Void after 5:00 P.M. New York City time on the last day of the Exercise Period, as defined in the Warrant CLASS B COMMON STOCK PURCHASE WARRANT OF SHUMATE INDUSTRIES, INC.
NEITHER
THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR
ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN
MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS
OR
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS WHICH, IN THE
OPINION OF COUNSEL FOR THE COMPANY, IS AVAILABLE.
Void
after 5:00 P.M. New York City time on the last day of the Exercise
Period,
as
defined in the Warrant
CLASS
B
COMMON
STOCK PURCHASE WARRANT
OF
▇▇▇▇▇▇▇
INDUSTRIES, INC.
Warrant
No.: _____
This
is
to certify that, FOR VALUE RECEIVED, _________(“Holder”), is entitled to
purchase, subject to the provisions of this warrant (“Warrant”
or
“Class
B Warrant”),
from
▇▇▇▇▇▇▇ Industries, Inc., a Delaware corporation (the “Company”),
at an
exercise price per share of $2.00, subject to adjustment as provided in this
Warrant (the “Warrant
Exercise Price”),
_________ shares of common stock, par value $0.001 per share (“Common
Stock”).
The
shares of Common Stock deliverable upon such exercise, and as adjusted from
time
to time (including shares issued as dividends or upon any stock split or
recapitalization), are hereinafter sometimes referred to as “Warrant
Shares.”
1. ISSUANCE
OF WARRANT.
This
Warrant is being issued pursuant to the exercise of a like number of Series
A
Warrants by the Holder hereof previously issued to the Holder in connection
with
its participation in the Company’s Placement (as defined below) as otherwise
described in the Company’s Private Placement Memorandum dated as of September
20, 2006, as amended (“Memorandum”).
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed thereto in the Subscription Agreement or Memorandum, as the case may
be. In addition, the following terms have the meanings set forth below:
“Class
A Warrants”
shall
mean the Class A Warrants issued in connection with the Placement.
“Convertible
Securities”
shall
mean evidences of indebtedness, shares of stock or other securities, which
are
convertible into or exchangeable, with or without payment of additional
consideration in cash or property, for shares of Common Stock, either
immediately or upon the occurrence of a specified date or a specified
event.
1
“Exercise
Period”
shall
mean the period commencing on the date hereof and ending at 5 p.m., Eastern
Time
on March 31, 2012.
“Permitted
Issuances”
shall
mean (i) Common Stock issued pursuant to a stock split or
subdivision,
or (ii)
Common Stock issuable or issued to employees, consultants or directors of the
Company directly or pursuant to a stock plan or other compensation arrangement
(including upon exercise of options or warrants) approved by the Board of
Directors of the Company at the then fair market value, or (iii) capital stock,
debt instruments convertible into capital stock or warrants or options to
purchase capital stock issued in connection with bona fide acquisitions,
mergers, purchases, corporate partnering agreements, consulting agreements,
joint ventures or similar transactions, the terms of which are approved by
the
Board of Directors of the Company, or (iv) Common Stock issued or issuable
upon
conversion of the Class A Warrants, or (v) Common Stock issuable upon exercise
of warrants issued to First Montauk Securities Corp. (or its assignees) as
compensation in connection with the Offering, or (vi) Common Stock or any other
securities exercisable or exchangeable for, or convertible into shares of Common
Stock outstanding as of September 20, 2006.
“Placement”
means
the private placement by the Company of up to $6,000,000 worth of its
securities, including the over-allotment option, consisting of shares of the
Company’s Common Stock and Class A Warrants, as described in the Memorandum. The
Placement was completed on December 14, 2006 and an aggregate of $3,787,550
worth of the Company’s securities were sold therein.
2. EXERCISE
OF WARRANT.
(a)
This Warrant may be exercised in whole or in part at any time or from time
to
time from the date hereof until the end of the Exercise Period by presentation
and surrender hereof to the Company at its principal office, or at the office
of
its stock transfer agent, if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Warrant Exercise Price for the number
of shares of Common Stock specified in such form. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder hereof to purchase the balance of the shares of Common Stock purchasable
hereunder. Upon receipt by the Company of this Warrant at its office, or by
the
stock transfer agent of the Company at its office, in proper form for exercise,
the Holder shall be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the stock transfer
books
of the Company shall then be closed or that certificates representing such
shares of Common Stock shall not then be actually delivered to the Holder.
As
soon as practicable after each exercise of this Warrant, in whole or in part,
and in any event within five (5) days thereafter, the Company at its expense
(including the payment by it of any applicable issue or transfer taxes and
transfer agent fees or opinions of counsel) will cause to be issued in the
name
of and delivered to the Holder hereof or, subject to Section 6 hereof, as the
Holder may direct a certificate or certificates (with appropriate restrictive
legends, as applicable) for the number of duly authorized, validly issued,
fully
paid and non-assessable shares of Common Stock to which the Holder shall be
entitled upon exercise plus, in lieu of any fractional share to which the Holder
would otherwise be entitled, all issuances of Common Stock shall be rounded
up
to the nearest whole share.
2
(b) Notwithstanding
the foregoing, at any time after March 31, 2008 that a registration statement
covering the resale of the Warrant Shares is not effective or is suspended,
or
that the related prospectus is outdated, defective or requires a supplement
or
amendment for any reason, the Holder may, at its option during such time, elect
to pay some or all of the Exercise Price payable upon an exercise of this
Warrant by canceling a portion of this Warrant exercisable for such number
of
Warrant Shares as is determined by dividing (i) the total Exercise Price
payable in respect of the number of Warrant Shares being purchased upon such
exercise by (ii) the excess of the Fair Market Value per share of Common
Stock as of the effective date of exercise, as determined pursuant to Section
3(d) below (the “Exercise
Date”)
over
the Exercise Price per share. If the Holder wishes to exercise this Warrant
pursuant to this method of payment with respect to the maximum number of Warrant
Shares purchasable pursuant to this method, then the number of Warrant Shares
so
purchasable shall be equal to the total number of Warrant Shares, minus the
product obtained by multiplying (x) the total number of Warrant Shares by
(y) a fraction, the numerator of which shall be the Exercise Price per
share and the denominator of which shall be the Fair Market Value per share
of
Common Stock as of the Exercise Date.
(c) For
purposes of this Warrant, “Fair Market Value” shall mean, on any
day:
(i) the
closing price of the Common Stock on a national securities exchange or as quoted
on the Nasdaq Global Select Market, Nasdaq Global Market or the Nasdaq Capital
Market on such day, as reported by the Wall Street Journal; or
(ii) if
the
Common Stock is quoted on the Nasdaq Global Select Market, Nasdaq Global Market
or the Nasdaq Capital Market but no sale occurs on such day, the average of
the
closing bid and asked prices of the Common Stock on the Nasdaq Global Select
Market, Nasdaq Global Market or the Nasdaq Capital Market on such day, as
reported by the Wall Street Journal; or
(iii) if
the
Common Stock is not so listed or quoted, the average of the closing bid and
asked prices of the Common Stock in the U.S. over-the-counter market; or
(iv) if
no
such trading market is readily available, the fair market value of the Common
Stock as determined in good faith and certified by a majority of the members
of
the Board of Directors of the Company.
3. RESERVATION
OF SHARES/FRACTIONAL SHARES.
The
Company hereby agrees that at all times there shall be reserved for issuance
and/or delivery upon exercise of this Warrant such number of shares of Common
Stock as shall be required for issuance and delivery upon exercise of this
Warrant. No fractional shares or script representing fractional shares shall
be
issued upon the exercise of this Warrant. Instead, the Company will round up
to
the nearest whole share.
4. EXCHANGE,
TRANSFER, ASSIGNMENT OR LOSS OF WARRANT.
This
Warrant is exchangeable, without expense, at the option of the Holder, upon
presentation and surrender hereof to the Company for other Warrants of different
denominations entitling the holder thereof to purchase in the aggregate the
same
number of shares of Common Stock purchasable hereunder. Upon surrender of this
Warrant to the Company or at the office of its stock transfer agent, if any,
with the Assignment Form annexed hereto duly executed and funds sufficient
to
pay any transfer tax, the Company shall, without charge, execute and deliver
a
new Warrant in the name of the assignee named in such instrument of assignment
and this Warrant shall promptly be canceled. This Warrant may be divided or
combined with other Warrants which carry the same rights upon presentation
hereof at the office of the Company or at the office of its stock transfer
agent, if any, together with a written notice specifying the names and
denominations in which new Warrants are to be issued and signed by the Holder
hereof. The term “Warrant” as used herein includes any Warrants into which this
Warrant may be divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor. Any such new Warrant executed and delivered shall constitute an
additional contractual obligation on the part of the Company, whether or not
this Warrant so lost, stolen, destroyed, or mutilated shall be at any time
enforceable by anyone.
3
5. RIGHTS
AND OBLIGATIONS OF THE HOLDER.
The
Holder shall not, by virtue of this Warrant, be entitled to any rights of a
stockholder in the Company, either at law or equity, and the rights of the
Holder are limited to those expressed in the Warrant and are not enforceable
against the Company except to the extent set forth herein. In addition,
no
provision hereof, in the absence of affirmative action by ▇▇▇▇▇▇ to purchase
shares of Common Stock, and no enumeration herein of the rights or privileges
of
Holder hereof, shall give rise to any liability of such Holder for the purchase
price of any Common Stock or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the
Company.
6. ANTI-DILUTION
PROVISIONS.
The
Warrant Exercise Price in effect at any time and the number and kind of
securities purchasable upon exercise of each Warrant shall be subject to
adjustment as follows and the Company shall give each Holder notice of any
event
described below which requires an adjustment pursuant to this Section 6 at
the
time of such event:
(a) Stock
Dividends, Subdivisions and Combinations.
If at
any time the Company shall:
(i) take
a
record of the holders of its Common Stock for the purpose of entitling them
to
receive a dividend payable in, or other distribution of, shares of Common
Stock,
(ii) subdivide
or reclassify its outstanding shares of Common Stock into a larger number of
shares of Common Stock, or
(iii) combine
or reclassify its outstanding shares of Common Stock into a smaller number
of
shares of Common Stock or otherwise effect a reverse stock split,
4
then
(i)
the number of shares of Common Stock for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of shares of Common Stock which a record holder of the same number
of
shares of Common Stock for which this Warrant is exercisable immediately prior
to the occurrence of such event, or the record date therefor, whichever is
earlier, would own or be entitled to receive after the happening of such event,
and (ii) the Warrant Exercise Price(s) shall be adjusted to equal (A) the
Warrant Exercise Price immediately prior to such event multiplied by the number
of shares of Common Stock for which this Warrant is exercisable immediately
prior to the adjustment divided by (B) the number of shares for which this
Warrant is exercisable immediately after such adjustment.
(b) Certain
Other Distributions and Adjustments.
(i) If
at any
time the Company shall take a record of the holders of its Common Stock for
the
purpose of entitling them to receive any dividend or other distribution of:
(A) cash,
(B) any
evidences of its indebtedness, any shares of its stock or any other securities
or property of any nature whatsoever (other than Convertible Securities or
shares of Common Stock), or
(C) any
warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of its stock or any other securities or property of
any
nature whatsoever (other than Convertible Securities or shares of Common
Stock),
then,
upon exercise of this Warrant, Holder shall be entitled to receive such dividend
or distribution with respect to the amount of Common Stock received on such
exercise, and, if such dividend or distribution shall have been securities,
any
property subsequently distributed with respect thereto. However, in the event
that at the time the Company has taken a record of the holders of its Common
Stock for the purposes described above: (i) the resale of the shares of Common
Stock issuable upon exercise of this Warrant is not registered with the SEC
for
resale to the public under an effective registration statement; and (ii) the
Common Stock issuable upon exercise of this Warrant is not quoted on the OTCBB
or a similar electronic quotation system or stock exchange, Holder shall be
entitled to receive such dividend or distribution as if Holder had exercised
this Warrant.
(ii) A
reclassification of the Common Stock (other than a change in par value, or
from
par value to no par value or from no par value to par value) into shares of
Common Stock and shares of any other class of stock shall be deemed a
distribution by the Company to the holders of its Common Stock of such shares
of
such other class of stock and in such event, upon exercise of this Warrant,
Holder shall be entitled to receive such distribution with respect to the amount
of Common Stock received on such exercise, and, if such dividend or distribution
shall have been securities, any property subsequently distributed with respect
thereto, and, if the outstanding shares of Common Stock shall be changed into
a
larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination,
as
the case may be, of the outstanding shares of Common Stock within the meaning
of
Section 6(a). However, in the event that at the time the Company has
reclassified its Common Stock, as described above: (i) the resale of the shares
of Common Stock issuable upon exercise of this Warrant is not registered with
the SEC for resale to the public under an effective registration statement;
and
(ii) the Common Stock issuable upon exercise of this Warrant is not quoted
on
the OTCBB or a similar electronic quotation system or stock exchange, Holder
shall be entitled to receive such distribution, and, if such dividend or
distribution shall have been securities, any property subsequently distributed
with respect thereto, as if ▇▇▇▇▇▇ had exercised this Warrant.
5
(c) Issuance
of Additional Shares of Common Stock.
(i) (A)
If
the Company at any time prior to the earlier to occur of: (i) the date that
is
fifteen (15) months after the date of the final Closing; or (ii) the Company
and
@Balance Americas, a Shell Technology Ventures company, entering into a
definitive distribution agreement for the Company’s Hemiwedge®
DIV product, shall
sell shares of Common Stock (or securities convertible into shares of Common
Stock) at a price per share (or having a conversion price per share, if a
security convertible into Common Stock) which is less than the then applicable
exercise price of the Class A Warrants (a “Subsequent
Offering Price”),
other
than Permitted Issuances, then the Warrant Exercise Price shall be reduced
to
equal the Subsequent Offering Price.
(B) If,
at
any time after the earlier to occur of: (i) the date that is fifteen (15) months
after the date of the final Closing; or (ii) the Company and @Balance Americas,
a Shell Technology Ventures company, entering into a definitive distribution
agreement for the Company’s Hemiwedge®
DIV product,
the
Company shall issue or sell any shares of Common Stock in exchange for
consideration in an amount per share of Common Stock less than the then
applicable, or last applicable, exercise price of the Class A Warrants (the
“Discounted
Price,”
each
such sale or issuance a “Discounted
Price Transaction”
and
the
number of shares sold or issued in such Discounted Price Transaction the
“Discounted
Sale Volume”),
other
than Permitted Issuances, then (a) the Warrant Exercise Price then in effect
shall be adjusted so that it shall equal the price determined by multiplying
the
Warrant Exercise Price in effect immediately prior to such event by a fraction,
of which the numerator shall be the sum of the amount of Common Stock
outstanding immediately before such Discounted Price Transaction, plus the
quotient obtained by dividing the total proceeds of such Discounted Price
Transaction by such Warrant Exercise Price, and of which the denominator shall
be the amount of Common Stock outstanding immediately following such exercise
(for purposes of determining the amount of Common Stock outstanding, all
outstanding securities exercisable for or convertible into Common Stock shall
be
deemed to have been so exercised or converted), and (b) the number of shares
of
Common Stock for which this Warrant is exercisable shall be adjusted to equal
the product obtained by multiplying the Warrant Exercise Price in effect
immediately prior to such Discounted Price Transaction by the number of shares
of Common Stock for which this Warrant is exercisable immediately prior to
such
Discounted Price Transaction and dividing the product thereof by the Warrant
Exercise Price resulting from the adjustment made pursuant to clause (a)
above.
6
For
purposes of Sections 6(c)(i)(A) and (B) hereof, in the event that the Class
A
Warrants have all been exercised and are no longer outstanding, then the
applicable exercise price of the Class A Warrants shall be the exercise price
at
which the last Class A Warrant was exercised.
(ii) The
provisions of paragraph (i) of this Section 6(c) shall not apply to any issuance
of shares of Common Stock for which an adjustment is provided under Section
6(a)
or 6(b). No adjustment of the number of shares of Common Stock for which this
Warrant shall be exercisable shall be made under paragraph (i) of this Section
6(c) upon the issuance of any shares of Common Stock which are issued pursuant
to the exercise of any warrants or other subscription or purchase rights or
pursuant to the exercise of any conversion or exchange rights in any Convertible
Securities, if any such adjustment shall previously have been made upon the
issuance of such warrants or other rights or upon the issuance of such
Convertible Securities (or upon the issuance of any warrant or other rights
therefor) pursuant to Section 6(d) or Section 6(e).
(d) Issuance
of Warrants or Other Rights.
If at
any time the Company shall: (i) take a record of the holders of its Common
Stock
for the purpose of entitling them to receive a distribution of, or (ii) in
any
manner issue or sell, any warrants or other rights to subscribe for or purchase
any shares of Common Stock or any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon the exercise of such
warrants or other rights or upon conversion or exchange of such Convertible
Securities shall be less than the Warrant Exercise Price, then the number of
shares for which this Warrant is exercisable and the Warrant Exercise Price
shall be adjusted as provided in Section 6(c) on the basis that the maximum
number of shares of Common Stock issuable pursuant to all such warrants or
other
rights or necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall be deemed to have received all the consideration payable therefor, if
any,
as of the date of issuance of such warrants or other rights. No further
adjustment of the Warrant Exercise Price(s) shall be made upon the actual issue
of such Common Stock or of such Convertible Securities upon exercise of such
warrants or other rights or upon the actual issuance of such Common Stock upon
such conversion or exchange of such Convertible Securities.
(e) Issuance
of Convertible Securities.
If at
any time the Company shall take a record of the holders of its Common Stock
for
the purpose of entitling them to receive a distribution of, or shall in any
manner (whether directly or by assumption in a merger in which the Company
is
the surviving corporation) issue or sell, any Convertible Securities, whether
or
not the rights to exchange or convert thereunder are immediately exercisable,
and the price per share for which Common Stock is issuable upon such conversion
or exchange shall be less than the Warrant Exercise Price, then the number
of
shares of Common Stock for which this Warrant is exercisable and the Warrant
Exercise Price shall be adjusted as provided in Section 6(c) on the basis that
the maximum number of shares of Common Stock necessary to effect the conversion
or exchange of all such Convertible Securities shall be deemed to have been
issued and outstanding and the Company shall have received all of the
consideration payable therefor, if any, as of the date of issuance of such
Convertible Securities. If any issue or sale of Convertible Securities is made
upon exercise of any warrant or other right to subscribe for or to purchase
any
such Convertible Securities for which adjustments of the number of shares of
Common Stock for which this Warrant is exercisable and the Warrant Exercise
Price have been or are to be made pursuant to Section 6(d), no further
adjustment of the number of shares of Common Stock for which this Warrant is
exercisable and the Warrant Exercise Price shall be made by reason of such
record, issue or sale.
7
(f) Superseding
Adjustment.
If at
any time after any adjustment of the number of shares of Common Stock for which
this Warrant is exercisable and the Warrant Exercise Price(s) shall have been
made pursuant to Section 6(d) or Section 6(e) as the result of any issuance
of
warrants, rights or Convertible Securities,
(i) such
warrants or rights, or the right of conversion or exchange in such other
Convertible Securities, shall expire, and all or a portion of such warrants
or
rights, or the right of conversion or exchange with respect to all or a portion
of such other Convertible Securities, as the case may be, shall not have been
exercised, or
(ii) the
consideration per share for which shares of Common Stock are issuable pursuant
to such warrants or rights, or the terms of such other Convertible Securities,
shall be increased solely by virtue of provisions therein contained for an
automatic increase in such consideration per share upon the occurrence of a
specified date or event,
then
for
each outstanding Warrant such previous adjustment shall be rescinded and
annulled and the shares of Common Stock which were deemed to have been issued
by
virtue of the computation made in connection with the adjustment so rescinded
and annulled shall no longer be deemed to have been issued by virtue of such
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a re-computation shall be made of the effect of such rights or
options or other Convertible Securities on the basis of:
(A) treating
the number of shares of Common Stock or other property, if any, theretofore
actually issued or issuable pursuant to the previous exercise of any such
warrants or rights or any such right of conversion or exchange, as having been
issued on the date or dates of any such exercise and for the consideration
actually received and receivable therefor, and
(B) treating
any such warrants or rights or any such other Convertible Securities which
then
remain outstanding as having been granted or issued immediately after the time
of such increase of the consideration per share for which shares of Common
Stock
or other property are issuable under such warrants or rights or other
convertible Securities; whereupon a new adjustment of the number of shares
of
Common Stock for which this Warrant is exercisable and the Warrant Exercise
Price(s) shall be made, which new adjustment shall supersede the previous
adjustment so rescinded and annulled.
(g) No
adjustment in the Warrant Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least one cent ($0.01)
in
such price; provided, however, that any adjustments which by reason of this
Section 6(g) are not required to be made shall be carried forward and taken
into
account in any subsequent adjustment. All calculations under this Section 6(g)
shall be made to the nearest cent or to the nearest one-hundredth of a share,
as
the case may be.
8
(h) The
Company may retain a firm of independent public accountants of recognized
standing selected by the Board (who may be the regular accountants employed
by
the Company) to make any computation required by this Section 6.
(i) In
the
event that at any time, as a result of an adjustment made pursuant to Section
6(a), (b) or (c) of this Warrant, the Holder of any Warrant thereafter shall
become entitled to receive any shares of the Company, other than Common Stock,
thereafter the number of such other shares so receivable upon exercise of any
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
Common Stock contained in Sections 6(a) through (h), inclusive, of this
Warrant.
(j) Notwithstanding
the foregoing, no adjustment shall be effected due to, or as a result of, any
Permitted Issuances except for Common Stock issued pursuant to a stock split
or
subdivision.
(k) Other
Action Affecting Common Stock.
In case
at any time or from time to time the Company shall take any action in respect
of
its Common Stock, other than any action described in this Section 6, then,
unless such action will not have a materially adverse effect upon the rights
of
the Holders, the number of shares of Common Stock or other stock for which
this
Warrant is exercisable and/or the purchase price thereof shall be adjusted
in
such manner as may be equitable in the circumstances.
7. REDEMPTION
OF WARRANT.
If
at
anytime during the Exercise Period the Common Stock trades at or above $4.00
per
share (subject to adjustment for forward and reverse stock splits,
recapitalizations, stock dividends and the like) (the "Threshold
Price")
during
10 consecutive Trading Days (the "Measurement
Period"),
then
the Company may, upon 30 days prior written notice “Redemption
Notice”),
call
for redemption (“Call”)
of all
but not less than all of the Warrants then outstanding provided that the Common
Stock has traded an
average of 100,000 shares per day during the Measurement Period (“Threshold
Volume”).
If the
conditions set forth below for such Call are satisfied from the period from
the
date of the Redemption Notice through and including the Redemption Date (as
defined below), then this Warrant for which a Notice of Exercise shall not
have
been received by the Redemption Date will be cancelled
at 5:00 p.m. (New York City time) on the 30th day after the date the Call Notice
is placed in the United States mail (by first class mail) (such date, the
"Redemption
Date").
In
furtherance thereof, the Company covenants and agrees that it will honor all
Notices of Exercise with respect to Warrant Shares subject to a Redemption
Notice that are tendered prior to 5:00 p.m. (New York City time) on the
Redemption Date. Notwithstanding anything to the contrary set forth in this
Warrant, the Company may not deliver a Redemption Notice or require the
cancellation of this Warrant (and any Redemption Notice will be void), unless,
from the beginning of the 10th consecutive Trading Day used to determine whether
the Common Stock has achieved the Threshold Price through the Redemption Date,
the Company has effective under the Securities Act of 1933, as amended, a
registration statement providing for the resale of the Warrant Shares and the
prospectus thereunder available for use by the Holders for the resale of all
such Warrant Shares.
9
8. PIGGYBACK
REGISTRATION RIGHTS.
(a)
Grant
of Right.
the
Holder shall have the right during the Exercise Period to include the Warrant
Shares as part of any other registration of securities filed by the Company
(other than in connection with a transaction contemplated by Rule 145(a)
promulgated under the Act or pursuant to Form S-8 or any equivalent form)
(“Registration
Statement”);
provided,
however,
that if,
solely in connection with any primary underwritten public offering for the
account of the Company, the managing underwriter(s) thereof shall, in its
reasonable discretion, impose a limitation on the number of shares of Common
Stock which may be included in the Registration Statement because, in such
underwriter(s)’ judgment, marketing or other factors dictate such limitation is
necessary to facilitate public distribution, then the Company shall be obligated
to include in such Registration Statement only such limited portion of the
Warrant Shares with respect to which the Holder requested inclusion hereunder
as
the underwriter shall reasonably permit. Any exclusion of Warrant Shares shall
be made pro rata among the Holders seeking to include Warrant Shares in
proportion to the number of Warrant Shares sought to be included by such
Holders; provided,
however,
that
the Company shall not exclude any Warrant Shares unless the Company has first
excluded all outstanding securities, the holders of which are not entitled
to
inclusion of such securities in such Registration Statement or are not entitled
to pro rata inclusion with the Warrant Shares.
(b)
Terms.
The
Company shall bear all fees and expenses attendant to registering the Warrant
Shares pursuant to Section 8(a) hereof, but the Holders shall pay any and all
underwriting commissions and the expenses of any legal counsel selected by
the
Holders to represent them in connection with the sale of the Warrant Shares.
In
the event of such a proposed registration, the Company shall furnish the then
Holders of outstanding Warrant Shares with not less than thirty (30) days
written notice prior to the proposed date of filing of such registration
statement. Such notice to the Holders shall continue to be given for each
registration statement filed by the Company until such time as all of the
Warrant Shares have been sold by the Holder. The holders of the Warrant Shares
shall exercise the “piggy-back” rights provided for herein by giving written
notice, within ten (10) days of the receipt of the Company’s notice of its
intention to file a registration statement. The Company will provide written
notice to each holder of Class B Warrants at least twenty (20) days prior to
its
intention to file a registration statement.
9. OFFICER’S
CERTIFICATE.
Whenever the Warrant Exercise Price(s) shall be adjusted as required by the
provisions of Section 6 of this Warrant, the Company shall forthwith file in
the
custody of its Secretary or an Assistant Secretary at its principal office
and
with its stock transfer agent, if any, an officer’s certificate showing the
adjusted Warrant Exercise Price(s) and the adjusted number of shares of Common
Stock issuable upon exercise of each Warrant, determined as herein provided,
setting forth in reasonable detail the facts requiring such adjustment,
including a statement of the number of additional shares of Common Stock, if
any, and such other facts as shall be necessary to show the reason for and
the
manner of computing such adjustment. Each such officer’s certificate shall be
forwarded to Holder as provided in Section 14.
10
10. NOTICES
TO WARRANT HOLDERS.
So long
as this Warrant shall be outstanding, (1) if the Company shall pay any dividend
or make any distribution upon Common Stock, or (2) if the Company shall offer
to
the holders of Common Stock for subscription or purchase by them any share
of
any class or any other rights, or (3) if any capital reorganization of the
Company, reclassification of the capital stock of the Company, consolidation
or
merger of the Company with or into another entity, tender offer transaction
for
the Company’s Common Stock, sale, lease or transfer of all or substantially all
of the property and assets of the Company, or voluntary or involuntary
dissolution, liquidation or winding up of the Company shall be effected, or
(4)
if the Company shall file a registration statement under the Securities Act
of
1933, as amended (the “Act”),
on
any form other than on Form S-4 or S-8 or any successor form, then in any such
case, the Company shall cause to be mailed by certified mail to the Holder,
at
least ten days prior to the date specified in clauses (1), (2), (3) or (4),
as
the case may be, of this Section 10 a notice containing a brief description
of
the proposed action and stating the date on which (i) a record is to be taken
for the purpose of such dividend, distribution or rights, or (ii) such
reclassification, reorganization, consolidation, merger, tender offer
transaction, conveyance, lease, dissolution, liquidation or winding up is to
take place and the date, if any is to be fixed, as of which the holders of
Common Stock or other securities shall receive cash or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up, or (iii) such registration
statement is to be filed with the SEC.
11. RECLASSIFICATION,
REORGANIZATION OR MERGER.
In case
of any reclassification, capital reorganization or other change of outstanding
shares of Common Stock of the Company, or in case of any consolidation or merger
of the Company with or into another corporation (other than a merger with a
subsidiary in which merger the Company is the continuing or surviving
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon exercise of this Warrant) or in case of any sale, lease
or
conveyance of all or substantially all of the assets of the Company, the Company
shall, as a condition precedent to such transaction, cause effective provisions
to be made so that (i) the Holder shall have the right thereafter by exercising
this Warrant, to purchase the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, capital
reorganization and other change, consolidation, merger, sale or conveyance
by a
holder of the number of shares of Common Stock which could have been purchased
upon exercise of this Warrant immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance, and (ii) the successor or
acquiring entity shall expressly assume the due and punctual observance and
performance of each covenant and condition of this Warrant to be performed
and
observed by the Company and all obligations and liabilities hereunder (including
but not limited to the provisions of Section 3 regarding the increase in the
number of shares of Warrant Shares potentially issuable hereunder). Any such
provision shall include provision for adjustments which shall be as nearly
equivalent as possible to the adjustments provided for in this Warrant. The
foregoing provisions of this Section 11 shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common
Stock
and to successive consolidations, mergers, sales or conveyances. In the event
that in connection with any such capital reorganization or reclassification,
consolidation, merger, sale or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution or payment, in whole
in
part, for a security of the Company other than Common Stock, any such issue
shall be treated as an issuance of Common Stock covered by the provisions of
Section 6 of this Warrant.
11
12. TRANSFER
TO COMPLY WITH THE SECURITIES ACT OF 1933; REGISTRATION
RIGHTS.
This
Warrant or the Warrant Shares or any other security issued or issuable upon
exercise of this Warrant may not be sold or otherwise disposed of except as
follows:
(i) to
a
person who, in the opinion of counsel for the Company, is a person to whom
this
Warrant or Warrant Shares may legally be transferred without registration and
without the delivery of a current prospectus under the Act with respect thereto
and then only against receipt of an agreement of such person to comply with
the
provisions of this Section 12 with respect to any resale or other disposition
of
such securities which agreement shall be satisfactory in form and substance
to
the Company and its counsel; or
(ii) to
any
person upon delivery of a prospectus then meeting the requirements of the Act
relating to such securities and the offering thereof for such sale or
disposition.
(iii) The
Holder of this Warrant shall be entitled to the registration rights as described
in the Subscription Agreement with respect to the Warrant Shares.
13. GOVERNING
LAW; JURISDICTION.
The
corporate laws of the State
of
Delaware shall govern all issues concerning the relative rights of the Company
and its stockholders. All issues concerning the construction, validity,
enforcement and interpretation of this Warrant shall be governed by and
construed in accordance with the internal laws of the State of Delaware without
giving effect to the principles of conflicts of law thereof. The
parties hereto agree that venue in any and all actions and proceedings related
to the subject matter of this Warrant shall be in the state and federal courts
in and for New York, New York, which courts shall have exclusive jurisdiction
for such purpose, and the parties hereto irrevocably submit to the exclusive
jurisdiction of such courts and irrevocably waive the defense of an inconvenient
forum to the maintenance of any such action or proceeding. Service of process
may be made in any manner recognized by such courts. 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 the change, waiver,
discharge or termination is sought.
12
14. NOTICES.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via
facsimile at the facsimile telephone number specified in this Section prior
to
6:30 p.m. (New York City time) on a Business Day, (ii) the Business Day after
the date of transmission, if such notice or communication is delivered
via
facsimile at the facsimile telephone number specified in this Agreement later
than 6:30 p.m. (New York City time) on any date and earlier than 11:59 p.m.
(New
York City time) on such date, (iii) the Business Day following the date of
mailing, if sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as
follows:
| If to the Company: | ▇▇▇▇▇▇▇ Industries,
Inc.
Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
12060
FM ▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Tel:
(▇▇▇) ▇▇▇-▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
|
||
| If to the Holder: | To the Address Set Forth In the Records of the Company | ||
| With copies to: | First
Montauk Securities Corporation
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Attn:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
|
15. PAYMENT
OF TAXES.
The
Company will pay all documentary stamp taxes attributable to the issuance of
shares of Common Stock underlying this Warrant upon exercise of this Warrant;
provided,
however,
that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the registration of any certificate for shares
of
Common Stock underlying this Warrant in a name other that of the Holder. The
Holder is responsible for all other tax liability that may arise as a result
of
holding or transferring this Warrant or receiving shares of Common Stock
underlying this Warrant upon exercise hereof.
[SIGNATURE
PAGE FOLLOWS]
13
IN
WITNESS WHEREOF,
this
Warrant has been duly executed as of March 31, 2007.
|
▇▇▇▇▇▇▇
INDUSTRIES, INC.
|
||
| |
|
|
| By: | ||
|
Name:
Title:
|
||
14
PURCHASE
FORM
To
▇▇▇▇▇▇▇ Industries, Inc.:
In
accordance with the Warrant enclosed with this Form of Election to Purchase,
the
undersigned hereby irrevocably elects to purchase _____________ shares of common
stock (“Common Stock”), $0.001 par value per share, of ▇▇▇▇▇▇▇ Industries, Inc.
The undersigned herewith makes payment of $____________, representing the full
purchase price for such shares at the Exercise Price provided for in such
Warrant, together with any applicable taxes payable by the undersigned pursuant
to the Warrant. 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 _____ Warrant Shares (using a Fair Market Value of $_____
per
share for purposes of this
calculation).
|
The
undersigned requests that certificates for the shares of Common Stock issuable
upon this exercise be issued in the name of:
_________________________________
(Name)
_________________________________
_________________________________
(Address)
_________________________________
(SSN
or
Tax ID No.)
ASSIGNMENT
FORM
FOR
VALUE RECEIVED,
_______________________________________ hereby sells, assigns and transfer
unto:
Name:_______________________________________________
(Please
typewrite or print in block letters)
Address:_____________________________________________
Social
Security or Employer Identification No.:__________________________
The
right
to purchase Common Stock represented by this Warrant to the extent of shares
as
to which such right is exercisable and does hereby irrevocably constitute and
appoint attorney to transfer the same on the books of the Company with full
power of substitution.
|
Dated:
_________________, 200_.
|
||
| |
|
|
| Signature: | ________________________________ | |
|
Signature
Guaranteed:
___________________________________
|
||