EXHIBIT 4.8
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR HIENERGY TECHNOLOGIES, INC. SHALL HAVE
RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
HIENERGY TECHNOLOGIES, INC.
Expires: October 7, 2004
No.: W-_____ Number of Shares: ___________
Date of Issuance: October 7, 2002
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, HiEnergy Technologies, Inc., a Washington corporation (together
with its successors and assigns, the "Issuer"), hereby certifies that
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________________________ or its registered assigns is entitled to subscribe for
and purchase, during the period specified in this Warrant, up to
_____________________________ (_________) shares (subject to adjustment as
hereinafter provided) of the duly authorized, validly issued, fully paid and
non-assessable Common Stock of the Issuer, at an exercise price per share equal
to the Warrant Price then in effect, subject, however, to the provisions and
upon the terms and conditions hereinafter set forth. Capitalized terms used in
this Warrant and not otherwise defined herein shall have the respective meanings
specified in Section 9 hereof.
1. Term. The right to subscribe for and purchase shares of Warrant
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Stock represented hereby shall commence on October 7, 2002 and shall expire at
5:00 p.m., eastern time, on October 7, 2004 (such period being the "Term").
----
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2. Method of Exercise Payment; Issuance of New Warrant; Transfer and
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Exchange.
(a) Time of Exercise. The purchase rights represented by this Warrant
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may be exercised in whole or in part at any time and from time to time during
the Term commencing on October 7, 2002.
(b) Method of Exercise. The Holder hereof may exercise this Warrant,
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in whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such Holder's election by certified or official bank check
or by wire transfer to an account designated by the Issuer.
(c) Issuance of Stock Certificates. In the event of any exercise of the
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rights represented by this Warrant in accordance with and subject to the terms
and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days after such
exercise or, if authorized by that certain Registration Rights Agreement dated
October 7, 2002, between the Issuer and the Holder, at the request of the
Holder, issued and delivered to the Depository Trust Company ("DTC") account on
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the Holder's behalf via the Deposit Withdrawal Agent Commission System ("DWAC")
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within a reasonable time, not exceeding three (3) Trading Days after such
exercise, and the Holder hereof shall be deemed for all purposes to be the
Holder of the shares of Warrant Stock so purchased as of the date of such
exercise and (ii) unless this Warrant has expired, a new Warrant representing
the number of shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have been exercised (less any amount thereof which shall
have been canceled in payment or partial payment of the Warrant Price as
hereinabove provided) shall also be issued to the Holder hereof at the Issuer's
expense within such time.
(d) Transferability of Warrant. Subject to Section 2(g), this Warrant
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may be transferred by a Holder without the consent of the Issuer. If
transferred pursuant to this paragraph and subject to the provisions of
subsection (g) of this Section 2, this Warrant may be transferred on the books
of the Issuer by the Holder hereof in person or by duly authorized attorney,
upon surrender of this Warrant at the principal office of the Issuer, properly
endorsed (by the Holder executing an assignment in the form attached hereto) and
upon payment of any necessary transfer tax or other governmental charge imposed
upon such transfer. This Warrant is exchangeable at the principal office of the
Issuer for Warrants for the purchase of the same aggregate number of shares of
Warrant Stock, each new Warrant to represent the right to purchase such number
of shares of Warrant Stock as the Holder hereof shall designate at the time of
such exchange. All Warrants issued on transfers or exchanges shall be dated the
Original Issue Date and shall be identical with this Warrant except as to the
number of shares of Warrant Stock issuable pursuant hereto.
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(e) Continuing Rights of Holder. The Issuer will, at the time of or at any
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time after each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing the extent, if any, of its continuing obligation to
afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
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failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.
(f) Compliance with Securities Laws.
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(i) The Holder of this Warrant, by acceptance hereof, acknowledges
that this Warrant or the shares of Warrant Stock to be issued upon exercise
hereof are being acquired solely for the Holder's own account and not as a
nominee for any other party, and for investment, and that the Holder will
not offer, sell or otherwise dispose of this Warrant or any shares of
Warrant Stock to be issued upon exercise hereof except pursuant to an
effective registration statement, or an exemption from registration, under
the Securities Act and any applicable state securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant and all
certificates representing shares of Warrant Stock issued upon exercise
hereof shall be stamped or imprinted with a legend in substantially the
following form:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR
HIENERGY TECHNOLOGIES, INC. SHALL HAVE RECEIVED AN OPINION OF ITS
COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT
AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED.
(iii) The restrictions imposed by this subsection (e) upon the
transfer of this Warrant or the shares of Warrant Stock to be purchased
upon exercise hereof shall terminate (A) when such securities shall have
been resold pursuant to an effective registration statement under the
Securities Act, (B) upon the Issuer's receipt of an opinion of counsel, in
form and substance reasonably satisfactory to the Issuer, addressed to the
Issuer to the effect that such restrictions are no longer required to
ensure compliance with the Securities Act and state securities laws or (C)
upon the Issuer's receipt of other evidence reasonably satisfactory to the
Issuer that such registration and qualification under the Securities Act
and state securities laws are not required. Whenever such restrictions
shall cease and terminate as to any such securities, the Holder thereof
shall be entitled to receive from the Issuer (or its transfer agent and
registrar), without expense (other than applicable transfer taxes, if any),
new Warrants (or, in the case of shares of Warrant Stock, new stock
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certificates) of like tenor not bearing the applicable legend required by
paragraph (ii) above relating to the Securities Act and state securities
laws.
3. Stock Fully Paid; Reservation and Listing of Shares; Covenants.
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(a) Stock Fully Paid. The Issuer represents, warrants, covenants and
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agrees that all shares of Warrant Stock which may be issued upon the exercise of
this Warrant or otherwise hereunder will, upon issuance, be duly authorized,
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges created by or through Issuer. The Issuer further covenants and agrees
that during the period within which this Warrant may be exercised, the Issuer
will at all times have authorized and reserved for the purpose of the issue upon
exercise of this Warrant a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(b) Reservation. If any shares of Common Stock required to be reserved
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for issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will, upon
notice from the Holder of such requirement, in good faith use its best efforts
as expeditiously as possible at its expense to cause such shares to be duly
registered or qualified. If the Issuer shall list any shares of Common Stock on
any securities exchange or market it will, at its expense, list thereon,
maintain and increase when necessary such listing, of, all shares of Warrant
Stock from time to time issued upon exercise of this Warrant or as otherwise
provided hereunder, and, to the extent permissible under the applicable
securities exchange rules, all unissued shares of Warrant Stock which are at any
time issuable hereunder, so long as any shares of Common Stock shall be so
listed. The Issuer will also so list on each securities exchange or market, and
will maintain such listing of, any other securities which the Holder of this
Warrant shall be entitled to receive upon the exercise of this Warrant if at the
time any securities of the same class shall be listed on such securities
exchange or market by the Issuer.
(c) Covenants. The Issuer shall not by any action including, without
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limitation, amending the Articles of Incorporation or the by-laws of the Issuer,
or through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other 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 actions as may be necessary or appropriate to protect
the rights of the Holder hereof against dilution (to the extent specifically
provided herein) or impairment. Without limiting the generality of the
foregoing, the Issuer will (i) not permit the par value, if any, of its Common
Stock to exceed the then effective Warrant Price, (ii) not amend or modify any
provision of the Articles of Incorporation or by-laws of the Issuer in any
manner that would adversely affect the rights of the Holders of the Warrants,
(iii) take all such action as may be reasonably necessary in order that the
Issuer may validly and legally issue fully paid and nonassessable shares of
Common Stock, free and clear of any liens, claims, encumbrances and restrictions
(other than as provided herein) upon the exercise of this Warrant, and (iv) use
its best efforts to obtain all such authorizations, exemptions or consents from
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any public regulatory body having jurisdiction thereof as may be reasonably
necessary to enable the Issuer to perform its obligations under this Warrant.
(d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
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satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
4. Adjustment of Warrant Price and Warrant Share Number. The number of
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shares of Common Stock for which this Warrant is exercisable, and the price at
which such shares may be purchased upon exercise of this Warrant, shall be
subject to adjustment from time to time as set forth in this Section 4. The
Issuer shall give the Holder notice of any event described below which requires
an adjustment pursuant to this Section 4 in accordance with Section 5.
(a) Recapitalization, Reorganization, Reclassification, Consolidation,
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Merger or Sale.
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(i) In case the Issuer after the Original Issue Date shall do any
of the following (each, a "Triggering Event"): (a) consolidate with or
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merge into any other Person and the Issuer shall not be the continuing
or surviving corporation of such consolidation or merger, or (b)
permit any other Person to consolidate with or merge into the Issuer
and the Issuer shall be the continuing or surviving Person but, in
connection with such consolidation or merger, any Capital Stock of the
Issuer shall be changed into or exchanged for Securities of any other
Person or cash or any other property, or (c) transfer all or
substantially all of its properties or assets to any other Person, or
(d) effect a capital reorganization or reclassification of its Capital
Stock, then, and in the case of each such Triggering Event, proper
provision shall be made so that, upon the basis and the terms and in
the manner provided in this Warrant, the Holder of this Warrant shall
be entitled upon the exercise hereof at any time after the
consummation of such Triggering Event, to the extent this Warrant is
not exercised prior to such Triggering Event, to receive at the
Warrant Price in effect at the time immediately prior to the
consummation of such Triggering Event in lieu of the Common Stock
issuable upon such exercise of this Warrant prior to such Triggering
Event, the Securities, cash and property to which such Holder would
have been entitled upon the consummation of such Triggering Event if
such Holder had exercised the rights represented by this Warrant
immediately prior thereto, subject to adjustments (subsequent to such
corporate action) as nearly equivalent as possible to the adjustments
provided for elsewhere in this Section 4.
(ii) Notwithstanding anything contained in this Warrant to the
contrary, the Issuer will not effect any Triggering Event if, prior to
the consummation thereof, each Person (other than the Issuer) which
may be required to deliver any Securities, cash or property upon the
exercise of this Warrant as provided herein shall assume, by written
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instrument delivered to, and reasonably satisfactory to, the Holder of
this Warrant, (A) the obligations of the Issuer under this Warrant
(and if the Issuer shall survive the consummation of such Triggering
Event, such assumption shall be in addition to, and shall not release
the Issuer from, any continuing obligations of the Issuer under this
Warrant) and (B) the obligation to deliver to such Holder such shares
of Securities, cash or property as, in accordance with the foregoing
provisions of this subsection (a), such Holder shall be entitled to
receive, and such Person shall have similarly delivered to such Holder
an opinion of counsel for such Person, which counsel shall be
reasonably satisfactory to such Holder, stating that this Warrant
shall thereafter continue in full force and effect and the terms
hereof (including, without limitation, all of the provisions of this
subsection (a)) shall be applicable to the Securities, cash or
property which such Person may be required to deliver upon any
exercise of this Warrant or the exercise of any rights pursuant
hereto. The Holder hereby (X) consents to the Issuer's merger with and
into a Delaware corporation to be formed for the purpose of changing
the Issuer's domicile, all as more fully described in the Purchase
Agreement, (Y) consents to the new corporation's assumption of the
Issuer's obligations hereunder as the Issuer's successor-in-interest,
and (Z) agrees that the change of domicile accomplished as described
in the Purchase Agreement shall not be considered a Triggering Event.
(b) Stock Dividends, Subdivisions and Combinations. If at any time the
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Issuer shall:
(i) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then (1) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (2) the Warrant Price then in
effect shall be adjusted to equal (A) the Warrant Price then in effect
multiplied by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment divided by (B) the number of
shares of Common Stock for which this Warrant is exercisable immediately after
such adjustment.
(c) Warrant Price Adjustment. In the event that the Registration
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Statement is not declared effective by the Securities and Exchange Commission
within one hundred eighty (180) days after the Original Issue Date, then for
each thirty (30) day period thereafter, the Warrant Price for one-sixth (1/6th)
of the number of shares of Warrant Stock issuable upon exercise of this Warrant
shall be adjusted to $.001 per share.
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(d) Form of Warrant after Adjustments. The form of this Warrant need
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not be changed because of any adjustments in the Warrant Price or the number and
kind of Securities purchasable upon the exercise of this Warrant.
(e) Escrow of Warrant Stock. If after any property becomes distributable
--------------------------
pursuant to this Section 4 by reason of the taking of any record of the holders
of Common Stock, but prior to the occurrence of the event for which such record
is taken, and the Holder exer-cises this Warrant, any shares of Common Stock
issuable upon exercise by reason of such adjustment shall be deemed the last
shares of Common Stock for which this Warrant is exercised (notwithstanding any
other provision to the contrary herein) and such shares or other property shall
be held in escrow for the Holder by the Issuer to be issued to the Holder upon
and to the extent that the event actually takes place, upon payment of the
current Warrant Price. Notwithstanding any other provision to the contrary
herein, if the event for which such record was taken fails to occur or is
rescinded, then such escrowed shares shall be cancelled by the Issuer and
escrowed property returned.
5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share
----------------------
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, each an "adjustment"), the Issuer shall cause its Chief Financial
Officer to prepare and execute a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of the
basis on which the Board made any determination hereunder), and the Warrant
Price and Warrant Share Number after giving effect to such adjustment, and shall
cause copies of such certificate to be delivered to the Holder of this Warrant
promptly after each adjustment. Any dispute between the Issuer and the Holder
of this Warrant with respect to the matters set forth in such certificate may at
the option of the Holder of this Warrant be submitted to one of the national
accounting firms currently known as the "big five" selected by the Holder,
provided that the Issuer shall have ten (10) days after receipt of notice from
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such Holder of its selection of such firm to object thereto, in which case such
Holder shall select another such firm and the Issuer shall have no such right of
objection. The firm selected by the Holder of this Warrant as provided in the
preceding sentence shall be instructed to deliver a written opinion as to such
matters to the Issuer and such Holder within thirty (30) days after submission
to it of such dispute. Such opinion shall be final and binding on the parties
hereto.
6. Fractional Shares. No fractional shares of Warrant Stock will be
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issued in connection with and exercise hereof, but in lieu of such fractional
shares, the Issuer shall make a cash payment therefor equal in amount to the
product of the applicable fraction multiplied by the Per Share Market Value then
in effect.
7. Call. Notwithstanding anything herein to the contrary, commencing
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any time after the effectiveness of the registration statement registering the
Warrant Stock, the Issuer, at its option, may call up to one hundred percent
(100%) of this Warrant if the Per Share Market Value of the Common Stock has
been equal to or greater than $3.20 per share for a period of ten (10)
consecutive Trading Days immediately prior to the date of delivery of the Call
Notice (a "Call Notice Period") by providing the Holder of this Warrant written
------------------
notice pursuant to Section 13 (the "Call Notice"); provided, that the
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Registration Statement has been declared effective and has been effective,
without lapse or suspension of any kind, during the Call Notice Period;
provided, further, that the Registration Statement must be effective from the
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date of delivery of the Call Notice until the 20th day after the Holder receives
the Call Notice (the "Early Termination Date"). The rights and privileges
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granted pursuant to this Warrant with respect to the shares of Warrant Stock
subject to the Call Notice (the "Called Warrant Shares") shall expire on the
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Early Termination Date if this Warrant is not exercised with respect to such
Called Warrant Shares prior to such Early Termination Date. In the event this
Warrant is not exercised with respect to the Called Warrant Shares, the Issuer
shall remit to the Holder of this Warrant (i) $.01 per Called Warrant Share and
(ii) a new Warrant representing the number of shares of Warrant Stock, if any,
which shall not have been subject to the Call Notice upon the Holder tendering
to the Issuer the applicable Warrant certificate.
8. Ownership Cap and Certain Exercise Restrictions. (a) Notwithstanding
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anything to the contrary set forth in this Warrant, at no time may a holder of
this Warrant exercise this Warrant if the number of shares of Common Stock to be
issued pursuant to such exercise would exceed, when aggregated with all other
shares of Common Stock owned by such holder at such time, the number of shares
of Common Stock which would result in such holder owning more than 4.999% of all
of the Common Stock outstanding at such time; provided, however, that upon a
holder of this Warrant providing the Issuer with sixty-one (61) days notice
(pursuant to Section 13 hereof) (the "Waiver Notice") that such holder would
like to waive this Section 8(a) with regard to any or all shares of Common Stock
issuable upon exercise of this Warrant, this Section 8(a) will be of no force or
effect with regard to all or a portion of the Warrant referenced in the Waiver
Notice; provided, further, that this provision shall be of no further force or
effect during the sixty-one (61) days immediately preceding the expiration of
the term of this Warrant; provided, further, that the Holder shall be entitled
to waive this provision immediately in connection with the exercise of this
Warrant with respect to Called Warrant Shares.
(b) The Holder may not exercise the Warrant hereunder to the extent
such exercise would result in the Holder beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules thereunder) in
excess of 9.999% of the then issued and outstanding shares of Common Stock,
including shares issuable upon exercise of the Warrant held by the Holder after
application of this Section; provided, however, that upon a holder of this
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Warrant providing the Company with a Waiver Notice that such holder would like
to waive this Section 8(b) with regard to any or all shares of Common Stock
issuable upon exercise of this Warrant, this Section 8(b) shall be of no force
or effect with regard to those shares of Warrant Stock referenced in the Waiver
Notice; provided, further, that this provision shall be of no further force or
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effect during the sixty-one (61) days immediately preceding the expiration of
the term of this Warrant; provided, further, that the Holder shall be entitled
to waive this provision immediately in connection with the exercise of this
Warrant with respect to Called Warrant Shares.
9. Definitions. For the purposes of this Warrant, the following terms
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have the following meanings:
"Articles of Incorporation" means the Articles of Incorporation of the
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Issuer as in effect on the Original Issue Date, and as hereafter from time to
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time amended, modified, supplemented or restated in accordance with the terms
hereof and thereof and pursuant to applicable law.
"Board" shall mean the Board of Directors of the Issuer.
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"Capital Stock" means and includes (i) any and all shares, interests,
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participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (ii) all partnership interests (whether general or limited) in
any Person which is a partnership, (iii) all membership interests or limited
liability company interests in any limited liability company, and (iv) all
equity or ownership interests in any Person of any other type.
"Common Stock" means the Common Stock, par value $0.0001 per share, of the
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Issuer and any other Capital Stock into which such stock may hereafter be
changed.
"Governmental Authority" means any governmental, regulatory or
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self-regulatory entity, department, body, official, authority, commission,
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board, agency or instrumentality, whether federal, state or local, and whether
domestic or foreign.
"Holders" mean the Persons who shall from time to time own any Warrant.
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The term "Holder" means one of the Holders.
"Independent Appraiser" means a nationally recognized or major regional
----------------------
investment banking firm or firm of independent certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements of the Issuer) that is regularly engaged in the business of
appraising the Capital Stock or assets of corporations or other entities as
going concerns, and which is not affiliated with either the Issuer or the Holder
of any Warrant.
"Issuer" means HiEnergy Technologies, Inc., a Washington corporation, and
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its successors.
"Majority Holders" means at any time the Holders of Warrants exercisable
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for a majority of the shares of Warrant Stock issuable under the Warrants at the
time outstanding.
"Original Issue Date" means October 7, 2002.
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"OTC Bulletin Board" means the over-the-counter electronic bulletin
--------------------
board.
"Other Common" means any other Capital Stock of the Issuer of any class
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which shall be authorized at any time after the date of this Warrant (other than
Common Stock) and which shall have the right to participate in the distribution
of earnings and assets of the Issuer without limitation as to amount.
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"Person" means an individual, corporation, limited liability company,
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partnership, joint stock company, trust, unincorporated organization, joint
venture, Governmental Authority or other entity of whatever nature.
"Per Share Market Value" means on any particular date (a) the closing bid
------------------------
price for a share of Common Stock in the over-the-counter market, as reported by
the OTC Bulletin Board or in the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions of reporting prices),
or as reported by such other senior United States trading facility as the Issuer
may elect, at the close of business on such date, or (b) if the Common Stock is
not then reported by the OTC Bulletin Board or the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices) or by such other senior United States trading facility as the
Issuer may elect, then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the Board, or (c) if the
Common Stock is not then publicly traded the fair market value of a share of
Common Stock as determined by the Board in good faith; provided, however, that
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the Majority Holders, after receipt of the determination by the Board, shall
have the right to select, jointly with the Issuer, an Independent Appraiser, in
which case, the fair market value shall be the determination by such Independent
Appraiser; and provided, further that all determinations of the Per Share Market
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Value shall be appropriately adjusted for any stock dividends, stock splits or
other similar transactions during such period. The determination of fair market
value shall be based upon the fair market value of the Issuer determined on a
going concern basis as between a willing buyer and a willing seller and taking
into account all relevant factors determinative of value, and shall be final and
binding on all parties. In determining the fair market value of any shares of
Common Stock, no consideration shall be given to any restrictions on transfer of
the Common Stock imposed by agreement or by federal or state securities laws, or
to the existence or absence of, or any limitations on, voting rights.
"Purchase Agreement" means the Series A Convertible Preferred Stock
-------------------
Purchase Agreement dated as of October 7, 2002 among the Issuer and the
investors a party thereto.
"Registration Statement" means the registration statement on Form
-----------------------
SB-2 registering the Warrant Stock and shares of Common Stock issuable upon
conversion of the Issuer's Series A Convertible Preferred Stock issued pursuant
to the Purchase Agreement.
"Securities" means any debt or equity securities of the Issuer, whether
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now or hereafter authorized, any instrument convertible into or exchangeable for
Securities or a Security, and any option, warrant or other right to purchase or
acquire any Security. "Security" means one of the Securities.
"Securities Act" means the Securities Act of 1933, as amended, or any
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similar federal statute then in effect.
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"Subsidiary" means any corporation at least 50% of whose outstanding Voting
----------
Stock shall at the time be owned directly or indirectly by the Issuer or by one
or more of its Subsidiaries, or by the Issuer and one or more of its
Subsidiaries.
"Term" has the meaning specified in Section 1 hereof.
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"Trading Day" means (a) a day on which the Common Stock is traded on
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the OTC Bulletin Board, or (b) if the Common Stock is not traded on the OTC
Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices) or such other senior United States trading facility as in the
issuer may elect; provided, however, that in the event that the Common Stock is
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not listed or quoted as set forth in (a) or (b) hereof, then Trading Day shall
mean any day except Saturday, Sunday and any day which shall be a legal holiday
or a day on which banking institutions in the State of New York are authorized
or required by law or other government action to close.
"Voting Stock" means, as applied to the Capital Stock of any corporation,
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Capital Stock of any class or classes (however designated) having ordinary
voting power for the election of a majority of the members of the Board of
Directors (or other governing body) of such corporation, other than Capital
Stock having such power only by reason of the happening of a contingency.
"Warrants" means the Warrants issued and sold pursuant to the Purchase
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Agreement, including, without limitation, this Warrant, and any other warrants
of like tenor issued in substitution or exchange for any thereof pursuant to the
provisions of Section 2(c), 2(d) or 2(e) hereof or of any of such other
Warrants.
"Warrant Price" initially means U.S. $1.50, as such price may be adjusted
--------------
from time to time as shall result from the adjustments specified in this
Warrant, including Section 4 hereto.
"Warrant Share Number" means at any time the aggregate number of shares of
---------------------
Warrant Stock which may at such time be purchased upon exercise of this Warrant,
after giving effect to all prior adjustments to such number made or required to
be made under the terms hereof.
"Warrant Stock" means Common Stock issuable upon exercise of any Warrant or
-------------
Warrants or otherwise issuable pursuant to any Warrant or Warrants.
10. Other Notices. In case at any time:
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(A) the Issuer shall make any distributions to the holders of Common
Stock; or
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(B) the Issuer shall authorize the granting to all holders of its
Common Stock of rights to subscribe for or purchase any shares of
Capital Stock of any class or other rights; or
(C) there shall be any reclassification of the Capital Stock of the
Issuer; or
(D) there shall be any capital reorganization by the Issuer; or
(E) there shall be any (i) consolidation or merger involving the
Issuer or (ii) sale, transfer or other disposition of all or
substantially all of the Issuer's property, assets or business
(except a merger or other reorganization in which the Issuer
shall be the surviving corporation and its shares of Capital
Stock shall continue to be outstanding and unchanged and except a
consolidation, merger, sale, transfer or other disposition
involving a wholly-owned Subsidiary); or
(F) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Issuer or any partial
liquidation of the Issuer or distribution to holders of Common
Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
(20) days prior to the action in question and not less than twenty (20) days
prior to the record date or the date on which the Issuer's transfer books are
closed in respect thereto. The Holder shall have the right to send two (2)
representatives selected by it to each meeting, who shall be permitted to
attend, but not vote at, such meeting and any adjournments thereof. This
Warrant entitles the Holder to receive copies of all financial and other
information distributed or required to be distributed to the holders of the
Common Stock. The Holder hereby (X) consents to the Issuer's merger with and
into a Delaware corporation to be formed for the purpose of changing the
Issuer's domicile, all as more fully described in the Purchase Agreement, (Y)
consents to the new corporation's assumption of the Issuer's obligations
hereunder as the Issuer's successor-in-interest, and (Z) agrees that the change
of domicile accomplished as described in the Purchase Agreement shall not be
considered a Triggering Event.
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11. Amendment and Waiver. Any term, covenant, agreement or condition in
----------------------
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and the Majority Holders; provided, however, that no such amendment or
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waiver shall reduce the Warrant Share Number, increase the Warrant Price,
shorten the period during which this Warrant may be exercised or modify any
provision of this Section 11 without the consent of the Holder of this Warrant.
12. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
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ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
13. Notices. Any and all notices or other communications or deliveries
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required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., eastern time, on a
Trading Day, (ii) the Trading Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile telephone number
specified for notice later than 5:00 p.m., eastern time, on any date and earlier
than 11:59 p.m., eastern time, on such date, (iii) the Trading Day following the
date of mailing, if sent by nationally recognized overnight courier service or
(iv) actual receipt by the party to whom such notice is required to be given.
The addresses for such communications shall be with respect to the Holder of
this Warrant or of Warrant Stock issued pursuant hereto, addressed to such
Holder at its last known address or facsimile number appearing on the books of
the Issuer maintained for such purposes, or with respect to the Issuer,
addressed to:
HiEnergy Technologies, Inc.
1601 Alton Parkway, Unit B
Irvine, California 92606
Attention: President
Tel. No.: (949) 757-0855
Fax No.: (949) 757-1477
with a copy to: QED Law Group, P.L.L.C.
3200 NW 68th Street
Seattle, Washington 98117
Attention: Shea Wilson, Esq.
Tel No.: (206) 781-7887
Fax No.: (206) 781-8002
Copies of notices to the Holder shall be sent to Jenkens & Gilchrist Parker
Chapin LLP, 405 Lexington Avenue, New York, New York 10174, Attention:
Christopher S. Auguste, Esq., Facsimile No.: (212) 704-6288. Any party hereto
may from time to time change its address for notices by giving at least ten (10)
days written notice of such changed address to the other party hereto.
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14. Warrant Agent. The Issuer may, by written notice to each Holder of
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this Warrant, appoint an agent having an office in New York, New York for the
purpose of issuing shares of Warrant Stock on the exercise of this Warrant
pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant
to subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
15. Remedies. The Issuer stipulates that the remedies at law of the
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Holder of this Warrant in the event of any default or threatened default by the
Issuer in the performance of or compliance with any of the terms of this Warrant
are not and will not be adequate and that, to the fullest extent permitted by
law, such terms may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise.
16. Successors and Assigns. This Warrant and the rights evidenced
------------------------
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Issuer, the Holder hereof and (to the extent provided herein) the
Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any
such Holder or Holder of Warrant Stock.
17. Modification and Severability. If, in any action before any court
------------------------------
or agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
18. Headings. The headings of the Sections of this Warrant are for
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convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day and
year first above written.
HIENERGY TECHNOLOGIES, INC.
By:
--------------------------------------
Name: Tom Pascoe
----------------------------
Title: CEO and President
----------------------------
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EXERCISE FORM
HIENERGY TECHNOLOGIES, INC.
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of HiEnergy
Technologies, Inc. covered by the within Warrant.
Dated: _________________ Signature ___________________________
Address _____________________
_____________________
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address _____________________
_____________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address _____________________
_____________________
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-_____ canceled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.
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