SURGE GLOBAL ENERGY, INC. WARRANT TO PURCHASE SHARES
Exhibit
10.11
THIS
WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXCLUSION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT PROVIDED BY REGULATION S (“REGULATION S”)
PROMULGATED UNDER THE SECURITIES ACT. THIS WARRANT AND THE UNDERLYING SECURITIES
MAY NOT BE REOFFERED FOR SALE OR RESOLD OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT. THIS WARRANT MAY NOT BE EXERCISED
IN
THE UNITED STATES OR BY OR ON BEHALF OF ANY PERSON IN THE UNITED STATES OR
BY OR
ON BEHALF OF ANY U.S. PERSON UNLESS THIS WARRANT AND THE UNDERLYING SECURITIES
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT AND THE APPLICABLE SECURITIES
LEGISLATION OF ANY SUCH STATE OR AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS IS AVAILABLE. HEDGING TRANSACTIONS INVOLVING THIS WARRANT AND
THE
UNDERLYING SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE
SECURITIES ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S
UNDER THE SECURITIES ACT.
Void
after
March
2,
2010
WARRANT
TO PURCHASE SHARES
This
Warrant is issued to 1304146 Alberta Ltd, a corporation organized under the
law
of Alberta, Canada (the “Holder”),
by
Surge Global Energy, Inc., a Delaware corporation (the “Company”),
in
connection with that certain promissory note made by the Company in favor of
the
Holder, on even date herewith, in the principal amount of CDN$1.5 Million due
and payable on August 30, 2007 (“Note
#3”).
Notwithstanding anything to the contrary in this Warrant, this Warrant shall
become effective only on that date upon which the Company has paid the entire
outstanding balance of Note #3 in full pursuant to the provisions of Note #3
(the “Effective
Date”).
If
the Company fails to pay the Note in full, this Warrant shall be void
ab
initio
and be
of no force or effect.
1. Purchase
of Shares.
Subject
to the terms and conditions hereinafter set forth, the Holder is entitled,
upon
surrender of this Warrant at the principal office of the Company (or at such
other place as the Company shall notify the Holder in writing), to purchase
from
the Company up to the number of fully paid and nonassessable Warrant Shares
(as
defined below), that equals the quotient obtained by dividing (a) 1,000,000
by (b) the Exercise Price (as defined below).
2. Definitions.
(a) CDN.
The
term “CDN” means dollars in lawful currency of Canada.
(b) Change
of Control.
The
term “Change
of Control”
shall
mean (i) any consolidation or merger involving the Company pursuant to
which the Company’s stockholders own less than fifty percent (50%) of the voting
securities of the surviving entity or (ii) the sale of all or substantially
all of the assets of the Company.
-1-
(c) Exercise
Price.
The
exercise price for the Warrant Shares shall be USD$1.00 per share (such price,
as adjusted from time to time, is herein referred to as the “Exercise
Price”).
(d) Exercise
Period.
This
Warrant shall be exercisable, in whole or in part, during the term commencing
the Effective Date and ending on the expiration of this Warrant pursuant to
Section 14 hereof.
(e) Regulation S.
The
term “Regulation
S”
means
Regulation S under the Securities Act.
(f) Securities
Act.
The
term “Securities
Act”
means
the United States Securities Act of 1933, as amended.
(g) Shares.
The
term “Shares”
means
shares of the Company’s Common Stock.
(h) USD.
The
term “USD” means dollars in lawful currency of the United States.
(i) U.S.
Person.
The
term “U.S.
Person”
means
a
“U.S. person” as such term is defined in Rule 902(k) of Regulation S promulgated
under the Securities Act, as presently in effect.
(j) United
States.
The
term “United
States”
means
United States of America, its territories and possessions, any state of the
United States and the District of Columbia.
(k) Warrant
Shares.
The
term “Warrant
Shares”
means
the Shares issuable upon exercise of the Warrants.
3. Method
of Exercise.
While
this Warrant remains outstanding and exercisable in accordance with
Section 2 above, the Holder may exercise, in whole or in part, the purchase
rights evidenced hereby. Such exercise shall be effected by:
(i) the
surrender of the Warrant, together with a notice of exercise to the Secretary
of
the Company (provided, however, the Warrant may not be exercised within the
United States or by a U.S. Person, and the Warrant Shares may not be delivered
within the United States upon exercise, unless registered under the Securities
Act or an exemption from such registration is available); and
(ii) the
payment to the Company of an amount equal to the aggregate Exercise Price for
the number of Warrant Shares being purchased.
4. Net
Exercise.
In lieu
of cash exercising this Warrant, the Holder may elect to receive shares equal
to
the value of this Warrant (or the portion thereof being canceled) by surrender
of this Warrant to the Secretary of the Company together with notice of such
election (subject, however, to the limitations set forth in the parenthetical
language in Section 3(i) above), in which event the Company shall issue to
the
Holder a number of Warrant Shares computed using the following
formula:
|
Y
(A-B)
|
|
|
X
=
|
A
|
Where
X
— The
number of Shares to be issued to the Holder.
-2-
Y
— The
number of Shares purchasable under this Warrant.
A
— The
fair
market value of one Share.
B
— The
Exercise Price (as adjusted to the date of such calculations).
For
purposes of this Section 4, the fair market value of a Share shall mean the
average of the closing bid and asked prices of Shares quoted in the
over-the-counter market in which the Shares are traded or the closing price
quoted on any exchange on which the Shares are listed, whichever is applicable,
as published in the Western Edition of The
Wall Street Journal
for the
ten (10) trading days prior to the date of determination of fair market
value (or such shorter period of time during which such stock was traded
over-the-counter or on such exchange). If the Shares are not traded on the
over-the-counter market or on an exchange, the fair market value shall be the
price per Share that the Company could obtain from a willing buyer for Shares
sold by the Company from authorized but unissued Shares, as such prices shall
be
determined in good faith by the Company’s Board of Directors.
5. Certificates
for Warrant Shares.
Upon
the exercise of the purchase rights evidenced by this Warrant, one or more
certificates for the number of Warrant Shares so purchased shall be issued
as
soon as practicable thereafter, and in any event within ten (10) days of the
delivery of the subscription notice.
6. Issuance
of Warrant Shares.
The
Company covenants that the Warrant Shares, when issued pursuant to the exercise
of this Warrant, will be duly and validly issued, fully paid and nonassessable
and free from all taxes, liens, and charges with respect to the issuance
thereof.
7. Adjustment
of Exercise Price and Number of Shares.
The
number of and kind of securities purchasable upon exercise of this Warrant
and
the Exercise Price shall be subject to adjustment from time to time as
follows:
(a) Subdivisions,
Combinations and Other Issuances.
If the
Company shall at any time prior to the expiration of this Warrant subdivide
the
Shares, by split up or otherwise, or combine its Shares, or issue additional
shares of its Shares as a dividend, the number of Warrant Shares shall forthwith
be proportionately increased in the case of a subdivision or stock dividend,
or
proportionately decreased in the case of a combination. Appropriate adjustments
shall also be made to the purchase price payable per share, but the aggregate
purchase price payable for the total number of Warrant Shares (as adjusted)
shall remain the same. Any adjustment under this Section 7(a) shall
become effective at the close of business on the date the subdivision or
combination becomes effective, or as of the record date of such dividend, or
in
the event that no record date is fixed, upon the making of such
dividend.
(b) Reclassification,
Reorganization and Consolidation.
In case
of any reclassification, capital reorganization, or change in the capital stock
of the Company (other than as a result of a subdivision, combination, or stock
dividend provided for in Section 7(a) above), then the Company shall
make appropriate provision so that the Holder shall have the right at any time
prior to the expiration of this Warrant to purchase, at a total price equal
to
that payable upon the exercise of this Warrant, the kind and amount of shares
of
stock and other securities and property receivable in connection with such
reclassification, reorganization, or change by a Holder of the same number
of
Shares as were purchasable by the Holder immediately prior to such
reclassification, reorganization, or change. In any such case appropriate
provisions shall be made with respect to the rights and interest of the Holder
so that the provisions hereof shall thereafter be applicable with respect to
any
shares of stock or other securities and property deliverable upon exercise
hereof, and appropriate adjustments shall be made to the purchase price per
share payable hereunder, provided the aggregate purchase price shall remain
the
same.
-3-
(c) Notice
of Adjustment.
When
any adjustment is required to be made in the number or kind of shares
purchasable upon exercise of the Warrant, or in the Exercise Price, the Company
shall promptly notify the Holder of such event and of the number of Shares
or
other securities or property thereafter purchasable upon exercise of this
Warrant.
8. No
Fractional Shares or Scrip.
No
fractional shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant, but in lieu of such fractional shares the Company
shall make a cash payment therefor on the basis of the Exercise Price then
in
effect.
9. Representations
of the Company.
The
Company represents and warrants to the Holder that all corporate actions on
the
part of the Company, its officers, directors and stockholders necessary for
the
sale and issuance of this Warrant have been taken.
10. Representations
and Warranties of the Holder.
The
Holder represents, warrants, acknowledges and agrees that:
(a) Holder
(i) is not located in the United States, (ii) is not a U.S. Person,
(iii) is not acquiring the Warrant and will not acquire the Warrant Shares
for the account or benefit of a U.S. Person or a person in the United States,
(iv) did not execute or deliver this Warrant in the United States; and (v)
will not engage in any hedging transactions with regard to this Warrant or
the
Warrant Shares unless in compliance with the Securities Act;
(b) If
Holder
decides to offer, sell, pledge or otherwise transfer any of the Warrants or
Warrant Shares, the Holder will not offer, sell, pledge or otherwise transfer
any of such securities, directly or indirectly, unless such securities are
registered for resale under the Securities Act and under any applicable state
securities laws, if required, or: (i) the transfer is to the Company;
(ii) the transfer is made outside the United States in accordance with the
provisions of Regulation S and in compliance with applicable local laws and
regulations; (iii) the transfer is made in compliance with an exemption
from registration under the Securities Act provided by Rule 144 thereunder,
if available, and in accordance with applicable state securities laws; or
(iv) the transfer is made in another transaction that does not require
registration under the Securities Act or any applicable state securities laws
after the seller furnishes to the Company an opinion of outside counsel in
form
and substance reasonably satisfactory to the Company or other evidence
reasonably satisfactory to the Company to such effect;
(c) This
Warrant and the Warrant Shares have not been registered under the Securities
Act
or the securities laws of any state of the United States and that the issuance
of this Warrant and the Warrant Shares will be made in reliance upon an
exclusion from such registration requirements availaible under Regulation S,
and
this Warrant and the Warrant Shares will be “restricted securities” within the
meaning of Rule 144 under the Securities Act. Holder is familiar with Rule
144
promulgated under the Securities Act, as presently in effect, and understands
the resale limitations imposed thereby and by the Securities Act. ADDITIONALLY,
HOLDER UNDERSTANDS AND ACKNOWLEDGES THAT AN INVESTMENT IN THIS WARRANT AND
THE
WARRANT SHARES INVOLVES AN EXTREMELY HIGH DEGREE OF RISK AND MAY RESULT IN
A
COMPLETE LOSS OF HOLDER’S INVESTMENT. Holder has no immediate need for liquidity
in connection with this investment, and does not anticipate that such Holder
will be required to sell this Warrant or Warrant Shares in the foreseeable
future;
-4-
(d) This
Warrant and the Warrant Shares are being acquired for the Holder’s own account,
for investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities
Act;
(e) The
Warrant and the Warrant Shares have not been registered under the Securities
Act
by reason of their issuance in a transaction excluded from the registration
and
prospectus delivery requirements of the Securities Act pursuant to Regulation
S
and that they must be held by the Holder indefinitely, and that the Holder
must
therefore bear the economic risk of such investment indefinitely, unless a
subsequent disposition thereof is registered under the Securities Act or is
exempted from such registration;
(f) Holder
has such knowledge and experience in financial and business matters that Holder
is capable of evaluating the merits and risks of the purchase of this Warrant
and the Warrant Shares and of protecting Holder’s interests in connection
therewith;
(g) Holder
is
able to bear the economic risk of the purchase of the Warrant Shares pursuant
to
the terms of this Warrant;
(h) Holder
will sell the Warrants and the Warrant Shares only in accordance with the
provisions of Regulation S, pursuant to registration under the Securities Act,
or pursuant to an available exemption from registration pursuant to the
Securities Act;
(i) Company
will refuse to register any transfer of the Warrants and the Warrant Shares
not
made in accordance with the provisions of Regulation S, pursuant to registration
under the Securities Act, or pursuant to an available exemption from
registration; and
(j) Holder
acknowledges that the Warrants are being issued pursuant to certain prospectus
and registration exemptions under Canadian securities laws and that each of
the
Warrants and the Warrant Shares may be subject to a statutory hold period which
may be of indefinite duration.
11. Restrictive
Legend.
(a) All
certificates representing the Warrant Shares will be endorsed with the following
legend:
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND HAVE BEEN ISSUED
IN RELIANCE UPON AN EXCLUSION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT PROVIDED BY REGULATION S (“REGULATION S”) PROMULGATED UNDER THE
SECURITIES ACT. SUCH SECURITIES MAY NOT BE REOFFERED FOR SALE OR RESOLD OR
OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION
S,
PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT
TO
AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT. HEDGING
TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE SECURITIES ACT.”
-5-
(b) Holder
will comply with all other applicable securities legislation in addition to
the
Securities Act to which the Holder is subject in selling or transferring any
Warrants or Warrant Shares and the Company may refuse to register any sale
or
transfer not in compliance with such other securities legislation.
12. Payment
of Taxes.
The
Company shall not be required to pay any tax or other charge imposed in
connection with the exercise of this Warrant or a permissible transfer involved
in the issuance of any certificate for shares issuable under this Warrant in
the
name other than that of the Holder, and in any such case, the Company shall
not
be required to issue or deliver any stock certificate until such tax or other
charge has been paid or it has been established to the Company’s satisfaction
that no such tax or other charge is due.
13. Rights
of Stockholders.
No
Holder shall be entitled, as a Warrant holder, to vote or receive dividends
or
be deemed the Holder of the Warrant Shares or any other securities of the
Company which may at any time be issuable on the exercise hereof for any
purpose, nor shall anything contained herein be construed to confer upon the
Holder, as such, any of the rights of a stockholder of the Company or any right
to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, consolidation, merger,
conveyance, or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Warrant shall have
been
exercised and the Warrant Shares purchasable upon the exercise hereof shall
have
become deliverable, as provided herein.
14. Expiration
of Warrant; Notice of Certain Events Terminating This Warrant.
(a) This
Warrant shall expire and shall no longer be exercisable upon the earlier to
occur of:
(i) 5:00
p.m., California local time, on March 2, 2010; or
(ii) Any
Change of Control.
(b) The
Company shall provide at least ten (10) calendar days prior written notice
of
any Change of Control).
15. Notices.
All
notices and other communications required or permitted hereunder shall be in
writing, shall be effective when given, and shall in any event be deemed to
be
given upon receipt or, if earlier, (a) five (5) days after deposit
with the U.S. Postal Service or other applicable postal service, if delivered
by
first class mail, postage prepaid, (b) upon delivery, if delivered by hand,
(c) one business day after the business day of deposit with Federal Express
or similar overnight courier, freight prepaid or (d) one business day after
the business day of facsimile transmission, if delivered by facsimile
transmission with copy by first class mail, postage prepaid, and shall be
addressed (i) if to the Holder, at the Holder’s address as set forth on the
Schedule of Warrant Shareholders to the Purchase Agreement, and (ii) if to
the Company, at the address of its principal corporate offices (attention:
President), with a copy to Xxxxxx X. Xxxxxxxx, Esq., Xxxxxxxxx Traurig, LLP,
000
Xxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxx Xxxx, Xxxxxxxxxx 00000 or at such other
address as a party may designate by ten days advance written notice to the
other
party pursuant to the provisions above.
-6-
16. Registration
Statement.
(a) Within
45
days following March 2, 2007, the Company covenants to prepare and file with
the
Securities and Exchange Commission (the “SEC”)
a
registration statement on Form SB-2 (“SB-2
Registration Statement”)
registering the Warrant Shares with any other securities of the Holder for
resale by the Holder. The Company covenants to keep the SB-2 Registration
Statement effective for up to two years following the date the SB-2 Registration
Statement becomes effective or, if earlier, until the Holder has completed
the
distribution related thereto. Holder shall prepare and file with the SEC such
amendments and supplements to the SB-2 Registration Statement and the prospectus
used in connection with such SB-2 Registration Statement as may be necessary
to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by the SB-2 Registration Statement. The Company shall
furnish to the Holder such number of copies of a prospectus in conformity with
the requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the Warrant Shares
owned by them. The Company shall notify the Holder by written notice to the
address set forth on the books of the Company (unless the Company is notified
in
writing of a different address for the Holder) at any time when a prospectus
relating thereto is required to be delivered under the of the happening of
any
event as a result of which the prospectus included in the SB-2 Registration
Statement as then in effect, includes an untrue statement of a material fact
or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.
(b) Notwithstanding
anything to the contrary in Section 16(a) above, if the Company becomes
eligible to register the Warrant Shares on Form S-3, Company will
(i) prepare and file with the SEC a registration statement on Form S-3
(“S-3
Registration Statement”)
registering the Warrant Shares for resale by the Holder; and (ii) the
Company shall keep the S-3 Registration Statement effective for a period of
up
to three years following the date the SB-2 Registration Statement (as opposed
to
the S-3 Registration Statement) became effective or, if earlier, until the
Holder has completed the distribution related thereto. At such time as the
SEC
declares the S-3 Registration Statement effective, the Company shall no longer
have any obligations under Section 16(a) above. The Company shall furnish
to the Holder such number of copies of a prospectus in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the Warrant Shares
owned by Holder. The Company shall notify the Holder by written notice to the
address set forth on the books of the Company (unless the Company is notified
in
writing of a different address for the Holder) at any time when a prospectus
relating thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in the
S-3
Registration Statement as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein
or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
(c) It
shall
be a condition precedent to the obligations of Surge to take any action under
this Section 16 that the Holder shall furnish to the Company such
information regarding Holder, the Warrant Shares held by Holder and the intended
method of disposition of such securities as may be reasonably requested by
the
Company and as shall be required to effect the registration of the Warrant
Shares.
17. Restrictions
on Transfer.
The
Holder shall refuse to register any sale or transfer of the Warrant or Warrant
Shares not made in accordance with the provisions of Regulation S, pursuant
to
registration under the Securities Act, or pursuant to an available exemption
from registration; provided, however, if foreign law prevents the Company from
refusing to register such securities transfers, the Company shall implement
procedures to prevent any transfer not made in accordance with the provisions
of
Regulation S.
-7-
18. Governing
Law.
This
Warrant and all actions arising out of or in connection with this Agreement
shall be governed by and construed in accordance with the laws of the State
of
California, without regard to the conflicts of law provisions of the State
of
California or of any other state.
19. Rights
and Obligations Survive Exercise of Warrant.
Unless
otherwise provided herein, the rights and obligations of the Company, of the
Holder and of the holder of the Warrant Shares issued upon exercise of this
Warrant, shall survive the exercise of this Warrant.
Issued
this March 2, 2007.
| COMPANY | ||
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a Delaware corporation
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| By: |
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| Title: |
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-8-
EXHIBIT A
NOTICE
OF EXERCISE
|
TO:
|
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00000
Xx Xxxxxx Xxxx
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Xxxxx
000
|
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Xxx
Xxxxx, XX 00000
|
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Attention:
President
|
1. The
undersigned hereby elects to purchase __________ shares of Common Stock (the
“Shares”) Surge Global Energy, Inc., a Delaware corporation (the “Company”),
pursuant to the terms of the attached Warrant.
2. Method
of
Exercise (Please initial the applicable blank):
|
___
|
The
undersigned elects to exercise the attached Warrant by means of a
cash
payment, and tenders herewith payment in full for the purchase price
of
the shares being purchased, together with all applicable transfer
taxes,
if any.
|
|
___
|
The
undersigned elects to exercise the attached Warrant by means of the
net
exercise provisions of Section 4 of the
Warrant.
|
3. Please
issue a certificate or certificates representing such Shares in the name of
the
undersigned or in such other name as is specified below:
_________________________________
(Name)
_________________________________
_________________________________
(Address)
4. The
undersigned represents, warrants, certifies and agrees as follows (only one
of
the following must be checked):
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A.
¨
|
The
undersigned holder (a) at the time of exercise of these Warrants
is not in
the United States, (b) is not a “U.S. person” (a “U.S. Person”), as such
term is defined in Regulation S under the United States Securities
Act of
1933, as amended (the “U.S. Securities Act”), and is not exercising such
securities on behalf of a U.S. Person or a person in the United States,
(c) did not execute or deliver this Notice of Exercise in the United
States, and (d) agrees not to engage in any hedging transactions
related
to the Shares unless in compliance with the U.S. Securities Act;
or
|
-9-
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B.
¨
|
The
undersigned holder has delivered to the Company a written opinion
of
counsel reasonably satisfactory to the Company to the effect that
an
exemption from the registration requirements of the U.S. Securities
Act
and applicable state securities laws is available for the issuance
of the
Shares.
|
The
undersigned holder understands that the certificate representing the Shares
will
bear a legend restricting transfer without registration under the U.S.
Securities Act and applicable state securities laws unless an exclusion or
exemption from registration is available. Unless Box B above is checked,
certificates representing Warrant Shares will not be registered or delivered
to
an address in the United States.
If
Box B
is checked, any opinion tendered must be reasonably satisfactory to the Company.
Holders planning to deliver an opinion of counsel in connection with the
exercise of Warrants should contact the Company in advance to determine whether
any opinions to be tendered will be satisfactory to the Company.
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(Signature) |
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(Name) |
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(Title) |
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(Date) |
-10-
