Current Report — Form 8-K Filing Table of Contents
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1: 8-K Current Report HTML 27K
2: EX-10.1 Material Contract HTML 292K
3: EX-10.2 Material Contract HTML 241K
4: EX-10.3 Material Contract HTML 137K
5: EX-10.4 Material Contract HTML 183K
6: EX-10.5 Material Contract HTML 117K
7: EX-10.6 Material Contract HTML 34K
8: EX-10.7 Material Contract HTML 51K
9: EX-99.1 Miscellaneous Exhibit HTML 17K
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 TO
THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE
COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR
ELIGIBLE TO BE 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.
Kandi
Technologies, Corp.
Warrant
To Purchase Common Stock
Warrant
No.: _______
Date of
Issuance: January __, 2010 (“Issuance Date”)
Kandi
Technologies, Corp., a Delaware corporation (the “Company”), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, [HUDSON BAY FUND, LP][HUDSON BAY OVERSEAS FUND, LTD.],
[OTHER BUYERS], 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 exercise 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 Issuance Date, but not after 11:59 p.m., New York time, on
the Expiration Date (as defined below), [______________] (subject to adjustment
as provided herein) fully paid and 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 17. 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 January 20, 2010 (the “Subscription Date”), by and
among the Company and the investors (the “Buyers”) referred to therein
(the “Securities Purchase
Agreement”).
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 Issuance Date, in whole or in part, by
delivery (whether via facsimile or otherwise) of a written notice, in the form
attached hereto as Exhibit
A (the “Exercise
Notice”), of the Holder’s election to exercise this Warrant. Within one
(1) Trading Day following an exercise of this Warrant as aforesaid, the Holder
shall deliver payment to the Company of an amount equal to the Exercise Price in
effect on the date of such exercise multiplied by the number of Warrant Shares
as to which this Warrant was so exercised (the “Aggregate Exercise Price”) via
wire transfer of immediately available funds if the Holder did not notify the
Company in such Exercise Notice that such exercise was made pursuant to a
Cashless Exercise (as defined in Section 1(d)). The Holder shall not be required
to deliver the original of this Warrant in order to effect an exercise
hereunder. Execution and delivery of an Exercise Notice with respect to less
than all of the Warrant Shares shall have the same effect as cancellation of the
original of this Warrant and issuance of a new Warrant evidencing the right to
purchase the remaining number of Warrant Shares. Execution and delivery of an
Exercise Notice for all of the then-remaining Warrant Shares shall have the same
effect as cancellation of the original of this Warrant after delivery of the
Warrant Shares in accordance with the terms hereof. On or before the second
(2nd) Trading Day following the date on which the Company has received an
Exercise Notice, the Company shall transmit by facsimile an acknowledgment of
confirmation of receipt of such Exercise Notice to the Holder and the Company’s
transfer agent (the “Transfer
Agent”). On or before the third (3rd) Trading Day following the date on
which the Company has received such Exercise Notice, 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 at Custodian system, or (Y) if the Transfer
Agent is not participating in the DTC Fast Automated Securities Transfer
Program, issue and deliver to the Holder or, at the Holder’s instruction
pursuant to the Exercise Notice, the Holder’s agent or designee, in each case,
sent by reputable overnight courier to the address as specified in the
applicable Exercise Notice, a certificate, registered in the Company’s share
register in the name of the Holder or its designee (as indicated in the
applicable Exercise Notice), for the number of shares of Common Stock to which
the Holder is entitled pursuant to such exercise. Upon delivery of an Exercise
Notice, the Holder shall be deemed for all corporate purposes to have become the
holder of record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date such Warrant Shares are credited to the
Holder’s DTC account or the date of delivery of the certificates evidencing such
Warrant Shares (as the case may be). 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, at the request of the
Holder, 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 and
deliver to the Holder (or its designee) a new Warrant (in accordance with
Section 7(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 with respect to 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
which 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 $6.5625,
subject to adjustment as provided herein.
(c) Company’s Failure to Timely
Deliver Securities. If the
Company shall fail, for any reason or for no reason, to issue to the Holder
within three (3) Trading Days after receipt of the applicable Exercise Notice, a
certificate for the 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 to credit the Holder’s balance account with DTC for such number of
shares of Common Stock to which the Holder is entitled upon the Holder’s
exercise of this Warrant (as the case may be), and if on or after such third
(3rd)
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, in addition to
all other remedies available to the Holder, 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 or credit the Holder’s balance account with DTC for the number of
shares of Common Stock to which the Holder is entitled upon the Holder’s
exercise hereunder (as the case may be) (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 or
credit the Holder’s balance account with DTC for the number of shares of Common
Stock to which the Holder is entitled upon the Holder’s exercise hereunder (as
the case may be) 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 Sale Price of the Common Stock on the Trading Day
immediately preceding the date of the applicable Exercise Notice.
(d) Cashless
Exercise.
Notwithstanding anything contained herein to the contrary (other than Section
1(f) below), if at the time of exercise hereof a Registration Statement (as
defined in the Registration Rights Agreement (as defined in the Securities
Purchase Agreement)) is not effective (or the prospectus contained therein is
not available for use) for the resale by the Holder of all of the Warrant
Shares, then 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
3
For purposes of the foregoing
formula:
A= the
total number of shares with respect to which this Warrant is then being
exercised.
B= as
applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day
immediately preceding the date of the applicable Exercise Notice if such
Exercise Notice is (1) both executed and delivered pursuant to Section 1(a)
hereof on a day that is not a Trading Day or (2) both executed and delivered
pursuant to Section 1(a) hereof on a Trading Day prior to the opening of regular
trading hours (as defined in Rule 600(b)(64) of Regulation NMS promulgated under
the federal securities laws) on such Trading Day, (ii) the Bid Price of the
Common Stock as of the time of the Holder’s execution of the applicable Exercise
Notice if such Exercise Notice is executed during regular trading hours on a
Trading Day and is delivered within two (2) hours thereafter pursuant to Section
1(a) hereof and (iii) the Closing Sale Price of the Common Stock on the date of
the applicable Exercise Notice if the date of such Exercise Notice is a Trading
Day and such Exercise Notice is both executed and delivered pursuant to Section
1(a) hereof after the close of regular trading hours on such Trading
Day.
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 number of Warrant Shares to be issued pursuant to
the terms hereof, 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 14.
(f) Limitations on
Exercises.
(i)
Beneficial
Ownership. Notwithstanding anything to the contrary contained
in this Warrant, this Warrant shall not be exercisable by the Holder hereof to
the extent (but only to the extent) that the Holder or any of its affiliates
would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the
Common Stock. To the extent the above limitation applies, the
determination of whether this Warrant shall be exercisable (vis-à-vis other
convertible, exercisable or exchangeable securities owned by the Holder) and of
which such securities shall be exercisable (as among all such securities owned
by the Holder) shall, subject to such Maximum Percentage limitation, be
determined on the basis of the first submission to the Company for conversion,
exercise or exchange (as the case may be). No prior inability to exercise this
Warrant pursuant to this paragraph shall have any effect on the applicability of
the provisions of this paragraph with respect to any subsequent
determination of exercisability. For the purposes of this paragraph, beneficial
ownership and all determinations and calculations (including, without
limitation, with respect to calculations of percentage ownership) shall be
determined in accordance with Section 13(d) of the 1934 Act (as defined in the
Securities Purchase Agreement) and the rules and regulations promulgated
thereunder. The provisions of this paragraph shall be implemented in a manner
otherwise than in strict conformity with the terms of this paragraph to correct
this paragraph (or any portion hereof) which may be defective or inconsistent
with the intended Maximum Percentage beneficial ownership limitation herein
contained or to make changes or supplements necessary or desirable to properly
give effect to such Maximum Percentage limitation. The limitations contained in
this paragraph shall apply to a successor Holder of this Warrant. The holders of
Common Stock shall be third party beneficiaries of this paragraph and the
Company may not waive this paragraph without the consent of holders of a
majority of its Common Stock. For any reason at any time, upon the written or
oral request of the Holder, the Company shall within one (1) Business Day
confirm orally and in writing to the Holder the number of shares of Common Stock
then outstanding, including by virtue of any prior conversion or exercise of
convertible or exercisable securities into Common Stock, including, without
limitation, pursuant to this Warrant or securities issued pursuant to the
Securities Purchase Agreement. By written notice to the Company, any
Holder may 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 61st day after such notice is delivered
to the Company, and (ii) any such increase or decrease will apply only to the
Holder sending such notice and not to any other holder of SPA
Warrants.
4
(ii) Principal Market
Regulation. The Company shall not issue any shares of Common Stock upon
exercise of this Warrant if the issuance of such shares of Common Stock would
exceed the aggregate number of shares of Common Stock which the Company may
issue upon conversion or exercise (as the case may be) of the Notes (as defined
in the Securities Purchase Agreement) and the SPA Warrants or otherwise pursuant
to the terms of the Notes without breaching the Company’s obligations under the
rules or regulations of the Principal Market (the number of shares which may be
issued without violating such rules and regulations, 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 Holder. Until such approval or such written opinion is obtained, no Buyer
shall be issued in the aggregate, upon exercise or conversion (as the case may
be) of any SPA Warrants or any of the Notes or otherwise pursuant to the terms
of the Notes, shares of Common Stock in an amount greater than the product of
(i) the Exchange Cap multiplied by (ii) the quotient of (1) the original
principal amount of Notes issued to such Buyer pursuant to the Securities
Purchase Agreement on the Closing Date divided by (2) the aggregate original
principal amount of all Notes issued to the Buyers pursuant to the Securities
Purchase Agreement on the Closing Date (with respect to 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 with respect to such portion of such SPA
Warrants so transferred, and the restrictions of the prior sentence shall apply
to such transferee with respect to the portion of the Exchange Cap Allocation so
allocated to such transferee. Upon exercise and conversion in full of a holder’s
SPA Warrants and Notes, the difference (if any) between such holder’s
Exchange Cap Allocation and the number of shares of Common Stock actually issued
to such holder upon such holder's exercise in full of such SPA Warrants and such
holder’s conversion in full of such Notes shall be allocated to the respective
Exchange Cap Allocations of the remaining holders of SPA Warrants and Notes on a
pro rata basis in proportion to the shares of Common Stock underlying the SPA
Warrants and Notes then held by each such holder.
5
(g) Insufficient Authorized
Shares. The
Company shall at all times keep reserved for issuance under this Warrant a
number of shares of Common Stock as shall be necessary to satisfy the Company’s
obligation to issue shares of Common Stock hereunder (without regard to any
limitation otherwise contained herein with respect to the number of shares of
Common Stock that may be acquirable upon exercise of this Warrant). If,
notwithstanding the foregoing, and not in limitation thereof, at any time while
any of the SPA 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 SPA Warrants at
least a number of shares of Common Stock equal to the number of shares of Common
Stock as shall from time to time be necessary to effect the exercise of all of
the SPA 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 all
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.
2. ADJUSTMENT OF EXERCISE PRICE
AND NUMBER OF WARRANT SHARES. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 2.
(a) Stock Dividends and
Splits. If
the Company, at any time on or after the date of the Securities Purchase
Agreement, (i) pays a stock dividend on one or more classes of its then
outstanding shares of Common Stock or otherwise makes a distribution on any
class of capital stock that is payable in shares of Common Stock, (ii)
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its then outstanding shares of Common Stock into a larger
number of shares or (iii) combines (by combination, reverse stock split or
otherwise) one or more classes of its then outstanding shares of Common Stock
into a smaller number of shares, then in each such case the Exercise Price shall
be multiplied by a fraction of which the numerator shall be the number of shares
of Common Stock outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause
(i) of this paragraph shall become effective immediately after the record date
for the determination of stockholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clause (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of such
subdivision or combination. If any event requiring an adjustment under this
paragraph occurs during the period that an Exercise Price is calculated
hereunder, then the calculation of such Exercise Price shall be adjusted
appropriately to reflect such event.
6
(b) Adjustment Upon Issuance of
Shares of Common Stock. If and
whenever on or after the date of the Securities Purchase Agreement until the two
year anniversary of the Effective 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 any Excluded Securities
issued or sold or deemed to have been issued or sold) for a consideration per
share (the “New Issuance
Price”) less than a price equal to the Exercise Price in effect
immediately prior to such issue or sale or deemed issuance or sale (such
Exercise Price then in effect is referred to as the “Applicable Price”) (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 New Issuance
Price. For purposes of determining the adjusted Exercise Price under this
Section 2(b), the following shall be applicable:
(i)
Issuance of
Options. If the Company in any manner grants or sells 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(b)(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. Except as contemplated below, no
further adjustment of the Exercise Price 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.
(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(b)(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. Except as
contemplated below, no further adjustment of the Exercise Price 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(b), except as contemplated below, no further
adjustment of the Exercise Price shall be made by reason of such issue or
sale.
7
(iii) Change in Option Price or
Rate of Conversion. If the purchase or exercise 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 in effect at the time of such increase or decrease shall be
adjusted to the Exercise Price 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(b)(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(b) shall be made if such adjustment would
result in an increase of the Exercise Price then in effect.
(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, (x) the Options will be deemed to have been issued for a
consideration equal to the Black-Scholes Consideration Value and (y) the other
securities issued or sold in such integrated transaction shall be deemed to have
been issued for the difference of (I) the aggregate consideration received by
the Company, less (II) the Black-Scholes Consideration Value. 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 of consideration 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 publicly traded
securities, in which case the amount of consideration received by the Company
for such securities will be the arithmetic average of the VWAPs of such security
for each of the five (5) Trading Days immediately preceding 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 publicly traded securities will be determined
jointly by the Company and the Holder. 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) Trading Days after the tenth (10th) day
following such Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Holder. 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.
8
(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).
(c) Number of Warrant
Shares.
Simultaneously with any adjustment to the Exercise Price pursuant to paragraphs
(a), (b) or (f) of this Section 2, the number of Warrant Shares that may be
purchased upon exercise of this Warrant shall be increased or decreased
proportionately, so that after such adjustment the aggregate Exercise Price
payable hereunder for the adjusted number of Warrant Shares shall be the same as
the aggregate Exercise Price in effect immediately prior to such adjustment
(without regard to any limitations on exercise contained herein).
(d) Other
Events. In the
event that the Company (or any direct or indirect subsidiary thereof) shall
take any action to which the provisions hereof are not strictly applicable, or,
if applicable, would not operate to protect the Holder from dilution or 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 shall in good faith
determine and implement an appropriate adjustment in the Exercise Price and the
number of Warrant Shares (if applicable) so as to protect the rights of the
Holder, provided that no such adjustment pursuant to this Section 2(d) will
increase the Exercise Price or decrease the number of Warrant Shares as
otherwise determined pursuant to this Section 2, provided further that if the
Holder does not accept such adjustments as appropriately protecting its
interests hereunder against such dilution, then the Company’s board of directors
and the Holder shall agree, in good faith, upon an independent investment bank
of nationally recognized standing to make such appropriate adjustments, whose
determination shall be final and binding and whose fees and expenses shall be
borne by the Company.
(e) Calculations. All
calculations under this Section 2 shall be made by rounding to the nearest cent
or the nearest 1/100th of a
share, as applicable. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
9
(f) Adjustment If
immediately following the close of business on the twenty-first consecutive
Trading Day immediately following (i) such date the applicable Registration
Statement filed pursuant to the Registration Rights Agreement shall be effective
and the prospectus contained therein shall be available for the resale by the
Holder of all of the Registrable Securities (which, solely for clarification
purposes, includes all shares of Common Stock issuable upon conversion of the
Notes or otherwise pursuant to the terms of the Notes and upon exercise of the
SPA Warrants (without regard for any limitations on conversion, issuance or
exercise set forth therein) in accordance with the terms of the Registration
Rights Agreement) or, (ii) if earlier, each of
(x) [ ]1 or such later date
thereafter when the Company shall have satisfied its current public information
requirement under Rule 144(c)(1) and (y) the Initial Effective Date (as defined
in the Registration Rights Agreement) (each, as applicable, an “Adjustment Date”), the
Exercise Price then in effect exceeds the Market Price as of such Adjustment
Date (the "Adjusted Exercise
Price"), the Exercise Price hereunder shall be reset to the Adjusted
Exercise Price as of such Adjustment Date. For the avoidance of
doubt, the Adjusted Exercise Price, if any, shall not apply to any exercise of
this Warrant prior to such Adjustment Date.
3. RIGHTS UPON DISTRIBUTION OF
ASSETS. In addition to any adjustments pursuant to Section 2 above, 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, the Holder shall be
entitled to participate in such Distribution to the same extent that the Holder
would have participated therein 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 exercise hereof, including without limitation, the Maximum
Percentage) immediately before the date on which a record is taken for such
Distribution, 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 participation in
such Distribution (provided, however, to the extent that the Holder’s right to
participate in any such Distributions would result in the Holder exceeding the
Maximum Percentage, then the Holder shall not be entitled to participate in such
Distribution to such extent (or the beneficial ownership of any such shares of
Common Stock as a result of such Distribution to such extent) and such
Distribution to such extent shall be held in abeyance for the benefit of the
Holder until such time, if ever, as its right thereto would not result in the
Holder exceeding the Maximum Percentage).
1 Insert
six month anniversary of the Issuance Date
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 exercise
hereof, including without limitation, the Maximum Percentage) 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 (provided, however, to the extent that the Holder’s
right to participate in any such Purchase Right would result in the Holder
exceeding the Maximum Percentage, then the Holder shall not be entitled to
participate in such Purchase Right to such extent (or beneficial ownership of
such shares of Common Stock as a result of such Purchase Right to such extent)
and such Purchase Right to such extent shall be held in abeyance for the Holder
until such time, if ever, as its right thereto would not result in the Holder
exceeding the Maximum Percentage).
(b) Fundamental
Transactions. The
Company shall not enter into or be party to a Fundamental
Transaction unless (i) the Successor Entity assumes in writing all of the
obligations of the Company under this Warrant and the other Transaction
Documents (as defined in the Securities Purchase Agreement) in accordance with
the provisions of this Section 4(b) pursuant to written agreements in form and
substance satisfactory to the Holder and approved by the Holder prior to such
Fundamental Transaction, including agreements to deliver to the Holder in
exchange for this Warrant a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to this Warrant,
including, without limitation, which is exercisable for a corresponding number
of shares of capital stock equivalent to the shares of Common Stock acquirable
and receivable upon exercise of this Warrant (without regard to any limitations
on the exercise of this Warrant) prior to such Fundamental Transaction, and with
an exercise price which applies the exercise price hereunder to such shares of
capital stock (but taking into account the relative value of the shares of
Common Stock pursuant to such Fundamental Transaction and the value of such
shares of capital stock, such adjustments to the number of shares of capital
stock and such exercise price being for the purpose of protecting the economic
value of this Warrant immediately prior to the consummation of such Fundamental
Transaction) and (ii) the Successor Entity (including its Parent Entity) is
a publicly traded corporation whose common stock is quoted on or listed for
trading on an Eligible Market. Upon the consummation of each Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so
that from and after the date of the applicable Fundamental Transaction, the
provisions of this Warrant and the other Transaction Documents referring to the
“Company” shall refer instead to the Successor Entity), and may exercise every
right and power of the Company and shall assume all of the obligations of the
Company under this Warrant and the other Transaction Documents with the same
effect as if such Successor Entity had been named as the Company herein. Upon
consummation of each Fundamental Transaction, the Successor Entity shall deliver
to the Holder confirmation that there shall be issued upon exercise of this
Warrant at any time after the consummation of the applicable Fundamental
Transaction, in lieu of the shares of Common Stock (or other securities, cash,
assets or other property (except such items still issuable under Sections 3 and
4(a) above, which shall continue to be receivable thereafter)) issuable upon the
exercise of this Warrant prior to the applicable Fundamental Transaction, such
shares of publicly traded common stock (or its equivalent) of the Successor
Entity (including its Parent Entity) which the Holder would have been entitled
to receive upon the happening of the applicable Fundamental Transaction had this
Warrant been exercised immediately prior to the applicable Fundamental
Transaction (without regard to any limitations on the exercise of this Warrant),
as adjusted in accordance with the provisions of this
Warrant. Notwithstanding the foregoing, the Holder may elect, at its
sole option, by delivery of written notice to the Company to waive this Section
4(b) to permit the Fundamental Transaction without the assumption of this
Warrant. In addition to and not in substitution for any other rights
hereunder, prior to the consummation of each Fundamental Transaction pursuant to
which holders of shares of Common Stock are entitled to receive securities or
other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company
shall make appropriate provision to insure that the Holder will thereafter have
the right to receive upon an exercise of this Warrant at any time after the
consummation of the applicable Fundamental Transaction but prior to the
Expiration Date, in lieu of the shares of the Common Stock (or other securities,
cash, assets or other property (except such items still issuable under Sections
3 and 4(a) above, which shall continue to be receivable thereafter)) issuable
upon the exercise of the Warrant prior to such Fundamental Transaction, such
shares of stock, securities, cash, assets or any other property whatsoever
(including warrants or other purchase or subscription rights) which the Holder
would have been entitled to receive upon the happening of the applicable
Fundamental Transaction had this Warrant been exercised immediately prior to the
applicable Fundamental Transaction (without regard to any limitations on the
exercise of this Warrant). Provision made pursuant to the preceding sentence
shall be in a form and substance reasonably satisfactory to the
Holder.
11
(c) Black Scholes
Value.
Notwithstanding the foregoing and the provisions of Section 4(b) above, in the
event of a Fundamental Transaction, if the Holder has not exercised this Warrant
in full prior to the consummation of such Fundamental Transaction, at the
request of the Holder delivered before the ninetieth (90th) day
after the consummation of such Fundamental Transaction, the Company or the
Successor Entity (as the case may be) shall purchase this Warrant from the
Holder on the date of such request by paying to the Holder cash in an amount
equal to the Black Scholes Value of the unexercised portion of this Warrant that
remained on the date of the consummation of such Fundamental
Transaction.
(d) Application. The
provisions of this Section 4 shall apply similarly and equally to successive
Fundamental Transactions and Corporate Events and shall be applied as if this
Warrant (and any such subsequent warrants) were fully exercisable and without
regard to any limitations on the exercise of this Warrant (provided that the
Holder shall continue to be entitled to the benefit of the Maximum Percentage,
applied however with respect to shares of capital stock registered under the
1934 Act and thereafter receivable upon exercise of this Warrant (or any such
other warrant)).
5. NONCIRCUMVENTION. The
Company hereby covenants and agrees that the Company will not, by amendment of
its Articles of Incorporation (as defined in the Securities Purchase Agreement),
Bylaws (as defined in the Securities Purchase Agreement) 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, the maximum 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).
12
6. WARRANT HOLDER NOT DEEMED A
STOCKHOLDER. Except as otherwise specifically provided herein, the
Holder, solely in its 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 its 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 it 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. 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 7(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 than the total number of
Warrant Shares then underlying this Warrant is being transferred, a new Warrant
(in accordance with Section 7(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 (as to which a written
certification and the indemnification contemplated below shall suffice as such
evidence), and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary and
reasonable 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 7(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 7(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, no
warrants for fractional shares of Common Stock shall be given.
13
(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 7(a) or Section 7(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.
8. NOTICES; CURRENCY;
PAYMENTS.
(a) 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 each adjustment of the Exercise Price and the
number of Warrant Shares, setting forth in reasonable detail, and certifying,
the calculation of such adjustment(s) and (ii) at least fifteen (15) 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 and (iii) at least ten
(10) Trading Days prior to the consummation of any Fundamental
Transaction. To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information regarding the Company
or any of its subsidiaries, the Company shall simultaneously file such notice
with the SEC (as defined in the Securities Purchase Agreement) pursuant to a
Current Report on Form 8-K. It is expressly understood and agreed that the time
of execution specified by the Holder in each Exercise Notice shall be definitive
and may not be disputed or challenged by the Company.
(b) Currency. All
amounts owing under this Warrant or any Transaction Document that, in accordance
with their terms, are paid in cash shall be paid in US
dollars. All amounts denominated in other currencies shall be
converted to the US dollar equivalent amount in accordance with the Exchange
Rate on the date of calculation. “Exchange Rate” means, in
relation to any amount of currency to be converted into US dollars pursuant to
this Warrant, the US dollar exchange rate as published in the Wall Street
Journal on the relevant date of calculation (it being understood and agreed that
where an amount is calculated with reference to, or over, a period of time, the
date of calculation shall be the final date of such period of
time).
14
(c) Payments. Whenever
any payment of cash is to be made by the Company to any Person pursuant to this
Warrant, such payment shall be made in lawful money of the United States of
America via wire transfer of U.S. dollars and immediately available funds in
accordance with the Holder's wire transfer instructions delivered to the Company
on or prior to such payment date or, in the absence of such instructions, by a
check drawn on the account of the Company and sent via overnight courier service
to such Person at such address as previously provided to the Company in writing
(which address, in the case of each of the Purchasers, shall initially be as set
forth in the Exchange Agreement of such Purchaser).
9.
AMENDMENT AND
WAIVER. Except as otherwise provided herein, the provisions of
this Warrant (other than Section 1(f)) 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
Holder. The Holder shall be entitled, at its option, to the benefit
of any amendment of (i) any other similar warrant issued under the Securities
Purchase Agreement or (ii) any other similar warrant. No consideration shall be
offered or paid to the Holder to amend or consent to a waiver or modification of
any provision of this Warrant unless the same consideration is also offered to
all of the holders of the other SPA Warrants. No waiver shall
be effective unless it is in writing and signed by an authorized representative
of the waiving party.
10. SEVERABILITY. If
any provision of this Warrant is prohibited by law or otherwise determined to be
invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the
validity of the remaining provisions of this Warrant so long as this Warrant as
so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of
the parties or the practical realization of the benefits that would otherwise be
conferred upon the parties. The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable provision(s).
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. The Company hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. In the event that any provision of
this Warrant is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of this Warrant. Nothing contained herein shall
be deemed or operate to preclude the Holder from bringing suit or taking other
legal action against the Company in any other jurisdiction to collect on the
Company's obligations to the Holder, to realize on any collateral or any other
security, if any, for such obligations, or to enforce a judgment or other court
ruling in favor of the Holder. The Company hereby appoints CT
Corporation System, with offices at 111 Eighth Avenue, New York, New York10011
as its agent for service of process in the United States. If service
of process is effected pursuant to the above sentence, such service will be
deemed sufficient under New York law and the Company shall not assert otherwise.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. THE COMPANY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.
15
12. JUDGMENT
CURRENCY.
(a) If
for the purpose of obtaining or enforcing judgment against the Company in any
court in any jurisdiction it becomes necessary to convert into any other
currency (such other currency being hereinafter in this Section 12 referred to
as the “Judgment
Currency”) an amount due in U.S. dollars under this Warrant, the
conversion shall be made at the Exchange Rate prevailing on the Trading Day
immediately preceding:
(i) the
date actual payment of the amount due, in the case of any proceeding in the
courts of New York or in the courts of any other jurisdiction that will give
effect to such conversion being made on such date: or
(ii) the
date on which the foreign court determines, in the case of any proceeding in the
courts of any other jurisdiction (the date as of which such conversion is made
pursuant to this Section 12(a)(ii) being hereinafter referred to as the “Judgment Conversion
Date”).
(b) If
in the case of any proceeding in the court of any jurisdiction referred to in
Section 12(a)(ii) above, there is a change in the Exchange Rate prevailing
between the Judgment Conversion Date and the date of actual payment of the
amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
(c) Any
amount due from the Company under this provision shall be due as a separate debt
and shall not be affected by judgment being obtained for any other amounts due
under or in respect of this Warrant.
16
13. CONSTRUCTION;
HEADINGS. This Warrant shall be deemed to be jointly drafted by the
Company and the Holder 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. Terms used in this Warrant but defined in the other Transaction
Documents shall have the meanings ascribed to such terms on the Closing Date (as
defined in the Securities Purchase Agreement) in such other Transaction
Documents unless otherwise consented to in writing by the Holder.
14. DISPUTE RESOLUTION.
In the case of a dispute as to the determination of the Exercise Price, the
Closing Sale Price, the Bid Price or fair market value or the arithmetic
calculation of the Warrant Shares (as the case may be), the Company or the
Holder (as the case may be) shall submit the disputed determinations or
arithmetic calculations (as the case may be) via facsimile (i) within two (2)
Business Days after receipt of the applicable notice giving rise to such dispute
to the Company or the Holder (as the case may be) or (ii) if no notice gave rise
to such dispute, at any time after the Holder learned of the circumstances
giving rise to such dispute (including, without limitation, as to whether any
issuance or sale or deemed issuance or sale was an issuance or sale or deemed
issuance or sale of Excluded Securities). If the Holder and the Company are
unable to agree upon such determination or calculation (as the case may be) of
the Exercise Price, the Closing Sale Price, the Bid Price or fair market value
or the number of Warrant Shares (as the case may be) within three (3) Business
Days of such disputed determination or arithmetic calculation being submitted to
the Company or the Holder (as the case may be), then the Company shall, within
two (2) Business Days submit via facsimile (a) the disputed determination of the
Exercise Price, the Closing Sale Price, the Bid Price or fair market value (as
the case may be) 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 (as the case may be) and
notify the Company and the Holder of the results no later than ten (10) Business
Days from the time it receives such disputed determinations or calculations (as
the case may be). Such investment bank’s or accountant’s determination or
calculation (as the case may be) shall be binding upon all parties absent
demonstrable error.
15. REMEDIES, CHARACTERIZATION,
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 to pursue actual
damages for any failure by the Company to comply with the terms of this Warrant.
The Company covenants to the Holder that there shall be no characterization
concerning this instrument other than as expressly provided herein. Amounts set
forth or provided for herein with respect to payments, exercises and the like
(and the computation thereof) shall be the amounts to be received by the Holder
and shall not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). 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. The Company shall provide all information and documentation to the
Holder that is requested by the Holder to enable the Holder to confirm the
Company’s compliance with the terms and conditions of this Warrant (including,
without limitation, compliance with Section 2 hereof). The issuance of shares
and certificates for shares as contemplated hereby upon the exercise of this
Warrant shall be made without charge to the Holder or such shares for any
issuance tax or other costs in respect thereof, provided that the Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other than
the Holder or its agent on its behalf.
17
16. 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(g) of
the Securities Purchase Agreement.
17. CERTAIN
DEFINITIONS. For purposes of this Warrant, the following terms
shall have the following meanings:
(a) “Approved Stock Plan” means any
employee benefit plan which has been approved by the board of directors of the
Company prior to or subsequent to the date hereof pursuant to which shares of
Common Stock and standard options to purchase Common Stock may be issued to any
employee, officer, consultant or director for services provided to the Company
in their capacity as such.
(b) “Bid Price” means, for any
security as of the particular time of determination, the bid price for such
security on the Principal Market as reported by Bloomberg as of such time of
determination, or, if the Principal Market is not the principal securities
exchange or trading market for such security, the bid price of such security on
the principal securities exchange or trading market where such security is
listed or traded as reported by Bloomberg as of such time of determination, or
if the foregoing does not apply, the bid price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg as of such time of determination, or, if no bid price is
reported for such security by Bloomberg as of such time of determination, the
average of the bid prices of any market makers for such security as reported in
the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.) as of such time of determination. If the Bid Price cannot be calculated
for a security as of the particular time of determination on any of the
foregoing bases, the Bid Price of such security as of such time of determination
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 in accordance with
the procedures in Section 14. All such determinations shall be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during such period.
(c) “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 of
consummation of the applicable Fundamental Transaction for pricing purposes 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 the date of the
Holder’s request pursuant to Section 4(c), (ii) an expected volatility equal to
the greater of 100% and the 30 day volatility obtained from the HVT function on
Bloomberg as of the Trading Day immediately following the public
announcement of the applicable Fundamental Transaction and, if applicable, (iii)
the underlying price per share used in such calculation shall be the sum of the
price per share being offered in cash, if any, plus the value of any non-cash
consideration, if any, being offered in the applicable Fundamental
Transaction.
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(d) “Black Scholes Consideration
Value” means the value of the applicable Options based on the Black and
Scholes Option Pricing Model obtained from the “OV” function on Bloomberg
determined as of the close of business on the Trading Day immediately preceding
the public announcement of the execution of definitive documents with respect to
the sale of such Options and reflecting (i) a risk-free interest rate
corresponding to the U.S. Treasury rate for a period equal to the remaining term
of such Options as of the date of issuance of the such Options and (ii) an
expected volatility equal to the greater of 100% and the 30 day volatility
obtained from the HVT function on Bloomberg as of the Trading Day
immediately following the date of issuance of the such Options.
(e) “Bloomberg” means Bloomberg,
L.P.
(f) “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.
(g) “Closing Sale Price” means, for
any security as of any date, the last closing trade price 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
trade price, then the last trade price 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
trade price 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 does not apply, the last trade price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no last trade price is reported for such security
by Bloomberg, the average of the ask prices 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 Sale Price cannot be calculated
for a security on a particular date on any of the foregoing bases, the Closing
Sale Price 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 in accordance with the procedures in Section 14.
All such determinations shall be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during such
period.
(h) “Common Stock” means
(i) the Company’s shares of common stock, $0.001 par value per share, and
(ii) any capital stock into which such common stock shall have been changed or
any share capital resulting from a reclassification of such common
stock.
19
(i) “Convertible Securities” means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for shares of Common Stock.
(j) “Effective Date” means such
date either (x) the applicable Registration Statement filed pursuant to the
Registration Rights Agreement shall be effective and the prospectus contained
therein shall be available for the resale by the Holder of all of the
Registrable Securities (which, solely for clarification purposes, includes all
shares of Common Stock issuable upon conversion of the Notes or otherwise
pursuant to the terms of the Notes and upon exercise of the SPA Warrants
(without regard for any limitations on conversion, issuance or exercise set
forth therein) in accordance with the terms of the Registration Rights
Agreement) or (y) all Registrable Securities shall be eligible for sale without
restriction under Rule 144 (as defined in the Securities Purchase Agreement)
(including, without limitation, volume restrictions) and without the need for
current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if
applicable) and without the need for registration under any applicable federal
or state securities laws (in each case, disregarding any limitation on
conversion of the Notes, other issuance of securities with respect to
the Notes and exercise of the SPA Warrants).
(k) “Eligible Market” means The New
York Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market,
the NYSE Amex or the Principal Market.
(l) “Excluded Securities” means any
Common Stock issued or issuable: (i) to directors, officers, consultants or
employees of the Company in their capacity as such pursuant to an Approved Stock
Plan, provided that (A) all such issuances (taking into account the shares of
Common Stock issuable upon exercise of Options) after the date hereof pursuant
to this clause (i) do not, in the aggregate, exceed more than 15% of the Common
Stock issued and outstanding immediately prior to the date hereof, and (B) such
Options are not amended to increase the number of shares issuable thereunder or
to lower the exercise price thereof or to otherwise materially change the terms
or conditions thereof in any manner that adversely affects any of the Buyers;
(ii) upon the conversion or exercise of Options or Convertible Securities issued
prior to the date hereof, provided that such Options or Convertible Securities
have not been amended since the date of this Agreement to increase the number of
shares issuable thereunder or to lower the exercise or conversion price thereof
or otherwise materially change the terms or conditions thereof in any manner
that adversely affects any of the Buyer, (iii) upon conversion of the Notes (as
defined in the Securities Purchase Agreement) or the exercise of the SPA
Warrants and (iv) in connection with strategic alliances, acquisitions, mergers,
and strategic partnerships, provided, that (A) the primary purpose of such
issuance is not to raise capital as determined in good faith by the Required
Holders, (B) the purchaser or acquirer of the securities in such issuance solely
consists of either (x) the actual participants in such strategic alliance or
strategic partnership, (y) the actual owners of such assets or securities
acquired in such acquisition or merger or (z) the stockholders, partners or
members of the foregoing Persons and (C) the number or amount of securities
issued to such Person by the Company shall not be disproportionate to such
Person’s actual participation in such strategic alliance or strategic
partnership or ownership of such assets or securities to be acquired by the
Company, as applicable.
20
(m) “Expiration Date” means the
date that is the third (3rd) anniversary of the Issuance Date or, 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.
(n) “Fundamental Transaction” means
that (i) the Company or any of its Subsidiaries shall, directly or indirectly,
in one or more related transactions, (1) consolidate or merge with or into
(whether or not the Company or any of its Subsidiaries is the surviving
corporation) another Person, or (2) sell, lease, license, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties or
assets of the Company or any of its Subsidiaries to another Person, or (3) allow
another Person to make a purchase, tender or exchange offer that is accepted by
the holders of more than 50% of the outstanding shares of Voting Stock of the
Company (not including any shares of Voting Stock of the Company 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 (4)
consummate a stock or share 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 50% of the outstanding shares of Voting Stock of the Company (not
including any shares of Voting Stock of the Company 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 or share purchase agreement or other
business combination), or (5) reorganize, recapitalize or reclassify its Common
Stock, or (ii) any “person” or “group” (as these terms are used for purposes of
Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations
promulgated thereunder) is or shall become the “beneficial owner” (as defined in
Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate
ordinary voting power represented by issued and outstanding Voting Stock of the
Company.
(o) "Market Price" means, for any
given date, the greater of (x) $3.00 (as adjusted for any stock dividend, stock
split, stock combination, reclassification or similar transaction occurring
during the period commencing on the Subscription Date and ending on the
Adjustment Date) and (y) 110% of the quotient of (I) the sum of the VWAP of the
Common Stock on each of the ten (10) consecutive Trading Days ending and
including the Adjustment Date, divided by (II) ten (10) (such period, the “Market Price Measuring
Period”). All such determinations to be appropriately adjusted
for any stock dividend, stock split, stock combination, reclassification or
similar transaction during such Market Price Measuring Period.
(p) “Options” means any rights,
warrants or options to subscribe for or purchase shares of Common Stock or
Convertible Securities.
(q) “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.
(r)
“Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity or a government or any
department or agency thereof.
21
(s)
“Principal Market” means the
Nasdaq Capital Market.
(t)
“Successor Entity” means the
Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting
from or surviving any Fundamental Transaction or the Person (or, if so elected
by the Holder, the Parent Entity) with which such Fundamental Transaction shall
have been entered into.
(u) “Trading Day” means any day on
which the Common Stock is traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is
then traded, provided that “Trading Day” shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York time) unless such
day is otherwise designated as a Trading Day in writing by the
Holder.
(v) “Voting Stock” of a Person
means capital stock of such Person of the class or classes pursuant to which the
holders thereof have the general voting power to elect, or the general power to
appoint, at least a majority of the board of directors, managers or trustees of
such Person (irrespective of whether or not at the time capital stock of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency).
(w) “VWAP” means, for any security
as of any date, the dollar volume-weighted average price for such security on
the Principal Market (or, if the Principal Market is not the principal trading
market for such security, then on the principal securities exchange or
securities market on which such security is then traded) during the period
beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York
time, as reported by Bloomberg through its “Volume at Price” function or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York time, and
ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no
dollar volume-weighted average price is reported for such security by Bloomberg
for such hours, the average of the highest closing bid price and the lowest
closing ask price of any of the market makers for such security as reported in
the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.). If VWAP cannot be calculated for such security on such date on any of the
foregoing bases, the VWAP 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 in accordance with the procedures in Section 14.
All such determinations shall be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during such
period.
[signature page
follows]
22
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.
KANDI
TECHNOLOGIES, CORP.
By:
Name:
Title:
EXHIBIT
A
EXERCISE
NOTICE
TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT
TO PURCHASE COMMON STOCK
KANDI
TECHNOLOGIES, CORP.
The
undersigned holder hereby exercises the right to purchase _________________ of
the shares of Common Stock (“Warrant Shares”) of Kandi
Technologies, Corp., a Delaware corporation corporation (the “Company”), evidenced by
Warrant to Purchase Common Stock No. _______ (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” with respect to _________________ Warrant Shares;
and/or
____________
a
“Cashless
Exercise” with respect to _______________ Warrant
Shares.
In the
event that the Holder has elected a Cashless Exercise with respect to some or
all of the Warrant Shares to be issued pursuant hereto, the Holder hereby
represents and warrants that (i) this Exercise Notice was executed by the Holder
at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,
the Bid Price as of such time of execution of this Exercise Notice was
$________.
2. Payment of Exercise
Price. In the event that the Holder has elected a Cash Exercise with
respect to 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 Holder, or its designee
or agent as specified below, __________ Warrant Shares in accordance with the
terms of the Warrant. Delivery shall be made to Holder, or for its
benefit, to the following address:
_______________________
_______________________
_______________________
_______________________
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 January __, 2010, from the
Company and acknowledged and agreed to by Corporate Stock Transfer.
