(Print Name)
Address:
|
3.
|
The
undersigned represents that the undersigned is an “accredited investor,”
and that the Shares are being acquired for the account of the undersigned
for investment and not with a view to, or for resale in connection with,
the distribution thereof, and that the undersigned has no present
intention of distributing or reselling such
shares.
|
(Date)
By:
Name:Title:
AUS:619095.3
