THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
APPLICABLE SECURITIES LAWS UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
Void after 5:00 P.M. (Eastern Time),
December 31, 2005, except as otherwise provided herein.
Series A No. 1 Warrant to Purchase
-------------- 166,667 Shares of Common Stock
Date: December 8, 1998
WARRANT
TO PURCHASE COMMON STOCK OF
CONMAT TECHNOLOGIES, INC.
THIS CERTIFIES that, Mentor Special Situation Fund, L.P. (herein called
"Holder") or registered assigns, is entitled to purchase from ConMat
Technologies, Inc. (herein called the "Company"), a corporation organized and
existing under the laws of Delaware, at any time after December 8, 1998 and
until 5:00 P.M. (Eastern Time) on December 31, 2005, One Hundred Sixty- Six
Thousand Six Hundred Sixty-Six (166,667) fully paid and nonassessable shares of
Common Stock of the Company, $0.001 par value per share (the "Common Stock"),
subject to adjustment as provided herein, at a purchase price of $3.00 per
share, subject to adjustment as provided herein.
1. Definitions. For the purpose of the Warrants:
a. "Capital Stock" shall mean the Company's common stock, and
any other stock of any class, whether now or hereafter authorized, which has the
right to participate in the distribution of earnings and assets of the Company
without limit as to amount or percentage.
b. "Exercise Period" shall mean the period beginning December
8, 1998 and ending December 31, 2005.
c. "Market Price," as of any date, (i) means the average of
the closing bid prices for the shares of Common Stock as reported on the Nasdaq
SmallCap Market by Bloomberg Financial Markets ("Bloomberg") for the five (5)
consecutive trading days immediately preceding
such date, or (ii) if the Nasdaq SmallCap Market is not the principal trading
market for the shares of Common Stock, the average of the last sale prices
reported by Bloomberg on the principal trading market for the Common Stock
during the same period, or, if there is no sale price for such period, the last
bid price reported by Bloomberg for such period, or (iii) if the foregoing do
not apply, the last sale price of such security in the over-the-counter market
on the pink sheets or bulletin board for such security as reported by Bloomberg,
or if no sale price is so reported for such security, the last bid price of such
security as reported by Bloomberg, or (iv) if market value cannot be calculated
as of such date on any of the foregoing bases, the Market Price shall be the
average fair market value as reasonably determined by an investment banking firm
selected by the Company and reasonably acceptable to a majority in interest of
the holders of Warrants, with the costs of the appraisal to be borne by the
Company.
d. "Warrants of this Series" or "Warrants" shall mean the
original Warrants to purchase up to 166,667 shares of Common Stock of the
Company and any and all warrants which are issued in exchange or substitution
for any outstanding Warrant pursuant to the terms of that Warrant.
e. "Warrant Price" shall mean the price per share at which
shares of Common Stock of the Company are purchasable hereunder, as such prices
may be adjusted from time to time hereunder.
f. "Warrant Shares" shall mean the stock purchased upon
exercise of Warrants.
2. Method of Exercise of Warrants.
a. This Warrant may be exercised in whole or in part (but not
as to fractional shares) on one or more occasions during the Exercise Period by
the surrender of the Warrant, with the Purchase Agreement attachment hereto as
Rider A properly completed and duly executed, at the principal office of the
Company at Franklin Avenue and Grant Street, Phoenixville, Pennsylvania, or such
other location which shall at that time be the principal office of the Company
(the "Principal Office"), and upon payment to it of the purchase price for the
shares to be purchased upon such exercise. The purchase price may be paid, at
the Holder's option, by (i) delivering a certified check or bank draft or
immediately available funds to the order of the Company for the entire purchase
price, (ii) surrendering to the Company shares of Common Stock of the Company
owned by the Holder having an aggregate market value (determined by multiplying
the Market Price by the number of shares surrendered) equal to the purchase
price, or (iii) any combination of (i) and (ii) as determined by the Holder. The
persons entitled to the shares so purchased shall be treated for all purposes as
the holders of such shares as of the close of business on the date of exercise
and certificates for the shares of stock so purchased shall be delivered to the
persons so entitled within a reasonable time, not exceeding thirty (30) days,
after such exercise. Unless this warrant has expired, a new Warrant of like
tenor and for such number of shares as the holder of this Warrant shall direct,
representing in the aggregate the right to purchase a number of shares with
respect to
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which this Warrant shall not have been exercised, shall also be issued to the
holder of this Warrant within such time.
b. In addition to and without limiting the rights of the
Holder under any other terms set forth herein, the Holder shall have, upon
written request by the Holder delivered or transmitted to the Company together
with this Warrant, the right (the "Conversion Right") to require the Company to
convert this Warrant into shares of Common Stock as follows: upon exercise of
the Conversion Right, the Company shall deliver to the Holder (without any
payment by the Holder) that number of shares of Common Stock that is equal to
the quotient obtained by dividing (x) the value of this Warrant at the time the
Conversion Right is exercised (determined by subtracting the aggregate purchase
price in effect immediately prior to the exercise of the Conversion Right from
the aggregate current market value (determined by multiplying the Market Price
by the applicable number of shares) of the Warrant Shares issuable upon exercise
of this Warrant immediately prior to the exercise of the Conversion Right) by
(y) the Market Price immediately prior to the exercise of the Conversion Right.
The Conversion Right may be exercised by the Holder by surrender of this Warrant
at the principal office of the Company, together with a written statement
specifying that the Holder thereby intends to exercise the Conversion Right.
Certificates for shares of Common Stock issuable upon exercise of the Conversion
Right shall be delivered to the Holder promptly following the Company's receipt
of this Warrant together with the aforesaid written statement.
c. (i) The Company shall have the right and option (the "Call
Option"), at any time after redemption by the Company of its Series B Preferred
Stock, to purchase the Warrant from the Holder in accordance with this Section.
(ii) To exercise the Call Option, the Company shall
give written notice to the Holder, specifying the date on which the purchase is
to be completed (the "Call Option Purchase Date"), which shall not, without the
agreement of the Holder, be fewer than 10 days or more than 30 days after the
receipt of such notice.
(iii) The purchase price payable upon exercise of the
Call Option shall be equal to the aggregate number of Warrant Shares then
purchasable under this Warrant times the excess of (A) the greater of $7.00 per
Share or the Market Price over (B) the Warrant Price then in effect; provided,
that for purposes of this Section 2.c. Warrant Price and the number of Warrant
Shares shall be adjusted to eliminate any prior adjustment pursuant to Section
6.a. and any adjustment pursuant to Section 6.d. below as a result of the
adjustment pursuant to Section 6.a., and Market Price shall be adjusted to take
into account any previous adjustment under Section 6.a.
(iv) On the Call Option Purchase Date, (1) the Holder
shall assign this Warrant to the Company, without any representation or warranty
other than that the Holder is conveying good and valid title thereto, free and
clear of any lien, claim, encumbrance or restriction of any kind, and (2) the
Company shall pay the purchase price (determined under subsection (iii)) to the
Holder by (a) certified or official bank check or wire transfer of immediately
available funds, or (b) delivery to the Holder of shares of the Company's Common
Stock with an aggregate current
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market value (determined by multiplying the number of shares being delivered by
the Market Price) equal to the purchase price; provided that such shares of
Common Stock have been registered under the Securities Act of 1933 and is freely
tradeable by the holder without restriction.
3. Exchange. This Warrant is exchangeable, upon the surrender thereof
by the holder thereof at the Principal Office of the Company, for new Warrants
of like tenor registered in such holder's name and representing in the aggregate
the right to purchase the number of shares purchasable under the Warrant being
exchanged, each of such new Warrants to represent the right to subscribe for and
purchase such number of shares as shall be designated by said holder at the time
of such surrender.
4. Transfer. Subject to compliance with the Securities Act of 1933 and
the rules and regulations promulgated thereunder and restrictions on transfer
set forth in the Securities Purchase Agreement, this Warrant is transferable, in
whole or in part, at the Principal Office of the Company by the holder thereof,
in person or by duly authorized attorney, upon presentation of the Warrant,
properly endorsed, for transfer. Each holder of this Warrant, by holding it,
agrees that the Warrant, when endorsed in blank, may be deemed negotiable, and
that the holder thereof, when the Warrant shall have been so endorsed, may be
treated by the Company and all other persons dealing with the Warrant as the
absolute owner thereof for any purpose and as the person entitled to exercise
the rights represented by the Warrant, or to the transfer thereof on the books
of the Company, any notice to the contrary notwithstanding.
5. Certain Covenants of the Company. The Company covenants and agrees
that all shares which may be issued upon the exercise of Warrants of this
Series, will, upon issuance, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, and without limiting the generality of the forgoing, the Company
covenants and agrees that it will from time to time take all such action as may
be required to assure that the par value per share of the Common Stock is at all
times equal to or less than the then effective purchase price per share of the
Common Stock issuable pursuant to the Warrants. The Company further covenants
and agrees that during the period within which the rights represented by the
Warrants may be exercised, the Company will at all times have authorized, and
reserved for the purpose of issue upon exercise of the purchase rights evidenced
by the Warrants, a sufficient number of shares of its Common Stock to provide
for the exercise of the rights represented by the Warrants.
6. Adjustment of Purchase Price and Number of Shares. The number and
kind of securities purchasable upon the exercise of the Warrants of this Series
and the Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events as follows:
a. Adjustment to Warrant Price Due to Stock Split, Stock
Dividend, Etc. If at any time when Warrants are outstanding, the number of
outstanding shares of Common Stock is increased by a stock split, stock
dividend, reclassification or other similar event, the Warrant Price shall be
proportionately reduced, or if the number of outstanding shares of Common Stock
is
-4-
decreased by a reverse stock split, combination or reclassification of shares,
or other similar event, the Warrant Price shall be proportionately increased. In
such event, the Corporation shall notify the Holder of such change on or before
the effective date thereof.
b. Adjustment Due to Merger, Consolidation, Etc. If, at any
time when Warrants are outstanding, there shall be (i) any reclassification or
change of the outstanding shares of 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, or
as a result of a subdivision or combination), (ii) any consolidation or merger
of the Company with any other corporation (other than a merger in which the
Company is the surviving or continuing corporation and its capital stock is
unchanged), (iii) any sale or transfer of all or substantially all of the assets
of the Company or (iv) any share exchange pursuant to which all of the
outstanding shares of Common Stock are converted into other securities or
property, then the holders of Warrants shall, upon being given at least thirty
(30) days prior written notice of such transaction, thereafter have the right to
purchase and receive upon exercise of Warrants, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such shares of stock and/or
securities or other property as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
purchasable and receivable upon the exercise of Warrants held by such holders
had such merger, consolidation, exchange of shares, recapitalization,
reorganization or other similar event not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the holders of the Warrants to the end that the provisions hereof (including,
without limitation, provisions for adjustment of the Warrant Price and of the
number of shares issuable upon exercise of the Warrants) shall thereafter be
applicable, as nearly as may be practicable in relation to any shares of stock
or securities thereafter deliverable upon the exercise thereof. The Company
shall not effect any transaction described in this subsection (b) unless (i)
each holder of Warrants has received written notice of such transaction at least
thirty (30) days prior thereto, and (ii) the provisions of this paragraph have
been complied with. The above provisions shall apply regardless of whether or
not there would have been a sufficient number of shares of Common Stock
authorized and available for issuance upon exercise of the Warrants outstanding
as of the date of such transaction, and shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share exchanges.
c. Adjustment due to Below Market Issuance. If at any time
prior to the exercise of this Warrant in full, the Company shall (i) issue or
sell any Common Stock or Common Stock Equivalents without consideration or for
consideration per share (in cash, property or other assets) less than the
Warrant Price or (ii) fix a record date for the issuance of subscription rights,
options or warrants to all holders of Common Stock entitling them to subscribe
for or purchase Common Stock (or Common Stock Equivalents (as hereinafter
defined)) at a price (or having an exercise or conversion price per share) less
than the Warrant Price, the Warrant Price shall be adjusted so that the Warrant
Price shall equal such lower price. Any adjustments required by this Subsection
shall be made immediately after such issuance or sale or record date, as the
case may be. Such adjustments shall be made successively whenever such event
shall occur. To the extent that shares of Common Stock (or Common Stock
Equivalents) are not delivered in connection with such
-5-
subscription rights, options or warrants, the Warrant Price shall be readjusted
to the Warrant Price which would then be in effect had the adjustments made upon
the issuance of such rights, options or warrants not been made. In the case of
an issue of additional Common Stock or Common Stock Equivalents for cash, the
consideration received by the Company therefor, before deducting therefrom any
discount or commission or other expenses allowed, paid or incurred by the
Company for underwriting of, or otherwise in connection with, the issuance
thereof, shall be deemed to be the amount received by the Company therefor. In
the case of an issue of additional Common Stock or Common Stock Equivalents for
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as reasonably determined by
the Company's Board of Directors, irrespective of any accounting treatment. No
adjustments to the Warrant Price or the number of Warrant Shares issuable upon
exercise of this Warrant shall be made pursuant to this Subsection 6.c. for any
transaction for which adjustment thereto is required to be made pursuant to any
other provision of this Warrant, the exercise of Warrants or the conversion,
exchange or exercise of any Common Stock Equivalents. No adjustments to the
Warrant Price or the number of Warrant Shares issuable upon exercise of this
Warrant shall be made as the result of the issuance of stock options to
employees of the Company pursuant to any employee's employment agreement or an
employee stock option plan. For purposes of this Subsection c., "Common Stock
Equivalents" shall mean any subscription rights, options, warrants or other
securities or rights convertible into, or exercisable or exchangeable for,
shares of Common Stock.
d. Adjustment of Number of Shares. Upon each adjustment in a
Warrant Price pursuant to any provisions of this Section 6, the number of shares
of Common Stock purchasable hereunder at that Warrant Price shall be adjusted,
to the nearest one hundredth of a whole share, to the product obtained by
multiplying such number of shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall be
the Warrant Price immediately prior to such adjustment and the denominator of
which shall be the Warrant Price immediately thereafter.
7. Notice of Adjustments. Whenever any of the Warrant Price or the
number of shares of Common Stock purchasable under the terms of the Warrants at
that Warrant Price shall be adjusted pursuant to Section 6 hereof, the Company
shall promptly make a certificate signed by its President or a Vice President
and by its Treasurer or Assistant Treasurer or its Secretary or Assistant
Secretary, setting forth in reasonable detail the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Company's
Board of Directors made any determination hereunder), and the Warrant Price and
number of shares of Common Stock purchasable at that Warrant Price after giving
effect to such adjustment, and shall promptly cause copies of such certificate
to be mailed (by first class and postage prepaid) to the registered holders of
the Warrants.
8. Registration Rights. Each present and future holder of Warrant
Shares shall be entitled to the benefits of the registration rights granted
pursuant to this Section 8.
a. Definitions. For purposes of this Section 8:
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(i) The term "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Securities
Act, and the declaration or ordering of effectiveness of such registration
statement or document;
(ii) The term "Registrable Securities" means the
Warrant Shares and all shares of Common Stock issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, any of the Warrant Shares excluding in all cases, however, any
Registrable Securities (x) sold by a person in a transaction in which his rights
under this Section 8 are not assigned, (y) sold in a public offering registered
under the Securities Act or (z) sold pursuant to Rule 144 promulgated under the
Securities Act;
(iii) The number of shares of "Registrable Securities
then outstanding" shall be determined by the number of Warrant Shares which are,
and the number of shares of Common Stock issuable pursuant to then exercisable
or convertible securities which are, Registrable Securities;
(iv) The term "Holder" means any person owning or
having the right to acquire Registrable Securities;
(v) The term "SEC" means the Securities and Exchange
Commission; and
(vi) The term "Securities Act" shall mean the
Securities Act of 1933, as from time to time amended.
b. Company Registration. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any shares of
its Common Stock under the Securities Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to employees pursuant to stock option awards and/or to
participants in a Company employee benefit or stock plan, or a registration on
any form which does not include substantially the same information, other than
information related to the selling stockholders or their plan of distribution,
as would be required to be included in a registration statement covering the
sale of the Registrable Securities), the Company shall, at such time, promptly
give each Holder written notice of such registration. Upon the written request
of each Holder given within twenty (20) days after mailing of such notice by the
Company, the Company shall, subject to the provisions of the immediately
preceding sentence and Section 8.e. hereof, cause to be registered under the
Securities Act all of the Registrable Securities that each such Holder has
requested to be so registered.
c. Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 8
with respect to the Registrable Securities
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of any selling Holder that such Holder shall have furnished to the Company such
information regarding itself, the Registrable Securities held by it, and the
intended method of disposition of such securities as shall be required to effect
the registration of such Holder's Registrable Securities.
d. Expenses of Registration. The Company shall bear and pay
all expenses incurred by it in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 8.b., including without limitation all registration, filing,
and qualification fees, printers and accounting fees and all fees and
disbursements of counsel for the Company relating or allocable thereto. The
Company shall not pay any expenses incurred by a Holder in connection with any
such registration, filing or qualification, including, but not limited to
underwriting discounts and commissions relating to Registrable Securities and
the fees and disbursements of any professional advisors (including attorneys and
accountants) utilized by the selling Holders in connection with such
registration, filing or qualification.
e. Reduction of Registrable Securities Included in
Registration Statement. In connection with any offering involving an
underwriting of shares being issued by the Company, the Company shall not be
required under Section 8.b. hereof to include any of the Holders' securities in
such underwriting unless they accept the customary and reasonable terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it, and then only in such quantity as will not, in the opinion of the
underwriters, jeopardize the success of the offering by the Company. If the
total amount of securities, including Registrable Securities, requested by
stockholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters reasonably believe
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters believe will not jeopardize the
success of the offering (the securities so included to be allocated first among
holders of Registrable Securities who have provided notice required by Section
8.b. and then to all other holders of securities subject to registration rights
granted by the Company in proportion (as nearly as practicable) to the number of
shares of securities requested to be included in such registration by such other
holders and which would have been eligible for inclusion in such registration
but for the application of this sentence, or in such other proportions as shall
mutually be agreed to by such selling stockholders). For purposes of the
provision of the preceding sentence concerning apportionment amongst the selling
stockholders, for any selling stockholder which is a partnership or corporation,
the partners, retired partners and stockholders of such Holder, or the estates
and family members of any such partners and retired partners and any trusts for
the benefit of any of the foregoing persons shall be deemed to be a single
"selling stockholder," and any reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder," as defined in this sentence.
▇. ▇▇▇▇▇ of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any registration
by the Company as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 8.
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9. Payment of Taxes. All shares of Common Stock issued upon the
exercise of a Warrant shall be validly issued, fully paid and nonassessable, and
the Company shall pay all taxes and other governmental charges that may be
imposed in respect of the issue or delivery thereof. The Company shall not be
required, however, to pay any tax or other charge imposed in connection with any
transfer involved in the issue of any certificate for shares of Common Stock in
any name other than that of the registered holder of the Warrant surrendered in
connection with the purchase of such shares, and in such case the Company shall
not be required to issue or deliver any stock certificate until such tax or
other charge has been paid or it has been established to the Company's
satisfaction that no tax or other charge is due.
10. Fractional Shares. No fractional shares of the Company's Common
Stock will be issued in connection with any purchase hereunder but in lieu of
such fractional shares, the Company shall make a cash refund therefor equal in
amount to the product of the applicable fraction multiplied by the Warrant Price
paid by the holder for its Warrant Shares upon such exercise.
11. Loss, Theft, Destruction or Mutilation. Upon receipt by the Company
of evidence reasonably satisfactory to it that any Warrant of this Series has
been mutilated, destroyed, lost or stolen, and in the case of any destroyed,
lost or stolen Warrant, a bond of indemnity reasonably satisfactory to the
Company, or in the case of a mutilated Warrant, upon surrender and cancellation
thereof, the Company will execute and deliver in the Holder's name, in exchange
and substitution for the Warrant so mutilated, destroyed, lost or stolen, a new
Warrant of like tenor substantially in the form thereof with appropriate
insertions and variations.
12. Computations. The certificate of any firm of independent public
accountants of recognized standing selected by the Company shall be conclusive
evidence of the correctness of any computation under Warrants of this Series.
13. Headings. The descriptive headings of the several sections of these
warrants are inserted for convenience only and do not constitute a part of these
Warrants.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer under its corporate seal, attested by its duly
authorized officer, on the date of this Warrant.
CONMAT TECHNOLOGIES, INC.
[CORPORATE SEAL]
By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------
Attest:__________________________________
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Rider A
PURCHASE AGREEMENT
Date:_________________________
TO:
The undersigned, pursuant to the provisions set forth in the
attached Warrant, hereby agrees to purchase ______________________ shares of
Common Stock covered by such Warrant, and makes payment herewith in full
therefor at the price per share provided by this Warrant.
Signature:________________________________
Address:_________________________________
* * *
ASSIGNMENT
For Value Received, _________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
within Warrant, with respect to the number of shares of Common Stock covered by
such Warrant, to:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
---------------- ------- -------------
Dated:
Signature:________________________________
Witness:_________________________________
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