Contract
THIS
AMENDED AND RESTATED COMMON STOCK PURCHASE WARRANT AMENDS AND RESTATES THE
COMMON STOCK PURCHASE WARRANT ORIGINALLY ISSUED PURSUANT TO THE SECURITIES
PURCHASE AGREEMENT, DATED AS OF MARCH 5, 2008, BY AND BETWEEN BLUE HOLDINGS,
INC., A NEVADA CORPORATION, AND THE PURCHASER NAMED THEREIN.
NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS
SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED
BY
SUCH SECURITIES.
AMENDED
AND RESTATED
| Warrant Shares: 2,187,500 | Issue Date: March 5, 2008 |
THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”)
certifies that, for value received, GEMINI MASTER FUND, LTD. (the “Holder”)
is
entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the Issue Date (as
defined above) and on or prior to the close of business on the fifth
(5th)
anniversary of the Issue Date (the “Termination
Date”)
but
not thereafter, to subscribe for and purchase from Blue Holdings, Inc., a Nevada
corporation (the “Company”),
up to
2,187,500 shares (the “Warrant
Shares”)
of
Common Stock. The purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price, as defined in Section 2(b).
Section
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have the meanings
set forth in that certain Securities Purchase Agreement (the “Purchase
Agreement”),
dated
March 5, 2008, among the Company and the purchasers signatory
thereto.
1
Section
2. Exercise.
a) Exercise
of Warrant.
Exercise of the purchase rights represented by this Warrant may be made, in
whole or in part, at any time and from time to time on or after the Issue Date
and on or before the Termination Date by delivery to the Company of a duly
executed facsimile copy of the Notice of Exercise Form (“Notice
of Exercise”)
annexed hereto (or such other office or agency of the Company as it may
designate by notice in writing to the registered Holder at the address of the
Holder appearing on the books of the Company); and, within 3 Trading Days of
the
date said Notice of Exercise is delivered to the Company, the Company shall
have
received payment of the aggregate Exercise Price of the shares thereby purchased
by wire transfer or cashier’s check drawn on a United States bank, unless
payment is being made by cashless exercise as provided in Section 2(c) below.
Notwithstanding anything herein to the contrary, the Holder shall not be
required to physically surrender this Warrant to the Company until the Holder
has purchased all of the Warrant Shares available hereunder and the Warrant
has
been exercised in full, in which case the Holder shall surrender this Warrant
to
the Company for cancellation within 3 Trading Days of the date the final Notice
of Exercise is delivered to the Company. Partial exercises of this Warrant
resulting in purchases of a portion of the total number of Warrant Shares
available hereunder shall have the effect of lowering the outstanding number
of
Warrant Shares purchasable hereunder in an amount equal to the applicable number
of Warrant Shares purchased. The Holder and the Company shall maintain records
showing the number of Warrant Shares purchased and the date of such purchases.
In the event of any dispute or discrepancy, the records of the Company shall
be
controlling and determinative in the absence of manifest error. The Holder
and
any assignee, by acceptance of this Warrant, acknowledge and agree that, by
reason of the provisions of this paragraph, following the purchase of a portion
of the Warrant Shares hereunder, the number of Warrant Shares available for
purchase hereunder at any given time may be less than the amount stated on
the
face hereof.
b) Exercise
Price.
The
exercise price per share of the Common Stock under this Warrant shall be $0.40,
subject to adjustment hereunder (the “Exercise
Price”).
c) Cashless
Exercise.
This
Warrant may also be exercised by means of a “cashless exercise” in which the
Holder shall be entitled to receive a certificate for the number of Warrant
Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A),
where:
(A)
= the
VWAP on the Trading Day immediately preceding the date of such
election;
(B)
= the
Exercise Price of this Warrant, as adjusted; and
(X)
= the
number of Warrant Shares issuable upon exercise of this Warrant in accordance
with the terms of this Warrant by means of a cash exercise rather than a
cashless exercise.
Notwithstanding
anything herein to the contrary, on the Termination Date, this Warrant shall
be
automatically exercised via cashless exercise pursuant to this Section
2(c).
2
d) Holder’s
Restrictions.
The
Company shall not effect any exercise of this Warrant, and a Holder shall not
have the right to exercise any portion of this Warrant, pursuant to Section
2 or
otherwise, to the extent that after giving effect to such issuance after
exercise as set forth on the applicable Notice of Exercise, the Holder (together
with the Holder’s Affiliates, and any other person or entity acting as a group
together with the Holder or any of the Holder’s Affiliates), would beneficially
own in excess of the Beneficial Ownership Limitation (as defined below).
For purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates shall include the number
of
shares of Common Stock issuable upon exercise of this Warrant with respect
to
which such determination is being made, but shall exclude the number of shares
of Common Stock which would be issuable upon (A) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by the Holder or any
of
its Affiliates and (B) exercise or conversion of the unexercised or nonconverted
portion of any other securities of the Company (including, without limitation,
any other Common Stock Equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially owned by
the
Holder or any of its Affiliates. Except as set forth in the preceding
sentence, for purposes of this Section 2(d), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder, it being acknowledged by the Holder
that
the Company is not representing to the Holder that such calculation is in
compliance with Section 13(d) of the Exchange Act and the Holder is solely
responsible for any schedules required to be filed in accordance therewith.
To
the extent that the limitation contained in this Section 2(d) applies, the
determination of whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates) and of which
portion of this Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed to be the
Holder’s determination of whether this Warrant is exercisable (in relation to
other securities owned by the Holder together with any Affiliates) and of which
portion of this Warrant is exercisable, in each case subject to the Beneficial
Ownership Limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination. In addition, a determination as
to
any group status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. For purposes of this Section 2(d), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company’s most recent
periodic or annual report, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Company’s Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of a Holder, the Company
shall within three Trading Days confirm orally and in writing to the Holder
the
number of shares of Common Stock then outstanding. In any case, the number
of outstanding shares of Common Stock shall be determined after giving effect
to
the conversion or exercise of securities of the Company, including this Warrant,
by the Holder or its Affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. The “Beneficial
Ownership Limitation”
shall
be 4.9% of the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant. By written notice to the Company, the Holder may
at
any time and from time to time increase or decrease the Beneficial Ownership
Limitation to any other percentage specified in such notice (or specify that
the
Beneficial Ownership Limitation shall no longer be applicable), provided,
however, that (A) any such increase (or inapplicability) shall not be effective
until the sixty-first (61st) day after such notice is delivered to the Company,
and (B) any such increase or decrease shall apply only to the Holder and not
to
any other holder of Warrants. The provisions of this paragraph shall be
construed and implemented in a manner otherwise than in strict conformity with
the terms of this Section 2(d) to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements necessary or
desirable to properly give effect to such limitation. The limitations contained
in this paragraph shall apply to a successor holder of this
Warrant.
3
e) Mechanics
of Exercise.
i. Delivery
of Certificates Upon Exercise.
Certificates for shares purchased hereunder shall be transmitted by the transfer
agent of the Company to the Holder by crediting the account of the Holder’s
prime broker with the Depository Trust Company (“DTC”)
through its Deposit Withdrawal Agent Commission (“DWAC”)
system
if the Company is a participant in such system and either (x) there is an
effective Registration Statement permitting the resale of the Warrant Shares
by
the Holder, or (y) such shares may be sold pursuant to Rule 144, and otherwise
by physical delivery to the address specified by the Holder in the Notice of
Exercise, within 3 Trading Days from the delivery to the Company of the Notice
of Exercise, surrender of this Warrant (if required) and payment of the
aggregate Exercise Price as set forth above (“Warrant
Share Delivery Date”).
This
Warrant shall be deemed to have been exercised on the date the Exercise Price
is
received by the Company. The Warrant Shares shall be deemed to have been issued,
and the Holder or any other person so designated to be named therein shall
be
deemed to have become a holder of record of such shares for all purposes, as
of
the date the Warrant has been exercised by payment to the Company of the
Exercise Price (or by cashless exercise) and all taxes required to be paid
by
the Holder, if any, pursuant to Section 2(e)(vi) prior to the issuance of such
shares, have been paid. If the Company fails for any reason to deliver to the
Holder the Warrant Shares or certificates evidencing the Warrant Shares subject
to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall
pay to the Holder, in cash, as liquidated damages and not as a penalty, for
each
$1,000 of Warrant Shares subject to such exercise (based on the VWAP of the
Common Stock on the date of the applicable Notice of Exercise), $10 per Trading
Day (increasing to $17.50 per Trading Day on the fifth Trading Day after such
liquidated damages begin to accrue) for each Trading Day after such Warrant
Share Delivery Date until such shares or certificates are delivered.
ii. Delivery
of New Warrants Upon Exercise.
If this
Warrant shall have been exercised in part, the Company shall, at the request
of
a Holder and upon surrender of this Warrant, at the time of delivery of the
certificate or certificates representing Warrant Shares, deliver to the Holder
a
new Warrant evidencing the rights of the Holder to purchase the unpurchased
Warrant Shares called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant.
4
iii. Rescission
Rights.
If the
Company fails to cause its transfer agent to transmit to the Holder a
certificate or certificates representing the Warrant Shares (or otherwise
transmit such shares via DWAC to the Holder’s DTC account) pursuant to this
Section 2(e) by the Warrant Share Delivery Date, then the Holder will have
the
right to rescind such exercise.
iv. Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon
Exercise.
In
addition to any other rights available to the Holder, if the Company fails
to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Shares (or otherwise transmit such shares via DWAC
to
the Holder’s DTC account) pursuant to an exercise on or before the Warrant Share
Delivery Date, and if after such date the Holder is required by its broker
to
purchase (in an open market transaction or otherwise) or the Holder’s brokerage
firm otherwise purchases, shares of Common Stock to deliver in satisfaction
of a
sale by the Holder of the Warrant Shares which the Holder anticipated receiving
upon such exercise (a “Buy-In”),
then
the Company shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of Warrant Shares that the Company was required
to
deliver to the Holder in connection with the exercise at issue times (B) the
price at which the sell order giving rise to such purchase obligation was
executed, and (2) at the option of the Holder, either reinstate the portion
of
the Warrant and equivalent number of Warrant Shares for which such exercise
was
not honored or deliver to the Holder the number of shares of Common Stock that
would have been issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect
to
an attempted exercise of shares of Common Stock with an aggregate sale price
giving rise to such purchase obligation of $10,000, under clause (1) of the
immediately preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In and, upon request of
the
Company, evidence of the amount of such loss. Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver the
Warrant Shares or certificates representing shares of Common Stock upon exercise
of the Warrant as required pursuant to the terms hereof.
v. No
Fractional Shares or Scrip.
No
fractional shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant. As to any fraction of a share which the Holder
would otherwise be entitled to purchase upon such exercise, the Company shall
at
its election, either pay a cash adjustment in respect of such final fraction
in
an amount equal to such fraction multiplied by the Exercise Price or round
up to
the next whole share.
5
vi. Charges,
Taxes and Expenses.
Issuance of certificates for Warrant Shares shall be made without charge to
the
Holder for any issue or transfer tax or other incidental expense in respect
of
the issuance of such certificate, all of which taxes and expenses shall be
paid
by the Company, and such certificates shall be issued in the name of the Holder
or in such name or names as may be directed by the Holder; provided,
however,
that in
the event certificates for Warrant Shares are to be issued in a name other
than
the name of the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the Holder;
and the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.
vii. Closing
of Books.
The
Company will not close its stockholder books or records in any manner which
prevents the timely exercise of this Warrant, pursuant to the terms
hereof.
Section
3. Certain
Adjustments.
a) Stock
Dividends and Splits.
If the
Company, at any time while this Warrant is outstanding: (A) pays a stock
dividend or otherwise makes a distribution or distributions on shares of its
Common Stock or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company upon exercise of this Warrant),
(B)
subdivides outstanding shares of Common Stock into a larger number of shares,
(C) combines (including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares, or (D) issues by reclassification
of shares of the Common Stock any shares of capital stock of the Company, then
in each case the Exercise Price shall be multiplied by a fraction of which
the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event and the number of shares issuable upon exercise
of
this Warrant shall be proportionately adjusted such that the aggregate Exercise
Price of this Warrant shall remain unchanged. Any adjustment made pursuant
to
this Section 3(a) shall become effective immediately after the record date
for
the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date
in
the case of a subdivision, combination or re-classification.
b) Subsequent
Equity Sales.
If the
Company or any Subsidiary thereof, as applicable, at any time while this Warrant
is outstanding, shall sell or grant any option to purchase, or sell or grant
any
right to reprice, or otherwise dispose of or issue (or announce any offer,
sale,
grant or any option to purchase or other disposition) any Common Stock or Common
Stock Equivalents entitling any Person to acquire shares of Common Stock, at
an
effective price per share less than the then Exercise Price (such issuances
collectively, a “Dilutive
Issuance”)
(if
the holder of the Common Stock or Common Stock Equivalents so issued shall
at
any time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which are issued in connection with such
issuance, be entitled to receive shares of Common Stock at an effective price
per share which is less than the Exercise Price, such issuance shall be deemed
to have occurred for less than the Exercise Price on such date of the Dilutive
Issuance), then the Exercise Price shall be reduced and only reduced to equal
an
amount (“Adjusted Price”) determined by multiplying the Exercise Price then in
effect by a fraction (a) the numerator of which shall be the sum of (1) the
number of shares of Common Stock outstanding immediately prior to such issue
or
sale, plus (2) the number of shares of Common Stock which the aggregate
consideration received by the Company for such additional shares would purchase
at such Exercise Price, and (b) the denominator of which shall be the number
of
shares of Common Stock of the Company outstanding immediately after such issue
or sale, and the number of Warrant Shares issuable hereunder shall be increased
such that the aggregate Exercise Price payable hereunder, after taking into
account the decrease in the Exercise Price, shall be equal to the aggregate
Exercise Price prior to such adjustment. Such adjustment shall be made whenever
such Common Stock or Common Stock Equivalents are issued. Notwithstanding the
foregoing, no adjustments shall be made, paid or issued under this Section
3(b)
in respect of an Exempt Issuance or
in the
event that such adjustment will result in the issuance of more than 42,000,000
shares of Common Stock (as appropriately and equitably adjusted for stock
splits, stock dividends and similar events) when
aggregated with any shares of Common Stock issued on or after the Issue Date
and
prior to the Termination Date (A) in connection with the conversion of any
Notes
issued pursuant to the Purchase Agreement or as payment of principal, interest
or liquidated damages, (B) in connection with the exercise of any Warrants
issued pursuant to the Purchase Agreement, including this Warrant, and (C)
in
connection with any warrants issued to any registered broker-dealer as a fee
in
connection with the issuance of the Securities pursuant to the Purchase
Agreement. The Company shall notify the Holder in writing, no later than the
third (3rd)
Trading
Day following the issuance of any Common Stock or Common Stock Equivalents
subject to this Section 3(b), indicating therein the applicable issuance price,
or applicable reset price, exchange price, conversion price and other pricing
terms (such notice the “Dilutive
Issuance Notice”).
For
purposes of clarification, whether or not the Company provides a Dilutive
Issuance Notice pursuant to this Section 3(b), upon the occurrence of any
Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
entitled to receive a number of Warrant Shares based upon the Adjusted Price
regardless of whether the Holder accurately refers to the Adjusted Price in
the
Notice of Exercise.
6
c) Subsequent
Rights Offerings.
If the
Company, at any time while the Warrant is outstanding, shall issue rights,
options or warrants to all holders of Common Stock (and not to Holders in their
capacity as holders of Warrants) entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the VWAP at the record
date mentioned below, then the Exercise Price shall be multiplied by a fraction,
of which the denominator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of additional shares of Common Stock offered for subscription or purchase,
and
of which the numerator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares
issued (assuming receipt by the Company in full of all consideration payable
upon exercise of such rights, options or warrants) would purchase at such VWAP.
Such adjustment shall be made whenever such rights or warrants are issued,
and
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such rights, options or warrants.
7
d) Pro
Rata Distributions.
If the
Company, at any time while this Warrant is outstanding, shall distribute to
all
holders of Common Stock (and not to Holders in their capacity as holders of
Warrants) evidences of its indebtedness or assets (including cash and cash
dividends) or rights or warrants to subscribe for or purchase any security
other
than the Common Stock (which shall be subject to Section 3(b)), then in each
such case the Exercise Price shall be adjusted by multiplying the Exercise
Price
in effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the
denominator shall be the VWAP determined as of the record date mentioned above,
and of which the numerator shall be such VWAP on such record date less the
then
per share fair market value at such record date of the portion of such assets
or
evidence of indebtedness so distributed applicable to one outstanding share
of
the Common Stock as determined by the Board of Directors in good faith. In
either case the adjustments shall be described in a statement provided to the
Holder of the portion of assets or evidences of indebtedness so distributed
or
such subscription rights applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
e) Fundamental
Transaction.
If, at
any time while this Warrant is outstanding, (A) the Company effects any merger
or consolidation of the Company with or into another Person, (B) the Company
effects any sale of all or substantially all of its assets in one or a series
of
related transactions, (C) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other securities,
cash or property, or (D) the Company effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(each a “Fundamental
Transaction”),
then,
upon any subsequent exercise of this Warrant, the Holder shall have the right
to
receive, for each Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental Transaction, the number
of shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional consideration
(the “Alternate
Consideration”)
receivable as a result of such merger, consolidation or disposition of assets
by
a holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such event. For purposes of any such exercise,
the determination of the Exercise Price shall be appropriately adjusted to
apply
to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the
Alternate Consideration in a reasonable manner reflecting the relative value
of
any different components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holder shall be given the same choice
as
to the Alternate Consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction. To the extent necessary to effectuate
the foregoing provisions, any successor to the Company or surviving entity
in
such Fundamental Transaction shall issue to the Holder a new warrant consistent
with the foregoing provisions and evidencing the Holder’s right to exercise such
warrant into Alternate Consideration. The terms of any agreement pursuant to
which a Fundamental Transaction is effected shall include terms requiring any
such successor or surviving entity to comply with the provisions of this Section
3(e) and insuring that this Warrant (or any such replacement security) will
be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction. Notwithstanding anything to the contrary, in the event of a
Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3
transaction” as defined in Rule 13e-3 under the Securities Exchange Act of 1934,
as amended, or (3) a Fundamental Transaction involving a person or entity not
traded on a national securities exchange, the Nasdaq Global Select Market,
the
Nasdaq Global Market, the Nasdaq Capital Market or the OTC Bulletin Board,
the
Company or any successor entity shall pay at the Holder’s option, exercisable at
any time concurrently with or within 30 days after the consummation of the
Fundamental Transaction, an amount of cash equal to the value of this Warrant
as
determined in accordance with the Black Scholes Option Pricing Model obtained
from the “OV” function on Bloomberg L.P. using (i) a price per share of Common
Stock equal to the VWAP of the Common Stock for the Trading Day immediately
preceding the date of consummation of the applicable Fundamental Transaction,
(ii) a risk-free interest rate corresponding to the U.S. Treasury rate for
a
period equal to the remaining term of this Warrant as of the date of
consummation of the applicable Fundamental Transaction and (iii) an expected
volatility equal to the 100 day volatility obtained from the “HVT” function on
Bloomberg L.P. determined as of the Trading Day immediately following the public
announcement of the applicable Fundamental Transaction.
8
f) Calculations.
All
calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of this Section
3,
the number of shares of Common Stock deemed to be issued and outstanding as
of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.
g) Voluntary
Adjustment By Company.
The
Company may at any time during the term of this Warrant reduce the then current
Exercise Price to any amount and for any period of time deemed appropriate
by
the Board of Directors of the Company.
h) Notice
to Holder.
i. Adjustment
to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to any provision of this
Section 3, the Company shall promptly mail to the Holder a notice setting forth
the Exercise Price after such adjustment and setting forth a brief statement
of
the facts requiring such adjustment. If the Company enters into a Variable
Rate
Transaction (as defined in the Purchase Agreement), despite the prohibition
thereon in the Purchase Agreement, the Company shall be deemed to have issued
Common Stock or Common Stock Equivalents at the lowest possible conversion
or
exercise price at which such securities may be converted or exercised.
ii. Notice
to Allow Exercise by Holder.
If (A)
the Company shall declare a dividend (or any other distribution in whatever
form) on the Common Stock; (B) the Company shall declare a special nonrecurring
cash dividend on or a redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock rights or warrants
to
subscribe for or purchase any shares of capital stock of any class or of any
rights; (D) the approval of any stockholders of the Company shall be required
in
connection with any reclassification of the Common Stock, any consolidation
or
merger to which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, of any compulsory share exchange
whereby the Common Stock is converted into other securities, cash or property;
(E) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company; then, in each case,
the
Company shall cause to be mailed to the Holder at its last address as it shall
appear upon the Warrant Register of the Company, at least 20 calendar days
prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not
to
be taken, the date as of which the holders of the Common Stock of record to
be
entitled to such dividend, distributions, redemption, rights or warrants are
to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. The Holder is entitled to exercise this Warrant during the
period commencing on the date of such notice to the effective date of the event
triggering such notice.
9
Section
4. Transfer
of Warrant.
a) Transferability.
Subject
to compliance with any applicable securities laws and the conditions set forth
in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase
Agreement, this Warrant and all rights hereunder (including, without limitation,
any registration rights) are transferable, in whole or in part, upon surrender
of this Warrant at the principal office of the Company or its designated agent,
together with a written assignment of this Warrant substantially in the form
attached hereto duly executed by the Holder or its agent or attorney and funds
sufficient to pay any transfer taxes payable upon the making of such transfer.
Upon such surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination or denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the portion
of this Warrant not so assigned, and this Warrant shall promptly be cancelled.
A
Warrant, if properly assigned, may be exercised by a new holder for the purchase
of Warrant Shares without having a new Warrant issued.
10
b) New
Warrants.
This
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney. Subject to compliance with
Section 4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants
in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice. All Warrants issued on transfers or exchanges shall be dated
the original Issue Date and shall be identical with this Warrant except as
to
the number of Warrant Shares issuable pursuant thereto.
c) Warrant
Register.
The
Company shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant
Register”),
in
the name of the record Holder hereof from time to time. The Company may deem
and
treat the registered Holder of this Warrant as the absolute owner hereof for
the
purpose of any exercise hereof or any distribution to the Holder, and for all
other purposes, absent actual notice to the contrary.
d) Transfer
Restrictions.
If,
at the
time
of
the surrender of this Warrant in connection with any transfer of this Warrant,
the transfer of this Warrant shall not be registered pursuant to an effective
registration
statement under the Securities Act
and
under
applicable state securities or blue sky laws or eligible for resale under Rule
144, the Company may require, as a condition of allowing such transfer, that
the
Holder or transferee of this Warrant, as the case may be, comply
with the provisions of Section 5.7 of, and provide or otherwise agree to the
representations, warranties and covenants applicable to the “Purchasers” as set
forth in, the Purchase Agreement.
Section
5. Miscellaneous.
a) No
Rights as Shareholder Until Exercise.
This
Warrant does not entitle the Holder to any voting rights or other rights as
a
shareholder of the Company prior to the exercise hereof as set forth in Section
2(e)(i).
b) Loss,
Theft, Destruction or Mutilation of Warrant.
The
Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
or any stock certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it
(which, in the case of the Warrant, shall not include the posting of any bond),
and upon surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate
of like tenor and dated as of such cancellation, in lieu of such Warrant or
stock certificate.
c) Saturdays,
Sundays, Holidays, etc.
If the
last or appointed day for the taking of any action or the expiration of any
right required or granted herein shall not be a Business Day, then such action
may be taken or such right may be exercised on the next succeeding Business
Day.
11
d) Authorized
Shares.
The
Company covenants that during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise
of
any purchase rights under this Warrant. The Company further covenants that
its
issuance of this Warrant shall constitute full authority to its officers who
are
charged with the duty of executing stock certificates to execute and issue
the
necessary certificates for the Warrant Shares upon the exercise of the purchase
rights under this Warrant. The Company will take all such reasonable action
as
may be necessary to assure that such Warrant Shares may be issued as provided
herein without violation of any applicable law or regulation, or of any
requirements of the Trading Market upon which the Common Stock may be listed.
The Company covenants that all Warrant Shares which may be issued upon the
exercise of the purchase rights represented by this Warrant will, upon exercise
of the purchase rights represented by this Warrant, be duly authorized, validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
created by the Company in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the Company shall
not
by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of
this
Warrant, but will at all times in good faith assist in the carrying out of
all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of the Holder as set forth in this Warrant
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase
in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this
Warrant.
Before
taking any action which would result in an adjustment in the number of Warrant
Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof. Notwithstanding anything herein to the contrary, if the
Company has not obtained Shareholder Approval, then the Company may not issue,
upon exercise of this Warrant, a number of shares of Common Stock which, when
aggregated with any shares of Common Stock issued on or after the Issue Date
and
prior to the Termination Date (A) in connection with the conversion of any
Notes
issued pursuant to the Purchase Agreement or as payment of principal, interest
or liquidated damages, (B) in connection with the exercise of any Warrants
issued pursuant to the Purchase Agreement, including this Warrant, and (C)
in
connection with any warrants issued to any registered broker-dealer as a fee
in
connection with the issuance of the Securities pursuant to the Purchase
Agreement, would exceed 19.99% of the number of shares of Common Stock
outstanding on the Trading Day immediately preceding the date of the Purchase
Agreement (subject to adjustment for forward and reverse stock splits,
recapitalizations and the like) (such number of shares, the “Issuable
Maximum”).
Each
Holder shall be entitled to a portion of the Issuable Maximum equal to the
quotient obtained by dividing (x) the original principal amount of the Holder’s
Note by (y) the aggregate original principal amount of all Notes issued under
the Purchase Agreement to all Holders. In addition, each Holder may allocate
its
pro-rata portion of the Issuable Maximum among Notes and Warrants held by it
in
its sole discretion. Such portion shall be adjusted upward ratably in the event
a Holder no longer holds any Notes or Warrants and the amount of shares issued
to the Holder pursuant to the Holder’s Notes and Warrants was less than the
Holder’s pro-rata share of the Issuable Maximum. .
12
e) Jurisdiction.
All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be determined in accordance with the provisions of the
Purchase Agreement.
f) Restrictions.
The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this
Warrant, if not registered, will have restrictions upon resale imposed by state
and federal securities laws.
g) Nonwaiver
and Expenses.
No
course of dealing or any delay or failure to exercise any right hereunder on
the
part of the Holder shall operate as a waiver of such right or otherwise
prejudice the Holder’s rights, powers or remedies, notwithstanding the fact that
all rights hereunder terminate on the Termination Date. If the Company willfully
and knowingly fails to comply with any provision of this Warrant, which results
in any material damages to the Holder, the Company shall pay to the Holder
such
amounts as shall be sufficient to cover any costs and expenses including, but
not limited to, reasonable attorneys’ fees, including those of appellate
proceedings, incurred by the Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
h) Notices.
Any
notice, request or other document required or permitted to be given or delivered
to the Holder by the Company shall be delivered in accordance with the notice
provisions of the Purchase Agreement.
i) Limitation
of Liability.
No
provision hereof, in the absence of any affirmative action by the Holder to
exercise this Warrant to purchase Warrant Shares, and no enumeration herein
of
the rights or privileges of the Holder, shall give rise to any liability of
the
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors
of
the Company.
j) Remedies.
The
Holder, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of
its
rights under this Warrant. The Company agrees that monetary damages would not
be
adequate compensation for any loss incurred by reason of a breach by it of
the
provisions of this Warrant and hereby agrees to waive and not to assert the
defense in any action for specific performance that a remedy at law would be
adequate.
13
k) Successors
and Assigns.
Subject
to applicable securities laws, this Warrant and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon the
successors of the Company and the successors and permitted assigns of Holder.
The provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and shall be enforceable by each such
Holder.
l) Amendment.
This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Holder.
m) Severability.
Wherever possible, each provision of this Warrant shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the remaining
provisions of this Warrant.
n) Headings.
The
headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.
********************
14
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized as of the date first above
indicated.
| |
|
|
| By: | ||
|
Name:
Xxxxx X. Xxxxxx
|
||
|
Title:
CEO
|
||
NOTICE
OF EXERCISE
|
RE:
|
Warrant
originally issued on or about March ___, 2008 to ____________________
for
____________ Warrant Shares.
|
(1) The
undersigned hereby elects to purchase _______________ Warrant Shares of the
Company pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full, together
with
all applicable transfer taxes, if any.
(2) Payment
shall take the form of (check applicable box):
o
in
lawful money of the
United States; or
o
the
cancellation of such number of
Warrant Shares as is necessary, in accordance with the formula set forth in
subsection 2(c), to exercise this Warrant with respect to the maximum number
of
Warrant Shares purchasable pursuant to the cashless exercise procedure set
forth
in subsection 2(c).
(3) Please
issue a certificate or certificates representing said Warrant Shares in the
name
of the undersigned or in such other name as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:
_______________________________
_______________________________
_______________________________
(4)
Accredited
Investor.
The
undersigned is an “accredited investor” as defined in Regulation D promulgated
under the Securities Act of 1933, as amended.
[SIGNATURE
OF HOLDER]
Name
of
Warrant Holder:
________________________________________________________________________
Signature
of Authorized Signatory of Warrant Holder:
_________________________________________________
Name
of
Authorized Signatory:
___________________________________________________________________
Title
of
Authorized Signatory:
____________________________________________________________________
Date:
________________________________________________________________________________________
ASSIGNMENT
FORM
(To
assign the foregoing warrant, execute
this
form
and supply required information.
Do
not
use this form to exercise the warrant.)
FOR
VALUE
RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all
rights evidenced thereby are hereby assigned to
_______________________________________________
whose address is
_______________________________________________________________.
_______________________________________________________________
Dated:
______________, _______
Holder’s
Signature: _____________________________
Holder’s
Address: _____________________________
_____________________________
Signature
Guaranteed: ___________________________________________
NOTE:
The
signature to this Assignment Form must correspond with the name as it appears
on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing
Warrant.
