SUBSCRIPTION AGREEMENT
Exhibit
4.6
THIS
SUBSCRIPTION AGREEMENT (the
“Agreement”) is made as of the _____ day of April 2007, by and among Better
BioDiesel, Inc., a Colorado corporation (the “Company”), and the investors
listed on Schedule
A
attached
hereto and made a part hereof (the “Investor(s)”). Capitalized terms used but
not defined in this Agreement shall have the respective meanings given such
terms in the Private Placement Memorandum dated as of the same date herewith
(the “Memorandum”).
W
I T N E S S E T H
WHEREAS,
the
Company desires to sell to the Investors that number of Shares set forth
opposite each such Investor’s name on Schedule
A
attached
hereto;
WHEREAS,
each of
the Investors has been furnished with a Memorandum; and
WHEREAS,
the
Investors, after carefully reviewing the Memorandum, desire to purchase such
Shares on the terms and conditions contained in this Agreement.
NOW,
THEREFORE, IN CONSIDERATION FOR THE MUTUAL COVENANTS AND AGREEMENTS SET FORTH
HEREIN, AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, THE PARTIES HERETO HEREBY AGREE
AS
FOLLOWS:
1.
Purchase
and Sale of Units.
The
Investor hereby agrees to purchase that number of units, at a purchase price
of
Twenty thousand dollars ($20,000.00) per unit, as is set forth opposite such
Investor’s name on Schedule
A
attached
hereto, and the Company agrees to sell at the Closing to the Investor, for
the
aggregate purchase price set forth on Schedule
A
(the
“Purchase Price”), which units of securities of the Company consisting of the
following (the “Units”):
a(i).
Shares
of Common Stock.
Ten
thousand (10,000) shares of Common Stock of the Company, reflecting a per share
purchase price of Two dollars ($2.00) per Share; and
a(ii).
Warrants.
A five
(5) year warrant to purchase 10,000 shares of common stock of the Company (the
“Shares”) at an exercise price (the “Exercise Price”) equal to the lesser of (i)
the last trade on the day of the receipt of the Minimum (defined herein) funding
of this Offering or (ii) the five-day Volume Weighted Average Price (VWAP)
for
the five days prior to the date of the receipt of the Minimum funding of this
Offering.
b.
Delivery
of Shares.
The
Shares subscribed for herein shall be issued upon the Closing (hereinafter
defined).
c.
Closings.
The
consummation of the purchase and sale of the Shares contemplated by this
Agreement shall take place at The Xxxx Law Group, PLLC, 000 Xxxxx Xxxxxx, Xxxxx
0000, Xxxxxxx, Xxxxxxxxxx 00000, upon receipt of subscriptions acceptable by
the
Company in an amount equal to or greater than the Minimum Amount and at such
time as is mutually agreeable to the Company, or at such other time and place
as
the Company may designate (the “Closing” or “Closings”); provided,
however,
that
all Closings shall take place no later than the Closing of the Offering.
d.
Binding
and Enforceable.
This
Subscription Agreement will be binding upon and enforceable against the Company
only when countersigned by an authorized agent of the Company and delivered
to
Investors who have agreed to purchase at least the Minimum Amount.
e.
Anti-dilution
Provisions.
The
Company shall provide separate ratchet protection rights for the Common Stock
and Warrants, as follows:
(1)
Common
Stock:
If the
Company subsequently issues common stock or any type of securities convertible
into common stock, excepting warrants, at any time between the Closing of this
Offering prior to the SEC declaring a Registration Statement (defined herein)
including the Common Stock to be effective, investors in this Offering shall
be
extended full-ratchet protection as to their Common Stock. Anti-dilution will
not apply to shares issued to employees as part of a board-authorized
compensation scheme. Anti-dilution shall not apply to shares or options issued
to employees as part of a board-authorized compensation plan.
(2)
Warrants:
If the
Company issues either Warrants or options to purchase common stock during the
term of the Warrants, at a price below the exercise price below the Exercise
Price in this Offering, the investors in this Offering shall be extended
full-ratchet protection as to their Warrants. Anti-dilution shall not apply
to
shares or options issued to employees as part of a board-authorized compensation
plan.
2.
Representations
and Warranties of the Company.
The
Company hereby represents and warrants to each Investor as follows:
a.
Organization,
Good Standing and Qualification.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Colorado, and has all requisite power and
authority to carry on its business as now conducted. The Company is duly
qualified to transact business, and is in good standing, in each U.S.
jurisdiction in which the failure to so qualify would have a material adverse
effect on its business.
b.
Capitalization.
The
authorized capital of the Company consists of 200,000,000 shares of common
stock
and 5,000,000 shares of preferred stock. Prior to this Offering, 30,500,001
shares of Common Stock and 0 shares of Preferred Stock are issued and
outstanding.
c.
Authorization.
All
action on the part of the Company necessary for the authorization, execution
and
delivery of this Agreement, the performance of all obligations of the Company
hereunder and the authorization, issuance and delivery of the Shares being
sold
hereunder, to the extent that the foregoing requires performance on or prior
to
the Closing, has been taken or will be taken on or prior to the Closing, and
the
Company has all requisite power and authority to enter into this
Agreement.
3.
Representations
and Warranties of Investors.
Each
Investor hereby represents and warrants to the Company as follows:
a.
Organization;
Good Standing; Power and Authority; Binding Obligation.
Investor has full power and authority to enter into this Agreement, and, for
those Investors which are corporations (i) such Investor is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all requisite power and authority
to
carry on its business as now conducted, and (ii) all action on the part of
the
Investor necessary for the authorization, execution and delivery of this
Agreement, the performance of all obligations of the Investor hereunder,
including, without limitation, the payment of the purchase price for the Shares
being sold such Investor hereunder has been taken, and the Investor has all
requisite power and authority to enter into this Agreement. This Agreement
has
been duly executed and delivered by Investor and, assuming due authorization,
execution and delivery by the Company, constitutes Investor’s valid and legally
binding obligation enforceable against the Investor in accordance with its
terms, subject to the effect of any applicable bankruptcy, reorganization,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), moratorium or similar laws affecting creditors’ rights generally,
subject, as to enforceability, to the effect of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and subject to the effect of applicable securities laws as
to
rights of indemnification.
b.
Purchase
Entirely for Own Account.
The
Shares to be purchased by Investor hereunder will be acquired for investment
for
Investor’s own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof. Investor has no present intention
of
selling, granting any participation in, or otherwise distributing the Shares.
Investor does not have any contract, undertaking, agreement or arrangement
with
any person to sell, transfer or grant participations to any person with respect
to the Shares. The Investor has not construed the contents of this Agreement,
or
any additional agreement with respect to the proposed investment in the Shares
or any prior or subsequent communications from the Company, or any of its
officers, employees or representatives, as investment, tax or legal advice
or as
information necessarily applicable to such Investor’s particular financial
situation. The Investor has consulted its own financial advisor, tax advisor,
legal counsel and accountant, as necessary or desirable, as to matters
concerning his investment in the Shares.
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c.
Disclosure.
Investor has received or reviewed all the information which such Investor has
requested for the purposes of determining the merits of the Shares as an
investment. Investor has read and understands the Risk Factors and other
information presented in the Memorandum.
Investor
has had an opportunity to ask questions and receive answers from the Company
regarding the Company and its respective business, operations and financial
condition and the terms and conditions of this Offering of Shares, and answers
have been provided to Investor’s full satisfaction. Investor has fully reviewed
all corporate and governance documents of the Company and such other documents,
which Investor feels is necessary or appropriate prior to purchase of the
Shares, understands all relevant terms and has asked all questions and received
answers thereto to Investor’s full satisfaction. If deemed necessary by
Investor, Investor has consulted with a professional advisor who has provided
Investor with advice concerning terms. INVESTOR
ACKNOWLEDGES AND AGREES THAT THE PURCHASE OF THE SHARES INVOLVES A HIGH DEGREE
OF RISK, INCLUDING, WITHOUT LIMITATION, THOSE SET FORTH IN THE MEMORANDUM,
AND
MAY RESULT IN A LOSS OF THE ENTIRE AMOUNT INVESTED. EACH INVESTOR FURTHER
ACKNOWLEDGES AND AGREES THAT THERE IS NO ASSURANCE THAT THE COMPANY’S OPERATIONS
WILL RESULT IN REVENUES OR BE PROFITABLE.
d.
Accredited
Investor.
Investor is an “accredited investor” as defined in Rule 501(a) of Regulation D
promulgated under the 1933 Act. The information provided by Investor on the
Accredited Investor Questionnaire, attached to the Memorandum as Exhibit
B,
is
true, correct and complete in all respects. Investor is capable of bearing
the
economic risk of an investment in the Shares, including the possible loss of
Investor’s entire investment. Investor has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of an investment in the Shares offered hereby. If other than an
individual, Investor has not been organized solely for the purpose of acquiring
the Shares.
e.
Restricted
Securities.
Investor understands that the Shares being purchased hereunder are “restricted
securities” as defined in the Securities Act, and that under federal and state
securities laws the Shares may be resold without registration under the
Securities Act only in certain limited circumstances. Investor is familiar
with
Rule 144 promulgated by the SEC under the Securities Act, and understands the
resale limitations imposed thereby and by the Securities Act generally. Investor
also acknowledges that the Shares are subject to significant restrictions on
transfer, pledge or hypothecation.
f.
Legends.
It is
understood that certificates or other evidence of the Shares shall bear, in
substantial form, the following legend, as well as any legend required by the
laws of any state:
“THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY
MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS
NOT REQUIRED PURSUANT TO A VALID EXEMPTION THEREFROM UNDER THE SECURITIES ACT
OF
1933.”
g.
Consents
and Approvals; No Conflict.
(i) The
execution and delivery of this Agreement by the Investor does not, and the
performance of this Agreement by the Investor will not, require any consent,
approval, authorization or other action by, or filing with or notification
to,
any governmental or regulatory authority; (ii) The execution, delivery and
performance of this Agreement by the Investor does not (A) in the case of any
Investor that is not an individual, conflict with or violate the charter or
by-laws, partnership or other governing documents of such Investor, or (B)
conflict with or violate any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award applicable to the
Investor.
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h. Registration
Rights.
The
Investor shall have the following registration rights:
(1) The
Investor shall be entitled to “piggy-back” registration rights for the common
stock on all registrations (a “Registration Statement”), or earlier at the sole
discretion of the Company, excepting registrations on Form S-4 or Form S-8
or on
any demand registrations of any other investor subject to the right, however,
of
the Company and its underwriters to reduce the number of shares proposed to
be
registered pro rata in view of market conditions or legal considerations,
pursuant to Rule 415 of the Securities Act, which may limit the total number
of
shares included on a Registration Statement to 30% of the then issued and
outstanding common stock of the Company. The Company shall bear registration
expenses (exclusive of underwriting discounts and commissions) of all such
demands, piggy-backs, and S-3 or SB-2 registrations;
(2) Notwithstanding
the foregoing, subsequent to the date that is ninety (90) days from the Closing
of the Offering any investor in this Offering may demand that the Company file
a
Registration Statement including the Common Stock purchased in this Offering,
and the Company shall file such Registration within forty-five (45) days of
such
written notice of demand (the “Registration Filing Deadline”). The amount of
Common Stock included in a Registration Statement filed pursuant to an
investor’s demand remains subject, however, to the right of the Company and its
underwriters to reduce the number of shares proposed to be registered pro rata
in view of market conditions or legal considerations, pursuant to Rule 415
of
the Securities Act, which may limit the total number of shares included on
a
Registration Statement to 30% of the then issued and outstanding common stock
of
the Company;
h. (3)If,
however, the Company is actively pursuing and is engaged in negotiations or
discussions to attain financing equal to or greater than $5,000,000.00 (a
“Qualified Financing”), the investor agrees that the Company may elect to extend
the Registration Filing Deadline by an additional ninety days and to include
the
Common Stock on a Registration Statement filed as part of, or concurrent with,
such Qualified Financing. In the event that such Registration Statement is
not
filed in that time frame the Company shall pay to the investor penalty fees,
payable in common stock, equal to two percent (2%) of the Common Stock that
the
investor purchased in this Offering for each 30 days period beyond the
Registration Filing Deadline during which the Registration Statement has not
yet
been filed.
4.
Covenant
of Investors.
Each
Investor hereby covenants with the Company that, without in any way limiting
the
representations set forth in Section 3 above, Investor shall not make any
disposition of all or any portion of the Shares unless and until:
a.
there
is then in effect a registration statement under the Securities Act covering
such proposed disposition, and such disposition is made in accordance with
such
registration statement; or
b.
such
Investor shall have notified the Company of the proposed disposition and shall
have furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, and, if requested by the Company, such
Investor shall have furnished the Company with an opinion of counsel, in form
and substance satisfactory to the Company, that such disposition will not
require registration of the Shares under the Securities Act.
5.
Conditions
of Investor’s Obligations at Closing.
The
obligations of each Investor hereunder are subject to, and contingent upon,
the
fulfillment, on or before each Closing, of each of the following conditions,
the
waiver of which shall not be effective against any Investor who does not consent
in writing thereto:
a.
Representations
and Warranties.
The
representations and warranties of the Company contained in Section 2 hereof
shall be true and correct on and as of the Closing with the same effect as
though such representations and warranties had been made on and as of the date
of such
Closing.
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b.
Performance.
The
Company shall have performed and complied with all agreements, obligations
and
covenants contained in this Agreement that are required to be performed or
complied with by it on or before the Closing, provided,
however,
that
the obligations of the Investors shall not be subject to or contingent upon
the
issuance by the Company of the Shares to the persons or entities set forth
on
Schedule
A
attached
hereto who have not performed or tendered the performance of their obligations
required to be performed under this Agreement on or prior to the
Closing.
6.
Conditions
of the Company’s Obligations at Closing.
The
obligations of the Company to each Investor hereunder are subject to and
contingent upon the fulfillment by such Investor, on or before the Closing,
of
each of the following conditions:
a.
Representations
and Warranties.
The
representations and warranties of each Investor contained herein shall be true
and correct on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of such
Closing.
b.
Payment
of Purchase Price by Investors.
Each
Investor shall have delivered to the Company the Purchase Price specified in
Schedule
A
attached
hereto, in the manner specified in this Agreement and, in the event Investor
pays by check, the Purchase Price shall have been credited to the Escrow
Account.
c.
Statement
of Accredited Investor.
Each
Investor shall have delivered to the Company a Statement of Accredited Investor
in the form set forth in Exhibit
B
attached
to the Memorandum, and the information provided therein shall be true, correct
and complete on and as of the Closing with the same effect as though such
information had been provided as of the date of such Closing.
7.
Miscellaneous.
a.
Survival
of Warranties.
The
representations, warranties and covenants of the Investors contained in this
Agreement shall survive the execution and delivery of this Agreement and the
Closing.
b.
Successors
and Assigns.
This
Agreement may not be assigned by any party hereto. The terms and conditions
of
this Agreement shall inure to the benefit of, and be binding upon, the
respective successors of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party, other than the parties hereto
or
their respective successors, any rights, remedies, obligations or liabilities
under or by reason of this Agreement, except as expressly provided in this
Agreement.
c.
Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Utah, without regard to the principles of conflict of laws
thereof.
d.
Counterparts;
Delivery by Facsimile.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument. Delivery of this Agreement may be effected by
facsimile.
e.
Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.
f.
Notices.
Unless
otherwise provided, any notice required or permitted hereunder shall be given
by
personal service upon the party to be notified, by nationwide overnight delivery
service or upon deposit with the United States Post Office, by certified mail,
return receipt requested and:
(i)
if to
the Company, addressed to Better BioDiesel, Inc., 000 Xxxxx 0000 Xxxx, Xxxxxxx
Xxxx, Xxxx 00000, or at such other address as the Company may designate by
notice to each of the Investors in accordance with the provisions of this
Section; and
5
(ii)
if
to the Investors, at their respective addresses indicated on the signature
pages
hereof, or at such other addresses as any one or more Investors may designate
by
notice to the Company in accordance with the provisions of this
Section.
g.
Expenses.
Irrespective of whether a Closing is effected, the Company and the Investors
shall pay all of their own costs and expenses incurred with respect to the
negotiation, execution, delivery and performance of this Agreement. If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the prevailing party shall be entitled to reasonable attorney’s
fees, costs and necessary disbursements in addition to any other relief to
which
such party may be entitled.
h.
Amendments
and Waivers.
Any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
prospectively or retroactively), only with the written consent of the Company
and a majority in interest of the Investors.
i.
Severability.
If one
or more provisions of this Agreement are held to be unenforceable under
applicable law, such provisions shall be excluded from this Agreement and the
balance of this Agreement shall be interpreted as if such provision were so
excluded, and this Agreement shall be otherwise enforceable in accordance with
its terms.
j.
Entire
Agreement.
This
Agreement (including the appendices and schedules hereto) constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof
and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties hereto.
[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first above written.
By:
_______________________________
Name: Xxx
Crafts
Its:
President
and Chief Executive Officer
INVESTOR
By:
_______________________________
Name:
_____________________________
Its:
_______________________________
7
SCHEDULE
A
| NAME OF INVESTOR(S) |
NUMBER
OF SHARES
|
PURCHASE
PRICE
|
________________________________
________________________________
________________________________
________________________________
________________________________
8
WARRANT
NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISEABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR
(II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED PURSUANT TO AN
AVAILABLE EXEMPTION UNDER THE 1933 ACT IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
Warrant
To Purchase Common Stock
Warrant
No.:________
Number
of
Shares of Common Stock: ______________________
Date
of
Issuance: April 30, 2007 ("Issuance Date")
BETTER
BIODIESEL, INC., a Colorado corporation (the "Company"), hereby certifies that,
for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, INVESTOR, the registered holder hereof or its permitted
assigns (the "Holder"), is entitled, subject to the terms set forth below,
to
purchase from the Company, at the Exercise Price (as defined below) then in
effect, upon surrender of this Warrant (including any Warrants to purchase
common stock of the Company (the “Common Stock”) (“issued in exchange, transfer
or replacement hereof, the "Warrant"), at any time or times on or after the
date
hereof but not after 11:59 p.m., New York Time, on the Expiration Date (as
defined below), ______________________ fully paid nonassessable shares of Common
Stock (the "Warrant Shares"). Except as otherwise defined herein, capitalized
terms in this Warrant shall have the meanings set forth in Section 16. This
Warrant is one of the Warrants to purchase Common Stock of the Company (the
"SPA
Warrants") issued pursuant to Section 1 of that certain Subscription Agreement,
dated as of April 30, 2007 (the "Subscription Date"), by and among the Company
and the investors (the "Investors") referred to therein (the "Subscription
Agreement").
1. EXERCISE
OF WARRANT.
(a)
Mechanics
of Exercise.
Subject
to the terms and conditions hereof (including, without limitation, the
limitations set forth in Section 1(e)), this Warrant may be exercised by the
Holder upon the earlier of (i) the closing of a Qualified Financing (as defined
in the Subscription Agreement and or Memorandum) or (ii) one year from the
Subscription Date, in whole or in part, by (i) delivery of a written
notice, in the form attached hereto as Exhibit
A
(the
"Exercise Notice"), of the Holder's election to exercise this Warrant and
(ii) (A) payment to the Company of an amount equal to the applicable
Exercise Price multiplied by the number of Warrant Shares as to which this
Warrant is being exercised (the "Aggregate Exercise Price") in cash or wire
transfer of immediately available funds. The Holder shall not be required to
deliver the original Warrant in order to effect an exercise hereunder. Execution
and delivery of the Exercise Notice with respect to less than all of the Warrant
Shares shall have the same effect as cancellation of the original Warrant and
issuance of a new Warrant evidencing the right to purchase the remaining number
of Warrant Shares. On or before the first Business Day following the date on
which the Company has received each of the Exercise Notice and the Aggregate
Exercise Price (the "Exercise Delivery Documents"), the Company shall transmit
by facsimile an acknowledgment of confirmation of receipt of the Exercise
Delivery Documents to the Holder and the Company's transfer agent (the "Transfer
Agent"). On or before the third Business Day following the date on which the
Company has received all of the Exercise Delivery Documents (the "Share Delivery
Date"), the Company shall (X) provided that the Transfer Agent is participating
in The Depository Trust Company ("DTC") Fast Automated Securities Transfer
Program, upon the request of the Holder, credit such aggregate number of shares
of Common Stock to which the Holder is entitled pursuant to such exercise to
the
Holder's or its designee's balance account with DTC through its Deposit
Withdrawal Agent Commission system, or (Y) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer Program, issue
and
dispatch by overnight courier to the address as specified in the Exercise
Notice, a certificate, registered in the Company's share register in the name
of
the Holder or its designee, for the number of shares of Common Stock to which
the Holder is entitled pursuant to such exercise. Upon delivery of the Exercise
Notice and Aggregate Exercise Price referred to in clause (ii)(A) above, the
Holder shall be deemed for all corporate purposes to have become the holder
of
record of the Warrant Shares with respect to which this Warrant has been
exercised, irrespective of the date of delivery of the certificates evidencing
such Warrant Shares. If this Warrant is submitted in connection with any
exercise pursuant to this Section 1(a) and the number of Warrant Shares
represented by this Warrant submitted for exercise is greater than the number
of
Warrant Shares being acquired upon an exercise, then the Company shall as soon
as practicable and in no event later than five Business Days after any exercise
and at its own expense, issue a new Warrant (in accordance with Section 7(d))
representing the right to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant, less the number of
Warrant Shares with respect to which this Warrant is exercised. No fractional
shares of Common Stock are to be issued upon the exercise of this Warrant,
but
rather the number of shares of Common Stock to be issued shall be rounded up
to
the nearest whole number. The Company shall pay any and all taxes which may
be
payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant. This Warrant may be exercised for consideration of
the
per share Exercise Price (i) paid of cash or (ii) on a cashless basis according
to the following formula:
9
X
= Y
(A-B)
-------
A
Where
X =
the number of the Shares to be issued to the Holder.
Y =
the
number of the Shares purchasable under this Warrant.
A =
the
fair market value of one Share on the date of determination.
B
=
the per
share Exercise Price (as adjusted to the date of such
calculation).
(b)
Exercise
Price.
For
purpose of this Warrant, "Exercise Price" means an exercise price per share
equal to the lesser of equal to the lesser of (i) the last trade on the day
of
the receipt of the Minimum funding of this Offering or (ii) the five-day VWAP
for the five days prior to the date of the receipt of the Minimum funding of
this Offering, subject to adjustment as provided herein.
(c)
Company's
Failure to Timely Deliver Securities.
If the
Company shall fail for any reason or for no reason to issue to the Holder within
three (3) Business Days of receipt of the Exercise Delivery Documents, a
certificate for the number of shares of Common Stock to which the Holder is
entitled and register such shares of Common Stock on the Company's share
register or to credit the Holder's balance account with DTC for such number
of
shares of Common Stock to which the Holder is entitled upon the Holder's
exercise of this Warrant, and if on or after such Business Day the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock
to
deliver in satisfaction of a sale by the Holder of shares of Common Stock
issuable upon such exercise that the Holder anticipated receiving from the
Company (a "Buy-In"), then the Company shall, within three (3) Business Days
after the Holder's request and in the Holder's discretion, either (i) pay cash
to the Holder in an amount equal to the Holder's total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so purchased
(the
"Buy-In Price"), at which point the Company's obligation to deliver such
certificate (and to issue such shares of Common Stock) shall terminate, or
(ii)
promptly honor its obligation to deliver to the Holder a certificate or
certificates representing such shares of Common Stock and pay cash to the Holder
in an amount equal to the excess (if any) of the Buy-In Price over the product
of (A) such number of shares of Common Stock, times (B) the Closing Bid Price
on
the date of exercise.
(d)
Disputes.
In the
case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall promptly issue
to the Holder the number of Warrant Shares that are not disputed and resolve
such dispute in accordance with Section
13.
10
(e)
Limitations
on Exercises; Beneficial Ownership.
The
Company shall not effect the exercise of this Warrant, and the Holder shall
not
have the right to exercise this Warrant, to the extent that after giving effect
to such exercise, such Person (together with such Person's affiliates) would
beneficially own (directly or indirectly through Warrant Shares or otherwise)
in
excess of 9.99% of the shares of Common Stock outstanding immediately after
giving effect to such exercise. For purposes of the foregoing sentence, the
aggregate number of shares of Common Stock beneficially owned (directly or
indirectly through Warrant Shares or otherwise) by such Person and its
affiliates shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude shares of Common Stock which would
be
issuable upon (i) exercise of the remaining, unexercised portion of this Warrant
beneficially owned by such Person and its affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other securities
of
the Company beneficially owned by such Person and its affiliates (including,
without limitation, any convertible notes or convertible preferred stock or
warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein. Except as set forth in the preceding sentence,
for
purposes of this subsection, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended. For purposes of this Warrant, in determining the number of outstanding
shares of Common Stock, the Holder may rely on the number of outstanding shares
of Common Stock as reflected in (1) the Company's most recent Form 10-K, Form
10-Q, Current Report on Form 8-K or other public filing with the Securities
and
Exchange Commission, as the case may be, (2) a more recent public announcement
by the Company or (3) any other notice by the Company or the Transfer Agent
setting forth the number of shares of Common Stock outstanding. For any reason
at any time, upon the written or oral request of the Holder, the Company shall
within one Business Day confirm orally and in writing to the 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 the SPA
Securities and the SPA Warrants, by the Holder and its affiliates since the
date
as of which such number of outstanding shares of Common Stock was reported.
By
written notice to the Company, the Holder may increase or decrease the maximum
percentage to any other percentage not in excess of 9.99% specified in such
notice; provided that (i) any such increase or decrease will not be effective
until the sixty-first (61st)
day
after such notice is delivered to the Company, and (ii) any such increase or
decrease will apply only to the Holder and not to any other holder of SPA
Warrants.
2. ADJUSTMENT
OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
The
Exercise Price and the number of Warrant Shares shall be adjusted from
time to time as follows:
(a)
Adjustment
upon Subdivision or Combination of shares of Common Stock.
If the
Company at any time on or after the Subscription Date subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of
its
outstanding shares of Common Stock into a greater number of shares, the Exercise
Price in effect immediately prior to such subdivision will be proportionately
reduced and the number of Warrant Shares will be proportionately increased.
If
the Company at any time on or after the Subscription Date combines (by
combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination will be proportionately
increased and the number of Warrant Shares will be proportionately decreased.
Any adjustment under this Section 2(b) shall become effective at the close
of
business on the date the subdivision or combination becomes
effective.
11
(b)
Adjustment
of Exercise Price and Number of Warrant Shares.
The
Exercise Price and the number of Warrant Shares shall be further adjusted from
time to time as follows:
(1)
Adjustment
upon Issuance of shares of Warrants.
If and
whenever on or after the Subscription Date the Company issues or sells, or
in
accordance with this Section is deemed to have issued or sold, either any
warrants for shares of Common Stock or any options for the purchase of Common
Stock (including the issuance or sale of warrants or options owned or held
by or
for the account of the Company, for an exercise price per share (the "New
Issuance Price") less than a price (the "Applicable Price") equal to the
Exercise Price in effect immediately prior to such issue or sale (the foregoing
a "Dilutive Issuance"), then immediately after such Dilutive Issuance, the
Exercise Price then in effect shall be reduced to an amount equal to the New
Issuance Price; provided,
however, that
this Section 2(b)1 shall
not
apply to warrants or options issued to employees as part of a board-authorized
compensation plan. Upon each such adjustment of the Exercise Price hereunder,
the number of Warrant Shares shall be adjusted to the number of shares of Common
Stock determined by multiplying the Exercise Price in effect immediately prior
to such adjustment by the number of Warrant Shares acquirable upon exercise
of
this Warrant immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment, as set forth
in
the following formula:
(Exercise
Price)(# Warrant Shares) = Adjusted
# Warrant Shares
New
Issuance Price
For
purposes of determining the adjusted Exercise Price, the following shall be
applicable:
(2)
Record
Date.
If the
Company takes a record of the holders of shares of Common Stock for the purpose
of entitling them (A) to receive a dividend or other distribution payable
in shares of Common Stock, Options or in Convertible Securities or (B) to
subscribe for or purchase shares of Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue
or
sale of the shares of Common Stock deemed to have been issued or sold upon
the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case
may
be.
(c)
Other
Events.
If any
event occurs of the type contemplated by the provisions of this Section 2 but
not expressly provided for by such provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of Warrant Shares
so
as to protect the rights of the Holder; provided that no such adjustment
pursuant to this Section 2(b) will increase the Exercise Price or decrease
the
number of Warrant Shares except as determined pursuant to this Section
2.
12
3. RIGHTS
UPON DISTRIBUTION OF ASSETS.
If the
Company shall declare or make any dividend or other distribution of its assets
(or rights to acquire its assets) to holders of shares of Common Stock, by
way
of return of capital or otherwise (including, without limitation, any
distribution of cash, stock or other securities, property or options by way
of a
dividend, spin off, reclassification, corporate rearrangement, scheme of
arrangement or other similar transaction) (a "Distribution"), at any time after
the issuance of this Warrant, then, in each such case:
(a)
any
Exercise Price in effect immediately prior to the close of business on the
record date fixed for the determination of holders of shares of Common Stock
entitled to receive the Distribution shall be reduced, effective as of the
close
of business on such record date, to a price determined by multiplying such
Exercise Price by a fraction of which (i) the numerator shall be the Closing
Bid
Price of a share of Common Stock on the trading day immediately preceding such
record date minus the value of the Distribution (as determined in good faith
by
the Company's Board of Directors) applicable to one share of Common Stock,
and
(ii) the denominator shall be the Closing Bid Price of the shares of Common
Stock on the trading day immediately preceding such record date;
and
(b)
the
number of Warrant Shares shall be increased to a number of shares equal to
the
number of shares of Common Stock obtainable immediately prior to the close
of
business on the record date fixed for the determination of holders of shares
of
Common Stock entitled to receive the Distribution multiplied by the reciprocal
of the fraction set forth in the immediately preceding paragraph (a); provided
that in the event that the Distribution is of shares of Common Stock (or common
stock) ("Other Shares of Common Stock") of a company whose common shares are
traded on a national securities exchange or a national automated quotation
system, then the Holder may elect to receive a warrant to purchase Other Shares
of Common Stock in lieu of an increase in the number of Warrant Shares, the
terms of which shall be identical to those of this Warrant, except that such
warrant shall be exercisable into the number of shares of Other Shares of Common
Stock that would have been payable to the Holder pursuant to the Distribution
had the Holder exercised this Warrant immediately prior to such record date
and
with an aggregate exercise price equal to the product of the amount by which
the
exercise price of this Warrant was decreased with respect to the Distribution
pursuant to the terms of the immediately preceding paragraph (a) and the number
of Warrant Shares calculated in accordance with the first part of this paragraph
(b).
13
4. FUNDAMENTAL
TRANSACTIONS.
If the
Company enters into or is party to a Fundamental Transaction, then the Holder
shall have the right to either (A) purchase and receive upon the basis and
upon
the terms and conditions herein specified and in lieu of the Warrant Shares
immediately theretofore issuable upon exercise of the Warrant, such shares
of
stock, securities or assets (including cash) as would have been issuable or
payable with respect to or in exchange for a number of Warrant Shares equal
to
the number of Warrant Shares immediately theretofore issuable upon exercise
of
the Warrant, had such Fundamental Transaction not taken place or (B) require
the
repurchase of this Warrant for a purchase price, payable in cash within five
(5)
business days after such request, equal to the Black Scholes Value of the
remaining unexercised portion of this Warrant on the date of such request.
The
terms of any agreement pursuant to which a Fundamental Transaction is effected
shall include terms requiring any such successor or surviving entity and Holder
to comply with the provisions of this Section
4.
The
provisions of this Section shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations
on the exercise of this Warrant.
5. NONCIRCUMVENTION.
The
Company hereby covenants and agrees that the Company will not, by amendment
of
its Articles of Incorporation, Bylaws or through any reorganization, transfer
of
assets, consolidation, merger, scheme of arrangement, dissolution, issue or
sale
of securities, or any other voluntary action, for the purpose of avoiding or
seeking to avoid the observance or performance of any of the terms of this
Warrant, and will at all times in good faith carry out all the provisions of
this Warrant and take all action that is required hereunder to protect the
rights of the Holder. Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then
in
effect, (ii) shall take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the SPA Warrants are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the exercise of
the
SPA Warrants, 125% of the number of shares of Common Stock as shall from time
to
time be necessary to effect the exercise of the SPA Warrants then outstanding
(without regard to any limitations on exercise).
6. WARRANT
HOLDER NOT DEEMED A STOCKHOLDER.
Except
as otherwise specifically provided herein, the Holder, solely in such Person's
capacity as a holder of this Warrant, shall not be entitled to vote or receive
dividends or be deemed the holder of share capital of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the Holder, solely in such Person's capacity as the Holder of this Warrant,
any of the rights of a shareholder of the Company or any right to vote, give
or
withhold consent to any corporate action (whether any reorganization, issue
of
stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares
which such Person is then entitled to receive upon the due exercise of this
Warrant. In addition, nothing contained in this Warrant shall be construed
as
imposing any liabilities on the Holder to purchase any securities (upon exercise
of this Warrant or otherwise) or as a shareholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Notwithstanding this Section 6, the Company shall provide the Holder with copies
of the same notices and other information given to the shareholders of the
Company generally, contemporaneously with the giving thereof to its
shareholders.
14
7. REISSUANCE
OF WARRANTS.
(a)
Transfer
of Warrant.
If this
Warrant is to be transferred, the Holder shall surrender this Warrant to the
Company, whereupon the Company will forthwith issue and deliver upon the order
of the Holder a new Warrant (in accordance with Section 7(d)), registered as
the
Holder may request, representing the right to purchase the number of Warrant
Shares being transferred by the Holder and, if less then the total number of
Warrant Shares then underlying this Warrant is being transferred, a new Warrant
(in accordance with Section 7(d)) to the Holder representing the right to
purchase the number of Warrant Shares not being transferred.
(b)
Lost,
Stolen or Mutilated Warrant.
Upon
receipt by the Company of evidence reasonably satisfactory to the Company of
the
loss, theft, destruction or mutilation of this Warrant, and, in the case of
loss, theft or destruction, of any indemnification undertaking by the Holder
to
the Company in customary form and, in the case of mutilation, upon surrender
and
cancellation of this Warrant, the Company shall execute and deliver to the
Holder a new Warrant (in accordance with Section 7(d)) representing the right
to
purchase the Warrant Shares then underlying this Warrant.
(c)
Exchangeable
for Multiple Warrants.
This
Warrant is exchangeable, upon the surrender hereof by the Holder at the
principal office of the Company, for a new Warrant or Warrants (in accordance
with Section 7(d)) representing in the aggregate the right to purchase the
number of Warrant Shares then underlying this Warrant, and each such new Warrant
will represent the right to purchase such portion of such Warrant Shares as
is
designated by the Holder at the time of such surrender; provided, however,
that
no Warrants for fractional shares of Common Stock shall be given.
15
(d)
Issuance
of New Warrants.
Whenever the Company is required to issue a new Warrant pursuant to the terms
of
this Warrant, such new Warrant (i) shall be of like tenor with this Warrant,
(ii) shall represent, as indicated on the face of such new Warrant, the right
to
purchase the Warrant Shares then underlying this Warrant (or in the case of
a
new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant
Shares designated by the Holder which, when added to the number of shares of
Common Stock underlying the other new Warrants issued in connection with such
issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) shall have an issuance date, as indicated on the face of such
new Warrant which is the same as the Issuance Date, and (iv) shall have the
same
rights and conditions as this Warrant.
8. NOTICES.
Whenever notice is required to be given under this Warrant, unless otherwise
provided herein, such notice shall be given in accordance with Section 7(f)
of
the Subscription Agreement. The Company shall provide the Holder with prompt
written notice of all actions taken pursuant to this Warrant, including in
reasonable detail a description of such action and the reason therefore. Without
limiting the generality of the foregoing, the Company will give written notice
to the Holder (i) promptly after any adjustment of the Exercise Price, setting
forth in reasonable detail, and certifying, the calculation of such adjustment
and (ii) at least ten days prior to the date on which the Company closes
its books or takes a record (A) with respect to any dividend or distribution
upon the shares of Common Stock, (B) with respect to any grants, issuances
or
sales of any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property to all holders of shares of Common Stock
or (C) for determining rights to vote with respect to any Fundamental
Transaction, dissolution or liquidation, provided in each case that such
information shall be made known to the public prior to or in conjunction with
such notice being provided to the Holder.
9.AMENDMENT
AND WAIVER.
Except
as otherwise provided herein, the provisions of this Warrant may be amended
and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company has obtained the
written consent of the Required Holders; provided that no such action may
increase the exercise price of any SPA Warrant or decrease the number of shares
or class of stock obtainable upon exercise of any SPA Warrant without the
written consent of the Holder. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the SPA Warrants
then
outstanding.
10. SEVERABILITY.
If any
provision of this Warrant or the application thereof becomes or is declared
by a
court of competent jurisdiction to be illegal, void or unenforceable, the
remainder of the terms of this Warrant will continue in full force and
effect.
11. GOVERNING
LAW.
This
Warrant shall be governed by and construed and enforced in accor-dance with,
and
all questions concerning the construction, validity, interpretation and
performance of this Warrant shall be governed by, the internal laws of the
State
of Utah, without giving effect to any choice of law or conflict of law provision
or rule (whether of the State of Utah or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
of
Utah.
16
12. CONSTRUCTION;
HEADINGS.
This
Warrant shall be deemed to be jointly drafted by the Company and all the
Investors and shall not be construed against any person as the drafter hereof.
The headings of this Warrant are for convenience of reference and shall not
form
part of, or affect the interpretation of, this Warrant.
13. DISPUTE
RESOLUTION.
In the
case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall submit the
disputed determinations or arithmetic calculations via facsimile within two
Business Days of receipt of the Exercise Notice giving rise to such dispute,
as
the case may be, to the Holder. If the Holder and the Company are unable to
agree upon such determination or calculation of the Exercise Price or the
Warrant Shares within three Business Days of such disputed determination or
arithmetic calculation being submitted to the Holder, then the Company shall,
within two Business Days submit via facsimile (a) the disputed determination
of
the Exercise Price to an independent, reputable investment bank selected by
the
Company and approved by the Holder or (b) the disputed arithmetic calculation
of
the Warrant Shares to the Company's independent, outside accountant. The Company
shall cause, at its expense, the investment bank or the accountant, as the
case
may be, to perform the determinations or calculations and notify the Company
and
the Holder of the results no later than ten Business Days from the time it
receives the disputed determinations or calculations. Such investment bank's
or
accountant's determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error.
14. REMEDIES,
OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.
The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder
right
to pursue actual damages for any failure by the Company to comply with the
terms
of this Warrant. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at
law
for any such breach may be inadequate. The Company therefore agrees that, in
the
event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
15. TRANSFER. This
Warrant may be offered for sale, sold, transferred or assigned without the
consent of the Company, except as may otherwise be required by Section 7(b)
of
the Subscription Agreement.
16. CERTAIN
DEFINITIONS.
For
purposes of this Warrant, the following terms shall have the following
meanings:
"Black
Scholes Value"
means
the value of this Warrant based on the Black and Scholes Option Pricing Model
obtained from the "OV" function on Bloomberg determined as of the day
immediately following the public announcement of the applicable Fundamental
Transaction and reflecting (i) a risk-free interest rate corresponding to the
U.S. Treasury rate for a period equal to the remaining term of this Warrant
as
of such date of request and (ii) an expected volatility equal to the greater
of
60% and the 100 day volatility obtained from the HVT function on
Bloomberg.
17
"Bloomberg"
means
Bloomberg Financial Markets.
"Business
Day"
means
any day other than Saturday, Sunday or other day on which commercial banks
in
The City of New York are authorized or required by law to remain
closed.
"Closing
Bid Price"
and
"Closing
Sale Price"
means,
for any security as of any date, the last closing bid price and last closing
trade price, respectively, for such security on the Principal Market, as
reported by Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price or the closing
trade price, as the case may be, then the last bid price or last trade price,
respectively, of such security prior to 4:00:00 p.m., New York Time, as reported
by Bloomberg, or, if the Principal Market is not the principal securities
exchange or trading market for such security, the last closing bid price or
last
trade price, respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price or
last
trade price, respectively, of such security in the over-the-counter market
on
the electronic bulletin board for such security as reported by Bloomberg, or,
if
no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the "pink
sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.).
If
the Closing Bid Price or the Closing Sale Price cannot be calculated for a
security on a particular date on any of the foregoing bases, the Closing Bid
Price or the Closing Sale Price, as the case may be, of such security on such
date shall be the fair market value as mutually determined by the Company and
the Holder. If the Company and the Holder are unable to agree upon the fair
market value of such security, then such dispute shall be resolved pursuant
to
Section 12. All such determinations to be appropriately adjusted for any stock
dividend, stock split, stock combination or other similar transaction during
the
applicable calculation period.
"Common
Stock"
means
(i) the Company's shares of Common Stock, $0.001 par value per share, and
(ii) any share capital into which such Common Stock shall have been changed
or any share capital resulting from a reclassification of such Common
Stock.
"Convertible
Securities"
means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for shares of Common Stock.
"Eligible
Market"
means
the Principal Market, the American Stock Exchange, The New York Stock Exchange,
Inc., the Nasdaq National Market or the Nasdaq Capital Market.
"Expiration
Date"
means
the date that is sixty months after the Issuance Date or, if such date falls
on
a day other than a Business Day or on which trading does not take place on
the
Principal Market (a "Holiday"),
the
next date that is not a Holiday.
"Fundamental
Transaction"
means
that the Company shall, directly or indirectly, in one or more related
transactions, (i) consolidate or merge with or into (whether or not the Company
is the surviving corporation) another Person, or (ii) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties or
assets of the Company to another Person, or (iii) allow another Person to make
a
purchase, tender or exchange offer that is accepted by such number of holders
of
outstanding shares of Common Stock resulting in such Person (together with
any
affiliates of such Person) holding more than 50% of the outstanding Common
Stock
of the Company following such purchase, tender or exchange offer, or (iv)
consummate a stock purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off or scheme
of
arrangement) with another Person resulting in such other Person (together with
any affiliates of such person) holding more than the 50% of the outstanding
Common Stock of the Company following such stock purchase agreement or other
business combination), or (v) reorganize, recapitalize or reclassify its Common
Stock.
18
"Options"
means
any rights, warrants or options to subscribe for or purchase shares of Common
Stock or Convertible Securities.
"Person"
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization, any other entity and
a
government or any department or agency thereof.
"Principal
Market"
means
the OTC Bulletin Board.
"Registration
Rights Agreement"
means
that certain registration rights agreement by and among the Company and the
Investors.
"Required
Holders"
means
the holders of the SPA Warrants representing at least a majority of shares
of
Common Stock underlying the SPA Warrants then outstanding.
"SPA
Securities"
means
the Common Stock issued pursuant to the Subscription Agreement.
IN
WITNESS WHEREOF,
the
Company has caused this Warrant to Purchase Common Stock to be duly executed
as
of the Issuance Date set out above.
By:
_______________________________
Name: Xxx
Crafts
Title: Chairman
& CEO
19
Exhibit
A to Warrant
EXERCISE
NOTICE
TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT
TO PURCHASE COMMON STOCK
The
undersigned holder hereby exercises the right to purchase _________________
of
the shares of Common Stock ("Warrant
Shares")
of
Better Biodiesel, Inc., a Colorado corporation (the "Company"),
evidenced by the attached Warrant to Purchase Common Stock (the "Warrant").
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.
1.
Form
of Exercise Price. The Holder intends that payment of the Exercise Price shall
be made as a "Cash
Exercise"
with
respect to _________________ Warrant Shares.
2.
Cashless Exercise. The
Holder elects to exercise the attached Warrant by means of the net exercise
provisions of Section 1(a) of the Warrant. ____________ (State “Yes” on this
line)
3.
Notwithstanding anything to the contrary contained herein, this Exercise Notice
shall constitute a representation by the Holder of the Warrant submitting this
Exercise Notice that, after giving effect to the exercise provided for in this
Exercise Notice, such Holder (together with its affiliates) will not have
beneficial ownership (together with the beneficial ownership of such Person's
affiliates) of a number of shares of Common Stock which exceeds the maximum
percentage of the total outstanding shares of Common Stock as determined
pursuant to the provisions of Section 1(e)(i) of the Warrant.
4.
Payment of Exercise Price. In the event that the holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the Warrant,
or payment on a cashless basis, equal to the sum of ________________
shares.
5.
Delivery of Warrant Shares. The Company shall deliver to the holder __________
Warrant Shares in accordance with the terms of the Warrant.
Date:
_____________________, ______
____________________________
Name
of
Registered Holder
By:
_____________________________
Name:
Title:
20
ACKNOWLEDGMENT
The
Company hereby acknowledges this Exercise Notice and hereby directs _________
to
issue the above indicated number of shares of Common Stock in accordance with
the Transfer Agent Instructions dated ______________ from the Company and
acknowledged and agreed to by
_____________________________________.
By:
____________________________________
Name:
Title:
21
