STRATUS SERVICES, INC.
UNDERWRITERS' WARRANT AGREEMENT
UNDERWRITERS' WARRANT AGREEMENT dated as of ___________, 2000 by and among
STRATUS SERVICES, INC., (the "Company"), a Delaware corporation and HORNBLOWER &
WEEKS, INC. ("HBW"), as Representative of the several Underwriters (the
"Underwriters").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue warrants to the Underwriters
("Warrants") to purchase up to 150,000 shares of common stock, $.001 par value,
of the Company (the "Common Stock"); and
WHEREAS, the Underwriters have agreed, pursuant to the underwriting
agreement (the "Underwriting Agreement") dated _________, 2000 by and among the
Underwriters and the Company, to act as the underwriters in connection with the
Company's public offering of up to 1,500,000 shares of its Common Stock at a
public offering price of $_____ per share (the "Public Offering"); and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Underwriters in consideration for, and as part
of their compensation in connection with acting as underwriters pursuant to the
Underwriting Agreement;
NOW, THEREFORE, in consideration of the foregoing premises which are
incorporated into the terms hereof, of the payment by the Underwriters to the
Company of $100.00 for the Warrants purchased hereunder, the agreements herein
set forth and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Grant. The holders of the Warrants issued hereunder are hereby granted the
right to purchase, at any time from ________, 2001 until 5:00 p.m., New York
time, on ________, 2005, up to 150,000 shares of the Common Stock of the
Company, at an initial exercise price (subject to adjustment as provided in
Article 8 hereof) of $____ per Share (135% of the public offering price per
share), subject to the terms and conditions of this Agreement. The shares
issuable upon exercise of the Warrants are referred to as the "Warrant Shares".
2. Warrant Certificates. The warrant certificates (the "Warrant Certificates")
delivered and to be delivered pursuant to this Agreement shall be in the form
set forth in Exhibit A, attached hereto and made a part hereof, with such
appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. Exercise of Warrants. The Warrants are exercisable during the term set forth
in Section 1 hereof at the Exercise Price (defined below) per Share set forth in
Section 6 hereof payable by certified or cashier's check or money order payable
in lawful money of the United States, subject to adjustment as provided in
Article
8 hereof. Upon surrender of a Warrant Certificate with the annexed Form of
Election to Purchase duly executed, together with payment of the Exercise Price
(as hereinafter defined) for the Warrant Shares (and such other amounts, if any,
arising pursuant to Section 4 hereof) at the Company's principal office in
Manalapan, New Jersey, the registered holder of a Warrant Certificate ("Holder"
or "Holders") shall be entitled to receive a certificate or certificates for the
Warrant Shares so purchased. The purchase rights represented by each Warrant
Certificate are exercisable at the option of the Holder thereof, in whole or in
part, (but not as to fractional Shares). The Warrants may be exercised to
purchase all or part of the Warrant Shares represented thereby. In the case of
the purchase of less than all the Warrant Shares purchasable on the exercise of
the Warrants represented by a Warrant Certificate, the Company shall cancel the
Warrant Certificate represented thereby upon the surrender thereof and shall
execute and deliver a new Warrant Certificate of like tenor for the balance of
the Warrant Shares purchasable thereunder.
4. Issuance of Certificates. Upon the exercise of the Warrants and payment of
the Exercise Price therefor, the issuance of certificates for the Warrant Shares
underlying such Warrants shall be made forthwith (and in any event within three
(3) business days thereafter) without further charge to the Holder thereof, and
such certificates shall (subject to the provisions of Sections 5 and 7 hereof)
be issued in the name of, or in such names as may be directed by, the Holders
thereof; provided, however, 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 such certificates in a name other than that of the Holders, and
the Company shall not be required to issue or deliver such certificates unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. The Warrant
Certificates and the certificates representing the Warrant Shares shall be
executed on behalf of the Company by the manual or facsimile signature of the
then present Chairman or Vice Chairman of the Board of Directors or President or
Vice President of the Company under its corporate seal reproduced thereon,
attested to by the manual or facsimile signature of the then present Secretary
or Assistant Secretary or Treasurer or Assistant Treasurer of the Company.
Warrant Certificates shall be dated the date of execution by the Company upon
initial issuance, division, exchange, substitution or transfer.
5. Restriction on Transfer of Warrants. The Holder of a Warrant Certificate (and
its Permitted Transferee, as defined below), by its acceptance thereof,
covenants and agrees that the Warrants are being acquired as an investment and
not with a view to the distribution thereof; that the Warrants may be sold,
transferred, assigned, hypothecated or otherwise disposed of, in whole or in
part, to any person (a "Permitted Transferee"), provided such transfer,
assignment, hypothecation or other deposition is made in accordance with the
provisions of the Securities Act of 1933 (the "1933 Act"); and provided,
further, that until ________, 2001 (one year after the Effective Date, defined
below) only officers of the Underwriters, or any selling group member or their
respective officers or partners, shall be Permitted Transferees.
6. Exercise Price.
a. Initial and Adjusted Exercise Price. Except as otherwise provided in
Section 8 hereof, the initial exercise price of each Warrant to purchase Warrant
Shares shall be $____ per Share. The adjusted exercise price shall be the price
which shall result from time to time from any and all adjustments of the initial
exercise price in accordance with the provisions of Section 8 hereof.
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b. Exercise Price. The term "Exercise Price" herein shall mean the initial
exercise price or the adjusted exercise price, depending upon the context.
7. Registration Rights.
a. Registration Under the Securities Act of 1933. The Warrant certificates
shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE
OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 (THE "1933 ACT"), OR (II) AN OPINION OF COUNSEL, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH 1933 ACT IS AVAILABLE.
b. Demand Registration. At any time commencing one (1) year and expiring
five (5) years after the effective date of the Company's Registration Statement
relating to the Public Offering (the "Effective Date"), the Holders of the
Warrants and the Warrant Shares representing at least a Majority (as hereinafter
defined) of such securities shall have the right, exercisable by written notice
to the Company, to have the Company prepare and file with the Securities and
Exchange Commission (the "Commission"), on one (1) occasion, a registration
statement on Form X-0, XX-0 (or other appropriate form, including, without
limitation, a post-effective amendment to the Company's Registration Statement)
and such other documents, including a prospectus, as may be necessary in the
opinion of both counsel for the Company and counsel for the Holders, in order to
comply with the provisions of the 1933 Act, so as to permit a public offering
and sale, for a period of nine (9) months, of the Warrant Shares by such Holders
and any other Holders of the Warrants and/or Warrant Shares who notify the
Company within fifteen (15) business days after receipt of the notice described
in the succeeding sentence. The Company covenants and agrees to give written
notice of any registration request under this Section 7(b) by any Holder(s) to
all other registered Holders of the Warrants and the Warrant Shares within ten
(10) days from the date of the receipt of any such registration request. For
purposes of this Agreement, the term "Majority" in reference to the Holders of
the Warrants or Warrant Shares, shall mean in excess of fifty percent (50%) of
the then outstanding Warrants or Warrant Shares that (i) are not held by the
Company, an affiliate, officer, director, employee or agent thereof or any of
their respective affiliates, members of their family, persons acting as nominees
or in conjunction therewith, or (ii) have not been resold to the public pursuant
to a registration statement filed with the Commission under the 1933 Act. The
Holders of the Warrants may demand registration without exercising the Warrants,
and shall never be required to exercise same.
c. Piggyback Registration. If, at any time within the period commencing
one (1) year and expiring six (6) years after the Effective Date, the Company
should file a registration statement with the Commission under the 1933 Act
(other than in connection with a merger or pursuant to Form S-8) it will give
written notice by registered mail, at least twenty (20) days prior to the filing
of each such registration statement, to the Underwriters and to all other
Holders of the Warrants and/or the Warrant Shares of its intention to do so. If
the Underwriters or other Holders of the Warrants and/or the Warrant Shares
notify the Company within
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ten (10) days after receipt of any such notice of its or their desire to include
any Warrant Shares in such proposed registration statement, the Company shall
afford the Underwriters and such Holders of the Warrants and/or Warrant Shares
the opportunity to have any such Warrant Shares registered under such
registration statement. Notwithstanding the provisions of this Section 7(c), the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section 7(c) (irrespective of whether a written request
for inclusion of any such securities shall have been made) to elect not to file
any such proposed registration statement, or to withdraw the same after the
filing but prior to the effective date thereof.
If the underwriter of an offering to which the above piggyback rights
apply objects to such rights, such objection shall preclude such inclusion.
However, in such event, the Company will, within six (6) months of completion of
such subsequent underwriting, file at its sole expense, a registration statement
relating to such excluded Warrant Shares, which shall be in addition to any
registration statement required to be filed pursuant to Section 7(b), unless
such Holders had refused an opportunity provided with the consent of the
underwriter, to be included in the registration statement on the condition that
they agree not to offer the securities for sale without the prior written
consent of the underwriter for a period not exceeding 60 days from the effective
date of such registration statement.
If the underwriter in such underwritten offering shall advise the Company
that it declines to include a portion or all of the Warrant Shares requested by
the Underwriters and the Holders to be included in the registration statement,
then (A) registration of all of the Warrant Shares shall be excluded from such
registration statement on the condition that all securities to be registered by
other selling security holders, if any, are also excluded and (B) registration
of a portion of such Warrant Shares shall be allocated among the Underwriters
and the Holders and any other selling securityholders in proportion to the
respective numbers of securities to be registered by the Underwriters and each
such Holder and other selling securityholder. In such event the Company shall
give the Underwriters and the Holders prompt notice of the number of Warrant
Shares excluded.
d. Covenants of the Company With Respect to Registration. In connection
with any registrations under Sections 7(b) and 7(c) hereof, the Company
covenants and agrees as follows:
(1) The Company shall use its best efforts to file a registration
statement within forty-five (45) days of receipt of any demand
therefor; provided, however, that the Company shall not be required
to produce audited or unaudited financial statements for any period
prior to the date such financial statements are required to be filed
in a report on Form 10-K or Form 10-Q (or Form 10-KSB or Form
10-QSB), as the case may be. The Company shall use its best efforts
to have any registration statements declared effective at the
earliest possible time, and shall furnish each Holder desiring to
sell Shares such number of prospectuses as shall reasonably be
requested.
(2) The Company shall pay all costs (excluding fees and expenses of
Holder(s)' counsel and any underwriting discounts or selling fees,
expenses or commissions), fees and expenses in connection with any
registration statement filed pursuant to Sections 7(b) and 7(c)
hereof including, without limitation, the Company's legal and
accounting fees, printing expenses,
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blue sky fees and expenses. If the Company shall fail to comply with
the provisions of Section 7(d) (1), the Company shall, in addition
to any other equitable or other relief available to the Holder(s),
be liable for any or all incidental, special and consequential
damages and damages due to loss of profit sustained by the Holder(s)
requesting registration of their Warrant Shares.
(3) The Company will take all necessary action which may be required to
qualify or register the Warrant Shares included in a registration
statement for offering and sale under the securities or blue sky
laws of such states as reasonably are requested by the Holder(s),
provided that the Company shall not be obligated to execute or file
any general consent to service of process or to qualify as a foreign
corporation to do business under the laws of any such jurisdiction.
(4) The Company shall indemnify the Holder(s) of the Warrant Shares to
be sold pursuant to any registration statement and each person, if
any, who controls such Holders within the meaning of Section 15 of
the 1933 Act or Section 20(a) of the Securities Exchange Act of 1934
(the "Exchange Act"), against all losses, claims, damages, expenses
or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever)
to which any of them may become subject under the 1933 Act, the
Exchange Act or otherwise, arising from such registration statement,
but only to the same extent and with the same effect as the
provisions pursuant to which the Company has agreed to indemnify the
Underwriters contained in Section 6 of the Underwriting Agreement,
and the Holder(s) shall indemnify the Company to the same extent and
with the same effect as the provisions pursuant to which the
Underwriters have agreed to indemnify the Company contained in
Section 6 of the Underwriting Agreement.
(5) The Holder(s) of the Warrant Shares to be sold pursuant to a
registration statement, and their successors and assigns, shall
severally, and not jointly, indemnify the Company, its officers and
directors and each persons, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20(a) of the
Exchange Act, against all losses, claims, damages, expenses or
liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever)
to which they may become subject under the 1933 Act, the Exchange
Act or otherwise, arising from information furnished by or on behalf
of such Holders, or their successors or assigns, for specific
inclusion in such registration statement to the same extent and with
the same effect as the provisions contained in Section 6 of the
Underwriting Agreement pursuant to which the Underwriters have
agreed to indemnify the Company.
(6) Nothing contained in this Agreement shall be construed as requiring
the Holder(s) to exercise their Warrants prior to the initial filing
of any registration statement or the effectiveness thereof.
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(7) If the manner of distribution proposed by the holders of the
Warrants and the Warrant Shares is an underwriting, the Company
shall furnish to each Holder participating in the offering and to
each underwriter, a signed counterpart, addressed to such Holder or
underwriter of (i) an opinion of counsel to the Company, dated the
effective date of such registration statement (and if such
registration includes an underwritten public offering, an opinion
dated the date of the closing under the underwriting agreement), and
(ii) a "cold comfort" letter dated the effective date of such
registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing
under the underwriting agreement) signed by the independent public
accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in
accountants' letter, with respect to events subsequent to the date
of such financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
(8) The Company shall as soon as practicable after the effective date of
the registration statement, and in any event within the first full
four fiscal quarters following the effective date, make "generally
available to its security holders" (within the meaning of Rule 158
under the 0000 Xxx) an earnings statement (which need not be
audited) complying with Section 11(a) of the 0000 Xxx.
(9) The Company shall deliver promptly to each Holder participating in
the offering requesting the correspondence described below and any
managing underwriter, copies of all correspondence between the
Commission and the Company, its counsel or auditors with respect to
the registration statement and permit each Holder and underwriter to
do such investigation, upon reasonable advance notice, with respect
to information contained in or omitted from the registration
statement as it deems reasonably necessary to comply with applicable
securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to
books, records and properties and opportunities to discuss the
business of the Company with its officers and independent auditors,
all to such reasonable extent and at such reasonable times and as
often as any such Holder shall reasonably request.
(10) In connection with an offering for which the Holders have demand
rights, the Company shall enter into an underwriting agreement with
the managing underwriter selected for such underwriting by Holders
holding a Majority of the Shares requested to be included in such
underwriting. In connection with an offering for which the Holders
have piggyback rights, the Company shall have the sole right to
select the managing underwriter. Such underwriting agreement shall
be satisfactory in form and substance to the Company, a Majority of
such Holders and such managing underwriters, and shall contain such
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representations, warranties and covenants by the Company and such
other terms as are customarily contained in agreements of that type
used by the managing underwriter. The Holders shall be parties to
any underwriting agreement relating to an underwritten sale of their
Warrant Shares and may, at their option, require that any or all the
representations, warranties and covenants of the Company to or for
the benefit of such underwriters shall also be made to and for the
benefit of such Holders. Such Holders shall not be required to make
any representations or warranties to or agreements with the Company
or the underwriters except as they may relate to such Holders their
ownership and their intended methods of distribution.
e. Further Registrations. The Company will cooperate with the Holder(s) of the
Warrants and Warrant Shares in preparing and signing one additional registration
statement, in addition to the registration statements discussed above, required
in order to sell or transfer the Shares and will supply all information required
therefor, but such additional registration statement expenses or offering
statement expenses will be prorated between the Company and the Holders of the
Warrants and Warrant Shares according to the aggregate sales price of the
securities being issued. The provisions of Section 7(d) other than subsection
(2) shall apply to any such registration statement.
8. Adjustments to Exercise Price and Number of Securities; Redemption.
a. (i) Except as hereinafter provided, in the event the Company shall, at
any time or from time to time after the date hereof, issue any shares of Common
Stock as a stock dividend to the holders of Common Stock, or subdivide or
combine the outstanding shares of Common Stock into a greater or lesser number
of shares (any such issuance, subdivision or combination being herein called a
"Change of Shares"), then, and thereafter upon each further Change of Shares,
the Exercise Price for the Warrants (whether or not the same shall be issued and
outstanding) in effect immediately prior to such Change of Shares shall be
changed to a price (including any applicable fraction of a cent to the nearest
cent) determined by dividing (i) the sum of (a) the total number of shares of
Common Stock outstanding immediately prior to such Change of Shares, multiplied
by the Exercise Price in effect immediately prior to such Change of Shares, and
(b) the consideration, if any, received by the Company upon such issuance,
subdivision or combination by (ii) the total number of shares of Common Stock
outstanding immediately after such Change of Shares; provided, however, that in
no event shall the Exercise Price be adjusted pursuant to this computation to an
amount in excess of the Exercise Price in effect immediately prior to such
computation, except in the case of a combination of outstanding shares of Common
Stock.
For the purposes of any adjustment to be made in accordance with this
Section 8(a) the following provisions shall be applicable:
(1) Shares or equivalents of Common Stock issuable by way of dividend or
other distribution on any stock of the Company shall be deemed to
have been issued immediately after the opening of business on the
day following the record date for the determination of
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shareholders entitled to receive such dividend or other distribution
and shall be deemed to have been issued without consideration.
(2) The reclassification of securities of the Company other than shares
of Common Stock into securities including shares of Common Stock
shall be deemed to involve the issuance of such shares of Common
Stock for a consideration other than cash immediately prior to the
close of business on the date fixed for the determination of
security holders entitled to receive such shares, and the value of
the consideration allocable to such shares of Common Stock shall be
determined in good faith by the Board of Directors of the Company on
the basis of a record of values of similar property or services.
(3) The number of shares of Common Stock at any one time outstanding
shall be deemed to include the aggregate maximum number of shares
issuable (subject to readjustment upon the actual issuance thereof)
upon the exercise of options, rights or warrants and upon the
conversion or exchange of convertible or exchangeable securities.
b. Upon each adjustment of the Exercise Price pursuant to this Section 8,
the number of shares of Common Stock purchasable upon the exercise of each
Warrant shall be the number derived by multiplying the number of shares of
Common Stock purchasable immediately prior to such adjustment by the Exercise
Price in effect prior to such adjustment and dividing the product so obtained by
the applicable adjusted Exercise Price.
c. In case of any reclassification or change of outstanding shares of
Common Stock issuable upon exercise of the Warrants (other than a change in par
value, or from par value to no par value, or from no par value to par value or
as a result of a subdivision or combination), or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger with
a subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification or change of the then outstanding shares
of Common Stock or other capital stock issuable upon exercise of the Warrants
(other than a change in par value, or from par value to no par value, or from no
par value to par value or as a result of subdivision or combination) or in case
of any sale or conveyance to another corporation of the property of the Company
as an entirety or substantially as an entirety, then, as a condition of such
reclassification, change, consolidation, merger, sale or conveyance, the
Company, or such successor or purchasing corporation, as the case may be, shall
make lawful and adequate provision whereby the registered Holder of each Warrant
then outstanding shall have the right thereafter to receive on exercise of such
Warrant the kind and amount of securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of securities issuable upon exercise of such Warrant immediately
prior to such reclassification, change, consolidation, merger, sale or
conveyance. Such provisions shall include provision for adjustments which shall
be as nearly equivalent as may be practicable to the adjustments provided for in
Section 8a. The above provisions of this Section 8b. shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
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d. Irrespective of any adjustments or changes in the Exercise Price or the
number of shares of Common Stock purchasable upon exercise of the Warrants, the
Warrant Certificates theretofore and thereafter issued shall, unless the Company
shall exercise its option to issue new Warrant Certificates, continue to express
the Exercise Price per share and the number of shares purchasable thereunder as
the Exercise Price per share and the number of shares purchasable thereunder
were expressed in the Warrant Certificates when the same were originally issued.
e. After each adjustment of the Exercise Price pursuant to this Section 8,
the Company will promptly prepare a certificate signed by the Chairman or
President, and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary, of the Company setting forth: (i) the Exercise Price as so
adjusted, (ii) the number of shares of Common Stock purchasable upon exercise of
each Warrant, after such adjustment, and (iii) a brief statement of the facts
accounting for such adjustment. The Company will promptly cause a brief summary
thereof to be sent by ordinary first class mail to each registered Holder at his
last address as it shall appear on the registry books of the Company. No failure
to mail such notice nor any defect therein or in the mailing thereof shall
affect the validity thereof except as to the holder to whom the Company failed
to mail such notice, or except as to the holder whose notice was defective. The
affidavit of the Secretary or an Assistant Secretary of the Company that such
notice has been mailed shall, in the absence of fraud, be prima facie evidence
of the facts stated therein.
f. No adjustment of the Exercise Price shall be made as a result of or in
connection with the issuance or sale of shares of Common Stock pursuant to
options, warrants, stock purchase agreements and convertible or exchangeable
securities outstanding or in effect on the date hereof or granted upon the
consummation of and in connection with the first Business Combination (as
defined in the Registration Statement). In addition, registered Holders shall
not be entitled to cash dividends paid by the Company prior to the exercise of
any Warrant or Warrants held by them.
g. Definition of Common Stock. For the purpose of this Agreement, the term
"Common Stock" shall mean (i) the class of stock designated as Common Stock in
the Certificate of Incorporation of the Company as it may be amended as of the
date hereof, or (ii) any other class of stock resulting from successive changes
or reclassification of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value. In
the event that the Company shall after the date hereof issue securities with
greater or superior voting rights than those of the shares of Common Stock
outstanding as of the date hereof, the Holder, at its option, may receive upon
exercise of any Warrant either shares of Common Stock or a like number of such
securities with greater or superior voting rights.
h. Reclassification, Merger or Consolidation. The Company will not merge,
reorganize or take any other action which would terminate the Warrants without
first making adequate provision for the Warrants. In case of any
reclassification or change of the outstanding shares of Common Stock (other than
a change in par value to no par value, or from nor par value to par value, or as
a result of a subdivision or combination), or in case of any consolidation of
the Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger in which the Company
is the continuing corporation and which does not result in any reclassification
or change of the outstanding Common Stock except a change as a result of a
subdivision or combination of such shares or a
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change in par value, as aforesaid), or in the case of a sale or conveyance to
another corporation or other entity of the property of the Company as an
entirety, the Holder of each Warrant then outstanding or to be outstanding shall
have the right thereafter (until the expiration of such Warrant) to purchase,
upon exercise of such Warrant, the kind and number of shares of stock and other
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance as if the Holder were the owner of the
shares of Common Stock underlying such Warrants immediately prior to any such
events at a price equal to the product of (x) the number of shares issuable upon
exercise of the Warrants and (y) the Exercise Prices in effect immediately prior
to the record date for such reclassification, change, consolidation, merger,
sale or conveyance, as if such Holder has exercised the Warrants. In the event
of a consolidation, merger, sale or conveyance of property, the corporation
formed by such consolidation or merger, or acquiring such property, shall
execute and deliver to the Holders a supplemental warrant agreement to such
effect. Such supplemental warrant agreement shall provide for adjustments which
shall be identical to the adjustment to those provided in Section 8. The
provisions of this Section 8(h) shall similarly apply to successive
consolidations or mergers.
i. No Adjustment of Exercise Prices in Certain Cases. No adjustment of the
Exercise Prices shall be made:
(1) Upon the issuance or sale of (i) the Warrants or the Warrant Shares;
(ii) the shares of Common Stock pursuant to the Public Offering; or
(iii) the shares of Common Stock issuable upon the exercise of the
options or warrants outstanding or in effect on the date hereof as
described in the prospectus relating to the Public Offering.
(2) If the amount of said adjustments shall be less than five ($.05)
cents per Share, provided, however, that in such case any adjustment
that would otherwise be required then to be made shall be carried
forward and shall be made at the time of and together with the next
subsequent adjustment which, together with any adjustment so carried
forward, shall amount to at least five ($.05) cents per Share.
j. Dividends and Other Distributions. In the event that the Company shall
at any time prior to the exercise of all the Warrants declare a dividend (other
than a dividend consisting solely of shares of Common Stock) or otherwise
distribute to its stockholders any assets, property, rights, evidences of
indebtedness, securities (other than shares of Common Stock), whether issued by
the Company or by another, or any other thing of value, the Holders of the
unexercised Warrants shall thereafter be entitled, in addition to the shares of
Common Stock or other securities and property receivable upon the exercise
thereof, to receive, upon the exercise of such Warrants, the same property,
assets, rights, evidences of indebtedness, securities or any other thing of
value that they would have been entitled to receive at the time of such dividend
or distribution as if the Warrants had been exercised immediately prior to such
dividend or distribution. At the time of any such dividend or distribution, the
Company shall make appropriate reserves to ensure the timely performance of the
provisions of this Section 8 (j).
k. Subscription Rights for Shares of Common Stock of Other Securities. In
the event that the Company or an affiliate of the Company shall at any time
after the date hereof and prior to the exercise of
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all the Warrants issue any rights to subscribe for shares of Common Stock or any
other securities of the Company or of such affiliate to all the stockholders of
the Company, the Holders of the unexercised Warrants shall be entitled to
receive, in addition to the Warrant Shares receivable upon the exercise of the
Warrants, such rights at the time such rights are distributed to the other
stockholders of the Company.
9. Exchange and Replacement of Warrant Certificates. Each Warrant Certificate is
exchangeable without expense, upon the surrender thereof by the registered
Holder at the principal executive office of the Company, for a new Warrant
Certificate of like tenor and date representing in the aggregate the right to
purchase the same number of Shares in such denominations as shall be designated
by the Holder thereof at the time of such surrender. Upon receipt by the Company
of evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any Warrant Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of the Warrants, if mutilated, the Company will
make and deliver a new Warrant Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be required to
issue certificates representing fractions of Shares upon the exercise of the
Warrants, nor shall it be required to issue scrip or pay cash in lieu of
fractional interests; provided, however, that if a Holder exercises all Warrants
or held of record by such Holder the fractional interests shall be eliminated by
rounding any fraction up to the nearest whole number of Shares.
11. Reservation and Listing of Securities. The Company shall at all times
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issuance upon the exercise of the Warrants, such number of
shares of Common Stock as shall be issuable upon the exercise on conversion
thereof. The Company covenants and agrees that, upon exercise of the Warrants
and payment of the Exercise Price therefor, all the Warrant Shares issuable upon
such exercise shall be duly and validly issued, fully paid, nonassessable and
not subject to the preemptive rights of any stockholder. As long as the Warrants
shall be outstanding, the Company shall use its best efforts to cause the Common
Stock to be listed and quoted (subject to official notice of issuance) on all
securities exchanges on which the Common Stock issued to the public in
connection herewith may then be listed or quoted.
12. Notices to Warrant Holders. Nothing contained in this Agreement shall be
construed as conferring upon the Holders the right to vote or to consent or to
receive notice as a stockholder in respect of any meetings of stockholders for
the election of directors or any other matter, or as having any rights
whatsoever as a stockholder of the Company. If, however, at any time prior to
the expiration of the Warrants and their exercise, any of the following events
shall occur:
a. the Company shall take a record of the holders of its shares of Common
Stock for the purpose of entitling them to receive a dividend or distribution
payable otherwise than in cash, or a cash dividend or distribution payable
otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
11
b. the Company shall offer to all the holders of its Common Stock any
additional shares of capital stock of the Company or securities convertible into
or exchangeable for shares of capital stock of the Company, or any option, right
or warrant to subscribe therefor; or
c. a dissolution, liquidation or winding up of the Company (other than in
connection with a consolidation or merger) or a sale of all or substantially all
of its property, assets and business as an entirety shall be proposed; then, in
any one or more of said events, the Company shall give written notice of such
event at least fifteen (15) days prior to the date fixed as a record date or the
date of closing the transfer books for the determination of the stockholders
entitled to such dividend, distribution, convertible or exchangeable securities
or subscription rights, or entitled to vote on such proposed dissolution,
liquidation, winding up or sale. Such notice shall specify such record date or
the date of closing the transfer books, as the case may be. Failure to give such
notice or any defect therein shall not affect the validity of any action taken
in connection with the declaration or payment of any such dividend, or the
issuance of any convertible or exchangeable securities, or subscription rights,
options or warrants, or any proposed dissolution, liquidation, winding up or
sale.
13. Notices. All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made when delivered,
or mailed by registered or certified mail, return receipt requested:
a. If to the registered Holder of the Warrants, to the address of such
Holder as shown on the books of the Company; or
b. If to the Company to the address set forth in Section 3 hereof or to
such other address as the Company may designate by notice to the Holders.
14. Supplements and Amendments. The Company and the Underwriters may from time
to time supplement or amend this Agreement without the approval of any Holders
of Warrant Certificates (other than the Underwriters) in order to cure any
ambiguity, to correct or supplement any provision contained herein which may be
defective or inconsistent with any provisions herein, or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and HBW may deem necessary or desirable and which the Company and the
Underwriters deem shall not adversely affect the interests of the Holders of
Warrant Certificates.
15. Successors. All the covenants and provisions of this Agreement shall be
binding upon and inure to the benefit of the Company, the Underwriters, the
Holders and their respective successors and assigns hereunder.
16. Termination. This Agreement shall terminate at the close of business on
__________, 2010. Notwithstanding the foregoing, the indemnification provisions
of Section 7 shall survive such termination until the close of business on the
later of the expiration of any applicable statue of limitations or ________,
2011.
17. Governing Law; Submission to Jurisdiction. This Agreement and each Warrant
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of New York and for all
12
purposes shall be construed in accordance with the laws of said State without
giving effect to the rules of said State governing the conflicts of laws, except
that matters concerning the validity of the issuance of securities shall be
determined and construed in accordance with the laws of the State of Delaware.
The Company, the Underwriters and the Holders hereby agree that any action,
proceeding or claim against it arising out of, or relating in any way to, this
Agreement shall be brought and enforced in the courts of the State of New York
or of the United States of America for the Southern District of New York, and
irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive.
The Company, the Underwriters and the Holders hereby irrevocably waive any
objection to such exclusive jurisdiction or inconvenient forum. Any such process
or summons to be served upon any of the Company, the Underwriters and the
Holders (at the option of the party bringing such action, proceeding or claim)
may be served by transmitting a copy thereof, by registered or certified mail,
return receipt requested, postage prepaid, addressed to it at the address set
forth in Section 13 hereof. Such mailing shall be deemed personal service and
shall be legal and binding upon the party so served in any action, proceeding or
claim.
18. Entire Agreement; Modification. This Agreement (including the Underwriting
Agreement to the extent portions thereof are referred to herein) contains the
entire understanding between the parties hereto with respect to the subject
matter hereof. Subject to Section 14, this Agreement may not be modified or
amended except by a writing duly signed by the party against whom enforcement of
the modification or amendment is sought.
19. Severability. If any provision of this Agreement shall be held to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provision of this Agreement.
21. Captions. The caption headings of the Sections of this Agreement are for
convenience of reference only and are not intended, nor should they be construed
as, a part of this Agreement and shall be given no substantive effect.
22. Benefits of This Agreement. Nothing in this Agreement shall be construed to
give to any person or corporation, other than the Company and the Underwriters
and any other registered Holder(s) of the Warrant Certificates or Warrant
Shares, any legal or equitable right, remedy or claim under this Agreement; and
this Agreement shall be for the sole and exclusive benefit of the Company and
the Underwriters and any other Holder(s) of the Warrant Certificates or Warrant
Shares.
23. Counterparts. This Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and such counterparts shall together constitute but one and the same
instrument.
24. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Company, the Underwriters and their successors and assigns and
the Holders from time to time of the Warrant Certificate(s) or any of them.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
13
STRATUS SERVICES, INC.
By:
----------------------------------
HORNBLOWER & WEEKS, INC.
By:
----------------------------------
14
EXHIBIT A
STRATUS SERVICES, INC.
WARRANT CERTIFICATE
THE SECURITIES ISSUABLE UPON EXERCISE OF THE WARRANT REPRESENTED BY THIS
CERTIFICATE MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT"), (II) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (III) AN
OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL
FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE OR
SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933
ACT, OR (II) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY
SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER
SUCH 1933 ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANT REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE COMMENCING ________, 2001 THROUGH 5:00 P.M., NEW YORK TIME ________,
2005
NO. WC-1 _________ WARRANTS
This Warrant Certificate certifies that ____________________ or registered
assigns, is the registered holder of _________ warrants (the "Warrants") to
purchase initially, at any time from _______, 2001, until 5:00 p.m., New York
time on _______, 2005 (the "Expiration Date"), up to ________ fully paid and
non-assessable shares (the "Shares"), of Common Stock, $.001 par value (the
"Common Stock"), of Stratus Services, Inc. a Delaware corporation (the
"Company"), at the exercise price of $____ per Share (the "Exercise Price"),
upon the surrender of this Warrant Certificate and payment of the Exercise Price
at an office or agency of the Company, but subject to the conditions set forth
herein and in the Warrant Agreement dated as of _______, 2000 (the "Warrant
Agreement") by and among the Company, and Hornblower & Weeks, Inc. Payment of
the Exercise Price shall be made by certified or cashier's check or money order
payable to the order of the Company.
No Warrant may be exercised after 5:00 P.M, New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain events
the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange as provided herein,
without any charge except for any tax or other governmental charge imposed in
connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the undersigned has executed this certificate this
__th day of _______, 1996.
[SEAL]
STRATUS SERVICES, INC.
By:
---------------------------
ATTEST:
By:
----------------------------
FORM OF ASSIGNMENT
(To be executed by the registered holder
if such holder desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ____________________________________________
hereby sells, assigns and transfers unto _______________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ____________________
Attorney, to transfer the within Warrant Certificate on the books of The Parts
Source, Inc., with full power of substitution.
Dated:____________________
Signature
----------------------
(Signature must conform in all
respects to the name of holder
as specified on the face of the
Warrant Certificate.)
--------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase:
_______ Shares
and herewith tenders in payment for such securities a certified or cashier's
check or money order payable to the order of The Parts Source, Inc. in the
amount of $_______________, all in accordance with the terms hereof. The
undersigned requests that a certificate for such securities be registered in the
name of _____________________ whose address is ______________________________
and that such Certificate be delivered to _____________________________ whose
address is .
Dated:____________________
Signature
----------------------
(Signature must conform in all
respects to the name of holder
as specified on the face of the
Warrant Certificate.)
--------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
