NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
Warrant No. **XX** COMMON STOCK PURCHASE WARRANT **XXX** Shares
To Purchase Shares of Common Stock of
XXXXXX ENERGY, INC.
THIS COMMON STOCK PURCHASE WARRANT (the "Warrant") certifies that, for
value received,
**ABC**
(the "Holder"), is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, at any time on or after April
27, 2006 (the "Initial Exercise Date"), and on or prior to the close of business
on the five-year anniversary of the Initial Exercise Date (the "Termination
Date") but not thereafter, to subscribe for and purchase from Xxxxxx Energy,
Inc., a Nevada corporation (the "Company"), up to **XXX** shares (the "Warrant
Shares") of Common Stock, par value $.001 per share, of the Company (the "Common
Stock"). The purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price, as defined in Section 2(b).
Section 1. Definitions. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Securities
Purchase Agreement (the "Purchase Agreement"), dated April 11, 2006, among the
Company and the purchasers signatory thereto.
Section 2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights
represented by this Warrant may be made, in whole or in part, at any
time or times on or after the Initial Exercise Date and on or before
the Termination Date by delivery to the Company of a duly executed
facsimile copy of the Notice of Exercise Form annexed hereto (or such
other office or agency of the Company as it may designate by notice in
writing to the registered Holder at the address of such Holder
appearing on the books of the Company); and, within three Trading Days
of the date said Notice of Exercise is delivered to the Company, the
Company shall have received payment of the aggregate Exercise Price of
the shares thereby purchased by wire transfer or cashier's check drawn
on a United States bank. Notwithstanding anything herein to the
contrary, the Holder shall not be required to physically surrender this
Warrant to the Company until the Holder has purchased all of the
Warrant Shares available hereunder and the Warrant has been exercised
in full, in which case, the Holder shall surrender this Warrant to the
Company for cancellation within three Trading Days of the date the
final Notice of Exercise is delivered to the Company. Partial exercises
of this Warrant resulting in purchases of a portion of the total number
of Warrant Shares available hereunder shall have the effect of lowering
the outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased. The
Holder and the Company shall maintain records showing the number of
Warrant Shares purchased and the date of such purchases. The Company
shall deliver any objection to any Notice of Exercise Form within one
Trading Day of receipt of such notice. In the event of any dispute or
discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error. The Holder and any
assignee, by acceptance of this Warrant, acknowledge and agree that, by
reason of the provisions of this paragraph, following the purchase of a
portion of the Warrant Shares hereunder, the number of Warrant Shares
available for purchase hereunder at any given time may be less than the
amount stated on the face hereof.
b) Exercise Price. The exercise price per share of the Common
Stock under this Warrant shall be $3.00, subject to adjustment
hereunder (the "Exercise Price").
c) Cashless Exercise. If at any time after one year from the
date of issuance of this Warrant there is no effective Registration
Statement registering, or no current prospectus available for, the
resale of the Warrant Shares by the Holder, then this Warrant may also
be exercised at such time by means of a "cashless exercise" in which
the Holder shall be entitled to receive a certificate for the number of
Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)]
by (A), where:
(A) = the VWAP on the Trading Day immediately preceding the
date of such election;
(B) = the Exercise Price of this Warrant, as adjusted; and
(X) = the number of Warrant Shares issuable upon exercise of
this Warrant in accordance with the terms of this
Warrant by means of a cash exercise rather than a
cashless exercise.
Notwithstanding anything herein to the contrary, this Warrant
may also be exercised by means of a "cashless exercise" in accordance
with Section 2(f) hereof, and, in addition, on the Termination Date,
this Warrant shall be automatically exercised via cashless exercise
pursuant to this Section 2(c).
As used herein, "VWAP" means, for any date, the price
determined by the first of the following clauses that applies: (a) if
the Common Stock is then listed or quoted on a Trading Market, the
daily volume weighted average price of the Common Stock for such date
(or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted for trading as reported by
Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. (New
York City time) to 4:02 p.m. (New York City time)); (b) if the OTC
Bulletin Board is not a Trading Market, the volume weighted average
price of the Common Stock for such date (or the nearest preceding date)
on the OTC Bulletin Board; (c) if the Common Stock is not then quoted
for trading on the OTC Bulletin Board and if prices for the Common
Stock are then reported in the "Pink Sheets" published by Pink Sheets,
LLC (or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the Common
Stock so reported; or (d) in all other cases, the fair market value of
a share of Common Stock as determined by an independent appraiser
selected in good faith by the Holder and reasonably acceptable to the
Company.
d) Exercise Limitations. The Company shall not effect any
exercise of this Warrant, and a Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2(c) or
otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise, such
Holder (together with such Holder's Affiliates, and any other person or
entity acting as a group together with such Holder or any of such
Holder's Affiliates), as set forth on the applicable Notice of
Exercise, would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing sentence,
the number of shares of Common Stock beneficially owned by such Holder
and its Affiliates shall include the number of shares of Common Stock
issuable upon exercise of this Warrant with respect to which such
determination is being made, but shall exclude the number of shares of
Common Stock that would be issuable upon (A) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by such Holder
or any of its Affiliates and (B) exercise or conversion of the
unexercised or nonconverted portion of any other securities of the
Company (including, without limitation, any other Warrants) subject to
a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by such Holder or any of its
Affiliates. Except as set forth in the preceding sentence, for purposes
of this Section 2(d), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder, it being acknowledged by a Holder
that the Company is not representing to such Holder that such
calculation is in compliance with Section 13(d) of the Exchange Act and
such Holder is solely responsible for any schedules required to be
filed in accordance therewith. To the extent that the limitation
contained in this Section 2(d) applies, the determination of whether
this Warrant is exercisable (in relation to other securities owned by
such Holder together with any Affiliates) and of which a portion of
this Warrant is exercisable shall be in the sole discretion of a
Holder, and the submission of a Notice of Exercise shall be deemed to
be each Holder's determination of whether this Warrant is exercisable
(in relation to other securities owned by such Holder together with any
Affiliates) and of which portion of this Warrant is exercisable, in
each case subject to such aggregate percentage limitation, and the
Company shall have no obligation to verify or confirm the accuracy of
such determination. In addition, a determination as to any group status
as contemplated above shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. For purposes of this Section 2(d), in determining the
number of outstanding shares of Common Stock, a Holder may rely on the
number of outstanding shares of Common Stock as reflected in (x) the
Company's most recent Form 10-QSB or Form 10-KSB, as the case may be,
(y) a more recent public announcement by the Company or (z) any other
notice by the Company or the Company's Transfer Agent setting forth the
number of shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within two Trading Days confirm
orally and in writing to such Holder the number of shares of Common
Stock then outstanding. In any case, the number of outstanding shares
of Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company, including this
Warrant, by such Holder or its Affiliates since the date as of which
such number of outstanding shares of Common Stock was reported. The
2
"Beneficial Ownership Limitation" shall be 4.99% of the number of
shares of the Common Stock outstanding immediately after giving effect
to the issuance of shares of Common Stock issuable upon exercise of
this Warrant. The Beneficial Ownership Limitation provisions of this
Section 2(d) may be waived by such Holder, at the election of such
Holder, upon not less than 61 days' prior notice to the Company to
change the Beneficial Ownership Limitation to 9.99% of the number of
shares of the Common Stock outstanding immediately after giving effect
to the issuance of shares of Common Stock upon exercise of this
Warrant, and the provisions of this Section 2(d) shall continue to
apply. Upon such a change by a Holder of the Beneficial Ownership
Limitation from such 4.99% limitation to such 9.99% limitation, the
Beneficial Ownership Limitation may not be further waived by such
Holder. The provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with the
terms of this Section 2(d) to correct this paragraph (or any portion
hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such
limitation. The limitations contained in this paragraph shall apply to
a successor holder of this Warrant.
e) Mechanics of Exercise.
i. Authorization of Warrant Shares. The Company
covenants that all Warrant Shares that may be issued upon the
exercise of the purchase rights represented by this Warrant
will, upon exercise of the purchase rights represented by this
Warrant, be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges
created by the Company in respect of the issue thereof (other
than taxes in respect of any transfer occurring
contemporaneously with such issue).
ii. Delivery of Certificates upon Exercise.
Certificates for shares purchased hereunder shall be
transmitted by the transfer agent of the Company to the Holder
by crediting the account of the Holder's prime broker with the
Depository Trust Company through its Deposit Withdrawal Agent
Commission ("DWAC") system if the Company or its transfer
agent is a participant in such system, and otherwise by
physical delivery to the address specified by the Holder in
the Notice of Exercise within three Trading Days from the
delivery to the Company of the Notice of Exercise Form,
surrender of this Warrant (if required) and payment of the
aggregate Exercise Price as set forth above ("Warrant Share
Delivery Date"). This Warrant shall be deemed to have been
exercised on the date the Exercise Price is received by the
Company. The Warrant Shares shall be deemed to have been
issued, and Holder or any other person so designated to be
named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the
Warrant has been exercised by payment to the Company of the
Exercise Price (or by cashless exercise, if permitted) and all
taxes required to be paid by the Holder, if any, pursuant to
Section 2(e)(vii) prior to the issuance of such shares, have
been paid.
iii. Delivery of New Warrants upon Exercise. If this
Warrant shall have been exercised in part, the Company shall,
at the request of a Holder and upon surrender of this Warrant
certificate, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to Holder a
new Warrant evidencing the rights of Holder to purchase the
unpurchased Warrant Shares called for by this Warrant, which
new Warrant shall in all other respects be identical with this
Warrant.
iv. Rescission Rights. If the Company fails to cause
its transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Shares pursuant to this
Section 2(e)(iv) by the Warrant Share Delivery Date, then the
Holder will have the right to rescind such exercise.
v. Compensation for Buy-In on Failure to Timely
Deliver Certificates upon Exercise. In addition to any other
rights available to the Holder, if the Company fails to cause
its transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Shares pursuant to an
exercise on or before the Warrant Share Delivery Date, and if
after such date the Holder is required by its broker to
purchase (in an open market transaction or otherwise) shares
of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares that the Holder anticipated
receiving upon such exercise (a "Buy-In"), then the Company
shall (1) pay in cash to the Holder the amount by which (x)
the Holder's total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (A)
the number of Warrant Shares that the Company was required to
deliver to the Holder in connection with the exercise at issue
times (B) the price at which the sell order giving rise to
such purchase obligation was executed, and (2) at the option
3
of the Holder, either reinstate the portion of the Warrant and
equivalent number of Warrant Shares for which such exercise
was not honored or deliver to the Holder the number of shares
of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock
having a total purchase price of $11,000 to cover a Buy-In
with respect to an attempted exercise of shares of Common
Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000, under clause (1) of the
immediately preceding sentence the Company shall be required
to pay the Holder $1,000. The Holder shall provide the Company
written notice indicating the amounts payable to the Holder in
respect of the Buy-In and, upon request of the Company,
evidence of the amount of such loss. Nothing herein shall
limit a Holder's right to pursue any other remedies available
to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief with respect to the Company's failure to timely deliver
certificates representing shares of Common Stock upon exercise
of the Warrant as required pursuant to the terms hereof.
vi. No Fractional Shares or Scrip. No fractional
shares or scrip representing fractional shares shall be issued
upon the exercise of this Warrant. As to any fraction of a
share that Holder would otherwise be entitled to purchase upon
such exercise, the Company shall at its election, either pay a
cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or
round up to the next whole share.
vii. Charges, Taxes and Expenses. Issuance of
certificates for Warrant Shares shall be made without charge
to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by
the Company, and such certificates shall be issued in the name
of the Holder or in such name or names as may be directed by
the Holder; provided, however, that in the event certificates
for Warrant Shares are to be issued in a name other than the
name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto
duly executed by the Holder; and the Company may require, as a
condition thereto, the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto.
viii. Closing of Books. The Company will not close
its stockholder books or records in any manner that prevents
the timely exercise of this Warrant, pursuant to the terms
hereof.
f) Cashless Exercise at Election of the Company. Subject to
the provisions of Section 2(d) and this Section 2(f), at any time after
June 30, 2007, and after the Effective Date (i) the VWAP for each of 20
consecutive Trading Days (the "Measurement Period", which 20 Trading
Day period shall not have commenced until after the Effective Date and
after June 30, 2007) equals or exceeds 200% of the then Exercise Price
(subject to adjustment for forward and reverse stock splits,
recapitalizations, stock dividends and the like after the Initial
Exercise Date) (the "Threshold Price"), (ii) the average weekly trading
volume on the Trading Market for each week during such Measurement
Period equals or exceeds 250,000 shares of Common Stock per week
(subject to adjustment for forward and reverse stock splits,
recapitalizations, stock dividends and the like after the Initial
Exercise Date) and (iii) the Holder is not in possession of any
information that constitutes, or might constitute, material non-public
information, then the Company may, within two Trading Days of the end
of such period, elect to effect a cashless exercise in accordance with
Section 2(b) of all or any portion of this Warrant. Such election by
the Company shall be effected by sending to the Holder a Notice of
Cashless Exercise (a "Notice of Cashless Exercise"), which shall set
forth the volume and price in the Trading Market for each Trading Day
during the applicable Measurement Period, the calculation of the VWAP
for such period, the number of Warrants to be exercised and the date,
not less than 30 calendar days thereafter, upon which such Warrants
shall be exercised (the "Automatic Cashless Exercise Date"). Until 6:30
p.m., New York time, on the Automatic Cashless Exercise Date, Warrants
subject to such Notice of Cashless Exercise may be exercised in
accordance with the provisions of Section 2(a). The parties agree that
any Notice of Exercise delivered following a Notice of Cashless
Exercise which calls for the automatic cashless exercise of less than
all the Warrants shall first reduce to zero the number of Warrant
Shares subject to such Notice of Cashless Exercise prior to reducing
the remaining Warrant Shares available for purchase under this Warrant.
After the Automatic Cashless Exercise Date and issuance of Warrant
Shares to the Holder in accordance therewith, all rights of the Holder
of this Warrant respecting all Warrants that the Company has elected to
be exercised as set forth in the Notice of Cashless Exercise shall
cease, and such Warrant shall not after the Automatic Cashless Exercise
Date be exercisable respecting the Warrants subject to such Notice of
Cashless Exercise. In case less than all Warrants represented hereby
are exercised, a new Warrant of substantially like tenor shall be
issued respecting the unexercised Warrants without cost to the Holder
thereof within five Trading Days after the Automatic Cashless Exercise
Date. Notwithstanding anything to the contrary set forth in this
Warrant, the Company may not deliver a Notice of Cashless Exercise or
require the cancellation of this Warrant (and any such Notice of
Cashless Exercise will be void), unless, from the beginning of the 20th
consecutive Trading Day used to determine whether the Common Stock has
4
achieved the Threshold Price through the Automatic Cashless Exercise
Date, (i) the Company shall have honored in accordance with the terms
of this Warrant all Notices of Exercise delivered by 6:30 p.m. (New
York City time) on the Automatic Cashless Exercise Date, (ii) the
Registration Statement shall be effective as to all Warrant Shares and
the prospectus thereunder available for use by the Holder for the
resale of all such Warrant Shares and (iii) the Common Stock shall be
listed or quoted for trading on the Trading Market, and (iv) there is a
sufficient number of authorized shares of Common Stock for issuance of
all Securities under the Transaction Documents, and (v) the issuance of
the shares shall not cause a breach of any provision of 2(d) herein.
The Company's right to exercise an Automatic Cashless Exercise pursuant
to this section shall be exercised ratably among the Holders based on
each Holder's initial purchase of Warrants.
Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time
while this Warrant is outstanding: (A) pays a stock dividend or
otherwise make a distribution or distributions on shares of its Common
Stock or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company upon exercise
of this Warrant), (B) subdivides outstanding shares of Common Stock
into a larger number of shares, (C) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller
number of shares, or (D) issues by reclassification of shares of the
Common Stock any shares of capital stock of the Company, then in each
case the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding immediately before such event and
of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event and the number of shares
issuable upon exercise of this Warrant shall be proportionately
adjusted. Any adjustment made pursuant to this Section 3(a) shall
become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective
date in the case of a subdivision, combination or re-classification.
b) Subsequent Equity Sales. If the Company or any Subsidiary
thereof, as applicable, at any time while this Warrant is outstanding,
shall sell or grant any option to purchase or sell or grant any right
to reprice its securities, or otherwise dispose of or issue (or
announce any offer, sale, grant or any option to purchase or other
disposition) any Common Stock or Common Stock Equivalents entitling any
Person to acquire shares of Common Stock, at an effective price per
share less than the then Exercise Price (such lower price, the "Base
Share Price" and such issuances collectively, a "Dilutive Issuance")
(if the holder of the Common Stock or Common Stock Equivalents so
issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or
exchange prices or otherwise, or due to warrants, options or rights per
share that are issued in connection with such issuance, be entitled to
receive shares of Common Stock at an effective price per share that is
less than the Exercise Price, such issuance shall be deemed to have
occurred for less than the Exercise Price on such date of the Dilutive
Issuance), then the Exercise Price shall be reduced and only reduced to
equal the Base Share Price and the number of Warrant Shares issuable
hereunder shall be increased such that the aggregate Exercise Price
payable hereunder, after taking into account the decrease in the
Exercise Price, shall be equal to the aggregate Exercise Price prior to
such adjustment. Such adjustment shall be made whenever such Common
Stock or Common Stock Equivalents are issued. Notwithstanding the
foregoing, no adjustments shall be made, paid, or issued under this
Section 3(b) in respect of an Exempt Issuance. The Company shall notify
the Holder in writing, no later than the Trading Day following the
issuance of any Common Stock or Common Stock Equivalents subject to
this section, indicating therein the applicable issuance price, or
applicable reset price, exchange price, conversion price and other
pricing terms (such notice the "Dilutive Issuance Notice"). For
purposes of clarification, whether or not the Company provides a
Dilutive Issuance Notice pursuant to this Section 3(b), upon the
occurrence of any Dilutive Issuance, after the date of such Dilutive
Issuance the Holder is entitled to receive a number of Warrant Shares
based upon the Base Share Price regardless of whether the Holder
accurately refers to the Base Share Price in the Notice of Exercise.
c) Subsequent Rights Offerings. If the Company, at any time
while the Warrant is outstanding, shall issue rights, options or
warrants to all holders of Common Stock (and not to Holders) entitling
them to subscribe for or purchase shares of Common Stock at a price per
share less than the VWAP at the record date mentioned below, then the
Exercise Price shall be multiplied by a fraction, of which the
denominator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of shares of
the Common Stock outstanding on the date of issuance of such rights or
warrants plus the number of shares that the aggregate offering price of
the total number of shares so offered (assuming receipt by the Company
in full of all consideration payable upon exercise of such rights,
options or warrants) would purchase at such VWAP. Such adjustment shall
be made whenever such rights or warrants are issued, and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options, or warrants.
5
d) Pro Rata Distributions. If the Company, at any time prior
to the Termination Date, shall distribute to all holders of Common
Stock (and not to Holders of the Warrants) evidences of its
indebtedness or assets (including cash and cash dividends) or rights or
warrants to subscribe for or purchase any security other than the
Common Stock (which shall be subject to Section 3(b)), then in each
such case the Exercise Price shall be adjusted by multiplying the
Exercise Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the VWAP determined as of
the record date mentioned above, and of which the numerator shall be
such VWAP on such record date less the then per share fair market value
at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of the
Common Stock as determined by the Board of Directors in good faith. In
either case the adjustments shall be described in a statement provided
to the Holder of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of
Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the
record date mentioned above.
e) Fundamental Transaction. If, at any time while this Warrant
is outstanding, (A) the Company effects any merger or consolidation of
the Company with or into another Person, (B) the Company effects any
sale of all or substantially all of its assets in one or a series of
related transactions, (C) any tender offer or exchange offer (whether
by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (D) the Company
effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property (in
any such case, a "Fundamental Transaction"), then, upon any subsequent
exercise of this Warrant, the Holder shall have the right to receive,
for each Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental Transaction, at
the option of the Holder, (a) upon exercise of this Warrant, the number
of shares of Common Stock of the successor or acquiring corporation or
of the Company, if it is the surviving corporation, and any additional
consideration (the "Alternate Consideration") receivable upon or as a
result of such reorganization, reclassification, merger, consolidation
or disposition of assets by a Holder of the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such
event or (b) if the Company is acquired in an all cash transaction,
cash equal to the value of this Warrant as determined in accordance
with the Black-Scholes option pricing formula. For purposes of any such
exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based
on the amount of Alternate Consideration issuable in respect of one
share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Exercise Price among the Alternate Consideration in
a reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common Stock
are given any choice as to the securities, cash, or property to be
received in a Fundamental Transaction, then the Holder shall be given
the same choice as to the Alternate Consideration it receives upon any
exercise of this Warrant following such Fundamental Transaction. To the
extent necessary to effectuate the foregoing provisions, any successor
to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new warrant consistent with the foregoing
provisions and evidencing the Holder's right to exercise such warrant
into Alternate Consideration. The terms of any agreement pursuant to
which a Fundamental Transaction is affected shall include terms
requiring any such successor or surviving entity to comply with the
provisions of this Section 3(e) and insuring that this Warrant (or any
such replacement security) will be similarly adjusted upon any
subsequent transaction analogous to a Fundamental Transaction.
f) Calculations. All calculations under this Section 3 shall
be made to the nearest cent or the nearest 1/100th of a share, as the
case may be. For purposes of this Section 3, the number of shares of
Common Stock deemed to be issued and outstanding as of a given date
shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.
g) Voluntary Adjustment by Company. The Company may at any
time during the term of this Warrant reduce the then current Exercise
Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Company.
h) Notice to Holders.
i. Adjustment to Exercise Price. Whenever the
Exercise Price is adjusted pursuant to any provision of this
Section 3, the Company shall promptly mail to each Holder a
notice setting forth the Exercise Price after such adjustment
and setting forth a brief statement of the facts requiring
such adjustment. If the Company issues a variable rate
security, despite the prohibition thereon in the Purchase
Agreement, the Company shall be deemed to have issued Common
Stock or Common Stock Equivalents at the lowest possible
6
conversion or exercise price at which such securities may be
converted or exercised in the case of a Variable Rate
Transaction (as defined in the Purchase Agreement).
ii. Notice to Allow Exercise by Xxxxxx. If (A) the
Company shall declare a dividend (or any other distribution in
whatever form) on the Common Stock; (B) the Company shall
declare a special nonrecurring cash dividend on or a
redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock
rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; (D) the approval
of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any
sale or transfer of all or substantially all of the assets of
the Company, of any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or
property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the
affairs of the Company; then, in each case, the Company shall
cause to be mailed to the Holder at its last address as it
shall appear upon the Warrant Register of the Company, at
least 20 calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if
a record is not to be taken, the date as of which the holders
of the Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of
which it is expected that holders of the Common Stock of
record shall be entitled to exchange their shares of the
Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided that the failure to
mail such notice or any defect therein or in the mailing
thereof shall not affect the validity of the corporate action
required to be specified in such notice. The Holder is
entitled to exercise this Warrant during the 20-day period
commencing on the date of such notice to the effective date of
the event triggering such notice.
Section 4. Transfer of Warrant.
a) Transferability. Subject to compliance with any applicable
securities laws and the conditions set forth in Section 4(d) hereof and
to the provisions of Section 4.1 of the Purchase Agreement, this
Warrant and all rights hereunder (including, without limitation, any
registration rights) are transferable, in whole or in part, upon
surrender of this Warrant at the principal office of the Company or its
designated agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the Holder
or its agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing
the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without
having a new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with
other Warrants upon presentation hereof at the aforesaid office of the
Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with Section
4(a), as to any transfer that may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice.
c) Warrant Register. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time
to time. The Company may deem and treat the registered Holder of this
Warrant as the absolute owner hereof for the purpose of any exercise
hereof or any distribution to the Holder, and for all other purposes,
absent actual notice to the contrary.
d) Transfer Restrictions. If, at the time of the surrender of
this Warrant in connection with any transfer of this Warrant, the
transfer of this Warrant shall not be registered pursuant to an
effective registration statement under the Securities Act and under
applicable state securities or blue sky laws, the Company may require,
as a condition of allowing such transfer (i) that the Holder or
transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel (which opinion shall be in form, substance
and scope customary for opinions of counsel in comparable transactions)
to the effect that such transfer may be made without registration under
the Securities Act and under applicable state securities or blue sky
laws, (ii) that the holder or transferee execute and deliver to the
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Company an investment letter in form and substance acceptable to the
Company and (iii) that the transferee be an "accredited investor" as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8)
promulgated under the Securities Act or a "qualified institutional
buyer" as defined in Rule 144A(a) under the Securities Act.
Section 5. Miscellaneous.
a) No Rights as Stockholder until Exercise. This Warrant does
not entitle the Holder to any voting rights or other rights as a
stockholder of the Company prior to the exercise hereof as set forth in
Section 2(e)(ii).
b) Loss, Theft, Destruction or Mutilation of Warrant. The
Company covenants that upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant or any stock certificate relating to the
Warrant Shares, and in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to it (which, in the case of the
Warrant, shall not include the posting of any bond), and upon surrender
and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of
like tenor and dated as of such cancellation, in lieu of such Warrant
or stock certificate.
c) Saturdays, Sundays, Holidays, etc. If the last or appointed
day for the taking of any action or the expiration of any right
required or granted herein shall not be a Trading Day, then such action
may be taken or such right may be exercised on the next succeeding
Trading Day.
d) Authorized Shares.
The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized
and unissued Common Stock a sufficient number of shares to
provide for the issuance of the Warrant Shares upon the
exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant
shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as
may be necessary to assure that such Warrant Shares may be
issued as provided herein without violation of any applicable
law or regulation, or of any requirements of the Trading
Market upon which the Common Stock may be listed.
Except and to the extent as waived or consented to by
the Holder, the Company shall not by any action, including,
without limitation, amending its articles of incorporation or
through any reorganization, transfer of assets, consolidation,
merger, 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 Warrant, 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 to protect the rights of Holder as
set forth in this Warrant against impairment. Without limiting
the generality of the foregoing, the Company will (a) not
increase the par value of any Warrant Shares above the amount
payable therefor upon such exercise immediately prior to such
increase in par value, (b) take all such action as may be
necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares
upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company
to perform its obligations under this Warrant.
Before taking any action that would result in an
adjustment in the number of Warrant Shares for which this
Warrant is exercisable or in the Exercise Price, the Company
shall obtain all such authorizations or exemptions thereof, or
consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
e) Jurisdiction. All questions concerning the construction,
validity, enforcement and interpretation of this Warrant shall be
determined in accordance with the provisions of the Purchase Agreement.
f) Restrictions. The Holder acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered,
will have restrictions upon resale imposed by state and federal
securities laws.
g) Nonwaiver and Expenses. No course of dealing or any delay
or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Xxxxxx's
rights, powers, or remedies, notwithstanding the fact that all rights
hereunder terminate on the Termination Date. If the Company willfully
and knowingly fails to comply with any provision of this Warrant, which
results in any material damages to the Holder, the Company shall pay to
Holder such amounts as shall be sufficient to cover any costs and
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expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by Xxxxxx in
collecting any amounts due pursuant hereto or in otherwise enforcing
any of its rights, powers or remedies hereunder.
h) Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder by the Company shall
be delivered in accordance with the notice provisions of the Purchase
Agreement.
i) Limitation of Liability. No provision hereof, in the
absence of any affirmative action by Holder to exercise this Warrant to
purchase Warrant Shares, and no enumeration herein of the rights or
privileges of Holder, shall give rise to any liability of Holder for
the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by
creditors of the Company.
j) Remedies. Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Warrant. The
Company agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive and not to assert the defense
in any action for specific performance that a remedy at law would be
adequate.
k) Successors and Assigns. Subject to applicable securities
laws, this Warrant and the rights and obligations evidenced hereby
shall inure to the benefit of and be binding upon the successors of the
Company and the successors and permitted assigns of Holder. The
provisions of this Warrant are intended to be for the benefit of all
Holders from time to time of this Warrant and shall be enforceable by
any such Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and
the Holder.
m) Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Warrant shall
be prohibited by or invalid under applicable law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining
provisions of this Warrant.
n) Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed
a part of this Warrant.
********************
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.
Dated: April 25, 2006 XXXXXX ENERGY, INC.
By: /s/ Xxxxxx Xxxxxxxx
----------------------
Name: Xxxxxx Xxxxxxxx
Title: President
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NOTICE OF EXERCISE
To: xxxxxx energy, inc.
(1) The undersigned hereby elects to purchase ________ Warrant
Shares of the Company pursuant to the terms of the attached
Warrant (only if exercised in full), and tenders herewith
payment of the exercise price in full, together with all
applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] [if permitted] the cancellation of such number of Warrant
Shares as is necessary, in accordance with the formula set
forth in subsection 2(c), to exercise this Warrant with
respect to the maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth in
subsection 2(c).
(3) Please issue a certificate or certificates representing said
Warrant Shares in the name of the undersigned or in such other
name as is specified below:
________________________________________________________
The Warrant Shares shall be delivered to the following DWAC
Account Number or by physical delivery of a certificate to:
________________________________________________________
________________________________________________________
________________________________________________________
(4) Accredited Investor. The undersigned is an "accredited
investor" as defined in Regulation D promulgated under the
Securities Act of 1933, as amended.
SIGNATURE OF HOLDER
Name of Investing Entity:_______________________________________________________
Signature of Authorized Signatory of Investing Entity:__________________________
Name of Authorized Signatory:___________________________________________________
Title of Authorized Signatory:__________________________________________________
Date:___________________________________________________________________________
ASSIGNMENT FORM
(To assign the foregoing warrant, execute this form and supply required
information. Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant
and all rights evidenced thereby are hereby assigned to_________________________
whose address is ______________________________________________________________.
Dated: ______________, _______
Holder's Signature:___________________________________________
Holder's Address:_____________________________________________
______________________________________________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
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