EXHIBIT 10.40
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAW AND NEITHER MAY BE SOLD OR OTHERWISE
TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT
AND SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH
REGARD THERETO, OR (II) THE COMPANY SHALL HAVE RECEIVED A WRITTEN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER
SUCH SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER.
COMPOSITECH LTD.
COMMON STOCK PURCHASE WARRANT
Warrant No. 1 100,000 shares
Original Issue Date: March 16, 1999
THIS CERTIFIES THAT, FOR VALUE RECEIVED, SOVCAP EQUITY PARTNERS, LTD. or
its assigns (the "Holder") is entitled to purchase, on the terms and conditions
hereinafter set forth, at any time or from time to time from the date hereof
until 5:00 p.m., Eastern Time, on the fifth (5th) anniversary of the Original
Issue Date set forth above, or if such date is not a day on which the Company is
open for business, then the next succeeding day on which the Company is open for
business (such date is the "Expiration Date"), but not thereafter, up to ONE
HUNDRED THOUSAND (100,000) shares of the Common Stock, par value $.01 (the
"Common Stock"), of COMPOSITECH LTD., a Delaware corporation (the "Company"), at
a price of $.____ {110% of Closing Bid Price on Original Issue Date} per share
(the "Exercise Price"), such number of shares and Exercise Price being subject
to adjustment upon the occurrence of the contingencies set forth in this
Warrant. Each share of Common Stock as to which this Warrant is exercisable is a
"Warrant Share" and all such shares are collectively referred to as the "Warrant
Shares."
Section 1. Exercise of Warrant; Conversion of Warrant.
(a) This Warrant may, at the option of the Holder, be exercised in whole or
in part from time to time by delivery to the Company at its office at 000
Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxx 00000, Attention: President, or to any
transfer agent for the Common Stock, on or before 5:00 p.m., Eastern Time, on
the Expiration Date, (i) a written notice of such registered Holder's election
to exercise this Warrant (the "Exercise Notice"), which notice may be in the
form of the Notice of Exercise attached hereto, properly executed and completed
by the registered Holder or an authorized officer thereof, (ii) a check payable
to the order of the Company, in an amount equal to the product of the Exercise
Price multiplied by the number of Warrant Shares specified in the Exercise
Notice, and (iii) this Warrant (the items specified in (i), (ii), and (iii) are
collectively the "Exercise Materials").
(b) Upon timely receipt of the Exercise Materials, the Company shall, as
promptly as practicable, and in any event within five (5) business days after
its receipt of the Exercise Materials, execute or cause to be executed and
delivered to Holder a certificate or certificates representing the number of
Warrant Shares specified in the Exercise Notice, together with cash in lieu of
any fraction of a share, and, (x) if the Warrant is exercised in full, a copy of
this Warrant marked "Exercised," or (y) if the Warrant is partially exercised, a
copy of this Warrant marked "Partially Exercised" together with a new Warrant on
the same terms for the unexercised balance of the Warrant Shares, or (z) if the
Warrant is converted, a copy of this Warrant marked "Converted." The stock
certificate or certificates shall be registered in the name of the registered
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Holder of this Warrant or such other name or names as shall be designated in the
Exercise Notice or Conversion Notice. The date on which the Warrant shall be
deemed to have been exercised or converted (the "Effective Date"), and the date
the person in whose name any certificate evidencing the Common Stock issued upon
the exercise or conversion hereof is issued shall be deemed to have become the
holder of record of such shares, shall be the date the Corporation receives the
Exercise Materials, irrespective of the date of delivery of a certificate or
certificates evidencing the Common Stock issued upon the exercise or conversion
hereof, except that, if the date on which the Exercise Materials are received by
the Company is a date on which the stock transfer books of the Company are
closed, the Effective Date shall be the date the Company receives the Exercise
Materials, and the date such person shall be deemed to have become the holder of
the Common Stock issued upon the exercise or conversion hereof shall be the next
succeeding date on which the stock transfer books are open. All shares of Common
Stock issued upon the exercise or conversion of this Warrant will, upon
issuance, be fully paid and nonassessable and free from all taxes, liens, and
charges with respect thereto.
(c) If the Company shall fail to issue to Holder within five (5) business
days following the Effective Date a certificate for the number of shares of
Common Stock to which such holder is entitled upon such holder's exercise or
conversion of this Warrant, in addition to all other available remedies which
such holder may pursue hereunder and the Series 1 Bridge Note Purchase and
Security Agreement between the Company and the initial holder of the Warrant
(the "Securities Purchase Agreement") including indemnification pursuant to
Section 7.18 thereof (all of which shall be cumulative), the Company shall pay
additional damages to such holder on each day after the Effective Date, an
amount equal to 1.0% of the product of (A) the number of Warrant Shares not
issued to Holder and to which Holder is entitled multiplied by (B) the Closing
Bid Price of the Common Stock on the Effective Date. Such damages shall be
computed daily and are due and payable daily. Additionally, notwithstanding
anything in this Section 1 to the contrary, Holder may withdraw an Exercise
Notice at any time prior to Holder's receipt of certificates evidencing the
Warrant Shares if Holder has otherwise complied with the requirements of this
Section 1.
Section 2. Adjustments to Warrant Shares. The number of Warrant Shares
issuable upon the exercise hereof shall be subject to adjustment as follows:
(a) In the event the Company is a party to a consolidation, share
exchange, or merger, or the sale of all or substantially all of the assets
of the Company to, any person, or in the case of any consolidation or
merger of another corporation into the Company in which the Company is the
surviving corporation, and in which there is a reclassification or change
of the shares of Common Stock of the Company, this Warrant shall after such
consolidation, share exchange, merger, or sale be exercisable for the kind
and number of securities or amount and kind of property of the Company or
the corporation or other entity resulting from such share exchange, merger,
or consolidation, or to which such sale shall be made, as the case may be
(the "Successor Company"), to which a holder of the number of shares of
Common Stock deliverable upon the exercise (immediately prior to the time
of such consolidation, share exchange, merger, or sale) of this Warrant
would have been entitled upon such consolidation, share exchange, merger,
or sale; and in any such case appropriate adjustments shall be made in the
application of the provisions set forth herein with respect to the rights
and interests of the registered Holder of this Warrant, such that the
provisions set forth herein shall thereafter correspondingly be made
applicable, as nearly as may reasonably be, in relation to the number and
kind of securities or the type and amount of property thereafter
deliverable upon the exercise of this Warrant. The above provisions shall
similarly apply to successive consolidations, share
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exchanges, mergers, and sales. Any adjustment required by this Section 2
(a) because of a consolidation, share exchange, merger, or sale shall be
set forth in an undertaking delivered to the registered Holder of this
Warrant and executed by the Successor Company which provides that the
Holder of this Warrant shall have the right to exercise this Warrant for
the kind and number of securities or amount and kind of property of the
Successor Company or to which the holder of a number of shares of Common
Stock deliverable upon exercise (immediately prior to the time of such
consolidation, share exchange, merger, or sale) of this Warrant would have
been entitled upon such consolidation, share exchange, merger, or sale.
Such undertaking shall also provide for future adjustments to the number of
Warrant Shares and the Exercise Price in accordance with the provisions set
forth in Section 2 hereof.
(b) In the event the Company should at any time, or from time to time
after the Original Issue Date, fix a record date for the effectuation of a
stock split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or
other distribution payable in additional shares of Common Stock, or
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock
(hereinafter referred to as "Common Stock Equivalents") without payment of
any consideration by such holder for the additional shares of Common Stock
or the Common Stock Equivalents (including the additional shares of Common
Stock issuable upon exercise or exercise thereof), then, as of such record
date (or the date of such dividend, distribution, split, or subdivision if
no record date is fixed), the number of Warrant Shares issuable upon the
exercise hereof shall be proportionately increased and the Exercise Price
shall be appropriately decreased by the same proportion as the increase in
the number of outstanding Common Stock Equivalents of the Company resulting
from the dividend, distribution, split, or subdivision. Notwithstanding the
preceding sentence, no adjustment shall be made to decrease the Exercise
Price below $.01 per Share.
(c) In the event the Company should at any time or from time to time
after the Original Issue Date, fix a record date for the effectuation of a
reverse stock split, or a transaction having a similar effect on the number
of outstanding shares of Common Stock of the Company, then, as of such
record date (or the date of such reverse stock split or similar transaction
if no record date is fixed), the number of Warrant Shares issuable upon the
exercise hereof shall be proportionately decreased and the Exercise Price
shall be appropriately increased by the same proportion as the decrease of
the number of outstanding Common Stock Equivalents resulting from the
reverse stock split or similar transaction.
(d) In the event the Company should at any time or from time to time
after the Original Issue Date, fix a record date for a reclassification of
its Common Stock, then, as of such record date (or the date of the
reclassification if no record date is set), this Warrant shall thereafter
be convertible into such number and kind of securities as would have been
issuable as the result of such reclassification to a holder of a number of
shares of Common Stock equal to the number of Warrant Shares issuable upon
exercise of this Warrant immediately prior to such reclassification, and
the Exercise Price shall be unchanged.
(e) The Company will not, by amendment of its Certificate of
Incorporation or through reorganization, consolidation, merger,
dissolution, issue, or sale of securities, sale of assets or any other
voluntary action, void or seek to avoid the observance or performance of
any of the terms of the 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 in order to protect the rights of the
Holder against dilution or other impairment. Without limiting the
generality of
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the foregoing, the Company (x) will not create a par value of any share of
stock receivable upon the exercise of the Warrant above the amount payable
therefor upon such exercise, and (y) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally
issue fully paid and non-assessable shares upon the exercise of the
Warrant.
(f) When any adjustment is required to be made in the number or kind
of shares purchasable upon exercise of the Warrant, or in the Exercise
Price, the Company shall promptly notify the Holder of such event and of
the number of shares of Common Stock or other securities or property
thereafter purchasable upon exercise of the Warrants and of the Exercise
Price, together with the computation resulting in such adjustment.
(g) The Company covenants and agrees that all Warrant Shares which may
be issued will, upon issuance, be validly issued, fully paid, and
non-assessable. The Company further covenants and agrees that the Company
will at all times have authorized and reserved, free from preemptive
rights, a sufficient number of shares of its Common Stock to provide for
the exercise of the Warrant in full.
Section 3. No Stockholder Rights. This Warrant shall not entitle the Holder
hereof to any voting rights or other rights as a stockholder of the Company.
Section 4. Transfer of Securities.
(a) This Warrant and the Warrant Shares and any shares of capital stock
received in respect thereof, whether by reason of a stock split or share
reclassification thereof, a stock dividend thereon, or otherwise, shall not be
transferable except upon compliance with the provisions of the Securities Act of
1933, as amended (the "Securities Act") and applicable state securities laws
with respect to the transfer of such securities. The Holder of this Warrant, by
acceptance of this Warrant, agrees to be bound by the provisions of Section 4
hereof and to indemnify and hold harmless the Company against any loss or
liability arising from the disposition of this Warrant or the Warrant Shares
issuable upon exercise hereof or any interest in either thereof in violation of
the provisions of this Warrant.
(b) Each certificate for the Warrant Shares and any shares of capital stock
received in respect thereof, whether by reason of a stock split or share
reclassification thereof, a stock dividend thereon or otherwise, and each
certificate for any such securities issued to subsequent transferees of any such
certificate shall (unless otherwise permitted by the provisions hereof) be
stamped or otherwise imprinted with a legend in substantially the following
form:
Legend for Warrant Shares or other shares of capital stock:
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAW AND NEITHER MAY BE SOLD OR OTHERWISE
TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT
AND SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH
REGARD THERETO, OR (II) THE COMPANY SHALL HAVE RECEIVED A WRITTEN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER
SUCH SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER.
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Section 5. Miscellaneous.
(a) The terms of this Warrant shall be binding upon and shall inure to the
benefit of any successors or assigns of the Company and of the holder or holders
hereof and of the Common Stock issued or issuable upon the exercise hereof.
(b) Except as otherwise provided herein, this Warrant and all rights
hereunder are transferable by the registered holder hereof in person or by duly
authorized attorney on the books of the Company upon surrender of this Warrant,
properly endorsed, to the Company. The Company may deem and treat the registered
holder of this Warrant at any time as the absolute owner hereof for all purposes
and shall not be affected by any notice to the contrary.
(c) Notwithstanding any provision herein to the contrary, Holder hereof may
not exercise, sell, transfer, or otherwise assign this Warrant unless the
Company is provided with an opinion of counsel satisfactory in form and
substance to the Company, to the effect that such exercise, sale, transfer, or
assignment would not violate the Securities Act or applicable state securities
laws.
(d) This Warrant may be divided into separate Warrants covering one share
of Common Stock or any whole multiple thereof, for the total number of shares of
Common Stock then subject to this Warrant at any time, or from time to time,
upon the request of the registered holder of this Warrant and the surrender of
the same to the Company for such purpose. Such subdivided Warrants shall be
issued promptly by the Company following any such request and shall be of the
same form and tenor as this Warrant, except for any requested change in the name
of the registered holder stated herein.
(e) All notices, requests, demands, and other communications required or
permitted under this Warrant and the transactions contemplated herein shall be
in writing and shall be deemed to have been duly given, made, and received when
personally delivered the day after deposited with a recognized national
overnight delivery service prior to its dead-line for receiving packages for
next day delivery or upon the fifth day after deposited in the United States
registered or certified mail with postage prepaid, return receipt requested, in
each case addressed as set forth below:
If to the Company:
Compositech Ltd.
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
If to the Holder hereof, to the address of such Holder appearing on the
books of the Company.
(f) This Agreement 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
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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.
[Signatures on the following page]
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SIGNATURE PAGE
TO
COMPANY
COMMON STOCK PURCHASE WARRANT
IN WITNESS WHEREOF, the Company, has caused this Warrant to be executed in
its name by its duly authorized officers under its corporate seal, and to be
dated as of the date first above written.
COMPOSITECH LTD.
By:
-----------------------------------------
Xxxxxx X. Xxxxx, Executive Vice President
ATTEST:
---------------------
Secretary
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ASSIGNMENT
(To be Executed by the Registered Holder to effect a Transfer of the
foregoing Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, and assigns and transfers
unto ___________________________________________________________________________
the foregoing Warrant and the rights represented thereto to purchase shares of
Common Stock of Compositech Ltd. in accordance with terms and conditions
thereof, and does hereby irrevocably constitute and appoint ________________
Attorney to transfer the said Warrant on the books of the Company, with full
power of substitution.
Holder:
_______________________________
_______________________________
Address
Dated: __________________, 19__
In the presence of:
_______________________________
FORM OF NOTICE OF EXERCISE OR CONVERSION
[To be signed only upon exercise of Warrant]
To: COMPOSITECH LTD.
The undersigned registered Holder of the attached Warrant hereby
irrevocably elects to exercise the Warrant for, and to purchase thereunder,
_____ shares of Common Stock of Compositech Ltd., issuable upon exercise of said
Warrant and hereby surrenders said Warrant.
The Holder herewith delivers to Compositech Ltd., a check in the amount of
$______ representing the Exercise Price for such shares.
The undersigned herewith requests that the certificates for such shares be
issued in the name of, and delivered to the undersigned, whose address is
________________________________.
Dated: ___________________
Holder:
_______________________________
_______________________________
By:____________________________
________
NOTICE
The signature above must correspond to the name as written upon the face of
the within Warrant in every particular, without alteration or enlargement or any
change whatsoever.
