WARRANT AGREEMENT
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 ACT"), OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN
FORM, REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED
UNDER THE 1933 ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. ANY SUCH
OFFER, SALE, ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH THE APPLICABLE STATE
SECURITIES LAWS.
BASIC EMPIRE CORPORATION
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
Date of Issuance: May 26, 2004 Number of Shares: 89,285
Basic Empire Corporation, a Nevada corporation (the "Company"), hereby
certifies that, for Ten United States Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, the registered holder hereof or his permitted
assigns, is entitled, subject to the terms set forth below, to purchase from the
Company upon surrender of this Warrant, at any time or times on or after the
date of issuance, but not after 5:00 P.M. Central Time on the Expiration Date
(as defined herein) 89,285 fully paid nonassessable shares of Common Stock (as
defined herein) of the Company (the "Warrant Shares") at the purchase price per
share provided in Section 1 below.
Section 1. Definitions. The following words and terms as used in this
Warrant shall have the following meanings:
(a) "Business Day" means any day that is not a Saturday, Sunday or a
day on which the banks in the Dallas metropolitan area are generally closed.
(b) "Common Stock" means (i) the Company's common stock, par value
$0.001 per share, and (ii) any capital stock into which such Common Stock shall
have been changed or any capital stock resulting from a reclassification of such
Common Stock.
(c) "Expiration Date" means the date three (3) years from the date of
this Warrant or, if such date falls on a Saturday, Sunday or other day on which
banks are required or authorized to be closed in the City of Dallas or the State
of Texas or on which trading does not take place on the principal exchange or
automated quotation system on which the Common Stock is traded (a "Holiday"),
the next date that is not a Holiday.
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(d) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
(e) "Securities Act" means the Securities Act of 1933, as amended.
(f) "Warrant" means this Warrant and all Warrants issued in exchange,
transfer or replacement of any thereof.
(g) "Warrant Exercise Price" shall be $0.28 per share of Common Stock,
which price is the current fair market value of shares of Common Stock.
Section 2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised by the holder hereof then registered on the books of the Company, in
whole or in part, at any time on any Business Day on or after the date of
issuance of this Warrant and prior to 5:00 P.M. Eastern Time on the Expiration
Date by (i) delivery of a written notice, in the form of the subscription notice
attached as Exhibit A hereto (the "Exercise Notice"), of such holder's election
to exercise this Warrant, which notice shall specify the number of Warrant
Shares to be purchased, (ii) payment to the Company of an amount equal to the
Warrant Exercise Price multiplied by the number of Warrant Shares as to which
this Warrant is being exercised (plus any applicable issue or transfer taxes)
(the "Aggregate Exercise Price") in cash or by check or wire transfer, and (iii)
the surrender to a common carrier for delivery to the Company as soon as
practicable following such date, this Warrant (or an indemnification undertaking
with respect to this Warrant in the case of its loss, theft or destruction);
provided, that if such Warrant Shares are to be issued in any name other than
that of the registered holder of this Warrant, such issuance shall be deemed a
transfer and the provisions of Section 8 shall be applicable. In the event of
any exercise of the rights represented by this Warrant in compliance with this
Section 2(a), a certificate or certificates for the Warrant Shares so purchased,
in such denominations as may be requested by the holder hereof and registered in
the name of, or as directed by, the holder, shall be delivered at the Company's
expense to, or as directed by, such holder as soon as practicable, and in no
event later than ten (10) Business Days, after the Company's receipt of the
Exercise Notice, the Aggregate Exercise Price and this Warrant (or an
indemnification undertaking with respect to this Warrant in the case of its
loss, theft or destruction). Upon delivery of the Exercise Notice and Aggregate
Exercise Price referred to in clause (ii) above, the holder of this Warrant
shall be deemed for all corporate purposes to have become the holder of record
of the Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date of delivery of this Warrant as required by clause (iii)
above or the certificates evidencing such Warrant Shares.
(b) Unless the rights represented by this Warrant shall have expired or
shall have been fully exercised, the Company shall, as soon as practicable and
in no event later than ten (10) Business Days after any exercise and at its own
expense, issue a new Warrant identical in all respects to this Warrant exercised
except it shall represent rights to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under this Warrant exercised,
less the number of Warrant Shares with respect to which such Warrant is
exercised.
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(c) No fractional shares of Common Stock are to be issued upon the
exercise of this Warrant, but rather the number of shares of Common Stock issued
upon exercise of this Warrant shall be rounded up or down to the nearest whole
number.
Section 3. Covenants as to Common Stock. The Company hereby covenants
and agrees as follows:
(a) This Warrant is, and any Warrant issued in substitution for or
replacement of this Warrant will upon issuance be, duly authorized and validly
issued.
(b) All Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable and free from all taxes, liens and charges with respect to the
issue thereof.
(c) During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved at least 100% of the number of shares of Common Stock needed to provide
for the exercise of the rights then represented by this Warrant and the par
value of said shares will at all times be less than or equal to the applicable
Warrant Exercise Price.
(d) If the Company proposes at any time (a) to declare any dividend or
distribution upon any of its stock, whether in cash, property, stock, or other
securities and whether or not a regular cash dividend; (b) to offer for sale
additional shares of any class or series of the Company's stock; (c) to effect
any reclassification or recapitalization of any of its 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
10 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
10 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.
Section 4. Registration of Warrant Shares
(a) Mandatory Registration. The Company shall prepare, and, as soon as
practicable but in no event later than sixty (60) calendar days after the date
the holder exercises this Warrant, file with the SEC a Registration Statement or
Registration Statements (as is necessary) on Form S-8 (or if such form is
unavailable, such other form as is available for registration) covering the
resale of all of the Warrant Shares. The initial Registration Statement prepared
pursuant hereto shall register for resale at least that number of Company common
stock shares equal to the number of Warrant Shares as of the date immediately
preceding the date the Registration Statement is initially filed with the SEC,
subject to adjustment. The Company shall use its best efforts to have the
Registration Statement declared effective by the SEC as soon as practicable, but
in no event later than 120 calendar days after the date the holder exercises
this Warrant.
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(b) Piggy Back Registration Rights. If the Company decides, including
as required under any demand registration rights agreement, to register any of
its common stock or securities convertible into or exchangeable for common stock
under the Securities Act on a form which is suitable for an offering for cash or
shares of the Company held by third parties and which is not a registration
solely to implement an employee benefit plan, a registration statement on Form
S-4 (or successor form) or a transaction to which Rule 145 or any other similar
rule of the SEC is applicable, the Company will promptly give written notice to
the holder of this Warrant of its intention to effect such a registration.
Subject to Section 4(c) below, the Company shall include all of the Warrant
Shares that the holder requests to be included in such a registration by a
written notice delivered to the Company within fifteen (15) days after the
notice given by the Company.
(c) If the registration, as described in Section 4(b) above, involves
an underwritten offering, the Company will not be required to register Warrant
Shares in excess of the amount that the principal underwriter reasonably and in
good faith recommends may be included in such offering (a "Cutback"), which
recommendation, and supporting reasoning, shall be delivered to the holder of
this Warrant. If such a Cutback occurs, the number of shares that are entitled
to included in the registration and underwriting shall be allocated in the
following manner: (i) first, to the Company for any securities it proposes to
sell for its own account, (ii) second, to the holder of this Warrant requiring
such registration, and (iii) third, to other holders of stock of the Company
requesting inclusion in the registration, pro rata among the respective holders
thereof on the basis of the number of shares for which each such requesting
holder has requested registration.
Section 5. Taxes. The Company shall pay any and all taxes which may be
payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant.
Section 6. Warrant Holder Not Deemed a Stockholder. Except as otherwise
specifically provided herein, no holder, as such, of this Warrant shall be
entitled to vote or receive dividends or be deemed the holder of shares of the
Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the holder of this Warrant of the Warrant Shares which he or she is
then entitled to receive upon the due exercise of this Warrant. In addition,
nothing contained in this Warrant shall be construed as imposing any liabilities
on such holder to purchase any securities (upon exercise of this Warrant or
otherwise) or as a stockholder of the Company, whether such liabilities are
asserted by the Company or by creditors of the Company.
Section 7. Representations of Holder. The holder of this Warrant, by
the acceptance hereof, represents that it is acquiring this Warrant and the
Warrant Shares for its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution of
this Warrant or the Warrant Shares, except pursuant to sales registered or
exempted under the Securities Act; provided, however, that by making the
representations herein, the holder does not agree to hold this Warrant or any of
the Warrant Shares for any minimum or other specific term and reserves the right
to dispose of this Warrant and the Warrant Shares at any time in accordance with
or pursuant to a registration statement or an exemption under the Securities
Act.
4
Section 8. Ownership and Transfer.
(a) The Company shall maintain at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to the
holder hereof), a register for this Warrant, in which the Company shall record
the name and address of the Person in whose name this Warrant has been issued,
as well as the name and address of each transferee. The Company may treat the
Person in whose name any Warrant is registered on the register as the owner and
holder thereof for all purposes, notwithstanding any notice to the contrary, but
in all events recognizing any transfers made in accordance with the terms of
this Warrant.
(b) This Warrant and the rights granted to the holder hereof are
transferable, in whole or in part, upon surrender of this Warrant, together with
a properly executed warrant power in the form of Exhibit B attached hereto;
provided, however, that any transfer or assignment shall be subject to the
conditions set forth in Section 8(c) below.
(c) The holder of this Warrant understands that this Warrant has not
been and is not expected to be, registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (a) subsequently registered thereunder, or (b) such holder shall have
delivered to the Company an opinion of counsel, in generally acceptable form, to
the effect that the securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration;
provided that (i) any sale of such securities made in reliance on Rule 144
promulgated under the Securities Act may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any resale of
such securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the Securities Act) may require compliance with some other exemption
under the Securities Act or the rules and regulations of the Securities and
Exchange Commission thereunder; and (ii) neither the Company nor any other
person is under any obligation to register the Warrants under the Securities Act
or any state securities laws or to comply with the terms and conditions of any
exemption thereunder.
Section 9. Adjustment to the Shares. The Warrant Exercise Price and the
number of shares of Common Stock issuable upon exercise of this Warrant shall be
adjusted from time to time as follows:
(a) Adjustment of Warrant Exercise Price upon Subdivision or
Combination of Common Stock. If the Company at anytime after the date of
issuance of this Warrant subdivides (by any stock split, stock dividend,
recapitulation or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Warrant Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of shares of Common Stock obtainable upon the exercise of this
Warrant will be proportionately increased. If the Company at any time after the
date of issuance of this Warrant combines (by combination, reverse stock split
or otherwise) one or more classes of its outstanding shares of Common Stock into
a smaller number of shares, the Warrant Exercise Price in effect immediately
prior to such combination will be proportionately increased and the number of
shares of Common Stock obtainable upon exercise of this Warrant will be
proportionately decreased.
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(b) Reclassification, Exchange, Combinations or Substitution. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, the holder of this Warrant shall be entitled to
receive, upon exercise or conversion of this Warrant, the number and kind of
securities and property that the holder of this Warrant would have received for
the shares of Common Stock if this Warrant had been exercised immediately before
such reclassification, exchange, substitution, or other event. The Company or
its successor shall promptly issue to holder of this Warrant a new Warrant for
such new securities or other property. The new Warrant shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 9 including, without limitation,
adjustments to the Warrant Exercise Price and to the number of securities or
property issuable upon exercise of the new Warrant. The provisions of this
Section 9(b) shall similarly apply to successive reclassifications, exchanges,
substitutions, or other events.
(c) Adjustments for Diluting Issuances. The Warrant Exercise Price and
the number of shares of Common Stock issuable upon exercise of this Warrant
shall be subject to adjustment, from time to time in the manner set forth in the
Company's Articles or Certificate of Incorporation as if the shares of Common
Stock were issued and outstanding on and as of the date of any such required
adjustment. The provisions set forth for the shares of Common Stock in the
Company's Articles or Certificate (as applicable) of Incorporation relating to
the above in effect as of the date of issuance may not be amended, modified or
waived, without the prior written consent of the holder of this Warrant unless
such amendment, modification or waiver affects the rights associated with the
Warrant Shares in the same manner as such amendment, modification or waiver
affects the rights associated with all other shares of the same series and class
as the shares granted to the holder.
(d) No Impairment. The Company shall not, by amendment of its Articles
or Certificate (as applicable) of 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 of all the provisions of this Section 9 and in taking all such action as may
be necessary or appropriate to protect Holder's rights under this Section
against impairment.
(e) Certificate as to Adjustments. Upon each adjustment of the Warrant
Exercise Price, the Company shall promptly notify the holder in writing, and, at
the Company's expense, promptly compute such adjustment, and furnish to the
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 to the holder a certificate setting forth the
Warrant Exercise Price in effect upon the date thereof and the series of
adjustments leading to such Warrant Exercise Price.
6
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall, on receipt
of an indemnification undertaking, issue a new Warrant of like denomination and
tenor as this Warrant so lost, stolen, mutilated or destroyed.
Section 11. Notice. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this Warrant
must be in writing and will be deemed to have been delivered: (i) upon receipt,
when delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
Basic Empire Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: ______________
Facsimile: ______________
Attention: ______________
Notice to the holder of this Warrant shall be addressed as
follows until the Company receives notice of a change in
address:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone:_______________
Facsimile:_______________
Attention:_______________
Each party shall provide five days' prior written notice to the other party of
any change in address or facsimile number. Written confirmation of receipt (A)
given by the recipient of such notice, consent, waiver or other communication,
(B) mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a nationally recognized overnight
delivery service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
Section 12. Date. The date of this Warrant is May 26, 2004. This
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date.
Section 13. Amendment and Waiver. Except as otherwise provided herein,
the provisions of this Warrant may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holder of this Warrant.
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Section 14. Descriptive Headings The descriptive headings of the
several Sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant.
Section 15. Governing Law. This Warrant shall be governed by and
construed and enforced in accordance with the laws of the State of Texas,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Texas or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of Texas.
This Warrant has been duly executed by the Company as of the date first
set forth above.
BASIC EMPIRE CORPORATION
By: /s/ ▇▇▇▇▇ ▇. Little
------------------------
▇▇▇▇▇ ▇. Little
Chief Executive Officer
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EXHIBIT A TO WARRANT
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
BASIC EMPIRE CORPORATION
The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Common Stock ("Warrant Shares") of Basic
Empire Corporation, a Nevada corporation (the "Company"), evidenced by the
attached Warrant (the "Warrant"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.
1. Payment of Warrant Exercise Price. The holder shall pay the sum of
$___________________ to the Company in accordance with the terms of the Warrant.
2. Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the Warrant.
Date:______________ ________ , __________________
Name of Registered Holder
_____________________________
Name:________________________
A-1
EXHIBIT B TO WARRANT
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, Federal Identification No. __________, a warrant to purchase
____________ shares of the capital stock of Basic Empire Corporation, a Nevada
corporation, represented by warrant certificate no. _____, standing in the name
of the undersigned on the books of said corporation. The undersigned does hereby
irrevocably constitute and appoint ______________, attorney to transfer the
warrants of said corporation, with full power of substitution in the premises.
Dated: _______________, 200__
__________________________________
Name:_____________________________
B-1