EXHIBIT 10.43
Sovereign WARRANT AGREEMENT
THIS WARRANT AGREEMENT ("Agreement") dated as of March 16, 1999, between
COMPOSITECH LTD., a Delaware corporation (the "Company"), and SOVEREIGN CAPITAL
ADVISORS, LLC, a Nevada company (hereinafter referred to as "Sovereign").
Capitalized terms used in this Agreement and not otherwise defined herein shall
have the meanings ascribed to them in the Series 1 Bridge Note Purchase and
Security Agreement of even date herewith (the "Purchase Agreement") among the
Company and the Purchasers thereto.
Background
The Company has engaged Sovereign to assist the Company in connection with
the Company's offering (the "Offering") of up to $1,500,000 in principal amount
of Series 1 Secured Convertible Bridge Notes, funded through a series of
Subsequent Advances (the "Series 1 Bridge Notes"). The Company expects the
Offering to be consummated over a series of closings (each of which is a
"Closing"). The Warrant Certificates ("Warrants") issued pursuant to this
Agreement are being issued by the Company to Sovereign and/or its designees, in
consideration for, the services of Sovereign in connection with the Offering,
with one Warrant issued at each of the Closings.
Agreement
For and in consideration of the premises, the agreements herein set forth
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
Section 1. Issuance of Warrant Certificates. The Company hereby agrees
to issue to Sovereign and/or its designees (the "Holders") at each Closing
in the Offering, a warrant to purchase a number of shares of Common Stock,
par value $0.01 per share, of the Company (the "Warrant Shares") equal to
five percent (5%) of the principal amount of the Series 1 Bridge Notes
issued at such Closing, or five percent (5%) of the principal amount of any
Subsequent Advance made under any Subsequent Closing, if any, at any time
or from time to time during a five (5) year period which commences on the
date the issuance date of the Warrant and ends 5:00 P.M., Eastern Time, on
the fifth (5th) anniversary of the issuance date of such Warrant (the
"Warrant Exercise Term"). The exercise price of the Warrant shall be equal
to one hundred ten percent (110%) of the Closing Bid Price at each Closing
(the "Exercise Price").
Section 2. Warrant Certificates. The warrant certificates (the
"Warrant Certificates") delivered and to be delivered pursuant to this
Agreement shall be in the form set forth as Exhibit A, attached hereto and
made a part hereof, with such appropriate insertions, omissions,
substitutions, and other variations as required or permitted by this
Agreement.
Section 3. Exercise of Warrants.
3.1. Cash Exercise. The Exercise Price may be paid in cash or by check
to the order of the Company, or any combination of cash or check, subject
to adjustment as provided in Article 7 herein. Upon surrender of the
-1-
Warrant Certificate to be exercised with the annexed Form of Exercise
Notice duly executed, together with payment of the Exercise Price (as
hereinafter defined) for the Warrant Shares purchased, at the Company's
executive offices currently located at 000 Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxx
Xxxx 00000, the Holder of a Warrant Certificate shall be entitled to
receive a certificate or certificates for the Shares so purchased. The
purchase rights represented by each Warrant Certificate are exercisable at
the option of the Holder hereof, in whole or in part (but not as to
fractional shares of the Common Stock) at any time prior to the expiration
of the Warrant Exercise Term. In the case of the purchase of less than all
the Shares purchasable under any Warrant Certificate, the Company shall
cancel said Warrant Certificate upon the surrender thereof and shall
execute and deliver a new Warrant Certificate of like tenor for the balance
of the Shares purchasable thereunder. The date of issuance of the Common
Stock issuable upon exercise of the Warrants shall be the date the Company
receives the payment of the Exercise Price, a Warrant Certificate, and the
Election to Purchase.
3.2. Reserved.
Section 4. Issuance of Certificates. Upon the exercise of the
Warrants, the issuance of certificates for the Shares shall be made
forthwith (and in any event within five business days thereafter) without
charge to the Holder thereof including, without limitation, any tax which
may be payable in respect of the issuance thereof, and such certificates
shall be issued in the name of, or in such names as may be directed by, the
Holder thereof; provided however, that the Company shall not be required to
pay any tax other than that related to income which may be payable in
respect of any transfer involved in the issuance and delivery of any such
certificates in a name other than that of the Holder, and the Company shall
not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to satisfaction of
the Company that such tax has been paid. The Warrant Certificates and the
certificates representing the Shares shall be executed on behalf of the
Company by the manual or facsimile signature of the present or any future
Chairman or Vice Chairman of the Board of Directors, Chief Executive
Officer, President, or Vice President of the Company under its corporate
seal reproduced thereon, attested to by the manual or facsimile signature
of the present or any future Secretary or Assistant Secretary of the
Company. Warrant Certificates shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or
transfer. The Warrant Certificates and, upon exercise of the Warrants, in
part or in whole, certificates representing the Shares shall bear a legend
substantially similar to the following:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND MAY NOT BE OFFERED OR SOLD EXCEPT (I) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, (II) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (III) UPON THE DELIVERY
BY THE HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO COUNSEL TO THE ISSUER, STATING THAT AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
Section 5. Price.
5.1. Adjusted Exercise Price. The adjusted Exercise Price shall be the
price which shall result from time to time from any and all adjustments of
the initial Exercise Price specified in Section 3.1 hereof in accordance
with the provisions of Article 7 hereof.
Section 6. Registration Rights. The Warrants and Warrant Shares have
not been registered for purposes of public distribution under the
Securities Act of 1933, as amended, but as
-2-
Registrable Securities (as such term is defined in the Registration Rights
Agreement) are subject to all the terms and provisions of the Registration
Rights Agreement.
Section 7. Adjustments of Exercise Price and Number of Shares.
7.1. Subdivision and Combination. In case the Company shall at any
time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
7.2. Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Article 7, the number of
Shares issuable upon the exercise of each Warrant shall be adjusted to the
nearest full Share by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Shares
issuable upon exercise of the Warrants immediately prior to such adjustment
and dividing the product so obtained by the adjusted Exercise Price.
7.3. Reclassification, Consolidation, Merger, etc. In case of any
reclassification or change of the outstanding shares of Common Stock (other
than a change in par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or in the case of
any consolidation of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger in which the
Company is the surviving corporation and which does not result in any
reclassification or change of the outstanding shares of Common Stock,
except a change as a result of a subdivision or combination of such shares
or a change in par value, as aforesaid), or in the case of a sale or
conveyance to another corporation of the property of the Company as an
entirety, the Holders shall thereafter have the right to purchase the kind
and number of shares of stock and other securities and property receivable
upon such reclassification, change, consolidation, merger, sale, or
conveyance as if the Holders were the owners of the shares of Common Stock
underlying the Warrants immediately prior to any such events at a price
equal to the product of (x) the number of shares issuable upon exercise of
the Warrants and (y) the Exercise Price in effect immediately prior to the
record date for such reclassification, change, consolidation, merger, sale,
or conveyance as if such Holders had exercised the Warrants.
7.4. No Adjustment of Exercise Price in Certain Cases. No adjustment
of the Exercise Price shall be made:
(a) Upon the issuance or sale of shares of Common Stock upon the
exercise of the Warrants; or
(b) Upon (i) the issuance of options pursuant to the Company's
employee stock option plan in effect on the date hereof or the
issuance or sale by the Company of any shares of Common Stock pursuant
to the exercise of any such options, or (ii) the issuance or sale by
the Company of any shares of Common Stock pursuant to the exercise of
any options or warrants previously issued and outstanding on the date
hereof; or
(c) Upon the issuance of shares of Common Stock pursuant to
contractual obligations existing on the date hereof; or
-3-
(d) If the amount of said adjustment shall be less than 2 cents
(2(cent)) per Share, provided however, that in such case any
adjustment that would otherwise be required then to be made shall be
carried forward and shall be made at the time of and together with the
next subsequent adjustment which, together with any adjustment so
carried forward, shall amount to at least 2 cents (2(cent)) per Share.
7.5. Dividends and Other Distributions with Respect to Outstanding
Securities. In the event that the Company shall at any time prior to the
exercise of all Warrants declare a dividend (other than a dividend
consisting solely of shares of Common Stock or a cash dividend or
distribution payable out of current or retained earnings) or otherwise
distribute to its shareholders any monies, assets, property, rights,
evidences of indebtedness, securities (other than shares of Common Stock),
whether issued by the Company or by another person or entity, or any other
thing of value, the Holder or Holders of the unexercised Warrants shall
thereafter be entitled, in addition to the shares of Common Stock or other
securities receivable upon the exercise thereof, to receive, upon the
exercise of such Warrants, the same monies, property, assets, rights,
evidences of indebtedness, securities, or any other thing of value that
they would have been entitled to receive at the time of such dividend or
distribution. At the time of any such dividend or distribution, the Company
shall make appropriate reserves to ensure the timely performance of the
provisions of this Subsection 7.7.
7.6. Subscription Rights for Shares of Common Stock or Other
Securities. In the case the Company or an affiliate of the Company shall at
any time after the date hereof and prior to the exercise of all the
Warrants issue any rights to subscribe for shares of Common Stock or any
other securities of the Company or of such affiliate to all the
shareholders of the Company, the Holders of the unexercised Warrants shall
be entitled, in addition to the shares of Common Stock or other securities
receivable upon the exercise of the Warrants, to receive such rights at the
time such rights are distributed to the other shareholders of the Company.
Section 8. Exchange and Replacement of Warrant Certificates. Each
Warrant Certificate is exchangeable without expense, upon the surrender
hereof by the registered Holder at the principal executive office of the
Company, for a new Warrant Certificate of like tenor and date representing
in the aggregate the right to purchase the same number of Shares in such
denominations as shall be designated by the Holder thereof at the time of
such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction, or mutilation of any Warrant Certificate,
and, in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation
of the Warrants, if mutilated, the Company will make and deliver a new
Warrant Certificate of like tenor, in lieu thereof.
Section 9. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of shares of
Common Stock and shall not be required to issue scrip or pay cash in lieu
of fractional interests, it being the intent of the parties that all
fractional interests shall be eliminated by rounding any fraction up to the
nearest whole number of shares of Common Stock.
-4-
Section 10. Reservation and Listing of Securities. The Company shall
at all times reserve and keep available out of its authorized shares of
Common Stock, solely for the purpose of issuance upon the exercise of the
Warrants, such number of shares of Common Stock as shall be issuable upon
the exercise thereof. The Company covenants and agrees that, upon exercise
of the Warrants and payment of the Exercise Price therefor, all shares of
Common Stock issuable upon such exercise shall be duly and validly issued,
fully paid, nonassessable and not subject to the preemptive rights of any
shareholder. As long as the Warrants shall be outstanding, the Company
shall use its best efforts to cause all shares of Common Stock issuable
upon the exercise of the Warrants to be listed on or quoted on the
electronic bulletin board, by NASDAQ or listed on such national securities
exchanges as requested by Sovereign.
Section 11. Notices to Warrant Holders. Nothing contained in this
Agreement shall be construed as conferring upon the Holder or Holders the
right to vote or to consent or to receive notice as a shareholder in
respect of any meetings of shareholders for the election of directors or
any other matter, or as having any rights whatsoever as a shareholder of
the Company. If, however, at any time prior to the expiration of the
Warrants and their exercise, any of the following events shall occur:
(a) the Company shall make a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current or
retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital
stock of the Company, or any option, right or warrant to subscribe
therefor; or
(c) a dissolution, liquidation, or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property, assets and business as an
entirety shall be proposed;
then, in any one or more of said events, the Company shall give written
notice of such event at least fifteen (15) days prior to the date fixed as
a record date or the date of closing the transfer books for the
determination of the shareholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription fights, options or
warrants, or entitled to vote on such proposed dissolution, liquidation,
winding up or sale. Such notice shall specify such record date or the date
of closing the transfer books, as the case may be. Failure to give such
notice or any defect therein shall not affect the validity of any action
taken in connection with the declaration or payment of any such dividend or
distribution, or the issuance of any convertible or exchangeable securities
or subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
Section 12. Notices. All notices, requests, consents, and other
communications hereunder shall be in writing and shall be deemed to have
been duly made when delivered, or mailed by registered or certified mall,
return receipt requested:
(a) If to a registered Holder of the Warrants, to the address of
such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3 of
this Agreement or to such other address as the Company may designate
by notice to the Holders.
-5-
Section 13. Supplements and Amendments. The Company and Sovereign may
from time to time supplement or amend this Agreement without the approval
of any Holders of Warrant Certificates in order to cure any ambiguity, to
correct or supplement any provision contained herein which may be defective
or inconsistent with any provisions herein, or to make any other provisions
in regard to matters or questions arising hereunder which the Company and
Sovereign may deem necessary or desirable and which the Company and
Sovereign deem not to adversely affect the interests of the Holders of
Warrant Certificates.
Section 14. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company and the Holders inure to the
benefit of their respective successors and assigns hereunder.
Section 15. Termination. This Warrant Agreement shall terminate on the
date when all Warrants issued pursuant to this Agreement shall have been
exercised and all the Shares issuable upon exercise of the Warrants have
been resold to the public; provided however, that the provisions of Article
6 shall survive such termination until the fifth (5th) anniversary of the
date of issuance of the last warrant issued pursuant to this Agreement.
Section 16. Governing Law. This Agreement and each Warrant Certificate
hereunder shall be governed by and construed in accordance with the laws of
the State of New York, irrespective of the choice of law provisions
thereof. The parties agree that any appropriate state court located in New
Castle County, Delaware, or any federal Court located in Wilmington
Delaware, including without limitation to the United States District Court
of Delaware, shall have exclusive jurisdiction of any case or controversy
arising under or in connection with this Agreement and shall be a proper
forum in which to adjudicate such case or controversy. The parties consent
to the jurisdiction of such courts.
Section 17. Benefits of This Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the
Company and Sovereign and any other registered holder or holders of the
Warrant Certificates, Warrants, or the Shares any legal or equitable right,
remedy or claim under this Agreement; and this Agreement shall be for the
sole and exclusive benefit of the Company and Sovereign and any other
holder or holders of the Warrant Certificates, Warrants, or the Shares.
Section 18. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and such counterparts shall together constitute
but one and the same instrument.
[Signatures on Following Pages]
-6-
COMPANY SIGNATURE PAGE
TO
SOVEREIGN WARRANT AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
COMPOSITECH LTD.
By:
-----------------------------
Xxxxxx X. Xxxxx
Its: Chief Financial Officer
-7-
SOVEREIGN SIGNATURE PAGE
TO
SOVEREIGN WARRANT AGREEMENT
SOVEREIGN CAPITAL ADVISORS, LLC
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
-8-
EXHIBIT A
TO
SOVEREIGN WARRANT AGREEMENT
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES
ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR
SOLD EXCEPT (I) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT, (II) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER SUCH ACT (OR
ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES),
OR (III) UPON THE DELIVERY BY THE HOLDER TO THE COMPANY OF AN OPINION OF
COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, STATING THIAT
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., EASTERN TIME, MARCH ___, 2004
No. SCA __
WARRANT CERTIFICATE
This Warrant Certificate certifies that SOVEREIGN CAPITAL ADVISORS, LLC
("Sovereign") or registered assigns, is the registered holder of __________
Warrants to purchase, at any time from March 16, 1999 until 5:00 P.M. Eastern
Time on March ___, 2004 ("Expiration Date"), up to ____________ shares
("Shares") of fully-paid and non-assessable common stock, par value $.01
("Common Stock"), of Compositech Ltd., a Delaware corporation (the "Company"),
at the Initial Exercise Price, subject to adjustment in certain events (the
"Exercise Price"), of $_______ per Share upon surrender of this Warrant
Certificate and payment of the Exercise Price at an office or agency of the
Company, but subject to the conditions set forth herein and in the Warrant
Agreement dated as of March 16, 1999 between the Company and Sovereign (the
"Warrant Agreement"). Payment of the Exercise Price may be made in cash, or by
certified or official bank check in New York Clearing House funds payable to the
order of the Company, or any combination of cash or check.
No Warrant may be exercised after 5:00 P.M., Eastern Daylight Time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to in a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain events,
the Exercise Price and/or number of the Company's securities issuable thereupon
may, subject to certain conditions, be adjusted. In such event, the Company
will, at the, request of the holder, issue a new Warrant Certificate evidencing
the adjustment in the Exercise Price and the number and/or type of securities
issuable upon the exercise of the Warrants; provided however, that the failure
of the Company to issue such new
-9-
Warrant Certificates shall not in any way change, alter, or otherwise impair,
the rights of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferees) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax, or other governmental charge
imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
[Signature On Following Page]
-10-
COMPANY SIGNATURE PAGE
TO
EXHIBIT A
TO
SOVEREIGN WARRANT AGREEMENT
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated: March ___, 1999
COMPOSITECH LTD.
By:
------------------------------
Xxxxxx X. Xxxxx
Its: Chief Financial Officer
-11-
[FORM OF EXERCISE NOTICE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ____________ Shares and
herewith tenders in payment for such Shares cash or a certified or official bank
check payable in New York Clearing House Funds to the order of
_____________________ in the amount of $_______________ all in accordance with
the terms hereof. The undersigned requests that a certificate for such Shares be
registered in the name of whose address
is_____________________________________________ and that such Certificate be
delivered to _________________________________________ whose address is
------------------------.
Dated:______________________ Signature:________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
_________________________________
_________________________________
(Insert Social Security or Other
Identifying Number of Holder)
-12-
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _______________________________ hereby sells, assigns
and transfers unto _____________________________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title, and interest therein,
and does hereby irrevocably constitute and appoint ________________________,
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Dated:______________________ Signature:________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
_________________________________
_________________________________
(Insert Social Security or Other
Identifying Number of Holder)
-13-
