EXHIBIT 10.4
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES AS PERMITTED BY LAW AND THE SECURITIES PURCHASE
AGREEMENT PURSUANT TO WHICH THE SECURITIES WERE ISSUED.
COMMON STOCK PURCHASE WARRANT NO. BPK-2006-1
To Purchase Shares of Common Stock of
BPK RESOURCES, INC.
This COMMON STOCK PURCHASE WARRANT (this "Warrant") certifies that, for
value received, TRIDENT GROWTH FUND, L.P., a Delaware limited partnership (the
"Holder"), is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, at any time on or after the
date hereof, January 30, 2006 (the "Initial Exercise Date"), and on or prior to
the close of business on the fifth anniversary of the Initial Exercise Date (the
"Termination Date"), to subscribe for and purchase from BPK RESOURCES, INC., a
Nevada corporation (the "Company"), up to ONE MILLION TWO HUNDRED THOUSAND
(1,200,000) shares of common stock, par value $001 per share, of the Company
(the "Common Stock"), subject to adjustment herein (the "Warrant Shares"). The
purchase price of one share of Common Stock under this Warrant shall be equal to
the Exercise Price, as defined in Section 2(b).
Section 1. Definitions. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Securities Purchase
Agreement (the "Purchase Agreement"), of even date herewith, entered into by and
among the Company and the Purchaser signatory thereto.
Section 2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights represented
by this Warrant may be made at any time or times on or after the Initial
Exercise Date and on or before the Termination Date (each, an "Exercise
Date") by delivery to the Company of a duly executed facsimile copy of the
Notice of Exercise Form annexed hereto (or such other office or agency of
the Company as it may designate by notice in writing to the registered
Holder at the address of such Holder appearing on the books of the
Company); provided, however, within 5 Business Days of the date said
Notice of Exercise is delivered to the Company, the Holder shall have
surrendered this Warrant to the Company and the Company shall have
received payment of the aggregate Exercise Price of the shares thereby
purchased by wire transfer or cashier's check drawn on a United States
bank.
Page 1
b) Exercise Price. The Exercise Price (so called herein) of each
share of Common Stock under this Warrant shall be equal to the lesser of:
(i) $0.13; or
(ii) the average price per share of the Common Stock and
Common Stock Equivalents sold to any Person in the first Qualifying
Transaction to be consummated following the Original Issue Date
(determined by dividing the total number of shares of Common Stock
issued plus shares issuable under Common Stock Equivalents in such
Qualifying Transaction, by the aggregate gross consideration
received by the Company plus all consideration to be received upon
exercise or conversion of all Common Stock Equivalents issued in
such Qualifying Transaction). With respect to determining the price
paid per share in any asset purchase, only shares of Common Stock
actually issued and outstanding shall be used in determining such
per share calculation.
c) Cashless Exercise. If at any time after one year from the date of
issuance of this Warrant there is no effective Registration Statement
registering the resale of the Warrant Shares by the Holder, then this
Warrant may also be exercised at such time by means of a "cashless
exercise" in which the Holder shall be entitled to receive a certificate
for the number of Warrant Shares equal to the quotient obtained by
dividing [(A-B) (X)] by (A), where:
(A) = the price of said Common Stock determined by reference to the
last reported sale price for the Common Stock on such day on the principal
securities exchange on which the Common Stock is listed or admitted to
trading or if no such sale takes place on such date, the average of the
closing bid and asked prices thereof as officially reported, or, if not so
listed or admitted to trading on any securities exchange, the last sale
price for the Common Stock on the National Association of Securities
Dealers national market system on such date, or, if there shall have been
no trading on such date or if the Common Stock shall not be listed on such
system, the average of the closing bid and asked prices in the
over-the-counter market as furnished by any NASD member firm selected from
time to time by the Company for such purpose or, if the Common Stock is
not traded, then such price as is reasonably determined by the Company's
Board of Directors (the "Market Value");
(B) = the Exercise Price of this Warrant, as adjusted; and
Page 2
(X) = the number of Warrant Shares issuable upon exercise of this
Warrant in accordance with the terms of this Warrant by means
of a cash exercise rather than a cashless exercise.
Notwithstanding anything herein to the contrary, on the Termination
Date, this Warrant shall be automatically exercised via cashless exercise
pursuant to this Section 2(c).
d) Exercise Limitations. At any time after the Common Stock is
registered under Section 12 of the Exchange Act, the Holder shall not have
the right to exercise any portion of this Warrant, pursuant to Section
2(c) or otherwise, to the extent that after giving effect to such issuance
after exercise, the Holder (together with the Holder's affiliates), as set
forth on the applicable Notice of Exercise, would beneficially own in
excess of 4.99% (or as applicable, 9.99%) of the number of shares of the
Common Stock outstanding immediately after giving effect to such issuance.
For purposes of the foregoing determination, the number of shares of
Common Stock beneficially owned by the Holder and its affiliates shall
include the number of shares of Common Stock issuable upon such exercise
of this Warrant less the number of shares of Common Stock which would be
issuable upon (A) exercise of the remaining, nonexercised portion of this
Warrant and (B) exercise or conversion of the unexercised or unconverted
portion of any other Securities (including, without limitation, any other
Debentures or Warrants) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned by the
Holder. Except as set forth in the preceding sentence, for purposes of
this Section 2(d), beneficial ownership shall be calculated in accordance
with Section 13(d) of the Exchange Act. To the extent that the limitation
contained in this Section 2(d) applies, the determination of whether this
Warrant is exercisable (in relation to other securities owned by the
Holder) and of which a portion of this Warrant is exercisable shall be in
the sole discretion of such Holder. For purposes of this Section 2(d), in
determining the number of outstanding shares of Common Stock, the Holder
may rely on the number of outstanding shares of Common Stock as reflected
in (x) Schedule 3.1(g) to the Purchase Agreement, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Company's Transfer Agent setting forth the number of shares of Common
Stock outstanding. Upon the written or oral request of the Holder, the
Company shall within two Business Days confirm orally and in writing to
the Holder the number of shares of Common Stock then outstanding. The
provisions of this Section 2(d) may be waived by the Holder upon, at the
election of the Holder, not less than 61 days' prior notice to the
Company, and the provisions of this Section 2(d) shall continue to apply
until such 61st day (or such later date, as determined by the Holder, as
may be specified in such notice of waiver).
e) Mechanics of Exercise.
i. Authorization of Warrant Shares. The Company covenants that
all Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant, be duly authorized,
validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than
taxes in respect of any transfer occurring contemporaneously with
such issue). The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for
the issuance of the Warrant Shares upon the exercise of any purchase
rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the
Warrant Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which
the Common Stock may be listed.
Page 3
ii. Delivery of Certificates Upon Exercise. Certificates for
shares purchased hereunder shall be transmitted by the transfer
agent of the Company to the Holder by crediting the account of the
Holder's prime broker with the Depository Trust Company through its
Deposit Withdrawal Agent Commission ("DWAC") system if the Company
is a participant in such system and if the certificates may be
issued without a restrictive legend in accordance with applicable
federal securities laws, and otherwise by physical delivery to the
address specified by the Holder in the Notice of Exercise within two
(2) Business Days from the delivery to the Company of the Notice of
Exercise Form, surrender of this Warrant and payment of the
aggregate Exercise Price as set forth above ("Warrant Share Delivery
Date"). This Warrant shall be deemed to have been exercised on the
date the Exercise Price is received by the Company. The Warrant
Shares shall be deemed to have been issued, and Holder or any other
person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the
date the Warrant has been exercised by payment to the Company of the
Exercise Price and all taxes required to be paid by the Holder, if
any, pursuant to Section 2(e)(vii) prior to the issuance of such
shares, have been paid.
iii. Delivery of New Warrants Upon Exercise. If this Warrant
shall have been exercised in part, the Company shall, at the time of
delivery of the certificate or certificates representing Warrant
Shares, deliver to Holder a new Warrant evidencing the rights of
Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, which new Warrant shall in all other respects be identical
with this Warrant.
iv. Rescission Rights. If the Company fails to cause its
transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Shares pursuant to this
Section 2(e)(iv) by the Warrant Share Delivery Date, then the Holder
will have the right to rescind such exercise.
Page 4
v. Failure to Timely Deliver Certificates Upon Exercise. In
addition to any other rights available to the Holder, if the Company
or the Company's transfer agent fails to cause delivery to the
Holder of a certificate or certificates representing the Warrant
Shares or if the Company or its transfer agent fails to deliver such
certificates without the restrictive legend (if applicable) on or
before the Warrant Share Delivery Date, the Company shall pay to
Purchaser, in cash, as partial liquidated damages and not as a
penalty, the greater of (i) $500 for each Business Day after the
Warrant Share Delivery Date until such certificate is delivered with
an appropriate legend or without a restrictive legend, as the case
may be; and (ii) the difference in the Market Value of the Warrant
Shares on the Warrant Share Delivery Date and the date such shares
are actually received by the Holder. Nothing herein shall limit
Purchaser's right to pursue actual damages for the Company's failure
to deliver certificates representing any Securities as required
herein, and Purchaser shall have the right to pursue all remedies
available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief.
vi. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the
exercise of this Warrant. As to any fraction of a share which Holder
would otherwise be entitled to purchase upon such exercise, the
Company shall round such fractional share up to the next whole
number.
vii. Charges, Taxes and Expenses. Issuance of certificates for
Warrant Shares shall be made without charge to the Holder for any
issue or transfer tax or other incidental expense in respect of the
issuance of such certificate, all of which taxes and expenses shall
be paid by the Company, and such certificates shall be issued in the
name of the Holder or in such name or names as may be directed by
the Holder; provided, however, that in the event certificates for
Warrant Shares are to be issued in a name other than the name of the
Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by
the Holder; and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.
viii. Closing of Books. The Company will not close its
stockholder books or records in any manner which prevents the timely
exercise of this Warrant, pursuant to the terms hereof.
Page 5
Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while
this Warrant is outstanding: (A) pays a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or any other
equity or equity equivalent securities payable in shares of Common Stock
(which, for avoidance of doubt, shall not include any shares of Common
Stock issued by the Company pursuant to this Warrant), (B) subdivides
outstanding shares of Common Stock into a larger number of shares, (C)
combines (including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares, or (D) issues by
reclassification of shares of the Common Stock any shares of capital stock
of the Company, then in each case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding before such
event and of which the denominator shall be the number of shares of Common
Stock outstanding after such event and the number of shares issuable upon
exercise of this Warrant shall be proportionately adjusted. Any adjustment
made pursuant to this Section 3(a) shall become effective immediately
after the record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or re-classification.
b) Subsequent Equity Sales. If the Company at any time while this
Warrant is outstanding, shall offer, sell, grant any option to purchase or
offer, sell or grant any right to reprice its securities, or otherwise
dispose of or issue any Common Stock or Common Stock Equivalents entitling
any Person to acquire shares of Common Stock, at an price per share less
than the then Exercise Price (such lower price, the "Base Share Price" and
such issuances collectively, a "Dilutive Issuance"), as adjusted hereunder
(if the holder of the Common Stock or Common Stock Equivalents so issued
shall at any time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange prices or
otherwise, or due to warrants, options or rights per share which is issued
in connection with such issuance, be entitled to receive shares of Common
Stock at an effective price per share which is less than the Exercise
Price, such issuance shall be deemed to have occurred for less than the
Exercise Price), then, the Exercise Price shall be reduced to equal the
Base Share Price. Such adjustment shall be made whenever such Common Stock
or Common Stock Equivalents are issued. The Company shall notify the
Holder in writing, no later than the Business Day following the issuance
of any Common Stock or Common Stock Equivalents subject to this section,
indicating therein the applicable issuance price, or of applicable reset
price, exchange price, conversion price and other pricing terms (such
notice the "Dilutive Issuance Notice"). For purposes of clarification,
whether or not the Company provides a Dilutive Issuance Notice pursuant to
this Section 3(b), upon the occurrence of any Dilutive Issuance, after the
date of such Dilutive Issuance the Holder is entitled to receive a number
of Warrant Shares based upon the Base Share Price regardless of whether
the Holder accurately refers to the Base Share Price in the Notice of
Exercise.
Page 6
c) Pro Rata Distributions. If the Company, at any time prior to the
Termination Date, shall distribute to all holders of Common Stock (and not
to Holders of the Warrants) evidences of its indebtedness or assets or
rights or warrants to subscribe for or purchase any security other than
the Common Stock (which shall be subject to Section 3(b)), then in each
such case the Exercise Price shall be adjusted by multiplying the Exercise
Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the closing bid price of the
Common Stock on the then principal Trading Market determined as of the
record date mentioned above (if the closing bid price of the Common Stock
on the then principal Trading Market shall then be determinable and
otherwise the fair market value per share as determined by the Board of
Directors in good faith, and of which the numerator shall be such closing
bid price of the Common Stock on the then principal Trading Market on such
record date less the then per share fair market value at such record date
of the portion of such assets or evidence of indebtedness so distributed
applicable to one outstanding share of the Common Stock as determined by
the Board of Directors in good faith. In either case the adjustments shall
be described in a statement provided to the Holders of the portion of
assets or evidences of indebtedness so distributed or such subscription
rights applicable to one share of Common Stock. Such adjustment shall be
made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
d) Fundamental Transaction. If, at any time while this Warrant is
outstanding, there occurs a Fundamental Transaction, then, upon any
subsequent conversion of this Warrant, the Holder shall have the right to
receive, for each Warrant Share that would have been issuable upon such
exercise absent such Fundamental Transaction, at the option of the Holder,
(a) upon exercise of this Warrant, the number of shares of Common Stock of
the successor or acquiring corporation or of the Company, if it is the
surviving corporation, and Alternate Consideration receivable upon or as a
result of such reorganization, reclassification, merger, consolidation or
disposition of assets by a Holder of the number of shares of Common Stock
for which this Warrant is exercisable immediately prior to such event or
(b) if the Company is acquired in an all cash transaction, cash equal to
the value of this Warrant as determined by the difference between the
applicable Exercise Price and the amount of cash paid per share to the
shareholders of the Company (the "Alternate Consideration"). For purposes
of any such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based on
the amount of Alternate Consideration issuable in respect of one share of
Common Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common Stock are
given any choice as to the securities, cash or property to be received in
a Fundamental Transaction, then the Holder shall be given the same choice
as to the Alternate Consideration it receives upon any exercise of this
Warrant following such Fundamental Transaction. To the extent necessary to
effectuate the foregoing provisions, any successor to the Company or
surviving entity in such Fundamental Transaction shall issue to the Holder
a new warrant consistent with the foregoing provisions and evidencing the
Holder's right to exercise such warrant into Alternate Consideration. The
terms of any agreement pursuant to which a Fundamental Transaction is
effected shall include terms requiring any such successor or surviving
entity to comply with the provisions of this Section 3(d) and insuring
that this Warrant (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.
Page 7
e) Exempt Issuance. Notwithstanding the foregoing, no adjustments,
Alternate Consideration, nor notices shall be made, paid, or issued under
this Section 3 in respect of an Exempt Issuance.
f) Calculations. All calculations under this Section 3 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be.
The number of shares of Common Stock outstanding at any given time shall
not includes shares of Common Stock owned or held by or for the account of
the Company, and the description of any such shares of Common Stock shall
be considered on issue or sale of Common Stock. For purposes of this
Section 3, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding treasury shares, if any) issued and outstanding.
g) Voluntary Adjustment By Company. The Company may at any time
during the term of this Warrant reduce the then current Exercise Price to
any amount and for any period of time deemed appropriate by the Board of
Directors of the Company.
h) Intentionally Omitted.
i) Notice to Holders.
i. Adjustment to Exercise Price. Whenever the Exercise Price
is adjusted pursuant to this Section 3, the Company shall promptly
mail to each Holder a notice setting forth the Exercise Price after
such adjustment and setting forth a brief statement of the facts
requiring such adjustment. If the Company issues a variable rate
security, despite the prohibition thereon in the Purchase Agreement,
the Company shall be deemed to have issued Common Stock or Common
Stock Equivalents at the lowest possible conversion or exercise
price at which such securities may be converted or exercised in the
case of a Variable Rate Transaction (as defined in the Purchase
Agreement), or the lowest possible adjustment price in the case of
an MFN Transaction. The term "MFN Transaction" shall mean a
transaction in which the Company issues or sells any securities in a
capital raising transaction or series of related transactions which
grants to an investor the right to receive additional shares based
upon future transactions of the Company on terms more favorable than
those granted to such investor in such offering.
Page 8
ii. Notice to Allow Exercise by Holder. If (A) the Company
shall declare a dividend (or any other distribution) on the Common
Stock; (B) the Company shall declare a special nonrecurring cash
dividend on or a redemption of the Common Stock; (C) the Company
shall authorize the granting to all holders of the Common Stock
rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; (D) the approval of any
stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to
which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, of any compulsory
share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company; then, in each case, the Company shall
cause to be mailed to the Holder at its last addresses as it shall
appear upon the Warrant Register of the Company, at least 20
calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not
to be taken, the date as of which the holders of the Common Stock of
record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of
record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in such
notice. The Holder is entitled to exercise this Warrant during the
20-day period commencing the date of such notice to the effective
date of the event triggering such notice.
Section 4. Transfer of Warrant.
a) Transferability. Subject to compliance with any applicable
securities laws and the conditions set forth in Sections 5(a) and 4(d)
hereof and to the provisions of Section 4.1 of the Purchase Agreement,
this Warrant and all rights hereunder are transferable, in whole or in
part, upon surrender of this Warrant at the principal office of the
Company, together with a written assignment of this Warrant substantially
in the form attached hereto duly executed by the Holder or its agent or
attorney and funds sufficient to pay any transfer taxes payable upon the
making of such transfer. Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant or Warrants
in the name of the assignee or assignees and in the denomination or
denominations specified in such instrument of assignment, and shall issue
to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the purchase of
Warrant Shares without having a new Warrant issued.
Page 9
b) New Warrants. This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in
which new Warrants are to be issued, signed by the Holder or its agent or
attorney. Subject to compliance with Section 4(a), as to any transfer
which may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
c) Warrant Register. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent actual
notice to the contrary.
d) Transfer Restrictions. If, at the time of the surrender of this
Warrant in connection with any transfer of this Warrant, the transfer of
this Warrant shall not be registered pursuant to an effective registration
statement under the Securities Act and under applicable state securities
or blue sky laws, the Company may require, as a condition of allowing such
transfer (i) that the Holder or transferee of this Warrant, as the case
may be, furnish to the Company a written opinion of counsel (which opinion
shall be in form, substance and scope customary for opinions of counsel in
comparable transactions) to the effect that such transfer may be made
without registration under the Securities Act and under applicable state
securities or blue sky laws, (ii) that the holder or transferee execute
and deliver to the Company an investment letter in form and substance
acceptable to the Company and (iii) that the transferee be an "accredited
investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8)
promulgated under the Securities Act or a qualified institutional buyer as
defined in Rule 144A(a) under the Securities Act.
Section 5. Covenants.
(a) Negative Covenants. Other than with respect to actions taken in
furtherance of consummating the Graphite Transaction as set forth and described
in accordance with the Purchase Agreement, so long as any portion of this
Warrant is outstanding, without the prior written consent of the Holder, which
consent may be withheld in the sole discretion of the Holder, the Company will
not and will not permit any of its Subsidiaries to directly or indirectly:
i. Sale of Assets, Dissolution, Etc. Transfer, sell, assign,
lease or otherwise dispose of all or substantially all of its
properties or assets, or any assets or properties necessary or
desirable for the proper conduct of its business, or transfer, sell,
assign or otherwise dispose of any of its accounts, or contract
rights to any person or entity, or change the nature of its
business, wind-up, liquidate or dissolve, or agree to any of the
foregoing, other than in the ordinary course of business;
Page 10
ii. No Further Issuance of Securities. Other than in
accordance herewith, and other than with respect to any Exempt
Issuance or any issuance of securities to any Person or group of
Persons in any transaction or series of related transactions, which,
does not exceed, in the aggregate, 30% of the then outstanding and
issued securities of the Company, create, issue or permit the
issuance of any additional securities of the Company or of any of
its Subsidiaries, if any, or any rights, options or warrants to
acquire any such securities;
iii. Agreement. Enter into any agreement obligating the
Company to undertake any of the matters set forth in this Section
5(a).
(b) Affirmative Covenants. Other than with respect to actions taken in
furtherance of consummating the Graphite Transaction as set forth and described
in accordance with the Purchase Agreement, so long as any portion of this
Warrant is outstanding and unless the Holder otherwise consents in writing,
which consent may be withheld in the sole discretion of the Holder, the Company
will:
i. True Books. Keep true books of record and account in which full,
true and correct entries will be made of all of its dealings and
transactions, and set aside on its books such reserves as may be required
by GAAP, consistently applied, with respect to all taxes, assessments,
charges, levies and claims referred to in (a) above, and with respect to
its business in general, and include such reserves in interim as well as
year-end financial statements;
ii. Right of Inspection. Permit any person designated by the Holder,
at the Holder's expense, to visit and inspect any of the properties, books
and financial reports of the Company, all at such reasonable times upon
three (3) Business Days prior notice to Company, and as often as the
Holder may reasonably request, provided the Holder does not unreasonably
interfere with the daily operations of the Company and Holder executes a
confidentiality agreement; and
iii. Financial Reporting. The Company shall provide to Holder audited
annual financial statements, audited by the Company's independent certified
public accounting firm. Said financial statements shall be prepared in
accordance with GAAP, consistently applied, and shall be delivered to Holder
within ninety (90) days after the close of the Company's fiscal year. The
Company shall provide to Holder unaudited quarterly financial statements
(including period to date and year to date actual to prior periods) presented in
accordance with GAAP, consistently applied (subject to such exceptions for
interim financials as may be noted by the Company thereon), and shall be
delivered to Holder within forty-five (45) days after the close of the Company's
quarter. The Company shall also deliver any other reports reasonably requested
by Holder.
Section 6. Miscellaneous.
a) Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws and Section 4 of this Warrant, this Warrant and
all rights hereunder are transferable, in whole or in part, at the office or
agency of the Company by the Holder in person or by duly authorized attorney,
upon surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed. The transferee shall sign an investment letter in form and
substance reasonably satisfactory to the Company.
Page 11
b) No Rights as Shareholder Until Exercise. This Warrant does not entitle
the Holder to any voting rights or other rights as a shareholder of the Company
prior to the exercise hereof. Upon the surrender of this Warrant and the payment
of the aggregate Exercise Price (or by means of a cashless exercise), the
Warrant Shares so purchased shall be and be deemed to be issued to such Holder
as the record owner of such shares as of the close of business on the later of
the date of such surrender or payment.
c) Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of the Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.
d) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday, then such action may be taken or
such right may be exercised on the next succeeding day not a Saturday, Sunday or
legal holiday.
e) Authorized Shares.
The Company covenants that during the period the Warrant is outstanding,
it will reserve from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of the Warrant Shares upon the
exercise of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which the Common
Stock may be listed.
Except and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation, amending its
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities 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 actions as may be
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.
Page 12
Before taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the Exercise
Price, the Company shall obtain all such authorizations or exemptions thereof,
or consents thereto, as may be necessary from any public regulatory body or
bodies having jurisdiction thereof.
f) Jurisdiction. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.
g) Restrictions. The Holder acknowledges that the Warrant Shares acquired
upon the exercise of this Warrant, if not registered, will have restrictions
upon resale imposed by state and federal securities laws.
h) Expenses. If the Company willfully and knowingly fails to comply with
any provision of this Warrant, which results in any material damages to the
Holder, the Company shall pay to Holder such amounts as shall be sufficient to
cover any costs and expenses including, but not limited to, reasonable
attorneys' fees, including those of appellate proceedings, incurred by Holder in
collecting any amounts due pursuant hereto or in otherwise enforcing any of its
rights, powers or remedies hereunder.
i) Notices. Any notice, request or other document required or permitted to
be given or delivered to the Holder by the Company shall be delivered in
accordance with the notice provisions of the Purchase Agreement.
j) Limitation of Liability. No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant or purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
k) Remedies. Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Warrant and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
Page 13
l) Successors and Assigns. Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder or holder of Warrant Shares.
m) Amendment and Waiver. This Warrant may be modified or amended only with
the written consent of the Company and the Holder. No course of dealing or any
delay or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Holder's rights, powers
or remedies, notwithstanding the fact that all rights hereunder terminate on the
Termination Date.
n) Severability. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Warrant.
o) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.
p) Registration Rights. The Holder has certain rights with respect to the
registration of the Warrant Shares upon exercise of this Warrant, such rights
being specifically set forth in the Purchase Agreement entered into by and
between Holder and the Company on the date hereof.
[Signature Page Follows]
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officer thereunto duly authorized as of the date first written above.
BPK RESOURCES, INC.
By: /s/ Christopher H. Giordano
-------------------------------------
Name: Christopher H. Giordano
Title: Chief Executive Officer
NOTICE OF EXERCISE
TO: BPK RESOURCES, INC.
(1)______The undersigned hereby elects to purchase ________ Warrant
Shares of BPK Resources, Inc. pursuant to the terms of the attached Warrant
(only if exercised in full), and tenders herewith payment of the exercise price
in full, together with all applicable transfer taxes, if any.
(2)______Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection 2(c), to
exercise this Warrant with respect to the maximum number of Warrant Shares
purchasable pursuant to the cashless exercise procedure set forth in subsection
2(c).
(3)______Please issue a certificate or certificates representing
said Warrant Shares in the name of the undersigned or in such other name as is
specified below:
----------------------------------------
The Warrant Shares shall be delivered to the following:
----------------------------------------
----------------------------------------
----------------------------------------
(4) Accredited Investor. The undersigned, and, if applicable, the
person or entity identified in subsection 3 above, is an "accredited investor"
as defined in Regulation D promulgated under the Securities Act of 1933, as
amended.
[SIGNATURE OF HOLDER]
Name of Investing Entity: ______________________________________________________
Signature of Authorized Signatory of Investing Entity: _________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Date: __________________________________________________________________________
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
_______________________________________________ whose address is
_________________________________________________________________.
_________________________________________________________________
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.