Exhibit 99.4
FORM OF WARRANT
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.
AFG ENTERPRISES USA, INC.
SERIES [A] WARRANT TO PURCHASE COMMON STOCK
Warrant No.:
-------------------------------
Initial Number of Shares of Common Stock: (1)
-------------------
Date of Issuance: March 29, 2006 ("Issuance Date")
AFG Enterprises USA, Inc., a Nevada corporation (the "Company"), hereby
certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, [BUYER], the registered holder hereof or its
permitted assigns (the "Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company, at the Exercise Price (as defined below)
then in effect, upon surrender of this Warrant to Purchase Common Stock
(including any Warrants to Purchase Common Stock issued in exchange, transfer or
replacement hereof, the "Warrant"), at any time or times on or after the
Threshold Acquisition Date (as such term is defined in the Indenture (as defined
below)), but not after 11:59 P.M., New York time, on March 29, 2011 (the
"Expiration Date") fully paid nonassessable shares of Common Stock (as defined
below) (the "Warrant Shares"). Except as otherwise defined herein, capitalized
terms in this Warrant shall have the meanings set forth in Section 16. This
Warrant is one of the Warrants to Purchase Common Stock (the "SPA Warrants")
issued pursuant to Section 1 of that certain Securities Purchase Agreement,
dated as of March 29, 2006 (the "Subscription Date"), by and among the Company
and the buyers (the "Buyers") referred to therein (the "Securities Purchase
Agreement").
----------
(1) For Series A Warrant, insert number of shares equal to (x) 100% of the
principal amount of Nonconvertible Notes issued to the Holder pursuant to the
Securities Purchase Agreement divided by (y) $8.00. The aggregate number of
Series B Warrants issued will be equal to 10% of the aggregate number of Series
A Warrant issued to Note Holders.
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions
hereof (including, without limitation, the limitations set forth in Section
1(f)), this Warrant may be exercised by the Holder on any day on or after the
earlier of (x) six months after the Issuance Date and (y) the Threshold
Acquisition Date in whole or in part, by (i) delivery of a written notice, in
the form attached hereto as Exhibit A (the "Exercise Notice"), of the Holder's
election to exercise this Warrant and (ii) (A) payment to the Company of an
amount equal to the applicable Exercise Price multiplied by the number of
Warrant Shares as to which this Warrant is being exercised (the "Aggregate
Exercise Price") in cash or by wire transfer of immediately available funds or
(B) by notifying the Company that this Warrant is being exercised pursuant to a
Cashless Exercise (as defined in Section 1(d)). The Holder shall not be required
to deliver the original Warrant in order to effect an exercise hereunder.
Execution and delivery of the Exercise Notice with respect to less than all of
the Warrant Shares shall have the same effect as cancellation of the original
Warrant and issuance of a new Warrant evidencing the right to purchase the
remaining number of Warrant Shares. On or before the first Business Day
following the date on which the Company has received each of the Exercise Notice
and the Aggregate Exercise Price (or notice of a Cashless Exercise) (the
"Exercise Delivery Documents"), the Company shall transmit by facsimile an
acknowledgment of confirmation of receipt of the Exercise Delivery Documents to
the Holder and the Company's transfer agent (the "Transfer Agent"). On or before
the third Business Day following the date on which the Company has received all
of the Exercise Delivery Documents (the "Share Delivery Date"), the Company
shall (X) provided that the Transfer Agent is participating in The Depository
Trust Company ("DTC") Fast Automated Securities Transfer Program, upon the
request of the Holder, credit such aggregate number of shares of Common Stock to
which the Holder is entitled pursuant to such exercise to the Holder's or its
designee's balance account with DTC through its Deposit Withdrawal Agent
Commission system, or (Y) if the Transfer Agent is not participating in the DTC
Fast Automated Securities Transfer Program, issue and dispatch by overnight
courier to the address as specified in the Exercise Notice, a certificate,
registered in the Company's share register in the name of the Holder or its
designee, for the number of shares of Common Stock to which the Holder is
entitled pursuant to such exercise. Upon delivery of the Exercise Delivery
Documents or notification to the Company of a Cashless Exercise referred to in
Section 1(d), the Holder shall be deemed for all corporate purposes to have
become the holder of record of the Warrant Shares in respect of which this
Warrant has been exercised, irrespective of the date of delivery of the
certificates evidencing such Warrant Shares. If this Warrant is submitted in
connection with any exercise pursuant to this Section 1(a) and the number of
Warrant Shares represented by this Warrant submitted for exercise is greater
than the number of Warrant Shares being acquired upon an exercise, then the
Company shall as soon as practicable and in no event later than three (3)
Business Days after any exercise and at its own expense, issue a new Warrant (in
accordance with Section 8(d)) representing the right to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares in respect of which this Warrant is
exercised. No fractional shares of Common Stock are to be issued upon the
exercise of this Warrant, but rather the number of shares of Common Stock to be
issued shall be rounded up to the nearest whole number. The Company shall pay
any and all taxes, including without limitation, all documentary stamp, transfer
or similar taxes, or other incidental expense that may be payable with respect
to the issuance and delivery of Warrant Shares upon exercise of this Warrant.
- 2 -
(b) Exercise Price. For purposes of this Warrant, "Exercise Price"
means the lower of $8.00 and 125% of the per share price of the Common Stock
sold in the PIPE Offering (as defined in the Securities Purchase Agreement), and
as further adjusted as provided herein.
(c) Company's Failure to Timely Deliver Securities. If within three
(3) Trading Days after the Company's receipt of the facsimile copy of Exercise
Delivery Documents, the Company fails to issue and deliver a certificate for
that number of shares of Common Stock to which the Holder is entitled and
register such shares of Common Stock on the Company's share register or credit
the Holder's balance account with DTC for the number of shares of Common Stock
to which the Holder is entitled upon such Holder's exercise hereunder, and if on
or after such Trading Day the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of shares of Common Stock issuable upon such exercise that the Holder
anticipated receiving from the Company (a "Buy-In"), then the Company shall,
within three (3) Business Days after the Holder's request and in the Holder's
discretion, either (i) pay cash to the Holder in an amount equal to the Holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the "Buy-In Price"), at which point the Company's
obligation to deliver such certificate (and to issue such shares of Common
Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such shares of Common Stock
and pay cash to the Holder in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of Common Stock,
times (B) the Closing Bid Price on the date of exercise.
(d) Cashless Exercise. Notwithstanding anything contained herein to
the contrary, the Holder may, in its sole discretion, exercise this Warrant in
whole or in part and, in lieu of making the cash payment otherwise contemplated
to be made to the Company upon such exercise in payment of the Aggregate
Exercise Price, elect instead to receive upon such exercise the "Net Number" of
shares of Common Stock determined according to the following formula (a
"Cashless Exercise"):
Net Number = (A x B) - (A x C)
-----------------
B
For purposes of the foregoing formula:
A= the total number of shares in respect of which
this Warrant is then being exercised.
B= the Closing Sale Price of the shares of Common
Stock (as reported by Bloomberg) on the date
immediately preceding the date of the Exercise
Notice.
C= the Exercise Price then in effect for the
applicable Warrant Shares at the time of such
exercise.
(e) Disputes. In the case of a dispute as to the determination of
the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall promptly issue to the Holder the number of Warrant Shares that are
not disputed and resolve such dispute in accordance with Section 13.
- 3 -
(f) Limitations on Exercises
(i) Beneficial Ownership. The Company shall not effect the
exercise of this Warrant, and the Holder shall not have the right to
exercise this Warrant, to the extent that after giving effect to
such exercise, such Person (together with such Person's affiliates)
would beneficially own in excess of 4.99% (the "Maximum Percentage")
of the number of shares of Common Stock outstanding immediately
after giving effect to such exercise. For purposes of the foregoing
sentence, the aggregate number of shares of Common Stock
beneficially owned by such Person and its affiliates shall include
the number of shares of Common Stock issuable upon exercise of this
Warrant with respect to which the determination of such sentence is
being made, but shall exclude the number of shares of Common Stock
which would be issuable upon (i) exercise of the remaining,
unexercised portion of this Warrant beneficially owned by such
Person and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the
Company beneficially owned by such Person and its affiliates
(including, without limitation, any convertible notes or convertible
preferred stock or warrants) subject to a limitation on conversion
or exercise analogous to the limitation contained herein. Except as
set forth in the preceding sentence, for purposes of this paragraph,
beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended. For
purposes of this Warrant, 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 (1) the Company's
most recent Form 10-K, Form 10-Q, Current Report on Form 8-K or
other public filing with the Securities and Exchange Commission, as
the case may be, (2) a more recent public announcement by the
Company or (3) any other notice by the Company or the Transfer Agent
setting forth the number of shares of Common Stock outstanding. For
any reason at any time, upon the written or oral request of the
Holder, the Company shall within one Business Day confirm orally and
in writing to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including the Convertible
Notes issued pursuant to the Indenture and the SPA Warrants, by the
Holder and its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. By written notice
to the Company, the Holder may from time to time increase or
decrease the Maximum Percentage to any other percentage not in
excess of 9.99% specified in such notice; provided that (i) any such
increase will not be effective until the sixty-first (61st) day
after such notice is delivered to the Company, and (ii) any such
increase or decrease will apply only to the Holder and not to any
other holder of SPA Warrants.
- 4 -
(ii) Principal Market Regulation. The Company shall not be
obligated to issue any shares of Common Stock upon exercise of this
Warrant if the issuance of such shares of Common Stock would exceed
that number of shares of Common Stock which the Company may issue
upon conversion of the Convertible Notes issued pursuant to the
Indenture and exercise of the SPA Warrants without breaching the
Company's obligations under any applicable rules or regulations of
the Principal Market (the "Exchange Cap"), except that such
limitation shall not apply in the event that the Company (A) obtains
the approval of its stockholders as required by the applicable rules
of the Principal Market for issuances of shares of Common Stock in
excess of such amount or (B) obtains a written opinion from outside
counsel to the Company that such approval is not required, which
opinion shall be reasonably satisfactory to the Required Holders.
Until such approval or written opinion is obtained, no Buyer shall
be issued, upon exercise or conversion, as applicable, of any SPA
Warrants or Convertible Notes issued pursuant to the Indenture,
shares of Common Stock in an amount greater than the product of the
Exchange Cap multiplied by a fraction the numerator of which is the
total number of shares of Common Stock issuable to such Buyer upon
the exercise of all such Buyer's SPA Warrants and the conversion or
all such Buyer's Convertible Notes and the denominator of which is
the total number of shares of Common Stock issuable upon the
exercise of all the SPA Warrants and conversion of all the
Convertible Notes (in respect of each Buyer, the "Exchange Cap
Allocation"). In the event that any Buyer shall sell or otherwise
transfer any of such Buyer's SPA Warrants, the transferee shall be
allocated a pro rata portion of such Buyer's Exchange Cap
Allocation, and the restrictions of the prior sentence shall apply
to such transferee with respect to the portion of the Exchange Cap
Allocation allocated to such transferee. In the event that any
holder shall exercise all of such holder's SPA Warrants into a
number of shares of Common Stock which, in the aggregate, is less
than such holder's Exchange Cap Allocation, then the difference
between such holder's Exchange Cap Allocation and the number of
shares of Common Stock actually issued to such holder shall be
allocated to the respective Exchange Cap Allocations of the
remaining holders of SPA Warrants on a pro rata basis in proportion
to the shares of Common Stock underlying the SPA Warrants and
Convertible Notes then held by each such holder. In the event that
the Company is prohibited from issuing any Warrant Shares for which
an Exercise Notice has been received as a result of the operation of
this Section 1(f)(ii), the Company shall pay cash in exchange for
cancellation of such Warrant Shares, at a price per Warrant Share
equal to the difference between the Closing Sale Price and the
Exercise Price as of the date of the attempted exercise.
(g) Insufficient Authorized Shares. If at any time while any of the
Warrants remain outstanding the Company does not have a sufficient number of
authorized and unreserved shares of Common Stock to satisfy its obligation to
reserve for issuance upon exercise of the Warrants at least a number of shares
of Common Stock equal to 130% of the number of shares of Common Stock as shall
from time to time be necessary to effect the exercise of all of the Warrants
then outstanding (the "Required Reserve Amount") (an "Authorized Share
Failure"), then the Company shall immediately take all action necessary to
increase the Company's authorized shares of Common Stock to an amount sufficient
to allow the Company to reserve the Required Reserve Amount for the SPA Warrants
then outstanding. Without limiting the generality of the foregoing sentence, as
soon as practicable after the date of the occurrence of an Authorized Share
Failure, but in no event later than sixty (60) days after the occurrence of such
Authorized Share Failure, the Company shall hold a meeting of its stockholders
for the approval of an increase in the number of authorized shares of Common
Stock. In connection with such meeting, the Company shall provide each
stockholder with a proxy statement and shall use its best efforts to solicit its
stockholders' approval of such increase in authorized shares of Common Stock and
to cause its board of directors to recommend to the stockholders that they
approve such proposal.
- 5 -
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The
Exercise Price and the number of Warrant Shares shall be adjusted from time to
time as follows:
(a) Adjustment upon Issuance of Shares of Common Stock. If and
whenever on or after the Subscription Date the Company issues or sells, or in
accordance with this Section 2 is deemed to have issued or sold, any shares of
Common Stock (including the issuance or sale of shares of Common Stock owned or
held by or for the account of the Company, but excluding shares of Common Stock
deemed to have been issued by the Company in connection with any Excluded
Securities) for a consideration per share less than a price (the "Applicable
Price") equal to the Exercise Price in effect immediately prior to such issue or
sale or deemed issuance or sale (the foregoing a "Dilutive Issuance"), then
immediately after such Dilutive Issuance, the Exercise Price then in effect
shall be reduced to an amount equal to the product of (A) the Exercise Price in
effect immediately prior to such Dilutive Issuance and (B) the quotient
determined by dividing (1) the sum of (I) the product derived by multiplying the
Exercise Price in effect immediately prior to such Dilutive Issuance and the
number of shares of Common Stock Deemed Outstanding immediately prior to such
Dilutive Issuance plus (II) the consideration, if any, received by the Company
upon such Dilutive Issuance, by (2) the product derived by multiplying (I) the
Exercise Price in effect immediately prior to such Dilutive Issuance by (II) the
number of shares of Common Stock Deemed Outstanding immediately after such
Dilutive Issuance. Upon each such adjustment of the Exercise Price hereunder,
the number of Warrant Shares shall be adjusted to the number of shares of Common
Stock determined by multiplying the Exercise Price in effect immediately prior
to such adjustment by the number of Warrant Shares acquirable upon exercise of
this Warrant immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment. For purposes of
determining the adjusted Exercise Price under this Section 2(a), the following
shall be applicable:
(i) Issuance of Options. If the Company in any manner grants
any Options and the lowest price per share for which one share of
Common Stock is issuable upon the exercise of any such Option or
upon conversion, exercise or exchange of any Convertible Securities
issuable upon exercise of any such Option is less than the
Applicable Price, then such share of Common Stock shall be deemed to
be outstanding and to have been issued and sold by the Company at
the time of the granting or sale of such Option for such price per
share. For purposes of this Section 2(a)(i), the "lowest price per
share for which one share of Common Stock is issuable upon the
exercise of any such Options or upon conversion, exercise or
exchange of any Convertible Securities issuable upon exercise of any
such Option" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with
respect to any one share of Common Stock upon the granting or sale
of the Option, upon exercise of the Option and upon conversion,
exercise or exchange of any Convertible Security issuable upon
exercise of such Option. No further adjustment of the Exercise Price
or number of Warrant Shares shall be made upon the actual issuance
of such shares of Common Stock or of such Convertible Securities
upon the exercise of such Options or upon the actual issuance of
such shares of Common Stock upon conversion, exercise or exchange of
such Convertible Securities.
- 6 -
(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities and the lowest
price per share for which one share of Common Stock is issuable upon
the conversion, exercise or exchange thereof is less than the
Applicable Price, then such share of Common Stock shall be deemed to
be outstanding and to have been issued and sold by the Company at
the time of the issuance or sale of such Convertible Securities for
such price per share. For the purposes of this Section 2(a)(ii), the
"lowest price per share for which one share of Common Stock is
issuable upon the conversion, exercise or exchange thereof" shall be
equal to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to one share of
Common Stock upon the issuance or sale of the Convertible Security
and upon conversion, exercise or exchange of such Convertible
Security. No further adjustment of the Exercise Price or number of
Warrant Shares shall be made upon the actual issuance of such shares
of Common Stock upon conversion, exercise or exchange of such
Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for
which adjustment of this Warrant has been or is to be made pursuant
to other provisions of this Section 2(a), no further adjustment of
the Exercise Price or number of Warrant Shares shall be made by
reason of such issue or sale.
(iii) Change in Option Price or Rate of Conversion. If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion, exercise
or exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exercisable or
exchangeable for shares of Common Stock increases or decreases at
any time, the Exercise Price and the number of Warrant Shares in
effect at the time of such increase or decrease shall be adjusted to
the Exercise Price and the number of Warrant Shares which would have
been in effect at such time had such Options or Convertible
Securities provided for such increased or decreased purchase price,
additional consideration or increased or decreased conversion rate,
as the case may be, at the time initially granted, issued or sold.
For purposes of this Section 2(a)(iii), if the terms of any Option
or Convertible Security that was outstanding as of the date of
issuance of this Warrant are increased or decreased in the manner
described in the immediately preceding sentence, then such Option or
Convertible Security and the shares of Common Stock deemed issuable
upon exercise, conversion or exchange thereof shall be deemed to
have been issued as of the date of such increase or decrease. No
adjustment pursuant to this Section 2(a) shall be made if such
adjustment would result in an increase of the Exercise Price then in
effect or a decrease in the number of Warrant Shares.
- 7 -
(iv) Calculation of Consideration Received. In case any Option
is issued in connection with the issue or sale of other securities
of the Company, together comprising one integrated transaction in
which no specific consideration is allocated to such Options by the
parties thereto, the Options will be deemed to have been issued for
a consideration of $0.01. If any shares of Common Stock, Options or
Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be
deemed to be the net amount received by the Company therefor. If any
shares of Common Stock, Options or Convertible Securities are issued
or sold for a consideration other than cash, the amount of such
consideration received by the Company will be the fair value of such
consideration, except where such consideration consists of
securities, in which case the amount of consideration received by
the Company will be the Closing Sale Price of such security on the
date of receipt. If any shares of Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving
entity in connection with any merger in which the Company is the
surviving entity, the amount of consideration therefor will be
deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such
shares of Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or
securities will be determined jointly by the Company and the
Required Holders. If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring
valuation (the "Valuation Event"), the fair value of such
consideration will be determined within five (5) Business Days after
the tenth day following the Valuation Event by an independent,
reputable appraiser jointly selected by the Company and the Required
Holders. The determination of such appraiser shall be final and
binding upon all parties absent manifest error and the fees and
expenses of such appraiser shall be borne by the Company.
(v) Record Date. If the Company takes a record of the holders
of shares of Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in shares of Common
Stock, Options or in Convertible Securities or (B) to subscribe for
or purchase shares of Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making
of such other distribution or the date of the granting of such right
of subscription or purchase, as the case may be.
(b) Adjustment upon Subdivision or Combination of Common Stock. If
the Company at any time on or after the Subscription Date subdivides (by any
stock split, stock dividend, recapitalization or otherwise) one or more classes
of its outstanding shares of Common Stock into a greater number of shares, the
Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced and the number of Warrant Shares will be proportionately
increased. If the Company at any time on or after the Subscription Date combines
(by combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination will be proportionately
increased and the number of Warrant Shares will be proportionately decreased.
Any adjustment under this Section 2(b) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
- 8 -
(c) In case the Company or any of its Subsidiaries shall purchase
any shares of the Company's Common Stock by means of a tender offer, then,
effective immediately prior to the opening of business on the day after the last
date (the "Expiration Date") tenders could have been made pursuant to such
tender offer (as it may be amended) (the last time at which such tenders could
have been made on the Expiration Date is hereinafter sometimes called the
"Expiration Time"):
(i) the Exercise Price shall be adjusted so that the same
shall equal the price determined by multiplying the Exercise Price
in effect immediately prior to the close of business on the
Expiration Date by a fraction of which: (A) the numerator shall be
the product of the number of shares of Common Stock outstanding
(including Purchased Shares but excluding any shares held in the
treasury of the Company) immediately prior to the Expiration Time
multiplied by the Current Market Price per share of the Common
Stock; and (B) the denominator shall be the sum of (x) the aggregate
consideration (determined as set forth below) payable to
stockholders of the Company based on the acceptance (up to any
maximum specified in the terms of the tender offer) of all shares
validly tendered and not withdrawn as of the Expiration Time (the
shares deemed so accepted, up to any such maximum, being referred to
as the "Purchased Shares") and (y) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares and
excluding any shares held in the treasury of the Company)
immediately prior to the Expiration Time and the Current Market
Price per share of Common Stock; and
(ii) the number of Warrant shares shall be adjusted so that
the same shall equal the number of Warrant Shares in effect
immediately prior to the closing of business on the Expiration Date
multiplied by the reciprocal of the fraction described in the
preceding paragraph (i).
For purposes of this clause (c) of Section 2, the aggregate consideration in any
such tender offer shall equal the sum of the aggregate amount of cash
consideration and the aggregate fair market value (as determined by the Board of
Directors, whose determination shall be conclusive evidence thereof and which
shall be evidenced by an Officers' Certificate delivered to Holder) of any other
consideration payable in such tender offer. In the event that the Company is
obligated to purchase shares pursuant to any such tender offer, but the Company
is permanently prevented by applicable law from effecting any or all such
purchases or any or all such purchases are rescinded, the Exercise Price and
number of Warrant Shares shall again be adjusted to be the Exercise Price and
number of Warrant Shares which would have been in effect based upon the number
of shares actually purchased. If the application of this clause (c) of Section 2
to any tender offer would result in an increase in the Exercise Price or a
decrease in the number of Warrant Shares, no adjustment shall be made for such
tender offer under this Section 2. For purposes of this clause (c) of Section 2,
the term "tender offer" shall mean and include both tender offers and exchange
offers, all references to "purchases" of shares in tender offers (and all
similar references) shall mean and include both the purchase of shares in tender
offers and the acquisition of shares pursuant to exchange offers, and all
references to "tendered shares" (and all similar references) shall mean and
include shares tendered in both tender offers and exchange offers.
- 9 -
(d) Other Events. If any event occurs of the type contemplated by
the provisions of this Section 2 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company's Board of Directors will make an appropriate adjustment in the Exercise
Price and the number of Warrant Shares so as to protect the rights of the
Holder; provided that no such adjustment pursuant to this Section 2(c) will
increase the Exercise Price or decrease the number of Warrant Shares as
otherwise determined pursuant to this Section 2.
3. RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall declare or
make any dividend or other distribution of its assets (or rights to acquire its
assets) to holders of shares of Common Stock, by way of return of capital or
otherwise (including, without limitation, any distribution of cash, stock or
other securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a "Distribution"), at any time after the issuance of this
Warrant, then, in each such case:
(a) any Exercise Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of shares of
Common Stock entitled to receive the Distribution shall be reduced, effective as
of the close of business on such record date, to a price determined by
multiplying such Exercise Price by a fraction of which (i) the numerator shall
be the Closing Bid Price of the shares of Common Stock on the trading day
immediately preceding such record date minus the value of the Distribution (as
determined in good faith by the Company's Board of Directors) applicable to one
share of Common Stock, and (ii) the denominator shall be the Closing Bid Price
of the shares of Common Stock on the trading day immediately preceding such
record date; and
(b) the number of Warrant Shares shall be increased to a number of
shares equal to the number of shares of Common Stock obtainable immediately
prior to the close of business on the record date fixed for the determination of
holders of shares of Common Stock entitled to receive the Distribution
multiplied by the reciprocal of the fraction set forth in the immediately
preceding paragraph (a); provided that in the event that the Distribution is of
shares of Common Stock (or common stock) ("Other Shares of Common Stock") of a
company whose common shares are traded on a national securities exchange or a
national automated quotation system, then the Holder may elect to receive a
warrant to purchase Other Shares of Common Stock in lieu of an increase in the
number of Warrant Shares, the terms of which shall be identical to those of this
Warrant, except that such warrant shall be exercisable into the number of shares
of Other Shares of Common Stock that would have been payable to the Holder
pursuant to the Distribution had the Holder exercised this Warrant immediately
prior to such record date and with an aggregate exercise price equal to the
product of the amount by which the exercise price of this Warrant was decreased
with respect to the Distribution pursuant to the terms of the immediately
preceding paragraph (a) and the number of Warrant Shares calculated in
accordance with the first part of this paragraph (b).
- 10 -
4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.
(a) Purchase Rights. In addition to any adjustments pursuant to
Section 2 above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of shares of Common
Stock (the "Purchase Rights"), then the Holder will be entitled to acquire, upon
the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which the Holder could have acquired if the Holder had held the number of shares
of Common Stock acquirable upon complete exercise of this Warrant (without
regard to any limitations on the exercise of this Warrant) immediately before
the date on which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights.
(b) Fundamental Transactions. If, at any time while this Warrant is
outstanding there is a Fundamental Transaction, then the Holder shall have the
right thereafter to receive, upon exercise of this Warrant, the same amount and
kind of securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been, immediately
prior to such Fundamental Transaction, the holder of the number of Warrant
Shares then issuable upon exercise in full of this Warrant (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. At the Holder's option and request made prior to the consummation
of a Fundamental Transaction, any successor to the Company or surviving entity
in such Fundamental Transaction shall, either (1) issue to the Holder a new
warrant substantially in the form of this Warrant and consistent with the
foregoing provisions and evidencing the Holder's right to purchase the Alternate
Consideration for the aggregate Exercise Price upon exercise thereof, or (2)
purchase the Warrant from the Holder for a purchase price, payable in cash
within five Trading Days after such request (or, if later, on the effective date
of the Fundamental Transaction), equal to the Black Scholes value of the
remaining unexercised portion of this Warrant on the date of such request. 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 paragraph (b) and insuring that the Warrant (or any
such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.
- 11 -
5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Articles of Incorporation, Bylaws or
through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, 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, and will at all times in good faith carry out all the
provisions of this Warrant and take all action as may be required to protect the
rights of the Holder. Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the SPA Warrants are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the exercise of the
SPA Warrants, 130% of the number of shares of Common Stock as shall from time to
time be necessary to effect the exercise of the SPA Warrants then outstanding
(without regard to any limitations on exercise).
6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise
specifically provided herein, the Holder, solely in such Person's capacity as a
holder of this Warrant, shall not be entitled to vote or receive dividends or be
deemed the holder of share capital of the Company for any purpose, nor shall
anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person's capacity as the Holder of this Warrant, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the Holder of the Warrant Shares which such
Person is then entitled to receive upon the due exercise of this Warrant. In
addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on the Holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Notwithstanding this Section 6, the Company shall provide the Holder with copies
of the same notices and other information given to the stockholders of the
Company generally, contemporaneously with the giving thereof to the
stockholders.
7. COMPANY'S RIGHT OF OPTIONAL EXERCISE. Subject to the restictions set
forth in Section 1(f), if at any time from and after the Threshold Acquisition
Date (the "Optional Exercise Eligibility Date"), (i) the VWAP of the Common
Stock equals or exceeds 250% of the Exercise Price on the Issuance Date (subject
to appropriate adjustments for stock splits, stock dividends, stock combinations
and other similar transactions after the Issuance Date) for fifteen (15)
consecutive Trading Days following the Optional Exercise Eligibility Date (the
"Optional Exercise Measuring Period"), (ii) the average daily volume from and
including the Optional Exercise Notice Date (as defined below) through and
including the Optional Exercise Date (as defined below) exceeds 500% of the
number of shares of Common Stock for which all then outstanding SPA Warrants are
exercisable per Trading Day, and (iii) the Equity Conditions shall have been
satisfied (or waived in writing by the Holder) from and including the Optional
Exercise Notice Date through and including the Optional Exercise Date, then the
Company shall have the right to require the Holder to exercise all, but not less
than all, of the Warrant Shares as to which this Warrant can be exercised into
fully paid, validly issued and nonassessable shares of Common Stock in
accordance with Section 1 hereof at the Exercise Price as of the Optional
Exercise Date (as defined below) (an "Optional Exercise"). The Company may
exercise its right to require conversion under this Section 7, by delivering
within not more than two (2) Trading Days following the end of such Optional
Exercise Measuring Period, a written notice thereof by facsimile and overnight
courier to all, but not less than all, of the Holders and the Transfer Agent
(the "Optional Exercise Notice" and the date all of the holders received such
notice is referred to as the "Optional Exercise Notice Date"). The Optional
Exercise Notice shall be irrevocable. The Optional Exercise Notice shall state
(A) the date on which the Optional Exercise shall occur (the "Optional Exercise
Date") which date shall be not less than twenty (20) Business Days nor more than
sixty (60) Business Days after the Optional Exercise Notice Date, and (B) the
aggregate number of SPA Warrants which the Company has elected to be subject to
Optional Exercise from all of the Holders pursuant to this Section 7 on the
Optional Exercise Date and (C) the number of shares of Common Stock to be issued
to each such Holder on the Optional Exercise Date. The number of Warrant Shares
as to which this Warrant is being exercised by the Holder after the Optional
Exercise Notice Date shall reduce the number of SPA Warrants required to be
exercised on the Optional Exercise Date.
- 12 -
8. REISSUANCE OF WARRANTS.
(a) Transfer of Warrant. If this Warrant is to be transferred, the
Holder shall surrender this Warrant to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 8(d)), registered as the Holder may request,
representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less then the total number of Warrant Shares
then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 8(d)) to the Holder representing the right to purchase the number
of Warrant Shares not being transferred.
(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company
of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to the Company in
customary form and, in the case of mutilation, upon surrender and cancellation
of this Warrant, the Company shall execute and deliver to the Holder a new
Warrant (in accordance with Section 8(d)) representing the right to purchase the
Warrant Shares then underlying this Warrant.
(c) Exchangeable for Multiple Warrants. This Warrant is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Warrant or Warrants (in accordance with Section 8(d))
representing in the aggregate the right to purchase the number of Warrant Shares
then underlying this Warrant, and each such new Warrant will represent the right
to purchase such portion of such Warrant Shares as is designated by the Holder
at the time of such surrender; provided, however, that no Warrants for
fractional shares of Common Stock shall be given.
(d) Issuance of New Warrants. Whenever the Company is required to
issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i)
shall be of like tenor with this Warrant, (ii) shall represent, as indicated on
the face of such new Warrant, the right to purchase the Warrant Shares then
underlying this Warrant (or in the case of a new Warrant being issued pursuant
to Section 8(a) or Section 8(c), the Warrant Shares designated by the Holder
which, when added to the number of shares of Common Stock underlying the other
new Warrants issued in connection with such issuance, does not exceed the number
of Warrant Shares then underlying this Warrant), (iii) shall have an issuance
date, as indicated on the face of such new Warrant which is the same as the
Issuance Date, and (iv) shall have the same rights and conditions as this
Warrant.
- 13 -
9. NOTICES. Whenever notice is required to be given under this Warrant,
unless otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement. The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this Warrant,
including in reasonable detail a description of such action and the reason
therefor. Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) immediately upon any adjustment of the
Exercise Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least fifteen days prior to the date
on which the Company closes its books or takes a record (A) with respect to any
dividend or distribution upon the shares of Common Stock, (B) with respect to
any grants, issuances or sales of any Options, Convertible Securities or rights
to purchase stock, warrants, securities or other property to holders of shares
of Common Stock or (C) for determining rights to vote with respect to any
Fundamental Transaction, dissolution or liquidation, provided in each case that
such information shall be made known to the public prior to or in conjunction
with such notice being provided to the Holder.
10. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Required
Holders; provided that no such action may increase the exercise price of any SPA
Warrant or decrease the number of shares or class of stock obtainable upon
exercise of any SPA Warrant without the written consent of the Holder. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the SPA Warrants then outstanding.
11. GOVERNING LAW. This Warrant shall be governed by and construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Warrant shall be governed by,
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.
12. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly
drafted by the Company and all the Buyers and shall not be construed against any
person as the drafter hereof. The headings of this Warrant are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Warrant.
- 14 -
13. DISPUTE RESOLUTION. In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within two Business Days of receipt of the Exercise Notice giving rise
to such dispute, as the case may be, to the Holder. If the Holder and the
Company are unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three Business Days of such disputed
determination or arithmetic calculation being submitted to the Holder, then the
Company shall, within two (2) Business Days submit via facsimile (a) the
disputed determination of the Exercise Price to an independent, reputable
investment bank selected by the Company and approved by the Holder or (b) the
disputed arithmetic calculation of the Warrant Shares to the Company's
independent, outside accountant. The Company shall cause at its expense the
investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the Holder of the
results no later than ten Business Days from the time it receives the disputed
determinations or calculations. Such investment bank's or accountant's
determination or calculation, as the case may be, shall be binding upon all
parties absent demonstrable error.
14. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder right
to pursue actual damages for any failure by the Company to comply with the terms
of this Warrant. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
15. TRANSFER. This Warrant may be offered for sale, sold, transferred or
assigned without the consent of the Company, except as may otherwise be required
by Section 2(f) of the Securities Purchase Agreement.
16. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms
shall have the following meanings:
(i) "Approved Stock Plan" means any employee benefit plan which has been
approved by the Board of Directors of the Company, pursuant to which the
Company's securities may be issued to any employee, officer or director
for services provided to the Company or any Subsidiaries thereof.
(ii) "Black Scholes Value" means the value of this Warrant based on the
Black and Scholes Option Pricing Model obtained from the "OV" function on
Bloomberg determined as of the day immediately following the public
announcement of the applicable Fundamental Transaction and reflecting (i)
a risk-free interest rate corresponding to the U.S. Treasury rate for a
period equal to the remaining term of this Warrant as of such date of
request and (ii) an expected volatility equal to the greater of 60% and
the 100 day volatility obtained from the HVT function on Bloomberg.
(iii) "Bloomberg" means Bloomberg Financial Markets.
- 15 -
(iv) "Business Day" means any day other than Saturday, Sunday or other day
on which commercial banks in The City of New York are authorized or
required by law to remain closed.
(v) "Closing Bid Price" and "Closing Sale Price" means, for any security
as of any date, the last closing bid price and last closing trade price,
respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended
hours basis and does not designate the closing bid price or the closing
trade price, as the case may be, then the last bid price or last trade
price, respectively, of such security prior to 4:00:00 p.m., New York
time, as reported by Bloomberg, or, if the Principal Market is not the
principal securities exchange or trading market for such security, the
last closing bid price or last trade price, respectively, of such security
on the principal securities exchange or trading market where such security
is listed or traded as reported by Bloomberg, or if the foregoing do not
apply, the last closing bid price or last trade price, respectively, of
such security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively,
of any market makers for such security as reported in the "pink sheets" by
Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the
Closing Bid Price or the Closing Sale Price cannot be calculated for a
security on a particular date on any of the foregoing bases, the Closing
Bid Price or the Closing Sale Price, as the case may be, of such security
on such date shall be the fair market value as mutually determined by the
Company and the Holder. If the Company and the Holder are unable to agree
upon the fair market value of such security, then such dispute shall be
resolved pursuant to Section 13. All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock
combination or other similar transaction during the applicable calculation
period.
(vi) "Common Stock" means (i) the Company's shares of Common Stock, par
value $0.001 per share, and (ii) any share capital into which such Common
Stock shall have been changed or any share capital resulting from a
reclassification of such Common Stock.
(vii) "Common Stock Deemed Outstanding" means, at any given time, the
number of shares of Common Stock actually outstanding at such time, plus
the number of shares of Common Stock deemed to be outstanding pursuant to
Sections 2(a)(i) and 2(a)(ii) hereof regardless of whether the Options or
Convertible Securities are actually exercisable at such time, but
excluding any shares of Common Stock owned or held by or for the account
of the Company or issuable upon conversion of the Convertible Notes issued
under the Indenture and exercise of the SPA Warrants.
(viii) "Convertible Securities" means any stock or securities (other than
Options) directly or indirectly convertible into or exercisable or
exchangeable for shares of Common Stock.
- 16 -
(ix) "Current Market Price" means, on any date, the average of the daily
Closing Sale Price per Share for the ten (10) consecutive Trading Days
commencing on the record date in respect of distributions, issuances or
other events requiring such computation.
(x) "Eligible Market" means The New York Stock Exchange, Inc., the
American Stock Exchange or The Nasdaq SmallCap Market.
(xi) "Equity Conditions" means those certain conditions to forced
conversion set forth in the Indenture.
(xii) "Excluded Securities" means any Common Stock issued or issuable: (i)
in connection with any employee benefit plan which has been approved by
the Board of Directors of the Company, pursuant to which the Company's
securities may be issued to any employee, officer or director for services
provided to the Company or any Subsidiaries thereof; (ii) pursuant to a
bona fide firm commitment underwritten public offering with a nationally
recognized underwriter which generates gross proceeds to the Company in
excess of $50,000,000 (other than an "at-the-market offering" as defined
in Rule 415(a)(4) under the 1933 Act and "equity lines"); (iii) in the
sale or issuance of the PIPE Securities (as defined in the Indenture);
(iv) upon conversion of the SPA Notes or the exercise of the SPA Warrants
or PIPE Warrants (as defined in the Indenture); (v) in connection with any
acquisition by the Company, whether through an acquisition of stock or a
merger of any business, assets or technologies the primary purpose of
which is not to raise equity capital in an amount not to exceed, in the
aggregate, 10% of the outstanding shares of Common Stock in any calendar
year, or (vi) upon the exercise of an option or warrant or the conversion
of a security outstanding on the date hereof (provided that the terms of
such options or warrants are not amended or modified in any manner after
the date hereof) or an option or warrant issued or granted in compliance
with this paragraph.
(xiii) "Expiration Date" means the date that is sixty months after the
Issuance Date; provided that if such date falls on a day other than a
Business Day or on which trading does not take place on the Principal
Market (a "Holiday"), the next date that is not a Holiday.
(xiv) "Fundamental Transaction" means that the Company shall, directly or
indirectly, in one or more related transactions, (i) consolidate or merge
with or into (whether or not the Company is the surviving corporation)
another Person, or (ii) sell, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or assets of the
Company to another Person, or (iii) be the subject of a purchase, tender
or exchange offer by another Person that is accepted by the holders of
more than the 50% of the outstanding shares of Common Stock (not including
any shares of Common Stock held by the Person or Persons making or party
to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (iv) consummate a stock purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than the 50% of the
outstanding shares of Common Stock (not including any shares of Common
Stock held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to, such
stock purchase agreement or other business combination), or (v)
reorganize, recapitalize or reclassify its Common Stock.
- 17 -
(xv) "Indenture" means that certain Indenture dated March __, 2006,
between the Company and The Bank of New York, as Trustee (as the same may
be amended from time to time).
(xvi) "Options" means any rights, warrants or options to subscribe for or
purchase shares of Common Stock or Convertible Securities.
(xvii) "Parent Entity" of a Person means an entity that, directly or
indirectly, controls the applicable Person and whose common stock or
equivalent equity security is quoted or listed on an Eligible Market, or,
if there is more than one such Person or Parent Entity, the Person or
Parent Entity with the largest public market capitalization as of the date
of consummation of the Fundamental Transaction.
(xviii) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or
agency thereof.
(xix) "Principal Market" means the OTC Bulletin Board.
(xx) "Registration Rights Agreement" means that certain registration
rights agreement by and among the Company and the Buyers.
(xxi) "Required Holders" means the holders of the SPA Warrants
representing at least a majority of shares of Common Stock underlying the
SPA Warrants then outstanding.
(xxii) "SPA Notes" means the Notes issued pursuant to the Securities
Purchase Agreement.
(xxiii) "Successor Entity" means the Person (or, if so elected by the
Required Holders, the Parent Entity) formed by, resulting from or
surviving any Fundamental Transaction or the Person (or, if so elected by
the Required Holders, the Parent Entity) with which such Fundamental
Transaction shall have been entered into.
(xxiv) "Trading Day" means (a) if the applicable security is listed or
admitted for trading on the New York Stock Exchange or another national
security exchange, a day on which the New York Stock Exchange or such
other national security exchange is open for business, (b) if the
applicable security is quoted on the American Stock Exchange, Nasdaq
National Market or Nasdaq Capital Market, a day during which trades may be
made thereon or (c) if the applicable security is not so listed, admitted
for trading or quoted, any Business Day.
- 18 -
(xxv) "VWAP" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or
quoted on an Eligible Market, the daily volume weighted average price of
the Common Stock for such date (or the nearest preceding date) on the
Eligible Market on which the Common Stock is then listed or quoted as
reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30
a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if the Common Stock is
not then listed or quoted on an Eligible Market and if prices for the
Common Stock are then quoted on the OTC Bulletin Board, the volume
weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not
then listed or quoted on the OTC Bulletin Board and if prices for the
Common Stock are then reported in the "Pink Sheets" published by the Pink
Sheets, LLC (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of the
Common Stock so reported; or (d) in all other cases, the fair market value
of a share of Common Stock as determined by an independent appraiser
selected in good faith by the Holders and reasonably acceptable to the
Company.
[Signature Page Follows]
- 19 -
IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common
Stock to be duly executed as of the Issuance Date set out above.
AFG ENTERPRISES USA, INC.
By:
-----------------------------------------
Name:
Title:
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK
AFG ENETERPRISES USA, INC.
The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Common Stock ("Warrant Shares") of AFG
Enterprises USA, Inc., a Nevada corporation (the "Company"), evidenced by the
attached Warrant to Purchase Common Stock (the "Warrant"). Capitalized terms
used herein and not otherwise defined shall have the respective meanings set
forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as:
___________ a "Cash Exercise" in respect of ___________ Warrant
Shares; and/or
___________ a "Cashless Exercise" in respect of ____________ Warrant
Shares.
2. Payment of Exercise Price. In the event that the holder has elected a
Cash Exercise in respect of some or all of the Warrant Shares to be issued
pursuant hereto, the holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the Warrant.
Date: _______________ __, _______
- ---------------------------------
Name of Registered Holder
By:
----------------------------
Name:
Title:
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs
Corporate Stock Transfer to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated
____________________, 200__ from the Company and acknowledged and agreed to by
Corporate Stock Transfer.
AFG ENTERPRISES USA, INC.
By:
-----------------------------------------
Name:
Title:
- 2 -