Exhibit 10.38
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS.
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD,
PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION
WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT.
STOCK PURCHASE WARRANT
To Purchase 709,849 Shares of Common Stock of
COMPOSITECH LTD.
THIS CERTIFIES that, for value received, The Gross Foundation, Inc. (the
"Holder") and registered assigns, is entitled, upon the terms and subject to the
conditions hereinafter set forth, at any time on or after July 12, 2000 (the
"Initial Exercise Date") and on or prior to the close of business on July 12,
2003 (the "Termination Date") but not thereafter (the "Exercise Period"), to
subscribe for and purchase from Compositech Ltd., a Delaware corporation (the
"Company"), up to seven hundred nine thousand eight hundred forty-nine (709,849)
shares (the "Warrant Shares") of Common Stock, $.01 par value, of the Company
(the "Common Stock"). The purchase price of one share of Common Stock (the
"Exercise Price") under this Warrant shall be $0.7326 (130% of the average of
the closing bid prices of the Common Stock on the Nasdaq SmallCap Market on the
thirty Trading Days prior to the Closing Date of the Convertible Preferred Stock
and Warrants Purchase Agreement, dated as of July 7, 2000, pursuant to which
this Warrant has been issued (the "Purchase Agreement")), subject to a reduction
of ten percent (10%) for each month the Company is in a Registration Default (as
that term is defined in the Registration Rights Agreement, dated July 7, 2000),
pro-rated daily; provided, however, that in no event shall the Exercise Price be
reduced below $0.01 per Warrant Share. The Exercise Price and the number of
shares for which the Warrant is exercisable shall also be subject to adjustment
as provided herein. In the event of any conflict between the terms of this
Warrant and the Purchase Agreement, the Purchase Agreement shall control.
Capitalized terms used and not otherwise defined herein shall have the meanings
set forth for such terms in the Purchase Agreement.
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1. Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office of the Company by the holder
hereof in person or by duly authorized attorney, upon surrender of this Warrant
together with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of Common
Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Except as provided in Section 4 herein, exercise of
the purchase rights represented by this Warrant may be made at any time or times
(i) on or after the Initial Exercise Date, as to one-half of the number of
Warrants, and (ii) if and only if the Convertible Preferred Stock issued in
conjunction with this Warrant has not been redeemed in full by the Company in
accordance with its terms on or before the one-hundred twentieth (120th) day
after on or after the Initial Exercise Date, as to one-quarter of the Warrants,
on or after such date, which quarter shall otherwise be void and (iii) if and
only the Convertible Preferred Stock issued in conjunction with this Warrants
has not been redeemed in full by the Company in accordance with its terms on or
before the one-hundred eightieth (180th) day after the Initial Exercise Date, as
to the remaining one-quarter of the Warrants, on or after such date, which
quarter shall otherwise be void, and in all cases before the close of business
on the Termination Date by the surrender of this Warrant and the Notice of
Exercise Form annexed hereto duly executed, at the office of the Company (or
such other office or agency of the Company as it may designate by notice in
writing to the registered holder hereof at the address of such holder appearing
on the books of the Company) and upon payment of the Exercise Price of the
shares thereby purchased by wire transfer or cashier's check drawn on a United
States bank, the holder of this Warrant shall be entitled to receive a
certificate for the number of shares of Common Stock so purchased. Certificates
for shares purchased hereunder shall be delivered to the holder hereof within
three (3) Trading Days after the date on which this Warrant shall have been
exercised as aforesaid. This Warrant shall be deemed to have been exercised and
such certificate or certificates shall be deemed to have been issued, and Holder
or any other person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the date the
Warrant has been exercised by surrender of the Warrant and payment to the
Company of the Exercise Price and all taxes required to be paid by Holder, if
any, pursuant to Section 5 prior to the issuance of such shares, have been paid.
The Holder shall have the right to a "cashless exercise" in which the
Holder shall be entitled to receive a certificate for the number of shares equal
to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the average of the high and low trading prices per share of Common Stock
on the Trading Day preceding the date of such election;
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(B) = the Exercise Price of the Warrant; and
(X) = the number of Warrant Shares to be applied to the "cashless exercise" in
accordance with the terms of this Warrant.
If this Warrant shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates representing Warrant
Shares, deliver to Holder a new Warrant evidencing the rights of Holder to
purchase the unpurchased shares of Common Stock called for by this Warrant,
which new Warrant shall in all other respects be identical with this Warrant.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to the Exercise Price.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof; and the Company may require, as a condition thereto, the payment of a
sum sufficient to reimburse it for any transfer tax incidental thereto.
6. Closing of Books. The Company will not close its shareholder books or
records in any manner which prevents the timely exercise of this Warrant.
7. Transfer, Division and Combination. (a) Subject to compliance with any
applicable securities laws, transfer of this Warrant and all rights hereunder,
in whole or in part, shall be registered on the books of the Company to be
maintained for such purpose, upon surrender of this Warrant at the principal
office of the Company, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by Holder or its agent
or attorney and funds sufficient to pay any transfer taxes payable upon the
making of such transfer. Upon such surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination or denominations specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned, 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 of the Company, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by Holder. Subject to compliance with Section 7(a), as to
any transfer which may be involved in
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such division or combination, the Company shall execute and deliver a new
Warrant or Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice.
(c) The Company shall prepare, issue and deliver at its own expense (other
than transfer taxes) the new Warrant or Warrants under this Section 7.
(d) The Company agrees to maintain, at its aforesaid office, books for the
registration and the registration of transfer of the Warrants.
8. No Rights as Shareholder until Exercise. This Warrant does not entitle
the holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof. Upon the surrender of this Warrant and the
payment of the aggregate Exercise Price, the Warrant Shares so purchased shall
be and be deemed to be issued to such holder as the record owner of such shares
as of the close of business on the later of the date of such surrender or
payment.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants
that upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant certificate or any
stock certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday, then such action may be taken or
such right may be exercised on the next succeeding day not a Saturday, Sunday or
legal holiday.
11. Anti-Dilution Provisions. During the Exercise Period, the Exercise
Price and the number of Warrant Shares issuable hereunder and for which this
Warrant is then exercisable pursuant to this Warrant shall be subject to
adjustment from time to time as provided in this Section 11.
In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up or down
to the nearest cent.
(a) Adjustment of Exercise Price. Except as otherwise provided in Sections
11(c) and 11(e) hereof, if the Company issues or sells, or in accordance with
Section 11(b) hereof is deemed to have issued or sold, any shares of Common
Stock for a consideration per share of less than the Exercise Price per share or
for no consideration (collectively, a "Dilutive Issuance"), then effective
immediately upon the Dilutive Issuance, the Exercise Price will be adjusted in
accordance with the following formula:
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E(1) = E x O + P/E
--------------
CSDO
where:
E(1) = the adjusted Exercise Price;
E = the then current Exercise Price;
O = the number of shares of Common Stock
outstanding immediately prior to the
Dilutive Issuance;
P = the aggregate consideration, calculated
as set forth in Section 11(b) hereof,
received by the Company upon such
Dilutive Issuance; and
CSDO = the total number of shares of Common
Stock deemed outstanding immediately
after the Dilutive Issuance.
(b) Effect of Exercise Price of Certain Events. For purposes of determining
the adjusted Exercise Price under Section 11(a) hereof, the following will be
applicable:
(i) Issuance of Rights or Options. If the Company in any manner issues
or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other
securities exercisable, convertible into or exchangeable for Common Stock
("Convertible Securities") (such warrants, rights and options to purchase
Common Stock or Convertible Securities are hereinafter referred to as
"Options") and the price per share for which Common Stock is issuable upon
the exercise of such Options is less than the Exercise Price ("Below Base
Price Options"), then the maximum total number of shares of Common Stock
issuable upon the exercise of all such Below Base Price Options (assuming
full exercise, conversion or exchange of Convertible Securities, if
applicable) will, as of the date of the issuance or grant of such Below
Base Price Options, be deemed to be outstanding and to have been issued and
sold by the Company for such price per share. For purposes of the preceding
sentence, the "price per share for which Common Stock is issuable upon the
exercise of such Below Base Price Options" is determined by dividing (A)
the total amount, if any, received or receivable by the Company as
consideration for the issuance or granting of all such Below Base Price
Options, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the exercise of all such Below Base Price
Options, plus, in the case of Convertible Securities issuable upon the
exercise of such Below Base Price Options, the minimum aggregate amount of
additional consideration payable upon the exercise, conversion or exchange
thereof at the time such Convertible Securities first become exercisable,
convertible or exchangeable, by (B) the maximum total number of shares of
Common Stock issuable upon the exercise of all such Below Base Price
Options (assuming full conversion of Convertible Securities, if
applicable). No further adjustment to the Exercise Price will be made upon
the actual issuance of such Common Stock upon the exercise of such Below
Base Price Options or upon the exercise, conversion or exchange of
Convertible Securities issuable upon exercise of such Below Base Price
Options.
(ii) Issuance of Convertible Securities. If the Company in any manner
issues or sells any Convertible Securities, whether or not immediately
convertible (other than where the same are issuable upon the exercise of
Options) and the price per share for which Common Stock is issuable upon
such exercise, conversion or exchange is less than the Exercise Price, then
the maximum total number of shares of Common Stock issuable upon the
exercise, conversion or exchange of all such Convertible Securities will,
as of the date of the issuance of such Convertible Securities, be deemed to
be outstanding and to have been issued and sold by the Company for such
price per share. For the purposes of the preceding sentence, the "price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange" is determined by dividing (A) the total amount, if any, received
or receivable by the Company as consideration for the issuance or sale of
all such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise,
conversion or exchange thereof at the time such Convertible Securities
first become exercisable, convertible or exchangeable, by (B) the maximum
total number of shares of Common Stock issuable upon the
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exercise, conversion or exchange of all such Convertible Securities. No
further adjustment to the Exercise Price will be made upon the actual
issuance of such Common Stock upon exercise, conversion or exchange of such
Convertible Securities.
(iii) Change in Option Price or Conversion Rate. If there is a change
at any time in (A) the amount of additional consideration payable to the
Company upon the exercise of any Options; (B) the amount of additional
consideration, if any, payable to the Company upon the exercise, conversion
or exchange of any Convertible Securities; or (C) the rate at which any
Convertible Securities are convertible into or exchangeable for Common
Stock (in each such case, other than under or by reason of provisions
designed to protect against dilution), the Exercise Price in effect at the
time of such change will be readjusted to the Exercise Price which would
have been in effect at such time had such Options or Convertible Securities
still outstanding provided for such changed additional consideration or
changed conversion rate, as the case may be, at the time initially granted,
issued or sold.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. If, in any case, the total number of shares of Common Stock
issuable upon exercise of any Option or upon exercise, conversion or
exchange of any Convertible Securities is not, in fact, issued and the
rights to exercise such Option or to exercise, convert or exchange such
Convertible Securities shall have expired or terminated, the Exercise Price
then in effect will be readjusted to the Exercise Price which would have
been in effect at the time of such expiration or termination had such
Option or Convertible Securities, to the extent outstanding immediately
prior to such expiration or termination (other than in respect of the
actual number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.
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(v) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the
amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable
expenses paid or incurred by the Company in connection with such issuance,
grant or sale. In case any Common Stock, Options or Convertible Securities
are issued or sold for a consideration part or all of which shall be other
than cash, the amount of the consideration other than cash received by the
Company will be the fair market value of such consideration, except where
such consideration consists of securities, in which case the amount of
consideration received by the Company will be the Market Price thereof as
of the date of receipt. In case any Common Stock, Options or Convertible
Securities are issued in connection with any merger or consolidation in
which the Company is the surviving corporation, the amount of consideration
therefor will be deemed to be the fair market value of such portion of the
net assets and business of the non-surviving corporation as is attributable
to such Common Stock, Options or Convertible Securities, as the case may
be. The fair market value of any consideration other than cash or
securities will be determined in good faith by an investment banker or
other appropriate expert of national reputation selected by the Company and
reasonably acceptable to the holder hereof, with the costs of such
appraisal to be borne by the Company.
(vi) Exceptions to Adjustment of Exercise Price. No adjustment to the
Exercise Price will be made (A) upon the exercise of this Warrant or any
other warrant of this series or of any other series, (B) upon the issuance
by the Company of any security in connection with the proposed merger with
The Aeon Group, Inc., or (C) upon the exercise or conversion of any
Convertible Securities or Options issued and outstanding as of the date
hereof.
(c) Subdivision or Combination of Common Stock. If the Company, at any time
during the Exercise Period, subdivides (by any stock split, stock dividend,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a greater number of shares, then, after the date of record for
effecting such subdivision, the Exercise Price in effect immediately prior to
such subdivision will be proportionately reduced. If the Company, at any time
during the Exercise Period, combines (by reverse stock split, recapitalization,
reorganization, reclassification or otherwise) its shares of Common Stock into a
smaller number of shares, then, after the date of record for effecting such
combination, the Exercise Price in effect immediately prior to such combination
will be proportionately increased.
(d) Adjustment in Number of Shares. Upon each adjustment of the Exercise
Price pursuant to the provisions of this Section 11 (except for Section 11(e)
hereof), the number of shares of Common Stock issuable upon exercise of this
Warrant and for which this Warrant is or may become exercisable shall be
adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable or for which this Warrant is or may become exercisable (as applicable)
upon exercise of this Warrant immediately prior to such adjustment and dividing
the product so obtained by the adjusted Exercise Price.
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(e) Consolidation, Merger or Sale. In case of any consolidation of the
Company with, or merger of the Company into any other corporation (except for
the merger with The Aeon Group, Inc.), or in case of any sale or conveyance of
all or substantially all of the assets of the Company other than in connection
with a plan of complete liquidation of the Company at any time during the
Exercise Period, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this Warrant
will have the right to acquire and receive upon exercise of this Warrant in lieu
of the shares of Common Stock immediately theretofore acquirable upon the
exercise of this Warrant, such shares of stock, securities, cash or assets as
may be issued or payable with respect to or in exchange for the number of shares
of Common Stock immediately theretofore acquirable and receivable upon exercise
of this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision to insure
that the provisions of this Section 11 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Warrant and the obligations to
deliver to the holder of this Warrant such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the holder may be entitled to
acquire. Notwithstanding the foregoing, in the event of any such sale or
conveyance, the holder of this Warrant shall, at its option, have the right to
receive, and, in the event of any such merger, consolidation, sale or conveyance
which involves the receipt of cash consideration by the equity holders of the
Company's capital stock or in which the surviving or continuing entity is not a
publicly traded corporation whose common stock is listed for trading on the New
York Stock Exchange, the American Stock Exchange, the Nasdaq National Market or
the Nasdaq SmallCap Market, the holder of this Warrant shall be entitled to
receive, in connection with such transaction, cash consideration equal to the
fair market value (as determined in good faith by the holder of this Warrant) of
this Warrant.
(f) Distribution of Assets. In case the Company shall declare or make any
distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a partial liquidating dividend, stock repurchase by way of
return of capital or otherwise (including any dividend or distribution to the
Company's shareholders of cash or shares (or rights to acquire shares) of
capital stock of a subsidiary) (a "Distribution"), at any time during the
Exercise Period, then the holder of this Warrant shall be entitled upon exercise
of this Warrant for the purchase of any or all of the shares of Common Stock
subject hereto, to receive the amount of such assets (or rights) which would
have been payable to the holder had such holder been the holder of such shares
of Common Stock on the record date for the determination of shareholders
entitled to such Distribution.
(g) Notice of Adjustment. Upon the occurrence of any event which requires
any adjustment of the Exercise Price, then, and in each such case, the Company
shall give notice thereof to the holder of this Warrant, which notice shall
state the Exercise Price resulting from such adjustment and the increase or
decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of
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calculation and the facts upon which such calculation is based, provided that
such notice shall not contain any material nonpublic information. Such
calculation shall be certified by the chief financial officer of the Company.
(h) Minimum Adjustment of Exercise Price. No adjustment of the Exercise
Price shall be made in an amount of less than 1% of the Exercise Price in effect
at the time such adjustment is otherwise required to be made, but any such
lesser adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained
earnings consistent with the Company's past practices with respect to
declaring dividends and making distributions) to the holders of the Common
Stock;
(ii) the Company shall offer for subscription pro rata to the holders
of the Common Stock any additional shares of stock of any class or other
rights;
(iii) there shall be any capital reorganization of the Company, or
reclassification of the Common Stock, or consolidation or merger of the
Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(A) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (B) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable estimate thereof by the Company)
when the same shall take place. Such notice shall also specify the date on which
the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Except for The Aeon Group, Inc. merger (of which
the Corporation shall provide the legally required notice), such notice shall be
given at least thirty (30) days prior to the record date or the date on which
the Company's books are closed in respect thereto, but in no event prior to the
public disclosure thereof. Failure to give any such notice or any defect therein
shall not affect the validity of the proceedings referred to in clauses (i),
(ii), (iii) and (iv) above.
(j) Certain Events. If, at any time during the Exercise Period, any event
occurs of the type contemplated by the adjustment provisions of this Section 11
but not expressly provided for by such provisions, the Company will give notice
of such event as provided in
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Section 11(g) hereof, and the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of shares of Common
Stock acquirable upon exercise of this Warrant so that the rights of the holder
shall be neither enhanced nor diminished by such event.
(k) Certain Definitions.
"Common Stock Deemed Outstanding" shall mean the number of shares of
Common Stock actually outstanding (not including shares of Common Stock
held in the treasury of the Company), plus (A) in the case of any
adjustment required by Section 11(a) and 11(b) resulting from the issuance
of any Options, the maximum total number of shares of Common Stock issuable
upon the exercise of the Options for which the adjustment is required
(including any Common Stock issuable upon the conversion of Convertible
Securities issuable upon the exercise of such Options), and (B) in the case
of any adjustment required by Section 11(a) resulting from the issuance of
any Convertible Securities, the maximum total number of shares of Common
Stock issuable upon the exercise, conversion or exchange of the Convertible
Securities for which the adjustment is required, as of the date of issuance
of such Convertible Securities, if any.
"Common Stock" for purposes of this Section 11, includes the Common
Stock and any additional class of stock of the Company having no preference
as to dividends or distributions on liquidation, provided that the shares
purchasable pursuant to this Warrant shall include only Common Stock in
respect of which this Warrant is exercisable, or shares resulting from any
subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 11(e) hereof, the stock or other
securities or property provided for in such Section.
12. Voluntary Adjustment by the Company. The Company may at any time during
the term of this Warrant, reduce the then current Exercise Price to any amount
and for any period of time deemed appropriate by the Board of Directors of the
Company.
13. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Principal Market
upon which the Common Stock may be listed.
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all
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times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant, and (c) use its best efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the period
this Warrant is outstanding acknowledge in writing, in form reasonably
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
Before taking any action which would cause an adjustment reducing the
current Exercise Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and non-assessable shares of such Common Stock at
such adjusted Exercise Price.
Before taking any action which would result in an adjustment in the number
of shares of Common Stock for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
14. Miscellaneous.
(a) Jurisdiction. This Warrant shall be binding upon any successors or
assigns of the Company. This Warrant shall constitute a contract under the laws
of New York without regard to its conflict of law, principles or rules, and be
subject to arbitration pursuant to the terms set forth in the Purchase
Agreement.
(b) Restrictions. The holder hereof acknowledges that the Warrant Shares
acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Holder's rights, powers or remedies,
notwithstanding all rights hereunder terminate on the Termination Date. If the
Company fails to comply with any provision of this Warrant, the Company shall
pay to Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys' fees, including
those of appellate proceedings, incurred by Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
11
<PAGE>
(d) Notices. Any notice, request or other document required or permitted to
be given or delivered to the holder hereof by the Company shall be delivered in
accordance with the notice provisions of the Purchase Agreement.
(e) Limitation of Liability. No provision hereof, in the absence of
affirmative action by Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of Holder hereof, shall give rise
to any liability of Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
(f) Remedies. Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Warrant and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
(g) Successors and Assigns. Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted assigns of 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 or holder of Warrant Shares.
(h) Indemnification. The Company agrees to indemnify and hold harmless
Holder from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses
and disbursements of any kind which may be imposed upon, incurred by or asserted
against Holder in any manner relating to or arising out of any failure by the
Company to perform or observe in any material respect any of its covenants,
agreements, undertakings or obligations set forth in this Warrant; provided,
however, that the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses or disbursements are found in a final
non-appealable judgment by a court to have resulted from Holder's negligence,
bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
(i) Amendment. This Warrant may be modified or amended or the provisions
hereof waived with the written consent of the Company and the Holder.
(j) Severability. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Warrant.
(k) 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.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officer thereunto duly authorized.
Dated: July __, 2000
Compositech Ltd.
By:
---------------------------------
Name:
Title:
13
<PAGE>
NOTICE OF EXERCISE
To: Compositech Ltd.
(1)______The undersigned hereby elects to purchase ________ shares of
Common Stock (the "Common Stock"), of Compositech Ltd. pursuant to the terms of
the attached Warrant, and tenders herewith payment of the exercise price in
full, together with all applicable transfer taxes, if any.
(2)______Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:
----------------------------------------
(Name)
----------------------------------------
(Address)
----------------------------------------
Dated:
------------------------------
Signature
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
_______________________________________________ whose address is
---------------------------------------------------------------.
---------------------------------------------------------------
Dated: ______________, _______
Holder's Signature:
-----------------------------
Holder's Address:
-----------------------------
-----------------------------
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
<PAGE>
NOTICE OF EXERCISE OF COMMON STOCK WARRANT
PURSUANT TO NET ISSUE ("CASHLESS") EXERCISE PROVISIONS
DATE:
___________________________________ Aggregate Price of Warrant
___________________________________ Before Exercise: $
----------------------
___________________________________ Aggregate Price
Attention: Chief Financial Officer Being Exercised: $
----------------------
Warrant Price: $ per share
---------------
Number of Shares of Common Stock to be
Issued Under this Notice:
----------------
Remained Aggregate
Price (if any) After Issuance: $
--------
CASHLESS EXERCISE
Gentlemen:
The undersigned, registered Holder of the Common Stock Warrant delivered
herewith (the "Warrant"), hereby irrevocably exercises such Warrant for, and
purchases thereunder, shares of the Common Stock of Compositech Ltd., as
provided below. Capitalized terms used herein, unless otherwise defined herein,
shall have the meanings given in the Warrant. Such exercise shall be pursuant to
the "cashless exercise" provisions of Section 3 of the Warrant; therefore,
Holder makes no payment with this Notice of Exercise. The number of shares to be
issued pursuant to this exercise shall be determined by reference to the formula
in Section 3 of the Warrant which requires the use of the high and low trading
price of the Company's Common Stock on the Trading Day preceding the date of
such election. The high and low trading price of the Company's Common Stock has
been determined or agreed to by Holder and the Company to be $______ and
$_________, respectively, which figure is acceptable to Holder for calculations
of the number of shares of Common Stock issuable pursuant to this Notice of
Exercise. Holder requests that the certificates for the purchased shares of
Common Stock be issued in the name of and delivered to
_________________________. To the extent the foregoing exercise is for less than
the full Aggregate Price of the Warrant, a replacement Warrant representing the
remainder of the Aggregate Price (and otherwise of like form, tenor and effect)
shall be delivered to Holder along with the share certificate evidencing the
Common Stock issued in response to this Notice of Exercise.
By:
----------------------------
[NAME]
