WARRANT AGREEMENT
BETWEEN
VAUGHAN FOODS, INC.
AND
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DATED AS OF _________, 2006
WARRANT AGREEMENT
This Agreement, dated as of ________, 2006, is between Vaughan Foods,
Inc., an Oklahoma corporation (the "COMPANY") and ______________________, a
____________ corporation (the "WARRANT AGENT").
The Company, at or about the time that it is entering into this
Agreement, proposes to issue and sell to public investors up to 5,750,000 Units
(together with the additional units issuable as provided herein, the "UNITS").
Each Unit consists of one share of common stock, $0.001 par value, of the
Company, one redeemable Class A Warrant and one redeemable Class B Warrants. The
Class A Warrants and the Class B Warrants are herein collectively referred to as
the "WARRANTS." Each Warrant is exercisable to purchase one share of Common
Stock upon the terms and conditions and subject to adjustment in certain
circumstances, all as set forth in this Agreement.
The Company proposes to issue to the Representative of the Underwriters
in the public offering of Units referred to above warrants to purchase up to
500,000 additional Units.
The Company wishes to retain the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance, transfer, exchange and replacement of the certificates evidencing the
Warrants to be issued under this Agreement (the "WARRANT CERTIFICATES") and the
exercise of the Warrants;
The Company and the Warrant Agent wish to enter into this Agreement to
set forth the terms and conditions of the Warrants and the rights of the holders
thereof ("WARRANTHOLDERS") and to set forth the respective rights and
obligations of the Company and the Warrant Agent. Each Warrantholder is an
intended beneficiary of this Agreement with respect to the rights of
Warrantholders herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
1. APPOINTMENT OF WARRANT AGENT. The Company appoints the Warrant Agent
to act as agent for the Company in accordance with the instructions in this
Agreement and the Warrant Agent accepts such appointment.
2. DATE, DENOMINATION AND EXECUTION OF WARRANT CERTIFICATES.
(a) The Warrant Certificates (and the Form of Election to
Purchase and the Form of Assignment to be printed on the reverse thereof) shall
be in registered form only and shall be substantially of the tenor and purport
recited in EXHIBIT A hereto with respect to the Class A Warrants and EXHIBIT B
hereto with respect to the Class B Warrants, and may have such letters, numbers
or other marks of identification or designation and such legends, summaries or
endorsements printed, lithographed or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any law, or with any rule or regulation
made pursuant thereto, or with any rule or regulation of any stock exchange on
which the Common Stock or the Warrants may be listed or any automated quotation
system, or to conform to usage. Each Class A Warrant Certificate shall
entitle the registered holder thereof, subject to the provisions of this
Agreement and of the Warrant Certificate, to purchase, on or after _________,
2006 and on or before the close of business on _________, 2011 (the "EXPIRATION
DATE"), one fully paid and non-assessable share of Common Stock for each Warrant
evidenced by such Warrant Certificate for $_____. Each Class B Warrant
Certificate shall entitle the registered holder thereof, subject to the
provisions of this Agreement and of the Warrant Certificate, to purchase, on or
after _________, 2006 and on or before the close of business on the Expiration
Date, one fully paid and non-assessable share of Common Stock for each Warrant
evidenced by such Warrant Certificate for $______. The exercise price of the
Warrants (the "EXERCISE PRICE") is subject to adjustments as provided in Section
6 hereof. Each Warrant Certificate issued as a part of a Unit offered to the
public as described in the recitals, above, shall be dated _______, 2006; each
other Warrant Certificate shall be dated the date on which the Warrant Agent
receives valid issuance instructions from the Company or a transferring holder
of a Warrant Certificate or, if such instructions specify another date, such
other date.
(b) For purposes of this Agreement, the term "CLOSE OF BUSINESS"
on any given date shall mean 5:00 p.m., Pacific time, on such date; provided,
however, that if such date is not a business day, it shall mean 5:00 p.m.,
Pacific time, on the next succeeding business day. For purposes of this
Agreement, the term "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in New York, New York or in the
State in which the Warrant Agent maintains the principal office in which it
conducts business related to the Warrants are authorized or obligated by law to
be closed.
(c) Each Warrant Certificate shall be executed on behalf of the
Company by the Chairman of the Board, its Chief Executive Officer, its President
or a Vice President, either manually or by facsimile signature printed thereon,
and have affixed thereto the Company's seal or a facsimile thereof which shall
be attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. Each Warrant Certificate shall be manually
countersigned by the Warrant Agent and shall not be valid for any purpose unless
so countersigned. In case any officer of the Company who shall have signed any
Warrant Certificate shall cease to be such officer of the Company before
countersignature by the Warrant Agent and issue and delivery thereof by the
Company, such Warrant Certificate, nevertheless, may be countersigned by the
Warrant Agent, issued and delivered with the same force and effect as though the
person who signed such Warrant Certificate had not ceased to be such officer of
the Company.
3. SUBSEQUENT ISSUE OF WARRANT CERTIFICATES. Subsequent to their
original issuance, no Warrant Certificates shall be reissued except (i) Warrant
Certificates issued upon transfer thereof in accordance with Section 4 hereof,
(ii) Warrant Certificates issued upon any combination, split-up or exchange of
Warrant Certificates pursuant to Section 4 hereof, (iii) Warrant Certificates
issued in replacement of mutilated, destroyed, lost or stolen Warrant
Certificates pursuant to Section 5 hereof, (iv) Warrant Certificates issued upon
the partial exercise of Warrant Certificates pursuant to Section 7 hereof, and
(v) Warrant Certificates issued to reflect any adjustment or change in the
Exercise Price or the number or kind of shares purchasable thereunder pursuant
to Section 22 hereof. The Warrant Agent is hereby irrevocably authorized to
countersign and deliver, in accordance with the provisions of said Sections 4,
5, 7 and 22, the new Warrant Certificates required for purposes thereof, and the
Company, whenever
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required by the Warrant Agent, will supply the Warrant Agent with Warrant
Certificates duly executed on behalf of the Company for such purposes.
4. TRANSFERS AND EXCHANGES OF WARRANT CERTIFICATES.
(a) The Warrant Agent will keep or cause to be kept books for
registration of ownership and transfer of the Warrant Certificates issued
hereunder. Such registers shall show the names and addresses of the respective
holders of the Warrant Certificates and the class and number of Warrants
evidenced by each such Warrant Certificate.
(b) The Warrant Agent shall, from time to time, register the
transfer of any outstanding Warrants upon the books to be maintained by the
Warrant Agent for that purpose, upon surrender of the Warrant Certificate
evidencing such Warrants, with the Form of Assignment duly filled in and
executed with such signature guaranteed by a banking institution or NASD member
and such supporting documentation as the Warrant Agent or the Company may
reasonably require, to the Warrant Agent at its stock transfer office in
_______, ________ at any time on or before the Expiration Date of such Warrant,
and upon payment to the Warrant Agent for the account of the Company of an
amount equal to any applicable transfer tax. Payment of the amount of such tax
may be made in cash, or by certified or official bank check, payable in lawful
money of the United States of America to the order of the Company.
(c) Upon receipt of a Warrant Certificate, with the Form of
Assignment duly filled in and executed, accompanied by payment of an amount
equal to any applicable transfer tax, the Warrant Agent shall promptly cancel
the surrendered Warrant Certificate and countersign and deliver to the
transferee a new Warrant Certificate for the number of full Warrants of the same
class transferred to such transferee; provided, however, that in case the
registered holder of any Warrant Certificate shall elect to transfer fewer than
all of the Warrants evidenced by such Warrant Certificate, the Warrant Agent in
addition shall promptly countersign and deliver to such registered holder a new
Warrant Certificate or Certificates for the number of full Warrants not so
transferred.
(d) Any Warrant Certificate or Certificates may be exchanged at
the option of the holder thereof for another Warrant Certificate or Certificates
of different denominations, of like tenor and representing in the aggregate the
same class and number of Warrants, upon surrender of such Warrant Certificate or
Certificates, with the Form of Assignment duly filled in and executed, to the
Warrant Agent, at any time or from time to time after the close of business on
the date hereof and prior to the close of business on the Expiration Date
relating to such Warrant. The Warrant Agent shall promptly cancel the
surrendered Warrant Certificate and deliver the new Warrant Certificate pursuant
to the provisions of this Section.
5. MUTILATED, DESTROYED, LOST OR STOLEN WARRANT CERTIFICATES. Upon
receipt by the Company and the Warrant Agent of evidence reasonably satisfactory
to them of the loss, theft, destruction or mutilation of any Warrant
Certificate, and in the case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and reimbursement to them of all
reasonable expenses incidental thereto, and, in the case of mutilation, upon
surrender and cancellation of the Warrant Certificate, the Warrant Agent shall
countersign and deliver a new Warrant Certificate of like tenor for the same
class and number of Warrants.
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6. ADJUSTMENTS OF NUMBER AND KIND OF SHARES PURCHASABLE AND EXERCISE
PRICE. The number and kind of securities or other property purchasable upon
exercise of a Warrant shall be subject to adjustment from time to time upon the
occurrence, after the date hereof, of any of the following events:
(a) In case the Company shall (1) pay a dividend in, or make a
distribution of, shares of capital stock on its outstanding Common Stock, (2)
subdivide its outstanding shares of Common Stock into a greater number of such
shares or (3) combine its outstanding shares of Common Stock into a smaller
number of such shares, the total number of shares of Common Stock purchasable
upon the exercise of each Warrant outstanding immediately prior thereto shall be
adjusted so that the holder of any Warrant Certificate thereafter surrendered
for exercise shall be entitled to receive at the same aggregate Exercise Price
the number of shares of capital stock (of one or more classes) which such holder
would have owned or have been entitled to receive immediately following the
happening of any of the events described above had such Warrant been exercised
in full immediately prior to the record date with respect to such event. Any
adjustment made pursuant to this Subsection shall, in the case of a stock
dividend or distribution, become effective as of the record date therefor and,
in the case of a subdivision or combination, be made as of the effective date
thereof. If, as a result of an adjustment made pursuant to this Subsection, the
holder of any Warrant Certificate thereafter surrendered for exercise shall
become entitled to receive shares of two or more classes of capital stock of the
Company, the Board of Directors of the Company (whose determination shall be
conclusive and shall be evidenced by a Board resolution filed with the Warrant
Agent) shall determine the allocation of the adjusted Exercise Price between or
among shares of such classes of capital stock.
(b) In the event of a capital reorganization or a
reclassification of the Common Stock (except as provided in Subsection (a) above
or Subsection (d) below), any Warrantholder, upon exercise of Warrants, shall be
entitled to receive, in substitution for the Common Stock to which he would have
become entitled upon exercise immediately prior to such reorganization or
reclassification, the shares (of any class or classes) or other securities or
property of the Company (or cash) that he would have been entitled to receive at
the same aggregate Exercise Price upon such reorganization or reclassification
if such Warrants had been exercised immediately prior to the record date with
respect to such event; and in any such case, appropriate provision (as
determined by the Board of Directors of the Company, whose determination shall
be conclusive and shall be evidenced by a certified Board resolution filed with
the Warrant Agent) shall be made for the application of this Section 6 with
respect to the rights and interests thereafter of the Warrantholders (including
but not limited to the allocation of the Exercise Price between or among shares
of classes of capital stock), to the end that this Section 6 (including the
adjustments of the number of shares of Common Stock or other securities
purchasable and the Exercise Price thereof) shall thereafter be reflected, as
nearly as reasonably practicable, in all subsequent exercises of the Warrants
for any shares or securities or other property (or cash) thereafter deliverable
upon the exercise of the Warrants.
(c) Whenever the number of shares of Common Stock or other
securities purchasable upon exercise of a Warrant is adjusted as provided in
this Section 6, the Company will promptly file with the Warrant Agent a
certificate signed by a Chairman or co-Chairman of the Board, the Chief
Executive, the President or a Vice President of the Company and by the Treasurer
or an Assistant Treasurer or the Secretary or an Assistant Secretary of the
Company
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setting forth the number and kind of securities or other property purchasable
upon exercise of a Warrant, as so adjusted, stating that such adjustments in the
number or kind of shares or other securities or property conform to the
requirements of this Section 6, and setting forth a brief statement of the facts
accounting for such adjustments. Promptly after receipt of such certificate, the
Company, or the Warrant Agent at the Company's request, will deliver, by
first-class, postage prepaid mail, a brief summary thereof (to be supplied by
the Company) to the registered holders of the outstanding Warrant Certificates;
provided, however, that failure to file or to give any notice required under
this Subsection, or any defect therein, shall not affect the legality or
validity of any such adjustments under this Section 6; and provided, further,
that, where appropriate, such notice may be given in advance and included as
part of the notice required to be given pursuant to Section 12 hereof.
(d) In case of any consolidation of the Company with, or merger
of the Company into, another corporation (other than a consolidation or merger
which does not result in any reclassification or change of the outstanding
Common Stock), or in case of any sale or conveyance to another corporation of
the property of the Company as an entirety or substantially as an entirety, the
corporation formed by such consolidation or merger or the corporation which
shall have acquired such assets, as the case may be, shall execute and deliver
to the Warrant Agent a supplemental warrant agreement providing that the holder
of each Warrant then outstanding shall have the right thereafter (until the
expiration of such Warrant) to receive, upon exercise of such Warrant, solely
the kind and amount of shares of stock and other securities and property (or
cash) receivable upon such consolidation, merger, sale or transfer by a holder
of the number of shares of Common Stock of the Company for which such Warrant
might have been exercised immediately prior to such consolidation, merger, sale
or transfer. Such supplemental warrant agreement shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided in this Section. The above provision of this Subsection shall similarly
apply to successive consolidations, mergers, sales or transfers.
The Warrant Agent shall not be under any responsibility to determine
the correctness of any provision contained in any such supplemental warrant
agreement relating to either the kind or amount of shares of stock or securities
or property (or cash) purchasable by holders of Warrant Certificates upon the
exercise of their Warrants after any such consolidation, merger, sale or
transfer or of any adjustment to be made with respect thereto, but subject to
the provisions of Section 20 hereof, may accept as conclusive evidence of the
correctness of any such provisions, and shall be protected in relying upon, a
certificate of a firm of independent certified public accountants (who may be
the accountants regularly employed by the Company) with respect thereto.
(e) Irrespective of any adjustments in the number or kind of
shares issuable upon exercise of Warrants, Warrant Certificates theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in the similar Warrant Certificates initially issuable
pursuant to this Warrant Agreement.
(f) The Company may retain a firm of independent public
accountants of recognized standing, which may be the firm regularly retained by
the Company, selected by the Board of Directors of the Company or the Executive
Committee of said Board, and not disapproved by the Warrant Agent, to make any
computation required under this Section, and a
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certificate signed by such firm shall, in the absence of fraud or gross
negligence, be conclusive evidence of the correctness of any computation made
under this Section.
(g) For the purpose of this Section, the term "COMMON STOCK"
shall mean (i) the Common Stock or (ii) any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par value
to par value. In the event that at any time as a result of an adjustment made
pursuant to this Section, the holder of any Warrant thereafter surrendered for
exercise shall become entitled to receive any shares of capital stock of the
Company other than shares of Common Stock, thereafter the number of such other
shares so receivable upon exercise of any Warrant 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 Common Stock contained in this Section,
and all other provisions of this Agreement, with respect to the Common Stock,
shall apply on like terms to any such other shares.
(h) The Company may, from time to time and to the extent
permitted by law, reduce the Exercise Price of the Warrants by any amount for a
period of not less than 20 days. If the Company so reduces the Exercise Price of
such Warrants, it will give not less than 15 days' notice of such decrease,
which notice may be in the form of a press release, and shall take such other
steps as may be required under applicable law in connection with any offers or
sales of securities at the reduced price.
7. EXERCISE OF WARRANTS; REDEMPTION OF WARRANTS. Except with respect to
Warrants that have been redeemed as provided in this Section 7, the registered
holder of any Warrant Certificate may exercise the Warrants evidenced thereby,
in whole at any time or in part from time to time at or prior to the close of
business, on the Expiration Date, subject to the provisions of Section 9, at
which time the Warrant Certificates shall be and become wholly void and of no
value. Warrants may be exercised by their holders or redeemed by the Company as
follows:
(a) Exercise of Warrants shall be accomplished upon surrender of
the Warrant Certificate evidencing such Warrants, with the Form of Election to
Purchase on the reverse side thereof duly filled in and executed, to the Warrant
Agent at its stock transfer office in _______, ________, together with payment
to the Company of the Exercise Price (as of the date of such surrender) of the
Warrants then being exercised and an amount equal to any applicable transfer tax
and, if requested by the Company, any other taxes or governmental charges which
the Company may be required by law to collect in respect of such exercise.
Payment of the Exercise Price and other amounts may be made by wire transfer of
good funds, or by certified or bank cashier's check, payable in lawful money of
the United States of America to the order of the Company. No adjustment shall be
made for any cash dividends, whether paid or declared, on any securities
issuable upon exercise of a Warrant.
(b) Upon receipt of a Warrant Certificate, with the Form of
Election to Purchase duly filled in and executed, accompanied by payment of the
Exercise Price of the Warrants being exercised (and of an amount equal to any
applicable taxes or government charges as aforesaid), the Warrant Agent shall
promptly request from the Transfer Agent with respect to the securities to be
issued and deliver to or upon the order of the registered holder of such Warrant
Certificate, in such name or names as such registered holder may designate, a
certificate
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or certificates for the number of full shares of the securities to be purchased,
together with cash made available by the Company pursuant to Section 8 hereof in
respect of any fraction of a share of such securities otherwise issuable upon
such exercise. If the Warrant is then exercisable to purchase property other
than securities, the Warrant Agent shall take appropriate steps to cause such
property to be delivered to or upon the order of the registered holder of such
Warrant Certificate. In addition, if it is required by law and upon instruction
by the Company, the Warrant Agent will deliver to each Warrantholder a
prospectus which complies with the provisions of Section 9 of the Securities Act
of 1933 and the Company agrees to supply Warrant Agent with sufficient number of
prospectuses to effectuate that purpose.
(c) In case the registered holder of any Warrant Certificate
shall exercise fewer than all of the Warrants evidenced by such Warrant
Certificate, the Warrant Agent shall promptly countersign and deliver to the
registered holder of such Warrant Certificate, or to his duly authorized
assigns, a new Warrant Certificate or Certificates evidencing the number and
class of Warrants that were not so exercised.
(d) Each person in whose name any certificate for securities is
issued upon the exercise of Warrants shall for all purposes be deemed to have
become the holder of record of the securities represented thereby as of, and
such certificate shall be dated, the date upon which the Warrant Certificate was
duly surrendered in proper form and payment of the Exercise Price (and of any
applicable taxes or other governmental charges) was made; provided, however,
that if the date of such surrender and payment is a date on which the stock
transfer books of the Company are closed, such person shall be deemed to have
become the record holder of such shares as of, and the certificate for such
shares shall be dated, the next succeeding business day on which the stock
transfer books of the Company are open (whether before, on or after the
Expiration Date relating to such Warrant) and the Warrant Agent shall be under
no duty to deliver the certificate for such shares until such date. The Company
covenants and agrees that it shall not cause its stock transfer books to be
closed for a period of more than 20 consecutive business days except upon
consolidation, merger, sale of all or substantially all of its assets,
dissolution or liquidation or as otherwise provided by law.
(e) The Class A Warrants outstanding at the time of a redemption
may be redeemed at the option of the Company, in whole or in part on a pro-rata
basis, by giving not less than 30 days prior notice as provided in Section 7(g)
below, which notice may not be given before, but may be given at any time after,
the later of _________, 2007 and the date on which closing price of the Common
Stock on the principal exchange or trading facility on which it is then traded
has equaled or exceeded $_____ per share on each of five consecutive trading
days. The price at which Class A Warrants may be redeemed (the "REDEMPTION
PRICE") is $0.25 per Class A Warrant. On and after the redemption date the
holders of record of redeemed Class A Warrants shall be entitled to payment of
the Redemption Price upon surrender of such redeemed Class A Warrants to the
Company at the office of the Warrant Agent designated for that purpose.
(f) The Class B Warrants outstanding at the time of a redemption
may be redeemed at the option of the Company, beginning on ___________, 2006
[six months from the date of this Agreement], in whole or in part on a pro-rata
basis, by giving not less than 30 days' prior notice as provided in Section 7(g)
below, which notice may not be given before, but may be given at any time after,
the Company's gross revenue for any 12-month period preceding the date
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of the notice, as confirmed by an independent audit, equals or exceeds $100
million. The price at which Class B Warrants may be redeemed (the "REDEMPTION
PRICE") is $0.25 per Class B Warrant. On and after the redemption date the
holders of record of redeemed Class B Warrants shall be entitled to payment of
the Redemption Price upon surrender of such redeemed Class B Warrants to the
Company at the office of the Warrant Agent designated for that purpose.
(g) Notice of redemption of Warrants shall be given at least 30
days prior to the redemption date by mailing, by registered or certified mail,
return receipt requested, a copy of such notice to the Warrant Agent and to all
of the holders of record of Warrants at their respective addresses appearing on
the books or transfer records of the Company or such other address designated in
writing by the holder of record to the Warrant Agent not less than 40 days prior
to the redemption date.
(h) From and after the redemption date, all rights of the
Warrantholders with respect to the redeemed Warrants (except the right to
receive the Redemption Price) shall terminate, but only if (i) no later than one
day prior to the redemption date the Company shall have irrevocably deposited
with the Warrant Agent as paying agent a sufficient amount to pay on the
redemption date the Redemption Price for all Warrants called for redemption and
(ii) the notice of redemption shall have stated the name and address of the
Warrant Agent and the intention of the Company to deposit such amount with the
Warrant Agent no later than one day prior to the redemption date.
(i) On the Redemption Date, the Warrant Agent shall pay to the
holders of record of redeemed Warrants all monies received by the Warrant Agent
for the redemption of Warrants to which the holders of record of such redeemed
Warrants who shall have surrendered their Warrants are entitled. The Warrant
Agent shall have no obligation to pay for the redemption of Warrants except to
the extent that funds for such payment have been provided to it by the Company.
(j) Any amounts deposited with the Warrant Agent that are not
required for redemption of Warrants may be withdrawn by the Company. Any amounts
deposited with the Warrant Agent that shall be unclaimed after six months after
the redemption date shall be redelivered back to the Company, and thereafter the
holders of the Warrants called for redemption for which such funds were
deposited shall look solely to the Company for payment. The Company shall be
entitled to the interest, if any, on funds deposited with the Warrant Agent and
the holders of redeemed Warrants shall have no right to any such interest. At
the instruction of the Company, the Warrant Agent shall deposit or invest any
and all funds deposited with it by the Company in connection with any redemption
in federally insured, interest bearing accounts with a financial institution or
institutions designated by the Company but shall have no liability with respect
to the performance of any such investments other than, in the case of funds
deposited in accounts maintained by the Warrant Agent, the liability of the
Warrant Agent to its depositors in such accounts, generally.
(k) If the Company fails to make a sufficient deposit with the
Warrant Agent as provided above, the holder of any Warrants called for
redemption may at the option of the holder (i) by notice to the Company declare
the notice of redemption a nullity as to such holder, or (ii) maintain an action
against the Company for the Redemption Price. If the holder brings
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such an action, the Company will pay reasonable attorneys' fees of the holder.
If the holder fails to bring an action against the Company for the Redemption
Price within 60 days after the redemption date, the holder shall be deemed to
have elected to declare the notice of redemption to be a nullity as to such
holder and such notice shall be without any force or effect as to such holder.
Except as otherwise specifically provided in this Paragraph 7(k), a notice of
redemption, once mailed by the Company as provided in Paragraph 7(g) shall be
irrevocable.
(l) Notwithstanding anything to the contrary in this Section 7,
the Company may not provide notice of any redemption pursuant to this Section 7
at any time at which the Warrants are not currently exercisable as a result of
the application of Section 9. If, during the period between notice of redemption
and the Redemption Date, the Warrants become not currently exercisable as a
result of the application of Section 9, the Redemption Date shall be extended to
be the tenth business day after such restriction on exercise lapses.
8. FRACTIONAL INTERESTS. The Company shall not be required to issue any
Warrant Certificate evidencing a fraction of a Warrant or to issue fractions of
shares of securities on the exercise of the Warrants. If any fraction
(calculated to the nearest one-hundredth) of a Warrant or a share of securities
would, except for the provisions of this Section, be issuable on the exercise of
any Warrant, the Company shall, at its option, either purchase such fraction for
an amount in cash equal to the current value of such fraction computed on the
basis of the closing market price of a Warrant of the same class (as quoted on
the principal exchange or trading facility on which such class of Warrants is
traded) on the trading day immediately preceding the day upon which such Warrant
Certificate was surrendered for exercise in accordance with Section 7 hereof or
issue the required fractional Warrant or share. By accepting a Warrant
Certificate, the holder thereof expressly waives any right to receive a Warrant
Certificate evidencing any fraction of a Warrant or to receive any fractional
share of securities upon exercise of a Warrant, except as expressly provided in
this Section 8.
9. RESERVATION OF EQUITY SECURITIES. The Company covenants that it will
at all times reserve and keep available, free from any pre-emptive rights, out
of its authorized and unissued equity securities, solely for the purpose of
issue upon exercise of the Warrants, such number of shares of equity securities
of the Company as shall then be issuable upon the exercise of all outstanding
Warrants ("EQUITY SECURITIES"). The Company covenants that all Equity Securities
which shall be so issuable shall, upon such issue, be duly authorized, validly
issued, fully paid and non-assessable.
The Company covenants that if any equity securities, required to be
reserved for the purpose of issue upon exercise of the Warrants hereunder,
require registration with or approval of any governmental authority under any
federal or state law before such shares may be issued upon exercise of Warrants,
the Company will use all commercially reasonable efforts to cause such
securities to be duly registered, or approved, as the case may be, and, to the
extent practicable, take all such action in anticipation of and prior to the
exercise of the Warrants, including, without limitation, filing any and all
post-effective amendments to the Company's Registration Statement on Form S-1
(Registration No. 333-______) necessary to permit a public offering of the
securities underlying the Warrants at any and all times during the term of this
Agreement, provided, however, that in no event shall such securities be issued,
and the Company is authorized to refuse to honor the exercise of any Warrant, if
such exercise would result in the
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opinion of the Company's Board of Directors, upon advice of counsel, in the
violation of any law; and provided further that, in the case of a Warrant
exercisable solely for securities listed on a securities exchange or for which
there are at least three independent market makers, in lieu of obtaining such
registration or approval, the Company may elect to redeem Warrants submitted to
the Warrant Agent for exercise for a price equal to the difference between the
aggregate low asked price, or closing price, as the case may be, of the
securities for which such Warrant is exercisable on the date of such submission
and the Exercise Price of such Warrants; in the event of such redemption, the
Company will pay to the holder of such Warrants the above-described redemption
price in cash within 10 business days after receipt of notice from the Warrant
Agent that such Warrants have been submitted for exercise. If, at the Expiration
Date, the Warrants are not currently exercisable as a result of the provisions
of this paragraph, the Expiration Date shall be extended to a date that is 30
calendar days following notice to the holders of Warrants that the Warrants are
again exercisable and references to the Expiration Date herein shall thereafter
refer to such extended Expiration Date.
10. REDUCTION OF CONVERSION PRICE BELOW PAR VALUE. Before taking any
action that would cause an adjustment pursuant to Section 6 hereof reducing the
portion of the Exercise Price required to purchase one share of capital stock
below the then par value (if any) of a share of such capital stock, the Company
will use its best efforts to take any corporate action which, in the opinion of
its counsel, may be necessary in order that the Company may validly and legally
issue fully paid and non-assessable shares of such capital stock.
11. PAYMENT OF TAXES. The Company covenants and agrees that it will pay
when due and payable any and all federal and state documentary stamp and other
original issue taxes which may be payable in respect of the original issuance of
the Warrant Certificates, or any shares of Common Stock or other securities upon
the exercise of Warrants. The Company shall not, however, be required (a) to pay
any tax which may be payable in respect of any transfer involved in the transfer
and delivery of Warrant Certificates or the issuance or delivery of certificates
for Common Stock or other securities in a name other than that of the registered
holder of the Warrant Certificate surrendered for purchase or (b) to issue or
deliver any certificate for shares of Common Stock or other securities upon the
exercise of any Warrant Certificate until any such tax shall have been paid, all
such tax being payable by the holder of such Warrant Certificate at the time of
surrender.
12. NOTICE OF CERTAIN CORPORATE ACTION. In case the Company after the
date hereof shall propose (a) to offer to the holders of Common Stock,
generally, rights to subscribe to or purchase any additional shares of any class
of its capital stock, any evidences of its indebtedness or assets, or any other
rights or options or (b) to effect any reclassification of Common Stock (other
than a reclassification involving merely the subdivision or combination of
outstanding shares of Common Stock) or any capital reorganization, or any
consolidation or merger to which the Company is a party and for which approval
of any shareholders of the Company is required, or any sale, transfer or other
disposition of its property and assets substantially as an entirety, or the
liquidation, voluntary or involuntary dissolution or winding-up of the Company,
then, in each such case, the Company shall file with the Warrant Agent and the
Company, or the Warrant Agent on its behalf, shall mail (by first-class, postage
prepaid mail) to all registered holders of the Warrant Certificates notice of
such proposed action, which notice shall specify the date on which the books of
the Company shall close or a record be taken for such offer of rights or
10
options, or the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, other disposition, liquidation, voluntary
or involuntary dissolution or winding-up shall take place or commence, as the
case may be, and which shall also specify any record date for determination of
holders of Common Stock entitled to vote thereon or participate therein and
shall set forth such facts with respect thereto as shall be reasonably necessary
to indicate any adjustments in the Exercise Price and the number or kind of
shares or other securities purchasable upon exercise of Warrants which will be
required as a result of such action. Such notice shall be filed and mailed in
the case of any action covered by clause (a) above, at least ten days prior to
the record date for determining holders of the Common Stock for purposes of such
action or, if a record is not to be taken, the date as of which the holders of
shares of Common Stock of record are to be entitled to such offering; and, in
the case of any action covered by clause (b) above, at least 20 days prior to
the earlier of the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, other disposition, liquidation, voluntary
or involuntary dissolution or winding-up is expected to become effective and the
date on which it is expected that holders of shares of Common Stock of record on
such date shall be entitled to exchange their shares for securities or other
property deliverable upon such reclassification, reorganization, consolidation,
merger, sale, transfer, other disposition, liquidation, voluntary or involuntary
dissolution or winding-up.
Failure to give any such notice or any defect therein shall not affect
the legality or validity of any transaction listed in this Section 12.
13. DISPOSITION OF PROCEEDS ON EXERCISE OF WARRANT CERTIFICATES, ETC.
The Warrant Agent shall account promptly to the Company with respect to Warrants
exercised and concurrently pay to the Company all moneys received by the Warrant
Agent for the purchase of securities or other property through the exercise of
such Warrants.
The Warrant Agent shall keep copies of this Agreement available for
inspection by Warrantholders during normal business hours at its stock transfer
office. Copies of this Agreement may be obtained upon written request addressed
to the Warrant Agent at its stock transfer office in _______, ________.
14. WARRANTHOLDER NOT DEEMED A SHAREHOLDER. No Warrantholder, as such,
shall be entitled to vote, receive dividends or be deemed the holder of Common
Stock or any other securities of the Company which may at any time be issuable
on the exercise of the Warrants represented thereby for any purpose whatever,
nor shall anything contained herein or in any Warrant Certificate be construed
to confer upon any Warrantholder, as such, any of the rights of a shareholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to shareholders at any meeting thereof, or to give or withhold
consent to any corporate action (whether upon any recapitalization, issuance of
stock, reclassification of stock, change of par value or change of stock to no
par value, consolidation, merger, conveyance or otherwise), or to receive notice
of meetings or other actions affecting shareholders (except as provided in
Section 12 hereof), or to receive dividend or subscription rights, or otherwise,
until such Warrant Certificate shall have been exercised in accordance with the
provisions hereof and the receipt of the Exercise Price and any other amounts
payable upon such exercise by the Warrant Agent.
11
15. RIGHT OF ACTION. All rights of action in respect to this Agreement
are vested in the respective registered holders of the Warrant Certificates; and
any registered holder of any Warrant Certificate, without the consent of the
Warrant Agent or of any other holder of a Warrant Certificate, may, in his own
behalf for his own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Company suitable to enforce, or otherwise in
respect of, his right to exercise the Warrants evidenced by such Warrant
Certificate, for the purchase of shares of the Common Stock in the manner
provided in the Warrant Certificate and in this Agreement.
16. AGREEMENT OF HOLDERS OF WARRANT CERTIFICATES. Every holder of a
Warrant Certificate by accepting the same consents and agrees with the Company,
the Warrant Agent and with every other holder of a Warrant Certificate that:
(a) the Warrant Certificates are transferable on the registry
books of the Warrant Agent only upon the terms and conditions set forth in this
Agreement; and
(b) the Company and the Warrant Agent may deem and treat the
person in whose name the Warrant Certificate is registered as the absolute owner
of the Warrant (notwithstanding any notation of ownership or other writing
thereon made by anyone other than the Company or the Warrant Agent) for all
purposes whatever and neither the Company nor the Warrant Agent shall be
affected by any notice to the contrary.
17. CANCELLATION OF WARRANT CERTIFICATES. In the event that the Company shall
purchase or otherwise acquire any Warrant Certificate or Certificates after the
issuance thereof, such Warrant Certificate or Certificates shall thereupon be
delivered to the Warrant Agent and be canceled by it and retired. The Warrant
Agent shall also cancel any Warrant Certificate delivered to it for exercise, in
whole or in part, or delivered to it for transfer, split-up, combination or
exchange. Warrant Certificates so canceled shall be delivered by the Warrant
Agent to the Company from time to time, or disposed of in accordance with the
instructions of the Company.
18. CONCERNING THE WARRANT AGENT. The Company agrees to pay to the
Warrant Agent from time to time, on demand of the Warrant Agent, reasonable
compensation for all services rendered by it hereunder and also its reasonable
expenses, including counsel fees, and other disbursements incurred in the
administration and execution of this Agreement and the exercise and performance
of its duties hereunder. The Company also agrees to indemnify the Warrant Agent
for, and to hold it harmless against, any loss, liability or expense, incurred
without gross negligence, bad faith or willful misconduct on the part of the
Warrant Agent, arising out of or in connection with the acceptance and
administration of this Agreement.
19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT. Any
corporation into which the Warrant Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Warrant Agent shall be a party, or any corporation succeeding to the
corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor warrant agent under
the provisions of Section 21 hereof.
12
In case at the time such successor to the Warrant Agent shall succeed to the
agency created by this Agreement, any of the Warrant Certificates shall have
been countersigned but not delivered, any such successor to the Warrant Agent
may adopt the countersignature of the original Warrant Agent and deliver such
Warrant Certificates so countersigned; and in case at that time any of the
Warrant Certificates shall not have been countersigned, any successor to the
Warrant Agent may countersign such Warrant Certificates either in the name of
the predecessor Warrant Agent or in the name of the successor Warrant Agent; and
in all such cases such Warrant Certificates shall have the full force provided
in the Warrant Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent may adopt the countersignature under its prior
name and deliver Warrant Certificates so countersigned; and in case at that time
any of the Warrant Certificates shall not have been countersigned, the Warrant
Agent may countersign such Warrant Certificates either in its prior name or in
its changed name; and in all such cases such Warrant Certificates shall have the
full force provided in the Warrant Certificates and in this Agreement.
20. DUTIES OF WARRANT AGENT. The Warrant Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Warrant Certificates,
by their acceptance thereof, shall be bound:
(a) The Warrant Agent may consult with counsel satisfactory to it
(who may be counsel for the Company), and the opinion of such counsel shall be
full and complete authorization and protection to the Warrant Agent as to any
action taken, suffered or omitted by it in good faith and in accordance with
such opinion; provided, however, that the Warrant Agent shall have exercised
reasonable care in the selection of such counsel. Fees and expenses of such
counsel, to the extent reasonable, shall be paid by the Company.
(b) Whenever in the performance of its duties under this
Agreement, the Warrant Agent shall deem it necessary or desirable that any fact
or matter be proved or established by the Company prior to taking or suffering
any action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by a Chairman or co-Chairman of
the Board, the Chief Executive Officer, the President or a Vice President or the
Secretary of the Company and delivered to the Warrant Agent; and such
certificate shall be full authorization to the Warrant Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Warrant Agent shall be liable hereunder only for its own
gross negligence, bad faith or willful misconduct.
(d) The Warrant Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Warrant Certificates (except its countersignature on the Warrant Certificates
and such statements or recitals as describe the Warrant Agent or action taken or
to be taken by it) or be required to verify the same, but all such statements
and recitals are and shall be deemed to have been made by the Company only.
13
(e) The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Warrant Agent) or in respect of the
validity or execution of any Warrant Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Warrant Certificate;
nor shall it be responsible for the making of any change in the number of shares
of Common Stock for which a Warrant is exercisable required under the provisions
of Section 6 or responsible for the manner, method or amount of any such change
or the ascertaining of the existence of facts that would require any such
adjustment or change (except with respect to the exercise of Warrant
Certificates after actual notice of any adjustment of the Exercise Price); nor
shall it by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any shares of Common Stock to be
issued pursuant to this Agreement or any Warrant Certificate or as to whether
any shares of Common Stock will, when issued, be validly issued, fully paid and
non-assessable.
(f) The Warrant Agent shall be under no obligation to institute
any action, suit or legal proceeding or take any other action likely to involve
expense unless the Company or one or more registered holders of Warrant
Certificates shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred. All rights of action
under this Agreement or under any of the Warrants may be enforced by the Warrant
Agent without the possession of any of the Warrants or the production thereof at
any trial or other proceeding relative thereto, and any such action, suit or
proceeding instituted by the Warrant Agent shall be brought in its name as
Warrant Agent, and any recovery of judgment shall be for the ratable benefit of
the registered holders of the Warrant Certificates, as their respective rights
or interests may appear.
(g) The Warrant Agent and any shareholder, director, officer or
employee of the Warrant Agent may buy, sell or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to or otherwise act as fully and freely as though it were not Warrant
Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
(h) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from a
Chairman or co-Chairman of the Board or President or a Vice President or the
Secretary or the Controller of the Company, and to apply to such officers for
advice or instructions in connection with the Warrant Agent's duties, and it
shall not be liable for any action taken or suffered or omitted by it in good
faith in accordance with instructions of any such officer.
(i) The Warrant Agent will not be responsible for any failure of
the Company to comply with any of the covenants contained in this Agreement or
in the Warrant Certificates to be complied with by the Company.
(j) The Warrant Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys, agents or employees and the Warrant Agent shall not be
answerable or accountable for any act,
14
default, neglect or misconduct of any such attorneys, agents or employees or for
any loss to the Company resulting from such neglect or misconduct; provided,
however, that reasonable care shall have been exercised in the selection and
continued employment of such attorneys, agents and employees.
(k) The Warrant Agent will not incur any liability or
responsibility to the Company or to any holder of any Warrant Certificate for
any action taken, or any failure to take action, in reliance on any notice,
resolution, waiver, consent, order, certificate, or other paper, document or
instrument reasonably believed by the Warrant Agent to be genuine and to have
been signed, sent or presented by the proper party or parties.
(l) The Warrant Agent will act hereunder solely as agent of the
Company in a ministerial capacity, and its duties will be determined solely by
the provisions hereof. The Warrant Agent will not be liable for anything which
it may do or refrain from doing in connection with this Agreement except for its
own gross negligence, bad faith or willful conduct.
21. CHANGE OF WARRANT AGENT. The Warrant Agent may resign and be
discharged from its duties under this Agreement upon 30 days' prior notice in
writing mailed, by registered or certified mail, to the Company. The Company may
remove the Warrant Agent or any successor warrant agent upon 30 days' prior
notice in writing, mailed to the Warrant Agent or successor warrant agent, as
the case may be, by registered or certified mail. If the Warrant Agent shall
resign or be removed or shall otherwise become incapable of acting, the Company
shall appoint a successor to the Warrant Agent and shall, within 15 days
following such appointment, give notice thereof in writing to each registered
holder of the Warrant Certificates. If the Company shall fail to make such
appointment within a period of 15 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Warrant Agent, then the Company agrees to perform the
duties of the Warrant Agent hereunder until a successor Warrant Agent is
appointed. After appointment and execution of a copy of this Agreement in effect
at that time, the successor Warrant Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Warrant Agent without further act or deed; but the former Warrant Agent shall
deliver and transfer to the successor Warrant Agent, within a reasonable time,
any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Failure to
give any notice provided for in this Section, however, or any defect therein
shall not affect the legality or validity of the resignation or removal of the
Warrant Agent or the appointment of the successor warrant agent, as the case may
be.
22. ISSUANCE OF NEW WARRANT CERTIFICATES. Notwithstanding any of the
provisions of this Agreement or the several Warrant Certificates to the
contrary, the Company may, at its option, issue new Warrant Certificates in such
form as may be approved by its Board of Directors to reflect any adjustment or
change in the Exercise Price or the number or kind of shares purchasable under
the several Warrant Certificates made in accordance with the provisions of this
Agreement.
23. NOTICES. Notice or demand pursuant to this Agreement to be given or
made on the Company by the Warrant Agent or by the registered holder of any
Warrant Certificate shall be
15
sufficiently given or made if sent by first-class or registered mail, postage
prepaid, addressed (until another address is filed in writing by the Company
with the Warrant Agent) as follows:
Vaughan Foods, Inc.
216 N.E. 12th Street
Moore, Oklahoma 73160
Attention: Chief Financial Officer
Subject to the provisions of Section 21, any notice pursuant to this
Agreement to be given or made by the Company or by the holder of any Warrant
Certificate to or on the Warrant Agent shall be sufficiently given or made if
sent by first-class or registered mail, postage prepaid, addressed (until
another address is filed in writing by the Warrant Agent with the Company) as
follows:
--------------------------
--------------------------
--------------------------
--------------------------
Any notice or demand authorized to be given or made to the registered
holder of any Warrant Certificate under this Agreement shall be sufficiently
given or made if sent by first-class or registered mail, postage prepaid, to the
last address of such holder as it shall appear on the registers maintained by
the Warrant Agent.
24. MODIFICATION OF AGREEMENT. The Warrant Agent may, without the
consent or concurrence of the Warrantholders, by supplemental agreement or
otherwise, concur with the Company in making any changes or corrections in this
Agreement that the Warrant Agent shall have been advised by counsel (who may be
counsel for the Company) are necessary or desirable to cure any ambiguity or to
correct any defective or inconsistent provision or clerical omission or mistake
or manifest error herein contained, or to make any other provisions in regard to
matters or questions arising hereunder and which shall not be inconsistent with
the provisions of the Warrant Certificates and which shall not adversely affect
the interests of the Warrantholders. As of the date hereof, this Agreement
contains the entire and only agreement, understanding, representation,
condition, warranty or covenant between the parties hereto with respect to the
matters herein, supersedes any and all other agreements between the parties
hereto relating to such matters, and may be modified or amended only by a
written agreement signed by both parties hereto pursuant to the authority
granted by the first sentence of this Section.
25. SUCCESSORS. All the covenants and provisions of this Agreement by
or for the benefit of the Company or the Warrant Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
26. OKLAHOMA CONTRACT. This Agreement and each Warrant Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Oklahoma and for all purposes shall be construed in accordance with the
laws of said State.
16
27. TERMINATION. This Agreement shall terminate as of the close of
business on the Expiration Date, or such earlier date upon which all Warrants
shall have been exercised or redeemed, except that the Warrant Agent shall
account to the Company as to all Warrants outstanding and all cash held by it as
of the close of business on the Expiration Date.
28. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement or in the
Warrant Certificates shall be construed to give to any person or corporation
other than the Company, the Warrant Agent, and their respective successors and
assigns hereunder and the registered holders of the Warrant Certificates any
legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company, the
Warrant Agent, their respective successors and assigns hereunder and the
registered holders of the Warrant Certificates.
29. DESCRIPTIVE HEADINGS. The descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
30. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute one and the same instrument.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS)
17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
VAUGHAN FOODS, INC.
By:
-----------------------------------------
Name: Mark E. Vaughan
Title: Chief Executive Officer
[--------------------------]
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
18
EXHIBIT A
VOID AFTER 5 P.M. PACIFIC TIME ON _________, 2011
CLASS A WARRANTS TO PURCHASE COMMON STOCK
Certificate number _______ _________ Warrants
Vaughan Foods, Inc.
CUSIP __________
THIS CERTIFIES THAT
or registered assigns, is the registered holder of the number of Class A
Warrants ("WARRANTS") set forth above. Each Warrant, unless and until redeemed
by the Company as provided in the Warrant Agreement, hereinafter more fully
described (the "WARRANT AGREEMENT") entitles the holder thereof to purchase from
Vaughan Foods, Inc., a corporation incorporated under the laws of the State of
Oklahoma the ("COMPANY"), subject to the terms and conditions set forth
hereinafter and in the Warrant Agreement, at any time on or after _________,
2006 and before the close of business on _________, 2011 ("EXPIRATION DATE"),
one fully paid and non-assessable share of Common Stock of the Company ("COMMON
STOCK") upon presentation and surrender of this Warrant Certificate, with the
instructions for the registration and delivery of Common Stock filled in, at the
stock transfer office in _______, ________, of __________________________,
Warrant Agent of the Company ("WARRANT AGENT") or of its successor warrant agent
or, if there be no successor warrant agent, at the corporate offices of the
Company, and upon payment of the Exercise Price (as defined in the Warrant
Agreement) and any applicable taxes paid either in cash, or by certified or
official bank check, payable in lawful money of the United States of America to
the order of the Company. Each Warrant initially entitles the holder to purchase
one share of Common Stock for $_____. The number and kind of securities or other
property for which the Warrants are exercisable are subject to adjustment in
certain events, such as mergers, splits, stock dividends, splits and the like,
to prevent dilution. The Company may redeem any or all outstanding and
unexercised Warrants by giving not less than 30 days prior notice at any time
after the later of _________, 2007 and the date on which closing price of the
Common Stock on the principal exchange or trading facility on which it is traded
has equaled or exceeded $_____ per share on each of five consecutive trading
days. The Redemption Price is $0.25 per Warrant. All Warrants not theretofore
exercised will expire on the Expiration Date.
This Warrant Certificate is subject to all of the terms, provisions and
conditions of the Warrant Agreement, dated as of _______, 2006, between the
Company and the Warrant Agent, to all of which terms, provisions and conditions
the registered holder of this Warrant Certificate consents by acceptance hereof.
The Warrant Agreement is incorporated herein by reference and made a part hereof
and reference is made to the Warrant Agreement for a full description of the
rights, limitations of rights, obligations, duties and immunities of the Warrant
Agent, the Company and the holders of the Warrant Certificates. Copies of the
Warrant Agreement are available for inspection at the stock transfer office of
the Warrant Agent or may be obtained upon written request addressed to the
Company at Vaughan Foods, Inc., 216 N.E. 12th Street, Moore, Oklahoma 73160,
Attention: Chief Financial Officer.
The Company shall not be required upon the exercise of the Warrants
evidenced by this Warrant Certificate to issue fractions of Warrants, Common
Stock or other securities, but shall make adjustment therefor in cash on the
basis of the current market value of any fractional interest as provided in the
Warrant Agreement.
In certain cases, the sale of securities by the Company upon exercise
of Warrants may violate the securities laws of the United States, certain states
thereof or other jurisdictions. The Company has agreed to use all commercially
reasonable efforts to cause a registration statement to continue to be effective
during the term of the Warrants with respect to such sales under the Securities
Act of 1933, and to take such action under the laws of various states as may be
required to cause the sale of securities upon exercise to be lawful. However,
the Company will not be required to honor the exercise of Warrants if, in the
opinion of the Board of Directors, upon advice of counsel, the sale of
securities upon such exercise would be unlawful. In certain cases, the Company
may, but is not required to, purchase Warrants submitted for exercise for a cash
price equal to the difference between the market price of the securities
obtainable upon such exercise and the exercise price of such Warrants. If the
Warrants would otherwise expire while not exercisable as a result of any such
determination by the Board of Directors, their Expiration Date will be extended
to a date 30 days after the Warrants once again become exercisable.
This Warrant Certificate, with or without other Certificates, upon
surrender to the Warrant Agent, any successor warrant agent or, in the absence
of any successor warrant agent, at the corporate offices of the Company, may be
exchanged for another Warrant Certificate or Certificates evidencing in the
aggregate the same number of Warrants as the Warrant Certificate or Certificates
so surrendered. If the Warrants evidenced by this Warrant Certificate shall be
exercised in part, the holder hereof shall be entitled to receive upon surrender
hereof another Warrant Certificate or Certificates evidencing the number of
Warrants not so exercised.
No holder of this Warrant Certificate, as such, shall be entitled to
vote, receive dividends or be deemed the holder of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise
hereof for any purpose whatever, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon the holder of this Warrant
Certificate, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof or give or withhold consent to any corporate
action (whether upon any matter submitted to shareholders at any meeting
thereof, or give or withhold consent to any merger, recapitalization, issuance
of stock, reclassification of stock, change of par value or change of
stock to no par value, consolidation, conveyance or otherwise) or to receive
notice of meetings or other actions affecting shareholders (except as provided
in the Warrant Agreement) or to receive dividends or subscription rights or
otherwise until the Warrants evidenced by this Warrant Certificate shall have
been exercised and the Common Stock purchasable upon the exercise thereof shall
have become deliverable as provided in the Warrant Agreement.
If this Warrant Certificate shall be surrendered for exercise within
any period during which the transfer books for the Company's Common Stock or
other class of stock purchasable upon the exercise of the Warrants evidenced by
this Warrant Certificate are closed for any purpose, the Company shall not be
required to make delivery of certificates for shares purchasable upon such
transfer until the date of the reopening of said transfer books.
Every holder of this Warrant Certificate by accepting the same consents
and agrees with the Company, the Warrant Agent, and with every other holder of a
Warrant Certificate that:
(a) this Warrant Certificate is transferable on the registry books of
the Warrant Agent only upon the terms and conditions set forth in the Warrant
Agreement, and
(b) the Company and the Warrant Agent may deem and treat the person in
whose name this Warrant Certificate is registered as the absolute owner hereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone other than the Company or the Warrant Agent) for all purposes whatsoever
and neither the Company nor the Warrant Agent shall be affected by any notice to
the contrary. The Company shall not be required to issue or deliver any
certificate for shares of Common Stock or other securities upon the exercise of
Warrants evidenced by this Warrant Certificate until any tax which may be
payable in respect thereof by the holder of this Warrant Certificate pursuant to
the Warrant Agreement shall have been paid, such tax being payable by the holder
of this Warrant Certificate at the time of surrender.
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS)
WITNESS the facsimile signatures of the proper officers of the Company
and its corporate seal.
Dated: _______________
VAUGHAN FOODS, INC.
By: __________________________________
Name: Mark E. Vaughan
Title: Chief Executive Officer
Attest: _____________________________
Secretary
Countersigned:
[--------------------------]
By: ______________________________________
Authorized Officer
EXHIBIT B
VOID AFTER 5 P.M. PACIFIC TIME ON _________, 2011
CLASS B WARRANTS TO PURCHASE COMMON STOCK
Certificate number _______ _________ Warrants
Vaughan Foods, Inc.
CUSIP ______________
THIS CERTIFIES THAT
or registered assigns, is the registered holder of the number of Class B
Warrants ("WARRANTS") set forth above. Subject to the terms of the Warrant
Agreement, hereinafter more fully described (the "WARRANT AGREEMENT"), each
Warrant entitles the holder thereof to purchase from Vaughan Foods, Inc., a
corporation incorporated under the laws of the State of Oklahoma the
("COMPANY"), subject to the terms and conditions set forth hereinafter and in
the Warrant Agreement, at any time on or after _________, 2006 and before the
close of business on _________, 2011 ("EXPIRATION DATE"), one fully paid and
non-assessable share of Common Stock of the Company ("COMMON Stock") upon
presentation and surrender of this Warrant Certificate, with the instructions
for the registration and delivery of Common Stock filled in, at the stock
transfer office in _______, ________, of __________________________, Warrant
Agent of the Company ("WARRANT AGENT") or of its successor warrant agent or, if
there be no successor warrant agent, at the corporate offices of the Company,
and upon payment of the Exercise Price (as defined in the Warrant Agreement) and
any applicable taxes paid either in cash, or by certified or official bank
check, payable in lawful money of the United States of America to the order of
the Company. Each Warrant initially entitles the holder to purchase one share of
Common Stock for $______. The number and kind of securities or other property
for which the Warrants are exercisable are subject to adjustment in certain
events, such as mergers, splits, stock dividends, splits and the like, to
prevent dilution. Beginning on __________, 2006, the Company may redeem any or
all outstanding and unexercised warrants by giving not less than 30 days' prior
written notice at any time after the Company's gross revenue for any 12-month
period, as confirmed by an independent audit, equals or exceeds $100.0 million.
The Redemption Price is $0.25 per Warrant. All Warrants not theretofore
exercised will expire on the Expiration Date.
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This Warrant Certificate is subject to all of the terms, provisions and
conditions of the Warrant Agreement, dated as of _______, 2006, between the
Company and the Warrant Agent, to all of which terms, provisions and conditions
the registered holder of this Warrant Certificate consents by acceptance hereof.
The Warrant Agreement is incorporated herein by reference and made a part hereof
and reference is made to the Warrant Agreement for a full description of the
rights, limitations of rights, obligations, duties and immunities of the Warrant
Agent, the Company and the holders of the Warrant Certificates. Copies of the
Warrant Agreement are available for inspection at the stock transfer office of
the Warrant Agent or may be obtained upon written request addressed to the
Company at Vaughan Foods, Inc., 216 N.E. 12th Street, Moore, Oklahoma 73160,
Attention: Chief Financial Officer.
The Company shall not be required upon the exercise of the Warrants
evidenced by this Warrant Certificate to issue fractions of Warrants, Common
Stock or other securities, but shall make adjustment therefor in cash on the
basis of the current market value of any fractional interest as provided in the
Warrant Agreement.
In certain cases, the sale of securities by the Company upon exercise
of Warrants may violate the securities laws of the United States, certain states
thereof or other jurisdictions. The Company has agreed to use all commercially
reasonable efforts to cause a registration statement to continue to be effective
during the term of the Warrants with respect to such sales under the Securities
Act of 1933, and to take such action under the laws of various states as may be
required to cause the sale of securities upon exercise to be lawful. However,
the Company will not be required to honor the exercise of Warrants if, in the
opinion of the Board of Directors, upon advice of counsel, the sale of
securities upon such exercise would be unlawful. In certain cases, the Company
may, but is not required to, purchase Warrants submitted for exercise for a cash
price equal to the difference between the market price of the securities
obtainable upon such exercise and the exercise price of such Warrants. If the
Warrants would otherwise expire while not exercisable as a result of any such
determination by the Board of Directors, their Expiration Date will be extended
to a date 30 days after the Warrants once again become exercisable.
This Warrant Certificate, with or without other Certificates, upon
surrender to the Warrant Agent, any successor warrant agent or, in the absence
of any successor warrant agent, at the corporate offices of the Company, may be
exchanged for another Warrant Certificate or Certificates evidencing in the
aggregate the same number of Warrants as the Warrant Certificate or Certificates
so surrendered. If the Warrants evidenced by this Warrant Certificate shall be
exercised in part, the holder hereof shall be entitled to receive upon surrender
hereof another Warrant Certificate or Certificates evidencing the number of
Warrants not so exercised.
No holder of this Warrant Certificate, as such, shall be entitled to
vote, receive dividends or be deemed the holder of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise
hereof for any purpose whatever, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon the holder of this Warrant
Certificate, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof or give or withhold consent to any corporate
action (whether upon any matter submitted to shareholders at any meeting
thereof, or give or withhold consent to any merger, recapitalization, issuance
of stock, reclassification of stock, change of par value or change of
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stock to no par value, consolidation, conveyance or otherwise) or to receive
notice of meetings or other actions affecting shareholders (except as provided
in the Warrant Agreement) or to receive dividends or subscription rights or
otherwise until the Warrants evidenced by this Warrant Certificate shall have
been exercised and the Common Stock purchasable upon the exercise thereof shall
have become deliverable as provided in the Warrant Agreement.
If this Warrant Certificate shall be surrendered for exercise within
any period during which the transfer books for the Company's Common Stock or
other class of stock purchasable upon the exercise of the Warrants evidenced by
this Warrant Certificate are closed for any purpose, the Company shall not be
required to make delivery of certificates for shares purchasable upon such
transfer until the date of the reopening of said transfer books.
Every holder of this Warrant Certificate by accepting the same consents
and agrees with the Company, the Warrant Agent, and with every other holder of a
Warrant Certificate that:
(a) this Warrant Certificate is transferable on the registry books of
the Warrant Agent only upon the terms and conditions set forth in the Warrant
Agreement, and
(b) the Company and the Warrant Agent may deem and treat the person in
whose name this Warrant Certificate is registered as the absolute owner hereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone other than the Company or the Warrant Agent) for all purposes whatsoever
and neither the Company nor the Warrant Agent shall be affected by any notice to
the contrary. The Company shall not be required to issue or deliver any
certificate for shares of Common Stock or other securities upon the exercise of
Warrants evidenced by this Warrant Certificate until any tax which may be
payable in respect thereof by the holder of this Warrant Certificate pursuant to
the Warrant Agreement shall have been paid, such tax being payable by the holder
of this Warrant Certificate at the time of surrender.
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS)
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WITNESS the facsimile signatures of the proper officers of the Company
and its corporate seal.
Dated: _______________
VAUGHAN FOODS, INC.
By: ____________________________________
Name: Mark E. Vaughan
Title: Chief Executive Officer
Attest: _______________________________
Secretary
Countersigned:
[--------------------------]
By: ______________________________________
Authorized Officer
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