THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED IN A TRANSACTION NOT
INVOLVING ANY PUBLIC OFFERING AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE. SUCH SECURITIES
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT AND LAWS,
PICO PRODUCTS, INC.
Lakeview Terrace, California
STOCK PURCHASE WARRANT
APRIL 14, 1999
1. GRANT. Pico PRODUCTS, Inc. a New York corporation (hereinafter
COMPANY), for value received hereby grants to ALLIED INVESTMENT CORPORATION,
a Maryland corporation or its registered assigns (hereinafter HOLDER), or its
nominee, under the terms herein, the right to purchase One Million
(1,000,000) of the fully paid and non-assessable shares of the Company's
authorized but unissued $.01 par value common stock, The $.01 par value
common shares of the Company arc sometimes hereinafter referred to as Common
Stock. The Common Stock shares issuable under this Warrant are sometimes
hereinafter referred to as the Warrant Shares. The number of Warrant Shares
stated above is subject to certain anti-dilution adjustments set out below.
2. TERM. The right to exercise this Warrant shall expire six
(6) years after the date hereof.
3. EXERCISE PRICE. The exercise price of this Warrant (THE EXERCISE
PRICE) shall be $.095 per share, subject to certain anti-dilution adjustments
set out below.
4. ANTI-DILUTION PROVISIONS.
(a) ISSUANCE OF ADDITIONAL STOCK; ADJUSTMENTS TO EXERCISE PRICE.
Whenever the Company issues or sells any Additional Stock (as hereinafter
defined) for a consideration per share less than the Exercise Price in effect
immediately prior to such issuance or sale, upon such issuance or sale the
Exercise Price shall decline to equal the quotient obtained by dividing the
sum of the product of (i) the number of shares of Common Stock issued and
outstanding (or deemed to be issued, as hereinafter provided) immediately
prior to such issuance or sale and (ii) the Exercise Price in effect
immediately prior to such issuance or sale, plus the net consideration
received for such issuance or sale, as dividend, by the number of shares of
Common Stock issued and outstanding (or deemed to be issued) immediately
after such issuance or sale, as divisor. The foregoing is represented by the
formula as follows-
N = (AO + C) / B
wherein
N - the Exercise Price to be effect immediately after the subject
issuance or sale-,
O = the Exercise Price as in effect immediately prior to such
issuance or sale;
A = the number of shares of Common Stock issued and outstanding (or
deemed to be issued) immediately before such issuance or sale;
B = the number of shares of Common Stock issued and outstanding (or
deemed to be issued) immediately after such issuance or sale; and
C = the net consideration received for such issuance or sale,
(b) ADJUSTMENTS TO NUMBER OF WARRANT SHARES. Whenever the
Exercise Price declines according to the formula set out above, the number of
Warrant Shares shall increase to equal the quotient obtained by dividing $
95,000 as dividend, by the reduced Exercise Price as divisor.
(c) ADDITIONAL STOCK. For purposes hereof ADDITIONAL STOCK shall
mean any Common Stock issued after the date hereof other than Common Stock
issued upon the exercise of this Warrant or Common Stock issued by the
Company as a stock dividend on, or upon the subdivision or combination of,
the outstanding shares of Common Stock;
(d) OPTIONS AND WARRANTS. In case the Company shall at any time
other than pursuant to this Warrant issue or grant any options or rights to
subscribe for or to purchase Common Stock, all shares of Common stock which
the holders of such options or rights shall be entitled to subscribe for or
to purchase shall be deemed to be issued as of the date of such issuing or
granting of such options or rights; and the minimum aggregate consideration
specified 'n such options or rights for the shares covered thereby, plus the
cash consideration, if any, received by the Company for the issuance of such
options or rights, shall be deemed to be the consideration actually received
by the Company for the issuance of such shares;
(e) CONVERTIBLE SECURITIES. In case the Company shall at any time
other than pursuant to this Warrant issue any stock or obligations directly
or indirectly convertible into or exchangeable for Common Stock, then such
issuance shall be deemed to be an issuance (as of the date of issue of such
stock or obligations) of the total maximum number of shares of Common Stock
necessary to effect the exchange or conversion of all such stock or
obligations. The amount received or receivable by the Company in
consideration for the issuance of such stock or obligations (deducting
therefrom any commissions or expenses paid or incurred by the Company for any
underwriting of, or otherwise in connection with, such issuance), plus the
minimum aggregate amount of premiums, if any, payable to the Company upon
exchange of conversion, shall be deemed to be the consideration actually
received by the Company for such Common Stock;
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(f) CALCULATION OF CONSIDERATION. In the case of an issuance of
shares of Common Stock for cash, the consideration received by the Company
therefor shall be deemed to be the net proceeds received for such shares,
deducting therefrom any commissions or expenses paid or incurred by the
Company for any underwriting of, or otherwise in connection with, the issue
of such shares PROVIDED, HOWEVER, that in any such case where the shares of
Stock so issued are part of a unit or combination of securities of the
Company consisting of one or more shares of Common Stock and other securities
of the Company, if the amount of the cash consideration received by the
Company for the shares of Stock so issued not determinable at the time of
such issuance, such amount shall be deemed to be such portion of the total
cash consideration received by the Company for such units or combinations as
reasonably determined in good faith by the Company's Board of Directors,
regardless of the accounting treatment thereof by the Company;
(g) NON-CASH CONSIDERATION. In the case of an issuance (other than
as a dividend of other distribution on any Common Stock of the Company or
upon conversion or exchange of other securities of the Company) of shares of
Additional Stock for a consideration part or all of which shall be other than
cash, the amount of such consideration other than cash shall for purposes of
this Warrant be the fair market value of such consideration as reasonably
determined in good faith by the Holder, regardless of the accounting
treatment thereof by the Company;
(h) RESALE OF TREASURY STOCK. The sale or other disposition of any
shares of Common Stock of the Company or other securities held in the
treasury of the Company today, or of any securities resulting from any
reclassification or reclassifications of such shares or other securities
which were effected while they were held in the treasury of the Company,
shall be deemed an issuance thereof, PROVIDED, HOWEVER, that if any such
share or other security is sold or disposed of and subsequently re-acquired
by the Company, no future sale or other disposition thereof shall be deemed
an issuance thereof
(i) STOCK SPLIT OR DIVIDEND. In case the shares of Common Stock at
any time outstanding shall be subdivided into a greater or combined into a
lesser number of shares of Common Stock, by stock-split, reverse split or
otherwise, or in case shares of Common Stock shall be issued as a stock
dividend, the number of Warrant Shares, and the Exercise Price shall be
increased or decreased, as applicable, to an amount which shall bear the same
relation to the number of Warrant Shares and the Exercise Price in effect
immediately prior to such subdivision, combination or stock dividend as the
total number of shares of Common Stock issued and outstanding (or deemed
issued) immediately prior to such subdivision, combination or stock dividend
shall bear to the total number of shares of Common Stock issued and
outstanding (or deemed issued) immediately after such subdivision,
combination or stock dividend; an adjustment pursuant to THIS subparagraph
shall become effective immediately after the effective date of such
subdivision, combination or stock dividend, retroactive to the record date
(if any) for such subdivision, combination or stock dividend;
(j) MERGER. In case of any capital reorganization, or any
reclassification of the Common Stock of the Company, or in case of any
consolidation of the Company with or the merger of the Company into any other
entity (other than a consolidation or merger in which the Company is the
surviving entity) or in case of the sale of all or substantially all the
properties and assets of the
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Company to any other entity, this Warrant and conditions consolidation,
merger or sale be exercisable upon the term reclassification, consolidation,
merger of sale be exercisable upon the specified herein, for the number of
shares of stock or other securities or property of the Company, or of the
other entity resulting from such consolidation or surviving in such merger or
to which such sale shall be made, as the case may be, which the holder of
this Warrant would have been entitled to receive, under the terms of such
reorganization, reclassification, consolidation, merger or sale, if this
Warrant had been exercised in full prior to such reorganization,
reclassification, consolidation, merger or sale. In any such case, if
necessary, the provision set forth in this Warrant with respect to the rights
and interests thereafter of the Holder shall be appropriately adjusted so as
to be applicable, as nearly as may reasonably be, to any shares of stock or
other securities or property thereafter deliverable on the exercise of this
Warrant. The subdivision or combination of shares of Common Stock at any time
outstanding into a greater or lesser number of shares of Common Stock shall
not be deemed to be a reclassification of the Common Stock of the Company for
the purposes of this subparagraph. The Company shall not effect any such
consolidation, merger, or sale, unless prior to or simultaneously wit the
consummation thereof the surviving entity (if other than the Company)
resulting from such consolidation or merger or the entity purchasing such
assets, shall assume, by written agreement executed and delivered to the
Company, the obligation to deliver to the Holder such shares of stock,
securities or assets to which in accordance with the foregoing provisions,
such Holder may be entitled, as well as any other obligations arising under
this Warrant;
(k) DIVIDENDS IN KIND. If the Company shall declare a dividend
upon Common Stock payable other than from earnings or earned surplus or other
than in shares of Common Stock or stock or obligations directly or indirectly
convertible into or exchangeable for Common Stock, the holder of this Warrant
shall, upon exercise hereof in whole or in part, be entitled, in addition to
the shares of Common Stock deliverable upon such exercise, to the cash, stock
or other securities or property which Holder would have received as dividends
if continuously since the date hereof such Holder.
(i) had been the holder of record of the 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 such Common Stock or in respect
Of any such stock or other securities so paid or payable as such dividends.
For purposes of this subparagraph, a dividend payable other than in cash
shall be considered to be payable from earnings or earned surplus only to the
extent that such earnings or earned surplus shall be charged in an amount
equal to the fair value of such dividend as determined good faith by the
Board of Directors of the Company;
(l) DEMINIMIS. Anything in this section to the contrary
notwithstanding, no adjustment shall be made under this paragraph in any case
where the increase in the number of Warrant Shares would be less than 1 share
of Common Stock; but in such case any adjustment that could otherwise be made
shall be delayed and the adjustment shall be made only after the
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next issuance or deemed Issuance of Additional Stock which, together with any
and all such issuances, shall entitle Holder to receive at least one (1)
whole additional share of the said stock;
(m) EXPIRATION OF OPTIONS AND CONVERTIBLE SECURITIES. Upon an
expiration or lapse of options, warrants or convertible securities, the
issuance or grant of which had previously been the basis for an adjustment of
the Exercise Price and number of Warrant Shares, the Exercise Price and
number of Warrant Shares then in effect shall forthwith be readjusted to the
Exercise Price and number of Warrant Shares which would have been in effect
if the adjustment made upon the original issuance or grant of such options,
warrants or securities had excluded, from the calculation of Common Stock
issued and outstanding immediately after such issuance or grant, all Common
Stock which the holders of such expired or lapsed options, warrants or
securities were entitled to acquire thereunder,
5. BELOW PAR PRICE. If at any time the per share exercise price of this
Warrant shall be less than the par value of one share of Common Stock, the
Company shall take such action as shall be necessary to reduce such par value
to an amount less than the per share exercise price of this Warrant;
6. NOTICES OF STOCK SALES OR OTHER ADJUSTMENTS. Whenever there is an
issuance or sale of Additional Stock, the Company shall promptly place on
file at the Company's principal office a certificate signed by the President
stating the per-share price applicable to the transaction, a detailed
calculation of such price, the number of shares of Common Stock sold or
issued, the consideration received, and all fees and expenses incurred, and
further describing the transaction in detail and the adjustments (if any) to
the Exercise Price and the number of Warrant Shares resulting therefrom; and
cause a copy of such certificate to be sent to the Holder. Whenever the
number of Warrant Shares or the Exercise Price shall change other than upon
the issuance of Additional Stock, the Company shall promptly notify the
Holder in writing of such change and deliver to Holder a statement setting
forth the number of Warrant Shares and the Exercise Price after such
adjustment(s), and a brief statement of the facts requiring such
adjustment(s) and the Computation by which such adjustment(s) was made.
7. HOLDER'S REDEMPTION RIGHTS. The Holder will share pro rata in any
redemption of stock by the Company. If the Company shall redeem or otherwise
purchase for value any of its Common Stock prior to full exercise of this
Warrant, the Holder, at its option, may receive, at the time of such
redemption or purchase, the same proceeds it would have been entitled to
receive if this Warrant had been exercised in full prior to such redemption.
8. EXERCISE PROCEDURE. This Warrant may be exercised by presenting it
and tendering the aggregate Exercise Price in legal tender or by bank's,
cashier's or certified check to the Company at its address specified in the
Investment Agreement, along with written subscription substantially in the
form of Exhibit 8.00 hereof. The date on which this Warrant is thus
surrendered, accompanied by tender or payment as herein before or hereinafter
provided, is referred to herein as the Exercise Date. The Company shall
forthwith at its expense (including the payment of issue taxes), issue and
deliver the proper number of shares of Common Stock,
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and such shares shall be deemed issued for all purposes as of the opening of
business on the Exercise Date notwithstanding any delay in the actual
issuance',
9. EXCHANGE OF SHARES FOR EXERCISE PRICE. The Holder at its option may
provide the Exercise Price under this Warrant by reducing the number of
shares for which the Warrant is otherwise exercisable by the number of shares
having fair market value equal to the Exercise Price.
10. SALE OR EXCHANGE OF COMPANY OR ASSETS. If prior to issuance of
stock under this Warrant the Company sells or exchanges all or substantially
all of its assets, or the shares of common stock of the Company are sold or
exchanged to any party other than the Holder, then the Holder at its option
may receive, in lieu of the stock otherwise issuable hereunder, such money or
property it would have been entitle to receive if this Warrant had been
exercised prior to such sale or exchange.
11. RESALE OF WARRANT OR SHARES. Neither this Warrant nor other shares
of common stock issuable upon exercise hereof, have been registered under the
Securities Act of 1933 as amended, or under the securities laws of any state.
Neither this Warrant nor any shares when issued may be sold, transferred,
pledged or hypothecated in the absence of (i) an effective registration
statement for this Warrant or the shares, as the case may be, under the
Securities Act of 1933 as amended and such registration or qualification as
may be necessary under the securities laws of any state, or (ii) an opinion
of counsel reasonably satisfactory to the Company that such registration or
qualification is not required. The Company shall cause a certificate or
certificates evidencing all or any of the shares issued upon exercise hereof
prior to said registration and qualification of such shares to bear the
following legend:
The shares evidenced by this certificate have not been registered under
the SECURITIES ACT of 1933 as amended, or under the securities laws of
any state, The shares may not be sold, transferred, pledged or
hypothecated in the absence of an effective registration statement
under the SECURITIES ACT of 1933, as amended, and such registration or
qualification as may be necessary under the securities laws of any
state, or an opinion of counsel satisfactory to the Company that such
registration or qualification is not required.
12. TRANSFER. This Warrant shall be registered on the books of the
Company which shall be kept at its principal office for that purpose, and
shall be transferable in whole or in part but only on such books by the
Holder in person or by duly authorized attorney with written notice
substantially in the form of Exhibit 12.00 hereof, and only in compliance
with the preceding paragraph. The Company may issue appropriate stop orders
to its transfer agent to prevent a transfer in violation of the preceding
paragraph.
13. CLOSING of books. The Company shall not close its transfer books
against the transfer of this Warrant or any Common Stock or other securities
issuable upon the exercise of this Warrant in any manner which interferes
with the exercise of this Warrant.
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14. REPLACEMENT OF WARRANT. At the request of the Holder and on
production of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant and (in the case of loss,
theft, or destruction) if required by the Company, upon delivery of an
indemnity agreement with surety in such reasonable amount as tile Company may
determine thereof, the Company at its expense will issue in lieu thereof a
new Warrant of like tenor
15. INVESTMENT COVENANT. The Holder by its acceptance hereof covenants
that this Warrant is, and any stock issued hereunder will be, acquired for
investment purposes, and that the Holder will not distribute the same in
violation of any state or federal law or regulation.
16. NOTICE. Any notice or other communication required by this Warrant
to be given to the Holder shall be provided according to the notice
provisions in the Loan and Security Agreement being executed herewith.
17. WAIVER OF JURY TRIAL. THE COMPANY WAIVES ALL RIGHT TO TRIAL BY
JURY OF ALI, CLAIMS, DEFENSES, COUNTERCLAIMS AND SUITS OF ANY KIND DIRECTLY
OR INDIRECTLY ARISING FROM OR RELATING TO THIS WARRANT OR THE DEALINGS OF THE
PARTIES IN RESPECT HERETO. THE COMPANY ACKNOWLEDGES AND AGREES THAT THIS
PROVISION IS A MATERIAL TERM OF THIS WARRANT AND THAT 'THE HOLDER WOULD NOT
EXTEND ANY FUNDS UNDER THE LOAN DOCUMENTS IF THIS WAIVER OF JURY TRIAL WERE
NOT A PART OF THIS WARRANT, THE COMPANY ACKNOWLEDGES THAT THIS IS A WAIVER OF
A LEGAL RIGHT AND THAT IT MAKES THIS WAIVER VOLUNTARILY AND KNOWINGLY AFTER
CONSULTATION WITH, OR THE OPPORTUNITY TO CONSULT WITH, COUNSEL OF ITS CHOICE.
THE COMPANY AGREES THAT ALL SUCH CLAIMS, DEFENSES, COUNTERCLAIMS AND SUITS
SHALL BE TRIED BEFORE A JUDGE OF A COURT OF COMPETENT JURISDICTION, WITHOUT A
JURY.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on
its behalf by its undersigned officer, and its corporate seal to be hereunto
affixed, as of tile date first above written.
Pico Products, Inc.
Attest:
By: /s/ Mike Gavigan By: /s/ Charles G. Emley, Jr.
--------------------------- ---------------------------
Mike Gavigan, Asst. Secretary Charles G. Emley Jr.,
Chief Executive Officer
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