Document:

ex10-23.htm

Exhibit 10.23

 

SUMMARY OF UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

 

The following summary unaudited pro forma combined financial data is intended to show how the merger of Internet Media Services, Inc. (“IMS”, “the Company”) and U-Vend Canada, Inc. (“U-Vend”) might have affected historical financial statements if the merger had been completed on the first day of fiscal year 2012.

 

Background on merger between Internet Media Services, Inc. and U-Vend Canada, Inc.

 

On January 7, 2014, Internet Media Services Inc. entered into and consummated an Exchange of Securities Agreement (“the Agreement”) with U-Vend Canada, Inc. and the shareholders of U-Vend.  Pursuant to the agreement, IMS acquired all the outstanding shares of U-Vend in exchange for 466,666,667 shares of IMS’s common stock, par value $0.001 (the “Common Stock”). These shares were issued disproportionately in favor of the minority shareholders, and reducing the ownership of Mr. Paul Neelin and Ms. Diane Hope.   Mr. Neelin and Ms. Hope will have the ability to earn up to an additional 603,046,666 shares of IMS common stock, subject to certain earn-out provisions described below.  In addition, the Company issued an aggregate of 232,478,312 shares of Common Stock to financial advisors as compensation for their services in connection with the transaction contemplated by the merger agreement. Effective on January 7, 2104, as a result of the merger, U-Vend became a wholly owned subsidiary of IMS.

 

The Agreement allows for an earn-out based on 2014 and 2015 gross revenue targets. In the event that IMS gross revenue during the calendar year 2014 exceeds $1,000,000 then IMS shall issue to Paul Neelin and Diane Hope, allocated to them on an equal basis and no other U-Vend shareholders, an additional 301,523,333 shares of IMS common stock.  In addition, in the event that IMS gross revenue exceeds $2,000,000 during the calendar year 2015, IMS shall issue to Paul Neelin and Diane Hope, allocated to them on an equal basis and no other U-Vend shareholders, an additional 301,523,333, shares of IMS common stock.  These conditional shares are issued solely to Paul Neelin and Diane Hope in order to restore their ownership of the total shares issued for consideration to their approximate pre-merger ownership in U-Vend.  In the event that IMS gross revenue equals not less than 80% nor more than 99% of the $1,000,000 and $2,000,000 gross amounts described above, then IMS shall issue to Paul Neelin and Diane Hope and no other U-Vend shareholders allocated to them on an equal basis, additional shares of IMS common stock computed by determining the percentage of gross revenue achieved relative to the target revenues described above. Any shortfall or overage of shares measured in 2014 can be combined to the actual revenue earned in 2015 to earn the maximum shares in the earn-out provision.  The issuance of the earn-out shares is conditional on IMS providing access to a minimum level of financing needed to achieve the earn-out gross revenues.  In the event that the gross revenue targets are not obtained and the minimum level of financing was not provided by IMS, during the respective period, then at the end of each period Paul Neelin and Diane Hope shall receive the additional shares described above. At the time of the merger, management estimated a discount to the likelihood of meeting these earn-out targets.

 

  

1

  

Accounting Treatment of the Merger

 

U.S. Generally Accepted Accounting Principles (hereafter referred to as “GAAP”), requires that for each business combination, one of the combining entities shall be identified as the acquirer and the existence of a controlling financial interest shall be used to identify the acquirer in a business combination.  In a business combination effected primarily by exchanging equity interests, the acquirer is usually is the entity that issues its equity interests.  However, it is sometimes not clear which party is the acquirer.

 

In accordance with FASB Topic ASC 805 “Business Combinations”, if a business combination has occurred, but it is not clear which of the combining entities is the acquirer, GAAP requires considering additional factors in making that determination.  These factors include the relative voting rights of the combined entity, the composition of the governing body of the combined entity, the composition of senior management in the combined entity and the relative size of the combining entities.

 

Based on the aforementioned and after taking in consideration all the relevant facts and circumstances, management came to the conclusion that IMS, as the legal acquirer was also the accounting acquirer in the transaction.  The conclusion was based on the determination that the former stockholders of U-Vend had 48.8% of the voting interest in the combined entity as of the closing date of the merger, the former stockholders of U-Vend did not have indications of control when analyzed in the context of the other factors listed by FASB Topic ASC 805.  On the date of the merger, IMS shareholders as a group retained the largest portion of the voting rights in the combined entity, IMS on the date of the merger had the largest single owner holding the largest minority voting interest in the combined entity, and IMS had the ability to elect, appoint and remove a majority of the governing body of the combined entity on the date of the merger.  Further, various potentially dilutive instruments held by IMS interest holders could dilute U-Vend shareholders even if the additional contingent shares are earned.

 

As a result, the merger will be accounted for as a business combination in accordance with the Business Combination Topic of the FASB ASC 805.  Under the guidance, the fair value of the consideration will be determined and the assets and liabilities of U-Vend are recorded at their fair value at the date of the acquisition.  The excess of the purchase price over the estimated fair values, if any, is recorded as goodwill. If the fair value of the assets acquired exceeds the purchase price and the liabilities assumed, then a gain on acquisition is recorded.

 

This pro forma information is based on, and should be read in conjunction with, the following:

 

	
  

	
·

	
The historical audited financial statements of Internet Media Services, Inc. as of and for the fiscal year ended December 31, 2012 included in a Form 10-K filed on April 15, 2013;

 

	
  

	
·

	
The historical unaudited financial statements of Internet Media Services, Inc. as of and for the nine months ended September 30, 2013 included in a Form 10Q filed on November 19, 2013;

 

	
  

	
·

	
The historical audited financial statements of U-Vend Canada, Inc. as of and for the fiscal year ended November 30, 2012, included in a Form 8-K filed on January 13, 2014;

 

	
  

	
·

	
The historical unaudited financial statements of U-Vend Canada, Inc. as of and for the nine months ended August 31, 2013, included in a Form 8-K filed on January 13, 2014;

 

	
  

	
·

	
The historical audited financial statements of U-Vend Canada, Inc. as of and for the fiscal year ended November 30, 2013, included herein this Form 8-K.

  

2

  

The summary unaudited pro forma combined balance sheet presents the historical balance sheet of IMS as of September 30, 2013 and the historical balance sheet of U-Vend as of November 30, 2013. The pro forma gives effect to the merger as if it had been completed on these latest balance sheet dates.

 

The summary unaudited pro forma statements of operations for the fiscal year ended 2012 and for the nine months ended fiscal year 2013 for both IMS and U-Vend, and gives pro forma effect to the merger as if it had been completed on first day of fiscal year 2012.

 

The historical financial data has been adjusted to give pro forma effect to the events that are (i) directly attributable to the merger (ii) factually supportable, and (iii) with respect to the statements of operations, expected to have a continuing impact on combined results.  The pro forma adjustments are preliminary and based on management’s estimates of fair value and useful lives of the assets acquired and liabilities assumed and have been prepared to illustrate the estimated effect of the acquisition and certain other adjustments.

 

The unaudited pro forma combined financial statements are presented for illustrative purposes only, and are not necessarily indicative of the financial condition or results of operations of future periods or the financial condition or results of operations that actually would have been realized had the entities been combined during the periods presented.  In addition, the unaudited pro forma adjustments are based on management’s preliminary estimates of the fair value of the identifiable assets acquired and liabilities assumed.  As a result, the actual adjustments may differ materially from those presented in the unaudited pro forma statements.

 

Foreign Currency

The Company has determined that the Canadian Dollar is its functional currency for U-Vend Canada and the United States Dollar is the functional currency for U-Vend USA since that is the primary economic environment in which the entities operates.  Foreign currency transaction gains and losses resulting from or expected to result from transactions denominated in a currency other than the Company’s functional currency are recognized in other expense in the accompanying consolidated statements of operations. Foreign currency transaction losses were de minimus for the year ended November 30, 2013 and 2012.  The assets and liabilities of the U-Vend USA are translated into Canadian dollars at current exchange rates, and revenues and expenses are translated at average rates of exchange in effect during the period. The resulting translation adjustments are recorded as other comprehensive losses as a component within other comprehensive income in the consolidated statements of operations and comprehensive income.  During the year ended December 31, 2013 and 2012, the translation is not considered material. The U-Vend financial results have not been converted to U.S. dollars in the accompanying pro-forma reports as a result of the de minimus impact. 

 

Purchase Price Allocation

 

The purchase price was determined in accordance with the accounting treatment of the merger as a business combination in accordance with the Business Combination Topic of the FASB ASC 805.  Under the guidance, the fair value of the consideration will be determined and the assets and liabilities of the acquired business, U-Vend, are recorded at their fair values at the date of the acquisition.  The excess of the purchase price over the estimated fair values is recorded as goodwill, if any.  If the fair value of the assets acquired exceeds the purchase price and the liabilities assumed then a gain on acquisition is recorded.

 

The fair value of the IMS common stock issued to the former shareholders of U-Vend on January 7, 2014 is based on the $0.0007 share price of the IMS common stock as of the close of business on January 6, 2014. The contingent consideration represented by the earn-out shares were also measured using a $0.0007 share price, discounted for the probability that the shares will be issued in the future upon achievement of the revenue targets defined. A discount was made to the market price of these IMS shares to reflect the restrictions on IMS common shares as a result of lock-up agreements in place.  The purchase price also included the effective settlement of the intercompany amounts payable by U-Vend to IMS as of November 30, 2013.

 

	
Consideration  issued:

	 	 	 
	
Fair value of 466,666,667 shares of IMS common stock issued to U-Vend shareholders at $0.0007 on January 7, 2014

	 	$	326,667	 
	  	 	 	 	 
	
Fair value of 603,046,666 shares of IMS common stock measured at $0.0007, discounted for the probability that the earn out based on 2014-2015 gross revenue targets will be achieved

	 	 	316,599	 
	  	 	 	643,266	 
	  	 	 	 	 
	
Discount for lack of marketability during lock-up period

	 	 	(160,816	)
	
Effective settlement of intercompany payable due to IMS

	 	 	147,323	 
	  	 	 	 	 
	
Total estimated purchase price

	 	$	629,773	 

  

3

  

While IMS uses its best estimates and assumptions as part of the purchase price allocation process to value the assets acquired and liabilities assumed, the purchase price allocation is preliminary and could change during the measurement period (not to exceed one year) if new information is obtained about the facts and circumstances that existed as of the merger date that, if known, would have resulted in the recognition of additional or changes to the value of the assets and liabilities presented in this pro forma purchase price allocation.  For purposes of this pro forma, the entire intangible asset is considered separately identifiable with a 7 year life.  Some portion of this amount is expected to relate to goodwill once the final values are determined.

 

	
Cash

	 	$	9,763	 
	
Inventory

	 	 	11,715	 
	
Prepaid expense and other assets

	 	 	274	 
	
Security deposit

	 	 	6,631	 
	
Property and equipment

	 	 	232,657	 
	
Intangible assets

	 	 	779,155	 
	
Goodwill

	 	 	296,079	 
	
Total assets

	 	 	1,336,274	 
	  	 	 	 	 
	
Accounts payable

	 	 	54,329	 
	
Accrued expenses

	 	 	31,927	 
	
Convertible notes payable

	 	 	125,034	 
	
Current portion of lease obligation

	 	 	32,082	 
	
Long term lease obligation

	 	 	117,238	 
	
Note payable- officers/director

	 	 	49,812	 
	
Deferred tax liability

	 	 	296,079	 
	
Total liabilities

	 	 	706,501	 
	
Net assets

	 	$	629,773	 

  

4

  

Notes to Unaudited Pro Forma Consolidated Balance sheet and Statement of Operations:

 

	
1.

	
This pro forma adjustment is to record the business combination in accordance with FASB ASC 805 as described above under the caption “Purchase Price Allocation.”

 

As a result of the balance sheet for each individual company representing a different period, the intercompany amounts do not eliminate.  A portion of the difference relates to IMS warrants issued as a discount on U-Vend debt and the balance represents costs incurred by U-Vend between September 30, 2013 and November 30, 2013 and will be included in accumulated deficit.

 

With respect to the deferred tax liability resulting from the increase in book basis of the U-Vend tangible and intangible assets, excluding goodwill, which did not result in an increase in basis for tax purposes was calculated using a 38% effective tax rate. Estimated deferred tax benefit that resulted directly from the transaction is a result of the release of the deferred tax asset valuation allowance and not included in pro forma consolidated statement of operations. Under the acquisition method of accounting, the impact on the acquiring company's deferred tax assets is recorded outside of acquisition accounting. Accordingly, the valuation allowance on the Company’s deferred tax assets will be released to offset the increase in deferred tax liability and result in an estimated financial statement income tax benefit of approximately $296,000. The unaudited pro forma combined statements of operations for the periods presented herein have been adjusted to give effect to pro forma events that are expected to have a continuing impact on the combined results. As such, the estimated income tax benefit related to the estimated release of valuation allowance expected to be reflected in the statement of operations is not reflected in the accompanying unaudited pro forma combined statements of operations.

 

	
2.

	
Included in the historical balance sheet of U-Vend were convertible notes payable and accrued interest that were converted into common shares of U-Vend just before the merger. This entry adjusts the historical balance sheet for the conversion of this debt to equity in the pro forma combined balance sheet.

 

	
3.

	
This pro forma adjustment records broker and financial advisory fees, of 232,478,311 shares of IMS stock, warrants to purchase shares of IMS and U-Vend, and $31,000 in cash; $5,000 of which was paid in January 2013 and $26,000 after the merger.  The $5,000 fees were eliminated in the pro forma Statement of Operations as these amounts are considered non-recurring. The shares were valued using the $0.0007 close price on January 6, 2014 and the warrants had de minimis value.

 

	
4.

	
This pro forma adjustment records officers’ salaries in accordance with employment agreements in place effective with the merger.

 

	
5.

	
This pro forma adjustment reverses interest expense and amortization of debt discount on convertible notes that were converted into shares of U-Vend in advance of the merger on January 7, 2014.

 

	
6.

	
This pro forma adjustment represents the additional amortization expense that will result from the intangible assets acquired from U-Vend which include operating and distribution agreements and assigned a 7 year life.    Management is responsible for determining the fair value of the tangible and intangible assets acquired and liabilities assumed as of the merger date.  Management will consider a number of factors, including reference to an analysis under FASB ASC 805 solely for the purpose of allocating the purchase price to the assets acquired and liabilities assumed.  The analysis will include a discounted cash flow which estimate the future cash flows resulting from the operating and distribution agreements based on forecasts as of the date of acquisition, considering assumptions and estimates related to future market opportunities. A discount rate consistent with the risks associated with achieving the estimated cash flows will be used to estimate the present value of the estimated projected cash flows. Amounts attributable to the operating and distribution agreements are being amortized using a straight-line method over an estimated economic useful life which is 7 years for purposes of this pro forma.

 

 

  

5

  

 

	
Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2013

	 	 	 	 	 	 	 	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	  	 	
Historical

	 	 	 	 	 	 	 	 	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	  	 	
U-Vend Canada, Inc.

	 	 	
Internet Media Services, Inc.

	 	 	

Pro Forma Adjustments

	 	 	
Notes

	 	 	
Pro Forma Consolidated

	 
	
ASSETS

	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Current assets:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Cash

	 	$	9,763	 	 	$	33,434	 	 	$	-	 	 	 	 	 	$	43,197	 
	
Inventory

	 	 	11,715	 	 	 	-	 	 	 	-	 	 	 	 	 	 	11,715	 
	
Prepaid expenses and other assets

	 	 	274	 	 	 	49,109	 	 	 	(48,601	)	 	 	1	 	 	 	782	 
	
Total current assets

	 	 	21,752	 	 	 	82,543	 	 	 	(48,601	)	 	 	 	 	 	 	55,694	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Deferred financing costs, net

	 	 	-	 	 	 	10,833	 	 	 	-	 	 	 	 	 	 	 	10,833	 
	
Security deposit

	 	 	6,631	 	 	 	-	 	 	 	-	 	 	 	 	 	 	 	6,631	 
	
Property and equipment

	 	 	232,657	 	 	 	-	 	 	 	-	 	 	 	 	 	 	 	232,657	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Other intangibles

	 	 	-	 	 	 	-	 	 	 	779,155	 	 	 	1	 	 	 	779,155	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Goodwill

	 	 	-	 	 	 	-	 	 	 	296,079	 	 	 	1	 	 	 	296,079	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Total assets

	 	$	261,040	 	 	$	93,376	 	 	$	1,026,632	 	 	 	 	 	 	$	1,381,048	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
LIABILITIES AND STOCKHOLDERS' DEFICIENCY

	 	 	 	 	 	 	 	 	 	 	 	 
	
Current liabilities:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Accounts payable

	 	$	54,329	 	 	$	17,021	 	 	$	-	 	 	 	 	 	 	$	71,350	 
	
Accrued expenses

	 	 	35,901	 	 	 	211,115	 	 	 	22,026	 	 	 	2,3	 	 	 	269,042	 
	
Convertible notes payable

	 	 	164,370	 	 	 	98,678	 	 	 	(39,336	)	 	 	1,2	 	 	 	223,712	 
	
Revolving note from related party

	 	 	-	 	 	 	181,016	 	 	 	-	 	 	 	 	 	 	 	181,016	 
	
Senior convertible notes, net of discount of $83,333

	 	 	-	 	 	 	16,667	 	 	 	-	 	 	 	 	 	 	 	16,667	 
	
Current portion lease obligaiton

	 	 	32,082	 	 	 	-	 	 	 	-	 	 	 	 	 	 	 	32,082	 
	
Payable to IMS

	 	 	147,323	 	 	 	-	 	 	 	(147,323	)	 	 	1	 	 	 	-	 
	
Note payable - officers/director

	 	 	49,812	 	 	 	50,000	 	 	 	-	 	 	 	 	 	 	 	99,812	 
	
Total current liabilities

	 	 	483,817	 	 	 	574,497	 	 	 	(164,633	)	 	 	 	 	 	 	893,681	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Deferred tax

	 	 	-	 	 	 	-	 	 	 	296,079	 	 	 	1	 	 	 	296,079	 
	
Long term lease obligation

	 	 	117,238	 	 	 	-	 	 	 	-	 	 	 	 	 	 	 	117,238	 
	
Warrant liabilities

	 	 	-	 	 	 	89,570	 	 	 	-	 	 	 	 	 	 	 	89,570	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Stockholders' deficiency

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Common stock, $.001 par value,

	 	 	-	 	 	 	107,445	 	 	 	232,478	 	 	 	1,3	 	 	 	339,923	 
	
Additional paid-in capital

	 	 	539,393	 	 	 	985,803	 	 	 	(80,972	)	 	 	1,3	 	 	 	1,444,224	 
	
Accumulated deficit

	 	 	(879,408	)	 	 	(1,663,939	)	 	 	743,681	 	 	 	1,3	 	 	 	(1,799,666	)
	
Total stockholders' deficiency

	 	 	(340,015	)	 	 	(570,691	)	 	 	895,187	 	 	 	 	 	 	 	(15,519	)
	
Total liabilities and stockholders' deficiency

	 	$	261,040	 	 	$	93,376	 	 	$	1,026,632	 	 	 	 	 	 	$	1,381,048	 

 

  

6

  

 

	
Unaudited Pro Forma Consolidated Statement of Operations for the nine months ended September 30, 2013

	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	  	 	
Historical

	 	 	 	 	 	 	 	 	 	 
	  	 	
U-Vend Canada, Inc.

	 	 	
Internet Media Services, Inc.

	 	 	

Pro Forma adjustments

	 	 	
Notes

	 	 	
Pro Forma Consolidated

	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Revenue

	 	$	-	 	 	$	-	 	 	$	-	 	 	 	 	 	$	-	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Costs of revenue

	 	 	-	 	 	 	-	 	 	 	-	 	 	 	 	 	 	-	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Gross loss

	 	 	-	 	 	 	-	 	 	 	-	 	 	 	 	 	 	-	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Operating expenses:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Selling general and administrative

	 	 	143,957	 	 	 	251,846	 	 	 	(6,519	)	 	 	3,4,6	 	 	 	389,284	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Operating loss

	 	 	(143,957	)	 	 	(251,846	)	 	 	6,519	 	 	 	 	 	 	 	(389,284	)
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Other expenses:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Loss from change in fair value of notes payable

	 	 	-	 	 	 	-	 	 	 	-	 	 	 	 	 	 	 	-	 
	
Amortization of debt discount and deferred financing costs

	 	 	-	 	 	 	(18,834	)	 	 	-	 	 	 	 	 	 	 	(18,834	)
	
Interest expense

	 	 	(14,037	)	 	 	(29,291	)	 	 	5,648	 	 	 	5	 	 	 	(37,680	)
	
Other expenses:

	 	 	1,963	 	 	 	-	 	 	 	-	 	 	 	 	 	 	 	1,963	 
	  	 	 	(12,074	)	 	 	(48,125	)	 	 	5,648	 	 	 	 	 	 	 	(54,551	)
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Loss before income taxes

	 	 	(156,031	)	 	 	(299,971	)	 	 	12,167	 	 	 	 	 	 	 	(443,835	)
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Income tax provision

	 	 	-	 	 	 	-	 	 	 	-	 	 	 	 	 	 	 	-	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Loss from continuing operations

	 	 	(156,031	)	 	 	(299,971	)	 	 	12,167	 	 	 	 	 	 	 	(443,835	)
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Discontinued operations:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Gain from disposal of discontinued operations

	 	 	-	 	 	 	3,839	 	 	 	-	 	 	 	 	 	 	 	3,839	 
	
Net (loss) income from discontinued operations

	 	 	-	 	 	 	19,174	 	 	 	-	 	 	 	 	 	 	 	19,174	 
	  	 	 	-	 	 	 	23,013	 	 	 	-	 	 	 	 	 	 	 	23,013	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Net loss

	 	$	(156,031	)	 	$	(276,958	)	 	$	12,167	 	 	 	 	 	 	$	(420,822	)
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Net loss from continuing operations per share - basic and diluted

	 	 	$	(0.01	)	 	 	 	 	 	 	 	 	 	$	(0.00	)
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Net (loss) income from discontinued operations per share - basic and diluted

	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Net loss per share - basic and diluted

	 	 	$	(0.01	)	 	 	 	 	 	 	 	 	 	$	(0.00	)
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	

Weighted average common shares outstanding - basic and diluted

	 	 	 	39,617,780	 	 	 	699,144,978	 	 	 	 	 	 	 	738,762,758	 

 

  

7

  

 

	
Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2012

	 	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	  	 	
Historical

	 	 	 	 	 	 	 	 	 	 
	  	 	
U-Vend Canada, Inc.

	 	 	
Internet Media Services, Inc.

	 	 	

Pro Forma adjustments

	 	 	
Notes

	 	 	
Pro Forma Consolidated

	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Revenue

	 	$	5,094	 	 	$	-	 	 	$	-	 	 	 	 	 	$	5,094	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Costs of revenue

	 	 	2,871	 	 	 	-	 	 	 	-	 	 	 	 	 	 	2,871	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Gross loss

	 	 	2,223	 	 	 	-	 	 	 	-	 	 	 	 	 	 	2,223	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Operating expenses:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Selling, general and administrative

	 	 	104,837	 	 	 	242,506	 	 	 	270,308	 	 	 	4,6	 	 	 	617,651	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Operating loss

	 	 	(102,614	)	 	 	(242,506	)	 	 	(270,308	)	 	 	 	 	 	 	(615,428	)
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Other expenses:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Loss from change in fair value of notes payable

	 	 	-	 	 	 	(105,009	)	 	 	-	 	 	 	 	 	 	 	(105,009	)
	
Amortization of debt discount and deferred financing costs

	 	 	-	 	 	 	-	 	 	 	-	 	 	 	 	 	 	 	-	 
	
Interest expense

	 	 	(16,367	)	 	 	(37,440	)	 	 	7,911	 	 	 	5	 	 	 	(45,896	)
	
Other expenses:

	 	 	(1,039	)	 	 	 	 	 	 	-	 	 	 	 	 	 	 	(1,039	)
	  	 	 	(17,406	)	 	 	(142,449	)	 	 	7,911	 	 	 	 	 	 	 	(151,944	)
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Loss before income taxes

	 	 	(120,020	)	 	 	(384,955	)	 	 	(262,397	)	 	 	 	 	 	 	(767,372	)
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Income tax provision

	 	 	-	 	 	 	(4,185	)	 	 	-	 	 	 	 	 	 	 	(4,185	)
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Loss from continuing operations

	 	 	(120,020	)	 	 	(389,140	)	 	 	(262,397	)	 	 	 	 	 	 	(771,557	)
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Discontinued operations:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Write down of assets associated with a discontinued component, net of income tax effect

	 	 	-	 	 	 	(35,000	)	 	 	-	 	 	 	 	 	 	 	(35,000	)
	
Net (loss) income from discontinued operations

	 	 	-	 	 	 	(2,858	)	 	 	-	 	 	 	 	 	 	 	(2,858	)
	  	 	 	-	 	 	 	(37,858	)	 	 	-	 	 	 	 	 	 	 	(37,858	)
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Net loss

	 	 	(120,020	)	 	$	(426,998	)	 	$	(262,397	)	 	 	 	 	 	$	(809,415	)
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Net loss from continuing operations per share - basic and diluted

	 	 	$	(0.02	)	 	 	 	 	 	 	 	 	 	$	(0.00	)
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Net (loss) income from discontinued operations per share - basic and diluted

	 	 	 	(0.00	)	 	 	 	 	 	 	 	 	 	 	(0.00	)
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Net loss per share - basic and diluted

	 	 	$	(0.02	)	 	 	 	 	 	 	 	 	 	$	(0.00	)
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	

Weighted average common shares outstanding - basic and diluted

	 	 	 	24,313,958	 	 	 	699,144,978	 	 	 	 	 	 	 	723,458,936	 

 

 

 81041aFormofAmendedandRestatedWarranttoPurchaseSharesofCommonStock

Exhibit 10.41
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 4 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.
FORM OF 
AMENDED AND RESTATED
WARRANT TO PURCHASE SHARES OF COMMON STOCK

		
	Company:
	Rice Energy Inc., a Delaware corporation (the “Company”)

		
	Number of Shares:
	[●]

		
	Class of Shares
	Common Stock, par value $0.01 per share

		
	Warrant Price:
	$11.57 per share of Common Stock

		
	Issue Date:
	January 29, 2014

		
	Original Issue Date: 
	August 15, 2011

Exercise 
		
	Commencement Date:
	Same as Original Issue Date

		
	Expiration Date:
	The 5th anniversary of the Exercise Commencement Date.

THIS AMENDED AND RESTATED WARRANT CERTIFIES THAT, for good and valuable consideration, [●] (together with any registered holder from time to time of this Warrant) (“Holder”) is entitled to purchase the number of fully paid and nonassessable shares of common stock of the Company, par value $0.01 per share (the “Shares”) at the Warrant Price, all as set forth above and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. 

ARTICLE 1. EXERCISE; CONVERSION.

1.1    Method of Exercise.  Holder may exercise this Warrant at any time before the expiration date of this Warrant by delivering to the Company a duly executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company together with a check, wire transfer (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.

1.2    Conversion Right.  

1.2.1    Number of Shares on Conversion.  In lieu of exercising this Warrant as specified in Article 1.1, Holder may, at any time before the expiration date of this Warrant, convert this Warrant on a cashless basis, in whole or in part, into a number of Shares determined by dividing (a) the aggregate Fair Market Value of the Shares or other securities otherwise issuable upon exercise of this Warrant (or the portion thereof being exercised) minus the aggregate Warrant Price of such Shares by (b) the Fair Market Value of one Share.  The Fair Market Value of the Shares shall be determined pursuant to Article 1.2.2.

1.2.2    Fair Market Value.    Upon request of Holder pursuant to Article 1.2.1, the Company shall determine Fair Market Value in accordance with the definition of the term Fair Market Value.  Upon such determination of Fair Market Value, the Company shall give written notice thereof to the Holder, setting forth in reasonable detail (i) the calculation of such Fair Market Value, and (ii) the method and basis of determination thereof (the “Company Determination”).  For purposes of this Warrant, “Fair Market Value” of a Share as of any date of determination means:
    
(A)    if the Shares are traded on an exchange or are quoted on NASDAQ, then the average of the closing or last sale prices, respectively, reported for the 20 trading days ended immediately preceding the determination date; or
    
(B)    if the Shares are not traded on an exchange or quoted on NASDAQ but are traded in the over-the-counter market, then the mean of the average of the closing bid and asked prices reported for the 20 trading days ended immediately preceding the determination date; and
    
(C)    in all other circumstances, the fair market value per Share as determined in good faith and on a reasonable basis by the Board of Directors of the Company (or any successor to the Company.
    
1.3    Replacement of Warrants.  On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation on surrender and cancellation of this Warrant, the Company shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.

1.4    Expenses of Delivery of Warrant.  The Company shall pay all reasonable expenses, stamp, documentary and similar taxes (other than transfer taxes and taxes imposed on the income of Holder) and other charges payable in connection with the preparation, issuance and delivery of this Warrant.

1.5    Treatment of Warrant Upon Acquisition of Company.

1.5.1    “Acquisition”.  For the purpose of this Warrant, “Acquisition” means any sale or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company’s securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction.

1.5.2    Treatment of Warrant at Acquisition.
(A)    Upon the written request of the Company, Holder agrees that, in the event of an Acquisition that is not an asset sale and in which the sole consideration is cash (whether such cash is paid at time that such Acquisition is consummated or subsequently, including without limitation through the payment of a promissory note or earnout), either (a) Holder shall exercise or convert this Warrant pursuant to the terms hereof and such exercise or conversion will be deemed effective immediately prior to the consummation of such Acquisition or (b) if Holder elects not to exercise or convert this Warrant pursuant to the terms hereof, this Warrant will expire upon the consummation of such Acquisition.  The Company shall provide Holder with written notice of its request relating to the foregoing (together with such reasonable information as Holder may request in connection with such contemplated Acquisition giving rise to such notice), which is to be delivered to Holder not less than ten (10) days prior to the consummation of the proposed Acquisition.
(B)    Upon the written request of the Company, Holder agrees that, in the event of an Acquisition that is an asset sale to a third party that is not an Affiliate (as defined below) of the Company (a “True Asset Sale”), either (a) Holder shall exercise or convert this Warrant pursuant to the terms hereof and such exercise will be deemed effective immediately prior to the consummation of such Acquisition or (b) if Holder elects not to exercise or convert this Warrant pursuant to the terms hereof, this Warrant will (i) continue until the Expiration Date if the Company continues as a going concern following the consummation of any such True Asset Sale or (ii) expire upon the consummation of such True Asset Sale if the Company does not continue as a going concern following the consummation of any such True Asset Sale.  The Company shall provide Holder with written notice of its request relating to the foregoing (together with such reasonable information as Holder may request in connection with such contemplated Acquisition giving rise to such notice), which is to be delivered to Holder not less than ten (10) days prior to the consummation of the proposed Acquisition.
(C)    Upon the consummation of any Acquisition other than those particularly described in subsections (A) and (B) above, the successor entity shall assume the obligations of this Warrant, and this Warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing.  The Warrant Price and/or number of Shares shall be adjusted accordingly.
As used herein “Affiliate” shall mean any person or entity that controls or is controlled by or is under common control with such persons or entities, and each of such person’s or entity’s officers, directors, joint venturers or partners, as applicable.

ARTICLE 2. ADJUSTMENTS TO THE SHARES.

2.1    Share Dividends, Splits, Etc.  If the Company declares or pays a dividend on the Shares payable in membership interests, or other securities of the Company, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without additional cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend occurred.  If the Company subdivides the Shares by reclassification or otherwise into a greater number of Shares or takes any other action which increases the amount of Shares into which the Shares are convertible, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased.  If the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a lesser number of Shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.

2.2    Reclassification, Exchange, Combinations or Substitution.  Upon (i) any reorganization, reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant (including without limitation any automatic conversion of the outstanding or issuable securities of the Company of the same class or series as the Shares to common stock pursuant to the terms of the Company’s Articles of Organization upon the consummation of a registered public offering by the Company of its equity securities), or (ii) subject to Article 1.5, in the case of any consolidation of the Company with, or merger of the Company with, another company or corporation, or in the case of any sale, lease or conveyance of all, or substantially all, of the property, assets, business and goodwill of the Company as an entity, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this Warrant had been exercised or converted immediately before such reorganization, reclassification, exchange, substitution, consolidation, merger or other event.  The Company or its successor shall promptly issue to Holder an amendment to this Warrant setting forth the number and kind of such new securities or other property issuable upon exercise or conversion of this Warrant as a result of such reclassification, exchange, substitution or other event that results in a change of the number and/or class of securities issuable upon exercise or conversion of this Warrant.  The amendment to this Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise or conversion of the new Warrant.  The provisions of this Article 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events. 
2.3    Liquidation or Dissolution.  In the event that the Company shall, at any time prior to the expiration of this Warrant and prior to the exercise thereof, dissolve, liquidate or wind up its affairs, the Company shall give the Holder written notice of such dissolution, liquidation or winding up at least ten (10) days prior thereto.  If the Company does not provide such notice at least ten (10) days prior to such dissolution, liquidation or winding up, the Holder shall be entitled, upon the exercise thereof and payment of the Warrant Price, to receive, in lieu of Shares which it would have been entitled to receive, the same kind and amount of assets as would have been issued, distributed or paid to it upon such Shares, had it been the holder of record of the Shares receivable upon the exercise of this Warrant on the record date for the determination of those entitled to receive any such liquidating distribution. In connection with any such dissolution, liquidation or winding up which is expected to result in any distribution in excess of the Warrant Price provided for by this Warrant, the Holder may at its option exercise the same prior to such dissolution, liquidation or winding up without making payment of the aggregate Warrant Price and in such case the Company shall upon the distribution to said Holder consider that the aggregate Warrant Price has been paid in full to it and in making settlement to said Holder, shall deduct from the amount payable to such Holder an amount equal to the aggregate Warrant Price.

2.4    No Impairment.  The Company shall not, by amendment of its Articles of Organization or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out of all the provisions of this Article 2 and in taking all such action as may be necessary or appropriate to protect Holder’s rights under this Article 2 against impairment. 

2.5    Fractional Shares.  No fractional Shares shall be issuable upon exercise or conversion of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share.  If a fractional Share interest arises upon any exercise or conversion of this Warrant, the Company shall eliminate such fractional Share interest by paying Holder the amount computed by multiplying the fractional interest by the Fair Market Value of a full Share.

2.6    Certificate as to Adjustments.  Upon each adjustment of the Warrant Price, the Company shall promptly notify Holder in writing, and, at the Company’s expense, promptly compute such adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based.  The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price in effect upon the date thereof and the series of adjustments leading to such Warrant Price.

2.7    No Member Rights.  Except as provided in this Warrant, Holder will not have any rights as a member of the Company until the exercise or conversion of this Warrant.

ARTICLE 3. REPRESENTATIONS, WARRANTIES OF HOLDER.  Holder represents and warrants to the Company as follows:

3.1    Purchase for Own Account.  This Warrant and the securities to be acquired upon exercise or conversion of this Warrant by Holder will be acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act.  Holder also represents that Holder has not been formed for the specific purpose of acquiring this Warrant or the Shares.

3.2    Disclosure of Information.  Holder has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities.  Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.

3.3    Investment Experience.  Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk.  Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.

3.4    The Act.  Holder understands that this Warrant and the Shares issuable upon exercise or conversion hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Holder’s investment intent as expressed herein.  Holder understands that this Warrant and the Shares issued upon any exercise or conversion hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available.  

ARTICLE 4. MISCELLANEOUS.

4.1    Term.  This Warrant is exercisable in whole or in part at any time and from time to time during the period commencing on the Exercise Commencement Date and ending on (but excluding) the Expiration Date.  

4.2    Legends.    This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with legends in substantially the following form:

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

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OTHER TERMS AND CONDITIONS SET FORTH IN THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND AMENDED AND RESTATED BYLAWS OF THE COMPANY, COPIES OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.

4.3    Compliance with Securities Laws on Transfer.  Subject to Article 4.4, this Warrant and the Shares issuable upon exercise or conversion of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may be transferred or assigned in whole or in part provided that such transfer or assignment is made in compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company).  Notwithstanding the foregoing, this Warrant (and any portion of this Warrant) may not be transferred or assigned in such a manner that would result in more than fifty (50) separate transferees holding any portion of this Warrant.

4.4    Transfer Procedure.  Subject to the provisions of Article 4.3 and upon providing the Company with written notice, any Holder may transfer all or part of this Warrant to any transferee, provided, however, in connection with any such transfer, any Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable).  The Company may refuse to transfer this Warrant any person who directly competes with the Company, unless the Shares of the Company are publicly traded.  Holder may transfer all or any of the Shares issuable upon exercise or conversion of this Warrant (or the Shares issuable directly or indirectly, upon conversion of the Shares, if any) only as otherwise permitted by the Operating Agreement for the transfer of Shares, and subject to any restrictions or limitations applicable to such Shares.

4.5    Notices.  All notices and other communications from the Company to Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or Holder, as the case may be (or on the first business day after transmission by facsimile), in writing by the Company or such Holder from time to time.  Effective upon receipt of the fully executed Warrant and the initial transfer described in Article 4.4 above, all notices to Holder shall be addressed as set forth on the signature page hereto until the Company receives notice of a change of address in connection with a transfer or otherwise.

Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:

Rice Energy Inc.
171 Hillpointe Drive, Suite 301
Canonsburg, Pennsylvania 15317
Attn:  James W. Rogers

4.6    Waiver.  This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

4.7    Attorneys’ Fees.  In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.

4.8    Counterparts.  This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement.

4.9    Governing Law.  This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to its principles regarding conflicts of law.

[Signature page follows.]

	
		
	“COMPANY”

RICE ENERGY INC.

By:                   
   Name:   Daniel J. Rice IV 
   Title:   Chief Executive Officer

	Holder (if a corporation, limited liability 
company, partnership, trust or other entity)

                                                                
Name of Entity

                  
State of Organization or Jurisdiction

By:                  
     Name:                
     Title:                

                  
Street Address

                  
City         State      Zip

               
Taxpayer Identification Number

Dated:         

	 
	Holder (if an individual)

                  
Print Name

                  
Sign Name

                  
Street Address

                  
City         State      Zip

____________________________________
Social Security Number

Dated:         

APPENDIX 1

NOTICE OF EXERCISE

1.    Holder elects to purchase ___________ Shares of Rice Energy Inc. pursuant to the terms of the attached Warrant, and tenders payment of the purchase price of the Shares in full.

2.    By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Article 3 of the Warrant as of the date hereof.
                            
	
		
	Holder (if a corporation, limited liability 
company, partnership, trust or other entity)

                  
Name of Entity

                  
State of Organization or Jurisdiction

By:                  
     Name:               
     Title:               

                  
Street Address

                  
City         State      Zip

____________________________________
Taxpayer Identification Number

Dated:         
	Holder (if an individual)

                  
Print Name

                  
Sign Name

                  
Street Address

                  
City         State      Zip

____________________________________
Social Security Number

Dated:

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