Document:

f8k052813ex10i_hotelout.htm

Exhibit 10.1

 

 

Loan Agreement

 

Dated as of May 22nd, 2013

 

	
By and between:

	
HOMI Industries Ltd, an Israeli company, #512805193, whose address for the purposes of this Agreement shall be Merkazim A Building, 1 Aba Eben Street, 3rd Floor, Herzliya Pituach Herzliya Pituach 46725, Israel; Fax: +972-9-9728626, e-mail: jackronnel@my-homi.com, with a mandatory copy to Reif & Reif Law Offices, e-mail: Mail@ReifLaw.com (“HOMI”);

	  	  
	
And:

	
Ilan Bahry, I.D. 032033136, email: ilanbahry@gmail.com

	  	  
	  	
Amir Schechtman, I.D. 038299624, email: amir221177@gmail.com ; and

	  	  
	  	
Asif Izak , ID 22542544, email: asifizak@walla.com

	  	  
	  	
all of whose address for fhe purposes of this Agreement shall be c/o Amir Schechtman, PO Box 29020, Tel-Aviv 61290 (individually and collectively, the “Lender”);

	  	  
	
Whereas:

	
HOMI owns a turnkey computerized mini-bar system, including 150 HOMI® 226 computerized minibars, a central unit and a license to HOMI® software, which HOMI’s affiliate, HOMI Israel Ltd (the “Affiliate”), which is under common control as HOMI, installed at the Cramim Resort & SPA Jerusalem (the “Hotel” and the “Minibar System”, respectively), and which HOMI operates under an outsource operation agreement between   the Affiliate and the Hotel (the “Operation” and the “Outsource Agreement”, respectively) ; and

	  	  
	
Whereas:

	
HOMI would like to take a loan from Lender, and Lender would like to grant a loan to HOMI, which will be repaid in accordance with and subject to the terms and conditions set forth herein;

 

Therefore, the parties have made condition and agreed as follows:

 

	
1.

	
The Loan

 

	
  

	
1.1

	
Upon the terms and conditions set forth in this Agreement, Lender agrees to loan to HOMI the principal amount of $71,250.00 (Seventy one thousand two hundred fifty US dollars) (the “Loan”), being equivalent to $475 for each minibar in the Minibar System.

 

	
  

	
1.2

	
All rights and obligations of Lender pursuant to this Agreement shall be allocated as follows: Ilan Bahry: 15%; Amir Schechtman: 15%; Asif Izak: 70%.

 

	
  

	
1.3

	
30% of the Loan will be made available to HOMI within 3 business days of the date hereof, by means of SWIFT wire transfer to HOMI’s account No. 725000/52 at Bank Leumi, branch No. 809, IBAN: IL690108090000072500052. 40% of the loan will be made available within 3 business days of HOMI notifying Lender that the Minibar System has been shipped from China, and the remaining 30% of the Loan will be made available to HOMI, by the means stated above, within 3 business days of HOMI notifying Lender that the Minibar System has arrived to Israeli Port.

 

	
2.

	
Repayment

 

	
  

	
2.1

	
HOMI undertakes to repay the entire Loan, in the manner set forth below.

 

	
  

	
2.2

	
On a monthly basis, for each month of the Operation, commencing as of the first calendar month following installation and start-up of the Minibar System at the Hotel (the “Effective Date”):

 

	
  

	
a.

	
HOMI will deliver to Lender a copy of its Affiliates’ monthly invoices to the Hotels in respect of the full amount of monthly net revenues from the Operations  (“HOMI’s Invoices to the Hotels”), which the Hotels are obliged to pay to the Affiliates under the Outsource Agreements for that month (“Net Revenues from Hotels”).

 

  

 

  

 

	2
	

Loan Agreement – Cramim Resort & SPA

HOMI Industries –Amir, Ilan, Asif

	

 

	
  

	
b.

	
From the sum equal to the Net Revenues from Hotels, HOMI will deduct: (i) the cost of goods being sold via the Minibar Systems, with no margin to HOMI, (ii) Operations’ direct labour costs, (iii) maintenance fees of $0.06 per Minibar per day, and (iv) a management fee of 8% of Net Revenues from Hotels (collectively, “Operational Payments”). The aforementioned maintenance fees are all-inclusive, and in return HOMI will take whatever action is needed, including parts and labour, to maintain the Minibar Systems in normal working condition.

 

	
  

	
c.

	
If Net Revenues from Hotels, as collected by HOMI’s Affiliates, exceed Operational Payments by at least $1,781.25, then HOMI will pay to Lender a sum equal to 60% of all such excess, towards repayment of the Loan.

 

	
  

	
d.

	
If Net Revenues from Hotels, as collected by HOMI’s Affiliates, exceed Operational Payments by more than $1,068.75 but less than $1,781.25, then HOMI will pay to Lender exactly $1,068.75 towards repayment of the Loan.

 

	
  

	
e.

	
If Net Revenues from Hotels, as collected by HOMI’s Affiliates, exceed Operational Payments by less than $1,068.75, then HOMI will pay to Lender a sum equal to 100% of all such excess, towards repayment of the Loan.

 

	
  

	
f.

	
If Net Revenues from Hotels, as collected by HOMI’s Affiliates, do not exceed Operational Payments, then no payment will be made to Lender for that month.

 

	
  

	
g.

	
Payments to Lender as set forth above will be effected on the 30th of the calendar month following the month for which payment is being made, by means of swift wire transfer to Lender’s joint account, at the Lincoln Branch (No. 772) of Bank Hapoalim B.M (No.12)                                                      

 

	
  

	
2.3

	
The provisions of Sections ‎2.2c, ‎2.2d and ‎2.2e above shall only apply for the first 9 years of this Agreement (the “Initial Term”). Thereafter, HOMI will pay to Lender a sum equal to 60% of the entire amount by which Net Revenues from Hotels shall exceed Operational Payments, if at all.

 

	
  

	
2.4

	
A sample spreadsheet showing key elements of the mechanism for implementation of the provisions of this Section ‎2 above, is attached hereto as Exhibit A’.

 

	
  

	
2.5

	
HOMI shall continue to effect the payments to Lender pursuant to Section ‎2.2 and 2.3 above, for as long as the Operation continues in respect of the Minibar System. Initially all Payment made to Lender  hereunder shall go towards repayment of principal of the loan. If and when the aggregate total of such repayments exceeds the principal of the Loan, such repayments shall be deemed interest on the Loan.

 

	
  

	
2.6

	
If the Outsource Agreement is terminated during an initial term of 9 years from the Effective Date (the “Initial Term”) and the Minibar System removed from the Hotel, then HOMI will, at its own cost, reinstall the Minibar System at one or more other hotels at which the Minibar System will have equivalent revenue earning capacity as in the Hotel, as soon as possible and in any event within 6 months of its removal from the Hotel.

 

	
  

	
2.7

	
If reinstallation was not performed within said 6 months, then HOMI shall be obliged, at any time during the following 3 months, to transfer the fixed charge being granted to Lender under Section ‎5.1 below, to other installed minibars, of equivalent value and revenue earning capacity, and such other minibars will then form the basis for the computations as set forth in Section ‎2.2 above.

 

	
  

	
2.8

	
If, as a result of HOMI non-compliance with the provisions of this Agreement, Lender makes such demand, HOMI will agree to establish a trust account, into which will be deposited a sum equal to the Net Revenues from Hotel, for allocation and distribution to the parties by a trustee who will be appointed by mutual consent of the parties.

 

  

 

  

 

	3
	

Loan Agreement – Cramim Resort & SPA

HOMI Industries –Amir, Ilan, Asif

	

 

	
3.

	
Specified Purpose of Loan

 

	
  

	
3.1

	
The Parties hereby confirm and agree that HOMI requested the Loan for the sole purpose of using all of said Loan to finance its activity in the ordinary course of business, including making financing available to one or more of its subsidiaries and/or affiliates, to finance their activity in the ordinary course of business (the “Specified Purpose”).

 

	
  

	
3.2

	
HOMI hereby undertakes to use the Loan solely for the Specified Purpose and not to use any part of the Loan for any purpose other than the Specified Purpose.

 

	
  

	
3.3

	
HOMI hereby recognizes and acknowledges that Lender’s consent to make the Loan to HOMI in accordance with the terms hereof is inter alia subject to and in reliance upon HOMI’s undertaking as set forth in Section ‎3.2 above, which is a fundamental condition of this Agreement.

 

	
4.

	
Events of Default

 

The occurrence and continuation of any of the following events shall be considered an Event of Default upon the occurrence of which the entire unpaid balance of the Loan, and all reasonable costs of collection, including reasonable attorney fees and expenses, shall become immediately due and payable:

 

	
  

	
4.1

	
HOMI shall fail to make any payment which it is obliged to make under the terms of this Agreement and such failure is not fully remedied within thirty (30) days of HOMI’s receiving written notice from Lender of the occurrence thereof;

 

	
  

	
4.2

	
for the avoidance of doubt it is hereby stipulated and emphasized that it is the fundamental obligation and undertaking of HOMI to repay the Loan, in its entirety, and failure by HOMI to repay the Loan in its entirety shall be considered an Event of Default, regardless of the reason for such failure;

 

	
  

	
4.3

	
HOMI shall default in the performance of any material covenant or obligation contained herein and such default is not remedied within thirty (30) days of HOMI’s receiving written notice from Lender of the occurrence thereof;

 

	
  

	
4.4

	
HOMI uses and/or attempts and/or permits use of the Loan, or any part thereof, for any purpose other than the Specified Purpose;

 

	
  

	
4.5

	
any representation or warranty made by or on behalf of HOMI to Lender, howsoever in connection with the Loan and/or this Agreement, shall at any time prove to have been materially incorrect or misleading;

 

	
  

	
4.6

	
any judgment materially affecting the ability of HOMI to repay the Loan and pay the Interest shall be entered against HOMI or any attachment, levy or execution against a substantial portion of its properties shall remain unpaid, or shall not be released, discharged, dismissed, suspended or stayed for a period of thirty (30) days or more after its entry, issue or levy, as the case may be;

 

	
  

	
4.7

	
any proceedings seeking to declare HOMI bankrupt, or insolvent, or seeking liquidation, winding up, reorganization, arrangement with creditors, composition of debts or any other similar proceedings shall be initiated against HOMI, and such proceeding shall not be dismissed within thirty (30) days;

 

	
  

	
4.8

	
any event shall occur materially adversely affecting the ability of HOMI to repay the Loan under the terms of this Agreement.

 

  

 

  

 

	4
	

Loan Agreement – Cramim Resort & SPA

HOMI Industries –Amir, Ilan, Asif

	

 

	
5.

	
Security and Collateral

 

	
  

	
5.1

	
As security and collateral for the full and timely repayment of the Loan pursuant to this Agreement, HOMI will, promptly upon receipt of the Loan and installation of the Minibar System, encumber the Minibar System by registering a first degree fixed charge over the Minibar System, in favour of the Lender and will take such action as is required in order to give this fixed charge full effect, including by means of its being reported and registered with the appropriate authorities, with a copy to Lender. This fixed charge will remain in force until the Loan has been repaid in full, at which time Lender will cooperate with HOMI in the cancellation and removal of the fixed charge.

 

	
  

	
5.2

	
Upon the occurrence of an Event of Default, and for as long as said Event of Default remains uncured, Lender may, without prejudice to any and all other rights, remedies and/or relief to which Lender may be entitled by law, exercise and realize any and all security interests and/or collateral granted to Lender by HOMI pursuant to the terms hereof, including the security and collateral as set forth in Section ‎5.1 above, without in any way derogating from HOMI’s obligation to pay to Lender any and all sums still owed by HOMI to Lender pursuant to the terms hereof even after said actions by the Lender.

 

	
  

	
5.3

	
HOMI hereby recognizes, acknowledges and agrees that Lender may, at any particular time, hold various forms of security and/or collateral in respect of the Loan, whether received from HOMI or from any third party, including the security and collateral as set forth in Section ‎5.1 above (all such security and collateral being termed hereinafter, the “Collateral”), and that Lender’s rights herein with respect to the security and collateral as set forth in Section ‎5.1 above shall remain in full force and effect regardless of, and in addition to, any other Collateral then held by Lender, and Lender shall have full and absolute discretion as to the order and/or nature in which it exercises and/or realizes its rights in the Collateral, if at all, and as to the timing of any such exercise and/or realization, and HOMI hereby waives any and all claims, demands and/or actions, of any kind whatsoever, against Lender, in this regard.

 

	
  

	
5.4

	
HOMI undertakes, from time to time forthwith upon a Lender’s demand, in order to guarantee Lender’s rights with respect to any current and/or and future creditors, to take any action and sign any instrument and/or form and/or agreement as per Lender’s request, in the event Lender and/or HOMI believes that any laws by which it or its assets are bound require such action or signature in order to accord full validity to the Collateral, against the whole world.

 

	
6.

	
HOMI’s General Covenants

 

	
  

	
6.1

	
HOMI shall keep proper records and books of account in accordance with generally accepted accounting principles consistently applied, and shall maintain, preserve and keep all of its properties and assets in good working order and condition, subject to ordinary wear and tear.

 

	
  

	
6.2

	
HOMI shall conduct its affairs in such manner as is appropriate for the subsidiary of a public company whose shares are traded on the New York OTCQB, and in accordance with all laws and regulations by which it is bound.

 

	
  

	
6.3

	
HOMI shall provide Lender with monthly reports of actual performance of the Minibar System at the Hotel.

 

	
7.

	
Representations and Warranties

 

HOMI hereby represents and warrants to Lender as follows:

 

	
  

	
7.1

	
that it is duly organized and existing under the laws of the jurisdiction in which it was incorporated, with the requisite corporate or other power to own and operate its properties and assets, and to carry on its business as presently conducted and to execute and perform its obligations under this Agreement;

 

	
  

	
7.2

	
that this Agreement is valid and binding upon it and it is bound by it and obliged to act in accordance with its terms; and that the execution and performance by it of this Agreement, and compliance therewith, and the consummation of the transactions contemplated by this Agreement will not result in any violation of and will not conflict with, or result in a breach of any of the terms of, or constitute a default under, any document, other obligation, law, regulation or order to which it is or will be party or by which it is or will be bound;

 

  

 

  

 

	5
	

Loan Agreement – Cramim Resort & SPA

HOMI Industries –Amir, Ilan, Asif

	

 

	
  

	
7.3

	
that all actions on its part and on the part of its directors, required for the authorization, execution, and performance by it, of this Agreement, and the consummation of all the transactions contemplated herein, have been obtained, or that they will be obtained within 30 days of the date hereof.

 

	
8.

	
Miscellaneous

 

No Amendment to this Agreement, or any part thereof, shall be valid or binding upon the Parties unless drawn up in writing and signed by both Parties. The Preamble, and any Appendices, Exhibits or Schedules to this Agreement, constitute an integral part hereof. The headings used in this Agreement are for convenience of reference only and will not be used in the construction of this Agreement. Any use of the word “including” in this Agreement shall be construed as meaning “including, without limitation”, unless expressly stipulated to the contrary. All pronouns contained herein, and any variations thereof, shall be deemed equally to refer to the masculine, feminine or neutral, singular or plural, as the context may require. No principle of construction against the drafter shall apply in any way to this Agreement or any of the Exhibits, Appendices and/or Schedules attached hereto. No failure or delay on the part of any Party in exercising any right and/or remedy to which it may be entitled hereunder and/or by law shall operate as a waiver by that Party of any right whatsoever. No waiver of any right under this Agreement shall be deemed as a waiver of any further or future right hereunder, whether or not such right is the same kind of right as was waived in a previous instance. In case any provision of the Agreement shall be declared invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and shall continue in full force and effect. This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and replaces any previous agreements between the Parties, if at all, whether written or verbal, pertaining to any of the subject-matter hereof. This Agreement shall be deemed to have been made and concluded in Israel and the construction, validity and performance of this Agreement shall be governed by the laws of Israel without giving effect to the conflicts of law principles thereunder. By their execution hereof, the parties irrevocably agree to submit all disputes arising hereunder to the jurisdiction of the competent courts of Tel-Aviv, Israel. Notices sent by one Party to the other under this Agreement will be sent by registered mail to the addresses specified in the Preamble, delivered by hand, transmitted by fax, or sent by e-mail or other electronic means of communication and will be deemed to have reached their destination within 3 days of being deposited with the Post Office for dispatch as registered mail (7 days in the case of air mail), upon actual delivery when delivered by hand, and upon receipt of the recipient’s confirmation of receipt when sent by fax, e-mail or other electronic means of communication. This Agreement may be executed in any number of counterparts, in original or by facsimile, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute one and the same agreement.

 

In witness whereof the Parties have executed this

 

Loan Agreement on the date first above written:

	
 

_______________________________

HOMI

	  	
 

________________________________

 

	
Industries Ltd

	 	
Ilan Barhy___________________

 

	
Daniel Cohen________________

 

Jacob Ronnel________________

	 	
Amir Schechtman_____________

 

Asif Izak____________________f8k053013ex4i_magnegas.htm

Exhibit 4.1

 

WARRANT AGREEMENT

  

THIS WARRANT AGREEMENT (the “Agreement”), by and between MagneGas Corporation, a Delaware corporation (the “Company”) and Corporate Stock Transfer, Inc., a Colorado corporation (the “Warrant Agent”).

 

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

 

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

 

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

 

“Exercise Price” means $[___], subject to adjustment in accordance with Section 10.

 

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

 

 “Purchase Agreement” means the Underwriting Agreement, dated [___________], 2013, to which the Company and Northland Securities, Inc. are parties.

 

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

 

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

 

2.           Form of Warrant Certificate.  Each Common Stock Purchase Warrant (the “Warrant”) will certify that for value received, the holder or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Original Issue Date”) and on or prior to 5:30 p.m., New York City time, on the date that is five (5) years following the Original Issue Date (the “Expiration Date”) but not thereafter, to subscribe for and purchase from the Company, up to [______] shares (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock. The purchase price of $[___] per share of Common Stock under the Warrant shall be equal to the Exercise Price, as defined in Section 1.  The Company shall issue each Warrant in registered form only, 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 an authorized officer of the Company.

 

  

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

 

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

 

5.           Exercise and Duration of Warrants.

 

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

 

(b)            Notwithstanding anything to the contrary contained herein, the number of Warrant Shares that may be acquired by the Holder upon any exercise of the Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such exercise (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its affiliates (as defined under Rule 144, “Affiliates”) and any other persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise).  For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  This provision shall not restrict the number of shares of Common Stock which a Holder may receive or beneficially own in order to determine the amount of securities or other consideration that such Holder may receive in the event of a Fundamental Transaction as contemplated in Section 10 of this Agreement.  By written notice to the Company, the Holder may waive the provisions of this Section 5(b) but any such waiver will not be effective until the 61st day after delivery of such notice, nor will any such waiver effect any other Holder.

 

Notwithstanding anything to the contrary contained herein, the number of Warrant Shares that may be acquired by the Holder upon any exercise of the Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such exercise (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its Affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act, does not exceed 9.999% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise).  For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  This provision shall not restrict the number of shares of Common Stock which a Holder may receive or beneficially own in order to determine the amount of securities or other consideration that such Holder may receive in the event of a Fundamental Transaction as contemplated in Section 10 of this Agreement.  This restriction may not be waived.

 

  

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6.           Delivery of Warrant Shares.

 

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

 

(b)           If by the third Trading Day after the Company receives notice of the Warrant Agent receiving an Exercise Notice, the Company fails to cause the Warrant Agent to deliver the required number of Warrant Shares in the manner required pursuant to Section 6(a), then the Holder will have the right to rescind such exercise.

 

(c)           If by the third Trading Day after the Company receives notice of the Warrant Agent receiving an Exercise Notice, the Company fails to cause the Warrant Agent to deliver the required number of Warrant Shares in the manner required pursuant to Section 6(a), and if after such third Trading Day and prior to the receipt of such Warrant Shares, the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue by (B) the closing bid price of the Common Stock at the time of the obligation giving rise to such purchase obligation and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. The Holder shall provide the Warrant Agent written notice indicating the amounts payable to the Holder in respect of the Buy-In.

 

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

 

  

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(e)           If the Warrant is exercised in part, the Warrant Agent shall, at the request of a Holder and upon surrender of the Warrant, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by the Warrant, which new Warrant shall in all other respects be identical with the Warrant

 

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

 

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

 

9.           Reservation of Warrant Shares.  The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of the Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of Persons other than the Holder (taking into account the adjustments and restrictions of Section 10). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable.

 

10.           Certain Adjustments.  The Exercise Price and number of Warrant Shares issuable upon exercise of the Warrant are subject to adjustment from time to time as set forth in this Section 10.

 

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

 

  

4

  

 

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

 

(c)           Number of Warrant Shares.  Simultaneously with any adjustment to the Exercise Price pursuant to this Section 10, the number of Warrant Shares that may be purchased upon exercise of the 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.

 

(d)           Calculations. All calculations under this Section 10 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

 

(e)           Notice of Adjustments.  Upon the occurrence of each adjustment pursuant to this Section 10, the Company at its expense will promptly compute such adjustment in accordance with the terms of the Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of the Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Warrant Agent will promptly deliver a copy of each such certificate to the Holder.

 

  

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

 

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

 

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

 

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

 

where:  

 

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

 

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

 

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

 

B = the Exercise Price.  

 

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

 

(c)           Disposition of Proceeds on Exercise of Warrants.  The Warrant Agent shall promptly forward to the Company all monies received by the Warrant Agent for the purchase of shares of Common Stock through the exercise of Warrants.

 

12.           No Fractional Shares. No fractional shares of Warrant Shares will be issued in connection with any exercise of any Warrant. In lieu of any fractional shares which would, otherwise be issuable, the Company shall, at its election, either pay cash equal to the product of such fraction multiplied by the Closing Price of one Warrant Share on the date of exercise or round up to the next whole share.

 

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

 

  

6

  

 

14.           Warrant Agent.  The Company’s transfer agent for its Common Stock and Warrants, Corporate Stock Transfer, Inc., shall serve as warrant agent under the Warrant (the “Warrant Agent”).  Upon thirty (30) days’ notice to the Holder, the Company may appoint a new warrant agent.  Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under the Warrant without any further act.  Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the Warrant Register.  The Warrant Agent is hereby authorized to countersign and to deliver, in accordance with the terms of this Agreement, the Warrant Shares required to be issued pursuant to the provisions of Section 6, and the Company, whenever required by the Warrant Agent, will supply the Warrant Agent with certificates duly executed on behalf of the Company for such purpose.  The Warrant Agent shall be liable under this Agreement only for its own negligence, willful misconduct and bad faith.  The Company agrees to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and reasonable counsel fees, for anything done or omitted by the Warrant Agent in the execution of this Agreement except as a result of the Warrant Agent’s negligence, willful misconduct or bad faith.  The Warrant Agent shall have no responsibility with respect to the validity of this Agreement or 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 Agreement or in any Warrant.  The Warrant Agent hereby accepts the agency established by this 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 the Warrants exercised and concurrently account for, and pay to the Company, all moneys received by the Warrant Agent for the purchase of shares of the Company’s Common stock through the exercise of Warrants.  The Warrant Agent shall keep copies of this Agreement available for inspection by holders of Warrants during normal business hours.

 

15.           Miscellaneous.

 

a)           Successors and Assigns.  This Agreement shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Agreement shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Agreement.

 

b)           Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflicts of law thereof.

 

c)           Amendment.  The provisions of the Warrant and all warrants issued pursuant to the Purchase Agreement 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 Holders representing not less than a majority of the Warrant Shares obtainable upon exercise of the Warrants then outstanding.

 

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

 

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

 

  

7

  

 

f)           No Rights as Stockholder Until Exercise.  Prior to exercise of the Warrant, the Holder hereof shall not, by reason of by being a Holder, be entitled to any rights of a stockholder with respect to the Warrant Shares.

 

g)           Closing of Books.  The Company will not close its stockholder books or records in any manner which prevents the timely exercise of the Warrant, pursuant to the terms hereof.

 

[signature page follows]

 

  

8

  

 

In witness whereof, the undersigned have caused this Agreement to be duly executed as of the date first indicated above.

 

	 	MAGNEGAS CORPORATION	 
	 	 	 	 
	 	
By: 

	 	 
	 	Name:	 	 
	 	
Its:

	 	 

 

	 	
CORPORATE STOCK TRANSFER, INC.

	 
	 	 	 	 
	 	
By: 

	 	 
	 	Name:	 	 
	 	
Its:

	 	 

[Warrant Agreement]

  

9

  

 

	
Number

	 	
MAGNEGAS CORPORATION

	 	
Warrant

	 	 	 	 	 
	 	 	
THIS WARRANT WILL BE VOID IF NOT EXERCISED PRIOR

	 	 
	 	 	
TO 5:30 P.M. NEW YORK CITY TIME, [_______], 2018

	 	 
	 	 	 	 	 

 

THIS CERTIFIES THAT, for value received, SPECIMEN

is the registered holder of a Warrant or Warrants expiring [_______], 2018 (the “Warrant”) to purchase [___] of one fully paid and non-assessable share of common stock, no par value (“Shares”) of MagneGas Corporation, a Delaware corporation (the “Company”) for each Warrant evidenced by this Warrant Certificate.  The Warrant entitles the holder thereof to purchase from the Company, commencing upon the date of issuance, such number of Shares of the Company at the price of $[___] per full Share (the “Exercise Price”), upon surrender of the Warrant, with a duly executed facsimile copy of the Notice of Exercise Form attached hereto and payment of the Exercise Price at the office or agency of the Warrant Agent, Corporate Stock Transfer, Inc. (the “Warrant Agent”), but subject to the conditions set forth herein and in the Common Stock Purchase Warrant Agreement between the Company and the Warrant Agent (the “Warrant Agreement”).  The terms of the Warrant Agreement are incorporated herein in their entirety.  In the event of a conflict between this Warrant Certificate and the Warrant Agreement, the terms of the Warrant Agreement shall control.

 

This Warrant will expire on the date first written above if it is not exercised prior to such date by the registered holder pursuant to the terms of the Warrant Agreement.

 

No fraction of a Share will be issued upon any exercise of a Warrant.  If the holder of a Warrant would be entitled to receive a fraction of a Share upon any exercise of a Warrant, the Company shall, upon such exercise, round up to the nearest whole number the number of Shares to be issued to such holder or pay a cash adjustment in respect of such fractional amount.

 

Warrant Certificates, when surrendered at the office or agency of the Warrant Agent by the registered holder hereof in person or by attorney duly authorized in writing, may be exchanged in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants.

 

Upon due presentment for registration of transfer of the Warrant Certificate at the office or agency of the Warrant Agent in the manner provided in the Warrant Agreement, a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee in exchange for this Warrant Certificate as provided in the Warrant Agreement.

 

The Company and the Warrant Agent may deem and treat the registered holder as the absolute owner of this Warrant Certificate (notwithstanding any notation of ownership or writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the registered holder, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.

 

This Warrant does not entitle the registered holder to any of the rights of a stockholder of the Company.

 

		
 

	 	 	 	CORPORATE STOCK TRANSFER, INC.
	 	 	 	 	By:	 
	President	 	Secretary	 	 	Transfer Agent and Registrar Authorized Officer

 

  

10

  

 

EXERCISE NOTICE

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

 

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

 

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

 

                     “Cash Exercise” under Section 10

 

                              “Cashless Exercise” under Section 10

 

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

 

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

 

	
Dated ______________ __, _____           

	
Name of Holder:

	 
	 	 	 
	 	
(Print)

	 
	 	 	 
	 	 	 
	 	 	 	 
	 	
By: 

	 	 
	 	Its:	 	 
	 	
(Signature must conform in all respects toname of holder as specified on the face ofthe Warrant)

	 

 

  

11

  

 

Warrant Shares Exercise Log

	
Date

	
Number of Warrant

Shares Available

to be Exercised

	
Number of Warrant

Shares Exercised

	
Number of Warrant

Shares Remaining

to be Exercised

	 	 	 	 

  

12

  

 

FORM OF ASSIGNMENT

 

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

 

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

Dated: __________ __, _______

 

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

Address of Transferee

 

	 	 	 
	 	 	 
	 	 	 
	 	 	
Note:  Address for Delivery may not be a P.O. box and must be a physical address where stock certificates may be delivered in connection with this purchase or any future stock issued through splits, warrant conversions or other circumstances.  The delivery address may be a personal residence, or a broker dealer where the certificate would be deposited

	
Attest:

	 	 
	 	 	 

 

 

 13

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