Exhibit 4.2 [FORM OF BRIDGE WARRANT] NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT CERTIFICATE. WARRANTS TO PURCHASE AN AGGREGATE OF ________ SHARES OF COMMON STOCK OF JPAL, INC., A NEVADA CORPORATION ISSUED TO: _______________________ DATED: ________, 2002 THIS IS TO CERTIFY that, for value received, ________________ or its registered assigns (herein collectively referred to as the "Warrantholder"), is entitled to the number of Warrants (the "Warrants") set forth above, each of which represents the right, upon the due exercise hereof, at any time commencing on the date hereof and ending on the second anniversary of the Closing (as defined in Section10(b) below) (the "Expiration Date"), unless earlier terminated, to purchase from JPAL, Inc., a Nevada corporation (the "Company"), one share of common stock, par value $.001 per share, of the Company ("Common Stock") upon surrender hereof, with the form of election to purchase included herein (the "Election to Purchase") completed and duly executed, at the office of the Company, and upon simultaneous payment therefor of an exercise price per share equal to the Purchase Price (as defined in Section 1 below) in cash and/or check payable to the order of the Company. The number of shares of Common Stock issuable upon exercise of the Warrants and the Purchase Price therefor are subject to adjustment as provided herein. 1. Definitions ----------- (a) "Purchase Price" means the purchase price for the shares of Common Stock purchasable hereunder, which shall be equal to $1.90 per share, subject to adjustment as hereinafter described. (b) "Market Price" means, on any date: (i) if the Common Stock is listed or admitted for trading on any national securities exchange, the last reported sales price as reported on such national securities exchange; (ii) if the Common Stock is not listed or admitted for trading on any national securities exchange, the average of the last reported closing bid and asked quotation for the Common Stock as reported on the Nasdaq Stock Market; (iii) if the Common Stock is not listed or admitted for trading on any national securities exchange or quoted on the Nasdaq Stock Market or a similar service, 1the average of the last reported bid and asked quotation for the Common Stock as quoted by a market maker in the Common Stock (or if there is more than one market maker, the bid and asked quotation shall be obtained from two market makers and the average of the lowest bid and highest asked quotation shall be the "Market Price"); or (iv) if the Common Stock is not listed or admitted for trading on any national securities exchange or quoted on the Nasdaq Stock Market and there is no market maker in the Common Stock, the fair market value of such securities as determined in good faith by the Board of Directors of the Company. 2. Transfer -------- The Warrants may not be transferred, sold or assigned except to, in whole or in part, (i) any entity controlled by, or under common control with, the Warrantholder, (ii) any officer director or stockholder of the Warrantholder, or (iii) by operation of law; provided, however, that such transfer, sale or assignment shall be offered in compliance with all applicable securities laws. Upon any such transfer, the Company agrees to accept and cancel the Warrants originally issued and issue new Warrants in substitution thereof to any of the transferees set forth above. 3. Issuance of Shares of Common Stock ---------------------------------- Subject to the restrictions set forth in Section 4 below, upon surrender of the Warrants and payment of the Purchase Price, the Company shall issue and deliver with all reasonable dispatch the certificate(s) for the shares of Common Stock to the Warrantholder or upon the written order of the Warrantholder in such name or names as the Warrantholder may designate, together with a cash amount in respect of any fraction of a share otherwise issuable upon the exercise of the Warrants (as set forth in Section 9 below). Such certificate(s) shall represent the number of shares of Common Stock issuable upon the exercise of the Warrants, rounded down to the nearest whole number. Certificates representing the shares of Common Stock shall be deemed to have been issued and the person so designated to be named therein shall be deemed to have become a holder of record of such shares as of the date of the surrender of the Warrants and payment of the Purchase Price as aforesaid; notwithstanding that the transfer books for the Common Stock or other classes of securities purchasable upon the exercise of the Warrants shall then be closed or the certificate(s) for the shares of Common Stock in respect of which the Warrants is then exercised shall not then have been actually delivered to the Warrantholder. As soon as practicable after each such exercise of the Warrants, the Company shall issue and deliver the certificate(s) for the shares of Common Stock issuable upon such exercise, registered as requested. The Warrants shall be exercisable, at the election of the registered holder hereof, either as an entirety or from time to time for part of the number of shares of Common Stock specified herein, but in no event shall fractional shares of Common Stock be issued with regard to the exercise of the Warrants. In the event that only a portion of the Warrants is exercised at any time prior to the close of business on the Expiration Date, a new warrant certificate shall be issued to the Warrantholder for the remaining number of shares of Common Stock purchasable pursuant hereto. The Company shall cancel the Warrants when they are surrendered upon exercise. 2 Prior to due presentment for registration of transfer of the Warrants, the Company shall deem and treat the Warrantholder as the absolute owner of the Warrants (notwithstanding any notation of ownership or other writing on this warrant certificate made by anyone other than the Company) for the purpose of any exercise hereof or any distribution to the Warrantholder and for all other purposes, and the Company shall not be affected by any notice to the contrary. 4. Payment of Expenses, Taxes, etc. Upon Exercise ---------------------------------------------- The Company shall pay all documentary stamp taxes, if any, attributable to the initial issuance of the shares of Common Stock upon the exercise of the Warrants; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue or delivery of any certificates for shares of Common Stock in a name other than that of the Warrantholder upon the exercise of the Warrants, and in such case the Company shall not be required to issue or deliver any certificates for shares of Common Stock until or unless the person or persons requesting the issuance have paid to the Company the amount of such tax or have established to the Company's satisfaction that such tax has been paid or is not required to be paid. 5. Lost, Stolen, or Mutilated Warrant Certificate ---------------------------------------------- In case this warrant certificate shall be mutilated, lost, stolen or destroyed, the Company shall issue and deliver, in exchange and substitution for and upon cancellation of the mutilated warrant certificate, or in lieu of and substitution for the warrant certificate lost, stolen or destroyed, a new warrant certificate of like tenor and representing an equivalent number of shares of Common Stock purchasable upon exercise, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of such warrant certificate and reasonable indemnity, if requested, also reasonably satisfactory to the Company. No bond or other security shall be required from the original Warrantholder in connection with the replacement by the Company of a lost, stolen or mutilated warrant certificate. 6. Rights Upon Expiration ---------------------- Unless the Warrants are surrendered and payment made for the shares of Common Stock as herein provided before the close of business on the Expiration Date (or within the 30-day period specified in Section 12(a) below), this warrant certificate will become wholly void and all rights evidenced hereby will terminate after such time. 7. Exchange of Warrant Certificate ------------------------------- Subject to the provisions of Section 3 above, this warrant certificate may be exchanged for a number of warrant certificates of the same tenor as this warrant certificate for the purchase in the aggregate of the same number of shares of Common Stock as are purchasable upon the exercise of this 3 warrant certificate, upon surrender hereof at the office of the Company with written instructions as to the denominations of the warrant certificates to be issued in exchange. 8. Adjustment for Certain Events ----------------------------- (a) In case the Company shall at any time after the date the Warrants are first issued (i) declare a dividend on the Common Stock payable in securities of the Company (whether in Common Stock or of any other securities), (ii) split or subdivide the outstanding shares of Common Stock into a greater number of shares of Common Stock, (iii) reverse split or combine the outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any securities of the Company in a reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing Company), then, in each case, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such split, subdivision, reverse split, combination or reclassification, and the number and kind of securities issuable upon exercise of the Warrants on such date, shall be proportionately adjusted so that the holder of any Warrant exercised after such time shall be entitled to receive (at an equivalent aggregate price) the aggregate number and kind of securities which, if such Warrant had been exercised immediately prior to such date, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, split, subdivision, reverse split, combination or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur. (b) No adjustment in the Purchase Price shall be required unless such adjustment would be less than $.01 per share; provided, however, that any adjustment which by reason of this Section 8 is not required to be made immediately shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 8 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be, but in no event shall the Company be obligated to issue fractional shares of Common Stock or fractional portions of any securities upon the exercise of the Warrants. (c) In the event that at any time, as a result of an adjustment made pursuant to this Section 8, the holder of any Warrant thereafter exercised shall become entitled to receive any securities of the Company other than the shares of Common Stock, thereafter the number of such other securities so receivable upon exercise of this Warrant and the Purchase Price shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of Common Stock contained in this Section 8, and the provisions of this warrant certificate with respect to the shares of Common Stock shall apply, to the extent applicable, on like terms to any such other warrants or other securities. (d) Upon each adjustment of the Purchase Price as a result of calculations made in this Section 8, each Warrant outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of shares of Common Stock (calculated to the nearest hundredth), obtained by (i) multiplying the number of shares of Common Stock purchasable upon exercise of a Warrant immediately prior to such adjustment of the Purchase Price by the Purchase Price in effect 4 immediately prior to such adjustment and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (e) In case of any capital reorganization of the Company or of any reclassification of the Common Stock or in case of the consolidation of the Company with, or the merger of the Company into, any other corporation (other than a consolidation or merger in which the Company is the continuing Company) or of the sale of the properties and assets of the Company as, or substantially as, an entirety, each Warrant shall, after such reorganization, reclassification, consolidation, merger or sale, be exercisable, upon the terms and conditions specified herein, for the number of shares of Common Stock or other securities or warrants or other securities or property to which a holder of the number of shares of Common Stock purchasable (at the time of such reorganization, reclassification, consolidation, merger or sale) upon exercise of such Warrant would have been entitled upon such reorganization, reclassification, consolidation, merger or sale; and in any such case, if necessary, the provisions set forth in this Section 8(e) with respect to the rights and interests thereafter of the registered holders of all Warrants shall be appropriately adjusted so as to be applicable, as nearly as may reasonably be, to any shares of Common Stock or other securities or property thereafter deliverable on the exercise of the Warrants. The split, subdivision, reverse split or combination of Common Stock at any time outstanding into a greater or lesser number of shares of Common Stock shall not be deemed to be a reclassification of the Common Stock for the purposes of this Section 8(e). 9. Fractional Shares ----------------- Upon exercise of the Warrants, the Company shall not be required to issue fractional shares of Common Stock or other securities. In lieu of such fractional shares, the Warrantholder shall receive an amount in cash equal to the same fraction of the (a) current Market Price of one whole share if clause (i), (ii) or (iii) in the definition of Market Price in Section 1 above is applicable or (b) book value of one whole share as reported in the Company's most recent financial statements if clause (iv) in the definition of Market Price in Section 1 above is applicable. All calculations under this Section 9 shall be made to the nearest cent. 10. Securities Act Legend; Registration Rights ------------------------------------------ (a) The Warrantholder shall not be entitled to any rights of a stockholder of the Company with respect to any shares of Common Stock purchasable upon the exercise hereof, including voting, dividend or dissolution rights, until such shares have been paid for in full. As soon as practicable after such exercise, the Company shall deliver a certificate or certificates for the securities issuable upon such exercise, all of which shall be fully paid and nonassessable, to the person or persons entitled to receive the same; provided, however, that, if applicable, such certificate or certificates delivered to the holder of the surrendered Warrant shall bear a legend reading substantially as follows: 5 "These securities have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state and may not be sold or transferred in the absence of such registration or any exemption therefrom under such Act and laws, if applicable. The Company, prior to permitting a transfer of these securities, may require an opinion of counsel or other assurances satisfactory to it as to compliance with or exemption from such Act and laws." (b) Promptly following the closing (the "Closing") of the transactions contemplated by that certain Amended Contribution Agreement, dated as of April 24, 2002, by and among the Company, Essential Reality, LLC ("ER") and the members of ER (the "ER Transaction"), the Company shall file a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), covering the resale of the shares of Common Stock issuable upon exercise of the Warrants. 11. Notice of Adjustment -------------------- (a) Upon any adjustment of the Purchase Price pursuant to Section 8 above, the Company, within 30 calendar days thereafter, shall have on file for inspection by the Warrantholders a certificate of the Board of Directors of the Company setting forth the Purchase Price after such adjustment, the method of calculation thereof in reasonable detail, the facts upon which such calculations were based and the number of shares of Common Stock or other securities issuable upon exercise of a Warrant after such adjustment in the Purchase Price, which certificate shall be conclusive evidence of the correctness of the matters set forth therein. (b) In case: (i) the Company shall authorize the issuance to all holders of Common Stock of rights, options or warrants to subscribe for or purchase securities of the Company or of any other subscription rights, options or warrants; or (ii) the Company shall authorize the distribution to all holders of Common Stock its assets; or (iii) of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required (other than the ER Transaction), of the conveyance or transfer of the properties and assets of the Company substantially as an entirety or of any capital reorganization or any reclassification of Common Stock (other than a change in par value or from a specified par value to no par value or from no par value to a specified par value or as a result of a subdivision or combination, each to the extent applicable); or (iv) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or 6 (v) the Company proposes to take any other action which would require an adjustment of the Purchase Price pursuant to Section 8 above; then, in each such case, the Company shall give to the Warrantholder at its address appearing below at least 20 calendar days prior to the applicable record date hereinafter specified in (A), (B), or (C) below, by first class mail, postage prepaid, a written notice stating (A) the date as of which the holders of record of shares of Common Stock entitled to receive any such rights, options, warrants or distribution are to be determined or (B) the date on which any such consolidation, merger, conveyance, transfer, reorganization, reclassification, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange such shares for securities or other property, if any, deliverable upon such consolidation, merger, conveyance, transfer, reorganization, reclassification, dissolution, liquidation or winding up or (C) the date of such action which would require an adjustment of the Purchase Price. The failure to give the notice required by this Section 11(b) or any defect therein shall not affect the legality or validity of any such issuance, distribution, consolidation, merger, conveyance, transfer, reorganization, reclassification, dissolution, liquidation, winding up or other action or the vote upon any such action. Except as provided herein, nothing contained herein shall be construed as conferring upon the Warrantholder the right to vote on any matter submitted to the stockholders of the Company for their vote or to receive notice of meetings of stockholders or the election of directors of the Company or any other proceedings of the Company, or any rights whatsoever as a stockholder of the Company. 12. Call Provisions --------------- The Company shall have the right to "call" the Warrants upon the occurrence of the following events: (i) the average closing Market Price of a share of Common Stock is trading at $1.50 or more above the prevailing exercise price for a period of no less than 15 consecutive trading days, (ii) prior to the commencement of such period, the Securities and Exchange Commission declared effective the Registration Statement pursuant to which the shares of Common Stock underlying the Warrants shall have been registered and (iii) the average daily volume of Common Stock traded during such period was at least 100,000 shares. If the Company elects to exercise its call right, then it shall deliver a written notice to the Warrantholder stating such, and the Warrantholder shall then have 30 days to exercise the Warrants pursuant to the terms of this warrant certificate. If the Warrants are not exercised within such 30-day period, then the Warrants and the underlying shares of Common Stock shall be forfeited and cancelled as set forth in Section 6 above. 13. Representations of Warrantholder -------------------------------- (a) The Warrantholder represents that it is acquiring the Warrants and the shares of Common Stock issuable upon conversion of the Warrants (collectively, the "Securities") solely for its own account and beneficial interest, for investment purposes and not for sale or with a view to distribution of the Securities or any part thereof, has no present intention of selling (in connection with a distribution or otherwise), granting any 7 participation in, or otherwise distributing the same, and does not presently have reason to anticipate a change in such intention. The Warrantholder further represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. (b) The Warrantholder understands that the Securities have not been registered under the Securities Act on the basis that no distribution or public offering of the securities of the Company is to be effected. The Warrantholder realizes that the basis for the exemption may not be present if its representations are not true. The Warrantholder recognizes that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. 14. Notices ------- Any notice, request, demand or other communication pursuant to the terms of this warrant certificate shall be in writing and shall be sufficiently given or made when delivered or mailed by first class or registered mail, postage-prepaid, to the following addresses: If to the Company (following the Closing): c/o Essential Reality 49 West 27th Street, Suite 7 East New York, New York 10001 Attention: General Counsel with a copy to: Olshan Grundman Frome Rosenzweig & Wolosky LLP 505 Park Avenue New York, New York 10022 Attention: Steven Wolosky, Esq. If to the Warrantholder: -------------------------- -------------------------- -------------------------- -------------------------- or to such other address or such other counsel as the Company or the Warrantholder may designate by written notice to the other party. 8 15. Miscellaneous ------------- (a) All the covenants and provisions herein by or for the benefit of the Company shall bind and inure to the benefit of its successors or assigns and all of the covenants and provisions herein for the benefit of the Warrantholder hereof shall inure to the benefit of its successors or assigns. (b) This warrant certificate shall be deemed to be a contract made under the laws of the State of New York for all purposes and shall be construed in accordance with the laws of such State. (c) Nothing in this warrant certificate shall be construed to give any person or corporation other than the Company and the Warrantholder and its permitted transferees any legal or equitable right, remedy or claim under this warrant certificate; but this warrant certificate shall be for the sole and exclusive benefit of the Company and the Warrantholder and its permitted transferees. [SIGNATURE PAGE FOLLOWS] 9 IN WITNESS WHEREOF, an authorized officer of the Company has signed and delivered to the Warrantholder this warrant certificate as of the date first written above. JPAL, INC. By: -------------------------- Name: Frank Drechsler Title: President 10 ELECTION TO PURCHASE (To be executed by the registered holder if such holder desires to exercise the within Warrants) JPAL, Inc. c/o Essential Reality 49 West 27th Street, Suite 7 East New York, New York 10001 Attention: General Counsel The undersigned hereby (1) irrevocably elects to exercise his or its rights to purchase ____________ shares of Common Stock covered by the within Warrants, (2) makes payment in full of the Purchase Price by enclosure of a certified check, (3) requests that certificates for such shares of Common Stock be issued in the name of: Please print name, address and Social Security or Tax Identification Number: - ------------------------------------------------ - ------------------------------------------------ - ------------------------------------------------ - ------------------------------------------------ and (4) if said number of shares of Common Stock shall not be all the shares evidenced by the within Warrants, requests that a new warrant certificate for the balance of the shares covered by the within Warrants be registered in the name of, and delivered to: Please print name and address: - ------------------------------------------------ - ------------------------------------------------ - ------------------------------------------------ - ------------------------------------------------ In lieu of receipt of a fractional share of Common Stock, the undersigned will receive a check representing payment therefor. Dated: _____________________ _________________________________ WARRANTHOLDER By: _____________________________ Name: Title: 11
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SB-2 Filing
Alliance Distributors Holding (ADTR) Inactive SB-2Registration of securities for small business issuer
Filed: 19 Jul 02, 12:00am