THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER THE 1933 ACT, OR AN OPINION OF COUNSEL,
SATISFACTORY TO THE ISSUER HEREOF, TO THE EFFECT THAT REGISTRATION IS NOT
REQUIRED UNDER THE 1933 ACT.
[FORM OF]
WARRANT TO PURCHASE
COMMON STOCK OF
PETROSEARCH ENERGY CORPORATION
Date of Issuance: _________________ Warrant No. ___
This certifies that, for value received, PETROSEARCH ENERGY
CORPORATION, a Nevada corporation (the "Company"), grants __________________ or
registered assigns (the "Registered Holder"), the right to subscribe for and
purchase from the Company, at the Exercise Price (as defined herein), from and
after 9:00 a.m. Texas time on the Exercise Commencement Date hereinafter defined
and to and including 5:00 p.m., Texas time on _________________ (the "Expiration
Date"), ___________________________________________________ (__________)
shares, as such number of shares may be adjusted from time to time as described
herein (the "Warrant Shares"), of the Company's common stock, par value $.001
per share (the "Common Stock"), subject to the provisions and upon the terms and
conditions herein set forth. The "Exercise Price" per share of Common Stock
shall be ___________________________ ($____) per share. THIS WARRANT IS GIVEN
IN REPLACEMENT AND SUBSTITUTION FOR A WARRANT ISSUED BY PETROSEARCH CORPORATION,
A TEXAS CORPORATION, PRIOR TO ITS 6.5 TO 1 REVERSE SPLIT AND ITS SUBSEQUENT
MERGER WITH THE COMPANY. THE NUMBER OF WARRANT SHARES AND THE EXERCISE PRICE IN
THIS WARRANT HAVE BEEN ADJUSTED TO GIVE EFFECT TO THE REVERSE SPLIT ACCORDINGLY.
SECTION 1. REGISTRATION. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the "Warrant
Records"), in the name of the Registered Holder. The Company may deem and treat
the Registered Holder as the absolute owner of this Warrant for the purpose of
any exercise hereof or any distribution to the Registered Holder, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
SECTION 2. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) Subject to Section 11 hereof, the Company shall register the
transfer of this Warrant, in whole or in part, upon records to be maintained by
the Company for that purpose, upon surrender of this Warrant, with the Form of
Assignment attached hereto completed and duly endorsed by the Registered Holder,
to the Company at the office specified in or pursuant to Section 3(b). Upon any
such registration of transfer, a new Warrant, in substantially the form of this
Warrant, evidencing the Common Stock purchase rights so transferred shall be
issued to the transferee and a new Warrant, in similar form, evidencing the
remaining Common Stock purchase rights not so transferred, if any, shall be
issued to the Registered Holder.
(b) This Warrant is exchangeable, upon the surrender hereof by the
Registered Holder at the office of the Company specified in or pursuant to
Section 3(b) hereof, for new Warrants, in substantially the form of this Warrant
evidencing, in the aggregate, the right to purchase the number of Warrant Shares
which may then be purchased hereunder, each of such new Warrants to be dated the
date of such exchange and to represent the right to purchase such number of
Warrant Shares as shall be designated by the Registered Holder at the time of
such surrender.
SECTION 3. DURATION AND EXERCISE OF THIS WARRANT.
(a) This Warrant shall be exercisable by the Registered Holder as
to the Warrant Shares at any time during the period commencing on the Exercise
Commencement Date and ending on the Expiration Date; provided, however, that
upon a "change of control," 100% of the Warrant Shares shall be immediately
exercisable. At 5:00 p.m., Texas time, on the Expiration Date, this Warrant, to
the extent not previously exercised, shall become void and of no further force
or effect.
(b) Subject to Sections 4, and 11(a) hereof, upon exercise or
surrender of this Warrant, with the Form of Election to Purchase attached hereto
completed and duly endorsed by the Registered Holder, to the Company and
delivered to the Company's designated brokerage firm for warrant exercise and
processing as described in the Warrant Exercise Policy on file at the Company
offices at 0000 Xxxxxxx Xxxxx, Xxxxx 000X, Xxxxxxx, Xxxxx 00000, Attention:
President, or at such other address as the Company may specify in writing to the
Registered Holder in its Warrant Exercise Policy, and upon payment of the
Exercise Price multiplied by up to the number of Warrant Shares then issuable
upon exercise of this Warrant in lawful money of the United States of America
(except as otherwise provided for in Section 3(c) hereof), all as specified by
the Registered Holder in the Form of Election to Purchase, the Company shall
promptly issue and cause to be delivered to or upon the written order of the
Registered Holder, and in such name or names as the Registered Holder may
designate, a certificate for the Warrant Shares issued upon such exercise. Any
person so designated in the Form of Election to Purchase, duly endorsed by the
Registered Holder, as the person to be named on the certificates for the Warrant
Shares, shall be deemed to have become holder of record of such Warrant Shares,
evidenced by such certificates, as of the Date of Exercise (as hereinafter
defined) of such Warrant.
(c) The Registered Holder may pay the applicable Exercise Price
pursuant to Section 3(b), at the option of the Registered Holder, either (i) in
cash or by cashier's or certified bank check payable to the Company in an amount
equal to the product of the Exercise Price multiplied by the number of Warrant
Shares being purchased upon such exercise (the "Aggregate Exercise Price"), or
(ii) by wire transfer of immediately available funds to the account which shall
be indicated in writing by the Company to the Registered Holder. In the event
that Registered Holder elects to exercise his Cashless Exercise rights under
this Warrant, then, in such event, Registered Holder shall deliver his Warrant
to the designated brokerage firm under the Company's Warrant Exercise Policy for
implementation by the brokerage firm of the exercise procedures set forth in the
Policy, as amended from time to time.
(d) The "Date of Exercise" of any Warrant means the date on which
the Company shall have received (i) this Warrant, with the Form of Election to
Purchase attached hereto appropriately completed and duly endorsed, and (ii)
payment of the Aggregate Exercise Price as provided herein.
(e) This Warrant shall be exercisable either as an entirety or,
from time to time, for part only of the number of Warrant Shares which are
issuable hereunder. If this Warrant shall have been exercised only in part, the
Company shall, at the time of delivery of the certificates for the Warrant
Shares issued pursuant to such exercise, deliver to the Registered Holder a new
Warrant evidencing the
2
rights to purchase the remaining Warrant Shares, which Warrant shall be
substantially in the form of this Warrant.
(f) Definition of Market Price. As used in this Warrant, the term
--------------------------
"Market Price" shall mean the average of the daily closing prices per share of
the Common Stock for the ten (10) consecutive trading days immediately preceding
the day as of which Market Price is being determined. The closing price for
each day shall be the last reported sale price or, in case no such sale takes
place on such day, the average of the reported closing bid and asked prices, in
either case on the New York Stock Exchange, or, if the Common Stock is not
listed or admitted to trading on the New York Stock Exchange, on the principal
national securities exchange on which the shares are listed or admitted to
trading, or, if the shares are not so listed or admitted to trading, the average
of the highest reported bid and lowest reported asked prices as furnished by the
National Association of Securities Dealers, Inc. (the "NASD") through NASDAQ or
through a similar organization if NASDAQ is no longer reporting such information
or as reported on the NASD's OTC Electronic Bulletin Board ("OTC"). If shares
of Common Stock are not listed or admitted to trading on any exchange or quoted
through NASDAQ or any similar organization or reported on OTC, the Market Price
shall be deemed to be the higher of (A) the book value of a share of the Common
Stock as determined by any firm of independent public accountants selected by
the Board of Directors of the Company and acceptable to the Registered Holder,
as of the end of the most recent fiscal quarter preceding the date as of which
the determination is to be made, or (B) the fair value thereof determined in
good faith by the Company's Board of Directors as expressed by a resolution of
such board as of a date which is within fifteen (15) days of the date as of
which the determination is to be made. The fees and expenses of any accounting
firm engaged pursuant to subclause (A) of this Section 3(f) shall be paid by the
Company.
SECTION 4. PAYMENT OF TAXES AND EXPENSES.
(a) The Company will pay all expenses and taxes (other than any
federal or state income tax or similar obligations of the Registered Holder) and
other governmental charges attributable to the preparation, execution, issuance
and delivery of this Warrant, any new Warrant and the Warrant Shares; provided,
however, that the Company shall not be required to pay any tax in respect of the
transfer of this Warrant or the Warrant Shares, or the issuance or delivery of
certificates for Warrant Shares upon the exercise of this Warrant, to a person
or entity other than a Registered Holder or an Affiliate (as hereinafter
defined) of such Registered Holder.
(b) An "Affiliate" of any person or entity means any other person
or entity directly or indirectly controlling, controlled by or under direct or
indirect common control with such person or entity.
SECTION 5. MUTILATED OR MISSING WARRANT CERTIFICATE. If this
Warrant shall be mutilated, lost, stolen or destroyed, upon request by the
Registered Holder, the Company will issue, in exchange for and upon cancellation
of the mutilated Warrant, or in substitution for the lost, stolen or destroyed
Warrant, a new Warrant, in substantially the form of this Warrant, of like
tenor, but, in the case of loss, theft or destruction, only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction of this Warrant and, if requested by the Company, indemnity also
reasonably satisfactory to it.
SECTION 6. RESERVATION, LISTING AND ISSUANCE OF WARRANT SHARES.
(a) The Company will at all times have authorized, and reserve and
keep available, free from preemptive rights, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon the exercise of the rights
represented by this Warrant, the number of Warrant Shares
3
deliverable upon exercise of this Warrant. The Company will, at its expense,
use it best efforts to cause such shares to be included in or listed on (subject
to issuance or notice of issuance of Warrant Shares) all markets or stock
exchanges in or on which the Common Stock is included or listed not later than
the date on which the Common Stock is first included or listed on any such
market or exchange and will thereafter maintain such inclusion or listing of all
shares of Common Stock from time to time issuable upon exercise of this Warrant.
(b) Before taking any action which could cause an adjustment
pursuant to Section 7 hereof reducing the Exercise Price below the par value of
the Warrant Shares, the Company will take any corporate action which may be
necessary in order that the Company may validly and legally issue at the
Exercise Price, as so adjusted, Warrant Shares that are fully paid and
non-assessable.
(c) The Company covenants that all Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be (i) duly authorized,
fully paid and nonassessable, and (ii) free from all taxes with respect to the
issuance thereof and from all liens, charges and security interests.
SECTION 7. ADJUSTMENT OF NUMBER OF WARRANT SHARES. The number of
Warrant Shares to be purchased upon exercise hereof is subject to change or
adjustment from time to time as hereinafter provided:
(a) Stock Dividends. In case the Company shall declare a dividend
---------------
or make any other distribution upon any security of the Company payable in
Common Stock or Convertible Securities, such issue of Common Stock or
Convertible Securities, as the case may be, shall be deemed to have been made
without consideration.
(b) Consideration for Stock. In case any shares of Common Stock
-------------------------
or Convertible Securities or any rights or options or warrants to purchase any
such Common Stock or Convertible Securities shall be issued or sold for cash,
the consideration received therefor shall be deemed to be the amount received by
the Company therefor, without deduction therefrom of any expenses incurred or
any underwriting commissions or concessions paid or allowed by the Company in
connection therewith. In case any shares of Common Stock or Convertible
Securities or any rights or options or warrants to purchase any such Common
Stock or Convertible Securities shall be issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such consideration, as
determined, in good faith and in the exercise of reasonable business judgment,
by the Board of Directors of the Company, without deduction of any expenses
incurred or any underwriting commissions or concessions paid or allowed by the
Company in connection therewith.
(c) Record Dates. In case the Company shall take a record of the
-------------
holders of Common Stock for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock or in Convertible
Securities, or (ii) to subscribe for or purchase Common Stock or in Convertible
Securities, then such record date shall be deemed to be the date of issue or
sale of the shares of Common Stock deemed to have been issued 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.
(d) Treasury Stock. The number of shares of Common Stock
---------------
outstanding at any given time shall include shares owned or held by or for the
account of the Company, and the disposition of any such shares so owned or held
shall not be considered an issue of Common Stock.
4
(e) Subdivisions or Combinations of Common Stock. In case the
------------------------------------------------
Company shall at any time subdivide the outstanding shares of Common Stock into
a greater number of shares, the Exercise Price in effect immediately prior to
such subdivision shall be proportionately decreased and the shares of Common
Stock underlying this Warrant immediately prior to such subdivision shall be
proportionately increased; and conversely, in case the outstanding shares of
Common Stock shall be combined into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination shall be proportionately
increased and the shares of Common Stock underlying this Warrant immediately
prior to such combination shall be proportionately decreased.
(f) Adjustments for Consolidation, Merger, Sale of Assets,
------------------------------------------------------------
Reorganization, etc. In case the Company (i) consolidates with or merges into
--------------------
any other corporation and is not the continuing or surviving corporation of such
consolidation of merger, or (ii) permits any other corporation to consolidate
with or merge into the Company and the Company is the continuing or surviving
corporation but, in connection with such consolidation or merger, the Common
Stock is changed into or exchanged for stock or other securities of any other
corporation or cash or any other assets, or (iii) transfers all or substantially
all of its properties and assets to any other corporation, or (iv) effects a
capital reorganization or reclassification of the capital stock of the Company
in such a way that holders of Common Stock shall be entitled to receive stock,
securities, cash and/or assets with respect to or in exchange for Common Stock,
then, and in each such case, proper provision shall be made so that, upon the
basis and upon the terms and in the manner provided in this subsection (f), the
Registered Holder, upon the exercise of this Warrant at any time after the
consummation of such consolidation, merger, transfer, reorganization or
reclassification, shall be entitled to receive (at the aggregate Exercise Price
in effect for all shares of Common Stock issuable upon such exercise immediately
prior to such consummation as adjusted to the time of such transaction), in lieu
of shares of Common Stock issuable upon such exercise prior to such
consummation, the stock and other securities, cash and/or assets to which such
holder would have been entitled upon such consummation if the Registered Holder
had so exercised this Warrant immediately prior thereto (subject to adjustments
subsequent to such corporate action as nearly equivalent as possible to the
adjustments provided for in this Section).
(g) Notice of Adjustment. Upon any adjustment of the Exercise
----------------------
Price, then and in each case the Company shall promptly deliver a notice to the
Registered Holder and either (i) a certificate of the chief financial officer of
the Company or (ii) upon the request of the Registered Holder, the opinion of a
firm of independent certified public accountants (which may be the regular
auditors of the Company) of recognized national standing selected by the Board
of Directors, which notice or opinion shall state the Exercise Price resulting
from such adjustment and the increase or decrease, if any, in the number of
shares purchasable at such price upon the exercise of this Warrant, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.
(h) Other Notices. In case at any time:
--------------
(i) the Company shall declare any cash dividend on its Common
Stock;
(ii) the Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than regular cash dividends) to
the holders of its Common Stock;
(iii) the Company shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of any class or
other rights;
(iv) the Company shall authorize the distribution to all
holders of its Common Stock of evidences of its indebtedness or assets (other
than cash dividends or cash distributions payable out of earnings or earned
surplus or dividends payable in Common Stock);
5
(v) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with another corporation (other than a subsidiary of the Company
in which the Company is the surviving or continuing corporation and no change
occurs in the Company's Common Stock), or sale of all or substantially all of
its assets to another corporation;
(vi) there shall be a voluntary or involuntary dissolution,
liquidation, bankruptcy, assignment for the benefit of creditors, or winding up
of the Company;
then, in any one or more of said cases the Company shall give written notice,
addressed to the Registered Holder at the address of such Registered Holder as
shown on the books of the Company, of (1) the date on which the books of the
Company shall close or a record shall be taken for such dividend, distribution
or subscription rights, or (2) the date (or, if not then known, a reasonable
approximation thereof by the Company) on which such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
bankruptcy, assignment for the benefit of creditors, winding up or other action,
as the case may be, shall take place. Such notice shall also specify (or, if not
then known, reasonably approximate) the date as of which the holders of Common
Stock of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, bankruptcy, assignment
for the benefit of creditors, winding up, or other action, as the case may be.
Such written notice shall be given at least thirty (30) days prior to the action
in question and not less than thirty (30) days prior to the record date or the
date on which the Company's transfer books are closed in respect thereto. Such
notice shall also state that the action in question or the record date is
subject to the effectiveness of a registration statement under the 1933 Act, or
to a favorable vote of stockholders, if either is required.
(i) Certain Events. If any event occurs as to which in the
---------------
reasonable opinion of the Registered Holder, in good faith, the other provisions
of this Section 7 are not strictly applicable but the lack of any adjustment
would not in the opinion of the Registered Holder fairly protect the Registered
Holder in accordance with the basic intent and principles of such provisions, or
if strictly applicable would not fairly protect the purchase rights of the
Registered Holder in accordance with the basic intent and principles of such
provisions, then the Registered Holder shall give written notice thereof to the
Company. If the Company and the Registered Holder cannot agree with respect to
an adjustment of the Exercise Price hereof within fifteen (15) days of the
delivery of such notice by the Registered Holder to the Company, then the
Company shall appoint a firm of independent certified public accountants (which
may be the regular auditors of the Company) of recognized national standing,
which shall give their opinion upon the adjustment, if any, on a basis
consistent with the basic intent and principles established in the other
provisions of this Section 7, necessary to preserve, without dilution, the
exercise rights of the Registered Holder. Upon receipt of such opinion, the
Company shall forthwith make the adjustments described therein. The cost of the
services performed by the firm of independent certified public accountants shall
be borne by the Company.
SECTION 8. CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the event that
the Company shall at any time prior to the exercise of this Warrant declare a
dividend (other than a dividend consisting solely of shares of Common Stock or a
cash dividend or distribution payable out of current or retained earnings) or
otherwise distribute to its stockholders any monies, assets, property, rights,
evidences of indebtedness, securities (other than shares of Common Stock),
whether issued by the Company or by another person or entity, or any other thing
of value, the Registered Holder shall thereafter be entitled, in addition to the
shares of Common Stock receivable upon the exercise of the Warrant, to receive,
upon the exercise of the Warrant, the same monies, property, assets, rights,
evidences of indebtedness, securities
6
or any other thing of value that the Registered Holder would have been entitled
to receive at the time of such dividend or distribution had the Registered
Holder been an owner of record of the shares of Common Stock into which the
Warrant is then being exercised as of the record date or other date of
determination for such dividend or distribution and an appropriate provision
(which provision may include without limitation, the establishment of an escrow
agreement in favor of the Registered Holder in which the portion of the dividend
or distribution attributable to such warrants is held) shall be made a part of
any such dividend or distribution. Notwithstanding any provision herein to the
contrary, no adjustment under this Section 8 shall be made with respect to any
cash dividend or distribution payable solely out of current or retained earnings
of the Company.
SECTION 9. NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. The
Registered Holder shall not be entitled to vote or be deemed the holder of
Common Stock or any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained herein be
construed to confer upon the holder of this Warrant, as such, the rights of a
stockholder of the Company or the right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or give or
withhold consent to any corporate action or to receive notice of meetings or
other actions affecting stockholders (except as provided herein), or to receive
dividends or subscription rights or otherwise, until the Date of Exercise shall
have occurred. No provision of this Warrant, in the absence of affirmative
action by the Registered Holder hereof to purchase shares of Common Stock, and
no mere enumeration herein of the rights and privileges of the Registered
Holder, shall give rise to any liability of such holder for the Exercise Price
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
SECTION 10. FRACTIONAL WARRANT SHARES. The Company shall not be
required to issue fractions of Warrant Shares upon exercise of the Warrant or to
distribute certificates which evidence fractional Warrant Shares. If any
fraction of a Warrant Share would, except for the provisions of this Section 10,
be issuable on the exercise of any Warrant (or specified portion thereof), the
Company shall pay to the Registered Holder an amount in cash equal to the Market
Price as of the Exercise Date, multiplied by such fraction.
SECTION 11. TRANSFER RESTRICTIONS; REGISTRATION OF THE WARRANT AND
WARRANT SHARES.
(a) Neither the Warrant nor the Warrant Shares have been
registered under the 1933 Act. The Registered Holder, by acceptance hereof,
represents that it is acquiring this Warrant to be issued to it for its own
account and not with a view to the distribution thereof, and agrees not to sell,
transfer, pledge or hypothecate this Warrant, any purchase rights evidenced
hereby or any Warrant Shares unless a registration statement is effective for
this Warrant or the Warrant Shares under the 1933 Act or in the opinion of such
Registered Holder's counsel reasonably satisfactory to the Company, a copy of
which opinion shall be delivered to the Company, such transaction is exempt from
the registration requirements of the 1933 Act.
(b) Subject to the provisions of the following paragraph of this
Section 11, each Certificate for Warrant Shares shall be stamped or otherwise
imprinted with a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE
7
REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE 1933 ACT, OR AN
OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER HEREOF, TO THE EFFECT
THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT.
(c) The restrictions and requirements set forth in the foregoing
paragraph shall apply with respect to Warrant Shares unless and until such
Warrant Shares are sold or otherwise transferred pursuant to an effective
registration statement under the 1933 Act or are otherwise no longer subject to
the restrictions of the 1933 Act, at which time the Company agrees to promptly
cause such restrictive legends to be removed and stop transfer restrictions
applicable to such Warrant Shares to be rescinded.
(d) The Company will use its best efforts to comply with the
reporting requirements of Section 13 and 15(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act") (whether or not it shall be required to do so
pursuant to such Sections) and will use its best efforts to comply with all
other public information reporting requirements of the Securities and Exchange
Commission (including, without limitation, Securities and Exchange Commission
("SEC") Rule 144 promulgated under the 0000 Xxx) from time to time in effect and
relating to the availability of an exemption from the 1933 Act for sale of
restricted securities. The Company also will cooperate with the Registered
Holder and with each holder of any Warrant Shares in supplying such information
as may be necessary for any such holders to complete and file any information
reporting forms presently or hereafter required by the SEC as a condition to the
availability of an exemption from the 1933 Act for the sale of restricted
securities.
SECTION 12. REGISTRATION RIGHTS.
--------------------
The Company covenants and agrees as follows:
(a) Definitions. For purposes of this Section 12:
-----------
(i) The term "1934 Act" means the Securities Exchange Act of
1934, as amended.
(ii) The term "Holder" means each of the persons who at the
time holds Registrable Securities or a warrant or warrants (including this
Warrant) to purchase Registrable Securities.
(iii) The term "Public Corporation" means a corporation which
has a class of equity securities registered pursuant to Section 12 of the 1934
Act, or which is required to file periodic reports pursuant to Section 15(d) of
the 1934 Act.
(iv) The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the 1933 Act, and such
registration statement or document becoming effective.
(v) The term "Registrable Securities" means (i) the Warrant
Shares, and (ii) any Common Stock issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
the Warrant Shares; provided, however, that any such securities shall cease to
be Registrable Securities when (i) one or more registration statements with
respect to the sale of such securities shall have become effective under the
1933 Act and all such securities shall have been disposed of in accordance with
the plan of distribution set forth therein; (ii) such securities shall have been
disposed of in accordance with SEC Rule 144 promulgated under the 1933 Act, or
any successor rule or regulation thereto, or any statute hereafter adopted to
replace or to establish the exemption that is now covered by said Rule 144
("Rule 144"); (iii) such securities may be sold by a Holder in a transaction
pursuant to the provisions of Rule 144 provided that such rule shall be at such
time available for the sale
8
of all such securities which the Holder at such time desires to sell; or (iv)
such securities may otherwise be sold to the public in a transaction not
requiring registration under the 1933 Act.
(vi) The term "Registration Expenses" means all registration,
qualification and filing fees, printing expenses, escrow fees and blue sky fees,
fees and disbursements of counsel for the Company and of the Company's
independent certified public accountants, in each case incident to or required
by the registration under this Warrant, and any other fees and expenses of the
registration under this Warrant which are not Selling Expenses.
(vii) The term "Selling Expenses" means all underwriting
discounts, selling commissions and stock transfer taxes applicable to the
securities registered by the Holders and all fees and disbursements of counsel
for any Holder.
(viii) All other capitalized terms used in this Section that
are not defined herein shall have the meaning otherwise given in this Warrant.
(b) Reserved.
---------
(c) Piggyback Registration Rights.
-------------------------------
(i) If, at any time or from time to time, the Company shall
determine to register any shares of its Common Stock, either for its own account
or for the account of a security holder or holders, other than (A) a
registration relating solely to stock option or employee benefit plans or (B) a
registration relating solely to a transaction covered by Rule 145 under the 1933
Act, the Company will (X) promptly give the Holders written notice thereof, and
(Y) include in such registration (and any related qualification under blue sky
or other state securities laws), and in any underwriting involved therein, all
of the Registrable Securities specified in a written request or requests made by
a Holder or Holders within twenty (20) days after receipt of such written notice
from the Company.
(ii) If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise the Holder as part of the written notice given pursuant to Section
12(c)(i). In such event, the right of each Holder to registration pursuant to
this Section 12(c) shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of the Registrable Securities owned by such
Holder in the underwriting to the extent provided under this Section 12(c). If
a Holder proposes to distribute its Registrable Securities through such
underwriting it shall (together with the Company and any other holders of
securities of the Company distributing their securities through such
underwriting) enter into an underwriting agreement with the managing or lead
managing underwriter selected by the Company in the form customarily used by
such underwriter with such changes thereto as the parties thereto shall agree.
Notwithstanding any other provision of this Section 12(c), if the managing or
lead managing underwriter determines that market factors require that the number
of Registrable Securities and other securities requested to be included in the
registration be limited, the managing or lead managing underwriter may reduce
the number of Registrable Securities and securities of any other holders of
securities to be included in the registration. If the registration includes an
underwritten primary registration on behalf of the Company, the reduction shall
be taken (i) first from and to the extent of the securities requested to be
included in the such registration by the Holders and the holders of any other
securities pro rata according to the number of securities requested by the
--- ----
Holders and such holders to be included in the registration, and (ii) thereafter
from the securities to be registered on behalf of the Company. If the
registration consists only of any underwritten secondary registration on behalf
of holders of securities of the Company, the reduction shall be taken (i) first
from and to the extent of the securities requested to be included in the such
registration by the Holders and any other holders of securities included in the
registration other than pursuant to demand registration rights pro rata
--- ----
according to the number of securities requested by the Holders and such other
holders to be included in the registration and (ii) thereafter from securities,
if any, to be registered on behalf of holders of securities included in the
registration pursuant to demand registration rights. The Company shall advise
any Holders and other holders participating in such underwriting as to
9
any such limitation and the number of shares that may be included in the
registration and underwriting. If a Holder disapproves of the terms of such
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company and the managing or lead underwriter. Any Registrable Securities
excluded or withdrawn from such underwriting shall be withdrawn from the
registration.
(iii) The Company may withdraw a registration for which
registration rights have been exercised pursuant to this Section 12(c) at any
time prior to the time it becomes effective.
(d) Expenses of Registration. All Registration Expenses incurred
-------------------------
in connection with a registration pursuant to this Section 12 shall be borne by
the Company. All Selling Expenses relating to the Registrable Securities
registered on behalf of a Holder shall be borne by such Holder.
(e) Registration Procedures.
------------------------
(i) In connection with the registration of Registrable
Securities pursuant to this Section 12, the Company shall as expeditiously as is
reasonable:
(A) prepare and file with the SEC on any appropriate
form a registration statement with respect to such Registrable Securities and
use its best efforts to cause such registration statement to become effective;
(B) prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective and to comply with the provisions of
the 1933 Act with respect to the disposition of all Registrable Securities and
other securities covered by such registration statement until the Holder or
Holders have completed the distribution described in such registration
statement;
(C) furnish to each seller of such Registrable
Securities such number of conformed copies of such registration statement and of
each such amendment and supplement thereto (at least one of which shall include
all exhibits), such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus and any summary
prospectus), in conformity with the requirements of the 1933 Act, such documents
incorporated by reference in such registration statement or prospectus, and such
other documents, as such seller may reasonably request in order to facilitate
the sale or disposition of such Registrable Securities;
(D) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities or "blue sky" laws of such jurisdictions
as the underwriter shall reasonably request, and do any and all other acts and
things as may be reasonably necessary to consummate the disposition in such
jurisdictions of the Registrable Securities covered by such registration
statement, except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified, or to subject itself to taxation in respect of
doing business in any such jurisdiction, or to consent to general service of
process in any such jurisdiction.
(E) immediately notify each seller of Registrable
Securities, at any time when a prospectus relating thereto is required to be
delivered under the 1933 Act, of the happening of any event as a result of which
the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing or if it is
necessary, in the opinion of counsel to the Company, to amend or supplement such
prospectus to comply with law, and at the request of any such seller prepare and
furnish to any such seller a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances
10
then existing and shall otherwise comply in all material respects with law and
so that such prospectus, as amended or supplemented, will comply with law.
(F) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve (12) months, beginning with the first month of the
first fiscal quarter after the effective date of such registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
1933 Act;
(G) use its best efforts to list such securities on each
securities exchange or over-the-counter market on which shares of Common Stock
are then listed, if such securities are not already so listed and if such
listing is then permitted under the rules of such exchange and, if shares of
Common Stock are not then listed on a securities exchange or over- the-counter
market, to use is best efforts to cause such securities to be listed on such
securities exchange or over-the-counter market as the managing or lead managing
underwriter shall reasonably request;
(H) use its best efforts to provide a transfer agent and
registrar for such Registrable Securities not later than the effective date of
such registration statement; and
(I) issue to any underwriter to which any holder of
Registrable Securities may sell such Registrable Securities in connection with
any such registration (and to any direct or indirect transferee of any such
underwriter) certificates evidencing shares of Common Stock without restrictive
legends.
(ii) If requested by the managing or lead managing
underwriter for any underwritten offering of Registrable Securities on behalf of
a Holder or Holders of Registrable Securities, the Company will enter into an
underwriting agreement with the underwriters of such offering, such agreement to
contain such representations and warranties by the Company and each such Holder
and such other terms and conditions as are contained in underwriting agreements
customarily used by such managing or lead managing underwriter with such changes
as the parties thereto shall agree, including, without limitation, provisions
relating to indemnification and contribution in lieu thereof.
(iii) The Holder or Holders of Registrable Securities
included in any registration shall furnish to the Company such information
regarding such Holder or Holders, the Registrable Securities held by them and
the distribution proposed by such Holder or Holders as the Company may from time
to time reasonably request and as shall be reasonably required in connection
with any registration, qualification or compliance referred to in this
Agreement.
(iv) The Holder or Holders of Registrable Securities included
in any registration shall, upon request by the Company and the managing or lead
managing underwriter, execute and deliver custodian agreements and powers of
attorney in form and substance reasonably satisfactory to the Company and such
Holder or Holders and as shall be reasonably necessary to consummate the
offering.
(f) Indemnification. (i) The Company will indemnify each Holder
---------------
with respect to which a registration has been effected pursuant to this Warrant,
and each underwriter, if any, and each person who controls any underwriter
within the meaning of Section 15 of the 1933 Act, against any and all losses,
claims, damages, liabilities or expenses (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement or prospectus, or any amendment or supplement thereto, incident to any
such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
in which they were made, not misleading, or any violation by the Company of the
1933 Act or any rule or regulation promulgated under the 1933 Act applicable to
the Company in connection with any such registration, and the Company will
reimburse each such Holder, each such underwriter and
11
each person who controls any such underwriter, for any legal and other expenses
reasonably incurred, as such expenses are incurred, in connection with
investigating, preparing or defending any such claims, loss, damage, liability
or action; provided, however, that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder or underwriter and stated to be specifically for use therein.
(ii) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration is being
effected, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the 1933 Act and each other such holder of securities
included in the registration against any and all losses, claims, damages,
liabilities and expenses (or actions in respect thereof), arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement or prospectus, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statement therein, in the light of the circumstances
under which they were made, not misleading, and will reimburse the Company, such
holders, underwriters or control persons for any legal or any other expenses
reasonably incurred, as such expenses are incurred, in connection with
investigating or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement or prospectus in reliance upon and in conformity with
written information furnished to the Company by such Holder. Notwithstanding
the foregoing, the liability of each Holder under this Section 12(f) shall be
limited to an amount equal to the aggregate proceeds received by such Holder
from the sale of Registrable Securities hereunder, unless such liability arises
out of or is based on willful conduct by such Holder.
(iii) Each party entitled to indemnification under this
Section 12 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claims or any litigation resulting therefrom; provided, however, that
counsel for the Indemnifying Party, who shall conduct the defense of such claim
or litigation, shall be approved by the Indemnified Party (which approval shall
not be unreasonably withheld), and the Indemnified Party may participate in such
defense at such Indemnified Party's expense; provided, however, that the failure
of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action. Notwithstanding the foregoing, the Indemnifying Party shall
not be entitled to assume the defense for matters as to which there is, in the
opinion of counsel to the Indemnifying Party, a conflict of interest or separate
and different defenses. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and the litigation resulting therefrom.
(g) Contribution.
------------
(i) If the indemnification provided for in Section 12(f)
hereof is unavailable to the Indemnified Parties in respect of any losses,
claims, damages, liabilities or expenses (or actions in respect thereof)
referred to therein, then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of
12
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and the Indemnified Party on the other in
connection with the statement or omission which resulted in such losses, claims,
damages, liabilities or expenses (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, whether the untrue statement (or alleged
untrue statement), of a material fact or the omission (or alleged omission) to
state a material fact relates to information supplied by the Indemnifying Party
or the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and each Holder agree that it would not be just and equitable if
contribution pursuant to this Section 12(g) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above. The amount paid or payable by
an Indemnified Party as a result of the losses, claims, damages, liabilities or
expenses (or actions in respect thereof) referred to above in this Section shall
be deemed to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such action
or claim.
(ii) Notwithstanding anything to the contrary contained
herein, the obligation of each Holder to contribute pursuant to this Section
12(g) is several and not joint and no selling Holder shall be required to
contribute any amount in excess of the amount by which the total price at which
the Registrable Securities of such Holder were offered to the public exceeds the
amount of any damages which such selling Holder has otherwise been required to
pay by reason of such untrue statement (or alleged untrue statement) or omission
(or alleged omission).
(iii) No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 0000 Xxx) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(h) 1934 Act Registration. The Company covenants and agrees
-----------------------
that upon the Company becoming a Public Corporation, if ever, and until such
time as there shall be no Registrable Securities outstanding :
(i) it will, if required by law, maintain an effective
registration statement (containing such information and documents as the SEC
shall specify) with respect to the Common Stock under Section 12(g) of the 1934
Act and will file in a timely manner such information, documents and reports as
the SEC may require or prescribe for companies whose stock has been registered
pursuant to said Section 12(g);
(ii) it will, if a registration statement with respect to the
Common Stock under Section 12(b) or Section 12(g) of the 1934 Act is effective,
make whatever filings with the SEC or otherwise make generally available to the
public such financial and other information as may be necessary in order to
enable the Holders to sell shares of Common Stock pursuant to the provisions of
Rule 144;
(iii) it will, if no longer required to file reports pursuant
to Section 12 (g) of the 1934 Act, upon the request of the Registered Holder,
make publicly available the information specified in subparagraph (c)(2) of Rule
144, and will take such further action as any Holder may reasonably request, all
to the extent required from time to time to enable such Holder to sell
Registrable Securities without registration under the 1933 Act within the
limitation of the exemptions provided by Rule 144 or any similar rule or
regulation hereafter adopted by the SEC; and
(iv) upon the request of any Holder, it will deliver to
such Holder a written statement as to whether it has complied with the
requirements of this Section 12(h).
The Company represents and warrants that such registration statement or any
information, documents or report filed with the SEC in connection therewith or
any information so made public shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
13
therein or necessary in order to make the statements contained therein not
misleading. The Company agrees to indemnify and hold harmless (or to the extent
the same is not enforceable, make contribution to) the Holders, their partners,
advisory committee members, officers, directors and employees acting for any
Holder in connection with any offering or sale by such Holder of Registrable
Securities or any person, firm or corporation controlling (within the meaning of
either Section 15 of the 1933 Act or Section 20 of the 1934 Act) such Holder
from and against any and all losses, claims, damages, liabilities or expenses
(or actions in respect thereof) arising out of or resulting from any breach of
the foregoing representation or warranty, all on terms and conditions comparable
to those set forth in Section 12(f); provided, however, that the Company shall
be given written notice and an opportunity to assume on terms and conditions
comparable to those set forth in Section 12(f) the defense thereof.
SECTION 13. NOTICES. All notices, requests, demands and other
communications relating to this Warrant shall be in writing and shall be deemed
to have been duly given if delivered personally or sent by United States
certified or registered first-class mail, postage prepaid, return receipt
requested, to the parties hereto at the following addresses or at such other
address as any party hereto shall hereafter specify by notice to the other party
hereto:
(a) If to the Registered Holder of this Warrant or the holder of
the Warrant Shares, addressed to the address of such Registered Holder or holder
as set forth on books of the Company or otherwise furnished by the Registered
Holder or holder to the Company.
(b) If to the Company, addressed to:
Petrosearch Energy Corporation
0000 Xxxxxxx Xxxxx, Xxxxx 000X
Xxxxxxx, Xxxxx 00000
Attn: Xxxxx Xxxxxxx
SECTION 14 BINDING EFFECT. This Warrant shall be binding upon and
inure to the sole and exclusive benefit of the Company, its successors and
assigns, and the holder or holders from time to time of this Warrant and the
Warrant Shares.
SECTION 15 SURVIVAL OF RIGHTS AND DUTIES. This Warrant shall
terminate and be of no further force and effect on the earlier of (i) 5:00 p.m.,
Texas time, on the Expiration Date and (ii) the date on which this Warrant and
all purchase rights evidenced hereby have been exercised, except that the
provisions of Sections 4, 6(c) 11 and 12 hereof shall continue in full force and
effect after such termination date.
SECTION 16 GOVERNING LAW. This Warrant shall be construed in
accordance with and governed by the laws of the State of Nevada.
SECTION 17 SECTION HEADINGS. The Section headings in this Warrant
are for purposes of convenience only and shall not constitute a part hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
under its corporate seal by its officers thereunto duly authorized as of the
date hereof.
SIGNATURES APPEAR ON FOLLOWING PAGE
14
PETROSEARCH ENERGY CORPORATION
By: _________________________________________
Xxxxxxx X. Xxxx, President and CEO
By: _________________________________________
Xxxxx Xxxxxxx, Vice President and CFO
15
FORM OF ELECTION TO PURCHASE
(To Be Executed Upon Exercise of this Warrant)
To Petrosearch Energy Corporation:
The undersigned, the record holder of this Warrant (Warrant No.
_____), hereby irrevocably elects to exercise the right, represented by this
Warrant, to purchase ___________ of the Warrant Shares and herewith either (xxxx
only one of the following boxes):
[_] Tenders payment for such Warrant Shares to the order of
Petrosearch Energy Corporation of $_________ representing the full purchase
price for such shares at the price per share provided for in such Warrant and
the delivery of any applicable taxes payable by the undersigned pursuant to such
Warrant.
[_] In lieu of paying the purchase price as provided in the preceding
paragraph, the undersigned elects to make a cashless exercise pursuant to
Section 3(c) of the attached Warrant.
The undersigned requests that certificates for such shares be issued
in the name of:
_______________________________
_______________________________
_______________________________
_______________________________ ___________________________________________
(Please print name and address) Social Security or Tax Identification No.
In the event that not all of the purchase rights represented by the
Warrant are exercised, a new Warrant, substantially identical to the attached
Warrant, representing the rights formerly represented by the attached Warrant
which have not been exercised, shall be issued in the name of and delivered to:
_______________________________
_______________________________
_______________________________ ___________________________________________
(Please print name and address) Social Security or Tax Identification No.
Dated: ________________ Name of Holder (Print):
By: __________________________________
(Name): ______________________________
(Title): _____________________________
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, __________________ hereby sells, assigns and
transfers to each assignee set forth below all of the rights of the undersigned
under the attached Warrant (Warrant No. 001) with respect to the number of
shares of Common Stock covered thereby set forth opposite the name of such
assignee unto:
Name of Assignee Address Number of Shares of
---------------- ------- Of Common Stock
---------------
If the total of said purchase rights represented by the Warrant shall
not be assigned, the undersigned requests that a new Warrant Certificate
evidencing the purchase rights not so assigned be issued in the name of and
delivered to the undersigned.
Dated: __________________ Name of Holder (Print): _____________________
_____________________________________________
(signature)
