THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER THE 1933 ACT, OR AN OPINION OF COUNSEL,
SATISFACTORY TO THE ISSUER HEREOF, TO THE EFFECT THAT REGISTRATION IS NOT
REQUIRED UNDER THE 1933 ACT.
WARRANT TO PURCHASE
COMMON STOCK OF
PETROSEARCH ENERGY CORPORATION
Date of Issuance: September 30, 2005 Warrant No. ____
This certifies that, for value received, PETROSEARCH ENERGY
CORPORATION, a Nevada corporation (the "Company"), grants FORTUNA ENERGY, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP or registered assigns (the "Registered
Holder"), the right to subscribe for and purchase from the Company, at the
Exercise Price (as defined herein), from and after 9:00 a.m. Texas time on
September 30, 2005 (the "Date of Issuance") and to and including 5:00 p.m.,
Texas time on November 1, 2007 (the "Expiration Date"), ONE HUNDRED THOUSAND
(100,000) shares, as such number of shares may be adjusted from time to time as
described herein (the "Warrant Shares"), of the Company's common stock, par
value $.001 per share (the "Common Stock"), subject to the provisions and upon
the terms and conditions herein set forth. The "Exercise Price" per share of
Common Stock shall be TWO DOLLARS ($2.00) per share.
SECTION 1. REGISTRATION. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the "Warrant
Records"), in the name of the Registered Holder. The Company may deem and treat
the Registered Holder as the absolute owner of this Warrant for the purpose of
any exercise hereof or any distribution to the Registered Holder, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
SECTION 2. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) Subject to Section 9 hereof, the Company shall register the
transfer of this Warrant, in whole or in part, upon records to be maintained by
the Company for that purpose, upon surrender of this Warrant, with the Form of
Assignment attached hereto completed and duly endorsed by the Registered Holder,
to the Company at the office specified in or pursuant to Section 3(b). Upon any
such registration of transfer, a new Warrant, in substantially the form of this
Warrant, evidencing the Common Stock purchase rights so transferred shall be
issued to the transferee and a new Warrant, in similar form, evidencing the
remaining Common Stock purchase rights not so transferred, if any, shall be
issued to the Registered Holder.
(b) This Warrant is exchangeable, upon the surrender hereof by the
Registered Holder at the office of the Company specified in or pursuant to
Section 3(b) hereof, for new Warrants, in substantially the form of this Warrant
evidencing, in the aggregate, the right to purchase the number of Warrant Shares
which may then be purchased hereunder, each of such new Warrants to be dated the
date of such exchange and to represent the right to purchase such number of
Warrant Shares as shall be designated by the Registered Holder at the time of
such surrender.
SECTION 3. DURATION AND EXERCISE OF THIS WARRANT.
(a) This Warrant shall be exercisable by the Registered Holder as
to the Warrant Shares at any time during the period commencing on the Date of
Issuance and ending on the Expiration Date. At 5:00 p.m., Texas time, on the
Expiration Date, this Warrant, to the extent not previously exercised, shall
become void and of no further force or effect.
(b) Subject to Sections 4, and 7 hereof, upon exercise or
surrender of this Warrant, with the Form of Election to Purchase attached hereto
completed and duly endorsed by the Registered Holder, to the Company at 000
Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000, Attention: President, or at such
other address as the Company may specify in writing to the Registered Holder,
and upon payment of the Exercise Price multiplied by up to the number of Warrant
Shares then issuable upon exercise of this Warrant in lawful money of the United
States of America, all as specified by the Registered Holder in the Form of
Election to Purchase, the Company shall promptly issue and cause to be delivered
to or upon the written order of the Registered Holder, and in such name or names
as the Registered Holder may designate, a certificate for the Warrant Shares
issued upon such exercise. Any person so designated in the Form of Election to
Purchase, duly endorsed by the Registered Holder, as the person to be named on
the certificates for the Warrant Shares, shall be deemed to have become holder
of record of such Warrant Shares, evidenced by such certificates, as of the Date
of Exercise (as hereinafter defined) of such Warrant.
(c) The Registered Holder may pay the applicable Exercise Price
pursuant to Section 3(b), at the option of the Registered Holder, either (i) in
cash or by cashier's or certified bank check payable to the Company in an amount
equal to the product of the Exercise Price multiplied by the number of Warrant
Shares being purchased upon such exercise (the "Aggregate Exercise Price"), or
(ii) by wire transfer of immediately available funds to the account which shall
be indicated in writing by the Company to the Registered Holder.
(d) The "Date of Exercise" of any Warrant means the date on which
the Company shall have received (i) this Warrant, with the Form of Election to
Purchase attached hereto appropriately completed and duly endorsed, and (ii)
payment of the Aggregate Exercise Price as provided herein.
(e) This Warrant shall be exercisable either in its entirety or,
from time to time, for part only of the number of Warrant Shares which are
issuable hereunder. If this Warrant shall have been exercised only in part, the
Company shall, at the time of delivery of the certificates for the Warrant
Shares issued pursuant to such exercise, deliver to the Registered Holder a new
Warrant evidencing the rights to purchase the remaining Warrant Shares, which
Warrant shall be substantially in the form of this Warrant.
SECTION 4. PAYMENT OF TAXES AND EXPENSES.
(a) The Company will pay all expenses and taxes (other than any
federal or state income tax or similar obligations of the Registered Holder) and
other governmental charges attributable to the preparation, execution, issuance
and delivery of this Warrant, any new Warrant and the Warrant Shares; provided,
however, that the Company shall not be required to pay any tax in respect of the
transfer of this Warrant or the Warrant Shares, or the issuance or delivery of
certificates for Warrant Shares upon the exercise of this Warrant, to a person
or entity other than a Registered Holder or an Affiliate (as hereinafter
defined) of such Registered Holder.
(b) An "Affiliate" of any person or entity means any other person
or entity directly or indirectly controlling, controlled by or under direct or
indirect common control with such person or entity.
SECTION 5. MUTILATED OR MISSING WARRANT CERTIFICATE. If this
Warrant shall be mutilated, lost, stolen or destroyed, upon request by the
Registered Holder, the Company will issue, in exchange for and upon cancellation
of the mutilated Warrant, or in substitution for the lost, stolen or destroyed
Warrant, a new Warrant, in substantially the form of this Warrant, of like
tenor, but, in the case of loss, theft or destruction, only
2
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction of this Warrant and, if requested by the Company, indemnity
also reasonably satisfactory to it.
SECTION 6. RESERVATION, LISTING AND ISSUANCE OF WARRANT SHARES.
(a) The Company will at all times have authorized, and reserve and
keep available, free from preemptive rights, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon the exercise of the rights
represented by this Warrant, the number of Warrant Shares deliverable upon
exercise of this Warrant. The Company will, at its expense, use it best efforts
to cause such shares to be included in or listed on (subject to issuance or
notice of issuance of Warrant Shares) all markets or stock exchanges in or on
which the Common Stock is included or listed not later than the date on which
the Common Stock is first included or listed on any such market or exchange and
will thereafter maintain such inclusion or listing of all shares of Common Stock
from time to time issuable upon exercise of this Warrant.
(b) Before taking any action which could cause an adjustment
pursuant to Section 7 hereof reducing the Exercise Price below the par value of
the Warrant Shares, the Company will take any corporate action which may be
necessary in order that the Company may validly and legally issue at the
Exercise Price, as so adjusted, Warrant Shares that are fully paid and
non-assessable.
(c) The Company covenants that all Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be (i) duly authorized,
fully paid and nonassessable, and (ii) free from all taxes with respect to the
issuance thereof and from all liens, charges and security interests.
SECTION 7. ADJUSTMENT OF NUMBER OF WARRANT SHARES.
(a) The number of Warrant Shares to be purchased upon exercise hereof
is subject to change or adjustment from time to time as hereinafter provided:
(i) Stock Dividends; Stock Splits; Reverse Stock Splits;
---------------------------------------------------------
Reclassifications. In case the Company shall (a) pay a dividend with respect to
-----------------
its Common Stock in shares of capital stock, (b) subdivide its outstanding
shares of Common Stock, (c) combine its outstanding shares of Common Stock into
a smaller number of shares of any class of Common Stock or (d) issue any shares
of its capital stock in a reclassification of the Common Stock (including any
such reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), other than elimination of par value, a
change in par value, or a change from par value to no par value (any one of
which actions is herein referred to as an "Adjustment Event"), the number of
Warrant Shares purchasable upon exercise of the Warrant immediately prior to
the record date for such Adjustment Event shall be adjusted so that the
Registered Holder shall thereafter be entitled to receive the number of shares
of Common Stock or other securities of the Company (such other securities
thereafter enjoying the rights of shares of Common Stock under this Warrant)
that such Registered Holder would have owned or have been entitled to receive
after the happening of such Adjustment Event, had such Warrant been exercised
immediately prior to the happening of such Adjustment Event or any record date
with respect thereto. An adjustment made pursuant to this Section 7(a)(i) shall
become effective immediately after the effective date of such Adjustment Event
retroactive to the record date, if any, for such Adjustment Event.
(ii) Adjustment of Exercise Price. Whenever the number of
-------------------------------
Warrant Shares purchasable upon the exercise of each Warrant is adjusted
pursuant to Section 7(a)(i), the Exercise Price for each Warrant Share payable
upon exercise of each Warrant shall be adjusted by multiplying such Exercise
Price immediately prior to such adjustment by a fraction, the numerator of which
shall be the
3
number of shares of Common Stock purchasable upon the exercise of each Warrant
immediately prior to such adjustment, and the denominator of which shall be the
number of shares of Common Stock so purchasable immediately thereafter.
(iii) Adjustments for Consolidation, Merger, Sale of Assets,
-------------------------------------------------------
Reorganization, etc. In case the Company (i) consolidates with or merges into
--------------------
any other corporation and is not the continuing or surviving corporation of such
consolidation of merger, or (ii) permits any other corporation to consolidate
with or merge into the Company and the Company is the continuing or surviving
corporation but, in connection with such consolidation or merger, the Common
Stock is changed into or exchanged for stock or other securities of any other
corporation or cash or any other assets, or (iii) transfers all or substantially
all of its properties and assets to any other corporation, or (iv) effects a
capital reorganization or reclassification of the capital stock of the Company
in such a way that holders of Common Stock shall be entitled to receive stock,
securities, cash and/or assets with respect to or in exchange for Common Stock,
then, and in each such case, proper provision shall be made so that, upon the
basis and upon the terms and in the manner provided in this subsection (f), the
Registered Holder, upon the exercise of this Warrant at any time after the
consummation of such consolidation, merger, transfer, reorganization or
reclassification, shall be entitled to receive (at the aggregate Exercise Price
in effect for all shares of Common Stock issuable upon such exercise immediately
prior to such consummation as adjusted to the time of such transaction), in lieu
of shares of Common Stock issuable upon such exercise prior to such
consummation, the stock and other securities, cash and/or assets to which such
holder would have been entitled upon such consummation if the Registered Holder
had so exercised this Warrant immediately prior thereto (subject to adjustments
subsequent to such corporate action as nearly equivalent as possible to the
adjustments provided for in this Section).
(iv) De Minimis Adjustments. No adjustment in the Exercise
------------------------
Price and number of Warrant Shares purchasable hereunder shall be required
unless such adjustment would require an increase or decrease of at least $0.15
in the Exercise Price; provided, however, that any adjustments which by reason
of this Section 7(a)(iv) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations shall be
made to the nearest full share.
(b) Notice of Adjustment. Whenever the number of Warrant Shares
----------------------
purchasable upon the exercise of each Warrant or the Exercise Price is adjusted,
as herein provided, the Company shall promptly notify the Registered Holder in
writing (such writing referred to as an "Adjustment Notice") of such adjustment
or adjustments and shall deliver to such Registered Holder a statement setting
forth the number of shares of Common Stock purchasable upon the exercise of each
Warrant and the Exercise Price after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made.
(c) Other Notices. In case at any time:
--------------
(i) the Company shall declare any cash dividend on its Common
Stock;
(ii) the Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than regular cash dividends) to
the holders of its Common Stock;
(iii) the Company shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of any class or
other rights;
(iv) the Company shall authorize the distribution to all
holders of its Common Stock of evidences of its indebtedness or assets (other
than cash dividends or cash distributions payable out of earnings or earned
surplus or dividends payable in Common Stock);
4
(v) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with another corporation (other than a subsidiary of the Company
in which the Company is the surviving or continuing corporation and no change
occurs in the Company's Common Stock), or sale of all or substantially all of
its assets to another corporation; or
(vi) there shall be a voluntary or involuntary dissolution,
liquidation, bankruptcy, assignment for the benefit of creditors, or winding up
of the Company;
then, in any one or more of said cases the Company shall give written notice,
addressed to the Registered Holder at the address of such Registered Holder as
shown on the books of the Company, of (1) the date on which the books of the
Company shall close or a record shall be taken for such dividend, distribution
or subscription rights, or (2) the date (or, if not then known, a reasonable
approximation thereof by the Company) on which such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
bankruptcy, assignment for the benefit of creditors, winding up or other action,
as the case may be, shall take place. Such notice shall also specify (or, if not
then known, reasonably approximate) the date as of which the holders of Common
Stock of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, bankruptcy, assignment
for the benefit of creditors, winding up, or other action, as the case may be.
Such written notice shall be given at least ten (10) days prior to the action in
question and not less than ten (10) days prior to the record date or the date on
which the Company's transfer books are closed in respect thereto. Such notice
shall also state that the action in question or the record date is subject to
the effectiveness of a registration statement under the 1933 Act, or to a
favorable vote of stockholders, if either is required.
(d) Statement on Warrants. The form of this Warrant need not be
-----------------------
changed because of any change in the Exercise Price or in the number or kind of
shares purchasable upon the exercise of a Warrant. However, the Company may at
any time in its sole discretion make any change in the form of the Warrant that
it may deem appropriate and that does not affect the substance thereof and any
Warrant thereafter issued, whether in exchange or substitution for any
outstanding Warrant or otherwise, may be in the form so changed.
(e) Fractional Interest. The Company shall not be required to
--------------------
issue fractional Warrant Shares on the exercise of the Warrants. The number of
full Warrant Shares which shall be issuable upon such exercise shall be computed
on the basis of the aggregate number of whole shares of Common Stock purchasable
on the exercise of the Warrants so presented. If any fraction of a share of
Common Stock would, except for the provisions of this Section 7(e) be issuable
on the exercise of the Warrants (or specified proportion thereof), the Company
shall pay an amount in cash calculated by it to be equal to the then fair value
of one share of Common Stock, as determined by the Board of Directors of the
Company in good faith, multiplied by such fraction computed to the nearest whole
cent.
SECTION 8. NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. The
Registered Holder shall not be entitled to vote or be deemed the holder of
Common Stock or any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained herein be
construed to confer upon the holder of this Warrant, as such, the rights of a
stockholder of the Company or the right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or give or
withhold consent to any corporate action or to receive notice of meetings or
other actions affecting stockholders (except as provided herein), or to receive
dividends or subscription rights or otherwise, until the Date of Exercise shall
have occurred. No provision of this Warrant, in the absence of affirmative
action by the Registered Holder hereof to purchase shares of Common Stock, and
no mere enumeration herein of the rights and privileges of the Registered
Holder,
5
shall give rise to any liability of such holder for the Exercise Price or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
SECTION 9. TRANSFER RESTRICTIONS; REGISTRATION OF THE WARRANT AND
WARRANT SHARES.
(a) Neither the Warrant nor the Warrant Shares have been
registered under the 1933 Act. The Registered Holder, by acceptance hereof,
represents that it is acquiring this Warrant to be issued to it for its own
account and not with a view to the distribution thereof, and agrees not to sell,
transfer, pledge or hypothecate this Warrant, any purchase rights evidenced
hereby or any Warrant Shares unless a registration statement is effective for
this Warrant or the Warrant Shares under the 1933 Act or in the opinion of such
Registered Holder's counsel reasonably satisfactory to the Company, a copy of
which opinion shall be delivered to the Company, such transaction is exempt from
the registration requirements of the 1933 Act.
(b) Subject to the provisions of the following paragraph of this
Section 9, each Certificate for Warrant Shares shall be stamped or otherwise
imprinted with a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE 1933 ACT, OR AN OPINION OF COUNSEL,
SATISFACTORY TO THE ISSUER HEREOF, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT.
(c) The restrictions and requirements set forth in the foregoing
paragraph shall apply with respect to Warrant Shares unless and until such
Warrant Shares are sold or otherwise transferred pursuant to an effective
registration statement under the 1933 Act or are otherwise no longer subject to
the restrictions of the 1933 Act, at which time the Company agrees to promptly
cause such restrictive legends to be removed and stop transfer restrictions
applicable to such Warrant Shares to be rescinded.
(d) The Company will use its best efforts to comply with the
reporting requirements of Section 13 and 15(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act") (whether or not it shall be required to do so
pursuant to such Sections) and will use its best efforts to comply with all
other public information reporting requirements of the Securities and Exchange
Commission (including, without limitation, Securities and Exchange Commission
("SEC") Rule 144 promulgated under the 0000 Xxx) from time to time in effect and
relating to the availability of an exemption from the 1933 Act for sale of
restricted securities. The Company also will cooperate with the Registered
Holder and with each holder of any Warrant Shares in supplying such information
as may be necessary for any such holders to complete and file any information
reporting forms presently or hereafter required by the SEC as a condition to the
availability of an exemption from the 1933 Act for the sale of restricted
securities.
SECTION 10. REGISTRATION RIGHTS.
--------------------
The Company covenants and agrees as follows:
(a) Definitions. For purposes of this Section 10:
-----------
(i) The term "1934 Act" means the Securities Exchange Act of
1934, as amended.
(ii) The term "Holder" means each of the persons who at the time
holds Registrable Securities or a warrant or warrants (including this Warrant)
to purchase Registrable Securities.
6
(ii) The term "Public Corporation" means a corporation which has
a class of equity securities registered pursuant to Section 12 of the 1934 Act,
or which is required to file periodic reports pursuant to Section 15(d) of the
1934 Act.
(iv) The terms "register," "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the 1933 Act, and such registration
statement or document becoming effective.
(v) The term "Registrable Securities" means (i) the Warrant
Shares, and (ii) any Common Stock issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
the Warrant Shares; provided, however, that any such securities shall cease to
be Registrable Securities when (i) one or more registration statements with
respect to the sale of such securities shall have become effective under the
1933 Act and all such securities shall have been disposed of in accordance with
the plan of distribution set forth therein; (ii) such securities shall have been
disposed of in accordance with SEC Rule 144 promulgated under the 1933 Act, or
any successor rule or regulation thereto, or any statute hereafter adopted to
replace or to establish the exemption that is now covered by said Rule 144
("Rule 144"); (iii) such securities may be sold by a Holder in a transaction
pursuant to the provisions of Rule 144 provided that such rule shall be at such
time available for the sale of all such securities which the Holder at such time
desires to sell; or (iv) such securities may otherwise be sold to the public in
a transaction not requiring registration under the 1933 Act.
(vi) The term "Registration Expenses" means all registration,
qualification and filing fees, printing expenses, escrow fees and blue sky fees,
fees and disbursements of counsel for the Company and of the Company's
independent certified public accountants, in each case incident to or required
by the registration under this Warrant, and any other fees and expenses of the
registration under this Warrant which are not Selling Expenses.
(vii) The term "Selling Expenses" means all underwriting
discounts, selling commissions and stock transfer taxes applicable to the
securities registered by the Holders and all fees and disbursements of counsel
for any Holder.
(viii) All other capitalized terms used in this Section that
are not defined herein shall have the meaning otherwise given in this Warrant.
(b) Reserved.
---------
(c) Piggyback Registration Rights.
-------------------------------
(i) If, at any time or from time to time, the Company shall
determine to register any shares of its Common Stock, either for its own account
or for the account of a security holder or holders, other than (A) a
registration relating solely to stock option or employee benefit plans or (B) a
registration relating solely to a transaction covered by Rule 145 under the 1933
Act, the Company will (X) promptly give the Holders written notice thereof, and
(Y) include in such registration (and any related qualification under blue sky
or other state securities laws), and in any underwriting involved therein, all
of the Registrable Securities specified in a written request or requests made by
a Holder or Holders within twenty (20) days after receipt of such written notice
from the Company.
(ii) If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise the Holder as part of the written notice given pursuant to Section
10(c)(i). In such event, the right of each Holder to registration pursuant to
this Section 10(c) shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of the Registrable Securities owned by such
Holder in the underwriting to the extent provided under this Section 10(c). If a
Holder proposes to distribute its Registrable Securities through such
underwriting it shall (together with the Company and any other holders of
securities of the Company distributing their securities through such
underwriting) enter into an underwriting agreement with the managing or lead
managing underwriter selected by the Company in the form customarily used by
such underwriter with such changes thereto as the parties thereto shall agree.
Notwithstanding any other provision of this Section 10(c), if the managing or
lead managing underwriter
7
determines that market factors require that the number of Registrable Securities
and other securities requested to be included in the registration be limited,
the managing or lead managing underwriter may reduce the number of Registrable
Securities and securities of any other holders of securities to be included in
the registration. If the registration includes an underwritten primary
registration on behalf of the Company, the reduction shall be taken (i) first
from and to the extent of the securities requested to be included in the such
registration by the Holders and the holders of any other securities pro rata
--- ----
according to the number of securities requested by the Holders and such holders
to be included in the registration, and (ii) thereafter from the securities to
be registered on behalf of the Company. If the registration consists only of
any underwritten secondary registration on behalf of holders of securities of
the Company, the reduction shall be taken (i) first from and to the extent of
the securities requested to be included in the such registration by the Holders
and any other holders of securities included in the registration other than
pursuant to demand registration rights pro rata according to the number of
--- ----
securities requested by the Holders and such other holders to be included in the
registration and (ii) thereafter from securities, if any, to be registered on
behalf of holders of securities included in the registration pursuant to demand
registration rights. The Company shall advise any Holders and other holders
participating in such underwriting as to any such limitation and the number of
shares that may be included in the registration and underwriting. If a Holder
disapproves of the terms of such underwriting, such Holder may elect to withdraw
therefrom by written notice to the Company and the managing or lead underwriter.
Any Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from the registration.
(iii) The Company may withdraw a registration for which
registration rights have been exercised pursuant to this Section 10(c) at any
time prior to the time it becomes effective.
(d) Expenses of Registration. All Registration Expenses incurred
-------------------------
in connection with a registration pursuant to this Section 10 shall be borne by
the Company. All Selling Expenses relating to the Registrable Securities
registered on behalf of a Holder shall be borne by such Holder.
(e) Registration Procedures.
------------------------
(i) In connection with the registration of Registrable
Securities pursuant to this Section 10, the Company shall as expeditiously as is
reasonable:
(A) prepare and file with the SEC on any appropriate
form a registration statement with respect to such Registrable Securities and
use its best efforts to cause such registration statement to become effective;
(B) prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective and to comply with the provisions of
the 1933 Act with respect to the disposition of all Registrable Securities and
other securities covered by such registration statement until the Holder or
Holders have completed the distribution described in such registration
statement;
(C) furnish to each seller of such Registrable
Securities such number of conformed copies of such registration statement and of
each such amendment and supplement thereto (at least one of which shall include
all exhibits), such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus and any summary
prospectus), in conformity with the requirements of the 1933 Act, such documents
incorporated by reference in such registration statement or prospectus, and such
other documents, as such seller may reasonably request in order to facilitate
the sale or disposition of such Registrable Securities;
(D) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities or "blue sky" laws of such jurisdictions
as the underwriter shall reasonably request, and do any and all other acts and
things as may be reasonably necessary to consummate the disposition in such
jurisdictions of the Registrable Securities covered by such registration
statement, except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified, or to subject
8
itself to taxation in respect of doing business in any such jurisdiction, or to
consent to general service of process in any such jurisdiction.
(E) immediately notify each seller of Registrable
Securities, at any time when a prospectus relating thereto is required to be
delivered under the 1933 Act, of the happening of any event as a result of which
the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing or if it is
necessary, in the opinion of counsel to the Company, to amend or supplement such
prospectus to comply with law, and at the request of any such seller prepare and
furnish to any such seller a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit 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 and shall
otherwise comply in all material respects with law and so that such prospectus,
as amended or supplemented, will comply with law.
(F) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve (12) months, beginning with the first month of the
first fiscal quarter after the effective date of such registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
1933 Act;
(G) use its best efforts to list such securities on each
securities exchange or over-the-counter market on which shares of Common Stock
are then listed, if such securities are not already so listed and if such
listing is then permitted under the rules of such exchange and, if shares of
Common Stock are not then listed on a securities exchange or over- the-counter
market, to use is best efforts to cause such securities to be listed on such
securities exchange or over-the-counter market as the managing or lead managing
underwriter shall reasonably request;
(H) use its best efforts to provide a transfer agent and
registrar for such Registrable Securities not later than the effective date of
such registration statement; and
(I) issue to any underwriter to which any holder of
Registrable Securities may sell such Registrable Securities in connection with
any such registration (and to any direct or indirect transferee of any such
underwriter) certificates evidencing shares of Common Stock without restrictive
legends.
(ii) If requested by the managing or lead managing
underwriter for any underwritten offering of Registrable Securities on behalf of
a Holder or Holders of Registrable Securities, the Company will enter into an
underwriting agreement with the underwriters of such offering, such agreement to
contain such representations and warranties by the Company and each such Holder
and such other terms and conditions as are contained in underwriting agreements
customarily used by such managing or lead managing underwriter with such changes
as the parties thereto shall agree, including, without limitation, provisions
relating to indemnification and contribution in lieu thereof.
(iii) The Holder or Holders of Registrable Securities
included in any registration shall furnish to the Company such information
regarding such Holder or Holders, the Registrable Securities held by them and
the distribution proposed by such Holder or Holders as the Company may from time
to time reasonably request and as shall be reasonably required in connection
with any registration, qualification or compliance referred to in this
Agreement.
(iv) The Holder or Holders of Registrable Securities included
in any registration shall, upon request by the Company and the managing or lead
managing underwriter, execute and deliver custodian agreements and powers of
attorney in form and substance reasonably satisfactory to the Company and such
Holder or Holders and as shall be reasonably necessary to consummate the
offering.
(f) Indemnification. (i) The Company will indemnify each Holder
---------------
with respect to which a registration has been effected pursuant to this Warrant,
and each underwriter, if any, and each person who
9
controls any underwriter within the meaning of Section 15 of the 1933 Act,
against any and all losses, claims, damages, liabilities or expenses (or actions
in respect thereof), including any of the foregoing incurred in settlement of
any litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement or prospectus, or any amendment or supplement thereto,
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading, or any violation by the
Company of the 1933 Act or any rule or regulation promulgated under the 1933 Act
applicable to the Company in connection with any such registration, and the
Company will reimburse each such Holder, each such underwriter and each person
who controls any such underwriter, for any legal and other expenses reasonably
incurred, as such expenses are incurred, in connection with investigating,
preparing or defending any such claims, loss, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder or
underwriter and stated to be specifically for use therein.
(ii) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration is being
effected, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the 1933 Act and each other such holder of securities
included in the registration against any and all losses, claims, damages,
liabilities and expenses (or actions in respect thereof), arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement or prospectus, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statement therein, in the light of the circumstances
under which they were made, not misleading, and will reimburse the Company, such
holders, underwriters or control persons for any legal or any other expenses
reasonably incurred, as such expenses are incurred, in connection with
investigating or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement or prospectus in reliance upon and in conformity with
written information furnished to the Company by such Holder. Notwithstanding the
foregoing, the liability of each Holder under this Section 10(f) shall be
limited to an amount equal to the aggregate proceeds received by such Holder
from the sale of Registrable Securities hereunder, unless such liability arises
out of or is based on willful conduct by such Holder.
(iii) Each party entitled to indemnification under this Section 10
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claims or any
litigation resulting therefrom; provided, however, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (which approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at such Indemnified Party's expense; provided, however, that the failure
of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action. Notwithstanding the foregoing, the Indemnifying Party shall
not be entitled to assume the defense for matters as to which there is, in the
opinion of counsel to the Indemnifying Party, a conflict of interest or separate
and different defenses. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an
10
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and the litigation
resulting therefrom.
(g) Contribution.
------------
(i) If the indemnification provided for in Section 10(f)
hereof is unavailable to the Indemnified Parties in respect of any losses,
claims, damages, liabilities or expenses (or actions in respect thereof)
referred to therein, then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) in such proportion as is appropriate to
reflect the relative fault of the Indemnifying Party on the one hand and the
Indemnified Party on the other in connection with the statement or omission
which resulted in such losses, claims, damages, liabilities or expenses (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue statement (or alleged untrue statement), of a
material fact or the omission (or alleged omission) to state a material fact
relates to information supplied by the Indemnifying Party or the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
each Holder agree that it would not be just and equitable if contribution
pursuant to this Section 10(g) were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above. The amount paid or payable by an Indemnified
Party as a result of the losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to above in this Section shall be deemed to
include any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
(ii) Notwithstanding anything to the contrary contained
herein, the obligation of each Holder to contribute pursuant to this Section
10(g) is several and not joint and no selling Holder shall be required to
contribute any amount in excess of the amount by which the total price at which
the Registrable Securities of such Holder were offered to the public exceeds the
amount of any damages which such selling Holder has otherwise been required to
pay by reason of such untrue statement (or alleged untrue statement) or omission
(or alleged omission).
(iii) No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 0000 Xxx) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(h) 1934 Act Registration. The Company covenants and agrees
-----------------------
that upon the Company becoming a Public Corporation, if ever, and until such
time as there shall be no Registrable Securities outstanding :
(i) it will, if required by law, maintain an effective
registration statement (containing such information and documents as the SEC
shall specify) with respect to the Common Stock under Section 12(g) of the 1934
Act and will file in a timely manner such information, documents and reports as
the SEC may require or prescribe for companies whose stock has been registered
pursuant to said Section 12(g);
(ii) it will, if a registration statement with respect to the
Common Stock under Section 12(b) or Section 12(g) of the 1934 Act is effective,
make whatever filings with the SEC or otherwise make generally available to the
public such financial and other information as may be necessary in order to
enable the Holders to sell shares of Common Stock pursuant to the provisions of
Rule 144;
(iii) it will, if no longer required to file reports pursuant
to Section 12 (g) of the 1934 Act, upon the request of the Registered Holder,
make publicly available the information specified in subparagraph (c)(2) of Rule
144, and will take such further action as any Holder may reasonably request, all
to the extent required from time to time to enable such Holder to sell
Registrable Securities without registration under the 1933 Act within the
limitation of the exemptions provided by Rule 144 or any similar rule or
regulation hereafter adopted by the SEC; and
11
(iv) upon the request of any Holder, it will deliver to such
Holder a written statement as to whether it has complied with the requirements
of this Section 10(h).
The Company represents and warrants that such registration statement or any
information, documents or report filed with the SEC in connection therewith or
any information so made public shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements contained therein not misleading. The
Company agrees to indemnify and hold harmless (or to the extent the same is not
enforceable, make contribution to) the Holders, their partners, advisory
committee members, officers, directors and employees acting for any Holder in
connection with any offering or sale by such Holder of Registrable Securities or
any person, firm or corporation controlling (within the meaning of either
Section 15 of the 1933 Act or Section 20 of the 1934 Act) such Holder from and
against any and all losses, claims, damages, liabilities or expenses (or actions
in respect thereof) arising out of or resulting from any breach of the foregoing
representation or warranty, all on terms and conditions comparable to those set
forth in Section 10(f); provided, however, that the Company shall be given
written notice and an opportunity to assume on terms and conditions comparable
to those set forth in Section 10(f) the defense thereof.
SECTION 11. NOTICES. All notices, requests, demands and other
communications relating to this Warrant shall be in writing and shall be deemed
to have been duly given if delivered personally or sent by United States
certified or registered first-class mail, postage prepaid, return receipt
requested, to the parties hereto at the following addresses or at such other
address as any party hereto shall hereafter specify by notice to the other party
hereto:
(a) If to the Registered Holder of this Warrant or the holder of
the Warrant Shares, addressed to the address of such Registered Holder or holder
as set forth on books of the Company or otherwise furnished by the Registered
Holder or holder to the Company.
(b) If to the Company, addressed to:
Petrosearch Energy Corporation
000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: President
SECTION 12. BINDING EFFECT. This Warrant shall be binding upon
and inure to the sole and exclusive benefit of the Company, its successors and
assigns, and the holder or holders from time to time of this Warrant and the
Warrant Shares.
SECTION 13. SURVIVAL OF RIGHTS AND DUTIES. This Warrant shall
terminate and be of no further force and effect on the earlier of (i) 5:00 p.m.,
Texas time, on the Expiration Date and (ii) the date on which this Warrant and
all purchase rights evidenced hereby have been exercised, except that the
provisions of Sections 4, 6(c), 10 and 11 hereof shall continue in full force
and effect after such termination date.
SECTION 14. GOVERNING LAW. This Warrant shall be construed in
accordance with and governed by the laws of the State of Nevada.
SECTION 15. SECTION HEADINGS. The Section headings in this
Warrant are for purposes of convenience only and shall not constitute a part
hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
under its corporate seal by its officers thereunto duly authorized as of the
date hereof.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE.]
12
PETROSEARCH ENERGY CORPORATION
By: ______________________________________
Xxxxxxx X. Xxxx, President and CEO
By: ______________________________________
Xxxxx Xxxxxxx, Vice President and CFO
13
FORM OF ELECTION TO PURCHASE
(To Be Executed Upon Exercise of this Warrant)
To Petrosearch Energy Corporation:
The undersigned, the record holder of this Warrant (Warrant No.
_____), hereby irrevocably elects to exercise the right, represented by this
Warrant, to purchase ___________ of the Warrant Shares and herewith and hereby
tenders payment for such Warrant Shares to the order of Petrosearch Energy
Corporation of $_________ representing the full purchase price for such shares
at the price per share provided for in such Warrant and the delivery of any
applicable taxes payable by the undersigned pursuant to such Warrant.
The undersigned requests that certificates for such shares be issued
in the name of:
_______________________________
_______________________________
_______________________________
_______________________________ __________________________________
(Please print name and address) Social Security or Tax Identification No.
In the event that not all of the purchase rights represented by the
Warrant are exercised, a new Warrant, substantially identical to the attached
Warrant, representing the rights formerly represented by the attached Warrant
which have not been exercised, shall be issued in the name of and delivered to:
_______________________________
_______________________________
_______________________________ __________________________________
(Please print name and address) Social Security or Tax Identification No.
Dated: ________________ Name of Holder (Print):
By: __________________________________
(Name): ______________________________
(Title): _____________________________
14
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, ________________ hereby sells, assigns and
transfers to each assignee set forth below all of the rights of the undersigned
under the attached Warrant (Warrant No. ___) with respect to the number of
shares of Common Stock covered thereby set forth opposite the name of such
assignee unto:
Name of Assignee Address Number of Shares of
---------------- ------- Of Common Stock
---------------
If the total of said purchase rights represented by the Warrant shall
not be assigned, the undersigned requests that a new Warrant Certificate
evidencing the purchase rights not so assigned be issued in the name of and
delivered to the undersigned.
Dated: __________________ Name of Holder (Print): ________________________
________________________________
(Signature of Holder)
