COMMON UNIT PURCHASE WARRANT To Purchase __________ Common Units of CROSSPOINT ENERGY COMPANY
NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS
SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED
BY
SUCH SECURITIES.
To
Purchase __________ Common Units of
CROSSPOINT
ENERGY COMPANY
THIS
COMMON UNIT PURCHASE WARRANT (the “Warrant”)
certifies that, for value received, _____________ (the “Holder”),
is
entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date hereof (the
“Initial
Exercise Date”)
and on
or prior to the close of business on the five year anniversary of the Initial
Exercise Date (the “Termination
Date”)
but
not thereafter, to subscribe for and purchase from CrossPoint Energy Company,
a
Texas limited liability company (the “Company”),
up to
______ Common Units (the “Warrant
Units”)
of the
Company (the “Common
Units”).
The
purchase price of one Common Unit under this Warrant shall be equal to the
Exercise Price, as defined in Section 2(b).
Section
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have the meanings
set forth in that certain Securities Purchase Agreement (the “Purchase
Agreement”),
dated
June 30, 2006, among the Company and the purchasers signatory
thereto.
Section
2. Exercise.
a) Exercise
of Warrant.
Exercise of the purchase rights represented by this Warrant may be made, in
whole or in part, at any time or times on or after the Initial Exercise Date
and
on or before the Termination Date by delivery to the Company of a duly executed
facsimile copy of the Notice of Exercise Form annexed hereto (or such other
office or agency of the Company as it may designate by notice in writing to
the
registered Holder at the address of such Holder appearing on the books of the
Company); and, within 3 Trading Days of the date said Notice of Exercise is
delivered to the Company, the Holder shall have surrendered this Warrant and
the
Company shall have received payment of the aggregate Exercise Price of the
shares thereby purchased by wire transfer or cashier’s check drawn on a United
States bank.
b) Exercise
Price.
The
exercise price per share of the Common Units under this Warrant shall be $1.95,
subject to adjustment hereunder (the “Exercise
Price”).
c) Cashless
Exercise.
If at
any time after one year from the date of issuance of this Warrant there is
no
effective Registration Statement registering, or no current prospectus available
for, the resale of the Warrant Units by the Holder, then this Warrant may also
be exercised at such time by means of a “cashless exercise” in which the Holder
shall be entitled to receive a certificate for the number of Warrant Units
equal
to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A)
= the
VWAP on the Trading Day immediately preceding the date of such
election;
(B)
= the
Exercise Price of this Warrant, as adjusted; and
(X)
= the
number of Warrant Units issuable upon exercise of this Warrant in accordance
with the terms of this Warrant by means of a cash exercise rather than a
cashless exercise.
Notwithstanding
anything herein to the contrary, on the Termination Date, this Warrant shall
be
automatically exercised via cashless exercise pursuant to this Section
2(c).
As
used
herein, “VWAP”
means,
for any date, the price determined by the first of the following clauses that
applies: (a) if the Common Units are then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Units for such date (or
the nearest preceding date) on the Trading Market on which the Common Units
are
then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day
from
9:30 a.m. New York City time to 4:02 p.m. New York City time); (b) if the
OTC Bulletin Board is not a Trading Market, the volume weighted average price
of
the Common Units for such date (or the nearest preceding date) on the OTC
Bulletin Board; (c) if the Common Units are not then listed or quoted on the
OTC
Bulletin Board and if prices for the Common Units are then reported in the
“Pink
Sheets” published by Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price
per
unit of the Common Unit so reported; or (d) in all other cases, the fair
market value of one Common Unit as determined by an independent appraiser
selected in good faith by the Holder and reasonably acceptable to the
Company.
2
d) Exercise
Limitations.
|
i.
|
Holder’s
Restrictions.
The Company shall not effect any exercise of this Warrant, and a
Holder
shall not have the right to exercise any portion of this Warrant,
pursuant
to Section 2(c) or otherwise, to the extent that after giving effect
to
such issuance after exercise as set forth on the applicable Notice
of
Exercise, such Holder (together with such Holder’s Affiliates, and any
other person or entity acting as a group together with such Holder
or any
of such Holder’s Affiliates), as set forth on the applicable Notice of
Exercise, would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing
sentence, the number of Common Units beneficially owned by such Holder
and
its Affiliates shall include the number of Common Units issuable
upon
exercise of this Warrant with respect to which such determination
is being
made, but shall exclude the number of Common Units which would be
issuable
upon (A) exercise of the remaining, nonexercised portion of this
Warrant
beneficially owned by such Holder or any of its Affiliates and (B)
exercise or conversion of the unexercised or nonconverted portion
of any
other securities of the Company (including, without limitation, any
other
Warrants) subject to a limitation on conversion or exercise analogous
to
the limitation contained herein beneficially owned by such Holder
or any
of its affiliates. Except as set forth in the preceding sentence,
for purposes of this Section 2(d)(i), beneficial ownership shall
be
calculated in accordance with Section 13(d) of the Exchange Act and
the
rules and regulations promulgated thereunder, it being acknowledged
by a
Holder that the Company is not representing to such Holder that such
calculation is in compliance with Section 13(d) of the Exchange Act
and
such Holder is solely responsible for any schedules required to be
filed
in accordance therewith. To the extent that the limitation contained
in
this Section 2(d) applies, the determination of whether this Warrant
is
exercisable (in relation to other securities owned by such Holder
together
with any Affiliates) and of which a portion of this Warrant is exercisable
shall be in the sole discretion of a Holder, and the submission of
a
Notice of Exercise shall be deemed to be each Holder’s determination of
whether this Warrant is exercisable (in relation to other securities
owned
by such Holder together with any Affiliates) and of which portion
of this
Warrant is exercisable, in each case subject to such aggregate percentage
limitation, and the Company shall have no obligation to verify or
confirm
the accuracy of such determination. In addition, a determination
as to any
group status as contemplated above shall be determined in accordance
with
Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. For purposes of this Section 2(d), in determining
the number of outstanding Common Units, a Holder may rely on the
number of
outstanding Common Units as reflected in (x) the Company’s most recent
Form 10-QSB or Form 10-KSB, as the case may be, (y) a more recent
public
announcement by the Company or (z) any other notice by the Company
or the
Company’s Transfer Agent setting forth the number of Common Units
outstanding. Upon the written or oral request of a Holder, the
Company shall within two Trading Days confirm orally and in writing
to
such Holder the number of Common Units then outstanding. In any
case, the number of outstanding Common Units shall be determined
after
giving effect to the conversion or exercise of securities of the
Company,
including this Warrant, by such Holder or its Affiliates since the
date as
of which such number of outstanding Common Units was reported. The
“Beneficial Ownership Limitation” shall be 4.99% of the number of Common
Units outstanding immediately after giving effect to the issuance
of
Common Units issuable upon exercise of this Warrant. The Beneficial
Ownership Limitation provisions of this Section 2(d)(i) may be waived
by
such ▇▇▇▇▇▇, at the election of such Holder, upon not less than 61
days’
prior notice to the Company to change the Beneficial Ownership Limitation
to 9.99% of the number of the Common Units outstanding immediately
after
giving effect to the issuance of Common Units upon exercise of this
Warrant, and the provisions of this Section 2(d) shall continue to
apply.
Upon such a change by a Holder of the Beneficial Ownership Limitation
from
such 4.99% limitation to such 9.99% limitation, the Beneficial Ownership
Limitation may not be further waived by such Holder. The provisions
of
this paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 2(d)(i)
to
correct this paragraph (or any portion hereof) which may be defective
or
inconsistent with the intended Beneficial Ownership Limitation herein
contained or to make changes or supplements necessary or desirable
to
properly give effect to such limitation. The limitations contained
in this
paragraph shall apply to a successor holder of this
Warrant.
|
3
e) Mechanics
of Exercise.
i. Authorization
of Warrant Units.
The
Company covenants that all Warrant Units which may be issued upon the exercise
of the purchase rights represented by this Warrant will, upon exercise of the
purchase rights represented by this Warrant, be duly authorized, validly issued,
fully paid and nonassessable and free from all taxes, liens and charges created
by the Company in respect of the issue thereof (other than taxes in respect
of
any transfer occurring contemporaneously with such issue).
ii. Delivery
of Certificates Upon Exercise.
Certificates for shares purchased hereunder shall be transmitted by the transfer
agent of the Company to the Holder by crediting the account of the Holder’s
prime broker with the Depository Trust Company through its Deposit Withdrawal
Agent Commission (“DWAC”)
system
if the Company is a participant in such system, and otherwise by physical
delivery to the address specified by the Holder in the Notice of Exercise within
3 Trading Days from the delivery to the Company of the Notice of Exercise Form,
surrender of this Warrant and payment of the aggregate Exercise Price as set
forth above (“Warrant
Unit Delivery Date”).
This
Warrant shall be deemed to have been exercised on the date the Exercise Price
is
received by the Company. The Warrant Units shall be deemed to have been issued,
and Holder or any other person so designated to be named therein shall be deemed
to have become a holder of record of such shares for all purposes, as of the
date the Warrant has been exercised by payment to the Company of the Exercise
Price (or by cashless exercise, if permitted) and all taxes required to be
paid
by the Holder, if any, pursuant to Section 2(e)(vii) prior to the issuance
of
such shares, have been paid.
4
iii. Delivery
of New Warrants Upon Exercise.
If this
Warrant shall have been exercised in part, the Company shall, at the request
of
a Holder and upon surrender of this Warrant certificate, at the time of delivery
of the certificate or certificates representing Warrant Units, deliver to Holder
a new Warrant evidencing the rights of Holder to purchase the unpurchased
Warrant Units called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant.
iv. Rescission
Rights.
If the
Company fails to cause its transfer agent to transmit to the Holder a
certificate or certificates representing the Warrant Units pursuant to this
Section 2(e)(iv) by the Warrant Unit Delivery Date, then the Holder will have
the right to rescind such exercise.
v. Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon
Exercise.
In
addition to any other rights available to the Holder, if the Company fails
to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Units pursuant to an exercise on or before the Warrant
Unit Delivery Date, and if after such date the Holder is required by its broker
to purchase (in an open market transaction or otherwise) Common Units to deliver
in satisfaction of a sale by the Holder of the Warrant Units which the Holder
anticipated receiving upon such exercise (a “Buy-In”),
then
the Company shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
Common Units so purchased exceeds (y) the amount obtained by multiplying (A)
the
number of Warrant Units that the Company was required to deliver to the Holder
in connection with the exercise at issue times (B) the price at which the sell
order giving rise to such purchase obligation was executed, and (2) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Units for which such exercise was not honored or deliver
to
the Holder the number of Common Units that would have been issued had the
Company timely complied with its exercise and delivery obligations hereunder.
For example, if the Holder purchases Common Units having a total purchase price
of $11,000 to cover a Buy-In with respect to an attempted exercise of shares
of
Common Units with an aggregate sale price giving rise to such purchase
obligation of $10,000, under clause (1) of the immediately preceding sentence
the Company shall be required to pay the Holder $1,000. The Holder shall provide
the Company written notice indicating the amounts payable to the Holder in
respect of the Buy-In and, upon request of the Company, evidence of the amount
of such loss. Nothing herein shall limit a ▇▇▇▇▇▇’s right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver certificates representing
Common Units upon exercise of the Warrant as required pursuant to the terms
hereof.
5
vi. No
Fractional Units or Scrip.
No
fractional units or scrip representing fractional units shall be issued upon
the
exercise of this Warrant. As to any fraction of a unit which Holder would
otherwise be entitled to purchase upon such exercise, the Company shall at
its
election, either pay a cash adjustment in respect of such final fraction in
an
amount equal to such fraction multiplied by the Exercise Price or round up
to
the next whole unit.
vii. Charges,
Taxes and Expenses.
Issuance of certificates for Warrant Units shall be made without charge to
the
Holder for any issue or transfer tax or other incidental expense in respect
of
the issuance of such certificate, all of which taxes and expenses shall be
paid
by the Company, and such certificates shall be issued in the name of the Holder
or in such name or names as may be directed by the Holder; provided,
however,
that in
the event certificates for Warrant Units are to be issued in a name other than
the name of the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the Holder;
and the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.
viii. Closing
of Books.
The
Company will not close its member or stockholder books or records in any manner
which prevents the timely exercise of this Warrant, pursuant to the terms
hereof.
6
f) Call
Provision.
Subject
to the provisions of Section 2(d) and this Section 2(f), if, at any time after
the date that is one year and 180 days after the Effective Date (i) the VWAP
for
each of at least 20 out of 30 consecutive Trading Days (the “Measurement
Period”,
which
30 Trading Day period shall not have commenced until after the Effective Date)
exceeds $3.00 (subject to adjustment for forward and reverse stock splits,
recapitalizations, stock dividends and the like after the Initial Exercise
Date)
(the “Threshold
Price”),
(ii)
the daily dollar trading volume for such Threshold Period, which Threshold
Period shall have commenced only after the Effective Date, exceeds $100,000
per
Trading Day and (iii) the Holder is not in possession of any information
provided by or on behalf of the Company that constitutes, or might constitute,
material non-public information, then the Company may, within one Trading Day
of
the end of such period, call for cancellation of all or any portion of this
Warrant for which a Notice of Exercise has not yet been delivered (such right,
a
“Call”).
To
exercise this right, the Company must deliver to the Holder an irrevocable
written notice (a “Call
Notice”),
indicating therein the portion of unexercised portion of this Warrant to which
such notice applies. If the conditions set forth below for such Call are
satisfied from the period from the date of the Call Notice through and including
the Call Date (as defined below), then any portion of this Warrant subject
to
such Call Notice for which a Notice of Exercise shall not have been received
by
the Call Date will be cancelled at 6:30 p.m. (New York City time) on the tenth
Trading Day after the date the Call Notice is received by the Holder (such
date
and time, the “Call
Date”).
Any
unexercised portion of this Warrant to which the Call Notice does not pertain
will be unaffected by such Call Notice. In furtherance thereof, the Company
covenants and agrees that it will honor all Notices of Exercise with respect
to
Warrant Shares subject to a Call Notice that are tendered through 6:30 p.m.
(New
York City time) on the Call Date. The parties agree that any Notice of Exercise
delivered following a Call Notice which calls less than all the Warrants shall
first reduce to zero the number of Warrant Shares subject to such Call Notice
prior to reducing the remaining Warrant Shares available for purchase under
this
Warrant. For example, if (x) this Warrant then permits the Holder to acquire
100
Warrant Shares, (y) a Call Notice pertains to 75 Warrant Shares, and (z) prior
to 6:30 p.m. (New York City time) on the Call Date the Holder tenders a Notice
of Exercise in respect of 50 Warrant Shares, then (1) on the Call Date the
right
under this Warrant to acquire 25 Warrant Shares will be automatically cancelled,
(2) the Company, in the time and manner required under this Warrant, will have
issued and delivered to the Holder 50 Warrant Shares in respect of the exercises
following receipt of the Call Notice, and (3) the Holder may, until the
Termination Date, exercise this Warrant for 25 Warrant Shares (subject to
adjustment as herein provided and subject to subsequent Call Notices). Subject
again to the provisions of this Section 2(f), the Company may deliver subsequent
Call Notices for any portion of this Warrant for which the Holder shall not
have
delivered a Notice of Exercise. Notwithstanding anything to the contrary set
forth in this Warrant, the Company may not deliver a Call Notice or require
the
cancellation of this Warrant (and any such Call Notice will be void), unless,
from the beginning of the 20th consecutive Trading Day used to determine whether
the Common Stock has achieved the Threshold Price through the Call Date, (i)
the
Company shall have honored in accordance with the terms of this Warrant all
Notices of Exercise delivered by 6:30 p.m. (New York City time) on the Call
Date, (ii) the Registration Statement shall be effective as to all Warrant
Shares and the prospectus thereunder available for use by the Holder for the
resale of all such Warrant Shares and (iii) the Common Stock shall be listed
or
quoted for trading on the Trading Market, and (iv) there is a sufficient number
of authorized shares of Common Stock for issuance of all Securities under the
Transaction Documents, and (v) the issuance of the shares shall not cause a
breach of any provision of 2(d) herein. The Company’s right to Call the Warrant
shall be exercised ratably among the Holders based on each Holder’s initial
purchase of Warrants.
Section
3. Certain Adjustments.
a) Stock
Dividends and Splits.
If the
Company, at any time while this Warrant is outstanding: (A) pays a stock
dividend or otherwise make a distribution or distributions on Common Units
or
any other equity or equity equivalent securities payable in Common Units (which,
for avoidance of doubt, shall not include any Common Units issued by the Company
upon exercise of this Warrant), (B) subdivides outstanding Common Units into
a
larger number of shares, (C) combines (including by way of reverse stock split)
outstanding Common Units into a smaller number of units, or (D) issues by
reclassification of Common Units any other securities of the Company, then
in
each case the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of Common Units (excluding treasury units, if
any)
outstanding immediately before such event and of which the denominator shall
be
the number of Common Units outstanding immediately after such event and the
number of units issuable upon exercise of this Warrant shall be proportionately
adjusted. Any adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination of members
entitled to receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination
or re-classification.
7
b) Subsequent
Equity Sales.
If the
Company or any Subsidiary thereof, as applicable, at any time while this Warrant
is outstanding, shall sell or grant any option to purchase or sell or grant
any
right to reprice its securities, or otherwise dispose of or issue (or announce
any offer, sale, grant or any option to purchase or other disposition) any
Common Units or Common Unit Equivalents entitling any Person to acquire Common
Units, at an effective price per share less than the then Exercise Price (such
lower price, the “Base
Share Price”
and
such issuances collectively, a “Dilutive
Issuance”)
(if
the holder of the Common Units or Common Unit Equivalents so issued shall at
any
time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which are issued in connection with such
issuance, be entitled to receive Common Units at an effective price per unit
which is less than the Exercise Price, such issuance shall be deemed to have
occurred for less than the Exercise Price on such date of the Dilutive
Issuance), then the Exercise Price shall be reduced and only reduced by
multiplying the Exercise Price by a fraction, the numerator of which is the
number of Common Units issued and outstanding immediately prior to the Dilutive
Issuance plus the number of Common Units which the offering price for such
Dilutive Issuance would purchase at the then Exercise Price, and the denominator
of which shall be the sum of the number of Common Units issued and outstanding
immediately prior to the Dilutive Issuance plus the number of Common Units
so
issued or issuable in connection with the Dilutive Issuance and the number
of
Warrant Shares issuable hereunder shall be increased such that the aggregate
Exercise Price payable hereunder, after taking into account the decrease in
the
Exercise Price, shall be equal to the aggregate Exercise Price prior to such
adjustment. Such adjustment shall be made whenever such Common Units or Common
Unit Equivalents are issued. Notwithstanding the foregoing, no adjustments
shall
be made, paid or issued under this Section 3(b) in respect of an Exempt
Issuance. The Company shall notify the Holder in writing, no later than the
Trading Day following the issuance of any Common Units or Common Unit
Equivalents subject to this section, indicating therein the applicable issuance
price, or applicable reset price, exchange price, conversion price and other
pricing terms (such notice the “Dilutive
Issuance Notice”).
For
purposes of clarification, whether or not the Company provides a Dilutive
Issuance Notice pursuant to this Section 3(b), upon the occurrence of any
Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
entitled to receive a number of Warrant Units based upon the Base Share Price
regardless of whether the Holder accurately refers to the Base Share Price
in
the Notice of Exercise.
c) Subsequent
Rights Offerings.
If the
Company, at any time while the Warrant is outstanding, shall issue rights,
options or warrants to all holders of Common Units (and not to Holders)
entitling them to subscribe for or purchase Common Units at a price per share
less than the VWAP at the record date mentioned below, then the Exercise Price
shall be multiplied by a fraction, of which the denominator shall be the number
of shares of the Common Units outstanding on the date of issuance of such rights
or warrants plus the number of additional Common Units offered for subscription
or purchase, and of which the numerator shall be the number of shares of the
Common Units outstanding on the date of issuance of such rights or warrants
plus
the number of shares which the aggregate offering price of the total number
of
shares so offered (assuming receipt by the Company in full of all consideration
payable upon exercise of such rights, options or warrants) would purchase at
such VWAP. Such adjustment shall be made whenever such rights or warrants are
issued, and shall become effective immediately after the record date for the
determination of members or stockholders entitled to receive such rights,
options or warrants.
8
d) Pro
Rata Distributions.
If the
Company, at any time prior to the Termination Date, shall distribute to all
holders of Common Units (and not to Holders of the Warrants) evidences of its
indebtedness or assets (including cash and cash dividends) or rights or warrants
to subscribe for or purchase any security other than the Common Units (which
shall be subject to Section 3(b)), then in each such case the Exercise Price
shall be adjusted by multiplying the Exercise Price in effect immediately prior
to the record date fixed for determination of members or stockholders entitled
to receive such distribution by a fraction of which the denominator shall be
the
VWAP determined as of the record date mentioned above, and of which the
numerator shall be such VWAP on such record date less the then per share fair
market value at such record date of the portion of such assets or evidence
of
indebtedness so distributed applicable to one outstanding Common Units as
determined by the Board of Managers in good faith. In either case the
adjustments shall be described in a statement provided to the Holder of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Units. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
e) Fundamental
Transaction.
If, at
any time while this Warrant is outstanding, (A) the Company effects any merger
or consolidation of the Company with or into another Person, (B) the Company
effects any sale of all or substantially all of its assets in one or a series
of
related transactions, (C) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common
Units are permitted to tender or exchange their shares for other securities,
cash or property, or (D) the Company effects any reclassification of the Common
Units or any compulsory share exchange pursuant to which the Common Units is
effectively converted into or exchanged for other securities, cash or property
(in any such case, a “Fundamental
Transaction”),
then,
upon any subsequent exercise of this Warrant, the Holder shall have the right
to
receive, for each Warrant Unit that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental Transaction, at the
option of the Holder, (a) upon exercise of this Warrant, the number of Common
Units of the successor or acquiring corporation or of the Company, if it is
the
surviving corporation, and any additional consideration (the “Alternate
Consideration”)
receivable upon or as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets by a Holder of the number of Common
Units
for which this Warrant is exercisable immediately prior to such event or (b)
if
the Company is acquired in an all cash transaction, cash equal to the value
of
this Warrant as determined in accordance with the Black-Scholes option pricing
formula. For purposes of any such exercise, the determination of the Exercise
Price shall be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect of one Common
Unit in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Units are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration
it
receives upon any exercise of this Warrant following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions,
any
successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new warrant consistent with the foregoing provisions
and evidencing the Holder’s right to exercise such warrant into Alternate
Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this Section 3(e) and insuring
that this Warrant (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental
Transaction.
9
f) Calculations.
All
calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of this Section
3,
the number of Common Units deemed to be issued and outstanding as of a given
date shall be the sum of the number of Common Units (excluding treasury shares,
if any) issued and outstanding.
g) Voluntary
Adjustment By Company.
The
Company may at any time during the term of this Warrant reduce the then current
Exercise Price to any amount and for any period of time deemed appropriate
by
the Board of Managers of the Company.
h) Notice
to Holders.
i. Adjustment
to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to any provision of this
Section 3, the Company shall promptly mail to each Holder a notice setting
forth
the Exercise Price after such adjustment and setting forth a brief statement
of
the facts requiring such adjustment. If the Company issues a variable rate
security, despite the prohibition thereon in the Purchase Agreement, the Company
shall be deemed to have issued Common Units or Common Unit Equivalents at the
lowest possible conversion or exercise price at which such securities may be
converted or exercised in the case of a Variable Rate Transaction (as defined
in
the Purchase Agreement).
10
ii. Notice
to Allow Exercise by ▇▇▇▇▇▇.
If (A)
the Company shall declare a dividend (or any other distribution in whatever
form) on the Common Units; (B) the Company shall declare a special nonrecurring
cash dividend on or a redemption of the Common Units; (C) the Company shall
authorize the granting to all holders of the Common Units rights or warrants
to
subscribe for or purchase any shares of capital stock of any class or of any
rights; (D) the approval of any members or stockholders of the Company shall
be
required in connection with any reclassification of the Common Units, any
consolidation or merger to which the Company is a party, any sale or transfer
of
all or substantially all of the assets of the Company, of any compulsory share
exchange whereby the Common Units are converted into other securities, cash
or
property; (E) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company; then,
in
each case, the Company shall cause to be mailed to the Holder at its last
address as it shall appear upon the Warrant Register of the Company, at least
15
calendar days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or warrants,
or
if a record is not to be taken, the date as of which the holders of the Common
Units of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected
that holders of the Common Units of record shall be entitled to exchange their
Common Units for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange;
provided that the failure to mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of the limited liability company
action required to be specified in such notice. The Holder is entitled to
exercise this Warrant during the 15-day period commencing on the date of such
notice to the effective date of the event triggering such notice.
i) Adjustments
Not Effected by Exercise Limitations.
The
adjustments set forth in this Section 3 shall not be limited or restricted
by
the limitations imposed on exercise of this Warrant in Section
2(d).
Section
4. Transfer
of Warrant.
a) Transferability.
Subject
to compliance with any applicable securities laws and the conditions set forth
in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase
Agreement, this Warrant and all rights hereunder (including, without limitation,
any registration rights) are transferable, in whole or in part, upon surrender
of this Warrant at the principal office of the Company or its designated agent,
together with a written assignment of this Warrant substantially in the form
attached hereto duly executed by the Holder or its agent or attorney and funds
sufficient to pay any transfer taxes payable upon the making of such transfer.
Upon such surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination or denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the portion
of this Warrant not so assigned, and this Warrant shall promptly be cancelled.
A
Warrant, if properly assigned, may be exercised by a new holder for the purchase
of Warrant Units without having a new Warrant issued.
11
b) New
Warrants.
This
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney. Subject to compliance with
Section 4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants
in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
c) Warrant
Register.
The
Company shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant
Register”),
in
the name of the record Holder hereof from time to time. The Company may deem
and
treat the registered Holder of this Warrant as the absolute owner hereof for
the
purpose of any exercise hereof or any distribution to the Holder, and for all
other purposes, absent actual notice to the contrary.
d) Transfer
Restrictions.
If,
at the
time
of
the surrender of this Warrant in connection with any transfer of this Warrant,
the transfer of this Warrant shall not be registered pursuant to an effective
registration
statement under the Securities Act
and
under
applicable state securities or blue sky laws, the Company may require, as a
condition of allowing such transfer (i) that, if the Warrant may not then be
sold pursuant to Rule 144(k) under the Securities Act, the Holder or transferee
of this Warrant, as the case may be, furnish to the Company a written opinion
of
counsel (which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect that such transfer
may be made without
registration under
the
Securities Act and under applicable state securities or blue sky laws, (ii)
that
the holder or transferee execute and deliver to the Company an investment letter
in form and substance acceptable to the Company and (iii) that the transferee
be
an “accredited
investor” as defined in Rule 501(a) promulgated under the Securities
Act.
Section
5. Miscellaneous.
a) No
Rights as Shareholder Until Exercise.
This
Warrant does not entitle the Holder to any voting rights or other rights as
a
shareholder of the Company prior to the exercise hereof as set forth in Section
2(e)(ii).
b) Loss,
Theft, Destruction or Mutilation of Warrant.
The
Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
or any stock certificate relating to the Warrant Units, and in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it
(which, in the case of the Warrant, shall not include the posting of any bond),
and upon surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate
of like tenor and dated as of such cancellation, in lieu of such Warrant or
stock certificate.
12
c) Saturdays,
Sundays, Holidays, etc.
If the
last or appointed day for the taking of any action or the expiration of any
right required or granted herein shall not be a Business Day, then such action
may be taken or such right may be exercised on the next succeeding Business
Day.
d) Authorized
Shares.
The
Company covenants that during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Units a sufficient number of
Common Units to provide for the issuance of the Warrant Units upon the exercise
of any purchase rights under this Warrant. The Company further covenants that
its issuance of this Warrant shall constitute full authority to its officers
who
are charged with the duty of executing stock certificates to execute and issue
the necessary certificates for the Warrant Units upon the exercise of the
purchase rights under this Warrant. The Company will take all such reasonable
action as may be necessary to assure that such Warrant Units may be issued
as
provided herein without violation of any applicable law or regulation, or of
any
requirements of the Trading Market upon which the Common Units may be listed.
Except
and to the extent as waived or consented to by the Holder, the Company shall
not
by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of
this
Warrant, but will at all times in good faith assist in the carrying out of
all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant against
impairment. Without limiting the generality of the foregoing, the Company will
(a) not increase the par value of any Warrant Units above the amount payable
therefor upon such exercise immediately prior to such increase in par value,
(b)
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable Warrant
Units
upon the exercise of this Warrant, and (c) use commercially reasonable efforts
to obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant.
Before
taking any action which would result in an adjustment in the number of Warrant
Units for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.
13
e) Jurisdiction.
All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be determined in accordance with the provisions of the
Purchase Agreement.
f) Restrictions.
The
Holder acknowledges that the Warrant Units acquired upon the exercise of this
Warrant, if not registered, will have restrictions upon resale imposed by state
and federal securities laws.
g) Nonwaiver
and Expenses.
No
course of dealing or any delay or failure to exercise any right hereunder on
the
part of Holder shall operate as a waiver of such right or otherwise prejudice
Holder’s rights, powers or remedies, notwithstanding the fact that all rights
hereunder terminate on the Termination Date. If the Company willfully and
knowingly fails to comply with any provision of this Warrant, which results
in
any material damages to the Holder, the Company shall pay to Holder such amounts
as shall be sufficient to cover any costs and expenses including, but not
limited to, reasonable attorneys’ fees, including those of appellate
proceedings, incurred by Holder in collecting any amounts due pursuant hereto
or
in otherwise enforcing any of its rights, powers or remedies
hereunder.
h) Notices.
Any
notice, request or other document required or permitted to be given or delivered
to the Holder by the Company shall be delivered in accordance with the notice
provisions of the Purchase Agreement.
i) Limitation
of Liability.
No
provision hereof, in the absence of any affirmative action by Holder to exercise
this Warrant to purchase Warrant Units, and no enumeration herein of the rights
or privileges of Holder, shall give rise to any liability of Holder for the
purchase price of any Common Units or as a member or stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
j) Remedies.
Holder,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of
the
provisions of this Warrant and hereby agrees to waive and not to assert the
defense in any action for specific performance that a remedy at law would be
adequate.
k) Successors
and Assigns.
Subject
to applicable securities laws, this Warrant and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon the
successors of the Company and the successors and permitted assigns of Holder.
The provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and shall be enforceable by any such Holder
or
holder of Warrant Units.
l) Amendment.
This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Holder.
14
m) Severability.
Wherever possible, each provision of this Warrant shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the remaining
provisions of this Warrant.
n) Headings.
The
headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.
********************
15
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized.
Dated:
__________, 2006
| CROSSPOINT ENERGY COMPANY | ||
| |
|
|
| Date: | By: | |
|
|
||
| Title | ||
16
NOTICE
OF EXERCISE
TO: _______________________
(1) The
undersigned hereby elects to purchase ________ Warrant Units of the Company
pursuant to the terms of the attached Warrant (only if exercised in full),
and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.
(2) Payment
shall take the form of (check applicable box):
[
] in
lawful money of the United States; or
[
] [if
permitted] the cancellation of such number of Warrant Units as is necessary,
in
accordance with the formula set forth in subsection 2(c), to exercise this
Warrant with respect to the maximum number of Warrant Units purchasable pursuant
to the cashless exercise procedure set forth in subsection 2(c).
(3) Please
issue a certificate or certificates representing said Warrant Units in the
name
of the undersigned or in such other name as is specified below:
_______________________________
The
Warrant Units shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:
_______________________________
_______________________________
_______________________________
(4)
Accredited
Investor.
The
undersigned is an “accredited investor” as defined in Regulation D promulgated
under the Securities Act of 1933, as amended.
[SIGNATURE
OF HOLDER]
Name
of
Investing Entity:
________________________________________________________________________
Signature
of Authorized Signatory of Investing Entity:
_________________________________________________
Name
of
Authorized Signatory:
___________________________________________________________________
Title
of
Authorized Signatory:
____________________________________________________________________
Date:
________________________________________________________________________________________
17
ASSIGNMENT
FORM
(To
assign the foregoing warrant, execute
this
form
and supply required information.
Do
not
use this form to exercise the warrant.)
FOR
VALUE
RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all
rights evidenced thereby are hereby assigned to
_______________________________________________
whose address is
_______________________________________________________________.
_______________________________________________________________
Dated:
______________, _______
Holder’s
Signature: _____________________________
Holder’s
Address: _____________________________
_____________________________
Signature
Guaranteed: ___________________________________________
NOTE:
The
signature to this Assignment Form must correspond with the name as it appears
on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing
Warrant.
18