Exhibit 10.88
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is dated October 14, 2009,
between Syntroleum Corporation, a Delaware corporation (the “Company”) and,
Fletcher International, Ltd., a company domiciled in Bermuda (the “Purchaser”).
RECITALS
WHEREAS, the Company desires to issue and sell to the Purchaser, and the
Purchaser desires to purchase from the Company, authorized but unissued shares
of Common Stock upon the terms and subject to the conditions set forth in this
Agreement; and
WHEREAS, the Company and the Purchaser have executed and delivered that certain
Settlement Agreement of even date herewith (the “Settlement Agreement”), which
Settlement Agreement releases all obligations and claims evidenced by, under,
relating to or arising out of that certain Agreement dated as of November 18,
2007 by and between the Company and the Purchaser, including all amendments and
supplements thereto, and all related documents, certificates and instruments
(collectively, the “Prior Agreement”), and releases the Company, the Purchaser
and their employees, Affiliates, representatives, stockholders, directors and
agents of all obligations, action, claims, causes of action, losses,
controversies, agreements and demands arising thereunder, including without
limitation all claims arising out of Civil Action No. 08-cv-5851, Fletcher
International, Ltd. vs. Syntroleum Corporation, in the United States District
Court for the Southern District of New York.
AGREEMENT
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchaser agree
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement,
for all purposes of this Agreement, the following terms have the meanings set
forth in this Section 1.1:
“Acquiring Person” means, in connection with any Change of Control, (i) the
continuing or surviving Person of a consolidation or merger with the Company (if
other than the Company), (ii) the transferee of all or substantially all of the
properties or assets of the Company, (iii) the corporation consolidating with or
merging into the Company in a consolidation or merger in connection with which
the Common Stock is changed into or exchanged for stock or other securities of
any other Person or cash or any other property, (iv) the entity or group acting
in concert acquiring or possessing the power to cast the majority of the
eligible votes at a meeting of the Company’s stockholders at which directors are
elected, (v) in the case of a capital reorganization or reclassification of the
Common Stock pursuant to which the shareholders of the Company immediately prior
to such reorganization or reclassification do not beneficially own at least
fifty percent (50%) of each class of voting securities of the Company
outstanding immediately following such reorganization or reclassification, the
Company, or (vi) if the holders of Common Stock are to receive securities of a
Person that controls the Person that would be otherwise treated as the Acquiring
Person directly or indirectly through one or more intermediaries, then such
controlling Person shall be treated as the Acquiring Person for the other
provisions of this Agreement.

 

 

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“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person as such terms are used in and construed under Rule 405 under the
Securities Act. With respect to the Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as the Purchaser will be deemed to be an Affiliate of the Purchaser.
“Board of Directors” means the board of directors of the Company.
“Business Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York or Nasdaq is closed.
“Change of Control” means:
(i) an acquisition of the Company by means of merger or other form of corporate
reorganization in which outstanding shares of the Company are exchanged for
securities or other consideration issued, or caused to be issued, by the
Acquiring Person or its parent, subsidiary or affiliate (each as defined in
Rule 12b-2 of the Exchange Act),
(ii) a sale of all or substantially all of the assets of the Company (on a
consolidated basis) in a single transaction or series of related transactions,
(iii) any tender offer, exchange offer, stock purchase or other transaction or
series of related transactions by the Company in which the power to cast the
majority of the eligible votes at a meeting of the Company’s stockholders at
which directors are elected is transferred to a single entity or group acting in
concert, or
(iv) a capital reorganization or reclassification of the Common Stock pursuant
to which the shareholders of the Company immediately prior to such
reorganization or reclassification do not beneficially own at least fifty
percent (50%) of each class of voting securities of the Company outstanding
immediately following such reorganization or reclassification. Notwithstanding
anything contained herein to the contrary, the change in the state of
incorporation of the Company shall not in and of itself constitute a Change of
Control.
“Code” means the Internal Revenue Code of 1986, as amended, and the treasury
regulations thereunder.
“Common Stock” means common stock of the Company, $0.01 par value per share.

 

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“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
“Existing Registration Statement” means that registration statement on Form S-3
filed March 12, 2009 by the Company with the SEC, as amended (Registration
No. 333-157879), along with any amendments and supplements thereto and any
replacement registration statement with respect thereto.
“Initial Closing Shares” means the shares of Common Stock issued to the
Purchaser in the Initial Closing pursuant to this Agreement and upon the
exercise of the Initial Closing Warrant.
“Material Adverse Effect” means any material adverse effect with respect to
(A) the business, properties, assets, operations, results of operations,
revenues, or condition, financial or otherwise, of the Company and its
subsidiaries taken as a whole, (B) the legality, validity or enforceability of
the Agreement and the Warrants, or the Existing Registration Statement or
Prospectus, or (C) the Company’s ability to perform fully on a timely basis its
obligations under the Agreement or the Warrants.
“Nasdaq” shall mean the Nasdaq Capital Market, but if the Nasdaq Capital Market
is not then the principal U.S. trading market for the Common Stock, then
“Nasdaq” shall be deemed to mean the principal U.S. trading market on which the
Common Stock, or such other applicable common stock, is then traded.
“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
“Shares” means the shares of Common Stock issued or issuable to the Purchaser
pursuant to this Agreement and the Warrants.
“Subsequent Closing Shares” means the shares of Common Stock issued to the
Purchaser in a Subsequent Closing pursuant to this Agreement and upon the
exercise of a Subsequent Closing Warrant.
“Tax Affiliate” means any Person in which the Purchaser, directly or indirectly
through one or more intermediaries, owns any equity interest.
“Tax Covenants” means Sections 4.2(a), (b), (c) and (d) of this Agreement.
“Transaction Documents” means this Agreement, the Warrants, and any other
documents or agreements executed and delivered in connection with the
transactions contemplated hereunder.

 

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ARTICLE II.
PURCHASE AND SALE
2.1 Closings.
(a) Initial Closing. Subject to the terms and conditions set forth in this
Agreement, the initial purchase and sale of shares of Common Stock (the “Initial
Closing”) shall take place at 9:30 a.m., New York City time, on October 14, 2009
unless the Purchaser and the Company shall mutually agree on a different date
and time (the “Initial Closing Date”). At the Initial Closing, the Company shall
issue and the Purchaser shall acquire from the Company:
(i) 1,513,833 shares of Common Stock at a price per share equal to $2.6423 (“Per
Share Purchase Price”). The purchase price shall be paid at the Initial Closing
by wire transfer as directed by the Company; and
(ii) a warrant in the form attached hereto as Annex A (the “Initial Closing
Warrant”). The Warrant delivered at the Initial Closing shall cover 1,892,291
shares of Common Stock and shall be exercisable at a per share price of $3.3029.
(b) Subsequent Closing. Until 6:00 p.m., New York City time on June 30, 2010
(the “Expiration Date”), the Purchaser shall have the right to purchase at the
Per Share Purchase Price (subject to adjustment pursuant to Sections 2.1(d) and
4.5(b)(iii)(C) hereof) up to a maximum of $8,000,000.00 of Common Stock from the
Company at up to two closings of a minimum of $4,000,000.00 for the first such
closing and up to the remainder of the $8,000,000.00, if any, at the second such
closing (each a “Subsequent Closing” and together with the Initial Closing, each
a “Closing”).
(i) To exercise the right to purchase shares of Common Stock in a Subsequent
Closing, the Purchaser shall deliver a notice in the form attached hereto as
Annex B (the “Purchaser Notice”) to the Company at least three (3) Business Days
prior to the Expiration Date; provided, however, that the Purchaser shall not be
entitled to deliver a Purchaser Notice (A) if the Purchaser shall have breached
any of the Tax Covenants; (B) if (1) the Purchaser shall have materially
breached any of its obligations (other than the Tax Covenants) under this
Agreement or the Warrants (as defined below), (2) such breach caused material
damage or loss to the Company, and (3) an investment by the Purchaser at a
Subsequent Closing would cause the Company additional material damage or loss;
or (C) if the sale of the Subsequent Closing Shares to the Purchaser would
result in the breach of Section 4.2(a) of this Agreement (each of the conditions
specified in (A), (B) and (C) being referred to herein as the “Non-Exercise
Conditions”).

 

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(ii) Subject to (i) above, the date of a Subsequent Closing shall be set forth
in the Purchaser Notice delivered in connection therewith; provided, however,
that such date shall be no less than three (3) Business Days after the Company’s
receipt of the Purchaser Notice and no later than the Expiration Date.
(iii) At each Subsequent Closing, Purchaser shall deliver to the Company, via
wire transfer, immediately available funds equal to the aggregate purchase price
for the Subsequent Closing Shares to be purchased at such Subsequent Closing,
and the Company shall deliver to each Purchaser the Subsequent Closing Shares
purchased at such Subsequent Closing and a Warrant in the form attached hereto
as Annex A (a “Subsequent Closing Warrant,” and together with the Initial
Closing Warrant, the “Warrants”) evidencing rights to purchase from the Company,
subject to the terms and conditions set forth in such Subsequent Closing Warrant
and this Agreement, that number of shares of Common Stock as is equal to 125% of
the number of shares of Common Stock issued to the Purchaser at such Subsequent
Closing at an exercise price of 125% of the Per Share Purchase Price.
(c) Notwithstanding anything to the contrary in Section 2.1(b) or elsewhere in
this Agreement, in no event (including the occurrence of a Non-Exercise
Condition) shall the Expiration Date be extended.
(d) For the purpose of Section 2.1(b), in case the Company may effect any
subdivision or combination of the issued Common Stock, whether by reason of any
dividend or distribution of units, split, recapitalization, reorganization,
spin-off, combination or other similar change, then (i) in the case of any such
distribution, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
distribution, or (ii) in the case of any such subdivision or combination, at the
close of business on the Business Day immediately prior to the Business Day upon
which such Company action becomes effective, the Per Share Purchase Price shall
be proportionately changed.
2.2 Closing Conditions.
(a) The obligations of the Company with respect to the Initial Closing and each
Subsequent Closing are subject to the performance by the Purchaser of its
obligations hereunder and the payment of the applicable price with respect to
the shares of Common Stock purchased at such Closing and to the satisfaction of
the following additional conditions precedent (in each case, unless waived in
writing by the Company):
(i) As of each applicable Closing Date, the representations and warranties made
by the Purchaser in this Agreement shall be true and correct, except those
representations and warranties which address matters only as of a particular
date, which shall be true and correct as of such date;
(ii) The Purchaser shall be in compliance in all material respects with all of
the covenants and agreements in this Agreement;
(iii) On the applicable Closing Date, the Company shall have received from the
Purchaser a certificate of an appropriate officer of the Purchaser dated as of
such Closing Date certifying as to the matters set forth in the foregoing
clauses (i) and (ii);

 

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(iv) At the Initial Closing the Purchaser shall have executed and delivered the
Settlement Agreement and such agreement shall be in full force and effect; and
(v) With respect to each Subsequent Closing none of the Non-Exercise Conditions
shall exist at the time of such Subsequent Closing.
(b) The obligations of the Purchaser with respect to the Initial Closing and
each Subsequent Closing hereunder are subject to the performance by the Company
of its obligations hereunder and to the satisfaction of the following additional
conditions precedent (in each case, unless waived in writing by the Purchaser):
(i) As of each applicable Closing Date, the representations and warranties made
by the Company in this Agreement shall be true and correct, except those
representations and warranties which address matters only as of a particular
date, which shall be true and correct as of such date;
(ii) The Company shall be in compliance in all material respects with all of the
covenants and agreements in this Agreement;
(iii) On the applicable Closing Date, the Purchaser shall have received a
certificate of the Chief Executive Officer and the Principal Financial Officer
of the Company dated as of such Closing Date stating as to the matters set forth
in the foregoing clauses (i) through (ii);
(iv) At the Initial Closing the Company shall have executed and delivered the
Settlement Agreement and such agreement shall be in full force and effect; and
(v) On the applicable Closing Date, the Existing Registration Statement shall be
effective to cover all of the Shares and the Warrants issuable hereunder and the
Shares issuable upon exercise of the Warrants.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby makes the
following representations and warranties to the Purchaser on each Closing Date:
(a) Offering. The Company has authorized the sale and issuance of all shares of
Common Stock, the Warrants issuable under this Agreement and the shares of
Common Stock issuable upon exercise of the Warrants (the “Offering”). The
Offering, and any subsequent issuance of shares of Common Stock upon exercise of
the Warrants will, subject to compliance by the Purchaser with the applicable
representations and warranties contained in Section 3.2 hereof and with the
applicable covenants and agreements contained in Article IV hereof, be
registered under the Securities Act.

 

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(b) Incorporation. The Company has been duly incorporated and is validly
existing in good standing under the laws of Delaware or, after the relevant
Closing Date, if another entity has succeeded the Company in accordance with the
terms hereof, under the laws of its jurisdiction of incorporation.
(c) Authorization. The execution, delivery and performance of this Agreement and
the Warrants (including the authorization, sale, issuance and delivery of the
shares of Common Stock issuable hereunder and thereunder) have been duly
authorized by all requisite corporate action and no further consent or
authorization of the Company, its Board of Directors or its stockholders is
required.
(d) Execution and Delivery. This Agreement and the Warrants have been duly
executed and delivered by the Company and are valid and binding agreements
enforceable against the Company in accordance with their respective terms,
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors’ rights generally
and to general principles of equity. The issuance of the shares of Common Stock
issuable hereunder and under the Warrants is not and will not be subject to any
preemptive right or rights of first refusal that have not been properly waived
or complied with and will not trigger any antidilution or similar rights that
have not been properly waived.
(e) Power and Authority; Qualification to Conduct Business. The Company has full
corporate power and authority necessary to (i) own and operate its properties
and assets, (ii) execute and deliver this Agreement and the Warrants,
(iii) perform its obligations hereunder and under the Warrants (including, but
not limited to, the issuance of the shares of Common Stock issuable hereunder
and under the Warrants) and (iv) carry on its business as presently conducted
and as presently proposed to be conducted. The Company and its subsidiaries are
duly qualified and are authorized to do business and are in good standing as
foreign corporations in all jurisdictions in which the nature of their
activities and of their properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions in which failure to do
so would not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect.
(f) Consents. No consent, approval, authorization or order of any court,
governmental agency or other body is required for execution and delivery by the
Company of this Agreement or the Warrants or the performance by the Company of
any of its obligations hereunder or under the Warrants.

 

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(g) Conflicts. Neither the execution and delivery by the Company of this
Agreement nor the performance by the Company of any of its obligations hereunder
and under the Warrants:
(i) violates, conflicts with, results in a breach of, or constitutes a default
(or an event which with the giving of notice or the lapse of time or both would
be reasonably likely to constitute a default) or creates any rights in respect
of any Person under (A) the certificates of incorporation or by-laws of the
Company or any of its subsidiaries, (B) any decree, judgment, order, law,
treaty, rule, regulation or determination of any court, governmental agency or
body, or arbitrator having jurisdiction over the Company or any of its
subsidiaries or any of their respective properties or assets, (C) the terms of
any bond, debenture, indenture, credit agreement, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan, lease,
mortgage, deed of trust or other instrument to which the Company or any of its
subsidiaries is a party, by which the Company or any of its subsidiaries is
bound, or to which any of the properties or assets of the Company or any of its
subsidiaries is subject, (D) the terms of any “lock-up” or similar provision of
any underwriting or similar agreement to which the Company or any of its
subsidiaries is a party or (E) a any rule or regulation of the Financial
Industry Regulatory Authority, Inc. (successor entity to National Association of
Securities Dealers, Inc.) (“FINRA”) or Nasdaq; or
(ii) results in the creation or imposition of any lien, charge or encumbrance
upon any shares of Common Stock issuable hereunder or under the Warrants or upon
any of the properties or assets of the Company or any of its subsidiaries.
(h) Valid Issuance. When issued to Purchaser against payment therefor, each
share of Common Stock issuable hereunder and each share of Common Stock issuable
upon exercise of the Warrants:
(i) will have been duly and validly authorized, duly and validly issued, fully
paid and non-assessable;
(ii) will be free and clear of any security interests, liens, claims or other
encumbrances; and
(iii) will not have been issued or sold in violation of any preemptive or other
similar rights of the holders of any securities of the Company.
(i) Filings Complete and Accurate in All Material Respects. Since January 1,
2006, none of the Company’s filings with the United States Securities and
Exchange Commission (the “SEC”) under the Securities Act or under Section 13 or
15(d) of the Exchange Act, including the financial statements, schedules,
exhibits and results of the Company’s operations and cash flow contained therein
(each an “SEC Filing”), contained, when filed, any untrue statement of a
material fact or omitted to state any material fact necessary in order to make
the statements, in the light of the circumstances under which they were made,
not misleading. As of their respective filing dates, the SEC Filings complied in
all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the SEC promulgated thereunder as
in effect at the time of filing (including as to the reporting and accounting
for stock options, as to internal controls, disclosures as to off balance sheet
arrangements, and disclosures as to transactions with officers, directors or
employees).
(j) No Integrated Offering. Neither the Company, nor any Person authorized to
act on its behalf, has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would cause the Offering to be integrated with prior offerings by the Company
for purposes of the Securities Act or the rules and regulations of FINRA or
Nasdaq.

 

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(k) Capitalization. Immediately prior to the Initial Closing Date, the
authorized capital stock of the Company consists of 150,000,000 shares of Common
Stock, par value $0.01 per share and 5,000,000 shares of preferred stock, par
value $0.01 per share. As of the Initial Closing Date, (i) 72,607,956 shares of
Common Stock are issued and outstanding, and 17,768,705 shares of Common Stock
are reserved and subject to issuance upon the exercise of outstanding stock
options, warrants or other convertible rights, (ii) no shares of preferred stock
have been designated, and (iii) no shares of capital stock are held in the
treasury of the Company. All of the outstanding shares of Common Stock are, and
all shares of capital stock which may be issued pursuant to outstanding stock
options, warrants or other convertible rights will be, when issued and paid for
in accordance with the respective terms thereof, duly authorized, validly
issued, fully paid and non-assessable, free of any preemptive rights in respect
thereof and issued in compliance with all applicable state and federal laws
concerning issuance of securities. As of the Initial Closing Date, except as set
forth above, and except for shares of Common Stock or other securities issued
upon conversion, exchange, exercise or purchase associated with the securities,
options, warrants, rights and other instruments referenced above, no shares of
capital stock or other voting securities of the Company were outstanding, no
equity equivalents, interests in the ownership or earnings of the Company or
other similar rights were outstanding, and there were no existing options,
warrants, calls, subscriptions or other rights or agreements or commitments
relating to the capital stock of the Company or any of its subsidiaries or
obligating the Company or any of its subsidiaries to issue, transfer, sell or
redeem any shares of capital stock, or other equity interest in, the Company or
any of its subsidiaries or obligating the Company or any of its subsidiaries to
grant, extend or enter into any such option, warrant, call, subscription or
other right, agreement or commitment.
3.2 Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Company on each Closing Date:
(a) The Purchaser has been duly incorporated and is validly existing under the
laws of Bermuda as of the date of this Agreement.
(b) The execution, delivery and performance of this Agreement by the Purchaser
have been duly authorized by all requisite corporate action and no further
consent or authorization of the Purchaser, its Board of Directors or its
stockholders is required. This Agreement has been duly executed and delivered by
the Purchaser and, when duly authorized, executed and delivered by the Company,
will be a valid and binding agreement enforceable against the Purchaser in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors’ rights generally and to general principles of equity.
(c) The Purchaser represents and warrants to the Company that:
(i) As of any Subsequent Closing, no Non-Exercise Condition has occurred or
exists;
(ii) As of any Subsequent Closing, the Purchaser shall be in compliance in all
material respects with all of the covenants and agreements in this Agreement;

 

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(iii) With respect to each Closing, neither the Purchaser, its Affiliates, nor
any Persons acting on the behalf of or in concert with the Purchaser or its
Affiliates has taken, directly or indirectly, any action designed to cause or to
result in the reduction, stabilization or manipulation of the price of any
shares of Common Stock or other security of the Company or paid any broker’s
fees or similar compensation (for the avoidance of doubt, excluding any
compensation paid to employees or consultants of the Purchaser or its
Affiliates) with respect to the issuance or sale of the Common Stock or
Warrants.
(d) The Purchaser represents and warrants to the Company that on the date
hereof, the date of each Subsequent Closing and the date of each exercise of
Warrants:
(i) The Purchaser and its Tax Affiliates do not and will not own immediately
before and immediately after, respectively, each such Closing or exercise more
than 4.95% of the shares of Common Stock of the Company outstanding at the time
of such Closing or exercise. For purposes of the foregoing sentence:
(A) ownership of Common Stock shall include any long derivative or synthetic
position or any other stock (as defined in Temporary Treasury Regulation Section
1.382-2T(f)(18) or any successor provision) of the Company held by the Purchaser
or its Tax Affiliates; (B) notwithstanding any other provision in this Agreement
(including the foregoing clause (A)), ownership of Common Stock shall not
include any Common Stock which may be acquired pursuant to this Agreement or by
exercise of any Warrant until such Common Stock is purchased and issued to the
Purchaser or its Tax Affiliates; (C) any short actual, synthetic or derivative
positions held by the Purchaser or its Tax Affiliates shall not decrease the
amount of Common Stock they are treated as owning, and (D) for purposes of
calculating the percentage ownership interest of the Purchaser and its Tax
Affiliates as of a particular date, the aggregate number of shares of Common
Stock outstanding shall be the number of outstanding shares of Common Stock of
the Company most recently reported prior to such date by the Company in a filing
with the SEC, provided, however, that if at least twenty (20) Business Days
prior to the effectiveness of the Purchaser’s representation in this clause
(d)(i), the Company informs the Purchaser in writing that it has redeemed shares
of its Common Stock and provides the Purchaser with the number of outstanding
shares of Common Stock following such redemption which the Purchaser can rely
upon for this purpose, the Purchaser will use such revised number of outstanding
shares instead, unless and until further updated by a subsequent SEC filing
and/or Company notice pursuant to this clause (d)(i).
(ii) The Purchaser and its Tax Affiliates have not and will not be required to
file either Schedule 13D or 13G with respect to the capital stock of the Company
pursuant to Regulation 13D or 13G promulgated under the Exchange Act; and
(iii) The Affidavits (as defined below) provided previously are true, correct
and complete and none of such Affidavits contains or omits any information that
would be necessary in order for such Affidavits to be not misleading.

 

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ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 [Intentionally Omitted]
4.2 Limits on Shares Issuable and Held.
(a) The Purchaser covenants and agrees with the Company that neither the
Purchaser, nor any of its Tax Affiliates will at any time, directly, together
with or through Persons who have a formal or informal understanding to make a
coordinated acquisition of stock with the Purchaser or its Tax Affiliates,
acquire, offer to acquire, or agree to acquire, by purchase or otherwise, any
shares of stock (as defined in Temporary Treasury
Regulation Section 1.382-2T(f)(18) or any successor provision) of the Company,
including any Common Stock acquired hereunder or pursuant to the Warrants, if,
as a result of such acquisition, it would not be able to make the
representations and warranties contained in Section 3.2(d) hereof or issue any
Affidavit described in Section 4.2(d) hereof.
(b) Any transfer of Common Stock or exercise or transfer of the Warrants that
results in a breach of Section 4.2(a) hereof shall be void ab initio and without
force or effect (a “Purported Transfer”). The Purchaser and the Company covenant
and agree to take all steps reasonably practicable to unwind any such transfer
so as to return the transferee and transferor to the position they were in prior
to the Purported Transfer.
(i) If the Purported Transfer is a public transaction and the Purchaser or a Tax
Affiliate is the buyer, then the Purported Transfer shall be void ab initio with
respect to the Purchaser or Tax Affiliate, and the Purchaser or Tax Affiliate
immediately shall turn over the shares transferred in the Purported Transfer
(the “Void Shares”) to the Company, which shall sell the Void Shares in the open
market. If the proceeds of such sale are more than the amount paid by the buyer
for the Void Shares, the Company shall return to the buyer only the amount paid
by the buyer for the shares and any excess shall be contributed to the United
States Treasury as a charitable contribution in respect of which no Person shall
claim a deduction for tax purposes. If the Company receives less for the Void
Shares than was paid by the buyer, the Company shall pay to the buyer only the
amount received by the Company for the Void Shares and the Company shall have no
further liability to the Purchaser, the buyer, if not the Purchaser, or to any
other Person.
(ii) If the Purported Transfer is not a public transaction, the Purchaser shall
take all steps reasonably practicable within its power to cause the transaction
to be rescinded, including reimbursing any party to such transaction for any
loss incurred as a result of such rescission. If the Purchaser is unable to
cause the rescission of the Purported Transfer and the Purchaser or a Tax
Affiliate is the buyer in the Purported Transfer, the Purported Transfer shall
be treated the same as a public transaction and shall have all of the
consequences of a Purported Transfer that is a public transaction described in
the preceding clause (i).
(c) In connection with any transfer by the Purchaser or a Tax Affiliate in a
non-public transaction, the Purchaser or Tax Affiliate shall obtain (i) a
representation or warranty from the transferee substantially to the same effect
as the representation and warranty set forth in Section 3.2(d) hereof, which
shall expressly state that it may be relied upon by the Company and (ii)
covenants and affidavits from the transferee substantially to the same effect as
the Tax Covenants and Affidavits provided for herein, which shall expressly
state that the Company shall be the beneficiary of such covenants.

 

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(d) Within 90 days after the end of each fiscal year of the Company, if the
Purchaser or a Tax Affiliate owned any Common Stock during such fiscal year, and
at the time of each Subsequent Closing and exercise or transfer of a Warrant,
the Purchaser (or, in the case of a Warrant transfer, the transferor and
transferee of the Warrant) shall provide the Company with an affidavit,
attesting that at no time during the preceding fiscal year (in the case of the
affidavit after the end of the fiscal year) or immediately before and
immediately after the Subsequent Closing, transfer of a Warrant or issuance of
shares pursuant to a Warrant (in the case of the Subsequent Closing or transfer
or exercise of a Warrant) was the Purchaser and its Tax Affiliates (treated in
the aggregate) a “5-percent shareholder” (as the term is defined under
Section 382 of the Code treating, for this purpose, the Purchaser and its Tax
Affiliates in the aggregate as one individual (and, separately, in the case of a
transfer of a Warrant, treating the transferee and its Tax Affiliates in the
aggregate as one individual and, separately, treating the transferor and its Tax
Affiliates in the aggregate as one individual)), in each case, based on the
number of outstanding shares determined in the manner provided in
Section 3.2(d)(i)(D) (an “Affidavit”). For the first fiscal year in which the
Purchaser and its Tax Affiliates owned no Common Stock at any time during such
fiscal year, the Purchaser shall so attest in an Affidavit within 90 days after
the end of such fiscal year; and for each fiscal year thereafter, the Purchaser
and its Tax Affiliates shall have no duty to provide an Affidavit, unless and
until an Affidavit is again required by the first sentence of this clause (d).
The attestations of all Affidavits made pursuant to this Section 4.2(d) shall be
made under penalty of perjury.
(e) The Purchaser shall not be bound by the terms and provisions of any
so-called “poison pill” or other arrangement intended to protect the
unrestricted use of the Company’s tax net operating loss carryforwards, that are
any more restrictive on the Purchaser than the provisions of this Agreement. For
the avoidance of doubt, this Section 4.2(e) shall not be construed to apply (i)
to any transferee of Common Stock or Warrants from the Purchaser and (ii) to any
Person other than the Purchaser, including any person to whom Common Stock held
by the Purchaser would be attributed pursuant to Section 382 of the Code.
(f) In the event that the Purchaser attempts to acquire Subsequent Closing
Shares (including associated Warrants) or exercise Warrants but is limited by
Section 4.2(a) from doing so, the Purchaser may nonetheless exercise its right
to acquire Subsequent Closing Shares (including associated Warrants) and/or
exercise Warrants at a later date, subject to the terms and conditions of this
Agreement and/or the Warrants.
(g) Notwithstanding anything in this Agreement or the Warrants to the contrary,
the parties hereby agree that (i) (A) any deliberate and intentional violation
by the Purchaser of Section 3.2(d) or the Tax Covenants would result in actual,
direct and foreseeable damages to the Company, for which the Company may seek
all available legal and equitable remedies, provided that conduct shall be
treated as “deliberate and intentional” if such conduct was undertaken without
the exercise of reasonable diligence with respect to such conduct, provided
further, however, that the exercise of reasonable diligence does not include
having to inquire into facts that would not have been taken into account under
Treasury Regulations Section 1.382-2T in the absence of actual knowledge of such
facts, but (B) that the Company shall be entitled to seek only specific
performance of Section 3.2(d) or the Tax Covenants (and not a financial remedy)
for any other actual or alleged violation of such provisions, this clause
(g)(i)(B) being intended as an express limitation-of-remedies provision
enforceable by the Purchaser, its Affiliates and

 

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any Tax Affiliate; (ii) no repurchase or redemption of shares of capital stock
by the Company shall result in any breach by the Purchaser, its Affiliates or
any Tax Affiliate of this Agreement or the Warrants, provided, that for purposes
of any subsequent calculation of percentage ownership under this Agreement or
the Warrant, the Purchaser, its Affiliates and its Tax Affiliates take into
account the number of shares of Common Stock outstanding as provided in
Section 3.2(d)(i)(D); (iii) Section 3.2(d) and the Tax Covenants and related
provisions of this Agreement and the Warrants shall not apply in connection with
or following a Change of Control, provided that such Change of Control would
result in an ownership change (as that term is defined under Section 382 of the
Code) without taking into account any acquisitions of shares by the Purchaser
that would otherwise breach Section 3.2(d), the Tax Covenants or the related
provisions of this Agreement and the Warrants; and (iv) Section 3.2(d) and
Section 4.2(e) shall cease to apply and the Tax Covenants shall terminate at
such time that both (1) the Purchaser’s right to purchase Shares pursuant to
Section 2.1(b) and its right to exercise any and all Warrants have expired, and
(2) the Purchaser and the Tax Affiliates no longer own any Shares acquired
pursuant to the terms of this Agreement or pursuant to the exercise of Warrants.
(h) The total number of shares of Common Stock that may be issued under this
Agreement and the Warrants shall not exceed a number equal to nineteen and
ninety-nine one-hundredths percent (19.99%) of the outstanding shares of Common
Stock as of the date of this Agreement, as indicated in Section 3.1(k) hereof.
4.3 Registration Rights.
(a) No later than the Initial Closing Date, the Company shall, at its own
expense, cause all of the Shares (including the Initial Closing Shares,
Subsequent Closing Shares and Shares issuable upon exercise of the Warrants) and
the Warrants (including the Initial Closing Warrant and all Subsequent Closing
Warrants) to be included on the Existing Registration Statement and file a
Prospectus Supplement thereunder.
(b) The Company will: (i) use its commercial best efforts to keep the Existing
Registration Statement effective until such time as no additional Shares or
Warrants may be issued pursuant to this Agreement and no additional Shares may
be issued pursuant to the Warrants (such period, the Existing Registration
Statement’s “Registration Period”); (ii) prepare and file with the SEC such
amendments and supplements to the Existing Registration Statement and the
prospectus used in connection with the Existing Registration Statement (as so
amended and supplemented from time to time, the “Prospectus”) as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all Shares by the Purchaser or any of its Affiliates; (iii)
furnish such number of Prospectuses and other documents incident thereto,
including any amendment of or supplement to the Prospectus, as the Purchaser
from time to time may reasonably request; (iv) cause all Shares to be listed on
each securities exchange and quoted on each quotation service on which similar
securities issued by the Company are then listed or quoted; and (v) otherwise
comply with all applicable rules and regulations of the SEC, FINRA and Nasdaq.

 

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(c) Notwithstanding anything else in this Section 4, if, at any time during
which the Shares (including the Initial Closing Shares, Subsequent Closing
Shares and Shares issuable upon the exercise of the Warrants) and the Warrants
(including the Initial Closing Warrant and all Subsequent Closing Warrants) may
be issued pursuant to the Existing Registration Statement or a Prospectus is
required to be delivered in connection with the sale of any Shares, the Company
determines in good faith and upon the advice of its outside legal counsel that a
development has occurred or a condition exists as a result of which the Existing
Registration Statement or the Prospectus contains a material misstatement or
omission, or that a material transaction in which the Company is engaged or
proposes to engage would require an immediate amendment to the Existing
Registration Statement, a supplement to the Prospectus, or a filing under the
Exchange Act or other public disclosure of material information and the
disclosure of such transaction would be premature or injurious to the
consummation of the transaction, the Company will immediately notify the
Purchaser, and any permitted assignee of any Warrant or additional investment
right under Section 2.1(b)(i), thereof by telephone and in writing. Upon receipt
of such notification, all offers and sales of the Shares pursuant to the
Existing Registration Statement shall be immediately suspended. In such event,
the Company will amend or supplement the Existing Registration Statement and the
Prospectus or make such filings or public disclosures as promptly as practicable
and will take such other steps as may be required to permit sales of the Shares
thereunder, in accordance with applicable federal and state securities laws. The
Company will promptly notify the Purchaser after it has determined in good faith
that such sales have become permissible in such manner and will promptly deliver
copies of the Existing Registration Statement and the Prospectus (as so amended
or supplemented, if applicable) to the Purchaser in accordance with this
Section 4.3. Notwithstanding the foregoing, (i) under no circumstances shall the
Company be entitled to exercise its right to suspend sales of any Shares more
than twice in any twelve (12)-month period, (ii) the period during which such
sales may be suspended (each a “Blackout Period”) at any time shall not exceed
forty-five (45) calendar days, and (C) no Blackout Period may commence less than
forty-five (45) calendar days after the end of the preceding Blackout Period.
4.4 Compliance. With respect to the acquisition, ownership and disposition of
the Shares and Warrants issued and to be issued pursuant to the terms of this
Agreement, the Purchaser shall use its commercial best efforts to comply with
federal and state laws applicable to the Purchaser and rules and regulations of
federal and state governmental or self-regulatory agencies and bodies,
including, but not limited to, the SEC, FINRA and Nasdaq, applicable to the
Purchaser.
4.5 Change of Control.
(a) If after the date of this Agreement and prior to the Expiration Date, a
Change of Control or plan or proposal with respect thereto is publicly announced
or occurs, and the Acquiring Person (or its direct or indirect parent entity)
does not have a class of common equity securities listed or admitted for trading
on any securities exchange or over-the-counter or other organized market,
whether U.S. or not, then between the date such Change of Control is announced
and the effective date of the Change of Control, but not thereafter, the
Purchaser shall continue to have the right to submit to the Company a Purchaser
Notice (which Purchaser Notice may, at the Purchaser’s option, specify that the
Subsequent Closing shall occur simultaneously with, and be contingent upon, the
occurrence of the Change of Control) in accordance with the terms and conditions
of this Agreement; provided, however, that so long as the Company has provided
the Purchaser with at least five (5) Business Days advance written notice of the
closing date for the Change of Control, the Company shall not be required to
postpone such closing date in order to facilitate the Subsequent Closing.

 

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(b) If after the date of this Agreement and prior to the Expiration Date, a
Change of Control or plan or proposal with respect thereto is publicly announced
or occurs, and the Acquiring Person (or its direct or indirect parent entity)
has a class of common equity securities listed or admitted for trading on any
securities exchange or over-the-counter or other organized market, whether U.S.
or not, then:
(i) Between the date such Change of Control is announced and the effective date
of the Change of Control, the Purchaser shall continue to have the right to
submit to the Company a Purchaser Notice (which Purchaser Notice may, at the
Purchaser’s option, specify that the Subsequent Closing shall occur
simultaneously with, and be contingent upon, the occurrence of the Change of
Control) in accordance with the terms and conditions of this Agreement;
provided, however, that so long as the Company has provided the Purchaser with
at least five (5) Business Days advance written notice of the closing date for
the Change of Control, the Company shall not be required to postpone such
closing date in order to facilitate the Subsequent Closing;
(ii) The Company shall not enter into an agreement with the Acquiring Person
resulting in such Change of Control unless such agreement expressly obligates
the Acquiring Person to assume all of the Company’s obligations under this
Agreement; and
(iii) In the event that any right to acquire shares pursuant to Section 2.1(b)
hereof remains unexercised upon consummation of the Change of Control, the
Purchaser shall thereafter automatically have equivalent rights with respect to
the Acquiring Person, and from and after the effective date of the Change of
Control and regardless of whether the Acquiring Person expressly assumes the
Company’s obligations:
(A) all references to the Company in this Agreement shall be references to the
Acquiring Person,
(B) all references to Common Stock in this Agreement shall be references to the
securities for which the Common Stock are exchanged in the Change of Control (or
if none, the most widely-held class of common equity securities of the Acquiring
Person), and
(C) the Per Share Purchase Price shall be adjusted to equal the Per Share
Purchase Price as in effect immediately prior to the Change of Control
multiplied by a fraction, (1) the numerator of which is the volume-weighted
average price, calculated to the nearest ten thousandth (i.e., four decimal
places (.xxxx)), of the securities for which Common Stock is exchanged in the
Change of Control (or if none, the most widely-held class of voting common
equity securities of the Acquiring Person), and (2) the denominator of which is
the Daily Market Price of the Company, in the case of (1) and (2) determined as
of the Business Day immediately preceding and excluding the date on which the
Change of Control is consummated. For purposes of this Agreement, “Daily Market
Price” means, on any date, the amount per share of the Common Stock (or, for
purposes of determining the Daily Market Price of the common stock of an
Acquiring Person, the common stock of such Acquiring Person),

 

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equal to (i) the daily volume-weighted average price, calculated to the nearest
ten thousandth (i.e., four decimal places (.xxxx)), on Nasdaq or, if no sale
takes place on such date, the average of the closing bid and asked prices,
calculated to the nearest ten thousandth (i.e., four decimal places (.xxxx)), on
Nasdaq on such date, in each case as reported by Bloomberg, L.P. (or by such
other Person as the Purchaser and the Company may agree), or (ii) if such Common
Stock (or the common stock of an Acquiring Person) is not then listed or
admitted to trading on Nasdaq, the higher of (x) the book value per share
thereof as determined by any firm of independent public accountants of
recognized standing selected by Company and reasonably acceptable to the
Purchaser as of the last calendar day of the most recent month ending before the
date as of which the determination is to be made and (y) the fair market value
per share thereof determined in good faith by an independent, nationally
recognized appraisal firm selected by the Purchaser and reasonably acceptable to
the Company (whose fees and expenses shall be borne by the Company), subject in
each case to adjustment for stock splits, recombinations, stock dividends and
the like.
ARTICLE V.
NON-PERFORMANCE AND INDEMNIFICATION
5.1 Non-Performance.
(a) If the Company, at any time, shall fail to deliver the shares of Common
Stock to the Purchaser required to be delivered pursuant to this Agreement or
the Warrants, in accordance with the terms and conditions of this Agreement or
the Warrants, as the case may be, for any reason other than the failure of any
condition precedent to the Company’s obligations hereunder or the failure by
Purchaser to comply with its obligations hereunder, then the Company shall
(without limitation to Purchaser’s other remedies at law or in equity):
(i) indemnify and hold Purchaser harmless against any loss, claim or damage
(excluding incidental, special, punitive and consequential damages) arising from
or as a result of such failure by the Company; and
(ii) reimburse Purchaser for all of its reasonable out-of-pocket expenses,
including fees and disbursements of its counsel, incurred by Purchaser in
connection with this Agreement, the Warrants and the transactions contemplated
herein and therein.
(b) If Purchaser, at any time, shall fail to comply with its obligations to
effect the Initial Closing or the Subsequent Closings under this Agreement for
any reason other than the failure of any condition precedent to Purchaser’s
obligations hereunder or the failure by the Company to comply with its
obligations hereunder, then Purchaser shall (without limitation to the Company’s
other remedies at law or in equity):
(i) indemnify and hold the Company harmless against any loss, claim or damage
(excluding incidental, special, punitive and consequential damages) arising from
or as a result of such failure by Purchaser; and
(ii) reimburse the Company for all of its reasonable out-of-pocket expenses,
including fees and disbursements of its counsel, incurred by the Company in
connection with this Agreement, the Warrants and the transactions contemplated
herein and therein.

 

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5.2 Indemnification.
(a) Company Indemnification Obligation. The Company hereby agrees to indemnify
the Purchaser and each of its officers, directors, employees, consultants,
agents, attorneys, accountants and Affiliates and each Person that controls
(within the meaning of Section 20 of the Exchange Act) any of the foregoing
Persons (each a “Purchaser Indemnified Party”) against any claim, demand,
action, liability, damages (excluding any and all damages other than damages
actually suffered by the Purchaser Indemnified Party and excluding incidental,
special, punitive and consequential damages), cost or expense (including,
without limitation, reasonable legal fees and expenses incurred by such
Purchaser Indemnified Party in investigating or defending any such proceeding)
(all of the foregoing, including associated costs and expenses being referred to
herein as a “Purchaser Indemnified Proceeding”), that it may incur in connection
with any of the transactions contemplated hereby arising out of or based upon:
(i) any of the material representations or warranties made by the Company herein
being untrue or incorrect at the time such representation or warranty was made;
and
(ii) any material breach or non-performance by the Company of any of its
covenants, agreements or obligations under this Agreement or the Warrants;
provided, however, that the foregoing indemnity shall not apply to any Purchaser
Indemnified Proceeding to the extent that it arises out of, or is based upon,
the gross negligence or willful misconduct of the Purchaser in connection
therewith or a claim by the Purchaser subject to Section 5.1(a).
(b) Purchaser Indemnification Obligation. Except as otherwise expressly provided
in Section 4.2(g), the Purchaser hereby agrees to indemnify the Company and each
of its officers, directors, employees, consultants, agents, attorneys,
accountants and Affiliates and each Person that controls (within the meaning of
Section 20 of the Exchange Act) any of the foregoing Persons (each a “Company
Indemnified Party”) against any claim, demand, action, liability, damages
(excluding any and all damages other than damages actually suffered by the
Company Indemnified Party and excluding incidental, special, punitive and
consequential damages), cost or expense (including, without limitation,
reasonable legal fees and expenses incurred by such Company Indemnified Party in
investigating or defending any such proceeding) (all of the foregoing, including
associated costs and expenses being referred to herein as a “Company Indemnified
Proceeding,” and together with the Purchaser Indemnified Proceeding, the
“Proceeding”), that it may incur in connection with any of the transactions
contemplated hereby arising out of or based upon:
(i) any of the material representations or warranties made by the Purchaser
herein being untrue or incorrect at the time such representation or warranty was
made; and

 

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(ii) any material breach or non-performance by the Purchaser of any of its
covenants, agreements or obligations under this Agreement or the Warrants;
provided, however, that the foregoing indemnity shall not apply to any Company
Indemnified Proceeding to the extent that it arises out of, or is based upon,
the gross negligence or willful misconduct of the Company in connection
therewith or a claim by the Company subject to Section 5.1(b).
(c) Conduct of Claims.
(i) Whenever a claim for indemnification shall arise under this Section 5.2, the
party seeking indemnification (the “Indemnified Party”), shall notify the party
from whom such indemnification is sought (the “Indemnifying Party”) in writing
of the Proceeding and the facts constituting the basis for such claim in
reasonable detail;
(ii) If any action shall be brought against the Indemnified Party in respect of
which indemnity may be sought, the Indemnifying Party shall have the right to
assume the defense thereof. The Indemnified Party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the Indemnified
Party except to the extent that (i) the employment thereof and the Indemnifying
Party’s payment of such fees and expenses has been specifically authorized by
the Indemnifying Party in writing; or (ii) the Indemnifying Party has failed
after a reasonable period of time to assume such defense and to employ counsel.
In no event shall the Indemnifying Party be liable for fees and expenses of more
than one counsel separate from its own counsel for all Indemnified Parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances;
and
(iii) No Indemnifying Party shall, without the prior written consent of the
Indemnified Parties (which consent shall not be unreasonably withheld), settle
or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification could be sought under this Section 5.2 unless such settlement,
compromise or consent (A) includes an unconditional release of each Indemnified
Party from all liability arising out of such litigation, investigation,
proceeding or claim and (B) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any Indemnified
Party.
ARTICLE VI.
MISCELLANEOUS
6.1 [Intentionally omitted.]
6.2 Fees and Expenses. Each of the Purchaser and the Company agrees to pay its
own expenses incident to the performance of its obligations hereunder,
including, but not limited to, the fees, expenses and disbursements of such
party’s counsel, except (a) as specified in the indemnification provisions set
forth in Section 5.2 and (b) in the event of any future litigation between the
parties relating to or arising out of this Agreement, the prevailing party shall
be entitled to recover its reasonable attorneys’ fees and costs from the
non-prevailing party.

 

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6.3 Entire Agreement. The Transaction Documents (including the exhibits and
schedules thereto), together with the Settlement Agreement, contain the entire
understanding of the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
6.4 Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (a) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number set
forth on the signature pages attached hereto prior to 6:00 p.m. (New York City
time) on a Business Day, (b) the next Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Business Day or later than 6:00 p.m. (New York City time) on any
Business Day, (c) the 2nd Business Day following the date of mailing, if sent by
U.S. nationally recognized overnight courier service, or (d) upon actual receipt
by the party to whom such notice is required to be given. The address for such
notices and communications to the Company and the Purchaser shall be as set
forth on the signature pages attached hereto.
6.5 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the
Company and the Purchaser or, in the case of a waiver, by the party against whom
enforcement of any such waived provision is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right.
6.6 Headings. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the
provisions hereof. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.
6.7 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. Neither
the Company nor the Purchaser may assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other party
(other than by merger or otherwise by operation of law); provided, however, that
the Purchaser may assign its rights and obligations under this Agreement in
whole or in part to any of its Affiliates to which it transfers shares of Common
Stock or rights to acquire shares pursuant to Section 2.1(b), as long as such
Affiliate assignee expressly assumes the obligations hereunder in writing.
Notwithstanding any assignment by the Purchaser of its rights and obligations
under this Agreement in whole or in part to any of its Affiliates, the Purchaser
shall remain jointly and severally liable under this Agreement with such
Affiliate assignee, unless expressly released by the Company. No Person
acquiring Common Stock from the Purchaser pursuant to a public market purchase
or otherwise will thereby obtain any of the rights contained in this Agreement.

 

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6.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person.
6.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof.
6.10 Jurisdiction. Each of the parties hereto hereby submits to the exclusive
jurisdiction of any state or federal court in the Southern District of New York
and any court hearing any appeal therefrom, over any suit, action or proceeding
arising out of or based upon this Agreement. Each of the parties hereto hereby
waives any objection to any proceeding in such courts whether on the grounds of
venue, residence or domicile or on the ground that the proceeding has been
brought in an inconvenient forum.
6.11 Survival. The representations and warranties contained herein shall survive
the Initial Closing, regardless of any investigation made by or on behalf of the
other party to this Agreement or any officer, director or employee of, or Person
controlling or under common control with, such party and will survive delivery
of and payment for any shares of Common Stock issuable hereunder.
6.12 Execution. This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” or “.tif” format data
file, such signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force
and effect as if such facsimile or “.pdf” or “.tif” signature page were an
original thereof.
6.13 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
6.14 Saturdays, Sundays, Holidays. If the last or appointed day for the taking
of any action or the expiration of any right required or granted herein shall
not be a Business Day, then such action may be taken or such right may be
exercised on the next succeeding Business Day.

 

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6.15 Construction. The parties agree that each of them and/or their respective
counsel has reviewed and had an opportunity to revise the Transaction Documents
and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.
6.16 Delivery of Shares. Unless otherwise mutually agreed upon by the parties,
to the extent reasonably practicable, the Company shall deliver the shares of
Common Stock issued to the Purchaser in the Initial Closing and the shares of
Common Stock, if any, issued to the Purchaser in a Subsequent Closing to
Purchaser’s account via The Depository Trust Company’s Deposit/Withdrawal at
Custodian (DWAC) system using the account information provided by Purchaser on
or before the applicable Closing Date.
6.17 Currency. All dollar ($) amounts set forth herein and in the Warrants refer
to United States dollars. All payments hereunder and thereunder will be made in
lawful currency of the United States of America.
(Signature Pages Follow)

 

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

              SYNTROLEUM CORPORATION   Address for Notice:
 
           
By:
  /s/ Edward G. Roth       Syntroleum Corporation
 
           
 
  Name: Edward G. Roth       5416 South Yale, Suite 400
 
  Title: Chief Executive Officer       Tulsa, Oklahoma 74135
 
          Attention:   Principal Financial Officer
 
          Telephone: (918) 592-7900
 
          Facsimile:   (918) 592-7979
 
           
 
          With a copy to (which shall not constitute notice):
 
           
 
          Syntroleum Corporation
 
          5416 South Yale, Suite 400
 
          Tulsa, Oklahoma 74135
 
          Attention:   Chief Executive Officer
 
          Telephone: (918) 592-7900
 
          Facsimile:   (918) 592-7979

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR THE PURCHASER FOLLOWS]
[Signature Page to Securities Purchase Agreement]

 

 

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IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

              FLETCHER INTERNATIONAL, LTD.   Address for Notice:
 
           
By:
  /s/ Peter Zayfert   Fletcher International, Ltd.
 
           
 
  Name: Peter Zayfert       c/o Appleby Services (Bermuda) Ltd.
 
  Title: Authorized Signatory       Canon’s Court
 
          22 Victoria Street
By:
  /s/ Stewart Turner   PO Box HM 1179
 
           
 
  Name: Stewart Turner       Hamilton HM EX
 
  Title: Authorized Signatory       Bermuda
 
          Attention: Desirae Jones, Corporate
 
          Administrator]
 
           
 
          With a copy to (which shall not constitute notice):
 
           
 
          Fletcher International, Ltd.
 
          c/o Fletcher Asset Management, Inc.
 
          48 Wall Street
 
          New York, NY 10005
 
          Telephone: 212-284-4801
 
           
 
          And:
 
           
 
          Irell & Manella LLP
 
          1800 Avenue of the Stars, Suite 900
 
          Los Angeles, CA 90067
 
          Attention: Anthony T. Iler
 
          Facsimile: 310-203-7199

[Signature Page to Securities Purchase Agreement]

 

 

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ANNEX A
THIS WARRANT IS SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN
THIS COMMON STOCK PURCHASE WARRANT.
SYNTROLEUM CORPORATION
COMMON STOCK PURCHASE WARRANT
[DATE]
This Warrant (the “Warrant”) entitles Fletcher International, Ltd., a company
domiciled in Bermuda (including any successors or assigns, the “Holder”), for
value received, to purchase from SYNTROLEUM CORPORATION, a Delaware corporation
(the “Company”), during the Warrant Term (as defined below) and subject to the
terms and conditions set forth herein, all or any portion of the Warrant Shares
(as defined below) at the Exercise Price (as defined below). This Warrant is
issued subject to the following terms and conditions:
1. Warrants.
1.1 General. This Warrant has been issued pursuant to that certain Securities
Purchase Agreement, dated October 14, 2009, as it may be amended from time to
time, by and among the Company and the Holder (the “Securities Purchase
Agreement”), and are subject to the terms and conditions thereof. Unless
otherwise defined herein, capitalized terms used herein shall have the meanings
set forth in the Securities Purchase Agreement. A copy of the Securities
Purchase Agreement may be obtained at no cost by the Holder upon written request
to the Secretary of the Company at the principal executive offices of the
Company.
1.2 Warrant Amount. This Warrant shall entitle the Holder to purchase up to
[                    ] shares of newly-issued Common Stock (the “Warrant
Shares”).
1.3 Exercise Price. The per share exercise price for the Warrant Shares shall be
[                    ] (the “Exercise Price”).
1.4 Warrant Term. Subject to the limitations contained herein, the Warrant may
be exercised (in whole or in part) at any time or from time to time after the
date hereof until 11:59 P.M., New York City time on the date that is six
(6) years after the date hereof (the “Warrant Term”); provided, however, that in
connection with a Change of Control (as defined in the Securities Purchase
Agreement), this Warrant shall be subject to Section 3.4.
2. Exercise of Warrant.
2.1 Method of Exercise; Payment. Subject to all of the terms and conditions
hereof and the limitations set forth in Sections 2.6 and 2.7, the Holder shall
notify the Company prior to any exercise of this Warrant, in whole or in part,
with respect to any Warrant Shares, during the Warrant Term, by delivering a
notice of intent to exercise substantially in the form attached hereto, three
(3) Business Days prior to the exercise date set forth therein; provided that
any such notice must be delivered to the Company at least three (3) Business
Days prior to the expiration of the Warrant Term. Upon the exercise date set
forth in the applicable notice, subject to all of the terms and conditions
hereof and the limitations set forth in Sections 2.6 and 2.7, the Holder shall
(1) surrender this Warrant to the Company at its principal office, (2) deliver
to the Company a subscription substantially in the form attached hereto, and
(3) send a (a) wire transfer of immediately available funds or (b) certified or
official bank check payable to the order of the Company, in each case in the
amount obtained by multiplying (i) the number of Warrant Shares for which the
Warrant is being exercised, as designated in such notice and subscription, by
(ii) the Exercise Price. Thereupon, the Holder shall be entitled to receive the
applicable number of duly authorized, validly issued, fully paid and
nonassessable Warrant Shares. Notwithstanding the foregoing, each exercise of
the Warrant by the Holder must be for at least 1,000,000 Warrant Shares;
provided, however, that the Warrant may be exercised for a lower number of
Warrant Shares if such exercise is for all remaining Warrant Shares subject to
the Warrant.

 

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2.2 Delivery of Stock Certificates on Exercise. Upon the exercise date of this
Warrant, unless otherwise mutually agreed upon by the parties, to the extent
reasonably practicable, the Company, at its expense, and in accordance with
applicable securities laws, shall deliver the number of Warrant Shares purchased
by the Holder on such exercise to Holder’s account via The Depository Trust
Company’s Deposit/Withdrawal at Custodian (DWAC) system using the account
information provided by Holder in its notice of intent to exercise.
2.3 Shares To Be Fully Paid and Nonassessable. All Warrant Shares issued upon
the exercise of this Warrant shall be duly authorized, validly issued, fully
paid and nonassessable, free of all liens, taxes, charges and other encumbrances
or restrictions on sale (other than those set forth herein).
2.4 Payment of Taxes and Expenses. The Company shall pay any recording, filing,
stamp or similar tax which may be payable in respect of any transfer involved in
the issuance of, and the preparation and, as applicable, the delivery of
certificates representing or the delivery via The Depository Trust Company’s
Deposit/Withdrawal at Custodian (DWAC) system of, (i) any Warrant Shares
purchased upon exercise of this Warrant and/or (ii) new or replacement warrants
in the Holder’s name or the name of any transferee of all or any portion of this
Warrant.
2.5 Cooperation with Filings. The Company shall assist and cooperate with the
Holder if the Holder is required to make any governmental or regulatory filings
or obtain any governmental or regulatory approvals prior to or in connection
with any exercise of this Warrant (including, without limitation, making any
filings required to be made by the Company).
2.6 Limitation on Exercise. This Warrant shall not be exercisable (i) to the
extent that, on or immediately after exercise, the representations in
Section 3.2(d) of the Securities Purchase Agreement would be untrue, and
(ii) unless and until such representations are made and the Tax Covenants, as
applicable, are performed.
2.7 Limitation on Exercise by Transferees. In the event this Warrant is
transferred in accordance with Section 5, this Warrant shall not be exercisable
(i) to the extent that, on or immediately after exercise, the representations in
Section 3.2(d) of the Securities Purchase Agreement would be untrue with respect
to the person exercising the Warrant and such person’s Tax Affiliates, and
(ii) unless and until the person exercising the Warrant makes such
representations and performs the Tax Covenants. For purposes of this
Section 2.7, references to the Purchaser and its Tax Affiliates in
Section 3.2(d) of the Securities Purchase Agreement and in the Tax Covenants
shall be treated as referring to the person exercising the Warrant and such
person’s Tax Affiliates.
2.8 The provisions of Section 4.2(g) of the Securities Purchase Agreement shall
apply hereto, to the extent relevant to the provisions hereof, substituting
“Holder” for “Purchaser” therein.

 

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3. Adjustment of Exercise Price and Warrant Shares. The Exercise Price and the
number of Warrant Shares shall be subject to adjustment from time to time upon
the happening of certain events as described in this Section 3.
3.1 Subdivision or Combination of Stock. If at any time or from time to time
after the date hereof, the Company shall subdivide (by way of stock dividend,
stock split or otherwise) its outstanding shares of Common Stock, the Exercise
Price in effect immediately prior to such subdivision shall be reduced
proportionately and the number of Warrant Shares (calculated to the nearest
whole share) shall be increased proportionately, and conversely, in the event
the outstanding shares of Common Stock shall be combined (whether by stock
combination, reverse stock split or otherwise) into a smaller number of shares,
the Exercise Price in effect immediately prior to such combination shall be
increased proportionately and the number of Warrant Shares (calculated to the
nearest whole share) shall be decreased proportionately. The Exercise Price and
the number of Warrant Shares, as so adjusted, shall be readjusted in the same
manner upon the happening of any successive event or events described in this
Section 3.1.
3.2 Adjustment for Stock Dividends. If at any time after the date hereof, the
Company shall declare a dividend or make any other distribution upon any class
or series of stock of the Company payable in shares of Common Stock, the
Exercise Price in effect immediately prior to such declaration or distribution
shall be reduced proportionately and the number of Warrant Shares (calculated to
the nearest whole share) shall be increased proportionately, to reflect the
issuance of any shares of Common Stock, issuable in payment of such dividend or
distribution. The Exercise Price and the number of Warrant Shares, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described in this Section 3.2.
3.3 Adjustments for Reclassifications. If the Common Stock issuable upon the
exercise of this Warrant shall be changed into the same or a different number of
shares of any class(es) or series of stock and/or the right to receive property,
whether by reclassification or otherwise (other than an adjustment under
Sections 3.1 and 3.2 or a merger, consolidation, or sale of assets provided for
under Section 3.4), then and in each such event, the Holder hereof shall have
the right thereafter to convert each Warrant Share into the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, or other change by holders of the number of shares of Common
Stock into which such Warrant Shares would have been convertible immediately
prior to such reclassification or change, all subject to successive adjustments
thereafter from time to time pursuant to and in accordance with, the provisions
of this Section 3.
3.4 Adjustments for Merger or Consolidation.
(a) If during the Warrant Term a Change of Control or plan or proposal with
respect thereto is publicly announced or occurs, and the Acquiring Person (as
defined in the Securities Purchase Agreement) (or its direct or indirect parent
entity) does not have a class of common equity securities listed or admitted for
trading on any securities exchange or over-the-counter or other organized
market, whether U.S. or not, then this Warrant shall terminate upon the
effective date of a Change of Control; provided that between the date such
Change of Control is announced and the effective date of the Change of Control,
but not thereafter, the Holder shall have the right to submit to the Company an
exercise notice (which exercise notice may, at the Holder’s option, specify that
the exercise and payment of the Exercise Price shall occur simultaneously with,
and be contingent upon, the occurrence of the Change of Control) in accordance
with the terms and conditions of this Warrant; provided, however, that so long
as the Company has provided the Holder with at least five (5) Business Days (as
defined in the Securities Purchase Agreement) advance written notice of the
effective date for the Change of Control, the Company shall not be required to
postpone such closing date in order to facilitate the closing of the exercise.

 

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(b) If during the Warrant Term a Change of Control or plan or proposal with
respect thereto is publicly announced or occurs, and the Acquiring Person (or
its direct or indirect parent entity) has a class of common equity securities
listed or admitted for trading on any securities exchange or over-the-counter or
other organized market, whether U.S. or not, then:
(i) Between the date such Change of Control is announced and the effective date
of the Change of Control, the Holder shall have the right to submit to the
Company an exercise notice (which exercise notice may, at the Holder’s option,
specify that the exercise and payment of the Exercise Price shall occur
simultaneously with, and be contingent upon, the occurrence of the Change of
Control) in accordance with the terms and conditions of this Warrant; provided,
however, that so long as the Company has provided the Holder with at least five
(5) Business Days advance written notice of the effective date for the Change of
Control, the Company shall not be required to postpone such closing date in
order to facilitate the closing of the exercise;
(ii) The Company shall not enter into an agreement with the Acquiring Person
resulting in such Change of Control unless such agreement expressly obligates
the Acquiring Person to assume all of the Company’s obligations under this
Warrant; and
(iii) In the event that any portion of this Warrant remains unexercised upon
consummation of the Change of Control, the Holder shall thereafter automatically
have equivalent rights with respect to the Acquiring Person, and from and after
the effective date of the Change of Control and regardless of whether the
Acquiring Person expressly assumes the Company’s obligations:
(A) all references to the Company in this Warrant shall be references to the
Acquiring Person,
(B) all references to Common Stock in this Warrant shall be references to the
securities for which the Common Stock are exchanged in the Change of Control (or
if none, the most widely-held class of common equity securities of the Acquiring
Person),
(C) the Exercise Price shall be adjusted, employing the methodology set forth in
the example(s) on Annex I hereto, to equal the Exercise Price as in effect
immediately prior to the Change of Control multiplied by a fraction, (1) the
numerator of which is the volume-weighted average price, calculated to the
nearest ten thousandth (i.e., four decimal places (.xxxx)), of the securities
for which Common Stock is exchanged in the Change of Control (or if none, the
most widely-held class of voting common equity securities of the Acquiring
Person), and (2) the denominator of which is the Daily Market Price of the
Company, in the case of (1) and (2) determined as of the Business Day
immediately preceding and excluding the date on which the Change of Control is
consummated. For purposes of this Warrant, “Daily Market Price” has the meaning
given in the Securities Purchase Agreement, substituting references to the
“Holder” for the “Purchaser,” and
(D) the number of Warrant Shares shall be adjusted, employing the methodology
set forth in the example(s) on Annex I hereto, to equal the product of the
number of Warrant Shares in effect immediately prior to the Change of Control
multiplied by a fraction, (1) the numerator of which is the Daily Market Price
of the Company, and (2) the denominator of which is the volume-weighted average
price, calculated to the nearest ten thousandth (i.e., four decimal places
(.xxxx)), of the securities for which Common Stock is exchanged in the Change of
Control (or if none, the most widely-held class of voting common equity
securities of the Acquiring Person), in the case of (1) and (2) determined as of
the Business Day immediately preceding and excluding the date on which the
Change of Control is consummated.

 

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3.5 Minimum Adjustment of Exercise Price. If the amount of any adjustment of the
Exercise Price required pursuant to this Section 3 would be less than one-tenth
(1/10) of one percent (1%) of the Exercise Price in effect at the time such
adjustment is otherwise so required to be made, such amount shall be carried
forward and adjustment with respect thereto made at the time of and together
with any subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least one tenth (1/10)
of one percent (1%) of such Exercise Price.
3.6 Certificate as to Adjustments. Upon the occurrence of each adjustment or
readjustment of the Exercise Price and number of Warrant Shares pursuant to this
Section 3, this Warrant shall, without any action on the part of the Holder, be
adjusted in accordance with this Section 3, and the Company, at its expense,
promptly shall compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to the Holder a certificate setting forth
such adjustment or readjustment, showing in detail the facts upon which such
adjustment or readjustment is based. The Company will forthwith send a copy of
each such certificate to the Holder in accordance with Section 7.4 below.
4. Notices of Record Date. Upon (a) any establishment by the Company of a record
date of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, or right or option to acquire securities of the Company, or any
other right, or (b) any capital reorganization, reclassification,
recapitalization, merger or consolidation of the Company with or into any other
Person, any transfer of all or substantially all the assets of the Company, or
any voluntary or involuntary dissolution, liquidation or winding up of the
Company, or the sale, in a single transaction, of a majority of the Company’s
voting stock (whether newly issued, or from treasury, or previously issued and
then outstanding, or any combination thereof), the Company shall mail to the
Holder at least ten (10) Business Days, or such longer period as may be required
by law, prior to the record date specified therein and at least ten
(10) Business Days prior to the date specified in clause (ii) or (iii) hereof, a
notice specifying (i) the date established as the record date for the purpose of
such dividend, distribution, option or right and a description of such dividend,
distribution, option or right, (ii) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up, or sale is expected to become effective and (iii) the date, if any,
fixed as to when the holders of record of Common Stock shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable upon such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up. Subject to the other limitations
on exercise contained in this Warrant, nothing in this Section 4 shall prohibit
the Holder from exercising this Warrant during the ten (10) Business Day period
commencing on the date of such notice.
5. Transfer Provisions, etc.
5.1 Limitations on Transfer. None of the Holder, or any subsequent successor,
transferee or assign, shall sell or otherwise transfer this Warrant to any
Person unless and until (1) the transferee makes the representations in
Section 3.2(d) of the Securities Purchase Agreement, agrees to perform and, to
the extent then applicable, performs the Tax Covenants and (2) the transferor
and the transferee, each represent in writing, under penalty of perjury, that it
does not have a principal purpose of avoiding or ameliorating the impact of an
ownership change within the meaning of Treasury Regulation Section 1.382-4(d)
related to the transfer of the Warrant. For purposes of this Section 5.1,
references to the Purchaser and its Tax Affiliates in Section 3.2(d) and in the
Tax Covenants of the Securities Purchase Agreement shall be treated as referring
to the transferee and its Tax Affiliates. Upon any transfer by the Holder, or
any subsequent successor, transferee or assign, such Person shall deliver to the
Company the Notice of Transfer, in the form attached hereto.

 

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5.2 Warrant Register. The Company shall keep at its principal office a register
for the registration, and registration of transfers, of the Warrants. The name
and address of each Holder of one or more of the Warrants, each transfer thereof
and the name and address of each transferee of one or more of the Warrants shall
be registered in such register.
6. Lost, Stolen or Destroyed Warrant. Upon receipt by the Company of evidence
satisfactory to it of loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft or destruction, on delivery of a customary
affidavit of the Holder and customary unsecured indemnity agreement, or, in the
case of mutilation, upon surrender of this Warrant, the Company at its expense
will execute and deliver, or will instruct its transfer agent to execute and
deliver, a new Warrant of like tenor and date and representing the same rights
represented by such lost, stolen, destroyed or mutilated warrant and any such
lost, stolen, mutilated or destroyed Warrant thereupon shall become void.
7. General.
7.1 Authorized Shares, Reservation of Shares for Issuance. At all times while
this Warrant is outstanding, the Company shall maintain its corporate authority
to issue, and shall have authorized and reserved for issuance upon exercise of
this Warrant, such number of shares of Common Stock, and any other capital stock
or other securities as shall be sufficient to perform its obligations under this
Warrant (after giving effect to any and all adjustments to the number and kind
of Warrant Shares purchasable upon exercise of this Warrant).
7.2 No Impairment. The Company will not, by amendment of its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issuance or sale of securities, sale or other transfer of
any of its assets or properties, or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder hereunder against impairment. Without limiting
the generality of the foregoing, the Company (a) will not increase the par value
of any shares of Common Stock receivable upon the exercise of this Warrant above
the amount payable therefor on such exercise, and (b) will take all action that
may be 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.
7.3 No Rights as Stockholder. Except as provided herein, the Holder shall not be
entitled to vote or to receive dividends or to be deemed the holder of Common
Stock that may at any time be issuable upon exercise of this Warrant for any
purpose whatsoever, nor shall anything contained herein be construed to confer
upon the Holder any of the rights of a stockholder of the Company or any right
to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance or
reclassification of stock, change of par value or change of stock to no par
value, consolidation, merger or conveyance or otherwise), or to receive notice
of meetings (except to the extent otherwise provided in this Warrant), or to
receive dividends or subscription rights, until the Holder shall have exercised
this Warrant and been issued Warrant Shares in accordance with the provisions
hereof and continues to hold Warrant Shares.

 

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7.4 Notices. Any notices, reports or other correspondence (hereinafter
collectively referred to as “correspondence”) required or permitted to be given
hereunder shall be sent by postage prepaid first class mail, overnight courier
or facsimile transmission, or delivered by hand to the party to whom such
correspondence is required or permitted to be given hereunder. The date of
giving any notice shall be the date of its actual receipt.
(a) All correspondence to the Company shall be addressed as follows:
Syntroleum Corporation
5416 South Yale, Suite 400
Tulsa, Oklahoma 74135
Attn: Principal Financial Officer
Facsimile: (918) 592-7900
with a copy to:
Syntroleum Corporation
5416 South Yale, Suite 400
Tulsa, Oklahoma 74135
Attention: Chief Executive Officer
Facsimile: (918) 592-7979
(b) All correspondence to the Holder shall be addressed to the Holder at its
address appearing in the books maintained by the Company.
8. Amendment and Waiver. No failure or delay of the Holder in exercising any
power or right hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Holder are cumulative and not exclusive of any rights or
remedies which it would otherwise have. Any term of this Warrant may be amended
or waived upon the written consent of the Company and the Holder.
9. Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Warrant shall be governed by and construed
and enforced in accordance with the internal laws of the State of Delaware,
without regard to the principles of conflicts of law thereof.
10. Covenants To Bind Successor and Assigns. Except as expressly provided
otherwise, all covenants, stipulations, promises and agreements in this Warrant
contained by or on behalf of the Company shall bind its successors and assigns,
whether so expressed or not.
11. Severability. In case any one or more of the provisions contained in this
Warrant shall be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby. The parties shall endeavor in
good faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
12. Construction. The definitions of this Warrant shall apply equally to both
the singular and the plural forms of the terms defined. Wherever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The section and paragraph headings used herein are for convenience
of reference only, are not part of this Warrant and are not to affect the
construction of or be taken into consideration in interpreting this Warrant.

 

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[Signature Page to Follow]

 

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In Witness Whereof, the Company has executed this Common Stock Purchase Warrant
as of the date first written above.

            COMPANY:

SYNTROLEUM CORPORATION
      By:           Name:           Title:      

 

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ANNEX I

                                      Case 1: Acquiror     Case 2: Acquiror    
Case 3: Acquiror           Price Above SYNM     Price Below SYNM     Price
Equals SYNM       Units   Price     Price     Price  
 
                           
Example Change of Control Calculations
                           
(A): Acquiror share price daily VWAP on day prior to Closing
  $/share   $ 25.0000     $ 2.0000     $ 5.0000  
(B): Daily Market Price of Syntroleum on day prior to Closing
  $/share   $ 5.0000     $ 5.0000     $ 5.0000  
 
                           
Adjusted Exercise Price
                           
Exercise Price in Effect Prior to Change of Control
  $/share   $ 3.3750     $ 3.3750     $ 3.3750  
Multiplied by fraction (A) divided by (B)
        5.0000       0.4000       1.0000  
 
                     
Adjusted Exercise Price
  $/share   $ 16.8750     $ 1.3500     $ 3.3750  
 
                           
Adjusted Warrants Outstanding
                           
Fletcher Warrants in Effect Prior to Change of Control
  000 shares     5,556       5,556       5,556  
Multiplied by fraction (B) divided by (A)
        0.2000       2.5000       1.0000  
 
                     
Adjusted Warrants Outstanding
  000 shares     1,111       13,890       5,556  
 
                           
Warrant Exercise Consideration Post Acquisition
                           
New Exercise Price X
  $/share   $ 16.8750     $ 1.3500     $ 3.3750  
New Warrants Outstanding
  000 shares     1,111       13,890       5,556  
 
                     
Exercise Consideration Post Acquisition
  000 $   $ 18,748.12 **   $ 18,751.50     $ 18,751.50  
 
                           
Equals
                           
 
                           
Warrant Exercise Consideration Pre-Acquisition
                           
Original Exercise Price X
  $/share   $ 3.3750     $ 3.3750     $ 3.3750  
Original Warrants
  000 shares     5,556       5,556       5,556  
 
                     
Exercise Consideration Pre Acquisition
  000 $   $ 18,751.50     $ 18,751.50     $ 18,751.50  

      **  
The variation from “Exercise Consideration Pre Acquisition” is due to rounding
to the nearest whole share in computing the New Warrants Outstanding.

 

 

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NOTICE OF INTENT TO EXERCISE

To:  
Syntroleum Corporation
5416 South Yale, Suite 400
Tulsa, Oklahoma 74135

The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the attached Warrant for, and to exercise thereunder,
                     shares of Common Stock, of Syntroleum Corporation, a
Delaware corporation (the “Company”), at a per share exercise price equal to
$                    .

         
Exercise Date:
      (3 Business Days after the date of this Notice)
 
 
 
   

Upon the Exercise Date, to the extent reasonably practicable, please deliver the
shares of Common Stock described above to the undersigned’s account via The
Depository Trust Company’s Deposit/Withdrawal at Custodian (DWAC) system using
the following account information:

             
 
       
 
       
 
       
 
   

If said number of shares of Common Stock shall not be all the shares of Common
Stock issuable upon exercise of the attached Warrant, a new Warrant is to be
issued in the name of the undersigned for the remaining balance of such shares
of Common Stock.

            Holder
    Dated:                     , ____        Signature   

 

 

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SUBSCRIPTION

To:  
Syntroleum Corporation
5416 South Yale, Suite 400
Tulsa, Oklahoma 74135

The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the attached Warrant for, and to exercise thereunder,
                     shares of Common Stock, of Syntroleum Corporation, a
Delaware corporation (the “Company”), at a per share exercise price equal to
$                    , and accordingly tenders herewith an aggregate payment of
$                    , representing the aggregate purchase price for such shares
based on the price(s) per share provided for in such Warrant. Such payment is
being made in accordance with Section 2.1 of the attached Warrant.
The undersigned hereby represents and warrants as follows:
(a) the undersigned does not by the exercise of the Warrant pursuant to this
notice violate Section 2.6 and/or Section 2.7 of the Warrant;
(b) the undersigned and its “Tax Affiliates” (defined as any Person in which the
undersigned directly or indirectly through one or more intermediaries, owns any
equity interest) do not and will not own, immediately before or immediately
after this exercise, more than 4.95% of the shares of Common Stock of the
Company outstanding as of the date hereof. For purposes of the foregoing
sentence and subsection (c) below: (A) ownership of Common Stock shall include
any long derivative or synthetic position and any other stock (as defined in
Temporary Treasury Regulation Section 1.382-2T(f)(18) or any successor
provision) of the Company held by the undersigned or its Tax Affiliates;
(B) notwithstanding the foregoing clause (A), ownership of Common Stock shall
not include any Common Stock which may be acquired pursuant to Section 2.1(b) of
the Securities Purchase Agreement or by exercise of this Warrant (other than
this exercise) or any other Warrants issued pursuant to the Securities Purchase
Agreement until such Common Stock is purchased and issued; (C) any short actual,
synthetic or derivative positions shall not decrease the amount of Common Stock
that the undersigned and its Tax Affiliates are treated as owning, and (D) for
purposes of calculating the percentage ownership interest of the undersigned and
its Tax Affiliates as of a particular date, the aggregate number of shares of
Common Stock outstanding shall be the number of outstanding shares of Common
Stock of the Company most recently reported prior to such date by the Company in
a filing with the SEC, provided, however, that if at least twenty (20) Business
Days prior to this exercise, the Company informs the undersigned in writing that
it has redeemed shares of its Common Stock and provides the undersigned with the
number of outstanding shares of Common Stock following such redemption which the
undersigned can rely upon for this purpose, the undersigned will use such
revised number of outstanding shares instead, unless and until further updated
by a subsequent SEC filing and/or Company notice pursuant hereto; and
(c) the undersigned has delivered to the Company the Affidavits described in
Section 4.2(d) of the Securities Purchase Agreement and has performed all the
Tax Covenants set forth in the Securities Purchase Agreement, applying such
Section 4.2(d) and the Tax Covenants as if the undersigned were the Purchaser
referenced therein.
[Signature Page to Follow]

 

 

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            Holder
    Dated:                     , ____        Signature   

Syntroleum Corporation hereby acknowledges receipt of this Subscription and
authorizes issuance of the shares of Common Stock described above.

          Syntroleum Corporation
      By:           Title:          Date:       

 

 

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NOTICE OF TRANSFER

To:  
Syntroleum Corporation
5416 South Yale, Suite 400
Tulsa, Oklahoma 74135

For value received, the undersigned hereby sells, assigns and transfers unto
                     (the “Transferee”) [the attached Warrant]
[                     Warrant Shares (the “Transferred Warrant Shares”)],
together with all right, title and interest therein, and does hereby irrevocably
constitute and appoint                      attorney to transfer said [Warrant]
[Transferred Warrant Shares] on the books of Syntroleum Corporation, a Delaware
corporation (the “Company”), with full power of substitution in the premises.
If not all of the attached Warrant is to be so transferred, a new Warrant is to
be issued in the name of the undersigned for the balance of said Warrant.
The undersigned transferor hereby represents and warrants as follows:
(a) the transfer is in compliance with the requirements and restrictions set
forth in 4.2 of the Securities Purchase Agreement, applied as if the undersigned
transferor were the Purchaser referenced in such provisions; and
(b) it does not have a principal purpose of avoiding or ameliorating the impact
of an ownership change within the meaning of Treasury
Regulation Section 1.382-4(d) related to the transfer of the Warrant.
The Transferee hereby represents and warrants as follows:
(a) the Transferee and its “Tax Affiliates” (defined as any Person in which the
Transferee, directly or indirectly through one or more intermediaries, owns any
equity interest) do not and will not own, immediately before or immediately
after this transfer, more than 4.95% of the shares of Common Stock of the
Company outstanding as of the date hereof. For purposes of the foregoing
sentence and subsection (b) below: (A) ownership of Common Stock shall include
any long derivative or synthetic position and any other stock (as defined in
Temporary Treasury Regulation Section 1.382-2T(f)(18) or any successor
provision) of the Company held by the Transferee or its Tax Affiliates;
(B) notwithstanding the foregoing clause (A), ownership of Common Stock shall
not include any Common Stock which may be acquired pursuant to Section 2.1(b) of
the Securities Purchase Agreement or by exercise of this Warrant or any other
Warrants issued pursuant to the Securities Purchase Agreement until such Common
Stock is purchased and issued; (C) any short actual, synthetic or derivative
positions shall not decrease the amount of Common Stock that the Transferee and
its Tax Affiliates are treated as owning, and (D) for purposes of calculating
the percentage ownership interest of the Transferee and its Tax Affiliates as of
a particular date, the aggregate number of shares of Common Stock outstanding
shall be the number of outstanding shares of Common Stock of the Company most
recently reported prior to such date by the Company in a filing with the SEC,
provided, however, that if at least twenty (20) business days prior to the
transfer, the Company informs the Transferee in writing that it has redeemed
shares of its Common Stock and provides the Transferee with the number of
outstanding shares of Common Stock following such redemption which the
Transferee can rely upon for this purpose, the Transferee will use such revised
number of outstanding shares instead, unless and until further updated by a
subsequent SEC filing and/or Company notice pursuant hereto.

 

 

--------------------------------------------------------------------------------

 

(b) the Transferee has delivered to the Company an affidavit, attesting that
immediately before and immediately after the transfer of this Warrant the
Transferee and its Tax Affiliates (treated in the aggregate) are not a
“5-percent shareholder” (as the term is defined under Section 382 of the Code
treating, for this purpose, the Transferee and its Tax Affiliates in the
aggregate as one individual) based on the number of outstanding shares
determined in the manner provided in subsection (a) above.
(c) it does not have a principal purpose of the transfer is not to avoid or
ameliorate the impact of an ownership change within the meaning of Treasury
Regulation Section 1.382-4(d) related to the transfer of the Warrant;
(d) that it has performed and will continue to perform the Tax Covenants,
applied as if the Transferee were the Purchaser referenced therein;
(e) the Transferee shall be subject to the terms and conditions of the Warrant,
as if it were the original Holder thereunder, and Sections 4.2(a), (b), (c),
(d), and (f) of the Securities Purchase Agreement, as if it were the Purchaser
referenced thereunder, with respect to any exercise or transfer of the Warrant;
and
(f) the Transferee understands and acknowledges that the transfer is dependent
upon the representations and warranties of the Transferee being true and correct
and that the Company shall be entitled to rely on and shall be the beneficiary
of these representations and warranties.
[Signature Page to Follow]

 

 

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            Holder
    Dated:                     , ____        Signature   

Acknowledged and Agreed:

     
Transferee
   
 
   
 
Signature
   

Syntroleum Corporation hereby acknowledges receipt of this Notice of Transfer.

          Syntroleum Corporation
      By:           Title:          Date:       

 

 

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ANNEX B
PURCHASER
NOTICE

To:  
Syntroleum Corporation
5416 South Yale, Suite 400
Tulsa, Oklahoma 74135
Fax: 918-592-7979

This Purchaser Notice (“Notice”) is being delivered pursuant to
Section 2.1(b)(i) of that certain Securities Purchase Agreement dated
October 14, 2009 (the “Agreement”) by and between Syntroleum Corporation, a
Delaware corporation (the “Company”), and Fletcher International, Ltd., a
company domiciled in Bermuda (the “Purchaser”). All capitalized terms used
herein, and not otherwise defined, shall have the meanings set forth in the
Agreement.
The Purchaser has the right to purchase up to a maximum of $8,000,000.00 of
Common Stock from the Company at up to two closings of a minimum of
$4,000,000.00 for the first such closing and up to the remainder of the
$8,000,000.00, if any, at the second such closing, subject to the terms and
conditions set forth in the Agreement. The Purchaser hereby irrevocably elects
to exercise its right to purchase the amount set forth as the “Subsequent
Closing Investment Amount” of Common Stock of the Company. The Subsequent
Closing date shall be the date set forth below:

         
Subsequent Closing Date:
 
 
  (at least 3 Business Days after the date of this Notice and no later than 3
Business Days prior to June 30, 2010)
 
       
Subsequent Closing
Investment Amount:
 
 
  (subject to the limitations set forth in Section 2.1(b))
 
       
Subsequent Closing Shares:
 
 
  (Subsequent Closing Investment Amount divided by the Per Share Purchase Price)
(rounded down to the nearest whole share)

 

 

--------------------------------------------------------------------------------

 

In addition to any representations and warranties to be brought down upon the
Subsequent Closing pursuant to the Agreement, the Purchaser hereby represents
and warrants as follows:
(i) The Purchaser and its Tax Affiliates do not and will not own immediately
before or immediately after, the Subsequent Closing, more than 4.95% of the
shares of Common Stock of the Company outstanding at the time of such Subsequent
Closing. For purposes of the foregoing sentence: (A) ownership of Common Stock
shall include any long derivative or synthetic position or any other stock (as
defined in Temporary Treasury Regulation Section 1.382-2T(f)(18) or any
successor provision) of the Company held by the Purchaser or its Tax Affiliates;
(B) notwithstanding any other provision in the Agreement (including the
foregoing clause (A)), ownership of Common Stock shall not include any Common
Stock which may be acquired pursuant to Section 2.1(b) of the Agreement or by
exercise of any Warrant until such Common Stock is purchased and issued to the
Purchaser or its Tax Affiliates; (C) any short actual, synthetic or derivative
positions held by the Purchaser or its Tax Affiliates shall not decrease the
amount of Common Stock they are treated as owning, and (D) for purposes of
calculating the percentage ownership interest of the Purchaser and its Tax
Affiliates as of a particular date, the aggregate number of shares of Common
Stock outstanding shall be the number of outstanding shares of Common Stock of
the Company most recently reported prior to such date by the Company in a filing
with the SEC, provided, however, that if at least twenty (20) Business Days
prior to the Subsequent Closing, the Company informed the Purchaser in writing
that it has redeemed shares of its Common Stock and provided the Purchaser with
the number of outstanding shares of Common Stock following such redemption which
the Purchaser can rely upon for this purpose, the Purchaser shall use such
revised number of outstanding shares instead, unless and until further updated
by a subsequent SEC filing and/or Company notice pursuant hereto; and
(ii) Purchaser has delivered, and shall deliver upon the Subsequent Closing, to
the Company the Affidavit specified in Section 4.2(d) of the Agreement.
[Signature Page of the Purchaser and Acknowledgement by the Company Follows]

 

 

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          Dated:                     , ___   Fletcher International, Ltd.
      By its duly authorized investment advisor       FLETCHER ASSET MANAGEMENT,
INC.
      By:           Title:          Date:              By:           Title:     
    Date:     

ACKNOWLEDGED AND ACCEPTED:

          Syntroleum Corporation
      By:           Title:          Date: