EXHIBIT 10
FORM OF WARRANT
WARRANT TO PURCHASE COMMON STOCK
THIS WARRANT AND THE SECURITIES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.
THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE COMMON STOCK
Number of Shares: Up to_____________________shares (subject to adjustment)
Warrant Price: $___ __per share
Issuance Date: July 29, 2004
Expiration Date: July 29, 2007
THIS WARRANT CERTIFIES THAT for value received, Mercator Advisory Group, LLC
or its registered assigns (hereinafter called the "Holder") is entitled to
purchase from Energy & Engine Technology Corporation (hereinafter called the
"Company"), the above referenced number of fully paid and nonassessable shares
(the "Shares") of common stock (the "Common Stock"), of Company, at the
Warrant Price per Share referenced above; the number of shares purchasable
upon exercise of this Warrant referenced above being subject to adjustment
from time to time as described herein. This Warrant is issued in connection
with that certain Stock Purchase Agreement dated as of July 29, 2004, by and
between the Company and Holder (the "Stock Purchase Agreement"). The exercise
of this Warrant shall be subject to the provisions, limitations and
restrictions contained herein.
1. Term and Exercise.
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1.1 Term. This Warrant is exercisable in whole or in part (but not as to
any fractional share of Common Stock), at any time and from time to time after
the date hereof prior to 6:00 p.m. on the Expiration Date set forth above.
1.2 Warrant Price. The Warrant shall be exercisable at the Warrant Price
described above.
1.3 Maximum Number of Shares. The maximum number of Shares of Common Stock
exercisable pursuant to this Warrant is ____________ Shares. However,
notwithstanding anything herein to the contrary, in no event shall the Holder
be permitted to exercise this Warrant for a number of Shares greater than the
number that would cause the aggregate beneficial ownership of the Company's
Common Stock (calculated pursuant to Rule 13d-3 of the Securities Exchange Act
of 1934, as amended) of the Holder and all persons affiliated with the Holder
to equal 9.99% of the Company's Common Stock then outstanding.
1.4 Procedure for Exercise of Warrant. Holder may exercise this Warrant by
delivering the following to the principal office of the Company in accordance
with Section 5.1 hereof: (i) a duly executed Notice of Exercise in
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substantially the form attached as Schedule A, (ii) payment of the Warrant
Price then in effect for each of the Shares being purchased, as designated in
the Notice of Exercise, and (iii) this Warrant. Payment of the Warrant Price
may be in cash, certified or official bank check payable to the order of the
Company, or wire transfer of funds to the Company's account (or any
combination of any of the foregoing) in the amount of the Warrant Price for
each share being purchased.
1.5 Delivery of Certificate and New Warrant. In the event of any exercise
of the rights represented by this Warrant, a certificate or certificates for
the shares of Common Stock so purchased, registered in the name of the Holder
or such other name or names as may be designated by the Holder, together with
any other securities or other property which the Holder is entitled to receive
upon exercise of this Warrant, shall be delivered to the Holder hereof, at the
Company's expense, within a reasonable time, not exceeding fifteen (15)
calendar days, after the rights represented by this Warrant shall have been so
exercised; and, unless this Warrant has expired, a new Warrant representing
the number of Shares (except a remaining fractional share), if any, with
respect to which this Warrant shall not then have been exercised shall also be
issued to the Holder hereof within such time. The person in whose name any
certificate for shares of Common Stock is issued upon exercise of this Warrant
shall for all purposes be deemed to have become the holder of record of such
shares on the date on which the Warrant was surrendered and payment of the
Warrant Price was received by the Company, irrespective of the date of
delivery of such certificate, except that, if the date of such surrender and
payment is on a date when the stock transfer books of the Company are closed,
such person shall be deemed to have become the holder of such Shares at the
close of business on the next succeeding date on which the stock transfer
books are open.
1.6 Restrictive Legend. Each certificate for Shares shall bear a restrictive
legend in substantially the form as follows, together with any additional
legend required by (i) any applicable state securities laws and (ii) any
securities exchange upon which such Shares may, at the time of such exercise,
be listed:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended
and may not be sold, offered for sale, transferred or
pledged in the absence of such registration or an
exemption therefrom under such Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend shall also bear such legend unless, in the
opinion of counsel for the Holder thereof (which counsel shall be reasonably
satisfactory to the Company), the securities represented thereby are not, at
such time, required by law to bear such legend.
1.7 Fractional Shares. No fractional Shares shall be issuable upon exercise
or conversion of the Warrant and the number of Shares to be issued shall be
rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying to Holder an amount
computed by multiplying the fractional interest by the Current Market Price
(as defined below) of a full Share. For purposes of this Warrant, the
"Current Market Price" of one share of Common Stock as of a particular date
shall be determined as follows: (i) if traded on a national securities
exchange or through the Nasdaq Stock Market, the Current Market Price shall
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be deemed to be the volume weighted average trading price of the Common Stock
on such exchange as of five business days immediately prior to such date (or
if no reported sales took place on such day, the last date on which any such
sales took place prior to the date of exercise); (ii) if traded over-the-
counter but not on the Nasdaq Stock Market, the Current Market Price shall be
deemed to be the average of the closing bid and asked prices as of five
business days immediately prior to such date; and (iii) if there is no active
public market, the Current Market Price shall be the fair market value of the
Common Stock as of such date, as determined in good faith by the Board of
Directors of the Company.
2. Representations, Warranties and Covenants.
-----------------------------------------
2.1 Representations and Warranties.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation and has all
necessary power and authority to perform its obligations under this Warrant;
(b) The execution, delivery and performance of this Warrant has been
duly authorized by all necessary actions on the part of the Company and
constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms; and
(c) This Warrant does not violate and is not in conflict in any material
respect with any of the provisions of the Company's Articles of Incorporation
or Certificate of Determination, Bylaws and any resolutions of the Company's
Board of Directors or stockholders, or any agreement of the Company, and no
event has occurred and no condition or circumstance exists that might (with or
without notice or lapse of time) constitute or result directly or indirectly
in such a violation or conflict.
2.2 Issuance of Shares. The Company covenants and agrees that all shares of
Common Stock that may be issued upon the exercise of the rights represented
by this Warrant will, upon issuance, be validly issued, fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. The Company further covenants and agrees that it will pay
when due and payable any and all federal and state taxes which may be payable
in respect of the issue of this Warrant or any Common Stock or certificates
therefor issuable upon the exercise of this Warrant. The Company further
covenants and agrees that the Company will at all times have authorized and
reserved, free from preemptive rights, a sufficient number of shares of Common
Stock to provide for the exercise in full of the rights represented by this
Warrant. If at any time the number of authorized but unissued shares of
Common Stock of the Company shall not be sufficient to effect the exercise of
the Warrant in full, subject to the limitations set forth in Section 1.3
hereto, then the Company will take all such corporate action as may, in the
opinion of counsel to the Company, be necessary or advisable to increase the
number of its authorized shares of Common Stock as shall be sufficient to
permit the exercise of the Warrant in full, subject to the limitations set
forth in Section 1.3 hereto, including without limitation, using its best
efforts to obtain any necessary stockholder approval of such increase. The
Company further covenants and agrees that if any shares of capital stock to
be reserved for the purpose of the issuance of shares upon the exercise of
this Warrant require registration with or approval of any governmental
authority under any federal or state law before such shares may be validly
issued or delivered upon exercise, then the Company will in good faith and
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as expeditiously as possible endeavor to secure such registration or
approval, as the case may be. If and so long as the Common Stock issuable
upon the exercise of this Warrant is listed on any national securities
exchange or the Nasdaq Stock Market, the Company will, if permitted by the
rules of such exchange or market, list and keep listed on such exchange or
market, upon official notice of issuance, all shares of such Common Stock
issuable upon exercise of this Warrant.
3. Other Adjustments.
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3.1 Subdivision or Combination of Shares. In case the Company shall at
any time subdivide its outstanding Common Stock into a greater number of
shares, the Warrant Price in effect immediately prior to such subdivision
shall be proportionately reduced, and the number of Shares subject to this
Warrant shall be proportionately increased, and conversely, in case the
outstanding Common Stock of the Company shall be combined into a smaller
number of shares, the Warrant Price in effect immediately prior to such
combination shall be proportionately increased, and the number of Shares
subject to this Warrant shall be proportionately decreased.
3.2 Dividends in Common Stock, Other Stock or Property. If at any time or
from time to time the holders of Common Stock (or any shares of stock or other
securities at the time receivable upon the exercise of this Warrant) shall
have received or become entitled to receive, without payment therefor:
(a) Common Stock, Options or any shares or other securities which are at
any time directly or indirectly convertible into or exchangeable for Common
Stock, or any rights or options to subscribe for, purchase or otherwise
acquire any of the foregoing by way of dividend or other distribution;
(b) any cash paid or payable otherwise than as a regular cash dividend;
or
(c) Common Stock or additional shares or other securities or property
(including cash) by way of spin-off, split-up, reclassification, combination
of shares or similar corporate rearrangement (other than Common Stock issued
as a stock split or adjustments in respect of which shall be covered by the
terms of Section 3.1 above) and additional shares, other securities or
property issued in connection with a Change (as defined below) (which shall
be covered by the terms of Section 3.4 below), then and in each such case,
the Holder hereof shall, upon the exercise of this Warrant, be entitled to
receive, in addition to the number of shares of Common Stock receivable
thereupon, and without payment of any additional consideration therefor, the
amount of stock and other securities and property (including cash in the
cases referred to in clause (b) above and this clause (c)) which such Holder
would hold on the date of such exercise had such Holder been the holder of
record of such Common Stock as of the date on which holders of Common Stock
received or became entitled to receive such shares or all other additional
stock and other securities and property.
3.3 Reorganization, Reclassification, Consolidation, Merger or Sale. If any
recapitalization, reclassification or reorganization of the share capital of
the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its shares and/or
assets or other transaction (including, without limitation, a sale of
substantially all of its assets followed by a liquidation) shall be effected
in such a way that holders of Common Stock shall be entitled to receive
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shares, securities or other assets or property (a "Change"), then, as a
condition of such Change, lawful and adequate provisions shall be made by the
Company whereby the Holder hereof shall thereafter have the right to purchase
and receive (in lieu of the Common Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby) such shares, securities or other assets or property as
may be issued or payable with respect to or in exchange for the number of
outstanding Common Stock which such Holder would have been entitled to receive
had such Holder exercised this Warrant immediately prior to the consummation
of such Change. The Company or its successor shall promptly issue to Holder
a new Warrant for such new securities or other property. The new Warrant
shall provide for adjustments which shall be as nearly equivalent as may be
practicable to give effect to the adjustments provided for in this Section 3
including, without limitation, adjustments to the Warrant Price and to the
number of securities or property issuable upon exercise of the new Warrant.
The provisions of this Section 3.3 shall similarly apply to successive
Changes.
4. Ownership and Transfer.
----------------------
4.1 Ownership of This Warrant. The Company may deem and treat the person in
whose name this Warrant is registered as the holder and owner hereof (notwith-
standing any notations of ownership or writing hereon made by anyone other
than the Company) for all purposes and shall not be affected by any notice to
the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 4.
4.2 Transfer and Replacement. This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the Holder
hereof in person or by duly authorized attorney, and a new Warrant or
Warrants, of the same tenor as this Warrant but registered in the name of the
transferee or transferees (and in the name of the Holder, if a partial
transfer is effected) shall be made and delivered by the Company upon
surrender of this Warrant duly endorsed, at the office of the Company in
accordance with Section 5.1 hereof. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft or destruction, and, in such
case, of indemnity or security reasonably satisfactory to it, and upon
surrender of this Warrant if mutilated, the Company will make and deliver a
new Warrant of like tenor, in lieu of this Warrant; provided that if the
Holder hereof is an instrumentality of a state or local government or an
institutional holder or a nominee for such an instrumentality or institutional
holder an irrevocable agreement of indemnity by such Holder shall be
sufficient for all purposes of this Warrant, and no evidence of loss or theft
or destruction shall be necessary. This Warrant shall be promptly cancelled
by the Company upon the surrender hereof in connection with any transfer or
replacement. Except as otherwise provided above, in the case of the loss,
theft or destruction of a Warrant, the Company shall pay all expenses, taxes
and other charges payable in connection with any transfer or replacement of
this Warrant, other than income taxes and stock transfer taxes (if any)
payable in connection with a transfer of this Warrant, which shall be payable
by the Holder. Holder will not transfer this Warrant and the rights hereunder
except in compliance with federal and state securities laws and except after
providing evidence of such compliance reasonably satisfactory to the Company.
4.3 Call Option. Upon the effectiveness of the Registration Statement and so
long as the Registration Statement remains effective, the Company may compel
Holder to exercise the Warrant (the "Call") if for each trading day during the
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10 trading days immediately preceding the date of the Call ("Call Date") the
closing price of the Common Stock is at least three hundred percent (300%) of
the Warrant Price. In order for the Call to be effective, the Company must
deliver written notice to the Holder on the Call Date (the "Call Notice").
The Call Notice shall specify the number of shares of Company Common Stock
outstanding as of the Call Date and the number of shares equal to 9.99% of the
shares of Common Stock outstanding on the Call Date (the "Daily Maximum").
Commencing two trading days after receipt of the Call Notice, the Holder and
its affiliates shall be obligated each trading day to exercise in the
aggregate the Daily Maximum. In the event that the Holder and its affiliates
in the aggregate exercise less than the Daily Maximum, then a number of
Warrant Shares held by Holder and its affiliates equal to the difference
between the Daily Maximum and the Warrant Shares actually exercised by Holder
and its affiliates on such day shall cancel. The cancelled warrant shares
shall be allocated among Holder and it affiliates. Notwithstanding the
foregoing, if the shares of outstanding common stock decreases at any time
after the Call Notice is delivered, the Daily Maximum shall be adjusted
accordingly.
5. Miscellaneous Provisions.
------------------------
5.1 Notices. Any notice or other document required or permitted to be given
or delivered to the Holder shall be delivered or forwarded to the Holder at
c/o Mercator Advisory Group, LLC, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (Facsimile No.
213/553-8285), or to such other address or number as shall have been furnished
to the Company in writing by the Holder, with a copy to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-1448 Attention ▇▇▇▇▇ ▇. ▇▇▇▇▇ (Facsimile No. 213/620-1398).
Any notice or other document required or permitted to be given or delivered to
the Company shall be delivered or forwarded to the Company at Energy & Engine
Technology Corporation, ▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Phone
(▇▇▇) ▇▇▇-▇▇▇▇ Fax (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ III, with a
copy to Energy & Engine Technology Corporation, ▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Phone (▇▇▇) ▇▇▇-▇▇▇▇ Fax (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇
▇▇▇▇, Esq., or to such other address or number as shall have been furnished to
Holder in writing by the Company.
5.2 All notices, requests and approvals required by this Warrant shall be in
writing and shall be conclusively deemed to be given (i) when hand-delivered
to the other party, (ii) when received if sent by facsimile at the address and
number set forth above; provided that notices given by facsimile shall not be
effective, unless either (a) a duplicate copy of such facsimile notice is
promptly given by depositing the same in the mail, postage prepaid and
addressed to the party as set forth below or (b) the receiving party delivers
a written confirmation of receipt for such notice by any other method
permitted under this paragraph; and further provided that any notice given by
facsimile received after 5:00 p.m. (recipient's time) or on a non-business
day shall be deemed received on the next business day; (iii) five (5) business
days after deposit in the United States mail, certified, return receipt
requested, postage prepaid, and addressed to the party as set forth below; or
(iv) the next business day after deposit with an international overnight
delivery service, postage prepaid, addressed to the party as set forth below
with next business day delivery guaranteed; provided that the sending party
receives confirmation of delivery from the delivery service provider.
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5.3 No Rights as Shareholder; Limitation of Liability. This Warrant shall
not entitle the Holder to any of the rights of a shareholder of the Company
except upon exercise in accordance with the terms hereof. No provision
hereof, in the absence of affirmative action by the Holder to purchase shares
of Common Stock, and no mere enumeration herein of the rights or privileges
of the Holder, shall give rise to any liability of the Holder for the Warrant
Price hereunder or as a shareholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
5.4 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California as applied to agreements
among California residents made and to be performed entirely within the State
of California, without giving effect to the conflict of law principles
thereof.
5.5 Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets and/or securities. All of
the obligations of the Company relating to the Shares issuable upon the
exercise of this Warrant shall survive the exercise and termination of this
Warrant. All of the covenants and agreements of the Company shall inure to
the benefit of the successors and assigns of the Holder.
5.6 Waiver, Amendments and Headings. This Warrant and any provision hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by both parties (either generally or in a particular instance
and either retroactively or prospectively). The headings in this Warrant are
for purposes of reference only and shall not affect the meaning or
construction of any of the provisions hereof.
5.7 Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable
to contracts made and to be performed in the State of California. Each of
the parties irrevocably agrees that any and all suits or proceedings based on
or arising under this Agreement may be brought only in and shall be resolved
in the federal or state courts located in the City of Los Angeles, California
and consents to the jurisdiction of such courts for such purpose. Each of
the parties irrevocably waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding in any such court. Each of the
parties further agrees that service of process upon such party mailed by
first class mail to the address set forth in Section 5.1 shall be deemed in
every respect effective service of process upon such party in any such suit
or proceeding. Nothing herein shall affect the right of a Holder to serve
process in any other manner permitted by law. Each of the parties agrees
that a final non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on such
judgment or in any other lawful manner.
5.8 Attorneys' Fees and Disbursements. If any action at law or in equity
is necessary to enforce or interpret the terms of this Agreement, the
prevailing party or parties shall be entitled to receive from the other
party or parties reasonable attorneys' fees and disbursements in addition
to any other relief to which the prevailing party or parties may be entitled.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer this 29 day of July, 2004.
COMPANY: ENERGY & ENGINE TECHNOLOGY CORPORATION
By:
Print Name:
Title:
148
SCHEDULE A
FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of the Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby elects to purchase _______ shares of Common Stock (the
"Shares") of Energy & Engine Technology Corporation under the Warrant to
Purchase Common Stock dated ____________ , 2004, which the undersigned is
entitled to purchase pursuant to the terms of such Warrant. The undersigned
has delivered $_________, the aggregate Warrant Price for _____ Shares
purchased herewith, in full in cash or by certified or official bank check or
wire transfer.
Please issue a certificate or certificates representing such shares of
Common Stock in the name of the undersigned or in such other name as is
specified below and in the denominations as is set forth below:
______________________________________________________________________
[Type Name of Holder as it should appear on the stock certificate]
______________________________________________________________________
[Requested Denominations - if no denomination is specified, a single
certificate will be issued]
The initial address of such Holder to be entered on the books of Company shall
be:
_____________________________________
_____________________________________
_____________________________________
The undersigned hereby represents and warrants that the undersigned is
acquiring such shares for his own account for investment purposes only, and
not for resale or with a view to distribution of such shares or any part
thereof.
By:
Print Name:
Title:
Dated:
149
FORM OF ASSIGNMENT
(ENTIRE)
[To be signed only upon transfer of entire Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns and
transfers unto _______________________________ all rights of the undersigned
under and pursuant to the within Warrant, and the undersigned does hereby
irrevocably constitute and appoint _____________________ Attorney to transfer
the said Warrant on the books of ________ _________, with full power of
substitution.
_______________________________________
[Type Name of Holder]
By:
Title:
Dated:
NOTICE
The signature to the foregoing Assignment must correspond exactly to the name
as written upon the face of the within Warrant, without alteration or
enlargement or any change whatsoever.
150
FORM OF ASSIGNMENT
(PARTIAL)
[To be signed only upon partial transfer of Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns and
transfers unto ____________________________ (i) the rights of the undersigned
to purchase ____________________ shares of Common Stock under and pursuant to
the within Warrant, and (ii) on a non-exclusive basis, all other rights of the
undersigned under and pursuant to the within Warrant, it being understood that
the undersigned shall retain, severally (and not jointly) with the
transferee(s) named herein, all rights assigned on such non-exclusive basis.
The undersigned does hereby irrevocably constitute and appoint ______________
Attorney to transfer the said Warrant on the books of Energy & Engine
Technology Corporation, with full power of substitution.
_________________________________________
[Type Name of Holder]
By:
Title:
Dated:
NOTICE
The signature to the foregoing Assignment must correspond exactly to the name
as written upon the face of the within Warrant, without alteration or
enlargement or any change whatsoever.
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