Document:

Exhibit 4.1

 

WARRANT AGENCY AGREEMENT

 

WARRANT AGENCY AGREEMENT made as of November 15, 2017 (the “Issuance Date”), between Synergy Pharmaceuticals Inc., a Delaware corporation, with offices at 420 Lexington Avenue, Suite 2012, New York, NY 10170 (“Company”), and Philadelphia Stock Transfer, Inc., with offices at 2320 Haverford Rd, Suite 230, Ardmore, PA 19003 (“Warrant Agent”).

 

WHEREAS, the Company is engaged in a public offering (the “Offering”) of common stock and warrants to purchase common stock and, in connection therewith, has determined to issue and deliver up to 21,705,426 Warrants (the “Warrants”) to the public investors, with each such Warrant evidencing the right of the holder thereof to purchase one share of common stock, par value $0.0001 per share, of the Company’s Common Stock (the “Common Stock”) for $ 2.86, subject to adjustment as described herein; and

 

WHEREAS, the Company has filed with the Securities and Exchange Commission a Registration Statement, No. 333-221501 on Form S-3 (as the same may be amended from time to time, the “Registration Statement”) for the registration, under the Securities Act of 1933, as amended (the “Act”) of, among other securities, the Warrants and the Common Stock issuable upon exercise of the Warrants (the “Warrant Shares”), and such Registration Statement was declared effective on November 13, 2017; and

 

WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, registration, transfer, exchange and exercise of the Warrants; and

 

WHEREAS, the Company desires to provide for the form and provisions of the Warrants, the terms upon which they shall be issued and exercised, and the respective rights, limitation of rights, and immunities of the Company, the Warrant Agent, and the holders of the Warrants; and

 

WHEREAS, all acts and things have been done and performed which are necessary to make the Warrants, when executed on behalf of the Company and countersigned by or on behalf of the Warrant Agent, as provided herein, the valid, binding and legal obligations of the Company, and to authorize the execution and delivery of this Warrant Agreement.

 

NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows:

 

1.                                      Appointment of Warrant Agent.  The Company hereby appoints the Warrant Agent to act as agent for the Company for the Warrants, and the Warrant Agent hereby accepts such appointment and agrees to perform the same in accordance with the terms and conditions set forth in this Warrant Agreement.

 

2.                                      Warrants.

 

2.1                               Form of Warrant.  Each Warrant shall be issued in registered form only, shall be in substantially the form of Exhibit A hereto, the provisions of which are incorporated herein, and shall be signed by, or bear the facsimile signature of, the Chief Executive Officer, President, Chief Financial Officer or Treasurer, Secretary or Assistant Secretary of the Company and shall bear a facsimile of the Company’s seal. In the event the person whose facsimile signature has been placed upon any Warrant shall have ceased to serve in the capacity in which such person signed the Warrant before such Warrant is issued, it may be issued with the same effect as if he or she had not ceased to be such at the date of issuance.  All of the Warrants shall initially be represented by one or more book-entry certificates (each a “Book-Entry Warrant Certificate”).

 

2.2.                            Effect of Countersignature.  Unless and until countersigned by the Warrant Agent pursuant to this Warrant Agreement, a Warrant shall be invalid and of no effect and may not be exercised by the holder thereof.

 

 

2.3.                            Registration.

 

2.3.1.                  Warrant Register.  The Warrant Agent shall maintain books (“Warrant Register”), for the registration of original issuance and the registration of transfer of the Warrants.  Upon the initial issuance of the Warrants, the Warrant Agent shall issue and register the Warrants in the names of the respective holders thereof in such denominations and otherwise in accordance with instructions delivered to the Warrant Agent by the Company.  To the extent the Warrants are DTC eligible as of the Issuance Date, all of the Warrants shall be represented by one or more Book-Entry Warrant Certificates deposited with the Depository Trust Company (the “Depository”) and registered in the name of Cede & Co., a nominee of the Depository. Ownership of beneficial interests in the Book-Entry Warrant Certificates shall be shown on, and the transfer of such ownership shall be effected through, records maintained (i) by the Depository or its nominee for each Book-Entry Warrant Certificate; (ii) by institutions that have accounts with the Depository (such institution, with respect to a Warrant in its account, a “Participant”); or (iii) directly on the book-entry records of the Warrant Agent with respect only to owners of beneficial interests that represent such direct registration.

 

If the Warrants are not DTC Eligible as of the Issuance Date or the Depository subsequently ceases to make its book-entry settlement system available for the Warrants, the Company may instruct the Warrant Agent regarding making other arrangements for book-entry settlement within ten (10) days after the Depository ceases to make its book-entry settlement available.  In the event that the Company does not make alternative arrangements for book-entry settlement within ten (10) days or the Warrants are not eligible for, or it is no longer necessary to have the Warrants available in, book-entry form, the Warrant Agent shall provide written instructions to the Depository to deliver to the Warrant Agent for cancellation each Book-Entry Warrant Certificate, and the Company shall instruct the Warrant Agent to deliver to the Depository definitive Warrant Certificates in physical form evidencing such Warrants.  Such definitive Warrant Certificates shall be in substantially the form annexed hereto as Exhibit A.

 

2.3.2.                  Beneficial Owner; Registered Holder.  The term “beneficial owner” shall mean any person in whose name ownership of a beneficial interest in the Warrants evidenced by a Book-Entry Warrant Certificate is recorded in the records maintained by the Depository or its nominee.  Prior to due presentment for registration of transfer of any Warrant, the Company and the Warrant Agent may deem and treat the person in whose name such Warrant shall be registered upon the Warrant Register (“registered holder”), as the absolute owner of such Warrant and of each Warrant represented thereby (notwithstanding any notation of ownership or other writing on the Warrant Certificate made by anyone other than the Company or the Warrant Agent), for the purpose of any exercise thereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.

 

2.4.                            Intentionally Omitted.

 

2.5                               Uncertificated Warrants.  Notwithstanding the foregoing and anything else herein to the contrary, the Warrants may be issued in uncertificated form.

 

3.                                      Terms and Exercise of Warrants.

 

3.1.                            Exercise Price.  Each Warrant shall, when countersigned by the Warrant Agent, entitle the registered holder thereof, subject to the provisions of such Warrant and of this Warrant Agreement, to purchase from the Company the number of shares of Common Stock stated therein, at the price of $2.86 per whole share, subject to the subsequent adjustments provided in Section 4 hereof.  The term “Exercise Price” as used in this Warrant Agreement refers to the price per share at which Common Stock may be purchased at the time a Warrant is exercised.

 

3.2.                            Duration of Warrants.  A Warrant may be exercised only during the period (“Exercise Period”) commencing on the Issuance Date and terminating at 11:59 P.M., New York City time on November 15, 2019 (“Expiration Date”).  Each Warrant not exercised on or before the Expiration Date shall become void, and all rights thereunder and all rights in respect thereof under this Warrant Agreement shall cease at the close of business on the Expiration Date.

 

2

 

3.3.                            Exercise of Warrants.

 

3.3.1.                  Exercise and Payment.  The provisions of section 1(a) of the form of warrant attached hereto as Exhibit A hereto are incorporated herein by reference.

 

3.3.2.                  Issuance of Certificates.  The Warrant Agent shall, by 11:00 A.M. New York Time on the business day following the date on which a notice of exercise is delivered (the “Exercise Date”) of any Warrant, advise the Company or the transfer agent and registrar in respect of (a) the Warrant Shares issuable upon such exercise as to the number of Warrants exercised in accordance with the terms and conditions of this Agreement, (b) the instructions of each registered holder or Participant, as the case may be, with respect to delivery of the Warrant Shares issuable upon such exercise, and the delivery of definitive Warrant Certificates, as appropriate, evidencing the balance, if any, of the Warrants remaining after such exercise, (c) in case of a Book-Entry Warrant Certificate, the notation that shall be made to the records maintained by the Depository, its nominee for each Book-Entry Warrant Certificate, or a Participant, as appropriate, evidencing the balance, if any, of the Warrants remaining after such exercise and (d) such other information as the Company or such transfer agent and registrar shall reasonably require.

 

The Company shall, by 5:00 P.M., New York time, on the second business day next succeeding the Exercise Date of any Warrant and the clearance of the funds in payment of the Warrant Price, execute, issue and deliver to the Warrant Agent, the Warrant Shares to which such registered holder or Participant, as the case may be, is entitled, in fully registered form, registered in such name or names as may be directed by such registered holder or the Participant, as the case may be.  Upon receipt of such Warrant Shares, the Warrant Agent shall, by 5:00 P.M., New York time, on the second Business Day next succeeding such Exercise Date, transmit such Warrant Shares to or upon the order of the registered holder or Participant, as the case may be.

 

In lieu of delivering physical certificates representing the Warrant Shares issuable upon exercise, provided the Company’s transfer agent is participating in the Depository’s Fast Automated Securities Transfer program, the Company shall use its reasonable best efforts to cause its transfer agent to electronically transmit the Warrant Shares issuable upon exercise to the Depository by crediting the account of the Depository or of the Participant through its Deposit Withdrawal Agent Commission system, provided the broker has properly initiated said DWAC.  The time periods for delivery described in the immediately preceding paragraph shall apply to the electronic transmittals described herein.

 

3.3.3.                  Valid Issuance.  All shares of Common Stock issued upon the proper exercise of a Warrant in conformity with this Warrant Agreement shall be validly issued, fully paid and nonassessable.

 

3.3.4.                  No Fractional Exercise.  Warrants may be exercised only in whole numbers of Warrant Shares.  No fractional Warrant Shares are to be issued upon the exercise of the Warrant, but rather the number of Warrant Shares to be issued shall be rounded up to the nearest whole number. If fewer than all of the Warrants evidenced by a Warrant Certificate are exercised, a new Warrant Certificate for the number of unexercised Warrants remaining shall be executed by the Company and countersigned by the Warrant Agent as provided in Section 2 of this Warrant Agreement, and delivered to the holder of this Warrant Certificate at the address specified on the books of the Warrant Agent or as otherwise specified by such registered holder. If fewer than all the Warrants evidenced by a Book-Entry Warrant Certificate are exercised, a notation shall be made to the records maintained by the Depository, its nominee for each Book-Entry Warrant Certificate, or a Participant, as appropriate, evidencing the balance of the Warrants remaining after such exercise.

 

3.3.5                     No Transfer Taxes.  The Company shall pay any stamp or other tax or governmental charge required to be paid in connection with any transfer involved in the issue of the Warrant Shares upon the exercise of Warrants; and in the event that any such transfer is involved, the Company shall not be required to issue or deliver any Warrant Shares until such tax or other charge shall have been paid or it has been established to the Company’s satisfaction that no such tax or other charge is due.

 

3.3.6                     Date of Issuance.  Each person in whose name any such certificate for shares of Common Stock is issued shall for all purposes be deemed to have become the holder of record of such shares on the date on which the Warrant was surrendered and payment of the Warrant Price was made, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is a date when the stock transfer

 

3

 

books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.

 

3.3.7                     Cashless Exercise Under Certain Circumstances. The provisions of section 1(d) of the form of warrant attached hereto as Exhibit A hereto are incorporated herein by reference.

 

3.3.8                     Disputes.  In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the registered holder the number of Warrant Shares that are not disputed.

 

4.                                      Adjustments.

 

4.1                               Adjustment of Exercise Price and Number of Warrant Shares. The provisions of section 2 of the form of warrant attached hereto as Exhibit A hereto are incorporated herein by reference.

 

4.2.                            Notices of Changes in Warrant.  Upon every adjustment of the Warrant Price or the number of shares issuable upon exercise of a Warrant, the Company shall give written notice thereof to the Warrant Agent, which notice shall state the Warrant Price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of a Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.  Upon the occurrence of any event specified in Section 4.1, then, in any such event, the Company shall give written notice to each registered holder, at the last address set forth for such holder in the warrant register, of the record date or the effective date of the event.  Failure to give such notice, or any defect therein, shall not affect the legality or validity of such event.

 

4.3.                            No Fractional Shares.  Notwithstanding any provision contained in this Warrant Agreement to the contrary, the Company shall not issue fractional shares upon exercise of Warrants.  If, by reason of any adjustment made pursuant to this Section 4, the holder of any Warrant would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a share, the Company shall, upon such exercise, round up to the nearest whole number the number of the shares of Common Stock to be issued to the registered holder.

 

4.4.                            Form of Warrant.  The form of Warrant need not be changed because of any adjustment pursuant to this Section 4, and Warrants issued after such adjustment may state the same Warrant Price and the same number of shares as is stated in the Warrants initially issued pursuant to this Warrant Agreement.  However, the Company may at any time in its sole discretion make any change in the form of Warrant that the Company may deem appropriate and that does not affect the substance thereof, and any Warrant thereafter issued or countersigned, whether in exchange or substitution for an outstanding Warrant or otherwise, may be in the form as so changed.

 

5.                                      Transfer and Exchange of Warrants.

 

5.1.                            Registration of Transfer.  The Warrant Agent shall register the transfer, from time to time, of any outstanding Warrant upon the Warrant Register, upon surrender of such Warrant for transfer, properly endorsed with signatures properly guaranteed and accompanied by appropriate instructions for transfer.  Upon any such transfer, a new Warrant representing an equal aggregate number of Warrants shall be issued and the old Warrant shall be cancelled by the Warrant Agent.  The Warrants so cancelled shall be delivered by the Warrant Agent to the Company from time to time upon request.

 

5.2.                            Procedure for Surrender of Warrants.  Warrants may be surrendered to the Warrant Agent, together with a written request for exchange or transfer reasonably acceptable to Warrant Agent, duly executed by the registered holder thereof, or by a duly authorized attorney, and thereupon the Warrant Agent shall issue in exchange therefor one or more new Warrants as requested by the registered holder of the Warrants so surrendered, representing an equal aggregate number of Warrants; provided, however, that except as otherwise provided herein or in any Book-Entry Warrant Certificate, each Book-Entry Warrant Certificate may be transferred only in whole and only to the Depository, to another nominee of the Depository, to a successor depository, or to a nominee of a successor depository; provided further, however, that in the event that a Warrant surrendered for transfer bears a restrictive legend, the Warrant Agent shall not cancel such Warrant and issue new Warrants in exchange therefor until the Warrant Agent has received an opinion of counsel for the Company stating that such

 

4

 

transfer may be made and indicating whether the new Warrants must also bear a restrictive legend.  Upon any such registration of transfer, the Company shall execute, and the Warrant Agent shall countersign and deliver, in the name of the designated transferee a new Warrant Certificate or Warrant Certificates of any authorized denomination evidencing in the aggregate a like number of unexercised Warrants.

 

5.3.                            Fractional Warrants.  The Warrant Agent shall not be required to effect any registration of transfer or exchange which will result in the issuance of a Warrant Certificate for a fraction of a Warrant.

 

5.4.                            Service Charges.  A service charge shall be made for any exchange or registration of transfer of Warrants, as negotiated between Company and Warrant Agent.

 

5.5.                            Warrant Execution and Countersignature.  The Warrant Agent is hereby authorized to countersign and to deliver, in accordance with the terms of this Warrant Agreement, the Warrants required to be issued pursuant to the provisions of this Section 5, and the Company, whenever required by the Warrant Agent, will supply the Warrant Agent with Warrants duly executed on behalf of the Company for such purpose.

 

6.                                      Limitations on Exercise.     The provisions of section 1(f) of the form of warrant attached hereto as Exhibit A hereto are incorporated herein by reference.

 

7.                                      Other Provisions Relating to Rights of Holders of Warrants.

 

7.1.                            No Rights as Stockholder.  Except as otherwise specifically provided herein, a registered holder, solely in its capacity as a holder of a Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant Agreement be construed to confer upon a registered holder, solely in its capacity as the registered holder of a Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the registered holder of the Warrant Shares which it is then entitled to receive upon the due exercise of a Warrant. A Warrant does not entitle the registered holder thereof to any of the rights of a stockholder.

 

7.2.                            Lost, Stolen, Mutilated, or Destroyed Warrants.  If any Warrant is lost, stolen, mutilated, or destroyed, the Company and the Warrant Agent may on such terms as to indemnity (including obtaining an open penalty bond protecting the Warrant Agent) or otherwise as they may in their discretion impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination, tenor, and date as the Warrant so lost, stolen, mutilated, or destroyed.  Any such new Warrant shall constitute a substitute contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated, or destroyed Warrant shall be at any time enforceable by anyone.

 

7.3.                            Reservation of Common Stock.  The Company shall at all times reserve and keep available a number of its authorized but unissued shares of Common Stock that will be sufficient to permit the exercise in full of all outstanding Warrants issued pursuant to this Warrant Agreement.

 

8.                                      Concerning the Warrant Agent and Other Matters.

 

8.1                               Concerning the Warrant Agent.  The Warrant Agent:

 

a)                                     shall have no duties or obligations other than those set forth herein and no duties or obligations shall be inferred or implied;

 

b)                                     may rely on and shall be held harmless by the Company in acting upon any certificate, statement, instrument, opinion, notice, letter, facsimile transmission, telegram or other document, or any security delivered to it, and reasonably believed by it to be genuine and to have been made or signed by the proper party or parties;

 

5

 

c)                                      may rely on and shall be held harmless by the Company in acting upon written or oral instructions or statements from the Company with respect to any matter relating to its acting as Warrant Agent;

 

d)                                     May consult with counsel satisfactory to it (including counsel for the Company) and shall be held harmless by the Company in relying on the advice or opinion of such counsel in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion of such counsel;

 

e)                                      solely shall make the final determination as to whether or not a Warrant received by Warrant Agent is duly, completely and correctly executed, and Warrant Agent shall be held harmless by the Company in respect of any action taken, suffered or omitted by Warrant Agent hereunder in good faith and in accordance with its determination;

 

f)                                       shall not be obligated to take any legal or other action hereunder which might, in its judgment subject or expose it to any expense or liability unless it shall have been furnished with an indemnity satisfactory to it; and

 

g)                                      shall not be liable or responsible for any failure of the Company to comply with any of its obligations relating to the Registration Statement or this Warrant Agreement, including without limitation obligations under applicable regulation or law.

 

8.2                               Payment of Taxes.  The Company will from time to time promptly pay all taxes and charges that may be imposed upon the Company or the Warrant Agent in respect of the issuance or delivery of shares of Common Stock upon the exercise of Warrants.  The Warrant Agent shall not register any transfer or issue or deliver any Warrant Certificate(s) or Warrant Shares unless or until the persons requesting the registration or issuance shall have paid to the Warrant Agent for the account of the Company the amount of such tax, if any, or shall have established to the reasonable satisfaction of the Company that such tax, if any, has been paid

 

8.3                                                                               Resignation, Consolidation, or Merger of Warrant Agent.

 

8.3.1.                  Appointment of Successor Warrant Agent.  The Warrant Agent, or any successor to it hereafter appointed, may resign its duties and be discharged from all further duties and liabilities hereunder after giving sixty (60) days’ notice in writing to the Company.  If the office of the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise, the Company shall appoint in writing a successor Warrant Agent in place of the Warrant Agent.  If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such resignation or incapacity by the Warrant Agent or by the holder of the Warrant (who shall, with such notice, submit his Warrant for inspection by the Company), then the holder of any Warrant may apply to the Supreme Court of the State of New York for the County of New York for the appointment of a successor Warrant Agent at the Company’s cost.  Any successor Warrant Agent (but not including the initial Warrant Agent), whether appointed by the Company or by such court, shall be a corporation organized and existing under the laws of the State of New York, in good standing and having its principal office in the Borough of Manhattan, City and State of New York, and authorized under such laws to exercise corporate trust powers and subject to supervision or examination by federal or state authority.  After appointment, any successor Warrant Agent shall be vested with all the authority, powers, rights, immunities, duties, and obligations of its predecessor Warrant Agent with like effect as if originally named as Warrant Agent hereunder, without any further act or deed; but if for any reason it becomes necessary or appropriate, the predecessor Warrant Agent shall execute and deliver, at the expense of the Company, an instrument transferring to such successor Warrant Agent all the authority, powers, and rights of such predecessor Warrant Agent hereunder; and upon request of any successor Warrant Agent the Company shall make, execute, acknowledge, and deliver any and all instruments in writing for more fully and effectually vesting in and confirming to such successor Warrant Agent all such authority, powers, rights, immunities, duties, and obligations.

 

8.2.2.                  Notice of Successor Warrant Agent.  In the event a successor Warrant Agent shall be appointed, the Company shall give notice thereof to the predecessor Warrant Agent and the transfer agent for the Common Stock not later than the effective date of any such appointment.

 

6

 

8.2.3.                  Merger or Consolidation of Warrant Agent.  Any corporation into which the Warrant Agent may be merged or with which it may be consolidated or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party shall be the successor Warrant Agent under this Warrant Agreement without any further act.

 

8.3.                            Fees and Expenses of Warrant Agent.

 

8.3.1.                  Remuneration.  The Company agrees to pay the Warrant Agent reasonable remuneration in an amount separately agreed to between Company and Warrant Agent for its services as Warrant Agent hereunder and will reimburse the Warrant Agent upon demand for all expenditures that the Warrant Agent may reasonably incur in the execution of its duties hereunder.  One half of the total Warrant Agent fees (not including postage) must be paid upon execution of this Warrant Agreement.  The remaining half must be paid within fifteen (15) business days thereafter.  An invoice for any out-of-pocket and/or per item fees incurred will be rendered to and payable by the Company within fifteen (15) days of the date of said invoice.  It is understood and agreed that all services to be performed by Warrant Agent shall cease if full payment for its services has not been received in accordance with the above schedule, and said services will not commence thereafter until all payment due has been received by Warrant Agent.

 

8.3.2.                  Further Assurances.  The Company agrees to perform, execute, acknowledge, and deliver or cause to be performed, executed, acknowledged, and delivered all such further and other acts, instruments, and assurances as may reasonably be required by the Warrant Agent for the carrying out or performing of the provisions of this Warrant Agreement.

 

8.4.                            Liability of Warrant Agent.

 

8.4.1.                  Reliance on Company Statement.  Whenever in the performance of its duties under this Warrant Agreement, the Warrant Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a statement signed by the President of the Company and delivered to the Warrant Agent.  The Warrant Agent may rely upon such statement for any action taken or suffered in good faith by it pursuant to the provisions of this Warrant Agreement.

 

8.4.2.                  Indemnity.  The Warrant Agent shall be liable hereunder only for its own gross negligence, willful misconduct or bad faith.  The Company agrees to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, claims, losses, damages, costs and reasonable counsel fees, for anything done or omitted by the Warrant Agent in the execution of this Warrant Agreement except as a result of the Warrant Agent’s gross negligence, willful misconduct, or bad faith.

 

8.4.3.                  Limitation of Liability. The Warrant Agent’s aggregate liability, if any, during the term of this Warrant Agreement with respect to, arising from, or arising in connection with this Warrant Agreement, or from all services provided or omitted to be provided under this Warrant Agreement, whether in contract, or in tort, or otherwise, is limited to, and shall not exceed, the amounts paid or payable hereunder by the Company to Warrant Agent as fees and charges, but not including reimbursable expenses.

 

8.4.4                     Disputes.  In the event any question or dispute arises with respect to the proper interpretation of this Warrant Agreement or the Warrant Agent’s duties hereunder or the rights of the Company or of any holder of a Warrant, the Warrant Agent shall not be required to act and shall not be held liable or responsible for refusing to act until the question or dispute has been judicially settled (and the Warrant Agent may, if it deems it advisable, but shall not be obligated to, file a suit in interpleader or for a declaratory judgment for such purpose) by final judgment rendered by a court of competent jurisdiction, binding on all parties interested in the matter which is no longer subject to review or appeal, or settled by a written document in form and substance satisfactory to the Warrant Agent and executed by the Company and each other interested party.  In addition, the Warrant Agent may require for such purpose, but shall not be obligated to require, the execution of such written settlement by all the Warrant holders, as applicable, and all other parties that may have an interest in the settlement.

 

7

 

8.4.5                     Exclusions.  The Warrant Agent shall have no responsibility with respect to the validity of this Warrant Agreement or with respect to the validity or execution of any Warrant (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Warrant Agreement or in any Warrant; nor shall it be responsible to make any adjustments required under the provisions of Section 4 hereof or responsible for the manner, method, or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Warrant Agreement or any Warrant or as to whether any shares of Common Stock will when issued be valid and fully paid and nonassessable.

 

8.5.                            Acceptance of Agency.  The Warrant Agent hereby accepts the agency established by this Warrant Agreement and agrees to perform the same upon the terms and conditions herein set forth and among other things, shall account promptly to the Company with respect to Warrants exercised and concurrently account for, and pay to the Company, all moneys received by the Warrant Agent for the purchase of shares of Common Stock through the exercise of Warrants.

 

9.                                      Miscellaneous Provisions.

 

9.1.                            Successors.  All the covenants and provisions of this Warrant Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns.

 

9.2.                            Notices.  Any notice, statement or demand authorized by this Warrant Agreement to be given or made by the Warrant Agent or by the holder of any Warrant to or on the Company shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent), as follows:

 

Synergy Pharmaceuticals Inc.

420 Lexington Avenue, Suite 2012

New York, NY 10170
 Attn:       Gary Jacob, Chief Executive Officer

 

Any notice, statement or demand authorized by this Warrant Agreement to be given or made by the holder of any Warrant or by the Company to or on the Warrant Agent shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company), as follows:

 

Philadelphia Stock Transfer, Inc.,

2320 Haverford Rd, Suite 230

Ardmore, PA 19003

Attn:  Compliance Department

 

with a copy to:

 

Sheppard Mullin Richter & Hampton LLP

30 Rockefeller Plaza
 New York, NY 10112
 Attn:  Jeffrey J. Fessler, Esq.

 

9.3.                            Applicable law.  The validity, interpretation, and performance of this Warrant Agreement and of the Warrants shall be governed in all respects by the laws of the State of New York, without giving effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction.  The Company hereby agrees that any action, proceeding or claim against it arising out of or relating in any way to this

 

8

 

Warrant Agreement shall be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive.  The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenience forum.  Any such process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 9.2 hereof.  Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim.

 

9.4.                            Persons Having Rights under this Warrant Agreement.  Nothing in this Warrant Agreement expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other than the parties hereto and the registered holders of the Warrants and, for purposes of Sections 3.3, 9.3 and 9.8, the Underwriter, any right, remedy, or claim under or by reason of this Warrant Agreement or of any covenant, condition, stipulation, promise, or agreement hereof.  The Underwriters shall be deemed to be an express third-party beneficiary of this Warrant Agreement with respect to Sections 3.3, 9.3 and 9.8 hereof. All covenants, conditions, stipulations, promises, and agreements  contained in this Warrant Agreement shall be for the sole and exclusive benefit of the parties hereto (and the Underwriters with respect to the Sections 3.3, 9.3 and 9.8 hereof) and their successors and assigns and of the registered holders of the Warrants.

 

9.5.                            Examination of the Warrant Agreement.  A copy of this Warrant Agreement shall be available at all reasonable times at the office of the Warrant Agent in the city of Philadelphia, Commonwealth of Pennsylvania, for inspection by the registered holder of any Warrant.  The Warrant Agent may require any such holder to submit his Warrant for inspection by it.

 

9.6.                            Counterparts.  This Warrant Agreement may be executed in any number of original or facsimile counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

 

9.7.                            Effect of Headings.  The Section headings herein are for convenience only and are not part of this Warrant Agreement and shall not affect the interpretation thereof.

 

9.8                               Amendments.  This Warrant Agreement may be amended by the parties hereto without the consent of any registered holder for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained herein or adding or changing any other provisions with respect to matters or questions arising under this Warrant Agreement as the parties may deem necessary or desirable and that the parties deem shall not adversely affect the interest of the registered holders.  All other modifications or amendments, including any amendment to increase the Warrant Price or shorten the Exercise Period, shall require the written consent of the Underwriter and the registered holders of a majority of the then outstanding Warrants.

 

9.9                               Severability. This Warrant Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Warrant Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Warrant Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.

 

9.10                        Force Majeure.  In the event either party is unable to perform its obligations under the terms of this Warrant Agreement because of acts of God, strikes, failure of carrier or utilities, equipment or transmission failure or damage that is reasonably beyond its control, or any other cause that is reasonably beyond its control, such party shall not be liable for damages to the other for any damages resulting from such failure to perform or otherwise from such causes.  Performance under this Warrant Agreement shall resume when the affected party or parties are able to perform substantially that party’s duties.

 

9.11                        Consequential Damages.  Notwithstanding anything in this Warrant Agreement to the contrary, neither party to this Warrant Agreement shall be liable to the other party for any consequential, indirect, special or incidental damages under any provision of this Agreement or for any consequential, indirect, punitive,

 

9

 

special or incidental damages arising out of any act or failure to act hereunder even if that party has been advised of or has foreseen the possibility of such damages.

 

10

 

IN WITNESS WHEREOF, this Warrant Agreement has been duly executed by the parties hereto as of the day and year first above written.

 

	
 
    	
SYNERGY PHARMACEUTICALS   INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name: Gary S. Jacob
    
	
 
    	
Title: CEO
    
	
 
    	
 
    
	
 
    	
PHILADELPHIA STOCK   TRANSFER, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

11

 

Exhibit A

[FORM OF WARRANT]

 

THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 1(a) OF THIS WARRANT.

 

SYNERGY PHARMACEUTICALS INC.

 

WARRANT TO PURCHASE COMMON STOCK

 

Warrant No.: 01

 

Date of Issuance: November 15, 2017 (“Issuance Date”)

 

Synergy Pharmaceuticals Inc., Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, CEDE & CO., the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59 p.m., New York time, on the Expiration Date (as defined below), 21,705,426 (subject to adjustment as provided herein) fully paid and non-assessable shares of Common Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”).  Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in Section 17.  This Warrant is one of the Warrants to Purchase Common Stock (the “Registered Warrants”) issued pursuant to that certain Underwriting Agreement, dated as of November 13, 2017 (the “Subscription Date”), by and between the Company and Jefferies LLC (the “Underwriting Agreement”) and (ii) the Company’s Registration Statement on Form S-3 (File number 333-221501) (the “Registration Statement”).

 

1.                                      EXERCISE OF WARRANT.

 

(a)                           Mechanics of Exercise.  Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrant may be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant.  Within one (1) Trading Day following an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date of such exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer of immediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (as defined in Section 1(d)).  The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder.  Execution and delivery of an Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares.  Execution and delivery of an Exercise Notice for all of the then-remaining Warrant Shares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof.  On or before the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronic mail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent (the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the terms herein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), the Company shall (i) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer 

 

12

 

Program, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (ii) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the Exercise Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant to such exercise.  Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such Warrant Shares (as the case may be).  If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise and upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event later than two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance with Section 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.  No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather the number of shares of Common Stock to be issued shall be rounded up to the nearest whole number.  The Company shall pay any and all transfer, stamp, issuance and similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant.  Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly made pursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (A) three (3) Trading Days after receipt of the applicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date) and (B) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of a Cashless Exercise) (such later date, the “Share Delivery Deadline”) shall not be deemed to be a breach of this Warrant.  From the Issuance Date through and including the Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.

 

(b)                           Exercise Price.  For purposes of this Warrant, “Exercise Price” means $2.86, subject to adjustment as provided herein.

 

(c)                            Company’s Failure to Timely Deliver Securities.  If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Deadline, either (I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificate for the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for such number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (or prospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is not available for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shares electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause (II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), and if on or after such Share Delivery Deadline 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 all or any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company (a “Buy-In”), then, in addition to all other remedies available to the Holder, the Company shall, within three (3) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “Buy-In Price”), at which point the Company’s obligation to so issue and deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, 

 

13

 

as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares) shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit the balance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date of the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “Buy-In Payment Amount”).  Nothing shall limit the 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 shares of Common Stock (or to electronically deliver such shares of Common Stock) upon the exercise of this Warrant as required pursuant to the terms hereof.

 

(d)                           Cashless Exercise.  Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof the Registration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holder may, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according to the following formula (a “Cashless Exercise”):

 

Net Number = (A x B) - (A x C)

D

 

For purposes of the foregoing formula:

 

A= the total number of shares with respect to which this Warrant is then being exercised.

 

B = the quotient of (x) the sum of the VWAP of the Common Stock of each of the three (3) Trading Days ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice, divided by (y) three (3).

 

C =  the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.

 

D =  the VWAP of the Common Stock at the close of business on the Principal Market on the date of the delivery of the applicable Exercise Notice.

 

If the Warrant Shares are issued in a Cashless Exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the 1933 Act, the Warrant Shares take on the registered characteristics of the Warrants being exercised.  For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued in a Cashless Exercise 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 pursuant to the Underwriting Agreement.

 

In the event the Company does not have an effective Registration Statement at the time of exercise hereof, there is no circumstance provided for herein that would require the Company to net cash settle the Warrant in lieu of issuing Warrant Shares.

 

(e)                            Disputes.  In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issued pursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute in accordance with Section 13.

 

14

 

(f)                             Limitations on Exercises.  The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise any portion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extent that after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise.  For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held by the Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercised portion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including other Registered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitation contained in this Section 1(f)(i).  For purposes of this Section 1(f)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act.  For purposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding the Maximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public filing with the SEC, as the case may be, (y) a more recent public announcement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stock outstanding (the “Reported Outstanding Share Number”).  If the Company receives an Exercise Notice from the Holder at a time when the actual number of outstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number of shares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determined pursuant to this Section 1(f)(i), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquired pursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, the Company shall return to the Holder any exercise price paid by the Holder for the Reduction Shares.  For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number was reported.  In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other Attribution Parties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (as determined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficial ownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have the power to vote or to transfer the Excess Shares.  As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, the Company shall return to the Holder the exercise price paid by the Holder for the Excess Shares.  Upon delivery of a written notice to the Company, the Holder may from time to time increase (with such increase not effective until the sixty-first (61st) day after delivery of such notice) or decrease the Maximum Percentage to any other percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until the sixty-first (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other Attribution Parties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder.  For purposes of clarity, the shares of Common Stock issuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act.  No prior inability to exercise this Warrant pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f)(i) to the extent necessary to correct this paragraph or any portion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section

 

15

 

1(f)(i) or to make changes or supplements necessary or desirable to properly give effect to such limitation.  The limitation contained in this paragraph may not be waived and shall apply to a successor holder of this Warrant.

 

(g)                            Reservation of Shares.

 

(i)                                     Required Reserve Amount.  So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under this Warrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfy the Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise) (the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) be reduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.  The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among the holders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on the Closing Date (without regard to any limitations on exercise) or increase in the number of reserved shares, as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s Registered Warrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata based on the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitations on exercise).

 

(ii)                                  Insufficient Authorized Shares.  If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the Registered Warrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for all the Registered Warrants then outstanding.  Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock.  In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal.

 

2.                                      ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.  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 1(g)(ii).

 

(a)                           Stock Dividends and Splits.  Without limiting any provision of Section 2(b), Section 2(e), Section 3 or Section 4, if the Company, at any time on or after the Subscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied 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.  If any event requiring an adjustment under this paragraph occurs during 

 

16

 

the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflect such event.

 

(b)                           Adjustment Upon Issuance of Shares of Common Stock.  If and whenever on or after the Subscription Date, the Company issues or sells, or in accordance with this Section 1(g)(ii) is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration per share (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (such Exercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the Exercise Price then in effect shall be reduced to an amount equal to the New Issuance Price.  For all purposes of the foregoing (including, without limitation, determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:

 

(i)                                     Issuance of Options.  If the Company in any manner grants or sells any Options (other than Excluded Securities) and the lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share.  For purposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof”  shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price set forth in such Option for which one share of Common Stock is issuable upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on (including, without limitation, the excess, if any, of the initial fair market value of such Convertible Security over such portion of the purchase price paid for such Option in accordance with Section 2(b)(iv) below), the holder of such Option (or any other Person).  Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of such shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.

 

(ii)                                  Issuance of Convertible Securities.  If the Company in any manner issues or sells any Convertible Securities (other than Excluded Securities) and the lowest price per share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale of such Convertible Securities for such price per share.  For the purposes of this Section 2(b)(ii), the “lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security or otherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock is issuable upon conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale of such Convertible Security plus the value of any other consideration received or

 

17

 

receivable by, or benefit conferred on (including, without limitation, the excess, if any, of the initial fair market value of such Convertible Security over such portion of the purchase price paid for such Convertible Security in accordance with Section 2(b)(iv) below), the holder of such Convertible Security (or any other Person).  Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any such issuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be made pursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of such issuance or sale.

 

(iii)                               Change in Option Price or Rate of Conversion.  If the purchase or exercise price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion or exercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decrease shall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold.  For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increased or decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease.  No adjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.

 

(iv)                              Calculation of Consideration Received.  If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with the issuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Option and/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), together comprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to be the lower of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for which one share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii) above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the public announcement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Market on a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period).  If any shares of Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount of consideration received by the Company therefor.  If any shares of Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security, but not for the purpose of the calculation of the Black Scholes Consideration Value) will be deemed to be the net amount of consideration received by the Company therefor.  If any shares of Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration received by the Company (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security, but not for the purpose of the calculation of the Black Scholes Consideration Value) will be the fair value of such consideration, except where such consideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be the arithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt.  If any shares of Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security, but not for the 

 

18

 

purpose of the calculation of the Black Scholes Consideration Value) will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be).  The fair value of any consideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder.  If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Holder.  The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company.

 

(v)                                 Record Date.  If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares of Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase (as the case may be).

 

(c)                            Number of Warrant Shares.  Simultaneously with any adjustment to the Exercise Price pursuant to Section 1(g)(ii)(a), 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 (without regard to any limitations on exercise contained herein).

 

(d)                           Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities.  In addition to and not in limitation of the other provisions of this Section , if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (any such securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable or exercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or more reset(s) to a fixed price, but exclusive of such formulations reflecting customary anti-dilution provisions (such as share splits, share combinations, share dividends and similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide written notice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options.  From and after the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its sole discretion to substitute the Variable Price then in effect for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise of this Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect.  The Holder’s election to rely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.

 

(e)                            Stock Combination Event Adjustment.  If at any time and from time to time on or after the Issuance Date there occurs any stock combination, reverse split or other similar transaction involving the Common Stock (each, a “Stock Combination Event”, and such date thereof, the “Stock Combination Event Date”) and the Event Market Price (as defined below) is less than the Exercise Price then in effect (after giving effect to the adjustment in clause 2(a) above), then on the sixteenth (16th) Trading Day immediately following such Stock Combination Event, the Exercise Price then in effect on such sixteenth (16th) Trading Day (after giving effect to the adjustment in Section 2(a) above) shall be reduced (but in no event increased) to the Event Market Price.  For the avoidance of doubt, if the adjustment in the immediately preceding sentence would otherwise result in an increase in the Exercise Price hereunder, no adjustment shall be made.

 

(f)                             Other Events.  In the event that the Company (or any subsidiary) shall take any action to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplated by the provisions of this Section 2 but not expressly provided for by 

 

19

 

such provisions (including, without limitation, the granting of  stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriate adjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustment pursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, provided further that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board of directors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.

 

(g)                            Calculations.  All calculations under this Section 1(g)(ii) shall be made by rounding 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 issuance or sale of Common Stock.

 

(h)                           Voluntary Adjustment By Company.  The Company may at any time during the term of this Warrant, with the prior written consent of the Holder, reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the board of directors of the Company.

 

3.                                      RIGHTS UPON DISTRIBUTION OF ASSETS.  In addition to any adjustments pursuant to Section 1(g)(ii) above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right to participate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on any subsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).

 

4.                                      PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.

 

(a)                           Purchase Rights.  In addition to any adjustments pursuant to Section 1(g)(ii) above, if at any time prior to the Expiration Date the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such 

 

20

 

Purchase Right (and beneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on any subsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).

 

(b)                           Fundamental Transactions.  The Company shall not enter into or be party to a Fundamental Transaction unless the Successor Entity assumes in writing all of the obligations of the Company under this Warrant in accordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance reasonably satisfactory to the Holder, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number of shares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction).  Upon the consummation of each Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant with the same effect as if such Successor Entity had been named as the Company herein.  Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter)) issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of the Successor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), as adjusted in accordance with the provisions of this Warrant.  Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its sole option, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant.  In addition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter)) issuable upon the exercise of the Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant).  Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.

 

(c)                            Black Scholes Value.  Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any time commencing on the earliest to occur of (x) the public disclosure of any Change of Control, (y) the consummation of any Change of Control and (z) the Holder first becoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control by the Company pursuant to a Current Report on Form 8-K filed with the SEC, (other than a Change of Control which was not approved by the Board of Directors, as to which this right shall not apply) the Company or the Successor Entity (as the case may be) shall purchase this Warrant from the Holder on the date of

 

21

 

such request by paying to the Holder cash in an amount equal to the Black Scholes Value.  Payment of such amounts shall be made by the Company (or at the Company’s direction) to the Holder on or prior to the later of (x) the second (2nd) Trading Day after the date of such request and (y) the date of consummation of such Change of Control.

 

(d)                           Application.  The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shall be applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant (provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registered under the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).

 

5.                                      NONCIRCUMVENTION.  The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issuance or sale of securities, or any other voluntary action,  avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.  Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the exercise of this Warrant.  Notwithstanding anything herein to the contrary, if after the sixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant to restrictions set forth in Section 1(f) hereof), the Company shall use its reasonable best efforts to promptly remedy such failure, including, without limitation, obtaining such consents or approvals as necessary to permit such exercise into shares of Common Stock.

 

6.                                      WARRANT HOLDER NOT DEEMED A STOCKHOLDER.  Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in its capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of this Warrant.  In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.  Notwithstanding this Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders;provided, however, that the Company shall not be obligated to provide such notice or information if it is filed with the Securities and Exchange Commission through EDGAR and available to the public through the EDGAR system.

 

7.                                      REISSUANCE OF WARRANTS.

 

(a)                           Transfer of Warrant.  If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.

 

(b)                           Lost, Stolen or Mutilated Warrant.  Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and 

 

22

 

deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.

 

(c)                            Exchangeable for Multiple Warrants.  This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, no warrants for fractional shares of Common Stock shall be given.

 

(d)                           Issuance of New Warrants.  Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.

 

8.                                      NOTICES.  Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given to the Holder at the address or facsimile number appearing on the Warrant Register or such other address or facsimile number as the Holder may provide to the Company in accordance with this Section 8.  The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than the issuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reason therefor.  Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the Exercise Price and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least ten Trading Days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Days prior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of its Subsidiaries, the Company shall simultaneously file such notice with the SEC pursuant to a Current Report on Form 8-K.  If the Company or any of its Subsidiaries provides material non-public information to the Holder that is not simultaneously filed in a Current Report on Form 8-K and the Holder has not agreed to receive such material non-public information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of its Subsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basis of, such material non-public information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall be definitive and may not be disputed or challenged by the Company.

 

9.                                      AMENDMENT AND WAIVER.  Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder.  No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.

 

10.                               SEVERABILITY.  If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or 

 

23

 

unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties.  The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

11.                               GOVERNING LAW.  This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.  The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to the Company at 420 Lexington Avenue, Suite 2012, New York, NY 10170, Attn:  Gary Jacob, Chief Executive Officer and agrees that such service shall constitute good and sufficient service of process and notice thereof.  The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.  THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

12.                               CONSTRUCTION; HEADINGS.  This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof.  The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.

 

13.                               DISPUTE RESOLUTION.

 

(a)                           Submission to Dispute Resolution.

 

(i)                                     In the case of a dispute relating to the Exercise Price, the Closing Sale Price, Black Scholes Value or fair market value or the arithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any of the foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile or email (A) if by the Company, within two (2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, (x) if with respect to a Change of Control, within ninety (90) days after the public disclosure of the consummation of such Change of Control, or (y) otherwise, within ten (10) Trading Days after the Holder learns of the circumstances giving rise to such dispute (or, if the Holder thereafter learns new information with respect to such circumstances, within ten (10) Trading Days after the Holder learns of such new information).  If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, such Closing Sale Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as the case may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of such dispute to the Company or the Holder (as the case may be), then the Holder and the Company shall mutually agree upon, and select, an independent, reputable investment bank  to resolve such dispute.

 

(ii)                                  The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered in accordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, no later than 5:00 

 

24

 

p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the investment bank was selected by the parties hereto (the “Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the “Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required Dispute Documentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to such dispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investment bank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested by such investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to such investment bank in connection with such dispute (other than the Required Dispute Documentation).

 

(iii)                               The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and the Holder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of such investment bank shall be paid 50/50 by the Company and the Holder.

 

(b)                           Miscellaneous.  The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Company and the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”) and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) a dispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall be entitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by such investment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance or sale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving such dispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant, (iv) either the Company or the Holder shall have the right to submit any dispute described in this Section 13 to any state or federal court sitting in The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holder from obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).

 

14.                               REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.  The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Warrant.  The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein.  Amounts set forth or provided for herein with respect to payments, exercises and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof).  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate.  The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary and 

 

25

 

permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security.  The Company shall provide all information and documentation to the Holder that is  requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 1(g)(ii) hereof).  The issuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.

 

15.                               PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS.  If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions of this Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involving a claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.

 

16.                               TRANSFER.  This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.

 

17.                               CERTAIN DEFINITIONS.  For purposes of this Warrant, the following terms shall have the following meanings:

 

(a)                           “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

 

(b)                           “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

 

(c)                            “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (or deemed issuance or sale in accordance with Section 1(g)(ii)) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that could result in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cash settlement rights, cash adjustment or other similar rights).

 

(d)                           “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

 

(e)                            “Approved Stock Plan” means any employee benefit plan which has been approved by the board of directors of the Company prior to or subsequent to the date hereof pursuant to which shares of Common Stock and options to purchase Common Stock may be issued to any employee, officer, consultant or director for services provided to the Company in their capacity as such.

 

(f)                             “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managed accounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliates or principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Group together with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could be aggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act.  For clarity, the purpose of the foregoing is to subject collectively the Holder and all other Attribution Parties to the Maximum Percentage.

 

26

 

(g)                            “Black Scholes Consideration Value” means the value of the applicable Option, Convertible Security or Adjustment Right  (as the case may be) as of the date of issuance thereof calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the public announcement of the execution of definitive documents with respect to the issuance of such Option or Convertible Security (as the case may be), (ii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of such Option, Convertible Security or Adjustment Right (as the case may be) as of the date of issuance of such Option, Convertible Security or Adjustment Right (as the case may be), (iii) a zero cost of borrow and (iv) an expected volatility equal to the greater of 100% and the 30 day volatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the date of issuance of such Option, Convertible Security or Adjustment Right (as the case may be).

 

(h)                           “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section 4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding the announcement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the Trading Day of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any) plus the value of the non-cash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effect on the date of the Holder’s request pursuant to Section 4(c), (iii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of (1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date of consummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of the consummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 day volatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the earliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C) the date on which the Holder first became aware of the applicable Fundamental Transaction.

 

(i)                               “Bloomberg” means Bloomberg, L.P.

 

(j)                              “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

 

(k)                           “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, wholly-owned Subsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders of the Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization or reclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (or entities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities) after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company or any of its Subsidiaries.

 

(l)                               “Closing Sale Price” means, for any security as of any date, the last closing trade price for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing trade price, then the last trade price of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last trade price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing does not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no last trade price is reported for such security by Bloomberg, the 

 

27

 

average of the ask prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC).  If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder.  If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13.  All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

(m)                       “Common Stock” means (i) the Company’s shares of common stock, $0.0001 par value per share, and (ii) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.

 

(n)                           “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.

 

(o)                           “Eligible Market” means The New York Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market or the Principal Market.

 

(p)                           “Event Market Price” means, with respect to any Stock Combination Event Date, the quotient determined by dividing (x) the sum of the VWAP of the Common Stock for each of the five (5) lowest Trading Days during the fifteen (15) consecutive Trading Day period ending and including the Trading Day immediately preceding the sixteenth (16th) Trading Day after such Stock Combination Event Date, divided by (y) five (5).

 

(q)                                 “Excluded Securities” means (i) shares of Common Stock, restricted stock units, stock appreciation rights, options to purchase Common Stock or similar rights issued to directors, officers, employees or consultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that the exercise price of any such options is not lowered, none of such options are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adversely affects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than = options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversion price of any such Convertible Securities (other than options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) is not lowered, none of such Convertible Securities (other than options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any such Convertible Securities (other than options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) are otherwise materially changed in any manner that adversely affects any of the Buyers; (iii) shares of Common Stock, Options and Convertible Securities issued pursuant to equipment acquisitions, strategic mergers or acquisitions of other assets or businesses, or strategic licensing or development transactions; provided that (x) the primary purpose of such issuance is not to raise capital as determined in good faith by the Buyers, (y) the purchaser or acquirer of such shares of Common Stock in such issuance solely consists of either (1) the actual participants in such strategic licensing or development transactions, (2) the actual owners of such assets or securities acquired in such merger or acquisition or (3) the shareholders, partners or members of the foregoing Persons, and (z) the number or amount (as the case may be) of such shares of Common Stock issued to such Person by the Company shall not be disproportionate to such Person’s actual participation in such strategic licensing or development transactions or ownership of such assets or securities to be acquired by the Company (as applicable); (iv) the shares of Common Stock issuable upon exercise of the Registered Warrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilution adjustments pursuant to the terms thereof in effect as of the Subscription Date); (v) up to an aggregate of $10,000,000 of gross proceeds from the sale of shares of Common Stock.

 

(r)                              “Expiration Date” means the date that is the second (2nd) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or on which trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.

 

28

 

(s)                             “Fundamental Transaction” means upon Board approval (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule 1-02 of Regulation S-X) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have its Common Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all Subject Entities making or party to, or Affiliated with any Subject Entities making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in the aggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entities as of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow such Subject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stock without approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction.

 

(t)                              “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d-5 thereunder.

 

(u)                           “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

 

(v)                           “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

 

(w)                         “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.

 

29

 

(x)                           “Principal Market” means the the Nasdaq Global Select Market.

 

(y)                           “SEC” means the United States Securities and Exchange Commission or the successor thereto.

 

(z)                            “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.

 

(aa)                    “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.

 

(bb)                    “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) or (y) with respect to all determinations other than price determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successor thereto) is open for trading of securities.

 

(cc)                      “VWAP” means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or, if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set to weighted average) or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC).  If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the Holder.  If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13.  All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction during such period.

 

[signature page follows]

 

30

 

IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.

 

	
 
    	
SYNERGY PHARMACEUTICALS   INC., INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

	
DATED: 
    
	
 
    
	
 
    
	
Countersigned:   
    
	
PHILADELPHIA STOCK TRANSFER, INC.,   
    
	
as   Warrant Agent
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

 

EXHIBIT A

 

EXERCISE NOTICE

 

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
 WARRANT TO PURCHASE COMMON STOCK

 

SYNERGY PHARMACEUTICALS INC., INC.

 

The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No.         (the “Warrant”) of Synergy Pharmaceuticals Inc., Inc., a Delaware corporation (the “Company”) as specified below.  Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

 

1.                                      Form of Exercise Price.  The Holder intends that payment of the Aggregate Exercise Price shall be made as:

 

o                                    a “Cash Exercise” with respect to                   Warrant Shares; and/or

 

o                                    a “Cashless Exercise” with respect to                 Warrant Shares.

 

In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holder hereby represents and warrants that this Exercise Notice was executed by the Holder at            [a.m.][p.m.] on the date set forth below.

 

2.                                      Payment of Exercise Price.  In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $                    to the Company in accordance with the terms of the Warrant.

 

3.                                      Maximum Percentage Representation.  Notwithstanding anything to the contrary contained herein, this Exercise Notice shall constitute a representation by the Holder of the Warrant submitting this Exercise Notice that after giving effect to the exercise provided for in this Exercise Notice, such Holder (together with its affiliates) will not have beneficial ownership (together with the beneficial ownership of such Person’s affiliates) of a number of shares of Common Stock which exceeds the Maximum Percentage (as defined in the Warrant) of the total outstanding shares of Common Stock of the Company as determined pursuant to the provisions of Section 1(f) of the Warrant.

 

4.                                      Delivery of Warrant Shares.  The Company shall deliver to Holder, or its designee or agent as specified below,            shares of Common Stock in accordance with the terms of the Warrant.  Delivery shall be made to Holder, or for its benefit, as follows:

 

o                                    Check here if requesting delivery as a certificate to the following name and to the following address:

 

	
Issue to:
    	
 
    
	
 
    	
 
    

 

o                                    Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:

 

	
DTC Participant:
    	
 
    
	
 
    	
 
    
	
DTC Number:
    	
 
    

 

 

	
Account Number:
    	
 
    

 

	
Date:                     ,           
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Name of Registered Holder
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Tax ID:
    	
 
    
	
 
    	
Facsimile:
    	
 
    
	
 
    	
E-mail Address:
    	
 
    

 

 

EXHIBIT B

 

ACKNOWLEDGMENT

 

The Company hereby acknowledges this Exercise Notice and hereby directs                to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated          , 201 , from the Company and acknowledged and agreed to by                .

 

	
 
    	
SYNERGY PHARMACEUTICALS   INC., INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

34Blueprint

Exhibit 10.18

EXPORT SERVICE AGREEMENT

 

 

 

between

 

 

 

PURE CYCLE CORPORATION

 

 

 

and

 

 

 

RANGEVIEW METROPOLITAN DISTRICT,

 

ACTING BY AND THROUGH ITS WATER ACTIVITY ENTERPRISE

 

 

TABLE OF CONTENTS

Page

 

 

	

ARTICLE I Definitions

	

2

	

1.1

	

Lowry Range

	

2

	

1.2

	

New Service Agreement

	

2

	

1.3

	

Operating Expenses

	

3

	

1.4

	

Rules and Regulations

	

3

	

1.5

	

Schedule of Service

	

3

	

1.6

	

Wastewater User

	

3

	

1.7

	

Wastewater System

	

3

	

1.8

	

Water User

	

3

	

1.9

	

Water System

	

3

	

ARTICLE II Contract Service Provider

	

3

	

2.1

	

Exclusivity

	

3

	

2.2

	

Service Provider

	

3

	

2.3

	

Additional Consideration

	

4

	

ARTICLE III Representations and Covenants

	

4

	

3.1

	

Lease

	

4

	

3.2

	

New Service Agreements

	

4

	

3.3

	

Conflicts of Interest

	

4

	

3.4

	

Rangeview Administrative Functions

	

4

	

ARTICLE IV Agreements and Service

	

5

	

4.1

	

Customers

	

5

	

4.2

	

Construction

	

5

	

4.3

	

Water Quality

	

6

	

4.4

	

Wastewater System

	

6

	

4.5

	

Rules and Regulations of Rangeview

	

6

	

ARTICLE V Coordination of Lease Assets

	

7

	

ARTICLE VI Ownership, Operation, and Maintenance of
Facilities

	

7

	

ARTICLE VII Obligations of Service Provider

	

7

	

7.1

	

Water System and Wastewater System

	

7

	

7.2

	

Control

	

7

	

7.3

	

Phased Development

	

7

	

7.4

	

Administration

	

7

	

7.5

	

Records

	

7

	

7.6

	

Services

	

8

	

7.7

	

Compliance with Laws

	

8

	

7.8

	

Personnel

	

8

	

7.9

	

Permits and Licenses

	

8

	

7.1

	

Taxes

	

9

	

7.11

	

Financing

	

9

 

-i-

 

 

	

7.12

	

Reporting

	

9

	

7.13

	

Accounting

	

9

	

7.14

	

Schedule of Service

	

9

	

ARTICLE VIII Billing and Rates

	

10

	

8.1

	

Rates

	

10

	

8.2

	

Billing

	

10

	

8.3

	

Renegotiation

	

10

	

8.4

	

Reserves

	

11

	

8.5

	

Reports and Audits

	

12

	

ARTICLE IX Management of Water

	

13

	

ARTICLE X Rights-of-Way

	

13

	

10.1

	

Rights-of-Way

	

13

	

10.2

	

Fees for Rights-of-Way

	

13

	

10.3

	

Condemnation of Land

	

14

	

ARTICLE XI Indemnification

	

14

	

ARTICLE XII Insurance and Bonds

	

14

	

12.1

	

Insurance

	

14

	

12.2

	

Bonds

	

14

	

12.3

	

Bond of Contractors

	

14

	

ARTICLE XIII Term, Default and Termination

	

15

	

13.1

	

Term

	

15

	

13.2

	

Default and Remedies

	

15

	

13.3

	

Service Provider Right of Termination

	

16

	

13.4

	

Termination of New Service Agreement

	

16

	

13.5

	

Compliance with Regulations

	

16

	

13.6

	

Multi-Fiscal Year Obligation

	

16

	

ARTICLE XIV General Provisions

	

16

	

14.1

	

Assignment

	

16

	

14.2

	

Third Party Beneficiaries

	

17

	

14.3

	

Notice

	

17

	

14.4

	

Construction

	

17

	

14.5

	

Entire Agreement

	

17

	

14.6

	

Authority

	

17

	

14.7

	

Copies

	

18

	

14.8

	

Counterparts

	

18

	

14.9

	

Amendment

	

18

	

14.1

	

Compliance with Law

	

18

	

14.11

	

Binding Effect

	

18

	

14.12

	

Severability

	

18

 

-ii-

 

 

	

14.13

	

Duty of Good Faith and Fair Dealing; Regular
Consultation

	

18

	

14.14

	

Further Assurance

	

18

	

14.15

	

Governing Law

	

18

	

14.16

	

Arbitration

	

18

	

14.17

	

Litigation and Attorneys’ Fees

	

19

	

14.18

	

No Waiver of Governmental Immunity

	

19

	

14.19

	

Force Majeure

	

19

 

 

Exhibit
A        

Schedule of
Services

 

-iii-

 

EXPORT SERVICE AGREEMENT

 

THIS
EXPORT SERVICE AGREEMENT (the “Agreement”) is entered
into as of the 16 day of June 2017, by and between PURE CYCLE
CORPORATION, a Colorado corporation (“Service
Provider”), and RANGEVIEW METROPOLITAN DISTRICT, a
quasi-municipal corporation and political subdivision of the State
of Colorado, acting by and through its water activity enterprise
(“Rangeview”).

 

RECITALS

 

A. Rangeview is a
special district organized pursuant to Title 32 of the
Colorado Revised Statutes with the power, among others, to supply
water for domestic and other public and private purposes and to
provide complete sanitary sewage collection, transmission,
treatment and disposal services. Rangeview’s water activity
enterprise was established by resolution of the district adopted at
a public meeting of its board of directors on September 11,
1995, and effective as of the date of its adoption.

 

B. Service Provider is
a corporation involved in the acquisition and development of water
and wastewater facilities and systems.

 

C. Rangeview, Service
Provider, and the State of Colorado, acting through the State Board
of Land Commissioners (the “Land Board”), are parties
to Lease Number S-37280, most recently amended and restated on
July 10, 2014 (the “Lease”), pursuant to which
Rangeview and Service Provider have certain water rights as defined
in the Lease.

 

D. Service Provider
and Rangeview are parties to a Service Agreement dated
April 11, 1996, most recently amended and restated on July 10,
2014 (the “Lowry Service Agreement”), pursuant to which
Rangeview granted Service Provider the exclusive right as its agent
to provide water services to surface tenants, occupants,
developers, landowners and all other water users on the Lowry Range
(as defined below), subject to the terms and conditions set forth
in the Lease.

 

E. Service Provider
and Rangeview are parties to a Wastewater Service Agreement dated
January 22, 1997 (the “Lowry Wastewater Service
Agreement”), pursuant to which Rangeview granted Service
Provider the exclusive right as its agent to provide wastewater
service to persons and entities who own real property on the Lowry
Range and in all other property included in Rangeview’s
service area with Service Provider’s prior written consent
and agreement to provide such properties with wastewater
service.

 

F. Service Provider
owns certain water rights, including water rights and water storage
rights it purchased pursuant to the Lease, water rights located in
Arapahoe County, and water rights pursuant to the WISE Project
Financing and Service Agreement between Service Provider and
Rangeview dated November 10, 2014 (the “WISE
Agreement”) relating to the Water Infrastructure Supply
Efficiency Partnership known as “WISE”, and may acquire
additional water rights for use as it deems desirable.

 

G. Rangeview has
acquired and anticipates acquiring rights to provide water and/or
wastewater service to governmental entities, including cities,
towns, and special districts, and property owners, who may or may
not have sufficient water supplies, financial capabilities, design,
engineering, construction, or operational capabilities to construct
Water Systems or Wastewater Systems (each as defined below) and who
may require services that Service Provider is capable of
providing.

 

 

 

 

H. Rangeview is
desirous of expanding its relationship with Service Provider in
exchange for Service Provider’s commitment to provide water
and wastewater service, as applicable, to customers pursuant to
this Agreement and has determined that it is in the best interest
of Rangeview to enter into this Agreement with Service Provider for
the following reasons, among others:

 

(1) Service Provider
has a long-term relationship with Rangeview and is the service
provider for the Lowry Range;

 

(2) It is more
efficient and economical to have only one service provider with
respect to Rangeview’s development of Water and Wastewater
Systems to provide water and wastewater service for customers on
and off the Lowry Range;

 

(3) It is desirable to
limit the number of parties jointly using and expanding the Water
and Wastewater Systems; and

 

(4) Service Provider
has expertise in the development and financing of water and
wastewater facilities and systems.

 

I. The parties desire
to enter into this Agreement to provide the terms and conditions
under which Service Provider will act as Rangeview’s contract
service provider to design, permit, finance, construct, operate and
maintain Water Systems to provide water service to Water Users and
Wastewater Systems to provide wastewater service to Wastewater
Users.

 

AGREEMENT

 

In
consideration of the foregoing, the covenants and agreements set
forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:

 

ARTICLE I 

Definitions

 

As used
in this Agreement, the following terms shall have the meanings set
forth in this Agreement or as referenced below:

 

1.1 Lowry Range . “Lowry
Range” shall mean the approximately 24,567.21 acres in
Arapahoe County, Colorado as more particularly described in the
Lease.

 

1.2 New Service Agreement
.
“New Service Agreement” shall mean the agreement(s) set
forth on the Schedule of Service that provides for the extension of
(i) water services to one or more specified Water Users and/or
(ii) wastewater services to one or more specified Wastewater
Users.

 

-2-

 

 

1.3 Operating Expenses
.
“Operating Expenses” shall mean all actual maintenance
and operating costs incurred by Rangeview in discharging
Rangeview’s obligations to provide water service to Water
Users and wastewater services to Wastewater Users.

 

1.4 Rules and Regulations
.
“Rules and Regulations” shall mean the rules and
regulations of Rangeview as adopted and amended from time to
time.

 

1.5 Schedule of Service
.
“Schedule of Service” shall mean Exhibit A attached hereto, as it may be
amended from time to time by the parties.

 

1.6 Wastewater User
.
“Wastewater User” shall mean any user receiving service
from a Wastewater System pursuant to this Agreement.

 

1.7 Wastewater System
.
“Wastewater System” shall mean the wastewater
transmission, treatment and disposal facilities, including re-use
and land application facilities, and all other components of a
wastewater system or systems to provide wastewater service to
Wastewater Users.

 

1.8 Water User . “Water
User” shall mean any user of potable or non-potable water
provided pursuant to this Agreement.

 

1.9 Water System
.
“Water System” shall mean wells, intake lines, pumps,
treatment facilities, transmission systems, storage facilities and
all other components of a water supply system or systems to provide
water to Water Users.

 

ARTICLE II 

Contract Service
Provider

 

2.1 Exclusivity . Service Provider
shall have the sole and exclusive right to be Rangeview’s
water and wastewater service provider. The parties acknowledge that
if Rangeview acquires additional water, such water shall be subject
to the provisions of this Agreement. Further, if Rangeview acquires
additional water or wastewater service rights, such water or
wastewater service rights shall be subject to the terms of this
Agreement unless determined otherwise after compliance with
Section 4.1 and Section 14.16.

 

2.2 Service Provider
.
During the term of this Agreement, Rangeview hereby grants to
Service Provider the sole and exclusive right as its contract
service provider to (a) market, lease, license, sell or otherwise
transfer, and withdraw and treat in and through the Water Systems
covered by this Agreement any water supplies owned or controlled by
Rangeview; (b) collect wastewater from Wastewater Users and to
market, lease, license, sell or otherwise transfer, and treat such
wastewater in and through the Wastewater Systems covered by this
Agreement; (c) design, permit, finance, construct, operate and
maintain Water Systems and Wastewater Systems to provide water
services to Water Users and wastewater services to Wastewater
Users, respectively; and (d) provide other requested water and
wastewater provider services as required by Rangeview. To the
extent, if any, that the terms of this Agreement are contrary to,
or inconsistent with, the terms of the Lease relating to assets
covered under the Lease, the provisions of the Lease shall control
and govern the conduct of the parties. Rangeview hereby grants to
Service Provider the sole and exclusive right and license to
market, lease, license, sell or otherwise transfer and to collect,
withdraw and treat in and through (i) the Water Systems
covered by this Agreement any water supplies owned or controlled by
Service Provider and (ii) the Wastewater Systems covered by
this Agreement any wastewater owned or controlled by Service
Provider.

 

-3-

 

 

2.3 Additional Consideration
. Any
additional consideration paid by Service Provider in exchange for
the exclusive rights granted hereunder with respect to a particular
New Service Agreement shall be set forth on the Schedule of
Service. Rangeview acknowledges that Service Provider has paid
Rangeview the amount(s) set forth on the Schedule of Service in
exchange for the exclusive rights granted hereunder.

 

ARTICLE III 

Representations and
Covenants

 

3.1 Lease . Rangeview
represents and warrants that all terms and conditions of the Lease
have been complied with by it. Rangeview shall not enter into any
amendments to the Lease that affect Service Provider’s rights
and/or obligations under this Agreement without Service
Provider’s prior written approval. Rangeview agrees that it
will comply with the terms of the Lease, including paying all rents
and royalties due under the Lease, and maintain it in effect during
the term of this Agreement. It shall not be a breach of this
covenant if Rangeview’s failure to maintain the Lease in
effect is due to a breach of this Agreement or the Lease by Service
Provider.

 

3.2 New Service Agreements
.
Rangeview represents and warrants that all terms and conditions of
each New Service Agreement set forth on the Schedule of Service
have been complied with by it. Rangeview shall not enter into any
amendments to a New Service Agreement that affect Service
Provider’s rights and/or obligations under this Agreement
without Service Provider’s prior written approval. Rangeview
agrees that it will comply with the terms of each New Service
Agreement and maintain it in effect during the term of this
Agreement. It shall not be a breach of this covenant if
Rangeview’s failure to maintain a New Service Agreement in
effect is due to a breach of this Agreement or a New Service
Agreement by Service Provider.

 

3.3 Conflicts of Interest
. The
parties hereto acknowledge that certain members of the board of
directors of Rangeview are officers, directors or employees of
Service Provider and may have conflicts of interest with regard to
this transaction. Rangeview represents and warrants that such board
members have, pursuant to § 24-18-110, C.R.S., filed all
necessary disclosure statements with Rangeview and the Colorado
Secretary of State. Service Provider represents and warrants that
the members of Service Provider’s board of directors who also
serve on the Rangeview board of directors have fully disclosed such
interests to the disinterested board members of Service Provider
prior to obtaining board approval of this Agreement and those
members with potential conflicts have abstained from voting on this
Agreement.

 

3.4 Rangeview Administrative
Functions . Rangeview shall
be responsible for performing at its sole expense all functions and
reporting obligations imposed upon it as a local government entity
and political subdivision of the State of Colorado. Such functions
include without limitation, compliance with budget, audit,
election, open meetings, public records, conflict of interest
disclosure and management laws, and Article X, Section 20 of
the Colorado Constitution. Rangeview shall further be solely
responsible for performing customer relations functions, adopting
and amending the Rules and Regulations, including establishing
rates, fees and charges imposed by it upon Water and Wastewater
Users, and supervising tap sales. Rangeview shall have primary
responsibility for the administration and enforcement of the Rules
and Regulations, design standards, easements and service and main
extension agreements, but shall coordinate with Service Provider in
the performance of these functions.

 

-4-

 

 

ARTICLE IV

Agreements and
Service

 

4.1 Customers . Rangeview or
Service Provider, as the contract service provider, may negotiate
and enter into agreements to lease, license, sell or otherwise
transfer and withdraw, collect or treat any water or wastewater
available to Rangeview to provide water or wastewater service
subject to the terms of this Agreement. Rangeview further agrees
that Service Provider may, at its option, negotiate and enter into
agreements to lease, license, sell or otherwise transfer, withdraw,
collect or treat any water or wastewater available to Service
Provider to provide water or wastewater service subject to the
terms of this Agreement. Each party shall make available to the
other copies of any such agreements twenty-one (21) days prior to
execution (a draft being acceptable if finals are not available).
The receiving party shall review such information for the sole
purposes of determining whether (i) such contract is commercially
reasonable, (ii) such contract is in compliance with prudent water
provider practice in Colorado, and (iii) such contract is in
compliance with this Agreement. The receiving party shall be deemed
to have consented to the contract unless, within fourteen (14) days
of the date of delivery of the contract, it delivers to the other
party a notice specifically stating the reasons that it objects to
such contract based on the criteria stated in this section 4.1.
Disputes, if any, as to matters under this Section will be
submitted to arbitration pursuant to Section 14.16, and a
hearing shall be held within fourteen (14) days of selection of an
arbitrator or arbitrators, as applicable. Any undisputed contract
shall become a New Service Agreement and shall be added to the
Schedule of Service. Whether a disputed contract becomes a New
Service Agreement that is added to the Schedule of Service will be
resolved pursuant to Section 14.16.

 

4.2 Construction
.
Service Provider shall be responsible for designing, permitting,
financing, and managing the construction of each Water System and
Wastewater System owned by Rangeview, pursuant to Rangeview’s
Rules and Regulations to provide water or wastewater service to
meet the demands of Water Users and Wastewater Users, as
applicable, and shall do so in a commercially reasonable time and
manner consistent with (i) prudent water or wastewater service
provider practices in Colorado, (ii) the terms of any applicable
New Service Agreement, and (iii) the terms of any other applicable
agreement to which Rangeview and Service Provider are parties, and
subject to the receipt of all necessary governmental approvals.
Upon receiving a written request for water or wastewater service
from a Water User or Wastewater User, Rangeview shall give Service
Provider written notice of such request. Within thirty (30) days
after receipt of all information necessary to establish the service
needs of the Water or Wastewater User, Rangeview and Service
Provider shall establish a construction schedule identifying the
scope of improvements and the timing of construction for such User
(“Construction Schedule”). Upon execution of an
agreement which secures the commitment of such Water or Wastewater
User to purchase taps or receive water and/or wastewater service,
as applicable, which agreement shall indicate, if applicable, that
Rangeview’s commitment for service is subject to the
completion of the improvements identified in the Construction
Schedule, Service Provider shall design, permit, finance, and
manage the construction of the identified improvements pursuant to
Rangeview’s Rules and Regulations and pursuant to the time
frame set forth in the Construction Schedule. Once construction is
completed, Service Provider will provide Rangeview with copies of
the plans for the improvements as built. Service Provider shall
cause the Water System and/or Wastewater System to be completed in
a workmanlike manner and in compliance with the plans approved by
Rangeview, which approval will not be unreasonably withheld or
delayed. Service Provider shall make available to Rangeview copies
of any and all construction contracts and related documents
concerning the Water System or Wastewater System. Twenty-one (21)
days prior to the execution of any construction contract related to
either System in excess of One Million Dollars ($1,000,000),
Service Provider shall provide Rangeview with a copy of such
contract (a draft being acceptable if finals are not available) and
information regarding how the improvements will be financed and how
such financing obligation will be paid. Rangeview shall review such
information for the sole purposes of determining whether such
contract is commercially reasonable and in compliance with
governing laws and consistent with prudent water or wastewater
service provider practices in Colorado, as applicable, and whether
the project is fiscally viable. Rangeview shall be deemed to have
consented to the contract unless, within fourteen (14) days of the
date of delivery of the contract, it delivers to Service Provider a
notice specifically stating the reasons for its determination that
the proposed contract is not commercially reasonable, is not in
compliance with governing laws or with prudent water or wastewater
service provider practices in Colorado, as applicable, or the
project is not fiscally viable. Disputes, if any, as to matters
under this Section will be submitted to arbitration pursuant to
Section 14.16, and a hearing shall be held within fourteen (14)
days of selection of an arbitrator or arbitrators, as
applicable.

 

-5-

 

 

4.3 Water Quality
.
Service Provider shall cause the Water System to be designed to
comply with applicable requirements of the Colorado Primary
Drinking Water Regulations, 5CCR 1002-11 or such other similar or
successor laws (the “Primary Drinking Water
Regulations”) in effect at the time the Water System is
constructed. In addition, Service Provider shall operate and
maintain the Water System, and to the extent necessary, modify or
upgrade the Water System, such that the water provided through the
Water System complies with the Primary Drinking Water Regulations;
provided, however, that it shall not be a default of this Section
if at any time the water fails to comply with the requirements of
the Primary Drinking Water Regulations, Service Provider cures such
noncompliance within thirty (30) days of learning of such
noncompliance, or if more than thirty (30) days is reasonably
required to cure such noncompliance, Service Provider commences to
correct the problem within thirty (30) days and thereafter
prosecutes the same to completion with reasonable
diligence.

 

4.4 Wastewater System.
 
Service Provider shall cause the Wastewater System to be designed,
and shall operate and maintain the Wastewater System, in compliance
with applicable regulatory requirements. It shall not be a default
of this Section if the Service Provider cures such noncompliance
within thirty (30) days of learning of such noncompliance, or if
more than thirty (30) days is reasonably required to cure such
noncompliance, Service Provider commences to correct the problem
within thirty (30) days and thereafter prosecutes the same to
completion with reasonable diligence.

 

4.5 Rules and Regulations of
Rangeview . All construction,
operation, and maintenance of the Water System and Wastewater
System shall be performed in accordance with the Rules and
Regulations.

 

-6-

 

 

ARTICLE V 

Coordination of Lease
Assets

 

Rangeview and
Service Provider hold certain rights to water, storage, and
infrastructure capacities pursuant to the terms and conditions of
the Lease, and the parties shall coordinate the use of any Lease
assets subject to the party’s respective rights to such
assets and subject to the provisions of the Lease

 

ARTICLE VI 

Ownership, Operation, and
Maintenance of Facilities

 

Rangeview shall own
the Water System and Wastewater System, except as otherwise
specified in a New Service Agreement. Service Provider shall
operate, maintain, repair, replace and administer the Water System
and the Wastewater System in a commercially reasonable manner
consistent with prudent water or wastewater service provider
practices in Colorado, as applicable, and in accordance with this
Agreement and any applicable New Service Agreement.

 

ARTICLE VII 

Obligations of Service
Provider

 

7.1 Water System and Wastewater
System . At its cost,
Service Provider shall provide a Water System for Water Users and a
Wastewater System for Wastewater Users in a commercially reasonable
manner consistent with prudent water or wastewater service provider
practices in Colorado, as applicable, in order to meet the demands
of Water Users and Wastewater Users. In addition, Service Provider
shall install meters, in accordance with the Rules and Regulations,
capable of measuring the quantity of water delivered to Water
Users.

 

7.2 Control . Service Provider
shall have the responsibility for and control over the details and
means for providing the services hereunder subject to the
requirement that the services be provided in a commercially
reasonable time and manner consistent with prudent water or
wastewater service provider practices in Colorado, as applicable,
and in accordance with this Agreement and the Rules and
Regulations.

 

7.3 Phased Development
.
Service Provider may phase the installation of the Water System and
Wastewater System in accordance with the needs of Water Users and
Wastewater Users. Service Provider shall have no obligation
whatsoever to install or create access to a Water System or
Wastewater System in advance of the need for such facilities, such
need to be based upon commercially reasonable standards for similar
development projects and the existence of agreements with Water
Users or Wastewater Users, as applicable, providing for payment for
such services.

 

7.4 Administration
.
Service Provider shall operate, maintain and administer the Water
System and Wastewater System, including, but not limited to issuing
taps on behalf of Rangeview and billing all charges for water and
wastewater services in accordance with Article VIII and any
applicable New Service Agreements.

 

7.5 Records . Service Provider
shall keep and maintain accurate files of all contracts concerning
the Water System and Wastewater System and all other records
necessary to the orderly administration and operation of the Water
System and Wastewater System which are required to be kept by
local, state or federal statutes, ordinances or regulations.
Service Provider shall provide to Rangeview a copy of each executed
contract concerning the Water System or Wastewater System within
five business days.

 

-7-

 

 

7.6 Services . Service Provider
shall employ or contract with such qualified engineers, operators,
and administrative and other personnel as it deems appropriate, to
perform the duties of operating the Water System and Wastewater
System, including the following:

 

(a) cooperating with
Rangeview and other state, county, local and federal authorities in
providing such tests, performing such activities, and maintaining
such records as are necessary to maintain compliance with
appropriate governmental standards;

 

(b) supervising the
connection of lines to private development and recording such
connections for billing proposes in accordance with Section
8.2;

 

(c) coordinating
construction with various utility companies to ensure minimum
interference with the Water System and Wastewater
System;

 

(d) performing all
maintenance and repairs, or otherwise providing for the services of
contractors, necessary to maintain and continue the efficient
operation of the Water System and Wastewater System;
and

 

(e) providing for
emergency preparedness to provide response to emergencies,
including, but not limited to line breaks, freeze-ups,
obstructions, backups, mechanical problems, violations of water or
effluent treatment standards, and the interruption of services from
other causes.

 

To the
extent Service Provider engages contractors, it shall require such
contractors to maintain bonds (or other acceptable sureties or
guaranties) and insurance, including workers’ compensation
insurance, in compliance with applicable laws and the Rules and
Regulations. Such bonds and insurance shall name Rangeview, and any
third party reasonably requested by Rangeview, as additional
insured.

 

7.7 Compliance with Laws
.
Service Provider shall comply with the Rules and Regulations and
all applicable government statutes, regulations, ordinances,
permits and orders, and, if applicable, Colo. Rev. Stat.
§24-91-103, 103.5 and 103.6, in its performance under this
Agreement.

 

7.8 Personnel . Service Provider
shall engage Certified Water Professionals holding appropriate
levels of certification to act as Certified Operator(s) in
Responsible Charge for the Water System and the Wastewater System
in accordance with and as those terms are defined in Regulation No.
100 of the Colorado Department of Public Health and Environment or
any successor requirements of the State of Colorado.

 

7.9 Permits and Licenses
.
Service Provider shall, at its own expense, apply for and obtain
all necessary building, occupancy, well and other permits, licenses
and authorizations which may be required by any governmental entity
that has jurisdiction over the operations to be performed by
Service Provider pursuant to this Agreement. Rangeview shall
cooperate with and provide such reasonable assistance to Service
Provider, as Service Provider may request in obtaining such
authorizations. All well permits shall be in the name of the owner
of the water rights for whom the well permits are filed, and
Service Provider shall demonstrate it has the lawful authority to
use the water rights.

 

-8-

 

 

7.10 Taxes . Service Provider
shall be solely responsible for and shall pay all taxes, fees,
charges and assessments, if any, in connection with work or the
materials on facilities it will own which are to be utilized in
accomplishing the activities of Service Provider pursuant to this
Agreement.

 

7.11 Financing . Service Provider
shall be responsible for financing its obligations hereunder with
the funds it receives pursuant to this Agreement or from such other
sources as it deems desirable subject to Section 4.2 hereof and the
terms of any applicable New Service Agreement.

 

7.12 Reporting . In addition to
the reports required pursuant to Section 8.5, Service Provider
agrees to provide Rangeview with annual budgets and business plans
with respect to the Water System and Wastewater System and such
other information as Rangeview may reasonably request in order to
assure itself that the demands of Water Users and Wastewater Users
are being adequately provided for and to assist Rangeview in its
long-term planning efforts. Service Provider shall also supply
Rangeview with such information as Rangeview may reasonably require
to comply with its obligations to state, county, local and federal
authorities, including, for example, the results of tests on the
quality of the water and information concerning compliance with
health and safety regulations.

 

7.13 Accounting . Service Provider
shall prepare and maintain records reflecting or recording costs of
service, both for capital development and for operations and
administration expenses, for the Water System and the Wastewater
System, in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) for state and
local governments as prescribed by the Governmental Accounting
Standards Board, as now or hereafter constituted, or if GAAP is no
longer available or appropriate, in accordance with other generally
accepted water and wastewater utility cost accounting standards
designated by the parties. Such records shall be available during
normal business hours for inspection and copying by Rangeview.
Service Provider shall ensure that any contract or other
arrangement it makes with a third person to perform capital
development or operations and administration functions assumed by
Service Provider hereunder expressly imposes this same requirement
upon such person for the benefit of Rangeview. Disputes, if any, as
to the appropriate cost accounting standards to be followed will be
submitted to arbitration pursuant to
Section 14.16.

 

7.14 Schedule of Service
. To
the extent Rangeview has obligations under a New Service Agreement
related to the services to be performed by Service Provider under
this Agreement, Service Provider agrees to provide the services
hereunder in conformance with the applicable terms of the New
Service Agreement, and Service Provider shall not take any action
or omit to take any action that would cause Rangeview to be in
breach of any New Service Agreement.

 

 

-9-

 

 

ARTICLE VIII 

Billing and Rates

 

8.1 Rates . Unless otherwise
established in a New Service Agreement, Rangeview shall establish
tap fees, usage charges, service charges, and other rates, fees and
charges to be imposed upon Water Users and Wastewater Users in
accordance with the Rules and Regulations.

 

8.2 Billing

 

(a) Unless otherwise
provided in a New Service Agreement, (i) Service Provider
shall read the meters and bill the Water Users for water services
provided hereunder, including all tap fees, usage charges, and
service charges, and (ii) Service Provider shall bill the
Wastewater Users for wastewater services hereunder, including all
system development fees and service charges; in each case on behalf
of Rangeview and in accordance with the Rules and Regulations. The
bills shall provide that payment shall be made by Water Users and
Wastewater Users to Rangeview at an address designated by
Rangeview.

 

(b) Rangeview shall be
responsible for collection efforts on delinquent accounts and will
establish and maintain policies and procedures encouraging prompt
and vigorous collection of delinquent accounts.

 

(c)   After
deducting the amount required to be paid or accrued to pay the
royalties required for water governed under the Lease, Rangeview
shall pay Service Provider on or before the 15th day of each month
one hundred percent (100%) of tap fees and ninety-eight percent
(98%) of all remaining amounts collected by Rangeview from Water
Users in the previous month. To the extent necessary to enable
Rangeview to determine royalties due under the Lease, Service
Provider shall provide Rangeview with a written report to enable
Rangeview to distinguish which payments are for water governed
under the Lease and of such bills, which are to Title 32 water
districts or similar municipal entities supplying water for public
use (“Public Entities”).

 

(d) Rangeview shall pay
Service Provider on or before the 15th day of each month
100% of wastewater system development fees and ninety percent (90%)
of all remaining amounts collected by Rangeview from Wastewater
Users in the previous month.

 

(e) Each payment by
Rangeview for system development fees pursuant to Sections 8.2(c)
and (d) above shall be accompanied by a written report from
Rangeview stating the service address or other description of the
licensed premises for which the water and/or wastewater system
development fees were paid, the number of equivalent taps licensed
for each premise, and the amount of the system development fees
collected for each licensed premise.

 

8.3 Renegotiation
. The
parties acknowledge that the administrative and operating costs of
Rangeview and Service Provider with respect to the water and
wastewater service to be provided to Water Users and Wastewater
Users are unknown. Therefore, notwithstanding the provisions of
Section 8.2, if the percentage of water and wastewater fees and
charges allocable to each party pursuant to Section 8.2 are
insufficient to cover the respective parties’ costs relating
to the provision of water service or wastewater service, as
applicable, pursuant to this Agreement, including, in each case,
without limitation, the proportionate share of each party’s
reasonable general, legal, administrative, engineering, regulatory
compliance, and long-term planning costs attributable to provision
of water service or wastewater service, as applicable, Service
Provider and Rangeview shall negotiate in good faith, within ninety
(90) days after the insufficiency is reasonably claimed by either
party, an amendment to Section 8.2 which provides each party
with sufficient revenues from this Agreement to cover its costs
related to the provision of water or wastewater service, as
applicable, or amend the rate structure so that additional rate
revenues are generated. During any period of renegotiation, each
party shall continue to perform its obligations under this
Agreement. Disputes as to an appropriate amendment to provide
either party with sufficient rate revenues under Section 8.2
or to amend the rate structure in the Rules and Regulations will be
settled by arbitration pursuant to Section 14.16 of this
Agreement.

 

-10-

 

 

8.4 Reserves.

 

(a) Rangeview shall
utilize the revenues retained by it pursuant to Section 8.2(c) and
(d) and, any other revenues retained by it, (i) to pay proper and
necessary expenses related to the functions of Rangeview, (ii) to
establish a fund for Rangeview’s budget for the following
calendar year, (iii) to establish an operating reserve fund in an
amount consistent with prudent water service provider practices in
Colorado and conforming with applicable statutory requirements, and
(iv) to establish any operating reserve required by any New
Service Agreement. The operating reserve funds shall be
continuously maintained and may be utilized by Rangeview solely for
paying lawful obligations relating to the provision of water and
wastewater service to Water Users and Wastewater Users. The
obligations of Rangeview with respect to the budget and operating
reserve fund required by subsection (ii) and (iii) above are
not cumulative with any budget and operating reserve fund
requirements included in other agreements between the parties with
respect to water and/or wastewater services, including, but not
limited to the Lowry Service Agreement and the Lowry Wastewater
Service Agreement. Thus, Rangeview need not establish duplicate
budget funds and need only establish one operating reserve fund for
the highest percentage of Operating Expenses required by any
agreement between the parties. The obligations of Rangeview
pursuant to subsection (iv) are exclusive to and allocated
pursuant to the revenues derived from this Agreement and shall not
affect and shall not be reduced or limited by reserves or funds
accumulated by Rangeview under subsections (ii) or (iii)
or derived from or required by other agreements entered into
by Rangeview for purposes that are outside of the terms of this
Agreement.

 

(b) Service Provider
agrees that if and to the extent at any time monies are not
available to Rangeview to fund the operating reserve which
Rangeview is required to maintain pursuant to a New Service
Agreement or if monies in such operating reserve are withdrawn (for
a purpose permitted by a New Service Agreement) such that the
amount of the operating reserve drops below the amount which
Rangeview is required to maintain pursuant to a New Service
Agreement and such operating reserve cannot reasonably be expected
to be reestablished from anticipated income to Rangeview within one
year, then within thirty (30) days of receipt of notice from
Rangeview of such fact, Service Provider shall deliver funds to
Rangeview sufficient to replenish the operating reserve fund to the
level required pursuant to the New Service Agreement.
Notwithstanding the fact that the operating reserve can reasonably
be expected to be reestablished within one year, if this Service
Agreement terminates during such one-year period, Service Provider
agrees to deliver funds to Rangeview sufficient to replenish the
operating reserve fund to the level required pursuant to a New
Service Agreement at the time this Agreement terminates. If Service
Provider has given notice to Rangeview pursuant to Section 13.4 of
Service Provider’s election to terminate this Agreement, any
use by Rangeview of the reserve fund in a manner which would cause
Service Provider to be required to replenish the fund pursuant to
the foregoing sentence because the termination date of this
Agreement will occur sooner than the date on which the reserves are
reasonably expected to be reestablished shall require the prior
written consent of Service Provider, which consent shall not be
withheld to the extent it is necessary to make such expenditure at
that time.

 

-11-

 

 

(c) Any dispute as to
the necessity of an expenditure or whether the operating reserve
fund can reasonably be expected to be reestablished from
anticipated income within one year shall be submitted to
arbitration pursuant to Section 14.16 of this
Agreement.

 

(d) Service Provider
shall, in consideration of reasonable industry practice, accumulate
or make provisions for an adequate capital reserves for repair and
replacement of the Water System and Wastewater System. Service
Provider shall establish a methodology for calculating the
appropriate capital reserve amount. Upon termination of this
Agreement, all amounts accumulated for capital reserves shall be
transferred to and become the property of Rangeview.

 

8.5 Reports and
Audits.

 

(a) Within twenty-five
(25) days after the end of each calendar year, or within such other
time period as may be set forth in the New Service Agreements,
during the term of this Agreement, Service Provider shall deliver a
report to Rangeview which specifies the quantity of water per New
Service Agreement (including any recharged or stored water)
delivered by Service Provider and the amount of such water removed
from any aquifer and such other information as may be necessary in
order to enable Rangeview to comply with its reporting
obligations.

 

(b) Service Provider
shall prepare and keep full, complete, and proper books, records
and accounts of all water (including any recharged or stored water)
sales or dispositions and shall document such transactions as may
be required by law. Said books, records, and accounts of Service
Provider shall be open at all reasonable times, upon three (3) days
prior written notice, to the inspection of Rangeview and its
representatives, and upon ten (10) days prior written notice,
Service Provider shall cooperate and produce such documents as may
be required by a lawful request presented to Rangeview pursuant to
the Colorado Open Records Act. Rangeview may, upon no less than
fourteen (14) days’ prior written notice to Service Provider,
cause a partial or complete audit to be made at Rangeview’s
expense by an auditor selected by Rangeview of the entire records
and operations of Service Provider for a five (5) year period
preceding the date of the audit relating to water use pursuant to
this Agreement. Within fourteen (14) days following receipt of such
a notice, Service Provider shall make available to the auditor the
books and records the auditor reasonably deems necessary or
desirable for the purpose of making the audit. If the results of
the audit reveal a deficiency in the amounts paid by Rangeview to a
third party as a result of inaccurate reports provided by Service
Provider to Rangeview, then Service Provider shall refund the
revenues it received from Rangeview under Section 8.2 which
should have been paid by Rangeview to such third party, together
with interest thereon at the rate of two percent (2%) per month
from the date or dates such amounts should have been paid to the
third party. If such inaccuracies resulted in a deficiency to the
third party in excess of two percent (2%) of the amounts previously
computed by Rangeview for the period covered by the audit, then
Service Provider shall also pay the actual cost of the
audit.

 

-12-

 

 

(c) Rangeview shall
prepare and keep full, complete, and proper books, records and
accounts of all collections with respect to water (including any
recharged or stored water) sales or dispositions and shall document
such transactions as may be required by law. Said books, records,
and accounts of Rangeview shall be open at all reasonable times to
the inspection of Service Provider and its representatives who may
also, at Service Provider’s expense, audit, copy or extract
all or a portion of said books, records, and accounts for a period
of five (5) years after the date such books, records and
accounts are made. Service Provider may, upon fourteen (14)
days’ prior written notice to Rangeview, cause a partial or
complete audit to be made at Service Provider’s expense, by
an auditor selected by Service Provider, of the entire records and
operations of Rangeview relating to water revenue collections
pursuant to this Agreement. Within fourteen (14) days following
receipt of such a notice, Rangeview shall make available to the
auditor the books and records the auditor deems necessary or
desirable for the purpose of making the audit. Any deficiency in
the payment of amounts due Service Provider pursuant to Section 8.2
determined by such audit shall be immediately due and payable by
Rangeview together with interest thereon at the rate of two percent
(2%) per month from the date or dates such amounts should have been
paid. If such deficiency is in excess of two percent (2%) of the
amounts previously computed by Rangeview for the period covered by
the audit, then Rangeview shall also pay the actual cost of the
audit, at the time the deficiency is paid.

 

ARTICLE IX 

Management of
Water

 

All use
of water by Service Provider hereunder, including any re-use or
successive use, shall be done in a commercially reasonable manner
consistent with prudent water service provider practices in
Colorado in accordance with the decrees adjudicating such water and
in accordance with applicable New Service Agreements.

 

ARTICLE X 

Rights-of-Way

 

10.1 Rights-of-Way
.
Rangeview shall use its best efforts to obtain licenses within
public rights-of-way and easements reasonably necessary to perform
the services contemplated by this Agreement. To the extent
rights-of-way on or under the Lowry Range are reasonably necessary
to enable Service Provider to perform the services contemplated by
this Agreement, Service Provider shall notify Rangeview, and
Rangeview shall file a request for the right-of-way with the Land
Board in accordance with the Lease. Upon grant of a right-of-way by
the Land Board, Rangeview shall promptly notify Service Provider
and, to the extent necessary to enable Service Provider to perform
its services hereunder, Rangeview shall grant a license to Service
Provider to use the rights-of-way granted by the Land
Board.

 

10.2 Fees for Rights-of-Way
.
Service Provider shall pay the costs (including, if applicable,
legal and engineering fees) associated with obtaining licenses
within public rights-of-way or easements necessary for the Water
System.

 

-13-

 

 

10.3 Condemnation of Land
. Upon
Service Provider’s request, Rangeview agrees to consider and
use best efforts to utilize its governmental powers of condemnation
if such condemnation is reasonably necessary to enable Service
Provider to perform the services contemplated by this Agreement.
Rangeview agrees to grant Service Provider a right-of-way, easement
or license in such condemned property in such form as is reasonable
and appropriate for the services to be conducted or facilities to
be constructed on the property. Service Provider shall be
responsible for the costs associated with Rangeview’s
condemnation of such land. Nothing in this section 10.3 shall be
construed as a delegation of Rangeview’s governmental powers
to Service Provider, and Rangeview shall retain sole judicial and
legislative discretion in regard to such matters.

 

ARTICLE XI 

Indemnification

 

As
between Service Provider and Rangeview, each party shall indemnify
and hold harmless the other, to the extent permitted by law,
against and from all liabilities, claims and demands, settlement or
litigation expenses, and related attorneys’ fees (i) for
personal injury or property damage arising out of, or caused by,
any act or omission of such party, its contractors, agents or
employees or (ii) relating to liens or claims of right to
enforce liens arising from actions of such party, its contractors
and agents. The party whose actions caused such liens to arise
shall promptly cause any such lien to be removed notwithstanding
the fact that such party may believe that there is a valid defense
to any such claim. Such party shall retain the right to pursue any
claims against the person filing the lien after any such lien is
removed.

 

ARTICLE XII 

Insurance and
Bonds

 

12.1 Insurance . Service Provider
shall at all times carry insurance in amounts and with carriers
acceptable to Rangeview for workers’ compensation coverage
fully covering all persons engaged in the performance of this
Agreement in accordance with Colorado law, and for public liability
insurance covering death and bodily injury with limits of not less
than $1,500,000 for one person and $5,000,000 for any one accident
or disaster, and property damage coverage with limits of not less
than $500,000, which insurance shall name Rangeview and any other
party reasonably requested by Rangeview as additional
insureds.

 

12.2 Bonds . No operations are
to be commenced until Service Provider has arranged for good and
sufficient bonds, or other acceptable sureties or guaranties,
consistent with any applicable governmental requirements, including
the Rules and Regulations, and listing Rangeview and any other
required parties as a coinsured, in an amount prescribed by the
applicable governmental requirements to secure the payment for
damages, losses or expenses caused by Service Provider as a result
of its operations.

 

12.3 Bond of Contractors
. Bonds
provided by contractors for construction activities to Service
Provider shall list Rangeview and any other required parties as
coinsureds. As long as such bonds otherwise comply with Section
12.2 above and list Rangeview and all other required parties as
coinsureds, the contractors shall not be required to obtain any
other bonds for Rangeview.

 

-14-

 

 

ARTICLE XIII 

Term, Default and
Termination

 

13.1 Term . This Agreement
shall commence on the date first entered above and, unless sooner
terminated pursuant to this Article, shall expire on the day that
the last New Service Agreement set forth on the Schedule of Service
expires.

 

13.2 Default and
Remedies.

 

(a) The following
events shall constitute events of default under this
Agreement:

 

(i) The institution by
or against a party of proceedings under any bankruptcy law or
insolvency act or for dissolution, or the appointment of a receiver
or trustee for all or substantially all of the property of a party,
which proceeding is not dismissed or receivership or trusteeship is
not vacated within sixty (60) days after such institution or
appointment; provided, however, that if a party seeks to dissolve
pursuant to C.R.S. § 32-1-701, et  seq., as amended, and (i) it
notifies the other party in writing concurrently with filing the
application for dissolution, and (ii) the plan for dissolution
shall include provisions for continuation of this Agreement with a
responsible party acceptable to the other party being substituted
as a party to this Agreement, and such substituted party assumes
all obligations and rights of the dissolving party hereunder, then
such dissolution shall not be a default;

 

(ii) The
taking of the Lease or any part thereof upon execution or other
process of law directed against Rangeview or the subjection of the
Lease or any part thereof to attachment at the instance of any
creditor or claimant against Rangeview, which attachment is not
discharged or disposed of within sixty (60) days after the levy
thereof;

 

(iii) The
material default in the performance of any material term, covenant
or condition in this Agreement which default shall continue and not
be cured for a period of thirty (30) days after written notice
specifically setting forth the nature of the default has been given
by the non-defaulting party to the defaulting party, or if more
than thirty (30) days is reasonably required to cure such
matter complained of, if the defaulting party shall fail to
commence to correct the same within said thirty (30) day
period and shall thereafter fail to prosecute the same to
completion with reasonable diligence.

 

(b) If an event of
default shall occur, then the non-defaulting party may, at its
option, without any prejudice to any other remedies it may have,
proceed to protect and enforce its rights against the defaulting or
breaching party by mandamus or such other suit, action or special
proceedings in equity or at law, in any court of competent
jurisdiction, including an action for damages or specific
performance, or by self-help. In the event of any litigation or
other proceeding to enforce any of the terms, covenants or
conditions hereof, the prevailing party in such litigation or other
proceeding shall obtain, as part of its judgment or award, its
reasonable attorneys’ fees and costs.

 

(c) If either party
shall act or fail to act in a manner which would constitute an
event of default under any New Service Agreement (as that term may
be defined or described in any New Service Agreement) or if
Rangeview is in default pursuant to Section 13.2(a)(ii),
immediately, with the passage of time, with notice, or any of the
foregoing, the non-defaulting party may, at its option, without
prejudice to any other remedies it may have, cure such event of
default and seek reimbursement from the defaulting party for any
costs and damages associated therewith or offset such costs and
damages from any amounts owed to the defaulting party under this
Agreement or otherwise without waiting for the thirty-day period
provided for in Section 13.2(a)(iii) or the sixty-day period
provided for in Section 13.2(a)(ii) to run.

 

-15-

 

 

(d) If an event of
default shall occur and after the non-defaulting party proceeds in
accordance with Section 13.2(b) or (c), the non-defaulting party
shall be permitted to terminate this Agreement upon sixty (60) days
advance written notice to the defaulting party only if: (i)
monetary damages are not paid by the defaulting party when due or
(ii) the defaulting party refuses to perform its obligations
hereunder.

 

13.3 Service Provider Right of
Termination . Service Provider
may terminate this Agreement at any time without cause upon giving
one year’s prior written notice to Rangeview. During the
one-year period, Service Provider shall continue to discharge all
of its obligations under this Agreement and shall be entitled to
the benefits of this Agreement, unless Rangeview, at its option,
requires Service Provider to discontinue providing services
hereunder prior to the expiration of the one-year notice
period.

 

13.4 Termination of New Service
Agreement . If
Rangeview’s rights under a New Service Agreement expire or
are terminated, the New Service Agreement shall be deleted from the
Schedule of Service and shall no longer be part of the rights and
obligations under this Agreement. This Agreement shall remain in
full force and effect as to all New Service Agreements remaining on
the Schedule of Service.

 

13.5 Compliance with
Regulations . The parties
understand and agree that compliance with all applicable federal
and state regulations must take place at all times. In the event of
any termination of this Agreement, with or without cause, the
parties shall cooperate to ensure that there is no gap or break in
the compliance with all applicable regulations in the provision of
service to Water Users and Wastewater Users during the transition
of service, including the payment of all applicable rates, fees and
charges by Water Users and Wastewater Users and as required by
Section 8.2.

 

13.6 Multi-Fiscal Year
Obligation . Nothing in this
Agreement shall be interpreted or construed as constituting a
multiple fiscal year obligation of Rangeview as defined in Article
X, Section 20 of the Colorado Constitution.

 

ARTICLE XIV 

General Provisions

 

14.1 Assignment . Servicer Provider
may assign its interest in this Agreement, but only upon terms
expressly approved in writing by Rangeview, which approval may not
be unreasonably withheld. Rangeview shall not be deemed to be
unreasonable in withholding consent if it is unable to obtain any
consent required under a New Service Agreement. Any attempted
assignment in contravention of this Section shall be null and void.
Notwithstanding the foregoing, Servicer Provider may contract with
third parties to perform portions of its obligations under this
Agreement and such action on Servicer Provider’s part shall
not be deemed an assignment of its interest in this
Agreement.

 

-16-

 

 

14.2 Third Party
Beneficiaries . It is not the
intent of the parties, nor shall it be the effect of this
Agreement, to vest rights of any nature or form in individuals or
entities not executing this Agreement as a party.

 

14.3 Notice . All notices
required by this Agreement shall be in writing and shall be
delivered to the person to whom the notice is directed, in person,
by courier service or by United States mail as a certified item,
return receipt requested, addressed to the address stated below.
Notices delivered in person or by courier service shall be deemed
given when delivered to the person to whom the notice is directed.
Notices delivered by mail shall be deemed given on the date of
delivery as indicated on the return receipt. The parties may change
the stated address by giving ten (10) days’ written notice of
such change pursuant to this Section.

 

If to
Rangeview:

 

Rangeview
Metropolitan District

141
Union Boulevard, Suite 150

Lakewood, CO
80228

Attention:
Manager

 

If to
Service Provider:

 

Pure
Cycle Corporation

34501
E. Quincy Ave., Box 10, Bldg. 34

Watkins, Colorado
80137

Attention:
President

 

14.4 Construction
. Where
required for proper interpretation, words in the singular shall
include the plural, and the masculine gender shall include the
neuter and the feminine, and vice versa, as is appropriate. The
article and section headings are for convenience and are not a
substantive portion of the Agreement. The Agreement shall be
construed as if it were equally drafted in all aspects by all
parties.

 

14.5 Entire Agreement
. This
Agreement, including the items referenced herein or to be attached
in accordance with the provisions of this Agreement, constitutes
the entire agreement among the parties pertaining to the subject
matter of this Agreement and supersedes all prior and
contemporaneous agreements and understandings of the parties as to
the subject matter of this Agreement. No representation, warranty,
covenant, agreement or condition not expressed in this Agreement
shall be binding upon the parties or shall change or restrict the
provisions of this Agreement.

 

14.6 Authority . Each of the
parties represents and warrants that it has all requisite power,
corporate and otherwise, to execute, deliver and perform its
obligations pursuant to this Agreement, that the execution,
delivery and performance of this Agreement and the documents to be
executed and delivered pursuant to this Agreement have been duly
authorized by it, and that upon execution and delivery, this
Agreement and all documents to be executed and delivered pursuant
to this Agreement will constitute its legal, valid and binding
obligation, enforceable against it in accordance with their
terms.

 

-17-

 

 

14.7 Copies . Numerous copies
of this Agreement have been executed by the parties. Each such
executed copy shall have the full force and effect of an original,
executed Agreement.

 

14.8 Counterparts
. This
Agreement may be executed in one or more counterparts, all of which
together shall constitute one and the same instrument.

 

14.9 Amendment . This Agreement
shall not be amended except by a writing executed by both
parties.

 

14.10 Compliance with Law
.
Rangeview and Service Provider covenant and agree that during the
continuance of this Agreement, they shall comply fully with all
provisions, terms, and conditions of all laws whether state or
federal, and orders issued thereunder, which may be in effect
during the continuance hereof.

 

14.11 Binding Effect
. The
benefits and terms and obligations of this Agreement shall extend
to and be binding upon the successors or permitted assigns of the
respective parties hereto.

 

14.12 Severability
. If
any clause or provision of this Agreement is illegal, invalid or
unenforceable under present or future laws effective during the
term of this Agreement, then, and in that event, it is the
intention of the parties hereto that the remainder of this
Agreement shall not be affected thereby. It is also agreed that in
lieu of each clause or provision of this Agreement that is illegal,
invalid or unenforceable, there shall be added as a part of this
Agreement a clause or provision as similar in terms to such
illegal, invalid or unenforceable clause or provision as may be
possible and be legal, valid and enforceable.

 

14.13 Duty of Good Faith and Fair Dealing;
Regular Consultation . The parties
acknowledge and agree that each party has a duty of good faith and
fair dealing in its performance of this Agreement. Service Provider
will advise Rangeview of its activities no less than annually
during the term of this Agreement and will respond to reasonable
requests of Rangeview for additional information on Service
Provider’s activities.

 

14.14 Further Assurance
. Each
of the parties hereto, at any time and from time to time, will
execute and deliver such further instruments and take such further
action as may reasonably be requested by the other party hereto, in
order to cure any defects in the execution and delivery of, or to
comply with or accomplish the covenants and agreements contained in
this Agreement and/or any other agreements or documents related
thereto.

 

14.15 Governing Law
. This
Agreement shall be governed by and construed in accordance with the
laws of the State of Colorado and applicable federal
law.

 

14.16 Arbitration . Any controversy
or claim arising out of or relating to the computation of amounts
due pursuant to Section 8.2 under this Agreement and all other
controversies or claims which the parties have expressly agreed
herein shall be submitted to arbitration, shall be settled by
arbitration in accordance with the Commercial Rules of the American
Arbitration Association, including discovery, experts, evidence and
hearings. Judgment upon the award rendered by the arbitrator(s) may
be entered in any court having jurisdiction thereof. Arbitration
shall be instituted on written demand of any party setting forth
the issues to be arbitrated. The party responding to the
arbitration demand shall respond to the demand within ten (10)
days, after which the parties shall proceed to select an arbitrator
within ten (10) days; provided however, that if the parties are
unable to agree on a single arbitrator within such ten (10) days,
the arbitration shall be by majority decision of a panel of three
arbitrators, at least two of whom shall have experience and
expertise in water rights or water utility matters, who may, but
need not, be affiliated with the American Arbitration Association.
Within ten (10) days, each party shall appoint one arbitrator, who
together shall appoint the third. If a party fails to appoint an
arbitrator within ten (10) days, an arbitrator shall be appointed
for such party by the American Arbitration Association upon the
request of another party. Arbitration shall be concluded and an
award entered within sixty (60) days of the completion of selection
of the arbitration panel, unless a shorter period is set forth
elsewhere in this Agreement.

 

-18-

 

 

14.17 Litigation and Attorneys’
Fees . Except as
provided in Section 14.16 above, in the event of claims,
disputes or other disagreements between the parties which the
parties are not able to resolve amicably, either party may bring
suit in a court of competent jurisdiction seeking resolution of the
matter. The prevailing party in any arbitration or suit shall be
entitled to recover its reasonable attorneys’ fees and costs
from the other party.

 

14.18 No Waiver of Governmental
Immunity . Nothing in this
Agreement shall be interpreted or construed as constituting a
waiver of the immunity granted to Rangeview pursuant to the
Colorado Governmental Immunity Act, C.R.S. § 24-10-101,
et seq., as
amended.

 

14.19 Force Majeure
.
Should either party be unable to perform any obligation required of
it under this Agreement, other than the payment of money, because
of any cause beyond its control (including, but not limited to war,
insurrection, riot, civil commotion, shortages, strikes, lockout,
fire, earthquake, calamity, windstorm, flood, material shortages,
failure of any suppliers, freight handlers, transportation vendors
or like activities, or any other force majeure), then such
party’s performance of any such obligation shall be suspended
for such period as the party is unable to perform such
obligation.

 

 

 

-19-

 

 

IN
WITNESS WHEREOF, the parties hereto have executed this Service
Agreement on the date first written above.

 

Rangeview:  RANGEVIEW METROPOLITAN DISTRICT,
acting by and through its water enterprise

 

 

By:
 /s/ Mark
Harding                                                 
Attest By: /s/ Scott
Lehman 

            
Mark
Harding,
President                                                      
Scott Lehman, Secretary

 

 

STATE
OF COLORADO     )

                                             
)
ss.

COUNTY
OF ARAPAHOE )

 

The
foregoing instrument was acknowledged before me this 16th day of
June 2017, by Mark Harding as President, and Scott Lehman as
Secretary of RANGEVIEW METROPOLITAN DISTRICT, a quasi-municipal
corporation and political subdivision of the state of
Colorado.

 

Witness
my hand and official seal.

 

My
commission expires: November 17, 2020

 

/s/ James D.
Ewing 

             
Notary

 

Service Provider: PURE CYCLE
CORPORATION, a Colorado corporation

 

  By:
 /s/ Mark
Harding

Mark
Harding, President

 

 

STATE
OF COLORADO     )

                                             
)
ss.

COUNTY
OF ARAPAHOE )

 

 

The
foregoing instrument was acknowledged before me this 16th day of
June 2017, by Mark Harding as President of Pure Cycle Corporation,
a Colorado corporation.

 

Witness
my hand and official seal.

 

My
commission expires: November 17, 2020

 

/s/ James D.
Ewing 

             
Notary

-20-

 

Exhibit A

Schedule of Services

(as of
June 16, 2017)

 

 

1.

Service Area
– Elbert County/Wild Pointe Ranch

 

a.

Terms of Service:

 

Water
Service Agreement by and between Rangeview Metropolitan District,
acting by and through its Water Activity Enterprise, and Elbert
& Highway 86 Commercial Metropolitan District, acting by and
through its Wild Pointe Water Activity Enterprise, effective as of
December 15, 2016 (the “Wild Pointe Service
Agreement”).

 

b.

Additional
Consideration:

 

Service
Provider paid Rangeview $1,600,000 in cash in exchange for the
exclusive right to provide water services to customers in Wild
Pointe Ranch in accordance with the Wild Pointe Service
Agreement.

 

c.

Exceptions to 8.2:

 

None

 

2.

Service Area
– Sky Ranch Development

 

a.

Terms of Service:

 

Water
and Wastewater Service Agreement for the Sky Ranch Development by
and between Rangeview Metropolitan District, acting by and through
its Water Activity Enterprise, and PCY Holdings, LLC, dated June
16, 2017 regarding the Sky Ranch Development.

 

b.

Additional
Consideration:

 

None

 

c.

Exceptions to 8.2:

 

None

 

A-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00276-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00276-of-00352.parquet"}]]