THIS WARRANT AND THE SHARES ISSUABLE ON EXERCISE HEREOF ARE
NOT REGISTERED UNDER THE SECURITIES ACT OF 1933 AND ARE HELD
SUBJECT TO THE TERMS, COVENANTS AND CONDITIONS OF AN AGREEMENT
DATED APRIL 22, 1998, BY AND AMONG THE COMPANY AND THE HOLDER,
AND MAY NOT BE TRANSFERRED OR DISPOSED OF EXCEPT IN ACCORDANCE
WITH THE TERMS AND PROVISIONS THEREOF AND IN COMPLIANCE WITH
APPROPRIATE LEGAL REQUIREMENTS. A COPY OF SUCH AGREEMENT IS ON
FILE AND MAY BE INSPECTED BY THE HOLDER AT THE PRINCIPAL EXECUTIVE
OFFICES OF THE COMPANY.
Dated:APRIL 22, 1998
Warrant No. 002
WARRANT To Purchase Shares of Common Stock of
CANISCO RESOURCES, INC.
THIS IS TO CERTIFY THAT, for value received, R. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
(the "Holder") is entitled to purchase from Canisco Resources, Inc.,
a Delaware corporation ("Company"), at any time or from time to time
prior to 5:00 p.m., Wilmington, Delaware time, 30 days after the date
on which a written statement showing Income Before Tax (as hereinafter
defined) for each of the fiscal year(s) ended March 31, 1999, 2000,
2001, 2002, and 2003, respectively, has been delivered to the Holder
(the "Expiration Time"), at $2.625 per share (the "Exercise
Price") 40,000 shares of Common Stock, par value $.0025 per
share (the "Common Stock"), of Company, all subject to adjustment
and upon the terms and conditions as hereinafter provided, and is
entitled also to exercise the other rights described below. To the
extent not exercised previously, the Holder's rights under this
warrant will become void at the Expiration Time.
ARTICLE I
EXERCISE OF WARRANTS
1.1. Method of Exercise. To exercise this Warrant in whole or in
part, the Holder shall deliver to Company, at the principal office
of Company, (a) this Warrant, (b) a written notice, in substantially
the form of the Subscription Notice attached hereto, of such Holder's
election to exercise this Warrant, which notice shall specify the
number of shares of Common Stock to be purchased, (c) payment of the
Exercise Price with respect to such shares, and (d) the representation
required by Section 2.3 hereof. Such payment may be made, at
the option of the Holder, by cash, certified or bank cashier's
check or wire transfer.
As promptly as practicable after receipt of the items referred
to above, Company shall execute and deliver to the Holder, in
accordance with such notice, a certificate or certificates
representing the aggregate number of shares of fully paid and
non-assessable Common Stock specified in such notice. Such certificate
or certificates shall be deemed to have been issued, and such Holder
shall be deemed for all purposes to have become a holder of record of
such shares, as of the date the Subscription Notice is received by
Company. If this Warrant shall have been exercised only in part, at the
time of delivery of the certificate or certificates Company
shall deliver to the Holder a new Warrant evidencing the
rights to purchase the remaining shares of Common Stock
called for by this Warrant, which new Warrant shall in all
other respects be identical with this Warrant or, at the
election of Company, appropriate notation may be made on
this Warrant, which shall then be returned to the Holder.
Company shall pay all expenses, taxes (if any) and other
charges payable in connection with the preparation, issuance
and delivery of share certificates and new Warrants.
1.2. Exercisability.
This Warrant shall become exercisable in five non-cumulative
installments, subject to the conditions set forth below:
(i) As used herein, "Income Before Tax" shall mean net
profit of the Business (as hereinafter defined) after
substantially all expenses (including reserves for doubtful
accounts, anticipated losses, and accruals for bonuses,
insurance and liabilities) except income taxes on the earned
revenue. As used herein, "Budgeted Income Before Tax" shall
be the amount of budgeted income for the Business as established
by its Board of Directors and approved by the Board of Directors
of Canisco Resources, Inc. prior to the commencement of each
Fiscal Year. The "Business" shall be Mansfield Industrial
Coatings, Inc., a Mississippi corporation, or any successor.
The budget for the Business shall be determined in accordance
with, and the Business shall be operated in accordance with, a
Stock Purchase Agreement of even date between Company and the
Holder of this Warrant.
(ii) This Warrant shall be exercisable in five non-cumulative
Installments, with the number of shares purchasable in each
Installment to be based upon the extent to which Income Before
Tax compares with Budgeted Income Before Tax for each of the
following fiscal years (the "Fiscal Years"):
Installment Fiscal Year Ended March 31,
First Installment 1999
Second Installment 2000
Third Installment 2001
Fourth Installment 2002
Fifth Installment 2003
If Income Before Tax exactly equals Budgeted Net Income in each
Fiscal Year, this Warrant will become exercisable for:
40,000 shares, or 8,000 shares in each Installment.
(iii) In each Fiscal Year, if Income Before Tax is 100% or
less than Budgeted Income Before Tax, the Installment for
that Fiscal Year shall be the following number of shares
covered by this Warrant:
Income Before Tax as a Number of Shares
Percentage of Budgeted Issuable on Exercise of
Income Before Tax the Fiscal Year's Installment
98 but less than 100% 7,200
96% or more but less than 98% 6,400
94% or more but less than 96% 5,600
92% or more but less than 94% 4,800
90% or more but less than 92% 4,000
88% or more but less than 90% 3,200
86% or more but less than 88% 2,400
84% or more but less than 86% 1,600
82% or more but less than 84% 800
Less than 82% -0-
(iv) In each Fiscal Year, if Income Before Tax is more
than 100% of Budgeted Income Before Tax, the number of
shares covered by the Installment for that Fiscal Year
shall be 8,000, increased by the percentage by which Income
Before Tax exceeds Budgeted Income Before Tax. For example,
if Income Before Tax exceeds Budgeted Income Before Tax by 10%
in a given Fiscal Year, the Installment for that year shall be
8,800 shares (8,000 shares x 110%); if Income Before Tax exceeds
Budgeted Income Before Tax by 20% in a given Fiscal Year,
the Installment for that year shall be 9,600 shares
(8,000 shares x 120%).
(v) Company shall advise Holder in writing of the Budgeted Net
Income Before Tax and Income Before Tax promptly after such
amounts have been determined for each Fiscal Year. Notwithstanding
anything herein to the contrary, if the right to exercise any
Installment is not exercised within sixty (60) days after Holder
has been advised of Income Before Tax for a Fiscal Year, the right
to exercise that Installment shall lapse and the shares covered by
such Installment shall no longer be subject to purchase under this Warrant.
1.3. No Fractional Shares to Be Issued. Company shall not be
required to issue fractions of shares of Common Stock upon
exercise of this Warrant. If any fraction of a share would,
but for this Section, be issuable upon any exercise of this Warrant,
if the fraction shall be less than one-half, the number of shares
issuable shall be rounded downward to the nearest whole number;
otherwise the number of shares issuable shall be rounded upward
to the nearest whole number.
1.4. Share Legend. Each certificate for shares of Common Stock
issued upon exercise of this Warrant shall bear the following
legend, unless at the time of exercise such shares are registered
under the Securities Act:
The shares represented hereby are not registered under the
Securities Act of 1933, are "restricted securities" as defined
under that Act and are held subject to the terms, covenants and
conditions of an agreement dated April 22, 1998, by and among this
Company and certain other persons, and may not be transferred or
disposed of except in accordance with the terms and provisions
thereof and in compliance with appropriate legal requirements.
A copy of such agreement and all amendments thereto is on file
and may be inspected at the principal executive offices of Company.
Any share certificate issued at any time in exchange or
substitution for any share certificate bearing such legend
(except a new certificate issued upon completion of a public
distribution pursuant to a registration statement under the
Securities Act of 1933 the Act) shall also bear such legend
unless, in the opinion of counsel which is satisfactory in form
and substance to counsel for Company, the shares represented thereby
are no longer subject to restrictions on resale under the Securities
Act or the agreement referred to in such legend.
ARTICLE II
TRANSFER, EXCHANGE AND REPLACEMENT
OF WARRANTS
2.1. Ownership of Warrant. Company may deem and treat the
Holder as the holder and owner hereof (notwithstanding any
notations of ownership or writing hereon made by any person)
for all purposes and shall not be affected by any notice to
the contrary, until presentation of this Warrant for transfer
as provided in this Article II.
2.2 Loss, Theft, Destruction or Mutilation of Warrants.
Upon receipt of evidence satisfactory to Company of the loss,
theft, destruction or mutilation of this Warrant and, in the
case of any such loss, theft or destruction, upon receipt of
indemnity or security reasonably satisfactory to Company or,
in the case of any such mutilation, upon surrender and cancellation
of this Warrant, Company will make and deliver, in lieu of such lost,
stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and
to purchase the same aggregate number of shares of Common Stock as
provided for in such lost, stolen, destroyed or mutilated Warrant.
2.3. Transfer Restrictions. By acceptance of this Warrant,
the Holder acknowledges that it is acquiring the Warrant for
such Holder's own individual account, and not with a view to
distribution or resale. Upon exercise of this Warrant, the Holder
will make a similar written representation with respect to the
shares to be received upon exercise unless, in an opinion of
counsel which is satisfactory in form and substance to counsel
for Company, such representation is not necessary or appropriate
to assure compliance with the registration
provisions of the Act or any applicable state securities
laws. Notwithstanding anything herein to the contrary, no transfer
may be made of this Warrant or the shares acquired on the exercise
hereof (except a sale of shares registered under the Act) unless
Company has received an opinion of counsel which is satisfactory
in form and substance to counsel for Company that such transfer
can be made in compliance with the Act or such applicable state
securities laws.
2.4 Proportional Adjustments on Division of this Warrant.
Notwithstanding anything herein to the contrary, if the interest
represented by this Warrant is transferred in part or otherwise
divided into two or more Warrants as permitted by Section 4.4
hereof, the number of shares referred to in Section 1.2 and
elsewhere herein shall be adjusted proportionately, as determined
in good faith by Company, so that the aggregate of the rights
represented by the multiple Warrants resulting from such transfer
or division shall equal the rights of this Warrant before such
transfer or division.
ARTICLE III
ANTIDILUTION PROVISIONS
3.1 Certain Adjustments. If Company (i) pays a dividend
in shares of Common Stock or makes a dividend or other
distribution in shares of Common Stock in excess of 5%,
(ii) subdivides its outstanding shares of Common Stock,
(iii) combines its outstanding shares of Common Stock into
a smaller number of shares of Common Stock, or (iv) issues
other securities of Company to all holders of Common Stock,
the Board of Directors of Company shall cause an adjustment
to be made in the number of shares purchasable upon exercise of this
Warrant and the Exercise Price so that the Holder of this
Warrant shall be entitled to receive the kind and number
of shares of Common Stock or other securities of Company
which the Holder would have owned or have been entitled to
receive if this Warrant had been exercised immediately prior
to any such event or any record date with respect thereto.
An adjustment made pursuant to this Section 3.1 shall become
effective immediately after the effective date of such event,
retroactive to the record date, if any, for such event, and prompt
written notice thereto shall be given to the Holder.
The Board of Directors shall have the sole discretion
to make additional adjustments that it deems equitable
to prevent dilution or enlargement of the benefits intended
to be granted by this Warrant. Notwithstanding anything
herein to the contrary, if Company issues a new Warrant in
whole or partial replacement of this Warrant upon the transfer,
combination, division or partial exercise of this Warrant, in
replacement of a loss, theft, destruction or mutilation of this Warrant
or for any other reason, the new Warrant, at Company's option,
may reflect any adjustments therefore made pursuant to this Article III.
ARTICLE IV
MISCELLANEOUS
4.1. Notices. All notices, requests, demands and other
communications required or permitted to Company hereunder
shall be in writing and shall be deemed to have been duly
given, made and received only when delivered (personally,
by courier service such as Federal Express, or by other
messenger) or three days after being deposited in the United
States mails, registered or certified mail, postage prepaid,
return receipt requested, addressed to (i) if Company, at its
then principal executive office, marked to the attention of its
President, and (ii) if to Holder, at his most recent residence
address supplied in writing to Company by Holder.
4.2. Amendments. The provisions of this Warrant may be amended, modified
or waived only by written consent of Company and the Holder of this Warrant.
4.3. No Rights as Shareholder. This Warrant shall not entitle
the Holder to any rights as a shareholder of Company either in law
or in equity, unless and until the Holder exercises the right to
purchase Common Stock as provided herein and subject to the provisions
of Section 1.1 hereof.
4.4. No Assignment. This warrant and the rights evidenced
hereby are not assignable or transferrable by Holder, except
in accordance with the laws of descent and distribution.
IN WITNESS WHEREOF, Company has caused this Warrant to be
executed on April 22, 1998 .
CANISCO RESOURCES, INC.
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
SUBSCRIPTION NOTICE
(To be executed for exercise of the Warrant)
To: Canisco Resources, Inc.
The undersigned hereby irrevocably elects to exercise the right
of purchase represented by the attached Warrant for, and to purchase
thereunder, _____* shares of Common Stock, as provided for therein,
and tenders herewith payment of the Exercise Price in full in the
form of cash, certified or bank cashier's check or wire transfer
in the amount of $_____. *
*Complete this number based upon the number of shares
stated on the face of this Warrant before any adjustments
pursuant to Article III. Company will advise the Holder on
request about any adjustments that have been made and the
equivalent number of shares or other securities that are
issuable in lieu of one share of Common Stock outstanding
as of the date this Warrants was originally issued, as well
as any adjustments that have been made in the Exercise Price.
Note: An investment representation must be attached if
required by Section 2.3 of the within Warrant.
Dated: ___________ __, ____
Note: The above signature should correspond exactly with
the name on the face of the attached Warrant or with the
name of the assignee appearing in the assignment form below.