Exhibit 10.49
WARRANT AGREEMENT dated as of August __, 2001 between TSET,
INC. a Nevada corporation (the "Company") and THE EAGLE ROCK GROUP, LLC
("Holder").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company proposes to issue to Holder warrants (the
"Warrants") to purchase up to an aggregate of one million four hundred thousand
(1,400,000) shares (the "Shares") of common stock of the Company, par value
$.001 per share (the "Common Stock"); and
WHEREAS, Holder has agreed pursuant to the letter agreement
(the "Letter Agreement") dated as of the date hereof between the the Company and
Holder, to provide certain support and services to the Company, as set forth in
the Letter Agreement; and
WHEREAS, the Warrants issued pursuant to this Agreement are
being issued by the Company to Holder, in consideration for, and as part of the
Holder's compensation in connection with the services to be rendered to the
Company pursuant to the Letter Agreement;
NOW, THEREFORE, in consideration of the foregoing premises,
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. Holder, and its designees, successors and assigns,
are hereby granted the right to purchase, at any time from January 1, 2002 until
5:00 P.M., New York City time, on January 1, 2012 (the "Warrant Exercise Term"),
up to an aggregate of one million four hundred thousand (1,400,000) Shares at an
initial exercise price (subject to adjustment as provided in Article 8 hereof)
of [$0.68] per Share subject to the terms and conditions of this Agreement.
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 as 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.
3.1 CASH EXERCISE. The Warrants initially are exercisable
at a price of $.68 per Share, payable in cash or by certified check to the order
of the Company, or any combination of cash or certified check, subject to
adjustment as provided in Article 8 hereof. Upon surrender of the Warrant
Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Exercise Price (as hereinafter defined) for the
Shares purchased at the Company's principal offices, the Holder shall be
entitled to receive a certificate or certificates for the Shares so purchased.
The purchase rights represented by each Warrant Certificate are exercisable at
the option of the Holder hereof, in whole or in part (but not as to fractional
shares of the Common Stock underlying the Warrants). In the case of the purchase
of less than all the Shares purchasable under any Warrant Certificate, the
Company shall cancel said Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the Shares purchasable thereunder.
3.2 CASHLESS EXERCISE. At any time during the Warrant
Exercise Term, the Holder may, at its option, exchange this Warrant, in whole or
in part (a "Warrant Exchange") and/or shares of the Company's Common Stock held
by Holder (a "Share Exchange"), into the number of Shares determined in
accordance with this Section 3.2, by surrendering this Warrant, and/or
certificates representing the shares of Common Stock to be exchanged, at the
principal office of the Company or at the office of its transfer agent,
accompanied by a notice stating (i) such Holder's intent to effect such
exchange, (ii) the number of Shares to be exchanged and (iii) the date on which
the Holder requests that such Warrant Exchange and/or Share Exchange occur (the
"Notice of Exchange"). The Warrant Exchange and/or Share Exchange shall take
place on the date specified in the Notice of Exchange or, if later, the date the
Notice of Exchange is received by the Company (the "Exchange Date").
Certificates for the Shares issuable upon such Warrant Exchange and/or Share
Exchange and, if applicable, a new Warrant of like tenor evidencing the balance
of the Shares remaining subject to this Warrant, shall be issued as of the
Exchange Date and delivered to the Holder within five (5) business days
following the Exchange Date. In connection with any Warrant Exchange and/or
Share Exchange, this Warrant shall represent the right to subscribe for and
acquire the number of Shares (rounded to the next highest integer) equal to (i)
the number of Shares specified by the Holder in its Notice of Exchange (the
"Total Number") less (ii) the number of Shares equal to the quotient obtained by
dividing (A) the product of the Total Number and the existing Exercise Price (as
hereinafter defined) by (B) the current market value of a share of Common Stock.
For purposes of this Section 3.2, the term "current market value" shall mean the
(i) last reported sale price on the last trading day or, in case no such
reported sale takes place on such day, the average last reported sale price for
the last three (3) trading days, in either case as officially reported by the
principal securities exchange on which the Common Stock is listed or admitted to
trading, or by the Nasdaq National Market or SmallCap Market (referred to
hereinafter as "NASDAQ") if the Common Stock is not listed or admitted to
trading on any national securities exchange but is listed or quoted upon NASDAQ,
or (ii) if the Common Stock is not traded on a national securities exchange or
NASDAQ, the closing bid price on the last trading day, or, in case no such
reported bid takes place on such day, the average closing bid price for the last
three (3) trading days, as furnished by NASDAQ or similar organization if NASDAQ
is no longer reporting such information, or (iii) if the Common Stock is not
listed upon a principal exchange or quoted on NASDAQ, but quotes for the Common
Stock are available in the OTC Bulletin Board or "pink sheets", the average
closing bid price for the last three (3) trading days as furnished on the OTC
Bulletin Board or (iv) in the event the Common Stock is not traded upon a
principal exchange and not listed on NASDAQ and quotes are not available on the
OTC Bulletin Board, the price as determined in good faith by resolution of the
Board of Directors of the Company, based on the best information available to
it.
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4. ISSUANCE OF CERTIFICATES.
4.1 ISSUANCE. Upon the exercise of the Warrants, the
issuance of certificates for the Shares shall be made forthwith (and in any
event within five (5) business days thereafter) without charge to the Holder
thereof including, without limitation, any tax which may be payable in respect
of the issuance thereof, and such certificates shall (subject to the provisions
of Article 5 hereof) be issued in the name of, or in such names as may be
directed in writing by, the Holder 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 Holder 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.
4.2 FORM OF CERTIFICATES. The Warrant Certificates and
certificates representing the 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 of the
Company. Warrant Certificates shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer. The
Warrant Certificates and, upon exercise of the Warrants, in part or in whole,
certificates representing the Shares shall bear a legend substantially similar
to the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), and may not be offered or sold except (i) pursuant to an
effective registration statement under the Act, (ii) to the extent
applicable, pursuant to Rule 144 under the Act (or any similar rule
under such Act relating to the disposition of securities), or (iii)
upon the delivery by the holder to the Company of an opinion of
counsel, reasonably satisfactory to counsel to the Company, stating
that an exemption from registration under such Act is available."
5. TRANSFER OF WARRANTS. The Holder of a Warrant Certificate
may sell, transfer, assign, hypothecate or otherwise dispose of, in whole or in
part, a Warrant Certificate, in which case such designee, assignee or transferee
shall be entitled to receive a replacement Warrant Certificate in accordance
with Section 9 hereof upon presentment of a properly executed Form of Assignment
in the form set forth on Exhibit A attached to the Warrant Certificate. In
connection with the transfer or exercise of Warrants, the purchaser and Holder
agree to execute any documents which may be reasonably required by counsel to
the Company to comply with the provisions of the Act and applicable state
securities laws.
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6. PRICE.
6.1 INITIAL AND ADJUSTED EXERCISE PRICE. The initial
exercise price of each Warrant shall be [$.68] 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
Article 8 hereof.
6.2 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.
7.1 REGISTRATION UNDER THE SECURITIES ACT OF 1933. The
Warrants and the Shares have not been registered for purposes of public
distribution under the Securities Act of 1933, as amended (the "Act").
7.2 REGISTRABLE SECURITIES. As used herein the term
"Registrable Security" means each of the Shares and any shares of Common Stock
issued upon any stock split or stock dividend in respect of such Shares;
provided, however, that with respect to any particular Registrable Security,
such security shall cease to be a Registrable Security when, as of the date of
determination, (i) it has been effectively registered under the Act and disposed
of pursuant thereto, or (ii) it has ceased to be outstanding. The term
"Registrable Securities" means any and/or all of the securities falling within
the foregoing definition of a "Registrable Security. " In the event of any
merger, reorganization, consolidation, recapitalization or other change in
corporate structure affecting the Common Stock, such adjustment shall be made in
the definition of "Registrable Security" as is appropriate in order to prevent
any dilution or enlargement of the rights granted pursuant to this Article 7.
7.3 PIGGYBACK REGISTRATION. (a) Except with respect to the
S-1 Registration Statement to be filed by the Company with respect to the
transaction with Fusion Capital Fund II LLC, if, at any time during the ten (10)
years following the date of this Agreement, the Company proposes to prepare and
file any new registration statement or post-effective amendments thereto
covering equity or debt securities of the Company, or any such securities of the
Company held by its shareholders (other than in connection with a merger or
pursuant to a Form S-8 or a successor form) (for purposes of this Article 7,
collectively, a "Registration Statement"), it will give written notice of its
intention to do so by registered mail ("Notice"), at least thirty (30) days
prior to the filing of each such Registration Statement, to all holders of the
Registrable Securities. Upon the written request of such a holder (a "Requesting
Holder"), made within twenty (20) days after receipt of the Notice, that the
Company include any of the Requesting Holder's Registrable Securities in the
proposed Registration Statement, the Company shall, as to each such Requesting
Holder, use its best efforts to effect the registration under the Act of the
Registrable Securities which it has been so requested to register ("Piggyback
Registration"), at the Company's sole cost and expense and at no cost or expense
to the Requesting Holders (other than underwriting discounts and commissions
applicable to the sale of such Registrable Securities and the fees and
disbursements, if any, of counsel or any advisor to the Requesting Holders),
provided that, if such Registration Statement relates to an underwritten public
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offering and the managing underwriter advises the Company and the Requesting
Holders in writing that the number of Registrable Securities which can be
included in such offering must be limited, the Requesting Holders will agree to
reduce the number of Registrable Securities included in such Registration
Statement on a pro rata basis with any other selling security holder on whose
behalf other securities of the Company may be included therein for registration.
Notwithstanding the provisions of this Section 7.3(a), the Company shall have
the right at any time after it shall have given written notice pursuant to this
Section 7.3(a) (irrespective of whether any written request for inclusion of
Registrable Securities shall have already 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.
7.4 DEMAND REGISTRATION
(a) At any time during the Warrant Exercise Term, any
"Demand Holder" (as such term is defined in Section 7.4(d) below) of the
Registrable Securities shall have the right (which right is in addition to the
piggyback registration rights provided for under Section 7.3 hereof),
exercisable by written notice to the Company (the "Demand Registration
Request"), to have the Company prepare and file with the Securities and Exchange
Commission (the "Commission"), on two occasions, at the sole expense of the
Company, a 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 such Demand Holders), in order to comply with the provisions of
the Act, so as to permit a public offering and sale of the Registrable
Securities by such Demand Holders and any other Holders of the Warrants and/or
Shares who notify the Company within twenty (20) days after receiving notice
from the Company of such request.
(b) The Company covenants and agrees to give written
notice of any Demand Registration Request to all holders of the Registrable
Securities within ten (10) days from the date of the Company's receipt of any
such Demand Registration Request. After receiving notice from the Company as
provided in this Section 7.4(b), holders of Registrable Securities may request
the Company to include their Registrable Securities in the Registration
Statement to be filed pursuant to Section 7.4(a) hereof by notifying the Company
of their decision to have such securities included within ten (10) days of their
receipt of the Company's notice.
(c) In addition to the registration rights provided for
under Section 7.3 hereof and subsection (a) of this Section 7.4, at any time
during the Warrant Exercise Term, any Demand Holder (as defined below in Section
7.4(d)) of Registrable Securities shall have the right, exercisable by written
request to the Company, to have the Company prepare and file with the
Commission, on one occasion in respect of all holders of Registrable Securities,
a Registration Statement so as to permit a public offering and sale of such
Registrable Securities; provided, however, that all costs incident thereto shall
be at the expense of the holders of the Registrable Securities included in such
Registration Statement; and, provided, further, that a Demand Holder shall not
be entitled to exercise any registration right pursuant to this Section 7.4(c)
without the prior written consent of Holder. If a Demand Holder shall give
notice to the Company at any time of its or their desire to exercise the
registration right granted pursuant to this Section 7.4(c), then within ten (10)
days after the Company's receipt of such notice, the Company shall give notice
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to the other holders of Registrable Securities advising them that the Company is
proceeding with such registration and offering to include therein the
Registrable Securities of such holders, provided they furnish the Company with
such appropriate information in connection therewith as the Company shall
reasonably request in writing. Nothing contained herein shall require the
Company to undergo an audit of its financial statements other than in the
ordinary course of business.
(d) The term "Demand Holder" as used in this Section 7.4
shall mean any holder or any combination of holders of Registrable Securities,
if included in such holders' Registrable Securities are that aggregate number of
Shares (including Shares already issued and Shares issuable pursuant to the
exercise of outstanding Warrants) as would constitute 50% or more of the
aggregate number of Shares (including Shares already issued and Shares issuable
pursuant to the exercise of outstanding Warrants) included in all of the
Registrable Securities, but in any event not less than 100,000 Shares.
(e) No right of any Demand Holder under this Section 7.4
shall be deemed to have been exercised if with respect to such right:
(A) the requisite notice given by Demand Holders pursuant
to this Section 7.4 is withdrawn prior to the date of filing of
a Registration Statement or if a Registration Statement filed by
the Company under the Securities Act pursuant to this Section
7.4 is withdrawn prior to its effective date, in either case, by
written notice to the Company from the Holders of fifty percent
(50%) or more of the Warrants and/or Shares to be included or
which are included in such Registration Statement stating that
such Holders have elected not to proceed with the offering
contemplated by such registration statement because (i) a
development in the Company's affairs has occurred or has become
known to such Demand Holders subsequent to the date of the
notice by the Demand Holders to the Company requesting
registration of the Warrants and/or Shares of the filing of such
Registration Statement which, in the judgment of such Demand
Holders or the managing underwriter of the proposed public
offering, adversely affects the market price of such Shares or
(ii) a Registration Statement filed by the Company pursuant to
this Section 7.4, in the reasonable opinion of counsel for such
Demand Holders or the managing underwriter of the proposed
public offering, contains an untrue statement of a material fact
or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in
light of the circumstances under which made (other than any such
statement or omission relating to such Demand Holders and based
on information supplied or failed to be supplied by such Demand
Holders) and the Company has not, promptly after written notice
thereof, corrected such statement or omission in an amendment
filed to such registration statement; or
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(B) a Registration Statement pursuant to this Section 7.4
shall have become effective under the Securities Act and (i) the
underwriters shall not purchase any Shares because of a failure
of condition contained in the underwriting agreement (other than
a condition to be performed by or within the control of the
Demand Holders) relating to the offering covered by such
Registration Statement or (ii) less than 85% of the Shares
included therein shall have been sold as a result of any stop
order, injunction or other order or requirement of the
Commission or other governmental agency or court.
7.5 SHELF REGISTRATION. Within thirty (30) days after filing
the Company's Form 10-Q for the period ended December 31, 2001, the Company
shall prepare and file with the Commission, at the sole expense of the Company,
a 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
such the Holders of the Warrants), in order to comply with the provisions of the
Act, so as to permit a public offering and sale of the Registrable Securities by
any Holders of the Warrants and/or Shares. The registration effected pursuant to
this Section 7.5 shall not be counted as demands for registration or
registrations effected pursuant to Sections 7.3 or 7.4, respectively.
7.6 COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. The
Company covenants and agrees as follows:
(a) In connection with any registration under Section 7.4
hereof, the Company shall file the Registration Statement as expeditiously as
possible, but in no event later than thirty (30) days (except during the first
quarter of any fiscal year of the Company, in which case any such Registration
Statement shall be filed within ten (10) days after the date that is the earlier
of the date (i) the Company's Form 10-K was filed or (ii) was required to be
filed without reference to any requested extension for filing, delay in filing
or the like) following receipt of any demand therefor (unless delayed by the
failure of a holder of Registrable Securities to promptly furnish such
information necessary to complete such registration statement), shall use its
best efforts to have any such Registration Statement declared effective at the
earliest possible time and shall furnish each holder of Registrable Securities
such number of prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs, fees and expenses in
connection with all Registration Statements filed pursuant to Sections 7.3,
7.4(a) and 7.5 hereof (excluding any underwriting discounts and commissions
which may be incurred in connection with the sale of any Registrable Securities)
including, without limitation, the Company's legal and accounting fees, printing
expenses, and blue sky fees and expenses.
(c) The Company will take all reasonably necessary action
which may be required in qualifying or registering the Registrable Securities
included in a Registration Statement for offering and sale under the securities
or blue sky laws of such states as are reasonably requested by the holders of
such securities, provided that the Company shall not be obligated to execute or
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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.
(d) The Company shall indemnify any holder of the
Registrable Securities to be sold pursuant to any Registration Statement and any
underwriter or person deemed to be an underwriter under the Act and each person,
if any, who controls such holder or underwriter or person deemed to be an
underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), against all loss,
claim, damage, expense 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 Act, the Exchange Act or otherwise,
arising from such Registration Statement.
(e) Any holder of Registrable Securities to be sold
pursuant to a Registration Statement, and its successors and assigns, shall
severally, and not jointly, indemnify, the Company, its officers and directors
and each person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, against all loss, claim,
damage or expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Act, the Exchange Act or otherwise, arising
from information furnished in writing by or on behalf of such holder, or its
successors or assigns, for specific inclusion in such Registration Statement.
(f) Nothing contained in this Agreement shall be construed
as requiring any Holder to exercise its Warrants prior to the initial filing of
any Registration Statement or the effectiveness thereof.
(g) The Company shall deliver promptly to each holder of
Registrable Securities participating in the offering copies of all
correspondence between the Commission and the Company, its counsel or auditors
and all memoranda relating to discussions with the Commission or its staff with
respect to the Registration Statement and permit each holder of Registrable
Securities and underwriters 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"); provided that each such holder of Registrable Securities
agrees not to disclose such information without the prior consent of the
Company. 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 of Registrable Securities or
underwriter shall reasonably request.
(h) If required by the underwriter in connection with an
underwritten offering which includes Registrable Securities pursuant to Article
7, the Company shall enter into an underwriting agreement with one or more
underwriters selected for such underwriting, such agreement shall contain such
representations, warranties and covenants by the Company and such other terms as
are customarily contained in agreements of that type used by the underwriters.
If required by the underwriter, the holders of Registrable Securities shall be
parties to any underwriting agreement relating to an underwritten sale of their
Registrable Securities and may, at their option, require that any or all the
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representations and warranties of the Company to or for the benefit of such
underwriters shall, to the extent that they may be applicable, also be made to
and for the benefit of such holders of Registrable Securities. Such holders of
Registrable Securities 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 of Registrable Securities and their intended methods
of distribution.
(i) In connection with any Registration Statement filed
pursuant to Section 7.3 hereof, the Company shall furnish to each Holder
participating in any underwritten 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' letters delivered to underwriters in underwritten public
offerings of securities.
(j) The Company shall promptly notify each Holder of
Warrants and/or Warrants Shares covered by such registration statement, at any
time when a prospectus relating thereto is required to be delivered under the
Act, upon the Company's discovery that, or upon the happening of any event as a
result of which, the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made, and at the request of any such Holder promptly prepare and furnish to such
Holder and each underwriter, if any, a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made.
(k) Whenever required to effect the registration of any
Registrable Securities, the Company shall use all reasonable efforts to cause
such Registration Statement to become effective and keep such Registration
Statement effective until the holders of the Registrable Securities have
completed the distribution with respect thereto. In connection with Section 7.5,
the Company shall be required to file, cause to become effective and maintain
the effectiveness of a Registration Statement that contemplates a distribution
of securities on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act. The Company shall prepare and file with the Commission such
amendments and supplements to any Registration Statement and the prospectus used
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in connection with such Registration Statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement.
8. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF SHARES.
8.1 COMPUTATION OF ADJUSTED PRICE. In case the Company shall
at any time after the date hereof pay a dividend in shares of Common Stock or
make a distribution in shares of Common Stock, then upon such dividend or
distribution the Exercise Price in effect immediately prior to such dividend or
distribution shall forthwith be reduced to a price determined by dividing:
(a) an amount equal to the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution
multiplied by the Exercise Price in effect immediately prior to such dividend or
distribution, by
(b) the total number of shares of Common Stock outstanding
immediately after such issuance or sale. For the purposes of any computation to
be made in accordance with the provisions of this Section 8.1, the following
provisions shall be applicable: 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 date following the date
fixed for the determination of stockholders entitled to receive such dividend or
other distribution.
8.2 SUBDIVISION AND COMBINATION. In case the Company shall at
any time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
8.3 ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Article 8, the number of
Shares issuable upon the exercise of each Warrant shall be adjusted to the
nearest full Share, by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Shares issuable
upon exercise of the Warrants immediately prior to such adjustment and dividing
the product so obtained by the adjusted Exercise Price.
8.4 RECLASSIFICATION CONSOLIDATION MERGER ETC. In the event
of a Change of Control (defined below), then, except as provided in Section 8.8
below, proper provision shall be made so that, upon the basis and the terms and
in the manner provided in this Agreement and the Warrants, the Holders of the
Warrants, upon the exercise thereof at any time after the consummation of a
Change of Control, shall be entitled to receive (at the aggregate Exercise Price
in effect at the time of such consummation for all Common Stock issuable upon
such exercise immediately prior to such Change of Control), in lieu of the
Common Stock or other securities issuable upon such exercise prior to such
Change of Control, the highest amount of securities, cash or other property to
which such Holders would actually have been entitled as stockholders upon such
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Change of Control if such Holders had exercised the rights represented by the
Warrants immediately prior thereto, subject to adjustments (subsequent to such
Change of Control) as nearly equivalent as possible to the adjustments provided
for in Section 8; PROVIDED that if a purchase, tender or exchange offer shall
have been made to and accepted by the holders of more than 50% of the
outstanding shares of Common Stock, and if a Holder of Warrants so designates in
a notice given to the Company on or before the date immediately preceding the
date of the consummation of a Change of Control, such Holder of such Warrants
shall be entitled to receive the highest amount of securities, cash or other
property to which such Holder would actually have been entitled as a stockholder
if such Holder of such Warrants had exercised such Warrants prior to the
expiration of such purchase, tender or exchange offer and accepted such offer,
subject to adjustments (from and after the consummation of such purchase, tender
or exchange offer) as nearly equivalent as possible to the adjustments provided
for in Section 8. Notwithstanding anything contained in the Warrants to the
contrary, the Company will not effect a Change of Control unless, prior to the
consummation thereof, each person (other than the Company) which may be required
to deliver any stock, securities, cash or property upon the exercise of the
Warrants as provided herein shall assume, by written instrument delivered to,
and reasonably satisfactory to, the Holders of the Warrants, (a) the obligations
of the Company under this Agreement and the Warrants (and if the Company shall
survive the consummation of such Change of Control, such assumption shall be in
addition to, and shall not release the Company from, any continuing obligations
of the Company under this Agreement and the Warrants) and (b) the obligation to
deliver to such Holders such shares of stock, securities, cash or property as,
in accordance with the foregoing provisions of this Section, such Holders may be
entitled to receive, and such person shall have similarly delivered to such
Holders an opinion of counsel for such person, which counsel shall be reasonably
satisfactory to such Holders, stating that this Agreement and the Warrants shall
thereafter continue in full force and effect and the terms hereof (including,
without limitation, all of the provisions of this Section 8) shall be applicable
to the stock, securities, cash or property which such person may be required to
deliver upon any exercise of the Warrants or the exercise of any rights pursuant
hereto. For purposes of this Agreement, a "Change in Control" shall mean the
happening of any of the following events: (i) an acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act of 1934, as amended) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act of 1934, as
amended) of 20% or more of either (1) the then outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or (2) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); or (ii) the approval by the stockholders of the
Company of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company ("Corporate
Transaction"); excluding, however, such a Corporate Transaction pursuant to
which (1) all or substantially all of the individuals and entities who are the
beneficial owners, respectively, of the outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly, more than 50% of,
respectively, the outstanding shares of Common Stock, and the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation resulting from
such Corporate Transaction (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or substantially all of
the Company's assets, either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Corporate Transaction, of the outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (2) no Person (other than the
Company; any employee benefit plan (or related trust) sponsored or maintained by
the Company, by any corporation controlled by the Company, or by such
corporation resulting from such Corporate Transaction) will beneficially own,
directly or indirectly, more than 20% of, respectively, the outstanding shares
of Common Stock of the corporation resulting from such Corporate Transaction or
the combined voting power of the outstanding voting securities of such
corporation entitled to vote generally in the election of directors, except to
the extent that such ownership existed with respect to the Company prior to the
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Corporate Transaction, and (3) individuals who were members of the board of
directors of the Company immediately prior to the approval by the stockholders
of the Corporation of such Corporate Transaction will constitute at least a
majority of the members of the board of directors of the Company resulting from
such Corporate Transaction; or (iii) the approval by the stockholders of the
Company of a complete liquidation or dissolution of the Company, other than to a
corporation pursuant to a transaction which would comply with clauses (1), (2)
and (3) of subsection (ii) above, assuming for this purpose that such
transaction were a Corporate Transaction; or (iv) during any consecutive 36
month period, individuals who at the beginning of such period constituted the
members of the board of directors of the Company or equivalent body of any
successor of the Company (together with any new directors whose election was
approved by a vote of the majority of the directors then still in office who
were directors at the beginning of such period or whose election was previously
so approved) cease for any reason (other than by action of the Holders) to
constitute a majority of the board of directors then in office of the Company or
equivalent body of any successor of the Company; or (v) shall effect a capital
reorganization or reclassification of the Common Stock (other than a capital
reorganization or reclassification resulting in the issue of additional shares
of Common Stock for which adjustment in the Exercise Price is provided in
Section 8).
8.5 DETERMINATION OF OUTSTANDING SHARES OF COMMON STOCK.
The number of shares of Common Stock at any one time outstanding shall include
the aggregate number of shares issued or issuable upon the exercise of options,
rights, warrants and upon the conversion or exchange of convertible or
exchangeable securities (excluding shares issuable upon the exercise of options
and warrants outstanding on the date hereof).
8.6 DIVIDENDS AND OTHER DISTRIBUTIONS WITH RESPECT TO
OUTSTANDING SECURITIES. In the event that the Company shall at any time prior to
the exercise of all Warrants declare a dividend (other than a dividend
consisting solely of shares of Common Stock or a cash dividend or distribution
payable out of current or retained earnings) or otherwise distribute to its
shareholders any monies, assets, property, rights, evidences of indebtedness,
securities (other than shares of Common Stock), whether issued by the Company or
by another person or entity, or any other thing of value, the Holder or Holders
of the unexercised Warrants shall thereafter be entitled, in addition to the
shares of Common Stock or other securities receivable upon the exercise thereof,
to receive, upon the exercise of such Warrants, the same monies, 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. 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 8.6.
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8.7 SUBSCRIPTION RIGHTS FOR SHARES OF COMMON STOCK OR
OTHER SECURITIES. In the case the Company or an affiliate of the Company shall
at any time after the date hereof and prior to the exercise of 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 shareholders of the Company, the
Holders of the unexercised Warrants shall be entitled, in addition to the shares
of Common Stock or other securities receivable upon the exercise of the
Warrants, to receive such rights at the time such rights are distributed to the
other shareholders of the Company.
8.8 REDEMPTION RIGHTS. Notwithstanding anything to the
contrary contained in Section 8.4 above, within twenty (20) days after the
Holders have been provided notice by the Company that the Company has entered
into a transaction that will result in a Change of Control (which such notice
must be provided to the Company within ten (10) days after the Company has
entered into such transaction), the Holder shall have the option to have the
Company repurchase any or all of the Warrants and/or the Shares at the
difference between the Exercise Price and the average closing bid price of the
Shares for the last ten (10) trading days prior to the date of the consummation
of the Change of Control. Such repurchase, if elected by the Holders, shall be
in immediately available funds and shall close simultaneously with the closing
of the Change of Control.
9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES.
9.1 EXCHANGE. Each Warrant Certificate is exchangeable
without expense, upon the surrender hereof 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.
9.2 REPLACEMENT. 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 of Common
Stock and shall not be required to issue scrip or pay cash in lieu of fractional
interests, it being the intent of the parties that all fractional interests
shall be eliminated by rounding any fraction up to the nearest whole number of
shares of Common Stock.
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,
13
such number of shares of Common Stock as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the Warrants
and payment of the Exercise Price thereof, all shares of Common Stock issuable
upon such exercise shall be duly and validly issued, fully paid, non-assessable
and not subject to the preemptive rights of any shareholder. As long as the
Warrants shall be outstanding, the Company shall use its best efforts to cause
all shares of Common Stock issuable upon the exercise of the Warrants to be
listed on or quoted by the exchange upon which the Company's Common Stock is
then listed or quoted.
12. NOTICES TO WARRANT HOLDERS. Nothing contained in this
Agreement shall be construed as conferring upon the Holder or Holders the right
to vote or to consent or to receive notice as a shareholder in respect of any
meetings of shareholders for the election of directors or any other matter, or
as having any rights whatsoever as a shareholder 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
(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 twenty (20) days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
shareholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or warrants, 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 of 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 distribution, 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, telecopied or mailed by registered or certified mail,
return receipt requested:
(a) If to a registered Holder of the Warrants, to the
address of such Holder as shown on the books of the Company; or
14
(b) If to the Company, to the address of the principal
office of the Company or to such other address as the Company may designate by
notice to the Holders.
14. SUPPLEMENTS AND AMENDMENTS. The Company and Holder may
from time to time supplement or amend this Agreement without the approval of any
Holders of Warrant Certificates 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 Holder may deem necessary
or desirable and which the Company and Holder deem not to adversely affect the
interests of the Holders of Warrant Certificates.
15. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company and the Holders inure to the
benefit of their respective successors and assigns hereunder.
16. GOVERNING LAW. This Agreement and each Warrant
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Oregon with respect to contracts made and to be wholly
performed in said State and for all purposes shall be construed in accordance
with the laws of said State. The Company, the Holder and any other registered
holder or holders agree of the Warrant Certificates (a) agree that any legal
suit, action or proceeding arising out of or relating to this Agreement shall be
instituted exclusively in a federal or state court located in Clackamas County,
Oregon (b) waive any objection which the they may have now or hereafter to the
venue of any such suit, action or proceeding, and (c) irrevocably consent to the
jurisdiction of a any federal or state court located in Clackamas County, Oregon
in any such suit, action or procedure. In the event of litigation between the
parties arising hereunder, the prevailing party shall be entitled to costs and
reasonable attorney's fees.
17. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any person or corporation, other than the Company
and Holder and any other registered holder or holders of the Warrant
Certificates, Warrants or the 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 Holder and any other holder or holders of
the Warrant Certificates, Warrants or the Shares.
19. PRESERVATION OF RIGHTS. The Company will not, by amendment
of its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, 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 Agreement or the Warrants or the rights represented
thereby, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holders of the Warrants
against dilution or other impairment.
20. 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.
15
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
[SEAL] TSET, INC.
By:
----------------------------------
Name:
Title:
Attest:
Name:
Title:
THE EAGLE ROCK GROUP, LLC
By:
----------------------------------
Name:
Title:
16
EXHIBIT A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (I) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (II) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (III) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, JANUARY 1, 2012
No. W- 1,400,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that THE EAGLE ROCK GROUP,
LLC or registered assigns is the registered holder of one million four hundred
thousand (1,400,000) Warrants to purchase, at any time from January 1, 2002
until 5:00 P.M. New York City time on January 1, 2012 ("Expiration Date") up to
one million four hundred thousand (1,400,000) shares ("Shares") of fully-paid
and nonassessable common stock, par value $.001 per share ("Common Stock"), of
TSET, INC., a Nevada corporation (the "Company"), at the initial exercise price,
subject to adjustment in certain events (the "Exercise Price"), of [$.68] per
Share upon 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 August __, 2001 ("Warrant
Agreement") between the Company and The Eagle Rock Group, LLC. Payment of the
Exercise Price may be made in cash, or by certified or official bank check in
New York Clearing House funds payable to the order of the Company, or any
combination of cash or certified check, or in accordance with Section 3.2 of the
Warrant Agreement.
No Warrant may be exercised after 5:00 P.M., New York City
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 in 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/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 for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax, or
other governmental charge imposed in connection therewith.
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.
2
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 Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated: July __, 2001 TSET, INC.
[SEAL] By: _________________________________
Name:
Title:
Attest:
Name:
Title:
3
[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 Shares cash or a certified or official bank check
payable in New York Clearing House Funds to the order of _____________________
in the amount of $_______ all in accordance with the terms hereof. The
undersigned requests that a certificate for such Shares be registered in the
name of ____________________, whose address is _____________________ and that
such Certificate be delivered to whose address is ___________________________.
|_| The Undersigned hereby elects to exercise of the Warrants held by it in
accordance with Section 3.2 of the Warrant Agreement dated August _____, 2001.
Dated: Signature:
-------------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
---------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
[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
within-named Company, with full power of substitution.
Dated: Signature:
-------------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
--------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
