===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMISSION FILE NUMBER 0-16322
EVANS ENVIRONMENTAL CORPORATION
-----------------------------------------------------------
(Name of small business issuer as specified in its charter)
COLORADO 84-1061207
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
99 S.E. FIFTH STREET,
FOURTH FLOOR, MIAMI, FLORIDA 33131
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (305) 374-8300
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days:
Yes [X] No [ ]
As of January 31, 1996, the Company had a total of 4,509,641 shares of common
stock, $.012 par value, outstanding.
Transitional Small Business Disclosure format (check one): Yes [ ] No [X]
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Page 1 of 20
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial statements:
Consolidated balance sheets
- December 31, 1995 and March 31, 1995 3
Consolidated statements of operations
- Nine and Three Months Ended December 31, 1995 and 1994 4
Consolidated statements of cash flows
- Nine months ended December 31, 1995 and 1994 5-6
Notes to financial statements 7-11
Item 2. Management's discussion and analysis of
financial condition and results of
operations 12-18
PART II. OTHER INFORMATION
Item 1. Legal proceedings 19
Item 2. Changes in securities 19
Item 3. Defaults upon senior securities 19
Item 4. Submission of matters to a vote of security holders 19
Item 5. Other information 19
Item 6. Exhibits and reports on form 8-K 19
SIGNATURES 20
Page 2 of 20
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND MARCH 31, 1995
(UNAUDITED)
--------------
DEC 31, 1995 MARCH 31, 1995
------------ --------------
ASSETS
Current assets:
Cash $ 222,386 $ 300,743
Restricted cash 141,729 141,729
Marketable investments 350,000 -
Accounts receivable, net 1,841,595 1,863,038
Inventory 481,543 392,928
Laboratory sale proceeds due 139,908 -
Prepaid expenses & other 594,901 411,964
----------- -----------
Total current assets 3,772,062 3,110,402
Amounts due under state
reimbursement program 1,072,839 995,088
Property & equipment, net 772,675 900,972
Goodwill, net 1,432,539 1,532,280
Other assets 51,674 49,765
----------- -----------
Total assets $ 7,101,789 $ 6,588,507
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,336,182 $ 2,075,178
Accrued expenses 576,478 1,097,790
Delinquent payroll taxes 1,069,389 1,068,864
Related party note payable 85,000 -
Current portion of capital lease
obligations & notes payable 1,200,318 1,141,668
----------- -----------
Total current liabilities 5,267,367 5,383,500
Capital lease obligations & notes payable 767,058 472,151
Commitments & contingencies
Stockholders' equity:
Preferred stock:
$.001 par value, $.64 liquidation
preference, 5,000,000 authorized,
13,495 issued and outstanding 14 -
Common stock:
$.012 par value, 25,000,000 authorized,
issued and outstanding:
December 31, 1995 - 4,509,641
March 31, 1995 - 3,252,403 54,114 39,029
Additional paid in capital 6,606,283 5,760,097
Retained deficit (5,593,047) (5,066,270)
----------- -----------
Total stockholders' equity 1,067,364 732,856
----------- -----------
Total liabilities &
stockholders' equity $ 7,101,789 $ 6,588,507
=========== ===========
See accompanying notes
Page 3 of 20
<PAGE>
<TABLE>
<CAPTION>
EVANS ENVIRONMENTAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED DECEMBER 31, 1995 AND 1994
(UNAUDITED)
--------------
THREE MONTHS NINE MONTHS
------------------------------------ -----------------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Consulting $ 1,207,699 $ 1,793,576 $ 4,473,249 $ 5,322,925
Laboratory - 565,214 - 1,983,817
Cable products 1,458,207 870,209 4,094,271 2,853,195
----------- ----------- ----------- -----------
Total revenue 2,665,906 3,228,999 8,567,520 10,159,937
Environmental services:
Direct labor & employee
benefit costs 460,333 837,729 1,562,567 3,113,671
Other direct costs 319,093 631,812 1,000,580 2,115,097
----------- ----------- ----------- -----------
Cost of environmental
services 779,426 1,469,541 2,563,147 5,228,768
Cost of cable products 1,118,159 659,788 3,125,262 2,133,501
----------- ----------- ----------- -----------
Total direct costs 1,897,585 2,129,329 5,688,409 7,362,269
----------- ----------- ----------- -----------
Gross profit 768,321 1,099,670 2,879,111 2,797,668
----------- ----------- ----------- -----------
General, administrative
& other operating costs 858,625 1,361,697 3,119,292 3,979,102
Reserve against Enviropact
fees & expenses - - - 211,712
Investment write off - 1,423 - 88,082
----------- ----------- ----------- -----------
Total other
operating costs 858,625 1,363,120 3,119,292 4,278,896
----------- ----------- ----------- -----------
Operating loss (90,304) (263,450) (240,181) (1,481,228)
----------- ----------- ----------- -----------
Other income (expense):
Interest, net (45,982) (40,752) (135,130) (73,433)
Equipment disposals, net - - 300 2,000
----------- ----------- ----------- -----------
Other, net (45,982) (40,752) (134,830) (71,433)
----------- ----------- ----------- -----------
Loss before income taxes (136,286) (304,202) (375,011) (1,552,661)
Provision for income taxes - - - -
----------- ----------- ----------- -----------
Loss before
extraordinary item (136,286) (304,202) (375,011) (1,552,661)
Extraordinary item - - (151,766) -
----------- ----------- ----------- -----------
Net loss $ (136,286) $ (304,202) $ (526,777) $(1,552,661)
=========== =========== =========== ===========
Loss per common share:
Loss before
extraordinary item $ (.03) $ (.10) $ (.11) $ (.58)
Extraordinary item - - (.04) -
----------- ----------- ----------- -----------
Loss per share $ (.03) $ (.10) $ (.15) $ (.58)
=========== =========== =========== ===========
</TABLE>
See accompanying notes
Page 4 of 20
<PAGE>
<TABLE>
<CAPTION>
EVANS ENVIRONMENTAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED DECEMBER 31, 1995 AND 1994
(UNAUDITED)
--------------
1995 1994
------------ ----------
<S> <C> <C>
Cash flows from operating
activities:
Net loss $ (526,777) $ (1,552,661)
Adjustments to reconcile net loss
to net cash used in
operating activities:
Depreciation & amortization 268,380 377,461
Non-cash expenses 16,522 283,712
Gain on sale of equipment (300) (2,000)
Changes in operating assets &
liabilities, net of effects
of acquisitions
Accounts receivable (221,519) 602,956
Inventory (85,970) (187,656)
Income tax receivable - 110,345
Prepaid expenses & other (182,937) (167,421)
Amounts due under reimbursement
program (77,751) (746,316)
Other assets (1,909) -
Accounts payable 261,004 674,075
Accrued expenses (521,312) (273,882)
Payroll taxes 525 590,696
------------ ------------
Total adjustments (545,267) 1,261,970
------------ ------------
Net cash used in
operating activities (1,072,044) (290,691)
Cash flows provided by (used in)
investing activities:
Payments for acquisition,
including acquisition costs,
less cash acquired - (56,698)
Laboratory sale proceeds 103,054 -
Proceeds from equipment disposals 300 2,000
Proceeds from investments 150,000 -
Purchases of equipment (47,509) (427,085)
------------ ------------
Net cash provided by (used in)
investing activities 205,845 (481,783)
</TABLE>
See accompanying notes
Page 5 of 20
<PAGE>
<TABLE>
<CAPTION>
EVANS ENVIRONMENTAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
NINE MONTHS ENDED DECEMBER 31, 1995 AND 1994
(UNAUDITED)
--------------
1995 1994
------------ ------------
<S> <C> <C>
Cash flows provided by financing activities:
Original issuance of stock $ 477,013 $ -
Costs associated with issuance
of stock (127,728) (200,047)
Increase in notes payable 460,028 1,382,920
Increase in related party note payable 85,000 -
Payments on capital lease obligations
and notes payable (106,471) (410,387)
------------ ------------
Net cash provided by
financing activities 787,842 772,486
------------ ------------
Net increase (decrease) in cash (78,357) 12
Cash, beginning of period 300,743 322,465
------------ ------------
Cash, end of period $ 222,386 $ 322,477
============ ============
</TABLE>
Non-cash activities:
During the nine months ended December 31, 1995, the Company issued an aggregate
of 49,000 shares of common stock in exchange for services valued at
approximately $12,000.
See accompanying notes
Page 6 of 20
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
--------------
1. BUSINESS AND COMMON STOCK
BUSINESS
The Company is primarily engaged, through its wholly-owned
subsidiaries, in environmental consulting and other environmental
related services (the "Environmental Division") and the production and
sale of cable products (the "Cable Products Division").
COMMON STOCK
On December 27, 1995, the shareholders of the Company approved a
one-for-four reverse split of common stock effective December 29, 1995.
Unless otherwise noted, all share and per share data of the Company
included in the accompanying financial statements and notes thereto
have been adjusted to give effect to the reverse stock split.
2. SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The
consolidated balance sheet as of March 31, 1995 has been derived from
the audited financial statements as of the period ended March 31, 1995,
but does not include all disclosures required by generally accepted
accounting principles. In the opinion of management, these statements
reflect all adjustments, consisting of normal recurring adjustments,
considered necessary for a fair presentation for the periods presented.
Operating results for the three and nine months ended December 31, 1995
and 1994 are not necessarily indicative of the results that may be
expected for the year ended March 31, 1996. These statements should be
read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the period
ended March 31, 1995.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All intercompany balances
and transactions have been eliminated.
PRESENTATION
Certain amounts previously reported have been reclassified to conform
to the Fiscal 1996 financial statement presentation.
Page 7 of 20
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
--------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PER SHARE DATA
Per share data is based on the weighted average number of shares of
common stock, 4,147,081 and 3,178,227 for the quarters ended December
31, 1995 and 1994, respectively; and 3,555,256 and 2,656,636 for the
nine months ended December 31, 1995 and 1994, respectively. Common
stock equivalents have not been included in the weighted average number
of shares as they are anti-dilutive for all periods presented.
3. BUSINESS SEGMENTS
The Company's operations are classified into two segments:
environmental consulting and other environmental related services and
the production and sale of cable products. Identifiable assets by
segment are those tangible and intangible assets that are used in the
operation of that unit.
A summary of the Company's operations by segment as of and for the nine
months ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
ENVIRON-
MENTAL CABLE CORPORATE TOTAL
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Net sales $4,473,249 $4,094,271 $ - $8,567,520
Operating
income (loss) (308,860) 315,523 (246,844) (240,181)
Identifiable assets 4,873,708 1,810,738 417,343 7,101,789
Capital expenditures 28,185 19,324 - 47,509
Depreciation &
amortization 235,540 32,840 - 268,380
</TABLE>
4. WAIVERS, CONSENTS & NOTES PAYABLE
In April 1995, the Company issued additional warrants to its
subordinated lender. A total of 3,125 shares of common stock and
761,731 shares of series A preferred stock are issuable under the
warrants. The warrants to purchase the preferred stock are exercisable
until the year 2002 subject to a continuously resetting exercise price
equal to a 10 day trailing average market price of the Company's common
stock up to a maximum of $2.70 per each underlying share of common
stock, subject to certain adjustments. The preferred stock is
convertible into 2,285,193 shares of common stock. The new warrants to
purchase common stock are exercisable until the year 2002, subject to
certain restrictions, under the same market price conditions as set
forth above, except that there is not a maximum exercise price. In
connection with this transaction, the exercise price of the then
existing common stock warrants was also reduced to $2.70 per share, the
then market price of the Company's common stock.
Page 8 of 20
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
--------------
4. WAIVERS, CONSENTS & NOTES PAYABLE (CONTINUED)
In April and August 1995, the Company had received certain limited
waivers and consents related to its outstanding credit facility.
Certain of these waivers and consents contained dated cure periods
which have since expired and as such the Company is currently in
default under certain provisions of the credit facility. The Company
and its lender are currently attempting to achieve further consents and
waivers of these defaults. Additionally, the Company is attempting to
provide the lender with additional anti-dilution agreements acceptable
to both parties.
5. RELATED PARTY NOTE PAYABLE
In Fiscal 1996, the Company borrowed $85,000 from the spouse of the
Chairman of the Board of Directors. The note is due upon demand and
bears interest at 12% per annum. The Chairman disclaims any beneficial
interest in the loan.
6. DISPOSAL OF LABORATORY OPERATIONS
In May 1995, the Company divested itself of the laboratory operations
of the Environmental Division. The purchaser bought all the assets and
essentially all operating liabilities of the laboratory operations. The
Company received no direct cash proceeds from the sale, but received
free laboratory services and significant proceeds from the sold
receivables. As of March 31, 1995, the Company had reserved for the
loss and impairment on fixed and other assets related to this
divestiture. The Company still has certain contingent obligations
regarding its former laboratories' leases and loans which aggregate
approximately $250,000. During the nine months ended December 31, 1995,
the Company received cash or cash equivalents of approximately $103,000
in connection with the sale. The purchaser has recently sought
protection under Federal Bankruptcy proceedings. The Company is in the
process of reviewing the various alternative actions it might take, if
any are necessary.
Page 9 of 20
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
--------------
7. EXTRAORDINARY ITEM
During the year ended March 31, 1995, the Environmental Division became
delinquent in certain of its payroll tax deposits. As of December 31,
1995, the Company owed approximately $1,375,000 to the Internal Revenue
Service for payroll taxes, interest and penalties. In June 1995, the
Company and the Internal Revenue Service agreed to a payment schedule
and other agreements. Later in June 1995, the Company received a bank
cashiers check for payment on a Regulation S offering of the Company's
preferred stock. The Company gave this cashiers check to the Internal
Revenue Service to discharge all of the tax obligations. The cashiers
check was not honored by the bank, which denied its validity. A fee of
approximately $151,000 was paid to finders in this transaction. The
Company has demanded repayment of the fee and continues to discuss all
possible courses of action with the Internal Revenue Service, various
law enforcement agencies, its attorneys and advisers. The preferred
stock certificate issued in this transaction has been recovered. The
Company and the Internal Revenue Service are currently negotiating a
revised settlement agreement, although no assurance can be given that
such an agreement can be reached. Since March 31, 1995, the Company has
made all required payroll tax deposits for the current periods.
Although, the Company has demanded repayment of the $151,000 finders
fee, the Company has expensed, as an extraordinary item, the full
amount of the finders fee issued in this transaction.
8. STOCK ISSUANCES AND MARKETABLE SECURITIES
In August 1995, in connection with a full and final settlement of the
notes receivable issued in October 1994 in connection with the sale of
common stock, the Company agreed to revise the purchase price per share
of the stock sold from $3.00 to approximately $.96 and reduce the
number of shares purchased to 625,000. In addition, the Company issued,
at a price of $1.91 per unit, 249,745 units pursuant to Regulation S,
each unit consisting of one share of Series A preferred stock and 2.5
shares of common stock. The overall effect of this settlement is that
the Company has issued 249,745 Series A preferred stock, convertible
into 749,235 shares of common stock and 1,249,362 shares of common
stock at a purchase price of $976,500 or approximately $.49 per share.
The Company received a portion of the proceeds in the form of
marketable securities. The Company has begun an orderly liquidation of
these securities. The Company incurred costs and fees totalling
approximately $351,000 in association with these series of
transactions. During the nine months ended December 31, 1995, 236,250
shares of the Series A preferred stock were converted into 708,750
shares of common stock.
Page 10 of 20
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
--------------
9. PREFERRED STOCK
The Series A Convertible Preferred Stock, $.001 par value per share
(the "Preferred Stock") is entitled to receive cumulative preferential
dividends at the rate of $.0512 per share, per annum, payable either in
cash or in common stock of the Company. Each share of the Preferred
Stock is convertible into 3 shares of the Company's common stock. The
Preferred Stock contains certain liquidation rights in the event of any
liquidation, dissolution or winding up of the Company. The liquidation
value is $.64 per share of Preferred Stock, plus any accrued and unpaid
dividends. The Company may redeem the Preferred Stock at a price of
$.64 per share of Preferred Stock, in whole or in part, at any time
commencing 2 years after its issuance.
10. GOING CONCERN
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The
Company's audited consolidated financial statement as of and for the
two years in the period ended March 31, 1995 contained a going concern
qualification due to the significant net losses for the year ended
March 31, 1995 and delinquent payroll tax deposits, interest and
penalties, as of March 31, 1995, of approximately $1,450,000.
Furthermore, the timing of collections on amounts expected to be
received from the State of Florida pursuant to services performed by
the Company to assist in the clean up of sites eligible for
reimbursement by the Florida Inland Protection Trust Fund (the
"Program") is presently uncertain because the State of Florida has
placed a moratorium on the Program and has not resolved how such
Program will operate in the future. In addition, the Company violated
certain provisions of its credit agreement with its principal lender
during the year. Although the Company has received a waiver of past and
certain potential future covenant violations through September 30,
1995, there can be no assurances that the principal lender will grant
continued forbearance under the credit agreement and not demand
immediate repayment of amounts due subsequent to September 30, 1995.
The Company does not presently have the cash resources to satisfy such
a demand. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. The accompanying consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the
amount and classification of liabilities that might result should the
uncertainties be unfavorably resolved or the Company is unable to
continue as a going concern. Management is attempting to raise
additional financing through a private placement of its equity
securities to fund its current operations. In addition, management is
continuing to evaluate the need for future cost saving measures with
particular emphasis on its under-performing offices.
In the absence of achieving successful negotiations with its principal
lender, achieving viable settlements with the Internal Revenue Service
and the Company's creditors, obtaining profitable operations, or
obtaining additional debt or equity financing, the Company may not have
sufficient funds to continue operations in 1996.
Page 11 of 20
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
During the year ended March 31, 1995 ("Fiscal 1995"), the Company, mainly
through its Environmental Division, experienced a net loss of $4,732,301.
The Company's ability to survive is based on returning the Environmental
Division to profitability, obtaining additional financing and scheduling
workouts with the Internal Revenue Service and certain of its creditors.
The losses, which began in fiscal 1994 and which continued through December
1995 (although September 1995 through November 1995 were marginally
profitable), are attributable to the Company's inability to balance revenue
growth with a proper level of associated labor, other operational costs and
the write-down of certain assets. The Company took certain significant cost
saving actions during Fiscal 1995 and continues to do so, including the
divestiture of the Environmental Division's underperforming laboratory
operations. Although these cost savings, which included significant labor
reductions, restructuring of underperforming offices and divisions and
other cost saving measures have not yet returned the Company to
profitability, management believes that the Company can maintain profitable
revenue growth, although no assurances can be given. Management will
continue to evaluate the need for further cost saving measures on a monthly
basis, with particular emphasis on underperforming offices. While
management will continue to evaluate such cost saving measures, additional
focus will be on new marketing efforts to increase revenue from existing
offices. During the quarter ended December 31, 1995 the Company increased
its marketing and sales staff, created new marketing programs, and adding
additional marketing resources. During Fiscal 1995, the Company utilized
substantially all of its existing commercial lines of credit to finance
prior losses.
In May 1995, the Company divested the Environmental Division's laboratory
operations (the "Laboratory Divestiture"). The purchaser bought all the
assets and essentially all operating liabilities of the laboratory
operations. The Company received no direct cash proceeds from the sale, but
received free laboratory services and significant proceeds from the sold
receivables. The nine month period ended December 31, 1995 contains
immaterial amounts related to current period operating loss and impairment
on fixed and other assets related to the Laboratory Divestiture since the
impairment was recorded as of March 31, 1995. The Company still has certain
contingent obligations regarding its former laboratories' leases and loans
which aggregate approximately $250,000. During the nine months ended
December 31, 1995, the Company received cash or cash equivalents of
approximately $103,000 in connection with the Laboratory Divestiture. The
purchaser has recently sought protection under Federal Bankruptcy
proceedings. The Company is in the process of reviewing the various
alternative actions it might take, if any are necessary.
Page 12 of 20
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
QUARTER ENDED DECEMBER 31, 1995 COMPARED TO QUARTER ENDED DECEMBER 31, 1994
The Company's revenue decreased from $3,228,999 for the quarter ended
December 1994 (the "94 Quarter") to $2,665,906 for the quarter ended
December 31, 1995 (the "95 Quarter"), a decrease of $563,093 or 17.4%.
However, as a result of the Laboratory Divestiture, the 95 Quarter does not
contain any laboratory revenue, which in the 94 Quarter was $565,214.
Therefore, total comparable revenue slightly increased by $2,121 from
$2,663,785 in the 94 Quarter as compared to $2,665,906 in the 95 Quarter.
Within this net comparable increase, consulting revenue decreased from
$1,793,576 in the 94 Quarter to $1,207,699 in the 95 Quarter, a decrease of
$585,877 or 32.7% and cable products sales increased from $870,209 in the
94 Quarter to $1,458,207 in the 95 Quarter, an increase of $587,998 or
67.6%.
The decrease of $585,877 in environmental consulting during the comparative
quarters is directly related to the closing of offices. The closed offices
had no revenue in the 95 Quarter in comparison to $390,040 in the 94
Quarter. The comparable remaining consulting office revenue decreased by
$195,837 or 14.0% from $1,403,536 in the 94 Quarter to $1,207,699 in the 95
Quarter. Pricing for the Company's consulting services has not
significantly increased, and in many cases, due to competitive situations,
has decreased, compared to the comparable period in the 94 Quarter. Future
expansion of additional offices is dependent on future economic and
business conditions and the availability of capital.
Total revenue for the Cable Products Division was $1,458,207 for the 95
Quarter, as compared to $870,209 for the 94 Quarter, an increase of
$587,998 or 67.6%. This increase in revenue is attributable to the
introduction of certain new products and increased market penetration of
the Cable Products Division's fiber optic products. The Cable Products
Division's operating costs and expenses are comprised of cost of product
and overhead. The Cable Products Division's gross margin was 23.3% and
24.2% for the 95 and 94 Quarters, respectively. This decrease in gross
margin is largely attributable to the Cable Products Division's change in
product mix and the high cost of bringing new products to market.
Direct costs of environmental services were $779,426 for the 95 Quarter,
representing a decrease of $690,115 or 47.0% from the 94 Quarter. However,
the 95 Quarter does not contain any laboratory direct costs, which in the
94 Quarter were $262,097. Due to the aforementioned cost savings, direct
costs attributable to consulting services decreased by $428,018 or 35.5%
from $1,207,444 in the 94 Quarter. Direct costs consist of all professional
and technical labor, employee benefit costs together with other expenses
directly related to the production of revenue on a project. Other direct
costs include sub-contractors, suppliers and other revenue generating
expenses.
Page 13 of 20
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
The Environmental Division's gross margin was 35.5% and 37.7% for the 95
and 94 Quarters, respectively. As of December 31, 1995, the Environmental
Division, excluding laboratory personnel, had 79 employees on staff as
opposed to 113 on staff as of December 31, 1994, a decrease of 34 employees
or 30%. Although the gross margin decreased, better utilization of billable
staff and the reduction of staff significantly contributed to the overall
reduction of expenses.
General, administrative and other costs were $858,625 for the 95 Quarter, a
decrease of $504,495 or 37.0% from the 94 Quarter. The 94 Quarter includes
approximately $319,166 of expenses for offices that have been closed or
sold. The balance of the decrease in expenses is a result of the cost
savings measures that have been implemented and in particular, the
elimination of various staff positions.
The operating loss for the 95 Quarter was $90,304, a decrease in the
operating loss of $173,146 or 65.7% from the 94 Quarter. The operating loss
was comprised of an Environmental Division loss of $145,463, a Cable
Products Division profit of $94,429 and corporate expenses of $39,270.
During the 95 Quarter, due to extensive use of the Company's lines of
credit, the Company incurred $45,982 of net interest expense as compared to
$40,752 in the 94 Quarter.
The net loss of $136,286 for the 95 Quarter is $167,916 or 55.2% less than
the $304,202 loss in the 94 Quarter.
NINE MONTHS ENDED DECEMBER 31, 1995 COMPARED TO NINE MONTHS ENDED
DECEMBER 31, 1994
The Company's revenue decreased from $10,159,937 for the nine months ended
December 1994 (the "94 Nine Months") to $8,567,520 for the nine months
ended December 31, 1995 (the "95 Nine Months"), a decrease of $1,592,417 or
15.7%. However, the 95 Nine Months does not contain any laboratory revenue,
which in the 94 Nine Months was $1,983,817. Therefore, total comparable
revenue increased by $391,400 or 4.8% from $8,176,120 in the 94 Nine Months
as compared to $8,567,520 in the 95 Nine Months. Within this net comparable
increase, consulting revenue decreased from $5,322,925 in the 94 Nine
Months to $4,473,249 in the 95 Nine Months, a decrease of $849,676 or 16%
and cable products sales increased from $2,853,195 in the 94 Nine Months to
$4,094,271 in the 95 Nine Months, an increase of $1,241,076 or 43.5%.
The decrease of $849,676 in environmental consulting during the comparative
quarters is directly related to the closing of offices. In the 95 Nine
Months, the closed offices had revenue of $198,303 in comparison to
$1,275,059 in the 94 Nine Months, a decrease of $1,076,756. Comparable
consulting office revenue increased by $227,080 or 5.6% from $4,047,866 in
the 94 Nine Months to $4,274,946 in the 95 Nine Months. Substantially all
revenue growth in the 95 Nine Months over the 94 Nine Months is
attributable to increased number and size of contracts. During the 95 Nine
Months, the Company began providing services for emergency responses to
environmental hazardous situations. This new segment of business represents
a new opportunity for the Company to market its services to larger and more
sophisticated clients.
Page 14 of 20
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Total revenue for the Cable Products Division was $4,094,271 for the 95
Nine Months, as compared to $2,853,195 for the 94 Nine Months, an increase
of $1,241,076 or 43.5%. This increase in revenue is attributable to the
introduction of certain new products and increased market penetration of
the Cable Products Division's fiber optic products. The Cable Products
Division's operating costs and expenses are comprised of cost of product
and overhead. The Cable Products Division's gross margin was 23.7% and
25.2% for the 95 and 94 Nine Months, respectively. This decrease in gross
margin is largely attributable to the Cable Products Division's change in
product mix and the high cost of bringing new products to market.
Direct costs of environmental services were $2,563,147 for the 95 Nine
Months, representing a decrease of $2,665,621 or 51% from the 94 Nine
Months. However, the 95 Nine Months does not contain any laboratory direct
costs, which in the 94 Nine Months were $1,206,306. Direct costs
attributable to consulting services decreased by $1,459,315 or 36.3% from
$4,022,462 in the 94 Nine Months. Direct costs consist of all professional
and technical labor, employee benefit costs together with other expenses
directly related to the production of revenue on a project. Other direct
costs include sub-contractors, suppliers and other revenue generating
expenses.
The Environmental Division's gross margin was 42.7% and 28.4% for the 95
and 94 Nine Months, respectively. This increase in gross margin is directly
attributable to the Laboratory Divestiture, the closing of unprofitable
offices and other cost saving measures, including layoffs. Better
utilization of billable staff and the reduction of staff significantly
contributed to the overall reduction of expenses.
General, administrative and other costs were $3,119,292 for the 95 Nine
Months, a decrease of $1,159,604 or 27.1% from the 94 Nine Months. The 94
Nine Months includes approximately $844,967 of expenses for offices that
have been closed or sold and approximately $300,000 of write offs and
adjustments. The balance of the decrease in expenses is a result of the
cost savings measures that have been implemented and in particular, the
elimination of various staff positions. Penalties and interest accrued to
the Internal Revenue Service were approximately $60,000 in the 95 Nine
Months as compared to $21,000 in the 94 Nine Months.
The operating loss for the 95 Nine Months was $240,181, a decrease in the
operating loss of $1,241,047 or 83.8% from the 94 Nine Months. The
operating loss was comprised of an Environmental Division loss of $308,860,
a Cable Products Division profit of $315,523 and corporate expenses of
$246,844. During the 95 Nine Months, due to extensive use of the Company's
lines of credit, the Company incurred $135,130 of net interest expense as
compared to $73,433 in the 94 Nine Months.
Page 15 of 20
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
The net loss before income taxes and extraordinary item, of $375,011 for
the 95 Nine Months is $1,177,650 or 75.9% less than the $1,522,661 loss in
the 94 Nine Months. In the 95 Nine Months, in connection with a Regulation
S offering of the Company's preferred stock, a fee of $151,766 was paid to
finders. The Regulation S transaction was never completed when the check
purportedly issued by the Regulation S purchaser, on the Company's behalf,
was not honored by the bank. The Company has demanded repayment of the fee
and continues to discuss all possible courses of action with various law
enforcement agencies, its attorneys and advisers. Although, the Company has
demanded repayment of the finders fee, the Company has expensed, as an
extraordinary item, the full amount of the fee issued in this transactions.
The net loss of $526,777 for the 95 Nine Months is $1,025,884 or 66.1% less
than the $1,552,661 loss in the 95 Nine Months.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital ratio increased to .72 at December 31, 1995
from .58 at March 31, 1995. As of December 31, 1995, the Company had a net
working capital deficit of $1,495,305, representing a $777,793 reduction in
the March 31, 1995 working capital deficit of $2,273,098. The decrease in
the working capital deficit is primarily attributable to reduced operating
losses and the issuance of the Company's preferred and common stock for
cash and marketable investments.
Net cash decreased during the 95 Nine Months by $78,357 compared to a $12
increase during the 94 Nine Months. One of the major components of the net
cash decrease in the 95 Nine Months was the $151,766 cash fraud loss. Cash
flow used by operating activities in the 95 Nine Months excluding the cash
fraud loss was $920,278. The significant uses of this operating cash
deficit were the net loss before extraordinary item and a net reduction in
accrued expenses. During the 94 Nine Months, cash flow was enhanced due to
the utilization of the Company's lines of credit.
The Company reduced expenditures on capital and investment activities
during the 95 Nine Months, as compared to the 94 Nine Months resulting in a
net cash saving in the comparable periods of $687,628. The Company
continues to review all current operations and assets for potential
reorganizations, sale or liquidation in order to raise additional capital
or lower costs.
During the 95 Nine Months, the Company repaid its $25,000 line of credit
with a commercial bank for the Environmental Division's working capital
purposes. The Cable Products Division does not maintain any outside working
capital facilities. The Cable Products Division has established a $100,000
letter of credit with a commercial bank collateralized by a certificate of
deposit.
During the 95 Nine Months, the Company raised net proceeds of
approximately $349,000 from the sale of preferred and common stock.
Page 16 of 20
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
In July 1994, the Company established a $2,500,000 subordinated line of
credit with a private lender. This line of credit, which at the time of
issuance was subordinated to the Company's then outstanding commercial
banking line of credit, expires July 1996 and bears interest at 15%. This
facility is collateralized by a lien on assets of the Company, including
the outstanding stock of all the Company's subsidiaries and the assets of
those subsidiaries.
In April 1995, the Company issued additional warrants to its subordinated
lender. A total of 3,125 shares of common stock and 761,731 shares of
series A preferred stock are issuable under the warrants. The warrants to
purchase the preferred stock are exercisable until the year 2002 subject to
a continuously resetting exercise price equal to a 10 day trailing average
market price of the Company's common stock up to a maximum of $2.70 per
each underlying share of common stock, subject to certain adjustments. The
preferred stock is convertible into 2,285,193 shares of common stock. The
new warrants to purchase common stock are exercisable until the year 2002,
subject to certain restrictions, under the same market price conditions as
set forth above, except that there is not a maximum exercise price. In
connection with this transaction, the exercise price of the then existing
common stock warrants was also reduced to $2.70 per share, the then market
price of the Company's common stock.
In April and August 1995, the Company had received certain limited waivers
and consents related to its outstanding credit facility. Certain of these
waivers and consents contained dated cure periods which have since expired
and as such the Company is currently in default under certain provisions of
the credit facility. The Company and its lender are currently attempting to
achieve further consents and waivers of these defaults. Additionally, the
Company is attempting to provide the lender with additional anti-dilution
agreements acceptable to both parties.
The Company continues to monitor the recent governmental activities in the
State of Florida with respect to proposed changes in the Florida Inland
Protection Trust Fund program, which provides for the remediation of
contamination related to the storage of petroleum and petroleum products.
During the 95 Nine Months, approximately 4% of the Company's business was
currently related, directly or indirectly, to this state-funded
reimbursement program.
During the 95 Nine Months, the Company funded certain of its receivables
under the Florida Inland Protection Trust Fund program. The cost of funding
is 8.75% per annum for the first 12 months, 10% per annum for the next 6
months, and prime plus 3% for any periods thereafter. Interest has
been prepaid for the first 18 months.
As of December 31, 1995, the Company had no additional availability under
its commercial lines of credit. Availability under the Company's commercial
lines of credit are based upon eligibility of the Company's accounts
receivable and other conditions. As of December 31, 1995, the Company had
approximately $235,000 of available credit under its various funding
agreements for receivables under the Florida Inland Protection Trust
program.
Page 17 of 20
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
The Company and the Internal Revenue Service are currently negotiating a
settlement agreement, although no assurance can be given that such an
agreement can be reached. Since March 31, 1995, the Company has made all
required payroll tax deposits for the current periods. In addition, several
of the Company's subsidiaries and their unsecured creditors are currently
negotiating a settlement agreement, although no assurances can be given
that such agreements will be reached. Based on these proposed agreements,
the Company's and its lender have entered discussions regarding continued
funding, waivers, consents and anti-dilution provisions.
In August 1995, in connection with a full and final settlement of the notes
receivable issued in October 1994 in connection with the sale of common
stock, the Company agreed to revise the purchase price per share of the
stock sold from $3.00 to approximately $.96 and reduce the number of shares
purchased to 625,000. In addition, the Company issued, at a price of $1.91
per unit, 249,745 units pursuant to Regulation S, each unit consisting of
one share of Series A preferred stock and ten shares of common stock. The
overall effect of this settlement is that the Company has issued 249,745
Series A preferred stock, convertible into 749,235 shares of common stock
and 1,249,362 shares of common stock at a purchase price of $976,500 or
approximately $.49 per share. The Company received a portion of the
proceeds in the form of marketable securities. The Company has begun an
orderly liquidation of these securities. The Company incurred costs and
fees totalling approximately $351,000 in association with these series of
transactions. During the nine months ended December 31, 1995, 236,250
shares of the Series A preferred stock were converted into 708,750 shares
of common stock.
The Company has no material commitments for capital expenditures.
The Company intends to fund its current operations from a combination of
cash on hand, cash generated from operations, proceeds from the above
referenced marketable securities, potential new equity or a sale of assets.
These sources of capital are expected to fund the Company's current
operations through March 31, 1996. Management expects a return to
profitability in Fiscal 1996. However, if the Company does not return to
profitability, and cannot liquidate the marketable securities then, absent
alternative sources of financing, there would be a material adverse effect
on the financial condition, operations and business prospects of the
Company. The Company has no arrangements in place for alternative sources
of financing, and no assurance can be given that such financing will be
available at all or on terms acceptable to the Company.
Page 18 of 20
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS None
ITEM 2. CHANGES IN SECURITIES None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 27, 1995, the Company held a special meeting of
shareholders to approve a one-for-four reverse split of the
Company's Common Stock and to approve an increase in the
authorized post-split shares of Common Stock to 25,000,000.
The votes on the matters were as follows:
FOR AGAINST ABSTAIN
---------- ------- -------
Reverse stock split 10,285,804 361,060 16,345
Increase authorized shares 9,808,859 816,605 37,745
ITEM 5. OTHER INFORMATION None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS,
INCLUDING INDENTURES
4.1 Warrant agreement dated July 11, 1994 between the
Company and Strategica Group, Inc.
4.2 Warrant agreement dated July 11, 1994 between the
Company and Strategica Capital Corporation.
4.3 Warrant agreement dated April 4, 1995 between the
Company and Strategica Capital Corporation.
4.4 Additional warrant agreement dated April 4, 1995 between
the Company and Strategica Capital Corporation.
4.5 Amendment to warrant agreement between the Company and
Strategica Capital Corporation dated April 4, 1995.
4.6 Amendment to warrant agreement between the Company and
Strategica Group, Inc. dated April 4, 1995.
B. REPORTS ON FORM 8-K None
Page 19 of 20
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EVANS ENVIRONMENTAL
CORPORATION
February 12, 1996 By: /S/ SCOTT E. SALPETER
---------------------------------
Scott E. Salpeter, Vice President
on behalf of the Registrant and as
Principal Accounting Officer
Page 20 of 20
- -------------------------------------------------------------------------------
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES
ACT") OR APPLICABLE STATE SECURITIES LAWS ("STATE ACTS"). THIS WARRANT AND ANY
SECURITIES ISSUED UPON EXERCISE OF THIS WARRANT MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED, HYPOTHEGATED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER
THE SECURITIES ACT AND APPLICABLE STATE ACTS UNLESS THE CORPORATION HAS RECEIVED
AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS
NOT REQUIRED.
- -------------------------------------------------------------------------------
EVANS ENVIRONMENTAL CORPORATION
WARRANT CERTIFICATE
Warrants to Subscribe for July 11, 1994
350,000 shares of
Common Stock
THIS CERTIFIES that, for value received, Strategica Group, Inc., or its
registered assigns (the "Holder"), is the registered owner of 350,000 warrants
(the "Warrants") of EVANS ENVIRONMENTAL CORPORATION, a Colorado corporation
(hereinafter referred to as the "Corporation" or the "Company"). Each of the
Warrants entitles the Holder to purchase one duty authorized, validly issued,
fully paid and nonassessable share of voting common stock, $.003 par value per
share, of the Corporation (the "Common Stock"). Each share of Common Stock
relating to a Warrant and/or each share of Common Stock underlying a Warrant may
sometimes hereinafter be referred to as a "Warrant Share."
Section 1. EXERCISE OF WARRANT. This Warrant may be exercised at any time
from the date hereof until and including July 11, 1997, 5:00 p.m., Miami,
Florida time (the "Expiration Date"). Subject to adjustment pursuant to Section
4 below, the exercise price of the shares of Common Stock purchasable pursuant
to this Warrant shall be $1.25 per share for the period commencing on the date
hereof through and including January 11, 1996, and, thereafter, the exercise
price shall be $2.00 per share through and including July 11, 1997 (such price,
as adjusted from time to time, being hereinafter referred to as the "Exercise
Price"). Notwithstanding the foregoing, in the event that the average of the
closing bid and asked prices of the Company's publicly traded Common Stock for
the ten (10) trading days (in which the Company's Common Stock is traded)
immediately prior to January 11, 1996 is less than $3.00 per share, then the
Exercise Price shall remain $1.25 per share through and including the Expiration
Date. The rights represented by this Warrant may be exercised by the holder
hereof,
<PAGE>
in whole or in part, but not as to a fractional share of Common Stock, by the
surrender of this Warrant (properly endorsed) at the office of the Corporation
or its transfer agent, and by payment to the Corporation of the Exercise Price
in cash or by wire transfer, for each share being purchased. Upon the exercise
of this Warrant, a certificate or certificates for the shares of Common Stock so
purchased, registered in the name of the holder, shall be promptly delivered to
the holder hereof within a reasonable time. The person in whose name any
certificate for shares of Common Stock is issued upon exercise of this Warrant
shall for all purposes be deemed to have become the holder of record of such
shares on the date on which the Warrant was surrendered and payment of the
Exercise Price and any applicable taxes was made, except that, if the date of
such surrender and payment is a date on which the stock transfer books of the
Corporation are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
Section 2. TRANSFER, DIVISION AND COMBINATION.
(a) Neither the Warrants or the Warrant Shares may be sold,
assigned or otherwise transferred prior to July 11, 1995 to any person other
than an officer, managing director or affiliate of Holder. Transfer of this
Warrant and all rights hereunder, in whole or in part, is registrable on the
books of the Corporation to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Corporation, together with the
Assignment Form annexed hereto 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 Corporation shall
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denomination 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.
(b) This Warrant may be divided or combined with other Warrants
upon presentation hereof at the aforesaid office or agency of the Corporation,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by Holder or his agent or attorney.
Subject to compliance with subparagraph (a) above, as to any transfer which may
be involved in such division or combination, the Corporation 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.
(c) The Corporation shall prepare, issue and deliver at its own
expense (other than stock transfer taxes) the new Warrant or Warrants under this
Section 2.
(d) The Corporation agrees to maintain, at its aforesaid office
or agency, books for the registration and the registration of transfer of the
Warrants.
(e) In the case of all dividends or other distributions of the
Corporation to the holders of its Common Stock with respect to which any
provision of Section 3 refers to the
- 2 -
<PAGE>
taking of a record of such holders, the Corporation will in each such case take
such a record and will take such record as of the close of business on a
business day. The Corporation will not at any time, except upon dissolution,
liquidation or winding up of the Corporation, close its stock transfer books or
warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any warrant.
Section 3. ADJUSTMENT OF NUMBER OF SHARES SUBJECT TO WARRANT. Upon any
adjustment of the Exercise Price pursuant to Sections 4(a) or 4(b) hereof, the
holder of this Warrant shall thereafter be entitled to purchase, at the adjusted
Exercise Price, the number of shares (calculated to the nearest tenth of a
share) obtained by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of shares purchasable pursuant hereto immediately
prior to such adjustment and dividing the product thereof by the Exercise Price
resulting from such adjustment.
Section 4. ADJUSTMENT OF EXERCISE PRICE.
(a) If the Corporation shall hereafter split, subdivide or
combine its Common Stock, then the Exercise Price shall be proportionately
adjusted so that the holder of this Warrant shall receive the equivalent number
of shares, at the equivalent cost per share, as if this Warrant was exercised on
the date immediately preceding such split, subdivision or combination of the
Corporation's Common Stock.
(b) If the Corporation shall pay a dividend with respect to the
Common Stock or make any other distribution with respect to the Common Stock
payable in shares of Common Stock, then the Exercise Price shall be adjusted,
from and after the date of determination of the shareholders entitled to receive
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such date of determination by a
fraction (i) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution, and
(ii) the denominator of which shall be the total number of shares of Common
Stock outstanding immediately after such dividend or distribution.
(c) Upon any such adjustment of the Exercise Price pursuant to
this Section, then and in each such case the Corporation shall give written
notice thereof to Holder stating the Exercise Price resulting from such
adjustment and the number of shares of Common Stock thereafter purchasable under
this Warrant and setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based.
Section 5. RECLASSIFICATION, MERGER, ETC. In the case of any
reclassification of the Common Stock or in the case of any consolidation or
merger of the Corporation with or into another corporation (other than a merger
with another corporation in which the Corporation is the surviving corporation
and which does not result in any reclassification of the Common Stock) or in the
case of any sale of all or substantially all of the assets of the Corporation,
then the Corporation, or such successor or purchasing corporation, as the case
may be, shall execute a
- 3 -
<PAGE>
new certificate, providing that the holder of this Warrant shall have the right
to exercise such new Warrant and upon such exercise to receive, in lieu of each
share of Common Stock theretofore issuable upon exercise of this Warrant, the
number and kind of shares of stock, other securities, money or property
receivable upon such reclassification, consolidation, merger or sale of assets
by a holder of shares of the Common Stock with respect to one share of Common
Stock. Such new Warrant certificate shall provide for adjustments which shall be
as nearly equivalent as may be practicable to the adjustments provided for
herein. The provisions of this Section shall similarly apply to successive
reclassifications, consolidations, mergers or sales of assets.
Section 6. STOCK TO BE RESERVED. The Corporation will at all times reserve
and keep available out of its authorized Common Stock or its treasury shares,
solely for the purpose of issue upon the exercise of this Warrant as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the exercise of this Warrant. The Corporation covenants that all shares of
Common Stock which shall be so issued shall be duly and validly issued and fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof. The Corporation will take all such action as may be
necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any requirements of
any national securities exchange upon which the Common Stock of the Corporation
may be listed. The Corporation has not granted and will not grant any right of
first refusal with respect to shares issuable upon exercise of this Warrant, and
there are no preemptive rights associated with such shares.
Section 7. NO STOCKHOLDER RIGHTS OR LIABILITIES. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a stockholder
of the Corporation. No provision hereof, in the absence of affirmative action by
the holder hereof to purchase shares of Common Stock, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Corporation, whether such liability is asserted by the Corporation or by
creditors of the Corporation.
Section 8. FRACTIONAL SHARES. No fractional shares shall be issued upon
the exercise of this Warrant, but the Company shall pay the holder an amount
equal to the fair market value of such fractional share of Common Stock in lieu
of each fraction of a share otherwise called for upon any exercise of this
Warrant. For purposes of this Warrant, the fair market value of a share of
Common Stock shall be determined as follows:
(a) If the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the NASDAQ system, the current market value shall be the last
reported sale price of the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant or on such day the
average of the closing bid and asked prices for such day on such exchange or
system, as applicable; or
- 4 -
<PAGE>
(b) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the mean of the last
reported bid and ask prices reported by the National Quotation Bureau, Inc. on
the last business day prior to the date of the exercise of this Warrant; or
(c) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the current
market value shall be an amount, not less than book value thereof as at the end
of the most recent fiscal year of the Company ending prior to the date of the
exercise of the Warrant, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
Section 9. REGISTRATION RIGHTS. Neither the Warrant nor the Warrant
Shares have been registered under the Securities Act of 1933, as amended (the
"Securities Act").
9.1 After January 1, 1995, whenever the Company proposes to file
under the Securities Act a Registration Statement relating to any of its Common
Stock, whether on its own behalf or on behalf of any holders of Common Stock of
the Company, the Company shall, at least thirty (30) days prior to such filing,
give written notice of such proposed filing to Holder. Upon receipt by the
Company not more than thirty (30) days after such notice of a written request
from Holder for registration of Warrant Shares issuable upon exercise of the
Warrants by Holder or held by Holder, the Company shall (A) include in such
registration statement or in a separate registration statement concurrently
filed, and shall use its best efforts to cause such registration statement to
become effective with respect to, the Warrant Shares as to which Holder requests
registration and (B) if such proposed registration is in connection with an
underwritten offering of Common Stock for the benefit of the Company, upon
request of Holder, use its best efforts to cause the managing underwriter
therefor to include in such offering the Warrant Shares as to which Holder
requests such inclusion, on terms and conditions comparable to those of the
securities offered on behalf of the Company. Holder shall cooperate with the
Company in the preparation of such Registration Statement to the extent
required to furnish information concerning the Holder therein. Notwithstanding
the foregoing, this Section 9.1 shall not be applicable to registration
statements of the Company filed pursuant to Form S-8 or Form S-4.
9.2 Whenever one or more registered holders of a majority of the
Warrants or Warrant Shares issued as of the date hereof pursuant to a certain
Advisory Agreement effective as of July 11, 1994 between Strategica Group, Inc.
or its designees and the Company shall make a written request to the Company to
register under the Securities Act Warrant Shares either issuable upon exercise
of the Warrants or held by such holders, the Company shall within ten (10) days
after such request is received promptly give written notice to holder stating
the estimated approximate date of filing such registration statement, and shall
thereupon promptly use its best efforts to file a registration statement (and
thereafter use its best efforts to cause such registration) with respect to all
Warrant Shares issuable upon exercise of the Warrants by Holder or held by
Holder as soon as reasonably practical after the date of receipt of such notice
by the Company. The Company shall not be required at its expense to effect more
than one registration statement pursuant to this Section 9.2. Notwithstanding
anything to the contrary contained
- 5 -
<PAGE>
herein, in the event that Holder exercises its registration rights under this
Section 9.2: (a) on or prior to October 13, 1995, and the registration of the
subject Warrant Shares issuable upon exercise of the Warrants or held by such
holders shall not have been declared effective by the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Act on or prior to January 5,
1996, then the $1.25 per share Exercise Price shall be extended to the date that
is five (5) business days following such effective date; or (b) on or prior to
April 12, 1997, and the registration of the subject Warrant Shares issuable upon
exercise of the Warrants or held by such holders shall not have been declared
effective by the SEC pursuant to the Securities Act on or prior to July 7, 1997,
then the Expiration Date shall be extended to the date that is five (5) business
days following such effective date.
9.3 If the Corporation is required by the provisions of this
Section 9 to use its best efforts to effect the registration of any of its
securities under the Securities Act, the Corporation will, as expeditiously as
is possible:
(a) Prepare and file with the SEC a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such registration statement
whenever the Holder of such securities shall desire to transfer the same.
(c) Furnish to the Holder such number of copies of a summary
prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents, as the Holder may reasonably request in order to facilitate the
transfer of the securities owned by such Holder.
(d) Use its best efforts to register or qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions within the United States as Holder shall
request (provided that the Company shall not be required to pay registration or
qualification expense for more than ten (10) states to be designated by Holder)
and do such other reasonable acts and things as may be the transfer in such
jurisdictions of the securities owned by Holder.
(e) Furnish, at the request of the Holder requesting
registration of Warrant Shares, on the date that such Warrant Shares are
delivered to the underwriters for sale pursuant to such registration or, if such
Warrant Shares are not being sold through underwriters, on the date that the
registration statement with respect to such shares becoming effective, (1) an
opinion, dated such date, of the outside counsel representing the Corporation
for the purposes of such registration, addressed to the underwriters, if any,
and if such Warrant Shares are not being sold through underwriters, then to the
holders making such request, stating that such
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<PAGE>
registration statement has become effective under the Securities Act and that
(i) to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Securities Act, (ii)
the registration statement, the related prospectus, and each amendment or
supplement thereto, comply as to form in all material respects with the
requirements of the Securities Act and the applicable rules and regulations of
the SEC thereunder (except that such counsel need express no opinion as to
financial statements contained therein), (iii) such counsel has no reason to
believe that either the registration statement or the prospectus, or any
amendment or supplement thereto, contains any untrue statement of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (iv) the descriptions in the registration statement or the
prospectus, or any amendment or supplement thereto, of all legal matters and
contracts and other legal documents or instruments are accurate and fairly
present the information required to be shown, and (v) such counsel does not know
of any legal or governmental proceedings, pending or contemplated, required to
be described in the registration statement or prospectus, or any amendment or
supplement thereto, which are not described as required, nor of any contracts or
documents or instruments of a character required to be described in the
registration statement or prospectus, or any amendment or supplement thereto, or
to be filed as exhibits to the registration statement which are not described
and filed or incorporated by reference as required; and (2) a letter dated such
date, from the independent certified public accountants of the Corporation,
addressed to the underwriters, if any, and if such Warrant Shares are not being
sold through underwriters, then to the Holders making such request, stating that
they are independent certified public accountants within the meaning of the
Securities Act and that, in the opinion of such accountants, the financial
statements and other financial data of the Corporation included in the
registration statement or the prospectus, or any amendment or supplement
thereto, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act. Such opinion of counsel shall
additionally cover such other legal matters with respect to the registration in
respect of which such opinion is being given as the Holders may reasonably
request. Such letter from the independent certified public accountants shall
additionally cover such other financial matters (including information as to
the period ending not more than five (5) business days prior to the date of such
letter) with respect to the registration in respect of which such letter is
being given as the Holders may reasonably request.
(f) Otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC.
9.4 The Holder of the securities being so registered agrees to
pay all of the underwriting discounts and commissions with respect to the
securities owned by them being registered. The Company will pay all other costs
and expenses in connection with a registration statement to be filed pursuant to
Section 9 hereof including, without limitation, registration fees, the
reasonable fees and expenses of counsel for the Company and Holder, the fees and
expenses of its accountants and all other costs and expenses incident to the
preparation, printing and filing under the Securities Act of any such
registration statement, each prospectus and all amendments and supplements
thereto, the costs incurred in connection with the qualification of such
securities
- 7 -
<PAGE>
for sale in not more than ten (10) states as Holder has designated, including
fees and disbursements of counsel for the Company, and the costs of supplying a
reasonable number of copies of the registration statement, each preliminary
prospectus, final prospectus and any supplements or amendments thereto to the
Holder.
9.5 The Company agrees to enter into an appropriate cross-
indemnity agreement with any underwriter (as defined in the Securities Act) for
the Holder in connection with the filing of a registration statement pursuant to
Section 9.1 hereof.
9.6 If the Company shall file any registration statement
including therein all or any part of the Warrant Shares either issuable upon
exercise of the Warrants by Holder or held by Holder, the Company and the Holder
shall enter into an appropriate cross-indemnity agreement whereby the Company
shall indemnify and hold harmless the Holder against any losses, claims, damages
or liabilities (or actions in respect thereof) arising out of or based upon any
untrue statement or alleged untrue statement of any material fact contained in
such registration statement, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
statements therein not misleading unless such statement or omission was made in
reliance upon and in conformity with written information furnished or required
to be furnished by the Holder, and the Holder shall (to the extent of and
limited to the amount of net proceeds received by the Holder from the sale of
Warrant Shares) indemnify and hold harmless the Company, each of its directors
and officers who have signed the registration statement and each person, if any,
who controls the Company, within the meaning of the Securities Act against any
losses, claims, damages or liabilities (or actions in respect thereof) arising
out of or based upon any untrue statement or alleged untrue statement of any
material fact contained in such registration statement, or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make statements therein not misleading, if the statement or
omission was made in reliance upon and in conformity with written information
furnished or required to be furnished by the Holder expressly for use in such
registration statement.
9.7 Nothing herein shall be construed to require any of the
holders who may desire to include any securities in any registration statement
referred to in Section 9.1 hereof to exercise their Warrants prior to the
effective date of registration statement and such holders, at their option, to
the extent permissible by law, may exercise the Warrants against payment of the
proceeds of the sale of such securities pursuant to a registration statement.
9.8 Until the shares shall be sold or capable of sale without
registration under the Securities Act, the Company at its expense will file such
post-effective amendments as may be necessary to make available for use a
prospectus meeting the requirements of the Securities Act, including, without
limitation, Section 10(a)(3). The Company will cause copies of such prospectus
to be delivered to any person exercising the warrant or selling the shares as
may be required by the Securities Act and the rules and regulations of the SEC.
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<PAGE>
Section 10. INVESTMENT REPRESENTATION AND LEGEND. Each holder, by
acceptance of this Warrant, represents and warrants to the Corporation that the
Holder is acquiring the Warrant and the securities issuable upon exercise
hereof, unless at the time of exercise a registration statement under the
Securities Act is effective with respect to such securities, for investment
purposes only and not with a view towards the resale or other distribution
thereof.
The Holder, by acceptance of this Warrant, agrees that the Corporation
may affix, unless the shares subject to this Warrant are registered at the time
of exercise, the following legend to certificates for securities issued upon
exercise of this Warrant:
The securities represented by this certificate have been issued in
reliance upon the representation of the holder that they have been
acquired for investment and not with a view toward the resale or other
distribution thereof, and have not been registered under the
Securities Act of 1933 (the "Securities Act") or applicable state
securities laws ("State Acts") and may not be offered, sold,
transferred, encumbered or otherwise disposed of unless there is an
effective registration statement under the Securities Act and the
applicable State Acts or unless in the opinion of counsel acceptable
to the Corporation, such registration is not required.
Section 11. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant
is lost, stolen, mutilated or destroyed, the Corporation may, on such terms as
to indemnity or otherwise as it may in its discretion reasonably impose (which
shall, in the case of a mutilated Warrant, include the surrender thereof), issue
a new Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated or destroyed. Any such new Warrant shall constitute an original
contractual obligation of the Corporation, whether or not the allegedly lost,
stolen, mutilated or destroyed Warrant shall be at any time enforceable by
anyone.
Section 12. PAYMENT OF TAXES. The Company will pay all taxes, if any,
attributable to the transfer and/or issuance of the Warrants and the Warrant
Shares.
Section 13. NOTICES. All notices, requests, demands and other
communications relating to this Warrant Certificate shall be in writing,
addressed, if to the registered owner hereof, to it at the address furnished by
the registered owner to the Company, and, if to the Company, to it at 2600 S.W.
Third Avenue, Second Floor, Miami, Florida 33129-2383, or to such other address
as any party shall notify the other party in writing, and shall be effective, in
the case of written notice by first class certified mail, postage prepaid, three
(3) days after placement into the mails, in the case of written notice by
express mail or other overnight courier, the day after placement with that
service, and, in the case of notice by confirmed telex, facsimile transmission,
telegram or cable, on the same day as sent.
Section 14. BINDING EFFECT. This Warrant Certificate shall be binding upon
and inure to the sole and exclusive benefit of the Company, its successors and
assigns and the registered holder or holders from time to time of the Warrants
and the Warrant Shares.
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<PAGE>
Section 15. SUPPLYING INFORMATION. The Corporation shall cooperate with
the Holder in supplying such information as may be necessary for the Holder to
complete and file any information reporting forms presently or hereafter
required by the SEC as a condition to the availability of an exemption from the
Securities Act for the sale of any Warrant or Warrant Shares.
Section 16. FILINGS. The Corporation will deliver to Holder promptly
upon their becoming available one copy of each report, notice or proxy statement
sent by the Corporation to its stockholders generally, and of each regular or
periodic report (pursuant to the Securities Exchange Act of 1934, as amended)
and any registration statement, prospectus or written communication (other than
transmittal letters) (pursuant to the Securities Act), filed by the Corporation
with (i) the SEC or (ii) any securities exchange on which shares of Common Stock
are listed.
Section 17. SUCCESSORS AND ASSIGNS. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors of the
Corporation and Holder. The provisions of this Warrant are intended to be for
the benefit of all Holders from time to time of this Warrant, and shall be
enforceable by any such Holder.
Section 18. AMENDMENT. This Warrant may not be modified or amended except
by written agreement of the parties.
Section 19. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
Section 20. GOVERNING LAW. THIS WARRANT CERTIFICATE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF FLORIDA, WITHOUT
REFERENCE TO THE CONFLICTS OF LAWS PRINCIPLES OF THE STATE OF FLORIDA.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Warrant on and as
of the day and year first above written.
EVANS ENVIRONMENTAL CORPORATION,
a Colorado corporation
By: /s/ SCOTT E. SALPETER
----------------------------------------
Scott E. Salpeter, Vice President
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<PAGE>
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the within Warrant
to the extent of purchasing _________ shares of Common Stock of Evans
Environmental Corporation, a Colorado, and hereby makes payment of $_______ in
payment therefor.
_____________________________________________
Signature
_____________________________________________
Signature, if jointly held
_____________________________________________
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
(if other than to the registered holder of the within Warrant)
Name________________________________________________________________________
(Please typewrite or print in block letters)
Address______________________________________________________________________
_____________________________________________________________________________
Social Security or Taxpayer Identification Number____________________________
And if said number of shares shall not be all the shares exchangeable or
purchasable under the within Warrant, a new Warrant is to be issued in the name
of the undersigned for the balance remaining of the shares purchasable
thereunder.
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________________________ hereby sells,
assigns and transfers unto ______________________________________________ , the
right to purchase Common Stock of Evans Environmental Corporation, a Colorado
corporation represented by this Warrant to the extent of shares as to which
such right is exercisable and does hereby irrevocably constitute and appoint
_____________________________________________________________________ Attorney,
to transfer the same on the books of the Company with full power of
substitution in the premises.
Dated: ______________, 199__
____________________________________________
Signature
_____________________________________________
Signature, if jointly held
- --------------------------------------------------------------------------------
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES
ACT") OR APPLICABLE STATE SECURITIES LAWS ("STATE ACTS"). THIS WARRANT AND ANY
SECURITIES ISSUED UPON EXERCISE OF THIS WARRANT MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER
THE SECURITIES ACT AND APPLICABLE STATE ACTS UNLESS THE CORPORATION HAS RECEIVED
AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS
NOT REQUIRED.
- --------------------------------------------------------------------------------
EVANS ENVIRONMENTAL CORPORATION
WARRANT CERTIFICATE
Warrants to Subscribe for July 11, 1994
350,000 shares of
Common Stock
THIS CERTIFIES that, for value received, Strategica Capital Corporation, or
its registered assigns (the "Holder"), is the registered owner of 350,000
warrants (the "Warrants") of EVANS ENVIRONMENTAL CORPORATION, a Colorado
corporation (hereinafter referred to as the "Corporation" or the "Company").
Each of the Warrants entitles the Holder to purchase one duly authorized,
validly issued, fully paid and nonassessable share of voting common stock, $.003
par value per share, of the Corporation (the "Common Stock"). Each share of
Common Stock relating to a Warrant and/or each share of Common Stock underlying
a Warrant may sometimes hereinafter be referred to as a "Warrant Share."
SECTION 1. EXERCISE OF WARRANT. This Warrant may be exercised at any time
from the date hereof until and including July 11, 1997, 5:00 p.m., Miami,
Florida time (the "Expiration Date"). Subject to adjustment pursuant to Section
4 below, the exercise price of the shares of Common Stock purchasable pursuant
to this Warrant shall be $1.25 per share for the period commencing on the date
hereof through and including January 11, 1996, and, thereafter, the exercise
price shall be $2.00 per share through and including July 11, 1997 (such price,
as adjusted from time to time, being hereinafter referred to as the "Exercise
Price"). Notwithstanding the foregoing, in the event that the average of the
closing bid and asked prices of the Company's publicly traded Common Stock for
the ten (10) trading days (in which the Company's Common Stock is traded)
immediately prior to January 11, 1996 is less than $3.00 per share, then the
Exercise Price shall remain $1.25 per share through and including the Expiration
Date. The rights represented by this Warrant may be exercised by the holder
hereof,
<PAGE>
in whole or in part, but not as to a fractional share of Common Stock, by the
surrender of this Warrant (properly endorsed) at the office of the Corporation
or its transfer agent, and by payment to the Corporation of the Exercise Price
in cash or by wire transfer, for each share being purchased. Upon the exercise
of this Warrant, a certificate or certificates for the shares of Common Stock so
purchased, registered in the name of the holder, shall be promptly delivered to
the holder hereof within a reasonable time. The person in whose name any
certificate for shares of Common Stock is issued upon exercise of this Warrant
shall for all purposes be deemed to have become the holder of record of such
shares on the date on which the Warrant was surrendered and payment of the
Exercise Price and any applicable taxes was made, except that, if the date of
such surrender and payment is a date on which the stock transfer books of the
Corporation are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
SECTION 2. TRANSFER, DIVISION AND COMBINATION.
(a) Neither the Warrants or the Warrant Shares may be sold,
assigned or otherwise transferred prior to July 11, 1995 to any person other
than an officer, managing director or affiliate of Holder. Transfer of this
Warrant and all rights hereunder, in whole or in part, is registrable on the
books of the Corporation to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Corporation, together with the
Assignment Form annexed hereto 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 Corporation shall
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denomination 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.
(b) This Warrant may be divided or combined with other Warrants
upon presentation hereof at the aforesaid office or agency of the Corporation,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by Holder or his agent or attorney.
Subject to compliance with subparagraph (a) above, as to any transfer which may
be involved in such division or combination, the Corporation 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.
(c) The Corporation shall prepare, issue and deliver at its own
expense (other than stock transfer taxes) the new Warrant or Warrants under this
Section 2.
(d) The Corporation agrees to maintain, at its aforesaid office or
agency, books for the registration and the registration of transfer of the
Warrants.
(e) In the case of all dividends or other distributions of the
Corporation to the holders of its Common Stock with respect to which any
provision of Section 3 refers to the
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<PAGE>
taking of a record of such holders, the Corporation will in each such case take
such a record and will take such record as of the close of business on a
business day. The Corporation will not at any time, except upon dissolution,
liquidation or winding up of the Corporation, close its stock transfer books or
warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any warrant.
SECTION 3. ADJUSTMENT OF NUMBER OF SHARES SUBJECT TO WARRANT. Upon any
adjustment of the Exercise Price pursuant to Sections 4(a) or 4(b) hereof, the
holder of this Warrant shall thereafter be entitled to purchase, at the adjusted
Exercise Price, the number of shares (calculated to the nearest tenth of a
share) obtained by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of shares purchasable pursuant hereto immediately
prior to such adjustment and dividing the product thereof by the Exercise Price
resulting from such adjustment.
SECTION 4. ADJUSTMENT OF EXERCISE PRICE.
(a) If the Corporation shall hereafter split, subdivide or combine
its Common Stock, then the Exercise Price shall be proportionately adjusted so
that the holder of this Warrant shall receive the equivalent number of shares,
at the equivalent cost per share, as if this Warrant was exercised on the date
immediately preceding such split, subdivision or combination of the
Corporation's Common Stock.
(b) If the Corporation shall pay a dividend with respect to the
Common Stock or make any other distribution with respect to the Common Stock
payable in shares of Common Stock, then the Exercise Price shall be adjusted,
from and after the date of determination of the shareholders entitled to receive
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such date of determination by a
fraction (i) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution, and
(ii) the denominator of which shall be the total number of shares of Common
Stock outstanding immediately after such dividend or distribution.
(c) Upon any such adjustment of the Exercise Price pursuant to
this Section, then and in each such case the Corporation shall give written
notice thereof to Holder stating the Exercise Price resulting from such
adjustment and the number of shares of Common Stock thereafter purchasable under
this Warrant and setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based.
SECTION 5. RECLASSIFICATION, MERGER, ETC. In the case of any
reclassification of the Common Stock or in the case of any consolidation or
merger of the Corporation with or into another corporation (other than a merger
with another corporation in which the Corporation is the surviving corporation
and which does not result in any reclassification of the Common Stock) or in the
case of any sale of all or substantially all of the assets of the Corporation,
then the Corporation, or such successor or purchasing corporation, as the case
may be, shall execute a
- 3 -
<PAGE>
new certificate, providing that the holder of this Warrant shall have the right
to exercise such new Warrant and upon such exercise to receive, in lieu of each
share of Common Stock theretofore issuable upon exercise of this Warrant, the
number and kind of shares of stock, other securities, money or property
receivable upon such reclassification, consolidation, merger or sale of assets
by a holder of shares of the Common Stock with respect to one share of Common
Stock. Such new Warrant certificate shall provide for adjustments which shall be
as nearly equivalent as may be practicable to the adjustments provided for
herein. The provisions of this Section shall similarly apply to successive
reclassifications, consolidations, mergers or sales of assets.
SECTION 6. STOCK TO BE RESERVED. The Corporation will at all times reserve
and keep available out of its authorized Common Stock or its treasury shares,
solely for the purpose of issue upon the exercise of this Warrant as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the exercise of this Warrant. The Corporation covenants that all shares of
Common Stock which shall be so issued shall be duly and validly issued and fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof. The Corporation will take all such action as may be
necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any requirements of
any national securities exchange upon which the Common Stock of the Corporation
may be listed. The Corporation has not granted and will not grant any right of
first refusal with respect to shares issuable upon exercise of this Warrant, and
there are no preemptive rights associated with such shares.
SECTION 7. NO STOCKHOLDER RIGHTS OR LIABILITIES. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a stockholder
of the Corporation. No provision hereof, in the absence of affirmative action by
the holder hereof to purchase shares of Common Stock, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Corporation, whether such liability is asserted by the Corporation or by
creditors of the Corporation.
SECTION 8. FRACTIONAL SHARES. No fractional shares shall be issued upon the
exercise of this Warrant, but the Company shall pay the holder an amount equal
to the fair market value of such fractional share of Common Stock in lieu of
each fraction of a share otherwise called for upon any exercise of this Warrant.
For purposes of this Warrant, the fair market value of a share of Common Stock
shall be determined as follows:
(a) If the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the NASDAQ system, the current market value shall be the last
reported sale price of the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant or on such day the
average of the closing bid and asked prices for such day on such exchange or
system, as applicable; or
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<PAGE>
(b) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the mean of the last
reported bid and ask prices reported by the National Quotation Bureau, Inc. on
the last business day prior to the date of the exercise of this Warrant; or
(c) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the current
market value shall be an amount, not less than book value thereof as at the end
of the most recent fiscal year of the Company ending prior to the date of the
exercise of the Warrant, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
SECTION 9. REGISTRATION RIGHTS. Neither the Warrant nor the Warrant Shares
have been registered under the Securities Act of 1933, as amended (the
"Securities Act").
9.1 After January 1, 1995, whenever the Company proposes to file
under the Securities Act a Registration Statement relating to any of its Common
Stock, whether on its own behalf or on behalf of any holders of Common Stock of
the Company, the Company shall, at least thirty (30) days prior to such filing,
give written notice of such proposed filing to Holder. Upon receipt by the
Company not more than thirty (30) days after such notice of a written request
from Holder for registration of Warrant Shares issuable upon exercise of the
Warrants by Holder or held by Holder, the Company shall (A) include in such
registration statement or in a separate registration statement concurrently
filed, and shall use its best efforts to cause such registration statement to
become effective with respect to, the Warrant Shares as to which Holder requests
registration and (B) if such proposed registration is in connection with an
underwritten offering of Common Stock for the benefit of the Company, upon
request of Holder, use its best efforts to cause the managing underwriter
therefor to include in such offering the Warrant Shares as to which Holder
requests such inclusion, on terms and conditions comparable to those of the
securities offered on behalf of the Company. Holder shall cooperate with the
Company in the preparation of such Registration Statement to the extent required
to furnish information concerning the Holder therein. Notwithstanding the
foregoing, this Section 9.1 shall not be applicable to registration statements
of the Company filed pursuant to Form S-8 or Form S-4.
9.2 Whenever one or more registered holders of a majority of the
Warrants or Warrant Shares issued as of the date hereof pursuant to a certain
Advisory Agreement effective as of July 11, 1994 between Strategica Group, Inc.
or its designees and the Company shall make a written request to the Company to
register under the Securities Act Warrant Shares either issuable upon exercise
of the Warrants or held by such holders, the Company shall within ten (10) days
after such request is received promptly give written notice to holder stating
the estimated approximate date of filing such registration statement, and shall
thereupon promptly use its best efforts to file a registration statement (and
thereafter use its best efforts to cause such registration) with respect to all
Warrant Shares issuable upon exercise of the Warrants by Holder or held by
Holder as soon as reasonably practical after the date of receipt of such notice
by the Company. The Company shall not be required at its expense to effect more
than one registration statement pursuant to this Section 9.2. Notwithstanding
anything to the contrary contained
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<PAGE>
herein, in the event that Holder exercises its registration rights under this
Section 9.2: (a) on or prior to October 13, 1995, and the registration of the
subject Warrant Shares issuable upon exercise of the Warrants or held by such
holders shall not have been declared effective by the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Act on or prior to January 5,
1996, then the $1.25 per share Exercise Price shall be extended to the date that
is five (5) business days following such effective date; or (b) on or prior to
April 12, 1997, and the registration of the subject Warrant Shares issuable upon
exercise of the Warrants or held by such holders shall not have been declared
effective by the SEC pursuant to the Securities Act on or prior to July 7, 1997,
then the Expiration Date shall be extended to the date that is five (5) business
days following such effective date.
9.3 If the Corporation is required by the provisions of this
Section 9 to use its best efforts to effect the registration of any of its
securities under the Securities Act, the Corporation will, as expeditiously as
is possible:
(a) Prepare and file with the SEC a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such registration statement
whenever the Holder of such securities shall desire to transfer the same.
(c) Furnish to the Holder such number of copies of a summary
prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents, as the Holder may reasonably request in order to facilitate the
transfer of the securities owned by such Holder.
(d) Use its best efforts to register or qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions within the United States as Holder shall
request (provided that the Company shall not be required to pay registration or
qualification expense for more than ten (10) states to be designated by Holder)
and do such other reasonable acts and things as may be the transfer in such
jurisdictions of the securities owned by Holder.
(e) Furnish, at the request of the Holder requesting
registration of Warrant Shares, on the date that such Warrant Shares are
delivered to the underwriters for sale pursuant to such registration or, if such
Warrant Shares are not being sold through underwriters, on the date that the
registration statement with respect to such shares becoming effective, (1) an
opinion, dated such date, of the outside counsel representing the Corporation
for the purposes of such registration, addressed to the underwriters, if any,
and if such Warrant Shares are not being sold through underwriters, then to the
holders making such request, stating that such
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<PAGE>
registration statement has become effective under the Securities Act and that
(i) to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Securities Act, (ii)
the registration statement, the related prospectus, and each amendment or
supplement thereto, comply as to form in all material respects with the
requirements of the Securities Act and the applicable rules and regulations of
the SEC thereunder (except that such counsel need express no opinion as to
financial statements contained therein), (iii) such counsel has no reason to
believe that either the registration statement or the prospectus, or any
amendment or supplement thereto, contains any untrue statement of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (iv) the descriptions, in the registration statement or the
prospectus, or any amendment or supplement thereto, of all legal matters and
contracts and other legal documents or instruments are accurate and fairly
present the information required to be shown, and (v) such counsel does not know
of any legal or governmental proceedings, pending or contemplated, required to
be described in the registration statement or prospectus, or any amendment or
supplement thereto, which are not described as required, nor of any contracts or
documents or instruments of a character required to be described in the
registration statement or prospectus, or any amendment or supplement thereto, or
to be filed as exhibits to the registration statement which are not described
and filed or incorporated by reference as required; and (2) a letter dated such
date, from the independent certified public accountants of the Corporation,
addressed to the underwriters, if any, and if such Warrant Shares are not being
sold through underwriters, then to the Holders making such request, stating that
they are independent certified public accountants within the meaning of the
Securities Act and that, in the opinion of such accountants, the financial
statements and other financial data of the Corporation included in the
registration statement or the prospectus, or any amendment or supplement
thereto, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act. Such opinion of counsel shall
additionally cover such other legal matters with respect to the registration in
respect of which such opinion is being given as the Holders may reasonably
request. Such letter from the independent certified public accountants shall
additionally cover such other financial matters (including information as to the
period ending not more than five (5) business days prior to the date of such
letter) with respect to the registration in respect of which such letter is
being given as the Holders may reasonably request.
(f) Otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC.
9.4 The Holder of the securities being so registered agrees to pay
all of the underwriting discounts and commissions with respect to the securities
owned by them being registered. The Company will pay all other costs and
expenses in connection with a registration statement to be filed pursuant to
Section 9 hereof including, without limitation, registration fees, the
reasonable fees and expenses of counsel for the Company and Holder, the fees and
expenses of its accountants and all other costs and expenses incident to the
preparation, printing and filing under the Securities Act of any such
registration statement, each prospectus and all amendments and supplements
thereto, the costs incurred in connection with the qualification of such
securities
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<PAGE>
for sale in not more than ten (10) states as Holder has designated, including
fees and disbursements of counsel for the Company, and the costs of supplying a
reasonable number of copies of the registration statement, each preliminary
prospectus, final prospectus and any supplements or amendments thereto to the
Holder.
9.5 The Company agrees to enter into an appropriate
cross-indemnity agreement with any underwriter (as defined in the Securities
Act) for the Holder in connection with the filing of a registration statement
pursuant to Section 9.1 hereof.
9.6 If the Company shall file any registration statement including
therein all or any part of the Warrant Shares either issuable upon exercise of
the Warrants by Holder or held by Holder, the Company and the Holder shall enter
into an appropriate cross-indemnity agreement whereby the Company shall
indemnify and hold harmless the Holder against any losses, claims, damages or
liabilities (or actions in respect thereof) arising out of or based upon any
untrue statement or alleged untrue statement of any material fact contained in
such registration statement, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
statements therein not misleading unless such statement or omission was made in
reliance upon and in conformity with written information furnished or required
to be furnished by the Holder, and the Holder shall (to the extent of and
limited to the amount of net proceeds received by the Holder from the sale of
Warrant Shares) indemnify and hold harmless the Company, each of its directors
and officers who have signed the registration statement and each person, if any,
who controls the Company, within the meaning of the Securities Act against any
losses, claims, damages or liabilities (or actions in respect thereof) arising
out of or based upon any untrue statement or alleged untrue statement of any
material fact contained in such registration statement, or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make statements therein not misleading, if the statement or
omission was made in reliance upon and in conformity with written information
furnished or required to be furnished by the Holder expressly for use in such
registration statement.
9.7 Nothing herein shall be construed to require any of the
holders who may desire to include any securities in any registration statement
referred to in Section 9.1 hereof to exercise their Warrants prior to the
effective date of registration statement and such holders, at their option, to
the extent permissible by law, may exercise the Warrants against payment of the
proceeds of the sale of such securities pursuant to a registration statement.
9.8 Until the shares shall be sold or capable of sale without
registration under the Securities Act, the Company at its expense will file such
post-effective amendments as may be necessary to make available for use a
prospectus meeting the requirements of the Securities Act, including, without
limitation, Section 10(a)(3). The Company will cause copies of such prospectus
to be delivered to any person exercising the warrant or selling the shares as
may be required by the Securities Act and the rules and regulations of the SEC.
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<PAGE>
SECTION 10. INVESTMENT REPRESENTATION AND LEGEND. Each holder, by
acceptance of this Warrant, represents and warrants to the Corporation that the
Holder is acquiring the Warrant and the securities issuable upon exercise
hereof, unless at the time of exercise a registration statement under the
Securities Act is effective with respect to such securities, for investment
purposes only and not with a view towards the resale or other distribution
thereof.
The Holder, by acceptance of this Warrant, agrees that the Corporation may
affix, unless the shares subject to this Warrant are registered at the time of
exercise, the following legend to certificates for securities issued upon
exercise of this Warrant:
The securities represented by this certificate have been issued
in reliance upon the representation of the holder that they
have been acquired for investment and not with a view toward
the resale or other distribution thereof, and have not been
registered under the Securities Act of 1933 (the "Securities
Act") or applicable state securities laws ("State Acts") and
may not be offered, sold, transferred, encumbered or otherwise
disposed of unless there is an effective registration statement
under the Securities Act and the applicable State Acts or unless
in the opinion of counsel acceptable to the Corporation, such
registration is not required.
SECTION 11. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant
is lost, stolen, mutilated or destroyed, the Corporation may, on such terms as
to indemnity or otherwise as it may in its discretion reasonably impose (which
shall, in the case of a mutilated Warrant, include the surrender thereof), issue
a new Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated or destroyed. Any such new Warrant shall constitute an original
contractual obligation of the Corporation, whether or not the allegedly lost,
stolen, mutilated or destroyed Warrant shall be at any time enforceable by
anyone.
SECTION 12. PAYMENT OF TAXES. The Company will pay all taxes, if any,
attributable to the transfer and/or issuance of the Warrants and the Warrant
Shares.
SECTION 13. NOTICES. All notices, requests, demands and other
communications relating to this Warrant Certificate shall be in writing,
addressed, if to the registered owner hereof, to it at the address furnished by
the registered owner to the Company, and, if to the Company, to it at 2600 S.W.
Third Avenue, Second Floor, Miami, Florida 33129-2383, or to such other address
as any party shall notify the other party in writing, and shall be effective, in
the case of written notice by first class certified mail, postage prepaid, three
(3) days after placement into the mails, in the case of written notice by
express mail or other overnight courier, the day after placement with that
service, and, in the case of notice by confirmed telex, facsimile transmission,
telegram or cable, on the same day as sent.
SECTION 14. BINDING EFFECT. This Warrant Certificate shall be binding upon
and inure to the sole and exclusive benefit of the Company, its successors and
assigns and the registered holder or holders from time to time of the Warrants
and the Warrant Shares.
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<PAGE>
SECTION 15. SUPPLYING INFORMATION. The Corporation shall cooperate with the
Holder in supplying such information as may be necessary for the Holder to
complete and file any information reporting forms presently or hereafter
required by the SEC as a condition to the availability of an exemption from the
Securities Act for the sale of any Warrant or Warrant Shares.
SECTION 16. FILINGS. The Corporation will deliver to Holder promptly upon
their becoming available one copy of each report, notice or proxy statement sent
by the Corporation to its stockholders generally, and of each regular or
periodic report (pursuant to the Securities Exchange Act of 1934, as amended)
and any registration statement, prospectus or written communication (other than
transmittal letters) (pursuant to the Securities Act), filed by the Corporation
with (i) the SEC or (ii) any securities exchange on which shares of Common Stock
are listed.
SECTION 17. SUCCESSORS AND ASSIGNS. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors of the
Corporation and Holder. The provisions of this Warrant are intended to be for
the benefit of all Holders from time to time of this Warrant, and shall be
enforceable by any such Holder.
SECTION 18. AMENDMENT. This Warrant may not be modified or amended except
by written agreement of the parties.
SECTION 19. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
SECTION 20. GOVERNING LAW. THIS WARRANT CERTIFICATE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF FLORIDA, WITHOUT
REFERENCE TO THE CONFLICTS OF LAWS PRINCIPLES OF THE STATE OF FLORIDA.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Warrant on and as of
the day and year first above written.
EVANS ENVIRONMENTAL CORPORATION,
a Colorado corporation
By: /s/ SCOTT E. SALPETER
-------------------------------------------
Scott E. Salpeter, Vice President
[EXECUTION PAGE TO WARRANT CERTIFICATE]
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<PAGE>
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing ____________ shares of Common Stock of Evans
Environmental Corporation, a Colorado, and hereby makes payment of
$________________ in payment therefor.
______________________________
Signature
______________________________
Signature, if jointly held
______________________________
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
(if other than to the registered holder of the within Warrant)
Name ___________________________________________________________________________
(Please typewrite or print in block letters)
Address ________________________________________________________________________
________________________________________________________________________________
Social Security or Taxpayer Identification Number ______________________________
And if said number of shares shall not be all the shares exchangeable or
purchasable under the within Warrant, a new Warrant is to be issued in the name
of the undersigned for the balance remaining of the shares purchasable
thereunder.
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, ___________________________________________ hereby
sells, assigns and transfers unto ___________________________________________,
the right to purchase Common Stock of Evans Environmental Corporation, a
Colorado corporation represented by this Warrant to the extent of shares as to
which such right is exercisable and does hereby irrevocably constitute and
appoint __________________________________ Attorney, to transfer the same on the
books of the Company with full power of substitution in the premises.
Dated: _______________________ 199_
______________________________
Signature
______________________________
Signature, if jointly held
- --------------------------------------------------------------------------------
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SEC ACT OF 1933, AS AMENDED ("SECURITIES ACT") OR
APPLICABLE STATE SECURITIES LAWS ("STATE ACTS"). THIS WARRANT AND ANY SECURITIES
ISSUED UPON EXERCISE OF THIS WARRANT MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE
SECURITIES ACT AND APPLICABLE STATE ACTS UNLESS THE CORPORATION HAS RECEIVED AN
OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
- --------------------------------------------------------------------------------
EVANS ENVIRONMENTAL CORPORATION
WARRANT CERTIFICATE
Warrants to Subscribe April 4, 1995
for 12,500 shares of
Common Stock
THIS CERTIFIES that, for value received, Strategica Capital Corporation, a
Delaware corporation, or its registered assigns (the "Holder"), is the
registered owner of 12,500 warrants (the "Warrants") of EVANS ENVIRONMENTAL
CORPORATION, a Colorado corporation (hereinafter referred to as the
"Corporation" or the "Company"). Each of the Warrants entitles the Holder to
purchase, after the satisfaction of the condition precedent to each such
purchase, one duly authorized, validly issued, fully paid and nonassessable
share of voting common stock, $.003 par value per share, of the Corporation (the
"Common Stock"). Each share of Common Stock relating to a Warrant and/or each
share of Common Stock underlying a Warrant may sometimes hereinafter be referred
to as a "Warrant Share."
SECTION 1. EXERCISE OF WARRANT. These Warrants may be exercised at any time
from the date hereof, to the extent that the condition precedent specified in
the next paragraph of this section is satisfied, until and including January 11,
1999, 5:00 p.m., Miami, Florida time (the "Expiration Date"). If the average of
the closing bid and asked prices of the Company's Common Stock for the ten (10)
trading days (in which the Company's Common Stock is traded) immediately prior
to January 11, 1999, is less than $2.00 per share on the original Expiration
Date, then the Expiration Date shall be extended for one additional year to
January 11, 2000 (the "First Extended Expiration Date"). If such average
immediately prior to January 11, 2000, is less than $2.00 per share on the First
Extended Expiration Date, then the Expiration Date shall be extended for one
additional year to January 11, 2001 (the "Second Extended Expiration
<PAGE>
Date"). If such average immediately prior to January 11, 2001, is less than
$2.00 per share on the Second Extended Expiration Date, then the Expiration Date
shall be extended for one additional year to January 11, 2002. Subject to
adjustment pursuant to Section 4 below, the exercise price per share of the
shares of Common Stock purchasable pursuant to this Warrant shall be equal to
the "Market Price," as hereinafter defined, of the Company's Common Stock (such
price, as adjusted from time to time, being hereinafter referred to as the
"Exercise Price"). For purposes of the preceding sentence, "Market Price" shall
be defined as the average of the closing bid prices of the Company's Common
Stock for the ten (10) trading days, in which the Company's Common Stock is
traded, immediately prior to date of exercise.
These Warrant are exercisable only to the extent that shares of Common
Stock have been issued by the Company as a result of the exercise of stock
options pursuant to any of the following agreements and then only at a rate of
0.25 shares of Common Stock for every share of Common Stock so issued:
(a) Option Agreement dated March 1, 1993, between the Company and Jorge
Diaz with respect to 10,000 shares of the Company's Common Stock.
(b) Option Agreement dated December 1, 1993, between the Company and
Stephen Kravitz with respect to 10,000 shares of the Company's Common
Stock.
(c) Option Agreement dated December 1, 1993, between the Company and
William L. Young with respect to 30,000 shares of the Company's Common
Stock.
The options granted pursuant to the foregoing agreements all expire on or before
April 28, 1997. Therefore, if none of the options are exercised, these Warrants
expire on April 28, 1997; otherwise such number of these Warrants are
exercisable for the periods described in the first paragraph of this section as
are equal to the number of shares of Common Stock for which the condition
precedent in this paragraph has been fulfilled. The Company shall give the
Holder written notice of the exercise of options pursuant to any of the
foregoing agreements within five (5) business days after the occurrence of such
exercise. Such notice shall specify the number of shares of Common Stock that
were issued upon such exercise and the number of these Warrants that have become
exercisable as a result of such exercise.
If the closing bid price per share of the Company's Common Stock for ten
(10) consecutive trading days, in which the Company's Common Stock is traded
(the "Mandatory Market Price"), equals or exceeds $1.50 per share at any times
during the first four years from the date hereof, the Holder shall, at the
option of the Company, exercise up to 10% of the original number of Warrants
during each of the first and second years from the date hereof and up to 25% of
the original number of Warrants during each of the third and fourth year from
the date hereof. If the Holder is not required to exercise the maximum number of
Warrants for any given year, then the unexercised number shall be added to the
maximum number for the succeeding year of the term of the Warrants. The Holder,
at its option in each instance of
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<PAGE>
required exercise, may exercise one-half or more of the number of Warrants
specified in the Company's notice to the Holder for cash and surrender the
balance of such number of Warrants to the Company in exchange for the number of
Warrant Shares equal to (x) the number of Warrant Shares as to which the
Warrants are being surrendered multiplied by (y) a fraction, the numerator of
which is the Mandatory Market Price less the Exercise Price of the Warrant
Shares and the denominator of which is the Mandatory Market Price of the Warrant
Shares. The Company shall give the Holder written notice of the Company's
exercise of each option to require mandatory exercise of outstanding Warrants
within five (5) business days after the occurrence of events triggering the
Company's right to exercise such option. If the Company does not timely give the
Holder such notice and the Mandatory Market Price falls below $1.50 per share,
then the Company's right to exercise each such option shall lapse for the time
being and shall reoccur each time the Mandatory Market Price again equals or
exceeds $1.50 per share until the Company exercises each such option.
The rights represented by this Warrant shall be exercised by the holder
hereof, in whole or in part, but not as to a fractional share of Common Stock,
by the surrender of this Warrant (properly endorsed) at the office of the
Corporation or its transfer agent, and by payment to the Corporation of the
Exercise Price in cash or by wire transfer, for each share being purchased. Upon
the exercise of this Warrant, a certificate or certificates for the shares of
Common Stock so purchased, registered in the name of the holder, shall be
promptly delivered to the holder hereof within a reasonable time. The person in
whose name any certificate for shares of Common Stock is issued upon exercise of
this Warrant shall for all purposes be deemed to have become the holder of
record of such shares on the date on which the Warrant was surrendered and
payment of the Exercise Price and any applicable taxes was made, except that, if
the date of such surrender and payment is a date on which the stock transfer
books of the Corporation are closed, such person shall be deemed to have become
the holder of such shares at the close of business on the next succeeding date
on which the stock transfer books are open.
SECTION 2. TRANSFER, DIVISION AND COMBINATION.
(a) Neither the Warrants or the Warrant Shares may be sold,
assigned or otherwise transferred prior to July 11, 1995 to any person other
than an officer, managing director or affiliate of Holder. Transfer of this
Warrant and all rights hereunder, in whole or in part, is registrable on the
books of the Corporation to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Corporation, together with the
Assignment Form annexed hereto 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 Corporation shall
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denomination 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.
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<PAGE>
(b) This Warrant may be divided or combined with other Warrants
upon presentation hereof at the aforesaid office or agency of the Corporation,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by Holder or his agent or attorney.
Subject to compliance with subparagraph (a) above, as to any transfer which may
be involved in such division or combination, the Corporation 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.
(c) The Corporation shall prepare, issue and deliver at its own
expense (other than stock transfer taxes) the new Warrant or Warrants under this
Section 2.
(d) The Corporation agrees to maintain, at its aforesaid office or
agency, books for the registration and the registration of transfer of the
Warrants.
(e) In the case of all dividends or other distributions of the
Corporation to the holders of its Common Stock with respect to which any
provision of Section 3 refers to the taking of a record of such holders, the
Corporation will in each such case take such a record and will take such record
as of the close of business on a business day. The Corporation will not at any
time, except upon dissolution, liquidation or winding up of the Corporation,
close its stock transfer books or warrant transfer books so as to result in
preventing or delaying the exercise or transfer of any warrant.
SECTION 3. ADJUSTMENT OF NUMBER OF SHARES SUBJECT TO WARRANT. Upon any
adjustment of the Exercise Price pursuant to Sections 4(a) or 4(b) hereof, the
holder of this Warrant shall thereafter be entitled to purchase, at the adjusted
Exercise Price, the number of shares (calculated to the nearest tenth of a
share) obtained by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of shares purchasable pursuant hereto immediately
prior to such adjustment and dividing the product thereof by the Exercise Price
resulting from such adjustment.
SECTION 4. ADJUSTMENT OF EXERCISE PRICE.
(a) If the Corporation shall hereafter split, subdivide or combine
its Common Stock, then the Exercise Price shall be proportionately adjusted so
that the holder of this Warrant shall receive the equivalent number of shares,
at the equivalent cost per share, as if this Warrant was exercised on the date
immediately preceding such split, subdivision or combination of the
Corporation's Common Stock.
(b) If the Corporation shall pay a dividend with respect to the
Common Stock or make any other distribution with respect to the Common Stock
payable in shares of Common Stock, then the Exercise Price shall be adjusted,
from and after the date of determination of the shareholders entitled to receive
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such date of determination by a
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<PAGE>
fraction (i) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution,
and (ii) the denominator of which shall be the total number of shares of Common
Stock outstanding immediately after such dividend or distribution.
(c) Upon any such adjustment of the Exercise Price pursuant to
this Section, then and in each such case the Corporation shall give written
notice thereof to Holder stating the Exercise Price resulting from such
adjustment and the number of shares of Common Stock thereafter purchasable under
this Warrant and setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based.
SECTION 5. RECLASSIFICATION, MERGER, ETC. In the case of any
reclassification of the Common Stock or in the case of any consolidation or
merger of the Corporation with or into another corporation (other than a merger
with another corporation in which the Corporation is the surviving corporation
and which does not result in any reclassification of the Common Stock) or in the
case of any sale of all or substantially all of the assets of the Corporation,
then the Corporation, or such successor or purchasing corporation, as the case
may be, shall execute a new certificate, providing that the holder of this
Warrant shall have the right to exercise such new Warrant and upon such exercise
to receive, in lieu of each share of Common Stock theretofore issuable upon
exercise of this Warrant, the number and kind of shares of stock, other
securities, money or property receivable upon such reclassification,
consolidation, merger or sale of assets by a holder of shares of the Common
Stock with respect to one share of Common Stock. Such new Warrant certificate
shall provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for herein. The provisions of this
Section shall similarly apply to successive reclassifications, consolidations,
mergers or sales of assets.
SECTION 6. STOCK TO BE RESERVED. The Corporation will at all times reserve
and keep available out of its authorized Common Stock or its treasury shares,
solely for the purpose of issue upon the exercise of this Warrant as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the exercise of this Warrant. The Corporation covenants that all shares of
Common Stock which shall be so issued shall be duly and validly issued and fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof. The Corporation will take all such action as may be
necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any requirements of
any national securities exchange upon which the Common Stock of the Corporation
may be listed. The Corporation has not granted and will not grant any right of
first refusal with respect to shares issuable upon exercise of this Warrant, and
there are no preemptive rights associated with such shares.
SECTION 7. NO STOCKHOLDER RIGHTS OR LIABILITIES. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a stockholder
of the Corporation. No provision hereof, in the absence of affirmative action by
the holder hereof to purchase shares
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<PAGE>
of Common Stock, and no mere enumeration herein of the rights or privileges of
the holder hereof, shall give rise to any liability of such holder for the
Exercise Price or as a shareholder of the Corporation, whether such liability is
asserted by the Corporation or by creditors of the Corporation.
SECTION 8. FRACTIONAL SHARES. No fractional shares shall be issued upon the
exercise of this Warrant, but the Company shall pay the holder an amount equal
to the fair market value of such fractional share of Common Stock in lieu of
each fraction of a share otherwise called for upon any exercise of this Warrant.
For purposes of this Warrant, the fair market value of a share of Common Stock
shall be determined as follows:
(a) If the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the Nasdaq system, the current market value shall be the last
reported sale price of the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant or on such day the
average of the closing bid and asked prices for such day on such exchange or
system, as applicable; or
(b) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the mean of the last
reported bid and ask prices reported by the National Quotation Bureau, Inc. on
the last business day prior to the date of the exercise of this Warrant; or
(c) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the current
market value shall be an amount, not less than book value thereof as at the end
of the most recent fiscal year of the Company ending prior to the date of the
exercise of the Warrant, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
SECTION 9. REGISTRATION RIGHTS. Neither the Warrant nor the Warrant Shares
have been registered under the Securities Act of 1933, as amended (the
"Securities Act").
9.1 After January 1, 1995, whenever the Company proposes to file
under the Securities Act a Registration Statement relating to any of its Common
Stock, whether on its own behalf or on behalf of any holders of Common Stock of
the Company, the Company shall, at least thirty (30) days prior to such filing,
give written notice of such proposed filing to Holder. Upon receipt by the
Company not more than thirty (30) days after such notice of a written request
from Holder for registration of Warrant Shares issuable upon exercise of the
Warrants by Holder or held by Holder, the Company shall (A) include in such
registration statement or in a separate registration statement concurrently
filed, and shall use its best efforts to cause such registration statement to
become effective with respect to, the Warrant Shares as to which Holder requests
registration and (B) if such proposed registration is in connection with an
underwritten offering of Common Stock for the benefit of the Company, upon
request of Holder, use its best
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<PAGE>
efforts to cause the managing underwriter therefor to include in such offering
the Warrant Shares as to which Holder requests such inclusion, on terms and
conditions comparable to those of the securities offered on behalf of the
Company. Holder shall cooperate with the Company in the preparation of such
Registration Statement, to the extent required to furnish information concerning
the Holder therein. Notwithstanding the foregoing, this Section 9.1 shall not be
applicable to registration statements of the Company filed pursuant to Form S-8
or Form S-4.
9.2 Whenever one or more registered holders of a majority of the
Warrants or Warrant Shares issued as of the date hereof pursuant to a certain
Advisory Agreement effective as of July 11, 1994 between Strategica Group, Inc.
or its designees and the Company shall make a written request to the Company to
register under the Securities Act Warrant Shares either issuable upon exercise
of the Warrants or held by such holders, the Company shall within ten (10) days
after such request is received promptly give written notice to holder stating
the estimated approximate date of filing such registration statement, and shall
thereupon promptly use its best efforts to file a registration statement (and
thereafter use its best efforts to cause such registration) with respect to all
Warrant Shares issuable upon exercise of the Warrants by Holder or held by
Holder as soon as reasonably practical after the date of receipt of such notice
by the Company. The Company shall not be required at its expense to effect more
than one registration statement pursuant to this Section 9.2. Notwithstanding
anything to the contrary contained herein, in the event that Holder exercises
its registration rights under this Section 9.2: (a) on or prior to October 13,
1995, and the registration of the subject Warrant Shares issuable upon exercise
of the Warrants or held by such holders shall not have been declared effective
by the Securities and Exchange Commission (the "SEC") pursuant to the Securities
Act on or prior to January 5, 1996, then the $1.25 per share Exercise Price
shall be extended to the date that is five (5) business days following such
effective date; or (b) on or prior to April 12, 1997, and the registration of
the subject Warrant Shares issuable upon exercise of the Warrants or held by
such holders shall not have been declared effective by the SEC pursuant to the
Securities Act on or prior to July 7, 1997, then the Expiration Date shall be
extended to the date that is five (5) business days following such effective
date.
9.3 If the Corporation is required by the provisions of this
Section 9 to use its best efforts to effect the registration of any of its
securities under the Securities Act, the Corporation will, as expeditiously as
is possible:
(a) Prepare and file with the SEC a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such registration statement
whenever the Holder of such securities shall desire to transfer the same.
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<PAGE>
(c) Furnish to the Holder such number of copies of a summary
prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents, as the Holder may reasonably request in order to facilitate the
transfer of the securities owned by such Holder.
(d) Use its best efforts to register or qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions within the United States as Holder shall
request (provided that the Company shall not be required to pay registration or
qualification expense for more than ten (10) states to be designated by Holder)
and do such other reasonable acts and things as may be the transfer in such
jurisdictions of the securities owned by Holder.
(e) Furnish, at the request of the Holder requesting
registration of Warrant Shares, on the date that such Warrant Shares are
delivered to the underwriters for sale pursuant to such registration or, if such
Warrant Shares are not being sold through underwriters, on the date that the
registration statement with respect to such shares becoming effective, (1) an
opinion, dated such date, of the outside counsel representing the Corporation
for the purposes of such registration, addressed to the underwriters, if any,
and if such Warrant Shares are not being sold through underwriters, then to the
holders making such request, stating that such registration statement has become
effective under the Securities Act and that (i) to the best knowledge of such
counsel, no stop order suspending the effectiveness thereof has been issued and
no proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act, (ii) the registration statement, the
related prospectus, and each amendment or supplement thereto, comply as to form
in all material respects with the requirements of the Securities Act and the
applicable rules and regulations of the SEC thereunder (except that such counsel
need express no opinion as to financial statements contained therein), (iii)
such counsel has no reason to believe that either the registration statement or
the prospectus, or any amendment or supplement thereto, contains any untrue
statement of a material fact required to be stated therein or necessary to make
the statements therein not misleading, (iv) the descriptions in the registration
statement or the prospectus, or any amendment or supplement thereto, of all
legal matters and contracts and other legal documents or instruments are
accurate and fairly present the information required to be shown, and (v) such
counsel does not know of any legal or governmental proceedings, pending or
contemplated, required to be described in the registration statement or
prospectus, or any amendment or supplement thereto, which are not described as
required, nor of any contracts or documents or instruments of a character
required to be described in the registration statement or prospectus, or any
amendment or supplement thereto, or to be filed as exhibits to the registration
statement which are not described and filed or incorporated by reference as
required; and (2) a letter dated such date, from the independent certified
public accountants of the Corporation, addressed to the underwriters, if any,
and if such Warrant Shares are not being sold through underwriters, then to the
Holders making such request, stating that they are independent certified public
accountants within the meaning of the Securities Act and that, in the opinion of
such accountants, the financial statements and other financial data of the
Corporation included in the registration statement or the prospectus, or any
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<PAGE>
amendment or supplement thereto, comply as to form in all material respects with
the applicable accounting requirements of the Securities Act. Such opinion of
counsel shall additionally cover such other legal matters with respect to the
registration in respect of which such opinion is being given as the Holders may
reasonably request. Such letter from the independent certified public
accountants shall additionally cover such other, financial matters (including
information as to the period ending not more than five (5) business days prior
to the date of such letter) with respect to the registration in respect of which
such letter is being given as the Holders may reasonably request.
(f) Otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC.
9.4 The Holder of the securities being so registered agrees to pay
all of the underwriting discounts and commissions with respect to the securities
owned by them being registered. The Company will pay all other costs and
expenses in connection with a registration statement to be filed pursuant to
Section 9 hereof including, without limitation, registration fees, the
reasonable fees and expenses of counsel for the Company and Holder, the fees and
expenses of its accountants and all other costs and expenses incident to the
preparation, printing and filing under the Securities Act of any such
registration statement, each prospectus and all amendments and supplements
thereto, the costs incurred in connection with the qualification of such
securities for sale in not more than ten (10) states as Holder has designated,
including fees and disbursements of counsel for the Company, and the costs of
supplying a reasonable number of copies of the registration statement, each
preliminary prospectus, final prospectus and any supplements or amendments
thereto to the Holder.
9.5 The Company agrees to enter into an appropriate
cross-indemnity agreement with any underwriter (as defined in the Securities
Act) for the Holder in connection with the filing of a registration statement
pursuant to Section 9.1 hereof.
9.6 If the Company shall file any registration statement including
therein all or any part of the Warrant Shares either issuable upon exercise of
the Warrants by Holder or held by Holder, the Company and the Holder shall enter
into an appropriate cross-indemnity agreement whereby the Company shall
indemnify and hold harmless the Holder against any losses, claims, damages or
liabilities (or actions in respect thereto arising out of or based upon any
untrue statement or alleged untrue statement of any material fact contained in
such registration statement, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
statements therein not misleading unless such statement or omission was made in
reliance upon and in conformity with written information furnished or required
to be furnished by the Holder, and the Holder shall (to the extent of and
limited to the amount of net proceeds received by the Holder from the sale of
Warrant Shares) indemnify and hold harmless the Company, each of its directors
and officers who have signed the registration statement and each person, if any,
who controls the Company, within the meaning of the Securities Act against any
losses, claims, damages or liabilities (or actions in respect thereof)
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<PAGE>
arising out of or based upon any untrue statement or alleged untrue statement of
any material fact contained in such registration statement, or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make statements therein not misleading, if the statement or
omission was made in reliance upon and in conformity with written information
furnished or required to be furnished by the Holder expressly for use in such
registration statement.
9.7 Nothing herein shall be construed to require any of the
holders who may desire to include any securities in any registration statement
referred to in Section 9.1 hereof to exercise their Warrants prior to the
effective date of registration statement and such holders, at their option, to
the extent permissible by law, may exercise the Warrants against payment of the
proceeds of the sale of such securities pursuant to a registration statement.
9.8 Until the shares shall be sold or capable of sale without
registration under the Securities Act, the Company at its expense will file such
post-effective amendments as may be necessary to make available for use a
prospectus meeting the requirements of the Securities Act, including, without
limitation, Section 10(a)(3). The Company will cause copies of such prospectus
to be delivered to any person exercising the warrant or selling the shares as
may be required by the Securities Act and the rules and regulations of the SEC.
SECTION 10. INVESTMENT REPRESENTATION AND LEGEND. Each holder, by
acceptance of this Warrant, represents and warrants to the Corporation that the
Holder is acquiring the Warrant and the securities issuable upon exercise
hereof, unless at the time of exercise a registration statement under the
Securities Act is effective with respect to such securities, for investment
purposes only and not with a view towards the resale or other distribution
thereof.
The Holder, by acceptance of this Warrant, agrees that the Corporation may
affix, unless the shares subject to this Warrant are registered at the time of
exercise, the following legend to certificates for securities issued upon
exercise of this Warrant:
The securities represented by this certificate have been issued
in reliance upon the representation of the holder that they
have been acquired for investment and not with a view toward
the resale or other distribution thereof, and have not been
registered under the Securities Act of 1933 (the "Securities
Act") or applicable state securities laws ("State Acts") and
may not be offered, sold, transferred, encumbered or otherwise
disposed of unless there is an effective registration statement
under the Securities Act and the applicable State Acts or unless
in the opinion of counsel acceptable to the Corporation, such
registration is not required.
SECTION 11. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant
is lost, stolen, mutilated or destroyed, the Corporation may, on such terms as
to indemnity or otherwise
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as it may in its discretion reasonably impose (which shall, in the case of a
mutilated Warrant, include the surrender thereof), issue a new Warrant of like
denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed.
Any such new Warrant shall constitute an original contractual obligation of the
Corporation, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall be at any time enforceable by anyone.
SECTION 12. PAYMENT OF TAXES. The Company will pay all taxes, if any,
attributable to the transfer and/or issuance of the Warrants and the Warrant
Shares.
SECTION 13. NOTICES. All notices, requests, demands and other
communications relating to this Warrant Certificate shall be in writing,
addressed, if to the registered owner hereof, to it at the address furnished by
the registered owner to the Company, and, if to the Company, to it at 2600 S.W.
Third Avenue, Second Floor, Miami, Florida 33129-2383, or to such other address
as any party shall notify the other party in writing, and shall be effective, in
the case of written notice by first class certified mail, postage prepaid, three
(3) days after placement into the mails, in the case of written notice by
express mail or other overnight courier, the day after placement with that
service, And, in the case of notice by confirmed telex, facsimile transmission,
telegram or cable, on the same day as sent.
SECTION 14. BINDING EFFECT. This Warrant Certificate shall be binding upon
and inure to the sole and exclusive benefit of the Company, its successors and
assigns and the registered holder or holders from time to time of the Warrants
and the Warrant Shares.
SECTION 15. SUPPLYING INFORMATION. The Corporation shall cooperate with the
Holder in supplying such information as may be necessary for the Holder to
complete and file any information reporting forms presently or hereafter
required by the SEC as a condition to the availability of an exemption from the
Securities Act for the sale of any Warrant or Warrant Shares.
SECTION 16. FILINGS. The Corporation will deliver to Holder promptly upon
their becoming available one copy of each report, notice or proxy statement sent
by the Corporation to its stockholders generally, and of each regular or
periodic report (pursuant to the Securities Exchange Act of 1934, as amended)
and any registration statement, prospectus or written communication (other than
transmittal letters) (pursuant to the Securities Act), filed by the Corporation
with (i) the SEC or (ii) any securities exchange on which shares of Common Stock
are listed.
SECTION 17. SUCCESSORS AND ASSIGNS. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors of the
Corporation and Holder. The provisions of this Warrant are intended to be for
the benefit of all Holders from time to time of this Warrant, and shall be
enforceable by any such Holder.
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<PAGE>
SECTION 18. AMENDMENT. This Warrant may not be modified or amended except
by written agreement of the parties.
SECTION 19. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
SECTION 20. GOVERNING LAW. THIS WARRANT CERTIFICATE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF FLORIDA, WITHOUT
REFERENCE TO THE CONFLICTS OF LAWS PRINCIPLES OF THE STATE OF FLORIDA.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned has executed this Warrant on and as of
the day and year first above written.
EVANS ENVIRONMENTAL CORPORATION,
a Colorado corporation
By: /s/ SCOTT E. SALPETER
-----------------------------------------
Scott E. Salpeter, Vice President
[EXECUTION PAGE TO WARRANT CERTIFICATE]
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<PAGE>
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing ____________ shares of Common Stock of Evans
Environmental Corporation, a Colorado, and hereby makes payment of $____________
in payment therefor.
______________________________________________
Signature
______________________________________________
Signature, if jointly held
______________________________________________
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
(if other than to the registered holder of the within Warrant)
Name ___________________________________________________________________________
(Please typewrite or print in block letters)
Address ________________________________________________________________________
________________________________________________________________________________
Social Security or Taxpayer Identification Number ______________________________
And if said number of shares shall not be all the shares exchangeable or
purchasable under the within Warrant, a new Warrant is to be issued in the name
of the undersigned for the balance remaining of the shares purchasable
thereunder.
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, ____________________________ hereby sells, assigns and
transfers unto _________________________________________, the right to purchase
Common Stock of Evans Environmental Corporation, a Colorado corporation
represented by this Warrant to the extent of shares as to which such right is
exercisable and does hereby irrevocably constitute and appoint
______________________________________________________ Attorney, to transfer the
same on the books of the Company with full power of substitution in the
premises.
Dated: ________________, 199_
___________________________________________
Signature
___________________________________________
Signature, if jointly held
- --------------------------------------------------------------------------------
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT")
OR APPLICABLE STATE SECURITIES LAWS ("STATE ACTS"). THIS WARRANT AND ANY
SECURITIES ISSUED UPON EXERCISE OF THIS WARRANT MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER
THE SECURITIES ACT AND APPLICABLE STATE ACTS UNLESS THE CORPORATION HAS RECEIVED
AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS
NOT REQUIRED.
- --------------------------------------------------------------------------------
EVANS ENVIRONMENTAL CORPORATION
WARRANT CERTIFICATE
Warrants to Subscribe April 4, 1995
for 761,731 shares of
Series A Preferred Stock
THIS CERTIFIES that, for value received, STRATEGICA CAPITAL CORPORATION, a
Delaware corporation, or its registered assigns (the "Holder"), is the
registered owner of 761,731 warrants (the "Warrants") of EVANS ENVIRONMENTAL
CORPORATION, a Colorado corporation (hereinafter referred to as the
"Corporation" or the "Company"). Each of the Warrants entitles the Holder to
purchase one duly authorized, validly issued, fully paid and nonassessable share
of nonvoting Series A Convertible Preferred Stock, $.001 par value per share, of
the Corporation (the "Series A Preferred Stock"). Each share of Series A
Preferred Stock relating to a Warrant and/or each share of Series A Preferred
Stock underlying a Warrant may sometimes hereinafter be referred to as a
"Warrant Share."
SECTION 1. EXERCISE OF WARRANT. This Warrant may be exercised at any time
from the date hereof until and including January 11, 1999, 5:00 p.m., Miami,
Florida time (the "Expiration Date"). If the average of the closing bid and
asked prices of the Company's Common Stock for the ten (10) trading days (in
which the Company's Common Stock is traded) immediately prior to January 11,
1999, is less than $2.00 per share on the original Expiration Date, then the
Expiration Date shall be extended for one additional year to January 11, 2000
(the "First Extended Expiration Date"). If such average immediately prior to
January 11, 2000, is less than $2.00 per share on the First Extended Expiration
Date, then the Expiration Date shall be extended for one additional year to
January 11, 2001 (the "Second Extended Expiration Date"). If such average
immediately prior to January 11, 2001, is less than $2.00 per share on
<PAGE>
the Second Extended Expiration Date, then the Expiration Date shall be extended
for one additional year to January 11, 2002. Subject to adjustment pursuant to
Section 4 below, the exercise price per share of the shares of Series A
Preferred Stock purchasable pursuant to this Warrant shall be equal to the
product of the "Market Price," as hereinafter defined, of the Company's common
stock, $.003 par value per share (the "Common Stock") and the number of shares
of Common Stock into which a share of the Series A Preferred Stock is then
convertible up to a maximum of $0.675 per share (such price, as adjusted from
time to time, being hereinafter referred to as the "Exercise Price"). For
purposes of the preceding sentence, "Market Price" shall be defined as the
average of the closing bid prices of the Company's Common Stock for the ten (10)
trading days, in which the Company's Common Stock is traded, immediately prior
to date of exercise.
If the closing bid price per share of the Company's Common Stock for ten
(10) consecutive trading days, in which the Company's Common Stock is traded
(the "Mandatory Market Price"), equals or exceeds $1.50 per share at any times
during the first four years from the date hereof, the Holder shall, at the
option of the Company, exercise up to 10% of the original number of Warrants
during each of the first and second years from the date hereof and up to 25% of
the original number of Warrants during each of the third and fourth year from
the date hereof. If the Holder is not required to exercise the maximum number of
Warrants for any given year, then the unexercised number shall be added to the
maximum number for the succeeding year of the term of the Warrants. The Holder,
at its option in each instance of required exercise, may exercise one-half or
more of the number of Warrants specified in the Company's notice to the Holder
for cash and surrender the balance of such number of Warrants to the Company in
exchange for the number of Warrant Shares equal to (x) the number of Warrant
Shares as to which the Warrants are being surrendered multiplied by (y) a
fraction, the numerator of which is the Mandatory Market Price less the Exercise
Price of the Warrant Shares and the denominator of which is the Mandatory Market
Price of the Warrant Shares. The Company shall give the Holder written notice of
the Company's exercise of each option to require mandatory exercise of
outstanding Warrants within five (5) business days after the occurrence of
events triggering the Company's right to exercise such option. If the Company
does not timely give the Holder such notice and the Mandatory Market Price falls
below $1.50 per share, then the Company's right to exercise each such option
shall lapse for the time being and shall reoccur each time the Mandatory Market
Price again equals or exceeds $1.50 per share until the Company exercises each
such option.
The rights represented by this Warrant shall be exercised by the holder
hereof, in whole or in part, but not as to a fractional share of Series A
Preferred Stock, by the surrender of this Warrant (properly endorsed) at the
office of the Corporation or its transfer agent, and by payment to the
Corporation of the Exercise Price in cash or by wire transfer, for each share
being purchased. Upon the exercise of this Warrant, a certificate or
certificates for the shares of Series A Preferred Stock so purchased, registered
in the name of the holder, shall be promptly delivered to the holder hereof
within a reasonable time. The person in whose name any certificate for shares of
Series A Preferred Stock is issued upon exercise of this Warrant
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<PAGE>
shall for all purposes be deemed to have become the holder of record of such
shares on the date on which the Warrant was surrendered and payment of the
Exercise Price and any applicable taxes was made, except that, if the date of
such surrender and payment is a date on which the stock transfer books of the
Corporation are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
SECTION 2. TRANSFER, DIVISION AND COMBINATION.
(a) Neither the Warrants or the Warrant Shares may be sold,
assigned or otherwise transferred prior to July 11, 1995 to any person other
than an officer, managing director or affiliate of Holder. Transfer of this
Warrant and all rights hereunder, in whole or in part, is registrable on the
books of the Corporation to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Corporation, together with the
Assignment Form annexed hereto 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 Corporation shall
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denomination 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 Series A Preferred Stock without having a
new Warrant issued.
(b) This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office or agency of the
Corporation, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by Holder or his
agent or attorney. Subject to compliance with subparagraph (a) above, as to any
transfer which may be involved in such division or combination, the Corporation
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.
(c) The Corporation shall prepare, issue and deliver at its
own expense (other than stock transfer taxes) the new Warrant or Warrants under
this Section 2.
(d) The Corporation agrees to maintain, at its aforesaid
office or agency, books for the registration and the registration of transfer of
the Warrants.
(e) In the case of all dividends or other distributions of
the Corporation to the holders of its Common Stock or any series of preferred
stock with respect to which there is a taking of a record of such holders, the
Corporation will in each such case take such a record and will take such record
as of the close of business on a business day. The Corporation will not at any
time, except upon dissolution, liquidation or winding up of the Corporation,
close its stock transfer books or warrant transfer books so as to result in
preventing or delaying the exercise or transfer of any warrant.
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<PAGE>
SECTION 3. ADJUSTMENT OF NUMBER OF SHARES SUBJECT TO WARRANT. Upon any
adjustment of the Exercise Price pursuant to Sections 4(a) or 4(b) hereof, the
holder of this Warrant shall thereafter be entitled to purchase, at the adjusted
Exercise Price, the number of shares (calculated to the nearest tenth of a
share) obtained by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of shares purchasable pursuant hereto immediately
prior to such adjustment and dividing the product thereof by the Exercise Price
resulting from such adjustment.
SECTION 4. ADJUSTMENT OF EXERCISE PRICE.
(a) If the Corporation shall hereafter split, subdivide or
combine its Common Stock, then the Exercise Price shall be proportionately
adjusted so that the holder of this Warrant shall receive the equivalent number
of shares, at the equivalent cost per share, as if this Warrant was exercised
and the Series A Preferred Stock converted on the date immediately preceding
such split, subdivision or combination of the Corporation's Common Stock.
(b) If the Corporation shall pay a dividend with respect to
the Common Stock or make any other distribution with respect to the Common Stock
payable in shares of Common Stock, then the Exercise Price shall be adjusted,
from and after the date of determination of the shareholders entitled to receive
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such date of determination by a
fraction (i) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution, and
(ii) the denominator of which shall be the total number of shares of Common
Stock outstanding immediately after such dividend or distribution.
(c) Upon any such adjustment of the Exercise Price pursuant
to this Section, then and in each such case the Corporation shall give written
notice thereof to Holder stating the Exercise Price resulting from such
adjustment and the number of shares of Series A Preferred Stock thereafter
purchasable under this Warrant and setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based.
SECTION 5. RECLASSIFICATION, MERGER, ETC. In the case of any
reclassification of the Common Stock or in the case of any consolidation or
merger of the Corporation with or into another corporation (other than a merger
with another corporation in which the Corporation is the surviving corporation
and which does not result in any reclassification of the Common Stock) or in the
case of any sale of all or substantially all of the assets of the Corporation,
then the Corporation, or such successor or purchasing corporation, as the case
may be, shall execute a new certificate, providing that the holder of this
Warrant shall have the right to exercise such new Warrant and upon such exercise
to receive, in lieu of each share of Common Stock theretofore issuable upon
conversion of the Series A Preferred Stock issuable upon exercise of this
Warrant, the number and kind of shares of stock, other securities, money or
property receivable upon such reclassification, consolidation, merger or sale of
assets by a holder of
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<PAGE>
shares of the Common Stock with respect to one share of Common Stock. Such new
Warrant certificate shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for herein. The
provisions of this Section shall similarly apply to successive
reclassifications, consolidations, mergers or sales of assets.
SECTION 6. STOCK TO BE RESERVED. The Corporation will at all times reserve
and keep available out of its authorized Series A Preferred Stock or its
treasury shares thereof, solely for the purpose of issue upon the exercise of
this Warrant as herein provided, such number of shares of Series A Preferred
Stock as shall then be issuable upon the exercise of this Warrant. The
Corporation will at all times also reserve and keep available out of its
authorized Common Stock or its treasury shares thereof, solely for the purpose
of issue upon the conversion of the Series A Preferred Stock as shall then be
issuable upon the exercise of this Warrant as herein provided, such number of
shares of Common Stock as shall then be issuable upon the conversion of the
Series A Preferred Stock issuable upon the exercise of this Warrant. The
Corporation covenants that all shares of Series A Preferred Stock and Common
Stock which shall be so issued shall be duly and validly issued and fully paid
and nonassessable and free from all taxes, liens and charges with respect to the
issue thereof. The Corporation will take all such action as may be necessary to
assure that all such shares of Series A Preferred Stock or Common Stock may be
so issued without violation of any applicable law or regulation, or of any
requirements of any national securities exchange upon which the Common Stock of
the Corporation may be listed. The Corporation has not granted and will not
grant any right of first refusal with respect to shares issuable upon exercise
of this Warrant, and there are no preemptive rights associated with such shares.
SECTION 7. NO STOCKHOLDER RIGHTS OR LIABILITIES. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a stockholder
of the Corporation. No provision hereof, in the absence of affirmative action by
the holder hereof to purchase shares of Series A Preferred Stock, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the Exercise Price or as a shareholder
of the Corporation, whether such liability is asserted by the Corporation or by
creditors of the Corporation.
SECTION 8. FRACTIONAL SHARES. No fractional shares shall be issued upon the
exercise of this Warrant, but the Company shall pay the holder an amount equal
to the fair market value of such fractional share of Series A Preferred Stock in
lieu of each fraction of a share otherwise called for upon any exercise of this
Warrant. For purposes of this Warrant, the fair market value of a share of
Series A Preferred Stock shall be determined with reference to the underlying
shares of Common Stock into which it is convertible as follows:
(a) If the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the Nasdaq system, the current market value shall be the last
reported sale price of the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant
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<PAGE>
or on such day the average of the closing bid and asked prices for such day on
such exchange or system, as applicable; or
(b) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the current market value shall be the mean of the
last reported bid and ask prices reported by the National Quotation Bureau, Inc.
on the last business day prior to the date of the exercise of this Warrant; or
(c) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
current market value shall be an amount, not less than book value thereof as at
the end of the most recent fiscal year of the Company ending prior to the date
of the exercise of the Warrant, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
SECTION 9. REGISTRATION RIGHTS. Neither the Warrant, the Warrant Shares or
the shares of Common Stock into which the Warrant Shares are convertible (the
"Warrant Common Shares") have been registered under the Securities Act of 1933,
as amended (the "Securities Act").
9.1 Whenever the Company proposes to file under the
Securities Act a Registration Statement relating to any of its Common Stock,
whether on its own behalf or on behalf of any holders of Common Stock of the
Company, the Company shall, at least thirty (30) days prior to such filing, give
written notice of such proposed filing to Holder. Upon receipt by the Company
not more than thirty (30) days after such notice of a written request from
Holder for registration of Warrant Common Shares issuable upon the conversion of
the Series A Preferred Stock issuable upon exercise of the Warrants by Holder or
held by Holder, the Company shall (A) include in such registration statement or
in a separate registration statement concurrently filed, and shall use its best
efforts to cause such registration statement to become effective with respect
to, the Warrant Common Shares as to which Holder requests registration and (B)
if such proposed registration is in connection with an underwritten offering of
Common Stock for the benefit of the Company, upon request of Holder, use its
best efforts to cause the managing underwriter therefor to include in such
offering the Warrant Common Shares as to which Holder requests such inclusion,
on terms and conditions comparable to those of the securities offered on behalf
of the Company. Holder shall cooperate with the Company in the preparation of
such Registration Statement, to the extent required to furnish information
concerning the Holder therein. Notwithstanding the foregoing, this Section 9.1
shall not be applicable to registration statements of the Company filed pursuant
to Form S-8 or Form S-4.
9.2 Whenever one or more registered holders of a majority of
the Warrants or Warrant Common Shares issued as of the date hereof pursuant to a
certain Advisory Agreement effective as of July 11, 1994 between Strategica
Group, Inc., a Florida corporation and predecessor by merger to the Holder, or
its designees and the Company shall make a written request to the Company to
register under the Securities Act Warrant Common Shares either
-6-
<PAGE>
issuable upon the conversion of Series A Preferred Stock issuable upon exercise
of the Warrants or held by such holders, the Company shall within ten (10) days
after such request is received promptly give written notice to the Holder
stating the estimated approximate date of filing such registration statement,
and shall thereupon promptly use its best efforts to file a registration
statement (and thereafter use its best efforts to cause such registration) with
respect to all Warrant Common Shares issuable upon conversion of Series A
Preferred Stock issuable upon exercise of the Warrants by Holder or held by
Holder as soon as reasonably practical after the date of receipt of such notice
by the Company. The Company shall not be required at its expense to effect more
than one registration statement pursuant to this Section 9.2. Notwithstanding
anything to the contrary contained herein, in the event that Holder exercises
its registration rights under this Section 9.2 on or prior to the date that is
three (3) months prior to the Expiration Date or any Extended Expiration Date
and the registration of the subject Warrant Common Shares issuable upon
conversion of Series A Preferred Stock issuable upon exercise of the Warrants or
held by such holders shall not have been declared effective by the Securities
and Exchange Commission (the "SEC") pursuant to the Securities Act on or prior
to the date that is five (5) business days prior to such Expiration Date or
Extended Expiration Date, then the Expiration Date or Extended Expiration Date
shall be extended to the date that is five (5) business days following such
effective date.
9.3 If the Corporation is required by the provisions of this
Section 9 to use its best efforts to effect the registration of any of its
securities under the Securities Act, the Corporation will, as expeditiously as
is possible:
(a) Prepare and file with the SEC a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such registration statement
whenever the Holder of such securities shall desire to transfer the same.
(c) Furnish to the Holder such number of copies of a
summary prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents, as the Holder may reasonably request in order to facilitate the
transfer of the securities owned by such Holder.
(d) Use its best efforts to register or qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions within the United States as Holder shall
request (provided that the Company shall not be required to pay registration or
qualification expense for more than ten (10) states to be
-7-
<PAGE>
designated by Holder) and do such other reasonable acts and things as may be the
transfer in such jurisdictions of the securities owned by Holder.
(e) Furnish, at the request of the Holder requesting
registration of Warrant Common Shares, on the date that such Warrant Common
Shares are delivered to the underwriters for sale pursuant to such registration
or, if such Warrant Common Shares are not being sold through underwriters, on
the date that the registration statement with respect to such shares becoming
effective, (1) an opinion, dated such date, of the outside counsel representing
the Corporation for the purposes of such registration, addressed to the
underwriters, if any, and if such Warrant Common Shares are not being sold
through underwriters, then to the holders making such request, stating that such
registration statement has become effective under the Securities Act and that
(i)) to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Securities Act, (ii)
the registration statement, the related prospectus, and each amendment or
supplement thereto, comply as to form in all material respects with the
requirements of the Securities Act and the applicable rules and regulations of
the SEC thereunder (except that such counsel need express no opinion as to
financial statements contained therein), (iii) such counsel has no reason to
believe that either the registration statement or the prospectus, or any
amendment or supplement thereto, contains any untrue statement of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (iv) the descriptions in the registration statement or the
prospectus, or any amendment or supplement thereto, of all legal matters and
contracts and other legal documents or instruments are accurate and fairly
present the information required to be shown, and (v) such counsel does not know
of any legal or governmental proceedings, pending or contemplated, required to
be described in the registration statement or prospectus, or any amendment or
supplement thereto, which are not described as required, nor of any contracts or
documents or instruments of a character required to be described in the
registration statement or prospectus, or any amendment or supplement thereto, or
to be filed as exhibits to the registration statement which are not described
and filed or incorporated by reference as required; and (2) a letter dated such
date, from the independent certified public accountants of the Corporation,
addressed to the underwriters, if any, and if such Warrant Common Shares are not
being sold through underwriters, then to the Holders making such request,
stating that they are independent certified public accountants within the
meaning of the Securities Act and that, in the opinion of such accountants, the
financial statements and other financial data of the Corporation included in the
registration statement or the prospectus, or any amendment or supplement
thereto, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act. Such opinion of counsel shall
additionally cover such other legal matters with respect to the registration in
respect of which such opinion is being given as the Holders may reasonably
request. Such letter from the independent certified public accountants shall
additionally cover such other, financial matters (including information as to
the period ending not more than five (5) business days prior to the date of such
letter) with respect to the registration in respect of which such letter is
being given as the Holders may reasonably request.
-8-
<PAGE>
(f) Otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC.
9.4 The Holder of the securities being so registered agrees to pay
all of the underwriting discounts and commissions with respect to the securities
owned by them being registered. The Company will pay all other costs and
expenses in connection with a registration statement to be filed pursuant to
Section 9 hereof including, without limitation, registration fees, the
reasonable fees and expenses of counsel for the Company and Holder, the fees and
expenses of its accountants and all other costs and expenses incident to the
preparation, printing and filing under the Securities Act of any such
registration statement, each prospectus and all amendments and supplements
thereto, the costs incurred in connection with the qualification of such
securities for sale in not more than ten (10) states as Holder has designated,
including fees and disbursements of counsel for the Company, and the costs of
supplying a reasonable number of copies of the registration statement, each
preliminary prospectus, final prospectus and any supplements or amendments
thereto to the Holder.
9.5 The Company agrees to enter into an appropriate
cross-indemnity agreement with any underwriter (as defined in the Securities
Act) for the Holder in connection with the filing of a registration statement
pursuant to Section 9.1 hereof.
9.6 If the Company shall file any registration statement including
therein all or any part of the Warrant Common Shares either issuable upon
conversion of Series A Preferred Stock issuable upon exercise of the Warrants by
Holder or held by Holder, the Company and the Holder shall enter into an
appropriate cross-indemnity agreement whereby the Company shall indemnify and
hold harmless the Holder against any losses, claims, damages or liabilities (or
actions in respect thereto arising out of or based upon any untrue statement or
alleged untrue statement of any material fact contained in such registration
statement, or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make statements therein not
misleading unless such statement or omission was made in reliance upon and in
conformity with written information furnished or required to be furnished by the
Holder, and the Holder shall (to the extent of and limited to the amount of net
proceeds received by the Holder from the sale of Warrant Common Shares)
indemnify and hold harmless the Company, each of its directors and officers who
have signed the registration statement and each person, if any, who controls the
Company, within the meaning of the Securities Act against any losses, claims,
damages or liabilities (or actions in respect thereof) arising out of or based
upon any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
statements therein not misleading, if the statement or omission was made in
reliance upon and in conformity with written information furnished or required
to be furnished by the Holder expressly for use in such registration statement.
-9-
<PAGE>
9.7 Nothing herein shall be construed to require any of the
holders who may desire to include any securities in any registration statement
referred to in Section 9.1 hereof to exercise their Warrants prior to the
effective date of registration statement and such holders, at their option, to
the extent permissible by law, may exercise the Warrants against payment of the
proceeds of the sale of such securities pursuant to a registration statement.
9.8 Until the shares shall be sold or capable of sale without
registration under the Securities Act, the Company at its expense will file
such post-effective amendments as may be necessary to make available for
use a prospectus meeting the requirements of the Securities Act, including,
without limitation, Section 10(a)(3). The Company will cause copies of
such prospectus to be delivered to any person exercising the warrant or
selling the shares as may be required by the Securities Act and the rules
and regulations of the SEC.
SECTION 10. INVESTMENT REPRESENTATION AND LEGEND. Each holder, by
acceptance of this Warrant, represents and warrants to the Corporation that the
Holder is acquiring the Warrant and the securities issuable upon exercise
hereof, unless at the time of exercise a registration statement under the
Securities Act is effective with respect to such securities, for investment
purposes only and not with a view towards the resale or other distribution
thereof.
The Holder, by acceptance of this Warrant, agrees that the Corporation may
affix, unless the shares subject to this Warrant are registered at the time of
exercise, the following legend to certificates for securities issued upon
exercise of this Warrant:
The securities represented by this certificate have been issued
in reliance upon the representation of the holder that they
have been acquired for investment and not with a view toward
the resale or other distribution thereof, and have not been
registered under the Securities Act of 1933 (the "Securities
Act") or applicable state securities laws ("State Acts") and
may not be offered, sold, transferred, encumbered or otherwise
disposed of unless there is an effective registration statement
under the Securities Act and the applicable State Acts or unless
in the opinion of counsel acceptable to the Corporation, such
registration is not required.
SECTION 11. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant
is lost, stolen, mutilated or destroyed, the Corporation may, on such terms as
to indemnity or otherwise as it may in its discretion reasonably impose (which
shall, in the case of a mutilated Warrant, include the surrender thereof), issue
a new Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated or destroyed. Any such new Warrant shall constitute an original
contractual obligation of the Corporation, whether or not the allegedly lost,
stolen, mutilated or destroyed Warrant shall be at any time enforceable by
anyone.
-10-
<PAGE>
SECTION 12. PAYMENT OF TAXES. The Company will pay all taxes, if any,
attributable to the transfer and/or issuance of the Warrants, the Warrant Shares
and the Warrant Common Shares.
SECTION 13. NOTICES. All notices, requests, demands and other
communications relating to this Warrant Certificate shall be in writing,
addressed, if to the registered owner hereof, to it at the address furnished by
the registered owner to the Company, and, if to the Company, to it at Fourth
Floor, 99 S.E. Fifth Street, Miami, Florida 33131, or to such other address as
any party shall notify the other party in writing, and shall be effective, in
the case of written notice by first class certified mail, postage prepaid, three
(3) days after placement into the mails, in the case of written notice by
express mail or other overnight courier, the day after placement with that
service, And, in the case of notice by confirmed telex, facsimile transmission,
telegram or cable, on the same day as sent.
SECTION 14. BINDING EFFECT. This Warrant Certificate shall be binding upon
and inure to the sole and exclusive benefit of the Company, its successors and
assigns and the registered holder or holders from time to time of the Warrants,
the Warrant Shares and the Warrant Common Shares.
SECTION 15. SUPPLYING INFORMATION. The Corporation shall cooperate with the
Holder in supplying such information as may be necessary for the Holder to
complete and file any information reporting forms presently or hereafter
required by the SEC as a condition to the availability of an exemption from the
Securities Act for the sale of any Warrant, Warrant Shares or Warrant Common
Shares.
SECTION 16. FILINGS. The Corporation will deliver to Holder promptly upon
their becoming available one copy of each report, notice or proxy statement sent
by the Corporation to its stockholders generally, and of each regular or
periodic report (pursuant to the Securities Exchange Act of 1934, as amended)
and any registration statement, prospectus or written communication (other than
transmittal letters) (pursuant to the Securities Act), filed by the Corporation
with (i) the SEC or (ii) any securities exchange on which shares of Common Stock
are listed.
SECTION 17. SUCCESSORS AND ASSIGNS. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors of the
Corporation and Holder. The provisions of this Warrant are intended to be for
the benefit of all Holders from time to time of this Warrant, and shall be
enforceable by any such Holder.
SECTION 18. AMENDMENT. This Warrant may not be modified or amended except
by written agreement of the parties.
SECTION 19. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
-11-
<PAGE>
SECTION 20. GOVERNING LAW. THIS WARRANT CERTIFICATE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF FLORIDA, WITHOUT
REFERENCE TO THE CONFLICTS OF LAWS PRINCIPLES OF THE STATE OF FLORIDA.
-12-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Warrant on and as of
the day and year first above written.
EVANS ENVIRONMENTAL CORPORATION,
a Colorado corporation
By: /s/ SCOTT E. SALPETER
-----------------------------------------
Scott E. Salpeter, Vice President
[EXECUTION PAGE TO WARRANT CERTIFICATE]
-13-
<PAGE>
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing _____________ shares of Series A Convertible Preferred
Stock of Evans Environmental Corporation, a Colorado corporation, and hereby
makes payment of $_____________ in payment therefor.
___________________________________
Signature
___________________________________
Signature, if jointly held
___________________________________
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
(if other than to the registered holder of the within Warrant)
Name ___________________________________________________________________________
(Please typewrite or print in block letters)
Address ________________________________________________________________________
________________________________________________________________________________
Social Security or Taxpayer Identification Number ______________________________
And if said number of shares shall not be all the shares exchangeable or
purchasable under the within Warrant, a new Warrant is to be issued in the name
of the undersigned for the balance remaining of the shares purchasable
thereunder.
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, ___________________________ hereby sells, assigns and
transfers unto _____________________________________________, the right to
purchase Series A Preferred Stock of Evans Environmental Corporation, a Colorado
corporation, represented by this Warrant to the extent of shares as to which
such right is exercisable and does hereby irrevocably constitute and appoint
______________________________________ Attorney, to transfer the same on the
books of the Company with full power of substitution in the premises.
Dated:_____________________ 199__
___________________________________
Signature
___________________________________
Signature, if jointly held
AMENDMENT TO WARRANT CERTIFICATE
THIS AMENDMENT TO WARRANT CERTIFICATE (the "Amendment") relates to a
certain Warrant Certificate dated July 11, 1994, (the "Warrant Certificate")
granted by EVANS ENVIRONMENTAL CORPORATION, a Colorado corporation, to
STRATEGICA CAPITAL CORPORATION, a Florida corporation, with respect to 350,000
shares of Evans' common stock.
Section 1 of the Warrant Certificate is hereby amended in its entirety
to read as follows:
"Section 1. EXERCISE OF WARRANT. This Warrant may be exercised at any
time from the date hereof until and including January 11, 1999, 5:00
P.M., Miami, Florida time (the "Expiration Date"). If the average of
the closing bid and asked prices of the Company's Common Stock for the
ten (10) trading days (in which the Company's Common Stock is traded)
immediately prior to January 11, 1999, is less than $2.00 per share on
the original Expiration Date, then the Expiration Date shall be
extended for one additional year to January 11, 2000 (the "First
Extended Expiration Date"). If such average immediately prior to
January 11, 2000, is less than $2.00 per share on the First Extended
Expiration Date, then the Expiration Date shall be extended for one
additional year to January 11, 2001 (the "Second Extended Expiration
Date"). If such average immediately prior to January 11, 2001, is less
than $2.00 per share on the Second Extended Expiration Date, then the
Expiration Date shall be extended for one additional year to January
11, 2002. Subject to adjustment pursuant to Section 4 below, the
exercise price of the shares of Common Stock purchasable pursuant to
this Warrant shall be $0.675 per share (such price, as adjusted from
time to time, being hereinafter referred to as the "Exercise Price").
The rights represented by this Warrant may be exercised by the holder
hereof, in whole or in part, but not as to a fractional share of
Common Stock, by the surrender of this Warrant (properly endorsed) at
the office of the Corporation or its transfer agent, and by payment to
the Corporation of the Exercise Price in cash or by wire transfer, for
each share being purchased. Upon the exercise of this Warrant, a
certificate or certificates for the shares of Common Stock so
purchased, registered in the name of the holder, shall be promptly
delivered to the holder hereof within a reasonable time. The person in
whose name any certificate for shares of Common Stock is issued upon
exercise of this Warrant shall for all purposes be deemed to have
become the holder of record of such shares on the date on which the
Warrant was surrendered and
<PAGE>
payment of the Exercise Price and any applicable taxes was made,
except that, if the date of such surrender and payment is a date on
which the stock transfer books of the Corporation are closed, such
person shall be deemed to have become the holder of such shares at the
close of business on the next succeeding date on which the stock
transfer books are open."
Except as amended hereby, the terms and conditions of the Warrant
Certificate shall remain the same and in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed as of this 4 day
of April, 1995.
EVANS ENVIRONMENTAL CORPORATION,
a Colorado corporation
By: /s/ SCOTT E. SALPETER
-------------------------------
Scott E. Salpeter,
Vice President
STRATEGICA CAPITAL CORPORATION,
a Delaware corporation,
Successor by Merger to
STRATEGICA CAPITAL CORPORATION,
a Florida corporation
By: /s/ STEVEN R. COOK
--------------------------------
Steven R. Cook,
Executive Vice President
-2-
AMENDMENT TO WARRANT CERTIFICATE
THIS AMENDMENT TO WARRANT CERTIFICATE (the "Amendment") relates to a
certain Warrant Certificate dated July 11, 1994 (the "Warrant Certificate"),
granted by EVANS ENVIRONMENTAL CORPORATION, a Colorado corporation, to
STRATEGICA GROUP, INC., a Florida corporation, with respect to 350,000 shares of
Evans' common stock.
Section 1 of the Warrant Certificate is hereby amended in its entirety
to read as follows:
"Section 1. EXERCISE OF WARRANT. This Warrant may be exercised at any
time from the date hereof until and including January 11, 1999, 5:00
P.M., Miami, Florida time (the "Expiration Date"). If the average of
the closing bid and asked prices of the Company's Common Stock for the
ten (10) trading days (in which the Company's Common Stock is traded)
immediately prior to January 11, 1999, is less than $2.00 per share on
the original Expiration Date, then the Expiration Date shall be
extended for one additional year to January 11, 2000 (the "First
Extended Expiration Date"). If such average immediately prior to
January 11, 2000, is less than $2.00 per share on the First Extended
Expiration Date, then the Expiration Date shall be extended for one
additional year to January 11, 2001 (the "Second Extended Expiration
Date"). If such average immediately prior to January 11, 2001, is
less than $2.00 per share on the Second Extended Expiration Date, then
the Expiration Date shall be extended for one additional year to
January 11, 2002. Subject to adjustment pursuant to Section 4 below,
the exercise price of the shares of Common Stock purchasable pursuant
to this Warrant shall be $0.675 per share (such price, as adjusted
from time to time, being hereinafter referred to as the "Exercise
Price"). The rights represented by this Warrant may be exercised by
the holder hereof, in whole or in part, but not as to a fractional
share of Common Stock, by the surrender of this Warrant (properly
endorsed) at the office of the Corporation or its transfer agent, and
by payment to the Corporation of the Exercise Price in cash or by wire
transfer, for each share being purchased. Upon the exercise of this
Warrant, a certificate or certificates for the shares of Common Stock
so purchased, registered in the name of the holder, shall be promptly
delivered to the holder hereof within a reasonable time. The person in
whose name any certificate for shares of Common Stock is issued upon
exercise of this Warrant shall for all purposes be deemed to have
become the holder of record of such shares on the date on which the
Warrant was surrendered and payment of the Exercise Price and any
applicable taxes was
<PAGE>
made, except that, if the date of such surrender and payment is a date
on which the stock transfer books of the Corporation are closed, such
person shall be deemed to have become the holder of such shares at the
close of business on the next succeeding date on which the stock
transfer books are open."
Except as amended hereby, the terms and conditions of the Warrant
Certificate shall remain the same and in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed as of this 4 day
of April, 1995.
EVANS ENVIRONMENTAL CORPORATION,
a Colorado corporation
By: /s/ SCOTT E. SALPETER
---------------------------------
Scott E. Salpeter,
Vice President
STRATEGICA CAPITAL CORPORATION,
a Delaware corporation,
Successor by Merger to
STRATEGICA GROUP, INC.,
a Florida corporation
By: /s/ STEVEN R. COOK
--------------------------------
Steven R. Cook,
Executive Vice President
-2-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000818675
<NAME> EVANS ENVIRONMENTAL CORPORATION
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 222,386
<SECURITIES> 350,000
<RECEIVABLES> 1,841,595
<ALLOWANCES> 0
<INVENTORY> 481,543
<CURRENT-ASSETS> 3,772,062
<PP&E> 772,675
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,101,789
<CURRENT-LIABILITIES> 5,267,367
<BONDS> 0
0
14
<COMMON> 54,114
<OTHER-SE> 6,606,283
<TOTAL-LIABILITY-AND-EQUITY> 7,101,789
<SALES> 8,567,520
<TOTAL-REVENUES> 8,567,520
<CGS> 5,688,409
<TOTAL-COSTS> 8,807,701
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 135,130
<INCOME-PRETAX> (375,011)
<INCOME-TAX> 0
<INCOME-CONTINUING> (375,011)
<DISCONTINUED> 0
<EXTRAORDINARY> (151,766)
<CHANGES> 0
<NET-INCOME> (526,777)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> 0
</TABLE>
