THESE SECURITIES MAY NOT BE
OFFERED OR SOLD UNLESS AT THE TIME OF SUCH OFFER OR SALE, THE
PERSON MAKING SUCH OFFER OR SALE DELIVERS A PROSPECTUS MEETING THE
REQUIREMENTS OF SECTION 10 OF THE SECURITIES ACT OF 1933, AS
AMENDED ("ACT"), FORMING A PART OF A REGISTRATION STATEMENT, OR
POST-EFFECTIVE AMENDMENT THERETO, WHICH IS EFFECTIVE UNDER SAID
ACT, UNLESS IN THE OPINION OF COUNSEL TO THE CORPORATION, SUCH
OFFER AND SALE IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF SAID
ACT.
ECOLOGY COATINGS,
INC.
WARRANT No. 1
This Warrant (the " Warrant " ) is made and entered into as of this 30th day
of September, 2009 ( " Grant Date " ) between ECOLOGY COATINGS, INC. , a
Nevada corporation (the " Company " ), and STROMBACK ACQUISITION CORPORATION
, an Illinois corporation (the " Holder " ).
WHEREAS, by this Agreement, the Company and the Holder
desire to set forth terms upon which the Company will grant to the
Holder and the Holder will accept from the Company this
Warrant.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the Company and the Holder hereby agree as
follows:
1. Grant and Term
of the Warrant .
1.1 Grant of
Warrant. Subject to the terms and conditions of
this Agreement, the Company grants to the Holder the right and
Warrant (the " Warrant " ) to purchase from the Company all or any part
of an aggregate of 14,400 shares of its Common Stock,
authorized (the " Shares " ) of Common Stock, par value $.001 per share, at
a price of $.42 per share (the " Purchase Price " ), as adjusted from time to time pursuant to the
provisions hereunder set forth. This Warrant is not
granted under any Warrant plan of the Company.
1.2 Time of
Exercise. Subject to the provisions of Sections
1.5, " Transfer and Assignment, " and 3.1, " Registration and Legends, " this Warrant may be exercised at any time and
from time to time after 9:00 a.m., E.S.T., on September 30, 2009
(the " Exercise Commencement Date " ) and will terminate at 5:00 p.m., E.S.T., on
September 30, 2019 (the " Expiration Date " ).
1.3.1 The Holder may
exercise this Warrant, in whole or in part, upon surrender of this
Warrant with the form of subscription attached hereto duly executed
to the Company at its corporate office together with the full
Purchase Price payable in cash.
1.3.2 Upon receipt of
this Warrant with the form of subscription duly executed and
accompanied by payment of the aggregate Purchase Price for the
Shares for which this Warrant is then being exercised, the Company
shall cause to be issued certificates or other evidence of
ownership for the total number of whole Shares for which this
Warrant is being exercised in such denominations as are required
for delivery to the Holder, and the Company shall thereupon deliver
such documents to the Holder or its nominee.
1.3.3 If the Holder
exercises this Warrant with respect to fewer than all of the Shares
that may be purchased under this Warrant, the Company shall execute
a new Warrant for the balance of the Shares that may be purchased
upon exercise of this Warrant and deliver such new Warrant to the
Holder.
1.3.4 The Company
covenants and agrees to pay when due and payable any and all taxes
that may be payable in respect of the issue of this Warrant, or the
issue of any Shares upon the exercise of this
Warrant. The Company shall not, however, be required to
pay any tax that may be payable in respect of any transfer involved
in the issuance or delivery of this Warrant or of the Shares in a
name other than that of the Holder at the time of surrender, and
until the payment of such tax, the Company shall not be required to
issue such Shares.
1.3.5 The Company shall,
at the time of any exercise of all or part of this Warrant, upon
the request of the Holder hereof, acknowledge in writing its
continuing obligation to afford to such Holder any rights to which
such Holders shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant, provided that if
the Holder of this Warrant fails to make any such request, such
failure shall not affect the continuing obligations of the Company
to afford any such rights to such Holder.
1.4 Exchange of
Warrant. This Warrant may be split-up, combined or
exchanged for another Warrant or Warrants of like tenor to purchase
a like aggregate number of Shares. If the Holder desires
to split-up, combine or exchange this Warrant, it shall make such
request in writing delivered to the Company at its corporate office
and shall surrender this Warrant and any other Warrants to be so
split-up, combined or exchanged, the Company shall execute and
deliver to the person entitled thereto an Warrant or Warrants, as
the case may be, as so requested. The Company shall not
be required to effect any split-up, combination or exchange which
will result in the issuance of an Warrant entitling the Holder to
purchase upon exercise a fraction of a Share. The
Company may require the Holder to pay a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with
any split-up, combination or exchange of Warrants. The
term "Warrant" as used herein includes any Warrants issued in
substitution for or replacement of this Warrant, or into which this
Warrant may be divided or exchanged.
1.5 Holder as
Owner. Prior to due presentment for registration of
transfer of this Warrant, the Company may deem and treat the Holder
as the absolute owner of this Warrant (notwithstanding any notation
of ownership or other writing hereon) for the purpose of any
exercise hereof and for all other purposes, and the Company shall
not be affected by any notice to the
contrary. Irrespective of the date of issue and delivery
of certificates for any Shares issuable upon the exercise of the
Warrant, each person in whose name any such certificate is issued
shall be deemed to have become the holder of record of the Shares
represented thereby on the date on which all or a portion of the
Warrant surrendered in connection with the subscription therefore
was surrendered and payment of the purchase price was
tendered. No surrender of all or a portion of the
Warrant on any date when the stock transfer books of the Company
are closed, however, shall be effective to constitute the person or
persons entitled to receive Shares upon such surrender as the
record holder of such Shares on such date, but such person or
persons shall be constituted the record holder or holders of such
Shares at the close of business on the next succeeding date on
which the stock transfer books are opened. Each person
holding any Shares received upon exercise of Warrant shall be
entitled to receive only dividends or distributions payable to
holders of record on or after the date on which such person shall
be deemed to have become the holder of record of such
Shares.
1.6 Transfer and
Assignment. This Warrant may not be sold,
hypothecated, exercised, assigned or transferred except in
accordance with and subject to the provisions of the Securities Act
of 1933, as amended ("Act") and only upon the consent of the
Company.
1.7 Method for
Assignment. Any assignment permitted under this
Warrant shall be made by surrender of this Warrant to the Company
at its principal office with the form of assignment attached hereto
duly executed and funds sufficient to pay any transfer
tax. In such event, the Company shall, without charge,
execute and deliver a new Warrant in the name of the assignee
designated in such instrument of assignment and this Warrant shall
promptly be canceled. This Warrant may be divided or
combined with other Warrants that carry the same rights upon
presentation thereof at the corporate office of the Company
together with a written notice signed by the Holder, specifying the
names and denominations in which such new Warrants are to be
issued.
1.8 Rights of
Holder. Nothing contained in this Warrant shall be
construed as conferring upon the Holder the right to vote or
consent or receive notice as a stockholder in respect of any
meetings of stockholders for the election of directors or any other
matter, or as having any rights whatsoever as a stockholder of the
Company. If, however, at any time prior to the
expiration of this Warrant and prior to its exercise, any of the
following shall occur:
1.8.1 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;
1.8.2 The Company shall
offer to 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
Warrant, right or warrant to subscribe therefore;
1.8.3 There shall be
proposed any capital reorganization or reclassification of the
Common Stock, or a sale of all or substantially all of the assets
of the Company, or a consolidation or merger of the Company with
another entity; or
1.8.4 There shall be
proposed a voluntary or involuntary dissolution, liquidation or
winding up of the Company; then, in any one or more of said cases,
the Company shall cause to be mailed to the Holder, at the earliest
practicable time (and, in any event, not less than thirty (30) days
before any record date or other date set for definitive action),
written notice of the date on which the books of the Company shall
close or a record shall be taken to determine the stockholders
entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote
on such reorganization, reclassification, sale, consolidation,
merger, dissolution, liquidation or winding up, as the case may
be. Such notice shall also set forth such facts as shall
indicate the effect of such action (to the extent such effect may
be known at the date of such notice) on the Purchase Price and the
kind and amount of the Common Stock and other securities and
property deliverable upon exercise of this Warrant. Such
notice shall also specify the date as of which the holders of the
Common Stock of record shall participate in said distribution or
subscription rights or shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such
reorganization, reclassification, sale, consolidation, merger,
dissolution, liquidation or winding up, as the case may be (on
which date, in the event of voluntary or involuntary dissolution,
liquidation or winding up of the Company, the right to exercise
this Warrant shall terminate). Without limiting the
obligation of the Company to provide notice to the holder of
actions hereunder, it is agreed that failure of the Company to give
notice shall not invalidate such action of the Company.
1.9 Lost
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 of
reasonably satisfactory indemnification, including a surety bond if
required by the Company, and upon surrender and cancellation of
this Warrant, if mutilated, the Company will cause to be executed
and delivered a new Warrant of like tenor and date. Any
such new Warrant executed and delivered shall constitute an
additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or
mutilated shall be at any time enforceable by anyone.
1.10 Covenants of
the Company. The Company covenants and agrees as
follows:
1.10.1 At all times it
shall reserve and keep available for the exercise of this Warrant
into Common Stock such number of authorized shares of Common Stock
as are sufficient to permit the exercise in full of this Warrant
into Common Stock; and
1.10.2 All Shares issued
upon exercise of the Warrant shall be duly authorized, validly
issued and outstanding, fully-paid and non-assessable.
2. Adjustment of
Purchase Price and Number of Shares Purchasable Upon
Exercise.
2.1
Recapitalization. The number of Shares
purchasable on exercise of this Warrant and the purchase price
therefore shall be subject to adjustment from time to time in the
event that the Company shall: (i) pay a dividend
in, or make a distribution of, shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a
greater number of shares, (iii) combine its outstanding shares
of Common Stock into a smaller number of shares, or
(iv) spin-off a subsidiary by distributing, as a dividend or
otherwise, shares of the subsidiary to its
stockholders. In any such case, the total number of
shares purchasable on exercise of this Warrant immediately prior
thereto shall be adjusted so that the Holder shall be entitled to
receive, at the same aggregate purchase price, the number of shares
of Common Stock that the Holder would have owned or would have been
entitled to receive immediately following the occurrence of any of
the events described above had this Warrant been exercised in full
immediately prior to the occurrence (or applicable record date) of
such event. An adjustment made pursuant to this Section
2 shall, in the case of a stock dividend or distribution, be made
as of the record date and, in the case o
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