WARRANT TO PURCHASE COMMON STOCK
(CONVERSION WARRANTS)
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT FOR DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED NEITHER THE WARRANT NOR THE SHARES MAY BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THIS WARRANT
MUST BE SURRENDERED TO THE COMPANY OR ITS TRANSFER AGENT AS A CONDITION
PRECEDENT TO THE SALE, PLEDGE OR OTHER TRANSFER OF ANY INTEREST IN THIS WARRANT
OR THE SHARES ISSUABLE HEREUNDER.
Issuer: Invicta Group Inc.
Class of Stock: Common Stock
Issue Date: April 27, 2004
Expiration Date: April 27, 2007
THIS WARRANT TO PURCHASE COMMON STOCK is being issued pursuant to that
certain Securities Purchase Agreement dated as of the date hereof (the "Purchase
Agreement") between Invicta Group Inc., a Nevada corporation (the "Company") and
Golden Gate Investors, Inc. ("Holder").
1.1 Warrants. The Company hereby grants to Holder the right to purchase
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3,000,000 shares of the Company's Common Stock (the "Shares" or "Warrant Shares.
For avoidance of doubt, this Warrant may be exercised concurrently with or
subsequent to the issuance of a Conversion Notice under the Debenture. The date
that the Holder issues a Conversion Notice under the Debenture is hereafter
referred to as the "Conversion Date." Defined terms not defined herein shall
have the meanings ascribed to them in the Debenture or the Purchase Agreement.
▇▇▇▇▇▇ agrees that, beginning in the first full calendar month after the
Registration Statement is declared effective,
Holder will exercise at least 5%, but no more than 15% (such 15% maximum amount
to be cumulative from the Deadline), of the Warrants per calendar month,
provided that the Common Shares are available, registered and freely tradable.
If Holder exercises more than 5% of the Warrants in any calendar month, the
excess over 5% shall be credited against the next month's minimum exercise
amount. The 15% monthly maximum amount shall not be applicable if the Current
Market Price of the Common Stock at anytime during the applicable month is
higher than the Current Market Price of the Common Stock on the Closing Date. In
the event Holder does not exercise at least 5% of the Warrants in any particular
calendar month, Holder shall not be entitled to collect interest on the
Debenture for that month.
This Warrant shall expire and Holder shall no longer be able to purchase the
Warrant Shares on April ___, 2007.
ARTICLE 2
EXERCISE
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2.1 Method of Exercise. Holder may exercise this Warrant by delivering a
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duly executed Warrant Notice of Exercise in substantially the form attached as
Appendix 1 to the principal office of the Company.
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2.2 Delivery of Certificate and New Warrant. As promptly as practicable
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after the receipt of the Warrant Notice of Exercise, but in any event not more
than three (3) Business Days after the Company's receipt of the Warrant Notice
of Exercise, the Company shall issue the Shares and cause to be mailed for
delivery by overnight courier, or if a Registration Statement covering the
Shares has been declared effective by the SEC cause to be electronically
transferred, to Holder a certificate representing the Shares acquired and, if
this Warrant has not been fully exercised and has not expired, a new Warrant
substantially in the form of this Warrant representing the right to acquire the
portion of the Shares not so acquired.
2.3 Replacement of Warrants. On receipt of evidence reasonably satisfactory
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to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft or destruction, on delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the
case of mutilation, or surrender and cancellation of this Warrant, the Company
at its expense shall execute and deliver, in lieu of this Warrant, a new warrant
of like tenor.
2.4 Exercise Price. The Exercise Price of this Warrant shall $1.00.
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2.5 Cashless Exercise. Notwithstanding anything to the contrary contained
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in this Warrant, if the resale of the Warrant Shares by ▇▇▇▇▇▇ is not then
registered pursuant to an effective Registration Statement, upon the expiration
of one year from the Issue Date, this Warrant may be exercised by presentation
and surrender of this Warrant to the Company at its principal executive offices
with a written notice of Holder's intention to effect a cashless exercise,
including a calculation of the number of shares of Common Stock to be issued
upon such exercise in accordance with the terms hereof ( a "Cashless Exercise").
In the event of a Cashless Exercise, in lieu of paying the Exercise Price in
cash, Holder shall surrender this Warrant for that number of shares of Common
Stock determined by multiplying the number of Warrant Shares to which it
otherwise would be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common Stock
and the Exercise Price, and the denominator or which shall be the then current
Market Price per share of Common Stock.
ARTICLE 3
ADJUSTMENT TO THE SHARES
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The number of Shares purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
3.1 Reclassification. In case of any reclassification or change of
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outstanding securities of the class issuable upon exercise of this Warrant then,
and in any such case, the Holder, upon the exercise hereof at any time after the
consummation of such reclassification or change, shall be entitled to receive in
lieu of each Share theretofore issuable upon exercise of this Warrant, the kind
and amount of shares of stock, other securities, money and/or property received
upon such reclassification or change by a holder of one Share. The provisions of
this Section 2.1 shall similarly apply to successive reclassifications or
changes.
3.2 Subdivision or Combination of Shares. If the Company at any time while
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this Warrant remains outstanding and unexpired shall subdivide or combine its
Shares, the Exercise Price shall be proportionately decreased in the case of a
subdivision or increased in the case of a combination.
3.3 Stock Dividends. If the Company, at any time while this Warrant is
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outstanding shall pay a dividend with respect to its Shares payable in Shares,
or make any other distribution of Shares with respect to Shares (except any
distribution specifically provided for in Section 2.1 and Section 2.2 above),
then the Exercise Price shall be adjusted, effective from and after the date of
determination of shareholders entitled to received such dividend or
distribution, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction, (a) the
numerator of which shall be the total number of Shares outstanding immediately
prior to such dividend or distribution, and (b) the denominator of which shall
be the total number of Shares outstanding immediately after such dividend or
distribution.
3.4 Non-Cash Dividends. If the Company at any time while this Warrant is
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outstanding shall pay a dividend with respect to Shares payable in securities
other than Shares or other non-cash property, or make any other distribution of
such securities or property with respect to Shares (except any distribution
specifically provided for in Section 2.1 and Section 2.2 above), then this
Warrant shall represent the right to acquire upon exercise of this Warrant such
securities or property which a holder of Shares would have been entitled to
receive upon such dividend or distribution, without the payment by the Holder of
any additional consideration for such securities or property.
3.5 Effect of Reorganization and Asset Sales. If any (i) reorganization or
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reclassification of the Common Stock (ii) consolidation or merger of the Company
with or into another corporation, or (iii) sale or all or substantially all of
the Company's operating assets to another corporation followed by a liquidation
of the Company (any such transaction shall be referred to herein as an "Event"),
is effected in such a way that holders of common Stock are entitled to receive
securities and/or assets as a result of their Common Stock ownership, the
Holder, upon exercise of this Warrant, shall be entitled to receive such shares
of stock securities or assets which the Holder would have received had it fully
exercised this Warrant on or prior the record date for such Event. The Company
shall not merge into or consolidate with another corporation or sell all of its
assets to another corporation for a consideration consisting primarily of
securities of such corporation, unless the successor or acquiring corporation,
as the case may be, shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Warrant to be
performed or observed by the Company and all of the obligations and liabilities
hereunder, subject to such modification as shall be necessary to provide for
adjustments which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 2. The foregoing provisions shall
similarly apply to successive mergers, consolidations or sales of assets.
3.6 Adjustment of Number of Shares. Upon each adjustment in the Exercise
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Price, the number of Shares shall be adjusted, to the nearest whole share, to
the product obtained by multiplying the number of Shares, purchasable
immediately prior to such adjustment by a fraction, the numerator of which shall
be the Exercise Price immediately prior to such adjustment and the denominator
of which shall be the Exercise Price immediately thereafter.
3.7 No Impairment. The Company shall not, by amendment of its articles of
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incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out all of the provisions of this Warrant and
in taking all such action as may be reasonably necessary or appropriate to
protect ▇▇▇▇▇▇'s rights hereunder against impairment. If the Company takes any
action affecting its Common Stock other than as described above that adversely
affects Holder's rights under this Warrant, the Exercise Price shall be adjusted
downward and the number of Shares issuable upon exercise of this Warrant shall
be adjusted upward in such a manner that the aggregate Exercise Price of this
Warrant is unchanged.
3.8 Fractional Shares. No fractional Shares shall be issuable upon the
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exercise of this Warrant, and the number of Shares to be issued shall be rounded
down to the nearest whole Share.
3.9 Certificate as to Adjustments. Upon any adjustment of the Exercise
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Price, the Company, at its expense, shall compute such adjustment and furnish
Holder with a certificate of its Chief Financial Officer setting forth such
adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Exercise Price in effect upon the date thereof and the series of adjustments
leading to such Exercise Price.
3.10 No Rights of Shareholders. This Warrant does not entitle Holder to any
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voting rights or any other rights as a shareholder of the Company prior to the
exercise of ▇▇▇▇▇▇'s right to purchase Shares as provided herein.
ARTICLE 4
REPRESENTATIONS AND COVENANTS OF THE COMPANY
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4.1 Representations and Warranties. The Company hereby represents and
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warrants to Holder that all Shares which may be issued upon the exercise of the
purchase right represented by this Warrant, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonasessable, and free of any liens
and encumbrances.
4.2 Notice of Certain Events. If the Company proposes at any time (a) to
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declare any dividend or distribution upon its Common Stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of Common Stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the Company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of Common Stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of Common
Stock will be entitled to exchange their Common Stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
4.3 Information Rights. So long as Holder holds this Warrant and/or any of
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the Shares, the Company shall deliver to Holder (a) promptly after mailing,
copies of all notices or other written communications to the shareholders of the
Company, (b) within ninety (90) days of their availability, the annual audited
financial statements of the Company certified by independent public accountants
of recognized standing, and (c) within forty-five (45) days after the end of
each fiscal quarter or each fiscal year, the Company's quarterly, unaudited
financial statements.
4.4 Reservation of Warrant Shares. The Company has reserved and will keep
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available, out of the authorized and unissued shares of Common Stock, the full
number of shares sufficient to provide for the exercise of the rights of
purchase represented by this Warrant.
4.5 Registration Rights. If Holder exercises this Warrant and purchases some
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or all of the Shares, Holder shall have the Registration Rights set forth in
that certain Registration Rights Agreement executed concurrently therewith.
ARTICLE 5
REPRESENTATIONS AND COVENANTS OF THE HOLDER
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5.1 Private Issue. Holder understands (i) that the Shares issuable upon
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exercise of Holder's rights contained in the Warrant are not registered under
the Act or qualified under applicable state securities laws on the ground that
the issuance contemplated by the Warrant will be exempt from the registration
and qualifications requirements thereof, and (ii) that the Company's reliance on
such exemption is predicated on Holder's representations set forth in this
Article 5.
5.2 Financial Risk. Holder has such knowledge and experience in financial
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and business matters as to be capable of evaluating the merits and risks of its
investment and has the ability to bear the economic risks of its investment.
5.3 Risk of No Registration. Holder understands that if the Company does
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not register with the Securities and Exchange Commission pursuant to Section 12
of the Act, or file reports pursuant to Section 15(d), of the Securities
Exchange Act of 1934 (the "1934 Act"), or if a registration statement covering
the securities under the Act is not in effect when it desires to sell (i) the
right to purchase Shares pursuant to the Warrant, or (ii) the Shares issuable
upon exercise of the right to purchase, it may be required to hold such
securities for an indefinite period.
5.4 Accredited Investor. Holder is an "accredited investor," as such term
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is defined in Regulation D promulgated pursuant to the Act.
ARTICLE 6
MISCELLANEOUS
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6.1 Term. This Warrant is exercisable, in whole or in part, at any time and
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from time to time on or after the Conversion Date and on or before the
Expiration Date set forth above.
6.2 Compliance with Securities Laws on Transfer. This Warrant may not be
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transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder.
6.3 Transfer Procedure. Holder shall have the right without the consent of
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the Company to transfer or assign in whole or in part this Warrant and the
Shares issuable upon exercise of this Warrant. ▇▇▇▇▇▇ agrees that unless there
is in effect a registration statement under the Act covering the proposed
transfer of all or part of this Warrant, prior to any such proposed transfer the
Holder shall give written notice thereof to the Company (a "Transfer Notice").
Each Transfer Notice shall describe the manner and circumstances of the proposed
transfer in reasonable detail and, if the company so requests, shall be
accompanied by an opinion of legal counsel, in a form reasonably satisfactory to
the Company, to the effect that the proposed transfer may be effected without
registration under the Act; provided that the Company will not require opinions
of counsel for transactions involving transfers to affiliates or pursuant to
Rule 144 promulgated by the Securities and Exchange Commission under the act,
except in unusual circumstances.
6.4 Notices, etc. All notices and other communications required or permitted
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hereunder shall be in writing and shall be delivered personally, or sent by
telecopier machine or by a nationally recognized overnight courier service, and
shall be deemed given when so delivered personally, or by telecopier machine or
overnight courier service as follows:
if to the Company, to:
Invicta Group Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile:
if to the Holder, to:
Golden Gate Investors, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
or at such other address as the Company shall have furnished to the Holder. Each
such notice or other communication shall for all purposes of this agreement be
treated as effective or having been given when delivered if delivered
personally, or, if sent by mail, at the earlier of its receipt or five days
after the same has been deposited in a regularly maintained receptacle for the
deposit of the United States mail, addressed and mailed as aforesaid.
6.5 Counterparts. This agreement may be executed in any number of
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counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument. Facsimile execution shall be deemed originals.
6.6 Waiver. This Warrant and any term hereof may be changed, waived,
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discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
6.7 Attorneys Fees. In the event of any dispute between the parties
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concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys fees.
6.8 Governing Law; Jurisdiction. This Warrant shall be governed by and
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construed in accordance with the laws of the State of California, without giving
effect to its principles regarding conflicts of law. Each of the parties hereto
consents to the jurisdiction of the federal courts whose districts encompass any
part of the City of San Diego or the state courts of the State of California
sitting in the City of San Diego in connection with any dispute arising under
this Warrant and hereby waives, to the maximum extent permitted by law, any
objection including any objection based on forum non conveniens, to the bringing
of any such proceeding in such jurisdictions.
6.9 Remedies. The Company acknowledges that a breach by it of its
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obligations hereunder will cause irreparable harm to the Holder, by vitiating
the intent and purpose of the transactions hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Warrant will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Warrant, that the Holder shall
be entitled, in addition to all other available remedies at law or in equity,
and in addition to the penalties assessable herein, to an injunction or
injunctions restraining, preventing or curing any breach of this Warrant and to
enforce specifically the terms and provisions hereof, without the necessity of
showing economic loss and without any bond or other security being required.
IN WITNESS WHEREOF, the parties hereto have duly caused this Warrant to
Purchase Common Stock to be executed and delivered on the date first above
written.
Invicta Group Inc. Golden Gate Investors, Inc.
By: __________________________ By: _________________________
Title: __________________________ Title: _________________________
APPENDIX 1
WARRANT NOTICE OF EXERCISE
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1. The undersigned hereby elects to purchase _____ shares of the Common Stock
of Invicta Group Inc. pursuant to the terms of the Warrant to Purchase
Common Stock issued by Invicta Group Inc. on April ___, 2004.
2. Please issue a certificate or certificates representing said shares in the
name of the undersigned or in such other name as is specified below:
_____________________
_____________________
_____________________
(Name and Address)
3. The undersigned makes the representations and covenants set forth in
Article 5 of the Warrant to Purchase Common Stock.
___________________________
(Signature)
___________________________
(Date)