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. 2008-_____
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”),
____________________________ or its registered assigns (the
“Holder”) is hereby granted the right to purchase at
any time, on or after the Issue Date (as defined below) until 5:00
P.M., New York City time, on the date which is the five-year
anniversary of the Issue Date (the “Expiration Date”),
__________________ (_______ ) fully paid and non-assessable 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 (the “Exercise Price”)
of $1.00 per share, subject to further adjustment as set forth
herein. Reference is made to the terms of that certain Subscription
Agreement, dated as of the Issue Date (the
“Agreement”), to which the Company and certain named
Subscribers are parties. Capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Agreement.
This Warrant was originally issued to the Holder or the Holder's
predecessor in interest on September ___, 2008 (the “Issue
Date”).
2. Exercise of Warrants
.
2.1 General . (a) This
Warrant is exercisable in whole or in part at any time and from
time to time commencing on the Issue Date. 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
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payments
incurred under this Section in immediately available funds upon
demand. Furthermore, 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 shares issuable to it in accordance with the
provisions of this Section 2.1 on the Exercise Date.
2.2 Call Right.
(a) Subject to the provisions of
Section 2.3, 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
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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.
2.3 Limitation on Exercise .
The Company shall not effect any exercise of this Warrant, and a
Holder shall not have the right to exercise any portion of this
Warrant, pursuant to Section 2.1, Section 2.2 or otherwise, to the
extent that after giving effect to such issuance after exercise as
set forth on the applicable Notice of Exercise, such Holder
(together with such Holder's Affiliates, and any other person or
entity acting as a group together with such Holder or any of such
Holder's Affiliates), as set forth on the applicable Notice of
Exercise, would beneficially own in excess of the Beneficial
Ownership Limitation (as defined below); provided, however, that
this provision shall not apply (i) as specifically provided in this
Warrant as an exception to this provision or (ii) while there is
outstanding a tender offer for any or all of the shares of the
Company's Common Stock. For purposes of the foregoing sentence, the
number of shares of Common Stock beneficially owned by such Holder
and its Affiliates shall include the number of shares of Common
Stock issuable upon exercise of this Warrant with respect to that
such determination is being made, but shall exclude the number of
shares of Common Stock which would be issuable upon (A) exercise of
the remaining, non-exercised portion of this Warrant beneficially
owned by such Holder or any of its Affiliates and (B) exercise or
conversion of the unexercised or non-converted portion of any other
securities of the Company (including, without limitation, any other
Warrants) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned by
such Holder or any of its affiliates. Except as set forth in the
preceding sentence, for purposes of this Section 2.3, beneficial
ownership shall be calculated in accordance with Section 13(d) of
the 1934 Act and the rules and regulations promulgated thereunder,
it being acknowledged by the Holder that the Company is not
representing to such Holder that such calculation is in compliance
with Section 13(d) of the Exchange Act and such Holder is solely
responsible for any schedules required to be filed in accordance
therewith. To the extent that the limitation contained in this
Section 2.3 applies, the determination of whether this Warrant is
exercisable (in relation to other securities owned by such Holder
together with any Affiliates) and of which portion of this Warrant
is exercisable shall be in the sole discretion of the Holder, and
the submission of a Notice of Exercise shall be deemed to be the
Holder's determination of whether this Warrant is exercisable (in
relation to other securities owned by such Holder together with any
Affiliates) and of which portion of this Warrant is exercisable, in
each case subject to such aggregate percentage limitation, and the
Company shall have no obligation to verify or confirm the accuracy
of such determination. In addition, a determination as to any group
status as contemplated above shall be determined in accordance with
Section 13(d) of the 1934 Act and the rules and regulations
promulgated thereunder. For purposes of this Section 2.3, in
determining the number of outstanding shares of Common Stock, a
Holder may rely on the number of outstanding shares of Common Stock
as reflected in (x) the Company's most recent Form 10-QSB or Form
10-KSB, as the case may be, (y) a more recent public announcement
by the Company or, if more recent, (z) any other notice by the
Company or the Company's transfer agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral
request of the Holder, the Company shall within two (2) Trading
Days confirm orally and in writing to such Holder the number of
shares of Common Stock then outstanding. In any cas
