Form of Series A Warrant

The following terms used in this document shall have the following meanings (unless otherwise expressly provided herein):

 

The “Act.”  The Securities Act of 1933, as amended.

 

The “Commission.”  The Securities and Exchange Commission.

 

The “Company.”   Vanguard Energy Corporation, a Colorado corporation.

“Shares.”  The Shares of the Company’s common stock or any other class of stock resulting from successive changes or reclassifications of the Company’s common stock consisting solely of changes in par value, or from par value to no par value, or from no par value to par value.

 

“Current Market Price.”  The price of the Company’s common stock on the OTC Bulletin Board or any other market in the United States where the Company’s common stock is publicly traded.

 

“Exercise Period.”  The period extending to and through the Expiration Date.

 

“Exercise Price.”  $4.00 per Share, as modified in accordance with Section 8, below.

 

“Expiration Date.”  5:00 p.m. Pacific time on October 31, 2014; provided, however, if such date shall be a holiday or a day on which banks are authorized to close in California, the Expiration Date shall mean 5:00 p.m. Pacific Time on the next following day which in California is not a holiday or a day on which banks are authorized to close.

 

“Holder” or “Warrant Holder.”  The person to whom a warrant certificate is issued, and any valid transferee thereof pursuant to Section 9 below.

 

“Warrants.”  The Warrants issued in accordance with the terms of this Agreement and any Warrants issued in substitution for or replacement of such Warrants, or any Warrants into which such Warrants may be divided or exchanged. 

 

“Warrant Agent.”  The Company will be the Warrant Agent unless the Company appoints a transfer agent that is registered under the Securities Exchange Act of 1934 to act as Warrant Agent, upon notice to all Warrant Holders.

“Warrant Shares.”  The Shares acquired upon exercise of a Warrant, and the Shares underlying the unexercised portion of a Warrant.

2.1           Description of Warrants.  Each Warrant shall initially entitle the Warrant Holder to purchase one Share on exercise thereof, subject to modification and adjustment as hereinafter provided in Section 8.  The Company shall deliver Warrant Certificates in required whole number denominations to the person entitled thereto in connection with the original issuance of Warrant Certificates or any transfer or exchange permitted under this Agreement.

 

2.2           Warrant Shares.  Share Certificates representing the Warrant Shares shall be issued only upon the exercise of the Warrants or upon transfer or exchange of the Warrant Shares following exercise of the Warrants.

 

2.3           Form of Certificates.  The Warrant Certificates shall be substantially in the form attached hereto as Attachment 1 and may have such letters, numbers or other marks of identification and such legends, summaries or endorsements printed, lithographed or engraved thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement.  The Warrant Certificates shall be dated as of the date of issuance, whether on initial issuance, transfer, exchange or in lieu of mutilated, lost, stolen or destroyed Warrant Certificates.

 

2.4           Execution of Certificates.  The Warrant Certificates shall be executed on behalf of the Company by its President and Secretary, by manual signatures or by facsimile signatures printed thereon.  If any person whose facsimile signature has been placed upon any Warrant Certificate as the signature of an officer of the Company shall have ceased to be such officer before such Warrant Certificate is countersigned, issued and delivered, such Warrant Certificate may be countersigned, issued and delivered with the same effect as if such person had not ceased to be such officer.  Any Warrant Certificate may be signed by, or may bear the facsimile signature of, any person who at the actual date of the preparation of such Warrant Certificate shall be a proper officer of the Company to sign such Warrant Certificate even though such person was not such an officer upon the date of this Agreement.

2.5           Mutilated, Lost, Stolen, or Destroyed Certificate.  In case the certificate or certificates evidencing the Warrants shall be mutilated, lost, stolen or destroyed, the Company shall, at the request of the Warrant Holder, issue and deliver in exchange and substitution for and upon cancellation of the mutilated certificate or certificates, or in lieu of and substitution for the certificate or certificates lost, stolen or destroyed, a new Warrant Certificate or Certificates of like tenor and representing an equivalent right or interest, but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of such Warrant and a bond of indemnity, if requested, also satisfactory in form and amount, at the applicant’s cost.  Applicants for such substitute Warrant Certificate shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe.

There has been reserved, and the Company shall at all times keep reserved so long as the Warrants remain outstanding, out of its authorized and unissued Shares, such number of Shares as shall be subject to purchase under the Warrants multiplied by 150%.  Every transfer agent for the Shares and other securities of the Company issuable upon the exercise of the Warrants will be irrevocably authorized and directed at all times to reserve such number of authorized shares and other securities as shall be requisite for such purpose.  The Company will supply every such transfer agent with duly executed stock and other certificates, as appropriate, for such purpose.

The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of the Warrants or the securities comprising the Warrant Shares and any tax (except federal or state income tax) which may be payable in respect of any transfer or exercise of the Warrants or the securities comprising the Warrant Shares.

The Company covenants that all Warrant Shares that may be issued and delivered to a Holder of this Warrant upon the exercise of this Warrant will be, upon such delivery, validly and duly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issuance thereof.

The number and kind of securities purchasable upon the exercise of the Warrants and the Exercise Price shall be subject to adjustment from time to time upon the happening of certain events, as follows:

The Warrant Holder agrees that prior to making any disposition of the Warrants or the Warrant Shares, the Warrant Holder shall give written notice to the Company describing briefly the manner in which any such proposed disposition is to be made; and no such disposition shall be made if the Company has notified the Warrant Holder that in the opinion of counsel reasonably satisfactory to the Warrant Holder a registration statement or other notification or post-effective amendment thereto (hereinafter collectively a “Registration Statement”) under the Act is required with respect to such disposition and no such Registration Statement has been filed by the Company with, and declared effective, if necessary, by, the Commission.

(b)           The term “Registrable Securities” shall mean together in the aggregate:  (A) the Underlying Stock issued or issuable upon exercise of this Warrant and (B) the Common Stock held by or issuable upon exercise of any warrant or conversion of convertible security to any other persons with similar registration rights as provided in this Warrant.

   10.2        Piggy-back Registration Rights.  If (but without any obligation to do so) at any time (a) after (i) the Company has sold securities registered under the Securities Act of 1933 or (2) it is required to file periodic reports under Section 12 of the Securities Exchange Act of 1934, and (b) prior to  (1) year after the Purchaser has fully exercised or converted this Warrant, the Company proposes to register any of its securities under the Act in connection with the public offering of such securities solely for cash (other than a registration on Form S-4, Form S-8 or any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities and a registration statement relating to a PIPE (private investment public equity) or similar transaction), the Company shall, each such time, promptly give the Holder written notice of such registration. Upon the written request of the Holder given within twenty (20) days after receipt of such written notice from the Company, the Company shall, subject to the provisions of Section 10, cause to be registered under the Act all of the Registrable Securities that the Holder has requested to be registered; provided, however, that if the managing underwriter of any underwritten offering by the Company expresses reasonable written objection to the registration of all of the Registrable Securities, then the Registrable Securities which shall be registered in such offering on behalf of holders of Registrable Securities shall be reduced in the proportion equal to the average proportion of reduction as that of all such holders seeking registration in connection with such offering, subject to any rights granted to other holders of securities of the Company that are expressly by the terms of their agreements with the Company entitled to have priority registration rights.  The inclusion of any of the Purchaser's Registrable Securities in a registration statement filed by the Company and declared effective by the SEC shall be deemed to be the exercise or conversion by such Purchaser of the piggy-back registration rights granted herein to such Purchaser except as to such Registrable Securities as were not registered as a result of the immediately preceding sentence.

(b)          Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement.

(c)           Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them.

(d)           Use its best efforts to register and qualify the securities covered by such registration statement under the securities laws of such jurisdictions as shall be reasonably requested by the Purchasers for the distribution of the securities covered by the registration statement, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such jurisdiction.

(e)           In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement with terms generally satisfactory to the managing underwriter of such offering.

(f)           Notify the Holders, promptly after the Company shall have received notice thereof, of the time when the registration statement becomes effective or any supplement to any prospectus forming a part of the registration statement has been filed.

(g)          Notify the Holders of any stop order suspending the effectiveness of the registration statement and use its reasonable best efforts to remove such stop order.

10.5        Furnish Information.  It shall be a condition precedent to the obligations of the Company to take any action pursuant hereto that the Purchaser, having chosen to have its Registrable Securities included for registration, shall furnish to the Company such information regarding the Purchaser, its Registrable Securities and the intended method of disposition of such securities as shall be required to effect the registration thereof.  The Purchaser shall be required to represent to the Company that all such information that is given is complete and accurate in all material respects. The Purchaser shall deliver to the Company a statement in writing from the beneficial owners of such securities that such beneficial owners bona fide intend to sell, transfer or otherwise dispose of such securities.

(b)           Selling Expenses. All underwriting discounts, underwriters' expense allowance, and selling commissions applicable to the sale of Registrable Securities by the Holders and all fees and disbursements of any special counsel (other than the Company's regular counsel) shall be borne by the Holders of the Registrable Securities so registered pro rata on the basis of the number of Registrable Securities so registered.

10.7         Underwriting Requirements; Lock-up Provisions.  All Holders proposing to distribute their Registrable Securities through an underwriting in which the Company has proposed or is proposing to participate, shall (together with the Company and any other Holders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for underwriting by the Company.  If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the managing underwriter; such notice to be given by the Holder not later than two (2) business days following receipt of the Company’s notice (which shall include the terms of the underwriting agreement) to Holder that the Company will file a registration statement (not later than five (5) business days after such Company’s notice) which will include a preliminary prospectus which sets forth the number of shares of Common Stock to be offered for sale by selling stockholders.  Any Registrable Securities excluded or withdrawn from such underwriting shall not be withdrawn from such registration except at the election of the Holder.

(a)           To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the officers, directors, employees, agents, attorneys and partners of each Holder, any underwriter (as defined in the Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Act or the Exchange Act, against any losses, claims, damages or liabilities (joint or several) to which they may become subject under the Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively, a “Violation”): (A) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (B) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (C) any violation or alleged violation by the Company of the Act, the Exchange Act, any applicable state securities law or any rule or regulation promulgated under the Act, the Exchange Act or any applicable state securities law; and the Company will reimburse the Holder for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Subsection 10.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling person; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in said registration statement, said preliminary prospectus, said final prospectus or said amendment or supplement in reliance upon and in conformity with written information furnished by such Holder or any other Holder, for use in the preparation thereof; and further provided, however, that the foregoing indemnity agreement is subject to the condition that, insofar as it relates to any untrue statement, alleged untrue statement, omission or alleged omission made in any preliminary prospectus but eliminated or remedied in the prospectus, such indemnity agreement shall not inure to the benefit of any underwriter or broker, if a copy of the final prospectus was not sent or given to such person with or prior to the confirmation of the sale of such securities to such person.

(b)           To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, its directors, its officers, its employees, its agents, its attorneys, any person who controls the Company within the meaning of the Act or the Exchange Act, any underwriter (within the meaning of the Act) for the Company and any person who controls such underwriter against any losses, claims, damages or liabilities joint or several) to which the Company or any such director, officer, employee, agent, attorney, controlling person, or underwriter or controlling person may become subject, under the Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by the Holder expressly for use in connection with such registration; and the Holder will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or controlling person thereof, in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Subsection 10.8(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld, and further provided that Holder’s obligations under this subsection shall not exceed the amount invested by Holder in the securities that are included in the registration to which the violation relates.

(c)           Promptly after receipt by an indemnified party under this Section 10.8 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 10.8 notify the indemnifying party in writing of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly notified, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to notify an indemnifying party within a reasonable time of the commencement of any such action, to the extent prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 10.8 but the omission so to notify the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section.

10.9         Survival.  The Company's obligations described in this Section shall continue in full force and effect regardless of the exercise, conversion, surrender, cancellation or expiration of this Warrant.

The Company and the Holder, and by receipt of a Warrant Certificate or any Warrant Shares, all subsequent Holders or holders of Warrant Shares, agree to submit all controversies, claims, disputes and matters of difference with respect to this Agreement and the Warrant Certificates, including, without limitation, the application of this Section, to arbitration in Los Angeles, California, according to the rules and practices of the American Arbitration Association from time to time in force.  This agreement to arbitrate shall be specifically enforceable.  Arbitration may proceed in the absence of any party if notice of the proceeding has been given to that party.  The parties agree to abide by all awards rendered in any such proceeding.  These awards shall be final and binding on all parties to the extent and in the manner provided by the rules of civil procedure enacted in California.  All awards may be filed, as a basis of judgment and of the issuance of execution for its collection, with the clerk of one or more courts, state or federal, having jurisdiction over either the party against whom that award is rendered or its property.  No party shall be considered in default hereunder during the pendency of arbitration proceedings relating to that default.