EXHIBIT 10.9
LOCAL TELECOM SYSTEMS, INC.
(A NEVADA CORPORATION)
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WARRANT TO PURCHASE
SHARES OF COMMON STOCK
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Effective May 5, 2005 (the "EFFECTIVE DATE")
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
APPLICABLE STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE DISPOSED OF OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS.
THIS CERTIFIES THAT, for value received, ▇▇▇▇▇▇▇▇▇ INVESTMENT
MANAGEMENT, LLC, or its registered assigns ("HOLDER"), is entitled to purchase,
subject to the conditions set forth below, at any time or from time to time
during the Exercise Period (as defined in SUBSECTION 1.2 below), TWO HUNDRED
FIFTY THOUSAND (250,000) shares ("SHARES") of fully paid and non-assessable
common stock, par value $.0167 per share (the "COMMON STOCK"), of LOCAL TELECOM
SYSTEMS, INC., a Nevada corporation (the "COMPANY"), at the per share purchase
price (the "WARRANT PRICE") set forth in SUBSECTION 1.1 below, subject to the
further provisions of this Warrant.
EXERCISE OF WARRANT
The terms and conditions upon which this Warrant may be exercised, and
the Shares subject hereto may be purchased, are as follows:
WARRANT PRICE. The Warrant Price shall be USD $0.20 per Share, subject
to adjustment as provided in SECTION 4 below.
METHOD OF EXERCISE. Holder may at any time from the Effective Date and
for three (3) years thereafter, or such later date as the Company may in its
sole discretion determine (the "EXERCISE PERIOD"), exercise in whole or in part
the purchase rights evidenced by this Warrant. Such exercise shall be effected
by:
the surrender of this Warrant, together with a duly executed
copy of the form of subscription attached hereto as EXHIBIT A, to the
Secretary of the Company at its principal offices;
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the payment to the Company, by cash, certified or cashier's
check payable to Company's order or wire transfer to the Company's
account, of an amount equal to the aggregate Warrant Price for the
number of Shares for which the purchase rights hereunder are being
exercised. Alternatively if then permitted under applicable securities
laws, Holder may exercise this Warrant by delivering to the Company:
(i) a properly executed notice of exercise together with irrevocable
instructions to a NASD-member securities broker to promptly deliver to
the Company cash or a check payable and acceptable to the Company in
the full amount of the exercise price for the total number of Shares
being purchased (if the Holder and the securities broker comply with
such procedures and enter into such agreements of indemnity and other
agreements as the Company may prescribe as a condition of that payment
procedure) or (ii) shares of Common Stock, free and clear of any and
all liens, claims and encumbrances, having an aggregate Fair Value (as
defined herein below) equal to the full amount of the exercise price
for the total number of Shares being purchased. The Holder may also
make payment in any combination of the permissible forms of payment
described in the preceding sentence. Fair Value of a share of Common
Stock (for purposes of this section) means (a) if the primary market
for the Shares is a National Securities Exchange, the NASDAQ National
Market System, or any other market or quotation system in which last
sale transactions are reported on a contemporaneous basis, the last
reported sales price of such Shares, as of the time of authorization of
the transaction giving rise to the right to receive such Shares; or (b)
if the primary market for such Shares is not an exchange or quotation
system, the fair value thereof as shall be determined in good faith by
the Board of Directors of the Company at the time of authorization of
the transaction giving rise to the right to receive such Shares; and
the delivery to the Company, if necessary in the discretion of
counsel for the Company, to assure compliance with the Securities Act,
and applicable state securities laws, of an instrument executed by
holder certifying that the Shares are being purchased solely for the
account of Holder and not with a view to any resale or distribution in
violation of the Securities Act or applicable state securities laws.
ISSUANCE OF SHARES AND NEW WARRANT. If the purchase rights evidenced by
this Warrant are exercised in whole or in part, one or more certificates for the
purchased Shares shall be issued as soon as practicable thereafter to Holder. If
the purchase rights evidenced by this Warrant are exercised only in part, the
Company shall also deliver to Holder at such time a new Warrant evidencing the
purchase rights regarding the number of Shares (if any) for which the purchase
rights under this Warrant remain unexercised and continue in force and effect.
All new Warrants issued in connection with the provisions of this SECTION 1.3
shall bear the same date as this Warrant and shall be substantially identical in
form and provisions to this Warrant except for the number of Shares purchasable
thereunder. Each person in whose name any certificate for Shares is to be issued
shall for all purposes be deemed to have become the holder of record of such
Shares on the date on which this Warrant was surrendered and payment of the
Warrant Price was made, irrespective of the date of delivery of such stock
certificate, except that if the date of such surrender and payment is a date
when the stock transfer books of the Company are closed, such person shall be
deemed to have become the holder of such Shares at the close of business on the
next succeeding date on which the stock transfer books are open.
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TRANSFERS
TRANSFERS. As long as it does not constitute an illegal public
distribution, this Warrant and all rights hereunder are transferable in whole or
in part by the Holder. The transfer shall be recorded on the books of the
Company upon (i) the surrender of this Warrant (together with a duly executed
and endorsed copy of the form of transfer certificate attached hereto as EXHIBIT
B) to the Secretary of the Company at its principal offices, and (ii) the
payment to the Company of all transfer taxes and other governmental charges
imposed on such transfer. In the event of a partial transfer, the Company shall
issue to the several holders one or more appropriate new Warrants.
REGISTERED HOLDER. Each holder of this Warrant agrees that until such
time as any transfer pursuant to SUBSECTION 2.1 above is recorded on the books
of the Company, the Company may treat the registered Holder of this Warrant as
the absolute owner.
FORM OF NEW WARRANTS. All new Warrants issued in connection with
transfers of this Warrant shall bear the same date as this Warrant and shall be
substantially identical in form and provisions to this Warrant except for the
number of Shares purchasable thereunder.
NO FRACTIONAL SHARES
Notwithstanding any adjustment (as required hereby) to the number of
Shares purchasable upon the exercise of this Warrant, the Company shall not be
required to issue any fraction of a Share upon exercise of this Warrant. If, by
reason of any change made pursuant to SECTION 4 below, the Holder would be
entitled, upon the exercise of any rights evidenced hereby, to receive a
fractional interest in a Share, the Company shall, upon such proper exercise of
this Warrant, purchase such fractional interest for an amount in cash equal to
the Fair Market Value of such fractional interest, determined as of the date of
such exercise of this Warrant. For purposes of this SECTION 3, the term "Fair
Market Value" means (a) if the primary market for the Shares is a National
Securities Exchange, the NASDAQ National Market System, or any other market or
quotation system in which last sale transactions are reported on a
contemporaneous basis, the last reported sales price of such Shares, as of the
time of authorization of the transaction giving rise to the right to receive
such Shares; or (b) if the primary market for such Shares is not an exchange or
quotation system, the fair value thereof as shall be determined in good faith by
the Board of Directors of the Company at the time of authorization of the
transaction giving rise to the right to receive such Shares.
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ANTIDILUTION PROVISIONS
STOCK SPLITS AND COMBINATIONS. If the Common Stock shall at any time be
subdivided into a greater number of shares, then the number of Shares
purchasable upon exercise of this Warrant shall be proportionately increased and
the Warrant Price shall be proportionately decreased. If the Common Stock shall
at any time be combined into a smaller number of Shares, the number of Shares
purchasable upon exercise of this Warrant shall be unaffected and the Warrant
Price shall be proportionally increased. Any adjustments under this SUBSECTION
4.1 shall become effective at the close of business on the date the subdivision
or combination becomes effective.
RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If the Common Stock shall
be changed into shares of any other class or classes of stock or other
securities of the Company, whether by capital reorganization, reclassification,
or otherwise, Holder shall, upon exercise of this Warrant, be entitled to
purchase for the same aggregate consideration, in lieu of the Shares that Holder
would have become entitled to purchase but for such change, a number of shares
of such other class or classes of stock or other securities of the Company
equivalent to the number of Shares that would have been subject to purchase by
Holder on exercise of this Warrant immediately before that change. Any
adjustments under this SUBSECTION 4.2 shall become effective at the close of
business on the date such change of th e Common Stock into shares of any other
class or classes of stock or other securities of the Company becomes effective.
REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALE OF ASSETS. If at any
time there shall be a reorganization involving the Common Stock (other than a
stock split, combination, reclassification, exchange, or subdivision of shares
provided for in SUBSECTIONS 4.1 and 4.2 above) or a merger or consolidation of
the Company with or into another corporation, or the sale of all or
substantially all of the Company's assets to any other person, then, as a part
of such reorganization, merger, consolidation or sale, lawful provision shall be
made so that Holder shall thereafter be entitled to receive upon exercise of
this Warrant, in accordance with the terms hereof, in lieu of the Shares that
Holder would have become entitled to purchase but for such event, such other
securities or property of the Company, or of the successor corporation resulting
from such event, to which Holder would have been entitled in such
reorganization, merger, consolidation or sale if this Warrant had been exercised
immediately before that reorganization, merger, consolidation or sale. In any
such case, appropriate adjustment (as determined in good faith by the Company's
Board of Directors) shall be made in the application of the provisions of this
Warrant with respect to the rights and interests of Holder after the
reorganization, merger, consolidation, or sale to the end that the provisions of
this Warrant (including adjustment of the Warrant Price then in effect and
number of Shares purchasable upon exercise of this Warrant) shall be applicable
after that event, as near as reasonably may be, in relation to any shares or
other property deliverable after that event upon exercise of this Warrant.
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ADJUSTMENTS OF OTHER DISTRIBUTIONS. If the Company shall at any time
declare and pay or deliver to the holders of Common Stock a distribution payable
in securities of other persons, evidences of indebtedness issued by the Company
or other persons, assets (excluding cash dividends) or options or rights, in any
case of a kind not referred to above, then, upon exercise of this Warrant,
Holder shall be entitled to receive a proportionate share of any such
distribution as though Holder was the holder of the number of shares of Common
Stock into which this Warrant may be exercised as of the record date fixed for
the determination of the holders of Common Stock entitled to receive such
distribution.
CERTIFICATE AS TO ADJUSTMENTS. In the case of each adjustment
(including a readjustment) under this SECTION 4, the Company will promptly, and
in any event within thirty (30) days after the event requiring the adjustment,
compute such adjustment in accordance with the terms hereof and deliver or cause
to be delivered to Holder a certificate describing in reasonable detail the
event requiring the adjustment and setting forth such adjustment and the
calculations and results of such adjustment.
RESERVATION OF STOCK ISSUABLE UPON EXERCISE. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock such number of shares of Common Stock as shall from time to time be
sufficient to effect the exercise of this Warrant. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the exercise of this Warrant, the Company will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose.
METHOD OF CALCULATION. All calculations under this SECTION 4 shall be
made to the nearest one hundredth of a share.
RIGHTS PRIOR TO EXERCISE OF WARRANT
This Warrant does not entitle Holder to any of the rights of a
stockholder of the Company, including (without limitation) the right to receive
dividends or other distributions, to vote or consent, or to receive notice as a
stockholder of the Company. If, however, at any time prior to the expiration of
this Warrant and prior to its exercise,
the Company shall declare any dividend payable in any
securities upon outstanding shares of Common Stock or make any other
distribution (other than a regular cash dividend) to the holders of
shares of Common Stock;
the Company shall offer to the holders of shares of Common
Stock any additional shares of Common Stock or securities convertible
into or exchangeable for shares of Common Stock or any right to
subscribe for or purchase any thereof; or
a dissolution, liquidation or winding-up of the Company (other
than in connection with a reorganization, consolidation, merger, or
sale of all or substantially all of its assets as an entirety) shall be
approved by the Company's Board of Directors,
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then, in any one or more of such events the Company shall give notice in writing
of such event to Holder, at its address as it shall then appear on the Company's
records, at least twenty (20) days prior to the date fixed as a record date or
the date of closing the transfer books for the determination of the stockholders
entitled to such dividends, distribution, or subscription rights, or for the
determination of stockholders entitled to vote on such proposed dissolution,
liquidation or winding-up. Such notice shall specify such record date or the
date of closing the transfer books, as the case may be.
Any failure to give such notice or any defect therein, however, shall
not affect the validity of any action taken in connection with such dividend,
distribution or subscription rights, or such proposed dissolution, liquidation
or winding-up.
SUCCESSORS AND ASSIGNS
The terms and provisions of this Warrant shall inure to the benefit of,
and be binding upon, the Company and its successors and assigns and Holder and
its successors and permitted assigns.
REGISTRATION RIGHTS
Holder and Company acknowledge that in the event the Company files a
registration statement registering the resale of shares of its Common Stock
statement with the Securities and Exchange Commission (the "SEC"), the Holder
shall be eligible to include the Shares issuable upon exercise of this Warrant
in such registration statement
LOSS OR MUTILATION
Upon receipt by the Company of satisfactory evidence of the ownership
of and the loss, theft, destruction, or mutilation of this Warrant, and (i) in
the case of loss, theft, or destruction, upon receipt by the Company of
indemnity satisfactory to it, or (ii) in the case of mutilation, upon receipt of
this Warrant and upon surrender and cancellation of this Warrant, the Company
shall execute and deliver in lieu thereof a new Warrant representing the right
to purchase an equal number of Shares.
EXPENSES OF REGISTRATION
The Company shall bear all expenses incurred in connection with each
registration pursuant to SECTION 7 of this Warrant, excluding underwriters'
discounts and commissions, but including, without limitation, all registration,
filing and qualification fees, word processing, duplicating, printers' and
accounting fees (including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and compliance), exchange
listing fees or National Association of Securities Dealers fees, messenger and
delivery expenses, all fees and expenses of complying with securities or blue
sky laws, fees and disbursements of counsel for the Company.
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NOTICES
All notices, requests, demands and other communications under this
Warrant shall be in writing and shall be deemed to have been duly given on the
date of receipt (or refusal of receipt) if delivered personally or by courier by
the party to whom notice is to be given, or on the earlier of the third business
day after the date of mailing or receipt if mailed to the party to whom notice
is to be given by first class mail, registered or certified, postage prepaid,
and properly addressed as follows: if to Holder, at its address as shown in the
Company's records; and if to the Company, at its principal office. Either party
may change its address for purposes of this SECTION 10 by giving the other party
written notice of the new address in the manner set forth above.
GOVERNING LAW
This Warrant and any dispute, disagreement or issue of construction or
interpretation arising hereunder, whether relating to its execution, its
validity, the obligations provided herein or performance, shall be governed or
interpreted according to the laws of the State of Delaware, without regard to
conflicts of law.
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DATED AS OF May 5, 2005.
LOCAL TELECOM SYSTEMS, INC.
By:/S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
Chief Executive Officer
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EXHIBIT "A"
SUBSCRIPTION
Local Telecom Systems, Inc.
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ _______
Gentlemen:
The undersigned, _______________________, hereby elects to purchase, pursuant to
the provisions to the foregoing Warrant held by the undersigned,
____________shares of the Common Stock, $______ (the "COMMON STOCK"), of Local
Telecom Systems, Inc.
The undersigned herewith encloses the Warrant and:
(1) a certificate representing the number of shares of Common Stock
having an aggregate current fair market value of USD $_________ in payment of
the Warrant Price; and/or
(2) cash or a certified or cashier's check (drawn in favor of the
Company) in the amount of USD $__________ in payment of the Warrant Price.
DATED:______________, ___________.
Signature:
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Address:
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EXHIBIT "B"
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
Shares of Common Stock set forth below:
NO. OF SHARES
NAME AND ADDRESS OF ASSIGNEE COMMON STOCK
and does hereby irrevocably constitute and appoint as Attorney
________________________________ to register such transfer on the books of
_______________________________________ maintained for the purpose, with full
power of substitution in the premises.
Dated: __________________________, _______.
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alternation or enlargement or any change whatsoever.
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