EXHIBIT 10.2
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EXHIBIT A
FORM OF WARRANT
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION
OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE ISSUER THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES
LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THIS WARRANT MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY THIS WARRANT.
ENTRADE INC.
Warrant To Purchase Common Stock
Warrant No.: ____________________ Number of Shares: __________
Date of Issuance: ______ __, 2000
Entrade Inc., a Pennsylvania corporation (the "Company"), hereby certifies
that, in exchange for warrants previously held and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, [Fisher Capital Ltd.] OR [Wingate Capital Ltd.] OR [HFTP
Investment L.L.C.] OR [Leonardo, L.P.], the registered holder hereof or its
permitted assigns, is entitled, subject to the terms set forth below, to
purchase from the Company upon surrender of this Warrant, at any time or
times on or after the date hereof, but not after 11:59 P.M. Eastern Time on
the Expiration Date (as defined herein) [INSERT: {FISHER} Two Hundred
Twenty-one Thousand Two Hundred Thirty-two (221,232) / {WINGATE} One
Hundred Nineteen Thousand One Hundred Twenty-seven (119,127) / {HFTP} Three
Hundred Forty Thousand Three Hundred Sixty-two (340,362) / {Leonardo} Three
Hundred Forty Thousand Three Hundred Fifty-nine (340,359)] fully paid
nonassessable shares of Common Stock (as defined herein) of the Company
(the "Warrant Shares") at the purchase price per share provided in Section
1(b) below; provided, however, that in no event shall the holder be
entitled to exercise this Warrant for a number of Warrant Shares in excess
of that number of Warrant Shares which, upon giving effect to such
exercise, would cause the aggregate number of shares of Common Stock
beneficially owned by the holder and its affiliates to exceed 4.99% of the
outstanding shares of the Common Stock following such exercise. For
purposes of the foregoing proviso, the aggregate number of shares of Common
Stock beneficially owned by the holder and its affiliates shall include the
number of shares of Common Stock issuable upon exercise of this Warrant
with respect to which the determination of such proviso is being made, but
shall exclude shares of Common Stock which would be issuable upon (i)
exercise of the remaining, unexercised Exchange Warrants (as defined below)
beneficially owned by the holder and its affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other
securities of the Company beneficially owned by the holder and its
affiliates (including, without limitation, any convertible notes or
preferred stock) subject to a limitation on conversion or exercise
analogous to the limitation contained herein. Except as set forth in the
preceding sentence, for purposes of this paragraph, beneficial ownership
shall be calculated in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended. For purposes of this Warrant, in
determining the number of outstanding shares of Common Stock a holder may
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rely on the number of outstanding shares of Common Stock as reflected in
(1) the Company's most recent Form 10-Q, Form 10-K or other public filing
with the Securities and Exchange Commission, as the case may be, (2) a more
recent public announcement by the Company or (3) any other notice by the
Company or its transfer agent setting forth the number of shares of Common
Stock outstanding. Upon the written request of any holder, the Company
shall promptly, but in no event later than one (1) Business Day following
the receipt of such notice, confirm in writing to any such holder the
number of shares of Common Stock then outstanding. In any case, the number
of outstanding shares of Common Stock shall be determined after giving
effect to the exercise of Exchange Warrants (as defined below) by such
holder and its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported.
Section 1.
(a) Exchange Agreement. This Warrant is one of the Exchange
Warrants (the "Exchange Warrants") issued pursuant to Section 1 of that
certain Exchange Agreement dated as of October 24, 2000, among the Company
and the Investors referred to therein (the "Exchange Agreement").
(b) Definitions. The following words and terms as used in
this Warrant shall have the following meanings:
(i) "Approved Stock Plan" shall mean any employee
benefit plan which has been approved by the Board of Directors of the
Company, pursuant to which the Company's securities may be issued to any
employee, officer, director or consultant for services provided to the
Company.
(ii) "Business Day" means any day other than Saturday,
Sunday or any other day on which commercial banks in the City of New York
are authorized or required by law to remain closed.
(iii)"Closing Bid Price" means, for any security as of
any date, the last closing bid price for such security on the Principal
Market (as defined below) as reported by Bloomberg Financial Markets
("Bloomberg"), or if the Principal Market begins to operate on an extended
hours basis, and does not designate the closing bid price, then the last
bid price at 4:00 p.m., Eastern Time, as reported by Bloomberg, or if the
foregoing do not apply, the last closing bid price of such security in the
over-the-counter market on the electronic bulletin board for such security
as reported by Bloomberg, or, if no last closing bid price is reported for
such security by Bloomberg, the last closing trade price of such security
as reported by Bloomberg, or, if no last closing trade price is reported
for such security by Bloomberg, the average of the closing bid prices of
any market makers for such security as reported in the "pink sheets" by the
National Quotation Bureau, Inc. If the Closing Bid Price cannot be
calculated for such security on such date on any of the foregoing bases,
the Closing Bid Price of such security on such date shall be the fair
market value as mutually determined by the Company and the holder of this
Warrant. If the Company and the holder of this Warrant are unable to agree
upon the fair market value of the Common Stock, then such dispute shall be
resolved pursuant to Section 2(a) below with the term "Closing Bid Price"
being substituted for the term "Market Price." All such determinations
shall be appropriately adjusted for any stock dividend, stock split or
other similar transaction during such period.
(iv) "Closing Sale Price" means, for any security as of
any date, the last closing trade price for such security on the Principal
Market (as defined below) as reported by Bloomberg, or if the Principal
Market begins to operate on an extended hours basis, and does not designate
the closing trade price, then the last trade price at 4:00 p.m. Eastern
Time as reported by Bloomberg, or, if the foregoing do not apply, the last
closing trade price of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or,
if no last closing trade price is reported for such security by Bloomberg,
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the average of the lowest ask price and the highest bid price of any market
makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Closing Sale Price cannot be calculated for
such security on such date on any of the foregoing bases, the Closing Sale
Price of such security on such date shall be the fair market value as
mutually determined by the Company and the holder of this Warrant. If the
Company and the holder of this Warrant are unable to agree upon the fair
market value of the Common Stock, then such dispute shall be resolved
pursuant to Section 2(a) below with the term "Closing Sale Price" being
substituted for the term "Market Price." All such determinations to be
appropriately adjusted for any stock dividend, stock split or other similar
transaction during such period.
(v) "Common Stock" means (i) the Company's common
stock, no par value per share, and (ii) any capital stock into which such
Common Stock shall have been changed or any capital stock resulting from a
reclassification of such Common Stock.
(vi) "Convertible Securities" means any stock or
securities (other than Options) directly or indirectly convertible into or
exchangeable for Common Stock.
(vii)"Expiration Date" means the date four (4) years
after the Issuance Date of this Warrant or, if such date falls on a
Saturday, Sunday or other day on which banks are required or authorized to
be closed in the City of New York or the State of New York or on which
trading does not take place on the Principal Market (a "Holiday"), the next
date that is not a Holiday.
(viii) "Excluded Securities" means (A) options to
purchase shares of Common Stock, provided (I) such options are issued after
the Issuance Date of this Warrant to employees or consultants of the
Company within 30 days of such employee or consultant starting their
employment or consultation with the Company, (II) such options are approved
by the Board of Directors of the Company or an appropriately designated
committee of the Board of Directors and (III) the exercise price of such
options is not less than the market price of the Common Stock on the date
of issuance of such options, (B) shares of Common Stock issued by the
Company in a firm commitment, underwritten public offering which generates
aggregate gross proceeds to the Company (as reflected in the preliminary
prospectus and final prospectus for such offering) of at least $30,000,000,
and (C) warrants to purchase Common Stock issued by the Company in
connection with any strategic partnership or relationship or joint venture
(the primary purpose of which is not to raise equity capital), provided
that all such warrants issued by the Company after the Issuance Date of
this Warrant do not grant the right to acquire in excess of 2,000,000
shares of Common Stock and the exercise price of such warrants is not less
than the market price of the common stock on the date the terms of such
warrant are agreed to in principle in writing.
(ix) "Issuance Date" means, with respect to each
Exchange Warrant, the date of issuance of the applicable Exchange Warrant.
(x) "Market Price" means, with respect to any security
for any date of determination, that price which shall be computed as the
arithmetic average of the Closing Sale Prices for such security on each of
the 10 consecutive trading days immediately preceding such date of
determination (all such determinations to be appropriately adjusted for any
stock dividend, stock split or similar transaction during the pricing
period).
(xi) "Options" means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities.
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(xii)"Other Securities" means (i) those options and
warrants of the Company issued prior to, and outstanding on, the date of
issuance of this Warrant, (ii) the shares of Common Stock issued upon
exercise of such options and warrants, provided such options and warrants
are not amended in any material way after the issuance date of this Warrant
and (iii) the shares of Common Stock issued upon exercise of the Exchange
Warrants.
(xiii) "Person" means an individual, a limited
liability company, a partnership, a joint venture, a corporation, a trust,
an unincorporated organization and a government or any department or agency
thereof.
(xiv)"Principal Market" means The New York Stock
Exchange, Inc. or if the Common Stock is not traded on The New York Stock
Exchange, Inc., then the principal securities exchange or trading market
for the Common Stock.
(xv) "Securities Act" means the Securities Act of 1933,
as amended.
(xvi)"Warrant" means this Warrant and all Warrants
issued in exchange, transfer or replacement hereof.
(xvii) "Warrant Exercise Price" shall be equal to
the Closing Bid Price of the Common Stock on October 24, 2000, as adjusted
for stock splits, stock dividends, stock combinations and similar
transaction and subject to adjustment as hereinafter provided.
(c) Other Definitional Provisions.
(i) Except as otherwise specified herein, all
references herein (A) to the Company shall be deemed to include the
Company's successors and (B) to any applicable law defined or referred to
herein, shall be deemed references to such applicable law as the same may
have been or may be amended or supplemented from time to time.
(ii) When used in this Warrant, the words "herein,"
"hereof," and "hereunder," and words of similar import, shall refer to this
Warrant as a whole and not to any provision of this Warrant, and the words
"Section," "Schedule," and "Exhibit" shall refer to Sections of, and
Schedules and Exhibits to, this Warrant unless otherwise specified.
(iii)Whenever the context so requires, the neuter gender
includes the masculine or feminine, and the singular number includes the
plural, and vice versa.
Section 2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant
may be exercised by the holder hereof then registered on the books of the
Company, in whole or in part, at any time on any Business Day on or after
the opening of business on the date hereof and prior to 11:59 P.M. Eastern
Time on the Expiration Date by (i) delivery of a written notice, in the
form of the subscription notice attached as Exhibit A hereto (the "Exercise
Notice"), of such holder's election to exercise this Warrant, which notice
shall specify the number of Warrant Shares to be purchased, (ii) (A)
payment to the Company of an amount equal to the applicable Warrant
Exercise Price multiplied by the number of Warrant Shares as to which this
Warrant is being exercised (the "Aggregate Exercise Price") in cash or wire
transfer of immediately available funds or (B) by notifying the Company
that this Warrant is being exercised pursuant to a Cashless Exercise (as
defined in Section 2(f)) and (iii) the surrender to a common carrier for
overnight delivery to the Company, as soon as practicable following such
date, of this Warrant (or an indemnification undertaking with respect to
this Warrant in the case of its loss, theft or destruction). In the event
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of any exercise of the rights represented by this Warrant in compliance
with this Section 2(a), the Company shall on the second Business Day
following the date of receipt of the Exercise Notice, the Aggregate
Exercise Price (or notice of a Cashless Exercise) and this Warrant (or an
indemnification undertaking with respect to this Warrant in the case of its
loss, theft or destruction) (the "Exercise Delivery Documents"), credit
such aggregate number of shares of Common Stock to which the holder shall
be entitled to the holder's or its designee's balance account with The
Depository Trust Company; provided, however, if the holder who submitted
the Exercise Notice requested physical delivery of any or all of the
Warrant Shares, then the Company shall, on or before the second Business
Day following receipt of the Exercise Delivery Documents issue and
surrender to a common carrier for overnight delivery to the address
specified in the Exercise Notice, a certificate, registered in the name of
the holder, for the number of shares of Common Stock to which the holder
shall be entitled pursuant to such request. Upon delivery of the Exercise
Notice and Aggregate Exercise Price referred to in clause (ii)(A) above or
notification to the Company of a Cashless Exercise referred to in Section
2(f), the holder of this Warrant shall be deemed for all corporate purposes
to have become the holder of record of the Warrant Shares with respect to
which this Warrant has been exercised, irrespective of the date of delivery
of this Warrant as required by clause (iii) above or the certificates
evidencing such Warrant Shares. In the case of a dispute as to the
determination of the Warrant Exercise Price or the Market Price of a
security or the arithmetic calculation of the Warrant Shares, the Company
shall promptly issue to the holder the number of shares of Common Stock
that is not disputed and shall transmit an explanation of the disputed
determinations or arithmetic calculations to the holder via facsimile
within one Business Day of receipt of the holder's subscription notice. If
the holder and the Company are unable to agree upon the determination of
the Warrant Exercise Price or the Market Price or arithmetic calculation of
the Warrant Shares within two (2) Business Days of such disputed
determination or arithmetic calculation being transmitted to the holder,
then the Company shall within one (1) Business Day transmit via facsimile
(i) the disputed determination of the Warrant Exercise Price or the Market
Price to an independent, reputable investment banking firm or (ii) the
disputed arithmetic calculation of the Warrant Shares to its independent,
outside accountant. The Company shall cause the investment banking firm or
the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the holder of the results no later
than forty-eight (48) hours from the time it receives the disputed
determinations or calculations. Such investment banking firm's or
accountant's determination or calculation, as the case may be, shall be
deemed conclusive absent manifest error.
(b) Unless the rights represented by this Warrant shall have
expired or shall have been fully exercised, the Company shall, as soon as
practicable and in no event later than five (5) Business Days after any
exercise and at its own expense, issue a new Warrant identical in all
respects to this Warrant except it shall represent rights to purchase the
number of Warrant Shares purchasable immediately prior to such exercise
under this Warrant, less the number of Warrant Shares with respect to which
such Warrant is exercised.
(c) No fractional shares of Common Stock are to be issued
upon the exercise of this Warrant, but rather the number of shares of
Common Stock issued upon exercise of this Warrant shall be rounded up or
down to the nearest whole number.
(d) If the Company shall fail for any reason or for no reason
to issue to the holder within five (5) Business Days of receipt of the
Exercise Delivery Documents, a certificate for the number of shares of
Common Stock to which the holder is entitled or to credit the holder's
balance account with The Depository Trust Company for such number of shares
<PAGE>
of Common Stock to which the holder is entitled upon the holder's exercise
of this Warrant, the Company shall, in addition to any other remedies under
this Warrant or the Exchange Agreement or otherwise available to such
holder, including any indemnification under Section 8 of the Exchange
Agreement, pay as additional damages in cash to such holder on each day
after such fifth (5th) Business Day that the delivery of such Common Stock
certificate is not timely effected an amount equal to 0.5% of the product
of (A) the sum of the number of shares of Common Stock not issued to the
holder on a timely basis and to which the holder is entitled, and (B) the
average of the Closing Sale Price of the Common Stock for the three
consecutive trading days immediately preceding the last possible date which
the Company could have issued such Common Stock to the holder without
violating this Section 2.
(e) If within five (5) Business Days after the Company's
receipt of the Exercise Delivery Documents, the Company fails to deliver a
new Warrant to the holder for the number of shares of Common Stock to which
such holder is entitled pursuant to Section 2(b) hereof, then, in addition
to any other available remedies under this Warrant or the Exchange
Agreement including indemnification pursuant to Section 8 thereof or
otherwise available to such holder, the Company shall pay as additional
damages in cash to such holder on each day after such fifth (5th) Business
Day that such delivery of such new Warrant is not timely effected an amount
equal to 0.5% of the product of (A) the number of shares of Common Stock
represented by the portion of this Warrant which is not being exercised and
(B) the average of the Closing Sale Prices of the Common Stock for the
three consecutive trading days immediately preceding the last possible date
which the Company could have issued such Warrant to the holder without
violating this Section 2.
(f) If the Warrant Shares to be issued are not registered
and available for resale pursuant to a registration statement in form and
manner acceptable to the holder of this Warrant, then notwithstanding
anything contained herein to the contrary, the holder of this Warrant may,
in its sole discretion, exercise this Warrant in whole or in part and, in
lieu of making the cash payment otherwise contemplated to be made to the
Company upon such exercise in payment of the Aggregate Exercise Price,
elect instead to receive upon such exercise the "Net Number" of shares of
Common Stock determined according to the following formula (a "Cashless
Exercise"):
Net Number = (A x B) - (A x C)
B
For purposes of the foregoing formula:
A= the total number of shares with
respect to which this Warrant is then being exercised.
B= the Closing Sale Price of the Common
Stock on the date immediately preceding the date of the subscription
notice.
C= the Warrant Exercise Price then in
effect for the applicable Warrant Shares at the time of such exercise.
Section 3. Covenants as to Common Stock. The Company hereby
covenants and agrees as follows:
(a) This Warrant is, and any Warrants issued in substitution
for or replacement of this Warrant will upon issuance be, duly authorized
and validly issued.
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(b) All Warrant Shares which may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be validly
issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof.
(c) During the period within which the rights represented by
this Warrant may be exercised, the Company will at all times have
authorized and reserved at least 100% of the number of shares of Common
Stock needed to provide for the exercise of the rights then represented by
this Warrant and the par value of said shares will at all times be less
than or equal to the applicable Warrant Exercise Price.
(d) The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of this Warrant upon each
national securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all shares
of Common Stock from time to time issuable upon the exercise of this
Warrant; and the Company shall so list on each national securities exchange
or automated quotation system, as the case may be, and shall maintain such
listing of, any other shares of capital stock of the Company issuable upon
the exercise of this Warrant if and so long as any shares of the same class
shall be listed on such national securities exchange or automated quotation
system.
(e) The Company will not, by amendment of 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 to be observed or performed by it
hereunder, but will at all times in good faith assist in the carrying out
of all the provisions of this Warrant and in the taking of all such action
as may reasonably be requested by the holder of this Warrant in order to
protect the exercise privilege of the holder of this Warrant against
dilution or other impairment, consistent with the tenor and purpose of this
Warrant. Without limiting the generality of the foregoing, the Company
(i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Warrant Exercise
Price then in effect, and (ii) will take all such actions 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.
Section 4. Taxes. The Company shall pay any and all taxes which may
be payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. Except as
otherwise specifically provided herein, no holder, as such, of this Warrant
shall be entitled to vote or receive dividends or be deemed the holder of
shares of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote, give or
withhold consent to any corporate action (whether any reorganization, issue
of stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the holder of this Warrant
of the Warrant Shares which he or she is then entitled to receive upon the
due exercise of this Warrant. In addition, nothing contained in this
Warrant shall be construed as imposing any liabilities on such holder to
purchase any securities (upon exercise of this Warrant or otherwise) or as
a stockholder of the Company, whether such liabilities are asserted by the
Company or by creditors of the Company. Notwithstanding this Section 5,
the Company will provide the holder of this Warrant with copies of the same
notices and other information given to the stockholders of the Company
generally, contemporaneously with the giving thereof to the stockholders.
<PAGE>
Section 6. Representations of Holder. The holder of this Warrant,
by the acceptance hereof, represents that it is acquiring this Warrant and
the Warrant Shares for its own account for investment only and not with a
view towards, or for resale in connection with, the public sale or
distribution of this Warrant or the Warrant Shares, except pursuant to
sales registered or exempted under the Securities Act; provided, however,
that by making the representations herein, the holder does not agree to
hold this Warrant or any of the Warrant Shares for any minimum or other
specific term and reserves the right to dispose of this Warrant and the
Warrant Shares at any time in accordance with or pursuant to a registration
statement or an exemption under the Securities Act. The holder of this
Warrant further represents, by acceptance hereof, that, as of this date,
such holder is an "accredited investor" as such term is defined in Rule
501(a)(1) of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act (an "Accredited Investor"). Upon
exercise of this Warrant, other than pursuant to a Cashless Exercise, the
holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the Warrant Shares so purchased are being
acquired solely for the holder's own account and not as a nominee for any
other party, for investment, and not with a view toward distribution or
resale and that such holder is an Accredited Investor. If such holder
cannot make such representations because they would be factually incorrect,
it shall be a condition to such holder's exercise of this Warrant, other
than pursuant to a Cashless Exercise, that the Company receive such other
representations as the Company considers reasonably necessary to assure the
Company that the issuance of its securities upon exercise of this Warrant
shall not violate any United States or state securities laws.
Section 7. Ownership and Transfer.
(a) The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate
by notice to the holder hereof), a register for this Warrant, in which the
Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each
transferee. The Company may treat the person in whose name any Warrant is
registered on the register as the owner and holder thereof for all
purposes, notwithstanding any notice to the contrary, but in all events
recognizing any transfers made in accordance with the terms of this
Warrant.
(b) This Warrant and the rights granted hereunder shall be
assignable by the holder hereof without the consent of the Company.
Section 8. Adjustment of Warrant Exercise Price and Number of
Shares. The Warrant Exercise Price and the number of shares of Common
Stock issuable upon exercise of this Warrant shall be adjusted from time to
time as follows:
(a) Adjustment of Warrant Exercise Price Upon Issuance of
Common Stock. If during the period beginning on and including the Issuance
Date and ending on and Including the date which is one (1) year after the
Issuance Date, the Company issues or sells, or is deemed to have issued or
sold, any shares of Common Stock (other than shares of Common Stock which
are issued or deemed to have been issued by the Company in connection with
an Approved Stock Plan or Excluded Security or upon the issuance, exercise
or conversion of the Other Securities) for a consideration per share less
than a price (the "Applicable Price") equal to the Warrant Exercise Price
in effect immediately prior to such issuance or sale, then immediately
after the date which is one (1) year after the Issuance Date the Warrant
Exercise Price then in effect shall be reduced to an amount equal to the
lowest consideration per share of Common Stock which the Company issued or
sold, or is deemed to have issued or sold, any shares of Common Stock
(other than shares of Common Stock which are issued or deemed to have been
issued by the Company in connection with an Approved Stock Plan or Excluded
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Security or upon the issuance, exercise or conversion of the Other
Securities) during the period beginning on and including the Issuance Date
and ending on and including the date which is one (1) year after the
Issuance Date (subject to adjustment for stock splits, stock dividends,
stock combinations and other similar transactions after such issue or sale
or deemed issue or sale and prior to the first date after the date which is
one year after the Issuance Date).
(b) Effect on Warrant Exercise Price of Certain Events. For
purposes of determining the adjusted Warrant Exercise Price under Section
8(a) above, the following shall be applicable:
(i) Issuance of Options. If the Company in any manner
grants any Options (other than shares of Common Stock which are issued or
deemed to have been issued by the Company in connection with an Approved
Stock Plan or Excluded Security or upon the issuance, exercise or
conversion of the Other Securities) and the lowest price per share for
which one share of Common Stock is issuable upon the exercise of any such
Option or upon conversion or exchange of any Convertible Securities
issuable upon exercise of any such Option is less than the Applicable
Price, then such share of Common Stock shall be deemed to be outstanding
and to have been issued and sold by the Company at the time of the granting
or sale of such Option for such price per share. For purposes of this
Section 8(b)(i), the "lowest price per share for which one share of Common
Stock is issuable upon exercise of such Options or upon conversion or
exchange of such Convertible Securities" shall be equal to the sum of the
lowest amounts of consideration (if any) received or receivable by the
Company with respect to any one share of Common Stock upon the granting or
sale of the Option, upon exercise of the Option and upon conversion or
exchange of any Convertible Security issuable upon exercise of such Option.
No further adjustment of the Warrant Exercise Price shall be made upon the
actual issuance of such Common Stock or of such Convertible Securities upon
the exercise of such Options or upon the actual issuance of such Common
Stock upon conversion or exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Company
in any manner issues or sells any Convertible Securities (other than shares
of Common Stock which are issued or deemed to have been issued by the
Company in connection with an Approved Stock Plan or Excluded Security or
upon the issuance, exercise or conversion of the Other Securities) and the
lowest price per share for which one share of Common Stock is issuable upon
the conversion or exchange thereof is less than the Applicable Price, then
such share of Common Stock shall be deemed to be outstanding and to have
been issued and sold by the Company at the time of the issuance or sale of
such Convertible Securities for such price per share. For the purposes of
this Section 8(b)(ii), the "lowest price per share for which one share of
Common Stock is issuable upon the conversion or exchange" shall be equal to
the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to one share of Common Stock upon
the issuance or sale of the Convertible Security and upon conversion or
exchange of such Convertible Security. No further adjustment of the
Warrant Exercise Price shall be made upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustment of the Warrant Exercise Price
had been or is to be made pursuant to other provisions of this Section
8(b), no further adjustment of the Warrant Exercise Price shall be made by
reason of such issue or sale.
<PAGE>
(iii)Change in Option Price or Rate of Conversion. If
the purchase price provided for in any Options (other than shares of Common
Stock which are issued or deemed to have been issued by the Company in
connection with an Approved Stock Plan or Excluded Security or upon the
issuance, exercise or conversion of the Other Securities), the additional
consideration, if any, payable upon the issue, conversion or exchange of
any Convertible Securities, or the rate at which any Convertible Securities
are convertible into or exchangeable for Common Stock changes at any time,
the Warrant Exercise Price in effect at the time of such change shall be
adjusted, effective as of the date of such change, to the Warrant Exercise
Price which would have been in effect at such time had such Options or
Convertible Securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold. For purposes of this Section 8(b)(iii),
if the terms of any Option or Convertible Security that was outstanding as
of the date of issuance of this Warrant are changed in the manner described
in the immediately preceding sentence, then such Option or Convertible
Security and the Common Stock deemed issuable upon exercise, conversion or
exchange thereof shall be deemed to have been issued as of the date of such
change. No adjustment pursuant to this Section 8(b) shall be made if such
adjustment would result in an increase of the Warrant Exercise Price then
in effect.
(c) Effect on Warrant Exercise Price of Certain Events. For
purposes of determining the adjusted Warrant Exercise Price under Sections
8(a) and 8(b), the following shall be applicable:
(i) Calculation of Consideration Received. If any
Common Stock, Options or Convertible Securities are issued or sold or
deemed to have been issued or sold for cash, the consideration received
therefor will be deemed to be the net amount received by the Company
therefor. If any Common Stock, Options or Convertible Securities are
issued or sold for a consideration other than cash, the amount of such
consideration received by the Company will be the fair 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 of such securities on the date of receipt of such securities.
If any Common Stock, Options or Convertible Securities are issued to the
owners of the non-surviving entity in connection with any merger in which
the Company is the surviving entity, the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such Common
Stock, Options or Convertible Securities, as the case may be. The fair
value of any consideration other than cash or securities will be determined
jointly by the Company and the holders of Exchange Warrants representing at
least two-thirds (?) of the shares of Common Stock obtainable upon exercise
of the Exchange Warrants then outstanding. If such parties are unable to
reach agreement within ten (10) days after the occurrence of an event
requiring valuation (the "Valuation Event"), the fair value of such
consideration will be determined within five Business Days after the tenth
(10th) day following the Valuation Event by an independent, reputable
appraiser jointly selected by the Company and the holders of Exchange
Warrants representing at least two-thirds (?) of the shares of Common Stock
obtainable upon exercise of the Exchange Warrants then outstanding. The
determination of such appraiser shall be final and binding upon all parties
and the fees and expenses of such appraiser shall be borne jointly by the
Company and the holders of Exchange Warrants.
(ii) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no
specific consideration is allocated to such Options by the parties thereto,
the Options will be deemed to have been issued for a consideration of
$0.01.
<PAGE>
(iii)Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned or held
by or for the account of the Company, and the disposition of any shares so
owned or held will be considered an issue or sale of Common Stock unless
such shares are cancelled.
(iv) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (1) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (2) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date will be deemed to
be the date of the issue or sale of the shares of Common Stock deemed to
have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such right
of subscription or purchase, as the case may be.
(d) Adjustment of Warrant Exercise Price upon Subdivision or
Combination of Common Stock. If the Company at any time after the date of
issuance of this Warrant subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, any Warrant
Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced and the number of shares of Common Stock obtainable
upon exercise of this Warrant will be proportionately increased. If the
Company at any time after the date of issuance of this Warrant combines (by
combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, any
Warrant Exercise Price in effect immediately prior to such combination will
be proportionately increased and the number of shares of Common Stock
obtainable upon exercise of this Warrant will be proportionately decreased.
Any adjustment under this Section 8(d) shall become effective at the close
of business on the date the subdivision or combination becomes effective.
(e) Distribution of Assets. If the Company shall declare or
make any dividend or other distribution of its assets (or rights to acquire
its assets) to holders of Common Stock, by way of return of capital or
otherwise (including, without limitation, any distribution of cash, stock
or other securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement or other similar transaction) (a
"Distribution"), at any time after the issuance of this Warrant, then, in
each such case:
(i) any Warrant Exercise Price in effect immediately
prior to the close of business on the record date fixed for the
determination of holders of Common Stock entitled to receive the
Distribution shall be reduced, effective as of the close of business on
such record date, to a price determined by multiplying such Warrant
Exercise Price by a fraction of which (A) the numerator shall be the
Closing Sale Price of the Common Stock on the trading day immediately
preceding such record date minus the value of the Distribution (as
determined in good faith by the Company's Board of Directors) applicable to
one share of Common Stock, and (B) the denominator shall be the Closing
Sale Price of the Common Stock on the trading day immediately preceding
such record date; and
(ii) either (A) the number of Warrant Shares obtainable
upon exercise of this Warrant shall be increased to a number of shares
equal to the number of shares of Common Stock obtainable immediately prior
to the close of business on the record date fixed for the determination of
holders of Common Stock entitled to receive the Distribution multiplied by
the reciprocal of the fraction set forth in the immediately preceding
clause (i), or (B) in the event that the Distribution is of common stock of
a company whose common stock is traded on a national securities exchange or
<PAGE>
a national automated quotation system, then the holder of this Warrant
shall receive an additional warrant to purchase Common Stock, the terms of
which shall be identical to those of this Warrant, except that such warrant
shall be exercisable into the amount of the assets that would have been
payable to the holder of this Warrant pursuant to the Distribution had the
holder exercised this Warrant immediately prior to such record date and
with an exercise price equal to the amount by which the exercise price of
this Warrant was decreased with respect to the Distribution pursuant to the
terms of the immediately preceding clause (i).
(f) Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 8 but not expressly provided
for by such provisions (including, without limitation, the granting of
stock appreciation rights, phantom stock rights or other rights with equity
features other than shares of Common Stock which are issued or deemed to
have been issued by the Company in connection with an Approved Stock Plan
or Excluded Security or upon the issuance, exercise or conversion of the
Other Securities), then the Company's Board of Directors will make an
appropriate adjustment in the Warrant Exercise Price and the number of
shares of Common Stock obtainable upon exercise of this Warrant so as to
protect the rights of the holders of the Exchange Warrants; provided that
no such adjustment pursuant to this Section 8(f) will increase the Warrant
Exercise Price or decrease the number of shares of Common Stock obtainable
as otherwise determined pursuant to this Section 8.
(g) Notices.
(i) Promptly upon any adjustment of a Warrant
Exercise Price, and in no event later than two (2) Business Days after such
adjustment, the Company will give written notice thereof to the holder of
this Warrant, setting forth in reasonable detail, and certifying, the
calculation of such adjustment.
(ii) The Company will give written notice to the
holder of this Warrant at least ten (10) days prior to the date on which
the Company closes its books or takes a record (A) with respect to any
dividend or distribution upon the Common Stock, (B) with respect to any pro
rata subscription offer to holders of Common Stock or (C) for determining
rights to vote with respect to any Organic Change (as defined below),
dissolution or liquidation, provided that such information shall be made
known to the public prior to or in conjunction with such notice being
provided to such holder.
(iii) The Company will also give written notice to
the holder of this Warrant at least ten (10) days prior to the date on
which any Organic Change, dissolution or liquidation will take place,
provided that such information shall be made known to the public prior to
or in conjunction with such notice being provided to such holder.
Section 9. Purchase Rights; Reorganization, Reclassification,
Consolidation, Merger or Sale.
(a) In addition to any adjustments pursuant to Section 8
above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock
(the "Purchase Rights"), then the holder of this Warrant will be entitled
to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if such
holder had held the number of shares of Common Stock acquirable upon
complete exercise of this Warrant immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the record holders of
Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
<PAGE>
(b) Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's
assets to another Person or other transaction in each case which is
effected in such a way that holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock is referred to
herein as an "Organic Change." Prior to the consummation of any (i) sale
of all or substantially all of the Company's assets to an acquiring Person
or (ii) other Organic Change following which the Company is not a surviving
entity, the Company will secure from the Person purchasing such assets or
the successor resulting from such Organic Change (in each case, the
"Acquiring Entity") a written agreement (in form and substance reasonably
satisfactory to the holders of Exchange Warrants representing at least two-
thirds (?) of the shares of Common Stock obtainable upon exercise of the
Exchange Warrants then outstanding) to deliver to each holder of Exchange
Warrants in exchange for such Warrants, a security of the Acquiring Entity
evidenced by a written instrument substantially similar in form and
substance to this Warrant and reasonably satisfactory to the holders of
two-thirds (?) of the Exchange Warrants then outstanding (including, an
adjusted warrant exercise price equal to the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, and
exercisable for a corresponding number of shares of Common Stock acquirable
and receivable upon exercise of the Exchange Warrants (without regard to
any limitations or exercise), if the value so reflected is less than any
Warrant Exercise Price in effect immediately prior to such consolidation,
merger or sale). Prior to the consummation of any other Organic Change,
the Company shall make appropriate provision (in form and substance
reasonably satisfactory to the holders of Exchange Warrants representing at
least two-thirds (?) of the shares of Common Stock obtainable upon exercise
of the Exchange Warrants then outstanding) to insure that each of the
holders of the Exchange Warrants will thereafter have the right to acquire
and receive in lieu of or in addition to (as the case may be) the shares of
Common Stock immediately theretofore acquirable and receivable upon the
exercise of such holder's Exchange Warrants (without regard to any
limitations or exercise), such shares of stock, securities or assets that
would have been issued or payable in such Organic Change with respect to or
in exchange for the number of shares of Common Stock which would have been
acquirable and receivable upon the exercise of such holder's Warrant as of
the date of such Organic Change (without taking into account any
limitations or restrictions on the exerciseability of this Warrant).
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If
this Warrant is lost, stolen, mutilated or destroyed, the Company shall
promptly, on receipt of an indemnification undertaking (or, in the case of
a mutilated Warrant, the Warrant), issue a new Warrant of like denomination
and tenor as this Warrant so lost, stolen, mutilated or destroyed.
Section 11. Notice. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Warrant must be in writing and will be deemed to have been delivered: (i)
upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii)
one Business Day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive
the same. The addresses and facsimile numbers for such communications
shall be:
<PAGE>
If to the Company:
Entrade Inc.
500 Central Avenue
Northfield, Illinois 60093
Telephone: (847) 784-3310
Facsimile: (847) 441-7652
Attention: Mark Santacrose, President
With a copy to:
Kwiatt & Ruben, Ltd.
211 Waukegan Road, Suite 300
Northfield, Illinois 60093
Telephone: (847) 441-7676
Facsimile: (847) 441-7696
Attention: Philip E. Ruben, Esq.
If to a holder of this Warrant, to it at the address and facsimile number
set forth on the Schedule of Investors to the Exchange Agreement, with
copies to such holder's representatives as set forth on such Schedule of
Investors, or at such other address and facsimile as shall be delivered to
the Company upon the issuance or transfer of this Warrant. Each party
shall provide five days' prior written notice to the other party of any
change in address or facsimile number. Written confirmation of receipt (A)
given by the recipient of such notice, consent, waiver or other
communication, (B) mechanically or electronically generated by the sender's
facsimile machine containing the time, date, recipient facsimile number and
an image of the first page of such transmission or (C) provided by a
nationally recognized overnight delivery service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from a
nationally recognized overnight delivery service in accordance with clause
(i), (ii) or (iii) above, respectively.
Section 12. Date. The date of this Warrant is _______ __,
2000. This Warrant, in all events, shall be wholly void and of no effect
after the close of business on the Expiration Date, except that
notwithstanding any other provisions hereof, the provisions of Section 7(c)
shall continue in full force and effect after such date as to any Warrant
Shares or other securities issued upon the exercise of this Warrant.
Section 13. Amendment and Waiver. Except as otherwise provided
herein, the provisions of the Exchange Warrants may be amended and the
Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company has obtained the
written consent of the holders of Exchange Warrants representing at least
two-thirds (?) of the shares of Common Stock obtainable upon exercise of
the Exchange Warrants then outstanding; provided that no such action may
increase the Warrant Exercise Price of any Preferred Share Warrant or
decrease the number of shares or class of stock obtainable upon exercise of
any Preferred Share Warrant without the written consent of the holder of
such Preferred Share Warrant.
Section 14. Descriptive Headings; Governing Law. The
descriptive headings of the several sections and paragraphs of this Warrant
are inserted for convenience only and do not constitute a part of this
Warrant. All questions concerning the construction, validity, enforcement
and interpretation of this Warrant shall be governed by the internal laws
of the State of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York, or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
[Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by ___________________, its _______________________, as of the ___ day of
_______, 2000.
ENTRADE INC.
By: _______________________________
Name: _____________________________
Title: ______________________________
<PAGE>
EXHIBIT A TO WARRANT
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THIS WARRANT
ENTRADE INC.
The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Common Stock ("Warrant Shares") of
Entrade Inc., a Pennsylvania corporation (the "Company"), evidenced by the
attached Warrant (the "Warrant"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the
Warrant.
1. Form of Warrant Exercise Price. The Holder intends that payment
of the Warrant Exercise Price shall be made as:
____________ a "Cash Exercise" with respect to _________________
Warrant Shares; and/or
____________ a "Cashless Exercise" with respect to
_______________ Warrant Shares (to the extent permitted by the terms of the
Warrant).
2. Payment of Warrant Exercise Price. In the event that the holder
has elected a Cash Exercise with respect to some or all of the Warrant
Shares to be issued pursuant hereto, the holder shall pay the sum of
$___________________ to the Company in accordance with the terms of the
Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the
holder __________ Warrant Shares in accordance with the terms of the
Warrant.
Date: _______________ __, ______
--------------------------------
Name of Registered Holder
By:
------------------------------
Name:
Title:
<PAGE>
ACKNOWLEDGMENT
--------------
The Company hereby acknowledges this Exercise Notice and hereby
directs [TRANSFER AGENT] to issue the above indicated number of shares of
Common Stock in accordance with the Transfer Agent Instructions dated
_______ ___, 2000 from the Company and acknowledged and agreed to by
[TRANSFER AGENT].
ENTRADE INC.
By: _______________________________________
Name: _____________________________________
Title: ______________________________________
<PAGE>
EXHIBIT B TO WARRANT
--------------------
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, Federal Identification No. __________, a warrant to
purchase ____________ shares of the capital stock of Entrade Inc., a
Pennsylvania corporation, represented by warrant certificate no. _____,
standing in the name of the undersigned on the books of said corporation.
The undersigned does hereby irrevocably constitute and appoint
______________, attorney to transfer the warrants of said corporation, with
full power of substitution in the premises.
Dated: _________, ____
____________________________________
By: _____________________________
Its: _____________________________
