THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE | ||||
UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED | ||||
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE | ||||
SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK | ||||
ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, | ||||
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE | ||||
OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS | ||||
WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE | ||||
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY | ||||
SATISFACTORY TO eLEC COMMUNICATIONS CORP. THAT SUCH | ||||
REGISTRATION IS NOT REQUIRED. | ||||
Right to Purchase up to Shares of Common Stock of | ||||
eLEC Communications Corp. | ||||
(subject to adjustment as provided herein) | ||||
COMMON STOCK PURCHASE WARRANT | ||||
No. | Issue Date: May 1, 2007 | |||
eLEC COMMUNICATIONS CORP., a corporation organized under the laws of the State | ||||
of New York (“ELEC”), hereby certifies that, for value received, , or their | ||||
assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the | ||||
Company (as defined herein) from and after the Issue Date of this Warrant and at any time or | ||||
from time to time before 5:00 p.m., New York time, through the close of business May 1, 2009 | ||||
(the “Expiration Date”), up to fully paid and nonassessable shares of Common Stock | ||||
(as hereinafter defined), at the applicable Exercise Price (as defined below) per share. The | ||||
number and character of such shares of Common Stock and the applicable Exercise Price per | ||||
share are subject to adjustment as provided herein. | ||||
As used herein the following terms, unless the context otherwise requires, have the | ||||
following respective meanings: | ||||
(a) | The term “Company” shall include ELEC and any corporation which shall | |||
succeed, or assume the obligations of, ELEC hereunder. | ||||
(b) | The term “Common Stock” includes (i) the Company’s Common Stock, | |||
par value $0.10 per share; and (ii) any other securities into which or for which any of the | ||||
securities described in the preceding clause (i) may be converted or exchanged pursuant | ||||
to a plan of recapitalization, reorganization, merger, sale of assets or otherwise. | ||||
(c) | The term “Other Securities” refers to any stock (other than Common | |||
Stock) and other securities of the Company or any other person (corporate or otherwise) | ||||
which the Holder of this Warrant at any time shall be entitled to receive, or shall have | ||||
received, on the exercise of the Warrant, in lieu of or in addition to Common Stock, or | ||||
which at any time shall be issuable or shall have been issued in exchange for or in | ||||
replacement of Common Stock or Other Securities pursuant to Section 4 or otherwise. | ||||
(d) | The “Exercise Price” applicable under this Warrant shall be $0.27. | |||
1. | Exercise of Warrant. | |||
1.1 | Number of Shares Issuable upon Exercise. From and after the date hereof | |||
through and including the Expiration Date, the Holder shall be entitled to receive, upon exercise | ||||
of this Warrant in whole or in part, by delivery of an original or fax copy of an exercise notice in | ||||
the form attached hereto as Exhibit A (the “Exercise Notice”), up toshares of | ||||
Common Stock of the Company, subject to adjustment pursuant to Section 4. | ||||
1.2 | Fair Market Value. For purposes hereof, the “Fair Market Value” of a | |||
share of Common Stock as of a particular date (the “Determination Date”) shall mean: | ||||
(a) | If the Company’s Common Stock is traded on the American Stock | |||
Exchange or another national exchange or is quoted on the National or SmallCap Market | ||||
of The Nasdaq Stock Market, Inc. (“Nasdaq”), then the closing or last sale price, | ||||
respectively, reported for the last business day immediately preceding the Determination | ||||
Date. | ||||
(b) | If the Company’s Common Stock is not traded on the American Stock | |||
Exchange or another national exchange or on the Nasdaq but is traded on the NASD OTC | ||||
Bulletin Board, then the mean of the average of the closing bid and asked prices reported | ||||
for the last business day immediately preceding the Determination Date. | ||||
(c) | Except as provided in clause (d) below, if the Company’s Common Stock | |||
is not publicly traded, then as the Holder and the Company agree or in the absence of | ||||
agreement by arbitration in accordance with the rules then in effect of the American | ||||
Arbitration Association, before a single arbitrator to be chosen from a panel of persons | ||||
qualified by education and training to pass on the matter to be decided. | ||||
(d) | If the Determination Date is the date of a liquidation, dissolution or | |||
winding up, or any event deemed to be a liquidation, dissolution or winding up pursuant | ||||
to the Company’s charter, then all amounts to be payable per share to holders of the | ||||
Common Stock pursuant to the charter in the event of such liquidation, dissolution or | ||||
winding up, plus all other amounts to be payable per share in respect of the Common | ||||
Stock in liquidation under the charter, assuming for the purposes of this clause (d) that all | ||||
of the shares of Common Stock then issuable upon exercise of the Warrant are | ||||
outstanding at the Determination Date. | ||||
1.3 | Company Acknowledgment. The Company will, at the time of the | |||
exercise of this Warrant, upon the request of the Holder hereof acknowledge in writing its | ||||
continuing obligation to afford to such Holder any rights to which such holder shall continue to | ||||
be entitled after such exercise in accordance with the provisions of this Warrant. If the Holder | ||||
shall fail to make any such request, such failure shall not affect the continuing obligation of the | ||||
Company to afford to such Holder any such rights. | ||||
2 |
1.4 | Trustee for Warrant Holders. In the event that a bank or trust company | |||
shall have been appointed as trustee for the Holder of this Warrant pursuant to Subsection 3.2, | ||||
such bank or trust company shall have all the powers and duties of a warrant agent (as | ||||
hereinafter described) and shall accept, in its own name for the account of the Company or such | ||||
successor person as may be entitled thereto, all amounts otherwise payable to the Company or | ||||
such successor, as the case may be, on exercise of this Warrant pursuant to this Section 1. | ||||
2. | Procedure for Exercise. | |||
2.1 | Delivery of Stock Certificates, Etc., on Exercise. The Company agrees | |||
that the shares of Common Stock purchased upon exercise of this Warrant shall be deemed to be | ||||
issued to the Holder as the record owner of such shares as of the close of business on the date on | ||||
which this Warrant shall have been surrendered and payment made for such shares in accordance | ||||
herewith. As soon as practicable after the exercise of this Warrant in full or in part, and in any | ||||
event within three (3) business days thereafter, the Company at its expense (including the | ||||
payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered | ||||
to the Holder, or as such Holder (upon payment by such Holder of any applicable transfer taxes) | ||||
may direct in compliance with applicable securities laws, a certificate or certificates for the | ||||
number of duly and validly issued, fully paid and nonassessable shares of Common Stock (or | ||||
Other Securities) to which such Holder shall be entitled on such exercise, plus, in lieu of any | ||||
fractional share to which such Holder would otherwise be entitled, cash equal to such fraction | ||||
multiplied by the then Fair Market Value of one full share, together with any other stock or other | ||||
securities and property (including cash, where applicable) to which such Holder is entitled upon | ||||
such exercise pursuant to Section 1 or otherwise. | ||||
2.2 | Exercise. Payment may be made in cash or by certified or official bank | |||
check payable to the order of the Company equal to the applicable aggregate Exercise Price for | ||||
the number of Common Shares specified in such Exercise Notice (as such exercise number shall | ||||
be adjusted to reflect any adjustment in the total number of shares of Common Stock issuable to | ||||
the Holder per the terms of this Warrant). Upon receipt by the Company of any Exercise Notice | ||||
and proper payment of the aggregate Exercise Price, the Holder shall thereupon be entitled to | ||||
receive the number of duly authorized, validly issued, fully-paid and non-assessable shares of | ||||
Common Stock (or Other Securities) determined as provided herein. | ||||
3. | Effect of Reorganization, Etc.; Adjustment of Exercise Price. | |||
3.1 | Reorganization, Consolidation, Merger, Etc. In case at any time or from | |||
time to time, the Company shall (a) effect a reorganization, (b) consolidate with or merge into | ||||
any other person, or (c) transfer all or substantially all of its properties or assets to any other | ||||
person under any plan or arrangement contemplating the dissolution of the Company, then, in | ||||
each such case, as a condition to the consummation of such a transaction, proper and adequate | ||||
provision shall be made by the Company whereby the Holder of this Warrant, on the exercise | ||||
hereof as provided in Section 1 at any time after the consummation of such reorganization, | ||||
consolidation or merger or the effective date of such dissolution, as the case may be, shall | ||||
receive, in lieu of the Common Stock (or Other Securities) issuable on such exercise prior to | ||||
such consummation or such effective date, the stock and other securities and property (including | ||||
cash) to which such Holder would have been entitled upon such consummation or in connection | ||||
3 |
with such dissolution, as the case may be, if such Holder had so exercised this Warrant, | ||||
immediately prior thereto, all subject to further adjustment thereafter as provided in Section 4. | ||||
3.2 | Dissolution. In the event of any dissolution of the Company following the | |||
transfer of all or substantially all of its properties or assets, the Company, concurrently with any | ||||
distributions made to holders of its Common Stock, shall at its expense deliver or cause to be | ||||
delivered to the Holder the stock and other securities and property (including cash, where | ||||
applicable) receivable by the Holder of this Warrant pursuant to Section 3.1, or, if the Holder | ||||
shall so instruct the Company, to a bank or trust company specified by the Holder and having its | ||||
principal office in New York, NY as trustee for the Holder of this Warrant (the “Trustee”). | ||||
3.3 | Continuation of Terms. Upon any reorganization, consolidation, merger | |||
or transfer (and any dissolution following any transfer) referred to in this Section 3, this Warrant | ||||
shall continue in full force and effect and the terms hereof shall be applicable to the shares of | ||||
stock and other securities and property receivable on the exercise of this Warrant after the | ||||
consummation of such reorganization, consolidation or merger or the effective date of | ||||
dissolution following any such transfer, as the case may be, and shall be binding upon the issuer | ||||
of any such stock or other securities, including, in the case of any such transfer, the person | ||||
acquiring all or substantially all of the properties or assets of the Company, whether or not such | ||||
person shall have expressly assumed the terms of this Warrant as provided in Section 4. In the | ||||
event this Warrant does not continue in full force and effect after the consummation of the | ||||
transactions described in this Section 3, then the Company’s securities and property (including | ||||
cash, where applicable) receivable by the Holders of the Warrant will be delivered to Holder or | ||||
the Trustee as contemplated by Section 3.2. | ||||
4. | Extraordinary Events Regarding Common Stock. In the event that the Company | |||
shall (a) issue additional shares of the Common Stock as a dividend or other distribution on | ||||
outstanding Common Stock, (b) subdivide its outstanding shares of Common Stock, or (c) | ||||
combine its outstanding shares of the Common Stock into a smaller number of shares of the | ||||
Common Stock, then, in each such event, the Exercise Price shall, simultaneously with the | ||||
happening of such event, be adjusted by multiplying the then Exercise Price by a fraction, the | ||||
numerator of which shall be the number of shares of Common Stock outstanding immediately | ||||
prior to such event and the denominator of which shall be the number of shares of Common | ||||
Stock outstanding immediately after such event, and the product so obtained shall thereafter be | ||||
the Exercise Price then in effect. The Exercise Price, as so adjusted, shall be readjusted in the | ||||
same manner upon the happening of any successive event or events described herein in this | ||||
Section 4. The number of shares of Common Stock that the Holder of this Warrant shall | ||||
thereafter, on the exercise hereof as provided in Section 1, be entitled to receive shall be adjusted | ||||
to a number determined by multiplying the number of shares of Common Stock that would | ||||
otherwise (but for the provisions of this Section 4) be issuable on such exercise by a fraction of | ||||
which (a) the numerator is the Exercise Price that would otherwise (but for the provisions of this | ||||
Section 4) be in effect, and (b) the denominator is the Exercise Price in effect on the date of such | ||||
exercise. | ||||
5. | Certificate as to Adjustments. In each case of any adjustment or readjustment in | |||
the shares of Common Stock (or Other Securities) issuable on the exercise of this Warrant, the | ||||
Company at its expense will promptly cause its Chief Financial Officer or other appropriate | ||||
4 |
designee to compute such adjustment or readjustment in accordance with the terms of this | ||
Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in | ||
detail the facts upon which such adjustment or readjustment is based, including a statement of (a) | ||
the consideration received or receivable by the Company for any additional shares of Common | ||
Stock (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number | ||
of shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding, and | ||
(c) the Exercise Price and the number of shares of Common Stock to be received upon exercise | ||
of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or | ||
readjusted as provided in this Warrant. The Company will forthwith mail a copy of each such | ||
certificate to the Holder of this Warrant and any Warrant agent of the Company (appointed | ||
pursuant to Section 11 hereof). | ||
6. | Reservation of Stock, Etc., Issuable on Exercise of Warrant. The Company will | |
at all times reserve and keep available, solely for issuance and delivery on the exercise of this | ||
Warrant, shares of Common Stock (or Other Securities) from time to time issuable on the | ||
exercise of this Warrant. | ||
7. | Assignment; Exchange of Warrant. Subject to compliance with applicable | |
securities laws, this Warrant, and the rights evidenced hereby, may be transferred by any | ||
registered holder hereof (a “Transferor”) in whole or in part. On the surrender for exchange of | ||
this Warrant, with the Transferor’s endorsement in the form ofExhibit Battached hereto (the | ||
“Transferor Endorsement Form”) and together with evidence reasonably satisfactory to the | ||
Company demonstrating compliance with applicable securities laws, which shall include, | ||
without limitation, if requested in writing by the Company, the provision of a legal opinion from | ||
the Transferor’s counsel (at the Company’s expense) that such transfer is exempt from the | ||
registration requirements of applicable securities laws, and with payment by the Transferor of | ||
any applicable transfer taxes) will issue and deliver to or on the order of the Transferor thereof a | ||
new Warrant of like tenor, in the name of the Transferor and/or the transferee(s) specified in | ||
such Transferor Endorsement Form (each a “Transferee”), calling in the aggregate on the face or | ||
faces thereof for the number of shares of Common Stock called for on the face or faces of the | ||
Warrant so surrendered by the Transferor. | ||
8. | Replacement of Warrant. On receipt of evidence reasonably satisfactory to the | |
Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such | ||
loss, theft or destruction of this Warrant, on delivery of an indemnity agreement or security | ||
reasonably satisfactory in form and amount to the Company or, in the case of any such | ||
mutilation, on surrender and cancellation of this Warrant, the Company at its expense will | ||
execute and deliver, in lieu thereof, a new Warrant of like tenor. | ||
9. | Warrant Agent. The Company may, by written notice to the Holder of this | |
Warrant, appoint an agent for the purpose of issuing Common Stock (or Other Securities) on the | ||
exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section 7, | ||
and replacing this Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such | ||
issuance, exchange or replacement, as the case may be, shall be made at such office by such | ||
agent. | ||
5 |
10. | Transfer on the Company’s Books. Until this Warrant is transferred on the books | |
of the Company, the Company may treat the registered Holder hereof as the absolute owner | ||
hereof for all purposes, notwithstanding any notice to the contrary. | ||
11. | Notices, Etc. All notices and other communications from the Company to the | |
Holder of this Warrant shall be mailed by first class registered or certified mail, postage prepaid, | ||
at such address as may have been furnished to the Company in writing by such Holder or, until | ||
any such Holder furnishes to the Company an address, then to, and at the address of, the last | ||
Holder of this Warrant who has so furnished an address to the Company. | ||
12. | Miscellaneous. This Warrant and any term hereof may be changed, waived, | |
discharged or terminated only by an instrument in writing signed by the party against which | ||
enforcement of such change, waiver, discharge or termination is sought. This Warrant shall be | ||
governed by and construed in accordance with the laws of State of New York without regard to | ||
principles of conflicts of laws. Any action brought concerning the transactions contemplated by | ||
this Warrant shall be brought only in the state courts of New York or in the federal courts located | ||
in the state of New York;provided,however, that the Holder may choose to waive this provision | ||
and bring an action outside the State of New York. The individuals executing this Warrant on | ||
behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by jury. | ||
The prevailing party shall be entitled to recover from the other party its reasonable attorney’s | ||
fees and costs. In the event that any provision of this Warrant is invalid or unenforceable under | ||
any applicable statute or rule of law, then such provision shall be deemed inoperative to the | ||
extent that it may conflict therewith and shall be deemed modified to conform with such statute | ||
or rule of law. Any such provision which may prove invalid or unenforceable under any law | ||
shall not affect the validity or enforceability of any other provision of this Warrant. The | ||
headings in this Warrant are for purposes of reference only, and shall not limit or otherwise | ||
affect any of the terms hereof. The invalidity or unenforceability of any provision hereof shall in | ||
no way affect the validity or enforceability of any other provision hereof. The Company | ||
acknowledges that legal counsel participated in the preparation of this Warrant and, therefore, | ||
stipulates that the rule of construction that ambiguities are to be resolved against the drafting | ||
party shall notbe applied in the interpretation of this Warrant to favor any party against the other | ||
party. | ||
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK; | ||
SIGNATURE PAGE FOLLOWS.] | ||
6 |
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first | ||
written above. | ||
eLEC COMMUNICATIONS CORP. | ||
WITNESS: | ||
By: | ||
Name: | ||
Title: | ||
7 |
EXHIBIT A | ||||||||
FORM OF SUBSCRIPTION | ||||||||
(To Be Signed Only On Exercise Of Warrant) | ||||||||
TO: | eLEC Communications Corp. | |||||||
75 South Broadway, Suite 302 | ||||||||
White Plains, New York 10601 | ||||||||
Attention: | Chief Financial Officer | |||||||
The undersigned, pursuant to the provisions set forth in the attached Warrant (No.____), | ||||||||
hereby irrevocably elects to purchase shares of the Common Stock covered by such | ||||||||
Warrant. | ||||||||
The undersigned herewith makes payment of the full Exercise Price for such shares at the | ||||||||
price per share provided for in such Warrant, which is $___________, in lawful money of the | ||||||||
United States. | ||||||||
The undersigned requests that the certificates for such shares be issued in the name of, | ||||||||
and delivered to whose address is | ||||||||
___________________________________________________________________ _. .. | ||||||||
The undersigned represents and warrants that all offers and sales by the undersigned of | ||||||||
the securities issuable upon exercise of the within Warrant shall be made pursuant to registration | ||||||||
of the Common Stock under the Securities Act of 1933, as amended (the “Securities Act”), or | ||||||||
pursuant to an exemption from registration under the Securities Act. | ||||||||
Dated: | ||||||||
(Signature must conform to name of holder as | ||||||||
specified on the face of the Warrant) | ||||||||
Address: | ||||||||
A-1 |
EXHIBIT B | ||||||||||
FORM OF TRANSFEROR ENDORSEMENT | ||||||||||
(To Be Signed Only On Transfer Of Warrant) | ||||||||||
For value received, the undersigned hereby sells, assigns, and transfers unto the person(s) | ||||||||||
named below under the heading “Transferees” the right represented by the within Warrant to | ||||||||||
purchase the percentage and number of shares of Common Stock of eLEC Communications | ||||||||||
Corp. into which the within Warrant relates specified under the headings “Percentage | ||||||||||
Transferred” and “Number Transferred,” respectively, opposite the name(s) of such person(s) | ||||||||||
and appoints each such person Attorney to transfer its respective right on the books of eLEC | ||||||||||
Communications Corp. with full power of substitution in the premises. | ||||||||||
Percentage | Number | |||||||||
Transferees | Address | Transferred | Transferred | |||||||
Dated: | ||||||||||
(Signature must conform to name of holder as | ||||||||||
specified on the face of the Warrant) | ||||||||||
Address: | ||||||||||
SIGNED IN THE PRESENCE OF: | ||||||||||
(Name) | ||||||||||
ACCEPTED AND AGREED: | ||||||||||
[TRANSFEREE] | ||||||||||
(Name) | ||||||||||
B-1 |