[LETTERHEAD OF XXXXXX XXXXXXX XXXXX XXXXXXXXX XXXXXXXXX & XXXXXXXX]
January 16, 1998
VIA Fax 000-000-0000 AND UPS OVERNIGHT
Xx. Xxxxxxx Xxxxxxxxx
Fidelity Holdings, Inc.
00-00 Xxx Xxxxxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Re: Fidelity/Major Xxxxxx
Dear Xxxxxxx:
In accordance with your request, enclosed herewith please find a copy of
the October 2, 1996 Warrant Agreement by and between Fidelity Holdings, Inc. and
Xxxxx Xxxxxxx and Xxxxxx Xxxxxxx. It is also my understanding that you are in
search of a copy of an amendment to this Warrant Agreement allegedly dated
October 11, 1997. Please be advised that I do not have nor do I believe I have
ever seen a draft or executed copy of such amendment.
If I may be of any further assistance, please do not hesitate to contact
me. Thank you.
Very truly yours,
/s/ XXXXXXXX X. XXXXXXXXX
-------------------------------
XXXXXXXX X. XXXXXXXXX
cc: Xxxxxx X. Xxxxx, Esquire
WARRANT AGREEMENT
THIS WARRANT AGREEMENT, made this 2nd day of October, 1996, by and
between:
FIDELITY HOLDINGS, INC., a Nevada corporation with its principal office
located at 000-00 Xxxxx Xxxxxxxx, Xxxxxxxx, Xxx Xxxx 00000, (hereinafter
referred to as the "COMPANY").
AND
XXXXX XXXXXXX and XXXXXX XXXXXXX, THE REGISTERED HOLDERS of the COMPANY's
1996-MAJOR warrants covered hereby (and their registered assigns), from time to
time, from the date of original issue of such warrants to the expiration date
thereof (hereinafter referred to as the "INVESTORS", "HOLDER" and/or "HOLDERS"
as the context may require).
WITNESSETH THAT:
WHEREAS, the COMPANY has entered into a certain Management Agreement of
even date with the INVESTORS, in which such, Management Agreement the COMPANY
has agreed, in consideration of the execution of such Agreement by the
INVESTORS, to issue and deliver Stock Purchase Warrants (hereinafter called the
"WARRANTS") to the INVESTORS entitling the HOLDERS thereof to purchase up to an
aggregate of Two Hundred Fifty Thousand (250,000) shares of the Common Stock of
the COMPANY (hereinafter called the "Shares"); and
WHEREAS, the COMPANY desires to provide for the form and provisions of the
WARRANTS, the terms upon which they shall be issued and exercised, and the
respective rights, limitation of rights, and immunities of the COMPANY and the
HOLDERS; and
WHEREAS, all acts and things necessary to make the WARRANTS, when executed
on behalf of the COMPANY, the valid, binding, and legal obligations of the
COMPANY, have been done and performed; and
WHEREAS, all acts and things necessary to authorize the execution and
delivery of this Warrant Agreement, and to execute and deliver the WARRANTS to
the INVESTORS as the original registered HOLDERS, have been done and performed;
NOW, THEREFORE, intending to be legally bound hereby, and intending the
original registered HOLDERS and their successors and assigns to rely hereon, the
COMPANY hereby represents and agrees, and the HOLDERS by acceptance of the
WARRANTS impliedly agree, as follows:
1. WARRANTS AUTHORIZED. COMPANY hereby authorizes the issuance to the
INVESTORS of Two Hundred Fifty Thousand (250,000) WARRANTS upon the terms and
conditions of this Warrant Agreement. The WARRANTS shall be called the
1996-MAJOR Warrants and, subject to sub-paragraph 5(b) below, shall be
exercisable after January 1, 1997 and until 5:00 P.M. E.D.T. on the day which is
six (6) months after the declaration of effectiveness of the Company's
Registration Statement registering the shares to be acquired upon exercise of
this Warrant, at an exercise price of $1.25 per share of Common Stock.
2. FORM AND EXECUTION. Each WARRANT, whenever issued: (a) shall be in
substantially the form attached hereto as Exhibit A; (b) shall be dated as of
the date of issuance, which shall be the same date as this Warrant Agreement;
(c) shall entitle the HOLDER to purchase the number of Shares stated thereon;
(d) shall be signed by the President or Vice President and the Secretary or
Treasurer of the COMPANY; (e) and shall have the COMPANY'S seal impressed
thereon. The COMPANY may adopt and use the facsimile signature of any person who
is a requisite officer of the COMPANY at the time such WARRANTS are executed, or
of any person now or hereafter holding such office, notwithstanding the fact
that at the time a WARRANT is issued he had ceased to be such officer of the
COMPANY.
3. WARRANT ISSUANCE AND ISSUANCE CONSIDERATION. These WARRANTS are being
hereby issued to the INVESTORS as the original registered HOLDERS, such
INVESTORS having entered into a certain Management Agreement with the COMPANY.
The consideration for the issuance of the WARRANTS is the execution of such
Agreement. The INVESTORS are acquiring these WARRANTS in a private transaction
for their own investment, purposes and not with a view to transfer, resale or
distribution of such WARRANTS or the underlying Common Stock.
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4. WARRANT EXERCISE PRICE. Each WARRANT shall entitle the registered
HOLDER thereof, subject to the provisions thereof and of this Warrant Agreement,
to purchase from the COMPANY the number of Shares of the COMPANY's Common Stock
as stated thereon, at the price of One Dollar and Twenty-five Cents ($1.25) per
Share, both the number of Shares and the price being subject to the
anti-dilution adjustments provided in Paragraph 8 hereof. The term "Warrant
Exercise Price" as used in this Warrant Agreement refers to the price per Share
at which Common Stock may be purchased at the time a WARRANT is exercised.
5. DURATION (Term). (a) Subject to sub-paragraph (b) following, the
1996-MAJOR Warrants may be exercised at any time between January 1, 1997 and the
close of business (5:00 P.M. Eastern Daylight Time) on the day which is six (6)
months after the declaration of effectiveness of the Company's Registration
Statement registering the shares to be acquired upon exercise of this Warrant,
such date being hereinafter called the "Expiration Date". Each WARRANT not
exercised on or before its Expiration Date shall become void, and all rights
thereunder and all rights in respect thereof under this Warrant Agreement shall
cease at the close of business on the respective Expiration Date. The COMPANY
reserves the right to extend the Expiration Date of the WARRANTS, from time to
time, any number of times, but shall be under no obligation to do so.
(b) The 1996-MAJOR Warrants shall terminate prior to the Expiration Date
in the event that there is an uncured material breach of the Management
Agreement, as provided therein.
6. TRANSFER AND/OR EXCHANGE OF WARRANTS. On or after the date of issuance
and prior to the Expiration Date, any HOLDER of any WARRANT, subject to the
transfer restrictions of federal and state securities laws, at any time prior to
the exercise thereof, may transfer all or any portion of the stock purchase
rights provided in the WARRANT. Upon presentation and surrender to the Warrant
Agent of the WARRANT, properly assigned, accompanied by appropriate transfer
instructions from the HOLDER, the Warrant Agent shall issue a WARRANT for the
assigned number of shares to the assignee as the new registered HOLDER and shall
issue a WARRANT for the unassigned balance of the shares to the assigning (old)
registered HOLDER. Any HOLDER of any WARRANT or WARRANTS, at any
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time prior to the exercise thereof, may exchange such WARRANT or WARRANTS for a
WARRANT or WARRANTS of like tenor exercisable for the same aggregate number of
Common Shares as the WARRANT surrendered; i.e., consolidate or divide his
holdings. The Warrant Agent is the COMPANY's Transfer Agent, Olde Monmouth Stock
Transfer Co., 00 Xxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxx Xxxxxxxxx, Xxx Xxxxxx
00000. The COMPANY shall give notice to the registered HOLDERS of WARRANTS of
any change in the address of, or in the designation of, its Warrant Agent.
7. EXERCISE. (a) Except as otherwise provided in sub-paragraph (f) below,
a WARRANT shall be exercisable only by the registered HOLDER surrendering it,
together with the subscription form set forth in the WARRANT duly executed,
accompanied by payment, in full, in lawful money of the United States, of the
Warrant Exercise Price for each full Share as to which the WARRANT is exercised,
to the Warrant Agent. The Warrant Agent is the COMPANY's Transfer Agent, Olde
Monmouth Stock Transfer Co., 00 Xxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxx Xxxxxxxxx,
Xxx Xxxxxx 00000. The COMPANY shall give notice to the registered HOLDERS of
WARRANTS of any change in the address of, or in the designation of, its Warrant
Agent.
(b) A WARRANT may be exercised wholly or in part. If a WARRANT is only
exercised in part, a new WARRANT for the number of Shares as to which the
WARRANT shall not have been exercised shall be issued to the registered HOLDER.
(c) As soon as practicable after the exercise of any WARRANT, the COMPANY
shall issue to or upon the order of the registered HOLDER a certificate or
certificates for the number of full Shares which he is entitled, registered in
such name or names as may be directed by him.
(d) All Shares issued upon exercise of a WARRANT shall be validly issued,
fully paid, and non-assessable. The COMPANY shall pay all taxes in respect of
the issue thereof. However, the registered HOLDER shall pay all taxes imposed in
connection with any transfer, even if involved in an issue of a certificate, and
the COMPANY shall not be required to issue or deliver any stock certificate in
such case until the tax shall have been paid.
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(e) Each person in whose name any such certificate for Shares is issued
shall for all purposes be deemed to have become the holder of record of such
shares on the date on which the WARRANT was surrendered and payment of the
Warrant Exercise Price and applicable taxes was made, irrespective of the date
of delivery of such certificate, except that, if the date of such surrender and
payment is a date when the stock transfer books of the COMPANY are closed, the
person or persons entitled to receive Shares upon such exercise shall be
considered the record holder or holders of such shares at the close of business
on the next succeeding date on which the stock transfer books are open and shall
be entitled to receive only dividends or distributions which are payable to
holders of record after that date.
8. SHARE DIVIDENDS, RECLASSIFICATION, REORGANIZATION, ANTI-DILUTION
PROVISIONS. Each WARRANT is subject to the following further provisions:
(a) In case, prior to the expiration of a WARRANT by exercise or by its
terms, the COMPANY shall issue any of its Common Stock as a share dividend or
subdivide the number of outstanding shares of Common Stock into a greater number
of shares, then, in either of such cases, the Purchase Price per share of the
Shares purchasable pursuant to a WARRANT in effect at the time of such action
shall be proportionately reduced and the number of Shares at the time
purchasable pursuant to a WARRANT shall be proportionately increased; and
conversely, in the event the COMPANY shall contract the number of outstanding
shares of Common Stock by combining such shares into a smaller number of shares,
then, in such case, the Purchase Price per share of the Shares purchasable
pursuant to a WARRANT in effect at the time of such action shall be
proportionately increased and the number of Shares at the time purchasable
pursuant to a WARRANT shall be proportionately decreased. If the COMPANY shall,
at any time during the life of a WARRANT, declare a dividend payable in cash on
its Common Stock and shall at substantially the same time offer to its
stockholders a right to purchase new Common Stock from the proceeds of such
dividend or for an amount substantially equal to the dividend, all shares of
Common Stock so issued shall, for the purpose of a WARRANT, be deemed to have
been issued as a share dividend. Any dividend paid or distributed upon the
Common Stock in shares of any
5
other class or securities convertible into Common Stock shall be treated as a
dividend paid in shares of Common Stock to the extent that shares of Common
Stock are issuable upon the conversion thereof.
(b) In case, prior to the expiration of a WARRANT by exercise or by its
terms, the COMPANY shall be recapitalized, or the COMPANY or a successor
corporation shall consolidate or merge with or convey all or substantially all
of its or of any successor corporation's property and assets to any other
corporation or corporations (any such corporation being included within the
meaning of the term "successor corporation, hereinbefore used in the event of
any consolidation or merger of any such corporation with, or the sale of all or
substantially all of the property of any such corporation to, another
corporation or corporations), the holder of a WARRANT shall thereafter have the
right to purchase, upon the basis and on the terms and conditions and during the
time specified in a WARRANT in lieu of the Shares of the COMPANY theretofore
purchasable, upon the exercise of a WARRANT, such shares, securities or assets
as may be issued or payable with respect to, or in exchange for, the number of
Shares of the COMPANY theretofore purchasable upon the exercise of a WARRANT had
such recapitalization, consolidation, merger or conveyance not taken place; and
in any such event, the rights of the holder, of a WARRANT to an adjustment in
the number of Shares purchasable upon the exercise of a WARRANT as herein
provided shall continue and be preserved in respect of any shares, securities,
or assets which the holder of a WARRANT becomes entitled to purchase.
(c) In case:
(i) the COMPANY shall take a record of the holders of its Common
Shares for the purpose of entitling them to receive a dividend
payable otherwise than in cash, or any other distribution in
respect of the Common Shares (including cash), pursuant to,
without limitation, any spin-off, split-off, or distribution
of the COMPANY's assets; or
(ii) the COMPANY shall take a record of the holders
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of its Common Shares for the purpose of entitling them to
subscribe for or purchase any shares of any class or to
receive any other rights; or
(iii) of any classification, reclassification, or other
reorganization of the shares which the COMPANY is authorized
to issue, consolidation or merger of the COMPANY with or into
another corporation, or conveyance of all or substantially all
of the assets of the COMPANY; or
(iv) of the voluntary or involuntary dissolution, liquidation, or
winding up of the COMPANY;
then, and in any such case, the COMPANY shall mail to the holder of a WARRANT,
at least 21 days prior thereto, a notice stating the date or expected date on
which a record is to be taken for the purpose of such dividend, distribution, or
rights, or the date on which such classification reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation, or
winding up is to take place, as the case may be. Such notice shall also specify
the date or expected date, if any is to be fixed, as of which holders of Common
Stock of record shall be entitled to participate in such dividend, distribution,
or rights, or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such classification, reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation, or
winding up, as the case may be.
(d) In case the COMPANY at any time while a WARRANT shall remains
unexpired and unexercised shall sell all or substantially all of its property or
dissolve, liquidate, or wind up its affairs, the holder of a WARRANT may
thereafter receive upon exercise hereof in lieu of each Share which it would
have been entitled to receive the same kind and amount of any securities or
assets as may be issuable, distributable, or payable upon such sale,
dissolution, liquidation, or winding up with respect to each Share.
(e) The COMPANY plans to make an offering of convertible debentures or
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convertible preferred stock or such other security which may be convertible into
Common Stock or carry warrants for the purchase of shares of common Stock. The
parties agree that this warrant issuance is related to such proposed offering(s)
and no adjustments (as described in this Section 8) shall be made to any of the
the WARRANTS on account of any such offering(s), for a period of twenty-four
(24) months from the date of the issuance of the first warrant subject to this
warrant agreement or until and unless the number of shares of COMPANY's Common
Stock outstanding exceeds twelve million (12,000,000) shares. After such 24
month period, or at any time that the outstanding Common Stock of the COMPANY
exceeds 12,000,000 shares if earlier than 24 months, then the provisions of
Section 8 hereinabove shall have full force and effect on the WARRANTS.
9. RESERVATION OF SHARES ISSUABLE ON EXERCISE OF WARRANTS. The COMPANY
shall at all times reserve and keep available out of its authorized shares
solely for issuance upon the exercise of all WARRANTS issued hereunder, such
number of Common Shares and other shares as from time to time shall be issuable
upon the exercise of a WARRANT and all other similar WARRANTS at the time
outstanding.
10. LOSS, THEFT, DESTRUCTION OR MUTILATION. Upon receipt by the COMPANY of
evidence satisfactory to it, (in the exercise of its reasonable discretion), of
the ownership of and the loss, theft, destruction, or mutilation of a WARRANT,
and (in the case of loss, theft, or destruction) of indemnity satisfactory to it
(in the case of mutilation) upon surrender and cancellation thereof, the COMPANY
will execute and deliver, in lieu thereof, a new WARRANT for like tenor.
11. WARRANT HOLDER NOT A SHAREHOLDER. The HOLDER of a WARRANT, as such,
shall not be entitled by reason of a WARRANT to any rights whatsoever of a
stockholder of the COMPANY. No HOLDER of any WARRANT shall be entitled to
receive any dividend or to vote with respect to any dividend declared or the
taking of a register of stockholders entitled to vote with a Record Date prior
to the date of exercise of the WARRANTS.
12. NOTICES. All notices and other communications from the COMPANY to the
HOLDER of a WARRANT shall be mailed by first-class
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registered mail, postage prepaid, to the address furnished to the COMPANY in
writing by the HOLDER of a WARRANT.
IN WITNESS WHEREOF, intending to be legally bound, the COMPANY has
executed this Warrant Agreement:
Dated: October 2, 1996
FIDELITY HOLDINGS, INC.
ATTEST
By: /s/
----------------------------
President
/s/ Xxxxxxx X. Xxx
----------------------
Secretary
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