THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON
EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
VOLCAN HOLDINGS, INC.
No. 1
COMMON STOCK PURCHASE WARRANT
1. Issuance . In consideration
of good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged by VOLCAN HOLDINGS, INC., a Delaware
corporation (the “Company”), L’HAYYIM PTY
LTD or its registered assigns (the “Holder”) is
hereby granted, subject to Section 2.1(a) below, the right to
purchase at any time, on or after the date hereof (the “Issue
Date”) until 5:00 P.M., New York City time, on the date which
is the five-year anniversary of an applicable Milestone Achievement
Date (as defined below) occurs (the “Expiration Date”),
up to an aggregate of One Hundred Million (100,000,000) fully paid
and nonassessable shares (the “Warrant Shares”) of the
Company’s common stock, $0.001 par value per share (the
“Common Stock”), at an initial exercise price per share
of $1.00 per share (the “Exercise Price”), subject to
further adjustment as set forth herein.
2. Exercise of Warrants
.
2.1 General . (a) This Warrant
becomes exercisable in five equal tranches of up to 20,000,000
shares of Common Stock each, upon satisfaction of the applicable
milestones set forth on Annex A hereto. The date that any such
milestone is achieved to the satisfaction of the Company is
referred to herein as a “Milestone Achievement Date.”
To the extent exercisable, such exercise shall be effectuated by
submitting to the Company (as set forth in Section 11 hereof) a
completed and duly executed Notice of Exercise (substantially in
the form attached to this Warrant Certificate). The date such
Notice of Exercise is delivered to the Company shall be the
“Exercise Date,” provided that, if such exercise
represents the full exercise of the outstanding balance of the
Warrant, the Holder of this Warrant shall tender this Warrant
Certificate to the Company within five (5) Trading Days (as defined
below) thereafter. The term “Trading Day” means any day
during which the Principal Market shall be open for business. The
Notice of Exercise shall be executed by the Holder of this Warrant
and shall indicate (i) the number of shares then being purchased
pursuant to such exercise and (ii) if applicable (as provided
below), whether the exercise is a cashless exercise.
(b) The provisions of this Section
2.1(b) shall only be applicable if, and only if, at any time which
is two years after the Issue Date, for any reason on the Exercise
Date, there is no effective registration statement naming the
Holder as selling stockholder or no current prospectus available
pursuant to which the Holder would be entitled to sell the Warrant
Shares on such date. If such conditions exist, then this Warrant
may also be exercised at such time by means of a “cashless
exercise”. If the Notice of Exercise form elects a
“cashless” exercise, the Holder shall thereby be
entitled to receive a number of shares of Common Stock equal to (w)
the excess of the Current Market Value (as defined below) over the
total cash exercise price of the portion of the Warrant then being
exercised, divided by (x) the Market Price of the Common Stock. For
the purposes of this Warrant, the terms (x) “Current Market
Value” shall mean an amount equal to the Market Price of the
Common Stock, multiplied by the number of shares of Common Stock
specified in the applicable Notice of Exercise, (y) “Market
Price of the Common Stock” shall mean the average Closing
Price of the Common Stock for the three (3) Trading Days ending on
the Trading Day immediately prior to the Exercise Date, and (z)
“Closing Price” means the 4:02 P.M. closing bid price
of the Common Stock on the Principal Market on the relevant Trading
Day(s), as reported by Bloomberg LP (or if that service is not then
reporting the relevant information regarding the Common Stock, a
comparable reporting service of national reputation selected by the
Holder and reasonably acceptable to the Company) for the relevant
date.
(c) If the Notice of Exercise form
elects a “cash” exercise (or if the cashless exercise
referred to in the immediately preceding paragraph (b) is not
available in accordance with its terms), the Exercise Price per
share of Common Stock for the shares then being exercised shall be
payable, at the election of the Holder, in cash or by certified or
official bank check or by wire transfer in accordance with
instructions provided by the Company at the request of the
Holder.
(d) Upon the appropriate payment, if
any, of the Exercise Price for the shares of Common Stock
purchased, together with the surrender of this Warrant Certificate
(if required), the Holder shall be entitled to receive a
certificate or certificates for the shares of Common Stock so
purchased. The Company shall deliver such certificates representing
the Warrant Shares in accordance with the instructions of the
Holder as provided in the Notice of Exercise (the certificates
delivered in such manner, the “Warrant Share
Certificates”) within five (5) Trading Days (such fifth
Trading Day, a “Delivery Date”) of (i) with respect to
a “cashless exercise,” the Exercise Date or, (ii) with
respect to a “cash” exercise, the later of the Exercise
Date or the date the payment of the Exercise Price for the relevant
Warrant Shares is received by the Company.
(e) The Company understands that a
delay in the delivery of the Warrant Share Certificates by the
Delivery Date could result in economic loss to the Holder. As
compensation to the Holder for such loss, the Company agrees to pay
late payment fees (as liquidated damages and not as a penalty) to
the Holder for late delivery of Warrant Share Certificates in the
amount of $100 per Trading Day after the Delivery Date for each
$10,000 of Exercise Price of the Warrant Shares subject to the
delivery default. The Company shall pay any payments incurred under
this Section in immediately available funds upon demand.
Furthermore,
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in addition
to any other remedies which may be available to the Holder, in the
event that the Company fails for any reason to effect delivery of
the Warrant Share Certificates by the Delivery Date, the Holder may
revoke all or part of the relevant Warrant exercise by delivery of
a notice to such effect to the Company, whereupon the Company and
the Holder shall each be restored to their respective positions
immediately prior to the exercise of the relevant portion of this
Warrant, except that the liquidated damages described above shall
be payable through the date notice of revocation or rescission is
given to the Company.
(f) In addition to any other rights
available to the Holder, if the Company fails to deliver to the
Warrant Share Certificates within seven (7) Trading Days after the
Delivery Date and the Holder purchases (in an open market
transaction or otherwise) shares of Common Stock (“Bought
Shares”) to deliver in satisfaction of a sale by the Holder
of the shares of Common Stock which the Holder was entitled to
receive from the Company on exercise of this Warrant (a
“Buy-In”), then the Company shall pay in cash to the
Holder (in addition to any remedies available to or elected by the
Holder) the amount by which (A) the Holder’s total purchase
price (including brokerage commissions, if any) for the Bought
Shares exceeds (B) the Exercise Price for such Warrant Shares,
together with interest thereon at a rate of 15% per annum, accruing
until such amount and any accrued interest thereon is paid in full
(which amount shall be paid as liquidated damages and not as a
penalty). For example, if the Holder purchases shares of Common
Stock having a total purchase price of $11,000 to cover a Buy-In
with respect to $10,000 (based on the Exercise Price) of Warrant
Shares, the Company shall be required to pay the Subscriber $1,000,
plus interest. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the
Buy-In.
(g) The Holder shall be deemed to be
the holder of the Warrant Shares issuable to it in accordance with
the provisions of this Section 2.1 on the Exercise Date.
2.2 Call Right.
(a) If at any time the Closing Price
is equal to or above $3.00, as adjusted for any stock splits, stock
combinations, stock dividends and other similar events (the
“Threshold Price”), for any thirty (30) consecutive
Trading Day period, then the Company shall have the right, but not
the obligation (the “Call Right”), exercisable at any
time within five (5) Trading Days after the last of such thirty
(30) consecutive Trading Day period, on twenty (20) Trading
Days’ prior written notice to the Holder, to accelerate the
Expiration Date on all, but not less than all, of the unexercised
portion of this Warrant to 5:30 P.M. (New York City time) on the
Trading Day which is the twentieth Trading Day after the Holder
receives the Call Notice (the “Cancellation
Date”).
(b) To exercise the Call Right, the
Company shall deliver to the Holder an irrevocable written notice
thereof (a “Call Notice”). Notwithstanding the Call
Notice, the Holder may continue to exercise this Warrant in
accordance with its terms at any time through and including the
Cancellation Date and the other provisions of this Warrant shall
remain in full force in effect through and including the
Cancellation Date. Any portion of this Warrant that is still
outstanding immediately after the Cancellation Date shall be
cancelled.
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2.3 Trustee for Warrant
Holders . In the event that a qualified bank or trust company
shall have been appointed as trustee for the Holder of the
Warrants, such bank or trust company shall have all the powers and
duties of a warrant agent (as hereinafter described) and shall
accept, in its own name for the account of the Company or such
successor person as may be entitled thereto, all amounts otherwise
payable to the Company or such successor, as the case may be, on
exercise of this Warrant pursuant to Section 2.1.
3. Reservation of Shares .
The Company hereby agrees that, at all times during the term of
this Warrant, there shall be reserved for issuance upon exercise of
this Warrant, one hundred percent (100%) of the number of shares of
its Common Stock as shall be required for issuance of the Warrant
Shares for the then unexercised portion of this Warrant. For the
purposes of such calculations, the Company should assume that the
outstanding portion of this Warrant was exercisable in full at any
time, without regard to any restrictions which might limit the
Holder’s right to exercise all or any portion of this Warrant
held by the Holder.
4. Mutilation or Loss of
Warrant . Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) receipt of
reasonably satisfactory indemnification, and (in the case of
mutilation) upon surrender and cancellation of this Warrant, the
Company will execute and deliver a new Warrant of like tenor and
date and any such lost, stolen, destroyed or mutilated Warrant
shall thereupon become void.
5. Rights of the Holder
. The Holder shall not, by virtue hereof, be entitled to any rights
of a stockholder in the Company, either at law or equity, and the
rights of the Holder are limited to those expressed in this Warrant
and are not enforceable against the Company except to the extent
set forth herein.
6. Protection Against Dilution and
Other Adjustments .
6.1 Adjustment Upon Issuance of
Common Stock .
(a) The term “Dilutive
Issuance” means a transaction (other than an Excepted
Issuance, as de
