WARRANT AGREEMENT
SPONGETECH DELIVERY SYSTEMS, INC.
AND
OLDE MONMOUTH STOCK TRANSFER CO., INC.
WARRANT AGENT
June 11, 2003
WARRANT AGREEMENT
THIS AGREEMENT dated as of June 11, 2003, between Spongetech Delivery
Systems, Inc., (the "Company"), and Olde Monmouth Stock Transfer Group, Inc., a
securities transfer agency (the "Warrant Agent") (collectively, the "Parties"
and individually a "Party").
WHEREAS, the Company has sold 3,000,000 warrants under Rule 504 under
Section 3(b) to the Securities Act of 1933, as amended (the "1933 Act") to
Colebrook, Inc., divided into three classes: "X," "X" and "C" and
WHEREAS, the Company desires to provide for the issuance, registration,
transfer, exchange and exercise of the Warrants and for the exercise of the
Warrants.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and provisions
of the Warrants, and the respective rights and obligations thereunder of the
Company, the registered holders of the Warrant Certificates and the Warrant
Agent, the Parties agree as follows:
1. Definitions
-----------
As used herein:
(a) "Common Stock" shall mean common stock of the Company, whether now or
hereafter authorized, holders of which have the right to participate in the
distribution of earnings and assets of the Company without limit as to
amount or percentage;
(b) "Corporate Office" shall mean the place of business of the Warrant Agent
(or any successor) which office is presently located at 000 Xxxxxxxx
Xxxxxxx, Xxxxxxxx Xxxxxxxxx Xxx Xxxxxx 00000;
(d) "Exercise Date" shall mean the date of exercise of the Warrants;
(e) "Exercise Period" shall mean the period commencing the latter of the date
of effectiveness of a registration statement to be filed with the
Securities and Exchange Commission relating to the resale of the shares
underlying the Warrants by the Registered Owner (the "Registration
Statement") or the commencement of trading of the Company's shares of
common stock on a public exchange or market (the "Commencement Date") and
extending to and through the Expiration Date. Exercise of the Warrants
shall be suspended during any period in which the effectiveness of the
Registration Statement or trading of the underlying shares of common stock
is suspended;
(f) "Exercise Price" shall mean for Class "A" - $.50 per share; Class "B" -
$.75 per share; Class "C" - $1.00 per share;
(g) "Expiration Date" shall mean 5:00 P.M. Eastern Time for Class "A" - three
months from the Commencement Date; for Class "B" - six months from the
Commencement Date; and for Class "C" - nine months from the Commencement
Date;
(i) "Registered Owner" shall mean Colebrook, Inc.;
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(k) "Warrant Agent" shall mean Olde Monmouth Stock Transfer Co., Inc. or any
successor, as the transfer agent and registrar of the Warrants;
(l) "Warrant Shares" shall mean and include up to 3,000,000 authorized and
unissued shares of Common Stock reserved for issuance on exercise of the
Warrants, and unless otherwise noted, and any additional shares of Common
Stock or other property which may hereafter be issuable or deliverable on
exercise of the Warrants.
2. Warrants and Issuance of Warrant Certificates
---------------------------------------------
Each Warrant shall initially entitle the Registered Owner of a Warrant
Certificate representing Warrants to purchase one share of Common Stock on the
exercise of each Warrant, subject to modification and adjustment as hereinafter
provided. Warrant Certificates representing 3,000,000 Warrants and evidencing
the right to purchase an aggregate of 3,000,000 shares of Common Stock of the
Company shall be executed by the proper officers of the Company. The Warrant
Agent shall deliver Warrant Certificates in required whole number denominations
to the persons entitled thereto in connection with any transfer or exchange
permitted under this Agreement.
3. Form and Execution of Warrant Certificates
------------------------------------------
The Warrant Certificates, for Class "A," "B" and "C" warrants shall be
substantially in the form attached as Exhibit "A" and may have such letters,
numbers or other marks of identification and such legends, summaries or
endorsements printed, lithographed or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement.
The Warrant Certificates shall be dated as of the date of issuance, whether on
initial issuance, transfer, exchange or in lieu of mutilated, lost, stolen or
destroyed Warrant Certificates.
The Warrant Certificates shall be executed on behalf of the Company by its
duly authorized officers, by manual signatures or by facsimile signatures
printed thereon, and shall have imprinted thereon a facsimile of the Company's
seal. In the event the Warrant Certificates bear facsimile signatures of the
Company's officers, they shall also be manually countersigned by the Warrant
Agent and shall not be valid for any purpose unless so countersigned. In the
event any officer of the Company who executed the Warrant Certificates shall
cease to be an officer of the Company before the date of issuance of the Warrant
Certificates or before countersignature and delivery by the Warrant Agent, such
Warrant Certificates may be countersigned, issued and delivered by the Warrant
Agent with the same force and effect as though the person who signed such
Warrant Certificates had not ceased to be an officer of the Company.
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4. Exercise
--------
No issuance of Warrant Shares shall be made unless there is an effective
registration statement under the 1933 Act, and registration or qualification of
the Warrant Shares, or an exemption therefrom, has been obtained from state or
other regulatory authorities in the jurisdiction in which such Warrant Shares
are sold. The Company may be required to deliver a prospectus that satisfies the
requirements of the with delivery of the Warrant Shares and must have a
registration statement (or a post-effective amendment to an existing
registration statement) effective under the 1933 Act in order for the Company to
comply with any such prospectus delivery requirements. The Company will advise
the Warrant Agent of the status of any such registration statement under the
1933 Act and of the effectiveness of the Company's registration statement or
lapse of effectiveness. The Company will provide to the Warrant Agent written
confirmation of all such registration or qualification, or an exemption
therefrom, when requested by the Warrant Agent.
The exercise of Warrants in accordance with this Agreement shall only be
permitted during the Exercise Period.
Warrants shall be deemed to have been exercised immediately prior to the
close of business on the Exercise Date. The exercise form shall be executed by
the Registered Owner thereof or the Registered Owner's attorney duly authorized
in writing and shall be delivered together with payment to the Company in cash
or by official bank or certified check, of an amount in lawful money of the
United States of America. Such payment shall be in an amount equal to the
Exercise Price as hereinabove defined. The Company shall redeliver, as soon as
possible, the certificate representing the Warrant and exercise form to the
Warrant Agent.
The person entitled to receive the number of Warrant Shares deliverable on
such exercise shall be treated for all purposes as the Registered Owner of such
Warrant Shares as of the close of business on the Exercise Date. The Company
shall not be obligated to issue any fractional share interests in Warrant
Shares. If Warrants represented by more than one Warrant Certificate shall be
exercised at one time by the same Registered Owner, the number of full Warrant
Shares which shall be issuable on exercise thereof shall be computed on the
basis of the aggregate number of full Warrant Shares issuable on such exercise.
As soon as practicable on or after the Exercise Date, the Warrant Agent
shall cause to be issued and delivered to the person or persons entitled to
receive the same, a certificate or certificates for the number of Warrant Shares
deliverable on such exercise. No adjustment shall be made in respect of cash
dividends on Warrant Shares deliverable on exercise of any Warrant. The Warrant
Agent shall promptly notify the Company in writing of any exercise. The Warrant
Agent shall not deliver any Warrant Shares until it has received from the
Company in writing verification that the aggregate exercise price for the
Warrant Shares has been paid in full to the Company and has cleared. Following a
determination by the Warrant Agent that collected funds have been received, the
Warrant Agent shall issue share certificates representing the number of Warrant
Shares purchased by the Registered Owner.
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Expenses incurred by the Warrant Agent, including administrative costs, and
the standard fees imposed by the Warrant Agent for the Warrant Agent's services,
shall be paid by the Company and shall be deducted from the Escrow Account prior
to distribution of funds to the Company.
The Warrant Agent shall render to the Company, at the completion of the
Exercise Period, a complete accounting setting forth the number of Warrants
exercised, the identity of persons exercising such Warrants, the number of
Warrant Shares issued and all expenses incurred by the Warrant Agent.
5. Reservation of Shares and Payment of Taxes
------------------------------------------
The Company covenants that it will at all times reserve and have available
from its authorized shares of Common Stock such number of Warrant Shares as
shall then be issuable on exercise of all outstanding Warrants. The Company
covenants that all Warrant Shares issuable shall be duly and validly issued,
fully paid and non-assessable, and free from all taxes, liens and charges with
respect to the issue thereof.
6. Adjustment of Exercise Price and Shares
---------------------------------------
If at any time prior to the expiration of the Warrants by their terms or by
exercise, the Company increases or decreases the number of its issued and
outstanding shares of Common Stock, or changes in any way the rights and
privileges of such shares of Common Stock, the number of Warrants and the
exercise price of the Warrants will be adjusted accordingly.
7. Duties, Compensation and Termination of Warrant Agent
-----------------------------------------------------
The Warrant Agent shall act hereunder as agent and in a ministerial
capacity for the Company, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not, by issuing and delivering Stock
Certificates or by any other act hereunder, be deemed to make any
representations as to the validity, value or authorization of the Warrants
represented thereby or of the Warrant Shares or other property delivered on
exercise of any Warrant. The Warrant Agent shall not be under any duty or
responsibility to any holder of the Warrant Certificates to make or cause to be
made any adjustment of the Exercise Price or to determine whether any fact
exists which may require any such adjustment.
The Warrant Agent shall not (i) be liable for any recital or statement of
fact contained herein or for any action taken or omitted by it in reliance on
any Warrant Certificate or other document or instrument believed by it in good
faith to be genuine and to have been signed or presented by the proper Party or
Parties, (ii) be responsible for any failure on the part of the Company to
comply with any of its covenants and obligations contained in this Agreement or
in the Warrant Certificates, or (iii) be liable for any act or omission in
connection with this Agreement except for its own negligence or willful
misconduct.
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The Warrant Agent may at any time consult with counsel satisfactory to it
(who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken or omitted by it in good faith in accordance
with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order or demand of
the Company shall be sufficiently evidenced by an instrument signed by an
officer of the Company. The Warrant Agent shall not be liable for any action
taken or omitted by it in accordance with such notice, statement, instruction,
request, direction, order or demand.
The Company agrees to pay the Warrant Agent reasonable compensation for its
services hereunder and to reimburse the Warrant Agent for its reasonable
expenses. The Company further agrees to indemnify the Warrant Agent against any
and all losses, expenses and liabilities, including judgments, costs and counsel
fees, for any action taken or omitted by the Warrant Agent in the execution of
its duties and powers hereunder, excepting losses, expenses and liabilities
arising as a result of the Warrant Agent's negligence or willful misconduct.
The Warrant Agent may resign its duties or the Company may terminate the
Warrant Agent and the Warrant Agent shall be discharged from all further duties
and liabilities hereunder (except liabilities arising as a result of the Warrant
Agent's own negligence or willful misconduct) on 30 days' prior written notice
to the other Party. Upon notice by the Company to the Warrant Agent, the Warrant
Agent shall cause a copy of such notice of resignation to be mailed to the
Registered Owner. If the Company shall fail to make such appointment within a
period of 30 days after it has been notified in writing of the resignation by
the Warrant Agent, then the Registered Owner of any Warrant Certificate may
apply to any court of competent jurisdiction for the appointment of a new
Warrant Agent. Any new Warrant Agent shall have its principal office in the
United States.
8. Modification of Agreement
-------------------------
The Warrant Agent and the Company may by supplemental agreement make any
changes or corrections in this Agreement they shall deem appropriate to cure any
ambiguity or to correct any defective or inconsistent provision or mistake or
error herein contained. Additionally, the Parties may make any changes or
corrections deemed necessary which shall not adversely affect the interests of
the Registered Owner; provided, however, this Agreement shall not otherwise be
modified, supplemented or altered in any respect except with the consent in
writing of the Registered Owner of the Warrants. Additionally, no change in the
number or nature of the shares purchasable on exercise of a Warrant or the
Exercise Price therefor shall be made without the consent in writing of the
Registered Owner, other than such changes as are specifically prescribed by this
Agreement.
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9. Notices
-------
All notices, demands, elections, opinions or requests (however
characterized or described) required or authorized hereunder shall be deemed
given sufficiently in writing and sent by registered or certified mail, return
receipt requested and postage prepaid, or by tested telex, telegram or cable to:
in the case of the Company:
Spongetech Delivery Systems, Inc.
Sunset Industrial Park
00 00xx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
and in the case of the Warrant Agent:
Olde Monmouth Stock Transfer Co., Inc.
000 Xxxxxxxx Xxxxxxx
Xxxxxxxx Xxxxxxxxx, Xxx Xxxxxx 00000
and, if requested by the Company to the Registered Owner of a Warrant
Certificate, at the address of such Registered Owner as set forth on the books
maintained by the Warrant Agent.
10. Persons Benefiting
------------------
This Agreement shall be binding upon and inure to the benefit of the
Company, the Warrant Agent and their respective successors and assigns, and the
Registered Owners and beneficial owners from time to time of the Warrant
Certificates. Nothing in this Agreement is intended or shall be construed to
confer on any other person any right, remedy or claim or to impose on any other
person any duty, liability or obligation.
11. Further Instruments
-------------------
The Parties shall execute and deliver any and all such other instruments
and shall take any and all such other actions as may be reasonable or necessary
to carry out the intention of this Agreement.
12. Severability
------------
If any provision of this Agreement shall be held, declared or pronounced
void, voidable, invalid, unenforceable or inoperative for any reason by any
court of competent jurisdiction, government authority or otherwise, such
holding, declaration or pronouncement shall not affect adversely any other
provision of this Agreement, which shall otherwise remain in full force and
effect and be enforced in accordance with its terms, and the effect of such
holding, declaration or pronouncement shall be limited to the territory or
jurisdiction in which made.
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13. Waiver
------
All the rights and remedies of either Party under this Agreement are
cumulative and not exclusive of any other rights and remedies as provided by
law. No delay or failure on the part of either Party in the exercise of any
right or remedy arising from a breach of this Agreement shall operate as a
waiver of any subsequent right or remedy arising from a subsequent breach of
this Agreement. The consent of any Party where required hereunder to any act or
occurrence shall not be deemed to be a consent to any other action or
occurrence.
14. General Provisions
------------------
This Agreement shall be construed and enforced in accordance with, and
governed by, the local laws of the State of New Jersey. Except as otherwise
expressly stated herein, time is of the essence in performing hereunder. This
Agreement embodies the entire agreement and understanding between the Parties
and supersedes all prior agreements and understandings relating to the subject
matter hereof, and this Agreement may not be modified or amended or any term or
provision hereof waived or discharged except in writing signed by the Party
against whom such amendment, modification, waiver or discharge is sought to be
enforced. The headings of this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning thereof. This Agreement may
be executed in any number of counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed as of the date first above stated.
THE COMPANY:
SPONGETECH DELIVERY SYSTEMS, INC.
By: /s/Xxxxxxx Xxxxxx
-----------------------
Name: Xxxxxxx Xxxxxx
Title: President
THE WARRANT AGENT:
OLDE MONMOUTH STOCK TRANSFER CO., INC.
By: /s/Xxxxx Xxxxxxx
----------------------
Name: Xxxxx Xxxxxxx
Title: President
Agreed to as of the date first above written:
COLEBROOK, INC.
Registered Owner
By: /s/Xxxxxx Xxxxxx
------------------------
Xxxxxx Xxxxxx
President
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