Contract
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
PETROALGAE INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to
Purchase up to 357,143 Shares of Common Stock of
(subject
to adjustment as provided herein)
COMMON
STOCK PURCHASE WARRANT
|
Issue
Date: December 24, 2009
|
PETROALGAE
INC., a corporation organized under the laws of the State of Delaware (the
“Company”), hereby
certifies that, for value received, Green Science Energy LLC, 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 prior to
December 24, 2014, up to three hundred fifty-seven thousand one hundred
forty-three (357,143) (subject to adjustment as provided herein) fully paid and
nonassessable shares of Common Stock (as hereinafter defined), par value $0.001,
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 “Common Stock”
includes (i) the Company’s Common Stock, par value $0.001; 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.
(b) The
term “Company” shall
include PetroAlgae Inc. and any person or entity which shall succeed, or assume
the obligations of, PetroAlgae Inc. hereunder.
(c) The
“Exercise Price”
applicable under this Warrant shall be $15.00 per share, subject to adjustment
as provided herein.
(d) The
term “Other Securities”
refers to any stock (other than Common Stock) and other securities of the
Company or any other person (corporate or otherwise) which the holder of the
Warrant at any time shall be entitled to receive, or shall have received, on the
exercise of the Warrant, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 4 or
otherwise.
1. Exercise of
Warrant.
1.1 Number of Shares Issuable
upon Exercise. From and after the date hereof, 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”), three hundred fifty-seven
thousand one hundred forty-three (357,143) 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 Global Market, the Global Select Market or
the 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 NASDAQ 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, 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 hereof acknowledge in writing
its continuing obligation to afford to such holder any rights to which such
holder shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant. If the holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to such holder any such rights.
2
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 either (i) in cash of immediately available funds 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 (b) 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.
3
(b) Notwithstanding
any provisions herein to the contrary, if the Fair Market Value of one share of
Common Stock is greater than the Exercise Price (at the date of calculation as
set forth below), in lieu of exercising this Warrant for 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. If there occurs any capital
reorganization or any reclassification of the Common Stock of the Company, the
consolidation or merger of the Company with or into another person or entity
(other than a merger or consolidation of the Company in which the Company is the
continuing entity and which does not result in any reorganization or
reclassification of its outstanding Common Stock) or the sale or conveyance of
all or substantially all of the assets of the Company to another person or
entity, then, as a condition precedent to any such reorganization,
reclassification, consolidation, merger, sale or conveyance, the Holder will be
entitled to receive upon surrender of this Warrant to the Company (x) to the
extent there are cash proceeds resulting from the consummation of such
reorganization, reclassification, consolidation, merger, sale or conveyance, in
exchange for this Warrant, cash in an amount equal to the cash proceeds that
would have been payable to the Holder had the Holder exercised this Warrant in
its entirety immediately prior to the consummation of such reorganization,
reclassification, consolidation, merger, sale or conveyance, less the aggregate
exercise price payable upon exercise of this Warrant in its entirety, and (y) to
the extent that the Holder would be entitled to receive securities (in addition
to or in lieu of cash in connection with any such reorganization,
reclassification, consolidation, merger, sale or conveyance), the same kind and
amounts of securities or other assets, or both, that are issuable or
distributable to the holders of outstanding Common Stock of the Company with
respect to their Common Stock upon such reorganization, reclassification,
consolidation, merger, sale or conveyance, as would have been deliverable to the
Holder had the Holder exercised this Warrant in its entirety immediately prior
to the consummation of such reorganization, reclassification, consolidation,
merger, sale or conveyance less an amount of such securities having a value
equal to the aggregate exercise price payable upon exercise of this Warrant in
its entirety.
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.
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.
3.4 Restricted
Securities. The Holder understands that this Warrant and the
shares of Common Stock issuable upon exercise of this Warrant, will not be
registered at the time of their issuance under the Securities Act of 1933 (the
“Securities Act”) for the reason that the sale provided for herein is exempt
based on the representations of the Holder set forth herein. The
Holder represents that it is experienced in evaluating companies such as the
Company, has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of its investment, and has the
ability to suffer the total loss of the investment. The Holder
further represents that it has had the opportunity to ask questions of and
receive answers from the Company concerning the terms and conditions of this
Warrant, the business of the Company, and to obtain additional information to
such Holder’s satisfaction. The Holder further represents that it is
an “accredited investor” within the meaning of Regulation D under the Securities
Act, as presently in effect. The Holder further represents that this
Warrant is being acquired for the account of the Holder for investment only and
not with a view to, or with any intention of, a distribution or resale thereof,
in whole or in part, or the grant of any participation therein.
3.5 Compliance with the
Securities Act. The Holder, by acceptance hereof, agrees that
this Warrant, and the shares of Common Stock issuable upon exercise of this
Warrant, are being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Warrant, or any shares of Common Stock
issuable upon exercise of this Warrant, except under circumstances which will
not result in a violation of the Securities Act, or any applicable state
securities laws.
5
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, (c) combine its
outstanding shares of the Common Stock into a smaller number of shares of the
Common Stock, then, in each such event, (i) 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 number of issued and outstanding shares of Common
Stock immediately after such any such event, and (b) the denominator is the
number of issued and outstanding shares of Common Stock immediately prior to any
such event, and (ii) the Exercise Price shall be accordingly adjusted so that
the aggregate Exercise Price prior to such adjustment shall equal to the
aggregate Exercise Price following such adjustment.
5. Certificate as to
Adjustments. In each case of any adjustment or readjustment
(i) in the shares of Common Stock (or Other Securities) issuable on the exercise
of this Warrant, (ii) of the Exercise Price, or (iii) the Effective Per Share
Price, 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, the
Effective Per Share 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 9 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, a legal opinion from the Transferor’s counsel (at the Company’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.
6
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. Warrant
Agent. The Company may, by written notice to the each Holder
of the Warrant, appoint an agent for the purpose of issuing Common Stock (or
Other Securities) on the exercise of this Warrant pursuant to Section 1,
exchanging this Warrant pursuant to Section 7, and replacing this Warrant
pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.
10. 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.
11. Rights of
Shareholders. No Holder shall be entitled to vote or receive
dividends or be deemed the holder of the shares of Common Stock or any other
securities of the Company which may at any time be issuable upon exercise of
this Warrant for any purpose (the “Warrant Shares”), nor shall
anything contained herein be construed to confer upon the Holder, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon the recapitalization, issuance of shares, reclassification of shares,
change of nominal value, consolidation, merger, conveyance or otherwise) or to
receive notice of meetings, or to receive dividends or subscription rights or
otherwise, in each case, until the earlier to occur of (x) the date of actual
delivery to Holder (or its designee) of the Warrant Shares issuable upon the
exercise hereof or (y) the third business day following the date such Warrant
Shares first become deliverable to Holder, as provided herein.
12. 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.
7
13. 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 STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE
STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE HOLDER MAY CHOOSE TO WAIVE THIS
PROVISION AND BRING AN ACTION OUTSIDE THE STATE OF NEW YORK. The
individuals executing this Warrant on behalf of the Company agree to submit to
the jurisdiction of such courts and waive trial by jury. The
prevailing party shall be entitled to recover from the other party its
reasonable attorneys’ fees and costs. In the event that any provision
of this Warrant is invalid or unenforceable under any applicable statute or rule
of law, then such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with such statute
or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of this Warrant. The headings in this Warrant are
for purposes of reference only, and shall not limit or otherwise affect any of
the terms hereof. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision hereof. The Company acknowledges that legal counsel
participated in the preparation of this Warrant and, therefore, stipulates that
the rule of construction that ambiguities are to be resolved against the
drafting party shall not be applied in the interpretation of this Warrant to
favor any party against the other party.
[BALANCE
OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE
PAGE FOLLOWS]
8
IN
WITNESS WHEREOF, the Company has executed this Warrant as of the date first
written above.
|
WITNESS:
|
|||
|
|
By:
|
/s/
Xxxxx Xxxxxxx
|
|
|
/s/
Xxxxx Xxxxxx
|
Name:
|
Xxxxx
Xxxxxxx
|
|
|
|
Title:
|
President
|
|
9
EXHIBIT
A TO WARRANT
FORM
OF SUBSCRIPTION
(To Be
Signed Only On Exercise Of Warrant)
|
TO:
|
|
|
_____________________
|
|
|
_____________________
|
|
Attention: Chief
Financial Officer
The
undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), 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:
|
||||
10
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 PetroAlgae 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 PetroAlgae 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)
|
||||
11
