sc13d

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q4lazFEFe+YIFOXrNRZXnA1odljCI3X+4PIL3MRYxY2yOiak+VAEuY5QxOr7wlTz Z6ItYDNjGG+N+M8hOUw7Vw== 0000950134-08-005509.txt : 20080327 0000950134-08-005509.hdr.sgml : 20080327 20080327171101 ACCESSION NUMBER: 0000950134-08-005509 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20080327 DATE AS OF CHANGE: 20080327 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: GreenHunter Energy, Inc. CENTRAL INDEX KEY: 0001410056 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [2860] IRS NUMBER: 204864036 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-83599 FILM NUMBER: 08715828 BUSINESS ADDRESS: STREET 1: 1048 TEXAN TRAIL CITY: GRAPEVINE STATE: TX ZIP: 76051 BUSINESS PHONE: 972-410-1044 MAIL ADDRESS: STREET 1: 1048 TEXAN TRAIL CITY: GRAPEVINE STATE: TX ZIP: 76051 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Southern Ute Indian Tribe CENTRAL INDEX KEY: 0001429685 IRS NUMBER: 840404384 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: P.O. BOX 367 CITY: IGNACIO STATE: CO ZIP: 81137 BUSINESS PHONE: 970-563-5003 MAIL ADDRESS: STREET 1: P.O. BOX 367 CITY: IGNACIO STATE: CO ZIP: 81137 SC 13D 1 d54567sc13d.htm SCHEDULE 13D sc13d

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

GREENHUNTER ENERGY, INC.

(Name of Issuer)

Common Stock, par value $0.001 per share

(Title of Class of Securities)

39530A 10 4

(CUSIP Number)

Robert J. Zahradnik
Southern Ute Indian Tribe
14933 Highway 172
Ignacio, Colorado 81137

with a copy to:
Reid A. Godbolt
Jones & Keller, P.C.
1625 Broadway, Sixteenth Floor
Denver, Colorado 80202

(970) 563-5003

(Name, Address and Telephone Number of Person

Authorized to Receive Notices and Communications)

December 10, 2007

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

*The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act.


CUSIP No.		39530A 10 4


1	NAMES OF REPORTING PERSONS: Southern Ute Indian Tribe I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (Entities only)


2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
	(a) o
	(b) o

3	SEC USE ONLY:



4	SOURCE OF FUNDS (See Instructions):

	N/A

5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e):

	o

6	CITIZENSHIP OR PLACE OF ORGANIZATION:

	Federally recognized Indian Tribe organized under the Indian Reorganization Act of 1934.

		7	SOLE VOTING POWER:

NUMBER OF			1,875,000 (1)

SHARES		8	SHARED VOTING POWER:
BENEFICIALLY
OWNED BY			-0-

EACH		9	SOLE DISPOSITIVE POWER:
REPORTING
PERSON			1,875,000 (1)

WITH		10	SHARED DISPOSITIVE POWER:

			-0-

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:

	1,875,000 (1)

12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions):

	o

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):

	6.4%(1) (2)

14	TYPE OF REPORTING PERSON (See Instructions):

	00 (3)


(1)		Includes 1,250,000 shares of common stock directly owned by the Reporting Person and 625,000 shares of common stock issuable upon exercise of a Warrant dated December 10, 2007, which Warrant is exercisable in full as of the date hereof through and including December 10, 2010.

(2)		Using the number in Item 11 divided by the number of outstanding shares of common stock as of a recent date (29,194,283).

(3)		The Reporting Person is a Federally recognized Indian Tribe organized under the Indian Reorganization Act of 1934.

Item 1. Security and Issuer

This Statement relates to the common stock, par value $0.001 per share (“Common Stock”), of GreenHunter Energy, Inc. (the “Issuer”). The address of the principal executive offices of the Issuer is 3129 Bass Pro Drive, Grapevine, Texas 76051.

Item 2. Identity and Background

(a) – (c), (f)

This Statement is filed on behalf of the Southern Ute Indian Tribe (the “Tribe”). The Tribe holds the Common Stock in the name of its 100% owned subsidiary, GF Private Equity Group, LLC, a Colorado limited liability company (“GF”). The sole manager of GF is GFMC, LLC, a Colorado limited liability company wholly owned by the Tribe.

The Tribe is a Federally recognized Indian Tribe organized under the Indian Reorganization Act of 1934. From time to time the Tribe engages in various investment activities through GF. The address of the principal business and principal office of the Tribe is 14933 Highway 172, Ignacio, Colorado 81137. The address of the principal business and principal office of GF is 175 Mercado Street, Suite 201, Durango, Colorado 81301. The address of the principal business and principal office of GFMC, LLC is 14933 Highway 172, Ignacio, Colorado 81137.

The Tribe is governed by a Tribal Council consisting of seven members. The members of the Tribal Council, its other executive officers and the managers of GFMC, LLC are listed below. The positions held and duties performed by each person listed below represent such person’s principal occupation and employment. The principal business address for each Tribal Council member and each Manager of GFMC, LLC is 14933 Highway 172, Ignacio, Colorado 81137. Each person is a citizen of the United States of America.

Tribal Council Members, Executive Officers of the Tribe and Managers of GFMC, LLC


Clement Frost		Chairman
Matthew Box		Council Member
Michelle Olguin		Vice Chairperson and Council Member
Jim Newton		Council Member
Stephen R. Herrera		Council Member
John Washington		Council Member
Ramona Eagle		Council Member, Treasurer and Manager of GFMC, LLC
Brian Zink		Chief Financial Officer
Byron Reed		Executive Officer
Robert J. Zahradnik		Manager of GFMC, LLC
Bruce Valdez		Manager of GFMC, LLC
Thomas C. Arland		Manager of GFMC, LLC
Clifton G. Baker		Manager of GFMC, LLC

(d) – (e)

During the last five years, neither the Tribe, GF nor, to the best of the Tribe’s knowledge, any of its respective Tribal Council members, its executive officers or the managers of GFMC, LLC (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors); or (ii) has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

Item 3. Source and Amount of Funds or Other Consideration

As of the close of business on March 24, 2008, the Tribe had purchased in the aggregate 1,250,000 shares of Common Stock (the “Shares”) and a warrant to purchase an additional 625,000 shares of Common Stock at $18.00 per share (the “Warrant”), exercisable in full on the date of issuance and which expires on December 10, 2010. The Shares and the Warrant were purchased for an aggregate total consideration of $15,000,000, which was obtained from funds reserved for investments on behalf of the Tribe. Also, as of such date, the Tribe beneficially owned an option (the “Option”) to purchase 100,000 shares of Common Stock exercisable as follows: 33,334 shares vest on December 13, 2008; 33,333 shares vest on December 13, 2009; and 33,333 shares vest on December 13, 2010, in each case so long as Robert J. Zahradnik has continuously served as a director of the Issuer from December 10, 2007. The economic benefit to the Option was transferred to the Tribe from Mr. Zahradnik effective March 24, 2008 for no consideration.

Item 4. Purpose of Transaction

The Shares, the Warrant and the economic benefit to the Option were acquired for investment purposes. Based on continuing evaluation of the Issuer’s businesses and prospects, alternative investment opportunities and all other factors deemed relevant, additional shares of Common Stock or other securities of the Issuer may be acquired in the open market or in privately negotiated transactions, or some or all of the shares of the Issuer’s Common Stock or other securities may be sold by the Tribe. Except as set forth elsewhere in this Statement, the Tribe has made no proposals and has entered into no agreements which would be related to or would result in any of the matters described in Items 4(a)-(j) of Schedule 13D; however, as part of its ongoing review of investment alternatives, the Tribe may consider further investment opportunities with the Issuer, its management or its Board of Directors or other stockholders of the Issuer. There can be no assurance that any proposal of the type described above will be made, or if made, that a transaction will be consummated. The Tribe may from time to time review or reconsider its position with respect to any of the foregoing matters and reserves the right to change its plans and intentions.

Item 5. Interest in Securities of the Issuer

(a) As of the date of this Statement, the Tribe beneficially owns 1,875,000 shares of Common Stock (approximately 6.4% of the Common Stock), 1,250,000 of which are issued and outstanding and an additional 625,000 of which the Tribe has the right to acquire upon exercise of the Warrant.

(b) Except for the purchases described herein, neither the Tribe nor GF and to the best of their knowledge, none of the Tribe’s respective council members or officers or the managers of GFMC, LLC, with the exception of Robert J. Zahradnik, has effected transactions involving the Common Stock during the last 60 days. On December 13, 2007, the Board of Directors of the Issuer granted the Option to Robert J. Zahradnik, a Manager of GFMC, LLC, and a director of the Issuer. The economic benefit to the Option was subsequently transferred by Mr. Zahradnik for no consideration to the Tribe effective March 24, 2008.

(c) On December 13, 2007, the Board of Directors of the Issuer granted Robert J. Zahradnik the Option, the economic benefit to which was subsequently transferred by Mr. Zahradnik for no consideration to the Tribe effective March 24, 2008.

(d) – (e) Not applicable.

Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer

The Tribe and the Issuer entered into a Subscription Agreement (the “Subscription Agreement”) on December 10, 2007. The Subscription Agreement provides that the Tribe may transfer its securities of the Issuer, subject to compliance with the federal and any applicable state securities laws. Additionally, the Subscription Agreement, among other things, provides:

	•		that one member of the Board of Directors of the Issuer may be elected by the Tribe so long as the Tribe holds five percent or more of the Issuer’s Common Stock; and

	•		that the Tribe has not entered into an agreement whereby brokerage or finder’s fees or commissions are or will be payable by the Issuer to any broker or other person with respect to the acquisition of the Shares.

Pursuant to the Subscription Agreement, Robert J. Zahradnik, Manager of GFMC, LLC, was appointed to the Board of Directors of the Issuer. Subsequently, on December 13, 2007, the Issuer granted Mr. Zahradnik the Option. The economic benefit to the Option was subsequently transferred by Mr. Zahradnik for no consideration to the Tribe effective March 24, 2008. The Option vests as follows: 33,334 shares of Common Stock vest on December 13, 2008; 33,333 shares of Common Stock vest on December 13, 2009; and 33,333 shares of Common Stock vest on December 13, 2010, in each case so long as Mr. Zahradnik has continuously served as a director of the Issuer since December 10, 2007.

In conjunction with the Subscription Agreement, the Issuer and the Tribe entered into a Warrant to Purchase Common Stock, dated December 10, 2007 (the “Warrant Agreement”). The Warrant Agreement provides that the Tribe may purchase up to 625,000 shares of Common Stock at an exercise price of $18.00 per share, subject to adjustment as provided in the Warrant Agreement, and which was exercisable in full the date of issuance through and including December 10, 2010. Additionally, the Warrant Agreement, among other things, provides:

•

the Warrant Agreement may be sold, transferred or assigned, subject to compliance with the federal and any applicable state securities laws; and

•

the Issuer may require the holder of the Warrant to exercise the Warrant if two years have elapsed since the issuance of the Warrant Agreement and the 10-day average price per share of the Common Stock, as quoted by the market, is greater than or equal to $24.00, subject to adjustment for splits and recapitalization.

Robert J. Zahradnik has a contractual right to 2% of the net proceeds, if any, of the Tribe’s interest in the Shares and Warrant in exchange for payment by him of 2% of the Tribe’s acquisition cost of such securities. As of the date of this Schedule 13D he had exercised his right to pay the 2% acquisition cost of the Shares of the Tribe reported hereunder. He does not have the power or right to vote or dispose of such securities.

Item 7. Material to be Filed as Exhibits

Filed herewith are the following:


Exhibit No.		Description of Exhibit

A		Form of Subscription Agreement by and between GreenHunter Energy, Inc. and the Southern Ute Indian Tribe, dated December 10, 2007.

B		Form of Warrant to Purchase Common Stock by and between GreenHunter Energy, Inc. and the Southern Ute Indian Tribe, dated December 10, 2007.

C		Associate Stock Option Agreement by and between GreenHunter Energy, Inc. and Robert J. Zahradnik, dated December 13, 2007.

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.


		Date: March 27, 2008

		Southern Ute Indian Tribe

		/s/ Robert J. Zahradnik
		By: Robert J. Zahradnik
		Title: Growth Fund Operating Director

EXHIBIT INDEX


Exhibit No.

A		Form of Subscription Agreement by and between GreenHunter Energy, Inc. and the Southern Ute Indian Tribe, dated December 10, 2007.

B		Form of Warrant to Purchase Common Stock by and between GreenHunter Energy, Inc. and the Southern Ute Indian Tribe, dated December 10, 2007.

C		Associate Stock Option Agreement by and between GreenHunter Energy, Inc. and Robert J. Zahradnik, dated December 13, 2007.

EX-99.A 2 d54567exv99wa.htm SUBSCRIPTION AGREEMENT exv99wa

Exhibit A

SUBSCRIPTION AGREEMENT

GreenHunter Energy, Inc.
3129 Bass Pro Drive
Grapevine, Texas 76051

Ladies and Gentlemen:

The undersigned subscriber (“Subscriber” or “Buyer”) hereby tenders this Subscription Agreement (this “Agreement”) in accordance with and subject to the terms and conditions set forth herein:

1. Subscription:

(a) Subscriber hereby subscribes for and agrees to purchase the aggregate amount of Units (the “Units”) of GreenHunter Energy, Inc. (the “Company”), indicated on the signature page attached hereto at the purchase price set forth on such signature page (the “Purchase Price”). Each Unit consists of two shares of Common Stock, par value $.001 per share (the “Common Stock”) and one Common Stock Purchase Warrant (the “Warrant”). The Common Stock and the Warrants are collectively referred to as the “Securities”. Subscriber has made payment by check or wire transfer of funds in accordance with instructions from the Company in the full amount of the Purchase Price of the Common Stock for which Subscriber is subscribing (the “Payment”).

(b) Subscriber understands that it will not earn interest on any funds held by the Company pursuant to this Agreement. The funds will be held pending the closing of the Offering. The Closing shall occur on December 10, 2007. The closing shall be deemed to have occurred on the date the conditions set forth in Sections 6 and 7 below are satisfied (the “Closing Date”).

(c) Subscriber hereby agrees to be bound hereby upon (i) execution and delivery to the Company of the signature page to this Agreement and (ii) written acceptance by the Company of Subscriber’s subscription, which shall be confirmed by faxing to the Subscriber the signature page to this Agreement that has been executed by the Company (the “Subscription”).

2. BUYER’S REPRESENTATIONS AND WARRANTIES.

Buyer represents and warrants to the Company with respect to only itself that:

(a) No Public Sale or Distribution. Buyer is acquiring the Units for investment purposes, as principal for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the Securities Act of 1933, as amended (the “1933 Act”); provided,

however, that by making the representations herein, Buyer does not agree to hold any of the Units for any minimum or other specific term and reserves the right to dispose of the Units at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act. Buyer is acquiring the Units hereunder in the ordinary course of its business. Buyer does not presently have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Units.

(b) Accredited Investor Status. At the time Buyer was offered the Units, it was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) of Regulation D under the 1933 Act (“Regulation D”). Buyer is not a registered broker-dealer under Section 15 of the 1934 Act.

(c) Experience of Buyer. Buyer, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Units, and has so evaluated the merits and risks of such investment. Buyer is able to bear the economic risk of an investment in the Units and, at the present time, is able to afford a complete loss of such investment.

(d) Reliance on Exemptions. Buyer understands that the Units are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of Buyer to acquire the Units.

(e) Information. Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Units which have been requested by Buyer. Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such inquiries nor any other due diligence investigations conducted by Buyer or its advisors, if any, or its representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained herein. Buyer understands that its investment in the Units involves a high degree of risk. Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Units.

(f) No Governmental Review. Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Units or the fairness or suitability of the investment in the Units nor have such authorities passed upon or endorsed the merits of the offering of the Units.

(g) Transfer or Resale. Buyer understands that: (i) the Securities have not been and are not being registered under the 1933 Act or any state securities laws, and may not

be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) sold, assigned or transferred pursuant to an exemption from such registration, provided that upon the request of the Company, Buyer delivers to the Company an opinion of counsel, in a form reasonably acceptable to the Company, confirming the availability of such exemption, or (C) Buyer provides the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act, as amended, (or a successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register the Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.

(h) Legends. Buyer understands that the certificates or other instruments representing the Securities, except as set forth below, shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED UNLESS (A) REGISTERED UNDER AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION, PROVIDED THAT UPON THE REQUEST OF THE COMPANY THE SELLER DELIVERS TO THE COMPANY AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Securities upon which it is stamped, if, unless otherwise required by state securities laws, (i) such Securities are registered for resale under the 1933 Act , or (ii) in connection with a sale, assignment or other transfer, such holder provides the Company with an opinion of counsel, in a form reasonably acceptable to the Company, to the effect that such sale or transfer of the Securities may be made without registration under the applicable requirements of the 1933 Act, or (iii) following

a sale of transfer of such Securities pursuant to Rule 144 (assuming the transferor is not an affiliate of the Company), or (iv) while such Securities are eligible for sale under Rule 144(k).

(i) Validity; Enforcement. This Agreement has been duly and validly authorized, executed and delivered by Buyer and constitute the legal, valid and binding obligation of Buyer enforceable against Buyer in accordance with its respective terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

(j) No Conflicts. The execution, delivery and performance by Buyer of this Agreement and the consummation by Buyer of the transactions contemplated hereby will not (i) result in a violation of the organizational documents of Buyer or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which Buyer is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to Buyer, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of Buyer to perform its obligations hereunder.

(k) Residency. Buyer is an entity organized in the state of Colorado.

(l) Independent Investment Decision. Buyer has independently evaluated the merits of its decision to purchase Units pursuant to this Agreement, and Buyer confirms that it has not relied on the advice of the Company nor any other Company’s business and/or legal counsel in making such decision.

(m) General Solicitation. Buyer is not purchasing the Units as a result of any advertisement, article, notice or other communication regarding the Units published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar.

(n) Organization. Buyer is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations thereunder.

(o) Certain Fees. Buyer has not entered into an agreement whereby brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other person with respect to the transactions contemplated by this Agreement.

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to each of the Buyers that:

(a) Organization and Qualification. The Company and its Subsidiaries are entities duly organized and validly existing in good standing under the laws of the jurisdiction in which they are formed, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted. Each of the Company and its Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not reasonably be expected to have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means any material adverse effect on the business, properties, assets, operations, results of operations, condition (financial or otherwise) or prospects of the Company and its Subsidiaries, taken as a whole, or on the transactions contemplated hereby or by the agreements and instruments to be entered into in connection herewith, or on the authority or ability of the Company to perform its obligations under this Agreement.

(b) Authorization; Enforcement; Validity. The Company has the requisite power and authority to enter into and perform its obligations under this Agreement, and to issue the Securities in accordance with the terms hereof. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby, including, without limitation, the issuance of the Securities have been duly authorized by the Company’s Board of Directors and other than (i) the filing of a Form D under Regulation D of the 1933 Act, and (iv) such filings required under applicable securities or “Blue Sky” laws of the states of the United States, no further filing, consent, or authorization is required by the Company, its Board of Directors or its stockholders. This Agreement has been duly executed and when delivered by the Company will constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with its respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

(c) Issuance of Securities. The issuance of the Securities are duly authorized and are free from all liens and charges with respect to the issue thereof. The Securities when issued, will be validly issued, fully paid and nonassessable and free from all preemptive or similar rights, liens and charges with respect to the issue thereof. Based in part upon the accuracy of the representations and warranties of the Buyers’ set forth in Article 2, the issuance by the Company of the Securities is, or will be upon issuance, exempt from registration under the 1933 Act.

(d) No Conflicts. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby (including, without limitation, the issuance of the Securities will not (i) result in a violation of any certificate of incorporation, certificate of formation, any certificate of

designations or other constituent documents of the Company or any of its Subsidiaries, or the bylaws of the Company or any of its Subsidiaries or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) in any respect under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including foreign, federal and state securities laws and regulations) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect.

(e) Consents. Other than as contemplated in Section 3(b), the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency or any regulatory or self-regulatory agency or any other person in order for it to execute, deliver or perform any of its obligations under or contemplated by this Agreement in accordance with the terms hereof.

(f) No General Solicitation; Placement Agents’ Fees. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Securities. The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or brokers’ commissions (other than for persons engaged by Buyer or its investment advisor) relating to or arising out of the transactions contemplated hereby.

(g) No Integrated Offering. None of the Company, its Subsidiaries, any of their affiliates, and any person acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of any of the Securities under the 1933 Act or cause the Private Placement to be integrated with prior offerings by the Company for purposes of the 1933 Act or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of any exchange or automated quotation system on which any of the Securities of the Company are listed or designated. None of the Company, its Subsidiaries, their affiliates and any person acting on their behalf will take any action or steps referred to in the preceding sentence that would require registration of any of the Securities under the 1933 Act or cause the Private Placement to be integrated with other offerings.

(h) Conduct of Business; Regulatory Permits. Neither the Company nor its Subsidiaries is in violation of any term of or in default under their organizational charter or bylaws. Neither the Company nor any of its Subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company or its Subsidiaries, except for possible violations which could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The

Company and its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.

(i) Equity Capitalization. As of the date hereof, the authorized capital stock of the Company consists of (i) 90,000,000 shares of Common Stock, of which as of the date hereof, 15,000,000 are issued and outstanding and (ii) 10,000,000 shares of preferred stock, of which as of the date hereof, no shares are issued and outstanding. All of such outstanding shares have been, or upon issuance will be, validly issued and are fully paid and nonassessable. None of the Company’s capital stock is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company. The Company has furnished to the Buyers true, correct and complete copies of the Company’s Certificate of Incorporation, as amended and as in effect on the date hereof, and the Company’s Bylaws, as amended and as in effect on the date hereof.

(j) Absence of Litigation. There is no action, suit, proceeding or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries, the Common Stock, the Preferred Stock or any of the Company’s Subsidiaries or any of the Company’s or its Subsidiaries’ officers or directors, whether of a civil or criminal nature or otherwise.

(k) Subsidiary Rights. The Company or one of its Subsidiaries has the unrestricted right to vote, and (subject to limitations imposed by applicable law) to receive dividends and distributions on, all capital common stock of its Subsidiaries as owned by the Company or such Subsidiary.

(l) Disclosure. All disclosure provided to the Buyers pursuant to this Agreement regarding the Company, its business and the transactions contemplated hereby, including the Schedules to this Agreement, furnished by or on behalf of the Company is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading

4. COVENANTS.

(a) Form D and Blue Sky. The Company agrees to file a Form D with respect to the Securities as required under Regulation D promulgated under the 1933 Act. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Securities for sale to Buyer pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from such qualification).

(b) Board Representation. Buyer will have the right to nominate one member to the Company’s Board of Directors, such member to initially be Mr. Robert J. Zahradnik, so long as Buyer owns common stock that aggregates at least 5% of the outstanding common stock of the Company. If Buyer desires to replace its nominee with a different member, Buyer must obtain the consent of the Company’s Board of Directors. In the event that Buyer ceases to own common stock of the Company that aggregates less than 5% of the outstanding common stock of the Company, Buyer’s representative on the Board of Directors of the Company shall resign within five business days of such event.

(c) LIMITATION AND DISCLAIMER OF IMPLIED REPRESENTATIONS AND WARRANTIES OF THE COMPANY. THE EXPRESS REPRESENTATIONS AND WARRANTIES OF THE COMPANY CONTAINED IN THIS AGREEMENT ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE. BUYER ACKNOWLEDGES THAT BUYER, TOGETHER WITH ITS REPRESENTATIVES AND ADVISORS, HAS CONDUCTED SUCH DUE DILIGENCE INVESTIGATIONS OF THE COMPANY AND ITS BUSINESS, FINANCIAL CONDITION, RESULTS AND PROSPECTS AS BUYER DEEMS NECESSARY. EXCEPT AS OTHERWISE PROVIDED IN THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT, THE COMPANY MAKES NO WARRANTY OR REPRESENTATION, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA, REPORTS, RECORDS, PROJECTIONS, INFORMATION OR MATERIALS NOW, HERETOFORE OR HEREAFTER FURNISHED OR MADE AVAILABLE TO BUYER OR ITS REPRESENTATIVES BY THE COMPANY OR BY THE COMPANY’S AGENTS OR REPRESENTATIVES; ANY AND ALL SUCH DATA, RECORDS, REPORTS, PROJECTIONS, INFORMATION AND OTHER MATERIALS FURNISHED BY THE COMPANY OR BY THE COMPANY’S AGENTS OR REPRESENTATIVES OR OTHERWISE MADE AVAILABLE TO BUYER OR BUYER’S REPRESENTATIVES ARE PROVIDED TO OR FOR THE BENEFIT OF BUYER AS A CONVENIENCE, AND SHALL NOT CREATE OR GIVE RISE TO ANY LIABILITY OF OR AGAINST THE COMPANY OR THE AGENTS OR REPRESENTATIVES OF THE COMPANY; AND ANY RELIANCE ON OR USE OF THE SAME SHALL BE AT BUYER’S SOLE RISK.

5. REGISTER.

The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate by notice to each holder of Common Stock), a register for the Common Stock in which the Company shall record the name and address of the Person in whose name the Common Stock have been issued (including the name and address of each transferee) and the aggregate principal amount of Common Stock held by such Person. The Company shall keep the register open and available at all times during business hours for inspection of any Buyer or its legal representatives upon reasonable notice.

6. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

The obligation of the Company hereunder to issue and sell the Units to Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion by providing Buyer with prior written notice thereof:

(a) Buyer shall have executed this Agreement and delivered the same to the Company.

(b) Buyer and each other Buyer shall have delivered to the Company the Purchase Price for the Units being purchased by Buyer at the Closing by check or wire transfer of immediately available funds pursuant to the wire instructions provided by the Company.

(c) The representations and warranties of Buyer shall be true and correct in all material respects (except for those representations and warranties that are qualified by materiality or Material Adverse Effect, which shall be true and correct in all respects) as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specific date), and Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by Buyer at or prior to the Closing Date.

7. CONDITIONS TO BUYER’S OBLIGATION TO PURCHASE.

The obligation of Buyer hereunder to purchase the Units at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for Buyer’s sole benefit and may be waived by Buyer at any time in its sole discretion by providing the Company with prior written notice thereof:

(a) The Company shall have duly executed and delivered to Buyer (i) this Agreement, including the Company’s acceptance of this Agreement and (ii) certificates representing the aggregate principal amount of Securities being purchased by Buyer at the Closing pursuant to this Agreement.

(b) The representations and warranties of the Company shall be true and correct in all material respects (except for those representations and warranties that are qualified by materiality or Material Adverse Effect, which shall be true and correct in all respects) as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date.

(c) The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale of the Units.

8. TERMINATION.

In the event that the Closing shall not have occurred with respect to a Buyer on or before December 31, 2007, then Buyer may terminate this Agreement by giving written notice to the Company.

9. MISCELLANEOUS.

(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of Texas, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Texas or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Texas. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of Dallas, County of Dallas, 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. Each party 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 such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

(b) Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile signature.

(c) Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

(d) Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.

(e) Entire Agreement; Amendments. This Agreement supersedes all other prior oral or written agreements between the Buyers, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein and therein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be amended or waived other than by an instrument in writing signed by the Company and the Buyer, and any amendment to this Agreement or any waiver of any provision of this Agreement made in conformity with the provisions of this Section 9(e) shall be binding on all Buyers and holders of Units, as applicable. No such amendment shall be effective to the extent that it applies to less than all of the holders of the applicable Units then outstanding. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of this Agreement unless the same consideration also is offered to all of the parties to this Agreement, or holders of Units, as the case may be. The Company has not, directly or indirectly, made any agreements with any Buyers relating to the terms or conditions of the transactions contemplated by this Agreement except as set forth in this Agreement. Without limiting the foregoing, the Company confirms that, except as set forth in this Agreement, no Buyer has made any commitment or promise or has any other obligation to provide any financing to the Company or otherwise.

(f) Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one Business Day after deposit with an overnight courier service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:

If to the Company:
GreenHunter Energy, Inc.
3129 Bass Pro Drive
Grapevine, Texas 76051
Telephone: (469) 293-4397
Attention: Chief Financial Officer

If to a Buyer, to its address and facsimile number set forth on the signature page hereto, with copies to Buyer’s representatives as set forth on the signature page hereto, or to such other address and/or facsimile number and/or to the attention of

such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively.

(g) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including any purchasers of Securities. Neither the Company nor Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other party; provided however, that Buyer may transfer and assign the Securities to a wholly-owned subsidiary or affiliate of the Buyer so long as such Assignee qualifies as an accredited investor under Regulation D without the Company’s consent. Any attempted assignment without such consent shall be void ab initio.

(h) No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

(i) Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

(j) No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

(k) Irrevocability. Subscriber hereby acknowledges and agrees that upon written notice of acceptance from the Company, the Subscription hereunder is irrevocable by Subscriber, that, except as required by law, Subscriber is not entitled to cancel, terminate or revoke this Agreement or any agreements of Subscriber hereunder and that this Agreement and such other agreements shall survive the death or disability of Subscriber and shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors, legal representatives and permitted assigns. If Subscriber is more than one person, the obligations of Subscriber hereunder shall be joint and several and the agreements, representations, warranties and acknowledgments herein contained shall be deemed to be made by and be binding upon each such person and his or her heirs, executors, administrators, successors, legal representatives and permitted assigns.

10. Signature.

The signature page of this Agreement is contained as part of the applicable subscription package, entitled “Signature Page.”

IN WITNESS WHEREOF, the Parties have executed this Subscription Agreement as of the 10^th day of December, 2007.


	GREENHUNTER ENERGY, INC.
	By:
	Name:		Morgan F. Johnston
	Title:		Sr. VP, General Counsel and Secretary

EX-99.B 3 d54567exv99wb.htm WARRANT TO PURCHASE COMMON STOCK exv99wb

Exhibit B

WARRANT

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISEABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

GREENHUNTER ENERGY, INC.

Warrant To Purchase Common Stock

Warrant No.:
Number of Shares of Common Stock:
Date of Issuance:                                          (“Issuance Date”)

GreenHunter Energy, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, , 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 surrender 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 date hereof, but not after 11:59 p.m., New York Time, on the Expiration Date (as defined below), fully paid nonassessable shares of Common Stock (as defined below) (the “Warrant Shares”). Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in Section 15.

1. EXERCISE OF WARRANT.

(a) Mechanics of Exercise. Subject to the terms and conditions hereof, this Warrant may be exercised by the Holder on any day on or after the date hereof, in whole or in part, by (i) delivery of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant and (ii) payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the “Aggregate Exercise Price”) in cash or wire transfer of immediately available funds. The Holder shall not be required to deliver the original

Warrant in order to effect an exercise hereunder. Execution and delivery of the Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares. On or before the first Business Day following the date on which the Company has received each of the Exercise Notice and the Aggregate Exercise Price (the "Exercise Delivery Documents”), the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of the Exercise Delivery Documents to the Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the third Business Day following the date on which the Company has received all of the Exercise Delivery Documents (the “Share Delivery Date”), the Company shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer 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 Agent Commission system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise. Upon delivery of the Exercise Notice and Aggregate Exercise Price referred to in clause (ii) above, 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 of delivery of the certificates evidencing such Warrant Shares. 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, then the Company shall as soon as practicable and in no event later than five Business Days after any exercise and at its own expense, issue 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 to the nearest whole number. The Company shall pay any and all taxes which may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant.

(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $18.00, subject to adjustment as provided herein.

(c) Company’s Failure to Timely Deliver Securities. If within three (3) trading days after the Company’s receipt of the facsimile copy of a Exercise Notice the Company shall fail to issue and deliver a certificate to the Holder and register such shares of Common Stock on the Company’s share register or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon such holder’s exercise hereunder, and if on or after such Trading Day the Holder purchases (in an open market transaction or in another bona fide transaction) shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of Common Stock issuable upon such exercise that the Holder anticipated receiving from the Company (a "Buy-In”), then the Company shall, within three Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the

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Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate (and to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such shares of Common Stock 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 shares of Common Stock, times (B) the Closing Bid Price on the date of exercise.

(d) 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 Holder the number of Warrant Shares that are not disputed and resolve such dispute in accordance with Section 12.

(e) Forced Exercise by the Company. The Company may force the Holder to exercise its Warrants, in whole or in part, at any time all of the Exercise Conditions are satisfied. Provided the Exercise Conditions have all been satisfied, the Company may provide notice (the “Company Conversion Notice”) to the Holder at any time within (7) Business Days after the occurrence of such events indicating the Company’s desire to have the Warrants exercised. The Holder shall have five (5) Business Days after receipt of such Company Conversion Notice to exercise the Warrants with the payment of the Aggregate Exercise Price. The Company shall promptly deliver the Warrant Shares issued on conversion of a Warrant to the Holder (without further action by the Holder being required).

2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:

(a) Adjustment upon Issuance of New Warrants. If and whenever on or after the Issuance Date the Company issues or sells, or in accordance with this Section 2 is deemed to have issued or sold, any warrants for an exercise price per share (the “New Securities Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issue or sale or deemed issuance or sale (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 Securities Issuance Price.

(b) Adjustment upon Issuance of shares of Common Stock Other than as provided in Section 2(a), if and whenever on or after the Issuance Date the Company issues or sells, or in accordance with this Section 2 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 Excluded Securities, for a consideration per share less than a price (the “Applicable Price”) equal to $12.00 (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 product of (A) the Exercise Price in effect immediately prior to such Dilutive Issuance and (B) the quotient determined by dividing (1) the sum of (I) the product derived by multiplying the Exercise Price in effect immediately prior to such Dilutive Issuance and the number of Common Stock Deemed Outstanding immediately prior to such Dilutive Issuance plus (II) the consideration, if any, received by the Company upon such Dilutive

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Issuance, by (2) the product derived by multiplying (I) the Exercise Price in effect immediately prior to such Dilutive Issuance by (II) the number of Common Stock Deemed Outstanding immediately after such Dilutive Issuance.

(c) Upon each such adjustment of the Exercise Price hereunder, in the case of Section 2(a) or 2(b), as applicable, the number of Warrant Shares shall be adjusted to the number of shares of Common Stock determined by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares acquirable upon exercise of this Warrant immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. For purposes of determining the adjusted Exercise Price under this Section 2, the following shall be applicable:

(i) Issuance of Options. If the Company in any manner grants any Options and the lowest price per share for which one share of shares of Common Stock is 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 is less than the Applicable Price, then such share of shares 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(c)(i), the “lowest price per share for which one share of shares of Common Stock is issuable upon exercise of such Options or upon conversion, exercise or exchange of such Convertible Securities” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of shares of Common Stock upon the granting or sale of the Option, upon exercise of the Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Exercise Price or number of Warrant Shares 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 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 and the lowest price per share for which one share of shares of Common Stock is issuable upon the conversion, exercise or exchange thereof is less than the Applicable Price, then such share of shares 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(c)(ii), the “lowest price per share for which one share of shares of Common Stock is issuable upon the conversion, exercise or exchange” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of shares of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or

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exchange of such Convertible Security. No further adjustment of the Exercise Price or number of Warrant Shares shall be made upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such issue 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(a), no further adjustment of the Exercise Price or number of Warrant Shares shall be made by reason of such issue or sale.

(iii) Change in Option Price or Rate of Conversion. If the purchase 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, the Exercise Price and the number of Warrant Shares in effect at the time of such increase or decrease shall be adjusted to the Exercise Price and the number of Warrant Shares 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(c)(iii), if the terms of any Option or Convertible Security that was outstanding as of the date of issuance of this Warrant 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(a) shall be made if such adjustment would result in an increase of the Exercise Price then in effect or a decrease in the number of Warrant Shares.

(iv) Calculation of Consideration Received. In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for a consideration of $0.01. 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 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 will be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the Closing Sale Price of

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such security on 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 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 securities will be determined jointly by the Company and the Required Holders. 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) Business Days after the tenth day following the Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Required Holders. 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 issue 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.

(d) Adjustment upon Subdivision or Combination of shares of Common Stock. If the Company at any time on or after the Issuance Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately increased. If the Company at any time on or after the Issuance Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased. Any adjustment under this Section 2(b) shall become effective at the close of business on the date the subdivision or combination becomes effective.

(e) Other Events. If any event occurs of the type contemplated by the provisions of this Section 2 but not expressly provided for by 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 will make an appropriate adjustment in the Exercise Price and the number of Warrant Shares so as to protect the rights of the Holder;

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provided that no such adjustment pursuant to this Section 2(c) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2.

3. RIGHTS UPON DISTRIBUTION OF ASSETS. 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 stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction, other than a distribution of cash) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case:

(a) any Exercise Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Exercise Price by a fraction of which (i) the numerator shall be the Closing Bid Price of the shares of Common Stock on the trading day immediately preceding such record date minus the value of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to one share of shares of Common Stock, and (ii) the denominator shall be the Closing Bid Price of the shares of Common Stock on the trading day immediately preceding such record date; and

(b) the number of Warrant Shares shall be increased to a number of shares equal to the number of shares of Common Stock obtainable immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution multiplied by the reciprocal of the fraction set forth in the immediately preceding paragraph (a); provided that in the event that the Distribution is of shares of Common Stock (or common stock) (“Other Shares of Common Stock”) of a company whose common shares are traded on a national securities exchange or a national automated quotation system, then the Holder may elect to receive a warrant to purchase Other Shares of Common Stock in lieu of an increase in the number of Warrant Shares, the terms of which shall be identical to those of this Warrant, except that such warrant shall be exercisable into the number of shares of Other Shares of Common Stock that would have been payable to the Holder pursuant to the Distribution had the Holder exercised this Warrant immediately prior to such record date and with an aggregate exercise price equal to the product of the amount by which the exercise price of this Warrant was decreased with respect to the Distribution pursuant to the terms of the immediately preceding paragraph (a) and the number of Warrant Shares calculated in accordance with the first part of this paragraph (b).

4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.

(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time 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 shares 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

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Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) 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, issue or sale of such Purchase Rights.

(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing (with the purchase of at least a majority of the outstanding shares of the Company’s Common Stock automatically constituting an assumption in writing) all of the obligations of the Company under this Warrant in accordance with the provisions of this Section (4)(b), including agreements to deliver to each holder of Warrants in exchange for such Warrants a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant, including, without limitation, an adjusted exercise price equal to the value for the shares of Common Stock reflected by the terms of such Fundamental Transaction, and 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. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such 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 the 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 Fundamental Transaction, in lieu of the shares of the Common Stock (or other securities, cash, assets or other property) purchasable 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 such Fundamental Transaction had this Warrant been converted immediately prior to such Fundamental Transaction, as adjusted in accordance with the provisions of this Warrant. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any 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 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) purchasable 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 such Fundamental Transaction had the Warrant been exercised immediately prior to such Fundamental Transaction. Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Required Holders. The provisions of this Section shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shall be applied without regard to any limitations on the exercise of this Warrant.

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5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms 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 (i) 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, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, so long as any of the Warrants are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the exercise of the Warrants.

6. WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise specifically provided herein, the Holder, solely in such Person’s 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 such Person’s capacity as the Holder of this Warrant, any of the rights of a shareholder 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 such Person 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 shareholder 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 shareholders of the Company generally, contemporaneously with the giving thereof to the shareholders.

7. REISSUANCE OF WARRANTS.

(a) Transfer of Warrant. Subject to compliance with applicable securities laws, 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 then 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, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and

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cancellation of this Warrant, the Company shall execute and 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, that 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 in accordance with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the Exercise Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least fifteen 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.

9. AMENDMENT AND WAIVER. The terms of this Warrant and all other Warrants may be amended, and the observance of any term therein may be waived, but only with the written consent of both the Company and the holders of Warrants evidencing 75% in number of the total number of shares of Common Stock at the time purchasable upon the exercise of all then outstanding Warrants, provided that no such action may change the Current Warrant Price, without the written consent of both the Company and the holders of Warrants representing at

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least 90% in number of the total number of shares of Common Stock at the time purchasable upon the exercise of all then outstanding Warrants.

10. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. NOTWITHSTANDING SUCH CHOICE OF LAW, THE COMPANY HEREBY IRREVOCABLY SUBMITS ITSELF AND EACH OTHER RELATED PERSON TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE STATE OF TEXAS AND THE COUNTY OF DALLAS AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT OR ANY OF ITS SUBSIDIARIES IN ANY LEGAL PROCEEDING RELATING TO THE OPERATIVE DOCUMENTS OR THE OBLIGATIONS BY ANY MEANS ALLOWED UNDER TEXAS OR FEDERAL LAW. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

11. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the Company and all the Buyers 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.

12. DISPUTE RESOLUTION. 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 submit the disputed determinations or arithmetic calculations via facsimile within two Business Days of receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation of the Exercise Price or the Warrant Shares within five Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within two Business Days submit via facsimile (a) the disputed determination of the Exercise Price to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant. The Company shall cause at its expense the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten Business Days from the time it receives the disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

13. REMEDIES, 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 and the other Transaction Documents, 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 right to pursue actual damages for any failure by the Company

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to comply with the terms of this Warrant. 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 an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

14. TRANSFER. This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company, except as may otherwise be required by applicable securities laws.

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

(a) “10-Day Average Price” per share of Common Stock, for purposes of any provision herein at the date specified in such provision, shall mean the average closing price of the Common Stock on the Market on which the Common Stock is listed or quoted for the ten day period immediately prior to such date in question.

(b) “Bloomberg” means Bloomberg Financial Markets.

(c) “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.

(d) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Market, as reported by Bloomberg, or, if the Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, 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 do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, 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 pursuant to Section 12. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

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(e) “Common Stock” means (i) the Company’s shares of Common Stock, par value $.001 per share, and (ii) any share capital into which such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.

(f) “Common Stock Deemed Outstanding” means, at any given time, the number of shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock deemed to be outstanding pursuant to Sections 2(c)(i) and 2(c)(ii) hereof regardless of whether the Options or Convertible Securities are actually exercisable at such time, but excluding any shares of Common Stock owned or held by or for the account of the Company or issuable upon exercise of the Warrants.

(g) “Convertible Securities” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable for shares of Common Stock.

(h) “Excluded Securities” means any Common Stock issued or deemed to be issued (A) in connection with any employee benefit plan which has been approved by the Board of Directors of the Corporation, pursuant to which the Corporation’s securities may be issued to any employee, officer, consultant or director for services provided to the Corporation; (B) upon issuance of shares upon exercise of the Warrants; (C) issued upon exercise of Options or Convertible Securities which are outstanding on the date immediately preceding the Issuance Date, provided that such issuance of Common Stock upon exercise of such Options or Convertible Securities is made pursuant to the terms of such Options or Convertible Securities in effect on the date immediately preceding the Issuance Date and such Options or Convertible Securities are not amended after the date immediately preceding the Issuance Date; (D) in connection with any acquisition by the Company, whether through an acquisition of stock or a merger of any business, assets or technologies the primary purpose of which is not to raise equity capital; and (E) issued in connection with any share split, share dividend, recapitalization or similar transaction by the Corporation for which adjustment is made pursuant to Section 2(d).

(i) “Exercise Conditions” means all of the following conditions: (i) two years has elapsed from the Issuance Date and (ii) the 10-Day Average Price per share of the Common Stock is greater than or equal to twenty four dollars ($24.00) (as adjusted for splits, recapitalization and the like).

(j) “Expiration Date” means the date three (3) years after the Issuance Date or, if such date falls on a day other than a Business Day or on which trading does not take place on the Market (a “Holiday”), the next date that is not a Holiday.

(k) “Fundamental Transaction” means that the Company shall, directly or indirectly, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, or (iii) allow another Person to make a purchase, tender or exchange offer that is accepted by the holders of more than the 50% of either the outstanding shares of Common Stock (not including any shares of Common Stock held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or

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exchange offer), or (iv) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock purchase agreement or other business combination), or (v) reorganize, recapitalize or reclassify its Common Stock, or (vi) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock. Notwithstanding anything stated herein to the contrary, a sale of all or any portion of the Company’s Legacy Operations or Legacy Operations Assets (as either term is defined in the Certificate of Designations setting forth the terms of the Company’s Series A Convertible Preferred Stock) shall not constitute a Fundamental Transaction.

(l) “Market” means with respect to any security, The New York Stock Exchange, Inc., the Nasdaq Global Select Market, the Nasdaq Global Market or The Nasdaq Capital Market, the American Stock Exchange or the OTC Bulletin Board.

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

(n) “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 a 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.

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

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

16. MAINTAIN OFFICE. .So long as any of the Warrants remains outstanding, the Company shall maintain an office in Grapevine, Texas where the Warrants may be presented for exercise, transfer, division or combination as in this Warrant provided. Such office shall be at 1048 Texan Trail, Grapevine, Texas 76051 unless and until the Company shall designate and maintain some other office for such purposes and give written notice thereof to the holders of all outstanding Warrants.

[Signature Page Follows]

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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.


GREENHUNTER ENERGY, INC.
By:
	Name:	Michael K. Studer
	Title:	President

EXHIBIT A

EXERCISE NOTICE

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

GREENHUNTER ENERGY, INC.

The undersigned holder hereby exercises the right to purchase of the shares of Common Stock (“Warrant Shares”) of GreenHunter Energy, Inc., a Delaware corporation (the “Company”), evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”). 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 Exercise Price shall be made as:

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

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. Delivery of Warrant Shares. The Company shall deliver to the holder Warrant Shares in accordance with the terms of the Warrant.

Date: __,



Name of Registered Holder

By:
		Name:
		Title:

ACKNOWLEDGMENT

The Company hereby acknowledges this Exercise Notice and hereby directs [Insert Name of Transfer Agent] to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated , 2007 from the Company and acknowledged and agreed to by [Insert Name of Transfer Agent].


	GREENHUNTER ENERGY, INC.
	By:
		Name:
		Title:

EX-99.C 4 d54567exv99wc.htm ASSOCIATE STOCK OPTION AGREEMENT exv99wc

Exhibit C

GREENHUNTER ENERGY, INC.
STOCK OPTION AGREEMENT

THIS ASSOCIATE STOCK OPTION AGREEMENT (the “Agreement”) is made as of the 13^th day of December 2007, between GreenHunter Energy, Inc., a Delaware corporation (hereinafter referred to as the “Company”), and Robert Zahradnik (hereinafter referred to as “Participant” or “Optionee”).

R E C I T A L S

(a) The Company grants a stock option to key associates and directors to encourage such persons to continue to work for the Company and obtain a larger ownership interest in the Company.

(b) The Optionee is an associate and/or a director of the Company, and the Company and the Optionee desire that Optionee be granted a stock option.

Now, Therefore, for and in consideration of the foregoing premises, the mutual covenants herein contained, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company and the Optionee agree as follows:

1. Grant of Option. The Company hereby grants to Optionee an option to purchase up to 100,000 shares (the “Shares”) of the Company’s Common Stock, $0.001 par value (“Common Stock”), at a purchase price of $10.00 per share (the “Option”).

2. Exercise of Option.

(a) Subject to Section 3 below, Optionee, regardless of whether Optionee is an employee or director of the Company or any subsidiary at the time of exercise, shall have the right to purchase any or all of the Shares at any time prior to December 13, 2017, unless this Option is sooner terminated or expires as provided in this Agreement.

(b) Subject to any required action by the stockholders of the Company, if the Company shall be the surviving corporation in any merger, consolidation or reorganization, the Option granted hereunder shall pertain to and apply to the securities to which a holder of the number of shares of stock subject to the Option would have been entitled.

(c) If the Optionee retires, dies or becomes totally and permanently disabled prior to the expiration of this Option, the Optionee or his representative, as applicable, may exercise the Option with respect to any Shares which Optionee could have purchased on his date of retirement, death or total and permanent disability. The exercise of this Option under this paragraph (c) must occur prior to the earlier of (i) twelve (12) months after the Optionee’s retirement, death or disability or (ii) the expiration of the term of this Option under paragraph (a). For purposes of this Agreement, “retirement” shall mean that the employee has voluntarily left the employment of the Company or its affiliates and such employee is at least 65 years of age and has been employed by the Company or its affiliates for at least ten (10) years prior to the date of his retirement.

(d) If there is a Change in Control, the Board of Directors shall cause the Company as a condition to the consummation of the Change in Control, to enter into an agreement to have the surviving, resulting or offering corporation assume Optionee’s Option and substitute shares of the surviving, resulting or offering Company for the Shares of Common Stock subject to the Options, with appropriate adjustment as to number and kind of securities and exercise prices based upon the terms of the transaction resulting in the Change of Control.

Change in Control means any person who, as of the effective date of this Agreement is unaffiliated with any current shareholder of the Corporation, becomes the beneficial owner of equity securities of the Company comprising 50% or more of the total fair market value or total combined voting power of the Common Stock.

3. Vesting of Options. The Option granted hereunder shall vest 33% each year beginning at the end of the first year and exercisable as provided below:


Beginning	Number of Shares
December 13, 2008		33,334

December 13, 2009		33,333

December 13, 2010		33,333

No part of the Option may be exercised after the date set forth in Section 2(a).

4. Manner of Exercise and Payment for Stock Upon Exercise of Option. Each exercise of this Option or a part of this Option shall be made by notice in writing to the Company, specifying the number of shares to be purchased and accompanied by (i) cash, (ii) a certified or cashier’s check or (iii) any other type of cleared funds in payment in full for the shares then being purchased. In addition, any portion of the purchase price of the shares to be issued may be paid by delivering to the Company a properly executed exercise notice together with a copy of irrevocable instructions to a stockbroker to sell immediately some or all of the shares acquired by exercise of the Option and to deliver promptly to the Company an amount of sales proceeds (or, in lieu of or pending a sale, loan proceeds) sufficient to pay the purchase price, including any taxes applicable thereto. The Company shall cause certificates representing the shares so purchased to be issued to the Optionee as soon as practicable thereafter, subject to compliance with all laws which affect such issuance.

No Shares shall be delivered to the Optionee, or any other person permitted to exercise the Option, pursuant to the exercise of the Option until the Optionee or such other person has made arrangements acceptable to the Company or its designee for the satisfaction of all applicable income tax, employment tax, and social security tax withholding obligations, including obligations incident to the receipt of Shares. Upon exercise of the Option, the Company or the Optionee’s employer may offset or withhold (from any amount owed by the Company or the Optionee’s employer to the Optionee) or collect from the Optionee, or such other person, an amount sufficient to satisfy such tax obligations and/or the employer’s withholding obligations.

5. Nontransferability of Option.

(a) Generally, other than pursuant to a valid qualified domestic relations order as defined in Section 414(p) of the Code or Title I of the Employee Retirement Income Security Act of 1974 ( “ERISA” ), as provided in paragraph (b), below, this Option may not be transferred or assigned other than by will or the laws of descent and distribution and may be exercised during the lifetime of the Participant only by the Participant or the Participant’s legally authorized representative. The designation, if permitted, by a Participant of a beneficiary will not constitute a transfer of the Option. The Company, or its designee, may, in its discretion, authorize all or a portion of this Option may be transferred by the Optionee to (i) the spouse, children or grandchildren of the Optionee (“Immediate Family Members”), (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members, or (iii) a partnership in which such Immediate Family Members are the only partners, (iv) an entity exempt from federal income tax pursuant to Section 501(c)(3) of the Code or any successor provision, or (v) a split interest trust or pooled income fund described in Section 2522(c)(2) of the Code or any successor provision, provided that (w) there shall be no consideration for any such transfer, (x) no such transfer shall be permitted if the Common Stock issuable under such transferred Option would not be eligible to be registered on Form S-8 promulgated under the Securities Act of 1933, and (z) subsequent transfers of the transferred Options shall be prohibited except those by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined in the Code or Title I of ERISA. Following transfer, any such Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of this Option agreement the term “Optionee” shall be deemed to include the transferee. The events of a termination of service shall continue to be applied with respect to the original Optionee, following which the Option shall be exercisable by the transferee only to the extent and for the periods specified in the original Option agreement and applicable to the Participant. Neither the Company, nor its designee, shall have any obligation to inform any transferee of an Option of any expiration, termination, lapse or acceleration of such Option. The Company shall have no obligation to register with any federal or state securities commission or agency any Common Stock issuable or issued under an Option that has been transferred by an Optionee.

(b) Notwithstanding the foregoing, an Option may be transferred pursuant to a valid qualified domestic relations order as defined in Section 414(p) of the Code or Title I of ERISA pursuant to which a court has determined, in connection with a divorce proceeding, that a spouse or former spouse of an Optionee has an interest in the Optionee’s Option. Following any such transfer each Option transferred shall continue to be subject to the same terms and conditions of the Option

agreement applicable to the Option immediately prior to transfer, provided that for all purposes under the Option agreement the term “Optionee” shall be deemed to include the transferee. The effect a termination of service shall have on the exercisability of an Option with respect to the original Optionee shall continue to apply to a transferee after a transfer, so that the Option transferred shall be exercisable by the transferee only to the extent and for the periods specified in the Option agreement, unless different periods are otherwise provided in a Participant’s original Option agreement. The Company or its designee shall have no obligation to inform any transferee of an Option of any expiration, termination, lapse or acceleration of such Option. The Company shall have no obligation to register with any federal or state securities commission or agency any Company Stock issuable or issued under an Option that has been transferred pursuant to this paragraph.

6. No Rights Prior to Exercise of Option. The Optionee shall not be deemed to be a holder of any shares pursuant to the exercise of this Option until payment of the option price by him in cash, certified or cashier’s check or other type of cleared funds has been received by the General Counsel for the Company. No adjustment shall be made for dividends or other rights for which the record date is prior to the date such cleared funds is delivered.

7. Restriction of Issuance of Shares. This Option shall be subject to the requirement that if any time the Board of Directors of the Company shall determine, in its sole discretion, that the listing, registration or qualification of the Common Stock under any federal or state law, or the consent or approval of any regulatory agency, is necessary or desirable as a condition of, or in connection with, the purchase or issuance of Common Stock hereunder, this Option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board of Directors.

8. Registration. The Company shall endeavor, but shall not be obligated, to register the Common Stock to be issued upon exercise of the Option under the Securities Act of 1933, as amended, as well as any applicable state statutes. In the event that the Common Stock to be issued upon exercise of the Option is not so registered, the Company may, as a condition precedent to the exercise of the Option, require from the Optionee (or, in the event of his death, his legal heirs, legatees or distributees) such written representations as, in the opinion of counsel for the Company, may be necessary to ensure that such exercise and subsequent disposition will not involve a violation of the Securities Act of 1933, as amended, as well as any applicable state statutes.

9. Amendment. This Agreement may be amended only in a writing executed by both parties hereto. If additional options are granted to Optionee, such additional options may be made subject to the terms of this Agreement by an addendum hereto. Any restrictions on shares purchased pursuant to such additional options shall be effective beginning on the date of execution of such addendum unless otherwise provided therein.

10. Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. In the event that any judicial proceedings are instituted concerning the interpretation or enforcement of this Agreement, exclusive venue over such proceedings shall be vested in the Federal and State Courts located in Dallas County, Texas.

11. Binding Effect. The provisions of this Agreement shall be binding upon the Optionee and upon his heirs, executors, administrators, successors and assigns. The Board of Directors’ interpretation or resolution of any conflicts or inconsistencies, application of provisions and determination in the event of omission, shall be binding and conclusive upon the Optionee.

12. Notice. Any notices required or permitted to be given under this Option by the Company or the Board of Directors shall be deemed delivered when placed in the United States mails, postage prepaid, in an envelope addressed to the last address of the Optionee which was communicated in writing to the person giving the notice.

13. Severability. In the event that any provisions of this Option shall for any reason be held to be invalid, such holding shall not affect any other provision hereof, and the remaining provisions of this option shall be construed as if such invalid provision had not been contained in the Option.

14. Gender and Number. As used in this Agreement, the masculine gender shall include the feminine gender and the singular number shall include the plural number and vice versa.

IN WITNESS WHEREOF, the Company and the Optionee have caused this Agreement to be executed as of the date first above written.


	GREENHUNTER ENERGY, INC.
	By:	/s/ Gary C. Evans
		Gary C. Evans, Chairman and CEO


	OPTIONEE:
	/s/ Robert Zahradnik
	Robert Zahradnik

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