Warrant and Registration Rights Agreement
____, 1997
NATIONAL SECURITIES CORPORATION
As Representative of the Several Underwriters
c/o National Securities Corporation
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Gentlemen:
Cotton Valley Resources Corporation., a corporation organized under the
laws of Ontario, Canada(the "Company"), hereby agrees to sell to the several
underwriters (the "Underwriters") named in Schedule I to that certain
Underwriting Agreement (herein so called) of even date herewith by and among you
and the Company, and you hereby agree, as representative of the Underwriters,
that the Underwriters will purchase from the Company at a purchase price of
$100, warrants (the "Underwriter Warrants") to purchase 125,000 of the Company's
units (the "Units"), each Unit consisting of two shares of the Company's Common
Stock and two Redeemable Common Stock Purchase Warrant (the "Warrants") issued
in accordance with the terms of a warrant agreement dated as of __________, 1997
between the Company and ___________as warrant agent. The Underwriter Warrants
will be exercisable by the holders thereof as to all or any lesser number of
Units covered thereby, at the Purchase Price per Unit (as defined below) at any
time and from time to time on and after the first anniversary of the date hereof
and ending at 5:00 p.m. on the fifth anniversary of the date hereof.
1. DEFINITIONS.
As used herein the following terms, unless the context otherwise
requires, shall have for all purposes hereof the following meanings:
(a) The term "Common Stock" refers to the common stock of the Company
pursuant to the Articles of Incorporation of the Company, as
amended.
(b) The term "Other Securities" refers to any stock (other than Units)
and other securities of the Company or any other person (corporate
or otherwise) which the holders of the Underwriter Warrants at any
time shall be entitled to receive, or shall have received, upon
the exercise of the Underwriter Warrants, in lieu of or in
addition to Preferred Stock and Warrants, or which at any time
shall be issuable or shall have been issued in exchange for or in
replacement of Units or Other Securities pursuant to Section 6
below or otherwise.
(c) The term "Purchase Price" refers to the purchase price of the
Underlying Units subject to this Agreement. The Purchase Price
shall equal 120% of the offering price per Unit as set forth in
the Registration Statement. The Purchase Price is subject to
adjustment as provided in Section 6 below.
(d) The term "Registration Statement" refers to the Registration
Statement on Form SB-2 (File No. 333-16,893 filed by the Company
with the Securities and Exchange Commission (the "Commission")
pursuant to the Securities Act of 1933, as amended (the "Act").
(e) The term "Underlying Securities" refers to the Underlying Units,
the Underlying Common Stock and the Underlying Warrants.
(f) The term "Underlying Units" refers to the Units issued or issuable
upon the exercise, in whole or in part, of the Underwriter
Warrants.
(g) The term "Underlying Warrants" refers to the Warrants which are
part of the Underlying Units and are issued or issuable upon the
exercise of the Underwriter Warrants.
(h) The term "Warrant Stock" refers to shares of Common Stock issued
or issuable upon the exercise of the Underlying Warrants.
The purchase and sale of the Underwriter Warrants shall take place, and the
purchase price therefore shall be paid by delivery of your check payable to the
Company on the Closing Date (as defined in the Underwriting Agreement).
2. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to you as follows:
(a) Corporate Action. The Company has all requisite corporate
power and authority, and has taken all necessary corporate action, to execute
and deliver this Agreement, to issue and deliver the Underwriter Warrants and
certificates evidencing same, and to authorize and reserve for issuance, and
upon payment from time to time of the Purchase Price to issue and deliver, the
Underlying Units, including the Underlying Common Stock, the Underlying Warrants
and the Warrant Stock.
(b) No Violation. Neither the execution nor delivery of this
Agreement, the consummation of the actions herein contemplated nor compliance
with the terms and provisions hereof will conflict with, or result in a breach
of, or constitute a default or an event permitting acceleration under, any of
the terms, provisions or conditions of the Articles of Incorporation or Bylaws
of the Company or any indenture, mortgage, deed of trust, note, bank loan,
credit agreement, franchise, license, lease, permit, judgment, decree, order,
statute, rule or regulation or any other agreement, understanding or instrument
to which the Company is a party or by which it is bound.
3. COMPLIANCE WITH THE ACT.
(a) Transferability of Underwriter Warrants. You agree that
the Underwriter Warrants may not be transferred, sold, assigned or hypothecated,
except to (i) persons who are officers of you or any successor of you; (ii) a
successor to you in a merger or consolidation; (iii) a purchaser of all or
substantially all of your assets; (iv) your shareholders in the event you are
liquidated or dissolved; (v) broker-dealers participating in the Company's
initial public offering, and (vi) persons who are officers or partners of such
participating broker-dealers.
(b) Registration of Underlying Common Stock. The Underlying
Common Stock issuable upon the exercise of the Underwriter Warrants has not been
registered under the Act. You agree not to make any sale or other disposition of
the Underlying Common Stock except pursuant to a new registration statement
which has become effective under the Act, setting forth the terms of such
offering, the underwriting discount and the commissions and any other pertinent
data with respect thereto, unless you have provided the Company with an opinion
of recognized counsel reasonably acceptable to the Company that such
registration is not required under the Act and applicable state securities laws.
(c) Inclusion in Registration of Other Securities. If at any
time after the first anniversary of the effective date hereof but prior to the
fifth anniversary of the effective date hereof, the Company shall propose the
registration on an appropriate form under the Act of any shares of Common Stock
or Other Securities (other than in connection with a merger or acquisition or an
employee benefit plan), the Company shall at least 30 days prior to the filing
of such registration statement give you written notice of such proposed
registration and, upon written notice given to the Company within 10 business
days after your receipt of such notice from the Company, shall include or cause
to be included in any such registration statement all or such portion of the
Underwriter Warrants, the Underlying Securities and the Warrant Stock as you may
request, provided, however, that the Company may at any time withdraw or cease
proceeding with any such registration if it shall at the same time withdraw or
cease proceeding with the registration of such Common Stock or such Other
Securities originally proposed to be registered.
Notwithstanding any provision of this Agreement to the contrary, if
any holder of any of the Underwriter Warrants exercises his Underwriter Warrants
but shall not have included all the Underlying Securities or Warrant Stock in a
registration statement which complies with Section 10(a)(3) of the Act, which
has been effective for at least 30 calendar days following the exercise of the
Underwriter Warrants, the registration rights set forth in this Subsection 3(c)
shall be extended until such time as (i) the registration statement has been
effective for at least 30 calendar days, or (ii) in the opinion of counsel
satisfactory to you and the Company, registration is not required under the Act
or under applicable state laws for resale of the Underlying Securities or
Warrant Stock in the manner proposed.
(d) Company's Obligations in Registration. In the event you
timely elect to participate in an offering by including your Underwriter
Warrants, the Underlying Securities or the Warrant Stock in a registration
statement pursuant to Subsection 3(c) above, the Company shall:
(i) Notify you as to the filing thereof and of all amendments or
supplements thereto filed prior to the effective date
thereof;
(ii) Comply with all applicable rules and regulations of the
Commission;
(iii)Notify you immediately, and confirm the notice in writing,
(1) when the registration statement becomes effective, (2)
of the issuance by the Commission of any stop order or of
the initiation, or the threatening, of any proceedings for
that purpose, (3) of the receipt by the Company of any
notification with respect to the suspension of qualification
of the Common Stock, the Preferred Stock, the Warrants or
the Units for sale in any jurisdiction or of the initiation,
or the threatening, of any proceedings for that purpose and
(4) of the receipt of any comments, or requests for
additional information, from the Commission or any state
regulatory authority. If the Commission or any state
regulatory authority shall enter such a stop order or order
suspending qualification at any time, the Company will make
every reasonable effort to obtain the lifting of such order
as promptly as practicable.
(iv) During the time when a registration statement is required to
be delivered under the Act during the period required for
the distribution of the Underlying Securities or the Warrant
Stock, comply so far as it is able with all requirements
imposed upon it by the Act, as hereafter amended, and by the
rules and regulations promulgated thereunder, as from time
to time in force, so far as necessary to permit the
continuance of sales of the Underlying Securities and the
Warrant Stock, as applicable. If at any time when a
registration statement relating to the Underlying Securities
or the Warrant Stock is required to be delivered under the
Act any event shall have occurred as a result of which, in
the opinion of counsel for the Company or your counsel, the
registration statement relating to the Underlying Securities
or the Warrant Stock as then amended or supplemented
includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or
necessary to make the statements therein, in the light of
the circumstances under which they were made, not
misleading, or if it is necessary at any time to amend such
registration statement to comply with the Act, the Company
will promptly prepare and file with the Commission an
appropriate amendment or supplement (in form satisfactory to
you).
(v) Endeavor in good faith, in cooperation with you, at or prior
to the time the registration statement becomes effective, to
qualify the Underlying Securities and/or the Warrant Stock,
as applicable for offering and sale under the securities
laws relating to the offering or sale of the Underlying
Securities and/or the Warrant Stock, as applicable in such
jurisdictions as you may reasonably designate and to
continue the qualifications in effect so long as required
for purposes of the sale of the Underlying Securities and/or
the Warrant Stock, as applicable; provided that no such
qualification shall be required in any jurisdiction where,
as a result thereof, the Company would be subject to service
of general process, or to taxation as a foreign corporation
doing business in such jurisdiction. In each jurisdiction
where such qualification shall be effected, the Company
will, unless you agree that such action is not at the time
necessary or advisable, file and make such statements or
reports at such times as are or may reasonably be required
by the laws of such jurisdiction. For the purposes of this
paragraph, "good faith" is defined as the same standard of
care and degree of effort as the Company will use to qualify
its securities other than the Underlying Securities and the
Warrant Stock.
(vi) Make generally available to its security holders as soon as
practicable, but not later than the first day of the
eighteenth full calendar month following the effective date
of the registration statement, an earnings statement (which
need not be certified by independent public or independent
certified public accountants unless required by the Act or
the rules and regulations promulgated thereunder, but which
shall satisfy the provisions of Section 11(a) of the Act)
covering a period of at least twelve months beginning after
the effective date of the registration statement.
(vii)After the effective date of such registration statement,
prepare, and promptly notify you of the proposed filing of,
and promptly file with the Commission, each and every
amendment or supplement thereto or to any registration
statement forming a part thereof as may be necessary to make
any statements therein not misleading in any material
respect; provided that no such amendment or supplement shall
be filed if you shall object thereto in writing promptly
after being furnished a copy thereof.
(viii) Furnish to you, as soon as available, copies of any such
registration statement, including all preliminary or final
registration statements, or supplement or amendment prepared
pursuant thereto, all in such quantities as you may from
time to time reasonably request;
(ix) Make such representations and warranties to any underwriter
of the Underlying Securities or the Warrant Stock, as
applicable, and use your best efforts to cause Company
counsel to render such usual and customary opinions to such
underwriter, as such underwriter may reasonably request; and
(x) Pay all costs and expenses incident to the performance of
the Company's obligations under Subsection 3 (c) above and
under this Subsection 3 (f), including without limitation
the fees and disbursements of Company auditors and legal
counsel, of legal counsel for you and of legal counsel
responsible for qualifying the Underlying Securities and/or
the Warrant Stock under blue sky laws, all filing fees and
printing expenses, all expenses in connection with the
transfer and delivery of the Underlying Securities and/or
Warrant Stock, and all expenses in connection with the
qualification of the Underlying Securities and/or the
Warrant Stock under blue sky laws provided, however, that
the Company shall not be responsible for indemnity discounts
and commissions.
(e) Agreements by Warrant Holder. In connection with the filing of a
registration statement pursuant to Subsection 3(c) above, if you participate in
the offering of the Underlying Securities and/or Warrant Stock by including
securities owned by you, you agree:
(i) To furnish the Company all material information requested by the
Company concerning yourself and your holdings of securities of the
Company and the proposed method of sale or other disposition of the
Underlying Securities and/or Warrant Stock and such other information
and undertakings as shall be reasonably required in connection with the
preparation and filing of any such registration statement covering all
or a part of the Underlying Securities and/or Warrant Stock and in
order to ensure full compliance with the Act; and
(ii) To cooperate in good faith with the Company and its underwriters,
if any, in connection with such registration, including placing the
shares of Underlying Securities and/or Warrant Stock to be included in
such registration statement in escrow or custody to facilitate the sale
and distribution thereof.
(f) Indemnification. The Company shall indemnify and hold harmless you
and each of the other Underwriters, each of your and their officers and
directors, and each person, if any, who respectively controls you or any such
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), against any
loss, liability, claim, damage and expense whatsoever (including but not limited
to any and all expense whatsoever reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever), joint or several, to which any of you or any such Underwriter
or such controlling person becomes subject, under the Act or otherwise, insofar
as such loss, liability, claim, damage and expense (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in (i) a registration statement
covering any Underlying Security or Warrant Stock, in the prospectus contained
therein, or in an amendment or supplement thereto or (ii) in any application or
other document or communication (in this Subsection collectively called
"application") executed by or on behalf of the Company or based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in order to qualify the Underlying Securities and/or Warrant Stock under the
securities laws thereof or filed with the Commission, or arise out of or based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
provided, however, that the Company shall not be obligated to indemnify in any
such case to the extent that any such loss, claim, damage, expense or liability
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made in reliance upon, and in conformity with,
written information respectively furnished by you or any such Underwriter or
such controlling person for use in the registration statement, or any amendment
or supplement thereto, or any application, as the case may be.
If any action is brought against a person in respect of which indemnity
may be sought against the Company pursuant to the foregoing paragraph, such
person shall promptly notify the Company in writing of the institution of such
action and the Company shall assume the defense of the action, including the
employment of counsel (satisfactory to the indemnified person in its reasonable
judgment) and payment of expenses. The indemnified person shall have the right
to employ its or their own counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of such indemnified person unless the
employment of such counsel shall have been authorized in writing by the Company
in connection with the defense of the action or the Company shall not have
employed counsel to have charge of the defense of the action or the indemnified
person shall have reasonably concluded that there may be defenses available to
it or them which are different from or additional to those available to the
Company (in which case the Company shall not have the right to direct the
defense of the action on behalf of the indemnified person), in any of which
events these fees and expenses shall be borne by the Company. Anything in this
paragraph to the contrary notwithstanding, the Company shall not be liable for
any settlement of any claim or action effected without its consent. The
Company's indemnity agreements contained in this Subsection shall remain in full
force and effect regardless of any investigation made by or on behalf of any
indemnified person, and shall survive any termination of this Agreement. The
Company agrees promptly to notify you of the commencement of any litigation or
proceedings against the Company or any of its officers or directors in
connection with the registration statement pursuant to Subsection 3(c) above.
If you choose to include all or a part of the Underlying Securities or
Warrant Stock in a public offering pursuant to Subsection 3(c), then you agree
to indemnify and hold harmless the Company and each of its directors and
officers who have signed any such registration statement, and any underwriter
for the Company (as defined in the Act), and each person, if any, who controls
the Company or such underwriter within the meaning of the Act, to the same
extent as the indemnity by the Company in this Subsection 3(f) but only with
respect to statements or omissions, if any, made in such registration statement,
or any amendment or supplement thereto, or in any application in reliance upon,
and in conformity with, written information furnished by you to the Company for
use in the registration statement, or any amendment or supplement thereto, or
any application, as the case may be. In case any action shall be brought in
respect of which indemnity may be sought against you, you shall have the rights
and duties given to the Company, and the persons so indemnified shall have the
rights and duties given to you by the provisions of the first paragraph of this
Subsection.
The Company further agrees that, if the indemnity provisions of the
foregoing paragraphs are held to be unenforceable, any holder of an Underwriter
Warrant or controlling person of such a holder may recover contribution from the
Company in an amount which, when added to contributions such holder or
controlling person has theretofore received or concurrently receives from
officers and directors of the Company or controlling persons of the Company,
will reimburse such holder or controlling person for all losses, claims, damages
or liabilities and legal or other expenses; provided, however, that if the full
amount of the contribution specified in this Subsection 3(f) is not permitted by
law, then such holder or controlling person shall be entitled to contribution
from the Company and its officers, directors and controlling persons to the full
extent permitted by law.
4. EXERCISE OF UNDERWRITER WARRANTS; PARTIAL EXERCISE.
(a) Exercise in Full. Each Underwriter Warrant may be
exercised in full by the holder thereof by surrender of the related Warrant
Certificate, with the form of subscription at the end thereof duly executed by
such holder, to the Company at its principal office, accompanied by payment, in
cash or by certified or bank cashiers check payable to the order of the Company,
in the respective amount obtained by multiplying the number of Underlying Units
represented by the Warrant Certificate (after giving effect to any adjustment
therein as provided in Section 6 below) by the Purchase Price per Unit.
(b) Partial Exercise. Each Underwriter Warrant may be
exercised in part by surrender of the related Warrant Certificate in the manner
and at the place provided in Subsection 4(a) above, accompanied by payment, in
cash or by certified or bank cashiers check payable to the order of the Company,
in the respective amount obtained by multiplying the number of Underlying Units
designated by the holder in the form of subscription attached to the Warrant
Certificate by the Purchase Price per Unit (after giving effect to any
adjustment therein as provided in Section 6 below). Upon any such partial
exercise, the Company at its expense will forthwith issue and deliver to or upon
the order of the purchasing holder, a new Warrant Certificate or Certificates of
like tenor, in the name of the holder thereof or as such holder (upon payment by
such holder of any applicable transfer taxes) may request calling in the
aggregate for the purchase of the number of Units equal to the number of such
Units called for on the face of the original Warrant Certificate (after giving
effect to any adjustment therein as provided in Section 6 below) minus the
number of such Units (after giving effect to such adjustment) designated by the
holder in the aforementioned form of subscription.
(c) Company to Reaffirm Obligations. The Company will, at the
time of any exercise of any Underwriter Warrant, upon the request of the holder
thereof, acknowledge in writing its continuing obligation to afford to such
holder any rights (including without limitation any right to registration of the
Underlying Securities and Warrant Stock) to which such holder shall continue to
be entitled after such exercise in accordance with the provisions of this
Agreement; provided, however, that if the holder of an Underwriter Warrant shall
fail to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such holder any such rights.
5. DELIVERY OF CERTIFICATES, ETC., ON EXERCISE.
As soon as practicable after the exercise of any Underwriter Warrant in
full or in part, and in any event within twenty days thereafter, the Company at
its expense (including the payment by it of any applicable issue taxes) will
cause to be issued in the name of and delivered to the purchasing holder
thereof, a certificate or certificates for the number of Units, Underlying
Warrants and fully paid and nonassessable shares of Underlying Preferred Stock
to which such holder shall be entitled upon such exercise, plus in lieu of any
fractional share to which such holder would otherwise be entitled, cash in an
amount determined pursuant to Section 7(g), together with any other stock or
other securities and property (including cash, where applicable) to which such
holder is entitled upon such exercise pursuant to Section 6 below or otherwise.
6. ANTI-DILUTION PROVISIONS.
The Underwriter Warrants are subject to the following terms and conditions
during the term thereof:
(a) Stock Distributions and Splits. In case (i) the
outstanding shares of Common Stock (or Other Securities) shall be subdivided
into a greater number of shares, or (ii) a dividend in Common Stock (or Other
Securities) shall be paid in respect of Common Stock (or Other Securities), the
Purchase Price per Unit in effect immediately prior to such subdivision or at
the record date of such dividend or distribution shall simultaneously with the
effectiveness of such subdivision or immediately after the record date of such
dividend or distribution be proportionately reduced; and if outstanding shares
of Common Stock or (or Other Securities) shall be combined into a smaller number
of shares thereof, the Purchase Price per Unit in effect immediately prior to
such combination shall simultaneously with the effectiveness of such combination
be proportionately increased. Any dividend paid or distributed on the Common
Stock (or Other Securities) in stock or any other securities convertible into
shares of Common Stock (or Other Securities) shall be treated as a dividend paid
in Common Stock (or Other Securities) to the extent that shares of Common Stock
(or Other Securities) are issuable upon the conversion thereof.
(b) Adjustments. Whenever the Purchase Price per Unit is
adjusted as provided in Subsection 6(a) above, the number of Underlying Units
purchasable upon exercise of the Underwriter Warrants immediately prior to such
Purchase Price adjustment shall be adjusted, effective simultaneously with such
Purchase Price adjustment, to equal the product obtained (calculated to the
nearest full share) by multiplying such number of Underlying Units by a
fraction, the numerator of which is the Purchase Price per Unit in effect
immediately prior to such Purchase Price adjustment and the denominator of which
is the Purchase Price per Unit in effect upon such Purchase Price adjustment,
which adjusted number of Underlying Units shall thereupon be the number of
Underlying Units purchasable upon exercise of the Underwriter Warrants until
further adjusted as provided herein.
(c) Reorganizations. If any consolidation or merger of the
Company with another corporation, or the sale of all or substantially all of its
assets to another corporation, shall be effected in such a way that holders of
Common Stock or Underlying Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock or
Underlying Common Stock, then, as a condition of such consolidation, merger or
sale, lawful and adequate provisions shall be made whereby the holders of
Underwriter Warrants shall thereafter have the right to purchase and receive
upon the basis and upon the terms and conditions specified in this Agreement and
in lieu of the shares of Common Stock or Underlying Common Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
Underwriter Warrants, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of Common Stock or Underlying Common Stock equal to the number of shares
of such stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented by the Underwriter Warrants had such
consolidation, merger or sale not taken place, and in any such case, appropriate
provision shall be made with respect to the rights and interests of the holders
of Underwriter Warrants to the end that the provisions hereof (including without
limitation provisions for adjustments of the Purchase Price and of the number of
Units purchasable and receivable upon the exercise of the Underwriter Warrants)
shall thereafter be applicable, as nearly as may be, in relation to any shares
of stock, securities or assets thereafter deliverable upon the exercise thereof
(including an immediate adjustment, by reason of such consolidation or merger,
of the Purchase Price to the value for the Common Stock or Underlying Common
Stock reflected by the terms of such consolidation or merger if the value so
reflected is less than the Purchase Price in effect immediately prior to such
consolidation or merger). In the event of a merger or consolidation of the
Company with or into another corporation as a result of which a number of shares
of common stock of the surviving corporation greater or lesser than the number
of shares of Common Stock of the Company outstanding immediately prior to such
merger or consolidation are issuable to holders of Common Stock or Underlying
Common Stock of the Company, then the Purchase Price in effect immediately prior
to such merger or consolidation shall be adjusted in the same manner as though
there were a subdivision or combination of the outstanding shares of Common
Stock or Underlying Common Stock of the Company. The Company will not effect any
such consolidation, merger or sale, unless prior to the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets shall assume
by written instrument executed and mailed or delivered to the registered holder
hereof at the last address of such holder appearing on the books of the Company,
the obligation to deliver to such holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to purchase. If a purchase, tender or exchange offer is made to and
accepted by the holders of more than 50% of the outstanding shares of Common
Stock of the Company, the Company shall not effect any consolidation, merger or
sale with the Person having made such offer or with any Affiliate of such
Person, unless prior to the consummation of such consolidation, merger or sale
the holders of Underwriter Warrants shall have been given a reasonable
opportunity to then elect to receive upon the exercise of Underwriter Warrants
either the stock, securities or assets then issuable with respect to the Common
Stock or Underlying Common Stock of the Company or the stock, securities or
assets, or the equivalent issued to previous holders of Common Stock in
accordance with such offer. The term "Person" as used in this subparagraph shall
mean and include an individual, a partnership, a corporation, a trust, a joint
venture, an unincorporated organization and a government or any department or
agency thereof. For the purposes of this subparagraph, an "Affiliate" of any
Person shall mean any Person directly or indirectly controlling, controlled by
or under direct or indirect common control with, such other Person. A Person
shall be deemed to control a corporation if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise.
(d) Effect of Dissolution or Liquidation. In case the Company
shall dissolve or liquidate all or substantially all of its assets, all rights
under this Agreement shall terminate as of the date upon which a certificate of
dissolution or liquidation shall be filed with the Secretary of the State of
Texas (or, if the Company theretofore shall have been merged or consolidated
with a corporation incorporated under the laws of another state, the date. upon
which action of equivalent effect shall have been taken); provided, however,
that (i) no dissolution or liquidation shall affect the rights under Subsection
6(c) of any holder of an Underwriter Warrant, and (ii) if the Company's Board of
Directors shall propose to dissolve or liquidate the Company, each holder of an
Underwriter Warrant shall be given written notice of such proposal at the
earlier of (i) the time when the Company's shareholders are first given notice
of the proposal, or (ii) the time when notice to the Company's shareholders is
first required.
(e) Notice of Change of Purchase Price. Whenever the Purchase
Price per Unit or the kind or amount of securities purchasable under the
Underwriter Warrants shall be adjusted pursuant to any of the provisions of this
Agreement, the Company shall forthwith thereafter cause to be sent to each
holder of an Underwriter Warrant, a certificate setting forth the adjustments in
the Purchase Price per Unit and/or in such number of Units, and also setting
forth in detail the facts requiring such adjustments, including without
limitation a statement of the consideration received or deemed to have been
received by the Company for any additional securities issued by it requiring
such adjustment. In addition, the Company at its expense shall within 90 days
following the end of each of its fiscal years during the term of this Agreement,
and promptly upon the reasonable request of any holder of an Underwriter Warrant
in connection with the exercise from time to time of all or any portion of any
Underwriter Warrant, cause independent certified public accountants of
recognized standing selected by the Company to compute any such adjustment in
accordance with the terms of the Underwriter Warrants and prepare a certificate
setting forth such adjustment and showing in detail the facts upon which such
adjustment is based.
(f) Notice of a Record Date. In the event of (i) any taking
by the Company of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend payable out of earned surplus of the
Company) or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, (ii) any transfer of all or
substantially all of the assets of the Company to, or consolidation or merger of
the Company with or into, any other person or (iii) any voluntary or involuntary
dissolution or liquidation of the Company, then and in each such event the
Company will mail or cause to be mailed to each holder of an Underwriter Warrant
a notice specifying not only the date on which any such record is to be taken
for the purpose of such dividend, distribution or right and stating the amount
and character of such dividend, distribution or right, but also the date on
which any such transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange their
shares of Common Stock or preferred Stock (or other Securities) for securities
or other property deliverable upon such transfer, consolidation, merger,
dissolution, liquidation or winding-up. Such notice shall be mailed at least 20
days prior to the proposed record date therein specified.
7.FURTHER COVENANTS OF THE COMPANY.
(a) Reservation of Stock. The Company shall at all times
reserve and keep available, solely for issuance and delivery upon the exercise
of the Underwriter Warrants, all shares of the Underlying Common Stock and
Warrant Stock from time to time issuable upon the exercise of the Underlying
Warrants and the Underwriter Warrants and shall take all necessary actions to
ensure that the par value per share, if any, of the Underlying Common Stock and
Warrant Stock is, at all times equal to or less than the then effective Purchase
Price per Unit attributable to each share of Common Stock as the case may be.
(b) Title to Units. All Units, all Underlying Warrants, all
Underlying Common Stock and all Warrant Stock delivered upon the exercise of the
Underwriter Warrants and the Underlying Warrants shall be validly issued, fully
paid and nonassessable; each holder of an Underwriter Warrant shall receive good
and marketable title to the Units, the Underlying Common Stock, the Underlying
Warrants and the Warrant Stock free and clear of all voting and other trust
arrangements, liens, encumbrances, equities and claims whatsoever; and the
Company shall have paid all taxes, if any, in respect of the issuance thereof.
(c) Listing on Securities Exchanges; Registration. If the
Company at any time shall list any Units, Common Stock or Warrants on any
national securities exchange, the Company will, at its expense, simultaneously
list on such exchange, upon official notice of issuance upon the exercise of the
Underwriter Warrants, and maintain such listing of, all Units, all Underlying
Securities and all Warrant Stock from time to time issuable upon the exercise of
the Underwriter Warrants; and the Company will so list on any national
securities exchange, will so register and will maintain such listing of, any
Other Securities if and at the time that any securities of like class or similar
type shall be listed on such national securities exchange by the Company.
(d) Exchange of Underwriter Warrants. Subject to Subsection
3(a) hereof, upon surrender for exchange of any Warrant Certificate to the
Company, the Company at its expense will promptly issue and deliver to or upon
the order of the holder thereof a new Warrant Certificate or certificates of
like tenor, in the name of such holder or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, calling in the aggregate
for the purchase of the number of Units called for on the face or faces of the
Warrant Certificate or Certificates so surrendered.
(e) Replacement of Underwriter Warrants. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Warrant Certificate and, in the case of any such loss,
theft or destruction, upon delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, upon surrender and cancellation of such Warrant Certificate, the
Company, at the expense of the holder of such Underwriter Warrant will execute
and deliver, in lieu thereof, a new Warrant Certificate of like tenor.
(f) Reporting by the Company. The Company agrees that, if it
files a registration statement during the term of the Underwriter Warrants, it
will use its best efforts to keep current in the filing of all forms and other
materials which it may be required to file with the appropriate regulatory
authority pursuant to the Exchange Act, and all other forms and reports required
to be filed with any regulatory authority having jurisdiction over the Company.
(g) Fractional Shares. No fractional shares of Underlying
Common Stock or Warrant Stock are to be issued upon the exercise of any
Underwriter Warrant or Warrant, but the Company shall pay a cash adjustment in
respect of any fraction of a share which would otherwise be issuable in an
amount equal to the same fraction of the highest market price per share of
Underlying Common Stock or Warrant Stock on the day of exercise, as determined
by the Company.
(h) Reorganizations and Reclassifications. While any
Underwriter Warrant remains outstanding, the Company shall not effect any
capital reorganization of the Company, or any reclassification or
recapitalization of the capital stock of the Company; provided, however, that
the Company may re- incorporate in another state if such re-incorporation does
not involve a change in the capital structure of the Company, and the Company
may change the par value of the Common Stock, subject to the anti-dilution
provisions hereof.
8. OTHER HOLDERS.
The Underwriter Warrants are issued upon the following terms, to all of
which each holder or owner thereof by the taking thereof consents and agrees as
follows: (a) any person who shall become a transferee, within the limitations on
transfer imposed by Subsection 3(a) hereof, of an Underwriter Warrant properly
endorsed shall take such Underwriter Warrant subject to the provisions of
Subsection 3(a) hereof and thereupon shall be authorized to represent himself as
absolute owner thereof and, subject to the restrictions contained in this
Agreement, shall be empowered to transfer absolute title by endorsement and
delivery thereof to a permitted bona fide purchaser for value; (b) each prior
taker or owner waives and renounces all of his equities or rights in such
Underwriter Warrant in favor of each such permitted bona fide purchaser, and
each such permitted bona fide purchaser shall acquire absolute title thereto and
to all rights presented thereby; (c) until such time as the respective
Underwriter Warrant is transferred on the books of the Company, the Company may
treat the registered holder thereof as the absolute owner thereof for all
purposes, notwithstanding any notice to the contrary and (d) all references to
the word "you" in this Agreement shall be deemed to apply with equal effect to
any person to whom a Warrant Certificate or Certificates have been transferred
in accordance with the terms hereof, and where appropriate, to any person
holding Units, Underlying Securities or Warrant Stock.
9. MISCELLANEOUS.
All notices, certificates and other communications from or at the
request of the Company to the holder of any Underwriter Warrant shall be mailed
by first class, registered or certified mail, postage prepaid, to such address
as may have been furnished to the Company in writing by such holder, or, until
an address is so furnished, to the address of the last holder of such
Underwriter Warrant who has so furnished an address to the Company, except as
otherwise provided herein. This Agreement and any of the terms hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Texas. The headings in
this Agreement are for reference only and shall not limit or otherwise affect
any of the terms hereof. This Agreement, together with the forms of instruments
annexed hereto as Schedule I, constitutes the full and complete agreement of the
parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on this _____ day of ______________, 1997, in Dallas, Texas, by its
proper corporate officers thereunto duly authorized.
Cotton Valley Resources Corporation
By:______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chairman
The above Warrant and Registration Rights Agreement is confirmed this
_____ day of __________, 1997.
National Securities Corporation
By:
SCHEDULE I
COTTON VALLEY RESOURCES CORPORATION
UNIT PURCHASE WARRANT
Certificate Evidencing Right to Purchase
This is to certify that _________________________________
("_____________") or assigns, is entitled to purchase at any time or from time
to time after 9 :00 A.M., Dallas, Texas time, on ____, 1998 and until 9: ▇▇
▇.▇., ▇▇▇▇▇▇, ▇▇▇▇▇ time, on _______________, 2002 up to the above referenced
number of Units consisting of two shares of the Company's Common Stock (the
"Shares") and two Redeemable Common Stock Purchase Warrant (the "Warrants"), of
Cotton Valley Resources Corporation., a corporation organized under the laws of
Ontario, Canada (the "Company"), for the consideration specified in Subsection
1(d) of the Warrant and Registration Rights Agreement dated _____________, 1997
between the Company and National Securities Corporation, as representative of
the several Underwriters (as defined therein) (the "Warrant Agreement"),
pursuant to which this Warrant is issued. All rights of the holder of this
Warrant are subject to the terms and provisions of the Warrant Agreement, copies
of which are available for inspection at the office of the Company.
The Units issuable upon the exercise of this Warrant have not been
registered under the Securities Act of 1933, as amended (the "Act"), and no
distribution of the Units, Shares or Warrants issuable upon exercise of this
Warrant may be made until the effectiveness of a registration statement under
the Act covering such Units. Transfer of this Warrant Certificate is restricted
as provided in Subsection 3(a) of the Warrant Agreement.
This Warrant has been issued to the registered owner in reliance upon
written representations necessary to ensure that this Warrant was issued in
accordance with an appropriate exemption from registration under any applicable
state and federal securities laws, rules and regulations. This Warrant may not
be sold, transferred, or assigned unless, in the opinion of the Company and its
legal counsel, such sale, transfer or assignment will not be in violation of the
Act, applicable rules and regulations of the Securities and Exchange Commission,
and any applicable state securities laws.
Subject to the provisions of the Act and of the Warrant Agreement, this
Warrant and all rights hereunder are transferable, in whole or in part, at the
offices of the Company, by the holder hereof in person or by duly authorized
attorney, upon surrender of this Warrant, together with the Assignment hereof
duly endorsed. Until transfer of this Warrant on the books of the Company, the
Company may treat the registered holder hereof as the owner hereof for all
purposes.
Any Units, Warrants or Common Stock which are acquired pursuant to the
exercise of this Warrant shall be acquired in accordance with the Warrant
Agreement and certificates representing all securities so acquired shall bear a
restrictive legend reading substantially as follows:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER THE SECURITIES ACT OF 1933
AND ANY APPLICABLE STATE LAW, OR (2) AN OPINION OF COUNSEL (SATISFACTORY TO THE
COMPANY) THAT REGISTRATION IS NOT REQUIRED."
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
on this _____ day of ___________, 1997, in Dallas, Texas, by its proper
corporate officer's thereunto duly authorized.
Cotton Valley Resources Corporation
(I) BY:________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chairman
ATTEST:________________________
SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To Cotton Valley Resources Corporation:
The undersigned, the holder of the enclosed Warrant, hereby
irrevocably elects to exercise the purchase right represented by such
Warrant for, and to purchase thereunder, _________________ Units (as
defined in the Warrant and Registration Rights Agreement to which the
form of this Subscription was attached) and herewith makes payment of
$______________ therefor, and requests that the certificate or
certificates for such Units be issued in the name of and delivered to
the undersigned.
Date:
(Signature must conform in all respects to name of holder as specified
on the face of the Warrant)
(Address)
Insert the number of Units called for on the face of the Warrant
(or, in the case of a partial exercise, the portion thereof as to which
the Warrant is being exercised), in either case without making any
adjustment for additional Units or other securities or property or cash
which, pursuant to the adjustment provisions of the Warrant, may be
deliverable upon exercise.
ASSIGNMENT
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns and
transfers unto _______________________________ the right represented by
the enclosed Warrant to purchase ________ Units with full power of
substitution in the premises.
The undersigned represents and warrants that the transfer, in
whole in or in part, of such right to purchase represented by the
enclosed Warrant is permitted by the terms of the Warrant and
Registration Rights Agreement pursuant to which the enclosed Warrant
has been issued, and the transferee hereof, by his acceptance of this
Assignment, represents and warrants that he is familiar with the terms
of such Warrant and Registration Rights Agreement and agrees to be
bound by the terms thereof with the same force and effect as if a
signatory thereto, including without limitation Section 3 thereof.
Date:
(Signature must conform in all respects to name of holder as specified
on the face of the Warrant)
(Address)
Signed in the presence of: