Document:

EXHIBIT 4.4

EXHIBIT 4.4

FLIGHT SAFETY TECHNOLOGIES, INC.,

a Nevada corporation,

 

and

PACIFIC STOCK TRANSFER COMPANY,

as Warrant Agent,

 

and

THE SHEMANO GROUP, INC.,

as Underwriter

 

 

 

PUBLIC WARRANT AGREEMENT

 

TABLE OF CONTENTS

	 	
Page

	
Section 1.  Appointment of Warrant Agent
	
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Section 2.  Form of Warrant
	
2

	
Section 3.  Countersignature and Registration
	
3

	
Section 4.  Transfers and Exchanges
	
3

	
Section 5.  Exercise of Warrants; Payment of Warrant Solicitation Fee
	
4

	
Section 6.  Payment of Taxes
	
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Section 7.  Mutilated or Missing Warrants
	
8

	
Section 8.  Reservation of Common Stock
	
8

	
Section 9.  Warrant Price; Adjustments
	
10

	
Section 10.  Elimination of Fractional Interests
	
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Section 11.  Notices to Warrantholders
	
16

	
Section 12.  Disposition of Proceeds on Exercise of Warrants
	
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Section 13.  Redemption of Warrants
	
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Section 14.  Merger or Consolidation or Change of Name of Warrant Agent
	
19

	
Section 15.  Duties of Warrant Agent
	
20

	
Section 16.  Change of Warrant Agent
	
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Section 17.  Identity of Transfer Agent
	
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Section 18.  Notices
	
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Section 19.  Supplements and Amendments 
	
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Section 20.  Governing Law
	
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Section 21.  Benefits of this Agreement
	
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Section 22.  Successors
	
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     WARRANT AGENT AGREEMENT dated as of February __, 2004, by and among Flight Safety Technologies, Inc., a Nevada corporation (the "Company"), The Shemano Group, Inc. (the "Underwriter"), and Pacific Stock Transfer Company, as warrant agent (hereinafter called the "Warrant Agent").

     WHEREAS, the Company proposes to issue and sell to the public up to 1,350,000 units (the "Units"), each Unit consisting of two shares of the common stock of the Company, par value $.001 per share (hereinafter, together with the stock of any other class to which such shares may hereafter have been changed, called "Common Stock"), and one Common Stock purchase warrant (the "Warrants");

     WHEREAS, each Warrant will entitle the holder to purchase one share of Common Stock;

     WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, registration, transfer, exchange and exercise of the Warrants;

     NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows:

     Section 1.     Appointment of Warrant Agent.  The Company hereby appoints the Warrant Agent to act as Warrant Agent for the Company in accordance with the instructions hereinafter set forth in this Agreement, and the Warrant Agent hereby accepts such appointment.

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     Section 2.     Form of Warrant.  The text of the Warrants and of the form of election to purchase Common Stock to be printed on the reverse thereof shall be substantially as set forth in Exhibit A attached hereto.  Each Warrant shall entitle the registered holder thereof to purchase one share of Common Stock at a purchase price of Three Dollars and Thirty Cents ($3.30), at any time commencing on the Separation Date (as hereinafter defined) until 5:00 p.m. Eastern time, on January 29, 2009 (the "Warrant Exercise Period").  The securities comprising the Units will become detachable and separately transferable commencing February 28, 2004 or such earlier date as to which the Underwriter consents (the "Separation Date").  The warrant price and the number of shares of Common Stock issuable upon exercise of the Warrants are subject to adjustment upon the occurrence of certain events, all as hereinafter provided.  The Warrants shall be executed on behalf of the Company by the manual or facsimile signature of the present or any future Chief Executive Officer, President or Vice President of the Company, attested to by the manual or facsimile signature of the present or any future Secretary or Assistant Secretary of the Company.

     Warrants shall be dated as of the issuance by the Warrant Agent either upon initial issuance or upon transfer or exchange.

     In the event the aforesaid expiration dates of the Warrants fall on a Saturday or Sunday, or on a legal holiday on which the New York Stock Exchange is closed, then the Warrants shall expire at 5:00 p.m. Eastern time on the next succeeding business day.

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     Section 3.     Countersignature and Registration.  The Warrant Agent shall maintain books for the transfer and registration of the Warrants.  Upon the initial issuance of the Warrants, the Warrant Agent shall issue and register the Warrants in the names of the respective holders thereof.  The Warrants shall be countersigned manually or by facsimile by the Warrant Agent (or by any successor to the Warrant Agent then acting as warrant agent under this Agreement) and shall not be valid for any purpose unless so countersigned.  Warrants may, however, be so countersigned by the Warrant Agent (or by its successor as Warrant Agent) and be delivered by the Warrant Agent, notwithstanding that the persons whose manual or facsimile signatures appear thereon as proper officers of the Company shall have ceased to be such officers at the time of such countersignature or delivery.

     Section 4.     Transfers and Exchanges.  The Warrant Agent shall transfer, from time to time, any outstanding Warrants upon the books to be maintained by the Warrant Agent for that purpose, upon surrender thereof for transfer properly endorsed or accompanied by appropriate instructions for transfer.  Upon any such transfer, a new Warrant shall be issued to the transferee and the surrendered Warrant shall be cancelled by the Warrant Agent.  Warrants so cancelled shall be delivered by the Warrant Agent to the Company from time to time upon request.  Warrants may be exchanged at the option of the holder thereof, when surrendered at the office of the Warrant Agent, for another Warrant, or other Warrants of different denominations of like tenor and representing in the aggregate the right to purchase a like number of shares of Common Stock.

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     Section 5.     Exercise of Warrants; Payment of Warrant Solicitation Fee.

     (a)     Subject to the provisions of this Agreement, each registered holder of Warrants shall have the right, which may be exercised commencing at the opening of business on the first day of the Warrant Exercise Period, to purchase from the Company (and the Company shall issue and sell to such registered holder of Warrants) the number of fully paid and non-assessable shares of Common Stock specified in such Warrants upon surrender of such Warrants to the Company at the office of the Warrant Agent, with the form of election to purchase on the reverse thereof duly filled in and signed, and upon payment to the Company of the warrant price, determined in accordance with the provisions of Sections 9 and 10 of this Agreement, for the number of shares of Common Stock in respect of which such Warrants are then exercised.  Payment of such warrant price shall be made in cash or by certified check or bank draft to the order of the Company.  Subject to Section 6, upon such surrender of Warrants and payment of the warrant price, the Company shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the registered holder of such Warrants and in such name or names as such registered holder may designate, a certificate or certificates for the number of full shares of Common Stock so purchased upon the exercise of such Warrants.  Such certificate or certificates shall be deemed to have been issued, and any person so designated to be named therein shall be deemed to have become a holder of record of such shares of Common Stock, as of the date of the surrender of such Warrants and payment of the warrant price as aforesaid.  The rights of purchase represented by the Warrants shall be exercisable, at the election of the registered holders thereof, either as an entirety or from time to time for a portion of the shares specified

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therein and, in the event that any Warrant is exercised in respect of less than all of the shares of Common Stock specified therein at any time prior to the date of expiration of the Warrants, a new Warrant or Warrants will be issued to the registered holder for the remaining number of shares of Common Stock specified in the Warrant so surrendered, and the Warrant Agent is hereby irrevocably authorized to countersign and to deliver the required new Warrants pursuant to the provisions of this Section and of Section 3 of this Agreement and the Company, whenever requested by the Warrant Agent, will supply the Warrant Agent with Warrants duly executed on behalf of the Company for such purpose.  Anything in the foregoing to the contrary notwithstanding, no Warrant will be exercisable unless at the time of exercise the Company has filed with the Securities and Exchange Commission a registration statement under the Securities Act of 1933, as amended (the "Act"), covering the shares of Common Stock issuable upon exercise of such Warrant and such shares have been so registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of such Warrant.  The Company shall use its best efforts to have all shares so registered or qualified on or before the date on which the Warrants become exercisable.

     (b)     If at the time of exercise of any Warrant after 12 months after the Effective Date (i) the market price of the Company's Common Stock is equal to or greater than the then purchase price of the Warrant, (ii) the exercise of the Warrant is solicited by the Underwriter at such time while the Underwriter is a member of the National Association of Securities Dealers, Inc. ("NASD"), (iii) the Warrant is not held in a discretionary account, (iv) disclosure of the compensation

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arrangement is made in documents provided to the holders of the Warrants; and (v) the solicitation of the exercise of the Warrant is not in violation of Regulation M (as such regulation or any successor regulation or rule may be in effect as of such time of exercise) promulgated under the Securities Exchange Act of 1934, then the Underwriter shall be entitled to receive from the Company upon exercise of each of the Warrant(s) so exercised a fee of five percent (5%) of the aggregate price of the Warrants so exercised (the "Exercise Fee"). The procedures for payment of the warrant solicitation fee are set forth in Section 5(c) below.

     (c)     (1)     Within five (5) days of the last day of each month commencing with February 2005, the Warrant Agent will notify the Underwriter of each Warrant Certificate which has been properly completed for exercise by holders of Warrants during the last month. The Company and Warrant Agent shall determine, in their sole and absolute discretion, whether a Warrant Certificate has been properly completed. The Warrant Agent will provide the Underwriter with such information, in connection with the exercise of each Warrant, as the Underwriter shall reasonably request.

             (2)     The Company hereby authorizes and instructs the Warrant Agent to deliver to the Underwriter the Exercise Fee promptly after receipt by the Warrant Agent from the Company of a check payable to the order of the Underwriter in the amount of the Exercise Fee.  In the event that an Exercise Fee is paid to the Underwriter with respect to a Warrant which the Company or the Warrant Agent determines is not properly completed for exercise or in respect of which the Underwriter is not entitled to an Exercise Fee, the  Underwriter will promptly return such 

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Exercise Fee to the Warrant Agent which shall forthwith return such fee to the Company.  In addition to the Exercise Fee payable hereunder, the Company shall pay all costs and expenses relating to any solicitation.  The Company hereby acknowledges that the Underwriter shall be the sole warrant solicitation agent in connection with the solicitation of warrants.

                     The Underwriter and the Company may at any time, after February 2005, and during business hours, examine the records of the Warrant Agent, including its ledger of original Warrant certificates returned to the Warrant Agent upon exercise of Warrants. Notwithstanding any provision to the contrary, the provisions of paragraphs 5(b) and 5(c) may not be modified, amended or deleted without the prior written consent of the Underwriter.

     6.     Payment of Taxes.  The Company will pay any documentary stamp taxes attributable to the initial issuance of Common Stock issuable upon the exercise of Warrants; 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 issue or delivery of any certificates of shares of Common Stock in a name other than that of the registered holder of Warrants in respect of which such shares are issued, and in such case neither the Company nor the Warrant Agent shall be required to issue or deliver any certificate for shares of Common Stock or any Warrant until the person requesting the same has paid to the Company the amount of such tax or has established to the Company's satisfaction that such tax has been paid.

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     Section 7.     Mutilated or Missing Warrants.  In case any of the Warrants shall be mutilated, lost, stolen or destroyed, the Company may, in its discretion, issue and the Warrant Agent shall countersign and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant, or in lieu of and in substitution for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and representing an equivalent right or interest, but only upon receipt of evidence satisfactory to the Company and the Warrant Agent of such loss, theft or destruction and, in case of a lost, stolen or destroyed Warrant, indemnity, if requested, also satisfactory to them.  Applicants for such substitute Warrants shall also comply with such other reasonable regulations and pay such reasonable charges as the Company or the Warrant Agent may prescribe.

     Section 8.     Reservation of Common Stock.  There have been reserved, and the Company shall at all times keep reserved, out of the authorized and unissued shares of Common Stock, a number of shares of Common Stock sufficient to provide for the exercise of the rights of purchase represented by the Warrants, and the transfer agent for the shares of Common Stock and every subsequent transfer agent for any shares of the Company's Common Stock issuable upon the exercise of any of the rights of purchase aforesaid are irrevocably authorized and directed at all times to reserve such number of authorized and unissued shares of Common Stock as shall be required for such purpose.  The Company agrees that all shares of Common Stock issued upon exercise of the Warrants shall be, at the time of delivery of the certificates of such shares, validly issued and outstanding, fully paid and non-assessable and listed on any national securities exchange upon which the other shares of Common Stock are then listed.  So long as any unexpired Warrants remain outstanding, the Company will file such post-effective 

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amendments to the registration statement (Form SB-2, Registration No. 333-109916) (the "Registration Statement") filed pursuant to the Act with respect to the Warrants (or other appropriate registration statements or post-effective amendment or supplements) as may be necessary to permit it to deliver to each person exercising a Warrant, a prospectus meeting the requirements of Section 10(a)(3) of the Act and otherwise complying therewith, and will deliver such a prospectus to each such person.  The Company will keep a copy of this Agreement on file with the transfer agent for the shares of Common Stock and with every subsequent transfer agent for any shares of the Company's Common Stock issuable upon the exercise of the rights of purchase represented by the Warrants.  The Warrant Agent is irrevocably authorized to requisition from time to time from such transfer agent stock certificates required to honor outstanding Warrants.  The Company will supply such transfer agent with duly executed stock certificates for that purpose.  All Warrants surrendered in the exercise of the rights thereby evidenced shall be cancelled by the Warrant Agent and shall thereafter be delivered to the Company, and such cancelled Warrants shall constitute sufficient evidence of the number of shares of Common Stock which have been issued upon the exercise of such Warrants.  Promptly after the date of expiration of the Warrants, the Warrant Agent shall certify to the Company the total aggregate amount of Warrants then outstanding, and thereafter no shares of Common Stock shall be subject to reservation in respect of such Warrants that shall have expired.

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     Section 9.     Warrant Price; Adjustments.

          (a)     The warrant price at which Common Stock shall be purchasable upon the exercise of the Warrants shall be $3.30 per share or, after adjustment as provided in this Section, shall be such price as so adjusted (the "Warrant Price").

          (b)     The Warrant Price shall be subject to adjustment from time to time as follows:

               (1)     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 Warrant Price in effect immediately prior to such dividend or distribution shall forthwith be reduced to a price determined by dividing:

                    (i)     an amount equal to the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution multiplied by the Warrant Price in effect immediately prior to such dividend or distribution, by

                    (ii)     the total number of shares of Common Stock outstanding immediately after such dividend or distribution.

     For the purposes of any computation to be made in accordance with the provisions of this Section 9(b)(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.

 

 

 

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               (2)     In case the Company shall at any time subdivide or combine the outstanding Common Stock, the Warrant Price shall forthwith be proportionately decreased in the case of subdivision or increased in the case of combination to the nearest one cent.  Any such adjustment shall become effective at the time such subdivision or combination shall become effective.

               (3)     Within a reasonable time after the close of each quarterly fiscal period of the Company during which the Warrant Price has been adjusted as herein provided, the Company shall:

                    (i)     file with the Warrant Agent a certificate signed by the Chief Executive Officer, President or Vice President of the Company and by the Chief Financial Officer, Principal Accounting Officer, Treasurer or Assistant Treasurer of the Company, showing in detail the facts requiring all such adjustments occurring during such period and the Warrant Price after each such adjustment; and

                    (ii)     the Warrant Agent shall have no duty with respect to any such certificate filed with it except to keep the same on file and available for inspection by holders of Warrants during reasonable business hours, and the Warrant Agent may conclusively rely upon the latest certificate furnished to it hereunder.  The Warrant Agent shall not at any time be under any duty or responsibility to any holder of a Warrant to determine whether any facts exist which may require any adjustment of the Warrant Price, or with respect to the nature or extent of any adjustment of the Warrant Price when made, or with respect to the method employed in making any such adjustment, or with respect to the nature or extent of the property or securities 

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deliverable hereunder.  In the absence of a certificate's having been furnished, the Warrant Agent may conclusively rely upon the provisions of the Warrants with respect to the Common Stock deliverable upon the exercise of the Warrants and the applicable Warrant Price.

               (4)     Notwithstanding anything contained herein to the contrary, no adjustment of the Warrant Price shall be made if the amount of such adjustment shall be less than $0.02, but in such case any adjustment that would otherwise be required then to be made shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustment so carried forward, shall amount to not less than $0.02.

               (5)     In the event that the number of outstanding shares of Common Stock is increased by a stock dividend payable in Common Stock or by a subdivision of the outstanding Common Stock, then, from and after the time at which the adjusted Warrant Price becomes effective pursuant to this Section 9(b) by reason of such dividend or subdivision, the number of shares of Common Stock issuable upon the exercise of each Warrant shall be increased in proportion to such increase in outstanding shares.  In the event that the number of shares of Common Stock outstanding is decreased by a combination of the outstanding Common Stock, then, from and after the time at which the adjusted Warrant Price becomes effective pursuant to this Section 9(b) by reason of such combination, the number of shares of Common Stock issuable upon the exercise of each Warrant shall be decreased in proportion to such decrease in the outstanding shares of Common Stock.

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               (6)     In case of any reorganization or reclassification of the outstanding Common Stock (other than a change in par value, or from par value to no par value, or as a result of a subdivision or combination), or in case of any consolidation of the Company with, or merger of the Company into, another corporation (other than a consolidation or merger in which the Company is the continuing corporation and which does not result in any reclassification of the outstanding Common Stock), or in case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, the holder of each Warrant then outstanding shall thereafter have the right to purchase the kind and amount of shares of Common Stock and other securities and property receivable upon such reorganization, reclassification, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock which the holder of such Warrant shall then be entitled to purchase; such adjustments shall apply with respect to all such changes occurring between the date of this Warrant Agreement and the date of exercise of such Warrant.

               (7)     Subject to the provisions of this Section 9, in case the Company shall, at any time prior to the exercise of the Warrants, make any distribution of its assets to holders of its Common Stock as a liquidating or a partial liquidating dividend, then the holder of Warrants who exercises its Warrants after the record date for the determination of those holders of Common Stock entitled to such distribution of assets as a liquidating or partial liquidating dividend shall be entitled to receive for the Warrant Price per Warrant, in addition to each share of Common 

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Stock, the amount of such distribution (or, at the option of the Company, a sum equal to the value of any such assets at the time of such distribution as determined by the Board of Directors of the Company in good faith) which would have been payable to such holder had such holder been the holder of record of the Common Stock receivable upon exercise of its Warrant on the record date for the determination of those entitled to such distribution.

               (8)     In case of the dissolution, liquidation or winding up of the Company, all rights under the Warrants shall terminate on a date fixed by the Company, such date to be no earlier than ten (10) days prior to the effectiveness of such dissolution, liquidation or winding up and not later than five (5) days prior to such effectiveness.  Notice of such termination of purchase rights shall be given to the last registered holder of the Warrants, as the same shall appear on the books of the Company maintained by the Warrant Agent, by registered mail at least thirty (30) days prior to such termination date.

               (9)     In case the Company shall, at any time prior to the expiration of the Warrants and prior to the exercise thereof, offer to the holders of its Common Stock any rights to subscribe for additional shares of any class of the Company, then the Company shall give written notice thereof to the registered holders of the Warrants not less than thirty (30) days prior to the date on which the books of the Company are closed or a record date is fixed for the determination of the stockholders entitled to such subscription rights. Such notice shall specify the date as to which 

 

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the books shall be closed or the record date fixed with respect to such offer of subscription and the right of the holders of the Warrants to participate in such offer of subscription shall terminate if the Warrant shall not be exercised on or before the date of such closing of the books or such record date.

               (10)     Any adjustment pursuant to the aforesaid provisions of this Section 9 shall be made on the basis of the number of shares of Common Stock that the holder thereof would have been entitled to acquire upon the exercise of the Warrant immediately prior to the event giving rise to such adjustment.

               (11)      Irrespective of any adjustments in the Warrant Price or the number or kind of shares purchasable upon exercise of the Warrants, Warrants previously or thereafter issued may continue to express the same price and number and kind of shares as are stated in the similar Warrants initially issuable pursuant to this Warrant Agreement.

               (12)      If at any time, as a result of an adjustment made pursuant to Section 9(b)(6) above, the holder of a Warrant or Warrants shall become entitled to purchase any securities other than shares of Common Stock, thereafter the number of such securities so purchasable upon exercise of each Warrant and the Warrant Price for such securities shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Sections 9(b)(2) through (5).

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     Section 10.     Elimination of Fractional Interests.  The Warrants may only be exercised to purchase full shares of Common Stock and the Company shall not be required to issue fractions of shares of Common Stock on the exercise of Warrants.  However, if a Warrant holder exercises all Warrants then owned of record by it and such exercise would result in the issuance of a fractional share, the Company will pay to such Warrant holder, in lieu of the issuance of any fractional share otherwise issuable, an amount of cash based on the market value of the Common Stock of the Company on the last trading day prior to the exercise date.

     Section 11.      Notices to Warrantholders.

          (a)      Upon any adjustment of the Warrant Price and the number of shares of Common Stock issuable upon exercise of a Warrant, then and in each such case the Company shall give written notice thereof to the Warrant Agent, which notice shall state the Warrant Price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of a Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.  The Company shall also mail such notice to the holders of the Warrants at their addresses appearing in the Warrant register.  Failure to give or mail such notice, or any defect therein, shall not affect the validity of the adjustments.

 

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          (b)      Nothing contained in this Agreement shall be construed as conferring upon the holders of Warrants the right to vote or to consent or to receive notice as a stockholder in respect of any meetings of stockholders for the election of directors or any other matter, or any rights whatsoever as a stockholder 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:

               (1)      the Company shall pay dividends payable in stock upon its Common Stock or make any distribution (other than regular cash dividends) to the holders of its Common Stock; or

               (2)      the Company shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or other rights; or

               (3)      there shall be any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with, or sale of substantially all of its assets to, another corporation; or

               (4)      there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;

then in any one or more of such events, the Company shall give written notice in the manner set forth in Section 11(a) of the date on which (A) a record shall be taken for such dividend, distribution or subscription rights, or (B) such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up shall take place, as the case may be.  Such notice shall also specify the date as of which the holders of Common Stock of record shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange 

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their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, as the case may be.  Such notice shall be given at least thirty (30) days prior to the action in question and not less than thirty (30) days prior to any record date in respect thereof.  Failure to give such notice, or any defect therein, shall not affect the legality or validity of any of the matters set forth in this Section 11(b).

          (c)      The Company shall cause copies of all financial statements and reports, proxy statements and other documents that are sent to its stockholders to be sent by first-class mail, postage prepaid to each registered holder of Warrants at his address appearing in the warrant register as of the record date for the determination of the stockholders entitled to such documents.

     Section 12.     Disposition of Proceeds on Exercise of Warrants.

          (a)      The Warrant Agent shall promptly forward to the Company all monies received by the Warrant Agent for the purchase of shares of Common Stock through the exercise of Warrants.

          (b)      The Warrant Agent shall keep copies of this Agreement available for inspection by holders of Warrants during normal business hours.

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     Section 13.     Redemption of Warrants.  The Warrants are redeemable by the Company, in whole or in part, on not less than thirty (30) days' prior written notice at a redemption price of $.25 per Warrant (subject to adjustment consistent with the provisions of Section 9 hereof) at any time after January 29, 2005; provided that (i) the last reported sales price per share of the Common Stock as reported by the principal exchange or trading market on which the Common Stock trades equals or exceeds $10.00 (subject to adjustment in certain circumstances) for twenty  (20) consecutive trading days ending on the tenth trading day prior to the day on which the Company gives notice (the "Call Date") of redemption and (ii) there is an effective registration statement under the Act covering the offer and sale of shares of Common Stock upon exercise of the Warrants.  The redemption notice shall be mailed to the holders of the Warrants at their addresses appearing in the Warrant register.  Holders of the Warrants will have exercise rights until the close of business on the business day next preceding the specified redemption date.

     Section 14.     Merger or Consolidation or Change of Name of Warrant Agent.  Any corporation or company which may succeed to the corporate trust business of the Warrant Agent by any merger or consolidation or otherwise shall be the successor to the Warrant Agent hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible to serve as a successor Warrant Agent under the provisions of Section 16 of this Agreement.  In case at the time such successor to the Warrant Agent shall succeed to the agency created by this Agreement, any of the Warrants 

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shall have been countersigned but not delivered, any such successor to the Warrant Agent may adopt the countersignature of the original Warrant Agent and deliver such Warrants so countersigned.

     In case at any time the name of the Warrant Agent shall be changed and at such time any of the Warrants shall have been countersigned but not delivered, the Warrant Agent may adopt the countersignature under its prior name and deliver Warrants so countersigned.  In all such cases such Warrants shall have the full force provided in the Warrants and in the Agreement.

     Section 15.     Duties of Warrant Agent.  The Warrant Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Warrants, by their acceptance thereof, shall be bound:

          (a)      The statements of fact and recitals contained herein and in the Warrants shall be taken as statements of the Company, and the Warrant Agent assumes no responsibility for the correctness of any of the same except such as describe the Warrant Agent or action taken or to be taken by it.  The Warrant Agent assumes no responsibility with respect to the distribution of the Warrants except as herein expressly provided.

          (b)      The Warrant Agent shall not be responsible for any failure of the Company to comply with any of the covenants in this Agreement or in the Warrants to be complied with by the Company.

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          (c)      The Warrant Agent may consult at any time with counsel satisfactory to it (who may be counsel for the Company) and the Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion or the advice of such counsel.

          (d)      The Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant for any action taken in reliance on any notice, resolution, waiver, consent, order, certificate or other instrument believed by it to be genuine and to have been signed, sent or presented by the proper party or parties.

          (e)      The Company agrees to pay to the Warrant Agent reasonable compensation for all services rendered by the Warrant Agent in the performance of its obligations under this Agreement, to reimburse the Warrant Agent for all expenses, taxes and governmental charges and other charges incurred by the Warrant Agent in the performance of its obligations under this Agreement and to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and reasonable counsel fees, for anything done or omitted by the Warrant Agent in the performance of its obligations under this Agreement except as a result of the Warrant Agent's negligence, willful misconduct or bad faith.

          (f)      The Warrant Agent shall be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve expenses unless the Company or one or more registered holders of Warrants shall furnish the Warrant Agent with reasonable security 

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and indemnity for any costs and expenses which may be incurred, but this provision shall not affect the power of the Warrant Agent to take such action as the Warrant Agent may consider proper, whether with or without any such security or indemnity.  All rights of action under this Agreement or under any of the Warrants may be enforced by the Warrant Agent without the possession of any of the Warrants or the production thereof at any trial or other proceeding, and any such action, suit or proceeding instituted by the Warrant Agent shall be brought in its name as Warrant Agent, and any recovery of judgment shall be for the ratable benefit of the registered holders of the Warrants, as their respective rights and interests may appear.

          (g)      The Warrant Agent and any stockholder, director, officer, partner or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to or otherwise act as fully and freely as though it were not the Warrant Agent under this Agreement.  Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity.

          (h)      The Warrant Agent shall act hereunder solely as agent and its duties shall be determined solely by the provisions hereof.

          (i)      The Warrant Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys, agents or employees, and the Warrant Agent shall not be answerable or accountable for any such attorneys, agents or employees or for any loss to the Company resulting from such neglect or misconduct, provided reasonable care had been exercised in the selection and continued employment thereof.

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          (j)      Any request, direction, election, order or demand of the Company shall be sufficiently evidenced by an instrument signed in the name of the Company by its Chief Executive Officer, President or a Vice President or its Secretary or an Assistant Secretary or its Treasurer or an Assistant Treasurer (unless other evidence in respect thereof be herein specifically prescribed); and any resolution of the Board of Directors may be evidenced to the Warrant Agent by a copy thereof certified by the Secretary or an Assistant Secretary of the Company.

     Section 16.     Change of Warrant Agent.  The Warrant Agent may resign and be discharged from its duties under this Agreement by giving to the Company notice in writing, and to the holders of the Warrants notice by mailing such notice to the holders at their addresses appearing on the Warrant register, of such resignation, specifying a date when such resignation shall take effect.  The Warrant Agent may be removed by like notice to the Warrant Agent from the Company and the like mailing of notice to the holders of the Warrants.  If the Warrant Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Warrant Agent.  If the Company shall fail to make such appointment within a period of thirty (30) days after such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Warrant Agent or after the Company has received such notice from a registered holder of a Warrant (who shall, with such notice, submit his Warrant for inspection by the Company), then the registered holder of any Warrant may apply to any court of competent jurisdiction for the appointment of a successor to 

23

 

the Warrant Agent.  Any successor Warrant Agent, whether appointed by the Company or by such a court, shall be a bank or trust company, in good standing, incorporated under New York, Nevada or federal law.  After appointment, the successor Warrant Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Warrant Agent without further act or deed and the former Warrant Agent shall deliver and transfer to the successor Warrant Agent all cancelled Warrants, records and property at the time held by it hereunder, and execute and deliver any further assurance or conveyance necessary for the purpose.  Failure to file or mail any notice provided for in this Section, however, or any defect therein, shall not affect the validity of the resignation or removal of the Warrant Agent or the appointment of the successor Warrant Agent, as the case may be.

     Section 17.     Identity of Transfer Agent.  Forthwith upon the appointment of any transfer agent for the shares of Common Stock or of any subsequent transfer agent for the shares of Common Stock or other shares of the Company's Common Stock issuable upon the exercise of the rights of purchase represented by the Warrants, the Company will file with the Warrant Agent a statement setting forth the name and address of such transfer agent.

     Section 18.     Notices.  Any notice pursuant to this Agreement to be given by the Warrant Agent, by the Underwriter or by the registered holder of any Warrant to the Company, shall be sufficiently given if sent by first-class mail, postage prepaid, addressed (until another is filed in writing by the Company with the Warrant Agent) as follows:

24

 

 

 

	 	
Flight Safety Technologies, Inc.

28 Cottrell Street

Mystic, Connecticut  06355

Attention:  Samuel A. Kovnat

                  Chairman and CEO

	
                 and a copy thereof to:

	 	
Tobin, Carberry, O'Malley, Riley, Selinger, P.C.

43 Broad Street

New London, Connecticut  06320

Attention:  Joseph J. Selinger, Jr., Esq.

     Any notice pursuant to this Agreement to be given by the Company, by the Underwriter or by the registered holder of any Warrant to the Warrant Agent shall be sufficiently given if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company) as follows:

	 	
Pacific Stock Transfer Company

500 E. Warm Springs Road, Suite 240

Las Vegas, Nevada  89119

Attention:  Valerie Killius

     Any notice pursuant to this Agreement to be given by the Warrant Agent or by the Company to the Underwriter shall be sufficiently given if sent by first-class mail, postage prepaid, addressed (until another address if filed in writing with the Warrant agent) as follows:

	 	
The Shemano Group, Inc.

601 California Street

Suite 1150

San Francisco, California  94108

Attention:  Gary J. Shemano

                   Chairman

25

 

 

	
                 and a copy thereof to:

	 	
Blank Rome LLP

405 Lexington Avenue

New York, New York 10174

Attention:  Richard DiStefano, Esq.

     Section 19.     Supplements and Amendments.  The Company and the Warrant Agent may from time to time supplement or amend this Agreement in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Warrant Agent may deem necessary or desirable and which shall not be inconsistent with the provisions of the Warrants and which shall not adversely affect the interest of the holders of Warrants.  

     Section 20.     Governing Law.  This Agreement and each Warrant issued hereunder shall be deemed to be a contract made under the laws of the State of New York and shall be construed in accordance with the laws of New York applicable to agreements to be performed wholly within New York.

26

 

 

     Section 21.     Benefits of this Agreement.  Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Warrant Agent and the registered holders of the Warrants any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Warrant Agent and the registered holders of the Warrants.

     Section 22.     Successors.  All the covenants and provisions of this Agreement by or for the benefit of the Company, the Warrant Agent or the Underwriter shall bind and inure to the benefit of their respective successors and assigns hereunder.

     IN WITNESS WHEREOF, the parties have entered into this Agreement on the date first above written.

	 	
FLIGHT SAFETY TECHNOLOGIES, INC.

By:                                                                           

Name:

Title:

	 	
PACIFIC STOCK TRANSFER COMPANY

By:                                                                           

Name:

Title:

	 	
THE SHEMANO GROUP, INC.

By:                                                                           

Name:

Title:

 

27

EXHIBIT A

[FORM OF WARRANT CERTIFICATE]

COMMON STOCK PURCHASE WARRANTS

FLIGHT SAFETY TECHNOLOGIES, INC.

EXERCISABLE ON OR BEFORE

5:00 P.M., EASTERN TIME, JANUARY 29, 2009

	
No.
	
Warrants

CUSIP                            

     THIS IS TO CERTIFY THAT 

or registered assigns, is the owner of the number of warrants set forth above.  Each warrant (subject to adjustments as hereinafter referred to) entitles the holder hereof to purchase at any time until 5:00 p.m. Eastern Time on January 29, 2009 one fully paid and non-assessable share of common stock (the "Common Stock") of Flight Safety Technologies, Inc., a Nevada corporation (the "Company") (such shares of Common Stock being hereinafter referred to as the "Shares" or a "Share"), upon payment of the warrant price (as hereinafter described), provided, however, that under certain conditions set forth in the Warrant Agreement hereinafter mentioned the number of Shares purchased upon the exercise of a warrant may be increased or reduced and the warrant price may be adjusted. Subject to adjustment as aforesaid, the warrant price per Share (hereinafter called the "Warrant Price") shall be $3.30 per Share.  As provided in said Warrant Agreement the Warrant Price is payable upon the exercise of the Warrant, either in cash or by certified check payable to the order of the Company.

     Under certain conditions set forth in the Warrant Agreement, this Warrant may be called for redemption on or after January 29, 2005, at a redemption price of $0.25 per Warrant (subject to adjustment consistent with the provisions of Section 9 of the Warrant Agreement) upon written notice of not less than 30 days.

     Upon the exercise of this Warrant, the form of election to purchase must be properly completed and executed.  In the event that this Warrant is exercised in respect of less than all of such Shares, a new Warrant for the remaining number of Shares will be issued on such surrender.

     This Warrant is issued under and the rights represented hereby are subject to the terms and provisions contained in a Public Warrant Agreement (the "Warrant Agreement"), dated as of February ___, 2004, among the Company, Pacific Stock Transfer Company, as Warrant Agent (the "Warrant Agent") and The Shemano Group, Inc., as the Underwriter (the "Underwriter"), all terms and provisions of which the registered holder of this Warrant, by acceptance hereof, assents to.  Reference is hereby made to said Warrant Agreement for a more complete statement of the rights and limitations of rights of the registered holders hereof, the rights and duties of the Warrant Agent and the rights and obligations of the Company hereunder.  Copies of said Warrant Agreement are on file at the office of the Warrant Agent.

     The Company shall not be required upon the exercise of this Warrant to issue fractions of Shares, but shall make adjustments therefor in cash on the basis of the then current market value of any fractional interest as provided in the Warrant Agreement.

     This Warrant is transferable at the office of the Warrant Agent (or of its successor as Warrant Agent) by the registered holder hereof in person or by attorney duly authorized in writing, but only in this manner and subject to the limitations provided in the Warrant Agreement and upon surrender of this Warrant and the payment of any transfer taxes.  Upon any such transfer, a new Warrant, or Warrants of different denominations, of this tenor and representing in the aggregate the right to purchase a like number of Shares will be issued to the transferee in exchange for this Warrant.

     If this Warrant Certificate shall be surrendered for exercise within any period during which the transfer books for the Company's Common Stock or other securities purchasable upon exercise of the Warrants are closed for any purpose, the Company shall not be required to make delivery of certificates for the securities purchased upon such exercise until the date of the reopening of said transfer books.

     The holder of this Warrant shall not be entitled to any of the rights of a shareholder of the Company prior to the exercise hereof.

     This Warrant shall not be valid unless countersigned by the Warrant Agent.

     Witness the facsimile seal of the Company and the facsimile signatures of its duly authorized officers.

 

 

DATED:

[SIGNATURE]                                  [CORPORATE SEAL]                             [SIGNATURE]

 

 

 

 

 

 

FLIGHT SAFETY TECHNOLOGIES, INC.

ELECTION TO PURCHASE

To Be Executed by the Registered Holder In Order to Exercise Warrants

To:     FLIGHT SAFETY TECHNOLOGIES, INC.

c/o:     Pacific Stock Transfer Company

           500 E. Warm Springs Road, Suite 240

           Las Vegas, Nevada  89119

     The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant(s) for and to purchase thereunder, ________________ shares of Common Stock provided for therein and tenders herewith payment of the purchase price in full to the order of the Company and requests that certificates for such shares shall be issued in the name of

 

 

	
                                                                                     

                   (Please Print or Typewrite)
	 	
                                                         

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER

and be delivered to                                                                                                                             

                                                                                    (Name)

at                                                                                                                                                         

         (Street Address)                           (City)                        (State)                           (Zip Code)

and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant for the balance remaining of the shares purchasable under the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below.

	
Dated:
	
Signature:
	
                                                                 

Note:  the above signature must correspond with the name as written upon the face of this Warrant or with the name of the assignee appearing in the assignment from below in every particular without alteration or enlargement or any change whatever.

 

	 	
Name:
	
                                                                 

           (Please Print or Typewrite)

                                                                 

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER

	 	

Address:
	

                                                                 

                       (Street)

                                                                 

(City)              (State)           (Zip Code)

*Signature Guaranteed:                                                         

 

 

 

 

ASSIGNMENT

For value received:                                                               hereby sell, assign and transfer unto

	
                                                                           

(Please Print or Typewrite Name of Assignee)
	
                                                               

PLEASE INSERT SOCIAL

SECURITY OR OTHER IDENTIFYING NUMBER

                                                                                                                                                           

                 (Street Address)                       (City)                         (State)                     (Zip Code)

 

(                        ) Warrants represented by the within Warrant Certificate, together with all right, title and interest therein, and do hereby irrevocably constitute and appoint                                  attorney to transfer said Warrant on the books of the within named Company, with full power of substitution in the premises, whatever.

	
Dated:
	
Signature:
	
                                                                 

Note:  the above signature must correspond with the name as written upon the face of this Warrant or with the name of the assignee appearing in the assignment from below in every particular without alteration or enlargement or any change whatever.

	 	
Name:
	
                                                                 

           (Please Print or Typewrite)

                                                                 

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER

*Signature Guaranteed:                                                                       

* In case of assignment or if the Common Stock issued upon exercise is to be registered in the name of a person other than the holder, the holder's signature must be guaranteed by a  commercial bank, trust company or an NASD member firm.Exhibit 4.5

Exhibit 4.5

UNDERWRITER'S UNIT WARRANT AGREEMENT

UNDERWRITER'S UNIT WARRANT AGREEMENT dated as of February __, 2004, between Flight Safety Technologies, Inc., a Nevada corporation (the "Company"), and The Shemano Group, Inc. (hereinafter referred to as the "Underwriter").

W I T N E S S E T H:

WHEREAS, pursuant to the terms of an Underwriting Agreement dated as of January _____, 30, 2004 (the "Underwriting Agreement") between the Underwriter and the Company, the Underwriter has agreed to purchase, in a public offering under the Securities Act of 1933, as amended (the "Act"), on a firm commitment basis (the "Offering"), One Million Three Hundred Fifty Thousand (1,350,00) units (the "Offered Units") at a public offering price of $6.00 per Offered Unit, each Offered Unit consisting of two (2) shares of the Company's common stock, par value $.001 per share (the "Common Shares") (each Common Share constituting part of an Offered Unit referred to as an "Offered Share"), and one (1) Common Share purchase warrant to purchase one (1) Common Share ("Offered Warrant"), with an option to purchase up to an additional Two Hundred Two Thousand Five Hundred (202,500) Offered Units for the purpose of covering over-allotments; and

WHEREAS, as additional consideration to the Underwriter for its services pursuant to the Underwriting Agreement, the Company has agreed to issue to the Underwriter a warrant ("Underwriter's Unit Warrant") to purchase up to an aggregate of  135,000 units  (the "Underwriter's Units") with an exercise price equal to $7.20, each Underwriter's Unit consisting of two (2) Common Shares ("Underwriter's Shares") and one (1) warrant to purchase one Common Share ("Underwriter's Warrant"), having the same terms as the Offered Warrants, except that the exercise price of each Underwriter's Warrant shall be 180% of the price allocated to one Offered Share; and

NOW, THEREFORE, in consideration of the foregoing premises, the payment by the Underwriter to the Company of an aggregate of One Hundred Dollars and No Cents ($100.00), 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.  The Underwriter, and/or its designees who are officers or partners (not directors) of the Underwriter or members of the selling group (the "Underwriter's Designees"), in connection with the Offering, are hereby granted the right to purchase, at any time from January 29, 2005 until 5:00 P.M., Eastern time, on January 29, 2009 (the "Warrant Exercise Term"), up to an aggregate of 135,000 Underwriter's Units at the initial exercise price (subject to adjustment 

 

 

as provided in Section 8 hereof) of $7.20 per Underwriter's Unit (the "Unit Exercise Price").  Notwithstanding the foregoing, the Warrants shall become immediately exercisable upon a Change in Control (as defined in Section 12(d) herein) of the Company.  The Underwriter's Shares issuable upon exercise of the Underwriter's Warrants are in all respects identical to the Common Shares being purchased by the Underwriter for resale to the public pursuant to the terms and provisions of the Underwriting Agreement.

     2.     Underwriter's Unit Warrant Certificates.  The Underwriter's warrant certificates (the "Underwriter's Unit Warrant Certificates") delivered and to be delivered pursuant to this Agreement shall be in the form set forth in 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 Underwriter's Unit Warrants.  The Underwriter's Unit Warrants initially are exercisable at an initial exercise price per Underwriter's Unit as set forth in Section 6 hereof, payable by electronic wire transfer, subject to adjustment as provided in Section 8 hereof, provided such Underwriter's Warrants shall be exercised in minimum amounts equal to the lesser of 2,500 Units or the amount of Units owned by the Holder.  Upon surrender at the Company's principal offices (presently located at 28 Cottrell Street, Mystic, CT 06355), of an Underwriter's Unit Warrant and a completed and executed form of Election to Purchase (in the form of Exhibit B attached hereto), together with payment of the purchase price for the number of Underwriter's Units purchased, the registered holder of an Underwriter's Unit Warrant ("Holder" or "Holders") shall be entitled to receive a certificate or certificates for the Underwriter's Units so purchased.  The Underwriter's Shares and the Underwriter's Warrants comprising the Underwriter's Units shall consist of the same Offered Shares and Offered Warrants as being sold to the public in the Offering, and shall contain the same terms and conditions and rights, and the Underwriter's Warrant obtained upon exercise of the Underwriter's Unit Warrant shall have an exercise price of $5.40 per Underwriter's Warrant  (the "Warrant Exercise Price").  The purchase rights represented by each Underwriter's Unit Warrant are exercisable at the option of the Holder thereof, in whole or in part, provided such Underwriter's Warrants shall be exercised subject to the minimum requirements set forth in this Section 3.  In the case of the purchase of less than all the Underwriter's Units purchasable under any Underwriter's Unit Warrant, the Company shall cancel the Underwriter's Unit Warrant upon the surrender thereof and shall execute and deliver a new Underwriter's Unit Warrant of like tenor for the balance of the Underwriter's Units purchasable thereunder.  The Unit Exercise Price and the Warrant Exercise Price are hereinafter sometimes collectively referred to as the "Exercise Price".  Upon separation of the Units, the minimum amounts to be exercised shall be equal to the lesser of (i) 5,000 Common Shares or 2,500 Underwriter's Warrants or (ii) the amount of Common Shares or Underwriter's Warrants, as the case may be, owned by the Holder.  All numbers in this Section 3 shall be subject to adjustment in accordance with Section 8.  

 

2

 

     4.      Issuance of Certificates.  Upon the exercise of the Underwriter's Unit Warrant, the issuance of certificates for the Underwriter's Warrants and Underwriter's Shares or other securities, properties or rights underlying such Underwriter's Unit Warrant 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 Sections 5 and 7 hereof) be issued in the name of, or in such names as may be directed 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  Underwriter 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.

     The Underwriter's Unit Warrants and the certificates representing the Underwriter's Warrants and Underwriter's Shares issuable upon exercise of the Underwriter's Unit Warrant shall be executed on behalf of the Company in the same manner as the certificates for the Offered Shares and Offered Warrants.  The Underwriter's Unit Warrants shall be dated the date of the execution by the Company upon initial issuance, division, exchange, substitution or transfer.  The certificates representing the Underwriter's Shares and Underwriter's Warrants issuable upon exercise of the Underwriter's Unit Warrants shall be identical in form and substance to the Offered Shares and Offered Warrants, including the terms of redemption for the Offered Warrants sold to the public.

     5.      Restriction on Transfer of Underwriter's Unit Warrant.  The Holder of a Underwriter's Unit Warrant, by its acceptance thereof, covenants and agrees that the Underwriter's Unit Warrant is being acquired as an investment and not with a view to the distribution thereof; and that the Underwriter's Unit Warrant may not be sold, transferred, assigned, hypothecated or otherwise disposed of, in whole or in part, for a period of one year from January 29, 2004, the effective date of the Offering (the "Effective Date"), except to the Underwriter's Designees and/or their officers or partners as  required for compliance with NASD Rule 2710(c)(7)(A), and upon presentment of a properly executed Form of Assignment in the form set forth on Exhibit C attached hereto and made a part hereof.

     6.      Exercise Price.

          6.1     Initial and Adjusted Exercise Price.  Except as otherwise provided in Section 8 hereof, the initial exercise price of each Underwriter's Unit Warrant shall be $7.20  per Underwriter's Unit.  The exercise price of the Underwriter's Warrant and the number of Underwriter's Shares to be received upon exercise of the Underwriter's Unit Warrant shall be subject to adjustment as provided in Section 8 hereof. 

3

 

     7.      Registration Rights.

          7.1     Demand Registration Under the Securities Act of 1933.  At any time commencing after  January 29, 2005 through and including January 29, 2009, the Underwriter and all other Holders of the Underwriter's Unit Warrants, Underwriter's Shares, Underwriter's Warrants or the Common Shares underlying the Underwriter's Warrants, representing a majority of the Common Shares issuable upon the exercise of the Units (assuming the exercise of all of the Underwriter's Unit Warrants) shall have the right (which right is in addition to the registration rights under Section 7.2 hereof), exercisable by written notice to the Company, to have the Company prepare and file with the Securities and Exchange Commission (the "Commission"), on one occasion, 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 the Underwriter and the Holders, in order to comply with the provisions of the Act, so as to permit a public offering and sale of their respective Underwriter's Shares or Underwriter's Warrants and during a period equal to the longer of: (i) nine (9) months or (ii) the unexpired term of the Underwriter's Warrants by such Holders and any other Holders of the Underwriter's Unit Warrant who shall notify the Company within ten (10) days after receiving notice from the Company of such request.

          7.2     Piggyback  Registration.

               (a)     If, at any time commencing after January 29, 2005, through and including  January 29, 2011, the Company proposes to register any of its securities under the Act  (other than in connection with a merger or similar transaction with a filing on a Form S-4 or pursuant to Form S-8 or similar form) it will give written notice by registered or certified mail, at least thirty (30) days prior to the filing of each such registration statement, to the Underwriter and to all other Holders of the Underwriter's Unit Warrants, Underwriter's Units, Underwriter's Shares, Underwriter's Warrants or the Common Shares underlying the Underwriter's Warrants, of its intention to do so.  If the Underwriter or any of the other Holders of the Underwriter's Unit Warrants, Underwriter's Units, Underwriter's Shares, Underwriter's Warrants or the Common Shares underlying the Underwriter's Warrants notify the Company within twenty (20) days after receipt of any such notice of its or their desire to include any such securities in such proposed registration statement, the Company shall afford each of the Underwriter and such Holders of the Underwriter's Unit Warrants, Underwriter's Units, Underwriter's Shares, Underwriter's Warrants or the Common Shares underlying the Underwriter's Warrants, the opportunity to have any of such securities registered under such registration statement.  

               (b)      If any Holder shall request inclusion of any securities held by such Holder in the registration of other securities of the Company and such proposed registration by the Company is, in whole or in part, an underwritten public offering, and if the managing underwriter determines and advises the Company in writing that inclusion in such registration of all proposed securities (including securities being offered by or on behalf of the Company and securities

4

 

covered by requests for registration) would materially adversely affect the marketability of the offering of the securities proposed to be registered by the Company, then such Holder shall be entitled to participate pro rata (based on the number of shares owned by the respective Holders) with the other Holders having similar piggyback registration rights with respect to such registration to the extent the managing underwriter determines that such securities may be included without such material adverse effect. 

               (c)      Notwithstanding the provisions of this Section 7.2, the Company shall have the right at any time after it shall have given written notice pursuant to this Section 7.2 (irrespective of whether a written request for inclusion of any such securities shall have 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. 

          7.3.      Notice to Be Delivered.  The Company covenants and agrees to give written notice of any registration request under Section 7.1 by the Underwriter or any Holder or Holders to the Underwriter and to all other Holders of the Underwriter's Unit Warrants, Underwriter's Units, Underwriter's Shares, Underwriter's Warrants and the Common Shares underlying the Underwriter's Warrants within ten (10) days from the date of the receipt of any such registration request.

          7.4.      Covenants of the Company With Respect to Registration.  In connection with any registration under Section 7.1 or 7.2 hereof, the Company covenants and agrees as follows:

               (a)      The Company shall use its best efforts to file a registration statement within forty-five  (45) days of receipt of any demand therefor in accordance with Section 7.1, shall use its best efforts to have any registration statement declared effective at the earliest practicable time, and shall furnish to the Underwriter and each Holder desiring to sell the Underwriter's  Shares, Underwriter's Warrants, the Common Shares underlying the  Underwriter's Warrants or any other securities held by the Underwriter or the other Holders as a result of any adjustment made pursuant to the provisions of Sections 8.1 or 8.2 hereof (collectively, the "Registrable Securities"), such number of prospectuses as shall reasonably be requested.

               (b)      The Company shall pay all costs  (excluding fees and expenses of the Underwriter's and the other Holders' counsel and any underwriting or selling commissions), fees and expenses in connection with all registration statements filed pursuant to Sections 7.1 and 7.2 hereof including, without limitation, the Company's legal and accounting fees, printing expenses, and blue sky fees and expenses.  If the Company shall fail to comply with the provisions of Section 7.4, the Company shall, in addition to any other equitable or other relief available to the Underwriter and the other Holders, be liable for any or all actual damages (which may include damages due to a loss of profit). 

5

 

 

               (c)      The Company will take all 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 reasonably are requested by the Underwriter and the other Holders, provided that the Company shall not be obligated to execute or 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 the Underwriter and all other Holders of  the Registrable Securities to be sold pursuant to any registration statement and each person, if any, who controls such Underwriter or Holders within the meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act of 1934, as amended (the "1934 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 1934 Act or otherwise, arising from such  registration  statement  to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the Underwriter in Section 5 of the Underwriting Agreement and to provide for just and equitable contribution as set forth in Section 6 of the Underwriting Agreement.

               (e)      The Underwriter and all other Holders of the Registrable Securities to be sold pursuant to a registration statement, and their 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 1934 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 1934 Act or otherwise, arising from information furnished by or on behalf of such Holders, or their successors or assigns, for specific inclusion in such registration statement to the same extent and with the same effect as the provisions contained in Section 5 of the Underwriting Agreement pursuant to which the Underwriter has agreed to indemnify the Company and to provide for just and equitable contribution as set forth in Section 6 of the Underwriting Agreement.

               (f)      Nothing contained in this Agreement shall be construed as requiring the Underwriter or other Holders to exercise their Underwriter's Unit Warrants or the Underwriter's Warrants prior to the initial filing of any registration statement or the effectiveness thereof.

               (g)      The Company shall deliver promptly to the Underwriter and all other Holders of the 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 the Underwriter and the other Holders of the Registrable Securities to do such investigation, upon 

6

 

 

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 the Underwriter and each such holder of the Registrable Securities agrees not to disclose such information without the prior written 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 the Underwriter and any other Holder of the Registrable Securities shall reasonably request.

               (h)      If required by the underwriters in connection with an underwritten offering which includes Registrable Securities pursuant to this Section 7, the Company shall enter into an underwriting agreement with one or more underwriters selected for such underwriting.  Such underwriting agreement shall be satisfactory in form and substance to the Company, the Underwriter and each other Holder of the Registrable Securities, and 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 underwriters, the Underwriter and the other Holders of the 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 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 the Underwriter and the other Holders of the Registrable Securities.  The Underwriter and the other Holders of the 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 the Underwriter and the other Holders of the Registrable Securities and their intended methods of distribution.

               (i)      In connection with any registration statement filed pursuant to Section 7 hereof, the Company shall furnish, or cause to be furnished, to the Underwriter and each Holder participating in any underwritten offering and to each underwriter, a signed counterpart, addressed to the Underwriter, 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.

7

               (j)      The Company shall promptly notify the Underwriter and each Holder of the Registrable Securities 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 upon receipt of such notice the Underwriter and each Holder shall not effect any sale of securities and shall immediately cease utilizing or distributing such prospectus.  At the request of the Underwriter or any such Holder, the Company shall promptly prepare and furnish to the Underwriter or 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)      For purposes of this Agreement, the term "majority" in reference to the Underwriter and the other Holders of the Underwriter's Unit Warrants, Underwriter's Units, Underwriter's Shares, Underwriter's Warrants or the Common Shares underlying the Underwriter's Warrants, shall mean in excess of fifty percent (50%) of the then outstanding Underwriter's Warrants and Underwriter's Shares that have not been resold to the public pursuant to Rule 144 under the Act or a  registration statement filed with the Commission under the Act.

     8.      Adjustments to Exercise Price and Number of Securities.

          8.1     Adjustments to Underwriter's Warrants.  The Exercise Price of the Underwriter's Warrants and number of securities issuable with respect to the Underwriter's Warrants shall be adjusted on the same terms and conditions, and at the same time, as any adjustments in the Exercise Price and number of shares issuable with respect to the Offered Warrants required by the terms of the Offered Warrants.

          8.2     Adjustment to Number of Underwriter's Shares.  The number of Underwriter's Shares to be received upon exercise of the Underwriter's Unit Warrants shall be subject to adjustment as follows:

               (a)      In the event that the number of outstanding Common Shares is increased by a stock dividend payable in Common Shares or by a subdivision of the outstanding Common Shares, then, from and after the effective time of such increase by reason of such dividend or subdivision, the number of Common Shares issuable upon the exercise of each Underwriter's Unit Warrant shall be increased in proportion to such increase in outstanding shares.  In the event 

 

8

 

that the number of Common Shares outstanding is decreased by a combination of the outstanding Common Shares, then, from and after the effective time of such decrease by reason of such combination, the number of Common Shares issuable upon the exercise of each Underwriter's Unit Warrant shall be decreased in proportion to such decrease in the outstanding Common Shares.

                (b)      In case of any reorganization or reclassification of the outstanding Common Shares (other than a change in par value, or from par value to no par value, or as a result of a subdivision or combination), or in case of any consolidation of the Company with, or merger of the Company into, another corporation  (other than a consolidation or merger in which the Company is the continuing corporation and which does not result in any reclassification of the outstanding Common Shares), or in case of any sale or  conveyance  to  another corporation of the property of the Company as an entirety or substantially as an entirety, the Holder of each Underwriter's  Unit Warrant then outstanding  shall thereafter have the right to purchase the kind and amount of Common Shares and other securities and property receivable upon such reorganization, reclassification, consolidation, merger, sale or conveyance by a holder of the number of Common Shares that the Holder of such Underwriter's Unit Warrant shall then be entitled to purchase;  such adjustments shall apply with respect to all such changes occurring between the date of this Agreement and the date of exercise of such Underwriter's Unit Warrant.

                (c)      Subject to the provisions of this Section 8, in case the Company shall, at any time prior to the exercise of the Underwriter's Unit Warrants or Underwriter's Warrants, make any distribution of its assets to holders of its Common Shares as a liquidating or a partial liquidating dividend, then the Holders of Underwriter's Unit Warrants or Underwriter's Warrants who exercises its Underwriter's Unit Warrants or Underwriter's Warrants after the record date for the determination of those holders of Common Shares entitled to such distribution of assets as a liquidating or partial liquidating dividend shall be entitled to receive for the Unit Exercise Price per Underwriter's Unit or the Warrant Exercise Price per Underwriter's Warrant,  in addition to each Common Share, the  amount of such distribution or, at the option of the Company, a sum equal to the value of any such  assets at the time of such  distribution as determined by the Board of Directors of the Company in good faith,  which would have been  payable to such Holder had such Holder been the holder of record of the Common Shares receivable upon exercise of its Underwriter's Unit Warrant or Underwriter's Warrant on the record date for the determination of those entitled to such distribution.

                (d)      In case of the dissolution, liquidation or winding up of the Company, all rights under the Underwriter's Unit Warrants shall terminate on a date fixed by the Company, such date to be no earlier than ten (10) days prior to the effectiveness of such dissolution, liquidation or winding up and not later than five (5) days prior to such effectiveness.  Notice of such termination of purchase rights shall be given to the last registered holder of the Underwriter's Unit Warrants, as the same shall appear on the books of the Company maintained by the Warrant Agent, by registered mail at least thirty (30) days prior to such termination date.

9

 

                (e)      In case the Company shall, at any time prior to the expiration of the Underwriter's Unit Warrants and prior to the exercise thereof, offer to the holders of its Common Shares any rights to subscribe for additional shares of any class of capital stock of the Company, then the Company shall give written notice thereof to the registered holders of the Underwriter's Unit Warrants not less than thirty (30) days prior to the date on which the books of the Company are closed or a record date is fixed for the determination of the stockholders entitled to such  subscription  rights.  Such notice shall specify the date as to which the books shall be closed or the record date fixed with respect to such offer of subscription and the right of the holders of the Underwriter's Unit Warrants to participate in such offer of subscription shall terminate if the Underwriter's Unit Warrant shall not be exercised on or before the date of such closing of the books or such record date.

                (f)      Any adjustment pursuant to the aforesaid provisions of this Section 8 shall be made on the basis of the number of Common Shares that the holder thereof would have been entitled to acquire upon the exercise of the Underwriter's Unit Warrant immediately prior to the event giving rise to such adjustment.

     9.      Exchange and Replacement of Underwriter's Unit Warrants.  Each Underwriter's Unit Warrant is exchangeable without expense, upon the surrender thereof by the registered Holder at the principal executive office of the Company, for a new Underwriter's Unit Warrant of like tenor and date representing in the aggregate the right to purchase the same number of Underwriter's Shares and Underwriter's Warrants as provided in the original Underwriter's Unit Warrant in such denominations as shall be designated by the Holder thereof at the time of such surrender.

     Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Underwriter's Unit Warrant, 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 Underwriter's Unit Warrant, if mutilated, the Company will make and deliver a new Underwriter's Unit Warrant of like tenor, in lieu thereof. 

     10.      Elimination of Fractional Interests.  The Company shall not be required to issue certificates representing fractions of Underwriter's Shares upon the exercise of the Underwriter's Unit Warrant.  However, if a holder of an Underwriter's Unit Warrant exercises all warrants then owned of record by such holder and such exercise would result in the issuance of a fractional share, the Company will pay to such holder, in lieu of the issuance of any fractional share otherwise issuable, an amount of cash based on the market value of the Common Shares of the Company on the last trading day prior to the exercise date.

 

10

 

     11.      Reservation and Listing of Securities.  The Company shall at all times reserve and keep available out of its authorized Common Shares, solely for the purpose of issuance upon the exercise of the Underwriter's Unit Warrant and Underwriter's Warrants, such number of Common Shares or other securities, properties or rights as shall be issuable upon the exercise thereof.  The Company covenants and agrees that, upon exercise of the Underwriter's Unit Warrant and/or the Underwriter's Warrants and payment of the Exercise Price therefor, all Underwriter's Shares and other securities issuable upon such exercise shall be duly and validly issued, fully paid, non-assessable and not subject to the preemptive rights of any stockholder.  As long as the Underwriter's Unit Warrant and/or Underwriter's Warrants shall be outstanding, the Company shall use its best efforts to cause all Underwriter's Units, Underwriter's Shares, Underwriter's Warrants and all Common Shares issuable upon the exercise of the Underwriter's Warrants to be listed  (subject to official notice of issuance) on all securities exchanges on which the Common Shares may then be listed and/or quoted on the American Stock Exchange (the "AMEX").

     12.      Notices to Underwriter's Unit Warrant Holders.  Nothing contained in this Agreement shall be construed as conferring upon the Holders the right to vote or to consent or to receive notice as a stockholder in respect of any meetings of stockholders for the election of directors or any other matter, or any rights whatsoever as a stockholder of the Company.  If, however, at any time prior to the expiration of the Underwriter's Unit Warrant or Underwriter's Warrants and their exercise, any of the following events shall occur: 

                (a)      the Company shall take a record of the holders of its Common Shares 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 Shares 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; or

                (d)      a Change in Control of the Company occurs; 

 

 

11

 

 

then, in any one or more of such 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 stockholders entitled to such dividend, distribution, convertible or exchangeable securities or subscription rights, 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 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, 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.  A "Change of Control" occurs when (a) the Company merges or consolidates with another corporation or entity; (b) a person or group other than certain of the Company's existing stockholders becomes the beneficial owner of 25% or more of the aggregate voting power of the Company; or (c) during any period of two consecutive calendar years, certain changes in the composition of the Company's present Board of Directors occur, including any plans or proposals to change the number or term of Directors or to fill any existing vacancies on the Board, except for the possible addition by the Company of one or more independent directors to its Board of Directors.

     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, or mailed by registered or certified mail, return receipt requested:

                (a)      If to the registered Holder of Registrable Securities, to the address of such Holder as shown on the books of the Company; or

                (b)      If to the Underwriter, to the address set forth in Section 12 of the Underwriting Agreement; or

                (c)      If to the Company, to the address set forth in Section 3 hereof or to such other address as the Company may designate by notice to the Holders.

     14.      Supplements and Amendments.  The Company and the Underwriter may from time to time supplement or amend this Agreement without the approval of any holders of Underwriter's Unit Warrants (other than the Underwriter) 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 the Underwriter may deem necessary or desirable and which the Company and the Underwriter deem shall not adversely affect the interests of the Holders of Registrable Securities.

 

12

 

     15.      Successors.  All the covenants and provisions of this Agreement shall be binding upon and inure to the benefit of the Company, the Underwriter, the Holders of Registrable Securities and their respective successors and assigns hereunder.

     16.      Termination.  This Agreement shall terminate at the close of business on January 29, 2011.  Notwithstanding the foregoing, the indemnification provisions of Section 7 shall survive such termination until the close of business on January 29, 2012.

     17.      Governing Law; Submission to Jurisdiction.

           (a)      This Agreement and each Underwriter's Unit Warrant issued hereunder shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be construed in accordance with the laws of such State without giving effect to the rules of said State governing the conflicts of laws.

           (b)      The Company, the Underwriter and the Holders hereby agree that any action, proceeding or claim against it arising out of, or relating in any way to, this Agreement shall be brought and enforced in the New York State Supreme Court, County of New York, or of the United States of America for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive.  The Company, the Underwriter and the Holders hereby irrevocably waive any objection to such exclusive jurisdiction or inconvenient forum.  Any such process or summons to be served upon any of the Company, the Underwriter and the Holders (at the option of the party bringing such action, proceeding or claim) may be served by transmitting a copy thereof, by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address determined in accordance with Section 13 hereof.  Such mailing shall be deemed personal service and shall be legal and binding upon the party so served in any action, proceeding or claim.  The Company, on the one hand, and the Underwriter and the Holders, on the other hand, agree that the prevailing party(ies) in any such action or proceeding shall be entitled to recover from the other party(ies) all of its/their reasonable legal costs and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor.

     18.      Entire Agreement; Modification.  This Agreement  (including the Underwriting Agreement to the extent portions thereof are referred to herein) contains the entire understanding between the parties hereto with respect to the subject matter hereof and, except as provided in Section 14 hereof, may not be modified or amended except by a writing duly signed by the party against whom enforcement of the modification or amendment is sought.  Any terms not otherwise defined herein shall have the meaning ascribed to such term in the Underwriting Agreement.

 

13

 

     19.      Severability.  If any provision of this Agreement shall be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision of this Agreement.

     20.      Captions.  The caption headings of the Sections of this Agreement are for convenience of reference only and are not intended, nor should they be construed as, a part of this Agreement and shall be given no substantive effect.

     21.      Benefits of this Agreement.  Nothing in this Agreement shall be construed to give to any person or corporation other than the Company and the Underwriter and any other registered Holders of the Registrable Securities 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 Underwriter and any other Holders of the Registrable Securities.

     22.      Preservation of Rights. The Company will not, by amendment of its articles 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 Underwriter's Unit Warrants or the Underwriter's Warrants or the rights represented hereby or 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 actions as may be necessary or appropriate in order to protect the rights of the Underwriter and all other Holders of the Underwriter's Unit Warrants and the Underwriter's Warrants against dilution or other impairment.

     23.      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.

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

14

 

 

     IN WITNESS WHEREOF, the parties hereto have caused this Underwriter's Unit Warrant Agreement to be duly executed, as of the day and year first above written.

	
[SEAL]
	
FLIGHT SAFETY TECHNOLOGIES, INC.

By:                                                                   

Name:

Title

Attest:

 

Secretary

 

Agreed and accepted as of

the date first above written:

THE SHEMANO GROUP, INC.,

    the Underwriter

By:                                                      

     Name:

     Title:

 

 

 

15

 

EXHIBIT A

[FORM OF UNDERWRITER'S UNIT WARRANT CERTIFICATE]

THE UNDERWRITER'S UNIT WARRANT REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE. 

THE TRANSFER OR EXCHANGE OF THE UNDERWRITER'S UNIT WARRANT REPRESENTED BY THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE UNDERWRITER'S UNIT WARRANT AGREEMENT FOR UNITS REFERRED TO HEREIN. 

 

EXERCISABLE ON OR BEFORE

5:00 P.M., EASTERN TIME, ____, 2009

	
No.       
	
                         Underwriter's Unit Warrant

UNDERWRITER'S UNIT WARRANT

     This Underwriter's Unit Warrant certifies that The Shemano Group, Inc., or registered assigns, is the registered holder of ________ Underwriter's Unit Warrants to purchase initially, at any time from ______, 2005 until 5:00 p.m.  Eastern time on _______, 2009 (the "Expiration Date"), up to ______ Units (the "Underwriter's Units") of Flight Safety Technologies, Inc., a Nevada corporation (the "Company"), at an initial exercise price, subject to adjustment in certain events  (the  "Exercise Price"), of $____ per Underwriter's Unit [120% of the exercise price of an Offered Unit] upon surrender of this Underwriter's Unit Warrant 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 Underwriter's Unit Warrant Agreement dated  as of ______,  2004, between the Company and The Shemano Group, Inc. (the  "Underwriter's Unit Warrant  Agreement").  Payment of the Exercise Price shall be made by electronic wire transfer, payable to the order of the Company.

     No Underwriter's Unit Warrant may be exercised after 5:00 p.m., Eastern time, on the Expiration Date, at which time all Underwriter's Unit Warrants evidenced hereby, unless exercised prior thereto, shall thereafter be void. 

 

     The Underwriter's Unit Warrant evidenced by this Underwriter's Unit Warrant Certificate are part of a duly authorized issue of Underwriter's Units pursuant to the Underwriter's Unit Warrant Agreement, which Underwriter's Unit Warrant Agreement is hereby incorporated by reference herein and made a part of this instrument and is hereby referred to for 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 Underwriter's Unit Warrant.

     The Underwriter's Unit Warrant Agreement provides that upon the occurrence of certain events the exercise prices 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 Underwriter's Unit Warrant Certificate evidencing the adjustment in the exercise price and the number and/or type of securities issuable upon the exercise of the Underwriter's Unit Warrant; provided, however, that the failure of the Company to issue such new Underwriter's Unit Warrants shall not in any way change, alter or otherwise impair, the rights of the holder as set forth in the Underwriter's Unit Warrant Agreement.

     Upon due presentment for registration of transfer of this Underwriter's Unit Warrant at an office or agency of the Company, a new Underwriter's Unit Warrant or Underwriter's Unit Warrants of like tenor and evidencing in the aggregate a like number of Underwriter's Unit Warrants shall be issued to the transferee(s) in exchange for this Underwriter's Unit Warrant, subject to the limitations provided herein and in the Underwriter's Unit Warrant Agreement, without any charge except for any tax or other governmental charge imposed in connection with such transfer.

     Upon the exercise of less than all of the Underwriter's Unit Warrants evidenced by this Certificate, the Company shall forthwith issue to the holder hereof a new Underwriter's Unit Warrant Certificate representing such number of unexercised Underwriter's Unit Warrants.

     The Company may deem and treat the registered holder(s) hereof as the absolute owner(s) of this Underwriter's Unit Warrant (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.

     All terms used in this Underwriter's Unit Warrant that are defined in the Underwriter's Unit Warrant Agreement shall have the meanings assigned to them in the Underwriter's Unit Warrant Agreement.

 

[SIGNATURE PAGE FOLLOWS]

 

     IN WITNESS WHEREOF, the Company has caused this Underwriter's Unit Warrant to be duly executed under its corporate seal.

Dated as of                            , 2004

	
[SEAL]
	
FLIGHT SAFETY TECHNOLOGIES, INC.

By:                                                                   

     Name:

     Title:

Attest:

Secretary

 

 

 

 

EXHIBIT B

[FORM OF ELECTION TO PURCHASE]

 

     The undersigned hereby irrevocably elects to exercise the right, represented by this Underwriter's Unit Warrant, to purchase ______ Units and herewith tenders in payment for such securities cash or a certified check payable to the order of Flight Safety Technologies, Inc. in the amount of $_____, all in accordance with the terms hereof.  The undersigned requests that a certificate for such securities be registered in the name of _________________ whose address is  _________________________ and that such certificate be delivered to  _________________ whose address is _______________________.

 

	
Dated:
	
                                                                        

Name of Registered Owner

                                                                        

Signature of Registered Owner

(Signature must conform in all respects to name of holder as specified on the face of the Underwriter's Unit Warrant.)

                                                                        

Street Address

                                                                        

City, State, Zip

                                                                        

IRS Identification Number/Social Security Number

 

 

 

 

EXHIBIT C

[FORM OF ASSIGNMENT]

(To be executed by the registered holder if such holder desires to transfer the Underwriter's Unit Warrant Certificate.)

     FOR VALUE RECEIVED, the undersigned registered owner of this Underwriter's Unit Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights, title and interest therein of the undersigned under the within Underwriter's Unit Warrant, with respect to the number of Underwriter's Units set forth below:

	
NAME OF ASSIGNEE
	
ADDRESS
	
NUMBER OF UNITS

	 	 	 

and does hereby irrevocably constitute and appoint                                     , Attorney, to transfer the within Underwriter's Unit Warrant Certificate on the books of Flight Safety Technologies, Inc., maintained for the purpose, with full power of substitution in the premises.  The undersigned understands that compliance with the provisions of the Underwriter's Unit Warrant is necessary to effect any assignment or transfer.   

	
Dated:
	
                                                                        

Signature of Registered Owner

(Signature must conform in all respects to name of holder as specified on the face of the Underwriter's Unit Warrant Certificate.)

                                                                        

Name of Registered Owner

                                                                        

IRS Identification Number/Social Security Number

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