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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) DECEMBER 22, 1995
ADVANCED MATERIALS GROUP, INC.
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(Exact name of registrant as specified in its charter)
Nevada 0-16401 33-0215295
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(State or other jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
20211 S. Susana Road, Rancho Dominguez, CA 90221
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(Address of principal executive offices)
Registrant's telephone number, including area code: (310) 537-5444
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(Former name or former address, if changed since last report)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Pursuant to a Subscription and Investment Representation Agreement dated
December 22, 1995, Trilon Dominion Partners, LLC, a Delaware limited liability
company ("Trilon") purchased from Advanced Materials Group, Inc. ("Registrant")
1,260,807 newly issued shares of Registrant's Common Stock, plus warrants (the
"Equity Warrants") to acquire an additional 30,000 shares of Common Stock,
exercisable for 5 years at an exercise price of $0.75 per share, for an
aggregate purchase price of $700,000 in cash.
Also effective as of December 22, 1995, Trilon increased the amount of a
line of credit to the Registrant from $700,000 to $1,000,000, and in connection
therewith was granted a warrant to acquire 60,000 shares of Common Stock,
exercisable for 5 years at an exercise price of $0.75 per share (the "Debt
Warrant"), and a warrant to acquire 30,0000 share of Common Stock, exercisable
in the event of a failure to pay the principal amount of the line of credit on
or before June 30, 1997, at an exercise price equal to the fair market value of
the Common Stock at such time (the "Springing Warrant" and collectively with all
other warrants held by Trilon to acquire the Registrant's Common Stock the
"Warrants").
After the transactions described herein, Trilon beneficially owns 3,600,807
shares of Registrant's Common Stock (4,595,807 assuming exercise of all the
Warrants). Such shares of Common Stock represent 34.5% of the outstanding
shares of Common Stock of Registrant (40% assuming exercise of all the Warrants
except the Springing Warrant).
In its Quarterly Report on Form 10-Q for the quarter ended August 31, 1995,
the Registrant reported a transaction separately reported on a Schedule 13D
filed by Dominion Resources, Inc., Dominion Capital, Inc. ("Dominion"), VC
Holdings, Inc. and Ronald W. Cantwell dated June 30, 1995, whereby Dominion
contributed its ownership of Common Stock of the Registrant, including warrants
to acquire Common Stock of the Registrant and the above-referenced line of
credit, to Trilon in exchange for a non-voting Class B membership interest in
Trilon. The Operating Agreement for Trilon, dated as of June 30, 1995, provides
that Trilon may not sell the shares of the Registrant's Common Stock contributed
by Dominion for less than the agreed fair market value of such shares at the
time of their contribution without (except in certain limited circumstances) the
consent of Dominion. William J. Hopke, Chairman of the Registrant's Board of
Directors, was formerly Senior Vice President and Treasurer of Dominion and is
now Executive Vice President and Director of Trilon. In its Schedule 13D filing
dated as of June 30, 1995, describing the transaction, Dominion stated that it
may be considered to be an indirect beneficial owner of such shares of the
Registrant's Common Stock, although it disclaims such beneficial ownership.
Accordingly, the Registrant initially believed that such transaction was in the
nature of a change in the manner of Dominion's holding of the Registrant's
stock. As a result of the sale of stock directly to Trilon and other factors,
the Registrant has now determined that it is appropriate to report a change in
control pursuant to this Current Report.
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ITEM 6. EXHIBITS
2.1 Form of Subscription and Investment Representation Agreement.
2.2 Form of Equity Warrant.
2.3 Form of Debt Warrant.
2.4 Form of Springing Warrant.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: December 29, 1995 ADVANCED MATERIALS GROUP, INC.
By: /s/ Jerry E. Fullerton
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Vice President and Controller
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Name of Subscriber ______________
Amount of Investment $______________
ADVANCED MATERIALS GROUP, INC.
SUBSCRIPTION AND INVESTMENT REPRESENTATION AGREEMENT
Advanced Materials Group, Inc.
20211 South Susana Road
Rancho Dominguez, California 90221
Gentlemen:
SECTION 1
1.1 SUBSCRIPTION. Trilon Dominion Partners, L.L.C. ("Trilon") hereby
subscribes for and agrees to purchase 1,260,807 shares of common stock, par
value $.001 per share (the "Securities"), of Advanced Materials Group, Inc., a
Nevada corporation (the "Company"), at a subscription price of $.5552 per share,
representing an aggregate investment in the Company of $700,000, on the terms
and conditions described herein, in the Confidential Term Sheet dated December
8, 1995 (together with all appendices and further supplements thereto, the "Term
Sheet") relating to the offering ("Offering") of securities, including warrants
(the "Warrants"), in the Company.
1.2 PURCHASE.
Trilon tenders herewith cash (by wire transfer) or a check made
payable to the order of "Advanced Materials Group, Inc." in the aggregate amount
indicated above and on the signature page hereof. Trilon also tenders herewith
an executed counterpart of the Suitability Questionnaire. On or before the
completion or termination of the Offering, the undersigned will be notified as
to whether its subscription has been accepted by the Company. At the Company's
option, the purchase price may be paid by the undersigned in the form of
forgiveness of debt, in which event the undersigned should enclose herewith the
Company's promissory note evidencing indebtedness to the undersigned in the
amount of $700,000.
1.
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SECTION 2
2.1 INVESTOR REPRESENTATIONS AND WARRANTIES. Trilon hereby acknowledges,
represents and warrants to, and agrees with the Company as follows:
(a) Trilon is acquiring the Securities for its own account, for
investment purposes only, and not with a view to or for the distribution or
fractionalization thereof, in whole or in part, and no other person has a direct
or indirect beneficial interest in the Securities herein subscribed for.
(b) Trilon acknowledges its understanding that the offering and sale
of the Securities is intended to be exempt from registration under the
Securities Act of 1933, as amended ("Act"), by virtue of Section 4(2) of the Act
and the provisions of Rules 505 or 506 of Regulation D promulgated thereunder.
In furtherance thereof, the undersigned represents and warrants to and agrees
with the Company as follows:
(i) Trilon has the financial ability to bear the economic risk
of its investment in the Company (including its possible loss), has
adequate means of providing for its current needs and personal
contingencies and has no need for liquidity with respect to its investment
in the Company;
(ii) Trilon has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in Securities and has obtained, in its judgment, sufficient
information from the Company to evaluate the merits and risks of an
investment in Securities;
(iii) Trilon hereby reconfirms as representations and
warranties, as though fully set forth herein, each of the statements and
answers of the undersigned set forth in its Suitability Questionnaire.
(c) Trilon:
(i) has been furnished the Term Sheet and any documents which
may have been made available upon request, has carefully read the Term
Sheet and understands and has evaluated the risks of a purchase of the
Securities, including the risks set forth in the Term Sheet under "Risk
Factors," and has relied solely (except as indicated in subsections (ii)
and (iii) below) on the information contained in the Term Sheet;
(ii) has been provided an opportunity to obtain any additional
information concerning the Offering or the Company and all other
information to the extent the Company possesses such information or can
acquire it without unreasonable effort or expense;
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(iii) has been given the opportunity to ask questions of, and
receive answers from, senior executive officers of the Company concerning
the terms and conditions of the Offering and other matters pertaining to
this investment, and has been given the opportunity to obtain such
additional information necessary to verify the accuracy of the information
contained in the Term Sheet or that which was otherwise provided in order
for it to evaluate the merits and risks of an investment in the Company to
the extent the Company possesses such information or can acquire it without
unreasonable effort or expense, and has not been furnished any other
offering literature or prospectus except the Term Sheet; and
(iv) has determined that the Securities are a suitable
investment for it and that at this time it could bear a complete loss of
its investment.
(d) In making a decision to purchase the Securities herein subscribed
for, the undersigned has relied solely upon independent investigations made by
it. Trilon is not relying on the Company with respect to tax and other economic
considerations involved in this investment.
(e) Trilon is an "accredited investor" as that term is defined in
Section 501 of Regulation D of the Act. An "accredited investor" includes
(1) a natural person whose net worth, or joint net worth, or joint net worth
with that person's spouse, exceeds $1,000,000; (2) a natural person who has
had income in excess of $200,000 in each of the two most recent years, or,
with that person's spouse, in excess of $300,000 in those years, and who
expects to have at least such income in the current year; (3) a corporation,
partnership or similar business entity, not formed for the specific purpose
of acquiring the Securities, with total assets in excess of $5,000,000; and
(4) any entity in which all of the equity owners are accredited investors.
(f) Trilon represents, warrants and agrees that it will not sell or
otherwise transfer the Securities without registration under the Act or an
exemption therefrom, and fully understands and agrees that it may bear the
economic risk of this investment for an indefinite period of time because,
among other reasons, the Securities have not been registered under the Act or
under the securities laws of any states and, therefore, cannot be resold,
pledged, assigned or otherwise disposed of unless they are subsequently
registered under the Act and under applicable securities laws of such states or
an exemption from such registration is available. It also understands that
sales or transfers of the Securities are further restricted by the provisions of
state securities laws.
(g) If the undersigned is a corporation, partnership, trust, employee
benefit plan, individual retirement account, Keogh plan, or other tax-exempt
entity, it is authorized and qualified to subscribe for Securities and the
person signing this Agreement on behalf of such entity has been duly authorized
by such entity to do so, the transaction contemplated herein has been duly
approved and authorized for such entity, and this Subscription and Investment
Representation Letter is enforceable against such entity in accordance with its
terms.
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(h) If the undersigned is, or is acting on behalf of, a Keogh or
corporate pension or profit-sharing plan, or an individual retirement account,
the undersigned represents and warrants that to the best of the undersigned's
knowledge the undersigned's subscription for Securities will not result in a
prohibited transaction as defined in Section 406 of ERISA or Section 4975 of the
Code.
(i) No representations or warranties have been made to the
undersigned by the Company, or any officer, employee, agent or affiliate
thereof, except as set forth herein.
(j) Trilon has not engaged, directly or indirectly, in short selling
and/or other hedging transactions with respect to the Company's securities and
does not intend to engage in such transactions in the future.
(k) Any information which the undersigned has heretofore furnished to
the Company with respect to its financial position and business experience,
including, without limitation, its Suitability Questionnaire, is correct and
complete as of the date of this Agreement.
2.2 INVESTOR AWARENESS. Trilon acknowledges, represents, agrees and is
aware that:
(a) the Company has a limited financial operating history;
(b) no federal or state agency has passed upon the Securities or made
any findings or determination as to the fairness of this investment;
(c) there are significant risks of loss of investment incidental to
the purchase of Securities, including those summarized under "Risk Factors" and
in other portions of the Term Sheet;
(d) the investment in the Company is an illiquid investment and the
undersigned may bear the economic risk of its investment in Securities for an
extended period; and
(e) the representations, warranties, agreements, undertakings and
acknowledgements made by the undersigned in this Agreement are made with the
intent that they be relied upon by the Company in determining suitability as a
purchaser of Securities.
2.3 COMPANY REPRESENTATIONS AND WARRANTIES.
The Company acknowledges, represents and warrants to, and agrees with
Trilon as follows:
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(a) AUTHORITY. The Company has all requisite corporate power and
authority to enter into this Agreement and consummate the transactions
contemplated herein. The execution and delivery of this Agreement, the
consummation of the transactions contemplated herein, and the issuance of the
Common Stock and Warrants in accordance with the terms hereof, have been duly
authorized and approved by the Board of Directors of the Company and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement, the transactions contemplated herein and the issuance of the Common
Stock in accordance with the terms hereof. This Agreement has been duly
executed and delivered by the Company and constitutes the valid and binding
obligation of the Company, enforceable in accordance with its terms.
(b) ORGANIZATION. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada.
The Company has the corporate power and authority to carry on its business as
presently conducted, and is qualified to do business in all jurisdictions where
the failure to be so qualified would have a material adverse effect on its
business or financial condition.
(c) CAPITALIZATION. The authorized capital stock of the Company
consists of 25,000,000 shares of Common Stock, par value $.001 per share, of
which 9,173,541 shares were issued and outstanding as at the date hereof, and
5,000,000 shares of Preferred Stock, par value $.001 per share, none of which
are outstanding. All of the issued and outstanding shares of Common Stock of
the Company are duly authorized, validly issued, fully paid and non-assessable.
No unissued shares of the Company's common stock are subject to preemptive
rights, and there are no preemptive rights with respect to the issuance of
shares to Trilon hereunder.
(d) NO CONFLICT. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby do not and will not
conflict with, or result in a breach of any term or provision of, or constitute
a default under or result in a violation of, the Articles of Incorporation or
Bylaws of the Company, any material agreement, contract, instrument, lease,
license, agreement or undertaking to which the Company is a party or by which
it or any of its assets are bound, or any judgment, decree, order or writ by
which the Company is bound or to which it or any of its assets are subject.
(e) VALIDITY OF SECURITIES. The Securities to be purchased and sold
pursuant to this Agreement, when issued, sold and delivered in accordance with
its terms for the consideration expressed herein, shall be duly and validly
issued. The Common Stock issuable upon conversion of the Warrants has been duly
and validly reserved and upon issuance and payment therefor will be duly and
validly issued, fully paid and nonassessable.
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SECTION 3
3.1 INDEMNITY. Trilon agrees to indemnify and hold harmless the Company,
and (other than Trilon Dominion Partners, LLC, Ronald Cantwell, Dominion
Resources, Inc., Dominion Capital, Inc. and VC Holdings, Inc.) (i) each other
person, if any, who controls or is controlled by, within the meaning of Section
15 of the Act, the Company, and (ii) each officer, investor, affiliate,
associate and the representative of them, against any and all loss, liability,
claim, damage and expense whatsoever (including, but not limited to, any and all
expenses whatsoever reasonably incurred in investigating, preparing or defending
against any litigation commenced or threatened or any claim whatsoever)
("Losses") arising out of or based upon any false representation or warranty or
breach or failure by the undersigned herein or in any other document furnished
by the undersigned to any of the foregoing in connection with this transaction,
except to the extent such Losses are caused by the intentional misconduct or
gross negligence of the Company.
3.2 MODIFICATION. Neither this Agreement nor any provision hereof shall
be modified, discharged or terminated except by an instrument in writing signed
by the party against whom any waiver, change, discharge or termination is
sought.
3.3 BINDING EFFECT. Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the parties and their heirs,
executors, administrators, successors, legal representatives and permitted
assigns.
3.4 ENTIRE AGREEMENT. This instrument contains the entire agreement of
the parties, and there are no representations, covenants or other agreements
except as stated or referred to herein.
3.5 ASSIGNABILITY. This Agreement is not transferable or assignable by
the undersigned.
3.6 APPLICABLE LAW. Notwithstanding the place where this Agreement may be
executed, all of the terms and provisions and validity of this Agreement shall
be governed by and construed in accordance with the internal laws of the State
of California.
3.7 COUNTERPARTS. This Agreement may be executed through the use of
separate signature pages or in any number of counterparts, and each of such
counterparts shall, for all purposes, constitute one agreement binding on all
the parties, notwithstanding that all parties are not signatories to the same
counterpart.
6.
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Type or print full name of Purchaser(s) as it (they) should appear on the stock
certificates evidencing the Shares subscribed for.
________________________________________________________________________________
IN WITNESS WHEREOF, the Purchase has executed this Subscription Agreement
the ____ day of _________________, 199__.
TRILON DOMINION PARTNERS, LLC.
________________________________________
________________________________________
Please print name
________________________________________
Title (if applicable)
________________________________________
Tax I.D. No.
ADDRESS:
________________________________________
Street Address
________________________________________
City State Zip Code
________________________________________
Telephone, Include Area Code
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ACCEPTED BY:
Advanced Materials Group, Inc.
By: _______________________________ Dated: _________________________________
__________________, President or
__________________, Secretary
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NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND NEITHER
THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE
TRANSFERRED EXCEPT AS PROVIDED IN SECTION 3 OF THIS WARRANT.
WARRANT
to Purchase Common Stock of
Advanced Materials Group, Inc.
Expiring December 22, 2000
This Warrant certifies that Trilon Dominion Partners, L.L.C., a Delaware
limited liability company, or registered assigns (the "Holder"), is entitled to
subscribe for and purchase from Advanced Materials Group, Inc., a Nevada
corporation (the "Company"), all or any part of duly authorized, validly issued,
fully paid and nonassessable shares of the Company's common stock, $.001 par
value per share (the common stock, including any stock into which it may be
changed, reclassified, or converted, is herein referred to as the "Common
Stock"), as comprise 30,000 Units (as defined below) at a purchase price per
Unit equal to $________(1) (the "Exercise Price"). A "Unit" shall consist
initially of one share of Common Stock of the Company as such stock is
constituted on the date of this Warrant, subject to adjustment as set forth
herein. The Warrant may be exercised at any time, and from time to time, during
the period from the date hereof and ending at 5:00 p.m., New York, New York
time, on December 22, 2000.
This Warrant is subject to the following provisions, terms and conditions:
Section 1. EXERCISE OF WARRANT.
To exercise this Warrant in whole or in part, the Holder shall deliver to
the Company at its principal office in Rancho
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(1) The purchase price per Unit shall be equal to the closing sales price
for the Common Stock on the date of issurance.
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Dominguez, California, (a) a written notice, in substantially the form of the
Subscription Notice appearing at the end of this Warrant, of the Holder's
election to exercise this Warrant, which notice shall specify the number of
shares of Common Stock to be purchased, (b) cash or a certified check payable to
the Company, or by cancellation of indebtedness of the Company to the Holder
hereof, if any, at the time of exercise, including any portion of the promissory
note, dated as of the date hereof, bearing interest at the prime rate published
in THE WALL STREET JOURNAL (Eastern Edition) plus 5%, in the principal amount of
$1,000,000, made by the Company in favor of the Holder, in an amount equal to
the aggregate purchase price of the number of shares of Common Stock being
purchased and (c) this Warrant. The Company shall as promptly as practicable,
and in any event within 15 days thereafter, execute and deliver or cause to be
executed and delivered, in accordance with such notice, a certificate or
certificates representing the aggregate number of shares of Common Stock
specified in such notice. The stock certificate or certificates so delivered
shall be in the denomination of 100 shares each or such lesser or greater
denomination as may be specified in such notice and shall be issued in the name
of the Holder or such other name as shall be designated in such notice. Such
certificate or certificates shall be deemed to have been issued and the Holder
or any other person so designated to be named therein shall be deemed for all
purposes to have become a holder of record of such shares as of the date such
notice is received by the Company as aforesaid. If this Warrant shall have been
exercised only in part, the Company shall, at the time of delivery of said
certificate or certificates, deliver to the Holder a new Warrant evidencing the
rights of the Holder to purchase the remaining shares of Common Stock called for
by this Warrant, which new Warrant shall in all other respects be identical to
this Warrant, or, at the request of the Holder, appropriate notation may be made
on this Warrant and the same returned to the Holder. The Company shall pay all
expenses, taxes and other charges payable in connection with the preparation,
issue and delivery of such stock certificates and new Warrants, except that, in
case such stock certificates or new Warrants shall be registered in a name or
names other than the name of the Holder, funds sufficient to pay all stock
transfer taxes that are payable upon the issuance of such stock certificate or
certificates or new Warrants shall be paid by the
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Holder at the time of delivering the notice of exercise mentioned above.
All shares of Common Stock issued upon the exercise of this Warrant shall
be validly issued, fully paid and nonassessable and, if the Common Stock is then
listed on a national securities exchange or quoted on an automated quotation
system, shall be duly listed or quoted thereon.
The Company shall not be required upon any exercise of this Warrant to
issue a certificate representing any fraction of a share of Common Stock, but,
in lieu thereof, shall pay to the Holder cash in an amount equal to a
corresponding fraction (calculated to the nearest 1/100 of a share) of the
purchase price of one share of Common Stock as of the date of receipt by the
Company of notice of exercise of this Warrant.
Section 2. TRANSFER, DIVISION AND COMBINATION.
The Company agrees to maintain at its principal office in Rancho Dominguez,
California, books for the Registration and transfer of this Warrant, and,
subject to the provisions of Section 3 hereof, this Warrant and all rights
hereunder are transferable, in whole, on such books at such office, upon
surrender of this Warrant at such office, together with a written assignment of
this Warrant duly executed by the Holder or his agent or attorney and funds
sufficient to pay any stock transfer taxes payable upon the making of such
transfer. Upon such surrender and payment, the Company shall execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees and
in the denominations specified in such instrument of assignment, and this
Warrant shall promptly be canceled. A Warrant may be exercised by a new holder
for the purchase of shares of Common Stock without having a new Warrant issued.
This Warrant may be divided or combined with other Warrants upon
presentation hereof at such principal office in Rancho Dominguez, California,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or his agent or attorney.
Subject to compliance with the preceding paragraph as to any transfer
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that 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.
Section 3. RESTRICTIONS ON EXERCISE AND TRANSFER OF WARRANTS AND COMMON
STOCK
This Warrant shall be exercisable (a) only under circumstances such that
the issue of Common Stock issuable upon such exercise is exempt from the
requirements of registration under the Securities Act of 1933, as amended (or
any similar statute then in effect) (the "1933 Act") and any applicable state
securities law or (b) upon registration of such Common Stock in compliance
therewith. This Warrant shall be transferable only under circumstances such
that the transfer is exempt from the requirements of registration under the 1933
Act and any applicable state securities law. By acceptance hereof, the Holder
agrees to comply with such legislation.
Before any transfer or attempted transfer of all or any part of this
Warrant or such Common Stock, the Holder shall give the Company written notice
of its intention so to do describing briefly the manner of any such proposed
transfer. Promptly after receiving such written notice, the Company shall
present copies thereof to Company counsel and, if the Company requests the
Holder to designate special counsel therefor, to any special counsel designated
by the Holder that is reasonably satisfactory to the Company. If, in the
opinion of counsel for the Company and counsel, if any, for the Holder, the
proposed transfer may be effected without registration under the 1933 Act and
any applicable state securities law of any such securities, the Company, as
promptly as practicable, shall notify the Holder of such opinion, whereupon the
securities proposed to be transferred may be transferred in accordance with the
terms of such notice. The Company shall not be required to effect any such
transfer before the receipt of such favorable opinion or opinions or the
effectiveness of registration.
Section 4. CERTAIN COVENANTS.
The Company covenants and agrees that it will at all times reserve and set
apart and have, free from preemptive rights, a
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number of shares of authorized but unissued Common Stock, or other stock or
securities deliverable pursuant to this Warrant, sufficient to enable it at any
time to fulfill all its obligations hereunder.
Section 5. NOTICES.
In the event that:
(a) the Company proposes to pay any dividend payable in stock (of any
class or classes) or in Convertible Securities, as defined below, upon its
Common Stock or make any distribution (other than ordinary cash dividends)
to the holders of its Common Stock,
(b) the Company proposes to grant to the holders of its Common Stock
generally any rights or options,
(c) the Company proposes to effect any capital reorganization or
reclassification of capital stock of the Company,
(d) the Company proposes to consolidate with, or merge into, any
other corporation or to transfer its property as an entirety or
substantially as an entirety, or
(e) the Company proposes to effect the liquidation, dissolution or
winding up of the Company,
then the Company shall cause notice of any such intended action to be given to
all holders of record of outstanding Warrants not less than 30 days before the
date on which the transfer books of the Company shall close or a record shall be
taken for such stock dividend, distribution or granting of rights or options, or
the date when such capital reorganization, reclassification, consolidation,
merger, transfer, liquidation, dissolution or winding up shall be effective, as
the case may be.
Any notice or other document required or permitted to be given or delivered
to holders of record of Warrants shall be delivered by facsimile, reliable
courier or first-class mail postage prepaid to each such holder at the last
address shown on the books of the Company maintained for the registry and
transfer
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of the Warrants. Any notice or other document required or permitted to be given
or delivered to holders of record of Common Stock issued pursuant to Warrants
shall be delivered by facsimile, reliable courier or first-class mail postage
prepaid to each such holder at such holder's address as the same appears on the
stock records of the Company. Any notice or other document required or
permitted to be given or delivered to the Company shall be delivered by
facsimile, reliable courier or first-class mail postage prepaid to the principal
office of the Company, at Rancho Dominguez, California or delivered to the
office of one of the Company's executive officers at such address, or such other
address as shall have been furnished by the Company to the holders of record of
such Warrants and the holders of record of such Common Stock.
Section 6. LIMITATION OF LIABILITY; NOT SHAREHOLDERS.
No provision of this Warrant shall be construed as conferring upon the
Holder the right to vote or to consent or to receive dividends or to receive
notice as a shareholder in respect of meetings of shareholders for the election
of directors of the Company or any other matter whatsoever as shareholders of
the Company. No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of Holder
for the purchase price or as a shareholder of the Company, whether such
liability is asserted by the Company, creditors of the Company or others.
Section 7. LOSS, DESTRUCTION, ETC, OF WARRANT.
Upon receipt of evidence satisfactory to the Company of the loss, theft,
mutilation or destruction of any Warrant, and in the case of any such loss,
theft or destruction upon delivery of a bond of indemnity in such form and
amount as shall be reasonably satisfactory to the Company, or in the event of
such mutilation upon surrender and cancellation of the Warrants, the Company
will make and deliver a new Warrant, of like tenor, in lieu of such lost,
stolen, destroyed or mutilated Warrant. Any Warrant issued under the provisions
of this Section 7 in lieu of any Warrant alleged to be lost, destroyed or
stolen, or of any mutilated
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Warrant, shall constitute an original contractual obligation on the part of the
Company.
Section 8. EXERCISE AND EXPIRATION OF WARRANT.
This Warrant shall become exercisable immediately upon its issuance to the
initial Holder. The expiration time and date of the Warrant shall be 5:00 p.m.
New York, New York time, December 22, 2000.
Section 9. ADJUSTMENT OF NUMBER OF SHARES ISSUABLE PURSUANT TO THIS
WARRANT.
The number of shares of Common Stock comprising a Unit shall be subject to
adjustment from time to time as follows:
(a) EFFECT OF "SPLIT-UPS" AND "SPLIT-DOWNS"; STOCK DIVIDENDS. If at
any time or from time to time the Company shall subdivide as a whole, by
reclassification, by the issuance of a stock dividend on the Common Stock
payable in Common Stock, or otherwise, the number of shares of Common Stock,
with or without par value, comprising a Unit that may be purchased hereunder
shall be increased proportionately as of the effective or record date of such
action. The issuance of such a stock dividend shall be treated as a subdivision
of the whole number of shares of Common Stock outstanding immediately before the
record date for such dividend into a number of shares equal to such whole number
of shares so outstanding plus the number of shares issued as a stock dividend.
In case at any time or from time to time the Company shall combine as a whole,
by reclassification or otherwise, the number of shares of Common Stock then
outstanding into a lesser number of shares of Common Stock, with or without par
value, the number of shares of Common Stock comprising a Unit that may be
purchased hereunder shall be reduced proportionately as of the effective date of
such action.
(b) EFFECT OF CERTAIN DIVIDENDS. If on any date the Company makes a
distribution to holders of its Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of its indebtedness or assets, the
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number of shares of Common Stock theretofore comprising a Unit shall be adjusted
as at the close of business on said date to a number determined by multiplying
the number of shares theretofore comprising a Unit by a fraction, the numerator
of which shall be the Current Price immediately prior to such distribution, and
the denominator of which shall be such Current Price minus the fair market value
(as determined by a single qualified appraiser (which shall be either a national
accounting firm or a national or regional major investment bank) selected by
mutual agreement between the Company and the Holder) of the portion of the
assets or evidences of indebtedness so to be distributed to one share of Common
Stock.
(c) EFFECT OF MERGER OR CONSOLIDATION. If the Company shall, while
this Warrant remains outstanding, enter into any consolidation with or merge
into any other corporation wherein the Company is not the continuing
corporation, or wherein cash or securities of a corporation other than the
Company are distributable to holders of Common Stock of the Company, or sell or
convey its property as an entirety or substantially as an
entirety, and in connection with such consolidation, merger, sale or conveyance,
shares of stock or cash or other securities shall be issuable or deliverable in
exchange for the Common Stock of the Company, the Holder shall thereafter be
entitled to purchase pursuant to this Warrant (in lieu of the number of shares
of Common Stock that the Holder would have been entitled to purchase or acquire
immediately before the effective date of such consolidation, merger, sale or
conveyance) the shares of stock or cash or other securities to which such number
of shares of Common Stock would have been entitled at the time of such
consolidation, merger, sale or conveyance, at an aggregate purchase price equal
to that which would have been payable if such number of shares of Common Stock
had been purchased upon exercise of a Warrant immediately prior thereto. In
cash of any such consolidation, merger, sale or conveyance, appropriate
provision (as determined by a resolution of the Board of Directors of the
Company) shall be made with respect to the rights and interests thereafter of
the Holder, to the end that all the provisions of this Warrant (including
adjustment provisions) shall thereafter be applicable as nearly as reasonably
practicable, in relation to such stock or other securities.
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(d) REORGANIZATION AND RECLASSIFICATION. In case of any capital
reorganization or any reclassification of the capital stock of the Company
(except as provided in Section 9(a) hereof) while this Warrant remains
outstanding, the Holder shall thereafter be entitled to purchase pursuant to
this Warrant (in lieu of the number of shares of Common Stock comprised in the
number of Units that the Holder would have been entitled to purchase immediately
before such reorganization or reclassification) the shares of stock of any class
or classes or other securities or cash or property to which such number of
shares of Common Stock comprised in such number of Units would have been
entitled if such shares of Common Stock had been purchased immediately before
such reorganization or reclassification. In case of any such reorganization or
reclassification, appropriate provision (as determined by resolution of the
Board of Directors of the Company) shall be made with respect to the rights and
in thereafter of the Holder, to the end that all the provisions of this Warrant
(including adjustment provisions) shall thereafter be applicable, as nearly as
reasonably practicable, in relation to such stock or other securities or
property.
(e) ADJUSTMENT OF UNIT AFTER A "DILUTING ISSUE". If on any date on
or after the date of this Warrant any additional shares of Common Stock (other
than shares of Excluded Stock) shall be issued for a consideration per share
(or, in the case of any transactions contemplated in paragraphs (2) or (3) of
this Section 9(e), shall be deemed to be issued for a Presumed Consideration per
share) less than the Current Price on the date such Common Stock was issued or
deemed to have been issued, the number of shares of Common Stock theretofore
comprising a Unit shall be adjusted as at the close of business on such date to
a number equal to the product (computed to the nearest ten thousandth of a
share) resulting from the multiplication of (i) the total number of shares of
Common Stock comprising a Unit immediately before such adjustment by (ii) a
fraction, the numerator of which is the Current Price on the date such Common
Stock was issued or deemed to have been issued, and the denominator of which is
the consideration received (or, without duplication, the Presumed Consideration
deemed to have been received) per share for such additional shares so issued.
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For the purpose of this Section 9(e), the following provisions shall be
applicable with respect to the issuance of additional shares of Common Stock and
the computation set forth in the immediately preceding paragraph:
(1) STOCK DIVIDENDS, ETC. In case any additional shares of Common
Stock shall be issued as a dividend on Common Stock, the number of shares
of Common Stock comprising a Unit shall be adjusted as provided in Section
9(a) hereof.
In case any additional shares of Common Stock shall be issued as a
dividend on any class of stock of the Company other than Common Stock, or
in case any obligations or stock convertible into or exchangeable for
shares of Common Stock (such convertible or exchangeable obligations or
stock being hereinafter called "Convertible Securities") shall be issued as
a dividend on any class of stock of the Company, such shares of Common
Stock or Convertible Securities shall be deemed to have been issued without
consideration on the day next succeeding the date for the determination of
stockholders entitled to such dividend.
(2) RIGHTS OR OPTIONS BELOW CURRENT PRICE. In case the Company shall
on or after the date of this Warrant grant any rights or options (other
than those exercisable for Excluded Stock) to subscribe for or to purchase
additional shares of Common Stock or Convertible Securities, and the
Presumed Consideration per share received and receivable by the Company for
such additional shares under such rights or options or pursuant to the
terms of such Convertible Securities shall be less than the Current Price
in effect immediately prior to the time of the granting of such rights or
options, the maximum number of additional shares of Common Stock issuable
pursuant to such rights or options or necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have been
issued as of the date of the granting of such rights or options, and the
Company shall be deemed to have received the Presumed Consideration
therefor. No adjustment (except as provided in paragraph (4) of this
Section 9(e) shall be made upon the actual issuance of Common Stock upon
the exercise of rights or options referenced in this paragraph (2) or the
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conversion of Convertible Securities referenced in this paragraph (2).
(3) SECURITIES CONVERTIBLE BELOW CURRENT PRICE. In case:
(i) the Company shall issue any Convertible Securities (other
than those convertible into Excluded Stock or pursuant to the exercise
of rights or options therefor in respect of which an adjustment shall
have theretofore been made under the foregoing paragraph (2)), and
(ii) the Presumed Consideration per share for additional shares
of Common Stock issuable pursuant to the terms of such Convertible
Securities shall be less than the Current Price in effect immediately
prior to the time of the issuance of such Convertible Securities,
then the issuance of such Convertible Securities shall be deemed to be an
issuance (as of the date of issuance of such Convertible Securities) of the
maximum number of additional shares of Common Stock necessary to effect the
conversion or exchange of all such Convertible Securities, and the Company
shall be deemed to have received the Presumed Consideration therefor as of
the date of issuance of such Convertible Securities. No further
adjustment, except as provided in paragraph (4) of this Section 9(e), shall
be made upon the actual issuance of Common Stock upon the conversion of
Convertible Securities.
(4) SUPERSEDING ADJUSTMENT OF NUMBER OF SHARES OF COMMON STOCK
COMPRISING A UNIT. If, at any time after any adjustment of the shares of
Common Stock comprising a Unit shall have been made on the basis of shares
of Common Stock deemed to be issued by reason of the provisions of the
foregoing paragraphs (2) or (3) of this Section 9(e) on the basis of the
granting of certain rights or options or the issuance of certain
Convertible Securities, or after any new adjustments of the shares of
Common Stock comprising a Unit shall have been made on the basis of shares
of Common Stock deemed to be issued by reason of the provisions of this
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paragraph (4), such rights or options or the right of conversion or
exchange in any such Convertible Securities (for which, or purchased
pursuant to any rights or options for which, such an adjustment shall
previously have been made) shall expire, and a portion of such rights or
options, or the right of conversion or exchange in respect of a portion of
such Convertible Securities, as the case may be, shall not have been
exercised, then such previous adjustment shall be rescinded and annulled
and the shares of Common Stock that were deemed to have been issued by
virtue of the computation made in connection with the adjustment so
rescinded and annulled, shall no longer be deemed to have been issued by
virtue of such computation. Thereupon, a re-computation shall be made of
the effect of such rights or options or such Convertible Securities on the
basis of:
(i) treating the number of additional shares of Common Stock, if
any, theretofore actually issued pursuant to the exercise of such
expired rights or options or such expired right of conversion or
exchange, as having been issued on the date or dates of such exercise
for the consideration actually received therefor (computed as provided
in paragraph (6) of this Section 9(e)); and
(ii) treating the maximum number of additional shares of Common
Stock, if any, thereafter issuable pursuant to the conversion or
exchange of any Convertible Securities actually issued or issuable
pursuant to the previous exercise of such rights or options as having
been issued as of the date of the granting of such rights or options
and treating the Presumed Consideration therefor as received as of
such date;
and, on such basis, such new adjustment, if any, of the number of shares of
Common Stock comprising a Unit shall be made as may be required by the
first paragraph of this Section 9(e), which new adjustment shall supersede
the previous adjustment so rescinded and annulled for the Warrant exercised
after such new adjustment.
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(5) EFFECT OF "SPLIT-UP" OR "SPLIT-DOWN" ON "DEEMED ISSUED" SHARES.
Upon the effective or record date for any subdivision or combination of the
Common Stock of the character described in Section 9(a) hereof, including
the issuance of a stock dividend which is treated as such a subdivision
under paragraph (1) of this Section 9(e), the number of the shares of
Common Stock which are at the time deemed to have been issued by virtue of
paragraphs (2), (3) or (4) of this Section 9(e), but have not actually been
issued, shall be deemed to be increased or decreased proportionately.
(6) COMPUTATION OF CONSIDERATION AND PRESUMED CONSIDERATION. For the
purposes of this Section 9:
(i) The consideration received by the Company upon the actual
issuance of additional shares of Common Stock shall be deemed to be
the sum of the amount of cash and the fair value of property (as
determined by a single qualified appraiser (which shall be either a
national accounting firm or a national or regional major investment
bank) selected by mutual agreement between the Company and the Holder
as at the time of issue or "deemed issue" in the case of the following
paragraph (ii)) received or receivable by the Company as the
consideration or part of the consideration (v) at the time of issuance
of the Common Stock, (w) for the issuance of any rights or options
upon the exercise or conversion of which such Common Stock was issued,
(x) for the issuance of any rights or options to purchase Convertible
Securities upon the conversion of which such Common Stock was issued,
(y) for the issuance of the Convertible Securities upon conversion of
which such Common Stock was issued and (z) at the time of the actual
exercise of such rights, options or conversion privileges upon the
exercise or conversion of which such Common Stock was issued, in each
case without deduction for commissions and expenses incurred by the
Company for any underwriting of, or otherwise in connection with the
issue or sale of, such rights, options, Convertible Securities or
Common Stock, but after deduction of any sums paid by the Company in
cash upon the exercise of, and pursuant to, such rights,
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options or conversion privileges in respect of fractional shares of
Common Stock;
(ii) The consideration deemed to have been received by the
Company for additional shares of Common Stock deemed to be issued
pursuant to rights, options and conversion privileges by reason of
transactions of the character described in paragraphs (2), (3) and
(4)(ii) of this Section 9(e) (herein called the "Presumed
Consideration" therefor) shall be the consideration (determined as
provided in the foregoing paragraph (i)) that would be received or
receivable by the Company at or before the actual issue of such shares
of Common Stock so deemed to be issued, if all rights, options and
conversion privileges necessary to effect the actual issue of the
number of shares deemed to have been issued had been exercised
(successively exercised in the case of rights or options to purchase
Convertible Securities), and the minimum consideration received or
receivable by the Company upon such exercise had been received; all
computed without regard to the possible future effect of anti-dilution
provisions on such rights, options and/or conversion privileges.
(f) STATEMENT OF ADJUSTMENT OF UNIT AND CURRENT PRICE. Whenever the
number of shares of Common Stock comprising a Unit is adjusted pursuant to
any of the foregoing provisions of this Section 9, the Company shall
promptly prepare a written statement signed by the chief executive officer
of the Company, setting forth the adjustment in the number of shares
comprising a Unit purchasable hereunder, determined as provided in this
Section, and the amount of the then effective Current Price, and in
reasonable detail the facts requiring such adjustment and the calculation
thereof. Such statement shall be filed among the permanent records of the
Company and a copy thereof shall be furnished to the Holder without request
and shall at all reasonable times during business hours be open to
inspection by the Holder. The Company shall also promptly cause a notice,
stating that such an adjustment has been effected and setting forth the
increased or decreased number of shares purchasable and the amount of the
then effective Current Price, to be delivered
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by facsimile, reliable courier or first-class mail postage prepaid to the
Holder.
(g) DETERMINATION BY THE BOARD OF DIRECTORS. All determinations by
the Board of Directors of the Company under the provisions of this Section
9 shall be made in good faith with due regard to the interests of the
Holder and the other holders of securities of the Company and in accordance
with good financial practice, and all valuations made by the Board of
Directors of the Company under the terms of this Section 9 must be made
with due regard to any market quotations of securities involved in, or
related to, the subject of such valuation.
(h) DEFINITIONS. For all purposes of this Section 9 and this
Warrant, unless the context otherwise requires, the following terms have
the following respective meanings:
"COMMON STOCK": (i) the Company's presently authorized Common Stock
as such class exists on the date of this Warrant; and (ii) stock of the
Company of any class thereafter authorized that ranks, or is entitled to a
participation, as to assets or dividends, substantially on a parity with
Common Stock.
"COMPANY": Advanced Materials Group, Inc., a Nevada corporation, and
any other corporation assuming the Company's obligations with respect to
this Warrant pursuant to this Section 9.
"CONVERTIBLE SECURITIES": the meaning specified in Section 9(e)(1).
"CURRENT PRICE": per share of Common Stock, the amount equal to the
quotient resulting from dividing (i) the Exercise Price per Unit herein
provided by (ii) the number of shares (including any fractional share) of
Common Stock comprising a Unit on such date.
"EXCLUDED STOCK": shares of Common Stock issued (i) upon exercise of
this Warrant, (ii) in respect of which an adjustment is required to be made
pursuant to Section 9(a), (b), (c) or (d) hereof, and (iii) pursuant to the
exercise
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or conversion of any options, warrants, convertible securities or other
securities issued and outstanding on the date hereof.
"PRESUMED CONSIDERATION": the meaning specified in Section
9(e)(6)(ii).
Section 10. REGISTRATION RIGHTS.
(a) REGISTRABLE STOCK. As used in this Section 10, the term
"Registrable Stock" shall mean (i) all shares of Common Stock that may be issued
upon exercise of this Warrant (and all shares of Common Stock that may
thereafter be issued in respect of this Warrant) and (ii) all shares of Common
Stock that may be issued upon the closing of a private placement involving the
sale of equity securities of the Company in which the aggregate amount sold in
the placement is at least $5,000,000.
References in this Warrant to rules, regulations and forms promulgated
by the Securities and Exchange Commission shall include rules, regulations and
forms succeeding to the functions thereof, whether or not bearing the same
designation.
The rights and obligations of the Company and the Holder with respect
to the Registrable Stock set forth in this Section 10 shall supersede any
registration rights and obligations of the Company and the Holder existing prior
to the date hereof with respect to the Registrable Stock.
(b) REQUEST FOR REGISTRATION. If the Company shall receive a written
request (specifying that it is being made pursuant to this Section 10(b)) from
the holders of more than 50% of the Registrable Stock that the Company file a
registration statement under the 1933 Act, or a similar document pursuant to any
other statute then in effect corresponding to the 1933 Act covering the
registration of at least 50% of the Registrable Stock, then the Company shall
promptly notify all other holders of Registrable Stock of such request and shall
use its reasonable best efforts to cause all Registrable Stock that holders have
requested be registered to be registered under the 1933 Act.
Notwithstanding the foregoing, (i) the Company shall not be obligated
to effect a registration pursuant to this
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Section 10(b) during the period starting with the date 60 days prior to the
Company's estimated date of filing of, and ending on a date 180 days following
the effective date of, a registration statement pertaining to an underwritten
public offering of securities for the account of the Company, provided that the
Company is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective and that the Company's estimate of
the date of filing such registration statement is made in good faith; and (ii)
if the Company shall furnish to such holders a certificate signed by the chief
executive officer of the Company stating that in the good faith judgment of the
Board of Directors it would be seriously detrimental to the Company or its
shareholders for a registration statement to be filed in the near future, then
the Company's obligation to use its best efforts to file a registration
statement shall be deferred for a period not to exceed six months.
The Company shall be obligated to effect only three registrations
pursuant to this Section 10(b). Any request for registration under this Section
10(b) must be for a firmly underwritten public offering to be managed by an
underwriter or underwriters of recognized national standing reasonably
acceptable to the Company.
(c) COMPANY REGISTRATION. Subject to Section 10(g), if at any time
the Company proposes to register any of its Common Stock under the 1933 Act in
connection with the public offering of such securities solely for cash on a form
that would also permit the registration of the Registrable Stock, the Company
shall, each such time, promptly give each holder of Registrable Stock written
notice of such determination. Upon the written request of any holder, given
within 20 days after mailing of any such notice by the Company, the Company
shall use its reasonable best efforts to cause to be registered under the 1933
Act all of the Registrable Stock that each such holder has requested be
registered.
(d) OBLIGATIONS OF THE COMPANY. Whenever required under Sections
10(b), 10(c) or 10(j) to use its reasonable best efforts to effect the
registration of any Registrable Stock, the Company shall, as expeditiously as
reasonably possible:
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(1) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Stock and use its
reasonable best efforts to cause such registration statement to become and
remain effective; PROVIDED, HOWEVER, that in connection with any proposed
registration intended to permit an offering of any securities from time to
time (i.e., a so-called "shelf registration"), the Company shall in no
event be obligated to cause any such registration to remain effective for
more than 90 days;
(2) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by such registration statement;
(3) furnish to the holders of Registrable Stock such numbers of
copies of a prospectus, including a preliminary prospectus, in conformity
with the requirements of the 1933 Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Stock owned by them; and
(4) use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other
securities or Blue Sky Laws of such jurisdictions as shall be reasonably
appropriate for the distribution of the securities covered by the
registration statement.
(e) FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 10
that the holders of Registrable Stock shall furnish to the Company such
information regarding them, the Registrable Stock held by them and the
intended method of disposition of such securities as the Company shall
reasonably request and as shall be required in connection with the action
to be taken by the Company.
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(f) EXPENSES OF DEMAND REGISTRATION. All expenses incurred in
connection with a registration pursuant to Sections 10(b) or 10(c)
(excluding underwriters' discounts and commissions),including, without
limitation, all registration and qualification fees, printers' and
accounting fees, fees and disbursements of counsel for the Company and the
reasonable fees and disbursements of one counsel for the selling holders,
shall be borne by the Company; PROVIDED, HOWEVER, that the Company shall
not be required to pay for any expenses of any registration proceeding
begun pursuant to Section 10(b) if the registration request is subsequently
withdrawn, unless the holders agree to forfeit their right to demand
registration pursuant to Section 10(b).
(g) UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares being issued by the Company, the
Company shall not be required under Section 10(c) to include any of the
holders' Registrable Stock in such underwriting unless they accept the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it or them, and then only in such quantity as will
not, in the written opinion of the underwriters, jeopardize the success of
the offering by the Company. If the total amount of securities that all
holders request to be included in such offering exceeds the amount of
securities that the underwriters reasonably believe compatible with the
success of the offering, the Company shall only be required to include in
the offering so many of the securities of the selling holders as the
underwriters believe will not jeopardize the success of the offering, shall
so advise all selling holders of Registrable Stock and the number of shares
of securities that are entitled to be included in the offering and
underwriting shall be allocated first, to the Company for securities being
sold for its own account, second, among all such selling holders of
Registrable Stock and, third, among all other selling stockholders, in each
case in proportion, as nearly as practicable, to the respective total
amounts of securities owned by said selling holders of Registrable Stock
and other selling stockholders. If any selling holder of Registrable Stock
or any other selling stockholder disapproves of the terms of any such
underwriting, he, she or it may elect to
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withdraw therefrom by written notice to the Company and the underwriter.
(h) DELAY OF REGISTRATION. No holders of Registrable Stock shall
have any right to take any action to restrain, enjoin or otherwise delay
any registration as the result of any controversy that might arise with
respect to the interpretation or implementation of this Section 10.
(i) INDEMNIFICATION. In the event any shares of Registrable Stock are
included in the registration statement under this Section 10:
(1) to the extent permitted by law, the Company will indemnify
and hold harmless each holder of Registrable Stock requesting or
joining in a registration, any underwriter (as defined in the 1933
Act) for it and each person, if any, who controls such holder or
underwriter within the meaning of the 1933 Act, against any losses,
claims, damages or liabilities, joint or several, to which they may
become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based on any untrue or alleged untrue statement of
any material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements
therein not misleading or arise out of any violation by the Company of
any rule or regulation promulgated under the 1933 Act applicable to
the Company and relating to action or inaction required of the Company
in connection with any such registration; and will reimburse each such
holder, such underwriter or controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action;
PROVIDED, HOWEVER, that the indemnity agreement contained in this
Section 10(i)(1) shall not apply to amounts paid in settlement
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of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld) nor shall the Company be
liable in any such case for any such loss, claim, damage, liability or
action to the extent that it arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
made in connection with such registration statement, preliminary
prospectus, final prospectus, or amendments or supplements thereto, in
reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such
holder, underwriter or controlling person;
(2) to the extent permitted by law, each holder requesting or
joining in a registration will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed
the registration statement, each person, if any, who controls the
Company within the meaning of the 1933 Act and each agent and any
underwriter for the Company (within the meaning of the 1933 Act)
against any losses, claims, damages or liabilities to which the
Company or any such director, officer, controlling person, agent or
underwriter may become subject, under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in such
registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto,
or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in
such registration statement, preliminary or final prospectus, or
amendments or supplements thereto, in reliance upon and in conformity
with written information furnished by such holder expressly for use
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in connection with such registration; and each such holder will
reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person, agent or
underwriter in connection with investigating or defending any such
loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the
indemnity agreement contained in this Section 10(i)(2) shall not apply
to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent
of such holder (which consent shall not be unreasonably withheld); and
(3) promptly after receipt by an indemnified party under this
paragraph of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this paragraph, notify the
indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof
with counsel mutually satisfactory to the parties. The failure to
notify an indemnifying party promptly of the commencement of any such
action, if prejudicial to his ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified
party under this paragraph, but the omission so to notify the
indemnifying party will not relieve him of any liability that he may
have to any indemnified party otherwise than under this paragraph.
(j) REGISTRATIONS ON FORM S-3.
(1) If (i) a holder or holders of Registrable Stock request in
writing (specifying that the request is being made pursuant to this Section
10(j)) that the Company file a registration statement on Form S-3 under the
1933 Act ("Form S-3") (or any successor form to Form S-3 regardless of its
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designation) for a public offering of shares of the Registrable Stock, the
reasonably anticipated aggregate price to the public of which would exceed
$500,000, and (ii) the Company is a registrant entitled to use Form S-3 to
register such shares, then the Company shall use its reasonable best
efforts to cause such shares to be registered on Form S-3 (or any successor
form to Form S-3); PROVIDED, HOWEVER, that the Company shall not be
obligated to effect any such registration pursuant to this Section 10(j) if
the Company has, within the 12-month period preceding the date of such
request, already effected two registrations on Form S-3 for the holders
pursuant to this Section 10(j).
(2) All expenses incurred in connection with a registration requested
pursuant to Section 10(j)(1), including, without limitation, all
registration, qualification, printing and accounting fees, and reasonable
fees and disbursements of counsel for the selling holder or holders and
counsel for the Company, shall be borne by the Company.
(3) Holders' rights to registration under this Section 10(j) are in
addition to, and not in lieu of, their rights to registration under
Sections 10(b) and 10(c).
(k) TERMINATION OF THE COMPANY'S OBLIGATIONS. The Company shall have
no obligations pursuant to Sections 10(b), 10(c) or 10(j) as to any holder
after the Company has included Registrable Stock of such holder in two
registrations pursuant to Sections 10(b), 10(c) or 10(j), PROVIDED,
HOWEVER, that if such holder has requested that all of its Registrable
Stock be registered under such sections, but such holders shall be
prohibited from selling all of such stock by virtue of Section 10(g), then
such holder's rights shall not be restricted by the provisions of this
Section 10(k) until such time as it has had an opportunity to sell all of
its Registrable Stock.
(l) REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the holders of Registrable Stock the benefits of Rule
144 promulgated under the 1933 Act and any other rule or regulation of the
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Securities and Exchange Commission that may at any time permit a holder to
sell securities of the Company to the public without registration, the
Company agrees to use its reasonable best efforts to:
(1) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times subsequent to 90
days after the effective date of the first registration statement
covering an underwritten public offering filed by the Company;
(2) file with the Securities and Exchange Commission in a timely
manner all reports and other documents required of the Company under
the 1933 Act and the Securities Exchange Act of 1934 (the "1934 Act");
and
(3) furnish to any holder so long as such holder owns any of the
Registrable Stock forthwith upon request a written statement by the
Company that it has complied with the reporting requirements of Rule
144 (at any time after 90 days after the effective date of said first
registration statement filed by the Company), and of the 1933 Act and
the 1934 Act (at any time after it has become subject to such
reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed
by the Company as may be reasonably requested in availing any holder
of any rule or regulation of the Securities and Exchange Commission
permitting the selling of any such securities without registration.
(m) LOCKUP AGREEMENT. In consideration for the Company's agreeing to
its obligations under this Section 10, the holder of Registrable Stock
agrees in connection with any registration of the Company's securities
that, upon the request of the Company or the underwriters managing any
underwritten offering of the Company's securities, not to sell, make any
short sale of, loan, grant any option for the purchase of or otherwise
dispose of any Registrable Stock (other than those included in the
registration) without the prior written consent of the Company or such
underwriters,
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<PAGE>
as the case may be, for such period of time (not to exceed 90 days) from
the effective date of such registration as the Company or the underwriters
may specify.
(n) CERTAIN LIMITATIONS IN CONNECTION WITH FUTURE GRANTS OF
REGISTRATION RIGHTS. From and after the date hereof, the Company shall not
enter into any agreement with any holder or prospective holder of any
securities of the Company providing for the granting to such holder of
registration rights unless such agreement:
(1) includes the equivalent of Section 10(m) as a term; and
(2) includes a provision that, in the case of a public offering
involving an underwritten registered offering under Section 10(c),
protects the holders of Registrable Stock if marketing factors require
a limitation on the number of securities to be included in the
underwriting in the manner in which the Company is protected under
Section 10(g).
(o) TRANSFER OF REGISTRATION RIGHTS. The registration rights of the
Holder of the Warrant under this Section 10 may be transferred to any
transferee who acquires at least 20% of the then outstanding shares of
Registrable Stock, or the Warrant; PROVIDED, HOWEVER, that the Company is
given written notice by the Holder at the time of such transfer stating the
name and address of the transferee and identifying the securities with
respect to which the rights under this Section 10 are being assigned.
Section 11. AMENDMENTS.
(a) Other than in respect of Section 10 hereof, neither this Warrant
nor any term hereof may be changed, waived, discharged or terminated orally or
in writing, provided that any term of this Warrant may be amended or the
observance of such term may be waived (either generally or in a particular
instance and either retroactively or prospectively) with, but only with, the
written consent of the Company and the holders of Warrants that are exercisable
for a number of Units that represent in the aggregate at least a majority of the
total number of Units for
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<PAGE>
which all Warrants are then exercisable (whether or not the holder of this
Warrant consents).
(b) Neither Section 10 of this Warrant nor Section 10 of the
Springing Warrant, nor any term of either of such Sections 10 may be changed,
waived, discharged or terminated orally or in writing, provided that any term of
Section 10 of this Warrant and any term of Section 10 of the Springing Warrant
may be amended or the observance of such term may be waived (either generally or
in a particular instance and either retroactively or prospectively)
with, but only with, the written consent of the Company and the holders of
Warrants and Springing Warrants that are exercisable for a number of Units that
represent in the aggregate at least a majority of the total number of Units for
which all Warrants and all Springing Warrants are then exercisable (whether or
not the holder of this Warrant consents).
Section 12. GOVERNING LAW.
This Warrant shall be governed by the laws of the State of New York without
regard to its conflict of laws principles or rules.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its
name by its duly authorized officer.
Dated: December ___, 1995
ADVANCED MATERIALS GROUP, INC.
By:
-------------------------------------
George R. Pache
Chief Financial Officer
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<PAGE>
SUBSCRIPTION NOTICE
The undersigned, the Holder, hereby elects to exercise purchase rights
represented by such Warrant for, and to purchase thereunder, ____________ shares
of the Common Stock covered by such Warrant and herewith makes payment in full
therefor of $_________ cash and/or by cancellation of $__________ of
indebtedness of the Company to the Holder hereof and requests that certificates
for such shares (and any securities or property deliverable upon such exercise)
be issued in the name of and delivered to _____________________________ whose
address is _______________________________________________.
The undersigned agrees that, in the absence of an effective registration
statement with respect to Common Stock issued upon this exercise, the
undersigned is acquiring such Common Stock for investment and not with a view to
distribution thereof and that the certificate or certificates representing such
Common Stock may bear a legend substantially as follows:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS. UNLESS THEY ARE SOLD
PURSUANT To RULE 144 PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION
UNDER SAID ACT, THEY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN ABSENCE OF
SUCH REGISTRATION AND QUALIFICATION WITHOUT AN OPINION OF COUNSEL FOR THE
HOLDER, REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
Dated:
-----------------------------------
Signature guaranteed:
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<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the rights represented by the foregoing
Warrant of _______________________ and appoints ________________________
________________________ attorney to transfer said rights on the books of said
corporation, with full power of substitution in the premises.
Dated:
-----------------------------------
Signature guaranteed:
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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<PAGE>
NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT MAY BE TRANSFERRED EXCEPT AS PROVIDED IN SECTION 3 OF THIS WARRANT.
WARRANT
to Purchase Common Stock of
Advanced Materials Group, Inc.
Expiring December ___, 2000
This Warrant certifies that Trilon Dominion Partners, L.L.C., a Delaware
limited liability company, or registered assigns (the "Holder"), is entitled to
subscribe for and purchase from Advanced Materials Group, Inc., a Nevada
corporation (the "Company"), all or any part of duly authorized, validly issued,
fully paid and nonassessable shares of the Company's common stock, $.001 par
value per share (the common stock, including any stock into which it may be
changed, reclassified, or converted, is herein referred to as the "Common
Stock"), as comprise 60,000 Units (as defined below) at a purchase price per
Unit equal to $_______(1) (the "Exercise Price"). A "Unit" shall consist
initially of one share of Common Stock of the Company as such stock is
constituted on the date of this Warrant, subject to adjustment as set forth
herein. The Warrant may be exercised at any time, and from time to time, during
the period from the date hereof and ending at 5:00 p.m., New York, New York time
on December ___, 2000.
This Warrant is issued pursuant to Amendment No. 2 to Credit Agreement,
dated as of December 15, 1995, by and between the Company and the Holder (the
"Amendment No. 2"). Amendment No. 2 amends a certain Credit Agreement dated as
of September 21, 1994, by and between the Company and Dominion Capital, Inc., a
Virginia corporation, as amended by Amendment No. 1 dated as of January 13, 1995
(the "Credit Agreement"). Pursuant to Amendment No. 2, the Holder has agreed,
among other things, to increase the aggregate amount of credit available to the
Company from $700,000 to $1,000,000.
This Warrant is subject to the following provisions, terms and conditions:
- ----------------------
(1)The purchase price per Unit shall be equal to the closing sales price
for the Common Stock on the date of issuance.
<PAGE>
Section 1. EXERCISE OF WARRANT
To exercise this Warrant in whole or in part, the Holder shall deliver
to the Company at its principal office in Rancho Dominguez, California, (a) a
written notice, in substantially the form of the Subscription Notice
appearing at the end of this Warrant, of the Holder's election to exercise
this Warrant, which notice shall specify the number of shares of Common Stock
to be purchased, (b) cash or a certified check payable to the Company, or by
cancellation of indebtedness of the Company to the Holder hereof, if any, at
the time of exercise, including any portion of the promissory note, dated as
of the date hereof, bearing interest at the prime rate published in THE WALL
STREET JOURNAL (Eastern Edition) plus 5% in the principal amount of
$1,000,000, made by the Company in favor of the Holder, in an amount equal to
the aggregate purchase price of the number of shares of Common Stock being
purchased and (c) this Warrant. The Company shall as promptly as
practicable, and in any event within 15 days thereafter, execute and deliver
or cause to be executed and delivered, in accordance with such notice, a
certificate or certificates representing the aggregate number of shares of
Common Stock specified in such notice. The stock certificate or
certificates so delivered shall be in the denomination of 100 shares each or
such lesser or greater denomination as may be specified in such notice and
shall be issued in the name of the Holder or such other name as shall be
designated in such notice. Such certificate or certificates shall be deemed
to have been issued and the Holder or any other person so designated to have
been issued and the Holder or any other person so designated to be named
therein shall be deemed for all purposes to have become a holder of record of
such shares as of the date such notice is received by the Company as
aforesaid. If this warrant shall have been exercised only in part, the
Company shall, at the time of delivery of said certificate or certificates,
deliver to the Holder a new Warrant evidencing the rights of the Holder to
purchase the remaining shares of Common Stock called for by this Warrant,
which new Warrant shall in all other respects be identical to this Warrant,
or, at the request of the Holder, appropriate notation may be made on this
Warrant and the same returned to the Holder. The Company shall be pay all
expenses, taxes and other charges payable in connection with the preparation,
issue and delivery of such stock certificates and new Warrants, except that,
in case such stock certificates or new Warrants shall be registered in a name
or names other than the name of the Holder, funds sufficient to pay all stock
transfer taxes that are payable upon the issuance of such stock certificate
or certificates or new Warrants shall be paid by the Holder at the time of
delivering the notice of exercise mentioned above.
All shares of Common Stock issued upon the exercise of this Warrant shall
be validly issued, fully paid and nonassessable and, if the Common Stock is then
listed on a national securities
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<PAGE>
exchange or quoted on an automated quotation system, shall be duly listed or
quoted thereon.
The Company shall not be required upon any exercise of this Warrant to
issue a certificate representing any fraction of a share of Common Stock,
but, in lieu of thereof, shall pay to the Holder cash in an amount equal to a
corresponding fraction (calculated to the nearest 1/100 of a share) of the
purchase price of one share of Common Stock as of the date of receipt by the
Company of notice of exercise of this Warrant.
Section 2. TRANSFER, DIVISION AND COMBINATION.
The Company agrees to maintain at its principal office in Rancho Dominguez,
California, books for the Registration and transfer of this Warrant, and,
subject to the provisions of Section 3 hereof, this Warrant and all rights
hereunder are transferable, in whole, on such books at such office, upon
surrender of this Warrant at such office, together with a written assignment of
this Warrant duly executed by the Holder or his agent or attorney and funds
sufficient to pay any stock transfer taxes payable upon the making of such
transfer. Upon such surrender and payment, the Company shall execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees and
in the denominations specified in such instrument of assignment, and this
Warrant shall promptly be canceled. A Warrant may be exercised by a new holder
for the purchase of shares of Common Stock without having a new Warrant issued.
This Warrant may be divided or combined with other Warrants upon
presentation hereof at such principal office in Rancho Dominguez, California,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or his agent or attorney.
Subject to compliance with the preceding paragraph as to any transfer that 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.
Section 3. RESTRICTIONS ON EXERCISE AND TRANSFER OF
WARRANTS AND COMMON STOCK
This Warrant shall be exercisable (a) only under circumstances such that
the issue of Common Stock issuable upon such exercise is exempt from the
requirements of registration under the Securities Act of 1933, as amended (or
any similar statute then in effect) (the "1933 Act") and any applicable state
securities law or (b) upon registration of such Common Stock in compliance
therewith. This Warrant shall be transferable only under circumstances such
that the transfer is exempt from the
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<PAGE>
requirements of registration under the 1933 Act and any applicable state
securities law. By acceptance hereof, the Holder agrees to comply with such
legislation.
Before any transfer or attempted transfer of all or any part of this
Warrant or such Common Stock, the Holder shall give the Company written notice
of its intention so to do describing briefly the manner of such proposed
transfer. Promptly after receiving such written notice, the Company shall
present copies thereof to Company counsel and, if the Company requests the
Holder to designate special counsel therefor, to any special counsel designated
by the Holder that is reasonably satisfactory to the Company. If, in the
opinion of counsel for the Company and counsel, if any, for the Holder, the
proposed transfer may be effected without registration under the 1933 Act and
any applicable state securities law of any such securities, the Company, as
promptly as practicable, shall notify the Holder of such opinion, whereupon the
securities proposed to be transferred may be transferred in accordance with the
terms of such notice. The Company shall not be required to effect any such
transfer before the receipt of such favorable opinion or opinions or the
effectiveness of registration.
Section 4. CERTAIN COVENANTS.
The Company covenants and agrees that it will at all times reserve and set
apart and have, free from preemptive rights, a number of shares of authorized
but unissued Common Stock, or other stock or securities deliverable pursuant to
this Warrant, sufficient to enable it at any time to fulfill all its obligations
hereunder.
Section 5. NOTICES.
In the event that:
(a) the Company proposes to pay any dividend payable in stock (of any
class or classes) or in Convertible Securities, as defined below, upon its
Common Stock or make any distribution (other than ordinary cash dividends) to
the holders of its Common Stock,
(b) the Company proposes to grant to the holders of its Common Stock
generally any rights or options,
(c) the Company proposes to effect any capital reorganization or
reclassification of capital stock of the Company,
(d) the Company proposes to consolidate with, or merge into, any
other corporation or to transfer its property as an entirety or substantially as
an entirety, or
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<PAGE>
(e) the Company proposes to effect the liquidation, dissolution or
winding up of the Company,
then the Company shall cause notice of any such intended action to be given to
all holders of record of outstanding Warrants not less than 30 days before the
date on which the transfer books of the Company shall close or a record shall be
taken for such stock dividend, distribution or granting of rights or options, or
the date when such capital reorganization, reclassification, consolidation,
merger, transfer, liquidation, dissolution or winding up shall be effective, as
the case may be.
Any notice or other document required or permitted to be given or delivered
to holders of record of Warrants shall be delivered by facsimile, reliable
courier or first-class mail postage prepaid to each such holder at the last
address shown on the books of the Company maintained for the registry and
transfer of the Warrants. Any notice or other document required or permitted to
be given or delivered to holders of record of Common Stock issued pursuant to
Warrants shall be delivered by facsimile, reliable courier or first-class mail
postage prepaid to each such holder at such holder's address as the same appears
on the stock records of the Company. Any notice or other document required or
permitted to be given or delivered to the Company shall be delivered by
facsimile, reliable courier or first-class mail postage prepaid to the principal
office of the Company, at Rancho Dominguez, California or delivered to the
office of one of the Company's executive officers at such address, or such other
address as shall have been furnished by the Company to the holders of record of
such Warrants and the holders of record of such Common Stock.
Section 6. LIMITATIONS OF LIABILITY; NOT SHAREHOLDERS.
No provision of this Warrant shall be construed as conferring upon the
Holder the right to vote or to consent or to receive dividends or to receive
notice as a shareholder in respect of meetings of shareholders for the election
of directors of the Company or any other matter whatsoever as shareholders of
the Company. No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of Holder
for the purchase price or as a shareholder of the Company, whether such
liability is asserted by the Company, creditors of the Company or others.
Section 7. LOSS, DESTRUCTION, ETC, OF WARRANT.
Upon receipt of evidence satisfactory to the Company of loss, theft,
mutilation or destruction of any Warrant, and in the case of any such loss,
theft or destruction upon delivery of a
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<PAGE>
bond of indemnity in such form and amount as shall be reasonably satisfactory to
the Company, or in the event of such mutilation upon surrender and cancellation
of the Warrants, the Company will make and deliver a new Warrant, of like tenor,
in lieu of such lost, stolen, destroyed or mutilated Warrant. Any Warrant
issued under the provisions of this Section 7 in lieu of any Warrant alleged to
be lost, destroyed or stolen, or of any mutilated Warrant, shall constitute an
original contractual obligation on the part of the Company.
Section 8. EXERCISE AND EXPIRATION OF WARRANT.
This Warrant shall become exercisable immediately upon its issuance to the
initial Holder. The expiration time and date of the Warrant shall be 5:00 p.m.
New York, New York time, December ____, 2000.
Section 9. ADJUSTMENT OF NUMBER OF SHARES ISSUABLE PURSUANT TO THIS
WARRANT.
The number of shares of Common Stock comprising a Unit shall be subject to
adjustment from time to time as follows:
(a) EFFECT OF "SPLIT-UPS" AND "SPLIT-DOWNS"; STOCK DIVIDENDS. If at
any time or from time to time the Company shall subdivide as a whole, by
reclassification, by the issuance of a stock dividend on the Common Stock
payable in Common Stock, or otherwise, the number of shares of Common Stock,
with or without par value, comprising a Unit that may be purchased hereunder
shall be increased proportionately as of the effective or record date of such
action. The issuance of such a stock dividend shall be treated as a subdivision
of the whole number of shares of Common Stock outstanding immediately before the
record date for such dividend into a number of shares equal to such whole number
of shares so outstanding plus the number of shares issued as a stock dividend.
In case at any time or from time to time the Company shall combine as a whole,
by reclassification or otherwise, the number of shares of Common Stock then
outstanding into a lesser number of shares of Common Stock, with or without par
value, the number of shares of Common Stock comprising a Unit that may be
purchased hereunder shall be reduced proportionately as of the effective date of
such action.
(b) EFFECT OF CERTAIN DIVIDENDS. If on any date the Company makes a
distribution to holders of its Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of its indebtedness or assets, the number
of shares of Common Stock theretofore comprising a Unit shall be adjusted as at
the close of business on said date to a number determined by multiplying the
number of shares theretofore comprising a Unit by a fraction, the numerator of
which shall be
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<PAGE>
the Current Price immediately prior to such distribution, and the denominator of
which shall be such Current Price minus the fair market value (as determined by
a single qualified appraiser (which shall be either a national accounting firm
or a national or regional major investment bank) selected by mutual agreement
between the Company and the Holder) of the portion of the assets or evidences of
indebtedness so to be distributed to one share of Common Stock.
(c) EFFECT OF MERGER OR CONSOLIDATION. If the Company shall, while
this Warrant remains outstanding, enter into any consolidation with or merge
into any other corporation wherein the Company is not the continuing
corporation, or wherein cash or securities of a corporation other than the
Company are distributable to holders of Common Stock of the Company, or sell or
convey its property as an entirety or substantially as an entirety, and in
connection with such consolidation, merger, sale or conveyance, shares of stock
or cash or other securities shall be issuable or deliverable in exchange for the
Common Stock of the Company, the Holder shall thereafter be entitled to purchase
pursuant to this Warrant (in lieu of the number of shares of Common Stock that
the Holder would have been entitled to purchase or acquire immediately before
the effective date of such consolidation, merger, sale or conveyance) the shares
of stock or cash or other securities to which such number of shares of Common
Stock would have been entitled at the time of such consolidation, merger, sale
or conveyance, at an aggregate purchase price equal to that which would have
been payable if such number of shares of Common Stock had been purchased upon
exercise of a Warrant immediately prior thereto. In cash of any such
consolidation, merger, sale or conveyance, appropriate provision (as determined
by a resolution of the Board of Directors of the Company) shall be made with
respect to the rights and interests thereafter of the Holder, to the end that
all the provisions of this Warrant (including adjustment provisions) shall
thereafter be applicable as nearly as reasonably practicable, in relation to
such stock or other securities.
(d) REORGANIZATION AND RECLASSIFICATION. In case of any capital
reorganization or any reclassification of the capital stock of the Company
(except as provided in Section 9(a) hereof) while this Warrant remains
outstanding, the Holder shall thereafter be entitled to purchase pursuant to
this Warrant (in lieu of the number of shares of Common Stock comprised in the
number of Units that the Holder would have been entitled to purchase immediately
before such reorganization or reclassification) the shares of stock of any class
or classes or other securities or cash or property to which such number of
shares of Common Stock comprised in such number of Units would have been
entitled if such shares of Common Stock had been purchased immediately before
such reorganization or reclassification. In case of any such reorganization or
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<PAGE>
reclassification, appropriate provision (as determined by resolution of the
Board of Directors of the Company) shall be made with respect to the rights and
in thereafter of the Holder, to the end that all the provisions of this Warrant
(including adjustment provisions) shall thereafter be applicable, as nearly as
reasonably practicable, in relation to such stock or other securities or
property.
(a) ADJUSTMENT OF UNIT AFTER A "DILUTING ISSUE". If on any date
on or after the date of this Warrant any additional shares of Common Stock
(other than shares of Excluded Stock) shall be issued for a consideration per
share (or, in the case of any transactions contemplated in paragraphs (2) or
(3) of this Section 9(e), shall be deemed to be issued for a Presumed
Consideration per share) less than the Current Price on the date such Common
Stock was issued or deemed to have been issued, the number of shares of
Common Stock theretofore comprising a Unit shall be adjusted as at the close
of business on such date to a number equal to the product (computed to the
nearest ten thousandth of a share) resulting from the multiplication of (i)
the total number of shares comprising a Unit immediately before such
adjustment by (ii) a fraction, the numerator of which is the Current Price on
the date such Common Stock was issued or deemed to have been issued, and the
denominator of which is the consideration received (or, without duplication,
the Presumed Consideration deemed to have been received) per share for such
additional shares so issued.
For the purpose of this Section 9(e), the following provisions shall be
applicable with respect to the issuance of additional shares of Common Stock and
the computation set forth in the immediately preceding paragraph:
(1) STOCK DIVIDENDS, ETC. In case any additional shares of Common
Stock shall be issued as a dividend on Common Stock, the number of shares
of Common Stock comprising a Unit shall be adjusted as provided in Section
9(a) hereof.
In case any additional shares of Common Stock shall be issued as a
dividend on any class of stock of the Company other than Common Stock, or
in case any obligations or stock convertible into or exchangeable for
shares of Common Stock (such convertible or exchangeable obligations or
stock being hereinafter called "Convertible Securities") shall be issued as
a dividend on any class of stock of the Company, such shares of Common
Stock or Convertible Securities shall be deemed to have been issued without
consideration on the day next succeeding the date for the determination of
stockholders entitled to such dividend.
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<PAGE>
(2) RIGHTS OR OPTIONS BELOW CURRENT PRICE. In case the Company shall
on or after the date of this Warrant grant any rights or options (other
than those exercisable for Excluded Stock) to subscribe for or to purchase
additional shares of Common Stock or Convertible Securities, and the
Presumed Consideration per share received and receivable by the Company for
such additional shares under such rights or options or pursuant to the
terms of such Convertible Securities shall be less than the Current Price
in effect immediately prior to the time of the granting of such rights or
options, the maximum number of additional shares of Common Stock issuable
pursuant to such rights or options or necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have been
issued as of the date of the granting of such rights or options, and the
Company shall be deemed to have received the Presumed Consideration
therefor. No adjustment (except as provided in paragraph (4) of this
Section 9(e) shall be made upon the actual issuance of Common Stock upon
the exercise of rights or options referenced in this paragraph (2) or the
conversion of Convertible Securities referenced in this paragraph (2).
(3) SECURITIES CONVERTIBLE BELOW CURRENT PRICE. In case:
(i) the Company shall issue any Convertible Securities (other
than those convertible into Excluded Stock or pursuant to the exercise
of rights or options therefor in respect of which an adjustment shall
have theretofore been made under the foregoing paragraph (2)), and
(ii) the Presumed Consideration per share for additional shares
of Common Stock issuable pursuant to the terms of such Convertible
Securities shall be less than the Current Price in effect immediately
prior to the time of the issuance of such Convertible Securities,
then the issuance of such Convertible Securities shall be deemed to be an
issuance (as of the date of issuance of such Convertible Securities) of the
maximum number of additional shares of Common Stock necessary to effect the
conversion or exchange of all such Convertible Securities, and the Company
shall be deemed to have received the Presumed Consideration therefor as of
the date of issuance of such Convertible Securities. No further
adjustment, except as provided in paragraph (4) of this Section 9(e), shall
be made upon the actual issuance of Common Stock upon the conversion of
Convertible Securities.
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<PAGE>
(4) SUPERSEDING ADJUSTMENT OF NUMBER OF SHARES OF COMMON STOCK
COMPRISING A UNIT. If, at any time after any adjustment of the shares of
Common Stock comprising a Unit shall have been made on the basis of shares
of Common Stock deemed to be issued by reason of the provisions of the
foregoing paragraphs (2) or (3) of this Section 9(e) on the basis of the
granting of certain rights or options or the issuance of certain
Convertible Securities, or after any new adjustments of the shares of
Common Stock comprising a Unit shall have been made on the basis of shares
of Common Stock deemed to be issued by reason of the provisions of this
paragraph (4), such rights or options or the right of conversion or
exchange in any such Convertible Securities (for which, or purchased
pursuant to any rights or options for which, such an adjustment shall
previously have been made) shall expire, and a portion of such rights or
options, or the right of conversion or exchange in respect of a portion of
such Convertible Securities, as the case may be, shall not have been
exercised, then such previous adjustment shall be rescinded and annulled
and the shares of Common Stock that were deemed to have been issued by
virtue of the computation made in connection with the adjustment so
rescinded and annulled, shall no longer be deemed to have been issued by
virtue of such computation. Thereupon, a recomputation shall be made of
the effect of such rights or options or such Convertible Securities on the
basis of:
(i) treating the number of additional shares of Common Stock,
if any, theretofore actually issued pursuant to the exercise of such
expired rights or options or such expired right of conversion or
exchange, as having been issued on the date or dates of such exercise
for the consideration actually received therefor (computed as provided
in paragraph (6) of this Section 9(e)); and
(ii) treating the maximum number of additional shares of Common
Stock, if any, thereafter issuable pursuant to the conversion or
exchange of any Convertible Securities actually issued or issuable
pursuant to the previous exercise of such rights or options as having
been issued as of the date of the granting of such rights or options
and treating the Presumed Consideration therefor as received as of
such date;
and, on such basis, such new adjustment, if any, of the n;umber of shares
of Common Stock comprising a Unit shall be made as may be required by the
first paragraph of this Section 9(e), which new adjustment shall supersede
the previous adjustment so rescinded and annulled for the Warrant exercised
after such new adjustment.
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(5) EFFECT OF "SPLIT-UP" OR "SPLIT-DOWN" ON "DEEMED ISSUED" SHARES.
Upon the effective or record date for any subdivision or combination of
the Common Stock of the character described in Section 9(a) hereof,
including the issuance of a stock dividend which is treated as such a
subdivision under paragraph (1) of this Section 9(e), the number of the
shares of Common Stock which are at the time deemed to have been issued by
virtue of paragraphs (2), (3) or (4) of this Section 9(e), but have not
actually been issued, shall be deemed to be increased or decreased
proportionately.
(6) COMPUTATION OF CONSIDERATION AND PRESUMED CONSIDERATION. For
the purposes of this Section 9:
(i) The consideration received by the Company upon the
actual issuance of additional shares of Common Stock shall be deemed
to be the sum of the amount of cash and the fair value of property (as
determined by a single qualified appraiser (which shall be either a
national accounting firm or a national or regional major investment
bank) selected by mutual agreement between the Company and the Holder
as at the time of issue or "deemed issue" in the case of the following
paragraph (ii)) received or receivable by the Company as the
consideration or part of the consideration (v) at the time of issuance
of the Common Stock, (w) for the issuance of any rights or options
upon the exercise or conversion of which such Common Stock was issued,
(x) for the issuance of any rights or options to purchase Convertible
Securities upon the conversion of which such Common Stock was issued,
(y) for the issuance of the Convertible Securities upon conversion of
which such Common Stock was issued and (z) at the time of the actual
exercise of such rights, options or conversion privileges upon the
exercise or conversion of which such Common Stock was issued, in each
case without deduction for commissions and expenses incurred by the
Company for any underwriting of, or otherwise in connection with the
issue or sale of, such rights, options, Convertible Securities or
Common Stock, but after deduction of any sums paid by the Company in
cash upon the exercise of, and pursuant to, such rights, options or
conversion privileges in respect of fractional shares of Common Stock;
(ii) The consideration deemed to have been received by
the Company for additional shares of Common Stock deemed to be issued
pursuant to rights, options and conversion privileges by reason of
transactions of the character described in paragraphs (2), (3) and
(4)(ii) of this Section 9(e) (herein called the
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"Presumed Consideration" therefor) shall be the consideration
(determined as provided in the foregoing paragraph (i)) that would be
received or receivable by the Company at or before the actual issue of
such shares of Common Stock so deemed to be issued, if all rights,
options and conversion privileges necessary to effect the actual issue
of the number of shares deemed to have been issued had been exercised
(successively exercised in the case of rights or options to purchase
Convertible Securities), and the minimum consideration received or
receivable by the Company upon such exercise had been received; all
computed without regard to the possible future effect of anti-dilution
provisions on such rights, options and/or conversion privileges.
(f) STATEMENT OF ADJUSTMENT OF UNIT AND CURRENT PRICE. Whenever the
number of shares of Common Stock comprising a Unit is adjusted pursuant
to any of the foregoing provisions of this Section 9, the Company shall
promptly prepare a written statement signed by the chief executive
officer of the Company, setting forth the adjustment in the number of
shares comprising a Unit purchasable hereunder, determined as provided in
this Section, and the amount of the then effective Current Price, and in
reasonable detail the facts requiring such adjustment and the calculation
thereof. Such statement shall be filed among the permanent records of the
Company and a copy thereof shall be furnished to the Holder without
request and shall at all reasonable times during business hours be open
to inspection by the Holder. The Company shall also promptly cause a
notice, stating that such an adjustment has been effected and setting
forth the increased or decreased number of shares purchasable and the
amount of the then effective Current Price, to be delivered by facsimile,
reliable courier or first-class mail postage prepaid to the Holder.
(g) DETERMINATION BY THE BOARD OF DIRECTORS. All determinations
by the Board of Directors of the Company under the provisions of this
Section 9 shall be made in good faith with due regard to the interests of
the Holder and the other holders of securities of the Company and in
accordance with good financial practice, and all valuations made by the
Board of Directors of the Company under the terms of this Section 9 must
be made with due regard to any market quotations of securities involved
in, or related to, the subject of such valuation.
(h) DEFINITIONS. For all purposes of this Section 9 and this
Warrant, unless the context otherwise requires, the following terms have the
following respective meanings:
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"COMMON STOCK": (i) the Company's presently authorized Common Stock
as such class exists on the date of this Warrant; and (ii) stock of the
Company of any class thereafter authorized that ranks, or is entitled to a
participation, as to assets or dividends, substantially on a parity with
Common Stock.
"COMPANY": Advanced Materials Group, Inc., a Nevada corporation,
and any other corporation assuming the Company's obligations with respect to
this Warrant pursuant to this Section 9.
"CONVERTIBLE SECURITIES": the meaning specified in Section 9(e)(1).
"CURRENT PRICE": per share of Common Stock, the amount equal to the
quotient resulting from dividing (i) the Exercise Price per Unit herein
provided by (ii) the number of shares (including any fractional share) of
Common Stock comprising a Unit on such date.
"EXCLUDED STOCK": shares of Common Stock issued (i) upon exercise
of this Warrant or that certain Springing Warrant to purchase shares of
Common Stock of the Company dated the date hereof issued by the Company
to the initial Holder of this Warrant (the "Springing Warrant"), (ii) in
respect of which an adjustment is required to be made pursuant to Section
9(a), (b), (c) or (d) hereof, (iii) pursuant to the exercise or conversion
of any options, warrants, convertible securities or other securities issued
and outstanding on the date hereof.
"PRESUMED CONSIDERATION": the meaning specified in Section
9(e)(6)(ii).
Section 10. REGISTRATION RIGHTS.
(a) REGISTRABLE STOCK. As used in this Section 10, the term
"Registrable Stock" shall mean (i) all shares of Common Stock that may be
issued upon exercise of the Warrant (and all shares of Common Stock that may
thereafter be issued in respect of such Warrant) and (ii) all shares of
Common Stock that may be issued upon exercise of the Springing Warrant (and
all shares of Common Stock that may thereafter be issued in respect of such
Springing Warrant).
References in this Warrant to rules, regulations and forms
promulgated by the Securities and Exchange Commission shall include rules,
regulations and forms succeeding to the functions thereof, whether or not
bearing the same designation.
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The rights and obligations of the Company and the Holder with
respect to the Registrable Stock set forth in this Section 10 shall supersede
any registration rights and obligations of the Company and the Holder existing
prior to the date hereof with respect to the Registrable Stock.
(b) REQUEST FOR REGISTRATION. If the Company shall receive a
written request (specifying that it is being made pursuant to this Section
10(b)) from the holders of more than 50% of the Registrable Stock that the
Company file a registration statement under the 1933 Act, or a similar
document pursuant to any other statute then in effect corresponding to the
1933 Act covering the registration of at least 50% of the Registrable Stock,
then the Company shall promptly notify all other holders of Registrable Stock
of such request and shall use its reasonable best efforts to cause all
Registrable Stock that holders have requested be registered to be registered
under the 1933 Act.
Notwithstanding the foregoing, (i) the Company shall not be
obligated to effect a registration pursuant to this Section 10(b) during the
period starting with the date 60 days prior to the Company's estimated date
of filing of, and ending on a date 180 days following the effective date of,
a registration statement pertaining to an underwritten public offering of
securities for the account of the Company, provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective and that the Company's estimate of
the date of filing such registration statement is made in good faith; and
(ii) if the Company shall furnish to such holders a certificate signed by the
chief executive officer of the Company stating that in the good faith
judgment of the Board of Directors it would be seriously detrimental to the
Company or its shareholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to file a
registration statement shall be deferred for a period not to exceed six
months.
The Company shall be obligated to effect only two registrations
pursuant to this Section 10(b). Any request for registration under this
Section 10(b) must be for a firmly underwritten public offering to be managed
by an underwriter or underwriters of recognized national standing reasonably
acceptable to the Company.
(c) COMPANY REGISTRATION. Subject to Section 10(g), if at any time
the Company proposes to register any of its Common Stock under the 1933 Act
in connection with the public offering of such securities solely for cash on
a form that would also permit the registration of the Registrable Stock, the
Company shall, each such time, promptly give each holder of Registrable Stock
written notice of such determination. Upon the written
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request of any holder, given within 20 days after mailing of any such notice
by the Company, the Company shall use its reasonable best efforts to cause to
be registered under the 1933 Act all of the Registrable Stock that each such
holder has requested be registered.
(d) OBLIGATIONS OF THE COMPANY. Whenever required under Sections
10(b), 10(c), or 10(j) to use its reasonable best efforts to effect the
registration of any Registrable Stock, the Company shall, as expeditiously as
reasonably possible:
(1) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Stock and use its
reasonable best efforts to cause such registration statement to become and
remain effective; PROVIDED, HOWEVER, that in connection with any proposed
registration intended to permit an offering of any securities from time to
time (i.e., a so-called "shelf registration"), the Company shall in no
event be obligated to cause any such registration to remain effective
for more than 90 days;
(2) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement and the
prospectus used in connection comply with the provisions of the 1933 Act
with respect to the disposition of all securities covered by such
registration statement;
(3) furnish to the holders of Registrable Stock such numbers of
copies of a prospectus, including a preliminary prospectus, in conformity
with the requirements of the 1933 Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Stock owned by them; and
(4) use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other
securities or Blue Sky Laws of such jurisdictions as shall be reasonably
appropriate for the distribution of the securities covered by the
registration statement.
(e) FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 10
that the holders of Registrable Stock shall furnish to the Company such
information regarding them, the Registrable Stock held by them and the
intended method of disposition of such securities as the Company shall
reasonably request and as
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shall be required in connection with the action to be taken by the Company.
(f) EXPENSES OF DEMAND REGISTRATION. All expenses incurred in
connection with a registration pursuant to Sections 10(b) or 10(c)
(excluding underwriters' discounts and commissions), including, without
limitation, all registration and qualification fees, printers' and
accounting fees, fees and disbursements of counsel for the Company and the
reasonable fees and disbursements of one counsel for the selling holders,
shall be borne by the Company; PROVIDED, HOWEVER, that the Company shall
not be required to pay for any expenses of any registration proceeding
begun pursuant to Section 10(b) if the registration request is
subsequently withdrawn, unless the holders agree to forfeit their right to
demand registration pursuant to Section (10)b.
(g) UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares being issued by the Company, the
Company shall not be required under Section 10(c) to include any of the
holders' Registrable Stock in such underwriting unless they accept the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it or them, and then only in such quantity as
will not, in the written opinion of the underwriters, jeopardize the
success of the offering by the Company. If the total amount of
securities that all holders request to be included in such offering
exceeds the amount of securities that the underwriters reasonably
believe compatible with the success of the offering, the Company shall
only be required to include in the offering so many of the securities of
the selling holders as the underwriters believe will not jeopardize the
success of the offering, shall so advise all selling holders of
Registrable Stock and the number of shares of securities that are
entitled to be included in the offering and underwriting shall be
allocated first, to the Company for securities being sold for its own
account, second, among all such selling holders of Registrable Stock
and, third, among all other selling stockholders, in each case in
proportion, as nearly as practicable, to the respective total amounts of
securities owned by said selling holders of Registrable Stock and other
selling stockholders. If any selling holder of Registrable Stock or any
other selling stockholder disapproves of the terms of any such
underwriting, he, she or it may elect to withdraw therefrom by written
notice to the Company and the underwriter.
(h) DELAY OF REGISTRATION. No holders of Registrable Stock shall
have any right to take any action to restrain, enjoin or otherwise delay
any registration as the result of
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any controversy that might arise with respect to the interpretation or
implementation of this Section 10.
(i) INDEMNIFICATION. In the event any shares of Registrable Stock
are included in the registration statement under this Section 10:
(1) to the extent permitted by law, the Company will indemnify
and hold harmless each holder of Registrable Stock requesting or
joining in a registration, any underwriter (as defined in the 1933
Act) for it and each person, if any, who controls such holder or
underwriter within the meaning of the 1933 Act, against any losses,
claims, damages or liabilities, joint or several, to which they may
become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based on any untrue or alleged untrue
statement of any material fact contained in such registration
statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, or arise
out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary
to make the statements therein not misleading or arise out of any
violation by the Company of any rule or regulation promulgated under
the 1933 Act applicable to the Company and relating to action or
inaction required of the Company in connection with any such
registration; and will reimburse each such holder, such underwriter
or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the indemnity agreement contained in this Section 10(i)(1)
shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected
without the consent of the Company (which consent shall not be
unreasonably withheld) nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in
connection with such registration statement, preliminary prospectus,
final prospectus, or amendments or supplements thereto, in reliance
upon and in conformity with written information furnished expressly
for use in connection with such registration by any such holder,
underwriter or controlling person;
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(2) to the extent permitted by law, each holder requesting or
joining in a registration will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed
the registration statement, each person, if any, who controls the
Company within the meaning of the 1933 Act and each agent and any
underwriter for the Company (within the meaning of the 1933 Act)
against any losses, claims, damages or liabilities to which the
Company or any such director, officer, controlling person, agent or
underwriter may become subject, under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions
in respect thereto) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained
in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments
or supplements thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in such registration
statement, preliminary or final prospectus, or amendments or
supplements thereto, in reliance upon and in conformity with
written information furnished by such holder expressly for use in
connection with such registration; and each such holder will
reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person, agent or
underwriter in connection with investigating or defending any such
loss, claim, damage, liability or action; PROVIDED, HOWEVER, that
the indemnity agreement contained in this Section 10(i)(2) shall
not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without
the consent of such holder (which consent shall not be unreasonably
withheld); and
(3) promptly after receipt by an indemnified party under this
paragraph of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this paragraph, notify the
indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to
the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof
with counsel mutually satisfactory
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to the parties. The failure to notify an indemnifying party promptly
of the commencement of any such action, if prejudicial to his ability
to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this paragraph, but the
omission so to notify the indemnifying party will not relieve him of
any liability that he may have to any indemnified party otherwise
than under this paragraph.
(j) REGISTRATIONS ON FORM S-3
(1) If (i) a holder or holders of Registrable Stock request in
writing (specifying that the request is being made pursuant to this
Section 10(j)) that the Company file a registration statement on Form S-3
under the 1933 Act ("Form S-3") (or any successor form to Form S-3
regardless of its designation) for a public offering of shares of the
Registrable Stock, the reasonably anticipated aggregate price to the
public of which would exceed $500,000, and (ii) the Company is a
registrant entitled to use Form S-3 to register such shares, then the
Company shall use its reasonable best efforts to cause such shares to be
registered on Form S-3 (or any successor form to Form S-3); PROVIDED,
HOWEVER, that the Company shall not be obligated to effect any such
registration pursuant to this Section 10(j) if the Company has, within
the 12-month period preceding the date of such request, already effected
two registrations on Form S-3 for the holders pursuant to this
Section 10(j).
(2) All expenses incurred in connection with a registration
requested pursuant to Section 10(j) (1), including, without limitation,
all registration, qualification, printing and accounting fees, and
reasonable fees and disbursements of counsel for the selling holder or
holders and counsel for the Company, shall be borne by the Company.
(3) Holders' rights to registration under this Section 10(j)
are in addition to, and not in lieu of, their rights to registration under
Sections 10(b) and 10(c).
(k) TERMINATION OF THE COMPANY'S OBLIGATIONS. The Company shall
have no obligations pursuant to Sections 10(b), 10(c) or 10(j) as to any
holder after the Company has included Registrable Stock of such holder
in two registrations pursuant to Sections 10(b), 10(c) or 10(j), PROVIDED,
HOWEVER, that if such holder has requested that all of its Registrable
Stock be registered under such sections, but such holders shall be
prohibited from selling all of such stock by virtue of Section 10(g),
then such holder's rights shall not be restricted by the provisions of
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this Section 10(k) until such time as it has had an opportunity to sell
all of its Registrable Stock.
(l) REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the holders of Registrable Stock the benefits of
Rule 144 promulgated under the 1933 Act and any other rule or regulation of
the Securities and Exchange Commission that may at any time permit a holder
to sell securities of the Company to the public without registration, the
Company agrees to use its reasonable best efforts to:
(1) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times subsequent to
90 days after the effective date of the first registration statement
covering an underwritten public offering filed by the Company;
(2) file with the Securities and Exchange Commission in a
timely manner all reports and other documents required of the Company
under the 1933 Act and the Securities Exchange Act of 1934 (the
"1934 Act"); and
(3) furnish to any holder so long as such holder owns any of
the Registrable Stock forthwith upon request a written statement by
the Company that it has complied with the reporting requirements of
Rule 144 (at any time after 90 days after the effective date of said
first registration statement filed by the Company), and of the 1933 Act
and the 1934 Act (at any time after it has become subject to such
reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed
by the Company as may be reasonably requested in availing any holder
of any rule or regulation of the Securities and Exchange Commission
permitting the selling of any such securities without registration.
(m) LOCKUP AGREEMENT. In consideration for the Company's agreeing
to its obligations under this Section 10, the holder of Registrable
Stock agrees in connection with any registration of the Company's securities
that, upon the request of the Company or the underwriters managing any
underwritten offering of the Company's securities, not to sell, make any
short sale of, loan, grant any option for the purchase of or otherwise
dispose of any Registrable Stock (other than those included in the
registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed
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90 days) from the effective date of such registration as the Company or
the underwriters may specify.
(n) CERTAIN LIMITATIONS IN CONNECTION WITH FUTURE GRANTS OF
REGISTRATION RIGHTS. From and after the date hereof, the Company shall not
enter into any agreement with any holder or prospective holder of any
securities of the Company providing for the granting to such holder of
registration rights unless such agreement:
(1) includes the equivalent of Section 10(m) as a term;
and
(2) includes a provision that, in the case of a public
offering involving an underwritten registered offering under
Section 10(c), protects the holders of Registrable Stock if marketing
factors require a limitation on the number of securities to be included
in the underwriting in the manner in which the Company is protected
under Section 10(g).
(o) TRANSFER OF REGISTRATION RIGHTS. The registration rights of the
Holder of the Warrant under this Section 10 may be transferred to any
transferee who acquires at least 20% of the then outstanding shares of
Registrable Stock, or the Warrant; PROVIDED, HOWEVER, that the Company is
given written notice by the Holder at the time of such transfer stating the
name and address of the transferee and identifying the securities with
respect to which the rights under this Section 10 are being assigned.
Section 11. AMENDMENTS.
(a) Other than in respect of Section 10 hereof, neither this Warrant nor
any term hereof may be changed, waived, discharged or terminated orally or in
writing, provided that any term of this Warrant may be amended or the
observance of such term may be waived (either generally or in a particular
instance and either retroactively or prospectively) with, but only with, the
written consent of the Company and the holders of Warrants that are
exercisable for a number of Units that represent in the aggregate at least a
majority of the total number of Units for which all Warrants are then
exercisable (whether or not the holder of this Warrant consents).
(b) Neither Section 10 of this Warrant nor Section 10 of the Springing
Warrant, nor any term of either of such Sections 10 may be changed, waived,
discharged or terminated orally or in writing, provided that any term of
Section 10 of this Warrant and any term of Section 10 of the Springing
Warrant may be amended or the observance of such term may be waived (either
generally or in a particular instance and either retroactively or
prospectively)
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with, but only with, the written consent of the Company and the holders of
Warrants and Springing Warrants that are exercisable for a number of Units
that represent in the aggregate at least a majority of the total number of
Units for which all Warrants and all Springing Warrants are then exercisable
(whether or not the holder of this Warrant consents).
Section 12. GOVERNING LAW.
This Warrant shall be governed by the laws of the State of New York
without regard to its conflict of laws principles or rules.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name by its duly authorized officer.
Dated: December __, 1995
ADVANCED MATERIALS GROUP, INC.
By: __________________________
George R. Pache
Chief Financial Officer
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SUBSCRIPTION NOTICE
The undersigned, the Holder, hereby elects to exercise purchase rights
represented by such Warrant for, and to purchase thereunder, __________ shares
of the Common Stock covered by such Warrant and herewith makes payment in
full therefor of $__________ cash and/or by cancellation of $_________ of
indebtedness of the Company to the Holder hereof and requests that
certificates for such shares (and any securities or property deliverable upon
such exercise) be issued in the name of and delivered to ____________________
_____________________________________________________________________________
whose address is ____________________________________________________________
The undersigned agrees that, in the absence of an effective registration
statement with respect to Common Stock issued upon this exercise, the
undersigned is acquiring such Common Stock for investment and not with a view
to distribution thereof and that the certificate or certificates representing
such Common Stock may bear a legend substantially as follows:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS. UNLESS THEY
ARE SOLD PURSUANT TO RULE 144 PROMULGATED BY THE SECURITIES AND EXCHANGE
COMMISSION UNDER SAID ACT, THEY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
IN ABSENCE OF SUCH REGISTRATION AND QUALIFICATION WITHOUT AN OPINION OF
COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
Dated:
____________________________________
Signature guaranteed:
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________________________ the rights represented
by the foregoing Warrant of _________________________________ and appoints
_________________________ ______________________ attorney to transfer said
rights on the books of said corporation, with full power of substitution in
the premises.
Dated:
____________________________________
Signature guaranteed:
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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NEITHER THIS SPRINGING WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS SPRINGING WARRANT HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND NEITHER THIS SPRINGING WARRANT NOR THE COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS SPRINGING WARRANT MAY BE TRANSFERRED EXCEPT AS PROVIDED IN
SECTION 3 OF THIS SPRINGING WARRANT.
SPRINGING WARRANT
to Purchase Common Stock of
Advanced Materials Group, Inc.
Subject to the occurrence of the conditions set forth in Section 8 hereof,
this Springing Warrant certifies that Trilon Dominion Partners, L.L.C., a
Delaware limited liability company, or registered assigns (the "Holder"), is
entitled to subscribe for and purchase from Advanced Materials Group, Inc., a
Nevada corporation (the "Company"), all or any part of duly authorized, validly
issued, fully paid and nonassessable shares of the Company's common stock, $.001
par value per share (the common stock, including any stock into which it may be
changed, reclassified, or converted, is herein referred to as the "Common
Stock"), as comprise 30,000 Units (as defined and as adjusted below) at a
purchase price per Unit equal to the closing sales price for the Common Stock on
the date this Springing Warrant becomes exercisable pursuant to Section 8
hereof. (the "Exercise Price"). The Springing Warrant may be exercised only as
provided in Section 8 hereof.
This Springing Warrant is issued pursuant to Amendment No. 2 to Credit
Agreement, dated as of December 15, 1995, by and between the Company and the
Holder (the "Amendment No. 2"). Amendment No. 2 amends a certain Credit
Agreement dated as of September 21, 1994, by and between the Company and
Dominion Capital, Inc., a Virginia corporation, as amended by Amendment No. 1
dated as of January 13, 1995 (the "Credit Agreement"). Pursuant to Amendment
No. 2, the Holder has agreed, among other things, to increase the aggregate
amount of credit available to the Company from $700,000 to $1,000,000.
<PAGE>
This Springing Warrant is subject to the following provisions, terms and
conditions:
Section 1. EXERCISE OF SPRINGING WARRANT.
To exercise this Springing Warrant in whole or in part, the Holder shall
deliver to the Company at its principal office in Rancho Dominguez,
California, (a) a written notice, in substantially the form of the
Subscription Notice appearing at the end of this Springing Warrant, of the
Holder's election to exercise this Springing Warrant, which notice shall
specify the number of shares of Common Stock to be purchased, (b) cash or a
certified check payable to the Company, or by cancellation of indebtedness of
the Company to the Holder hereof, if any, at the time of exercise, including
any portion of the promissory note, dated as of the date hereof, bearing
interest at the prime rate published in THE WALL STREET JOURNAL (Eastern
Edition) plus 5%, in the aggregate principal amount of $1,000,000 made by the
Company in favor of the Holder, in an amount equal to the aggregate purchase
price of the number of shares of Common Stock being purchased and (c) this
Springing Warrant. The Company shall as promptly as practicable, and in any
event within 15 days thereafter, execute and deliver or cause to be executed
and delivered, in accordance with such notice, a certificate or certificates
representing the aggregate number of shares of Common Stock specified in such
notice. The stock certificate or certificates so delivered shall be in the
denomination of 100 shares each or such lesser or greater denomination as may
be specified in such notice and shall be issued in the name of the Holder or
such other name as shall be designated in such notice. Such certificate or
certificates shall be deemed to have been issued and the Holder or any other
person so designated to be named therein shall be deemed for all purposes to
have become a holder of record of such shares as of the date such notice is
received by the Company as aforesaid. If this Springing Warrant shall have
been exercised only in part, the Company shall, at the time of delivery of
said certificate or certificates, deliver to the Holder a new Springing
Warrant evidencing the rights of the Holder to purchase the remaining shares
of Common Stock called for by this Springing Warrant, which new Springing
Warrant shall in all other respects be identical to this Springing Warrant,
or, at the request of the Holder, appropriate notation may be made on this
Springing Warrant and the same returned to the Holder. The
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Company shall pay all expenses, taxes and other charges payable in connection
with the preparation, issue and delivery of such stock certificates and new
Springing Warrants, except that, in case such stock certificates or new
Springing Warrants shall be registered in a name or names other than the name
of the Holder, funds sufficient to pay all stock transfer taxes that are
payable upon the issuance of such stock certificate or certificates or new
Springing Warrants shall be paid by the Holder at the time of delivering the
notice of exercise mentioned above.
All shares of Common Stock issued upon the exercise of this Springing
Warrant shall be validly issued, fully paid and nonassessable and, if the Common
Stock is then listed on a national securities exchange or quoted on an automated
quotation system, shall be duly listed or quoted thereon.
The Company shall not be required upon any exercise of this Springing
Warrant to issue a certificate representing any fraction of a share of Common
Stock, but, in lieu thereof, shall pay to the Holder cash in an amount equal to
a corresponding fraction (calculated to the nearest 1/100 of a share) of the
purchase price of one share of Common Stock as of the date of receipt by the
Company of notice of exercise of this Springing Warrant.
Section 2. TRANSFER, DIVISION AND COMBINATION.
The Company agrees to maintain at its principal office in Rancho Dominguez,
California, books for the registration and transfer of this Springing Warrant,
and, subject to the provisions of Section 3 hereof, this Springing Warrant and
all rights hereunder are transferable, in whole, on such books at such office,
upon surrender of this Springing Warrant at such office, together with a written
assignment of this Springing Warrant duly executed by the Holder or his agent or
attorney and funds sufficient to pay any stock transfer taxes payable upon the
making of such transfer. Upon such surrender and payment, the Company shall
execute and deliver a new Springing Warrant or Springing Warrants in the name of
the assignee or assignees and in the denominations specified in such instrument
of assignment, and this Springing Warrant shall promptly be canceled. A
Springing Warrant may be exercised by a new holder for the
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purchase of shares of Common Stock without having a new Springing Warrant
issued.
This Springing Warrant may be divided or combined with other Springing
Warrants upon presentation hereof at such principal office in Rancho Dominguez,
California together with a written notice specifying the names and denominations
in which new Springing Warrants are to be issued, signed by the Holder or his
agent or attorney. Subject to compliance with the preceding paragraph as to any
transfer that may be involved in such division or combination, the Company shall
execute and deliver a new Springing Warrant or Springing Warrants in exchange
for the Springing Warrant or Springing Warrants to be divided or combined in
accordance with such notice.
Section 3. RESTRICTIONS ON EXERCISE AND TRANSFER OF SPRINGING WARRANTS
AND COMMON STOCK.
This Springing Warrant shall be exercisable (a) only under circumstances
such that the issue of Common Stock issuable upon such exercise is exempt from
the requirements of registration under the Securities Act of 1933, as amended
(or any similar statute then in effect) (the "1933 Act") and any applicable
state securities law or (b) upon registration of such Common Stock in compliance
therewith. This Springing Warrant shall be transferable only under
circumstances such that the transfer is exempt from the requirements of
registration under the 1933 Act and any applicable state securities law. By
acceptance hereof, the Holder agrees to comply with such legislation.
Before any transfer or attempted transfer of all or any part of this
Springing Warrant or such Common Stock, the Holder shall give the Company
written notice of its intention so to do describing briefly the manner of any
such proposed transfer. Promptly after receiving such written notice, the
Company shall present copies thereof to Company counsel and, if the Company
requests the Holder to designate special counsel therefor, to any special
counsel designated by the Holder that is reasonably satisfactory to the
Company. If, in the opinion of counsel for the Company and counsel, if any,
for the Holder, the proposed transfer may be effected without registration
under the 1933 Act and any applicable state securities law of any such
securities, the Company, as promptly as practicable, shall notify the Holder
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of such opinion, whereupon the securities proposed to be transferred may be
transferred in accordance with the terms of such notice. The Company shall
not be required to effect any such transfer before the receipt of such
favorable opinion or opinions or the effectiveness of registration.
Section 4. CERTAIN COVENANTS.
The Company covenants and agrees that it will at all times reserve and set
apart and have, free from preemptive rights, a number of shares of authorized
but unissued Common Stock, or other stock or securities deliverable pursuant to
this Springing Warrant, sufficient to enable it at any time to fulfill all its
obligations hereunder.
Section 5. NOTICES.
In the event that:
(a) the Company proposes to pay any dividend payable in stock (of any
class or classes) or in Convertible Securities, as defined below, upon its
Common Stock or make any distribution (other than ordinary cash dividends)
to the holders of its Common Stock,
(b) the Company proposes to grant to the holders of its Common Stock
generally any rights or options,
(c) the Company proposes to effect any capital reorganization or
reclassification of capital stock of the Company,
(d) the Company proposes to consolidate with, or merge into, any
other corporation or to transfer its property as an entirety or
substantially as an entirety, or
(e) the Company proposes to effect the liquidation, dissolution or
winding up of the Company,
then the Company shall cause notice of any such intended action to be given to
all holders of record of outstanding Springing Warrants not less than 30 days
before the date on which the transfer books of the Company shall close or a
record shall be
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taken for such stock dividend, distribution or granting of rights or options,
or the date when such capital reorganization, reclassification,
consolidation, merger, transfer, liquidation, dissolution or winding up shall
be effective, as the case may be.
Any notice or other document required or permitted to be given or delivered
to holders of record of Springing Warrants shall be delivered by facsimile,
reliable courier or first-class mail postage prepaid to each such holder at the
last address shown on the books of the Company maintained for the registry and
transfer of the Springing Warrants. Any notice or other document required or
permitted to be given or delivered to holders of record of Common Stock issued
pursuant to Springing Warrants shall be delivered by facsimile, reliable courier
or first-class mail postage prepaid to each such holder at such holder's address
as the same appears on the stock records of the Company. Any notice or other
document required or permitted to be given or delivered to the Company shall be
delivered by facsimile, reliable courier or first-class mail postage prepaid to
the principal office of the Company, at Houston, Texas, or delivered to the
office of one of the Company's executive officers at such address, or such other
address as shall have been furnished by the Company to the holders of record of
such Springing Warrants and the holders of record of such Common Stock.
Section 6. LIMITATION OF LIABILITY; NOT SHAREHOLDERS.
No provision of this Springing Warrant shall be construed as conferring
upon the Holder the right to vote or to consent or to receive dividends or to
receive notice as a shareholder in respect of meetings of shareholders for the
election of directors of the Company or any other matter whatsoever as
shareholders of the Company. No provision hereof, in the absence of affirmative
action by the Holder to purchase shares of Common Stock, and no mere enumeration
herein of the rights or privileges of the Holder, shall give rise to any
liability of Holder for the purchase price or as a shareholder of the Company,
whether such liability is asserted by the Company, creditors of the Company or
others.
Section 7. LOSS, DESTRUCTION, ETC. OF SPRINGING WARRANT.
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Upon receipt of evidence satisfactory to the Company of the loss, theft,
mutilation or destruction of any Springing Warrant, and in the case of any such
loss, theft or destruction upon delivery of a bond of indemnity in such form and
amount as shall be reasonably satisfactory to the Company, or in the event of
such mutilation upon surrender and cancellation of the Springing Warrants, the
Company will make and deliver a new Springing Warrant, of like tenor, in lieu of
such lost, stolen, destroyed or mutilated Springing Warrant. Any Springing
Warrant issued under the provisions of this Section 7 in lieu of any Springing
Warrant alleged to be lost, destroyed or stolen, or of any mutilated Springing
Warrant, shall constitute an original contractual obligation on the part of the
Company.
Section 8. EXERCISE OF SPRINGING WARRANT; UNITS ISSUABLE UPON EXERCISE;
EXPIRATION OF SPRINGING WARRANT.
(a) This Springing Warrant shall become exercisable only in the event
that the principal amount, plus all accrued and unpaid interest, on that certain
Promissory Note, dated December 15, 1995, issued by the Company to the Holder, a
copy of which is attached hereto as EXHIBIT A (the "Note"), shall not be paid in
full on or before June 30, 1997.
(b) Upon the occurrence of the event described in Section 8(a), this
Springing Warrant shall be exercisable for 30,000 Units, at any time after the
date of such occurrence and on or prior to July 1, 2002. If the principal
amount plus all accrued and unpaid interest on the Note shall not be paid in
full by no later than the first day of the first calendar month following the
Maturity Date, the number of Units for which this Springing Warrant shall be
exercisable shall increase by 30,000 Units, and in respect of such 30,000 Units
shall be exercisable therefor at any time after such first day of such first
calendar month and on or before 5:00 p.m., New York, New York time, on the fifth
anniversary of such day, and for so long as any portion of the principal or
accrued and unpaid interest remains outstanding shall increase by an additional
30,000 Units on the first day of each calendar month thereafter, and, in each
case, in respect of which 30,000 Units shall be exercisable therefor at any time
on or after such first day of such first calendar month and on or
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before 5:00 p.m., New York, New York time, on the fifth anniversary of such
day.
(c) The Holder of this Springing Warrant is hereby authorized by the
Company to record on the grid attached to this Springing Warrant any increase in
the number of Units to be issued upon exercise of this Springing Warrant.
(d) A "Unit" shall as of each day that this Springing Warrant becomes
exercisable for Units in accordance with the provisions of Section 8(b), consist
initially of one share of Common Stock of the Company as such stock is
constituted on such date, subject to adjustment as set forth herein.
(e) The Holder of this Springing Warrant covenants and agrees to
surrender the Springing Warrant to the Company for cancellation in the event the
outstanding principal amount of the Note, plus all accrued and unpaid interest,
is paid in full on or prior to the Maturity Date.
Section 9. ADJUSTMENT OF NUMBER OF SHARES ISSUABLE PURSUANT TO THIS
SPRINGING WARRANT
The number of shares of Common Stock comprising a Unit shall be subject to
adjustment from time to time as follows:
(a) EFFECT OF "SPLIT-UPS" AND "SPLIT-DOWNS" STOCK DIVIDENDS. If at
any time or from time to time the Company shall subdivide as a whole, by
reclassification, by the issuance of a stock dividend on the Common Stock
payable in Common Stock, or otherwise, the number of shares of Common Stock,
with or without par value, the number of shares of Common Stock comprising a
Unit that may be purchased hereunder shall be increased proportionately as of
the effective or record date of such action. The issuance of such a stock
dividend shall be treated as a subdivision of the whole number of shares of
Common Stock outstanding immediately before the record date for such dividend
into a number of shares equal to such whole number of shares so outstanding plus
the number of shares issued as a stock dividend. In case at any time or from
time to time the Company shall combine as a whole, by reclassification or
otherwise, the number of shares of Common Stock then outstanding into a lesser
number of shares of Common Stock, with or without par value, the number
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of shares of Common Stock comprising a Unit that may be purchased hereunder
shall be reduced proportionately as of the effective date of such action.
(b) EFFECT OF CERTAIN DIVIDENDS. If on any date the Company makes a
distribution to holders of its Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of its indebtedness or assets, the number
of shares of Common Stock theretofore comprising a Unit shall be adjusted as at
the close of business on said date to a number determined by multiplying the
number of shares theretofore comprising a Unit by a fraction, the numerator of
which shall be the Current Price immediately prior to such distribution, and the
denominator of which shall be such Current Price minus the fair market value (as
determined by a single qualified appraiser (which shall be either a national
accounting firm or a national or regional major investment bank) selected by
mutual agreement between the Company and the Holder) of the portion of the
assets or evidences of indebtedness so to be distributed to one share of Common
Stock.
(c) EFFECT OF MERGER OR CONSOLIDATION. If the Company shall, while
this Springing Warrant remains outstanding, enter into any consolidation with or
merge into any other corporation wherein the Company is not the continuing
corporation, or wherein cash or securities of a corporation other than the
Company are distributable to holders of Common Stock of the Company, or sell or
convey its property as an entirety or substantially as an entirety, and in
connection with such consolidation, merger, sale or conveyance, shares of stock
or cash or other securities shall be issuable or deliverable in exchange for the
Common Stock of the Company, the Holder shall thereafter be entitled to purchase
pursuant to this Springing Warrant (in lieu of the number of shares of Common
Stock that the Holder would have been entitled to purchase or acquire
immediately before the effective date of such consolidation, merger, sale or
conveyance) the shares of stock or cash or other securities to which such number
of shares of Common Stock would have been entitled at the time of such
consolidation, merger, sale or conveyance, at an aggregate purchase price equal
to that which would have been payable if such number of shares of Common Stock
had been purchased upon exercise of a Springing Warrant immediately prior
thereto. In
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case of any such consolidation, merger, sale or conveyance, appropriate
provision (as determined by a resolution of the Board of Directors of the
Company) shall be made with respect to the rights and interests thereafter of
the Holder, to the end that all the provisions of this Springing Warrant
(including adjustment provisions) shall thereafter be applicable as nearly as
reasonably practicable, in relation to such stock or other securities.
(d) REORGANIZATION AND RECLASSIFICATION. In case of any capital
reorganization or any reclassification of the capital stock of the Company
(except as provided in Section 9(a) hereof) while this Springing Warrant remains
outstanding, the Holder shall thereafter be entitled to purchase pursuant to
this Springing Warrant (in lieu of the number of shares of Common Stock
comprised in the number of Units that the Holder would have been entitled to
purchase immediately before such reorganization or reclassification) the shares
of stock of any class or classes or other securities or cash or property to
which such number of shares of Common Stock comprised in such number of Units
would have been entitled if such shares of Common Stock had been purchased
immediately before such reorganization or reclassification. In case of any such
reorganization or reclassification, appropriate provision (as determined by
resolution of the Board of Directors of the Company) shall be made with respect
to the rights and interests thereafter of the Holder, to the end that all the
provisions of this Springing Warrant (including adjustment provisions) shall
thereafter be applicable, as nearly as reasonably practicable, in relation to
such stock or other securities or property.
(e) ADJUSTMENT OF UNIT AFTER A "DILUTING ISSUE". If on any date on
or after the date of this Springing Warrant any additional shares of Common
Stock (other than shares of Excluded Stock) shall be issued for a consideration
per share (or, in the case of any transactions contemplated in paragraphs (2) or
(3) of this Section 9(e), shall be deemed to be issued for a Presumed
Consideration per share) less than the Current Price on the date such Common
Stock was issued or deemed to have been issued, the number of shares of Common
Stock theretofore comprising a Unit shall be adjusted as at the close of
business on such date to a number equal to the product (computed to the nearest
ten thousandth of a share) resulting from the multiplication of (i)
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the total number of shares of Common Stock comprising a Unit immediately
before such adjustment by (ii) a fraction, the numerator of which is the
Current Price on the date such Common Stock was issued or deemed to have been
issued, and the denominator of which is the consideration received (or,
without duplication, the Presumed Consideration deemed to have been received)
per share for such additional shares so issued.
For the purpose of this Section 9(e), the following provisions shall be
applicable with respect to the issuance of additional shares of Common Stock and
the computation set forth in the immediately preceding paragraph:
(1) STOCK DIVIDENDS, ETC. In case any additional shares of Common
Stock shall be issued as a dividend on Common Stock, the number of shares of
Common Stock comprising a Unit shall be adjusted as provided in Section 9(a)
hereof.
In case any additional shares of Common Stock shall be issued as a
dividend on any class of stock of the Company other than Common Stock, or
in case any obligations or stock convertible into or exchangeable for
shares of Common Stock (such convertible or exchangeable obligations or
stock being hereinafter called "Convertible Securities") shall be issued as
a dividend on any class of stock of the Company, such shares of Common
Stock or Convertible Securities shall be deemed to have been issued without
consideration on the day next succeeding the date for the determination of
stockholders entitled to such dividend.
(2) RIGHTS OR OPTIONS BELOW CURRENT PRICE. In case the Company shall
on or after the date of this Springing Warrant grant any rights or options
(other than those exercisable for Excluded Stock) to subscribe for or to
purchase additional shares of Common Stock or Convertible Securities, and
the Presumed Consideration per share received and receivable by the Company
for such additional shares under such rights or options or pursuant to the
terms of such Convertible Securities shall be less than the Current Price
in effect immediately prior to the time of the granting of such rights or
options, the maximum number of additional shares of Common Stock issuable
pursuant to such rights or options or necessary to effect the conversion or
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exchange of all such Convertible Securities shall be deemed to have been
issued as of the date of the granting of such rights or options, and the
Company shall be deemed to have received the Presumed Consideration
therefor. No adjustment (except as provided in paragraph (4) of this
Section 9(e)) shall be made upon the actual issuance of Common Stock upon
the exercise of rights or options referenced in this paragraph (2) or the
conversion of Convertible Securities referenced in this paragraph (2).
(3) SECURITIES CONVERTIBLE BELOW CURRENT PRICE. In case:
(i) the Company shall issue any Convertible Securities (other
than those convertible into Excluded Stock or pursuant to the exercise
of rights or options therefor in respect of which an adjustment shall
have theretofore been made under the foregoing paragraph (2)), and
(ii) the Presumed Consideration per share for additional shares
of Common Stock issuable pursuant to the terms of such Convertible
Securities shall be less than the Current Price in effect immediately
prior to the time of the issuance of such Convertible Securities,
then the issuance of such Convertible Securities shall be deemed to be an
issuance (as of the date of issuance of such Convertible Securities) of the
maximum number of additional shares of Common Stock necessary to effect the
conversion or exchange of all such Convertible Securities, and the Company shall
be deemed to have received the Presumed Consideration therefor as of the date of
issuance of such Convertible Securities. No further adjustment, except as
provided in paragraph (4) of this Section 9(e), shall be made upon the actual
issuance of Common Stock upon the conversion of Convertible Securities.
(4) SUPERSEDING ADJUSTMENT OF NUMBER OF SHARES OF COMMON STOCK
COMPRISING A UNIT. If, at any time after any adjustment of the shares of
Common Stock comprising a Unit shall have been made on the basis of shares
of Common Stock deemed to be issued by reason of the provisions of the
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foregoing paragraphs (2) or (3) of this Section 9(e) on the basis of the
granting of certain rights or options or the issuance of certain
Convertible Securities, or after any new adjustments of the shares of
Common Stock comprising a Unit shall have been made on the basis of shares
of Common Stock deemed to be issued by reason of the provisions of this
paragraph (4), such rights or options or the right of conversion or
exchange in any such Convertible Securities (for which, or purchased
pursuant to any rights or options for which, such an adjustment shall
previously have been made) shall expire, and a portion of such rights or
options, or the right of conversion or exchange in respect of a portion of
such Convertible Securities, as the case may be, shall not have been
exercised, then such previous adjustment shall be rescinded and annulled
and the shares of Common Stock that were deemed to have been issued by
virtue of the computation made in connection with the adjustment so
rescinded and annulled, shall no longer be deemed to have been issued by
virtue of such computation. Thereupon, a re-computation shall be made of
the effect of such rights or options or such Convertible Securities on the
basis of:
(i) treating the number of additional shares of Common Stock, if
any, theretofore actually issued pursuant to the exercise of such
expired rights or options or such expired right of conversion or
exchange, as having been issued on the date or dates of such exercise
for the consideration actually received therefor (computed as provided
in paragraph (6) of this Section 9(e)); and
(ii) treating the maximum number of additional shares of Common
Stock, if any, thereafter issuable pursuant to the conversion or
exchange of any Convertible Securities actually issued or issuable
pursuant to the previous exercise of such rights or options as having
been issued as of the date of the granting of such rights or options
and treating the Presumed Consideration therefor as received as of
such date;
and, on such basis, such new adjustment, if any, of the number of shares of
Common Stock comprising a Unit shall be made as may be
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required by the first paragraph of this Section 9(e), which new adjustment
shall supersede the previous adjustment so rescinded and annulled for the
Springing Warrant exercised after such new adjustment.
(5) EFFECT OF "SPLIT-UP" OR "SPLIT-DOWN" ON "DEEMED ISSUED" SHARES.
Upon the effective or record date for any subdivision or combination of the
Common Stock of the character described in Section 9(a) hereof, including
the issuance of a stock dividend which is treated as such a subdivision
under paragraph (1) of this Section 9(e), the number of the shares of
Common Stock which are at the time deemed to have been issued by virtue of
paragraphs (2), (3) or (4) of this Section 9(e), but have not actually been
issued, shall be deemed to be increased or decreased proportionately.
(6) COMPUTATION OF CONSIDERATION AND PRESUMED CONSIDERATION. For the
purposes of this Section 9:
(i) The consideration received by the Company upon the actual
issuance of additional shares of Common Stock shall be deemed to be
the sum of the amount of cash and the fair value of property (as
determined by a single qualified appraiser (which shall be either a
national accounting firm or a national or regional major investment
bank) selected by mutual agreement between the Company and the Holder
as at the time of issue or "deemed issue" in the case of the following
paragraph (ii)) received or receivable by the Company as the
consideration or part of the consideration (v) at the time of issuance
of the Common Stock, (w) for the issuance of any rights or options
upon the exercise or conversion of which such Common Stock was issued,
(x) for the issuance of any rights or options to purchase Convertible
Securities upon the conversion of which such Common Stock was issued,
(y) for the issuance of the Convertible Securities upon conversion of
which such Common Stock was issued and (z) at the time of the actual
exercise of such rights, options or conversion privileges upon the
exercise or conversion of which such Common Stock was issued, in each
case without deduction for commissions and expenses incurred
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by the Company for any underwriting of, or otherwise in connection
with the issue or sale of, such rights, options, Convertible
Securities or Common Stock, but after deduction of any sums paid by
the Company in cash upon the exercise of, and pursuant to, such
rights, options or conversion privileges in respect of fractional
shares of Common Stock;
(ii) The consideration deemed to have been received by the
Company for additional shares of Common Stock deemed to be issued
pursuant to rights, options and conversion privileges by reason of
transactions of the character described in paragraphs (2), (3) and
(4)(ii) of this Section 9(e) (herein called the "Presumed
Consideration" therefor) shall be the consideration (determined as
provided in the foregoing paragraph (i)) that would be received or
receivable by the Company at or before the actual issue of such shares
of Common Stock so deemed to be issued, if all rights, options and
conversion privileges necessary to effect the actual issue of the
number of shares deemed to have been issued had been exercised
(successively exercised in the case of rights or options to purchase
Convertible Securities), and the minimum consideration received or
receivable by the Company upon such exercise had been received; all
computed without regard to the possible future effect of anti-dilution
provisions on such rights, options and/or conversion privileges.
(f) STATEMENT OF ADJUSTMENT OF UNIT AND CURRENT PRICE. Whenever the
number of shares of Common Stock comprising a Unit is adjusted pursuant to any
of the foregoing provisions of this Section 9, the Company shall promptly
prepare a written statement signed by the chief executive officer of the
Company, setting forth the adjustment in the number of shares comprising a Unit
purchasable hereunder, determined as provided in this Section, and the amount of
the then effective Current Price, and in reasonable detail the facts requiring
such adjustment and the calculation thereof. Such statement shall be filed
among the permanent records of the Company and a copy thereof shall be furnished
to the Holder without request and shall at all reasonable times during business
hours be open to inspection by
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the Holder. The Company shall also promptly cause a notice, stating that
such an adjustment has been effected and setting forth the increased or
decreased number of shares purchasable and the amount of the then effective
Current Price, to be delivered by facsimile, reliable courier or first-class
mail postage prepaid to the Holder.
(g) DETERMINATION BY THE BOARD OF DIRECTORS. All determinations by the
Board of Directors of the Company under the provisions of this Section 9 shall
be made in good faith with due regard to the interests of the Holder and the
other holders of securities of the Company and in accordance with good financial
practice, and all valuations made by the Board of Directors of the Company under
the terms of this Section 9 must be made with due regard to any market
quotations of securities involved in, or related to, the subject of such
valuation.
(h) DEFINITIONS. For all purposes of this Section 9 and this Springing
Warrant, unless the context otherwise requires, the following terms have the
following respective meanings:
"COMMON STOCK": (i) the Company's presently authorized Common Stock
as such class exists on the date of this Springing Warrant; and (ii) stock
of the Company of any class thereafter authorized that ranks, or is
entitled to a participation, as to assets or dividends, substantially on a
parity with Common Stock.
"COMPANY": Advanced Materials Group, Inc., a Nevada corporation, and
any other corporation assuming the Company's obligations with respect to
this Springing Warrant pursuant to this Section 9.
"CONVERTIBLE SECURITIES": the meaning specified in Section 9(e)(1).
"CURRENT PRICE": per share of Common Stock, the amount equal to the
quotient resulting from dividing (i) the Exercise Price per Unit herein
provided by (ii) the number of shares (including any fractional share) of
Common Stock comprising a Unit on such date.
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"EXCLUDED STOCK": shares of Common Stock issued (i) upon exercise of
this Springing Warrant or that certain Warrant to purchase shares of Common
Stock of the Company dated the date hereof issued by the Company to the
initial Holder of this Springing Warrant (the "Warrant"), (ii) in respect
of which an adjustment is required to be made pursuant to Section 9(a),
(b), (c) or (d) hereof, (iii) pursuant to the exercise or conversion of any
options, warrants, convertible securities or other securities issued and
outstanding on the date hereof.
"PRESUMED CONSIDERATION": the meaning specified in Section
9(e)(6)(ii).
Section 10. REGISTRATION RIGHTS.
(a) REGISTRABLE STOCK. As used in this Section 10, the term
"Registrable Stock" shall mean (i) all shares of Common Stock that may be issued
upon exercise of the Springing Warrant (and all shares of Common Stock that may
thereafter be issued in respect of such Springing Warrant) and (ii) all shares
of Common Stock that may be issued upon exercise of the Warrant (and all shares
of Common Stock that may thereafter be issued in respect of such Warrant).
References in this Springing Warrant to rules, regulations and forms
promulgated by the Securities and Exchange Commission shall include rules,
regulations and forms succeeding to the functions thereof, whether or not
bearing the same designation.
The rights and obligations of the Company and the Holder with respect
to the Registrable Stock set forth in this Section 10 shall supersede any
registration rights and obligations of the Company and the Holder existing prior
to the date hereof with respect to the Registrable Stock.
(b) REQUEST FOR REGISTRATION. If the Company shall receive a written
request (specifying that it is being made pursuant to this Section 10(b)) from
the holders of more than 50% of the Registrable Stock that the Company file a
registration statement under the 1933 Act, or a similar document pursuant to any
other statute then in effect corresponding to the 1933 Act
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<PAGE>
covering the registration of at least 50% of the Registrable Stock, then the
Company shall promptly notify all other holders of Registrable Stock of such
request and shall use its reasonable best efforts to cause all Registrable
Stock that holders have requested be registered to be registered under the
1933 Act.
Notwithstanding the foregoing, (i) the Company shall not be obligated
to effect a registration pursuant to this Section 10(b) during the period
starting with the date 60 days prior to the Company's estimated date of filing
of, and ending on a date 180 days following the effective date of, a
registration statement pertaining to an underwritten public offering of
securities for the account of the Company, provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective and that the Company's estimate of the date of
filing such registration statement is made in good faith; and (ii) if the
Company shall furnish to such holders a certificate signed by the chief
executive officer of the Company stating that in the good faith judgment of the
Board of Directors it would be seriously detrimental to the Company or its
shareholders for a registration statement to be filed in the near future, then
the Company's obligation to use its best efforts to file a registration
statement shall be deferred for a period not to exceed six months.
The Company shall be obligated to effect only two registrations
pursuant to this Section 10(b). Any request for registration under this Section
10(b) must be for a firmly underwritten public offering to be managed by an
underwriter or underwriters of recognized national standing reasonably
acceptable to the Company.
(c) COMPANY REGISTRATION. Subject to Section 10(g), if at any time
the Company proposes to register any of its Common Stock under the 1933 Act in
connection with the public offering of such securities solely for cash on a form
that would also permit the registration of the Registrable Stock, the Company
shall, each such time, promptly give each holder of Registrable Stock written
notice of such determination. Upon the written request of any holder, given
within 20 days after mailing of any such notice by the Company, the Company
shall use its reasonable best efforts to cause to be registered under the 1933
Act all of
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<PAGE>
the Registrable Stock that each such holder has requested be registered.
(d) OBLIGATIONS OF THE COMPANY. Whenever required under Sections
10(b), 10(c) or 10(j) to use its reasonable best efforts to effect the
registration of any Registrable Stock, the Company shall, as expeditiously as
reasonably possible:
(1) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Stock and use its
reasonable best efforts to cause such registration statement to become and
remain effective; PROVIDED, HOWEVER, that in connection with any proposed
registration intended to permit an offering of any securities from time to
time (I.E., a so-called "shelf registration"), the Company shall in no
event be obligated to cause any such registration to remain effective for
more than 90 days;
(2) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the 1933 Act with respect to the disposition of
all securities covered by such registration statement;
(3) furnish to the holders of Registrable Stock such numbers of
copies of a prospectus, including a preliminary prospectus, in conformity
with the requirements of the 1933 Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Stock owned by them; and
(4) use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other
securities or Blue Sky Laws of such jurisdictions as shall be reasonably
appropriate for the distribution of the securities covered by the
registration statement.
(e) FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action
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<PAGE>
pursuant to this Section 10 that the holders of Registrable Stock shall
furnish to the Company such information regarding them, the Registrable Stock
held by them and the intended method of disposition of such securities as the
Company shall reasonably request and as shall be required in connection with
the action to be taken by the Company.
(f) EXPENSES OF DEMAND REGISTRATION. All expenses incurred in
connection with a registration pursuant to Sections 10(b) or 10(c) (excluding
underwriters' discounts and commissions),including, without limitation, all
registration and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for the selling holders, shall be borne by the
Company; PROVIDED, HOWEVER, that the Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to Section 10(b) if
the registration request is subsequently withdrawn, unless the holders agree to
forfeit their right to demand registration pursuant to Section 10(b).
(g) UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 10(c) to include any of the holders'
Registrable Stock in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it or them, and then only in such quantity as will not, in the written opinion
of the underwriters, jeopardize the success of the offering by the Company. If
the total amount of securities that all holders request to be included in such
offering exceeds the amount of securities that the underwriters reasonably
believe compatible with the success of the offering, the Company shall only be
required to include in the offering so many of the securities of the selling
holders as the underwriters believe will not jeopardize the success of the
offering, shall so advise all selling holders of Registrable Stock and the
number of shares of securities that are entitled to be included in the offering
and underwriting shall be allocated first, to the Company for securities being
sold for its own account, second, among all such selling holders of Registrable
Stock and, third, among all other selling stockholders, in each case in
proportion, as nearly as practicable, to the respective total amounts of
securities owned
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<PAGE>
by said selling holders of Registrable Stock and other selling stockholders.
If any selling holder of Registrable Stock or any other selling stockholder
disapproves of the terms of any such underwriting, he, she or it may elect to
withdraw therefrom by written notice to the Company and the underwriter.
(h) DELAY OF REGISTRATION. No holders of Registrable Stock shall
have any right to take any action to restrain, enjoin or otherwise delay any
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 10.
(i) INDEMNIFICATION. In the event any shares of Registrable Stock are
included in the registration statement under this Section 10:
(1) to the extent permitted by law, the Company will indemnify
and hold harmless each holder of Registrable Stock requesting or
joining in a registration, any underwriter (as defined in the 1933
Act) for it and each person, if any, who controls such holder or
underwriter within the meaning of the 1933 Act, against any losses,
claims, damages or liabilities, joint or several, to which they may
become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based on any untrue or alleged untrue statement of
any material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements
therein not misleading or arise out of any violation by the Company of
any rule or regulation promulgated under the 1933 Act applicable to
the Company and relating to action or inaction required of the Company
in connection with any such registration; and will reimburse each such
holder, such underwriter or controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or
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<PAGE>
action; PROVIDED, HOWEVER, that the indemnity agreement contained in
this Section 10(i)(1) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld) nor shall the Company be
liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in connection with such registration statement,
preliminary prospectus, final prospectus, or amendments or
supplements thereto, in reliance upon and in conformity with written
information furnished expressly for use in connection with such
registration by any such holder, underwriter or controlling person;
(2) to the extent permitted by law, each holder requesting or
joining in a registration will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed
the registration statement, each person, if any, who controls the
Company within the meaning of the 1933 Act and each agent and any
underwriter for the Company (within the meaning of the 1933 Act)
against any losses, claims, damages or liabilities to which the
Company or any such director, officer, controlling person, agent or
underwriter may become subject, under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in such
registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto,
or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in
such registration statement, preliminary or final
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<PAGE>
prospectus, or amendments or supplements thereto, in reliance upon
and in conformity with written information furnished by such
holder expressly for use in connection with such registration; and
each such holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer,
controlling person, agent or underwriter in connection with
investigating or defending any such loss, claim, damage, liability
or action; PROVIDED, HOWEVER, that the indemnity agreement
contained in this Section 10(i)(2) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of such holder
(which consent shall not be unreasonably withheld); and
(3) promptly after receipt by an indemnified party under this
paragraph of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this paragraph, notify the
indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof
with counsel mutually satisfactory to the parties. The failure to
notify an indemnifying party promptly of the commencement of any such
action, if prejudicial to his ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified
party under this paragraph, but the omission so to notify the
indemnifying party will not relieve him of any liability that he may
have to any indemnified party otherwise than under this paragraph.
(j) REGISTRATIONS ON FORM S-3.
(1) If (i) a holder or holders of Registrable Stock request in
writing (specifying that the request is
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<PAGE>
being made pursuant to this Section 10(j)) that the Company file a
registration statement on Form S-3 under the 1933 Act ("Form S-3") (or
any successor form to Form S-3 regardless of its designation) for a
public offering of shares of the Registrable Stock, the reasonably
anticipated aggregate price to the public of which would exceed
$500,000, and (ii) the Company is a registrant entitled to use Form
S-3 to register such shares, then the Company shall use its reasonable
best efforts to cause such shares to be registered on Form S-3 (or any
successor form to Form S-3); PROVIDED, HOWEVER, that the Company shall
not be obligated to effect any such registration pursuant to this
Section 10(j)) if the Company has, within the 12-month period
preceding the date of such request, already effected two registrations
on Form S-3 for the holders pursuant to this Section 10(j).
(2) All expenses incurred in connection with a registration
requested pursuant to Section 10(j)(1), including, without limitation, all
registration, qualification, printing and accounting fees, and reasonable
fees and disbursements of counsel for the selling holder or holders and
counsel for the Company, shall be borne by the Company.
(3) Holders' rights to registration under this Section 10(j) are
in addition to, and not in lieu of, their rights to registration under
Sections 10(b) and 10(c).
(k) TERMINATION OF THE COMPANY'S OBLIGATIONS. The Company shall have
no obligations pursuant to Sections 10(b), 10(c) or 10(j) as to any holder after
the Company has included Registrable Stock of such holder in two registrations
pursuant to Sections 10(b), 10(c) or 10(j); PROVIDED, HOWEVER, that if such
holder has requested that all of its Registrable Stock be registered under such
sections, but such holders shall be prohibited from selling all of such stock by
virtue of Section 10(g), then such holder's rights shall not be restricted by
the provisions of this Section 10(k) until such time as it has had an
opportunity to sell all of its Registrable Stock.
(l) REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the holders of Registrable
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<PAGE>
Stock the benefits of Rule 144 promulgated under the 1933 Act and any other
rule or regulation of the Securities and Exchange Commission that may at any
time permit a holder to sell securities of the Company to the public without
registration, the Company agrees to use its reasonable best efforts to:
(1) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times subsequent to 90 days
after the effective date of the first registration statement covering an
underwritten public offering filed by the Company;
(2) file with the Securities and Exchange Commission in a timely
manner all reports and other documents required of the Company under the
1933 Act and the Securities Exchange Act of 1934 (the "1934 Act"); and
(3) furnish to any holder so long as such holder owns any of the
Registrable Stock forthwith upon request a written statement by the Company
that it has complied with the reporting requirements of Rule 144 (at any
time after 90 days after the effective date of said first registration
statement filed by the Company), and of the 1933 Act and the 1934 Act (at
any time after it has become subject to such reporting requirements), a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents so filed by the Company as may be reasonably
requested in availing any holder of any rule or regulation of the
Securities and Exchange Commission permitting the selling of any such
securities without registration.
(m) LOCKUP AGREEMENT. In consideration for the Company's agreeing to
its obligations under this Section 10, the holder of Registrable Stock agrees in
connection with any registration of the Company's securities that, upon the
request of the Company or the underwriters managing any underwritten offering of
the Company's securities, not to sell, make any short sale of, loan, grant any
option for the purchase of or otherwise dispose of any Registrable Stock (other
than those included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed 90 days) from the effective date of such registration as the
Company or the underwriters may specify.
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<PAGE>
(n) CERTAIN LIMITATIONS IN CONNECTION WITH FUTURE GRANTS OF
REGISTRATION RIGHTS. From and after the date hereof, the Company shall not
enter into any agreement with any holder or prospective holder of any securities
of the Company providing for the granting to such holder of registration rights
unless such agreement:
(1) includes the equivalent of Section 10(m) as a term; and
(2) includes a provision that, in the case of a public offering
involving an underwritten registered offering under Section 10(c),
protects the holders of Registrable Stock if marketing factors require
a limitation on the number of securities to be included in the
underwriting in the manner in which the Company is protected under
Section 10(g).
(o) TRANSFER OF REGISTRATION RIGHTS. The registration rights of the
Holder of the Springing Warrant under this Section 10 may be transferred to any
transferee who acquires at least 20% of the then outstanding shares of
Registrable Stock, or the Springing Warrant; PROVIDED, HOWEVER, that the Company
is given written notice by the Holder at the time of such transfer stating the
name and address of the transferee and identifying the securities with respect
to which the rights under this Section 10 are being assigned.
Section 11. AMENDMENTS.
(a) Other than in respect of Section 10 hereof, neither this
Springing Warrant nor any term hereof may be changed, waived, discharged or
terminated orally or in writing, provided that any term of this Springing
Warrant may be amended or the observance of such term may be waived (either
generally or in a particular instance and either retroactively or prospectively)
with, but only with, the written consent of the Company and the holders of
Springing Warrants that are exercisable for a number of Units that represent in
the aggregate at least a majority of the total number of Units for which all
Springing Warrants are then exercisable (whether or not the holder of this
Springing Warrant consents).
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<PAGE>
(b) Neither Section 10 of this Springing Warrant nor Section 10 of
the Warrant nor any term of either of such Sections 10 may be changed, waived,
discharged or terminated orally or in writing, provided that any term of Section
10 of this Springing Warrant and any term of Section 10 of the Warrant may be
amended or the observance of such term may be waived (either generally or in a
particular instance and either retroactively or prospectively) with, but only
with, the written consent of the Company and the holders of Springing Warrants
and Warrants that are exercisable for a number of Units that represent in the
aggregate at least a majority of the total number of Units for which all
Springing Warrants and all Warrants are then exercisable (whether or not the
holder of this Springing Warrant consents).
Section 12. GOVERNING LAW.
This Springing Warrant shall be governed by the laws of the State of New
York without regard to its conflict of laws, principles or rules.
IN WITNESS WHEREOF, the Company has caused this Springing Warrant to be
signed in its name by its duly authorized officer.
Dated: December ___, 1995
ADVANCED MATERIALS GROUP, INC.
By:_______________________________
George R. Pache
Chief Financial Officer
- 27 -
<PAGE>
- 28 -
<PAGE>
SUBSCRIPTION NOTICE
The undersigned, the Holder, hereby elects to exercise purchase rights
represented by such Springing Warrant for, and to purchase thereunder,
_____________________ shares of the Common Stock covered by such Springing
Warrant and herewith makes payment in full therefor of $_________ cash and/or
by cancellation of $___________________ of indebtedness of the Company to the
Holder hereof and requests that certificates for such shares (and any securities
or property deliverable upon such exercise) be issued in the name of and
delivered to _____________ whose address is __________________________
_________________________________.
The undersigned agrees that, in the absence of an effective registration
statement with respect to Common Stock issued upon this exercise, the
undersigned is acquiring such Common Stock for investment and not with a view to
distribution thereof and that the certificate or certificates representing such
Common Stock may bear a legend substantially as follows:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS. UNLESS THEY ARE SOLD
PURSUANT TO RULE 144 PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION
UNDER SAID ACT, THEY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN ABSENCE
OF SUCH REGISTRATION AND QUALIFICATION WITHOUT AN OPINION OF COUNSEL FOR
THE HOLDER, REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
Dated:
_________________________________
Signature guaranteed:
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<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the rights represented by the foregoing
Springing Warrant of _______________________ and appoints
________________________ ________________________ attorney to transfer said
rights on the books of said corporation, with full power of substitution in the
premises.
Dated:
______________________________
Signature guaranteed:
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within Springing Warrant in every particular,
without alteration or enlargement or any change whatsoever.
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<PAGE>
UNITS ISSUED UPON EXERCISE OF SPRINGING WARRANT
This Springing Warrant entitles the holder hereof to purchase the number of
shares of Common Stock as comprise the number of Units set forth below.
<TABLE>
<CAPTION>
Date of Default Increase Total Units Notation
on Note in Units Outstanding Made by
- --------------- -------- ----------- --------
<S> <C> <C> <C>
</TABLE>
- 31 -
<PAGE>
TRILON DOMINION PARTNERS, L.L.C.
250 PARK AVENUE, SUITE 2020
NEW YORK, NEW YORK 10017
December __, 1995
Advanced Materials Group, Inc.
1240 East 230th Street
Carson, California 90745
Attn: Jerry E. Fullerton
Gentlemen:
Reference is made to that certain Credit Agreement dated as of
September 21, 1994, between Trilon Dominion Partners, L.L.C. (the "LLC") and
Advanced Materials Group, Inc. ("Advanced Materials"), as amended as of
January 13, 1995 and as of December __, 1995 (as so amended, the "Credit
Agreement"). Capitalized terms used herein that are defined in the Credit
Agreement are so used as therein defined.
The parties hereby acknowledge and agree that during the term of the
$1,000,000 credit facility (the "Facility") made available by the LLC to
Advanced Materials pursuant to the Credit Agreement (such term is hereinafter
referred to as the "Consultancy Term"), Advanced Materials shall engage the
LLC to provide management consulting services and certain employees of the
LLC (hereinafter, the "Consultant") shall render such consulting services to
Advanced Materials upon the following terms and conditions:
1. In consideration for the consulting services rendered by the
Consultant to Advanced Materials pursuant to this Letter Agreement, Advanced
Materials shall pay the Consultant a fee in the amount of One Thousand Five
Hundred Dollars ($1,500.00) per month (the "Fee"), payable on the first day
of each month during the Consultancy Term; PROVIDED, HOWEVER, that in the
event such Consultancy Term begins prior to December 31, 1995, the pro rata
portion of the Fee for the month of December shall be due and payable at such
time.
<PAGE>
Advanced Materials, Inc.
Page 2
December __, 1995
2. Advanced Materials shall promptly reimburse the Consultant for
reasonable travel and other related expenses incurred by the Consultant
pursuant to its engagement hereunder.
3. The parties hereto acknowledge and agree that nothing herein shall
constitute Consultant an employee, officer or agent of Advanced Materials
and, consequently, the payment of the Fee hereunder shall not be subject to
applicable federal or state withholdings.
Please acknowledge your agreement with the forgoing by countersigning this
letter and returning it to the undersigned by facsimile and regular mail.
Sincerely,
TRILON DOMINION PARTNERS, L.L.C.
By: VC Holdings, Inc., its
Managing Member
By: _________________________
Ronald W. Cantwell
President
ACCEPTED AND AGREED:
ADVANCED MATERIALS, INC.
By: _____________________________
Name:
Title:
