THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE
OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
- --------------------------------------------------------------------------------
Warrant No. 060104-1 Number of Shares: 1,250,000
Date of Issuance: June 1, 2004 (subject to adjustment)
ENVIROKARE TECH, INC.
Common Stock Purchase Warrant
Envirokare Tech, Inc. (the "Company"), for value received, hereby certifies
that NOVA Chemicals Inc., or its registered assigns (the "Registered Holder"),
is entitled, subject to the terms set forth below, to purchase from the Company,
at any time after the date hereof and on or before the Expiration Date (as
defined in Section 5 below), up to 1,250,000 shares (as adjusted from time to
time pursuant to the provisions of this Warrant) of Common Stock of the Company,
at a purchase price of $.20 per share. The shares purchasable upon exercise of
this Warrant and the purchase price per share, as adjusted from time to time
pursuant to the provisions of this Warrant, are sometimes hereinafter referred
to as the "Warrant Stock" and the "Purchase Price," respectively.
This Warrant is issued pursuant to the Exclusivity Agreement dated June 1,
2004 between the Company and the Registered Holder (the "Exclusivity Agreement")
and is entitled to the rights set forth in the Registration Rights Agreement
dated June 1, 2004
1. Exercise.
(a) Manner of Exercise. This Warrant may be exercised by the Registered
Holder, in whole or in part, by surrendering this Warrant, with the
purchase/exercise form appended hereto as Exhibit A duly executed by such
Registered Holder or by such Registered Holder's duly authorized attorney, at
the principal office of the Company, or at such other office or agency as the
Company may designate, accompanied by payment in full of the Purchase Price
payable in respect of the number of shares of Warrant Stock purchased upon such
exercise. The Purchase Price may be paid by cash, check, wire transfer or by the
surrender of promissory notes or other instruments representing indebtedness of
the Company to the Registered Holder.
(b) Effective Time of Exercise. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
day on which this Warrant shall have been surrendered to the Company as provided
in Section 1(a) above. At such time, the person or persons in whose name or
names any certificates for Warrant Stock shall be issuable upon such exercise as
provided in Section 1(d) below shall be deemed to have become the holder or
holders of record of the Warrant Stock represented by such certificates.
(c) Net Issue Exercise.
(i) In lieu of exercising this Warrant in the manner provided above in
Section 1(a), the Registered Holder may elect to receive shares equal to the
value of this Warrant (or the portion thereof being canceled) by surrender of
this Warrant at the principal office of the Company together with notice of such
election on the purchase/exercise form appended hereto as Exhibit A duly
executed by such Registered Holder or such Registered Holder's duly authorized
attorney, in which event the Company shall issue to holder a number of shares of
Common Stock computed using the following formula:
X = Y (A - B)
A
Where
X = The number of shares of Common Stock to be issued to the Registered Holder.
Y = The number of shares of Common Stock purchasable under this Warrant (at the
date of such calculation).
A = The fair market value of one share of Common Stock (at the date of such
calculation).
B = The Purchase Price (as adjusted to the date of such calculation).
(ii) For purposes of this Section 1(c), the fair market value of one share
of Common Stock on the date of calculation shall mean:
(A) if the exercise is in connection with an initial public offering of the
Company's Common Stock, and if the Company's Registration Statement relating to
such public offering has been declared effective by the Securities and Exchange
Commission, then the fair market value of Common Stock shall be the initial
"Price to Public" per share specified in the final prospectus with respect to
the offering;
(B) if this Warrant is exercised after, and not in connection with, the
Company's initial public offering, and if the Company's Common Stock is traded
on a securities exchange or The Nasdaq Stock Market or actively traded
over-the-counter:
(1) if the Company's Common Stock is traded on a securities exchange or The
Nasdaq Stock Market, the fair market value shall be deemed to be the average of
the closing prices over a thirty (30) day period ending three days before date
of calculation; or
(2) if the Company's Common Stock is actively traded over-the-counter, the
fair market value shall be deemed to be the average of the closing bid or sales
price (whichever is applicable) over the thirty (30) day period ending three
days before the date of calculation; or
(C) if neither (A) nor (B) is applicable, the fair market value shall be at
the highest price per share which the Company could obtain on the date of
calculation from a willing buyer (not a current employee or director) for shares
of Common Stock sold by the Company, from authorized but unissued shares, as
agreed by the Company and the Registered Holder, unless the Company is at such
time subject to an acquisition as described in Section 5(b) below, in which case
the fair market value per share of Common Stock shall be deemed to be the value
of the consideration per share received by the holders of such stock pursuant to
such acquisition.
(d) Delivery to Holder. As soon as practicable after the exercise of this
Warrant in whole or in part, and in any event within ten (10) days thereafter,
the Company at its expense will cause to be issued in the name of, and delivered
to, the Registered Holder, or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of shares of Warrant Stock
to which such Registered Holder shall be entitled, and
(ii) in case such exercise is in part only, a new warrant or warrants
(dated the date hereof) of like tenor, calling in the aggregate on the face or
faces thereof for the number of shares of Warrant Stock equal (without giving
effect to any adjustment therein) to the number of such shares called for on the
face of this Warrant minus the number of such shares purchased by the Registered
Holder upon such exercise as provided in Section 1(a) above.
2. Adjustments.
(a) Stock Splits and Dividends. If outstanding shares of the Company's
Common Stock shall be subdivided into a greater number of shares or a dividend
in Common Stock shall be paid in respect of Common Stock, the Purchase Price in
effect immediately prior to such subdivision or at the record date of such
dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Purchase Price, the number of shares of Warrant Stock purchasable upon the
exercise of this Warrant shall be changed to the number determined by dividing
(i) an amount equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such adjustment, multiplied by the Purchase Price
in effect immediately prior to such adjustment, by (ii) the Purchase Price in
effect immediately after such adjustment.
(b) Reclassification, Etc. In case of any reclassification or change of the
outstanding securities of the Company or of any reorganization of the Company
(or any other corporation the stock or securities of which are at the time
receivable upon the exercise of this Warrant) or any similar corporate
reorganization on or after the date hereof, then and in each such case the
holder of this Warrant, upon the exercise hereof at any time after the
consummation of such reclassification, change, reorganization, merger or
conveyance, shall be entitled to receive, in lieu of the stock or other
securities and property receivable upon the exercise hereof prior to such
consummation, the stock or other securities or property to which such holder
would have been entitled upon such consummation if such holder had exercised
this Warrant immediately prior thereto, all subject to further adjustment as
provided in Section 2(a); and in each such case, the terms of this Section 2
shall be applicable to the shares of stock or other securities properly
receivable upon the exercise of this Warrant after such consummation.
(c) Adjustment Certificate. When any adjustment is required to be made in
the Warrant Stock or the Purchase Price pursuant to this Section 2, the Company
shall promptly mail to the Registered Holder a certificate setting forth (i) a
brief statement of the facts requiring such adjustment, (ii) the Purchase Price
after such adjustment and (iii) the kind and amount of stock or other securities
or property into which this Warrant shall be exercisable after such adjustment.
3. Transfers.
(a) Unregistered Security. Each holder of this Warrant acknowledges that
this Warrant and the Warrant Stock have not been registered under the Securities
Act of 1933, as amended (the "Securities Act"), and agrees not to sell, pledge,
distribute, offer for sale, transfer or otherwise dispose of this Warrant or any
Warrant Stock issued upon its exercise in the absence of (i) an effective
registration statement under the Act as to this Warrant or such Warrant Stock
and registration or qualification of this Warrant or such Warrant Stock under
any applicable U.S. federal or state securities law then in effect or (ii) an
opinion of counsel, satisfactory to the Company, that such registration and
qualification are not required. Each certificate or other instrument for Warrant
Stock issued upon the exercise of this Warrant shall bear a legend substantially
to the foregoing effect.
(b) Transferability. Subject to the provisions of Section 3(a) hereof, this
Warrant and all rights hereunder are transferable, in whole or in part, upon
surrender of the Warrant with a properly executed assignment (in the form of
Exhibit B hereto) at the principal office of the Company.
(c) Warrant Register. The Company will maintain a register containing the
names and addresses of the Registered Holders of this Warrant. Until any
transfer of this Warrant is made in the warrant register, the Company may treat
the Registered Holder of this Warrant as the absolute owner hereof for all
purposes; provided, however, that if this Warrant is properly assigned in blank,
the Company may (but shall not be required to) treat the bearer hereof as the
absolute owner hereof for all purposes, notwithstanding any notice to the
contrary. Any Registered Holder may change such Registered Holder's address as
shown on the warrant register by written notice to the Company requesting such
change.
4. Representations and Warranties of Holder. The Registered Holder hereby
represents and warrants to the Company as
follows:
(a) Purchase Entirely for Own Account. The Registered Holder acknowledges
that this Warrant is given to the Registered Holder in reliance upon the
Registered Holder's representation to the Company, which by its acceptance of
this Warrant the Registered Holder hereby confirms, that the Warrant, the
Warrant Stock, and the Common Stock issuable upon conversion of the Warrant
Stock (collectively, the "Securities") being acquired by the Registered Holder
are being acquired for investment for the Registered Holder's own account, not
as a nominee or agent, and not with a view to the resale or distribution of any
part thereof, and that the Registered Holder has no present intention of
selling, granting any participation in, or otherwise distributing the same. The
Registered Holder has not been formed for the specific purpose of acquiring any
of the Securities.
(b) Disclosure of Information. The Registered Holder is aware of the
Company's business affairs and financial condition and has acquired sufficient
information about the Company to reach an informed and knowledgeable decision to
acquire the Securities.
(c) Restricted Securities. The Registered Holder understands that the
Securities are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act only in certain limited circumstances. In this connection, the
Registered Holder represents that it is familiar with Securities and Exchange
Commission Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
(d) No Public Market. The Registered Holder understands that no public
market now exists for any of the securities issued by the Company and that the
Company has made no assurances that a public market will ever exist for the
Securities.
(e) Legends. The Registered Holder understands that the Securities, and any
securities issued in respect of or exchange for the Securities, may bear one or
all of the following legends:
(i) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933."
(ii) Any legend required by the Blue Sky laws of any state to the extent
such laws are applicable to the shares represented by the certificate so
legended.
(f) Accredited Investor. The Registered Holder is an accredited investor as
defined in Rule 501(a) of Regulation D promulgated under the Act.
5. No Impairment. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against impairment.
6. Termination. This Warrant (and the right to purchase securities upon
exercise hereof) shall terminate upon the earliest to occur of the following
(the "Expiration Date"): (a) June 1, 2014, (b) the sale, conveyance or disposal
of all or substantially all of the Company's property or business or the
Company's merger with or into or consolidation with any other corporation (other
than a wholly-owned subsidiary of the Company) or any other transaction or
series of related transactions in which more than fifty percent (50%) of the
voting power of the Company is disposed of, provided that this Section 6(b)
shall not apply to a merger effected exclusively for the purpose of changing the
domicile of the Company or to an equity financing in which the Company is the
surviving corporation.
7. Notices of Certain Transactions. In case:
(a) the Company shall take a record of the holders of its Common Stock (or
other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to receive any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right, to subscribe for or purchase any shares of stock of any class or any
other securities, or to receive any other right, or
(b) of any capital reorganization of the Company, any reclassification of
the capital stock of the Company, any consolidation or merger of the Company,
any consolidation or merger of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the surviving
entity), or any transfer of all or substantially all of the assets of the
Company, or
(c) of the voluntary or involuntary dissolution, liquidation or winding-up
of the Company, then, and in each such case, the Company will mail or cause to
be mailed to the Registered Holder of this Warrant a notice specifying, as the
case may be, (i) the date on which a record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock (or such other stock or
securities at the time deliverable upon such reorganization, reclassification,
consolidation, merger, transfer, dissolution, liquidation or winding-up) are to
be determined. Such notice shall be mailed at least ten (10) days prior to the
record date or effective date for the event specified in such notice.
8. Reservation of Stock. The Company will at all times reserve and keep
available, solely for the issuance and delivery upon the exercise of this
Warrant, such shares of Warrant Stock and other stock, securities and property,
as from time to time shall be issuable upon the exercise of this Warrant.
9. Exchange of Warrants. Upon the surrender by the Registered Holder of any
Warrant or Warrants, properly endorsed, to the Company at the principal office
of the Company, the Company will, subject to the provisions of Section 3 hereof,
issue and deliver to or upon the order of such Holder, at the Company's expense,
a new Warrant or Warrants of like tenor, in the name of such Registered Holder
or as such Registered Holder (upon payment by such Registered Holder of any
applicable transfer taxes) may direct, calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on the face or
faces of the Warrant or Warrants so surrendered.
10. Replacement of Warrants. Upon receipt 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) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
11. Notices. Any notice required or permitted by this Warrant shall be in
writing and shall be seemed sufficient upon receipt, when delivered personally
or by courier, overnight delivery service or confirmed facsimile, or forty-eight
(48) hours after being deposited in the regular mail as certified or registered
mail (airmail if sent internationally) with postage prepaid, addressed (a) if to
the Registered Holder, to the address of the Registered Holder most recently
furnished in writing to the Company and (b) if to the Company, to the address
set forth below or subsequently modified by written notice to the Registered
Holder.
12. No Rights as Shareholder. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a shareholder of the Company.
13. No Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
14. Amendment or Waiver. Any term of this Warrant may be amended or waived
only by an instrument in writing signed by the party against which enforcement
of the amendment or waiver is sought.
15. Headings. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
16. Governing Law. This Warrant shall be governed, construed and
interpreted in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of law.
ENVIROKARE TECH, INC.
By: /s/ John W. Verbicky
Address: 5850 T.G. Lee Boulevard
Orlando, Florida 32822
Fax Number: 407-856-8270
EXHIBIT A
PURCHASE/EXERCISE FORM
To: Envirokare Tech, Inc. Dated:
The undersigned, pursuant to the provisions set forth in the attached
Warrant No. ____, hereby irrevocably elects to (a) purchase _____ shares of the
Common Stock covered by such Warrant and herewith makes payment of $ _________,
representing the full purchase price for such shares at the price per share
provided for in such Warrant, or (b) exercise such Warrant for _______ shares
purchasable under the Warrant pursuant to the Net Issue Exercise provisions of
Section 1(c) of such Warrant.
The undersigned acknowledges that it has reviewed the representations and
warranties contained in Section 4 of the Warrant and by its signature below
hereby makes such representations and warranties to the Company.
Signature: ---------------------------------------
Name (print): -------------------------------------
Title (if applicable): ----------------------------
Company (if applicable): --------------------------
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, _________________________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the attached
Warrant with respect to the number of shares of Common Stock covered thereby set
forth below, to:
Name of Assignee Address/Fax Number No. of Shares
Dated: Signature:
Witness: