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EXHIBIT 10.2
 
FORM OF WARRANT
 

 
 
 

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The securities represented by this Warrant and issuable upon exercise hereof
have not been registered under the Securities Act of 1933, as amended (the
“Act”), or under the provisions of any applicable state securities laws, but
have been acquired by the registered holder hereof for purposes of investment
and in reliance on statutory exemptions under the Act, and under any applicable
state securities laws.  These securities and the securities issued upon exercise
hereof may not be sold, pledged, transferred or assigned, nor may this Warrant
be exercised, except in a transaction which is exempt under the provisions of
the Act and any applicable state securities laws or pursuant to an effective
registration statement.

ENERGY COMPOSITES CORPORATION
A Nevada Corporation
 
COMMON STOCK PURCHASE WARRANT
 
Date of Issuance: ____________ 2008
Certificate No. W-__
 
For value received, Energy Composites Corporation, a Nevada corporation (the
“Company”), hereby grants to ____________________ or its transferees and assigns
(“Registered Holder”), the right to purchase from the Company a total of
______________ shares (“Warrant Shares”) of the Company’s common stock, par
value $0.001 per share (“Common Stock”), at a price per share equal to $5.00
(the “Initial Exercise Price”).  The exercise price and number of Warrant Shares
(and the amount and kind of other securities) for which this Warrant is
exercisable shall be subject to adjustment as provided in Section 2
hereof.  This Warrant is being issued in connection with the Subscription
Agreement between Registered Holder and the Company dated ___________, 2008 (the
“Subscription Agreement”).  This Warrant is subject to the following provisions:
 
SECTION 1.    Exercise of Warrant.
 
(a)  Terms of Warrants; Exercise Period.  Subject to the terms of this
Agreement, the Registered Holder shall have the right, commencing on the date
hereof and expiring on the 3-year anniversary hereof (the “Expiration Date”), to
exercise this Warrant, in whole or in part, and receive from the Company the
number of Warrant Shares which the Registered Holder may at the time be entitled
to receive on exercise of this Warrant and payment of the Exercise Price then in
effect for the Warrant Shares.  To the extent not exercised prior to the
Expiration Date, this Warrant shall become void and all rights thereunder and
all rights in respect thereof under this Agreement shall cease as of such time.
 
(b)  Exercise Procedure.
 
(i)  This Warrant shall be deemed to have been exer­cised on the date specified
in a written notice from the Registered Holder to the Company (the “Exercise
Time”) and within three business days following the Exercise Time, the
Registered Holder shall deliver the following to the Company:
 
(A)   a completed Exercise Agreement, as described in Section 1(c) below;
 
(B)   this Warrant;
 
 
 

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(C)   if this Warrant is not registered in the name of the Registered Holder, an
Assignment or Assignments in the form set forth in Exhibit II hereto evidencing
the assignment of this Warrant to the Registered Holder, in which case the
Registered Holder shall have complied with the pro­visions set forth in
Section 4 hereof; and
 
(D)   wire transfer or a check payable to the Company in an amount equal to the
product of the Exercise Price (as such term is de­fined in Section 2) multiplied
by the number of Warrant Shares being purchased upon such exercise (the
“Aggregate Exercise Price”).
 
(ii)   Certificates for Warrant Shares purchased upon exercise of this Warrant
shall be delivered by the Company to the Registered Holder within 5 business
days after the date of the Exercise Time.  Unless this Warrant has expired or
all of the purchase rights represented hereby have been exercised, the Company
shall prepare a new Warrant, substantially identical hereto, representing the
rights formerly represented by this Warrant that have not expired or been
exercised and shall, within such 5-day period, deliver such new Warrant to the
Person designated for delivery in the Exercise Agreement.
 
(iii) The Warrant Shares issuable upon the exercise of this Warrant shall be
deemed to have been issued to the Registered Holder at the Exercise Time, and
the Registered Holder shall be deemed for all purposes to have become the record
holder of such Warrant Shares at the Exercise Time.
 
(iv)  The Company shall not close its books against the transfer of this Warrant
or of any Warrant Shares issued or issuable upon the exercise of this Warrant in
any manner which interferes with the timely exercise of this Warrant.
 
(v)   The Company shall assist and cooperate with the Registered Holder or any
Registered Holder required to make any governmental filings or obtain any
governmental approvals prior to or in connection with any exercise of this
Warrant.
 
(vi)  The Company shall at all times reserve and keep available out of its
authorized but unissued capital stock, solely for the purpose of issuance upon
the exercise of this Warrant, the maximum number of Warrant Shares issuable upon
the exercise of this Warrant.  All Warrant Shares which are so issuable shall,
when issued and upon the payment of the Exercise Price therefor, be duly and
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges.  The Company shall take all such ac­tions as may be necessary to assure
that all such Warrant Shares may be so issued without violation by the Company
of any applica­ble law or governmen­tal regulation or any requirements of any
domestic securities exchange upon which securities of the Company may be listed
(except for official notice of issuance which shall be immediately deliv­ered by
the Company upon each such issuance).
 
(c)  Exercise Agreement.  Upon any exercise of this Warrant, the Registered
Holder shall deliver an Exercise Agreement in the form set forth in Exhibit I
hereto, except that if the Warrant Shares are not to be issued in the name of
the Person in whose name this Warrant is registered, the Exercise Agreement
shall also state the name of the Person to whom the certificates for the Warrant
Shares are to be issued, and if the number of Warrant Shares to be issued does
not
 
 
 
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include all the Warrant Shares purchasable here­under, it shall also state the
name of the Person to whom a new Warrant for the unexer­cised portion of the
rights hereunder is to be issued.  Such Exercise Agreement shall be dated the
actual date of execution thereof.
 
(d)  Mandatory Exercise.  The Company may force the exercise of this Warrant if
all of the following conditions have been met:
 
(i)   The Company’s common stock, $0.001 par value (the “Common Stock”) has
traded above the Exercise Price for at least 20 consecutive trading days
immediately preceding the Mandatory Exercise Notice (defined below);
 
(ii)   The average trading volume shall be at least 100,000 shares per day
during such 20-consecutive day trading period; and
 
(iii)  The shares of Common Stock issuable upon exercise of this Warrant shall
be eligible for resale pursuant to Rule 144 under the Securities Act of 1933 or
there shall be an effective registration statement covering the resale of the
Warrant Shares.
 
The Company may exercise its right to force the exercise this Warrant by giving
notice thereof (the “Mandatory Exercise Notice”) to the holder of this Warrant
as it appears on the books of the Company, which notice shall specify the number
of Warrant Shares to be issued and shall fix a date for mandatory exercise,
which date shall not be less than 30 days nor more than 45 days after the date
of the Mandatory Exercise Notice.
 
SECTION 2.   Adjustment of Exercise Price and Number of Shares.  In order to
prevent dilution of the rights granted under this Warrant, the Initial Exercise
Price shall be subject to adjustment from time to time as provided in this
Section 2 (such price or such price as last adjusted pursuant to the terms
hereof, as the case may be, is herein called the “Exercise Price”), and the
number of Warrant Shares obtainable upon exercise of this Warrant shall be
subject to adjustment from time to time as provided in this Section 2.
 
(a)  Reorganization, Reclassification, Consolida­tion, Merger or Sale.  In case
of any reclassification, capital reorganization, consolidation, merger, sale of
all or substan­tially all of the Company’s assets to another Person or any other
change in the Common Stock of the Company, other than as a result of a
subdivision, combination, or stock dividend provided for in Section 2(b) below
(any of which, a “Change Event”), then, as a condition of such Change Event,
lawful provision shall be made, and duly executed documents evidencing the same
from the Company or its successor shall be delivered to the Registered Holder,
so that the Registered Holder shall have the right at any time prior to the
expiration of this Warrant to purchase, at a total price equal to that payable
upon the exercise of this Warrant (subject to adjustment of the Exercise Price
as provided in Section 2), the kind and amount of shares of stock and other
securities and property receivable in connection with such Change Event by a
holder of the same number of shares of Common Stock as were purchasable by the
Registered Holder immediately prior to such Change Event.  In any such case
appropriate provisions shall be made with respect to the rights and interest of
the Registered Holder so that the provisions hereof shall thereafter be
applicable with respect to any shares of stock or other securities and property
deliverable upon exercise hereof, and appropriate adjustments shall
 
 
 
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be made to the purchase price per share payable hereunder, provided the
aggregate purchase price shall remain the same.
 
(b)  Subdivisions, Combinations and Other Issuances.  If the Company shall at
any time prior to the expiration of this Warrant (i) subdivide its Common Stock,
by split-up or otherwise, or combine its Common Stock, or (ii) issue additional
shares of its Common Stock or other equity securities as a dividend with respect
to any shares of its Common Stock, the number of shares of Common Stock issuable
on the exercise of this Warrant shall forthwith be proportionately increased in
the case of a subdivision or stock, or proportionately decreased in the case of
a combination. Appropriate adjustments shall also be made to the purchase price
payable per share, but the aggregate purchase price payable for the total number
of Warrant Shares purchasable under this Warrant (as adjusted) shall remain the
same.  Any adjustment under this Section 2(b) shall become effective at the
close of business on the date the subdivision or combination becomes effective,
or as of the record date of such dividend, or in the event that no record date
is fixed, upon the making of such dividend.
 
(c)  Issuance of New Warrant.  Upon the occurrence of any of the events listed
in this Section 2 that results in an adjustment of the type, number or exercise
price of the securities underlying this Warrant, the Registered Holder shall
have the right to receive a new warrant reflecting such adjustment upon the
Registered Holder tendering this Warrant in exchange.  The new warrant shall
otherwise have terms identical to this Warrant.
 
(d)  Notices.
 
(i)   The Company shall give written notice to the Regis­tered Holder of this
Warrant at least 10 days prior to the date on which the Company closes its books
or takes a record for determining rights to vote with respect to any event
described in this Section 2 or any dissolu­tion or liquidation.
 
(ii)  The Company shall also give written notice to the Registered Holder of
this Warrant at least 10 days prior to the date on which any event described in
this Section 2 or any dissolution or liquidation shall take place.
 
SECTION 3.   No Voting Rights; Limitations of Liability.  This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a stockholder
of the Company.  No provision hereof, in the absence of affirmative action by
the Registered Holder to purchase Warrant Shares, and no enumeration herein of
the rights or privileges of the Registered Holder shall give rise to any
liability of such holder for the Exercise Price of Warrant Shares acquirable by
exercise hereof or as a stockholder of the Company.
 
SECTION 4.   Warrant Transferable.  Subject to compliance with applicable
securities laws and the terms of this Section 6, this Warrant and all rights
hereunder are transferable, in whole or in part, without charge to the
Registered Holder upon surrender of this Warrant with a properly executed
Assignment (in the form of Exhibit II hereto) at the principal office of the
Company.
 
 
 
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SECTION 5.   Warrant Exchangeable for Different Denominations.  This Warrant is
exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of the Company, for new Warrants of like tenor representing in
the aggregate the purchase rights hereunder, and each of such new Warrants shall
represent such portion of such rights as is designated by the Registered Holder
at the time of such surrender.  The date the Company initially issues this
Warrant shall be deemed to be the “Date of Issuance” hereof regardless of the
number of times new certificates representing the unexpired and unexercised
rights formerly represented by this Warrant shall be issued.  All Warrants
representing portions of the rights hereunder are referred to herein as the
“Warrants.”
 
SECTION 6.   Replacement.  Upon receipt of evidence reasonably satisfactory to
the Company of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing this Warrant, and in the case of any such loss, theft
or destruction, upon receipt of indemnity reasonably satisfactory to the
Company, or, in the case of any such mutilation upon surrender of such
certificate, the Company shall (at the expense of the Registered Holder) execute
and deliver in lieu of such certificate a new certificate of like kind
representing the same rights represented by such lost, stolen, destroyed or
mutilated certificate and dated the date of such lost, stolen, destroyed or
mutilated certificate.
 
SECTION 7.   Notices.  Any notice, demand, offer, request or other communication
required or permitted to be given pursuant to the terms of this Warrant shall be
in writing and shall be deemed effectively given the earlier of (i) when
received, (ii) when delivered personally, (iii) one business day after being
delivered by facsimile (with receipt of appropriate confirmation), or (iv) one
business day after being deposited with an overnight courier service, and
addressed to the recipient at the addresses set forth below unless another
address is provided to the other party in writing:
 
If to Company, to:

Energy Composites Corporation
4400 Commerce Drive
Wisconsin Rapids, WI 54494
Attn:    Samuel W. Fairchild
                              Fax:     (715) 421 2048
 
If to Registered Holder, to:

________________________
________________________
________________________
Fax:          _______________

 
 
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or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a Registered Holder of Warrants) or to
the Registered Holders of Warrants (in the case of the Company) in accordance
with the provisions of this paragraph.
 
SECTION 8.   Amendment and Waiver.  Except as otherwise provided herein, the
provisions of the Warrants may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Registered
Holders of Warrants representing a majority of the Warrant Shares obtainable
upon exercise of the then-outstanding Warrants; provided, however, that no such
action may change the Exercise Price of the Warrants or the number of shares or
class of capital stock obtainable upon exercise of each Warrant without the
written consent of all Registered Holders.
 
SECTION 9.   Descriptive Headings; Governing Law.
 
(a)   The descriptive headings of the several Sections of this Warrant are
inserted for convenience only and do not constitute a part of this Warrant.
 
(b)   All issues and questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by, and
construed in accordance with, the laws of the State of Nevada, without giving
effect to any choice of law or conflict of law rules or provisions (whether of
the State of Nevada or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of Nevada.
 
SECTION 10.  Warrant Register.  The Company shall maintain at its principal
executive office books for the registration and the registration of transfer of
this Warrant.  The Company may deem and treat the Registered Holder as the
absolute owner hereof (notwithstanding any notation of ownership or other
writing thereon made by anyone) for all purposes and shall not be affected by
any notice to the contrary.
 
SECTION 11.   Fractions of Shares.  The Company may, but shall not be required,
to issue a fraction of a Warrant Share upon the exercise of this Warrant in
whole or in part.  As to any fraction of a share which the Company elects not to
issue, the Company shall make a cash payment in respect of such fraction in an
amount equal to the same fraction of the market price of a Warrant Share on the
date of such exercise (as determined by the board of directors in its reasonable
discretion).
 
* * * * *
 

 
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
attested by its duly authorized officers and to be dated as of the Date of
Issuance hereof.
 
 
ENERGY COMPOSITES CORPORATION
 

 
By: _______________________________
Samuel W. Fairchild
Chief Executive Officer

 

 

 
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EXHIBIT I
 
EXERCISE AGREEMENT
 

 
To:                                                                                     Dated:
 

 
The undersigned, pursuant to the provisions set forth in the attached Warrant
(Certificate No. W-____), hereby agrees to subscribe for the purchase of ______
Warrant Shares covered by such Warrant and makes payment herewith in full
therefor at the price per share provided by such Warrant.  Please issue the
Warrant Shares in the following names and amounts:
 

 
Name                                                                Number of
Warrant Shares
 

 

 

 

 
Signature ____________________
 

 
Address ______________________
 

 

 
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EXHIBIT II
 
ASSIGNMENT
 

 
FOR VALUE RECEIVED, _____________________________ hereby sells, assigns and
transfers all of the rights of the undersigned under the attached Warrant
(Certificate No. W-_____) with respect to the number of the Warrant Shares
covered thereby set forth below, unto:
 
Names of
Assignee                                                          Address                                                      No.
of Shares
 

 

 

 

 

 
Dated:                                                                              Signature                             _______________________
 

 
Witness                                _______________________
 

 

 
The Assignee agrees to be bound by the terms of the Warrant.
 

 
Signature                                _______________________
 

 
Witness                                _______________________
 
 
 
 
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