Exhibit 10.12
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WARRANT TO PURCHASE COMMON STOCK
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THIS WARRANT AND THE SECURITIES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE COMMON STOCK
Number of Shares: Up to 1,644,737 shares (subject to adjustment)
Warrant Price: $0.87 per share
Issuance Date: November 18, 2004
Expiration Date: November 18, 2007
THIS WARRANT CERTIFIES THAT for value received, the Holder, together with any other securities or
Mercator Advisory Group, LLC or its registered other property which the Holder is entitled to
assigns (hereinafter called the "Holder") is receive upon exercise of this Warrant, shall be
entitled to purchase from Tidelands Oil & Gas delivered to the Holder hereof, at the Company's
Corporation (hereinafter called the "Company"), expense, within a reasonable time, not exceeding
the above referenced number of fully paid and fifteen (15) calendar days, after the rights
nonassessable shares (the "Shares") of common represented by this Warrant shall have been so
stock (the "Common Stock"), of Company, at the exercised; and, unless this Warrant has expired, a
Warrant Price per Share referenced above; the new Warrant representing the number of Shares
number of shares purchasable upon exercise of this (except a remaining fractional share), if any,
Warrant referenced above being subject to with respect to which this Warrant shall not then
adjustment from time to time as described herein. have been exercised shall also be issued to the
This Warrant is issued in connection with that Holder hereof within such time. The person in
certain Stock Purchase Agreement dated as of whose name any certificate for shares of Common
November 18, 2004, by and between the Company and Stock is issued upon exercise of this Warrant
Holder (the "Subscription Agreement"). The shall for all purposes be deemed to have become
exercise of this Warrant shall be subject to the the holder of record of such shares on the date on
provisions, limitations and restrictions contained which the Warrant was surrendered and payment of
herein. the Warrant Price was received by the Company,
irrespective of the date of delivery of such
1. Term and Exercise. certificate, except that, if the date of such
surrender and payment is on a date when the stock
1.1 Term. This Warrant is exercisable in whole or transfer books of the Company are closed, such
in part (but not as to any fractional share of person shall be deemed to have become the holder
Common Stock), at any time and from time to time of such Shares at the close of business on the
after the date hereof prior to 6:00 p.m. on the next succeeding date on which the stock transfer
Expiration Date set forth above. books are open.
1.2 Warrant Price. The Warrant shall be 1.6 Restrictive Legend. Each certificate for
exercisable at the Warrant Price described above. Shares shall bear a restrictive legend in
substantially the form as follows, together with
1.3 Maximum Number of Shares. The maximum number any additional legend required by (i) any
of Shares of Common Stock exercisable pursuant to applicable state securities laws and (ii) any
this Warrant is 1,644,737 Shares. However, securities exchange upon which such Shares may, at
notwithstanding anything herein to the contrary, the time of such exercise, be listed:
in no event shall the Holder be permitted to
exercise this Warrant for a number of Shares The shares of stock evidenced by this certificate
greater than the number that would cause the have not been registered under the U.S. Securities
aggregate beneficial ownership of the Company's Act of 1933, as amended, and may not be offered,
Common Stock (calculated pursuant to Rule 13d-3 of sold, pledged or otherwise transferred
the Securities Exchange Act of 1934, as amended) ("transferred") in the absence of such
of the Holder and all persons affiliated with the registration or an applicable exemption therefrom.
Holder to equal 9.99% of the Company's Common In the absence of such registration, such shares
Stock then outstanding. may not be transferred unless, if the Company
requests, the Company has received a written
1.4 Procedure for Exercise of Warrant. Holder may opinion from counsel in form and substance
exercise this Warrant by delivering the following satisfactory to the Company stating that such
to the principal office of the Company in transfer is being made in compliance with all
accordance with Section 5.1 hereof: (i) a duly applicable federal and state securities laws.
executed Notice of Exercise in substantially the
form attached as Schedule A, (ii) payment of the Any certificate issued at any time in exchange or
Warrant Price then in effect for each of the substitution for any certificate bearing such
Shares being purchased, as designated in the legend shall also bear such legend unless, in the
Notice of Exercise, and (iii) this Warrant. opinion of counsel for the Holder thereof (which
Payment of the Warrant Price may be in cash, counsel shall be reasonably satisfactory to the
certified or official bank check payable to the Company), the securities represented thereby are
order of the Company, or wire transfer of funds to not, at such time, required by law to bear such
the Company's account (or any combination of any legend.
of the foregoing) in the amount of the Warrant
Price for each share being purchased. 1.7 Fractional Shares. No fractional Shares shall
be issuable upon exercise or conversion of the
1.5 Delivery of Certificate and New Warrant. In Warrant. In the event of a fractional interest,
the event of any exercise of the rights the number of Shares to be issued shall be rounded
represented by this Warrant, a certificate or down to the nearest whole Share.
certificates for the shares of Common Stock so
purchased, registered in the name of the Holder or
such other name or names as may be designated by
2. Representations, Warranties and Covenants. of the Company shall be combined into a smaller
number of shares, the Warrant Price in effect
2.1 Representations and Warranties. immediately prior to such combination shall be
proportionately increased, and the number of
(a) The Company is a corporation duly Shares subject to this Warrant shall be
organized, validly existing and in good standing proportionately decreased.
under the laws of its state of incorporation and
has all necessary power and authority to perform 3.2 Dividends in Common Stock, Other Stock or
its obligations under this Warrant; Property. If at any time or from time to time the
holders of Common Stock (or any shares of stock or
(b) The execution, delivery and other securities at the time receivable upon the
performance of this Warrant has been duly exercise of this Warrant) shall have received or
authorized by all necessary actions on the part of become entitled to receive, without payment
the Company and constitutes the legal, valid and therefor:
binding obligation of the Company, enforceable
against the Company in accordance with its terms; (a) Common Stock, Options or any shares
and or other securities which are at any time directly
or indirectly convertible into or exchangeable for
(c) This Warrant does not violate and is Common Stock, or any rights or options to
not in conflict with any of the provisions of the subscribe for, purchase or otherwise acquire any
Company's Articles of Incorporation or Certificate of the foregoing by way of dividend or other
of Determination, Bylaws and any resolutions of distribution;
the Company's Board of Directors or stockholders,
or any agreement of the Company, and no event has (b) any cash paid or payable otherwise
occurred and no condition or circumstance exists than as a regular cash dividend; or
that might (with or without notice or lapse of
time) constitute or result directly or indirectly (c) Common Stock or additional shares or
in such a violation or conflict. other securities or property (including cash) by
way of spin-off, split-up, reclassification,
2.2 Issuance of Shares. The Company covenants and combination of shares or similar corporate
agrees that all shares of Common Stock that may be rearrangement (other than Common Stock issued as a
issued upon the exercise of the rights represented stock split or adjustments in respect of which
by this Warrant will, upon issuance, be validly shall be covered by the terms of Section 3.1
issued, fully paid and nonassessable, and free above) and additional shares, other securities or
from all taxes, liens and charges with respect to property issued in connection with a Change (as
the issue thereof. The Company further covenants defined below) (which shall be covered by the
and agrees that it will pay when due and payable terms of Section 3.4 below), then and in each such
any and all federal and state taxes which may be case, the Holder hereof shall, upon the exercise
payable in respect of the issue of this Warrant or of this Warrant, be entitled to receive, in
any Common Stock or certificates therefor issuable addition to the number of shares of Common Stock
upon the exercise of this Warrant. The Company receivable thereupon, and without payment of any
further covenants and agrees that the Company will additional consideration therefor, the amount of
at all times have authorized and reserved, free stock and other securities and property (including
from preemptive rights, a sufficient number of cash in the cases referred to in clause (b) above
shares of Common Stock to provide for the exercise and this clause (c)) which such Holder would hold
in full of the rights represented by this Warrant. on the date of such exercise had such Holder been
If at any time the number of authorized but the holder of record of such Common Stock as of
unissued shares of Common Stock of the Company the date on which holders of Common Stock received
shall not be sufficient to effect the exercise of or became entitled to receive such shares or all
the Warrant in full, subject to the limitations other additional stock and other securities and
set forth in Section 1.3 hereto, then the Company property.
will take all such corporate action as may, in the
opinion of counsel to the Company, be necessary or 3.3 Reorganization, Reclassification,
advisable to increase the number of its authorized Consolidation, Merger or Sale. If any
shares of Common Stock as shall be sufficient to recapitalization, reclassification or
permit the exercise of the Warrant in full, reorganization of the share capital of the
subject to the limitations set forth in Section Company, or any consolidation or merger of the
1.3 hereto, including without limitation, using Company with another corporation, or the sale of
its best efforts to obtain any necessary all or substantially all of its shares and/or
stockholder approval of such increase. The Company assets or other transaction (including, without
further covenants and agrees that if any shares of limitation, a sale of substantially all of its
capital stock to be reserved for the purpose of assets followed by a liquidation) shall be
the issuance of shares upon the exercise of this effected in such a way that holders of Common
Warrant require registration with or approval of Stock shall be entitled to receive shares,
any governmental authority under any federal or securities or other assets or property (a
state law before such shares may be validly issued "Change"), then, as a condition of such Change,
or delivered upon exercise, then the Company will lawful and adequate provisions shall be made by
in good faith and as expeditiously as possible the Company whereby the Holder hereof shall
endeavor to secure such registration or approval, thereafter have the right to purchase and receive
as the case may be. If and so long as the Common (in lieu of the Common Stock of the Company
Stock issuable upon the exercise of this Warrant immediately theretofore purchasable and receivable
is listed on any national securities exchange or upon the exercise of the rights represented
the Nasdaq Stock Market, the Company will, if hereby) such shares, securities or other assets or
permitted by the rules of such exchange or market, property as may be issued or payable with respect
list and keep listed on such exchange or market, to or in exchange for the number of outstanding
upon official notice of issuance, all shares of Common Stock which such Holder would have been
such Common Stock issuable upon exercise of this entitled to receive had such Holder exercised this
Warrant. Warrant immediately prior to the consummation of
such Change. The Company or its successor shall
3. Other Adjustments. promptly issue to Holder a new Warrant for such
new securities or other property. The new Warrant
3.1 Subdivision or Combination of Shares. In case shall provide for adjustments which shall be as
the Company shall at any time subdivide its nearly equivalent as may be practicable to give
outstanding Common Stock into a greater number of effect to the adjustments provided for in this
shares, the Warrant Price in effect immediately Section 3 including, without limitation,
prior to such subdivision shall be proportionately adjustments to the Warrant Price and to the number
reduced, and the number of Shares subject to this of securities or property issuable upon exercise
Warrant shall be proportionately increased, and of the new Warrant. The provisions of this Section
conversely, in case the outstanding Common Stock 3.3 shall similarly apply to successive Changes.
4. Ownership and Transfer. notice is promptly given by depositing the same in
the mail, postage prepaid and addressed to the
4.1 Ownership of This Warrant. The Company may party as set forth below or (b) the receiving
deem and treat the person in whose name this party delivers a written confirmation of receipt
Warrant is registered as the holder and owner for such notice by any other method permitted
hereof (notwithstanding any notations of ownership under this paragraph; and further provided that
or writing hereon made by anyone other than the any notice given by facsimile received after 5:00
Company) for all purposes and shall not be p.m. (recipient's time) or on a non-business day
affected by any notice to the contrary until shall be deemed received on the next business day;
presentation of this Warrant for registration of (iii) five (5) business days after deposit in the
transfer as provided in this Section 4. United States mail, certified, return receipt
requested, postage prepaid, and addressed to the
party as set forth below; or (iv) the next
4.2 Transfer and Replacement. This Warrant and all business day after deposit with an international
rights hereunder are transferable in whole or in overnight delivery service, postage prepaid,
part upon the books of the Company by the Holder addressed to the party as set forth below with
hereof in person or by duly authorized attorney, next business day delivery guaranteed; provided
and a new Warrant or Warrants, of the same tenor that the sending party receives confirmation of
as this Warrant but registered in the name of the delivery from the delivery service provider.
transferee or transferees (and in the name of the
Holder, if a partial transfer is effected) shall 5.3 No Rights as Shareholder; Limitation of
be made and delivered by the Company upon Liability. This Warrant shall not entitle the
surrender of this Warrant duly endorsed, at the Holder to any of the rights of a shareholder of
office of the Company in accordance with Section the Company except upon exercise in accordance
5.1 hereof. Upon receipt by the Company of with the terms hereof. No provision hereof, in the
evidence reasonably satisfactory to it of the absence of affirmative action by the Holder to
loss, theft or destruction, and, in such case, of purchase shares of Common Stock, and no mere
indemnity or security reasonably satisfactory to enumeration herein of the rights or privileges of
it, and upon surrender of this Warrant if the Holder, shall give rise to any liability of
mutilated, the Company will make and deliver a new the Holder for the Warrant Price hereunder or as a
Warrant of like tenor, in lieu of this Warrant; shareholder of the Company, whether such liability
provided that if the Holder hereof is an is asserted by the Company or by creditors of the
instrumentality of a state or local government or Company.
an institutional holder or a nominee for such an
instrumentality or institutional holder an 5.4 Governing Law. This Warrant shall be governed
irrevocable agreement of indemnity by such Holder by and construed in accordance with the laws of
shall be sufficient for all purposes of this the State of California as applied to agreements
Warrant, and no evidence of loss or theft or among California residents made and to be
destruction shall be necessary. This Warrant shall performed entirely within the State of California,
be promptly cancelled by the Company upon the without giving effect to the conflict of law
surrender hereof in connection with any transfer principles thereof.
or replacement. Except as otherwise provided
above, in the case of the loss, theft or 5.5 Binding Effect on Successors. This Warrant
destruction of a Warrant, the Company shall pay shall be binding upon any corporation succeeding
all expenses, taxes and other charges payable in the Company by merger, consolidation or
connection with any transfer or replacement of acquisition of all or substantially all of the
this Warrant, other than income taxes and stock Company's assets and/or securities. All of the
transfer taxes (if any) payable in connection with obligations of the Company relating to the Shares
a transfer of this Warrant, which shall be payable issuable upon the exercise of this Warrant shall
by the Holder. Holder will not transfer this survive the exercise and termination of this
Warrant and the rights hereunder except in Warrant. All of the covenants and agreements of
compliance with federal and state securities laws the Company shall inure to the benefit of the
and except after providing evidence of such successors and assigns of the Holder.
compliance reasonably satisfactory to the Company.
5.6 Waiver, Amendments and Headings. This Warrant
5. Miscellaneous Provisions. and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in
5.1 Notices. Any notice or other document required writing signed by both parties (either generally
or permitted to be given or delivered to the or in a particular instance and either
Holder shall be delivered or forwarded to the retroactively or prospectively). The headings in
Holder at c/o Mercator Advisory Group, LLC, 555 this Warrant are for purposes of reference only
Xxxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx, and shall not affect the meaning or construction
California 90071, Attention: Xxxxx X. Xxxxxxxxx of any of the provisions hereof.
(Facsimile No. 213/553-8285), or to such other
address or number as shall have been furnished to 5.7 Jurisdiction. Each of the parties irrevocably
the Company in writing by the Holder, with a copy agrees that any and all suits or proceedings based
to Xxxxxxxx Xxxxxx Xxxxxxx & Hampton LLP, 333 on or arising under this Agreement may be brought
South Hope Street, 48th Floor, Los Angeles, only in and shall be resolved in the federal or
California 90071-1448 Attention Xxxxx X. Xxxxx state courts located in the City of Los Angeles,
(Facsimile No. 213/620-1398). Any notice or other California and consents to the jurisdiction of
document required or permitted to be given or such courts for such purpose. Each of the parties
delivered to the Company shall be delivered or irrevocably waives the defense of an inconvenient
forwarded to the Company at ____________, with a forum to the maintenance of such suit or
copy to __________, ________ Attention: ________ proceeding in any such court. Each of the parties
(Facsimile No. ___), or to such other address or further agrees that service of process upon such
number as shall have been furnished to Holder in party mailed by first class mail to the address
writing by the Company. set forth in Section 5.1 shall be deemed in every
respect effective service of process upon such
5.2 All notices, requests and approvals required party in any such suit or proceeding. Nothing
by this Warrant shall be in writing and shall be herein shall affect the right of a Holder to serve
conclusively deemed to be given (i) when process in any other manner permitted by law. Each
hand-delivered to the other party, (ii) when of the parties agrees that a final non-appealable
received if sent by facsimile at the address and judgment in any such suit or proceeding shall be
number set forth above; provided that notices conclusive and may be enforced in other
given by facsimile shall not be effective, unless jurisdictions by suit on such judgment or in any
either (a) a duplicate copy of such facsimile other lawful manner.
5.8 Attorneys' Fees and Disbursements. If any
action at law or in equity is necessary to enforce
or interpret the terms of this Agreement, the
prevailing party or parties shall be entitled to
receive from the other party or parties reasonable
attorneys' fees and disbursements in addition to
any other relief to which the prevailing party or
parties may be entitled.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly
authorized officer this 18 day of November, 2004.
COMPANY:
TIDELANDS OIL & GAS CORPORATION
By_____________________________
Print Name:____________________
Title:_________________________
SCHEDULE A
FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of the Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby elects to purchase _______ shares of Common Stock (the
"Shares") of Tidelands Oil & Gas Corporation under the Warrant to Purchase
Common Stock dated November __ , 2004, which the undersigned is entitled to
purchase pursuant to the terms of such Warrant. The undersigned has delivered
$_________, the aggregate Warrant Price for _____ Shares purchased herewith, in
full in cash or by certified or official bank check or wire transfer.
Please issue a certificate or certificates representing such shares of
Common Stock in the name of the undersigned or in such other name as is
specified below and in the denominations as is set forth below:
_______________________________________________________________________
[Type Name of Holder as it should appear on the stock certificate]
_______________________________________________________________________
[Requested Denominations - if no denomination is specified, a single
certificate will be issued]
The initial address of such Holder to be entered on the books of
Company shall be:
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
The undersigned hereby represents and warrants that the undersigned is
acquiring such shares for his own account for investment purposes only, and not
for resale or with a view to distribution of such shares or any part thereof.
By:____________________________________
Print Name:____________________________
Title:_________________________________
Dated:_________________________________
FORM OF ASSIGNMENT
(ENTIRE)
[To be signed only upon transfer of entire Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns
and transfers unto _______________________________ all rights of the undersigned
under and pursuant to the within Warrant, and the undersigned does hereby
irrevocably constitute and appoint _____________________ Attorney to transfer
the said Warrant on the books of _________________, with full power of
substitution.
______________________________________
[Type Name of Holder]
By:___________________________________
Title:________________________________
Dated:________________________________
NOTICE
The signature to the foregoing Assignment must correspond exactly to the name as
written upon the face of the within Warrant, without alteration or enlargement
or any change whatsoever.
FORM OF ASSIGNMENT
(PARTIAL)
[To be signed only upon partial transfer of Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns and
transfers unto ____________________________ (i) the rights of the undersigned to
purchase ____________________ shares of Common Stock under and pursuant to the
within Warrant, and (ii) on a non-exclusive basis, all other rights of the
undersigned under and pursuant to the within Warrant, it being understood that
the undersigned shall retain, severally (and not jointly) with the transferee(s)
named herein, all rights assigned on such non-exclusive basis. The undersigned
does hereby irrevocably constitute and appoint __________________________
Attorney to transfer the said Warrant on the books of Tidelands Oil & Gas
Corporation, with full power of substitution.
______________________________________
[Type Name of Holder]
By:___________________________________
Title:________________________________
Dated:________________________________
NOTICE
The signature to the foregoing Assignment must correspond exactly to the name as
written upon the face of the within Warrant, without alteration or enlargement
or any change whatsoever.
