THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE
COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO XXXXXXX PETROSEARCH, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.
Right to up to 4,500 Purchase Shares of Common Stock of
Xxxxxxx Petrosearch, Inc.
(subject to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. 1 Issue Date: November 1, 2006
XXXXXXX PETROSEARCH, INC., a corporation organized under the laws of the
State of Texas (the "Company"), hereby certifies that, for value received,
LAURUS MASTER FUND, LTD., or assigns (the "Holder"), is entitled, subject to the
terms set forth below, to purchase from the Company at any time or from time to
time following payment in full of all obligations and liabilities owing by the
Company to the Holder in connection with the transactions contemplated by the
Securities Purchase Agreement dated as of the date hereof by and between the
Company and the Holder (as amended, modified and supplemented from time to time,
the "Securities Purchase Agreement") and the Related Agreements (as defined in
the Securities Purchase Agreement) (such date being hereinafter referred to as
the "Debt Repayment Date"), up to 4,500 of fully paid and nonassessable shares
of Common Stock (as hereinafter defined), $0.001 par value per share, at the
applicable Exercise Price per share (as defined below). The number and
character of such shares of Common Stock and the applicable Exercise Price per
share are subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include Xxxxxxx Petrosearch, Inc. and
any person or entity which shall succeed, or assume the obligations of,
Xxxxxxx Petrosearch, Inc. hereunder.
(b) The term "Common Stock" includes (i) the Company's Common
Stock, par value $0.001 per share; and (ii) any other securities into which
or for which any of the securities described in the preceding clause (i)
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The term "Exercise Price" means a price of $0.01 per share of
Common Stock.
(d) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person
(corporate or otherwise) which the holder of the Warrant at any time shall
be entitled to receive, or shall have received, on the exercise of the
Warrant, in lieu of or in addition to Common Stock, or which at any time
shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 4 or
otherwise.
1. Exercise of Warrant.
---------------------
1.1 Number of Shares Issuable upon Exercise. From and after the
-----------------------------------------
Debt Repayment Date, the Holder shall be entitled to receive, upon exercise of
this Warrant in whole or in part, by delivery of an original or fax copy of an
exercise notice in the form attached hereto as Exhibit A (the "Exercise
Notice"), shares of Common Stock of the Company, subject to adjustment pursuant
to Section 4.
1.2 Company Acknowledgment. The Company will, at the time of the
-----------------------
exercise of this Warrant, upon the request of the Holder hereof acknowledge in
writing its continuing obligation to afford to such Holder any rights to which
such Holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such Holder any such rights.
1.3 Trustee for Warrant Holder. In the event that a bank or trust
--------------------------
company shall have been appointed as trustee for the Holder pursuant to
Subsection 3.2, such bank or trust company shall have all the powers and duties
of a warrant agent (as hereinafter described) and shall accept, in its own name
for the account of the Company or such successor person as may be entitled
thereto, all amounts otherwise payable to the Company or such successor, as the
case may be, on exercise of this Warrant pursuant to this Section 1.
2. Procedure for Exercise.
------------------------
2.1 Delivery of Stock Certificates, Etc., on Exercise. The
-------------------------------------------------------
Company agrees that the shares of Common Stock purchased upon exercise of this
Warrant shall be deemed to be issued to the Holder as the record owner of such
shares as of the close of business on the date on which this Warrant shall have
been surrendered and payment made for such shares in accordance herewith. As
soon as practicable after the exercise of this Warrant in full or in part, and
in any event within three (3) business days thereafter, the Company at its
expense (including the payment by it of any applicable issue taxes) will cause
to be issued in the name of and delivered to the Holder, or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, together with any other stock or other securities and property
(including cash, where applicable) to which such Holder is entitled upon such
exercise pursuant to Section 1 or otherwise.
2.2 Exercise. Payment shall be made either in cash or by
--------
certified or official bank check payable to the order of the Company equal to
the applicable aggregate Exercise Price for the number of Common Shares
specified in such Exercise Notice (as such exercise number shall be adjusted to
reflect any adjustment in the total number of shares of Common Stock issuable to
the Holder in accordance with the terms of this Warrant) and the Holder shall
thereupon be entitled to receive the number of duly authorized, validly issued,
fully-paid and non-assessable shares of Common Stock (or Other Securities)
determined as provided herein.
3. Effect of Reorganization, Etc.; Adjustment of Exercise Price.
-------------------------------------------------------------------
3.1 Reorganization, Consolidation, Merger, Etc. In case at any
---------------------------------------------
time or from time to time the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder, on the
exercise hereof as provided in Section 1 at any time after the consummation of
such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock (or
Other Securities) issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which such Holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such Holder had so
exercised this Warrant, immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4.
3.2 Dissolution. In the event of any dissolution of the Company
-----------
following the transfer of all or substantially all of its properties or assets,
the Company, concurrently with any distributions made to holders of its Common
Stock, shall at its expense deliver or cause to be delivered to the Holder the
stock and other securities and property (including cash, where applicable)
receivable by the Holder pursuant to Section 3.1, or, if the Holder shall so
instruct the Company, to a bank or trust company specified by the Holder and
having its principal office in New York, NY as trustee for the Holder (the
"Trustee").
3.3 Continuation of Terms. Upon any reorganization,
-----------------------
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 4. In the
event this Warrant does not continue in full force and effect after the
consummation of the transactions described in this Section 3, then the Company's
securities and property (including cash, where applicable) receivable by the
Holder will be delivered to the Holder or the Trustee as contemplated by Section
3.2.
4. Extraordinary Events Regarding Common Stock. In the event that the
--------------------------------------------
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock or any preferred stock issued by
the Company, (b) subdivide its outstanding shares of Common Stock, or (c)
combine its outstanding shares of the Common Stock into a smaller number of
shares of the Common Stock, then, in each such event, the Exercise Price shall,
simultaneously with the happening of such event, be adjusted by multiplying the
then Exercise Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such event, and the product so obtained shall thereafter be
the Exercise Price then in effect. The Exercise Price, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive event or
events described herein in this Section 4. The number of shares of Common Stock
that the Holder shall thereafter, on the exercise hereof as provided in Section
1, be entitled to receive shall be adjusted to a number determined by
multiplying the number of shares of Common Stock that would otherwise (but for
the provisions of this Section 4) be issuable on such exercise by a fraction of
which (a) the numerator is the Exercise Price that would otherwise (but for the
provisions of this Section 4) be in effect, and (b) the denominator is the
Exercise Price in effect on the date of such exercise (taking into account the
provisions of this Section 4).
5. Certificate as to Adjustments. In each case of any adjustment or
--------------------------------
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of this Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the Holder and any Warrant agent of the
Company (appointed pursuant to Section 11 hereof).
6. Reservation of Stock, Etc., Issuable on Exercise of Warrant. The
--------------------------------------------------------------
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of this Warrant, shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of this Warrant.
7. Designated Actions. The Company shall not implement or effect (or
-------------------
otherwise resolve or agree to implement or effect) any of the following actions
without the prior written approval of the Holder:
(a) (i) declare or pay any dividends or make any other distribution
in respect of any of its securities or (ii) make any distribution
of any nature
(including repayment of loans) to any person, except, the
repayment of loans to the Holder ;
(b) sell or dispose of any assets or property, other than (i)
equipment which is worthless or obsolete or which is replaced by
equipment of equal suitability and value; and (ii) inventory
(including hydrocarbons sold as produced) which is sold in the
ordinary course of business on ordinary trade terms;
(c) establish, acquire or otherwise become an equity holder
(including, for greater certainty, a holder of securities
convertible into equity) in any corporate entity or any
partnership, equity joint venture or similar arrangements;
(d) enter into any transactions outside the ordinary course with
officers, directors or employees or members of their families or
other persons with whom they do not act at arm's length;
(e) enter into (other than in the ordinary course to fund working
capital needs) or materially modify any credit facility;
(f) create any mortgage, lien, charge or other form of encumbrance
with respect to any of its assets (other than in favor of the
Holder);
(g) alter the fundamental nature of its business or otherwise engage
in other businesses or activities that are not incidental to the
businesses or activities presently undertaken by it;
(h) issue or sell any capital stock of, or any rights, warrants or
securities convertible into or exercisable or exchangeable for
any capital stock of, the Company, including by way of initial
public offering;
(i) wind up, dissolve or liquidate;
(j) continue under the laws of a jurisdiction other than the
jurisdiction under which it was formed;
(k) change its fiscal year;
(l) amend its articles or by-laws;
(m) merge with or into any other company;
(n) take any action which would make it impossible to carry on its
ordinary business; or
(o) take any action which would place it into bankruptcy.
8. Assignment; Exchange of Warrant. Subject to compliance with
----------------------------------
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered holder hereof (a "Transferor") in whole or in
part. On the surrender for exchange of this Warrant, with the Transferor's
endorsement in the form of Exhibit B attached hereto (the "Transferor
Endorsement Form") and together with evidence reasonably satisfactory to the
Company demonstrating compliance with applicable securities laws, which shall
include, without limitation, the provision of a legal opinion from the
Transferor's counsel (at the Company's expense) that such transfer is exempt
from the registration or equivalent requirements of applicable securities laws,
the Company at its expense (but with payment by the Transferor of any applicable
transfer taxes) will issue and deliver to or on the order of the Transferor
thereof a new Warrant of like tenor, in the name of the Transferor and/or the
transferee(s) specified in such Transferor Endorsement Form (each a
"Transferee"), calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the Warrant
so surrendered by the Transferor.
9. Registration Rights. The Holder has been granted certain
--------------------
registration rights by the Company. These registration rights are set forth in
a Securities Purchase Agreement entered into by the Company and Holder dated as
of the date hereof, as the same may be amended, modified and/or supplemented
from time to time.
10. Replacement of Warrant. On receipt of evidence reasonably
------------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
11. Warrant Agent. The Company may, by written notice to the each
--------------
Holder of the Warrant, appoint an agent for the purpose of issuing Common Stock
(or Other Securities) on the exercise of this Warrant pursuant to Section 1,
exchanging this Warrant pursuant to Section 7, and replacing this Warrant
pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.
12. Transfer on the Company's Books. Until this Warrant is transferred
-------------------------------
on the books of the Company, the Company may treat the registered holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
13. Notices, Etc. All notices and other communications from the
-------------
Company to the Holder shall be mailed by first class registered or certified
mail, postage prepaid, at such address as may have been furnished to the Company
in writing by such Holder or, until any such Holder furnishes to the Company an
address, then to, and at the address of, the last Holder who has so furnished
an address to the Company.
14. Miscellaneous. This Warrant and any term hereof may be changed,
-------------
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. THIS WARRANT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT
CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS WARRANT SHALL BE BROUGHT ONLY
IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF
NEW YORK; PROVIDED, HOWEVER, THAT THE HOLDER MAY CHOOSE TO WAIVE THIS PROVISION
AND BRING AN ACTION OUTSIDE THE STATE OF NEW YORK. The individuals executing
this Warrant on behalf of the Company agree to submit to the jurisdiction of
such courts and waive trial by jury. The prevailing party shall be entitled to
recover from the other party its reasonable attorneys' fees and costs. In the
event that any provision of this Warrant is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of this Warrant. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision hereof. The Company acknowledges that legal counsel
participated in the preparation of this Warrant and, therefore, stipulates that
the rule of construction that ambiguities are to be resolved against the
drafting party shall not be applied in the interpretation of this Warrant to
favor any party against the other party.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.
XXXXXXX PETROSEARCH, INC.
WITNESS:
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------
Name: Xxxxxxx X. Xxxx
-----------------------------------
Title: Manager
------------------------------------ ----------------------------------
EXHIBIT A
FORM OF SUBSCRIPTION
(To Be Signed Only On Exercise Of Warrant)
TO: Xxxxxxx Petrosearch, Inc.
000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. 1), hereby irrevocably elects to purchase shares of the Common
Stock covered by such Warrant.
The undersigned herewith makes payment of the full Exercise Price for such
shares at the price per share provided for in such Warrant, which is
$ . Such payment takes the form of $ in lawful money of the
----------- ----------
United States.
The undersigned requests that the certificates for such shares be issued in
the name of, and delivered to
----------------------------------------------
whose address is .
--------------------------------------------------------------
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated:
----------------------------- ----------------------------------------
(Signature must conform to name of
holder as specified on the face of the
Warrant)
Address:
--------------------------------
--------------------------------
EXHIBIT B
FORM OF TRANSFEROR ENDORSEMENT
(To Be Signed Only On Transfer Of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto the person(s) named below under the heading "Transferees" the right
represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Xxxxxxx Petrosearch, Inc. into which the within
Warrant relates specified under the headings "Percentage Transferred" and
"Number Transferred," respectively, opposite the name(s) of such person(s) and
appoints each such person Attorney to transfer its respective right on the books
of Xxxxxxx Petrosearch, Inc. with full power of substitution in the premises.
Percentage Number
Transferees Address Transferred Transferred
----------- ------- ----------- -----------
------------------------ ------------------------ ------------- -------------
------------------------ ------------------------ ------------- -------------
------------------------ ------------------------ ------------- -------------
------------------------ ------------------------ ------------- -------------
Dated:
---------------------------- ----------------------------------------
(Signature must conform to name of
holder as specified on the face of the
Warrant)
Address:
--------------------------------
--------------------------------
Address:
SIGNED IN THE PRESENCE OF:
----------------------------------------
(Name)
ACCEPTED AND AGREED:
[TRANSFEREE]
-----------------------------------
(Name)
