THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT"). ACCORDINGLY, NO TRANSFER OF THESE
SECURITIES OR ANY INTEREST THEREIN MAY BE MADE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT UNLESS THE ISSUER HAS RECEIVED AN OPINION
OF COUNSEL SATISFACTORY TO IT THAT SUCH TRANSFER DOES NOT REQUIRE REGISTRATION
UNDER THE ACT.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
THE QUARTZ GROUP, INC.
(Incorporated under the laws of the State of Colorado)
CLASS F COMMON STOCK PURCHASE WARRANT
500,000 SHARES OF COMMON STOCK
Void After September 30, 2002 (the "Expiration Date")
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
This is to certify that, for value received, receipt of which is hereby
acknowledged, ,
or assigns (hereinafter called the "holder"), is entitled to purchase from THE
QUARTZ GROUP, INC., a Colorado corporation (hereinafter called the "Company"),
at the Warrant Price of FIFTY CENTS ($0.50) per share, subject to adjustment
as hereinafter provided (hereinafter called the "Warrant Price"), at any time
on or before 5:00 P.M. local California time on September 30, 2002 (the
"Expiration Date"), up to FIVE HUNDRED THOUSAND (500,000) fully paid and non-
assessable shares of Common Stock of the Company (hereinafter called "Common
Stock"), subject to the terms and conditions hereof, including such
adjustments as may be required under the terms hereof.
This Warrant was originally issued in September 1997 as part of a
private placement offering by the Company. This Warrant represents part of
an authorized issue of Class F Common Stock Purchase Warrants and is herein
called "this Warrant."
This Warrant may be exercised by the holder as hereinabove provided as
to the whole or any part of the shares of Common Stock covered hereby, by
surrender of this Warrant at the principal office of any transfer agent for
the Common Stock, or, if the Company shall not have any transfer agent for the
Common Stock, at the principal office of the Company (any such transfer agent,
or the Company acting hereunder, being hereinafter called the "Warrant
Agent"), with the statement of election to subscribe attached hereto duly
executed and upon payment to the Company of the Warrant Price for shares so
purchased in cash or by certified check or bank draft. Thereupon (except that
if, upon such date, the stock transfer books of the Company shall be closed,
then upon the next succeeding date on which such transfer books are open),
this Warrant shall be deemed to have been exercised and the person exercising
the same to have become a holder of record of shares of Common Stock (or of
the other securities or property to which such person is entitled upon such
exercise) purchased hereunder for all purposes, and certificates for such
shares so purchased shall be delivered to the purchaser within a reasonable
time (not exceeding five business days, except while the transfer books of the
Company are closed) after this Warrant shall have been exercised as set forth
hereinabove. If this Warrant shall be exercised in respect of a part only of
the shares of Common Stock covered hereby, the holder shall be entitled to
receive a similar warrant of like tenor and date covering the number of shares
in respect of which this Warrant shall not have been exercised.
The Company covenants and agrees that all shares which may be issued
upon the exercise of the rights represented by this Warrant will, upon
issuance, be validly issued, fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such issue). The
Company further covenants and agrees that, during the period within which the
rights represented by this Warrant may be exercised, the Company will at all
times have authorized and reserved a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant.
The rights of the holder of this Warrant shall be subject to the
following terms and conditions:
SECTION 1. CERTAIN ADJUSTMENTS AND NOTICES
1.1. In case the Company shall hereafter at any time change as a whole,
by split-up, subdivision or combination in any manner or by the making of a
stock dividend, the number of outstanding shares of Common Stock into a
different number of shares of Common Stock with or without par value, (i) the
number of shares of Common Stock which immediately prior to such change the
holder of this Warrant shall have been entitled to purchase pursuant to this
Warrant shall be increased or decreased in direct proportion to the increase
or decrease, respectively, in the number of shares of Common Stock outstanding
immediately prior to such change, and (ii) the Warrant Price in effect
immediately prior to such change shall be increased or decreased, as the case
may be, in inverse proportion to such increase or decrease in the number of
such shares outstanding immediately prior to such change; in any such event,
the rights of the holder of this Warrant to an adjustment in the number of
shares of Common Stock purchasable on exercise of this Warrant as herein
provided shall continue and be preserved in respect of any shares, securities,
or assets which the holder of this Warrant becomes entitled to purchase
hereafter.
1.2. In case of any capital reorganization or any reclassification of
the capital stock of the Company or in case of the consolidation or merger of
the Company with another corporation, or in case of any sale, transfer or
other disposition to another corporation of all or substantially all the
property, assets, business and goodwill of the Company as an entirety, as the
case may be, the holder of this Warrant shall thereafter be entitled to
purchase (and it shall be a condition to the consummation of any such
reorganization, reclassification, consolidation, merger, sale, transfer or
other disposition, that appropriate provision shall be made so that such
holder shall thereafter be entitled to purchase) the kind and amount of shares
of stock and other securities and property receivable, upon such capital
reorganization, reclassification of capital stock, consideration, merger,
sale, transfer or other disposition, by a holder of the number of shares of
Common Stock which this Warrant entitled the holder thereof to purchase
immediately prior to such capital reorganization, reclassification of capital
stock, consolidation, merger, sale, transfer or other disposition; and in any
such case appropriate adjustments (as determined in good faith by the Board of
Directors of the Company or of such other corporation, as the case may be)
shall be made in the application of the provisions herein set forth with
respect to rights and interests thereafter of the holder of this Warrant, to
the end that the provisions set forth herein (including the specified changes
in and other adjustments of the Warrant Price) shall thereafter be applicable,
as near as reasonably may be, in relation to any shares or other property
thereafter purchasable upon the exercise of this Warrant.
1.3. In case the Company shall hereafter at any time declare a dividend
upon shares of Common Stock payable otherwise than out of retained earnings or
otherwise than in shares of Common
Class F Common Stock Purchase Warrant Page 2
Stock or in stock or obligations directly or indirectly convertible into or
exchangeable for Common Stock, the holder of this Warrant shall, upon exercise
of this Warrant in whole or in part, be entitled to receive, in addition to
the number of shares of Common Stock deliverable upon such exercise against
payment of the Warrant Price therefor, but without further consideration, the
cash, stock or other securities or property which the holder of this Warrant
would have received as dividends (otherwise than out of such retained earnings
and otherwise than in shares of Common Stock or in such convertible or
exchangeable stock or obligations) if continuously since the date set forth at
the foot of this Warrant such holder (i) had been the holder of record of the
number of shares of Common Stock deliverable upon such exercise and (ii) had
retained all dividends in stock or other securities (other than shares of
Common Stock or such convertible or exchangeable stock or obligations) paid or
payable in respect of said number of shares of Common Stock or in respect of
any such stock or other securities so paid or payable as such dividends. For
purposes of this Section 1.3, a dividend payable otherwise than in cash shall
be considered to be payable out of retained earnings only to the extent of the
fair value of such dividend as determined by the Board of Directors of the
Company.
1.4. No certificates for fractional shares of Common Stock shall be
issued upon the exercise of this Warrant, but in lieu thereof the Company
shall, upon exercise in full of this Warrant, purchase out of funds legally
available therefor any such fractional interest for an amount in cash equal to
the current market value of such fractional interest calculated to the nearest
cent, computed on the basis of the closing sale price, as reported by the
National Quotation Bureau, of the Common Stock in the over-the-counter market
on the most recent day within ten days prior to the date of such exercise for
which such closing prices shall have been so reported, or, if the Common Stock
is listed on a stock exchange registered with the Securities and Exchange
Commission or traded on the NASDAQ Stock Market, the last reported sale price
on such day; and if there shall have been no sale on said day, then the
computation shall be made on the basis of the last reported sale price within
ten days prior to such date. If there have been no reported closing sale
prices, as the case may be, within such ten days, the current market value
shall be fixed in a manner determined in good faith by the Board of Directors
of the Company.
1.5. Whenever the Warrant Price is adjusted, as herein provided, the
Company shall forthwith file with the Warrant Agent a statement signed by the
President or any one of the Vice Presidents of the Company and by its
Treasurer or an Assistant Treasurer, stating the adjusted Warrant Price
determined as herein provided. Such statement shall show in detail the facts
requiring such adjustment, including a statement of the consideration received
by the Company for any additional securities issued. Whenever the Warrant
Price is adjusted, the Company will forthwith cause a notice stating the
adjustment and the Warrant Price to be mailed to the registered holder of this
Warrant at the address of such holder shown on the books of the Company.
SECTION 2. INVESTMENT INTENT
2.1. The holder of this Warrant, by acceptance hereof, agrees to give
written notice to the Company before exercising or selling this Warrant of
such holder's intention to do so, describing briefly the manner of any
proposed sale of this Warrant or such holder's intention as to the disposition
to be made of shares of Common Stock issuable upon such proposed exercise
hereof. Promptly upon receiving such written notice, the Company shall
present copies thereof to counsel for the Company for such counsel's opinion.
If in the opinion of such counsel, or upon receipt by the Company of a
reasonably satisfactory opinion from any other counsel, to the effect that the
proposed exercise or sale may be effected without registration under the
Securities Act of 1933, as amended ("Securities Act"), of this Warrant or the
shares of Common Stock issuable on the exercise hereof, the holder of this
Warrant shall
Class F Common Stock Purchase Warrant Page 3
be entitled to sell this Warrant, or to exercise this Warrant in accordance
with its terms and dispose of the shares received upon such exercise, all in
accordance with the terms of the notice delivered by such holder to the
Company. If in the opinion of counsel the proposed exercise or sale described
in said written notice given by the holder of this Warrant may not be effected
without registration of this Warrant or the shares of Common Stock issuable on
the exercise hereof, the Company shall promptly give written notice of such
opinion to the holder of this Warrant. The holder of this Warrant agrees
that, if the proposed exercise or sale by such holder cannot, in the opinion
of counsel, be effected without such registration, the holder will not so
exercise or sell this Warrant or the shares of Common Stock issuable upon the
exercise hereof unless this Warrant or the shares of Common Stock issuable
upon the exercise hereof are registered by the Company as herein provided.
SECTION 3. REGISTRATION RIGHTS -- "PIGGY-BACK" REGISTRATION.
3.1. If, at any time during the term of this Warrant, the Company
shall file a registration statement or post-effective amendment to a
registration statement on Form SB-1, SB-2, S-1, S-2 or S-3, or any form
substituted therefor, with respect to any shares of its capital stock under
the Securities Act, the Company will give to each holder or holders of the
Warrants and/or shares of Common Stock acquired upon the exercise of the
Warrants at least ten (10) days prior written notice of its intention to file
such registration statement (the "Registration").
3.2. Unless any holder of Warrants shall direct otherwise, the Company
shall include all Warrants and shares of Common Stock evidenced by the
Warrants or issued upon the exercise thereof in any such registration
statement and will maintain the prospectus included in any registration state-
ment which may be so filed current for a period of at least nine (9) months
subsequent to the effective date of such registration statement.
3.3. Nothing in this Section 3 shall be deemed to obligate the Company
to proceed with any registration of its securities after giving the notice
herein provided.
3.4. The obligations of the Company under this Section 3.1 shall be
fully satisfied after it has notified the holders of the Warrants of one (1)
opportunity to participate in any registration statements under this Section 3
which shall have become effective under the Securities Act.
3.5. All costs and expenses of any such registration statement
incurred by the Company, including, without limitation, filing fees, and all
legal, accounting and printing costs and expenses, shall be paid by the
Company. The holder of the Warrants and/or shares issued upon exercise of the
Warrants shall pay all sales and brokerage commissions directly related to the
sale of securities for their account.
3.6. POSSIBLE LOCK-UP LIMITATIONS UPON "PIGGY-BACK" REGISTRATION
RIGHTS. If an investment banker engaged by the Company in connection with an
underwritten public offering of securities proposed for registration under the
Securities Act for the account of the Company determines in its sole
discretion that registration of such securities for the account of the holders
of the Warrants or shares of Common Stock acquired upon exercise of the
Warrants would interfere with or be detrimental to such offering for the
account of the Company, the Company shall give prompt written notice of such
determination to such holder or holders, setting forth in reasonable detail
the reasons for such determination. In such event the Company, upon written
notice to the holder of such securities, shall have the right to require, as a
condition of such registration, that the holder of such securities execute a
written agreement that such holder will not sell such securities for a period
of up to six (6) months after the effective date of the registration statement
without the prior consent of the underwriter.
Class F Common Stock Purchase Warrant Page 4
3.7. AMENDMENT OR SUPPLEMENT TO PROSPECTUS. If at any time within nine
(9) months after a registration statement covering the Warrant and shares of
Common Stock subject to or acquired upon exercise of Warrants, as provided in
this Section 3, shall have become effective, to the knowledge of the Company
any event occurs as a result of which a prospectus included therein relating
to the Warrants or shares of Common Stock subject to or acquired upon exercise
of Warrants, as then amended or supplemented, would include any untrue
statement of a material fact, or would not state a material fact necessary to
make the statements therein, in the light of the circumstances then existing,
not misleading, the Company will promptly notify the holder or holders of
Warrants and/or shares of Common Stock covered by such prospectus thereof and
the Company will at its own cost and expense amend or supplement such
prospectus in order to correct such statement or omission in order that the
prospectus as so amended or supplemented will comply with the requirements of
Section 10(a) of the Securities Act.
3.8. UNDERTAKINGS. In connection with any registration statement or
post-effective amendment pursuant to this Section 3:
(a) The Company will comply with all applicable rules and regulations
of the Securities and Exchange Commission or any similar Federal commission
and will make available to its security holders, as soon as practicable, an
earnings statement (which need not be audited) covering a period of at least
12 months, but not more than 18 months, beginning with the first month after
the effective date of the registration statement or post-effective amendment,
as the case may be, which earnings statement will satisfy the provisions of
Section 11(a) of the Securities Act.
(b) Each holder of the Warrants and/or shares of Common Stock covered
by such registration statement, as the case may be, will furnish in writing to
the Company such information regarding such holder and its proposed plan of
distribution of such shares as the Company shall reasonably request and which
would be available to such holder without undue expenditure of time or cost in
order to have such registration statement declared effective.
(c) The Company agrees to furnish to the holders of the Warrants and
of the shares of Common Stock acquired upon the exercise thereof, a prospectus
(in such reasonable quantities as such holders shall request) containing cer-
tified financial statements and other information meeting the requirements of
the Securities Act and the rules and regulations thereunder and relating to
the Warrants and/or shares of Common Stock subject thereto and/or shares of
Common Stock acquired upon the exercise of the Warrants. The furnishing of
such prospectus shall be at the expense of the Company.
(d) The Company will use its best efforts to qualify the shares of
Common Stock covered by any registration statement or post-effective amendment
for public offering or sale on the effectiveness thereof in such jurisdictions
as the holders offering the same shall reasonably request and to maintain the
effectiveness of such qualification for a period not less than nine (9) months
after notification to holder; provided, however, that the Company shall not be
required to qualify as a foreign corporation in any jurisdiction or to give a
general consent to service of process in any jurisdiction except in connection
with matters arising from the sale of shares of Common Stock in such
jurisdiction, nor shall the Company be required to qualify the shares for sale
at the Company's expense in any states other than New York except with the
consent of the Company.
(e) Any new prospectus with respect to the shares of Common Stock
issuable upon exercise of the Warrants shall provide that such securities may
be offered or sold only upon such terms respecting the price or distribution
thereof, as the owners reasonably determine.
Class F Common Stock Purchase Warrant Page 5
3.9. INDEMNIFICATION. In the event of any registration of Warrants or
shares of Common Stock subject or acquired upon exercise of Warrants, the
Company will indemnify and hold harmless each holder of Warrants and shares of
Common Stock being offered and each person, if any, who may be deemed to
control such holder within the meaning of Section 15 of the Securities Act
against any losses, claims, damages or liabilities, joint or several, to which
any of them may become subject under the Securities Act, or otherwise, in so
far as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained, on the effective date thereof, in
any registration statement or post-effective amendment under which such
Warrants and shares of Common Stock were registered under the Securities Act,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse each of them for any legal or any other expenses reasonably
incurred by them in connection with investigating, defending or settling any
such loss, claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case to any of them to the extent that
any such loss, claim, damage, liability or expense arises out of or is based
upon any untrue statement of any material fact contained, or is based upon any
omission or alleged omission to state a material fact, on the effective date
thereof in such registration statement or post-effective amendment, such
preliminary prospectus or such final prospectus or any such amendment or
supplement in reliance upon and in conformity with information furnished in
writing by such persons to the Company expressly for use in the preparation
thereof.
The obligations of indemnification hereunder shall include any and all
losses, claims, damages, judgments, liabilities or costs, including related
attorneys' fees and other costs of investigation, preparation, defense and
providing evidence, whether or not in connection with litigation in which the
party to be indemnified is a party, as and when such losses, claims, damages,
judgments, liabilities or costs are incurred, which are directly or
indirectly caused by, relating to, based upon or arising out of any act or
omission on the part of the indemnifying party hereunder.
Each such person shall promptly give notice to the Company after such
person has actual knowledge of any such claim as to which indemnity may be
sought hereunder, or of the commencement of any legal proceedings against such
person as to such claim, whichever shall first occur, and (subject to clause
(c) below) the Company shall promptly assume the defense thereof, including
the employment of counsel reasonably satisfactory to such person and the
payment of all fees and expenses incurred in connection with the defense
thereof. Such person shall have the right to employ separate counsel in any
such action and to participate in the defense thereof if (a) such person shall
pay the fees and expenses of such separate counsel or (b) the Company shall
have failed promptly to assume the defense of such action or proceeding
through counsel reasonably satisfactory to such person or (c) the named
parties to any such action or proceeding (including any impleaded parties)
include both such person and the Company and such person shall have been
advised in writing by counsel that there may be one or more legal defenses
available to him which are different from or additional to those available to
the Company, in which case such person may elect in writing to employ separate
counsel at the expense of the Company (after which the Company shall not have
the right to defense of such action or proceeding on behalf of such person),
it being understood, however, that the Company shall not, in connection with
any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the fees and expenses
of more than one separate firm of attorneys (together with appropriate local
counsel) at any time, which firm shall be designated by agreement of all such
persons and, if no agreement is reached by all such persons and, if no
agreement is reached by all such persons within 15 days of the filing of the
relevant complaint, by
Class F Common Stock Purchase Warrant Page 6
the Company. The Company shall not be liable for any settlement of any such
action or proceeding effected without its written consent (which shall not be
unreasonably withheld), but if any such action or proceeding is settled with
its written consent, the Company agrees to indemnify and hold harmless such
person from and against any loss, claim, damage, or liability (to the extent
stated above) by reason of such settlement or judgment.
SECTION 4. MISCELLANEOUS
4.1. The issue of any stock or other certificate upon the exercise of
this Warrant shall be made without charge to the registered holder hereof for
any tax in respect of the issue of such certificate. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other
than that of the registered holder of this Warrant, and the Company shall not
be required to issue or deliver any such certificate unless and until the
person or persons requesting the issue thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
4.2. This Warrant and all rights hereunder or any portion thereof are
transferable on the books of the Company, upon surrender of this Warrant, with
the form of assignment attached hereto duly executed by the registered holder
hereof or by his attorney duly authorized in writing, to the Warrant agent at
its principal office hereinabove referred to, and thereupon there shall be
issued in the name of the transferee or transferees, in exchange for this
Warrant, a new Warrant or Warrants of like tenor and date, representing in the
aggregate the right to subscribe for and purchase the number of shares, or
such portion thereof as shall be so transferred, which may be subscribed for
and purchased hereunder and if there shall be any balance of such shares not
so transferred, there shall be issued in the name of the registered holder of
this Warrant, a new Warrant or Warrants of like tenor and date representing in
the aggregate the right to subscribe for and purchase the balance of the
number of shares which may be subscribed for and purchased hereunder.
4.3. If this Warrant shall be lost, stolen, mutilated or destroyed, the
Company may instruct the Warrant Agent, on such terms as to indemnify or
otherwise as the Company may in its discretion impose, to issue a new Warrant
of like denomination, tenor and date as the Warrant so lost, stolen, mutilated
or destroyed. Any such new Warrant shall constitute an original contractual
obligation of the Company, whether or not the allegedly lost, stolen,
mutilated or destroyed Warrant shall be at any time enforceable by anyone.
4.4. The Company and any Warrant Agent may deem and treat the
registered holder of this Warrant as the absolute owner of this Warrant for
all purposes and shall not be affected by any notice to the contrary.
4.5. This Warrant shall not entitle the holder to any rights of a
stockholder of the Company, either at law or in equity, including, without
limitation, the right to vote, to receive dividends and other distributions,
to exercise any preemptive rights or to receive any notice of meetings of
stockholders or of any other proceedings of the Company.
4.6. This Warrant shall be governed by the laws of the State of
California.
Class F Common Stock Purchase Warrant Page 7
IN WITNESS WHEREOF, THE QUARTZ GROUP, INC. has caused this Warrant to be
signed in its corporate name by its duly authorized officer as of the day and
year written below.
Dated: September _____, 1997
THE QUARTZ GROUP, INC.
By
------------------------
David J. Lopes, President
Attest:
________________________________
Secretary
Class F Common Stock Purchase Warrant Page 8