THE
SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT, OR APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE
EXEMPTION THEREFROM. THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY THE SECURITIES.
OSAGE
EXPLORATION AND DEVELOPMENT, INC.
WARRANT
TO PURCHASE COMMON STOCK
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Warrant
No.:
A-4
|
Number
of Shares: 1,125,000
|
|
CUSIP
No.:
68771Q106
|
(subject
to adjustment)
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Date
of Issuance: April 8, 2008
Osage
Exploration and Development, Inc., a Delaware corporation (the
“Company”), hereby certifies that, for good and
valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Sunstone Corporation, an Oklahoma
corporation, the registered holder hereof or its permitted
assigns is entitled, subject to the terms and conditions set
forth below, to purchase from the Company upon surrender of
this Warrant (as defined below), at any time or times on or
after the date hereof, but not after 5:00 p.m., Eastern Time,
on the Expiration Date (as defined below), 1,125,000 fully
paid nonassessable shares of Common Stock (as defined below)
of the Company at the Exercise Price per share provided in
Section 1(c) of this Warrant, subject to adjustment as
provided below.
Section 1. Definitions .
The following terms as used in this Warrant shall have the
following meanings:
(a)
“
Business Day ”
means any day other than Saturday, Sunday or other day on which
commercial banks in the City of New York are required by law or
executive order to remain closed.
(b)
“
Common Stock ”
means (i) the common stock, $0.0001 par value per share, of
the Company, and (ii) any capital stock into which such Common
Stock shall have been changed or any capital stock resulting from a
reclassification of such Common Stock.
(c)
“
Exercise Price ”
shall be equal to $1.25, subject to further adjustment as
hereinafter provided.
(d)
“
Expiration Date ”
means April 8, 2013 or, if such date does not fall on a Business
Day or on a Trading Day, then the next Business Day.
(e)
“
Person ”
means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a joint stock company, a trust, an
unincorporated organization or association and a government or any
department or agency thereof.
(f)
“
Principal Market ”
means the principal securities exchange or trading market for the
Common Stock.
(h)
“
Securities Act ”
means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
(i)
“
Trading Day ”
shall mean (x) a day on which the Principal Market is open for
business or (y) if the applicable security is not so listed on
a Principal Market or admitted for trading or quotation, a Business
Day.
(j)
“
Warrant ”
means this Warrant and all warrants issued in exchange, transfer or
replacement thereof.
(k)
“
Warrant Shares ”
means all shares of Common Stock issuable upon exercise of the
Warrants.
Section 2. Exercise of Warrant .
(a)
Subject to the terms and conditions hereof, including the
early termination of this Warrant pursuant to
Section 3(b) of this Warrant, this Warrant may be
exercised by the holder hereof then registered on the books of
the Company, in whole or in part, at any time on any Business
Day on or after the opening of business on the date hereof and
prior to 5:00 p.m., Eastern Time, on the Expiration Date by
(i) delivery of a written notice, in the form of the
subscription notice attached as Exhibit A hereto or a
reasonable facsimile thereof (the “Exercise
Notice”), to the Company, of such holder’s
election to exercise all or a portion of this Warrant, which
notice shall specify the number of Warrant Shares to be
purchased, (ii) payment to the Company of an amount equal
to the Exercise Price multiplied by the number of Warrant
Shares as to which this Warrant is being exercised (the
“Aggregate Exercise Price”) in cash or delivery of
a certified check or bank draft payable to the order of the
Company or wire transfer of immediately available funds and
(iii) the surrender of this Warrant to a common carrier
for overnight delivery to the Company as soon as practicable
following such date (or an indemnification undertaking or
other form of security reasonably satisfactory to the Company
with respect to this Warrant in the case of its loss, theft or
destruction, or an affidavit of lost Warrant, in accordance
with Section 11); provided, however, that if such Warrant
Shares are to be issued in any name other than that of the
registered holder of this Warrant, such issuance shall be
deemed a transfer and the provisions of Section 8 of this
Warrant shall be applicable. In the event of any exercise of
the rights represented by this Warrant in compliance with this
Section 2(a), the Company shall use its best efforts on
or before the third Business Day, but in no event later than
the fifth Business Day (the “Warrant Share Delivery
Date”) following the date of receipt by the Company of
the Exercise Notice, the Aggregate Exercise Price and this
Warrant (or an indemnification undertaking or other form of
security reasonably satisfactory to the Company with respect
to this Warrant in the case of its loss, theft or destruction,
or an affidavit of lost Warrant, in accordance with Section
11) (the “Exercise Delivery Documents”),
(A) at the holder’s request, to credit such
aggregate number of shares of Common Stock to which the holder
shall be entitled to the holder’s or its
designee’s balance account with The Depository Trust
Company (“DTC”) through its Deposit Withdrawal
Agent Commission system or (B) to issue and deliver to
the address as specified in the Exercise Notice, a certificate
or certificates in such denominations as may be requested by
the holder in the Exercise Notice, registered in the name of
the holder or its designee, for the number of shares of Common
Stock to which the holder shall be entitled upon such
exercise. Upon delivery of the Exercise Delivery Documents,
the holder of this Warrant shall be deemed for all corporate
purposes to have become the holder of record of the Warrant
Shares with respect to which this Warrant has been exercised,
irrespective of the date of delivery of this Warrant as
required by clause (iii) above or the certificates
evidencing such Warrant Shares. In the case of a dispute as to
the determination of the Exercise Price or the arithmetic
calculation of the number of Warrant Shares, the Company shall
promptly issue to the holder the number of shares of Common
Stock that is not disputed and shall submit the disputed
determination or arithmetic calculation to the holder via
facsimile within two (2) Business Days after receipt of the
holder’s Exercise Notice. If the holder and the Company
are unable to agree upon the determination of the Exercise
Price or arithmetic calculation of the number of Warrant
Shares within two (2) Business Days of such disputed
determination or arithmetic calculation being submitted to the
holder, then the Company shall immediately submit via
facsimile (i) the disputed determination of the Exercise
Price or the Closing Price (as defined in Section 9(f) of this
Warrant) to an independent, reputable investment banking firm
selected jointly by the Company and the holder or
(ii) the disputed arithmetic calculation of the number of
Warrant Shares to its independent, outside auditor. The
Company shall cause the investment banking firm or the outside
auditor, as the case may be, to perform the determination or
calculation and notify the Company and the holder of the
results no later than ten (10) Business Days from the time it
receives the disputed determination or calculation. Such
investment banking firm’s or outside auditor’s
determination or calculation, as the case may be, shall be
deemed conclusive absent manifest error. All fees and expenses
of such determinations shall be borne solely by the
Company.
(b)
Unless
the rights represented by this Warrant shall have expired or
shall have been fully exercised, the Company shall, as soon as
practicable but in no event later than five (5) Business Days
after any exercise (the “Warrant Delivery Date”)
and at its own expense, issue a new Warrant identical in all
respects to this Warrant exercised except it shall represent
rights to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant, less
the number of Warrant Shares with respect to which this
Warrant is exercised.
(c)
Notwithstanding
anything contained in this Warrant to the contrary, the
Company shall not be required to issue fractions of shares of
Common Stock upon exercise of this Warrant or to distribute
certificates which evidence such fractional shares. In lieu of
any fractional shares, there shall be paid to the holder an
amount of cash equal to the same fraction of the current
market value of a share of Common Stock. For purposes of this
Section 2(c) of this Warrant, the current market
value of a share of Common Stock shall be the Closing Price of
a share of Common Stock for the Trading Day immediately prior
to the date of such exercise or if not listed on a Principal
Market, then as determined in good faith by a majority of the
Company’s Board of Directors, whose determination shall
be final, binding and conclusive. If more than one Warrant
shall be presented for exercise in full at the same time by
the same holder, the number of full shares of Common Stock
which shall be issuable upon the exercise thereof shall be
computed on the basis of the aggregate number of shares of
Common Stock purchasable on exercise of all Warrants so
presented.
(d)
If
the Company shall fail for any reason or for no reason (except
in the case of a dispute as to the Exercise Price or the
Closing Price which is being resolved in accordance with
Section 2(a) of this Warrant) to issue to the holder on or
before the Warrant Share Delivery Date, a certificate for the
number of shares of Common Stock to which the holder is
entitled or to credit the holder’s or its
designee’s balance account with DTC, in accordance with
Section 2 of this Warrant, for such number of shares of
Common Stock to which the holder is entitled upon the
holder’s exercise of this Warrant or a new Warrant for
the number of shares of Common Stock to which such holder is
entitled pursuant to Section 2(b) of this Warrant,
the Company shall, in addition to any other remedies under
this Warrant or otherwise available to such holder, pay as
additional damages in cash to such holder on each day after
the Warrant Share Delivery Date if such exercise is not timely
effected and/or each day after the Warrant Delivery Date if
such Warrant is not delivered, as the case may be, an amount
equal to one-half percent (0.5%) per month multiplied by the
product of (I) the sum of the number of shares of Common
Stock not issued to the holder on or prior to the Warrant
Share Delivery Date and to which such holder is entitled and,
in the event the Company has failed to deliver a Warrant to
the holder on or prior to the Warrant Delivery Date and to
which such holder is entitled, the number of shares of Common
Stock issuable upon exercise of the Warrant as of the Warrant
Delivery Date and (II) the Closing Price of the Common
Stock on the Warrant Share Delivery Date, in the case of
failure to deliver Common Stock, or on the Warrant Delivery
Date, in the case of failure to deliver a Warrant, provided
that if the Common Stock is not listed on a Principal Market,
then the Closing Price shall be as determined in good faith by
a majority of the Company’s Board of Directors, whose
determination shall be final, binding and
conclusive.
(e)
If
the Company completes an Equity Offering (as defined in the
Membership Interest Purchase Agreement dated April 8, 2008
between Sunstone Corporation and the Company), the holder of
this Warrant may at the holder’s election, exchange this
Warrant for a replacement Warrant in the form of those issued
in such Equity Offering. To effect such exchange, the holder
shall deliver this Warrant together with a notice of the
Holder’s election to exchange the Warrant for such
replacement warrant to the Company in the manner provided in
this Section 2 for exercise of the Warrant. Upon receipt of
such documents, the Company shall, as soon as practicable but
in no event later than five (5) Business Days after such
receipt and at its own expense, issue to the holder a new
warrant to purchase the number of shares of Common Stock set
forth herein at the price and on the terms specified in these
warrants issued in the Equity Offering.
Section 3. Date; Duration .
The date of this Warrant is April 8, 2008 (the “Warrant
Date”). This Warrant, in all events, shall be wholly void and
of no effect at 5:00 pm, Eastern Time, on the Expiration Date or
the Termination Date (as defined below), if applicable, as the case
may be, except that notwithstanding any other provisions hereof,
the provisions of Section 8(c) of this Warrant shall
continue in full force and effect after such date as to any Warrant
Shares or other securities issued upon the exercise of this
Warrant.
Section 4. Covenants as to Common Stock
.
The Company hereby covenants and agrees as follows:
(a)
Issuance of Warrants and Warrant Shares .
This Warrant is, and any Warrants issued in substitution for or
replacement of this Warrant will, upon issuance, be, validly
issued, fully paid and non-assessable and free from all taxes,
liens and charges with respect to the issuance thereof, and shall
not be subject to preemptive rights or other similar rights of
shareholders of the Company. All Warrant Shares which may be issued
upon the exercise of the rights represented by this Warrant will,
upon issuance and payment hereof, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges created by
or through the Company with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of Common
Stock.
(b)
Reservation of Shares .
During the period within which the rights represented by this
Warrant may be exercised, the Company will take all actions
reasonably necessary to at all times have authorized, and reserved
for the purpose of issuance, no less than one hundred ten percent
(110%) of the number of shares of Common Stock needed to provide
for the issuance of the Warrant Shares upon exercise of all of the
Warrants without regard to any limitations on conversions or
exercise.
(c)
Listing .
The Company shall promptly use reasonable efforts to secure the
listing of the shares of Common Stock issuable upon exercise of
this Warrant upon the Principal Market upon which shares of Common
Stock are then listed (subject to official notice of issuance upon
exercise of this Warrant) and shall use reasonable efforts to
maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all shares of Common Stock issuable from
time to time upon the exercise of this Warrant; and the Company
shall use reasonable efforts to list on the Principal Market and
shall use reasonable efforts to maintain such listing of, any other
shares of capital stock of the Company issuable upon the exercise
of this Warrant if and so long as any shares of the same class
shall be listed on such Principal Market. The Company shall pay all
fees and expenses in connection with satisfying its obligations
under this Section 4(c).
(d)
Certain Actions .
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 by it
hereunder. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of
Common Stock issuable upon the exercise of this Warrant above the
Exercise Price then in effect, (ii) will take all such actions
as may be reasonably necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upon the exercise of this Warrant and
(iii) will not take any action which results in any adjustment
of the Exercise Price if the total number of shares of Common Stock
issuable after the action upon the exercise of all of the Warrants
would exceed the total number of shares of Common Stock then
authorized by the Company’s Articles of Incorporation and
available for the purpose of issue upon such exercise.
(e)
Obligations Binding on Successors .
This Warrant will be binding upon any entity succeeding to the
Company in one or a series of transactions by merger, consolidation
or acquisition of all or substantially all of the Company’s
assets or other similar transactions.
Section 5. Taxes .
(a)
The
Company shall pay any and all documentary, stamp, transfer and
other similar taxes which may be payable with respect to the
issuance and delivery of Warrant Shares upon exercise of this
Warrant.
(b)
Notwithstanding
any other provision of this Warrant or any other Transaction
Document, for income tax purposes, any assignee or transferee
shall agree that the Company and the Company’s Transfer
Agent shall be permitted to withhold from any amounts payable
to such assignee or transferee any taxes required by law to be
withheld from such amounts. Unless exempt from the obligation
to do so, each assignee or transferee shall execute and
deliver to the Company or the Transfer Agent, as applicable, a
properly completed Form W-8 or W-9, indicating that such
assignee or transferee is not subject to back-up withholding
for United States Federal income tax purposes. Each assignee
or transferee that does not deliver such a form pursuant to
the preceding sentence shall have the burden of proving to the
Company’s reasonable satisfaction that it is exempt from
such requirement.
Section 6. Warrant Holder Not Deemed a
Shareholder .
Except as otherwise specifically provided herein, prior to the
exercise of the Warrants represented hereby, the holder of this
Warrant shall not be entitled, solely by virtue of this Warrant, to
any rights of a shareholder of the Company, including, without
limitation, the right to vote or to consent to any action of the
shareholders of the Company, to receive dividends or other
distributions, to exercise any preemptive right or to receive
dividends or other distributions, to exercise any preemptive right
or to receive any notice of meetings of shareholders of the
Company, or to receive any notice of any proceedings of the
Company. In addition, nothing contained in this Warrant shall be
construed as imposing any liabilities on such holder to purchase
any securities (upon exercise of this Warrant or otherwise) or as a
shareholder of the Company, whether such liabilities are asserted
by the Company or by creditors of the Company.
Section 7. Compliance with Securities Laws
.
(a)
The
holder of this Warrant, by the acceptance hereof, represents
and warrants that (i) it is acquiring this Warrant and
(ii) upon exercise of this Warrant will acquire the
Warrant Shares then issuable upon exercise thereof for its own
account for investment only and not with a view towards, or
for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted from
registration under the Securities Act; provided, however, that
by making the representations herein, the holder does not
agree to hold this Warrant or any of the Warrant Shares for
any minimum or other specific term and reserves the right to
dispose of this Warrant and the Warrant Shares at any time in
accordance with or pursuant to a registration statement or an
exemption under the Securities Act. The holder of this Warrant
further represents, by acceptance hereof, that, as of this
date, such holder is an “accredited investor” as
such term is defined in Rule 501(a) of Regulation D
promulgated by the Securities and Exchange Commission under
the Securities Act and was not organized for the specific
purpose of acquiring the Warrants or Warrant
Shares.
(b)
This
Warrant and all the Warrant Shares issued upon exercise hereof
shall be stamped or imprinted with a legend in substantially
the following form (in addition to any legend required by
state securities laws or any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be
listed) on the face thereof unless at the time of exercise
such Warrant Shares shall be registered under the Securities
Act:
THE
SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OR APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION
THEREFROM. THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE
SECURITIES.
The
legend set forth above shall be removed and the Company shall
direct the Agent (in the case of Warrants) to issue a new
Warrant or Warrant(s) of like tenor and exercisable for the
same number of Warrant Shares, or the Transfer Agent (in the
case of Warrant Shares) to issue a certificate or certificates
representing Warrant Shares, as appropriate, without such
legends to the holder of the Warrant(s) or Warrant Shares upon
which they are stamped, (i) if such Warrant(s) or Warrant
Shares are registered for resale under the Securities Act and
are transferred or sold pursuant to such registration,
(ii) if, pursuant to a sale transaction, such holder
provides the Company with an opinion of counsel reasonably
acceptable to the Company to the effect that a public sale,
assignment or transfer of the Warrant(s) or Warrant Shares may
be made without registration under the Securities Act, or
(iii) the provisions of Rule 144 of the Securities Act permit
such removal. The Company shall not require such opinion of
counsel for the sale of Warrant(s) or Warrant Shares in
accordance with Rule 144 of the Securities Act, provided the
seller provides such representations that the Company shall
reasonably request confirming compliance with the requirements
of Rule 144.
Section 8. Ownership and Transfer
.
(a)
The
Company shall maintain at its principal corporate office (or
such office or agency of the Company as the Company may
designate by notice to the holder hereof), a register for this
Warrant (the “Warrant Register”), in which the
Company shall record the name and address of the Person in
whose name this Warrant has been issued, as well as the name
and address of each transferee. The Company may treat the
Person in whose name any Warrant is registered on the Warrant
Register as the owner and holder thereof for all purposes,
notwithstanding any notice to the contrary, but in all events
recognizing any transfers made in accordance with the terms of
this Warrant.
(b)
This
Warrant and all rights hereunder shall be assignable and
transferable by the holder hereof without the consent of the
Company upon surrender of this Warrant with a properly
executed assignment (in the form of Exhibit B attached
hereto) at the principal corporate trust office of the Company
(or such office or agency of the Company as the Company may
designate in writing to the holder hereof).
Section 9. Adjustment of Exercise Price and Number of Shares
Issuable .
The Exercise Price, the number of Warrant Shares issuable upon the
exercise of each Warrant, and the number of Warrants outstanding
are subject to adjustment from time to time upon the occurrence of
the events enumerated in this Section 9.
(a)
In
case the Company shall hereafter pay a dividend in shares of
Common Stock, or make a distribution of shares of Common
Stock, to all holders of the outstanding Common Stock, the
Exercise Price in effect at the opening of business on the
date following the date fixed for the determination of
shareholders entitled to receive such dividend or other
distribution shall be reduced by multiplying such Exercise
Price by a fraction of which (i) the numerator shall be
the number of shares of Common Stock outstanding at the close
of business on the Record Date (as defined in
Section 9(f) of this Warrant) fixed for such
determination and (ii) the denominator shall be the sum
of such number of shares and the total number of shares
constituting such dividend or other distribution, such
reduction in the Exercise Price to become effective
immediately afte
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