Warrant Agreement - American Pulp Exchange Inc. and PH Capital Holdings LLC
AMERICAN PULP EXCHANGE, INC.
AND
PH CAPITAL HOLDINGS, LLC
WARRANT AGREEMENT
DATED AS OF NOVEMBER 9, 2002
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WARRANT AGREEMENT
This WARRANT AGREEMENT (this "AGREEMENT") is made and entered into as
of November 9, 2002, by and between American Pulp Exchange, Inc., a Florida
corporation (the "COMPANY"), and PH Capital Holdings, LLC, a California limited
liability company (the "HOLDER").
The Company and the Holder hereby agree as follows:
SECTION 1. ISSUANCE OF THE WARRANT. Subject to the terms and conditions of this
Agreement, the Company hereby agrees to issue to the Holder a warrant
substantially in the form attached hereto as Exhibit A (the "WARRANT") to
purchase up to an aggregate of Five Hundred Seventy-Five Thousand (575,000)
shares of common stock, par value $0.0025 per share, of the Company (the "COMMON
STOCK"), at the Exercise Price (as defined in Section 2.3 below). The shares of
fully paid, duly authorized and non-assessable Common Stock issuable upon
exercise of the Warrant are referred to herein as the "WARRANT SHARES."
SECTION 2. TERM OF THE WARRANT; EXERCISE OF THE WARRANT;
RESTRICTIONS ON EXERCISE; EXERCISE PRICE.
2.1 TERM OF THE WARRANT. Subject to the terms and conditions of this
Agreement, the Holder shall have the right to purchase the Warrant Shares from
the Company. The Holder's right to purchase the Warrant Shares (a) may be
exercised, in whole or in part, at any time on or after the first business day
following the payment in full of all indebtedness under the Series C Notes in a
Qualified Refinancing and (b) shall expire at 5:00 p.m., Pacific time, on the
earlier of (x) the fifth anniversary of the day on which the Warrant first
becomes exercisable under clause (a) of this Section 2.1 or (y) if the Warrant
does not become exercisable on or before the maturity date of the Series C
Notes, the maturity date of the Series C Notes (the "EXPIRATION DATE"). If the
Warrant is not exercised on or prior to the Expiration Date, then the Warrant
shall become void, and all rights thereunder in respect thereof under this
Agreement shall cease at such time. For purposes of this Agreement, "BUSINESS
DAY" means any day, other than a Saturday, Sunday, or a day on which commercial
banks are required or permitted to be closed for business, "QUALIFIED
REFINANCING" means any equity or debt financing transaction completed by GM and
originated or arranged by the Holder, the net proceeds of which are sufficient,
and are used, to pay in full all indebtedness under the Series C Notes on or
before the maturity date thereof, "SERIES C NOTES" means the Series C 15% Senior
Secured Notes of GM, and "GM" means General Media, Inc., a Delaware corporation.
2.2 EXERCISE OF THE WARRANT. The Holder may exercise the Warrant upon
surrender to the Company, at its principal office, of the Warrant, together with
a completed and duly executed subscription form in substantially the form
attached hereto as Exhibit B (the "SUBSCRIPTION FORM"), and payment of the
aggregate Exercise Price (as defined in and determined in accordance with
Section 2 hereof) for the number of Warrant Shares in respect of which such
Warrant is then exercised. The aggregate Exercise Price shall be an amount equal
to the product obtained by multiplying (a) the number of Warrant Shares to be
purchased by the Holder by (b) the Exercise Price (as adjusted pursuant to
Section 6 of this Agreement). Unless the Holder has exercised its Net Exercise
Right (as defined in Section 2.4 below), payment of the
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aggregate Exercise Price shall be made wire transfer of funds or by check
payable to the Company's order in the amount of such aggregate Exercise Price.
The Exercise Price will be considered to have been paid only upon clearance of
the wire transfer or check; provided that if the Holder has exercised its Net
Exercise Right, the Surrendered Warrant Shares (as defined in Section 2.4 below)
shall be deemed to satisfy the payment of the Exercise Price.
A stock certificate representing the Warrant Shares subscribed for will
be issued and delivered as soon as practicable after the conditions set forth in
this Section 2.2 have been satisfied.
2.3 EXERCISE PRICE. The price per share at which the Warrant Shares
shall be purchasable upon exercise of the Warrant shall be One Cent ($0.01) per
share of Common Stock, subject to adjustment as provided in Section 6 hereof
(the "EXERCISE PRICE").
2.4 CASHLESS/NET EXERCISE. The Holder may exercise its right (the "NET
EXERCISE RIGHT"), prior to and including the Expiration Date, to receive Warrant
Shares on a net basis, such that, without the payment of cash, the Holder
receives that number of Warrant Shares otherwise issuable (or payable) upon
exercise of the Warrant less that number of Warrant Shares having an aggregate
fair market value (as defined below) at the time of exercise equal to the
aggregate Exercise Price that would otherwise have been paid by the Holder of
the Warrant Shares. The Holder may not exercise a Net Exercise Right unless the
fair market value of the Warrant Shares receivable upon exercise of the Warrant
(the "SURRENDERED WARRANT SHARES") is sufficient to satisfy the payment of the
Exercise Price in full. The number of Warrant Shares to be issued pursuant to
the Holder's exercise of the Net Exercise Right shall be computed using the
following formula:
Y(A-B)
X= ----------
A
where:
X = the number of Warrant Shares to be issued to the Holder
pursuant to this Section 2.4.
Y = the number of Warrant Shares as to which the Net Exercise
Right is being exercised.
A = the fair market value of one Warrant Share, as
determined in good faith by the Company's Board of
Directors (the "BOARD"), as at the time the Net
Exercise Right is exercised pursuant to this Section
2.4.
B = the Exercise Price (as adjusted pursuant to Section 6
hereof).
For purposes of this Section 2.4, "fair market value" per Warrant Share
will be the last reported closing price of the Common Stock, which shall be (i)
if the Common Stock is listed or admitted to trading on the New York Stock
Exchange, the closing price on the NYSE-Composite Tape (or any successor
composite tape reporting transactions on the New York Stock Exchange) or, if
such a composite tape shall not be in use or shall not report transactions in
the Common
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Stock, or if the Common Stock shall be listed on a stock exchange other than the
New York Stock Exchange , the last reported sales price regular way or, in case
no such reported sale takes place on such day, the average of the closing bid
and asked prices regular way for such day, in each case on the principal
national securities exchange on which the shares of Common Stock are listed or
admitted to trading (which shall be the national securities exchange on which
the greatest number of shares of the Common Stock have been traded during such
thirty (30) consecutive trading days), or (ii) if the Common Stock is not listed
or admitted to trading on a stock exchange, closing price of the Common Stock as
reported by The Nasdaq Stock Market or a comparable system or, if the Common
Stock is not admitted for quotation in the Nasdaq Stock Market or a comparable
system, the average of the closing bid and asked prices for the then most recent
day on which trading in the Common Stock had occurred, as furnished by the
Nasdaq OTC Bulletin Board. In the absence of one or more such closing prices,
the fair market value per Warrant Share shall be determined reasonably and in
good faith by the Board as of the date of any such exercise.
2.5 RESTRICTIONS ON EXERCISE. The Warrant may not be exercised if the
issuance of the Warrant Shares upon such exercise would constitute a violation
of any applicable federal or state securities laws or other laws or regulations.
As a condition to the exercise of the Warrant, the Holder shall execute the
Subscription Form, confirming and acknowledging that the representations and
warranties of the Holder set forth in Section 10 hereof are true and correct as
of the date of exercise.
2.6 PARTIAL EXERCISE. In event that the Warrant is exercised in respect
of fewer than all of the Warrant Shares issuable on such exercise at any time
prior to the Expiration Date, a new Warrant evidencing the remaining Warrant
Shares will be issued.
SECTION 3. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes
attributable to any issuance of the Warrant Shares upon the exercise of the
Warrant; provided, however, that the Company shall not be required to pay any
tax or taxes which may be payable in respect of any transfer involved in the
issue of the Warrant or any certificates for Warrant Shares in a name other than
that of the registered holder of the Warrant surrendered upon the exercise of
the Warrant, and the Company shall not be required to issue or deliver any such
securities 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 reasonable satisfaction of the Company that such tax has been paid.
SECTION 4. MUTILATED OR MISSING WARRANT. In case the Warrant shall be mutilated,
lost, stolen or destroyed, the Company may in its discretion issue and deliver
in exchange and substitution for and upon cancellation of the mutilated Warrant,
or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new
Warrant of like tenor; but only upon receipt of evidence reasonably satisfactory
to the Company of such loss, theft or destruction of such Warrant and an
agreement to indemnify the Company, if requested, also reasonably satisfactory
to the Company. Applicants for such substitute Warrant shall also comply with
such other reasonable regulations and pay such other reasonable charges as the
Company may prescribe.
SECTION 5. RESERVATION OF WARRANT SHARES. The Company shall at all times
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reserve and keep available, out of its authorized and unissued shares of Common
Stock, that number of shares of Common Stock sufficient to provide for the full
exercise of the Warrant. The Company or, if appointed, the transfer agent for
the Common Stock (the "TRANSFER AGENT") and every subsequent transfer agent for
any shares of the Company's capital stock issuable upon the exercise of any of
the rights of purchase aforesaid will be irrevocably authorized and directed at
all times to reserve such number of authorized shares as shall be required for
such purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrant.
SECTION 6. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The
Exercise Price and the number of Warrant Shares issuable upon the exercise of
the Warrant are subject to adjustment from time to time upon the occurrence of
the events enumerated in this Section 6. For purposes of this Section 6, "Common
Stock" means shares now or hereafter authorized of any class of common stock of
the Company and any other stock of the Company, however designated, that has the
right (subject to any prior rights of any class or series of preferred stock) to
participate in any distribution of the assets or earnings of the Company without
limit as to per share amount.
(a) Adjustment for Change in Capital Stock.
If the Company:
(i) pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock;
(ii) subdivides its outstanding shares of Common Stock
into a greater number of shares;
(iii) combines its outstanding shares of Common Stock
into a smaller number of shares;
(iv) makes a distribution on its Common Stock in shares
of its capital stock other than Common Stock; or
(v) issues by reclassification of its Common Stock any
shares of its capital stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the surviving entity);
then the Exercise Price in effect immediately prior to such action
shall be proportionately adjusted so that the Holder of the Warrant thereafter
exercised may receive the aggregate number and kind of shares of capital stock
of the Company which such Holder would have owned immediately following such
action if such Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record date
in the case of a dividend or distribution and immediately after the effective
date in the case of a subdivision, combination or reclassification.
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Such adjustment shall be made successively whenever any event listed
above shall occur.
(b) Adjustment for Other Distributions.
If the Company distributes to all holders of its Common Stock any of
its assets or debt securities or any rights or warrants to purchase debt
securities, assets or other securities of the Company, the Exercise Price shall
be adjusted in accordance with the formula:
E-F
E'=Ex --------
E
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
F = the fair market value on the record date mentioned
below of the assets, securities, rights or warrants
distributable to shareholders per share of
outstanding Common Stock. The Board shall determine
the fair market value reasonably and in good faith.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive the distribution.
The adjusted Exercise Price may never be less than zero. In the event that "F"
exceeds greater than one-half of "E" for any transaction or series of related
transactions, then no adjustment in "E" shall be made pursuant to the formula
contained in this clause (b) and, instead, the Company shall provide that the
Holder shall be entitled upon exercise of the Warrant, without duplication, to
its proportionate share of the assets, debt securities or such rights or
warrants as it would have been entitled to had it exercised the Warrant at the
latest time necessary to be entitled, as Warrant Share holders, to such
distribution directly.
(c) When De Minimis Adjustment May Be Deferred.
No adjustment in the Exercise Price need be made unless the adjustment
would require an increase or decrease of at least one percent (1%) in the
Exercise Price.
All calculations under this Section shall be made to the nearest cent
or to the nearest 1/100th of a share, as the case may be.
(d) When No Adjustment Required.
No adjustment need be made for a transaction referred to in subsections
(a) or (b) of this Section 6 if the Holder is able to participate in the
transaction on a basis and with notice that the Board determines to be fair and
appropriate in light of the basis and notice on which holders of Common Stock
participate in the transaction.
No adjustment need be made for rights to purchase Common Stock pursuant
to a Company plan for reinvestment of dividends or interest.
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To the extent the Warrant becomes exercisable for cash, no adjustment
need be made thereafter as to the cash. Interest will not accrue on the cash.
(e) Notice of Adjustment.
Whenever the Exercise Price is adjusted, the Company shall provide the
notices required by Section 9 hereof.
(f) Notice of Certain Transactions.
If:
(i) the Company takes any action that would require an
adjustment to the Exercise Price pursuant to subsections (a) or (b) of this
Section 6 and if the Company does not arrange for the Holder to participate
pursuant to subsection (d) of this Section 6;
(ii) the Company takes any action that would require a
supplemental Warrant Agreement pursuant to subsection (g) of this Section 6; or
(iii) there is a liquidation or dissolution of the
Company,
the Company shall mail to the Holder a notice stating the proposed
record date for a dividend or distribution or the proposed effective date of a
subdivision, combination, reclassification, consolidation, merger, transfer,
lease, liquidation or dissolution. The Company shall mail the notice at least
fifteen (15) days before such date. Failure to mail the notice or any defect in
it shall not affect the validity of the transaction.
(g) Reorganization of Company.
In case of any consolidation of the Company with or merger of the
Company into another entity, the Company or such successor entity shall execute
and deliver to the Holder an agreement that the Holder shall have the right
thereafter, and until the Expiration Date, upon payment of the applicable
Exercise Price in effect immediately prior to such action (after giving effect
to any applicable adjustments under subsections (a) and (b) of this Section 6)
to purchase upon exercise of the Warrant the kind and amount of shares and other
securities and property (including cash) that such Holder would have owned or
have been entitled to receive after the happening of such consolidation or
merger had such Warrant been exercised immediately prior to such action. The
Company shall at its sole expense mail by first class mail, postage prepaid, to
the Holder notice of the execution of any such agreement. Such agreement shall
provide for adjustments, which shall be substantially identical to the
adjustments provided for in this Section 6. In addition, the Company shall not
merge or consolidate with or into, any other entity unless the successor entity
(if not the Company), shall expressly assume, by supplemental Warrant Agreement
reasonably satisfactory in form and substance to the Holder in its sole judgment
and executed and delivered to the Holder, the due and punctual performance and
observance of each and every covenant and condition of this Agreement to be
performed and observed by the Company. The provisions of this subsection (g)
shall similarly apply to successive consolidations or mergers. Any transfer,
sale or lease of all or substantially all of the
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assets of the Company for a consideration consisting primarily of equity
securities shall be deemed a consolidation or merger for the foregoing purposes.
If the issuer of securities deliverable upon exercise of the Warrant
under the supplemental Warrant Agreement is an affiliate of the formed,
surviving, transferee or lessee entity, that issuer shall join in the
supplemental Warrant Agreement.
If this subsection (g) applies, subsections (a) and (b) of this Section
6 do not apply.
(h) Company Determination Final.
Any determination that the Company or the Board must make pursuant to
subsection (a), (b), (c) or (e) of this Section 6 is conclusive if made
reasonably and in good faith.
(i) Adjustment in Number of Shares.
Upon each adjustment of the Exercise Price pursuant to this Section 6,
the Warrant outstanding prior to the making of the adjustment in the Exercise
Price shall thereafter evidence the right to receive upon payment of the
adjusted Exercise Price that number of shares of Common Stock (calculated to the
nearest hundredth) obtained from the following formula:
E
N'=Nx ----
E'
where:
N' = the adjusted number of Warrant Shares issuable upon
exercise of the Warrant by payment of the adjusted
Exercise Price.
N = the number of Warrant Shares previously issuable
upon exercise of the Warrant by payment of the
Exercise Price prior to adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
SECTION 7. FRACTIONAL INTERESTS. No fractional shares may be issued upon any
exercise of the Warrant, and any fractions shall be rounded down to the nearest
whole number of shares. If upon any exercise of the Warrant, a fraction of a
share results, the Company will pay the cash value of any such fractional
shares, calculated on the basis of the Exercise Price.
SECTION 8. REDEMPTION OF WARRANTS. The Company shall be under no obligation
under this Agreement to redeem the Warrants, and the Warrants shall not be
redeemable at the Company's option.
SECTION 9. NOTICES TO WARRANT HOLDER. Upon any adjustment of the Exercise Price
pursuant to Section 6 hereof, the Company shall promptly thereafter give to the
Holder written notice of such adjustment(s). The notice shall set forth the
Exercise Price after such adjustment and a brief statement of the facts
requiring such adjustment and setting forth in
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reasonable detail the method of calculation and the number of Warrant Shares (or
portion thereof) issuable after such adjustment in the Exercise Price, upon
exercise of the Warrant and payment of the adjusted Exercise Price.
SECTION 10. REPRESENTATION, WARRANTIES AND CERTAIN AGREEMENTS OF HOLDER.
The Holder hereby represents and warrants to the Company that:
10.1 AUTHORIZATION. This Agreement constitutes the Holder's valid and
legally binding obligation, enforceable in accordance with its terms except as
may be limited by (i) applicable bankruptcy, insolvency, reorganization or other
laws of general application relating to or affecting the enforcement of
creditors' rights generally and (ii) the effect of rules of law governing the
availability of equitable remedies. The Holder represents that such Holder has
full power and authority to enter into this Agreement.
10.2 PURCHASE OF OWN ACCOUNT. The Warrant and the Warrant Shares
(collectively, the "SECURITIES") will be acquired for investment for such
Holder's own account, not as a nominee or agent, and not with a view to the
public resale or distribution thereof within the meaning of the Securities Act
of 1933, as amended (the "1933 Act"), and such Holder has no present intention
of selling, granting any participation in, or otherwise distributing the same.
10.3 DISCLOSURE OF INFORMATION. Such Holder has received or has had
full access to all the information it considers necessary or appropriate to make
an informed investment decision with respect to the Securities. Such Holder
further has had an opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the offering of the Securities and
to obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify any information furnished to such Holder or to which such
Holder had access.
10.4 INVESTMENT EXPERIENCE. Such Holder understands that the purchase
of the Securities involves substantial risk. Such Holder (i) has experience as
an investor in securities and acknowledges that such Holder is able to fend for
itself, can bear the economic risk of such Holder's investment in the Securities
and has such knowledge and experience in financial or business matters that such
Holder is capable of evaluating the merits and risks of this investment in the
Securities and protecting its own interest in connection with this investment
and/or (ii) has a preexisting personal or business relationship with the Company
and certain of its officers, directors or controlling persons of a nature and
duration that enables such Holder to be aware of the character, business acumen
and financial circumstances of such persons.
10.5 ACCREDITED INVESTOR STATUS. Such Holder is an "accredited
investor" within the meaning of Regulation D promulgated under the 1933 Act.
10.6 RESTRICTED SECURITIES. Such Holder understands that the Securities
are characterized as "restricted securities" under the 1933 Act and Rule 144
promulgated thereunder in as much as they are being acquired from the Company in
a transaction not involving a public offering, and that under the 1933 Act and
applicable regulations thereunder such securities may be resold without
registration under the 1933 Act only in certain limited circumstances. In this
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connection, such Holder is familiar with Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the 1933 Act. Such
Holder understands that no public market now exists for any of the Securities
and that it is uncertain whether a public market will ever exist for the
Securities.
10.7 NO SOLICITATION. At no time was the Holder presented with or
solicited by any publicly issued or circulated newspaper, mail, radio,
television or other form of general advertising or solicitation in connection
with the offer, sale and purchase of the Securities.
10.8 MARKET STANDOFF. The Holder agrees in connection with any
registration of the Company's securities under the 1933 Act that, upon the
request of the Company or the underwriters managing any registered public
offering of the Company's securities, Holder will not sell or otherwise dispose
of any Warrant Shares or any other securities of the Company without the prior
written consent of the Company or such managing underwriters, as the case may
be, for a period of time (not to exceed one hundred eighty (180) days) after the
effective date of such registration requested by such managing underwriters
subject to all restrictions as the Company or the managing underwriters may
specify generally. Holder further agrees to enter into any agreement reasonably
required by the underwriters to implement the foregoing; provided that,
notwithstanding a request by the Company, Holder shall not be restricted under
this Section from selling or otherwise transferring or disposing of any Warrant
Shares or other shares of stock of the Company at any time prior to the
effective date of any registration statement.
In order to enforce the foregoing covenant, the Company shall have the
right to place restrictive legends on the certificates representing the Warrant
Shares subject to this Section and to impose stop transfer instructions.
10.9 LEGENDS. Holder acknowledges that neither the Warrant nor the
Warrant Shares have been qualified or registered under the 1933 Act or any state
securities laws, and therefore may not be sold or disposed of in the absence of
such registration or qualification only pursuant to an exemption from such
registration or qualification and in accordance with this Agreement. The Warrant
and/or the stock certificate(s) representing the Warrant Shares will bear
legends substantially similar to those set forth below in addition to any other
legend that may be required by applicable law or by any agreement between the
Company and the Holder:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF APPLICABLE STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS
ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. HOLDER SHOULD BE
AWARE THAT IT MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER
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TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE
WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
10.10 TRANSFER RESTRICTIONS. Holder agrees not to sell, transfer or
otherwise dispose of the Warrant or Warrant Shares, in whole or in part, unless:
(a) a registration statement under the 1933 Act is in effect
with regard thereto; or
(b) such holder has notified the Company of the proposed
disposition and has furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
of such securities under the 1933 Act.
Notwithstanding the provisions of Section 10.10(a) and 10.10(b) above,
no such registration statement or opinion of counsel shall be required for any
transfer of the Warrant or the Warrant Shares in compliance with Rule 144
promulgated under the 1933 Act.
In addition, the Warrant Shares, upon issuance by the Company, shall be
subject to the terms and conditions of the Shareholders' Agreement (the
"SHAREHOLDERS' AGREEMENT") dated as of November 7, 2002, by and among General
Media International, Inc., Vector Partners, LLC and the Holder. The Holder
agrees not to transfer the Warrants to any person or entity (i) unless and until
such transferee shall furnish the Company with written agreements, documents
and/or opinions, in form and substance reasonably acceptable to the Company and
its counsel, to be bound by and comply with all provisions of the Shareholders'
Agreement and (ii) other than in accordance with the Shareholders' Agreement.
10.11 TRANSFER - GENERAL. Subject to the terms hereof, the Warrant
shall be transferable only on the books of the Company maintained at its
principal office upon delivery thereof duly endorsed by the Holder or by its
duly authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. In all cases of transfer, the
original power of attorney, duly approved, or a copy thereof, duly certified,
shall be deposited and remain with the Company. In case of transfer by
executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be required
to be deposited and to remain with the Company in its discretion. Upon any
registration of transfer, the person to whom such transfer is made shall receive
a new Warrant or Warrants as to the portion of the Warrant transferred, and the
Holder shall be entitled to receive a new Warrant or Warrants from the Company
as to the portion thereof retained. The designated transferee or transferees
will be recorded in the register maintained by the Company as the Holder(s) of
the new Warrant(s).
SECTION 11. NO RIGHTS AS STOCKHOLDER; NOTICES TO HOLDER. Nothing contained in
this Agreement or in the Warrant shall be construed as conferring upon the
Holder or its permitted transferees the right to vote or to receive dividends or
to consent to or receive notice as a stockholder in respect of any meeting of
stockholders for the election of directors of the Company or any other matter,
or any rights whatsoever as a stockholder of the Company;
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provided that this provision shall not limit the required notice as set forth in
Section 9 hereof.
SECTION 12. NOTICES. Any notices, requests and demands by the Holder to the
Company pursuant to this Agreement to be effective shall be in writing
(including by facsimile), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered by hand, or three (3)
days after being deposited in the mail, postage prepaid, or, in the case of a
facsimile notice, when received, or, in the case of delivery by a nationally
recognized overnight courier, when received, addressed:
If to the Company, to:
American Pulp Exchange, Inc.
11 Penn Plaza
12th Floor
New York, New York 10001
Attention: President
Fax: (212) 702-6248
With a copy to:
Pachulski, Stang, Ziehl, Young & Jones P.C.
461 Fifth Avenue
25th Floor
Attention: Robert Feinstein, Esq.
Fax: (212) 561-7777
Any notices, requests and demands by the Company to the Holder pursuant
to this Agreement to be effective shall be in writing (including by facsimile),
and, unless otherwise expressly provided herein, shall be deemed to have been
duly given or made when delivered by hand, or three (3) days after being
deposited in the mail, postage prepaid, or, in the case of a facsimile notice,
when received, or, in the case of delivery by a nationally recognized overnight
courier, when received, addressed to the Holder at its address as shown in the
stock record books of the Company. Each party hereto may from time to time
change the address to which notices to it are to be delivered or mailed
hereunder by notice in writing to the other party.
SECTION 13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
principles of conflict of laws thereof. The parties hereto agree to submit to
the jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Agreement. Venue for any such
actions shall be in the state or federal courts of New York, New York. In the
event of litigation, the prevailing party shall be entitled to reasonable
attorneys' fees and costs.
SECTION 14. SUCCESSORS. All the covenants and provisions of this Agreement by or
for the benefit of the Company shall bind and inure to the benefit of the
successors and assigns of the parties hereto.
SECTION 15. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to confer upon any person other than the Company and the Holder (and
their
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respective successors and assigns) 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 Holder, and their respective assignees.
SECTION 16. CAPTIONS. The captions of the Sections of this Agreement have been
inserted for convenience only and shall have no substantive effect.
SECTION 17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts each of which when so executed shall be deemed to be an original;
but such counterparts together shall constitute but one and the same instrument.
SECTION 18. AMENDMENT, WAIVER AND COURSE OF DEALING. No course of dealing or any
delay or failure to exercise any right hereunder on the part of any party
thereto shall operate as a waiver of such right or otherwise prejudice the
rights, powers or remedies of such party. This Agreement, the Warrant and any
term hereof and thereof, respectively, may be amended, waived or terminated only
by an instrument in writing signed by the party against which enforcement of
such change, waiver or termination is sought.
SECTION 19. FURTHER ASSURANCES. From and after the date of this Agreement, the
Company and the Holder shall execute and deliver such instruments, documents or
other writings as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement.
SECTION 20. ENTIRE AGREEMENT. This Agreement and the documents referred to
herein constitute the entire agreement among the parties with respect to the
subject matter hereof and thereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and thereof.
<PAGE>
IN WITNESS WHEREOF, the Company and the Holder have caused this
Agreement to be duly executed as of the date first above written.
HOLDER: THE COMPANY:
PH CAPITAL HOLDINGS, LLC, AMERICAN PULP EXCHANGE, INC.,
a California limited liability company a Florida corporation
By: s/s Charles Samel By: s/s R. Guccione
-------------------------------- ---------------------------
Name: Charles Samel Name: Robert C. Guccione
Title: Manager Title: Chairman and President
[SIGNATURE PAGE TO WARRANT AGREEMENT]
<PAGE>
EXHIBIT A
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER THE SECURITIES LAWS OF APPLICABLE STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. HOLDER SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
Warrant No. ____________ 575,000 Shares
WARRANT TO PURCHASE COMMON STOCK
Void After 5:00 P.M.
Pacific Time on [January ___, 2008]
THIS CERTIFIES THAT, for value received, PH Capital Holdings, LLC, or
registered assigns (the "HOLDER"), is the registered holder of this Warrant to
Purchase Common Stock (the "WARRANT") and is entitled to purchase from American
Pulp Exchange, Inc., a Florida corporation (the "COMPANY"), subject to the terms
and conditions of the Warrant Agreement dated as of November __, 2002, by and
between the Company and the Holder (the "WARRANT AGREEMENT"), at any time until
5:00 p.m., Pacific Time, on [January __, 2008] (the "EXPIRATION DATE"), Five
Hundred Seventy-Five Thousand (575,000) shares of the common stock of the
Company (the "COMMON STOCK") at a price of $0.01 per share (the "EXERCISE
PRICE"). The number of shares purchasable upon exercise of this Warrant and the
Exercise Price per share shall be subject to adjustment from time to time as set
forth in the Warrant Agreement.
This Warrant is issued under and in accordance with the Warrant
Agreement and is subject to the terms and provisions contained in the Warrant
Agreement, all of which are incorporated herein by reference. All capitalized
terms used and not otherwise defined herein shall have the meanings given them
in the Warrant Agreement.
This Warrant may be exercised in whole or in part by presentation of
this Warrant with the Subscription Form, the form of which is attached hereto,
duly executed and simultaneous payment of the Exercise Price (subject to
adjustment) at the principal office of the Company. Payment of such price shall
be payable at the option of the Holder hereof in cash made by wire transfer, by
check or by exercise of the Holder's Net Exercise Right as set forth in the
Warrant Agreement.
<PAGE>
Upon partial exercise, a Warrant for the unexercised portion shall be
delivered to the Holder. No fractional shares will be issued upon the exercise
of this Warrant, but the Company shall pay the cash value of any fraction upon
the exercise of the Warrant.
This Warrant does not entitle the Holder hereof to any of the rights as
a stockholder of the Company until such time as this Warrant is exercised in
accordance with the Warrant Agreement.
<PAGE>
IN WITNESS WHEREOF, the Company and the Holder have caused this Warrant
to be duly executed as of the date first above written.
AMERICAN PULP EXCHANGE, INC.,
a Florida corporation
By:
-------------------------
Name Robert C. Guccione
Title: Chairman and President
AGREED AND ACKNOWLEDGED:
PH CAPITAL HOLDINGS, LLC,
a California limited liability company
By:
-----------------------------------
Name: Charles Samel
Title: Manager
<PAGE>
EXHIBIT B
SUBSCRIPTION FORM
[INSERT DATE]
To: AMERICAN PULP EXCHANGE, INC.
Attention: President
[ ] The undersigned hereby elects to exercise the Warrant issued to it
by American Pulp Exchange, Inc., a Florida corporation (the "COMPANY"), pursuant
to the Warrant Agreement dated November ____, 2002 (the "WARRANT AGREEMENT"), by
and between the Company and PH Capital Holdings, LLC, a California limited
liability company, and to purchase thereunder ______________ (____________)
shares of Common Stock of the Company (the "SHARES") at a purchase price of
_______________ Dollars ($_______) per share or an aggregate purchase price of
_______________ Dollars ($_______) (the "PURCHASE PRICE").
[ ] The undersigned hereby elects under the provision set forth in
Section 2.4 of the Warrant Agreement to make a net exercise of the Warrant as to
__________ shares.
In exercising the Warrant, the undersigned hereby confirms and
acknowledges that the representations and warranties set forth in Section 10 of
the Warrant Agreement as they apply to the undersigned continue to be true and
correct as of this date.
Please issue a certificate representing such Shares in the name
specified below.
_______________________________________
(Name)
_______________________________________
(Address)
_______________________________________
(City, State, Zip Code)
_______________________________________ __________________________________
(Date) (Signature of Holder)