THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE (COLLECTIVELY, THE "LAWS"). THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE APPLICABLE LAWS OR (II) AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND
SCOPE REASONABLY ACCEPTABLE TO THE ISSUER, TO THE EFFECT THAT SUCH REGISTRATION
IS NOT REQUIRED DUE TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE APPLICABLE LAWS.
RAPIDTRON, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No. B-001 Number of Shares: 1,437,143
Date of Issuance: JUNE 21, 2005
Rapidtron, Inc., a Nevada corporation (the "COMPANY"), hereby certifies
that, for value received, Ceres Financial Limited and permitted assigns, the
registered holder hereof ("HOLDER"), is entitled, subject to the terms set forth
below, to purchase from the Company upon surrender of this Warrant to Purchase
Common Stock (the "WARRANT"), at any time after the date hereof, but not after
5:00 P.M. California time on the Expiration Date (as defined herein), 1,437,143
fully paid and non-assessable shares of Common Stock (as defined herein) of the
Company (each a "WARRANT SHARE" and collectively the "WARRANT SHARES") at a
purchase price per share (the "WARRANT EXERCISE PRICE") equal to the lower of
(i) US$0.175 or (ii) an amount equal to seventy-five percent (75%) of the lowest
closing bid price of the Common Stock for the five trading days immediately
preceding the date of the Exercise Notice as quoted on the OTC Bulletin Board or
such national securities exchange or other market on which the Common Stock is
then listed or quoted. The Warrant Exercise Price shall be paid in lawful money
of the United States, unless exercised pursuant to Section 2(b) hereof. Both
the number of Warrant Shares purchasable hereunder and the Warrant Exercise
Price are subject to adjustment as provided in Section 9 below.
Section 1. Definitions.
-----------
(a) The following words and terms used in this Warrant shall have the
following meanings:
"COMMON STOCK" means (i) the Company's US$0.001 par value common stock and
(ii) any capital stock into which such Common Stock shall have been changed or
any capital stock resulting from a reclassification of such Common Stock.
"EXPIRATION DATE" means the date which is five (5) years from the date of
this Warrant or, if such date falls on a Saturday, Sunday or other day on which
banks are required or authorized to be closed in the State of California (a
"HOLIDAY"), the next preceding date that is not a Holiday.
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"MARKET PRICE" means the average of the closing stock prices for the Common
Stock for the ten (10) trading days immediately prior to the date on which a
Notice of Exercise is delivered to the Company, as quoted on the OTC Bulletin
Board or such national securities exchange or other market on which the Common
Stock may then be listed or quoted.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES PURCHASE AGREEMENT" shall mean the Convertible Note and Warrant
Purchase Agreement between the Holder (or its predecessor in interest) and the
Company for the purchase of this Warrant and the Note (as defined in the
Securities Purchase Agreement).
(b) Other definitional provisions:
(i) Except as otherwise specified herein, all references herein (A) to
the Company shall be deemed to include the Company's successors and (B) to any
applicable law shall be deemed references to such applicable law as the same may
be amended or supplemented from time to time.
(ii) When used in this Warrant, unless otherwise specified in a
particular instance, the words "herein," "hereof," and "hereunder," and words of
similar import, shall refer to this Warrant as a whole and not to any provision
of this Warrant, and the words "Section" and "Exhibit" shall refer to Sections
of, and Exhibits to, this Warrant unless otherwise specified.
(iii) Whenever the context so requires, the neuter gender includes the
masculine or feminine, and the singular number includes the plural, and vice
versa.
(iv) When used in this Warrant, "transfer" shall include any
disposition of this Warrant or any Warrant Shares, or of any interest in either
thereof, which would constitute a sale thereof within the meaning of the
Securities Act or applicable state securities laws.
Section 2. Exercise of Warrant.
-------------------
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised by the Holder, as a whole or in part (except that this Warrant shall
not be exercisable as to a fractional share), at any time prior to 5:00 p.m.
California time on the Expiration Date. The rights represented by this Warrant
shall be exercised by the Holder by (i) delivery of a written notice in the form
attached as Exhibit I hereto (a "NOTICE OF EXERCISE") of the Holder's election
to exercise this Warrant, which notice shall specify the number of Warrant
Shares to be purchased, (ii) payment to the Company of an amount equal to the
Warrant Exercise Price multiplied by the number of Warrant Shares as to which
the Warrant is being exercised, plus any applicable issuance or transfer taxes,
in immediately available funds (either by wire transfer or a certified or
cashier's check drawn on a United States bank) and (iii) the surrender of this
Warrant, properly endorsed, at the principal office of the Company (or at such
other agency or office of the Company as the Company may designate by notice to
the Holder).
(b) In addition, and notwithstanding anything to the contrary contained
in this Warrant, at such time as the Market Price per share of the Common Stock
exceeds the Warrant Exercise Price, this Warrant may be exercised by
presentation and surrender of this Warrant to
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the Company in a cashless exercise, including a written calculation of the
number of Warrant Shares to be issued upon such exercise in accordance with the
terms hereof (a "CASHLESS EXERCISE"). In the event of a Cashless Exercise, in
lieu of paying the Warrant Exercise Price, the Holder shall surrender this
Warrant for, and the Company shall issue in respect thereof, the number of
Warrant Shares determined by multiplying the number of Warrant Shares to which
the Holder would otherwise be entitled by a fraction, the numerator of which
shall be determined by subtracting the Warrant Exercise Price from the then
current Market Price per share of Common Stock, and the denominator of which
shall be the then current Market Price per share of Common Stock.
(c) Any Warrant Shares shall be deemed to be issued to the Holder or
Holder's designee, as the record owner of such Warrant Shares, as of the date on
which this Warrant shall have been surrendered, the completed Notice of Exercise
shall have been delivered, and payment (or notice of an election to effect a
Cashless Exercise) shall have been made for such Warrant Shares as set forth
above, irrespective of the date of delivery of such share certificate, except
that, if the date of such surrender and payment is a date when the stock
transfer books of the Company are properly closed, such person shall be deemed
to have become the holder of such Warrant Shares at the opening of business on
the next succeeding date on which the stock transfer books are open. For each
exercise of the rights represented by this Warrant in compliance with this
Section 2, a certificate or certificates for the Warrant Shares so purchased,
registered in the name of, or as directed by, the Holder, shall be delivered to,
or as directed by, the Holder within three (3) business days after such rights
shall have been so exercised.
(d) Unless this Warrant shall have expired or shall have been fully
exercised, the Company shall issue a new Warrant identical in all respects to
the Warrant exercised except that it shall represent rights to purchase the
number of Warrant Shares purchasable immediately prior to such exercise under
the Warrant exercised, less the number of Warrant Shares with respect to which
such Warrant is exercised (or, in the case of a Cashless Exercise, the number of
shares to which the Holder would otherwise have been entitled).
(e) In the case of any dispute with respect to an exercise, the Company
shall promptly issue such number of Warrant Shares as are not disputed in
accordance with this Section. If such dispute only involves the number of
Warrant Shares receivable by the Holder under a Cashless Exercise, the Company
shall submit the disputed calculations to an independent accounting firm of
national standing via facsimile within two (2) business days of receipt of the
Notice of Exercise. The accountant shall review the calculations and notify the
Company and the Holder of the results no later than two (2) business days from
the date it receives the disputed calculations. The accountant's calculation
shall be deemed conclusive absent manifest error. The Company shall then issue
the appropriate number of shares of Common Stock in accordance with this
Section.
NOTWITHSTANDING ANY OTHER PROVISION HEREOF, NO HOLDER SHALL EXERCISE THESE
WARRANTS, IF AS A RESULT OF SUCH CONVERSION THE HOLDER WOULD THEN BECOME A "TEN
PERCENT BENEFICIAL OWNER" (AS DEFINED IN RULE 16A-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED) OF COMMON STOCK. FOR GREATER CERTAINTY, THE
WARRANTS SHALL NOT BE CONVERTIBLE BY THE HOLDER, IF, AFTER GIVING EFFECT TO SUCH
EXERCISE, THE HOLDER OF SUCH SECURITIES, TOGETHER WITH ITS AFFILIATES, WOULD IN
AGGREGATE BENEFICIALLY OWN, OR EXERCISE CONTROL OR DIRECTION OVER THAT
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NUMBER OF VOTING SECURITIES OF THE COMPANY WHICH IS 10% OR GREATER OF THE TOTAL
ISSUED AND OUTSTANDING VOTING SECURITIES OF THE COMPANY, IMMEDIATELY AFTER
GIVING EFFECT TO SUCH EXERCISE.
Section 3. Covenants as to Common Stock.
----------------------------
The Company covenants and agrees that all Warrant Shares which may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be validly issued, fully paid and non-assessable. The Company further
covenants and agrees that during the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized
and reserved a sufficient number of shares of Common Stock to provide for the
exercise of the rights then represented by this Warrant and that the par value
of said shares will at all times be less than or equal to the applicable Warrant
Exercise Price.
Section 4. Taxes.
-----
The Company shall not be required to pay any tax or taxes attributable to
the initial issuance of the Warrant Shares or any transfer involved in the
issuance or delivery of any certificates for Warrant Shares in a name other than
that of the Holder or any permitted transferee of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder.
---------------------------------------
No Holder of this Warrant, as such, shall be entitled to vote or receive
dividends or be deemed the holder of shares of the Company for any purpose, nor
shall anything contained in this Warrant be construed to confer upon the Holder,
as such, any of the rights of a stockholder of the Company or any right to vote,
give or withhold consent to any corporate action (whether any reorganization,
issuance of stock, reclassification of stock, consolidation, merger, conveyance
or otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares
which the Holder is then entitled to receive upon the due exercise of this
Warrant. Notwithstanding the foregoing, the Company will provide the Holder
with copies of the same notices and other information given to the stockholders
of the Company generally, contemporaneously with the delivery thereof to the
stockholders.
Section 6. No Limitation on Corporate Action.
---------------------------------
No provisions of this Warrant and no right or option granted or conferred
hereunder shall in any way limit, affect or abridge the exercise by the Company
of any of its corporate rights or powers to recapitalize, amend its Articles of
Incorporation, reorganize, consolidate or merge with or into another
corporation, or to transfer all or any part of its property or assets, or the
exercise of any other of its corporate rights and powers.
Section 7. Representations of Holder.
-------------------------
By the acceptance hereof, the Holder represents that the Holder is
acquiring this Warrant and the Warrant Shares for the Holder's own account for
investment and not with a view to, or
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for sale in connection with, any distribution hereof or of any of the shares of
Common Stock or other securities issuable upon the exercise hereof, and not with
any present intention of distributing any of the same. The Holder further
represents, by acceptance hereof, that, as of this date, the Holder is an
"accredited investor" as such term is defined in Rule 501(a) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act.
Upon exercise of this Warrant, the Holder shall, if requested by the Company,
confirm the foregoing representations in writing, in a form satisfactory to the
Company. If the Holder cannot make such representations because they would be
factually incorrect, it shall be a condition to the Holder's exercise of the
Warrant that the Company receive such other representations as the Company
considers reasonably necessary to assure the Company that the issuance of its
securities upon exercise of the Warrant shall not violate any federal or state
securities laws.
Section 8. Restrictions on Transfer.
------------------------
The Holder understands that (i) this Warrant and the Warrant Shares have
not been and are not being registered under the Securities Act or any state
securities laws (other than as described in the Securities Purchase Agreement),
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder or (B) pursuant to an exemption from such
registration, and (ii) neither the Company nor any other person is under any
obligation to register such securities (other than as described in the
Securities Purchase Agreement) under the Securities Act or any state securities
laws or to comply with the terms and conditions of any exemption thereunder.
Section 9. Adjustments.
-----------
(a) Reclassification and Reorganization. In case of any
-------------------------------------
reclassification, capital reorganization or other change of outstanding shares
of the Common Stock, or in case of any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock), the Company shall cause effective provision to be made so that
the Holder shall have the right thereafter, by exercising this Warrant, to
purchase the kind and number of shares of stock or other securities or property
(including cash) receivable upon such reclassification, capital reorganization
or other change, consolidation or merger by a holder of the number of shares of
Common Stock that could have been purchased upon exercise of the Warrant
immediately prior to such reclassification, capital reorganization or other
change, consolidation or merger. Any such provision shall include provision for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 9. The foregoing provisions shall
similarly apply to successive reclassifications, capital reorganizations and
other changes of outstanding shares of Common Stock and to successive
consolidations or mergers. If the consideration received by the holders of
Common Stock is other than cash, the value shall be as determined by the Board
of Directors of the Company acting in good faith.
(b) Dividends and Stock Splits. If and whenever the Company shall
-----------------------------
effect a stock dividend, a stock split, a stock combination, or a reverse stock
split of the Common Stock, the number of Warrant Shares purchasable hereunder
and the Warrant Exercise Price shall be proportionately adjusted in the manner
determined by the Company's Board of Directors acting
5
in good faith. The number of shares, as so adjusted, shall be rounded down to
the nearest whole number and the Warrant Exercise Price shall be rounded to the
nearest cent.
(c) Default Adjustment. Any other provision of this Warrant
-------------------
notwithstanding, in the event of a default under the Note (as defined in the
Securities Purchase Agreement), until the Expiration Date the Warrant Exercise
Price shall automatically be reduced to the par value of the Common Stock.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant.
--------------------------------------------
If this Warrant is lost, stolen or destroyed, the Company shall, on receipt
of an indemnification undertaking reasonably satisfactory to the Company, issue
a new Warrant of like denomination and tenor as the Warrant so lost, stolen or
destroyed. In the event the Holder asserts such loss, theft or destruction of
this Warrant, the Company may require the Holder to post a bond issued by a
surety reasonably satisfactory to the Company with respect to the issuance of
such new Warrant.
Section 11. Notice.
------
Any notices required or permitted to be given under the terms of this
Warrant shall be sent by mail or delivered personally or by courier or
facsimile, and shall be effective five days after being placed in the mail, if
mailed, certified or registered, return receipt requested, or upon receipt, if
delivered personally or by courier or by facsimile, in each case properly
addressed to the party to receive the same. The addresses for such
communications shall be as provided in the Securities Purchase Agreement. Each
party shall provide notice to the other party of any change in address.
Section 12. Miscellaneous.
-------------
This Warrant and any term hereof may be changed, waived, discharged, or
terminated only by an instrument in writing signed by the party or Holder
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be governed by and interpreted under the laws of the
State of California, without regard to the principles of conflict of laws.
Headings are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof. This Warrant shall be binding
upon the Company and its successors and assigns and shall inure to the benefit
of the Holder and its permitted successors and assigns. The Holder may not
assign this Warrant except in accordance with applicable federal and state
securities laws.
Section 13. Attorney's Fees.
---------------
If Holder or the Company shall bring any action for relief against the
other arising out of or in connection with this Warrant, in addition to all
other remedies to which the prevailing party may be entitled, the losing party
shall be required to pay to the prevailing party a reasonable sum for attorney's
fees and costs incurred in bringing such action and/or enforcing any judgment
granted therein, all of which shall be deemed to have accrued upon the
commencement of such action and shall be paid whether or not such action is
prosecuted to judgment. Any judgment or order entered in such action shall
contain a specific provision providing for the recovery of
6
attorney's fees and costs incurred in enforcing such judgment. For the purposes
of this Section, attorney's fees shall include, without limitation, fees
incurred with respect to the following: (i) post-judgment motions, (ii)
contempt proceedings, (iii) garnishment, levy and debtor and third party debtor
and third party examinations, (iv) discovery and (v) bankruptcy litigation.
Section 14. Effect of Expiration.
--------------------
This Warrant, in all events, shall be wholly void and of no effect after
the close of business on the Expiration Date, except that notwithstanding any
other provisions hereof, the provisions of Section 13 shall continue in full
force and effect after such date as to any Warrant Shares or other securities
issued upon the exercise of this Warrant.
RAPIDTRON, INC.
By:
-------------------------------------
President
By:
-------------------------------------
Secretary
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EXHIBIT I
NOTICE OF EXERCISE FORM
RAPIDTRON, INC.
The undersigned hereby exercises the right to purchase the number of
Warrant Shares covered by the Warrant attached hereto as specified below
according to the conditions thereof and herewith makes payment of US$___________
(unless effected by a Cashless Exercise in accordance with the terms of the
Warrant), which constitutes the aggregate Warrant Exercise Price of such Warrant
Shares pursuant to the terms and conditions of the Warrant.
(i) The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained upon exercise of the Warrant except under
circumstances that will not result in a violation of the Securities Act or
applicable state securities laws.
(ii) The undersigned requests that the stock certificates for the
Warrant Shares be issued, and a Warrant representing any unexercised portion
hereof be issued, pursuant to the terms of the Warrant in the name of the Holder
(or such other person(s) indicated below) and delivered to the undersigned (or
designee(s)) at the address or addresses set forth below.
Dated:_____________, _____.
HOLDER:
---------------------------------
By:
-----------------------------------
Title:
--------------------------------
Address:
------------------------------
------------------------------
------------------------------
Number of Warrant Shares being purchased:
--------------------------------------
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