COMMON STOCK PURCHASE WARRANT CHINA NORTH EAST PETROLEUM HOLDINGS, LIMITED
Exhibit
4.1
NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON
STOCK PURCHASE WARRANT
CHINA
NORTH EAST PETROLEUM HOLDINGS, LIMITED
|
Warrant
Shares: 250,000
|
Issue
Date: March 5, 2009
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THIS COMMON STOCK PURCHASE
WARRANT (the “Warrant”) certifies
that, for value received, LOTUSBOX INVESTMENTS LIMITED
or its assignee (the “Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise
Date”) and on or prior to the close of business on the fourth year
anniversary of the Initial Exercise Date (the “Termination Date”)
but not thereafter, to subscribe for and purchase from CHINA NORTH EAST PETROLEUM HOLDINGS
LIMITED, a Nevada corporation (the “Company”), up to
250,000 shares (the “Warrant Shares”) of
Common Stock. The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in Section
2(b).
This
Warrant is being issued pursuant to that certain Amendment No. 1 to 8% Debenture
by and between the Company and Lotusbox Investments Limited, dated March 5, 2009
(“Amendment No. 1”). Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Securities Purchase
Agreement, dated February 28, 2008, among the Company and the purchasers’
signatory thereto (the “Purchase Agreement”) or Amendment No. 1 (if such terms
are not inconsistent with the Purchase Agreement).
Section
1. Fully Vested
Shares. The Warrant Shares are fully vested and exercisable as
of the Initial Exercise Date.
1
Section
2. Exercise.
a) Exercise of
Warrant. Exercise of the purchase rights represented by this
Warrant may be made by the Holder, in whole or in part, at any time or times on
or after the Initial Exercise Date and on or before 5:00 p.m. New York time on
the Termination Date by delivery to the principal office of the Company of a
duly executed facsimile copy of the Notice of Exercise annexed hereto (or such
other office or agency of the Company as it may designate by notice in writing
to the registered Holder at the address of such Holder appearing on the books of
the Company); and, within 3 Trading Days of the date said Notice of Exercise is
delivered to the Company, the Company shall have received payment of
the aggregate Exercise Price for the number of Warrant Shares purchased upon
such exercise. The Exercise Price may be paid by wire transfer or
cashier’s check drawn on a United States bank. Notwithstanding
anything herein to the contrary, the Holder shall not be required to physically
surrender this Warrant to the Company until the Holder has purchased all of the
Warrant Shares available hereunder and the Warrant has been exercised in full,
in which case, the Holder shall surrender this Warrant to the Company for
cancellation within 3 Trading Days of the date the final Notice of Exercise is
delivered to the Company. Partial exercises of this Warrant resulting
in purchases of a portion of the total number of Warrant Shares available
hereunder shall have the effect of decreasing the outstanding number of Warrant
Shares available for purchase hereunder by the number of Warrant Xxxxxx
previously purchased. The Holder and the Company shall maintain
records showing the number of Warrant Shares purchased and the date of such
purchases. After any exercise, the Holder and the Company shall
confirm with each other the total amount of Warrant Shares remaining to be
exercised. The Company shall deliver any objection to any Notice of
Exercise within 3 Business Days of receipt of such notice. The Holder and any assignee, by
acceptance of this Warrant, acknowledge and agree that, by reason of the
provisions of this paragraph, following the purchase of any portion of the
Warrant Shares hereunder, the number of Warrant Shares available for purchase
hereunder at any given time may be less than the amount stated on the face
hereof.
b) Exercise
Price. The exercise price per share of the Common Stock under
this Warrant shall be $_____ subject to adjustment hereunder (the “Exercise
Price”).
c) Cashless
Exercise. If at any time after the date that is one hundred
and eighty (180) days after the Filing Date (as defined herein) there is no
effective registration statement pursuant to Section 5 herein, or no current
prospectus available for, the resale of the Warrant Shares by the Holder, then
this Warrant may also be exercised by means of a “cashless exercise” in which
the Holder shall be entitled to receive a certificate for the number of Warrant
Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A),
where:
(A) = the
VWAP on the Trading Day immediately preceding the date of such
election;
(B) = the
Exercise Price of this Warrant, as adjusted; and
2
(X) = the
number of Warrant Shares issuable upon exercise of this Warrant in accordance
with the terms of this Warrant by means of a cash exercise rather than a
cashless exercise.
Notwithstanding
anything herein to the contrary, on the Termination Date, this Warrant shall be
automatically exercised via cashless exercise pursuant to this Section
2(c).
d) Mechanics of
Exercise.
i.
Delivery of Certificates
Upon Exercise. Certificates for shares purchased hereunder
shall be transmitted by the transfer agent of the Company to the Holder by
crediting the account of the Holder’s prime broker with the Depository Trust
Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the
Company is a participant in such system and there is an exemption from
registration under the Securities Act permitting the resale of the Warrant
Shares by the Holder, and otherwise by physical delivery to the address
specified by the Holder in the Notice of Exercise within 5 Trading Days from the
delivery to the Company of the Notice of Exercise, surrender of this Warrant (if
required) and payment of the aggregate Exercise Price as set forth above (“Warrant Share Delivery
Date”). This Warrant shall be deemed to have been exercised on
the date the Exercise Price is received by the Company. The Warrant
Shares shall be deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become a holder of record
of such shares for all purposes, as of the date the Warrant has been exercised
by payment to the Company of the Exercise Price (or by cashless exercise, if
permitted) and all taxes required to be paid by the Holder, if any, pursuant to
Section 2(d)(vi) prior to the issuance of such shares, have been paid. If the
Company fails for any reason to deliver to the Holder certificates evidencing
the Warrant Shares subject to a Notice of Exercise by the 5th Trading
Day after the Warrant Share Delivery Date, the Company shall pay to such Holder,
in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant
Shares subject to such exercise (based on the VWAP of the Common Stock on the
date of the applicable Notice of Exercise), $5.00 per Trading Day (increasing to
$10.00 per Trading Day on the 45th Trading
Day after such liquidated damages begin to accrue) for each Trading Day after
such Warrant Share Delivery Date until such certificates are
delivered.
ii. Delivery of New Warrants
Upon Exercise. If this Warrant shall have been exercised in
part, the Company shall, at the request of a Holder and upon surrender of this
Warrant certificate, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant.
iii. Rescission
Rights. If the Company fails to cause its transfer agent to
transmit to the Holder a certificate or certificates representing the Warrant
Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the
Holder will have the right to rescind such exercise.
3
iv. Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Exercise. In
addition to any other rights available to the Holder, if the Company fails to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Shares pursuant to an exercise on or before the Warrant
Share Delivery Date, and if after such date the Holder is required by its broker
to purchase (in an open market transaction or otherwise) or the Holder’s
brokerage firm otherwise purchases, shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares which the Holder
anticipated receiving upon such exercise (a “Buy-In”), then the
Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of Warrant Shares that the Company was required to deliver to the Holder
in connection with the exercise at issue times (B) the price at which the sell
order giving rise to such purchase obligation was executed, and (2) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored or deliver to
the Holder the number of shares of Common Stock that would have been issued had
the Company timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the immediately
preceding sentence the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In and, upon request of the Company,
evidence of the amount of such loss. Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.
v. No Fractional Shares or
Scrip. No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall at its election, either pay a cash adjustment
in respect of such final fraction in an amount equal to such fraction multiplied
by the Exercise Price or round up to the next whole share.
vi. Charges, Taxes and
Expenses. Issuance of certificates for Warrant Shares shall be
made without charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate, all of which
expenses shall be paid by the Company, and such certificates shall be issued in
the name of the Holder or in such name or names as may be directed by the
Holder; that in the event certificates for Warrant Shares are to be issued in a
name other than the name of the Holder, this Warrant when surrendered for
exercise shall be accompanied by the Assignment Form attached hereto duly
executed by the Holder; and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax incidental
thereto.
4
vii. Closing of
Books. The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.
Section
3. Certain
Adjustments.
a) Stock Dividends and
Splits. If the Company, at any time while this Warrant is outstanding:
(A) pays a stock dividend or otherwise make a distribution or distributions on
shares of its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company upon exercise of this
Warrant), (B) subdivides outstanding shares of Common Stock into a larger number
of shares, (C) combines (including by way of reverse stock split) outstanding
shares of Common Stock into a smaller number of shares, or (D) issues by
reclassification of shares of the Common Stock any shares of capital stock of
the Company, then in each case the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding immediately before such event
and of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event and the number of shares issuable upon
exercise of this Warrant shall be proportionately adjusted such that the
aggregate Exercise Price of this Warrant shall remain unchanged. Any
adjustment made pursuant to this Section 3(a) shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
re-classification.
b) Subsequent Equity
Sales. If the Company or any Subsidiary thereof, as applicable, at any
time while this Warrant is outstanding, shall sell or grant any option to
purchase, or sell or grant any right to reprice, or otherwise dispose of or
issue (or announce any offer, sale, grant or any option to purchase or other
disposition) any Common Stock or Common Stock Equivalents entitling any Person
to acquire shares of Common Stock, at an effective price per share less than the
then Exercise Price (such lower price, the “Base Share Price” and
such issuances collectively, a “Dilutive Issuance”)
(if the holder of the Common Stock or Common Stock Equivalents so issued shall
at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights per share which are issued in connection with
such issuance, be entitled to receive shares of Common Stock at an effective
price per share which is less than the Exercise Price (as in effect from time to
time), such issuance shall be deemed to have occurred for less than the Exercise
Price on such date of the Dilutive Issuance), then the Exercise Price shall be
reduced in accordance with the following formula:
O + N
x P
----------
E’ = E x M
-----------------------
O +
N
5
where:
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E’
|
=
|
the
adjusted Exercise Price.
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|
|
E
|
=
|
the
then current Exercise Price.
|
|
|
O
|
=
|
the
number of shares of Common Stock outstanding on the record
date.
|
|
|
N
|
=
|
the
number of shares of additional Common Stock issued pursuant to such
rights, options or warrants.
|
|
|
P
|
=
|
the
price per share of the additional shares of Common
Stock.
|
|
|
M
|
=
|
the
Market Value per share of Common Stock on the record
date.
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c) Such
adjustment shall be made whenever such Common Stock or Common Stock Equivalents
are issued. Notwithstanding the foregoing, no adjustments shall be
made, paid or issued under this Section 3(c) in respect of an Exempt
Issuance. The Company shall notify the Holder in writing, no later
than 10 Trading Days following the issuance of any Common Stock or Common Stock
Equivalents subject to Section 3(b), indicating therein the applicable issuance
price, or applicable reset price, exchange price, conversion price and other
pricing terms (such notice the “Dilutive Issuance
Notice”). For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to Section 3(b), upon the
occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance
the Holder is entitled to receive a number of Warrant Shares based upon the Base
Share Price regardless of whether the Holder accurately refers to the Base Share
Price in the Notice of Exercise.
d) Subsequent Rights
Offerings. If the Company, at any time while the Warrant is
outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to Holders) entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the VWAP at the record date
mentioned below, then the Exercise Price shall be adjusted in accordance with
the formula:
O +
N x P
----------
E’ = E x M
-----------------------
O +
N
6
where:
|
E’
|
=
|
the
adjusted Exercise Price.
|
|
|
E
|
=
|
the
then current Exercise Price.
|
|
|
O
|
=
|
the
number of shares of Common Stock outstanding on the record
date.
|
|
|
N
|
=
|
the
number of shares of additional Common Stock issued pursuant to such
rights, options or warrants.
|
|
|
P
|
=
|
the
price per share of the additional shares of Common
Stock.
|
|
|
M
|
=
|
the
Market Value per share of Common Stock on the record
date.
|
The
adjustment shall be made successively whenever any such rights, options or
warrants are issued and shall become effective immediately after the record date
for the determination of stockholders entitled to receive the rights, options or
warrants. If at the end of the period during which such rights,
options or warrants are exercisable, not all rights, options or warrants shall
have been exercised, the applicable Exercise Price shall be promptly readjusted
to what it would have been if “N” in the above formula had been the number of
shares actually issued.
e) Pro Rata
Distributions. If the Company, at any time while this Warrant
is outstanding, shall distribute to all holders of Common Stock (and not to
Holders of the Warrants) evidences of its indebtedness or assets (including cash
and cash dividends) or rights or warrants to subscribe for or purchase any
security other than the Common Stock (which shall be subject to Section 3(b)),
then in each such case the Exercise Price shall be adjusted by multiplying the
Exercise Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the VWAP determined as of the record
date mentioned above, and of which the numerator shall be such VWAP on such
record date less the then per share fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed applicable to
one outstanding share of the Common Stock as determined by the Board of
Directors in good faith. In either case the adjustments shall be
described in a statement provided to the Holder of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date mentioned above.
7
f) Fundamental
Transaction. If, at any time while this Warrant is outstanding, (A) the
Company effects any merger or consolidation of the Company with or into another
Person, (B) the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (D) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (each “Fundamental
Transaction”), then, upon any subsequent exercise of this Warrant, the
Holder shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise immediately prior to the occurrence of such
Fundamental Transaction, the number of shares of Common Stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate
Consideration”) receivable as a result of such merger, consolidation or
disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event. For purposes
of any such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder’s right to exercise such warrant
into Alternate Consideration. The terms of any agreement pursuant to which a
Fundamental Transaction is affected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this Section 3(f)
and insuring that this Warrant (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction. Notwithstanding anything to the contrary, in the event of a
Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3
transaction” as defined in Rule 13e-3 under the Securities Exchange Act of 1934,
as amended, or (3) a Fundamental Transaction involving a person or entity not
traded on a national securities exchange, the Nasdaq Global Select Market, the
Nasdaq Global Market, or the Nasdaq Capital Market, the Company or any successor
entity shall pay at the Holder’s option, exercisable at any time concurrently
with or within 30 days after the consummation of the Fundamental Transaction, an
amount of cash equal to the value of this Warrant as determined in accordance
with the Black-Scholes option pricing formula using an expected volatility equal
to the 100 day historical price volatility obtained from the HVT function on
Bloomberg L.P. as of the trading day immediately prior to the public
announcement of the Fundamental Transaction.
8
g) Calculations. All
calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of this Section 3,
the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.
h) Voluntary Adjustment by
Company. The Company may at any time during the term of this Warrant
reduce the then current Exercise Price to any amount and for any period of time
deemed appropriate by the Board of Directors of the Company.
i) Notice to
Holder.
i. Adjustment to Exercise
Price. Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly mail to the Holder a notice
setting forth the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. If the Company
issues a variable rate security, despite the prohibition thereon in the Purchase
Agreement, the Company shall be deemed to have issued Common Stock or Common
Stock Equivalents at the lowest possible conversion or exercise price at which
such securities may be converted or exercised in the case of a Variable Rate
Transaction (as defined in the Purchase Agreement).
ii. Notice to Allow Exercise by
Xxxxxx. If (A) the Company shall declare a dividend (or any other
distribution in whatever form) on the Common Stock; (B) the Company shall
declare a special nonrecurring cash dividend on or a redemption of the Common
Stock; (C) the Company shall authorize the granting to all holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights; (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification of the Common
Stock, any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be mailed to the Holder
at its last address as it shall appear upon the Warrant Register of the Company,
at least 20 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of
the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
or Fundamental Transaction is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided that the failure to mail such notice
or any defect therein or in the mailing thereof shall not affect the validity of
the corporate action required to be specified in such notice. The
Holder is entitled to exercise this Warrant during the period commencing on the
date of such notice to the effective date of the event triggering such
notice.
9
Section
4. Transfer of
Warrant.
a) Transferability. Subject
to compliance with any applicable securities laws, this Warrant and all rights
hereunder are transferable, in whole or in part, upon surrender of this Warrant
at the principal office of the Company or its designated agent, together with a
written assignment of this Warrant substantially in the form attached hereto
duly executed by the Holder or its agent or attorney and funds sufficient to pay
any transfer taxes payable upon the making of such transfer. Upon
such surrender and, if required, such payment, the Company shall execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees and
in the denomination or denominations specified in such instrument of assignment,
and shall issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled. A Warrant, if properly assigned, may be exercised by a new
holder for the purchase of Warrant Shares without having a new Warrant
issued. The Company shall instruct its counsel to prepare and issue
any legal opinion of counsel necessary for the transfer of the Warrant or the
Warrant Shares by the Holder at the Company’s cost. If the Company
fails to instruct its counsel to prepare and issue such legal opinion, the
Company shall pay all reasonable fees and expenses incurred by the Holder in
connection with the preparation of such legal opinion by its
counsel.
b) New Warrants. This
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney. Subject to compliance
with Section 4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice. All Warrants issued on transfers or exchanges shall be dated
the original Issue Date and shall be identical with this Warrant except as to
the number of Warrant Shares issuable pursuant thereto.
c) Warrant Register. The
Company shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”),
in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the
contrary.
10
Section
5. Registration
Rights.
a) Piggy-Back
Registration. If the Company, at any time while this Warrant is
outstanding, shall determine to prepare and file with the Securities and
Exchange Commission (the “Commission”) a
registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with the Company’s stock option or other
employee benefit plans (the “Registration
Statement”), then the Company shall send to the Holder a written notice
of such determination and, if within fifteen days after the date of such notice,
the Holder shall so request in writing, the Company shall use its best efforts
to cause the Warrant Shares as to which registration has been requested to be
included in the securities covered by the Registration Statement proposed to be
filed by the Company, all to the extent requisite to permit the sale or other
disposition by the Holder (in accordance with its written request) of the
Warrant Shares so registered (“Piggyback Registration
Rights”); provided, however,
that if, at any time after giving written notice of its intention to register
any securities pursuant to this Section 5(a) and prior to the effective date of
the Registration Statement filed in connection with such registration, the
Company shall determine for any reason not to register such securities, the
Company shall give written notice to the Holder and, thereupon, shall be
relieved of its obligation to register the Warrant Shares in connection
with such registration. If a registration pursuant to this Section
5(a) involves an underwritten public offering, the Holder may elect, in writing
prior to the effective date of the Registration Statement filed in connection
with such registration, not to register such securities in connection with such
registration. The foregoing provisions notwithstanding, the Company
may withdraw any Registration Statement referred to in this Section 5(a) without
incurring any liability to the Holder; provided, however, that the Company shall
be liable to the Holder in the event it fails to comply with the provisions of
Section 5(b).
b) Filing
Date. If: (i) a Registration Statement is not filed on or
prior to the one year anniversary of the Initial Exercise Date (the “Filing Date”) or (ii)
the Company fails to file with the Commission a request for acceleration of a
Registration Statement in accordance with Rule 461 promulgated under the
Securities Act, within ten (10) Trading Days of the date that the Company is
notified (orally or in writing, whichever is earlier) by the Commission that
such Registration Statement will not be “reviewed” or not be subject to further
review, or (iii) prior to the effectiveness date of a Registration Statement,
the Company fails to file a pre-effective amendment and otherwise respond in
writing to comments made by the Commission in respect of such Registration
Statement within 10 Trading Days after the receipt of comments by or notice from
the Commission that such amendment is required in order for such Registration
Statement to be declared effective, or (iv) a Registration Statement registering
for resale all of the Warrant Shares, is not declared effective by
the Commission within one hundred and eighty (180) days of the Filing Date, or
(v) all of the Warrant Shares are not registered for resale pursuant to one or
more effective Registration Statements within one hundred and eighty (180) days
of the Filing Date or (vi) after the effectiveness date of a Registration
Statement, such Registration Statement ceases for any reason to remain
continuously effective as to all the Warrant Shares included in such
Registration Statement, or the Holder is otherwise not permitted to utilize the
prospectus therein to resell such Warrant Shares, for more than 10 consecutive
calendar days or more than an aggregate of 30 calendar days during any 12-month
period (which need not be consecutive calendar days) (any such failure or breach
being referred to as an “Event, and for
purposes of clause (i), (iv) or (v) the date on which such Event occurs, or for
purposes of clauses (ii) and (iii) the date which such 10 calendar day period is
exceeded, or for purposes of clause (vi) the date on which such 10 or 30
calendar day period, as applicable, is exceeded being referred to as “Event Date”), then,
in addition to any other rights the Holder may have hereunder or under
applicable law, on each such Event Date and on each six month anniversary of
each such Event Date (if the applicable Event shall not have been cured by such
date) until the applicable Event is cured, the Company shall execute and deliver
to the Holder a new Warrant to purchase 31,250 shares of Common Stock within
five days after the Event Date. All Warrants issued in connection with this
Section 5(b) shall be identical with this Warrant (including, without
limitation, the registration provisions of this Section 5) except as to the
number of Warrant Shares issuable pursuant thereto.
11
c) Registration
Procedures. In connection with the registration of the Warrant
Shares pursuant to this Section 5, the Company shall adhere to the registration
procedures set forth in Section 3 to that certain Registration Rights Agreement
between the Company and Lotusbox Investments Limited dated February 28, 2008, to
the extent applicable (the “Registration Rights Agreement”).
d) Registration
Expenses. All fees and expenses incident to the performance of or
compliance with this Section 5 by the Company shall be borne by the Company
whether or not the Warrant Shares are sold pursuant to a Registration Statement.
The fees and expenses referred to in the foregoing sentence shall include,
without limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses of the Company’s counsel and auditors) (A) with
respect to filings made with the Commission, (B) with respect to filings
required to be made with any exchange or market on which the Common Stock is
then listed for trading, (C) in compliance with applicable state securities or
blue sky laws reasonably agreed to by the Company in writing (including, without
limitation, fees and disbursements of counsel for the Company in connection with
blue sky qualifications or exemptions of the Warrant Shares) and (D) if not
previously paid by the Company, with respect to any filing that may be required
to be made by any broker through which a Holder intends to make sales of Warrant
Shares with FINRA pursuant to NASD Rule 2710, so long as the broker is receiving
no more than a customary brokerage commission in connection with such sale, (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Warrant Shares), (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities
Act liability insurance, if the Company so desires such insurance, and (vi) fees
and expenses of all other persons retained by the Company in connection with the
consummation of the transactions contemplated by this Section 5. In
addition, the Company shall be responsible for all of its internal expenses
incurred in connection with the consummation of the transactions contemplated by
this Section 5 (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit and the fees and expenses incurred in connection with the
listing of the Warrant Shares on any securities exchange as required
hereunder. In addition, the Company shall pay all legal fees incurred
by Holder in connection with the registration of the Warrant Shares pursuant to
this Section 5, such fees not to exceed $10,000. In no event shall
the Company be responsible for any broker or similar commissions of the
Holder.
12
e) Indemnification. The
indemnification provisions set forth in Section 5 of the Registration Rights
Agreement shall also be applicable to the transactions contemplated by this
Section 5.
Section
6. Miscellaneous.
a) No Rights as Shareholder
Until Exercise. This Warrant does not entitle the Holder to
any voting rights or other rights as a shareholder of the Company prior to the
exercise hereof as set forth in Section 2.
b) Loss, Theft, Destruction or
Mutilation of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant or any stock certificate relating to
the Warrant Shares, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it (which, in the case of the Warrant, shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.
c) Saturdays, Sundays,
Holidays, etc. If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not
be a Business Day, then such action may be taken or such right may be exercised
on the next succeeding Business Day.
d) Authorized
Shares.
The Company covenants that during the
period the Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of the Warrant Shares upon the exercise of any purchase rights under this
Warrant. The Company further covenants that its issuance of this
Warrant shall constitute full authority to its officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for the Warrant Shares upon the exercise of the purchase rights
under this Warrant. The Company will take all such reasonable action
as may be necessary to assure that such Warrant Shares may be issued as provided
herein without violation of any applicable law or regulation, or of any
requirements of the Trading Market upon which the Common Stock may be
listed. The Company covenants that all Warrant Shares which may be
issued upon the exercise of the purchase rights represented by this Warrant
will, upon exercise of the purchase rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the issue thereof
(other than taxes in respect of any transfer occurring contemporaneously with
such issue).
13
Except and to the extent as waived or
consented to by the Holder, the Company shall not by any action, including,
without limitation, amending its 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 of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against
impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this
Warrant.
Before taking any action which would
result in an adjustment in the number of Warrant Shares for which this Warrant
is exercisable or in the Exercise Price, the Company shall obtain all such
authorizations or exemptions thereof, or consents thereto, as may be necessary
from any public regulatory body or bodies having jurisdiction
thereof.
e) Jurisdiction; Governing
Law. All questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance with the laws
of the State of New York without regard to the principles of conflict of laws
thereof.
f) Restrictions. The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this
Warrant will have restrictions upon resale imposed by state and federal
securities laws.
g) Nonwaiver and
Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Holder’s rights, powers or remedies,
notwithstanding the fact that all rights hereunder terminate on the Termination
Date. If the Company willfully and knowingly fails to comply with any
provision of this Warrant, which results in any material damages to the Holder,
the Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.
h) Notices. Any
notice, request or other document required or permitted to be given or delivered
to the Holder by the Company shall be delivered to:
14
Company:
China
North East Petroleum Holdings Limited
000 Xxxx
Xxxxxx
New York,
NY 10022
FAX:
(000) 000-0000
Attn:
Xxxx Xxxx, Executive Vice President
With a
copy to:
Xxxxx
Rozynko, LLP
000
Xxxxxxxxxx Xxxxxx, Suite 1950
San
Francisco, CA 94104
FAX:
(000) 000-0000
Attn: Xxxxxxx
X. Xxxxx
Holder:
Lotusbox
Investments Limited
c/o 000,
Xxxxx Xxxx Xxxxxx
#04-04/05
Singapore
068602
FAX: x00
0000 0000
Attn: Xxxxx
The Xxx Xxxx
With a
copy to:
Xxxxxxxx
Xxxxxxxx & Schole LLP
000 Xxxx
00xx Xxxxxx
FAX:
(000) 000-0000
Attn:
Xxxxx X. Xxxxxxxx
i) Limitation of
Liability. No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
j) Remedies. Holder,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Warrant. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Warrant and hereby agrees to waive and not to assert
the defense in any action for specific performance that a remedy at law would be
adequate.
15
k) Successors and
Assigns. Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and
permitted assigns of Holder. The provisions of this Warrant are
intended to be for the benefit of all Holders from time to time of this Warrant
and shall be enforceable by any such Holder or holder of Warrant
Shares.
l) Amendment. This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Holder.
m) Severability. Wherever
possible, each provision of this Warrant shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Warrant shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Warrant.
n) Headings. The
headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.
[Signature
Page Follows]
16
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized as of the date first above
indicated.
|
CHINA
NORTH EAST PETROLEUM HOLDINGS, LIMITED
|
||
| By: | ||
| Name: | ||
| Title: | ||
17
NOTICE
OF EXERCISE
TO: CHINA NORTH EAST PETROLEUM HOLDINGS
LIMITED
(1) The
undersigned hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in full), and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.
(2) Payment
shall take the form of lawful money of the United States.
(3) Please
issue a certificate or certificates representing said Warrant Shares in the name
of the undersigned or in such other name as is specified below:
__________________________________________________________________________
The
Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
(4) Accredited
Investor. The undersigned is an “accredited investor” as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.
[SIGNATURE
OF HOLDER]
Name of
Investing Entity:
________________________________________________________________________________________________________
Signature of Authorized Signatory of
Investing Entity:
__________________________________________________________________________________
Name of
Authorized Signatory:
____________________________________________________________________________________________________
Title of
Authorized Signatory:
_____________________________________________________________________________________________________
Date:
________________________________________________________________________________________________________________________
ASSIGNMENT
FORM
(To
assign the foregoing warrant, execute
this form
and supply required information.
Do not
use this form to exercise the warrant.)
FOR VALUE
RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all
rights evidenced thereby are hereby assigned to
_________________________________________________________________________________________________________
whose address is
_______________________________________________________________________________________________________________________________.
_______________________________________________________________________________________________________________________________
Dated: ______________,
_______
Holder’s
Signature: _____________________________
Holder’s
Address: _____________________________
_____________________________
Signature
Guaranteed: ____________________________________________________________________________________________________________
NOTE: The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust
company. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.
