Document:

f8k103111ex10viii_bioneutral.htm

Exhibit 10.8

 

Employment Agreement

 

This EMPLOYMENT AGREEMENT (this “Agreement”), is made effective as of the [__] day of [___], 2011, (the “Effective Date”) by and between Bioneutral Group, Inc., a Nevada corporation, with an address at 211 Warren Street,  Newark, New Jersey, 07103 (the “Company”) and Dr. Andrew Kielbania, an individual with an address at [______________] (the “Executive”).

Recitals

WHEREAS, the Company is a specialty chemical corporation seeking to develop and commercialize a novel combinational chemistry-based technology; and

WHEREAS, the Company wishes to engage the Executive as its Interim Chief Executive Officer and as its Chief Scientific Officer going forward; and

WHEREAS, the Executive desires to serve as the Interim Chief Executive Officer and Chief Scientific Officer of the Company.

NOW THEREFORE, in consideration of the promises and mutual covenants set forth herein, the Parties agree as follows:

1.           Engagement.  The Executive is hereby engaged, on the terms and conditions set forth herein, for the following periods:

	
1.1  

	
As Interim CEO.  The Executive shall be engaged as the Company’s Interim Chief Executive Officer for a period of six (6) months from the date hereof, or until such time as the Company gives fifteen (15) days prior written notice to the Executive that a new Chief Executive Officer has been retained by the Company.

	
1.2  

	
As Chief Scientific Officer.  The Executive shall be engaged as the Company’s Chief Scientific Officer for a period of two (2) years from the date hereof.

2.          Type of Relationship. Executive and the Company agree that Executive’s employment with the Company constitutes “at-will” employment.  Any provision of this Agreement notwithstanding, Executive and the Company acknowledge that this employment relationship may be terminated at any time, upon written notice to the other Party, with or without good cause or for any or no cause, at the option either of the Company or Executive.  However, as described in this Agreement, the Executive, in his capacity as the Company’s Chief Scientific Officer, may be entitled to severance benefits depending upon the circumstances of Executive’s termination as Chief Scientific Officer of the Company.  Upon the termination of Executive’s employment as the Chief Scientific Officer for the Company for any reason other than for “just cause” as set forth in Section 6.1 hereof, Executive will be entitled to payment on his termination date of the greater of (i) all accrued but unpaid salary, vacation, expense reimbursements, and other benefits due to Executive through his termination date under any Company-provided or paid plans, policies, and arrangements; or (ii) all accrued but unpaid salary, vacation, expense reimbursements, and other benefits that would be due to Executive for a period of six (6) months under any Company-provided or paid plans, policies, and arrangements.

 

  

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3.           Duties.  The Executive shall perform those functions generally performed by persons of such title and position, shall attend all meetings of the stockholders and the Company’s Board of Directors (the “Board”), shall perform any and all related duties and shall have any and all powers as may be prescribed by resolution of the Board and shall be available to confer and consult with and advise the officers and directors of the Company at such times that may be required by the Board.  The Executive shall report to the Board.  The Executive shall not enter into any transaction on behalf of the Company, except as authorized by the Board, other than in the Company’s ordinary course of business.

4.           Compensation

	
  

	
4.1

	
Base Salary.  The Executive shall be paid at the rate of USD$15,000 per month during the Term of this Agreement for rendering his services as Interim Chief Financial Officer, and an amount of USD $10,000 per month for his services as Chief Scientific Officer (the “Salary”). The Executive shall be paid the Salary in accordance with the policies of the Company during the Term of this Agreement, but not less frequently than once per month.

	
  

	
4.2

	
Car Allowance.    In addition to the Salary payable to the Executive under Section 4.1 above, the Executive shall be entitled to receive a car allowance in the amount of USD$1,000 per month.  In addition, the Company shall be responsible to pay any down payment on the car lease, as well as any costs payable upon return of the vehicle.

	
  

	
4.3

	
Stock Options.  In addition to the compensation payable to the Executive under Sections 4.1 and 4.2 above, the Executive shall have the right to participate in any stock option plan establish for the benefit of officers and directors of the Company, under such terms and conditions set forth in such plan.

	
  

	
4.4

	
Compensation Review.  The Company shall review the Executive’s compensation on a yearly basis and upon reviewing the Executive’s performance, the Board may, in its sole discretion, adjust the Salary accordingly.

5.           Expense Reimbursement and Other Benefits.

	
  

	
5.1

	
Insurance. In addition to the Salary set forth in Section 4 hereof, during the Term, the Executive shall be entitled to participate in all life, short and long-term disability, health, medical insurance plans and programs, retirement, pension, profit sharing, or other plans applicable to executives of the Company.

	
  

	
5.2

	
Vacation. During the Term, the Executive shall be entitled to four (4) weeks paid vacation during each full year that he is employed by the Company. Vacations shall be taken by the Executive at times and with starting and ending dates determined by the Executive, taking into account the reasonable needs of the Company.

	
  

	
5.3

	
Out-of-Pocket Expenses.  The Executive shall be reimbursed for all reasonable out-of-pocket expenses incurred in the performance of his duties hereunder; provided, that such expenses are acceptable to the Company, and provided further, that the Executive shall submit to the Company reasonable detailed receipts with respect thereto.

 

  

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6.           Termination.

	
  

	
6.1

	
Termination by the Company. The Company may terminate the employment of the Executive as its Chief Scientific Officer:

	
(a)  

	
for reasons amounting to “just cause,” in which case the Executive shall only be paid all sums due and owing on the date of termination; or

	
(b)  

	
without “just cause” by the payment to the Executive of such amounts as set forth in Section 2 hereof.

	
  

	
(c)

	
For purposes of this Agreement, “just cause” shall mean (w) Executive’s misconduct that could reasonably be expected to have a material adverse effect on the business and affairs of the Company; (x) the Executive’s conviction for the commission of a felony; (y) any activity of the Executive involving theft, embezzlement, fraud and any other scheme pursuant to which the Company has lost assets; or (z) conduct on the part of the Executive that constitutes activity in direct and substantial competition with the Company.

	
  

	
6.2

	
Termination upon Death.  This Agreement shall automatically terminate upon the death of the Executive in which case the estate of the Executive shall be paid all of the amounts payable to the Executive as Salary which remain unpaid as of the date of the Executive’s death, plus all amounts payable under any applicable life insurance policy.

7.           Restrictive Covenants

	
  

	
7.1

	
Non-disclosure.  During the Term and for a period of one year thereafter, Executive shall not divulge, com­muni­cate, use to the detriment of the Company or for the benefit of any other person or persons, or misuse in any way, any Confiden­tial Information, as such term is defined below, pertaining to the business of the Company, unless required to do so by a governmental agency or court of law.  Any Confidential Information or data now or hereafter acquired by the Executive with respect to the business of the Company shall be deemed a valuable, special and unique asset of the Company that is received by the Executive in confidence and as a fiduciary, and the Executive shall remain a fidu­ciary to the Company with respect to all of such information.  For purposes of this Agreement, "Confidential Information" means all material information about the Company's business disclosed to the Executive or known by the Executive as a consequence of or through his engagement by the Company (including information conceived, originated, discovered or developed by the Executive) after the date hereof, and not generally known.

	
  

	
7.2

	
Non-solicitation of Employees.  During the Term and for a period of one year thereafter, Executive shall not directly or indirectly, for himself or for any other person, firm, corpo­ration, partnership, association or other entity, attempt to employ or enter into any contractual arrangement with any employee or former employee of the Company, unless such employee or former employee has not been employed by the Company for a period in excess of six months.

 

  

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7.3

	
Covenant Not to Compete.  Executive will not, at any time, during the Term of this Agreement, and for one year thereafter, either directly or indirectly, engage in, with or for any enterprise, institution, whether or not for profit, business, or company, competitive with the business (as identified herein) of the Company as such business may be conducted on the date thereof, as a creditor, guarantor, or financial backer, stockholder, director, officer, consultant, advisor, employee, member, or otherwise of or through any corporation, partner­ship, association, sole proprietorship or other entity; provided, that an investment by Executive, his spouse or his children is permitted if such investment is not more than 5% of the total debt or equity capital of any such competitive enterprise or business.  The Company shall have the right in its sole discretion to waive this Section 7.3.

	
  

	
7.4

	
Injunction.  It is recognized and hereby acknowledged by the Parties hereto that a breach by the Executive of any of the covenants contained in Section 7.1, 7.2 or 7.3 of this Agreement will cause irreparable harm and damage to the Company, the monetary amount of which may be impossible to ascertain.  As a result, the Executive recognizes and hereby acknowledges that the Company shall be entitled to an injunction from any court of competent juris­diction enjoining and restraining any violation of any or all of the covenants contained in this Section 7 by the Executive or any of his affiliates, associates, partners or agents, either directly or indirectly, and that such right to injunction shall be cumulative and in addition to whatever other remedies the Company may possess.

8.           Indemnification.  The Company shall indemnify and hold harmless the Executive from and against any and all claims, damages, losses, expenses, penalties, judgments  or liabilities of any nature whatsoever, including, but not limited to, legal fees, expenses and costs associated with investigating or preparing the defense of any proceeding or investigation, giving testimony or furnishing documents in response to a subpoena (collectively, the “Losses”) to which the Executive may become subject in connection with, rising out of or related to this Agreement or to the operation and affairs of the Company provided, however, that foregoing indemnification will not apply to any Losses that are determined by final judgment (after all appeals and the expiration of time to appeal) of a court of competent jurisdiction to have resulted from the willful misconduct or gross negligence of the Executive.

9.           Ownership of Intellectual Property.  All intellectual property or technology developed or produced by the Executive during his employment with the Company shall be owned solely by the Company and the Executive, by the execution of this Agreement, hereby expressly waives any right thereto and further waives any right to receive payment for such intellectual property or technology.

10.         Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the state of New York.

11.         Notices.  Any notice required or permitted to be given under this Agreement shall be in writing, delivered to the address set forth in the pre-amble, or such other addresses as either Party hereto may from time to time give notice of to the other in the aforesaid manner, and shall be deemed to have been given when delivered by hand or when deposited in the mail, by registered or certified mail, return receipt requested, postage prepaid, or via facsimile (with receipt confirmed) or via overnight courier.

12.         Successors.

	
  

	
12.1

	
Assignment.  This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive.  The amounts due to the Executive under this Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives.  This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

 

  

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12.2

	
Successors of the Company.  The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the busi­ness and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to per­form it if no such succession had taken place.  As used in this Agreement, "Company" shall mean the Company as herein­before defined and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law or otherwise.

13.         Severability. The invalidity of any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall not affect the enforceability of the remain­ing portions of this Agreement or any part thereof, all of which are inserted conditionally on their being valid in law, and, in the event that any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall be declared invalid, this Agreement shall be construed as if such invalid word or words, phrase or phrases, sentence or sentences, clause or clauses, or section or sections had not been inserted.  If such invalidity is caused by length of time, the otherwise invalid provision will be considered to be reduced to a period which would cure such invalidity.

14.         Waivers.  The waiver by either Party hereto of a breach or violation of any term or provision of this Agreement shall not operate nor be construed as a waiver of any subsequent breach or violation.

15.         Damages.  Nothing contained herein shall be con­strued to prevent the Company or the Executive from seeking and recover­ing from the other damages sustained by either or both of them as a result of its or his breach of any term or provision of this Agreement.

16.         No Third Party Beneficiary.  Nothing expressed or implied in this Agreement is intended, or shall be construed, to confer upon or give any person (other than the Parties hereto and, in the case of Executive, his heirs, personal representative(s) and/or legal represen­tative) any rights or remedies under or by reason of this Agreement.

 

[Remainder of page was intentionally left blank.]

 

  

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IN WITNESS WHEREOF, the Company and the Executive have executed this Agreement as of the date first above written.

 

 

	
THE EXECUTIVE

 

DR. ANDREW KIELBANIA

 

 

______________________________

	
THE COMPANY

 

BIONEUTRAL GROUP, INC.

 

 

By: _______________________________

Title:

 

 

 

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Exhibit 4.2

 

FORM OF WARRANT

NEITHER THE SECURITIES REPRESENTED HEREBY NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATES.  THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.  UNLESS SOLD PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

MAGNEGAS CORPORATION

 

WARRANT

 

 

Warrant No. __________                                                                                                Original Issue Date:[___________], 2011

 

                                                                                            

MAGNEGAS CORPORATION a Delaware corporation (the “Company”), hereby certifies that, for value received, Northland Securities, Inc. or its registered assigns (the “Holder”), is entitled to purchase from the Company up to a total of [____________] shares of Common Stock (each such share, a “Warrant Share” and all such shares, the “Warrant Shares”), at any time and from time to time from and after the Original Issue Date and through and including [___________], 2016 (the “Expiration Date”), and subject to the following terms and conditions:

 

1.           Definitions. As used in this Warrant, the following terms shall have the respective definitions set forth in this Section 1.  Capitalized terms that are used and not defined in this Warrant that are defined in the Purchase Agreement (as defined below) shall have the respective definitions set forth in the Purchase Agreement.

 

“Closing Price” means, for any date of determination, the price determined by the first of the following clauses that applies: (i) if the Common Stock is then listed or quoted on a Trading Market, the closing bid price per share of the Common Stock for such date (or the nearest preceding date) on such market; (ii) if prices for the Common Stock are then quoted on the OTC Bulletin Board, the closing bid price per share of the Common Stock for such date (or the nearest preceding date) so quoted; (iii) if prices for the Common Stock are then reported in the “Pink Sheets” published by the National Quotation Bureau Incorporated (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (iv) in all other cases, the fair market value of a share of Common Stock as determined by an independent qualified appraiser selected in good faith and paid for by the Company.

 

“Common Stock” means the common stock of the Company, par value $.001 per share, and any securities into which such common stock may hereafter be reclassified.

 

“Exercise Price” means $0.30, subject to adjustment in accordance with Section 9.

 

  

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“Fundamental Transaction” means any of the following: (i) the Company effects any merger or consolidation of the Company with or into another person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property.

 

“Original Issue Date” means the Original Issue Date first set forth on the first page of this Warrant or its predecessor instrument.

 

“Purchase Agreement” means the Common Stock and Warrant Purchase Agreement, dated [___________], 2011, to which the Company and the original Holder are parties.

 

“Trading Day” means (i) a day on which the Common Stock is traded on a Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading Market (other than the OTC Bulletin Board), a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in clauses (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

 

“Trading Market” means whichever of the New York Stock Exchange, NYSE AMEX, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or the OTC Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.

 

2.           Registration of Warrant.  The Company shall register this Warrant upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

3.           Registration of Transfers.  The Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Company at its address specified herein. Upon any such registration or transfer, a new Warrant to purchase Common Stock, in substantially the form of this Warrant (any such new Warrant, a “New Warrant”), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder of a Warrant.

 

4.           Exercise and Duration of Warrants.

 

(a)            This Warrant shall be exercisable by the registered Holder in whole at any time and in part from time to time from the Original Issue Date through and including the Expiration Date. At 5:00 p.m., Eastern time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value.  The Company may not call or redeem any portion of this Warrant without the prior written consent of the affected Holder.

 

  

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(b)            Notwithstanding anything to the contrary contained herein, the number of Warrant Shares that may be acquired by the Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such exercise (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its affiliates (as defined under Rule 144, “Affiliates”) and any other persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise).  For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  This provision shall not restrict the number of shares of Common Stock which a Holder may receive or beneficially own in order to determine the amount of securities or other consideration that such Holder may receive in the event of a Fundamental Transaction as contemplated in Section 9 of this Warrant.  By written notice to the Company, the Holder may waive the provisions of this Section 4(b) but any such waiver will not be effective until the 61st day after delivery of such notice, nor will any such waiver effect any other Holder.

 

Notwithstanding anything to the contrary contained herein, the number of Warrant Shares that may be acquired by the Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such exercise (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its Affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act, does not exceed 9.999% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise).  For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  This provision shall not restrict the number of shares of Common Stock which a Holder may receive or beneficially own in order to determine the amount of securities or other consideration that such Holder may receive in the event of a Fundamental Transaction as contemplated in Section 9 of this Warrant.  This restriction may not be waived.

 

5.           Delivery of Warrant Shares.

 

(a)            To effect exercises hereunder, the Holder shall not be required to physically surrender this Warrant unless the aggregate Warrant Shares represented by this Warrant are being exercised. Upon delivery of the Exercise Notice (in the form attached hereto) to the Company (with the attached Warrant Shares Exercise Log) at its address for notice set forth herein and upon payment of the Exercise Price multiplied by the number of Warrant Shares that the Holder intends to purchase hereunder and the Company shall promptly (but in no event later than three Trading Days after the Date of Exercise (as defined herein)) issue and deliver to the Holder, a certificate for the Warrant Shares issuable upon such exercise, which, unless otherwise required by the Purchase Agreement, shall be free of restrictive legends. The Company shall, upon request of the Holder and subsequent to the date on which a registration statement covering the resale of the Warrant Shares has been declared effective by the Securities and Exchange Commission, use its reasonable best efforts to deliver Warrant Shares hereunder electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions, if available, provided, that, the Company may, but will not be required to change its transfer agent if its current transfer agent cannot deliver Warrant Shares electronically through the Depository Trust Corporation. A “Date of Exercise” means the date on which the Holder shall have delivered to the Company: (i) the Exercise Notice (with the Warrant Exercise Log attached to it), appropriately completed and duly signed and (ii) if such Holder is not utilizing the cashless exercise provisions set forth in this Warrant, payment of the Exercise Price for the number of Warrant Shares so indicated by the Holder to be purchased.

 

(b)           If by the third Trading Day after a Date of Exercise the Company fails to deliver the required number of Warrant Shares in the manner required pursuant to Section 5(a), then the Holder will have the right to rescind such exercise.

 

  

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(c)           If by the third Trading Day after a Date of Exercise the Company fails to deliver the required number of Warrant Shares in the manner required pursuant to Section 5(a), and if after such third Trading Day and prior to the receipt of such Warrant Shares, the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue by (B) the closing bid price of the Common Stock at the time of the obligation giving rise to such purchase obligation and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In.

 

(d)           The Company’s obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing Warrant Shares upon exercise of the Warrant as required pursuant to the terms hereof.

 

6.           Charges, Taxes and Expenses.  Issuance and delivery of Warrant Shares upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.

 

7.           Replacement of Warrant.  If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity (which shall not include a surety bond), if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. If a New Warrant is requested as a result of a mutilation of this Warrant, then the Holder shall deliver such mutilated Warrant to the Company as a condition precedent to the Company’s obligation to issue the New Warrant.

 

8.           Reservation of Warrant Shares.  The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of Persons other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable.

 

  

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9.           Certain Adjustments.  The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9.

 

(a)           Stock Dividends and Splits.  If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be adjusted to equal the product obtained by multiplying the then-current Exercise Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.

 

(b)           Fundamental Transactions.  If, at any time while this Warrant is outstanding there is a Fundamental Transaction, then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant (the “Alternate Consideration”). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. At the Holder’s option and request, any successor to the Company or surviving entity in such Fundamental Transaction shall, either (1) issue to the Holder a new warrant substantially in the form of this Warrant and consistent with the foregoing provisions and evidencing the Holder’s right to purchase the Alternate Consideration for the aggregate Exercise Price upon exercise thereof, or (2) purchase the Warrant from the Holder for a purchase price, payable in cash within five Trading Days after such request (or, if later, on the effective date of the Fundamental Transaction), equal to the Black Scholes value of the remaining unexercised portion of this Warrant on the date of such request. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (b) and insuring that the Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

 

 (c)           Number of Warrant Shares.  Simultaneously with any adjustment to the Exercise Price pursuant to this Section 9, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.

 

  

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(d)           Calculations. All calculations under this Section 9 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

 

(e)           Notice of Adjustments.  Upon the occurrence of each adjustment pursuant to this Section 9, the Company at its expense will promptly compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company’s Transfer Agent.

 

10.           Payment of Exercise Price. The Holder may pay the Exercise Price in one of the following manners:

 

(a)           Cash Exercise.  The Holder may deliver immediately available funds; or

 

(b)           Cashless Exercise.  If an Exercise Notice is delivered at a time when a registration statement permitting the Holder to resell the Warrant Shares is not then effective or the prospectus forming a part thereof is not then available to the Holder for the resale of the Warrant Shares, then the Holder may notify the Company in an Exercise Notice of its election to utilize cashless exercise, in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows:

 

X = Y [(A-B)/A]  

 

where:  

 

X = the number of Warrant Shares to be issued to the Holder.  

 

Y = the number of Warrant Shares with respect to which this Warrant is being exercised.  

 

A = the average of the Closing Prices for the five Trading Days immediately prior to (but not including) the Exercise Date.  

 

B = the Exercise Price.  

 

For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued.

 

11.           No Fractional Shares. No fractional shares of Warrant Shares will be issued in connection with any exercise of this Warrant. In lieu of any fractional shares which would, otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the Closing Price of one Warrant Share on the date of exercise.

 

12.           Notices.  Any and all notices or other communications or deliveries hereunder (including, without limitation, any Exercise Notice) shall be in writing and shall be deemed given and effective if provided pursuant to the Purchase Agreement. In case any time:  (1) the Company shall declare any cash dividend on its capital stock; (2) the Company shall pay any dividend payable in stock upon its capital stock or make any distribution to the holders of its capital stock; (3) the Company shall offer for subscription pro rata to the holders of its capital stock any additional shares of stock of any class or other rights; (4) there shall be any capital reorganization, or reclassification of the capital stock of the Company, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation; or (5) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in any one or more of said cases, the Company shall give prompt written notice to the Holder. Such notice shall also specify the date as of which the holders of capital stock of record shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange their capital stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, or conversion or redemption, as the case may be.  Such written notice shall be given at least 20 days prior to the action in question and not less than 20 days prior to the record date or the date on which the Company’s transfer books are closed in respect thereto.

 

  

6

  

 

13.           Registration Rights.  The Holder shall be entitled to the registration rights set forth in Section 6 of the Purchase Agreement.

 

14.           Miscellaneous.

 

(a)           This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder and their successors and assigns.

 

(b)           All questions concerning the construction, validity, enforcement and interpretation of this Warrant 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.

 

(c)           The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

 

(d)           In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

 

(e)           Prior to exercise of this Warrant, the Holder hereof shall not, by reason of by being a Holder, be entitled to any rights of a stockholder with respect to the Warrant Shares.

 

[Remainder of page intentionally left blank, signature page follows]

 

  

7

  

 

In witness whereof, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above.

 

	 	

MAGNEGAS CORPORATION

	 
	 	 	 	 
	 	
By: 

	/s/ 	 
	 	Name:	 	 
	 	Its: 	 	 

  

8

  

                                                                                       

EXERCISE NOTICE

The undersigned Holder hereby irrevocably elects to purchase                      shares of Common Stock pursuant to the attached Warrant.  Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Warrant.

 

(1) The undersigned Holder hereby exercises its right to purchase                      Warrant Shares pursuant to the Warrant.

 

(2) The Holder intends that payment of the Exercise Price shall be made as (check one):

 

                     “Cash Exercise” under Section 10

 

                              “Cashless Exercise” under Section 10

 

(3) If the holder has elected a Cash Exercise, the holder shall pay the sum of $____________ to the Company in accordance with the terms of the Warrant.

 

(4) Pursuant to this Exercise Notice, the Company shall deliver to the holder                      Warrant Shares in accordance with the terms of the Warrant.

 

 

	

Dated: _____________   __, _____

	Name of Holder: 
	 	 
	 	(Print)
	 	

____________________________________

	 	 
	 	

By:_________________________________

	 	

Its:_________________________________

	 	

Signature must conform in all respects to name of holder as specified on the face of the Warrant)

                                                                       

  

9

  

Warrant Shares Exercise Log

	
Date

	
Number of Warrant

Shares Available

to be Exercised

	
Number of Warrant

Shares Exercised

	
Number of Warrant

Shares Remaining

to be Exercised

	  	  	  	  

  

10

  

 

FORM OF ASSIGNMENT

 

[To be completed and signed only upon transfer of Warrant]

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto                              the right represented by the attached Warrant to purchase                  shares of Common Stock to which such Warrant relates and appoints                              attorney to transfer said right on the books of the Company with full power of substitution in the premises.

Dated: ____________ __, _______

_________________________________________________________________________

(Signature must conform in all respects to name of holder as specified on the face of the Warrant)

Address of Transferee

__________________________________________

__________________________________________

__________________________________________

  

Attest:

__________________________________

 

 

11

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