WARRANT NO.: PA [_________]
FORM OF WARRANT
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES
REPRESENTED HEREBY HAVE BEEN TAKEN BY THE REGISTERED OWNER FOR INVESTMENT, AND
WITHOUT A VIEW TO RESALE OR DISTRIBUTION THEREOF, AND MAY NOT BE SOLD,
TRANSFERRED OR DISPOSED OF WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER THAT SUCH TRANSFER OR DISPOSITION DOES NOT VIOLATE THE SECURITIES ACT OF
1933, AS AMENDED, THE RULES AND REGULATIONS THEREUNDER OR OTHER APPLICABLE
SECURITIES LAWS.
WARRANT TO PURCHASE
COMMON STOCK OF
TOUCHSTONE RESOURCES USA, INC.
This warrant ("Warrant") is to verify that, FOR VALUE RECEIVED,
_________________________ ("Holder") is entitled to purchase, subject to the
terms and conditions hereof, from TOUCHSTONE RESOURCES USA, INC., a Delaware
corporation (the "Company"), ___________ shares of common stock, $.001 par value
per share, of the Company (the "Common Stock"), at any time during the period
commencing at 9:00 a.m., Eastern Standard Time on the date hereof (the
"Commencement Date") and ending at 5:00 p.m. Eastern Standard Time on the third
(3rd) anniversary of the Commencement Date (the "Termination Date"), at an
exercise price (the "Exercise Price") of $1.50 per share of Common Stock. The
number of shares of Common Stock purchasable upon exercise of this Warrant and
the Exercise Price per share shall be subject to adjustment from time to time
upon the occurrence of certain events as set forth below.
The shares of Common Stock or any other shares or other units of stock or
other securities or property, or any combination thereof, then receivable upon
exercise of this Warrant, as adjusted from time to time, are sometimes referred
to hereinafter as "Exercise Shares." The exercise price per share as from time
to time in effect is referred to hereinafter as the "Exercise Price."
1. Exercise of Warrant; Issuance of Exercise Shares.
(a) Exercise of Warrant. Subject to the terms hereof, the purchase rights
represented by this Warrant are exercisable by the Holder in whole or in part,
at any time, or from time to time, by the surrender of this Warrant and the
Notice of Exercise annexed hereto duly completed and executed on behalf of the
Holder, at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company) accompanied by payment of the
Exercise Price in full either: (i) in cash or by bank or certified check for the
Exercise Shares with respect to which this Warrant is exercised; (ii) by
delivery to the Company of shares of the Company's Common Stock having a Fair
Market Value (as defined below) equal to the aggregate Exercise Price of the
Exercise Shares being purchased that Holder is the record and beneficial owner
of and that have been held by the Holder for at least six (6) months; (iii)
provided that the sale of the Exercise Shares are covered by an effective
registration statement, by delivering to the Company a Notice of Exercise
together with an irrevocable direction to a broker-dealer registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to sell a
sufficient portion of the Exercise Shares and deliver the sales proceeds
directly to the Company to pay the Exercise Price; or (iv) by any combination of
the procedures set forth in subsections (i), (ii) and (iii) of this Section
1(a). For the purposes of this Section 1(a), "Fair Market Value" shall be an
amount equal to the average of the Current Market Value (as defined below) for
the ten (10) days preceding the Company's receipt of the duly executed Notice of
Exercise form attached hereto as Appendix A.
In the event that this Warrant shall be duly exercised in part prior to
the Termination Date, the Company shall issue a new Warrant or Warrants of like
tenor evidencing the rights of the Holder thereof to purchase the balance of the
Exercise Shares purchasable under the Warrant so surrendered that shall not have
been purchased.
(b) Issuance of Exercise Shares: Delivery of Warrant Certificate. The
Company shall, within ten (10) business days or as soon thereafter as is
practicable of the exercise of this Warrant, issue in the name of and cause to
be delivered to the Holder one or more certificates representing the Exercise
Shares to which the Holder shall be entitled upon such exercise under the terms
hereof. Such certificate or certificates shall be deemed to have been issued and
the Holder shall be deemed to have become the record holder of the Exercise
Shares as of the date of the due exercise of this Warrant.
(c) Exercise Shares Fully Paid and Non-assessable. The Company agrees and
covenants that all Exercise Shares issuable upon the due exercise of the Warrant
represented by this Warrant certificate ("Warrant Certificate") will, upon
issuance and payment therefor in accordance with the terms hereof, be duly
authorized, validly issued, fully paid and non-assessable and free and clear of
all taxes (other than taxes which, pursuant to Section 2 hereof, the Company
shall not be obligated to pay) or liens, charges, and security interests created
by the Company with respect to the issuance thereof.
(d) Reservation of Exercise Shares. The Company covenants that during the
term that this Warrant is exercisable, the Company will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of the Exercise Shares upon the exercise of this Warrant, and
from time to time will take all steps necessary to amend its articles of
incorporation to provide sufficient reserves of shares of Common Stock issuable
upon the exercise of the Warrant.
(e) Fractional Shares. The Company shall not be required to issue
fractional shares of capital stock upon the exercise of this Warrant or to
deliver Warrant Certificates that evidence fractional shares of capital stock.
In the event that any fraction of an Exercise Share would, except for the
provisions of this subsection (e), be issuable upon the exercise of this
Warrant, the Company shall pay to the Holder exercising the Warrant an amount in
cash equal to such fraction multiplied by the Current Market Value of the
Exercise Share on the last business day prior to the date on which this Warrant
is exercised. For purposes of this subsection (e), the "Current Market Value"
for any day shall be determined as follows:
(i) if the Exercise Shares are traded in the over-the-counter market
and not on any national securities exchange and not on the NASDAQ National
Market System or NASDAQ Small Cap Market (together, the "NASDAQ Reporting
System"), the average of the mean between the last bid and asked prices per
share, as reported by the National Quotation Bureau, Inc., or an equivalent
generally accepted reporting service, or if not so reported, the average of the
closing bid and asked prices for an Exercise Share as furnished to the Company
by any member of the National Association of Securities Dealers, Inc., selected
by the Company for that purpose; or
(ii) if the Exercise Shares are listed or traded on a national
securities exchange or the NASDAQ Reporting System, the closing price on the
principal national securities exchange on which they are so listed or traded, on
the NASDAQ Reporting System, as the case may be, on the last business day prior
to the date of the exercise of this Warrant. The closing price referred to in
this clause (ii) shall be the last reported sales price or, in case no such
reported sale takes place on such day, the average of the reported closing bid
and asked prices, in either case on the national securities exchange on which
the Exercise Shares are then listed or in the NASDAQ Reporting System; or
(iii) if no such closing price or closing bid and asked prices are
available, as determined in any reasonable manner as may be prescribed by the
Board of Directors of the Company.
2. Payment of Taxes.
(a) Stamp Taxes. The Company will pay all documentary stamp taxes, if any,
attributable to the initial issuance of Exercise Shares upon the exercise of
this Warrant; provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issue of any Warrant Certificates or any certificates for Exercise Shares in a
name other than that of the Holder of a Warrant Certificate surrendered upon the
exercise of a Warrant, and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(b) Withholding. The Holder shall pay to the Company, or make arrangements
satisfactory to the Company regarding payment of, any federal, state, local
and/or payroll taxes of any kind required by law to be withheld with respect to
the grant of this Warrant or the issuance of the Exercise Shares. The Company
may, to the extent permitted by law, deduct any such taxes from any payment of
any kind otherwise due to the Holder whether or not pursuant to this Warrant.
The Holder may elect, with the consent of the Company, to have such tax
withholding obligation satisfied, in whole or in part, by: (i) authorizing the
Company to withhold from the Exercise Shares a number of shares of Common Stock
having an aggregate Fair Market Value that would satisfy the minimum withholding
amount due, or (ii) delivering to the Company a number of shares of Common Stock
of which the Holder is the record and beneficial owner and that have been held
by the Holder for at least six (6) months with an aggregate Fair Market Value
that would satisfy the minimum withholding amount due. The Company may require
that any fractional share amount be settled in cash. For the purposes of this
Section 2, Fair Market Value shall be determined as of the date on which the
amount of tax to be withheld is determined.
3. Mutilated or Missing Warrant Certificates. In case any Warrant shall be
mutilated, lost, stolen or destroyed, the Company may in its discretion issue,
in exchange and substitution for and upon cancellation of the mutilated Warrant,
or in lieu of and in substitution for the Warrant lost, stolen or destroyed, a
new Warrant or Warrants of like tenor and in the same aggregate denomination,
but only (i) in the case of loss, theft or destruction, upon receipt of evidence
satisfactory to the Company of such loss, theft or destruction of such Warrant
and indemnity or bond, if requested, also satisfactory to them and (ii) in the
case of mutilation, upon surrender of the mutilated Warrant. Applicants for such
substitute Warrants shall also comply with such other reasonable regulations and
pay such other reasonable charges as the Company or its counsel may prescribe.
4. Rights of Holder. The Holder shall not, by virtue of anything contained in
this Warrant or otherwise, be entitled to any right whatsoever, either in law or
equity, of a stockholder of the Company, including without limitation, the right
to receive dividends or to vote or to consent or to receive notice as a
shareholder in respect of the meetings of shareholders or the election of
directors of the Company or any other matter.
5. Registration of Transfers and Exchanges. The Warrant shall be transferable,
subject to the provisions of Section 7 hereof, only upon the books of the
Company, if any, to be maintained by it for that purpose, upon surrender of the
Warrant Certificate to the Company at its principal office accompanied (if so
required by the Company) by a written instrument or instruments of transfer in
form satisfactory to the Company and duly executed by the Holder thereof or by
the duly appointed legal representative thereof or by a duly authorized attorney
and upon payment of any necessary transfer tax or other governmental charge
imposed upon such transfer. In all cases of transfer by an attorney, the
original letter of attorney, duly approved, or an official copy thereof, duly
certified, shall be deposited and remain with the Company. In case of transfer
by executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be required
to be deposited and remain with the Company in its discretion. Upon any such
registration of transfer, a new Warrant shall be issued to the transferee named
in such instrument of transfer, and the surrendered Warrant shall be canceled by
the Company.
Any Warrant may be exchanged, at the option of the Holder thereof and
without change, when surrendered to the Company at its principal office, or at
the office of its transfer agent, if any, for another Warrant or other Warrants
of like tenor and representing in the aggregate the right to purchase from the
Company a like number and kind of Exercise Shares as the Warrant surrendered for
exchange or transfer, and the Warrant so surrendered shall be canceled by the
Company or transfer agent, as the case may be.
6. Adjustment of Exercise Shares and Exercise Price. The Exercise Price and the
number and kind of Exercise Shares purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the happening of certain
events as hereinafter provided. The Exercise Price in effect at any time and the
number and kind of securities purchasable upon exercise of each Warrant shall be
subject to adjustment as follows:
(a) In case of any consolidation or merger of the Company with another
corporation (other than a merger with another corporation in which the Company
is the surviving corporation and which does not result in any reclassification
or change -- other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination -- of outstanding Common Stock issuable upon such exercise), the
rights of the Holder of this Warrant shall be adjusted in the manner described
below:
(i) In the event that the Company is the surviving corporation or is
merged into a wholly owned subsidiary for the purpose of incorporating the
Company in a different jurisdiction, this Warrant shall, without payment of
additional consideration therefor, be deemed modified so as to provide that the
Holder of this Warrant, upon the exercise thereof, shall procure, in lieu of
each share of Common Stock theretofore issuable upon such exercise, the kind and
amount of shares of stock, other securities, money and property receivable upon
such reclassification, change, consolidation or merger by the holder of each
share of Common Stock, had exercise of this Warrant occurred immediately prior
to such reclassification, change, consolidation or merger. This Warrant (as
adjusted) shall be deemed to provide for further adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 6. The provisions of this clause (i) shall similarly apply to successive
reclassifications, changes, consolidations and mergers.
(ii) In the event that the Company is not the surviving corporation
(except in the case of a merger of the Company into a wholly owned subsidiary
for the purpose of incorporating the Company in a different jurisdiction),
Holder shall be given at least fifteen (15) days prior written notice of such
transaction and shall be permitted to exercise this Warrant, to the extent it is
exercisable as of the date of such notice, during this fifteen (15) day period.
Upon expiration of such fifteen (15) day period, this Warrant and all of
Holder's rights hereunder shall terminate.
(b) If the Company, at any time while this Warrant, or any portion
thereof, remains outstanding and unexpired, by reclassification of securities or
otherwise, shall change any of the securities as to which purchase rights under
this Warrant exist into the same or a different number of securities of any
other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such reclassification or
other change and the Exercise Price therefor shall be appropriately adjusted,
all subject to further adjustment as provided in this Section 6.
(c) In case the Company shall (i) pay a dividend or make a distribution on
its shares of Common Stock in shares of Common Stock, (ii) subdivide or classify
its outstanding Common Stock into a greater number of shares, or (iii) combine
or reclassify its outstanding Common Stock into a smaller number of shares, the
Exercise Price in effect at the time of the record date for such dividend or
distribution or of the effective date of such subdivision, combination or
reclassification, shall be proportionally adjusted so that the Holder of this
Warrant exercised after such date shall be entitled to receive the aggregate
number and kind of shares that, if this Warrant had been exercised by such
Holder immediately prior to such date, he would have owned upon such exercise
and been entitled to receive upon such dividend, subdivision, combination or
reclassification. For example, if the Company declares a 2 for 1 stock dividend
or stock split and the Exercise Price immediately prior to such event was $2.00
per share, the adjusted Exercise Price immediately after such event would be
$1.00 per share. Such adjustment shall be made successively whenever any event
listed above shall occur. Whenever the Exercise Price payable upon exercise of
each Warrant is adjusted pursuant to this subsection (c), the number of Exercise
Shares purchasable upon exercise of this Warrant shall simultaneously be
adjusted by multiplying the number of Exercise Shares initially issuable upon
exercise of this Warrant by the Exercise Price in effect on the date hereof and
dividing the product so obtained by the Exercise Price, as adjusted.
(d) In the event that at any time, as a result of an adjustment made
pursuant to subsection (a), (b) or (c) above, the Holder of this Warrant
thereafter shall become entitled to receive any Exercise Shares of the Company,
other than Common Stock, thereafter the number of such other shares so
receivable upon exercise of this Warrant shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in subsections (a), (b) or
(c) above.
(e) Irrespective of any adjustments in the Exercise Price or the number or
kind of Exercise Shares purchasable upon exercise of this Warrant, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Warrant.
(f) Whenever the Exercise Price shall be adjusted as required by the
provisions of the foregoing Section 6, the Company shall forthwith file in the
custody of its Secretary or an Assistant Secretary at its principal office and
with its stock transfer agent, if any, an officer's certificate showing the
adjusted Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment, including a statement of
the number of additional shares of Common Stock, if any, and such other facts as
shall be necessary to show the reason for and the manner of computing such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the holder and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such certificate to
the Holder.
(g) All calculations under this Section 6 shall be made to the nearest
cent or to the nearest one one-hundredth (1/100th) of a share, as the case may
be.
7. Restrictions on Transferability: Restrictive Legend. Neither this Warrant nor
the Exercise Shares shall be transferable except in accordance with the
provisions of this Section.
(a) Restrictions on Transfer; Indemnification. Neither this Warrant nor
any Exercise Share may be offered for sale or sold, or otherwise transferred or
sold in any transaction which would constitute a sale thereof within the meaning
of the Securities Act of 1933, as amended (the "1933 Act"), unless (i) such
security has been registered for sale under the 1933 Act and registered or
qualified under applicable state securities laws relating to the offer and sale
of securities, or (ii) exemptions from the registration requirements of the 1933
Act and the registration or qualification requirements of all such state
securities laws are available and the Company shall have received an opinion of
counsel satisfactory to the Company that the proposed sale or other disposition
of such securities may be effected without registration under the 1933 Act and
would not result in any violation of any applicable state securities laws
relating to the registration or qualification of securities for sale, such
counsel and such opinion to be satisfactory to the Company.
The Holder agrees to indemnify and hold harmless the Company against any
loss, damage, claim or liability arising from the disposition of this Warrant or
any Exercise Share held by such holder or any interest therein in violation of
the provisions of this Section 7.
(b) Restrictive Legends. Unless and until otherwise permitted by this
Section 7, this Warrant Certificate, each Warrant Certificate issued to the
Holder or to any transferee or assignee of this Warrant Certificate, and each
certificate representing Exercise Shares issued upon exercise of this Warrant or
to any transferee of the person to whom the Exercise Shares were issued, shall
bear a legend setting forth the requirements of subsection (a) of this Section
7, together with such other legend or legends as may otherwise be deemed
necessary or appropriate by counsel to the Company.
(c) Removal of Legend. The Company shall, at the request of any registered
holder of a Warrant or Exercise Share, exchange the certificate representing
such security for a certificate representing the same security not bearing the
restrictive legend required by subsection (b) if, in the opinion of counsel
acceptable to the Company, such restrictive legend is no longer necessary.
8. Registration Rights. The Holder shall be entitled to the rights and subject
to the obligations set forth in Section 6 of that certain Form of Securities
Purchase Agreement related to the sale of up to 14,000,000 Units by and between
the Company and the purchasers of such Units.
9. Notices. All notices or other communications under this Warrant shall be in
writing and shall be deemed to have been given on the day of delivery if
delivered by hand, on the fifth day after deposit in the mail if mailed by
certified mail, postage prepaid, return receipt requested, or on the next
business day after mailing if sent by a nationally recognized overnight courier
such as federal express, addressed as follows:
If to the Company:
Touchstone Resources USA, Inc.
1600 Smith Street
Suite 5100
Houston, Texas 77002
Attention: Chief Executive Officer
with a copy to:
--------------
Fox Rothschild LLP
997 Lenox Drive
Building 3
Lawrenceville, NJ 08648-2311
Attention: Vincent A. Vietti, Esquire
and to the Holder at the address of the Holder appearing on the
books of the Company or the Company's transfer agent, if any.
Either of the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Section 9.
10. Supplements and Amendments. The Company may from time to time supplement or
amend this Warrant without the approval of any holders of Warrants in order to
cure any ambiguity or to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provision, or to make any
other provisions in regard to matters or questions herein arising hereunder
which the Company may deem necessary or desirable and which shall not materially
adversely affect the interests of the Holder.
11. Successors and Assigns. This Warrant shall inure to the benefit of and be
binding on the respective successors, assigns and legal representatives of the
Holder and the Company.
12. Severability. If for any reason any provision, paragraph or terms of this
Warrant is held to be invalid or unenforceable, all other valid provisions
herein shall remain in full force and effect and all terms, provisions and
paragraphs of this Warrant shall be deemed to be severable.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, without regard to
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof, except to the extent that the General Corporation Law of the State
of Delaware shall apply to the internal corporate governance of the Company.
14. Headings. Section and subsection headings used herein are included herein
for convenience of reference only and shall not affect the construction of this
Warrant nor constitute a part of this Warrant for any other purpose.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the Company has caused these presents to be duly
executed as of the _____ day of ______________, 200_.
TOUCHSTONE RESOURCES USA, INC.
By: /s/
------------------------------------
Name: Roger Abel
Title: Chief Executive Officer
APPENDIX A
NOTICE OF EXERCISE
To: Touchstone Resources USA, Inc.
1600 Smith Street, Suite 5100
Houston, TX 77002
Attention: Chief Executive Officer
(1) The undersigned hereby elects to purchase ____________ shares of
Common Stock of Touchstone Resources USA, Inc., a Delaware corporation, pursuant
to the terms of the attached Warrant, and tenders herewith payment of the
Exercise Price for such shares in full in accordance with the terms of the
Warrant in the following manner (please check one or more of the following
choices):
|_| In cash;
|_| Cashless exercise through a broker; or
|_| Delivery of previously owned shares of Common Stock.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock to be issued upon conversion hereof
are being acquired solely for the account of the undersigned, not as a nominee
for any other party, and for investment purposes only (unless such shares are
subject to resale pursuant to an effective prospectus), and that the undersigned
will not offer, sell or otherwise dispose of any such shares of Common Stock
except under circumstances that will not result in a violation of the Securities
Act of 1933, as amended, or any state securities laws.
(3) Terms not otherwise defined in this Notice of Exercise shall have the
meanings ascribed to such terms in the attached Warrant.
(4) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned.
HOLDER
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(Date) (Signature)