Exhibit 10.5
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON
STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO GENERAL ENVIRONMENTAL MANAGEMENT, INC., A NEVADA
CORPORATION, THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase up to 3,218,000 Shares of Common Stock of
General Environmental Management, Inc., a Nevada corporation
(subject to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. 701 Issue Date: February 28, 2006
GENERAL ENVIRONMENTAL MANAGEMENT, INC., a corporation organized under the
laws of the State of Nevada (the "Company"), hereby certifies that, for value
received, LAURUS MASTER FUND, LTD., or assigns (the "Holder"), is entitled,
subject to the terms set forth below, to purchase from the Company (as defined
herein) from and after the Issue Date of this Warrant and at any time or from
time to time before 5:00 p.m., New York time, through the close of business
February 28, 2013 (the "Expiration Date"), up to 3,218,000 fully paid and
nonassessable shares of Common Stock (as hereinafter defined), $0.001 par value
per share, at the applicable Exercise Price per share (as defined below). The
number and character of such shares of Common Stock and the applicable Exercise
Price per share are subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include General Environmental Management,
Inc., a Nevada corporation and any person or entity that shall succeed, or
assume the obligations of, General Environmental Management, Inc., a Nevada
corporation hereunder.
(b) The term "Common Stock" includes (i) the Company's Common Stock,
par value $0.001 per share; and (ii) any other securities into which or for
which any of the securities described in the preceding clause (i) may be
converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
1
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate
or otherwise) which the holder of the Warrant at any time shall be entitled
to receive, or shall have received, on the exercise of the Warrant, in lieu
of or in addition to Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in replacement of Common Stock
or Other Securities pursuant to Section 4 or otherwise.
(d) The "Exercise Price" applicable under this Warrant shall be $0.87
per share.
1. Exercise of Warrant.
1.1 Number of Shares Issuable upon Exercise. From and after the date hereof
through and including the Expiration Date, the Holder shall be entitled to
receive, upon exercise of this Warrant in whole or in part, by delivery of an
original or fax copy of an exercise notice in the form attached hereto as
Exhibit A (the "Exercise Notice"), shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4. 1.2 Fair Market Value. For purposes
hereof, the "Fair Market Value" of a share of Common Stock as of a particular
date (the "Determination Date") shall mean:
(a) If the Company's Common Stock is traded on the American Stock
Exchange or another national exchange or is quoted on the National or
Capital Market of The Nasdaq Stock Market, Inc. ("Nasdaq"), then the
closing or last sale price, respectively, reported for the last business
day immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on the American Stock
Exchange or another national exchange or on the Nasdaq but is traded on the
NASD Over The Counter Bulletin Board, then the mean of the average of the
closing bid and asked prices reported for the last business day immediately
preceding the Determination Date.
(c) Except as provided in clause (d) below, if the Company's Common
Stock is not publicly traded, then as the Holder and the Company agree or
in the absence of agreement by arbitration in accordance with the rules
then in effect of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided.
(d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company's charter, then all
amounts to be payable per share to holders of the Common Stock pursuant to
the charter in the event of such liquidation, dissolution or winding up,
plus all other amounts to be payable per share in respect of the Common
Stock in liquidation under the charter, assuming for the purposes of this
clause (d) that all of the shares of Common Stock then issuable upon
exercise of the Warrant are outstanding at the Determination Date.
2
1.3 Company Acknowledgment. The Company will, at the time of the exercise
of this Warrant, upon the request of the holder hereof acknowledge in writing
its continuing obligation to afford to such holder any rights to which such
holder shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant. If the holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to such holder any such rights.
1.4 Trustee for Warrant Holders. In the event that a bank or trust company
shall have been appointed as trustee for the holders of this Warrant pursuant to
Subsection 3.2, such bank or trust company shall have all the powers and duties
of a warrant agent (as hereinafter described) and shall accept, in its own name
for the account of the Company or such successor person as may be entitled
thereto, all amounts otherwise payable to the Company or such successor, as the
case may be, on exercise of this Warrant pursuant to this Section 1.
2. Procedure for Exercise.
2.1 Delivery of Stock Certificates, Etc., on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the Holder as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been surrendered
and payment made for such shares in accordance herewith. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
three (3) business days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder, or as such Holder (upon payment by such Holder
of any applicable transfer taxes) may direct in compliance with applicable
securities laws, a certificate or certificates for the number of duly and
validly issued, fully paid and nonassessable shares of Common Stock (or Other
Securities) to which such Holder shall be entitled on such exercise, plus, in
lieu of any fractional share to which such holder would otherwise be entitled,
cash equal to such fraction multiplied by the then Fair Market Value of one full
share, together with any other stock or other securities and property (including
cash, where applicable) to which such Holder is entitled upon such exercise
pursuant to Section 1 or otherwise.
2.2 Exercise.
(a) Payment may be made either (i) in cash or by certified or official
bank check payable to the order of the Company equal to the applicable
aggregate Exercise Price, (ii) by delivery of this Warrant, or shares of
Common Stock and/or Common Stock receivable upon exercise of this Warrant
in accordance with the formula set forth in subsection (b) below, or (iii)
by a combination of any of the foregoing methods, for the number of Common
Shares specified in such Exercise Notice (as such exercise number shall be
adjusted to reflect any adjustment in the total number of shares of Common
Stock issuable to the Holder per the terms of this Warrant) and the Holder
shall thereupon be entitled to receive the number of duly authorized,
validly issued, fully-paid and non-assessable shares of Common Stock (or
Other Securities) determined as provided herein; provided that, payment
shall be in cash only to the extent that (x) at the time of such exercise,
the Effectiveness Date (as defined in the Registration Rights Agreement
entered into by the Company and Holder dated as of the date hereof, as the
3
same may be amended, modified and/or supplemented from time to time (the
"Registration Rights Agreement")) shall have occurred, (y) the Registration
Statement (as defined in the Registration Rights Agreement) filed by the
Company with the SEC registering the shares of Common Stock issuable
hereunder shall have been declared effective by the SEC and (z) no
Discontinuation Event (as defined in the Registration Rights Agreement)
shall have occurred and be continuing at such time with respect to such
Registration Statement.
(b) Notwithstanding any provisions herein to the contrary, if the Fair
Market Value of one share of Common Stock is greater than the Exercise
Price (at the date of calculation as set forth below), in lieu of
exercising this Warrant for cash, the Holder may elect to receive shares
equal to the value (as determined below) of this Warrant (or the portion
thereof being exercised) by surrender of this Warrant at the principal
office of the Company together with the properly endorsed Exercise Notice
in which event the Company shall issue to the Holder a number of shares of
Common Stock computed using the following formula:
X= Y(A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to
the Holder
Y = the number of shares of Common Stock purchasable
under this Warrant or, if only a portion of this
Warrant is being exercised, the portion of this
Warrant being exercised (at the date of such
calculation)
A = the Fair Market Value of one share of the Company's
Common Stock (at the date of such calculation)
B = the Exercise Price per share (as adjusted to the date
of such calculation).
3. Effect of Reorganization, Etc.; Adjustment of Exercise Price.
3.1 Reorganization, Consolidation, Merger, Etc. In case at any time or from
time to time, the Company shall (a) effect a reorganization, (b) consolidate
with or merge into any other person, or (c) transfer all or substantially all of
its properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company, then, in each such case, as a
condition to the consummation of such a transaction, proper and adequate
provision shall be made by the Company whereby the Holder, on the exercise
hereof as provided in Section 1 at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock (or
Other Securities) issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which such Holder would have been entitled upon such consummation or in
4
connection with such dissolution, as the case may be, if such Holder had so
exercised this Warrant, immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4.
3.2 Dissolution. In the event of any dissolution of the Company following
the transfer of all or substantially all of its properties or assets, the
Company, concurrently with any distributions made to holders of its Common
Stock, shall at its expense deliver or cause to be delivered to the Holder the
stock and other securities and property (including cash, where applicable)
receivable by the Holder pursuant to Section 3.1, or, if the Holder shall so
instruct the Company, to a bank or trust company specified by the Holder and
having its principal office in New York, NY as trustee for the Holder.
3.3 Continuation of Terms. Upon any reorganization, consolidation, merger
or transfer (and any dissolution following any transfer) referred to in this
Section 3, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 4. In the
event this Warrant does not continue in full force and effect after the
consummation of the transactions described in this Section 3, then the Company's
securities and property (including cash, where applicable) receivable by the
Holder will be delivered to the Holder or the Trustee as contemplated by Section
3.2.
4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock or any preferred stock issued by
the Company, (b) subdivide its outstanding shares of Common Stock, (c) combine
its outstanding shares of the Common Stock into a smaller number of shares of
the Common Stock, then, in each such event, the Exercise Price shall,
simultaneously with the happening of such event, be adjusted by multiplying the
then Exercise Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such event, and the product so obtained shall thereafter be
the Exercise Price then in effect. The Exercise Price, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive event or
events described herein in this Section 4. The number of shares of Common Stock
that the holder shall thereafter, on the exercise hereof as provided in Section
1, be entitled to receive shall be adjusted to a number determined by
multiplying the number of shares of Common Stock that would otherwise (but for
the provisions of this Section 4) be issuable on such exercise by a fraction of
which (a) the numerator is the Exercise Price that would otherwise (but for the
provisions of this Section 4) be in effect, and (b) the denominator is the
Exercise Price in effect on the date of such exercise (taking into account the
provisions of this Section 4).
5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of this Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
5
or readjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the holder and any Warrant agent of the
Company (appointed pursuant to Section 11 hereof).
6. Reservation of Stock, Etc., Issuable on Exercise of Warrant. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of this Warrant, shares of Common Stock (or Other Securities)
from time to time issuable on the exercise of this Warrant.
7. Assignment; Exchange of Warrant. Subject to compliance with applicable
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") in whole or in
part. On the surrender for exchange of this Warrant, with the Transferor's
endorsement in the form of Exhibit B attached hereto (the "Transferor
Endorsement Form") and together with evidence reasonably satisfactory to the
Company demonstrating compliance with applicable securities laws, which shall
include, without limitation, a legal opinion from the Transferor's counsel (at
the Company's expense) that such transfer is exempt from the registration
requirements of applicable securities laws, the Company at its expense (but with
payment by the Transferor of any applicable transfer taxes) will issue and
deliver to or on the order of the Transferor thereof a new Warrant of like
tenor, in the name of the Transferor and/or the transferee(s) specified in such
Transferor Endorsement Form (each a "Transferee"), calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
9. Registration Rights. The Holder has been granted certain registration
rights by the Company. These registration rights are set forth in the
Registration Rights Agreement.
10. Maximum Exercise. Notwithstanding anything herein to the contrary, in
no event shall the Holder be entitled to exercise any portion of this Warrant in
excess of that portion of this Warrant upon exercise of which the sum of (1) the
number of shares of Common Stock beneficially owned by the Holder and its
Affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unexercised portion of the Warrant or the
unexercised or unconverted portion of any other security of the Holder subject
to a limitation on conversion analogous to the limitations contained herein) and
6
(2) the number of shares of Common Stock issuable upon the exercise of the
portion of this Warrant with respect to which the determination of this proviso
is being made, would result in beneficial ownership by the Holder and its
Affiliates of any amount greater than 4.99% of the then outstanding shares of
Common Stock (whether or not, at the time of such exercise, the Holder and its
Affiliates beneficially own more than 4.99% of the then outstanding shares of
Common Stock). As used herein, the term "Affiliate" means any person or entity
that, directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a person or entity, as such terms
are used in and construed under Rule 144 under the Securities Act. For purposes
of the proviso to the second preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulations 13D-G thereunder, except as otherwise provided
in clause (1) of such proviso. The limitations set forth herein (x) may be
waived by the Holder upon provision of no less than sixty-one (61) days prior
notice to the Company and (y) shall automatically become null and void following
notice to the Company upon the occurrence and during the continuance of an Event
of Default (as defined in the Security Agreement dated as of the date hereof
among the Holder, the Company and various subsidiaries of the Company (as
amended, modified, restated and/or supplemented from time to time, the "Security
Agreement")).
11. Warrant Agent. The Company may, by written notice to the each Holder of
the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
12. Transfer on the Company's Books. Until this Warrant is transferred on
the books of the Company, the Company may treat the registered holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
13. Notices, Etc. All notices and other communications from the Company to
the Holder shall be mailed by first class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company in writing by
such Holder or, until any such Holder furnishes to the Company an address, then
to, and at the address of, the last Holder who has so furnished an address to
the Company.
14. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
ANY ACTION BROUGHT CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS WARRANT
SHALL BE BROUGHT ONLY IN STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS
LOCATED IN THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE HOLDER MAY CHOOSE
TO WAIVE THIS PROVISION AND BRING AN ACTION OUTSIDE THE STATE OF NEW YORK. The
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS]
7
individuals executing this Warrant on behalf of the Company agree to submit to
the jurisdiction of such courts and waive trial by jury. The prevailing party
shall be entitled to recover from the other party its reasonable attorneys' fees
and costs. In the event that any provision of this Warrant is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Warrant.
The headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision hereof. The Company acknowledges that
legal counsel participated in the preparation of this Warrant and, therefore,
stipulates that the rule of construction that ambiguities are to be resolved
against the drafting party shall not be applied in the interpretation of this
Warrant to favor any party against the other party.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS]
8
IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first written above.
GENERAL ENVIRONMENTAL MANAGEMENT, INC.,
a Nevada corporation
WITNESS:
By:
Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
9
EXHIBIT A
FORM OF SUBSCRIPTION
(To Be Signed Only On Exercise Of Warrant)
TO: General Environmental Management, Inc.
0000 Xxxxxx Xxx.
Xxxxx 000
Xxxxxx, XX 00000
Attention: Chief Financial Officer
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No.____), hereby irrevocably elects to purchase (check applicable box):
________ _______ shares of the common stock covered by such warrant; or
________ the maximum number of shares of common stock covered by such
warrant pursuant to the cashless
exercise procedure set forth in Section 2.
The undersigned herewith makes payment of the full Exercise Price for
such shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):
________ $__________ in lawful money of the United States; and/or
________ the cancellation of such portion of the attached Warrant
as is exercisable for a total of _______ shares of Common
Stock (using a Fair Market Value of $_______ per share for
purposes of this calculation); and/or
________ the cancellation of such number of shares of Common Stock as
is necessary, in accordance with the formula set forth in
Section 2.2, to exercise this Warrant with respect to the
maximum number of shares of Common Stock purchasable pursuant
to the cashless exercise procedure set forth in Section 2.
The undersigned requests that the certificates for such shares be issued in
the name of, and delivered to ______________________________________________
whose address is_____________________________________________________________.
The undersigned represents and warrants that all offers and sales by
the undersigned of the securities issuable upon exercise of the within Warrant
shall be made pursuant to registration of the Common Stock under the Securities
Act of 1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated:
(Signature must conform to name of holder as
specified on the face of the Warrant)
Address:
10
EXHIBIT B
FORM OF TRANSFEROR ENDORSEMENT
(To Be Signed Only On Transfer Of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of General Environmental Management, Inc., a Nevada
corporation, into which the within Warrant relates specified under the headings
"Percentage Transferred" and "Number Transferred," respectively, opposite the
name(s) of such person(s) and appoints each such person Attorney to transfer its
respective right on the books of General Environmental Management, Inc., a
Nevada corporation, with full power of substitution in the premises.
Percentage Number
Transferees Address Transferred Transferred
Dated:
(Signature must conform to name of holder as
specified on the face of the Warrant)
Address:
SIGNED IN THE PRESENCE OF:
(Name)
ACCEPTED AND AGREED:
[TRANSFEREE]
-----------------------------------------------------
(Name)
11