Contract
Exhibit
10.37
THIS
WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR
SALE,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT
TO (A)
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS, OR (B) AN EXEMPTION THEREFROM AND, IF REQUESTED BY
THE
COMPANY, THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO THE COMPANY TO THE EFFECT THAT THE TRANSFER IS EXEMPT FROM THE REGISTRATION
PROVISIONS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS.
WARRANT
TO PURCHASE COMMON STOCK
OF
TEKOIL
& GAS CORPORATION
This
Warrant is issued to Xxxxxxx, Xxxxx & Co., or its registered assigns (the
“Holder”), by TEKOIL & GAS CORPORATION, a Delaware corporation (the
“Company”), on May 11, 2007 (the “Warrant Issue Date”). This Warrant is issued
pursuant to the terms of a certain Credit and Guaranty Agreement dated of even
date herewith (the “Credit Agreement”) in connection with a credit facility in
favor of a subsidiary of the Company provided by an affiliate of the Holder.
Capitalized terms used herein, but not otherwise defined, shall have the meaning
ascribed to them in the Credit Agreement.
1. Number
of Shares Subject to Warrant; Definition of Certain Terms.
Subject
to the terms and conditions hereinafter set forth, the Holder is entitled,
upon
surrender of this Warrant at the principal office of the Company, to purchase
from the Company, at a price per share equal to the Exercise Price (as defined
in Section 2 below), the Warrant Shares.
For
purposes of this Warrant:
(A) “Common
Stock” shall mean the Company’s common stock, $0.000001 par value, and shall
include: (i) in case of any reorganization, reclassification,
consolidation, merger, distribution, securities exchange or sale or conveyance
of assets, the securities or other property into or for which shares of such
common stock are converted or exchanged, and (ii) any other securities or
other property into or for which shares of such common stock may be converted
or
exchanged.
(B) “Convertible
Securities” shall mean evidences of indebtedness, shares of stock, interests or
other securities (other than Options) that are convertible into or exercisable
or exchangeable for, with or without payment of additional consideration, Common
Stock, either immediately or upon a specified date or the happening of a
specified event.
(C) “Fair
Market Value” of securities or other property shall mean (i) in the case of
securities that are traded on a national securities exchange, an amount per
share equal to the average of the high and low reported sale prices per share
of
such securities on the principal national securities exchange on which such
securities are traded, on each trading day in the seven-day period immediately
prior to the date as of which Fair Market Value is being determined or (ii)
in
the case of all securities or property not covered by clause (i) above, the
fair
market value of such securities or other property determined by the Board of
Directors of the Company in good faith, unless the Holder requests that an
independent appraisal of such securities or other property be obtained, in
which
case the fair market value shall be determined by a qualified, nationally
recognized, independent appraiser (the “Appraiser) selected by the Company and
acceptable to the Holder (such approval by the Holder not to be unreasonably
withheld or delayed) experienced in appraising securities or other property
similar to that with respect to which the Fair Market Value is to be determined.
The Company shall make available all information reasonably necessary to allow
the Appraiser to perform the appraisal and shall instruct the Appraiser to
use
commercially reasonable efforts to complete the appraisal and to provide the
Company and the Holder a written determination of the Fair Market Value within
twenty (20) days of the date as of which Fair Market Value is to be determined
hereunder. All fees and expenses of the Appraiser will be borne by the Company;
provided, however, that if the fair market value of such securities of other
property as determined by the Appraiser is not more than 10% more or less than
the fair market value determined by the Company’s Board of Directors, then the
fees and expenses of the Appraiser will be borne by the Holder (or reimbursed
to
the Company by the Holder to the extent previously paid by the
Company).
(C) “Fully
Diluted Basis” means that all outstanding Options and Convertible Securities
have been treated for computation purposes as if they have been exercised,
converted or exchanged for or into the maximum number of shares of Common Stock
for which or into which such Options and Convertible Securities may be
exercised, converted or exchanged as of the time of such
computation.
(D) “Options”
shall mean any options, warrants or other rights to subscribe for or to purchase
Common Stock or Convertible Securities.
(E) “Warrant
Shares” shall mean 900,000 shares of Common Stock, subject to adjustment as
described in Section 7 below.
2. Exercise
Price.
The per
share purchase price for the Warrant Shares shall be $0.50 (the “Exercise
Price”). The Exercise Price shall be subject to adjustment pursuant to Section 7
hereof.
3. Exercise
Period.
Except
as otherwise provided for herein, this Warrant shall be exercisable, in whole
or
in part, at any time and from time to time from and after the date hereof and
before or on May 11, 2012 (the “Expiration Date”). After the Expiration Date,
this Warrant shall be void and of no further force and effect, except as
provided in Section 13 hereof. Whether or not surrendered to the Company by
the
Holder, this Warrant shall be deemed canceled upon the expiration
hereof.
4. Method
of Exercise.
(a) While
this Warrant remains outstanding and exercisable in accordance with Section
3
hereof, the purchase rights hereby represented may be exercised in whole or
in
part, at the election of the Holder, by the tender of the Notice of Exercise
in
substantially the form attached hereto as Exhibit
A
and the
surrender of this Warrant at the principal office of the Company and by the
payment to the Company in cash, by check, cancellation of indebtedness or other
form of payment acceptable to the Company, of an amount equal to the then
applicable Exercise Price multiplied by the number of shares of Common Stock
then being purchased.
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(b) Notwithstanding
any provisions herein to the contrary, if the Fair Market Value of one share
of
Common Stock is greater than the Exercise Price (at the date of calculation
as
set forth below), in lieu of exercising this Warrant for payment of the
aggregate Exercise Price as provided above, the Holder may elect a net issue
exercise of this Warrant (or portion thereof being exercised) by surrender
of
this Warrant at the principal office of the Company together with the duly
executed Notice of Exercise, in which event the Company shall issue to the
Holder, without payment of any additional consideration therefore, a number
of
shares of Common Stock computed in accordance with the following formula:
X
= Y ((A
- B) / A)
WHERE:
X
= the
number of shares of Common Stock to be issued to the Holder pursuant to this
Section 4(b), rounded to the nearest whole number of shares;
Y
= the
number of shares of Common Stock with respect to which this Warrant is being
exercised;
A
= the
Fair Market Value of one share of Common Stock (at the date of such
calculation); and
B
= the
Exercise Price.
(c)
If this
Warrant is exercised only in part, the Company shall, upon surrender of this
Warrant, execute and deliver to the Holder a new Warrant evidencing the rights
of the Holder to purchase the balance of the Warrant Shares issuable hereunder
and otherwise identical to this Warrant.
5. Certificates
for Shares.
Upon
the exercise of the purchase rights evidenced by this Warrant, one or more
certificates for the number of shares of Common Stock so purchased shall be
issued as soon as practicable thereafter (with appropriate restrictive legends,
as applicable).
6. Issuance
of Shares.
The
Company hereby covenants that it will, at all times while this Warrant remains
outstanding, have authorized and duly and validly reserved for issuance a
sufficient number of shares of Common Stock to provide for the exercise of
this
Warrant in full. The Company represents, warrants and covenants that the Warrant
Shares, when issued pursuant to the exercise of this Warrant, will be duly
and
validly issued, fully paid and nonassessable and free from all taxes, liens,
and
charges with respect to the issuance thereof. The Company shall not take any
action that would cause the Exercise Price to be less than the par value of
the
Common Stock. The Warrant Shares issued hereunder shall have the same rights
and
obligations pertaining to the other shares of Common Stock issued previously
or
hereafter by the Company.
7. Adjustment
of Exercise Price and Number of Shares.
The
number of and kind of securities purchasable upon exercise of this Warrant
and
the Exercise Price shall be subject to adjustment from time to time as
follows:
(a) Subdivisions,
Combinations and Other Issuances.
If the
Company shall at any time prior to the exercise in full or expiration of this
Warrant subdivide its Common Stock, by split-up or otherwise, or combine its
Common Stock, or issue additional Common Stock as a dividend with respect to
any
of its Common Stock, the number of Warrant Shares shall forthwith be
proportionately increased in the case of a subdivision or stock dividend, or
proportionately decreased in the case of a combination. Appropriate adjustments
shall also be made to the Exercise Price, provided that the aggregate Exercise
Price payable hereunder for the total number of Warrant Shares purchasable
under
this Warrant (as adjusted) shall remain the same. Any adjustment under this
Section
7(a)
shall
become effective at the close of business on the date the subdivision or
combination becomes effective, or as of the record date of such dividend, or
in
the event that no record date is fixed, upon the making of such
dividend.
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(b) Reclassification,
Reorganization, Merger, Consolidation, Etc..
In the
event of any corporate reclassification, capital reorganization, merger,
consolidation, sale or conveyance by the Company of all or substantially all
of
its assets or property to another person, spin-off or change in the Common
Stock
of the Company (other than as a result of a subdivision, combination, or
dividend provided for in Section
7(a)
above),
then, as a condition of such event, lawful provision shall be made, and duly
executed documents evidencing the same from the Company or its successor shall
be delivered to the Holder, so that the Holder shall have the right at any
time
prior to the expiration of this Warrant to purchase, at a total price equal
to
that payable upon the exercise of this Warrant, the kind and amount of shares
of
stock and/or other securities and property receivable in connection with such
event by a holder of the same number of shares for which this Warrant could
have
been exercised immediately prior to such event. In any such case appropriate
provisions shall be made with respect to the rights and interest of the Holder
so that the provisions hereof shall thereafter be applicable with respect to
any
shares of stock or other securities and property deliverable upon exercise
hereof, and appropriate adjustments shall be made to the Exercise Price,
provided that the aggregate exercise price payable hereunder for the total
number of shares of Common Stock purchasable under this Warrant (as adjusted)
shall remain the same.
(c) Issuance
of Additional Shares of Common Stock.
(i) General.
If, at
any time after the date of this Warrant, the Company shall issue or sell (or,
in
accordance with subsection (c)(ii) of this Section 7, shall be deemed to
have issued or sold) any shares of Common Stock (other than any issuance for
which an adjustment is made pursuant to subsection (a), (b) or (d) of this
Section 7) without consideration or for a consideration per share of Common
Stock less than the Exercise Price determined immediately before the date of
such issuance or sale, then, effective immediately upon such issuance or sale
(or deemed issuance or sale), the Exercise Price shall
be
reduced to a price determined in accordance with the following
formula:
EP2
=
EP1
*
(A + B)
÷ (A + C).
For
purposes of the foregoing formula, the following definitions shall apply:
(1) “EP2”
shall
mean the Exercise Price in effect immediately after such issuance or sale of
shares of Common Stock;
(2) “EP1”
shall
mean the Exercise Price in effect immediately prior to such issuance or sale
of
shares of Common Stock;
(3) “A”
shall
mean the number of shares of Common Stock outstanding on a Fully Diluted Basis
immediately prior to such issuance or sale of shares of Common
Stock;
(4) “B”
shall
mean the number of shares of Common Stock that would have been issued (or deemed
issued) if such shares of Common Stock had been issued (or deemed issued) at
a
price per share equal to EP1
(determined by dividing the aggregate consideration received or deemed received
by the Company in respect of such issue by EP1);
and
(5) “C”
shall
mean the number of shares of Common Stock issued (or deemed issued) in such
transaction.
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(ii) Issuance
of Options or Convertible Securities.
The
issuance or sale of Options or Convertible Securities shall be deemed, in
accordance with this subsection (c)(ii), to be the issuance of shares of
Common Stock.
(1) Issuance
of Options.
If the
Company in any manner issues or grants any Options, then the total maximum
number of shares of Common Stock issuable upon the exercise of such Options
(or
upon conversion or exchange of the total maximum amount of Convertible
Securities issuable upon the exercise of such Options) shall be deemed, for
purposes of subsection (c)(i) of this Section 7, to be outstanding and to
have been issued and sold by the Company on the date of issuance or grant of
such Options. For purposes of subsection (c)(i) of this Section 7, the
shares of Common Stock issuable upon exercise of Options or upon conversion
or
exchange of Convertible Securities issuable upon exercise of Options for
Convertible Securities shall be deemed to have been issued and sold at a price
per share equal to (A) the sum of (x) the total amount, if any,
received or receivable by the Company as consideration for the issuance or
granting of such Options plus
(y) the minimum aggregate amount of additional consideration payable to the
Company upon the exercise of all such Options plus
(z) in the case of such Options for Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon issuance or sale of such Convertible Securities and the conversion or
exchange thereof divided
by
(B) the total maximum number of shares of Common Stock issuable upon
exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options.
(2) Issuance
of Convertible Securities.
If the
Company in any manner issues or sells any Convertible Securities, then the
maximum number of shares of Common Stock issuable upon the conversion or
exchange of such Convertible Securities shall be deemed, for purposes of
subsection (c)(i) of this Section 7, to be outstanding and to have been
issued and sold by the Company on the date of issuance or sale of such
Convertible Securities. For purposes of subsection (c)(i) of this
Section 7, the shares of Common Stock issuable upon conversion or exchange
of Convertible Securities shall be deemed to have been issued and sold at a
price per share equal to (A) the sum of (x) the total amount received
or receivable by the Company as consideration for the issuance or sale of such
Convertible Securities plus
(y) the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof divided
by
(B) the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities.
(3) Superseding
Adjustment.
To the
extent any Warrants have not been exercised, if at any time after any adjustment
of the Exercise Price shall have been made pursuant to subsection (c)(i) of
this
Section 7 as a result of the issuance of Options or Convertible Securities,
or after any new adjustment of the Exercise Price shall have been made pursuant
to this paragraph (3) (each of the foregoing, a “previous
adjustment”):
a. such
Options or the right of conversion or exchange of such Convertible Securities
shall expire, or be terminated or surrendered, and all or a portion of such
Options or the right of conversion or exchange with respect to all or a portion
of such Convertible Securities, as the case may be, shall not have been
exercised or treated as having been exercised or otherwise canceled or acquired
by the Company in connection with any settlement, including any cash settlement,
of such Options or the rights of conversion or exchange of such Convertible
Securities;
b. there
has
been any change in the number of shares of Common Stock issuable upon the
exercise of such Options or upon the conversion or exchange of such Convertible
Securities (including as a result of a change in the number of Convertible
Securities issuable upon the exercise of such Options or the operation of
antidilution provisions applicable thereto); or
-5-
c. the
consideration per share of Common Stock for which shares of Common Stock are
issuable upon the exercise of such Options or upon the conversion or exchange
of
such Convertible Securities shall be changed;
then
the
previous adjustment shall be rescinded and annulled and the shares of Common
Stock which were deemed to have been issued and that gave rise to the previous
adjustment shall no longer be deemed to have been issued. Thereupon, a
recomputation shall be made of the adjustment pursuant to this subsection
(c)(ii), if any, of the Exercise Price as a consequence of such Options or
Convertible Securities on the basis of:
d. treating
the number of shares of Common Stock, if, any, theretofore actually issued
or
issuable pursuant to the previous exercise of such Options or such right of
conversion or exchange (including Options or rights treated as exercised,
otherwise cancelled or acquired in connection with any settlement), as having
been issued on the date or dates of such issuance as determined for purposes
of
the previous adjustment and for the total amount of consideration actually
received and receivable therefor (determined in the manner described in
Section (c)(ii)(1) or (2), as the case may be);
e. treating
the maximum number of shares of Common Stock (1) issuable upon the exercise
(or upon the conversion or exchange of Convertible Securities issuable upon
the
exercise) of all Options which then remain outstanding and (2) issuable
upon the conversion or exchange of all Convertible Securities which then remain
outstanding, as having been issued; and
f. making
the computations called for in subsection (c)(i) of this Section 7 on the
basis of the revised terms of such outstanding Options or Convertible
Securities, as the case may be, as if they were newly issued at the time of
such
revision.
Any
such
adjustment of the Exercise Price resulting from such recomputation shall
supersede the previous adjustment.
(4) No
Further Adjustments.
Any
adjustment of the Exercise Price to be made pursuant to this subsection (c)
with
respect to the issuance of (A) any Options (whether for shares of Common
Stock or Convertible Securities), (B) any Convertible Securities issuable
upon the exercise of such Options or (C) any shares of Common Stock
issuable upon the exercise of such Options or the conversion or exchange of
such
Convertible Securities shall be made effective upon the issuance of such
Options. Any adjustment of the Exercise Price to be made pursuant to this
subsection (c) with respect to the issuance of (x) any Convertible
Securities (other than Convertible Securities issuable upon the exercise of
Options) or (y) any shares of Common Stock issuable upon the conversion or
exchange of such Convertible Securities shall be made effective upon the
issuance of such Convertible Securities. No further adjustment of the Exercise
Price shall be made upon the actual issuance of shares of Common Stock or of
Convertible Securities upon the exercise of such Options or upon the actual
issuance of shares of Common Stock upon conversion or exchange of such
Convertible Securities.
(d) Other
Actions Affecting the Common Stock.
(i) Equitable
Equivalent.
If at
any time or from time to time the Company shall take any action affecting its
Common Stock, other than any action of a type otherwise described in this
Section 7 (whether or not such action of a type otherwise described in this
Section 7 results in an adjustment to this Warrant), then the number of Warrant
Shares and the Exercise Price shall be adjusted to such extent, if any, and
in
such manner and at such time, as the Board of Directors of the Company shall
in
good faith determine to be equitable in the circumstances, provided
that no
such adjustment
shall decrease the number of Warrant Shares and provided,
further,
that no
adjustment shall be required for any cash dividends paid out of retained
earnings.
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(ii) No
Avoidance.
The
Company will not, by amendment of its Certificate of Incorporation or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company. The Company shall at all times in good
faith
assist in the carrying out of all the provisions of this Section 7 and in the
taking of all reasonable action in order to protect the exercise rights of
the
Holder against impairment.
(e) Miscellaneous.
(i) Calculation
of Consideration Received.
If any
shares of Common Stock, Options, Convertible Securities or other securities
of
the Company are issued or sold or deemed to have been issued or sold for cash,
then the consideration received therefor shall be deemed to be the net amount
received or deemed received by the Company therefor. If any shares of Common
Stock, Options, Convertible Securities or other securities of the Company are
issued or sold or deemed to have been issued or sold for consideration other
than cash, then the amount of the consideration other than cash received or
deemed received by the Company shall be the Fair Market Value of such
consideration, as of the date of receipt or deemed receipt.
(ii) Treasury
Stock.
The
number of shares of Common Stock outstanding at any given time shall not include
shares owned or held by or for the account of the Company or any of its
subsidiaries, and the disposition of any shares of Common Stock so owned or
held
shall be considered an issuance of shares of Common Stock.
(iii) 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 Convertible Securities or (B) to
subscribe for or purchase shares of Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issuance
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. If the Company shall take any such record of the holders of its shares
of
Common Stock and shall, thereafter and before the taking of the action for
which
such record was taken, legally abandons its plan to take such action, then
thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(iv) Notice;
Adjustment Rules.
Whenever the Exercise Price and the number of Warrant Shares shall be adjusted
as provided in this Section 7, the Company shall provide to the Holder a
statement, signed by a duly elected executive officer of the Company, describing
in detail the facts requiring such adjustment and setting forth a calculation
of
the Exercise Price and the number of Warrant Shares applicable to this Warrant
after giving effect to such adjustment. All calculations under this Section
7
shall be made to the nearest one hundredth of a cent ($.0001) or to the nearest
full share of Common Stock, as the case may be. Adjustments pursuant to this
Section 7 shall apply to successive events or transactions of the types covered
hereby. Notwithstanding any other provision of this Section 7, no adjustment
shall be made to the number of Warrant Shares or to the Exercise Price if such
adjustment represents less than one percent (1%) of the number of Warrant Shares
or less than one percent (1%) of the Exercise Price immediately prior to such
adjustment, but any lesser adjustment shall be carried forward and shall be
made
at the time and together with the next subsequent adjustment which together
with
any adjustments so carried forward shall amount to one percent (1%) or more
of
the number of Warrant Shares or the Exercise Price.
-7-
(v) Certain
Adjustments.
The
Company may make such reductions in the Exercise Price or increases in the
number of Warrant Shares, in addition to those adjustments required by this
Section 7, as it in its sole discretion shall determine to be advisable in
order
that any consolidation or subdivision of shares of Common Stock, or any issuance
wholly for cash of any shares of Common Stock, or any issuance wholly for cash
of Options or Convertible Securities, or any dividend, or any issuance of
Options hereafter made by the Company to the holders of its shares of Common
Stock shall not be taxable to such holders.
(vi) Excluded
Issuances.
Notwithstanding any other provision of this Section 7, no adjustment shall
be
made pursuant to subsection (c) or (d) of this Section 7, nor shall Section
14 apply, in respect of (i) the issuance from time to time of shares of
Common Stock upon the exercise of this Warrant, (ii) securities issued upon
exercise, conversion or exchange of any Options, Convertible Securities or
other
rights, warrants, commitments or claims, provided that the foregoing are issued
and outstanding on the date hereof, are listed on Schedule I hereto and
have not been amended, modified or restated after the date hereof, (iii) any
issuance of shares of restricted stock or options to purchase shares of Common
Stock to employees, officers or directors of the Company pursuant to a stock
option plan or other employee benefit arrangement approved by the Board of
Directors of the Company, in good faith, or (iv) any issuance of Common Stock
or
Common Stock equivalent to licensors, customers, lessors, consultants,
suppliers, lenders or vendors of the Company in connection with a bona fide
transaction of the Company approved by the Board of Directors; provided,
however, that the aggregate number of shares issued pursuant to
clauses (iii) and (iv) (including, without limitation, shares subject to
such options or Common Stock equivalents), does not exceed an aggregate of
15%
of the shares of Common Stock outstanding on a fully diluted basis (subject
to
adjustment in the event of stock splits, combinations or similar occurrences
after the date hereof).
8. Notice
of Certain Actions.
In the
event that the Company (or its Board of Directors):
(a) shall
authorize issuance to all holders of shares of Common Stock of rights or
warrants to subscribe for or purchase any equity interest in the Company or
of
any Options or Convertible Securities; or
(b) shall
authorize any distribution to holders of shares of Common Stock or any equity
interest in the Company, whether in the form of cash, property, assets,
evidences of indebtedness, or other consideration; or
(c) becomes
a
party to any consolidation or merger for which approval of any equity owners
of
the Company will be required, or to a conveyance or transfer of the properties
and assets of the Company substantially as an entirety, or of any capital
reorganization or reclassification or change of the shares of Common Stock
or
any equity interests of the Company; or
(d) commences
a voluntary or involuntary dissolution, liquidation or winding up;
or
(e) takes
any
other action that would require an adjustment pursuant to Section
7;
-8-
then
the
Company shall provide a written notice to the Holder stating (i) the date
as of which the holders of record of shares of Common Stock or other equity
interests of the Company to be entitled to receive any such rights, equity
or
distribution are to be determined, (ii) if applicable, the material terms
of any such consolidation or merger and the expected effective date thereof,
or
(iii) if applicable, the material terms of any such conveyance, transfer,
dissolution, liquidation or winding up, the date it is expected to become
effective, and the date as of which it is expected that holders of record will
be entitled to exchange their shares of Common Stock or other equity interests
of the Company for securities or other property, if any, deliverable upon such
reclassification, conveyance, transfer, dissolution, liquidation, or winding
up.
Such notice shall be given not later than twenty business days prior to the
effective date (or the applicable record date, if earlier) of such event. The
failure to give the notice required by this Section 8 or any defect therein
shall not affect the legality or validity of any distribution, right, warrant,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up, or the vote upon any action.
9. Merger
or Consolidation of the Company.
The
Company will not merge or consolidate with or into any other entity unless
the
successor entity expressly assumes, by supplemental agreement reasonably
satisfactory in form and substance to each Holder, the due and punctual
performance and observance of each and every covenant and condition of this
Warrant to be performed and observed by the Company.
10. No
Shareholder Rights.
Prior
to exercise of this Warrant, the Holder shall not be entitled to any rights
of a
shareholder with respect to the shares of Common Stock issuable upon exercise
of
this Warrant, including (without limitation) the right to vote such shares
of
Common Stock, receive dividends or other distributions thereon, exercise
preemptive rights or be notified of shareholder meetings, and such Holder shall
not, by reason of being the Holder, be entitled to any notice or other
communication concerning the business or affairs of the Company. However,
nothing in this Section 10 shall limit the right of the Holder or its affiliates
to be provided the notices required under this Warrant or the Credit
Agreement.
11. Compliance
With Securities Act; Transferability of Warrant or Shares.
(a) Compliance
With Securities Act.
The
Holder, by acceptance hereof, agrees that this Warrant, and the shares of Common
Stock issuable upon exercise of this Warrant, are being acquired for investment
and that such Holder will not offer, sell or otherwise dispose of this Warrant,
or any shares of Common Stock issuable upon exercise of this Warrant, except
under circumstances which will not result in a violation of the Securities
Act,
or any applicable state securities laws. This Warrant and all shares of Common
Stock issued upon exercise of this Warrant (unless registered under the
Securities Act and any applicable state securities laws) shall be stamped or
imprinted with a legend in substantially the following form:
“THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE
SOLD, OFFERED FOR SALE, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR AN EXEMPTION
THEREFROM, AND, IF REQUESTED BY THE COMPANY, THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THAT EFFECT. THIS WARRANT
HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR
RESALE.”
-9-
(b) Transferability.
Subject
to compliance with applicable federal and state securities laws and subject
to
Section 14(h) hereof, this Warrant and all rights hereunder are transferable
in
whole or in part by the Holder to any person or entity upon written notice
to
the Company. The transfer shall be recorded on the books of the Company upon
the
surrender of this Warrant, properly endorsed for transfer by delivery of an
Assignment Form in substantially the form attached hereto as Exhibit B,
to the
Company at the address set forth in Section 17 hereof, and the payment to
the Company of all transfer taxes and other governmental charges imposed on
such
transfer. In the event of a partial or complete transfer, the Company shall
issue to the Holders one or more appropriate new warrants that are identical
to
this Warrant except as to the number of shares of Common Stock issuable upon
exercise thereof (if such transfer is a partial transfer) and except that any
such warrant issued to a Holder other than Xxxxxxx, Xxxxx & Co. shall not
include Section 14 hereof or any references thereto.
12. Restricted
Securities.
The
Holder understands that this Warrant and the shares of Common Stock issuable
upon exercise of this Warrant, will not be registered at the time of their
issuance under the Securities Act for the reason that the sale provided for
herein and in the Credit Agreement is exempt pursuant to Section 4(2) of the
Securities Act based on the representations of the Holder set forth herein.
The
Holder represents that it has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of its
investment and has the ability to suffer the total loss of the investment.
The
Holder further represents that it has had the opportunity to ask questions
of
and receive answers from the Company concerning the terms and conditions of
this
Warrant and the business of the Company, and to obtain additional information
to
such Holder’s satisfaction. The Holder further represents that it is an
“accredited investor” within the meaning of Regulation D under the Securities
Act, as presently in effect. The Holder further represents that this Warrant
is
being acquired for the account of the Holder for investment only and not with
a
present view to, or with any present intention of, a distribution or resale
thereof, in whole or in part, or the grant of any participation therein, other
than pursuant to the terms of a certain Registration Rights Agreement of even
date herewith between Holder and the Company (the “Registration Rights
Agreement”) relating to the shares of Common Stock issuable upon exercise of
this Warrant.
13. Representations
and Warranties of the Company.
The
Company represents and warrants to the Holder that, as of the Warrant Issue
Date:
(a) The
authorized capital stock of the Company consists of (i) 200,000,000 shares
of
Common Stock, par value $0.000001 per share and (ii) 20,000,000 shares of
preferred stock, par value $0.00000001 per share.
(b) The
issued and outstanding shares of capital stock of the Company consist of (i)
38,546,175 shares of Common Stock and (ii) 2,892,000 shares of Series A
Convertible Preferred Stock; no shares of capital stock of the Company are
held
as treasury shares.
(c) Except
as
set forth on Schedule I hereto, there are no outstanding Options, Convertible
Securities or other rights, options, warrants, commitments, claims, contracts,
understandings or arrangements pursuant to which the Company may be required
to
issue any additional shares of Common Stock or any Options or Convertible
Securities at a price per share of Common Stock less than the Exercise
Price.
The
foregoing representations and warranties shall survive the exercise of this
Warrant.
-10-
14. Participation
in Future Equity Financings.
(a) Until
the
last to occur of the Maturity Date or the date the Loans are repaid in full,
in
the event that the Company proposes to engage in any financing transaction
involving the issuance of equity securities of the Company (an “Equity Financing
Transaction”), then Xxxxxxx, Xxxxx & Co. or one or more of its Affiliates
shall be entitled to participate in such Equity Financing Transaction in
accordance with the following provisions of this Section 14.
(b) Except
in
the circumstances contemplated by paragraph (d) below, at least 30 Business
Days
prior to the consummation of an Equity Financing Transaction, the Company shall
provide written notice (the “Financing Notice”) to Xxxxxxx, Sachs & Co. of
the proposed Equity Financing Transaction, which notice shall specify all
material terms of such proposed Equity Financing Transaction that are then
available and shall include copies of any and all documents, whether in draft
or
final form, relating to such Equity Financing Transaction that are then
available. Thereafter, the Company shall provide to Xxxxxxx, Xxxxx & Co., as
soon as practicable after it becomes available, any and all additional or
changed information regarding the terms of the Equity Financing Transaction
and
any additional or changed draft or final documentation relating to the Equity
Financing Transaction.
(c) Xxxxxxx,
Sachs & Co. or one or more of its Affiliates shall, to the extent Xxxxxxx,
Xxxxx & Co. or such Affiliate determines that it may participate in such
financing in accordance with applicable Laws and internal policies, have the
right, exercisable by written notice (the “Participation Notice”) to the Company
given within 10 Business Days after the giving of the Financing Notice, to
participate in the Equity Financing Transaction described in the Financing
Notice by purchasing up to 25% of the equity securities of the Company being
sold in such Equity Financing Transaction on the same terms as the other
purchasers of equity securities of the Company in such Equity Financing
Transaction. Such Participation Notice shall specify the percentage of the
equity securities to be sold that Xxxxxxx, Sachs & Co. or such Affiliate
desires to purchase, subject to the immediately preceding sentence. In the
event
that none of Xxxxxxx, Xxxxx & Co. and its Affiliates gives a Participation
Notice prior to the expiration of such 10 Business Day period, no such Person
shall have any right to participate in the Equity Financing Transaction
described in the Financing Notice.
(d) In
the
event that the Company’s Board of Directors or any of its authorized executive
officers determines in good faith that it is not practicable to deliver the
Financing Notice at least 30 Business Days in advance of the consummation of
an
Equity Financing Transaction, then the Company need not provide the Financing
Notice at such time, but instead shall provide the Financing Notice as soon
as
practicable and in any event no later than the first Business Day after the
consummation of the Equity Financing Transaction. In such event, Xxxxxxx, Sachs
& Co. or one or more of its Affiliates shall have the rights specified in
paragraph (c) to participate in the Equity Financing Transaction described
in
the Financing Notice, provided that if the Participation Notice is given after
the consummation of such Equity Financing Transaction and within 10 Business
Days after the giving of the Financing Notice, Xxxxxxx, Xxxxx & Co. or its
Affiliates shall have the right to purchase equity securities of the Company
of
the same type as those sold in the Equity Financing Transaction and on the
same
terms in an amount up to 33% of the number of such securities sold in the Equity
Financing Transaction.
(e) Following
the giving of a Participation Notice, the Company shall promptly provide to
Xxxxxxx, Sachs & Co. or its applicable Affiliate any and all information and
documents reasonably requested by Xxxxxxx, Xxxxx & Co. or such Affiliate in
connection with its participation in such Equity Financing Transaction and
its
due diligence review of the Company in connection therewith.
-11-
(f) Notwithstanding
the giving by Xxxxxxx, Sachs & Co. or any of its Affiliates of a
Participation Notice, the obligation of Xxxxxxx, Xxxxx & Co. or any such
Affiliate to participate in any Equity Financing Transaction shall be subject
to
the satisfactory completion of due diligence by Xxxxxxx, Sachs & Co. or such
Affiliate and to the execution and delivery of final documentation with respect
to such Equity Financing Transaction in such forms and containing such terms
as
are satisfactory to Xxxxxxx, Xxxxx & Co. or such Affiliate in its sole
discretion; provided, however, that if the Company complies with its obligations
under paragraph (e) above, Xxxxxxx, Sachs & Co. or such Affiliate shall
complete its due diligence no later than the fortieth Business Day after the
giving of the Financing Notice. The Company shall not be prohibited from
proceeding with the completion of an Equity Financing Transaction (provided
that
the Financing Notice has been or will be given in accordance with paragraph
(b)
or (d) above) if Xxxxxxx, Xxxxx & Co. or such Affiliate has not completed
its due diligence at the time the Company proposes to complete such Equity
Financing Transaction, but Xxxxxxx, Sachs & Co., subject to the forty-day
period referred to above, shall thereafter be entitled to participate in such
Equity Financing Transaction in accordance with the last sentence of paragraph
(d) above.
(g) Any
failure of Xxxxxxx, Xxxxx & Co. or its Affiliates to give a Participation
Notice with respect to or otherwise participate in any Equity Financing
Transaction shall not affect the right of Xxxxxxx, Sachs & Co. and its
Affiliates to participate in any other Equity Financing Transaction in
accordance with this Section 14. Nothing in this Section 14 shall be deemed
to
obligate Xxxxxxx, Xxxxx & Co. or any of its Affiliates to provide or arrange
any financing for or purchase any securities of the Company or to participate
in
any Equity Financing Transaction
(h) Notwithstanding
anything herein to the contrary, the rights of Xxxxxxx, Sachs & Co. and its
Affiliates under this Section 14 shall not be transferable to any Person,
including any transferee of all or a portion of this Warrant. In the event
that
this Warrant is exercised in full or transferred in its entirety by Xxxxxxx,
Xxxxx & Co. prior to the expiration of the rights set forth in this Section
14, the Company and Xxxxxxx, Sachs & Co. shall enter into a separate
agreement setting forth the rights and obligations specified in this Section
14.
15. Successors
and Assigns.
The
terms and provisions of this Warrant shall inure to the benefit of, and be
binding upon, the Company and the Holders hereof and their respective successors
and assigns.
16. Amendments
and Waivers.
Any
term of this Warrant may be amended and the observance of any term of this
Warrant may be waived (either generally or in a particular instance and either
retroactively or prospectively), with the written consent of the Company and
the
Holder.
-12-
17. Notices.
All
notices required under this Warrant shall be deemed to have been given or made
for all purposes (i) upon personal delivery, (ii) upon confirmation receipt
that
the communication was successfully sent to the applicable number if sent by
facsimile, (iii) one day after being sent, when sent by professional overnight
courier service, or (iv) three business days after posting when sent by
registered or certified mail. Notices to the Company shall be sent to the
address of the Company set forth below (or at such other place as the Company
shall notify the Holder hereof in writing) and notices to the Holder shall
be
sent to the address of the Holder set forth below (or at such other place as
the
Holder shall notify the Company hereof in writing):
|
To
the Company:
|
TEKOIL & GAS CORPORATION
0000
Xx. Xxxxxxxx Xxxx.
Xxxxx
000
Xxxxxxx,
XX 00000
Telephone:
(000) 000-0000
Telecopy:
(000) 000-0000
Attn:
Mr. Xxxx Xxxxxxx
|
To
the
Holder as provided on the signature page of this Warrant.
18. Captions.
The
section and subsection headings of this Warrant are inserted for convenience
only and shall not constitute a part of this Warrant in construing or
interpreting any provision hereof.
19. Governing
Law.
This
Warrant shall be governed by the laws of the State of Delaware, without regard
to the choice or conflict of laws principles thereof.
[SIGNATURE
PAGE FOLLOWS]
-13-
IN
WITNESS WHEREOF, the undersigned have caused this Warrant to be duly executed
as
of the date first set forth above.
| COMPANY | ||
| TEKOIL & GAS CORPORATION | ||
| |
|
|
| By: | /s/ Xxxx Xxxxxxx | |
|
Xxxx Xxxxxxx |
||
| CEO and Chairman of the Board of Directors | ||
Signature
Page to Warrant
| HOLDER | ||
|
XXXXXXX,
SACHS & CO.
|
||
| |
|
|
| By: | /s/ Xxxxxx X. Xxxxxxx | |
| Name: |
Xxxxxx X. Xxxxxxx III |
|
| Title: | Authorized Signatory | |
|
Holder’s
address for its principal place of business is
as follows:
|
||
|
c/o
Goldman Xxxxx E & P Capital
0000
Xxxxxxxxx Xx., Xxxxx 000
Xxxxxxx,
XX 00000
Attention:
Xxxx Xxxxx
|
||
|
Holder’s
address for notice purposes (if different than above):
|
||
Signature
Page to Warrant
EXHIBIT
A
NOTICE
OF
EXERCISE
To:
TEKOIL & GAS CORPORATION
The
undersigned hereby elects to purchase __________
shares of Common Stock (as defined in the attached Warrant) of TEKOIL & GAS
CORPORATION, pursuant to the terms of the attached Warrant.
Check
the
appropriate box for the applicable payment method:
______ Cash
Exercise: The aggregate Exercise Price is enclosed.
______ Net
Issue
Exercise. In lieu of cash payment of the aggregate Exercise Price,
the attached Warrant is being exercised in accordance with
Section 4(b) thereof.
The
Holder represents that it has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of its
investment, and has the ability to suffer the total loss of the investment.
The
Holder further represents that it has had the opportunity to ask questions
of
and receive answers from the Company concerning the terms and conditions of
the
Warrant and the business of the Company, and to obtain additional information
to
such Holder’s satisfaction. The Holder further represents that it is an
“accredited investor” within the meaning of Regulation D under the Securities
Act, as presently in effect. The undersigned hereby represents and warrants
that
the undersigned is acquiring such shares for its own account for investment
purposes only, and not for resale or with a present view to distribution of
such
shares or any part thereof in violation of the Securities Act.
| Date: ________________________ | WARRANTHOLDER: | |
| |
|
|
| By: | ||
|
Name:
Address:
|
||
Name
in
which shares should be registered: _____________________
-16-
EXHIBIT
B
ASSIGNMENT
FORM
TO: TEKOIL
& GAS CORPORATION
The
undersigned hereby assigns and transfers unto _____________________________
of
______________________________________________ (Please typewrite or print in
block letters) the right to purchase ____________ shares of Common Stock (as
defined in the Warrant) of TEKOIL & GAS CORPORATION subject to the Warrant,
dated as of _____________________________, by and between TEKOIL & GAS
CORPORATION and the undersigned (the “Warrant”).
This
assignment complies with the provisions of Section 11 of the Warrant and is
accompanied by funds sufficient to pay all applicable transfer
taxes.
In
addition, the undersigned and/or its assignee will provide such evidence as
is
reasonably requested by TEKOIL & GAS CORPORATION, to evidence compliance
with applicable securities laws as contemplated by Sections 11 and 12 of the
Warrant.
| Date: ________________________ | By: | |
|
|
||
|
(Print Name of Signatory) |
||
|
(Title of Signatory) |
||
-17-
Schedule
I
Options,
Convertible Securities and Other Rights
The
Series A Convertible Preferred Stock of the Company.
-18-
