Contract
Exhibit
4.2
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 BLAST ENERGY SERVICES, INC.
THAT
SUCH
REGISTRATION IS NOT REQUIRED.
Right
to
Purchase up to 6,090,000 Shares of Common Stock of
(subject
to adjustment as provided herein)
COMMON
STOCK PURCHASE WARRANT
|
Issue
Date: August 25, 2006
|
BLAST
ENERGY SERVICES, INC.,
a
corporation organized under the laws of the State of California (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 (as defined herein) from
and
after the Issue Date of this Warrant and at any time or from time to time before
5:00 p.m., New York time, through the close of business August 25, 2013 (the
“Expiration Date”),
up to
6,090,000 fully paid and nonassessable shares of Common Stock (as hereinafter
defined), par value of $0.001 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 mean Blast Energy Services, Inc. and any person or entity which
shall succeed, or assume the obligations of, Blast Energy Services, Inc.
hereunder.
(b) The
term
“Common Stock” shall mean (i) the Company’s Common Stock, no par value 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
“Exercise Price” shall mean a price of $1.44.
(d) The
term
“Other Securities” shall mean 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 date hereof through and
including the Expiration 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. Fair
Market Value. For purposes hereof, the “Fair Market Value” of a share of Common
Stock as of a particular date (the “Determination Date”) shall
mean:
(a) If
the
Company’s Common Stock is traded on the American Stock Exchange or another
national exchange or is quoted on the National or Capital Market of The Nasdaq
Stock Market, Inc.(“Nasdaq”), then the closing or last sale price, respectively,
reported for the last business day immediately preceding the Determination
Date.
(b) If
the
Company’s Common Stock is not traded on the American Stock Exchange or another
national exchange or on the Nasdaq but is traded on the NASD Over the Counter
Bulletin Board, then the mean of the average of the closing bid and asked prices
reported for the last business day immediately preceding the Determination
Date.
(c) Except
as
provided in clause (d) below, if the Company’s Common Stock is not publicly
traded, then as the Holder and the Company agree or in the absence of agreement
by arbitration in accordance with the rules then in effect of the American
Arbitration Association, before a single arbitrator to be chosen from a panel
of
persons qualified by education and training to pass on the matter to be
decided.
(d) If
the
Determination Date is the date of a liquidation, dissolution or winding up,
or
any event deemed to be a liquidation, dissolution or winding up pursuant to
the
Company’s charter, then all amounts to be payable per share to holders of the
Common Stock pursuant to the charter in the event of such liquidation,
dissolution or winding up, plus all other amounts to be payable per share in
respect of the Common Stock in liquidation under the charter, assuming for
the
purposes of this clause (d) that all of the shares of Common Stock then issuable
upon exercise of the Warrant are outstanding at the Determination
Date.
1.3. Company
Acknowledgment. The Company will, at the time of the exercise of this Warrant,
upon the request of the Holder 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.
1.4. Trustee
for Warrant Holders. In the event that a bank or trust company shall have been
appointed as trustee for the Holders of this Warrant 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, plus,
in
lieu of any fractional share to which such holder would otherwise be entitled,
cash equal to such fraction multiplied by the then Fair Market Value of one
full
share, 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.
(a) Payment
may be made in cash by wire transfer 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 per 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.
(b) Notwithstanding
the provisions of subsection (a) above to the contrary, if at the time the
Holder exercises this Warrant a Registration Statement (as defined in the
Registration Rights Agreement entered into by the Company and the Holder dated
as of the date hereof, as the same may be amended, restated, supplemented and/or
otherwise modified from time to time, the “Registration Rights Agreement”)
covering the Common Stock issuable to the Holder upon exercise of this Warrant
shall not have been declared effective under the Securities Act (as hereafter
defined) in accordance with the terms of the Registration Rights Agreement,
payment may be made, in the Holder’s discretion, either (i) in cash by wire
transfer or by certified or official bank check payable to the order of the
Company equal to the applicable aggregate Exercise Price, (ii) by delivery
of
this
Warrant, or shares of Common Stock and/or Common Stock receivable upon exercise
of this Warrant in accordance with the formula set forth in subsection (c)
below, or (iii) by a combination of any of the foregoing methods, 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 per 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.
(c) In
accordance with subsection (b) above, 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 cash, the Holder may
elect to receive shares equal to the value (as determined below) of this Warrant
(or the portion thereof being exercised) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Exercise
Notice in which event the Company shall issue to the Holder a number of shares
of Common Stock computed using the following formula:
|
X=
|
Y(A-B)
|
||
|
A
|
|||
|
Where
X =
|
the
number of shares of Common Stock to be issued to the
Holder
|
||
|
Y
=
|
the
number of shares of Common Stock purchasable under this Warrant
or, if
only a portion of this Warrant is being exercised, the portion
of this
Warrant being exercised (at the date of such
calculation)
|
||
|
A
=
|
the
Fair Market Value of one share of the Company’s Common Stock (at the date
of such calculation)
|
||
|
B
=
|
the
Exercise Price per share (as adjusted to the date of such
calculation)
|
||
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. 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 Transferor’s expense) that such transfer
is exempt from the registration 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.
8. 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.
9. Registration
Rights.
The
Holder has been granted certain registration rights by the Company. These
registration rights are set forth in a Registration Rights 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. Maximum
Exercise.
Notwithstanding anything herein to the contrary, in no event shall the Holder
be
entitled to exercise any portion of this Warrant in excess of that portion
of
this Warrant upon exercise of which the sum of (1) the number of shares of
Common Stock beneficially owned by the Holder and its Affiliates (other than
shares of Common Stock which may be deemed beneficially owned through the
ownership of the unexercised portion of the Warrant or the unexercised or
unconverted portion of any other security of the Holder subject to a limitation
on conversion analogous to the limitations contained herein) and (2) the number
of shares of Common Stock issuable upon the exercise of the portion of this
Warrant with respect to which the determination of this proviso is being made,
would result in beneficial ownership by the Holder and its Affiliates of any
amount greater than 4.99% of the then outstanding shares of Common Stock
(whether or not, at the time of such exercise, the Holder and its Affiliates
beneficially own more than 4.99% of the then outstanding shares of Common
Stock). As used herein, the term “Affiliate” means any person or entity that,
directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a person or entity, as such terms
are used in and construed under Rule 144 under the Securities Act of 1933,
as
amended (the “Securities Act”). For purposes of the proviso to the second
preceding sentence, beneficial ownership shall be determined in accordance
with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and
Regulations 13D-G thereunder, except as otherwise provided in clause (1) of
such
proviso. The limitations set forth herein (x) may be waived by the Holder
upon provision of no less than sixty-one (61) days prior notice to the Company
and (y) shall automatically become null and void following notice to the Company
upon the occurrence and during the continuance of an Event of Default (as
defined in the Note referred to in the Securities Purchase Agreement dated
as of
the date hereof among the Holder and the Company (as amended, modified, restated
and/or supplemented from time to time, the “Purchase Agreement”)).
11. Warrant
Agent.
The
Company may, by written notice to the 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.
IN
WITNESS WHEREOF, the Company has executed this Warrant as of the date first
written above.
|
WITNESS:
|
|
|
By:
/s/
Xxxx X’Xxxxx
|
|
|
Name:
Xxxx X’Xxxxx
|
|
|
/s/
Xxxx XxxXxxxxx
|
Title:
EVP, CFO, Co-CEO
|
Exhibit
A
FORM
OF SUBSCRIPTION
(To
Be
Signed Only On Exercise Of Warrant)
00000
Xxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxxx,
XX 00000
Attention:
Chief Financial Officer
The
undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____) (as amended, restated or otherwise modified from time to time, the
“Warrant”; capitalized terms used but not defined in this notice shall have the
meanings ascribed thereto in the Warrant), hereby irrevocably elects to purchase
(check applicable box):
|
________
shares of the Common Stock covered by such Warrant; or
|
|
|
the
maximum number of shares of Common Stock covered by such Warrant
pursuant
to the cashless exercise procedure set forth in Section
2.
|
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 (check applicable box or boxes):
|
$__________
in lawful money of the United States; and/or
|
|
|
the
cancellation of such portion of the attached Warrant as is exercisable
for
a total of _______ shares of Common Stock (using a Fair Market Value
of
$_______ per share for purposes of this calculation);
and/or
|
|
|
the
cancellation of such number of shares of Common Stock as is necessary,
in
accordance with the formula set forth in Section 2.2, to exercise
this
Warrant with respect to the maximum number of shares of Common Stock
purchasable pursuant to the cashless exercise procedure set forth
in
Section 2.
|
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 Blast Energy Services, 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 Blast Energy
Services, Inc. with full power of substitution in the premises.
|
Transferees
|
Address
|
Percentage
Transferred
|
Number
Transferred
|
|
Dated:
|
|
|
(Signature
must conform to name of holder as specified on the face of the
Warrant)
Address:
|
|
|
SIGNED
IN THE PRESENCE OF:
(Name)
|
|
|
ACCEPTED
AND AGREED:
[TRANSFEREE]
(Name)
|
