Exhibit 10.3
THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) OR QUALIFIED UNDER ANY APPLICABLE SECURITIES LAWS. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND QUALIFICATION UNDER SUCH STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND/OR
QUALIFICATION IS NOT REQUIRED.
JAYHAWK ENERGY, INC.
WARRANT AGREEMENT
July ___, 2007
THIS CERTIFIES THAT , for value received, _______________,
a _______________ (the “ Investor ”), or
Investor’s assigns (Investor and Investor’s assigns
being the “ Holder ”), is entitled to subscribe
for and purchase at any time during the Exercise Period from
Jayhawk Energy, Inc., a Nevada corporation, with an office located
at 370 Interlocken Blvd., Suite 400, Broomfield, CO 80021 (the
“ Company ”), a number of shares of Common Stock
equal to the Share Number at a per share price equal to the
Exercise Price in effect at such time. This Warrant is issued in
conjunction with the shares of the Company’s Common Stock
issued pursuant to the Subscription Agreement dated as of _________
___, 2007, by and between the Company and the
Investor.
1.
Definitions
. As used herein, the following terms shall
have the following respective meanings:
(a)
“Aggregate Warrant Price” shall mean the
dollar value obtained by multiplying $1.00 by
________.
(b)
“Common Stock” shall mean the common stock
of the Company.
(c)
“Exercise Period” shall mean the period
commencing on July ___, 2007, and ending on ______________ __,
2009.
(d)
“Exercise Price” shall mean $1.00 per share
of Common Stock.
(e)
“Exercise Shares” shall mean any Common
Stock acquired upon exercise of this Warrant.
(f)
“Share Number”, at any time, shall mean (i)
the Aggregate Warrant Price minus the aggregate exercise price
previously paid upon exercise of this Warrant, divided by (ii)
the Exercise Price then in effect.
2.
Exercise of
Warrant .
2.1
General; Exercise of Warrant .
(a)
The rights represented by this Warrant may be exercised
as a whole or in part at any time during the Exercise Period,
by delivery of the following to the Company at its address set
forth above (or at such other address as it may designate by
notice in writing to the Holder):
(i) An
executed Notice of Exercise in the form attached
hereto;
(ii) Payment
of the Exercise Price either in cash or by check;
and
(iii) This
Warrant.
(b)
Upon the exercise of the rights represented by this
Warrant, a certificate or certificates for the Exercise Shares
so purchased, registered in the name of the Holder or persons
affiliated with the Holder, if the Holder so designates (and
such designation is in compliance with applicable securities
laws and any stockholders, investor rights or similar
agreement), shall be issued and delivered to the Holder as
promptly as practicable after the rights represented by this
Warrant shall have been so exercised.
(c)
The person in whose name any certificate or certificates
for Exercise Shares are to be issued upon exercise of this
Warrant shall be deemed to have become the holder of record of
such shares on the date on which this Warrant was surrendered
and payment of the Exercise Price was made, irrespective of
the date of delivery of such certificate or certificates,
except that, if the date of such surrender and payment is 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.
2.2
Net Issue Exercise .
(a)
In lieu of paying the Exercise Price in cash or by check
as provided in Section 2.1, the Holder may elect a “Net
Issue Exercise” pursuant to which the Holder will
receive Exercise Shares equal to the value (as determined
below) of this Warrant (or the portion thereof being
exercised) by surrender of this Warrant at the principal
office of the Company together with an executed Notice of
Exercise in the form attached hereto in which event the
Company shall issue to the Holder a number of Exercise Shares
computed using the following formula:
X
= Y (A-B)
A
Where:
X
= the number of Exercise Shares to be issued to the
Holder;
Y
= the number of Exercise Shares purchasable under the Warrant
or, if only a portion of the Warrant is being exercised, the
portion of the Warrant being exercised (at the date of such
exercise);
A
= the Fair Market Value of one share of the Company’s
Common Stock (at the date of such exercise); and
B
= the Exercise Price (as adjusted to the date of such
exercise).
(b)
For purposes of the above calculation, “Fair
Market Value” shall be determined as
follows:
(i)
If the Common Stock is listed on any established stock
exchange or a national market system, including, without
limitation, The Nasdaq Stock Market’s Global Select or
Global Market, the Fair Market Value of a share of Common
Stock will be the average closing sales price for such stock
(or the closing bid, if no sales are reported) as quoted on
that system or exchange (or the system or exchange with the
greatest volume of trading in Common Stock), over the five (5)
trading day period ending on the trading day immediately
preceding the day the Warrant is being exercised, as reported
in the Wall Street Journal or any other source the Company
considers reliable.
(ii)
If the Common Stock is quoted on The Nasdaq Stock Market
( but not on The Nasdaq Stock Market’s Global Select or
Global Market) or is regularly quoted elsewhere by recognized
securities dealers but selling prices are not reported, the
Fair Market Value of a share of Common Stock will be the
average mean between the high bid and low asked prices for the
Common Stock over the five (5) trading day period ending on
the trading day immediately preceding the day the Warrant is
being exercised, as reported in the Wall Street Journal or any
other source the Company considers reliable.
(iii)
If the Common Stock is not traded as set forth above,
the Fair Market Value will be determined in good faith by the
Board of Directors of the Company.
(c)
If this Warrant is not exercised in full by a Net Issue
Exercise, then, the “Share Number” in effect
immediately after such partial exercise shall be appropriately
adjusted to take into account the effect of the Net Issue
Exercise.
3.
Covenants of the
Company.
3.1
Covenants as to Exercise Shares . The Company
covenants and agrees that all Exercise Shares that may be
issued upon the exercise of the rights represented by this
Warrant will, upon issuance, be validly issued and
outstanding, fully paid and nonassessable, and free from all
taxes, liens and charges with respect to the issuance thereof.
The Company further covenants and agrees that the Company will
at all times during the Exercise Period have authorized and
reserved, free from preemptive rights, a sufficient number of
shares of its Common Stock to provide for the exercise of the
rights represented by this Warrant. If at any time during the
Exercise Period the number of authorized but unissued shares
of Common Stock shall not be sufficient to permit exercise of
this Warrant, the Company will take such corporate action as
may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such
purposes.
3.2
No Impairment . Except and to the extent as
waived or consented to by the Holder, the Company will not, by
amendment of its Articles 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 to be observed or performed
hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of this
Warrant and in the taking of all such action as may be
necessary or appropriate in order to protect the exercise
rights of the Holder against impairment.
3.3
Notices of Record Date . In the event of any
taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a
cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, the Company shall
mail to the Holder, at least ten (10) days prior to the date
specified herein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend or
distribution.
4.
R
epresentations of Holder
.
4.1
Acquisition of Warrant for Personal Account .
The Holder represents and warrants that it is acquiring the
Warrant and any shares of capital stock issued or issuable
upon exercise or conversion of the Warrant for investment
purposes only and not with a view to or for resale in
connection with any distribution or public offering thereof
within the meaning of the Act (as defined below). The Holder
also represents that the entire legal and beneficial interests
of the Warrant and Exercise Shares the Holder is acquiring is
being acquired for, and will be held for, the account of the
Holder only.
4.2
Accredited Investor; Off-Shore Transaction; Not a
U.S. Person . The Holder represents and warrants that,
unless not a “U.S. Person” as defined below, the
Holder it is an “accredited investor” as such term
is defined in Rule 501 under the Securities Act of 1933, as
amended (the “ Act ”). The Holder shall
provide the Company with such additional information as the
Company may reasonably request with respect to the
Holder’s status as an “accredited investor.”
The exercise of this Warrant and the transactions contemplated
herein may constitute an “off-shore transaction,”
as that term is defined in Rule 902(h) of Regulations S
promulgated under the Securities Act. If the Holder is not an
accredited investor, then the Holder is not a “U.S.
Person,” as that term is defined in Rule 902(k) of
Regulation S promulgated under the Securities
Act.
4.3
Securities Are Not Registered .
(a)
The Holder understands that the Warrant and the Exercise
Shares have not been registered under the Act, on the basis
that no distribution or public offering of the
stock
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