COMMON STOCK PURCHASE WARRANT EXACTUS, INC.
Exhibit 10.3
NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY
A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.
Warrant Shares:
275,612
Issuance Date:
November 27, 2019
This
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that,
for value received, 3i, LP or its assigns (the “Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after November
27, 2019 (the “Issuance Date”) and on or
prior to the close of business on the second (2nd) year anniversary
of the Issuance Date (the “Termination Date”) but
not thereafter, to subscribe for and purchase from Exactus, Inc., a
Nevada corporation (the “Company”), up to 275,612
shares (as subject to adjustment hereunder, the “Warrant Shares”) of
common stock, par value $0.0001 per share, of the Company (the
“Common
Stock”). The purchase price of one share of Common
Stock under this Warrant shall be equal to the Exercise Price, as
defined in Section 2(b).
Section
1. Definitions.
In addition to the terms defined elsewhere in this Warrant, the
following terms have the meanings set forth in this Section
1:
a) “Affiliate” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.
b) “Business Day” means any
day other than a Saturday or Sunday or any other day on which the
Federal Reserve Bank of New York is not open for
business.
c) “Commission” means the
United States Securities and Exchange Commission.
d) “Common Stock Equivalents”
means any
securities of the Company or any Subsidiary which would entitle the
holder thereof to acquire at any time Common Stock, including,
without limitation, any debt, preferred stock, right, option,
warrant, unit or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Stock.
e) “Conversion Shares” means,
collectively, the shares of Common Stock issuable upon Conversion
of the Notes in accordance with the terms of this
Notes.
f) “Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
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g) “Exempt
Issuance” means
the issuance of (i) Common Stock by the Company pursuant to the
terms and conditions of the Purchase Agreement, (ii) the issuance
of (a) Conversion Shares upon conversion of the Notes or any other
Notes issued under the Purchase Agreement in accordance with the
terms of such Notes, which for the avoidance of doubt, includes any
adjustment to the conversion price prior to conversion hereof or
thereof, and (b) Warrant Shares upon exercise of the Warrants in
accordance with the terms of the Warrants, which for the avoidance
of doubt, includes any adjustment to the Exercise Price prior to
exercise thereof, (iii) the issue of shares of Common Stock or
options to employees, officers, directors, consultants, advisors or
contractors of the Company pursuant to any stock or option plan
duly adopted for any such purpose, by a majority of the
non-employee members of the Board of Directors of the Company or a
majority of the members of a committee of non-employee directors
established for such purpose, provided, in no event shall the
aggregate amount of such issuances to employees, officers,
directors, consultants, advisors or contractors of the Company
during the period commencing on the date of the Purchase Agreement
and ending on the date no Warrants are outstanding exceed fifteen
percent (15%) of the outstanding shares of Common Stock (as
adjusted for stock splits, stock dividends, stock combinations,
recapitalizations or other similar transactions following the
Issuance Date), (iv) securities issued as part of the purchase
price for strategic acquisitions, which in no event shall include
any issuances of securities that directly and/or indirectly will be
used to raise capital of all such strategic acquisitions, which
must have been approved by a majority of the disinterested
directors of the Company, and (v) the issuance of Common Stock upon
the exercise or exchange of or conversion of any Common Stock
Equivalents issued and outstanding on the date of the Purchase
Agreement pursuant to terms and conditions applicable to such
Common Stock Equivalents in effect as of the date of the Purchase
Agreement and disclosed in filings of the Company with the
Commission prior to the date of the Purchase Agreement,
provided that such
Common Stock Equivalents have not been amended since the date of
the Purchase Agreement to increase the number of such Common Stock
Equivalents or shares of Common Stock issuable upon the exercise or
exchange of or conversion of such Common Stock Equivalents, or to
decrease the Exercise Price, exchange price or conversion price of
such Common Stock Equivalents (other than Common Stock Equivalents
issued and outstanding on the date of the Purchase Agreement,
subject to exchange prices or conversion prices adjustable pursuant
to anti-dilution protection or in connection with stock splits or
combinations) or to extend the term of such Common Stock
Equivalents.
h) “Notes” means the 8%
Senior Secured Convertible Promissory Notes of the Company offered
by the Company pursuant to the Purchase Agreement.
i) “Person” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
j) “Purchase Agreement” means
that certain Securities Purchase Agreement, dated November 27,
2019, between the Company and the Holder.
k) “Rule 144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially
the same effect as such Rule.
l) “Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
m) “Transfer
Agent” means V Stock
Transfer, the current transfer agent of the Company, with a mailing
address of ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ and a phone
number of (▇▇▇) ▇▇▇-▇▇▇▇, attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, and any
successor transfer agent of the Company.
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Section
2. Exercise.
a) Exercise
of Warrant. Exercise of the purchase rights represented by
this Warrant may be made, in whole or in part, at any time or times
on or after the Issuance Date and on or before the Termination Date
by delivery to the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered
Holder at the address of the Holder appearing on the books of the
Company) of a duly executed facsimile copy of the Notice of
Exercise form annexed hereto and within two (2) Business Days of
the date said Notice of Exercise is delivered to the Company, the
Company shall have received payment of the aggregate Exercise Price
of the shares of Common Stock thereby purchased by wire transfer or
cashier’s check drawn on a United States bank . No ink-original Notice of Exercise
shall be required, nor shall any medallion guarantee (or other type
of guarantee or notarization) of any Notice of Exercise form be
required. Notwithstanding anything herein to the contrary, the
Holder shall not be required to physically surrender this Warrant
to the Company. Partial exercises of this Warrant resulting in
purchases of a portion of the total number of Warrant Shares
available hereunder shall have the effect of lowering the
outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased.
The Holder and the Company shall maintain records showing the
number of Warrant Shares purchased and the date of such purchases.
The Company shall deliver any objection to any Notice of Exercise
Form within one (1) Business Day of receipt of such notice.
The Holder and any assignee, by
acceptance of this Warrant, acknowledge and agree that, by reason
of the provisions of this paragraph, following the purchase of a
portion of the Warrant Shares hereunder, the number of Warrant
Shares available for purchase hereunder at any given time may be
less than the amount stated on the face hereof.
b) Exercise Price. The exercise
price per share of the Common Stock under this Warrant shall be
$0.756, subject to adjustment hereunder (the “Exercise
Price”).
c) Cashless
Exercise. Notwithstanding
anything contained herein to the contrary, if at any point after
the 180 day anniversary of the issuance of this Warrant a
Registration Statement on Form S-1 (or other applicable
registration statement under the 1933 Act (the
“Registration
Statement”) covering the
resale of the Warrant Shares is not available for the issuance of
such Warrant Shares, the Holder may, in its sole discretion,
exercise this Warrant in whole or in part and, in lieu of making
the cash payment otherwise contemplated to be made to the Company
upon such exercise in payment of the Exercise Price, elect instead
to exercise this Warrant by means of a cashless exercise (a
“Cashless
Exercise”) in which the
Holder shall be entitled to receive a number of Warrant Shares
equal to the quotient obtained by dividing [(A-B) (X)] by (A),
where:
(A) as
applicable: (i) the VWAP on the Trading Day immediately preceding
the date of the applicable Notice of Exercise if such Notice of
Exercise is (1) both executed and delivered pursuant to Section
1(a) hereof on a day that is not a Trading Day or (2) both executed
and delivered pursuant to Section 1(a) hereof on a Trading Day
prior to the opening of “regular trading hours” (as
defined in Rule 600(b)(64) of Regulation NMS promulgated under the
federal securities laws) on such Trading Day, (ii) the Bid Price of
the Common Shares on the principal Trading Market as reported by
Bloomberg L.P. as of the time of the Holder’s execution of
the applicable Notice of Exercise if such Notice of Exercise is
executed during “regular trading hours” on a Trading
Day and is delivered within two (2) hours thereafter pursuant to
Section 1(a) hereof or (iii) the VWAP on the date of the applicable
Notice of Exercise if the date of such Notice of Exercise is a
Trading Day and such Notice of Exercise is both executed and
delivered pursuant to Section 1(a) hereof after the close of
“regular trading hours” on such Trading
Day;
(B) =
the
Exercise Price of this Warrant, as adjusted hereunder;
and
(X)
=
the
number of Warrant Shares that would be issuable upon exercise of
this Warrant in accordance with the terms of this Warrant if such
exercise were by means of a cash exercise rather than a cashless
exercise.
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d) Mechanics
of Exercise.
i. Delivery of Warrant Shares Upon
Exercise. Warrant Shares purchased hereunder shall be
transmitted by the Transfer Agent to the Holder by crediting the
account of the Holder’s prime broker with The Depository
Trust Company through its Deposit or Withdrawal at Custodian system
(“DWAC”) if the Company is
then a participant in such system and either (A) there is an
effective registration statement permitting the issuance of the
Warrant Shares to or resale of the Warrant Shares by the Holder or
(B) the shares are eligible for resale by the Holder without volume
or manner-of-sale limitations pursuant to Rule 144, and otherwise
Warrant Shares purchased hereunder shall be transmitted by physical
delivery to the address specified by the Holder in the Notice of
Exercise by the date that is two (2) Business Days after the latest
of (A) the delivery to the Company of the Notice of Exercise and
(B) surrender of this Warrant (if required) (such date, the
“Warrant Share
Delivery Date”). The Warrant Shares shall be deemed to
have been issued, and Holder or any other person so designated to
be named therein shall be deemed to have become a holder of record
of such shares for all purposes, as of the date the Warrant has
been exercised, with payment to the Company of the Exercise Price,
which Exercise Price shall be paid in either lawful U.S. currency
or by contributing Notes that have been duly and validly issued by
the Company, and all taxes required to be paid by the Holder, if
any, pursuant to Section 2(d)(vi) prior to the issuance of such
shares, having been paid. The Warrant Shares shall bear a
restrictive legend in the following form, as
appropriate:
“THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL
SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.”
ii. Delivery of New Warrants Upon
Exercise. If this Warrant shall have been exercised in part,
the Company shall, at the request of a Holder and upon surrender of
this Warrant certificate, at the time of delivery of the Warrant
Shares, deliver to the Holder a new Warrant evidencing the rights
of the Holder to purchase the unpurchased Warrant Shares called for
by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant.
iii. Rescission
Rights. If the Company fails to cause the Transfer Agent to
transmit to the Holder the Warrant Shares pursuant to Section
2(d)(i) by the Warrant Share Delivery Date, then the Holder will
have the right to rescind such exercise.
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iv. Compensation for Buy-In on Failure to
Timely Deliver Warrant Shares Upon Exercise. In addition to
any other rights available to the Holder, if the Company fails to
cause the Transfer Agent to transmit to the Holder the Warrant
Shares pursuant to an exercise on or before the Warrant Share
Delivery Date, and if after such date the Holder is required by its
broker to purchase (in an open market transaction or otherwise) or
the Holder’s brokerage firm otherwise purchases, shares of
Common Stock to deliver in satisfaction of a sale by the Holder of
the Warrant Shares which the Holder anticipated receiving upon such
exercise (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder the amount, if any, by
which (x) the Holder’s total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (1) the
number of Warrant Shares that the Company was required to deliver
to the Holder in connection with the exercise at issue times (2)
the price at which the sell order giving rise to such purchase
obligation was executed, and (B) at the option of the Holder,
either reinstate the portion of the Warrant and equivalent number
of Warrant Shares for which such exercise was not honored (in which
case such exercise shall be deemed rescinded) or deliver to the
Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of
Common Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000, under clause (A) of the immediately
preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the
Buy-In and, upon request of the Company, evidence of the amount of
such loss. Nothing herein shall limit a ▇▇▇▇▇▇’s right to
pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the
Company’s failure to timely deliver shares of Common Stock
upon exercise of the Warrant as required pursuant to the terms
hereof.
v. No Fractional Shares or Scrip.
No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. As to any fraction of
a share which the Holder would otherwise be entitled to purchase
upon such exercise, the Company shall, at its election, either pay
a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up
to the next whole share.
vi. Charges, Taxes and Expenses.
Issuance of Warrant Shares shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of Warrant Shares, all of which taxes and
expenses shall be paid by the Company, and such Warrant Shares
shall be issued in the name of the Holder or in such name or names
as may be directed by the Holder; provided, however, that in the event that
Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by
the Holder and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.
vii. Closing
of Books. The Company will not close its stockholder books
or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.
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e) ▇▇▇▇▇▇’s
Exercise Limitations. The
Company shall not effect any exercise of this Warrant, and a Holder
shall not have the right to exercise any portion of this Warrant,
pursuant to Section 2 or otherwise, to the extent that after giving
effect to such issuance after exercise as set forth on the
applicable Notice of Exercise, the Holder (together with the
Holder’s Affiliates, and any other Persons acting as a group
together with the Holder or any of the Holder’s Affiliates
(such Persons, “Attribution
Parties”)), would
beneficially own in excess of the Beneficial Ownership Limitation
(as defined below). For purposes of the foregoing sentence,
the number of shares of Common Stock beneficially owned by the
Holder and its Affiliates and Attribution Parties shall include the
number of shares of Common Stock issuable upon exercise of this
Warrant with respect to which such determination is being made, but
shall exclude the number of shares of Common Stock which would be
issuable upon (i) exercise of the remaining, nonexercised portion
of this Warrant beneficially owned by the Holder or any of its
Affiliates or Attribution Parties and (ii) exercise or conversion
of the unexercised or nonconverted portion of any other securities
of the Company (including, without limitation, any other Common
Stock Equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for
purposes of this Section 2(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for
any schedules required to be filed in accordance therewith. To the
extent that the limitation contained in this Section 2(e) applies,
the determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder together with any
Affiliates and Attribution Parties) and of which portion of this
Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed
to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable, in each case subject to the
Beneficial Ownership Limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 2(e), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by
the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within two Trading Days
confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates or
Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The
“Beneficial Ownership
Limitation” shall be
4.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant. The Holder, upon
notice to the Company, may increase or decrease the Beneficial
Ownership Limitation provisions of this Section 2(e), provided that
the Beneficial Ownership Limitation in no event exceeds 9.99% of
the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock upon
exercise of this Warrant held by the Holder and the provisions of
this Section 2(e) shall continue to apply. Any increase in the
Beneficial Ownership Limitation will not be effective until the
61st
day after such notice is delivered to
the Company. The provisions of this paragraph shall be construed
and implemented in a manner otherwise than in strict conformity
with the terms of this Section 2(e) to correct this paragraph (or
any portion hereof) which may be defective or inconsistent with the
intended Beneficial Ownership Limitation herein contained or to
make changes or supplements necessary or desirable to properly give
effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of this
Warrant.
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Section
3. Certain
Adjustments.
a) Stock Dividends and Splits. If
the Company, at any time while this Warrant is outstanding: (i)
pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or
equity equivalent securities payable in shares of Common Stock
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company upon exercise of this Warrant),
(ii) subdivides outstanding shares of Common Stock into a larger
number of shares, (iii) combines (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of
shares or (iv) issues by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then in each case
the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding immediately before such event
and of which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted such that the aggregate Exercise Price of
this Warrant shall remain unchanged. Any adjustment made pursuant
to this Section 3(a) shall become effective immediately after the
record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or re-classification.
b) Intentionally
Omitted
c) Pro Rata Distributions. During
such time as this Warrant is outstanding, if the Company shall
declare or make any dividend or other distribution of its assets
(or rights to acquire its assets) to holders of shares of Common
Stock, by way of return of capital or otherwise (including, without
limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or
other similar transaction) (a “Distribution”), at any
time after the issuance of this Warrant, then, in each such case,
the Holder shall be entitled to participate in such Distribution to
the same extent that the Holder would have participated therein if
the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date of
which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the participation in such
Distribution (provided, however, to the extent that the
Holder's right to participate in any such Distribution would result
in the Holder exceeding the Beneficial Ownership Limitation, then
the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation;
provided, further, that to the extent that this Warrant has not
been partially or completely exercised at the time of such
Distribution, such portion of the Distribution shall be held in
abeyance for the benefit of the Holder until the Holder has
exercised this Warrant).
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d) Fundamental Transaction. If, at
any time while this Warrant is outstanding, (i) the Company,
directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Company with or into another
Person, (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a
series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders
of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted
by the holders of fifty percent (50%) or more of the outstanding
Common Stock, (iv) the Company, directly or indirectly, in one or
more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash
or property, or (v) the Company, directly or indirectly, in one or
more related transactions consummates a stock or share purchase
agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme
of arrangement) with another Person or group of Persons whereby
such other Person or group acquires more than 50% of the
outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making
or party to, such stock or share purchase agreement or other
business combination) (each a “Fundamental
Transaction”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder, the number of shares of
Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional
consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction. For
purposes of any such exercise, the determination of the Exercise
Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such
Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given
any choice as to the securities, cash or property to be received in
a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any
exercise of this Warrant following such Fundamental Transaction.
The Company shall cause any successor entity in a Fundamental
Transaction in which the Company is not the survivor (the
“Successor
Entity”) to assume in writing all of the obligations
of the Company under this Warrant and the other Transaction
Documents (as defined in the Purchase Agreement) in accordance with
the provisions of this Section 3(e) pursuant to written agreements
in form and substance reasonably satisfactory to the Holder and
approved by the Holder (without unreasonable delay) prior to such
Fundamental Transaction and shall, at the option of the Holder,
deliver to the Holder in exchange for this Warrant a security of
the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant which
is exercisable for a corresponding number of shares of capital
stock of such Successor Entity (or its parent entity) equivalent to
the shares of Common Stock acquirable and receivable upon exercise
of this Warrant (without regard to any limitations on the exercise
of this Warrant) prior to such Fundamental Transaction, and with an
exercise price which applies the exercise price hereunder to such
shares of capital stock (but taking into account the relative value
of the shares of Common Stock pursuant to such Fundamental
Transaction and the value of such shares of capital stock, such
number of shares of capital stock and such exercise price being for
the purpose of protecting the economic value of this Warrant
immediately prior to the consummation of such Fundamental
Transaction), and which is reasonably satisfactory in form and
substance to the Holder. Upon the occurrence of any such
Fundamental Transaction, the Successor Entity shall succeed to, and
be substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Warrant and the
other Transaction Documents (as defined in the Purchase Agreement)
referring to the “Company” shall refer instead to the
Successor Entity), and may exercise every right and power of the
Company and shall assume all of the obligations of the Company
under this Warrant and the other Transaction Documents (as defined
in the Purchase Agreement) with the same effect as if such
Successor Entity had been named as the Company herein.
-8-
e) Calculations. All calculations
under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the
case may be. For purposes of this Section 3, the number of shares
of Common Stock deemed to be issued and outstanding as of a given
date shall be the sum of the number of shares of Common Stock
(excluding treasury shares, if any) issued and
outstanding.
f) Notice to Holder.
i. Adjustment to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly mail to the Holder a
notice setting forth the Exercise Price after such adjustment and
any resulting adjustment to the number of Warrant Shares and
setting forth a brief statement of the facts requiring such
adjustment.
ii. Notice to Allow Exercise by
▇▇▇▇▇▇. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class
or of any rights, (D) the Company
grants, issues or sells any Common Stock Equivalents or rights to
purchase stock, warrants, securities or other property pro rata to
the record holders of any class of shares of Common Stock or
(E) the Company shall declare or make any dividend or other
distribution of its assets (or rights to acquire its assets) to
holders of shares of Common Stock, by way of return of capital or
otherwise (including, without limitation, any distribution of cash,
stock or other securities, property or options by way of a
dividend, spin off, reclassification, corporate rearrangement,
scheme of arrangement or other similar transaction), then, in each
case, the Company shall cause to be mailed to the Holder at its
last address as it shall appear upon the Warrant Register of the
Company, at least ten (10) Business Days prior to the applicable
record or effective date hereinafter specified, a notice stating
the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a
record is not to be taken, the date as of which the holders of the
Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined;
provided that the failure to mail such notice or any defect therein
or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice. The
Holder shall remain entitled to exercise this Warrant during the
period commencing on the date of such notice to the effective date
of the event triggering such notice except as may otherwise be
expressly set forth herein.
Section
4. Transfer
of Warrant.
a) Transferability. Subject to
compliance with any applicable securities laws and the conditions
set forth in Section 4(d) hereof, this Warrant and all rights
hereunder are transferable, in whole or in part, upon surrender of
this Warrant at the principal office of the Company or its
designated agent, together with a written assignment of this
Warrant substantially in the form attached hereto duly executed by
the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee
or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company unless the Holder
has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Business
Days of the date the Holder delivers an assignment form to the
Company assigning this Warrant full. The Warrant, if properly
assigned in accordance herewith, may be exercised by a new
holder for the purchase of Warrant Shares without having a new
Warrant issued.
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b) New Warrants. This Warrant may
be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which
may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with
such notice. All Warrants issued on transfers or exchanges shall be
dated the Issuance Date and shall be identical with this Warrant
except as to the number of Warrant Shares issuable pursuant
thereto.
c) Warrant Register. The Company
shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d) Transfer Restrictions. If, at
the time of the surrender of this Warrant in connection with any
transfer of this Warrant, the transfer of this Warrant shall not be
either (i) registered pursuant to an effective registration statement under the
Securities Act and under applicable state securities or blue sky
laws or (ii) eligible for resale without volume or manner-of-sale
restrictions or current public information requirements pursuant to
Rule 144, the Company may require, as a condition of allowing such
transfer, that the Holder or transferee of this Warrant, as the
case may be, comply with the provisions of Section
5(k).
a) Representation by the Holder.
The Holder, by the acceptance hereof, represents and warrants as of
the date hereof, and through the Termination Date, as
follows:
i. Organization;
Authority. The Holder is either
an individual or an entity duly incorporated or formed, validly
existing and in good standing under the laws of the jurisdiction of
its incorporation or formation with full right, corporate,
partnership, limited liability company or similar power and
authority to enter into and to consummate the transactions
contemplated by this Warrant.
ii. Own
Account. The Holder
understands that the securities are “restricted
securities” and is acquiring such securities for its own
account and not with a view to or for distributing or reselling
such securities or any part thereof in violation of the Securities
Act or any applicable state securities law, has no present
intention of distributing any of such securities in violation of
the Securities Act or any applicable state securities law and has
no direct or indirect arrangement or understandings with any other
persons to distribute or regarding the distribution of such
securities in violation of the Securities Act or any applicable
state securities law (this representation and warranty not limiting
the Holder’s right to sell the securities in compliance with
applicable federal and state securities laws). Holder understands
that any transfer of the securities will be made only in compliance
with the Securities Act and applicable state securities laws. The
Holder is acquiring the securities hereunder in the ordinary course
of its business.
iii. Holder
Status. At the time the
Holder was offered the Warrants, it was, and as of the date hereof
it is, and on each date on which it exercises the Warrants it will
be, an “accredited investor” as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act.
iv. Experience
of the Holder. The Holder, either
alone or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so
as to be capable of evaluating the merits and risks of the
prospective investment in the securities described herein, and has
so evaluated the merits and risks of such investment. The
Holder acknowledges that it must bear the economic risk of an
investment in the securities for an indefinite period of time
because, among other things, the securities have not been
registered under the Securities Act, and, therefore, cannot be
sold, transferred, pledged, or otherwise disposed of unless they
are subsequently registered under the Securities Act and the
applicable state securities laws or the Holder delivers an opinion
of counsel to the Company (in reasonably acceptable form and
substance to the Company) that an exemption from such registration
is available.
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v. General
Solicitation. The Holder is not
purchasing the securities as a result of any advertisement,
article, notice or other communication regarding the securities
published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or any other
general solicitation or general advertisement.
vi. Access
to Information. In order to
adequately evaluate the merits and risks of an investment in the
Company, the Holder has had an opportunity to (i) ask questions and
receive answers from the Company and its representatives concerning
the Company and the Holder’s investment therein, and (ii)
obtain any additional information which the Holder has requested
with respect to the Company and the Holder’s investment
therein.
vii. No
Government Approval. The Holder
understands that no federal or state governmental agency has passed
upon or will pass upon the securities or has made or will make any
finding or determination as to the fairness of investment in the
securities.
viii. Agreement.
The Holder has been furnished and has read, understands and is
fully familiar with, this Warrant and the Transaction Documents (as
defined in the Purchase Agreement), which will govern the
securities.
Section
5. Miscellaneous.
a) No Rights as Stockholder Until
Exercise. This Warrant does not entitle the Holder to any
voting rights, dividends or other rights as a stockholder of the
Company prior to the exercise hereof as set forth in Section
2(d)(i), except as expressly set forth in Section 3.
b) Loss, Theft, Destruction or Mutilation
of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in
lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays,
etc. If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein
shall not be a Business Day, then, such action may be taken, or
such right may be exercised on the next succeeding Business
Day.
d) Authorized Shares. The Company
covenants that, during the period the Warrant is outstanding, it
will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of the
Warrant Shares upon the exercise of any purchase rights under this
Warrant. The Company further covenants that its issuance of this
Warrant shall constitute full authority to its officers who are
charged with the duty of issuing the necessary Warrant Shares upon
the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure
that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any
requirements of any trading market upon which the Common Stock may
be listed. The Company covenants that all Warrant Shares which may
be issued upon the exercise of the purchase rights represented by
this Warrant will, upon exercise of the purchase rights represented
by this Warrant and payment for such Warrant Shares in accordance
herewith, be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges created by
the Company in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such
issue).
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Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
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 of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
Before
taking any action, which would result in an adjustment in the
number of Warrant Shares for which this Warrant is exercisable, the
Company shall obtain all such authorizations or exemptions thereof,
or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
e) Jurisdiction. All questions
concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.
f) Restrictions. The Holder
acknowledges that the Warrant Shares acquired upon the exercise of
this Warrant, if not registered, will have restrictions upon resale
imposed by state and federal securities laws.
g) Nonwaiver and Expenses. No
course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such
right or otherwise prejudice the Holder’s rights, powers or
remedies, notwithstanding the fact that all rights hereunder
terminate on the Termination Date. If the Company willfully and
knowingly fails to comply with any provision of this Warrant, which
results in any material damages to the Holder, the Company shall
pay to the Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable
attorneys’ fees, including those of appellate proceedings,
incurred by the Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or
remedies hereunder.
h) Notices. Any notice, request or
other document required or permitted to be given or delivered to
the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.
i) Limitation of Liability. No
provision hereof, in the absence of any affirmative action by the
Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the purchase price of
any Common Stock or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the
Company.
j) Remedies. The Holder, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this
Warrant and hereby agrees to waive and not to assert the defense in
any action for specific performance that a remedy at law would be
adequate.
k) Successors and Assigns. Subject
to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors and permitted assigns of the Company
and the successors and permitted assigns of Holder. The provisions
of this Warrant are intended to be for the benefit of any Holder
from time to time of this Warrant and shall be enforceable by such
Holder.
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l) Amendment. No provision of this
Warrant may be waived, modified, supplemented or amended except in
a written instrument signed, in the case of an amendment, by the
Company and the holders of warrants issued under the Purchase
Agreement holding at least 51% in interest of such warrants then
outstanding or, in the case of a waiver, by the party against whom
enforcement of any such waived provision is sought; provided,
however, that no such waiver,
modification, supplement or amendment, as applied to any provision
of this Warrant held by any particular holder of the Warrants,
shall, without the written consent of that particular holder (i)
reduce the number of Warrant Shares issuable upon exercise
of this Warrant, (ii) increase
in the Exercise Price under this Warrant, or (iii) disproportionally and adversely affect
any rights under this Warrant of any holder of the Warrants.
No waiver of any default with respect to any provision, condition
or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of any party to exercise any right
hereunder in any manner impair the exercise of any such
right.
m) Severability. Wherever
possible, each provision of this Warrant shall be interpreted in
such manner as to be effective and valid under applicable law, but
if any provision of this Warrant shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this
Warrant.
n) Headings. The headings used in
this Warrant are for the convenience of reference only and shall
not, for any purpose, be deemed a part of this
Warrant.
********************
(Signature Page Follows)
-13-
IN WITNESS WHEREOF, the Company has
caused this Warrant to be executed by its officer thereunto duly
authorized as of the date first above indicated.
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By:
/s/ ▇▇▇▇▇▇▇▇
▇▇▇▇
Name:
▇▇▇▇▇▇▇▇ ▇▇▇▇
Title:
President & CEO
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-14-
NOTICE OF EXERCISE
TO:
(1) The undersigned
hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.
(2) Payment
shall take the form of (check applicable box):
[ ]
in lawful money of the United States; or
[ ]
if permitted the cancellation of such number of Warrant Shares as
is necessary, in accordance with the formula set forth in
subsection 2(c), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection
2(c).
(3) Please issue said
Warrant Shares in the name of the undersigned or in such other name
as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC account
number:
_______________________________
_______________________________
_______________________________
(4)
Accredited
Investor. The undersigned is an “accredited
investor” as defined in Regulation D promulgated under the
Securities Act of 1933, as amended.
[SIGNATURE
OF HOLDER]
Name of
Investing Entity:
_________________________________________________________________
Signature of Authorized Signatory of Investing Entity:
___________________________________________
Name of
Authorized Signatory:
_____________________________________________________________
Title
of Authorized Signatory:
______________________________________________________________
Date:
_________________________________________________________________________________
-15-
ASSIGNMENT
FORM
(To assign the foregoing Warrant, execute this form and
supply required information. Do not use this form to purchase
shares.)
FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
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Name:
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Address:
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(Please
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Dated:
_______________ __, ______
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Holder’s
Signature:
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Holder’s
Address:
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