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WARRANT AGREEMENT
Dated as of June 27, 2005
Between
iSecureTrac Corp.
and
Mykonos 6420 LP
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WARRANT AGREEMENT
WARRANT AGREEMENT (the "Agreement"), dated as of June 27, 2005,
between iSecureTrac Corp., a Delaware corporation (the "Company"), and Mykonos
6420 LP, a Texas limited partnership (the "Investor").
RECITALS
WHEREAS, the Company proposes to issue to the Investor a series of
warrants, as hereinafter described (the "Warrants"), to purchase an aggregate of
32,342,315 shares (subject to adjustment), of the Common Stock, $0.001 par value
per share (the "Common Stock") of the Company, pursuant to that certain
Securities Purchase Agreement, dated as of June 21, 2005, between the Company
and the Investor (the "Purchase Agreement"). All capitalized terms used but not
defined herein shall have the meanings ascribed to them in the Purchase
Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Warrant Certificate. The Company will issue and deliver a
certificate evidencing the Warrants (the "Warrant Certificate") to the Investor
pursuant to the terms of the Purchase Agreement. Warrants to purchase an
aggregate of 32,342,315 shares of Common Stock will be issued as "Series B
Warrants" in the form of Exhibit A hereto. The Warrant Certificate may have such
notations, legends and endorsements as required by law, rules and regulations of
applicable stock exchanges or usage. Such certificate shall be in registered
form only and shall be dated the date of issuance by the Company.
SECTION 2. Execution of Warrant Certificate. The Warrant Certificate
shall be signed on behalf of the Company by its Chairman of the Board or its
Chief Executive Officer, President or a Vice President. Each such signature upon
the Warrant Certificate may be in the form of a facsimile signature of the
present or any future Chairman of the Board, Chief Executive Officer, President
or Vice President, and may be imprinted or otherwise reproduced on the Warrant
Certificate and for that purpose the Company may adopt and use the facsimile
signature of any person who shall have been Chairman of the Board, Chief
Executive Officer, President or Vice President, notwithstanding the fact that at
the time the Warrant Certificate shall be delivered or disposed of he shall have
ceased to hold such office. The Warrant Certificate shall also be manually
signed on behalf of the Company by its Secretary or an Assistant Secretary under
its corporate seal. The seal of the Company may be in the form of a facsimile
thereof and may be impressed, affixed, imprinted or otherwise reproduced on the
Warrant Certificate.
SECTION 3. Registration. The Company shall number and register the
Warrant Certificate in a register when it is issued. The Company may deem and
treat the registered holder(s) of the Warrant Certificate as the absolute
owner(s) thereof (notwithstanding any notation of ownership or other writing
thereon made by anyone) for all purposes and shall not be affected by any notice
to the contrary. The Warrants shall be registered initially in the name of the
Investor.
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SECTION 4. Warrants; Exercise of Warrants. Subject to the terms of
this Agreement, there shall be a total of 213 Warrants numbered 1-213 (the
"Numbered Warrants") with each Numbered Warrant being exercisable for the number
of fully paid and nonassesable shares of Common Stock of the Company set forth
on Schedule A for such Numbered Warrant (the "Applicable Warrant Shares") upon
payment of the aggregate Applicable Exercise Price (as hereinafter defined) for
such Numbered Warrant at any time, or from time to time, during the Applicable
Exercise Period (as hereinafter defined). The Applicable Exercise Period for any
Numbered Warrant shall commence on the exercise date for such Numbered Warrant
set forth on Schedule A and shall expire at 5:00 p.m., New York time on March
1st of the year following the calendar year of the expiration date for such
Numbered Warrant as set forth on Schedule A (the "Applicable Exercise Period").
The per share Applicable Exercise Price for any Numbered Warrant shall initially
be the exercise price for such Numbered Warrant set forth on Schedule A (the
"Applicable Exercise Price"), subject to adjustment pursuant to the terms
hereof.
A Numbered Warrant may be exercised upon surrender to the Company
(at its office address set forth in Section 11 hereof) of the Warrant
Certificate to be exercised with the form of election to purchase attached
thereto duly filled in and signed, and upon payment to the Company of the
Applicable Exercise Price for the number of Applicable Warrant Shares in respect
of which such Numbered Warrant is then exercised. Payment of the aggregate
Applicable Exercise Price shall be made in cash or by certified or official bank
check payable to the order of the Company or by wire transfer of immediately
available funds to an account designated by the Company.
Subject to the provisions of Section 6 hereof, upon such surrender
of the Warrant Certificate and payment of the aggregate Applicable Exercise
Price for the Numbered Warrant to be exercised, the Company shall issue and
cause to be delivered with all reasonable dispatch to or upon the written order
of the Investor and in such name or names as the Investor may designate a
certificate for the number of full Applicable Warrant Shares issuable upon the
exercise of such Numbered Warrant (and such other consideration as may be
deliverable upon exercise of such Numbered Warrant) together with cash for
fractional Applicable Warrant Shares as provided in Section 9. Such certificate
shall be deemed to have been issued and the person so named therein shall be
deemed to have become a holder of record of such Applicable Warrant Shares as of
the date of the surrender of such Warrant Certificate and payment of the
aggregate Applicable Exercise Price, irrespective of the date of delivery of
such certificate for Applicable Warrant Shares.
Each Numbered Warrant shall be exercisable during the Applicable
Exercise Period for such Numbered Warrant set forth on Schedule A, at the
election of the Investor, either in full or from time to time in part and, in
the event that a Numbered Warrant is exercised in respect of fewer than all of
the Applicable Warrant Shares issuable on such exercise at any time prior to the
date of expiration of the Numbered Warrant, a new certificate and a revised
Schedule A evidencing the remaining Applicable Warrant Shares will be issued and
delivered pursuant to the provisions of this Section and Section 2 hereof.
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If all of the 213 Warrants have been exercised, the Warrant
Certificate shall be cancelled and disposed of by the Company. The Company shall
keep copies of this Agreement and any notices given or received hereunder
available for inspection by the Investor during normal business hours at its
office.
SECTION 5. Payment of Taxes. The Company will pay all documentary
stamp taxes and other governmental charges (excluding all foreign, federal or
state income, franchise, property, estate, inheritance, gift or similar taxes)
in connection with the issuance or delivery of the Warrant Certificate
hereunder, as well as all such taxes attributable to the initial issuance or
delivery of Applicable Warrant Shares upon the exercise of Warrants and payment
of the aggregate Applicable Exercise Price. The Company shall not, however, be
required to pay any tax that may be payable in respect of any subsequent
transfer of the Warrants or any transfer involved in the issuance and delivery
of Applicable Warrant Shares in a name other than that in which the Warrants to
which such issuance relates were registered, and, if any such tax would
otherwise be payable by the Company, no such issuance or delivery shall be made
unless and until the person requesting such issuance has paid to the Company the
amount of any such tax, or it is, established to the reasonable satisfaction of
the Company that any such tax has been paid.
SECTION 6. Mutilated or Missing Warrant Certificate. If any Warrant
Certificate or certificate evidencing Applicable Warrant Shares shall be
mutilated, lost, stolen or destroyed, the Company shall issue, in exchange and
substitution therefore and upon cancellation of the mutilated Warrant
Certificate or other certificate, or in lieu of and substitution for the Warrant
Certificate or other certificate lost, stolen or destroyed, a new Warrant
Certificate or other certificate of like tenor and representing an equivalent
number of Applicable Warrant Shares.
SECTION 7. Reservation of Warrant Shares. The Company shall at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued shares of Common Stock or its
authorized and issued shares of Common Stock held in its treasury, for the
purpose of enabling it to satisfy any obligation to issue the Applicable Warrant
Shares upon exercise of the Warrants, the maximum number of shares of Common
Stock which may then be deliverable upon the exercise of all outstanding
Warrants.
If on any date, the number of authorized but unissued (and otherwise
unreserved) shares of Common Stock is less than the amount required to enable
the Company to satisfy any obligation to issue the Warrant Shares upon exercise
of the Warrants, then the Company shall use its best efforts to amend its
certificate of incorporation to increase the number of authorized but unissued
shares of Common Stock to enable it to fulfill such obligation as soon as
possible and, in any event, no later than the 75th day after such date.
The Company or, if appointed, the transfer agent for the Common
Stock and each transfer agent for any shares of the Company's capital stock
issuable upon the exercise of any of the Warrants (collectively, the "Transfer
Agent") will be irrevocably authorized and directed at all times to reserve such
number of authorized shares as shall be required for such purpose. The Company
shall keep a copy of this Agreement on file with the Transfer Agent. The Company
will supply the Transfer Agent with a duly executed certificate for such
purposes and will provide or otherwise make available all other consideration
that may be deliverable upon exercise of the Warrants. The Company will furnish
such Transfer Agent a copy of all notices of adjustments and certificate related
thereto, transmitted to the Investor pursuant to Section 11 hereof.
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Before taking any action which would cause an adjustment pursuant to
Section 8 hereof to reduce the per share Applicable Exercise Price below the
then par value of an Applicable Warrant Share, the Company shall take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and nonassessable
Applicable Warrant Shares at the Applicable Exercise Price as so adjusted.
The Company covenants that all the Applicable Warrant Shares and
other capital stock issued upon exercise of the Warrants will, upon payment of
the Applicable Exercise Price therefore and issue, be validly authorized and
issued, fully paid, nonassessable, free of preemptive rights and free from all
taxes, liens, charges and security interests with respect to the issue thereof.
The Company shall from time to time take all action which may be
necessary or appropriate so that the Common Stock issuable upon conversion of
the Applicable Warrant Shares following an exercise of the Warrants, will be
listed on the principal securities exchanges and markets within the United
States of America, if any, on which other shares of the same class of Common
Stock of the Company are then listed.
SECTION 8. Adjustment of Exercise Price and Number of Warrant Shares
Issuable. The Applicable Exercise Price and the number of Applicable Warrant
Shares issuable upon the exercise of each Numbered Warrant set forth in Schedule
A (the "Applicable Warrant Number") are subject to adjustment from time to time
upon the occurrence of the events enumerated in, or as otherwise provided in,
this Section 8.
(a) Adjustment for Change in Capital Stock
If the Company:
(1) pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock;
(2) subdivides or reclassifies its outstanding shares of
Common Stock into a greater number of shares;
(3) combines or reclassifies its outstanding shares of
Common Stock into a smaller number of shares;
(4) makes a distribution on its Common Stock in shares
of its capital stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any
shares of its capital stock;
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then the Applicable Exercise Price in effect immediately prior to such action
shall be proportionately adjusted so that the holder of any Numbered Warrant
thereafter exercised may receive the aggregate number and kind of shares of
capital stock of the Company which he or it would have owned immediately
following such action if such Numbered Warrant had been exercised immediately
prior to such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If after an adjustment a holder of a Numbered Warrant upon exercise
of it may receive shares of two or more classes of capital stock of the Company,
the Company shall determine the allocation of the adjusted Applicable Exercise
Price between the classes of capital stock. After such allocation, the exercise
privilege and the Applicable Exercise Price of each class of capital stock shall
thereafter be subject to adjustment on terms comparable to those applicable to
Common Stock in this Section 8.
Such adjustment shall be made successively whenever any event listed
above shall occur. If the occurrence of any event listed above results in an
adjustment under subsections (b) or (c) below, no further adjustment shall be
made under this subsection (a).
(b) Adjustment for Rights Issue
If the Company distributes any rights, options or warrants (whether
or not immediately exercisable) to all holders of its Common Stock entitling
them to purchase shares of Common Stock at a price per share less than the
Current Market Value per share within 60 days after the record date relating to
such distribution, the Applicable Exercise Price shall be adjusted in accordance
with the formula:
O + N x P
------
E' = E x M
---------
O + N
where:
E' = the adjusted Applicable Exercise Price.
E = the then current Applicable Exercise Price.
O = the number of shares of Common Stock outstanding on the
record date for any such distribution.
N = the number of additional shares of Common Stock issuable
upon exercise of such rights, options or warrants.
P = the exercise price per share of such rights, options or
warrants.
M = the Current Market Value per share of Common Stock on the
record date for any such distribution.
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The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the Applicable Exercise Price shall be immediately
readjusted to what it would have been if "N" in the above formula had been the
number of shares actually issued. No adjustment shall be required under this
subsection (b) if at the time of such distribution the Company makes the same
distribution to holders of Warrants as it makes to holders of shares of Common
Stock pro rata based on the number of shares of Common Stock for which such
Warrants are exercisable (whether or not currently exercisable). No adjustment
shall be made pursuant to this subsection (b) which shall be have the effect of
decreasing the number of Applicable Warrant Shares purchasable upon exercise of
a Numbered Warrant.
(c) Adjustment for Other Distributions
If the Company distributes to all holders of its Common Stock (i)
any evidences of indebtedness of the Company or any of its subsidiaries, (ii)
any cash or other assets of the Company or any of its subsidiaries, (iii) shares
of its capital stock or any other properties or securities or (iv) any rights,
options or warrants to acquire any of the foregoing or to acquire any other
securities of the Company (the items described in the foregoing clauses (i)-(iv)
being collectively referred to as the "Consideration"), the Applicable Exercise
Price for each Numbered Warrant shall be adjusted in accordance with the
formula:
E' = E x M - F
-----
M
where:
E' = the adjusted Applicable Exercise Price.
E = the then current Applicable Exercise Price.
M = the Current Market Value per share of Common Stock on the
record date mentioned below.
F = the fair market value on the record date mentioned below of
the Consideration distributable to the holder of one share of
Common Stock.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
If an adjustment is made pursuant to this subsection (c) as a result of the
issuance of rights, options or warrants and at the end of the period during
which any such rights, options or warrants are exercisable, not all such rights,
options or warrants shall have been exercised, the Applicable Exercise Price
shall be immediately readjusted as if "F" in the above formula was the fair
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market value on the record date of the indebtedness or assets actually
distributed upon exercise of such rights, options or warrants divided by the
number of shares of Common Stock outstanding on the record date. No adjustment
shall be required under this subsection (c) if at the time of such distribution
the Company makes the same distribution to holders of Warrants as it makes to
holders of shares of Common Stock pro rata based on the number of shares of
Common Stock for which such Warrants are exercisable (whether or not currently
exercisable). No adjustment shall be made pursuant to this subsection (c) which
shall have the effect of decreasing the number of Applicable Warrant Shares
purchasable upon exercise of any Numbered Warrant.
This subsection does not apply to any distribution referred to in
subsection (a) of this Section 9 or to rights, options or warrants referred to
in subsection (b) of this Section 9.
(d) Current Market Value
"Current Market Value" per share of Common Stock or of any other
security (herein collectively referred to as a "Security") at any date shall be:
(1) if the Security is registered under the Exchange
Act, the average of the daily Market Prices for each business
day during the period commencing 15 business days before such
date and ending on the date one day prior to such date or, if
the Security has been registered under the Exchange Act for
less than 15 consecutive business days before such date, then
the average of the daily Market Prices for all of the business
days before such date for which daily Market Prices are
available. If the Market Price is not determinable for at
least 10 business days in such period, the Current Market
Value of the Security shall be determined as if the Security
was not registered under the Exchange Act; or
(2) if the Security is not registered under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (i) the value of the Security determined in good faith
by the Board of Directors of the Company and certified in a
board resolution, based on the most recently completed arm's
length transaction between the Company and a person other than
an Affiliate of the Company in which such determination is
necessary and the closing of which occurs on such date or
shall have occurred within the six months preceding such date,
(ii) if no such transaction shall have occurred on such date
or within such six-month period, the value of the Security
most recently determined as of a date within the six months
preceding such date by an Independent Financial Expert or
(iii) if neither clause (i) nor (ii) is applicable, the value
of the Security determined as of such date by an Independent
Financial Expert.
The "Market Price" for any Security on each business day means: (A)
if such Security is listed or admitted to trading on any securities exchange,
the closing price, regular way, on such day on the principal exchange on which
such Security is traded, or if no sale takes place on such day, the average of
the closing bid and asked prices on such day, (B) if such Security is not then
listed or admitted to trading on any securities exchange, the last reported sale
price on such day, or if there is no such last reported sale price on such day,
the average of the closing bid and the asked prices on such day, as reported by
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a reputable quotation source designated by the Company, or (C) if neither clause
(A) nor (B) is applicable, the average of the reported high bid and low asked
prices on such day, as reported by a reputable quotation service, or a newspaper
of general circulation in the Borough of Manhattan, City of New York,
customarily published on each business day, designated by the Company. If there
are no such prices on a business day, then the Market Price shall not be
determinable for such business day.
"Independent Financial Expert" shall mean a nationally recognized
investment banking firm designated by the Company and reasonably acceptable to
the Investor (i) that does not (and whose directors, officers, employees and
Affiliates do not) have a direct or indirect material financial interest in the
Company, (ii) that has not been, and, at the time it is called upon to serve as
an Independent Financial Expert under this Agreement is not (and none of whose
directors, officers, employees or Affiliates is) a promoter, director or officer
of the Company, (iii) that has not been retained by the Company, the Investor or
an Affiliate of the Investor for any purpose, other than to perform an equity
valuation, within the preceding twelve months, and (iv) that, in the reasonable
judgment of the Board of Directors of the Company, is otherwise qualified to
serve as an independent financial advisor. Any such person may receive customary
compensation and indemnification by the Company for opinions or services it
provides as an Independent Financial Expert.
"Affiliate" shall mean, with respect to any person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such person. For the purposes of this definition, "control,"
when used with respect to any person, means the power to direct the management
and policies of such person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
(e) When De Minimis Adjustment May Be Deferred
No adjustment in the Applicable Exercise Price need be made unless
the adjustment would require an increase or decrease of at least 1% in the
Applicable Exercise Price. No adjustment in the Applicable Warrant Number need
be made unless the adjustment would require an increase or decrease of at least
0.5% in the Applicable Warrant Number. Any adjustments that are not made shall
be carried forward and taken into account in any subsequent adjustment, provided
that no such adjustment shall be deferred beyond the date on which a Numbered
Warrant is exercised.
All calculations under this Section 8 shall be made to the nearest
1/1000th of a share.
(f) When No Adjustment Required
If an adjustment is made upon the establishment of a record date or
issuance date for a distribution or issuance subject to subsections (a), (b) or
(c) hereof and such distribution or issuance is subsequently cancelled, the
Applicable Warrant Number then in effect shall be readjusted, effective as of
the date when the Board of Directors determines to cancel such distribution, to
that which would have been in effect if such record date had not been fixed.
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To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the amount of cash into which such
Warrants are exercisable. Interest will not accrue on the cash.
(g) Notice of Adjustment
Whenever the Applicable Exercise Price or the Applicable Warrant
Number is adjusted, the Company shall provide the notices required by Section 11
hereof.
(h) When Issuance or Payment May Be Deferred
In any case in which this Section 8 shall require that an adjustment
in the Applicable Exercise Price and Applicable Warrant Number be made effective
as of a record date for a specified event, the Company may elect to defer until
the occurrence of such event (i) issuing to the Investor of any Numbered Warrant
exercised after such record date the Applicable Warrant Shares and other capital
stock of the Company, if any, issuable upon such exercise over and above the
Applicable Warrant Shares and other capital stock of the Company, if any,
issuable upon such exercise on the basis of the Applicable Warrant Number prior
to such adjustment, and (ii) paying to the Investor any amount in cash in lieu
of a fractional share pursuant to Section 9; provided, however, that the Company
shall deliver to the Investor a due xxxx or other appropriate instrument
evidencing the Investor's right to receive such additional Applicable Warrant
Shares, other capital stock and cash upon the occurrence of the event requiring
such adjustment.
(i) Reorganizations
In case of any capital reorganization, other than in the cases
referred to in Sections 8(a), (b) or (c) hereof, or the consolidation or merger
of the Company with or into another corporation (other than a merger or
consolidation which does not result in any reclassification of the outstanding
shares of Common Stock into shares of other stock or other securities or
property) (collectively such actions being hereinafter referred to as
"Reorganizations"), there shall thereafter be deliverable upon exercise of any
Warrant (in lieu of the number of shares of Common Stock theretofore
deliverable) the number of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock that would otherwise have
been deliverable upon the exercise of such Warrant would have been entitled upon
such Reorganization if such Numbered Warrant had been exercised in full
immediately prior to such Reorganization. In case of any Reorganization,
appropriate adjustment, as determined in good faith by the Board of Directors of
the Company, whose determination shall be described in a duly adopted resolution
certified by the Company's Secretary or Assistant Secretary, shall be made in
the application of the provisions herein set forth with respect to the rights
and interests of the Investor so that the provisions set forth herein shall
thereafter be applicable, as nearly as possible, in relation to any shares or
other property thereafter deliverable upon exercise of Warrants.
The Company shall not effect any such Reorganization unless prior to
or simultaneously with the consummation thereof the successor corporation (if
other than the Company) resulting from such Reorganization or other appropriate
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corporation or entity shall expressly assume, by a supplemental Warrant
Agreement or other acknowledgement executed and delivered to the Investor, the
obligation to deliver to the Investor such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the Investor may be entitled to
purchase, and all other obligations and liabilities under this Agreement.
(j) Adjustment in Number of Shares
Upon each adjustment of the Applicable Exercise Price pursuant to
this Section 9, each Numbered Warrant outstanding prior to the making of the
adjustment in the Applicable Exercise Price shall thereafter evidence the right
to receive upon payment of the adjusted Applicable Exercise Price that number of
shares of Common Stock (calculated to the nearest thousandth) obtained from the
following formula:
N' = N x E
--
E'
where:
N' = the adjustment number of Applicable Warrant Shares issuable
upon exercise of a Numbered Warrant by payment of the adjusted
Applicable Exercise Price.
N = the number of Applicable Warrant Shares previously issuable
upon exercise of such Numbered Warrant by payment of the
applicable exercise price prior to adjustment.
E' = the adjusted Applicable Exercise Price.
E = the Applicable Exercise Price prior to adjustment.
(k) Form of Warrants
Irrespective of any adjustments in the Applicable Exercise Price or
the number or kind of shares purchasable upon the exercise of the Warrants,
Warrants theretofore or thereafter issued may continue to express the same price
and number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
(l) Adjustments in Other Securities
If as a result of any event or for any other reason, any adjustment
is made which increases the number of shares of Common Stock issuable upon
conversion, exercise or exchange of, or in the conversion or exercise price or
exchange ratio applicable to, any outstanding securities of the Company that are
convertible into, or exercisable or exchangeable for, Common Stock of the
Company, then a corresponding adjustment shall be made hereunder to increase the
number of shares of Common Stock issuable upon exercise of the Warrants, but
only to the extent that no such adjustment has been made pursuant to Sections
8(a), (b) or (c) hereof with respect to such event or for such other reason.
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(m) Tender Offers; Exchange Offers
In the event that the Company or any subsidiary of the Company shall
purchase shares of Common Stock pursuant to a tender offer or an exchange offer
for a price per share of Common Stock that is greater than the then Current
Market Value per share of shares of Common Stock in effect at the end of the
trading day immediately following the day on which such tender offer or exchange
offer expires, then the Company, or such subsidiary of the Company, shall,
within (10) business days of the expiry of such tender offer or exchange offer,
offer to purchase the Warrants for comparable consideration per share of Common
Stock based on the number of shares of Common Stock which the Investor would
receive upon exercise of such Warrants (the "Offer") (such amount less the
Applicable Exercise Price in respect of such share, the "Per Share
Consideration"); provided, however, if a tender offer is made for only a portion
of the outstanding shares of Common Stock, then such offer shall be made for
such shares of Common Stock issuable upon exercise of the Warrants in the same
pro rata proportion; provided, further, that the Company shall not be required
to make such an Offer if the Per Share Consideration is an amount less than the
then-existing Exercise Price per share.
The Offer shall remain open for a period of twenty (20) business
days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five (5) business days after the termination of the Offer Period (the "Purchase
Date"), the Company shall purchase such Warrants for the applicable Per Share
Consideration.
(n) Other Events
If any event shall occur as to which the other provisions of this
Section 8 are not strictly applicable but the failure to make any adjustment
would have the effect of depriving the Investor of the benefit of all or a
portion of the exercise rights in respect of any Numbered Warrant in accordance
with the essential intent and principles of this Section 8, then, in each such
case, the Company shall appoint an Independent Financial Expert, which shall
give its opinion upon the adjustment, if any, on a basis consistent with the
essential intent and principles established in this Section 8 necessary to
preserve, without dilution, such exercise rights. Upon receipt of such opinion,
the Company will promptly mail a copy thereof to the Investor and shall make the
adjustments described therein.
(o) Miscellaneous
For purpose of this Section 8 the term "shares of Common Stock"
shall mean (i) shares of any class of stock designated as Common Stock of the
Company at the date of this Agreement, and (ii) shares of any other class of
stock resulting from successive changes or reclassification of such shares
consisting solely of changes in par value, or from par value to no par value, or
from no par value to par value. In the event that at any time, as a result of an
adjustment made pursuant to this Section 8, the Investor shall become entitled
to purchase any securities of the Company other than, or in addition to, shares
of Common Stock, thereafter the number or amount of such other securities so
purchasable upon exercise of each Numbered Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Applicable Warrant Shares
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contained in subsections (a) through (n) of this Section 8, inclusive, and the
provisions of Sections 4, 5, 7 and 8 with respect to the Applicable Warrant
Shares or the Common Stock shall apply on like terms to any such other
securities.
SECTION 9. Fractional Interests. The Company shall not be required
to issue fractional Applicable Warrant Shares on the exercise of the Warrants.
If more than one Numbered Warrant shall be presented for exercise in full at the
same time by the Investor, the number of full Applicable Warrant Shares which
shall be issuable upon the exercise thereof shall be computed on the basis of
the aggregate number of the Applicable Warrant Shares purchasable on exercise of
the Warrants so presented. If any fraction of an Applicable Warrant Share would,
except for the provisions of this Section 9, be issuable on the exercise of any
Warrants (or specified portion thereof), the Company shall pay an amount in cash
equal to the fair market value of the Applicable Warrant Share so issuable (as
determined in good faith by the Board of Directors), multiplied by such
fraction.
SECTION 10. Notices to Investor. Upon any adjustment pursuant to
Section 8 hereof, the Company shall promptly thereafter (i) cause to be filed
with the Company a certificate of an officer of the Company setting forth the
Applicable Warrant Number and the Applicable Exercise Price after such
adjustment and setting forth in reasonable detail the method of calculation and
the facts upon which such calculations are based, and (ii) cause to be given to
the Investor notice of such adjustments by first class mail, postage prepaid to
the address of the Investor set forth in Section 11.
In case:
(a) the Company shall authorize the issuance to all
holders of shares of Common Stock of rights, options or
warrants to subscribe for or purchase shares of Common Stock
or of any other subscription rights or warrants; or
(b) the Company shall authorize the distribution to all
holders of shares of Common Stock of assets, including cash,
evidences of its indebtedness, or other securities; or
(c) of any consolidation or merger to which the Company
is a party and for which approval of any shareholders of the
Company is required, or of the conveyance or transfer of the
properties and assets of the Company substantially as an
entirety, or of any reclassification or change of Common Stock
issuable upon exercise of the Warrants (other than a change in
par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or
combination), or a tender offer or exchange offer for shares
of Common Stock; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(e) the Company proposes to take any action that would
require an adjustment to the Applicable Warrant Number or the
Applicable Exercise Price pursuant to Section 8 hereof;
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then the Company shall cause to be given to the Investor, at the address set
forth in Section 11 at least 20 days prior to the applicable record date
hereinafter specified, or 20 days prior to the date of the event in the case of
events for which there is no record date, by first-class mail, postage prepaid,
a written notice stating (i) the date as of which the holders of record of
shares of Common Stock to be entitled to receive any such rights, options,
warrants or distribution are to be determined, or (ii) the initial expiration
date set forth in any tender offer or exchange offer for shares of Common Stock,
or (iii) the date on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective or
consummated, and the date as of which it is expected that holders of record of
shares of Common Stock shall be entitled to exchange such shares for securities
or other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up. The failure to give the notice required by this Section 11 or any defect
therein shall not affect the legality or validity of any distribution, right,
option, warrant, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.
SECTION 11. Notices to the Company and Investor. All notices and
other communications provided for or permitted hereunder shall be made by hand
delivery, first-class mail, telex, telecopier, or overnight air courier
guaranteeing next day delivery:
(a) if to the Investor, at 0000 Xxxxxx Xxxx, Xxxxx 0000,
Xxxxxx, Xxxxx 00000, Attention: Xxxxxxx Xxxxxxx; and
(b) if to the Company, at 0000 X. 000xx Xxxxxx, Xxxxx,
XX 00000 Attention: Xxx Xxxxxxx.
All such notices and communications shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; five (5) business days
after being deposited in the mail, postage prepaid, if mailed; when answered
back if telexed; when receipt acknowledged, if telecopied; and the next business
day after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery. The parties may change the addresses to which
notices are to be given by giving five days' prior notice of such change in
accordance herewith.
SECTION 12. Restrictions on Transfer; Registration of Transfers and
Exchanges. The Warrants (and any shares of Common Stock issued upon the exercise
of the Warrants) shall not be transferable except in accordance with the terms
of this Agreement.
Prior to any proposed transfer of the Warrants or the shares of
Common Stock issued upon exercise of the Warrants, the Investor will deliver to
the Company a Certificate of Transfer in the form attached to the Warrant
Certificate and, if so requested by the Company, such other information relating
to the proposed transfer and the identity of the proposed transferee as the
Company may reasonably request in order to confirm that the Warrants or shares
of Common Stock, as applicable, may be sold or otherwise transferred in the
manner proposed. Upon original issuance thereof, and until such time as the same
shall have been registered under the Securities Act or sold pursuant to Rule 144
promulgated thereunder (or any similar rule or regulation) the Warrant
Certificate and any certificates evidencing shares of Common Stock issued upon
exercise of the Warrants shall bear the following legend unless, in the opinion
of qualified counsel, such legend is no longer required by the Securities Act:
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THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. SUCH SECURITIES GENERALLY MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR PURSUANT TO AN APPLICABLE EXEMPTION FROM
THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SAID ACT.
The Company shall from time to time register the transfer of any
outstanding Warrant Certificate in a Warrant register to be maintained by the
Company upon surrender thereof accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company, duly executed by
the Investor or by the duly appointed legal representative thereof or by a duly
authorized attorney. Upon any such registration of transfer, a new Warrant
Certificate shall be issued to the transferee(s) and the surrendered Warrant
Certificate shall be canceled and disposed of by the Company.
The Warrant Certificate may be exchanged at the option of the
Investor, when surrendered to the Company at its office for another Warrant
Certificate or other Warrant Certificate of like series and tenor and
representing in the aggregate a like number of Warrants. Warrant Certificate
surrendered for exchange shall be canceled and disposed of by the Company.
SECTION 13. Supplements and Amendments. The Company may from time to
time supplement or amend this Agreement without the approval of the Investor in
order to cure any ambiguity or to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provision herein,
or to make any other provisions in regard to matters or questions arising
hereunder which the Company may deem necessary or desirable and which shall not
in any way adversely affect the interests of the Investor. An amendment or
supplement to this Warrant Agreement that has an adverse effect on the Investor
shall require the written consent of the Investor.
SECTION 14. Successors and Assigns. All the covenants and provisions
of this Agreement by or for the benefit of the Company shall bind and inure to
the benefit of its respective successors and assigns hereunder.
SECTION 15. Termination. This Agreement shall terminate when all
Warrants have been exercised or have expired pursuant to this Agreement.
SECTION 16. No Rights or Liabilities as Stockholder. Nothing
contained herein shall be construed as conferring upon the Investor any rights
as a stockholder of the Company or as imposing any obligation on the Investor to
purchase any securities or as imposing any liabilities on the Investor as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
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SECTION 17. Governing Law. This Agreement and each Warrant
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Texas and for all purposes shall be construed in accordance
with the internal laws of said State.
SECTION 18. Benefits of This Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Investor any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of the Company, the
Investor and transferees of the Investor.
SECTION 19. Construction; Interpretation. This Agreement shall not be construed
for or against any party by reason of the authorship or alleged authorship of
any provision hereof or by reason of the status of the respective parties. This
Agreement shall be construed reasonably to carry out its intent without
presumption against or in favor of any party. The natural persons executing this
Agreement on behalf of each party have the full right, power and authority to do
and affirm the foregoing warranty on behalf of each party and on their own
behalf. The captions on sections are provided for purposes of convenience and
are not intended to limit, define the scope of or aid in interpretation of any
of the provisions hereof. All pronouns and singular or plural references as used
herein shall be deemed to have interchangeably (where the sense of the sentence
requires) a masculine, feminine or neuter, and/or singular or plural meaning, as
the case may be.
SECTION 20. 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 all such counterparts shall together constitute but one and
the same instrument.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
COMPANY:
iSecureTrac Corp., a Delaware corporation
By:
---------------------------------------
Name:
Title:
INVESTOR:
Mykonos 6420, L.P., a Texas limited
partnership
By: Sponsor Investments LLC
Its: General Partner
By: Herakles Investments, Inc.
Its: Manager
By:
---------------------------------------
Name:
Title:
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