Exhibit 10.2
SIBERIAN ENERGY GROUP, INC.
WARRANT AGREEMENT
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Date: September 14, 2006
To Whom It May Concern:
SIBERIAN ENERGY GROUP, INC. ("Company"), for value received, hereby agrees to
issue common stock purchase warrants entitling KEY BROKERAGE, INC. ("Holder")
and its assigns to purchase an aggregate of 250,000 shares of the Company's
common stock ("Common Stock"). Such warrant is evidenced by a warrant
certificate in the form attached hereto as Schedule 1 (such instrument being
hereinafter referred to as a "Warrant," and such Warrant and all instruments
hereafter issued in replacement, substitution, combination or subdivision
thereof being hereinafter collectively referred to as the "Warrant"). The
Warrant is issued in consideration for entering into the Option agreement with
the Company for the purchase of 75% of the share capital of Kondaneftegaz. The
number of shares of Common Stock purchasable upon exercise of the Warrant is
subject to adjustment as provided in Section 5 below. The Warrant will be
exercisable by the Warrant Holder as to all or any lesser number of shares of
Common Stock covered thereby, at an initial purchase price of $2.20 per share
(the "Purchase Price"), subject to adjustment as provided in Section 5 below,
for the exercise period defined in Section 3(a) below. The term "Warrant
Holder" refers to the person whose name appears on the signature page of this
Warrant Agreement and any transferee or transferees of any of them permitted by
Section 2(a) below.
1. REPRESENTATIONS AND WARRANTIES.
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The Company represents and warrants to you as follows:
(a) CORPORATE AND OTHER ACTION. The Company has all requisite
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power and authority (corporate and other), and has taken all
necessary corporate action, to authorize, execute, deliver and
perform this Warrant Agreement, to execute, issue, sell and
deliver the Warrant and a certificate or certificates evidencing
the Warrant, to authorize and reserve for issue and, upon payment
from time to time of the Purchase Price, to issue, sell and
deliver, the shares of the Common Stock issuable upon exercise of
the Warrant ("Shares"), and to perform all of its obligations
under this Warrant Agreement and the Warrant. The Shares, when
issued in accordance with this Warrant Agreement, will be duly
authorized and validly issued and outstanding, fully paid and
nonassessable and free of all liens, claims, encumbrances and
preemptive rights. This Warrant Agreement and, when issued, each
Warrant issued pursuant hereto, has been or will be duly executed
and delivered by the Company and is or will be a legal, valid and
binding agreement of the Company, enforceable in accordance with
its terms. No authorization, approval, consent or other order of
any governmental entity, regulatory authority or other third
party is required for such authorization, execution, delivery,
performance, issue or sale.
(b) NO VIOLATION. The execution and delivery of this Warrant
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Agreement, the consummation of the transactions herein
contemplated and the compliance with the terms and provisions of
this Warrant Agreement and of the Warrant will not conflict with,
or result in a breach of, or constitute a default or an event
permitting acceleration under, any statute, the articles of
incorporation, as amended, or bylaws of the Company or any
indenture, mortgage, deed of trust, note, bank loan, credit
agreement, franchise, license, lease, permit, or any other
agreement, understanding, instrument, judgment, decree, order,
statute, rule or regulation to which the Company is a party or by
which it is bound.
2. TRANSFER.
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(a) TRANSFERABILITY OF WARRANT. You agree that the Warrant is
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being acquired as an investment and not with a view to
distribution thereof and that the Warrant may not be transferred,
sold, assigned or hypothecated except as provided herein. The
Holder agrees that the Warrant may only be transferred by will or
by the laws of descent and distribution or for the benefit of one
or more of the following members of the Holder's immediate
family: any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law or sister-in-law
(including, without limitation, to a trust for the benefit of the
Holder and/or one or more of the foregoing members of the
Holder's immediate family or a corporation, partnership or
limited liability company established and controlled by the
Holder and/or one or more of the foregoing members of the
Holder's immediate family). You further acknowledge that the
Warrant may not be transferred, sold, assigned or hypothecated
unless pursuant to a registration statement that has become
effective under the Securities Act of 1933, as amended (the
"Act"), setting forth the terms of such offering and other
pertinent data with respect thereto, or unless you have provided
the Company with an acceptable opinion from acceptable counsel
that such registration is not required. Certificates representing
the Warrant shall bear an appropriate legend. Notwithstanding the
foregoing, any request to transfer the Warrant must be
accompanied by the Form of Assignment and Transfer attached
hereto as Schedule 2 executed by the Warrant Holder.
(b) REGISTRATION OF SHARES. You agree not to make any sale or
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other disposition of the Shares except pursuant to a registration
statement which has become effective under the Act, setting forth
the terms of such offering, the underwriting discount and
commissions and any other pertinent data with respect thereto,
unless you have provided the Company with an acceptable opinion
of counsel acceptable to the Company that such registration is
not required. Certificates representing the Shares, which are not
registered as provided in this Section 2, shall bear an
appropriate legend and be subject to a "stop-transfer" order.
(c) NO REGISTRATION RIGHTS. You hereby acknowledge that you do
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not have any rights to require the Company to register the
Warrant or the Shares under the Act or the laws of any State or
other jurisdiction, and you do not have the right to have the
Warrant or the Shares included in any registration under such
laws that the Company is undertaking or may undertake in the
future.
3. EXERCISE OF WARRANT, PARTIAL EXERCISE.
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(a) EXERCISE PERIOD. This Warrant shall expire and all rights
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hereunder shall be extinguished two (2) years from the date first
set forth above.
(b) EXERCISE IN FULL. Subject to Section 3(a), a Warrant may be
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exercised in full by the Warrant Holder by surrender of the
Warrant, with the Form of Subscription attached hereto as
Schedule 3 executed by such Warrant Holder, to the Company c/o
▇▇▇▇▇ ▇. ▇▇▇▇, Attorney at Law, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇, accompanied by payment as determined by
3(d) below, in the amount obtained by multiplying the number of
Shares represented by the respective Warrant by the Purchase
Price per share (after giving effect to any adjustments as
provided in Section 5 below).
(c) PARTIAL EXERCISE. Subject to Section 3(a), each Warrant may
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be exercised in part by the Warrant Holder by surrender of the
Warrant, with the Form of Subscription attached hereto as
Schedule 3 at the end thereof duly executed by such Warrant
Holder, in the manner and at the place provided in Section 3(b)
above, accompanied by payment as determined by 3(d) below, in
amount obtained by multiplying the number of Shares designated by
the Warrant Holder in the Form of Subscription attached hereto as
Schedule 3 to the Warrant by the Purchase Price per share (after
giving effect to any adjustments as provided in Section 5 below).
Upon any such partial exercise, the Company at its expense will
forthwith issue and deliver to or upon the order of the Warrant
Holder a new Warrant of like tenor, in the name of the Warrant
Holder subject to Section 2(a), calling in the aggregate for the
purchase of the number of Shares equal to the number of such
Shares called for on the face of the respective Warrant (after
giving effect to any adjustment herein as provided in Section 5
below) minus the number of such Shares designated by the Warrant
Holder in the aforementioned form of subscription.
(d) PAYMENT OF PURCHASE PRICE. Payment of the Purchase Price may
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be made by any of the following or a combination thereof, at the
election of the Warrant Holder:
(i) In cash, by wire transfer, by certified or cashier's
check, or by money order; or
(ii) By delivery to the Company of an exercise notice that
requests the Company to issue to the Warrant Holder the full
number of shares as to which the Warrant is then
exercisable, less the number of shares that have an
aggregate Fair Market Value at the time of exercise, equal
to the aggregate Purchase Price of the Shares to which such
exercise relates. (This method of exercise allows the
Warrant Holder to use a portion of the Shares issuable at
the time of exercise as payment for the Shares to which the
Warrant relates and is often referred to as a "cashless
exercise." For example, if the Warrant Holder elects to
exercise 1,000 Shares at an exercise price of $0.30 (or an
aggregate Purchase Price of $300.00) and the current Fair
Market Value of the shares on the date of exercise is $0.60,
the Warrant Holder can use 500 of the 1,000 shares at $0.60
per share to pay for the exercise of such portion of the
Warrant (500 x $0.60 = $300.00) and receive only the
remaining 500 shares.)
For purposes of this section, " Fair Market Value" shall be
defined as the average closing price of the Common Stock (if actual
sales price information on any trading day is not available, the
closing bid price shall be used) for the five (5) trading days prior
to the date of exercise of this Warrant (the "Average Closing Bid
Price"), as reported by the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), or if the Common Stock is not
traded on NASDAQ, the Average Closing Bid Price in the
over-the-counter market; provided, however, that if the Common Stock
is listed on a stock exchange, the Fair Market Value shall be the
Average Closing Bid Price on such exchange; and, provided further,
that if the Common Stock is not quoted or listed by any organization,
the fair value of the Common Stock, as determined by the Board of
Directors of the Company, whose determination shall be conclusive,
shall be used. In no event shall the Fair Market Value of any share of
Common Stock be less than its par value.
4. DELIVERY OF STOCK CERTIFICATES ON EXERCISE.
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Any exercise of the Warrant pursuant to Section 3 shall be deemed
to have been effected immediately prior to the close of business on
the date on which the Warrant together with the Form of Subscription
and the payment for the aggregate Purchase Price shall have been
received by the Company. At such time, the person or persons in whose
name or names any certificate or certificates representing the Shares
or Other Securities (as defined below) shall be issuable upon such
exercise shall be deemed to have become the holder or holders of
record of the Shares or Other Securities so purchased. As soon as
practicable after the exercise of any Warrant in full or in part, and
in any event within the (10) 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
purchasing Warrant Holder, a certificate or certificates representing
the number of fully paid and nonassessable shares of Common Stock or
Other Securities to which such Warrant Holder shall be entitled upon
such exercise, plus in lieu of any fractional share to which such
Warrant Holder would otherwise be entitled, cash in an amount
determined pursuant to Section 6(e). The term "Other Securities"
refers to any stock (other than Common Stock), other securities or
assets (including cash) of the Company or any other person (corporate
or otherwise) which the Warrant Holder at any time shall be entitled
to receive, or shall have received, upon 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 5
below or otherwise.
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES PURCHASABLE.
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The Purchase Price and the number of Shares are subject to
adjustment from time to time as set forth in this Section 5.
(a) In case the Company shall at any time after the date of this
Warrant Agreement (i) declare a dividend on the Common Stock in
shares of its capital stock, (ii) subdivide the outstanding
Common Stock, (iii) combine the outstanding Common Stock into a
smaller number of Common Stock, or (iv) issue any shares of its
capital stock by reclassification of the Common Stock (including
any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), then
in each case the Purchase Price, and the number and kind of
Shares receivable upon exercise, in effect at the time of the
record date for such dividend or of the effective date of such
subdivision, combination, or reclassification shall be
proportionately adjusted so that the holder of any Warrant
exercised after such time shall be entitled to receive the
aggregate number and kind of Shares which, if such Warrant had
been exercised immediately prior to such record date, he would
have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination, or
reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) No adjustment in the Purchase Price shall be required if
such adjustment is less than $.05; provided, however, that any
adjustments which by reason of this subsection (b) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest
one-thousandth of a share, as the case may be.
(c) Upon each adjustment of the Purchase Price as a result of
the calculations made in subsection (a) of this Section 5, the
Warrant outstanding prior to the making of the adjustment in the
Purchase Price shall thereafter evidence the right to purchase,
at the adjusted Purchase Price, that number of Shares (calculated
to the nearest thousandth) obtained by (i) multiplying the number
of Shares purchasable upon exercise of the Warrant immediately
prior to adjustment of the number of Shares by the Purchase Price
in effect prior to adjustment of the Purchase Price and (ii)
dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
6. FURTHER COVENANTS OF THE COMPANY.
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(a) DILUTION OR IMPAIRMENTS. The Company will not, by amendment
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of its articles of incorporation or through any reorganization,
transfer of assets, consolidation, merger or dissolution, avoid
or seek to avoid the observance or performance of any of the
terms of the Warrant or of this Warrant Agreement, but will at
all times in good faith assist in the carrying out of all such
terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Warrant Holder
against dilution or other impairment. Without limiting the
generality of the foregoing, the Company:
(i) shall at all times reserve and keep available, solely
for issuance and delivery upon the exercise of the Warrant,
all shares of Common Stock (or Other Securities) from time
to time issuable upon the exercise of the Warrant and shall
take all necessary actions to ensure that the par value per
share, if any, of the Common Stock (or Other Securities) is
at all times equal to or less than the then effective
Purchase Price per share; and
(ii) will take all such action as may be necessary or
appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common
Stock or Other Securities upon the exercise of the Warrant
from time to time outstanding.
(b) TITLE TO STOCK. All Shares delivered upon the exercise of
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the Warrant shall be validly issued, fully paid and
nonassessable; each Warrant Holder shall, upon such delivery,
receive good and marketable title to the Shares, free and clear
of all voting and other trust arrangements, liens, encumbrances,
equities and claims whatsoever; and the Company shall have paid
all taxes, if any, in respect of the issuance thereof.
(c) EXCHANGE OF WARRANT. Subject to Section 2(a) hereof, upon
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surrender for exchange of any Warrant to the Company, the Company
at its expense will promptly issue and deliver to or upon the
order of the holder thereof a new Warrant or like tenor, in the
name of such holder or as such holder (upon payment by such
Warrant holder of any applicable transfer taxes) may direct,
calling in the aggregate for the purchase of the number of Shares
called for on the face of the Warrant surrendered. The Warrant
and all rights thereunder are transferable in whole or in part
upon the books of the Company by the registered holder thereof,
subject to the provisions of Section 2(a), in person or by duly
authorized attorney, upon surrender of the Warrant, duly
endorsed, at the principal office of the Company.
(d) REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
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satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss,
theft or destruction, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company or, in
the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Company, at the expense of the Warrant
Holder, will execute and deliver, in lieu thereof, a new Warrant
of like tenor.
(e) FRACTIONAL SHARES. No fractional Shares are to be issued
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upon the exercise of any Warrant, but the Company shall round any
fraction of a share to the nearest whole Share.
7. OTHER WARRANT HOLDERS: HOLDERS OF SHARES.
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The Warrant is issued upon the following terms, to all of which
each Warrant Holder by the taking thereof consents and agrees: (a) any
person who shall become a transferee, within the limitations on
transfer imposed by Section 2(a) hereof, of a Warrant properly
endorsed shall take such Warrant subject to the provisions of Section
2(a) hereof and thereupon shall be authorized to represent himself,
herself or itself as absolute owner thereof and, subject to the
restrictions contained in this Warrant Agreement, shall be empowered
to transfer absolute title by endorsement and delivery thereof to a
permitted bona fide purchaser for value; (b) any person who shall
become a holder or owner of Shares shall take such shares subject to
the provisions of Section 2(b) hereof; (c) each prior taker or owner
waives and renounces all of his, her or its equities or rights in such
Warrant in favor of each such permitted bona fide purchaser, and each
such permitted bona fide purchaser shall acquire absolute title
thereto and to all rights presented thereby; and (d) until such time
as the respective Warrant is transferred on the books of the Company,
the Company may treat the registered holder thereof as the absolute
owner thereof for all purposes, notwithstanding any notice to the
contrary.
8. MISCELLANEOUS.
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All notices, certificates and other communications from or at the
request of the Company to any Warrant Holder shall be mailed by first
class, registered or certified mail, postage prepaid, to such address
as may have been furnished to the Company in writing by such Warrant
Holder, or, until an address is so furnished, to the address of the
last holder of such Warrant who has so furnished an address to the
Company, except as otherwise provided herein. This Warrant Agreement
and any of the terms 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 Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of
Texas. The headings in this Warrant Agreement are for purposes of
reference only and shall not limit or otherwise affect any of the
terms hereof. This Warrant Agreement, together with the forms of
instruments annexed hereto as schedules, constitutes the full and
complete agreement of the parties hereto with respect to the subject
matter hereof. For purposes of this Warrant Agreement, a faxed
signature shall constitute an original signature.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be executed
on this 14th day of September, 2006, by a duly authorized representative of the
Company.
SIBERIAN ENERGY GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
KEY BROKERAGE, INC.
By: /s/ ▇▇▇▇▇▇▇▇ Kolbassov
------------------------------
Name: ▇▇▇▇▇▇▇▇ Kolbassov
Title: President
SCHEDULE 1
WARRANT
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THIS WARRANT AND THE SHARES OF COMMON STOCK UNDELYING THIS WARRANT
(COLLECTIVELY, THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER: (A) THE
SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON THE EXEMPTIONS FROM
REGISTRATION PROVIDED IN SECTIONS 3 AND 4 OF SUCH ACT AND REGULATION D
PROMULGATED THEREUNDER; OR (B) ANY STATE SECURITIES LAWS IN RELIANCE UPON
APPLICABLE EXEMPTIONS THEREUNDER. THESE SECURITIES MUST BE ACQUIRED FOR
INVESTMENT ONLY FOR THE ACCOUNT OF THE INVESTOR, AND NEITHER THE WARRANT NOR THE
UNDERLYING COMMON STOCK MAY BE TRANSFERRED OR, IN THE CASE OF THE WARRANT,
EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE SECURITIES AND OTHER LAWS.
To Purchase 250,000 Shares
of Common Stock
SIBERIAN ENERGY GROUP, INC.
This certifies that, for value received, the hereafter named registered owner is
entitled, subject to the terms and conditions of this Warrant, until the
expiration date, to purchase the number of shares (the "Shares") set forth above
of the common stock ("Common Stock"), of SIBERIAN ENERGY GROUP, INC. (the
"Company") from the Company at the purchase price per share hereafter set forth
below, on delivery of this Warrant to the Company with the exercise form duly
executed and payment of the purchase price (in cash, by certified or bank
cashier's check payable to the order of the Company or by wire transfer) for
each Share purchased. This Warrant is subject to the terms of the Warrant
Agreement between the parties thereto dated September 14, 2006, the terms of
which are hereby incorporated herein. Reference is hereby made to such Warrant
Agreement for a further statement of the rights of the holder of this Warrant.
Registered Owner: KEY BROKERAGE, INC. Date: September 14, 2006
Purchase Price
Per Share: $2.20
Expiration Date: September 14, 2008, 5:00 p.m. Eastern Time.
WITNESS the signature of the Company's duly authorized representative:
SIBERIAN ENERGY GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
KEY BROKERAGE, INC.
By: /s/ Guergui Kolbassov
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Name: ▇▇▇▇▇▇▇▇ Kolbassov
Title: President
SCHEDULE 2
FORM OF ASSIGNMENT AND TRANSFER
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For value received, the undersigned hereby sells, assigns and transfers unto
__________________________________ the right represented by the enclosed Warrant
to purchase shares of Common Stock of SIBERIAN ENERGY GROUP, INC. to
which the enclosed Warrant relates, and appoints Attorney to
transfer such right on the books of SIBERIAN ENERGY GROUP, INC. with full power
of substitution in the premises.
The undersigned represents and warrants that the transfer of the enclosed
Warrant is permitted by the terms of the Warrant Agreement pursuant to which the
enclosed Warrant has been issued, and the transferee hereof, by his, her or its
acceptance of this Agreement, represents and warrants that he, she or it is
familiar with the terms of said Warrant Agreement and agrees to be bound by the
terms thereof with the same force and effect as if a signatory thereto.
Dated:______________
____________________________________________
(Signature and must conform in all respects to name of holder
as specified on the face of the enclosed Warrant)
____________________________________________
(Address)
Signed in the presence of:
____________________________________
SCHEDULE 3
FORM OF SUBSCRIPTION
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(To be signed only upon exercise of Warrant)
To SIBERIAN ENERGY GROUP, INC.:
The undersigned, the holder of the enclosed Warrant, hereby irrevocably elects
to exercise the purchase right represented by such Warrant for, and to purchase
thereunder, * shares of Common Stock of SIBERIAN ENERGY GROUP,
INC. and herewith makes payment of $_______________ therefore, and requests that
the certificate or certificates for such shares be issued in the name of and
delivered to the undersigned.
Dated:______________
____________________________________________
(Signature must conform in all respects to name of holder
as specified on the face of the enclosed Warrant)
____________________________________________
(Address)
___________________________
(*) Insert here the number of shares called for on the face of the Warrant
or, in the case of a partial exercise, the portion thereof as to which the
Warrant is being exercised, in either case without making any adjustment for
additional Common Stock or any other stock or other securities or property
which, pursuant to the adjustment provisions of the Warrant Agreement pursuant
to which the Warrant was granted, may be delivered upon exercise.
