Exhibit 4.2
SEPTEMBER 2008
WARRANT
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL, IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
OPEN ENERGY
CORPORATION
SEPTEMBER 2008 WARRANT TO
PURCHASE COMMON STOCK
Warrant No.: Quercus 2008-S
Number of Shares of Common Stock:
Seventy-Five Million (75,000,000)
Date of Issuance: September 18, 2008
(“ Issuance Date ”)
Open Energy Corporation, a Nevada
corporation (the “ Company ”), hereby certifies
that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, The Quercus Trust,
the registered holder hereof or its permitted assigns (the “
Holder ”), is entitled, subject to the terms set forth
below, to purchase from the Company, at the Exercise Price (as
defined below) then in effect, upon surrender of this
September 2008 Warrant to Purchase Common Stock (including any
Warrants to purchase Common Stock issued in exchange, transfer or
replacement hereof, the “ Warrant ”), at any
time or times on or after the date hereof, but not after
11:59 p.m., New York time, on the Expiration Date (as defined
below), Seventy-Five Million (75,000,000) fully-paid nonassessable
shares of Common Stock (as defined below) (the “ Warrant
Shares ”). Except as otherwise defined herein,
capitalized terms in this Warrant shall have the meanings set forth
in Section 15. This September 2008 Warrant is the
Warrant to purchase Common Stock issued pursuant to Section 1
of that certain Securities Purchase Agreement, dated as of
September 12, 2008, as amended, (the “
Subscription Date ”), by and among the Company and The
Quercus Trust (the “ Securities Purchase Agreement
”).
1.
EXERCISE OF WARRANT.
(a) Mechanics of
Exercise . Subject to the terms and conditions hereof,
this Warrant may be exercised by the Holder on any day on or after
the date hereof, in whole or in part, by (i) delivery of a
written notice, in the form attached hereto as
Exhibit A (the “ Exercise Notice ”),
of the Holder’s election to exercise this Warrant and
(ii) (A) payment to the Company
of an amount equal to the applicable Exercise
Price multiplied by the number of Warrant Shares as to which this
Warrant is being exercised (the “ Aggregate Exercise
Price ”) in cash or by wire transfer of immediately
available funds or (B) by notifying the Company that this
Warrant is being exercised pursuant to a Cashless Exercise (as
defined in Section 1(d)). The Holder shall not be
required to deliver the original Warrant in order to effect an
exercise hereunder. Execution and delivery of the Exercise
Notice with respect to less than all of the Warrant Shares shall
have the same effect as cancellation of the original Warrant and
issuance of a new Warrant evidencing the right to purchase the
remaining number of Warrant Shares. On or before the second
(2 nd ) Business Day following the date on which the
Company has received each of the Exercise Notice and the Aggregate
Exercise Price (or notice of a Cashless Exercise) (the “
Exercise Delivery Documents ”), the Company shall
transmit by facsimile an acknowledgment of confirmation of receipt
of the Exercise Delivery Documents to the Holder and the
Company’s transfer agent (the “ Transfer Agent
”). On or before the third (3 rd ) Business
Day following the date on which the Company has received all of the
Exercise Delivery Documents (the “ Share Delivery Date
”), the Company shall (X) provided that the Transfer
Agent is participating in The Depository Trust Company (“
DTC ”) Fast Automated Securities Transfer Program,
upon the request of the Holder, credit such aggregate number of
shares of Common Stock to which the Holder is entitled pursuant to
such exercise to the Holder’s or its designee’s balance
account with DTC through its Deposit Withdrawal Agent Commission
system, which balance account shall be specified in the Exercise
Notice, or (Y) if the Transfer Agent is not participating in
the DTC Fast Automated Securities Transfer Program, issue and
dispatch by overnight courier to the address as specified in the
Exercise Notice, a certificate, registered in the Company’s
share register in the name of the Holder or its designee, for the
number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise. Upon delivery of the Exercise Notice and
Aggregate Exercise Price referred to in clause (ii)(A) above
or notification to the Company of a Cashless Exercise referred to
in Section 1(d), the Holder 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 the certificates evidencing such Warrant
Shares. If this Warrant is submitted in connection with any
exercise pursuant to this Section 1(a) and the number of
Warrant Shares represented by this Warrant submitted for exercise
is greater than the number of Warrant Shares being acquired upon an
exercise, then the Company shall as soon as practicable and in no
event later than five (5) Business Days after any exercise and at
its own expense, issue a new Warrant (in accordance with
Section 7(d)) representing the right 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. No fractional shares of
Common Stock are to be issued upon the exercise of this Warrant,
but rather the number of shares of Common Stock to be issued shall
be rounded up to the nearest whole number. The Company shall
pay any and all taxes which may be payable with respect to the
issuance and delivery of Warrant Shares upon exercise of this
Warrant.
(b) Exercise
Price . For purposes of this Warrant, “ Exercise
Price ” means $0.067 per share, subject to adjustment as
provided herein.
(c) Company’s
Failure to Timely Deliver Securities . Upon the Company’s
receipt of an Exercise Notice or request for removal of restrictive
legends on the shares of Common Stock issuable in connection
therewith, the Company will deliver, or cause to be delivered, the
certificates evidencing such shares of Common Stock to the Holder
within three (3) Trading Days. If such delivery is
made more than two (2) additional Trading Days
after
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exercise or request for removal of legend, as
the case may be, then the Company will compensate the Holder at a
rate of $100 per day for each of the first ten (10) Trading
Days and $200 per day thereafter for each $10,000 of
securities. In such event, after the first such ten
(10) Trading Days noted above, the Holder will also have the
right to rescind its Exercise Notice for the Warrants. If the
certificates have not been delivered by the fifth (5 th
) Trading Day after conversion or request for removal of legend, as
the case may be, and the Holder has purchased (in an open market
transaction or otherwise) Common Stock to deliver in satisfaction
of a sale by the Holder of Common Stock issuable upon such
conversion that the Holder anticipated receiving from the Company
(a “ Buy-In ”), then the Company shall, within
three (3) Trading Days after the Holder’s request and in
the Holder’s discretion, either (i) pay cash to the
Holder in an amount equal to the Holder’s total purchase
price (including brokerage commissions and other out-of-pocket
expenses, if any) for the shares of Common Stock so purchased (the
“Buy-In Price” ), at which point the
Company’s obligation to deliver such certificate (and to
issue such Common Stock) shall terminate, or (ii) promptly
honor its obligation to deliver to the Holder a certificate or
certificates representing such Common Stock and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In
Price over the product of (A) such number of shares of Common
Stock, times (B) the Closing Bid Price on the Conversion
Date.
(d) Cashless
Exercise . Notwithstanding anything contained
herein to the contrary, if at any time after the twelve (12)-month
anniversary of the Issuance Date, a Registration Statement (as
defined in the Registration Rights Agreement) covering the Warrant
Shares that are the subject of an Exercise Notice (the “
Unavailable Warrant Shares ”) is not available for the
resale of such Unavailable Warrant Shares, the Holder may, in its
sole discretion, exercise this Warrant in whole or in part and, in
lieu of making the cash payment otherwise contemplated to be made
to the Company upon such exercise in payment of the Aggregate
Exercise Price, elect instead to receive upon such exercise the
“Net Number” of shares of Common Stock determined
according to the following formula (a “ Cashless
Exercise ”):
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Net Number = (A x B) - (A x C)
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B
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For purposes of the foregoing
formula:
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A= the total number of shares with
respect to which this Warrant is then being exercised.
B= the arithmetic average of the
Weighted Average Prices of the shares of Common Stock (as reported
by Bloomberg) for the five (5) consecutive Trading Days
ending on the date immediately preceding the date of the Exercise
Notice.
C= the Exercise Price then in effect
for the applicable Warrant Shares at the time of such
exercise.
(e) Cash Payment
. In the event that there is an Authorized Share Failure, as
defined in Section 1(g), which prevents the issuance of Common
Stock upon the exercise of all or any portion of this Warrant, so
that Company is unable to issue all or any portion of the Common
Stock for which the Warrant has been exercised, the Company shall
pay to Holder cash in an amount equal to the Black Scholes Value of
that portion of this Warrant which has been exercised but for which
Common Stock cannot be issued.
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(f) Disputes
. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares,
the Company shall promptly issue to the Holder the number of
Warrant Shares that are not disputed and resolve such dispute in
accordance with Section 12.
(g) Insufficient
Authorized Shares . If at any time while any of the
Warrants remain outstanding the Company does not have a sufficient
number of authorized and unreserved shares of Common Stock (an
“ Authorized Share Failure ”) to satisfy its
obligation to reserve for issuance upon exercise of the Warrants no
less than 120% of the number of shares of Common Stock as shall
from time to time be necessary to effect the exercise of all of the
Warrants then outstanding (in addition to all other convertible
securities) (the “ Required Reserve Amount ”),
then the Company shall immediately take all action necessary to
increase the Company’s authorized shares of Common Stock to
an amount sufficient to allow the Company to reserve the Required
Reserve Amount for the Warrants then outstanding. Without
limiting the generality of the foregoing sentence, as soon as
practicable after the date of the occurrence of an Authorized Share
Failure, but in no event later than sixty (60) days after the
occurrence of such Authorized Share Failure, the Company shall hold
a meeting of its stockholders for the approval of an increase in
the number of authorized shares of Common Stock. In
connection with such meeting, the Company shall provide each
stockholder with a proxy statement and shall use its best efforts
to solicit its stockholders’ approval of such increase in
authorized shares of Common Stock and to cause its board of
directors to recommend to the stockholders that they approve such
proposal.
2.
ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES
. The Exercise Price and the number of Warrant Shares shall
be adjusted from time to time as follows:
(a) Adjustment Upon
Issuance of Shares of Common Stock . If the Company
issues or sells, or in accordance with this Section 2 is
deemed to have issued or sold, any shares of Common Stock
(including the issuance or sale of shares of Common Stock owned or
held by or for the account of the Company, but excluding shares of
Common Stock deemed to have been issued by the Company in
connection with any Excluded Securities (as defined in the
Series B Convertible Note dated September 19, 2007,
issued to The Quercus Trust) for a consideration per share (the
“ New Issuance Price ”) less than a price (the
“ Applicable Price ”) equal to the Exercise
Price in effect immediately prior to such issue or sale or deemed
issuance or sale (the foregoing a “Dilutive
Issuance” ), then immediately after such Dilutive
Issuance, the Exercise Price then in effect shall be reduced to an
amount equal to the New Issuance Price. Upon each such
adjustment of the Exercise Price hereunder, the number of Warrant
Shares shall be adjusted to the number of shares of Common Stock
determined by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares acquirable
upon exercise of this Warrant immediately prior to such adjustment
and dividing the product thereof by the Exercise Price resulting
from such adjustment. For purposes of determining the
adjusted Exercise Price under this Section 2(a), the following
shall be applicable:
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(i)
Issuance of Options . If the Company grants any
Options (except in connection with the issuance of any Excluded
Securities) and the lowest price per share for which One
(1) share of Common Stock is issuable upon the exercise of any
such Option or upon conversion, exercise or exchange of any
Convertible Securities issuable upon exercise of any such Option is
less than the Applicable Price, then such share of Common Stock
shall be deemed to be outstanding and to have been issued and sold
by the Company at the time of the granting or sale of such Option
for such price per share. For purposes of this
Section 2(a)(i), the “lowest price per share for which
One (1) share of Common Stock is issuable upon exercise of
such Options or upon conversion, exercise or exchange of such
Convertible Securities” shall be equal to the sum of the
lowest amounts of consideration (if any) received or receivable by
the Company with respect to any One (1) share of Common Stock
upon the granting or sale of the Option, upon exercise of the
Option and upon conversion, exercise or exchange of any Convertible
Security issuable upon exercise of such Option. No further
adjustment of the Exercise Price or number of Warrant Shares shall
be made upon the actual issuance of such shares of Common Stock or
of such Convertible Securities upon the exercise of such Options or
upon the actual issuance of such shares of Common Stock upon
conversion, exercise or exchange of such Convertible
Securities.
(ii)
Issuance of Convertible Securities . If the Company in
any manner issues or sells any Convertible Securities (except in
connection with the issuance of any Excluded Securities) and the
lowest price per share for which One (1) share of Common Stock
is issuable upon the conversion, exercise or exchange thereof is
less than the Applicable Price, then such share of Common Stock
shall be deemed to be outstanding and to have been issued and sold
by the Company at the time of the issuance or sale of such
Convertible Securities for such price per share. For the
purposes of this Section 2(a)(ii), the “lowest price per
share for which One (1) share of Common Stock is issuable upon
the conversion, exercise or exchange” shall be equal to the
sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to One (1) share of
Common Stock upon the issuance or sale of the Convertible Security
and upon conversion, exercise or exchange of such Convertible
Security. No further adjustment of the Exercise Price or
number of Warrant Shares shall be made upon the actual issuance of
such shares of Common Stock upon conversion, exercise or exchange
of such Convertible Securities, and if any such issue or sale of
such Convertible Securities is made upon exercise of any Options
for which adjustment of this Warrant has been or is to be made
pursuant to other provisions of this Section 2(a), no further
adjustment of the Exercise Price or number of Warrant Shares shall
be made by reason of such issue or sale.
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(iii)
Change in Option Price or Rate of Conversion. If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion, exercise
or exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exercisable or
exchangeable for shares of Common Stock increases or decreases at
any time (except in each case in connection with the issuance of
any Excluded Securities), the Exercise Price and the number of
Warrant Shares in effect at the time of such increase or decrease
shall be adjusted to the Exercise Price and the number of Warrant
Shares which would have been in effect at such time had such
Options or Convertible Securities provided for such increased or
decreased purchase price, additional consideration or increased or
decreased conversion rate, as the case may be, at the time
initially granted, issued or sold. For purposes of this
Section 2(a)(iii), if the terms of any Option or Convertible
Security that was outstanding as of the date of issuance of this
Warrant are increased or decreased in the manner described in the
immediately preceding sentence, then such Option or Convertible
Security and the shares of Common Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such increase or decrease. No
adjustment pursuant to this Section 2(a) shall be made if
such adjustment would result in an increase of the Exercise Price
then in effect or a decrease in the number of Warrant
Shares.
(iv)
Calculation of Consideration Received . In case any
Option is issued in connection with the issue or sale of other
securities of the Company, together comprising one integrated
transaction (except in connection with the issuance of any Excluded
Securities), the Options will be deemed to have been issued for the
difference of (x) the aggregate fair market value of such
Options and other securities issued or sold in such integrated
transaction, less (y) the fair market value of the securities
other than such Option, issued or sold in such transaction and the
other securities issued or sold in such integrated transaction will
be deemed to have been issued or sold for the balance of the
consideration received by the Company. If any shares of
Common Stock, Options or Convertible Securities are issued or sold
or deemed to have been issued or sold for cash, the consideration
received therefor will be deemed to be the net amount received by
the Company therefor. If any shares of Common Stock, Options
or Convertible Securities are issued or sold for a consideration
other than cash, the amount of such consideration received by the
Company will be the fair value of such consideration, except where
such consideration consists of securities, in which case the amount
of consideration received by the Company will be the Weighted
Average Price of such security on the date of receipt. If any
shares of Common Stock, Options or Convertible Securities are
issued to the owners of the non-surviving entity in connection with
any merger in which the Company is the surviving entity, the amount
of consideration therefor will be deemed to be the fair value of
such portion of the net assets and business of the non-surviving
entity as is attributable to such shares of Common Stock, Options
or Convertible Securities, as the case may be. The fair value
of any consideration other than cash or securities will be
determined
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in good faith by the Board of
Directors of the Company within five (5) days after the
occurrence of an event requiring valuation. If the Required
Holders disagree with the determination of the Board of Directors
and give written notice of such disagreement to the Company within
ten (10) days after the occurrence of an event requiring
valuation (the “ Valuation Event ”), the fair
value of such consideration will be determined within five
(5) Business Days after the tenth (10 th ) day
following the Valuation Event by an independent, reputable
appraiser jointly selected by the Company and the Required
Holders. The determination of such appraiser shall be final
and binding upon all parties absent manifest error and the fees and
expenses of such appraiser shall be borne by the
Company.
(v)
Record Date . If the Company takes a record of the
holders of shares of Common Stock for the purpose of entitling them
(A) to receive a dividend or other distribution payable in
shares of Common Stock, Options or in Convertible Securities or
(B) to subscribe for or purchase shares of Common Stock,
Options or Convertible Securities, then such record date will be
deemed to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration of
such dividend or the making of such other distribution or the date
of the granting of such right of subscription or purchase, as the
case may be.
(b) Adjustment upon
Subdivision or Combination of Common Stock . If the
Company at any time on or after the Subscription Date subdivides
(by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into
a greater number of shares, the Exercise Price in effect
immediately prior to such subdivision will be proportionately
reduced and the number of Warrant Shares will be proportionately
increased. If the Company combines (by combination, reverse
stock split or otherwise) one or more classes of its outstanding
shares of Common Stock into a smaller number of shares, the
Exercise Price in effect immediately prior to such combination will
be proportionately increased and the number of Warrant Shares will
be proportionately decreased. Any adjustment under this
Section 2(b) shall become effective at the close of
business on the date the subdivision or combination becomes
effective.
(c) Minimum
Adjustment . No adjustment in the Exercise Price and the
number of Warrants shall be required unless such adjustment would
require an increase or decrease of at least 1% in the Exercise
Price as last adjusted; provided , however , that any
adjustments which would be required to be made but for this
Section 2(c) shall be carried forward and taken into
account in any subsequent adjustment. All calculations under
this Section 2 shall be made to the nearest cent, with one
half cent being rounded upward.
(d) Floor Price
. If the Company’s Common Stock is listed on either the
NYSE, AMEX or NASDAQ Stock Market, and such market requires
stockholder approval to adjust the Exercise Price in accordance
with this Section 2, then, unt
