EX-10.1







Exhibit 10.1



THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS
AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH
LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS THAT, IN THE OPINION OF COUNSEL
FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO COUNSEL FOR THIS
CORPORATION, IS AVAILABLE.




 



JOHN D. OIL AND GAS COMPANY

COMMON STOCK PURCHASE WARRANT




 




     This certifies that, for good and valuable consideration, John D. Oil and Gas Company, a
Maryland corporation (the “Company”), grants to Richard M. Osborne (the “Warrantholder”), the right
to purchase from the Company Fifty Thousand (50,000) validly issued, fully paid and nonassessable
shares (the “Warrant Shares”) of the Company’s common stock (as hereinafter defined), at the
purchase price per share of one dollar ($1.00) (the “Exercise Price”), at any time prior to 5:00
p.m., Cleveland time, on the Expiration Date, all subject to the terms, conditions and adjustments
herein set forth.



1. Duration and Exercise of Warrant.





     1.1 Subject to the terms and conditions set forth herein, this Warrant may be
exercised, in whole or in part, by the Warrantholder by:




     (a) the surrender of this Warrant to the Company, with a duly executed Exercise Form
specifying the number of Warrant Shares to be purchased, during
normal business hours on any Business Day (i) beginning on June 20, 2008 and (ii) prior to the
Expiration Date; and




     (b) the delivery of payment to the Company, for the account of the Company, by cash,
wire transfer, certified or official bank check or any other means approved by the Company,
of the Exercise Price for the number of Warrant Shares specified in the Exercise Form in
lawful money of the United States of America.


Notwithstanding the foregoing, the Warrantholder may, without the payment of cash or other
consideration (other than the surrender of the right to purchase certain Warrant Shares implicit in


 









 






the following formula), exercise this Warrant for “Net Warrant Shares.” The Warrantholder shall
provide written notice to the Company specifying the gross number of Warrant Shares as to which
this Warrant is then exercised. The number of Net Warrant Shares deliverable upon such exercise
will be determined by the following formula: Net Warrant Shares =
[WS x (CP - EP)]/CP, where “WS”
is the gross number of Warrant Shares as to which this Warrant is to be exercised; “CP” is the
Current Market Price of the Common Stock on the last trading day preceding the date of the request
to exercise this Warrant; and “EP” shall mean the then applicable Exercise Price.



The Company agrees that such Warrant Shares shall be deemed to be issued to the Warrantholder as
the record holder of such Warrant Shares as of the close of business on the date on which this
Warrant shall have been surrendered and payment has been made for the Warrant Shares.
Notwithstanding the foregoing, no such surrender shall be effective to constitute the Person
entitled to receive such shares as the record holder thereof while the transfer books of the
Company for the Common Stock are closed for any purpose (but not for any period in excess of five
days), but any such surrender of this Warrant for exercise during any period while such books are
so closed shall become effective for exercise immediately upon the reopening of such books, as if
the exercise had been made on the date this Warrant was surrendered and for the number of shares of
Common Stock and at the Exercise Price in effect at the date of such surrender.




     1.2 Warrant Shares Certificate. A stock certificate or certificates for the Warrant
Shares specified in the Exercise Form (or in the alternative, electronic delivery of the Warrant
Shares in a manner reasonably satisfactory to the Warrantholder) shall be delivered to the
Warrantholder within three Business Days after receipt of the Exercise Form by the Company and
payment of the purchase price. No fractional shares shall be issued upon the exercise of this
Warrant, provided that the Warrantholder shall receive, in lieu of any fractional shares, cash in
an amount equal to the product of the fraction multiplied by the Current Market Price per share of
Common Stock. If this Warrant shall been exercised only in part, the Company shall, at the time of
delivery of the stock certificate or certificates, deliver to the Warrantholder a new Warrant
evidencing the rights to purchase the remaining Warrant Shares, which new Warrant shall in all
other respects be identical with this Warrant.



     2. Restrictions on Transfer; Restrictive Legends.



          2.1 This Warrant may not be offered, sold, transferred, pledged or otherwise disposed of in
whole or in part, to any person; provided that the Warrantholder may offer, sell or transfer this
Warrant to any Affiliate of the Warrantholder.



          2.2 Except as otherwise permitted by this Section 2, each stock certificate for Warrant Shares
issued upon the exercise of any Warrant and each stock certificate issued upon the direct or
indirect transfer of any such Warrant Shares shall be stamped or otherwise imprinted with a legend
in substantially the following form:



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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST HEREIN
MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT AND SUCH LAWS THAT, IN THE OPINION OF COUNSEL FOR THE HOLDER,
WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS
AVAILABLE.



     Notwithstanding the foregoing, the Warrantholder may require the Company to issue a Warrant or
a stock certificate for Warrant Shares, in each case without a legend, if either (i) such Warrant
or such Warrant Shares, as the case may be, have been registered for resale under the Securities
Act, (ii) the Warrantholder has delivered to the Company an opinion of legal counsel (from a firm
reasonably satisfactory to the Company) which opinion shall be addressed to the Company and be
reasonably satisfactory in form and substance to the Company’s counsel, to the effect that such
registration is not required with respect to such Warrant or such Warrant Shares, as the case may
be, or (iii) such Warrant or Warrant Shares are sold in compliance with Rule 144 (or any successor
provision then in effect) under the Securities Act, the Company receives customary representations
to such effect and the Company receives an opinion of counsel to the Company in customary form that
such legend may be removed.



3. Reservation and Resignation of Shares.




     The Company covenants and agrees as follows:




     (a) All Warrant Shares that are issued upon the exercise of this Warrant shall, upon
issuance, be validly issued, fully paid and nonassessable, not subject to any preemptive
rights, and free from all taxes, liens, security interests, charges, and other encumbrances
with respect to the issuance thereof.




     (b) During the period within which this Warrant may be exercised, the Company shall at
all times have authorized and reserved, and keep available free from preemptive rights, a
sufficient number of shares of Common Stock to provide for the exercise of the rights
represented by this Warrant.



4. Loss or Destruction of Warrant.




     Subject to the terms and conditions hereof, upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, or destruction or mutilation of this Warrant and, in the
case of loss, theft or destruction, of such bond or indemnification as the Company may reasonably
require, and, in the case of such mutilation, upon surrender and cancellation of this Warrant, the
Company will execute and deliver a new Warrant of like tenor.



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5. Ownership of Warrant.




     The Company may deem and treat the person in whose name this Warrant is registered as the
holder and owner hereof (notwithstanding any notations of ownership or writing hereon made by
anyone other than the Company) for all purposes and shall not be affected by any notice to the
contrary, until presentation of this Warrant for registration of transfer.



6. Certain Adjustments.




     6.1 The number of Warrant Shares purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment as follows:




     (a) Stock Dividends, Splits, Combinations. If at any time after the date of
the issuance of this Warrant the Company (i) declares a dividend or other distribution
payable in Common Stock or subdivides its outstanding shares of Common Stock into a larger
number or (ii) combines its outstanding shares of Common Stock into a smaller number, then
(x) the number of Warrant Shares to be delivered upon exercise of this Warrant will, upon
the occurrence of an event set forth in clause (i) above, be increased and, upon the
occurrence of an event set forth in clause (ii) above, be decreased so that such
Warrantholder will be entitled to receive the number of shares of Common Stock that such
Warrantholder would have owned immediately following such action had this Warrant been
exercised immediately prior thereto and (y) the Exercise Price in effect immediately prior
to such dividend, other distribution, subdivision or combination, as the case may be, shall
be adjusted proportionately by multiplying such Exercise Price by a fraction, of which the
numerator shall be the number of Warrant Shares purchasable upon exercise of this Warrant
immediately prior to such adjustment and of which the denominator shall be the number of
Warrant Shares purchasable immediately thereafter.




     (b) Distribution of Stock, Other Securities, Evidence of Indebtedness. In case
the Company shall distribute to the holders of Common Stock, shares of its capital stock
(other than Common Stock for which adjustment is made under Section 6.1(a)), stock or other
securities of the Company or any other Person, evidences of indebtedness issued by the
Company or any other Person, assets (excluding cash dividends) or options, warrants or
rights to subscribe for or purchase the foregoing, then, and in each such case, immediately
following the record date fixed for the determination of the holders of Common Stock
entitled to receive such distribution, (A) the Exercise Price then in effect shall be
adjusted by multiplying the Exercise Price in effect immediately prior to such record date
by a fraction (i) the numerator of which shall be such Current Market Price of
the Common Stock on such record date (i.e. prior to such shares trading “ex-”) less the
then Fair Market Value (as determined by the Board of Directors or a duly appointed
committee thereof, each acting in good faith) of the portion of the stock, other securities,
evidences of indebtedness so distributed or of such options, warrants or rights applicable
to one share of Common Stock (but such numerator shall not be less than 0.10) and (ii) the
denominator of which shall be the Current Market Price of one share of Common Stock on such
record date (i.e. prior to such shares trading “ex-”) and (B) the number of Warrant Shares
shall be adjusted to equal (i) the number of Warrant Shares for which this



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Warrant is exercisable immediately prior to such adjustment multiplied by the Exercise Price then in
effect, divided by (ii) the Exercise Price as adjusted pursuant to clause (A) above. Such
adjustment shall become effective at the opening of business on the Business Day following
the record date for the determination of stockholders entitled to such distribution.




     (c) Reorganization, Merger, Sale of Assets. In case of any capital
reorganization or reclassification or other change of outstanding shares of Common Stock
(other than a change in par value), any consolidation or merger of the Company with or into
another Person (other than a consolidation or merger of the Company in which the Company is
the resulting or surviving Person and which does not result in any reclassification or
change of outstanding shares of Common Stock) or the sale of all or substantially all of the
assets of the Company to another Person, upon exercise of this Warrant the Warrantholder
shall have the right to receive the kind and amount of shares of stock or other securities
or property to which a holder of the number of shares of Common Stock of the Company
deliverable upon exercise of this Warrant would have been entitled upon such reorganization,
reclassification, consolidation, merger or sale had this Warrant been exercised immediately
prior to such event; and, in such case, appropriate adjustment (as determined in good faith
by the Board of Directors or a duly appointed committee thereof) shall be made in the
application of the provisions of this Section 6 with respect to the rights and interest
thereafter of the Warrantholder, to the end that the provisions set forth in this Section 6
(including provisions with respect to changes in and other adjustments of the Exercise Price
and number of Warrant Shares) shall thereafter be applicable, as nearly as reasonably may
be, in relation to any shares of stock or other property thereafter deliverable upon
exercise of this Warrant.




     (d) Carryover. Notwithstanding any other provision of this Section 6.1, no
adjustment shall be made to the number of shares of Common Stock to be delivered to the
Warrantholder (or to the Exercise Price) if such adjustment represents less than 1% of the
number of shares to be so delivered, but any lesser adjustment shall be carried forward and
shall be made at the time and together with the next subsequent adjustment that together
with any adjustments so carried forward shall amount to 1% or more of the number of shares
to be so delivered, provided however, that, upon exercise of this warrant pursuant
to Section 1 hereof, any adjustment called for by Sections 6. 1 (a), (b) or (c) which has
not been made as a result of this Section 6. 1(d) shall be made.



     6.2 No Adjustment for Dividends. Except as provided in Section 6.1, no adjustment in
respect of any dividends shall be made during the term of this Warrant or upon the exercise
of this Warrant. Notwithstanding any other provision hereof, no adjustments shall be made on
Warrant Shares issuable on the exercise of this Warrant for any cash dividends paid or payable to
holders of record of Common Stock prior to the date as of which the Warrantholder shall be deemed
to be the record holder of such Warrant Shares.



     6.3. Notice of Adjustment. Whenever the number of Warrant Shares or the Exercise
Price of such Warrant Shares shall be adjusted, as provided in Section 6.1, the Company shall
forthwith file, at the principal office of the Company (or at such other place as may be



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designated by the Company), a statement, certified by the chief financial officer of the Company, showing in
detail the facts requiring such adjustment, the computation by which such adjustment was made and
the Exercise Price that shall be in effect after such adjustment. The Company shall also cause a
copy of such statement to be sent by first class mail postage prepaid, to the Warrantholder, at
such Warrantholder’s address as shown in the records of the Company.



     7. Amendments.



     Any provision of this Warrant may be amended and the observance thereof waived only with the
written consent of the Company and the Warrantholder.



     8. Notices of Corporate Action.



     So long as this Warrant has not been exercised in full, in the event of




     (a) any taking by the Company of a record of all holders of Common Stock for the
purpose of determining the holders thereof who are entitled to receive any dividend (other
than cash dividends or distributions paid from the retained earnings of the Company) or
other distribution, or any right to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities or property, or to receive any other right;




     (b) any capital reorganization of the Company, any reclassification (other than a
change in par value of the Common Stock) or recapitalization of the capital stock of the
Company or any consolidation or merger involving the Company and any other Person or any
transfer of all or substantially all the assets of the Company to any other Person; or




     (c) any voluntary or involuntary dissolution, liquidation or winding-up of the Company;


the Company will mail to the Warrantholder a notice specifying (i) the date or expected date on
which any such record is to be taken for the purpose of such dividend, distribution or right and
the amount and character of any such dividend, distribution or right or (ii) the date or expected
date on which any such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time, if any such time is
to be fixed, as of which the holders of record of Common Stock shall be entitled to exchange their
Common Stock for the securities or other property, if any, deliverable upon such reorganization,
reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be delivered at least 5 days prior to the date therein specified, in
the case of any date referred to in the foregoing subdivisions (i) and (ii).




     9. Definitions.



     As used herein, unless the context otherwise requires, the following terms have the following
respective meanings;



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     “Affiliate” means any Person who is an “affiliate” as defined in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.



     “Business Day” means any day other than a Saturday, Sunday or a day on which national
banks are authorized by law to close in the State of Ohio.



     “Common Stock” means the shares of common stock, $0.001 par value per share, of the
Company and any capital stock into which such common stock may be changed.



     “Company” has the meaning specified on the cover of this Warrant.



     “Current Market Price” of a share of Common Stock as of a particular date (the
“Determination Date”) shall mean:




     (i) If the Common Stock is listed or admitted for trading on a national securities
exchange (including the NASDAQ Stock Market), then the Current Market Price shall be the
average of the last 10 closing sale prices of the Common Stock on the principal national
securities exchange on which the Common Stock is listed or admitted for trading on the last
10 trading days prior to the Determination Date (even if no sale takes place on 6 of such
days), or if not listed or traded on any such exchange, then the Current Market Price shall
be the average of the last 10 closing sale prices of the Common Stock on the
over-the-counter market on the last 10 trading days prior to the Determination Date (even if
no sale takes place on 6 of such days) (A) as reported by the National Association of
Securities Dealers Automated Quotation System or the National Quotation System Bureau
Incorporated or (B) if neither such firm is engaged in the business of reporting such
prices, as reported by a similarly generally accepted reporting service; or




     (ii) If the Common Stock is not so listed or admitted to unlisted trading privileges or
if no such sale is made on at least 7 of such days, then the Current Market Price shall be
reasonably determined in good faith by the Company’s Board of Directors or a duly appointed
committee of the Board of Directors (which determination shall be reasonably described in
the written notice delivered to the Warrantholder together with the Common Stock
certificates).



     “Exchange Act” means the Securities Exchange Act of 1934, as amended (or any successor
statute thereto), and the rules and regulations of the Commission promulgated thereunder.



     “Exercise Form” means an Exercise Form in the form annexed hereto as Exhibit A.



     “Exercise Price” has the meaning specified on the cover of this Warrant.



     “Expiration Date” means June 20, 2013.



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     “Fair Market Value” means the amount which a willing buyer would pay a willing seller
in an arm’s-length transaction.



     “Person” means any individual, firm, corporation, partnership, limited liability
company, trust, incorporated or unincorporated association, joint venture, joint stock company,
governmental authority or other entity of any kind, and shall include any successor (by merger or
otherwise) of such entity.



     “Securities Act” has the meaning specified on the cover of this Warrant, or any
similar Federal statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time. Reference to a particular section of the Securities Act, shall
include a reference to the comparable section, if any, of any such similar Federal statute.



     “Warrantholder” has the meaning specified on the cover of this Warrant.



     “Warrant Shares” has the meaning specified on the cover of this Warrant.



     10. Miscellaneous.



          10.1 Entire Agreement. This Warrant constitutes the entire agreement between the
Company and the Warrantholder with respect to this Warrant.




          10.2 Binding Effect; Benefit. This Warrant shall inure to the benefit of and shall be
binding upon the Company and the Warrantholder and their respective successors and assigns. Nothing
in this Warrant, expressed or implied, is intended to or shall confer on any person other than the
Company and the Warrantholder, or their respective successors or assigns, any rights, remedies,
obligations or liabilities under or by reason of this Warrant.




          10.3 Section and Other Headings. The section and other headings contained in this
Warrant are for reference purposes only and shall not be deemed to be a part of this Warrant or to
affect the meaning or interpretation of this Warrant.




          10.4 Notices. All notices, demands and other communications provided for or permitted
hereunder shall be made in writing and shall be by registered or certified first-class mail, return
receipt requested, telecopier, courier service, overnight mail or personal delivery:





	 	(a)	 	if to Warrantholder:
	 
	 	 	 	Richard M. Osborne

8500 Station Street, Suite 113

Mentor, Ohio 44060

Fax: (440) 255-8645
	 
	 	(b)	 	if to the Company:
	 
	 	 	 	John D. Oil and Gas Company




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	 	 	 	8500 Station Street, Suite 345

Mentor, Ohio 44060

Fax: (440) 205-8680

Attention: Chief Financial Officer





     All such notices and communications shall be deemed to have been duly given when delivered by
hand, if personally delivered; when delivered by courier or overnight mail, if delivered by
commercial courier service or overnight mail; five (5) Business Days after being deposited in the
mail, postage prepaid, if mailed; and when receipt is mechanically acknowledged, if faxed. Any
party may by notice given in accordance with this Section 11.4 designate another address or Person
for receipt of notices hereunder.



     10.5 Severability. Any term or provision of this Warrant which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable the terms and
provisions of this Warrant or affecting the validity or enforceability of any of the terms or
provisions of this Warrant in any other jurisdiction.



     10.6 Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF OHIO, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.



     10.7 No Rights or Liabilities as Stockholder. Nothing containing in this Warrant
shall be determined as conferring upon the Warrantholder any rights as a stockholder of the Company
or as imposing any liabilities on the Warrantholder to purchase any securities whether such
liabilities are asserted by the Company or by creditors or stockholders of the Company or
otherwise.



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     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized
officer.



	 	 	 	 	 
	 	JOHN D. OIL AND GAS COMPANY

 	 
	 	/s/ Gregory J. Osborne
 	 
	 	By:       Gregory J. Osborne 	 
	 	Its:       President and Chief Operating Officer 	 
	 



Dated: June 20, 2008




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EXHIBIT A




EXERCISE OF WARRANT



The undersigned,                                                         
             
           , pursuant to the
provisions of the within Warrant,
hereby elects to purchase           
              
                
shares of Common Stock of John D. Oil and Gas Company,
covered by the within Warrant, and tenders herewith payment of the Exercise Price in full in the
form of certified or bank cashier’s check or wire transfer.



Please issue a certificate or certificates for such shares of Common Stock in the following name or
names and denominations:



If said number of shares are not 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 balance
remaining of such shares less any faction of a share paid in cash.



[This form shall be modified by the Warrantholder and the Company as appropriate in the event
Warrantholder exercises the Warrant, in whole or in part, in accordance with the penultimate
paragraph of Section 1.1 of the Warrant.]




	 	 	 	 	 	 	 
	 

	 	Signature	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Note: The above
signature should correspond exactly with the name on the face of the within Warrant.	 	 






Dated: