Exhibit 5.2
WARRANT TO PURCHASE COMMON STOCK
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. HOLDERS MUST
RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS
INVOLVED.
Warrant to Purchase
250,000 shares
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Warrant to Purchase Common Stock
of
U.S. MICROBICS, INC.
THIS CERTIFIES that ▇▇▇▇▇▇ Private Equity, LLC, or any subsequent holder
hereof pursuant to Section 8 hereof ("Holder"), has the right to purchase from,
U.S. Microbics, Inc., a Colorado corporation (the "Company"), up to 250,000
fully paid and nonassessable shares of the Company's common stock, $.0001 par
value per share ("Common Stock"), subject to adjustment as provided herein, at a
price equal to the Exercise Price as defined in Section 3 below, at any time
beginning on the Date of Issuance (defined below) and ending at 5:00 p.m., New
York, New York time the date that is five (5) years after the Date of Issuance
(the "Exercise Period").
Holder agrees with the Company that this Warrant to purchase shares of
Common Stock of the Company (this "Warrant") is issued and all rights hereunder
shall be held subject to all of the conditions, limitations and provisions set
forth herein.
1. Date of Issuance and Term.
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This Warrant shall be deemed to be issued on January 27, 2000 ("Date of
Issuance"). The term of this Warrant is five (5) years from the Date of
Issuance.
This Warrant is exercisable into shares of Common Stock (the "Warrant
Shares") as follows: (i) one hundred thousand (100,000) of the Warrant Shares
after the ten (10) business day document review period (the "Review Period")
referenced in the Equity Line Letter of Agreement dated on or about January 10,
2000, between Holder and the Company (the "Letter of Agreement") has ended; (ii)
an additional seventy-five thousand (75,000) of the Warrant Shares upon the
execution of all Closing Documents (as defined in the Letter of Agreement); and
(iii) the remaining seventy-five thousand (75,000) Warrant Shares upon the
sooner of (a) the date that is 6 months from the date of the Letter of Agreement
or (b) the date of effectiveness of the Company's registration statement (the
"Registration Statement") to be filed pursuant to the Closing Documents.
Anything in this Warrant to the contrary notwithstanding, if the Company
delivers written notice to Holder prior to the expiration of the Review Period
that the Closing Documents are unacceptable and the Company wishes to terminate
the transaction, then Holder shall return this Warrant to the Company and all of
Holder's rights under this Warrant shall be null and void and of no effect.
2. Exercise.
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(a) Manner of Exercise. Subject to the provisions of Section 1, during the
Exercise Period, this Warrant may be exercised as to all or any lesser number of
Warrant Shares upon surrender of this Warrant, with the Exercise Form for
Warrant attached hereto as Exhibit A (the "Exercise Form") duly completed and
executed, together with the full Exercise Price (as defined below) for each
share of Common Stock as to which this Warrant is exercised, at the office of
the Company, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, CEO, ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇, Telephone (▇▇▇) ▇▇▇-▇▇▇▇, ext.102, Facsimile (▇▇▇) ▇▇▇-▇▇▇▇, or at
such other office or agency as the Company may designate in writing, by
overnight mail, with an advance copy of the Exercise Form sent to the Company
and its Transfer Agent by facsimile (such surrender and payment of the Exercise
Price hereinafter called the "Exercise of this Warrant").
(b) Date of Exercise. The "Date of Exercise" of this Warrant shall be
defined as the date that the advance copy of the completed and executed Exercise
Form is sent by facsimile to the Company, provided that the original Warrant and
Exercise Form are received by the Company as soon as practicable thereafter.
Alternatively, the Date of Exercise shall be defined as the date the original
Exercise Form is received by the Company, if Holder has not sent advance notice
by facsimile.
(c) Cancellation of Warrant. This Warrant shall be canceled upon the
exercise of this Warrant, and, as soon as practicable after the Date of
Exercise, Holder shall be entitled to receive Common Stock for the number of
shares purchased upon such exercise of this Warrant, and if this Warrant is not
exercised in full, then Holder shall be entitled to receive a new Warrant
(containing terms identical to this Warrant) representing any unexercised
portion of the Warrant Shares.
(d) Holder of Record. Each person in whose name any Warrant Shares are
issued shall, for all purposes, be deemed to be the Holder of record of such
shares on the Date of exercise of this Warrant, irrespective of the date of
delivery of the Warrant Shares purchased upon the exercise of this Warrant.
Nothing in this Warrant shall be construed as conferring upon Holder any rights
as a shareholder of the Company.
3. Payment of Warrant Exercise Price.
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The Exercise Price per share ("Exercise Price") shall initially equal (the
"Initial Exercise Price") the lowest Closing Bid Price for the five (5) trading
days immediately preceding January 10, 2000. If the lowest Closing Bid Price of
the Company's Common Stock for the five (5) trading days immediately preceding
the date, if any, that the Company and ▇▇▇▇▇▇ Private Equity, LLC enter into an
Investment Agreement ("Investment Agreement") pursuant to the Letter of
Agreement (the "Closing Market Price") is less than the Initial Exercise Price,
the Exercise Price shall be reset to equal the Closing Market Price, or, if the
Date of Exercise is more than six (6) months after the Date of Issuance, the
Exercise Price shall be reset to equal the lesser of (i) the Exercise Price then
in effect, or (ii) the "Lowest Reset Price," as that term is defined below. The
Company shall calculate a "Reset Price" on each six-month anniversary date of
the Date of Issuance, up through the date that is three (3) years from the Date
of Issuance, which shall equal one hundred percent (100%) of the average Closing
Bid Price of the Company's Common Stock for the five (5) trading days ending on
such six-month anniversary date of the Date of Issuance. The "Lowest Reset
Price" shall equal the lowest Reset Price determined on any six-month
anniversary date of the Date of Issuance preceding the Date of Exercise, taking
into account, as appropriate, any adjustments made pursuant to Section 5 hereof.
Payment of the Exercise Price may be made by either of the following, or a
combination thereof, at the election of Holder:
(i) "Cash Exercise:" cash, bank or cashiers check or wire transfer; or
(ii) "Cashless Exercise:" The Holder, at its option, may exercise this
Warrant in a cashless exercise transaction under this subsection (ii) if and
only if, on the Date of Exercise, there is not then in effect a current
registration statement that covers the resale of the Warrant Shares to be issued
upon exercise of this Warrant. In order to effect a cashless exercise, the
Holder shall surrender this Warrant at the principal office of the Company
together with notice of cashless election, in which event the Company shall
issue Holder a number of shares of Common Stock computed using the following
formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is being
exercised.
A = the Market Price of one (1) share of Common Stock (for
purposes of this Section 3(ii), the "Market Price" shall be
defined as the average closing price of the Common Stock for the
five (5) trading days prior to the Date of Exercise of this
Warrant (the "Average Closing Price"), as reported by the
Over-The-Counter Bulletin Board ("OTC Bulletin Board"), National
Association of Securities Dealers Automated Quotation System
("Nasdaq") SmallCap Market, or if the Common Stock is not traded
on the Nasdaq SmallCap Market, the Average Closing Price in any
other over-the-counter market; provided, however, that if the
Common Stock is listed on a stock exchange, the Market Price
shall be the Average Closing Price on such exchange for the five
(5) trading days prior to the Date of Exercise of this Warrant.
If the Common Stock is/was not traded during the five (5) trading
days prior to the Date of Exercise, then the closing price for
the last publicly traded day shall be deemed to be the closing
price for any and all (if applicable) days during such five (5)
trading day period.
B = the Exercise Price.
For purposes hereof, the term "Closing Bid Price" shall mean the closing
bid price on the Nasdaq SmallCap Market, the National Market System ("NMS"), the
New York Stock Exchange, or the OTC Bulletin Board, or if no longer traded on
the Nasdaq SmallCap Market, the NMS, the New York Stock Exchange, or the OTC
Bulletin Board, the "Closing Bid Price" shall equal the closing price on the
principal national securities exchange or the over-the-counter system on which
the Common Stock is so traded and, if not available, the mean of the high and
low prices on the principal national securities exchange on which the Common
Stock is so traded.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is
intended, understood and acknowledged that the Warrant Shares issuable upon
exercise of this Warrant in a cashless exercise transaction shall be deemed to
have been acquired at the time this Warrant was issued. Moreover, it is
intended, understood and acknowledged that the holding period for Warrant Shares
issuable upon exercise of this Warrant in a cashless exercise transaction shall
be deemed to have commenced on the date this Warrant was issued.
4. Transfer and Registration.
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(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in whole
or in part, in person or by attorney, upon surrender of this Warrant properly
completed and endorsed. This Warrant shall be canceled upon such surrender and,
as soon as practicable thereafter, the person to whom such transfer is made
shall be entitled to receive a new warrant or warrants as to the portion of the
Warrant Shares transferred, and Holder shall be entitled to receive a new
warrant as to the portion hereof retained.
(b) Registrable Securities. In addition to any other registration rights of
the Holder, if the Warrant Shares issuable upon exercise of this Warrant is not
registered for resale at the time the Company proposes to register (including
for this purpose a registration effected by the Company for shareholders other
than Holder) any of its Common Stock under the Securities Act (other than a
registration relating solely for the sale of securities to participants in the
Company's stock plan or a registration on Form S-4 promulgated under the
Securities Act or any successor or similar form registering stock issuable upon
a reclassification, upon a business combination involving an exchange of
securities or upon an exchange offer for securities of the issuer or another
entity) (a "Piggyback Registration Statement"), the Company shall cause to be
included in such Piggyback Registration Statement ("Piggyback Registration") all
of the Warrant Shares issuable upon the exercise of this Warrant ("Registrable
Securities") to the extent such inclusion does not violate the registration
rights of any other shareholder of the Company granted prior to the date hereof.
Nothing herein shall prevent the Company from withdrawing or abandoning the
Piggyback Registration Statement prior to its effectiveness.
(c) Limitation on Obligations to Register under a Piggyback Registration.
In the case of a Piggyback Registration pursuant to an underwritten public
offering by the Company, if the managing underwriter determines and advises in
writing that the inclusion in the registration statement of all Registrable
Securities proposed to be included would interfere with the successful marketing
of the securities proposed to be registered by the Company, then the number of
such Registrable Securities to be included in the Piggyback Registration
Statement, to the extent such Registrable Securities may be included in such
Piggyback Registration Statement, shall be allocated among all Holders who had
requested Piggyback Registration pursuant to the terms hereof, in the proportion
that the number of Registrable Securities which each such Holder seeks to
register bears to the total number of Registrable Securities sought to be
included by all Holders. If required by the managing underwriter of such an
underwritten public offering, the Holders shall enter into a reasonable
agreement limiting the number of Registrable Securities to be included in such
Piggyback Registration Statement and the terms, if any, regarding the future
sale of such Registrable Securities.
5. Anti-Dilution Adjustments.
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(a) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then Holder, upon exercise of this Warrant
after the record date for the determination of holders of Common Stock entitled
to receive such dividend, shall be entitled to receive upon exercise of this
Warrant, in addition to the number of Warrant Shares as to which this Warrant is
exercised, such additional shares of Common Stock as such Holder would have
received had this Warrant been exercised immediately prior to such record date
and the Exercise Price will be proportionately adjusted.
(b) Recapitalization or Reclassification.
(i) Stock Split. If the Company shall at any time effect a
recapitalization, reclassification or other similar transaction of such
character that the Warrant Shares shall be changed into or become exchangeable
for a larger number of shares (a "Stock Split"), then upon the effective date
thereof, the number of shares of Common Stock which Holder shall be entitled to
purchase upon exercise of this Warrant shall be increased in direct proportion
to the increase in the number of shares of Common Stock by reason of such
recapitalization, reclassification or similar transaction, and the Exercise
Price shall be proportionally decreased.
(ii) Reverse Stock Split. If the Company shall at any time effect a
recapitalization, reclassification or other similar transaction of such
character that the Warrant Shares shall be changed into or become exchangeable
for a smaller number of shares (a "Reverse Stock Split"), then upon the
effective date thereof, the number of shares of Common Stock which Holder shall
be entitled to purchase upon exercise of this Warrant shall be proportionately
decreased and the Exercise Price shall be proportionally increased. The Company
shall give Holder the same notice it provides to holders of Common Stock of any
transaction described in this Section 5(b).
(c) Distributions. If the Company shall at any time distribute for no
consideration to holders of Common Stock cash, evidences of indebtedness or
other securities or assets (other than cash dividends or distributions payable
out of earned surplus or net profits for the current or preceding years) then,
in any such case, Holder shall be entitled to receive, upon exercise of this
Warrant, with respect to each of the Warrant Shares issuable upon such exercise,
the amount of cash or evidences of indebtedness or other securities or assets
which Holder would have been entitled to receive with respect to each such share
of Common Stock as a result of the happening of such event had this Warrant been
exercised immediately prior to the record date or other date fixing shareholders
to be affected by such event (the "Determination Date") or, in lieu thereof, if
the Board of Directors of the Company should so determine at the time of such
distribution, a reduced Exercise Price determined by multiplying the Exercise
Price on the Determination Date by a fraction, the numerator of which is the
result of such Exercise Price reduced by the value of such distribution
applicable to one share of Common Stock (such value to be determined by the
Board of Directors of the Company in its discretion) and the denominator of
which is such Exercise Price.
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock shall be changed into
the same or a different number of shares of the same or another class or classes
of stock or securities or other assets of the Company or another entity or there
is a sale of all or substantially all the Company's assets (a "Corporate
Change"), then this Warrant shall be exercisable into such class and type of
securities or other assets as Holder would have received had Holder exercised
this Warrant immediately prior to such Corporate Change; provided, however, that
Company may not affect any Corporate Change unless it first shall have given
thirty (30) days notice to Holder hereof of any Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the term "Exercise
Price" shall mean the purchase price per share specified in Section 3 of this
Warrant, until the occurrence of an event stated in subsection (a), (b) or (c)
of this Section 5, and thereafter shall mean said price as adjusted from time to
time in accordance with the provisions of said subsection. No such adjustment
under this Section 5 shall be made unless such adjustment would change the
Exercise Price at the time by $.01 or more; provided, however, that all
adjustments not so made shall be deferred and made when the aggregate thereof
would change the Exercise Price at the time by $.01 or more.
(f) Adjustments: Additional Shares, Securities or Assets. In the event that
at any time, as a result of an adjustment made pursuant to this Section 5,
Holder shall, upon exercise of this Warrant, become entitled to receive shares
and/or other securities or assets (other than Common Stock) then, wherever
appropriate, all references herein to shares of Common Stock shall be deemed to
refer to and include such shares and/or other securities or assets; and
thereafter the number of such shares and/or other securities or assets shall be
subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.
6. Fractional Interests.
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No fractional shares or scrip representing fractional shares shall be
issuable upon the exercise of this Warrant, but on exercise of this Warrant,
Holder may purchase only a whole number of Warrant Shares. If, on exercise of
this Warrant, Holder would be entitled to a fractional share of Common Stock or
a right to acquire a fractional share of Common Stock, such fractional share
shall be disregarded and the number of Warrant Shares issuable upon exercise
shall be the next higher number of shares.
7. Reservation of Shares.
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The Company shall at all times reserve for issuance such number of
authorized and unissued shares of Common Stock (or other securities substituted
therefor as herein above provided) as shall be sufficient for the exercise of
this Warrant and payment of the Exercise Price. The Company covenants and agrees
that upon the exercise of this Warrant, all of the Warrant Shares issuable upon
such exercise shall be duly and validly issued, fully paid, nonassessable and
not subject to preemptive rights, rights of first refusal or similar rights of
any person or entity.
8. Restrictions on Transfer.
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(a) Registration or Exemption Required. This Warrant has been issued in a
transaction exempt from the registration requirements of the Securities Act by
virtue of Regulation D promulgated thereunder and exempt from state registration
under applicable state laws. This Warrant and the Warrant Shares issuable upon
the exercise of this Warrant may not be pledged, transferred, sold or assigned
except pursuant to an effective registration statement or unless the Company has
received an opinion from the Company's counsel to the effect that such
registration is not required, or the Holder has furnished to the Company an
opinion of the Holder's counsel, which counsel shall be reasonably satisfactory
to the Company, to the effect that such registration is not required; the
transfer complies with any applicable state securities laws; and, if no
registration covering the resale of the Warrant Shares is effective at the time
the Warrant Shares are issued, the Holder consents to a legend being placed on
certificates for the Warrant Shares stating that the securities have not been
registered under the Securities Act and referring to such restrictions on
transferability and sale.
(b) Assignment. If Holder can provide the Company with reasonably
satisfactory evidence that the conditions of subsection (a) above regarding
registration or exemption have been satisfied, Holder may sell, transfer,
assign, pledge or otherwise dispose of this Warrant, in whole or in part. Holder
shall deliver a written notice to Company, substantially in the form of the
Assignment attached hereto as Exhibit B, indicating the person or persons to
whom this Warrant shall be assigned and the respective number of Warrant Shares
to be assigned to each assignee. The Company shall effect the assignment within
ten (10) days, and shall deliver to the assignee(s) designated by Holder a
Warrant or Warrants of like tenor and terms for the appropriate number of
Warrant Shares.
9. Benefits of this Warrant.
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Nothing in this Warrant shall be construed to confer upon any person other
than the Company and Holder any legal or equitable right, remedy or claim under
this Warrant and this Warrant shall be for the sole and exclusive benefit of the
Company and Holder.
10. Applicable Law.
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This Warrant is issued under and shall for all purposes be governed by and
construed in accordance with the laws of the state of Colorado, without giving
effect to conflict of law provisions thereof.
11. Loss of Warrant.
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Upon receipt by the Company of evidence of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
indemnity or security reasonably satisfactory to the Company, and upon surrender
and cancellation of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.
12. Notice or Demands.
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Notices or demands pursuant to this Warrant to be given or made by Holder to or
on the Company shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, and addressed, until
another address is designated in writing by the Company, to the address set
forth in Section 2(a) above. Notices or demands pursuant to this Warrant to be
given or made by the Company to or on Holder shall be sufficiently given or made
if sent by certified or registered mail, return receipt requested, postage
prepaid, and addressed, to the address of Holder set forth in the Company's
records, until another address is designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the
27th day of January, 2000.
U.S. MICROBICS, INC.
By:
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Chief Executive Officer
EXHIBIT A
EXERCISE FORM FOR WARRANT
TO: U.S. MICROBICS, INC.
The undersigned hereby irrevocably exercises the right to purchase
____________ of the shares of Common Stock (the "Common Stock") of U. S.
MICROBICS, INC. a Colorado corporation (the "Company"), evidenced by the
attached warrant (the "Warrant"), and herewith makes payment of the exercise
price with respect to such shares in full, all in accordance with the conditions
and provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any of the Common Stock obtained on exercise of the Warrant, except in
accordance with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be issued
free of any restrictive legend, if appropriate, and a warrant representing any
unexercised portion hereof be issued, pursuant to the Warrant in the name of the
undersigned and delivered to the undersigned at the address set forth below:
Dated: _________
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Signature
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Print Name
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Address
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NOTICE
The signature to the foregoing Exercise Form must correspond to the name as
written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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EXHIBIT B
ASSIGNMENT
(To be executed by the registered holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned holder of the attached warrant (the
"Warrant") hereby sells, assigns and transfers unto the person or persons below
named the right to purchase _______ shares of the Common Stock of U.S.
MICROBICS, INC., (the "Company") evidenced by the attached Warrant and does
hereby irrevocably constitute and appoint _______________________ attorney to
transfer the said Warrant on the books of the Company, with full power of
substitution in the premises.
Dated: __________________________________
Signature
Fill in for new registration of Warrant:
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Name
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Address
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Please print name and address of assignee
(including zip code number)
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NOTICE
The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Warrant in every particular, without alteration or
enlargement or any change whatsoever.
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