AMENDED AND RESTATED STOCK PURCHASE WARRANT
This Warrant is issued as of this 30th day of September, 1997, by
CONSUMAT ENVIRONMENTAL SYSTEMS, INC., a Virginia corporation (formerly
Reorganized Consumat Systems, Inc.) (the "Company"), to SIRROM INVESTMENTS,
INC., a Tennessee corporation (Sirrom Investments, Inc. and any subsequent
assignee or transferee hereof are hereinafter referred to collectively as
"Holder" or "Holders")
WITNESSETH:
WHEREAS, the Company and Sirrom Investments, Inc. entered into a Stock
Purchase Warrant dated July 17, 1997 (the "Original Warrant"); and
WHEREAS, this Warrant shall amend, restate and supercede the Original
Warrant.
AGREEMENT:
1. Issuance of Warrant; Term. For and in consideration of the Holder
making a loan to the Company in an amount of Five Hundred Thousand and no/l00ths
Dollars ($500,000) pursuant to the terms of a Secured Promissory Note of even
date herewith (the "Note") and the Loan Agreement dated as of March 12, 1996
(the "Loan Agreement"), and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company hereby grants to
Holder the right to purchase 66,379 shares of the Company's common stock (the
"Common Stock"), which the Company represents equals approximately 5% of the
capital stock of the Company on the date hereof, calculated on a fully diluted
basis after exercise. The shares of Common Stock issuable upon exercise of this
Warrant are hereinafter referred to as the "Shares." This Warrant shall be
exercisable only if the indebtedness evidenced by the Note is outstanding on
July 16, 1998, and shall be exercisable at any time and from time to time on and
after July 16, 1998 until April 30, 2001. For purposes of this Warrant the term
"fully diluted basis" shall be determined in accordance with generally accepted
accounting principles as of the date hereof.
2. Exercise Price. The exercise price (the "Exercise Price") per share
for which all or any of the Shares may be purchased pursuant to the terms of
this Warrant shall be Two Dollars and Twenty-five cents ($2.25)
3. Exercise. This Warrant may be exercised by the Holder hereof (but
only on the conditions hereinafter set forth) as to all or any increment or
increments of One Hundred (100) Shares (or the balance of the Shares if less
than such number), upon
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delivery of written notice of intent to exercise to the Company at the following
address: 0000 Xxxx Xxxx, Xxxxxxxxxxxxxx, Xxxxxxxx 00000 or X.X. Xxx 0000,
Xxxxxxxx, Xxxxxxxx 00000, or such other address as the Company shall designate
in a written notice to the Holder hereof, together with this Warrant and payment
to the Company of the aggregate Exercise Price of the Shares so purchased. The
Exercise Price shall be payable, at the option of the Holder, (i) by certified
or bank check, (ii) by the surrender of the Note or portion thereof having an
outstanding principal balance equal to the aggregate Exercise Price or (iii) by
the surrender of a portion of this Warrant having a fair market value equal to
the aggregate Exercise Price. Upon exercise of this Warrant as aforesaid, the
Company shall as promptly as practicable, and in any event within fifteen (15)
days thereafter, execute and deliver to the Holder of this Warrant a certificate
or certificates for the total number of whole Shares for which this Warrant is
being exercised in such names and denominations as are requested by such Holder.
If this Warrant shall be exercised with respect to less than all of the Shares,
the Holder shall be entitled to receive a new Warrant covering the number of
Shares in respect of which this Warrant shall not have been exercised, which new
Warrant shall in all other respects be identical to this Warrant. The Company
covenants and agrees that it will pay when due any and all state and federal
issue taxes which may be payable in respect of the issuance of this Warrant or
the issuance of any Shares upon exercise of this Warrant.
4. Covenants and Conditions. The above provisions are subject to the
following:
(a) Neither this Warrant nor the Shares have been registered
under the Securities Act of 1933, as amended ("Securities Act") or any
state securities laws ("Blue Sky Laws") . This Warrant has been
acquired for investment purposes and not with a view to distribution or
resale and may not be pledged, hypothecated, sold, made subject to a
security interest, or otherwise transferred without (i) an effective
registration statement for such Warrant under the Securities Act and
such applicable Blue Sky Laws, or (ii) an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to the Company and
its counsel, that registration is not required under the Securities Act
or under any applicable Blue Sky Laws (the Company hereby acknowledges
that Bass, Xxxxx & Xxxx is acceptable counsel) Transfer of the shares
issued upon the exercise of this Warrant shall be restricted in the
same manner and to the same extent as the Warrant and the certificates
representing such Shares shall bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF
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1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE
SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL (I) A
REGISTRATION STATEMENT UNDER THE ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME
EFFECTIVE WITH REGARD THERETO, OR (II) IN THE OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION
UNDER SUCH SECURITIES ACTS OR SUCH APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH
SUCH PROPOSED TRANSFER.
The Holder hereof and the Company agree to execute such other documents and
instruments as counsel for the Company reasonably deems necessary to effect the
compliance of the issuance of this Warrant and any shares of Common Stock issued
upon exercise hereof with applicable federal and state securities laws.
(b) The Company covenants and agrees that all Shares which may
be issued upon exercise of this Warrant will, upon issuance and payment
therefor, be legally and validly issued and outstanding, fully paid and
nonassessable, free from all taxes, liens, charges and preemptive
rights, if any, with respect thereto or to the issuance thereof. The
Company shall at all times reserve and keep available for issuance upon
the exercise of this Warrant such number of authorized but unissued
shares of Common Stock as will be sufficient to permit the exercise in
full of this Warrant.
(c) The Company covenants and agrees that it shall not sell
any shares of the Company's capital stock at a price below the fair
market value of such shares, without the prior written consent of the
Holder hereof. In the event that the Company sells 3hares of the
Company's capital stock in violation of this Section 4(c), the number
of shares issuable upon exercise of this Warrant shall be equal to the
product obtained by multiplying the number of shares issuable pursuant
to this Warrant prior to such sale by the quotient obtained by dividing
(i) the fair market value of the shares issued in violation of this
Section 4(c) by (ii) the price at which such shares were sold.
5. Transfer of Warrant. Subject to the provisions of Section 4 hereof,
this Warrant may be transferred, in whole or in part, to any person or business
entity, by presentation of the Warrant to the Company with written instructions
for such transfer. Upon such presentation for transfer, the Company shall
promptly execute and deliver a new Warrant or Warrants in the form hereof in the
name of the assignee or assignees and in the denominations specified in such
instructions. The Company shall pay all expenses incurred by it in connection
with the preparation, issuance and delivery of Warrants under this Section.
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6. Warrant Holder Not Shareholder; Rights Offering; Preemptive Rights;
Preference Rights. Except as otherwise provided herein, this Warrant does not
confer upon the Holder, as such, any right whatsoever as a shareholder of the
Company. Notwithstanding the foregoing, if the Company should offer to all of
the Company's shareholders the right to purchase any securities of the Company,
then all shares of Common Stock that are subject to this Warrant shall be deemed
to be outstanding and owned by the Holder and the Holder shall be entitled to
participate in such rights offering. The Company shall not grant any preemptive
rights with respect to any of its capital stock without the prior written
consent of the Holder. The Company shall not issue any securities which entitle
the holder thereof to obtain any preference over holders of Common Stock upon
the dissolution, liquidation, winding-up, sale, merger, or reorganization of the
Company without the prior written consent of the Holder.
7. Observation Rights. The Holder of this Warrant shall (a) receive
notice of and be entitled to attend or may send a representative to attend all
meetings of the Company's Board of Directors in a non-voting observation
capacity, (b) receive copies of all notices, packages and documents provided to
members of the Company's Board of Directors for each board of directors meeting,
and (c) receive copies of all actions taken by written consent by the Company's
Board of Directors, from the date hereof until such time as the indebtedness
evidenced by the Note has been paid in full.
8. Adjustment Upon Changes in Stock.
(a) If all or any portion of this Warrant shall be exercised
subsequent to any stock split, stock dividend, recapitalization,
combination of shares of the Company, or other similar event, occurring
after the date hereof, then the Holder exercising this Warrant shall
receive, for the aggregate price paid upon such exercise, the aggregate
number and class of shares which such Holder would have received if
this Warrant had been exercised immediately prior to such stock split,
stock dividend, recapitalization, combination of shares, or other
similar event. If any adjustment under this Section 8(a) would create a
fractional share of Common Stock or a right to acquire a fractional
share of Common Stock, such fractional share shall be disregarded and
the number of shares subject to this Warrant shall be the next higher
number of shares, rounding all fractions upward. Whenever there shall
be an adjustment pursuant to this Section 8 (a), the Company shall
forthwith notify the Holder or Holders of this Warrant of such
adjustment, setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated.
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(b) If all or any portion of this Warrant shall be exercised
subsequent to any merger, consolidation, exchange of shares,
separation, reorganization or liquidation of the Company, or other
similar event, occurring after the date hereof, as a result of which
shares of Common Stock shall be changed into the same or a different
number of shares of the same or another class or classes of securities
of the Company or another entity, then the Holder exercising this
Warrant shall receive, for the aggregate price paid upon such exercise,
the aggregate number and class of shares which such Holder would have
received if this Warrant had been exercised immediately prior to such
merger, consolidation, exchange of shares, separation, reorganization
or liquidation, or other similar event. If any adjustment under this
Section 8(b) would create a fractional share of Common Stock or a right
to acquire a fractional share of Common Stock, such fractional share
shall be disregarded and the number of shares subject to this Warrant
shall be the next higher number of shares, rounding all fractions
upward. Whenever there shall be an adjustment pursuant to this Section
8(b), the Company shall forthwith notify the Holder or Holders of this
Warrant of such adjustment, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment
was calculated.
9. Put Agreement.
(a) The Company hereby irrevocably grants and issues to Holder
the right and option to sell to the Company (the "Put") this Warrant
for a period of 30 days immediately prior to the expiration thereof, at
a purchase price (the "Purchase Price") equal to the Fair Market Value
(as hereinafter defined) of the shares of Common Stock issuable to
Holder upon exercise of this Warrant.
(b) The Company shall pay to the Holder, in cash or certified
or cashier's check, the Purchase Price in exchange for the delivery to
the Company of this Warrant within thirty (30) days of the receipt of
written notice, addressed as set forth in Section 3 hereto, from the
Holder of its intention to exercise the Put.
(c) The Fair Market Value of the shares of Common Stock of the
Company issuable pursuant to this Warrant shall be the average trading
price of shares of Common Stock during the week preceding the date of
purchase or if the Common Stock is not publicly traded at such time
shall be determined as follows:
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(i) The Company and the Holder shall each appoint an
independent, experienced appraiser who is a member of a
recognized professional association of business appraisers.
The two appraisers shall determine the value of the shares of
Common Stock which would be issued upon the exercise of the
Warrant, taking into consideration that such shares would
constitute a minority interest, and would lack liquidity, and
further assuming that the sale would be between a willing
buyer and a willing seller, both of whom have full knowledge
of the financial and other affairs of the Company, and neither
of whom is under any compulsion to sell or to buy.
(ii) If the highest of the two appraisals is not more
than 10% more than the lowest of the appraisals, the Fair
Market Value shall be the average of the two appraisals. If
the highest of the two appraisals is 10% or more than the
lowest of the two appraisals, then a third appraiser shall be
appointed by the two appraisers, and if they cannot agree on a
third appraiser, the American Arbitration Association shall
appoint the third appraiser. The third appraiser, regardless
of who appoints him or her, shall have the same qualifications
as the first two appraisers.
(iii) The Fair Market Value after the appointment of
the third appraiser shall be the mean of the three appraisals.
(iv) The fees and expenses of the appraisers shall be
paid one-half by the Company and one-half by the Holder.
10. Registration.
(a) The Company and the holders of the Shares agree that if at
any time after the date hereof the Company shall propose to file a
registration statement with respect to any of its Common Stock on a
form suitable for a secondary offering, it will give notice in writing
to such effect to the registered holder(s) of the Shares at least
thirty (30) days prior to such filing, and, at the written request of
any such registered holder, made within ten (10) days after the receipt
of such notice, will include therein at the Company's cost and expense
(including the fees and expenses of counsel to such holder(s), but
excluding underwriting discounts, commissions and filing fees
attributable to the Shares included therein) such of the Shares as such
holder(s) shall request; provided, however, that if the offering being
registered by the Company is underwritten and if the representative of
the underwriters certifies in writing that the inclusion therein of the
Shares would
6
materially and adversely affect the sale of the securities to be sold
by the Company thereunder, then the Company shall be required to
include in the offering only that number of securities, including the
Shares, which the underwriters determine in their sole discretion will
not jeopardize the success of the offering (the securities so included
to be apportioned pro rata among all selling shareholders according to
the total amount of securities entitled to be included therein owned
by each selling shareholder, but in no event shall the total number of
Shares included in the offering be less than the number of securities
included in the offering by any other single selling shareholder).
(b) Whenever required under this Agreement to use its best
efforts to effect the registration of any of the Shares, the Company
shall, as expeditiously as reasonably possible:
(i) Prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement
covering such Shares and use its best efforts to cause such
registration statement to be declared effective by the
Commission as expeditiously as possible and to keep such
registration effective until the earlier of (A) the date when
all Shares covered by the registration statement have been
sold or (B) two hundred seventy (270) days from the effective
date of the registration statement; provided, that before
filing a registration statement or prospectus or any amendment
or supplements thereto, the Company will furnish to each
Holder of Shares covered by such registration statement and
the underwriters, if any, copies of all such documents
proposed to be filed (excluding exhibits, unless any such
person shall specifically request exhibits), which documents
will be subject to the review of such Holders and
underwriters, and the Company will not file such registration
statement or any amendment thereto or any prospectus or any
supplement thereto (including any documents incorporated by
reference therein) with the Commission if (A) the
underwriters, if any, shall reasonably object to such filing
or (B) if information in such registration statement or
prospectus concerning a particular selling Holder has changed
and such Holder or the underwriters, if any, shall reasonably
object.
(ii) Prepare and file with the Commission such
amendments and post-effective amendments to such registration
statement as may be necessary to keep such registration
statement effective during the period referred to in Section
10(b) (i) and to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered
by such
7
registration statement, and cause the prospectus to be
supplemented by any required prospectus supplement, and as so
supplemented to be filed with the Commission pursuant to Rule
424 under the Securities Act.
(iii) Furnish to the selling Holder(s) such numbers
of copies of such registration statement, each amendment
thereto, the prospectus included in such registration
statement (including each preliminary prospectus), each
supplement thereto and such other documents as they may
reasonably request in order to facilitate the disposition of
the Shares owned by them.
(iv) Use its best efforts to register and qualify
under such other securities laws of such jurisdictions as
shall be reasonably requested by any selling Holder and do any
and all other acts and things which may be reasonably
necessary or advisable to enable such selling Holder to
consummate the disposition of the Shares owned by such Holder,
in such jurisdictions; provided, however, that the Company
shall not be required in connection therewith or as a
condition thereto to qualify to transact business or to file a
general consent to service of process in any such states or
jurisdictions.
(v) Promptly notify each selling Holder of the
happening of any event as a result of which the prospectus
included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to
make the statements therein not misleading and, at the request
of any such Holder, the Company will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered
to the purchasers of such Shares, such prospectus will not
contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not
misleading.
(vi) Provide a transfer agent and registrar for all
such Shares not later than the effective date of such
registration statement.
(vii) Enter into such customary agreements (including
underwriting agreements in customary form for a primary
offering) and take all such other actions as the underwriters,
if any, reasonably request in order to expedite or facilitate
the disposition of such Shares (including, without limitation,
effecting a stock split or a combination of shares)
(viii) Make available for inspection by any selling
Holder or any underwriter participating in any
8
disposition pursuant to such registration statement and any
attorney, accountant or other agent retained by any such
selling Holder or underwriter, all financial and other
records, pertinent corporate documents and properties of the
Company, and cause the officers, directors, employees and
independent accountants of the Company to supply all
information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with
such registration statement.
(ix) Promptly notify the selling Holder(s) and the
underwriters, if any, of the following events and (if
requested by any such person) confirm such notification in
writing: (A) the filing of the prospectus or any prospectus
supplement and the registration statement and any amendment or
post-effective amendment thereto and, with respect to the
registration statement or any post-effective amendment
thereto, the declaration of the effectiveness of such
documents, (B) any requests by the Commission for amendments
or supplements to the registration statement or the prospectus
or for additional information, (C) the issuance or threat of
issuance by the Commission of any stop order suspending the
effectiveness of the registration statement or the initiation
of any proceedings for that purpose, and (D) the receipt by
the Company of any notification with respect to the suspension
of the qualification of the Shares for sale in any
jurisdiction or the initiation or threat of initiation of any
proceeding for such purposes.
(x) Make every reasonable effort to prevent the entry
of any order suspending the effectiveness of the registration
statement and obtain at the earliest possible moment the
withdrawal of any such order, if entered.
(xi) Cooperate with the selling Holder(s) and the
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing the Shares to be sold
and not bearing any restrictive legends, and enable such
Shares to be in such lots and registered in such names as the
underwriters may request at least two (2) business days prior
to any delivery of the Shares to the underwriters.
(xii) Provide a CUSIP number for all the Shares not
later than the effective date of the registration statement.
(xiii) Prior to the effectiveness of the registration
statement and any post-effective amendment
9
thereto and at each closing of an underwritten offering, (A)
make such representations and warranties to the selling
Holder(s) and the underwriters, if any, with respect to the
Shares and the registration statement as are customarily made
by issuers in primary underwritten offerings; (B) use its best
efforts to obtain "cold comfort" letters and updates thereof
from the Company's independent certified public accountants
addressed to the selling Holders and the underwriters, if any,
such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters by
underwriters in connection with primary underwritten
offerings; (C) deliver such documents and certificates as may
be reasonably requested (1) by the holders of a majority of
the Shares being sold, and (2) by the underwriters, if any, to
evidence compliance with clause (A) above and with any
customary conditions contained in the underwriting agreement
or other agreement entered into by the Company; and (D) obtain
opinions of counsel to the Company and updates thereof (which
counsel and which opinions shall be reasonably satisfactory to
the underwriters, if any), covering the matters customarily
covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by the
selling Holders and underwriters or their counsel. Such
counsel shall also state that no facts have come to the
attention of such counsel which cause them to believe that
such registration statement, the prospectus contained therein,
or any amendment or supplement thereto, as of their respective
effective or issue dates, contains any untrue statement of any
material fact or omits to state any material fact necessary to
make the statements therein not misleading (except that no
statement need be made with respect to any financial
statements, notes thereto or other financial data or other
expertized material contained therein) . If for any reason the
Company's counsel is unable to give such opinion, the Company
shall so notify the Holders of the Shares and shall use its
best efforts to remove expeditiously all impediments to the
rendering of such opinion.
(xiv) Otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and
make generally available to its security holders earnings
statements satisfying the provisions of Section 11(a) of the
Securities Act, no later than forty-five (45) days after the
end of any twelve-month period (or ninety (90) days, if such
period is a fiscal year) (A) commencing at the end of any
fiscal quarter in which the Shares are sold to underwriters in
a firm or best efforts underwritten
10
offering, or (B) if not sold to underwriters in such an
offering, beginning with the first month of the first fiscal
quarter of the Company commencing after the effective date of
the registration statement, which statements shall cover such
twelve-month periods.
(c) After the date hereof, the Company shall not grant to any
holder of securities of the Company any registration rights which have
a priority greater than or equal to those granted to Holders pursuant
to this Warrant without the prior written consent of the Holder(s).
(d) The Company's obligations under Section 10(a) above with
respect to each holder of Shares are expressly conditioned upon such
holder's furnishing to the Company in writing such information
concerning such holder and the terms of such holder's proposed offering
as the Company shall reasonably request for inclusion in the
registration statement. If any registration statement including any of
the Shares is filed, then the Company shall indemnify each holder
thereof (and each underwriter for such holder and each person, if any,
who controls such underwriter within the meaning of the Securities Act)
from any loss, claim, damage or liability arising out of, based upon or
in any way relating to any untrue statement of a material fact
contained in such registration statement or any omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except for any such
statement or omission based on information furnished in writing by such
holder of the Shares expressly for use in connection with such
registration statement; and such holder shall indemnify the Company
(and each of its officers and directors who has signed such
registration statement, each director, each person, if any, who
controls the Company within the meaning of the Securities Act, each
underwriter for the Company and each person, if any, who controls such
underwriter within the meaning of the Securities Act) and each other
such holder against any loss, claim, damage or liability arising from
any such statement or omission which was made in reliance upon
information furnished in writing to the Company by such holder of the
Shares expressly for use in connection with such registration
statement.
(e) For purposes of this Section 10, all of the Shares shall
be deemed to be issued and outstanding.
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11. Certain Notices. In case at any time the Company shall propose to:
(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in
stock or make any special dividend or other distribution to the holders
of its Common Stock;
(c) offer for subscription to the holders of any of its Common
Stock any additional shares of stock in any class or other rights;
(d) reorganize1 or reclassify the capital stock of the
Company, or consolidate, merge or otherwise combine with, or sell all
or substantially all of its assets to, another corporation; or
(e) voluntarily or involuntarily dissolve, liquidate or wind
up the affairs of the Company;
then, in any one or more of said cases, the Company shall give to the Holder of
the Warrant, by certified or registered mail, (i) at least twenty (20) days'
prior written notice of the date on which the books of the Company shall close
or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, and (ii) in the case of such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place. Any notice required by clause (i) shall also specify, in the case of any
such dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto, and any notice required by
clause (ii) shall specify the date on which the holders of Common Stock 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.
12. Severability. If any provision(s) of this Warrant or
the application thereof to any person or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Warrant and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
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13. Counterparts. This Warrant may be executed in any number of
counterparts and be different parties to this Warrant in separate counterparts,
each of 'which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same Warrant.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
date first above written.
CONSUMAT ENVIRONMENTAL SYSTEMS,
INC., a Virginia corporation
By: /s/ Xxxxxx X. Xxxxxx
Title: President & CEO
SIRROM INVESTMENTS, INC., a
Tennessee corporation
By: /s/ Xxxx X. Xxxxxxxx
Title: VP
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