EXHIBIT 10.3
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WARRANT AGREEMENT
THIS WARRANT AGREEMENT is dated as of January 16, 2004, by and
between GMX Resources Inc., an Oklahoma corporation (the "Company"), and the
persons named on the signature page hereof (collectively, the "Holders and
individually a "Holder").
Contemporaneously with the execution and delivery of this Agreement,
the Holders have made a subordinated loan to the Company in the aggregate
principal amount of $1,000,000 pursuant to the terms and provisions of that
certain Subordinated Note Purchase Agreement, dated as of the date hereof, by
and among the Company and the Holders (the "Note Purchase Agreement"). As
additional consideration for Holders' advance of funds to the Company under the
Note Purchase Agreement, the Company has agreed to issue and deliver the
Warrants (as defined herein) to the Holders pro-rata based on the amount of Each
Holder's advance.
NOW, THEREFORE, for and in consideration of the mutual promises,
representations, covenants and conditions contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. As used in this Agreement, the following terms
shall have the meanings indicated below, unless the context clearly indicates to
the contrary:
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such Person. For purposes of this definition, a Person shall be deemed to
"control" another Person if such first Person possesses directly or indirectly
the power to (i) vote 50% or more of the securities having ordinary voting power
for the selection of directors of such Person, or (ii) direct, or cause the
direction of, the management and policies of the second Person, whether through
the ownership of voting securities, by contract or otherwise.
"Agreement" means this Warrant Agreement, as amended, supplemented
or modified from time to time.
"Board of Directors" means the board of directors of the Company.
"Business Day" means any day other than Saturday, Sunday or a legal
holiday in the State of New York.
"Closing Date" means January 16, 2004, the date of the closing of
the transactions contemplated by the Note Purchase Agreement.
"Commission" means the Securities and Exchange Commission or any
entity succeeding to any or all of its functions under the Securities Act and
the Exchange Act.
"Common Stock" means the common stock, par value $0.001 per share,
of the Company.
"Company" has the meaning given to such term in the first paragraph
hereof.
"Composite Transaction Tape" means a security price reporting
service that includes all transactions in a security on each of the exchanges
and in the over-the-counter market.
"Current Market Price Per Share" means, with respect to any share of
Common Stock, as of any particular date of determination:
(i) If the Common Stock is then reported on a Composite
Transaction Tape, the average of the daily closing prices for the 30
consecutive trading days immediately prior to such date, as reported
on the Composite Transaction Tape (as adjusted for any stock
dividend, split, combination or reclassification that occurred
during such 30-day period);
(ii) If the Common Stock is not then reported on a
Composite Transaction Tape but is then listed or admitted to trading
on a national securities exchange, the average of the daily last
sale prices regular way of the Common Stock for the 30 consecutive
trading days immediately prior to such date (as adjusted for any
stock dividend, split, combination or reclassification that occurred
during such 30-day period), on the principal national securities
exchange on which the Common Stock is traded or, in case no such
sale takes place on any such day, the average of the closing bid and
asked prices regular way, in either case on such national securities
exchange;
(iii) If the Common Stock is not then reported on a
Composite Transaction Tape but is then traded in the
over-the-counter market, the average of the daily closing sales
prices, or, if there is no closing sales price, the average of the
closing bid and asked prices, in the over-the-counter market, for
the 30 consecutive trading days immediately prior to such date (as
adjusted for any stock dividend, split, combination or
reclassification that occurred during such 30-day period), as
reported by the National Association of Securities Dealers'
Automated Quotation System, or, if not so reported, as reported by
the National Quotation Bureau, Incorporated or any successor
thereof, or, if not so reported the average of the closing bid and
asked prices as furnished by any member of the National Association
of Securities Dealers, Inc. selected from time to time by the Board
of Directors and agreed to by the holders of a majority of the
Warrants for that purpose; or
(iv) If no such prices are then furnished, the fair
market value of a share of the Common Stock as determined by the
Board of Directors in good faith.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute and the rules and regulations of the
Commission thereunder, all as the same may be in effect from time to time.
"Exercise Price" means $1.50 per share, subject to adjustment as may
be required by Section 11.
"Expiration Date" means 5:00, p.m. New York time on the fifth
anniversary of the date hereof, or such earlier date as is permitted pursuant to
Section 11(j).
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"Non-Public Warrant Shares" means Warrant Shares that have not been
sold to the public and bear the legend set forth in Section 13(b).
"Note Purchase Agreement" has the meaning given to such term in the
second paragraph hereof.
"Person" means any person, firm or entity.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor federal statute and the rules and regulations of the Commission
thereunder, all as the same may be in effect from time to time.
"Subsidiary" means, as to any Person, a corporation of which shares
of stock having ordinary voting power (other than stock having such power only
by reason of the occurrence of a contingency) to elect a majority of the board
of directors or other managers of such corporation are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Company.
"Warrant Certificate" means a certificate evidencing one or more
Warrants, substantially in the form of Exhibit A attached hereto, with such
changes therein as may be required to reflect any adjustments made pursuant to
Section 11.
"Warrant Holders" means the Holders and such other Persons to whom
any Holder transfers Warrants in compliance with the terms of this Agreement.
"Warrant Office" means the office or agency of the Company at which
the Warrant Register shall be maintained and where the Warrants may be presented
for exercise, exchange, substitution and transfer, which office or agency will
be the office of the Company located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, which office or agency may be changed by the Company
pursuant to notice in writing to the Persons named in the Warrant Register as
the holders of the Warrants.
"Warrant Register" means the register, substantially in the form of
Exhibit B attached hereto, maintained by the Company at the Warrant Office.
"Warrant Shares" means the shares of Common Stock issued or issuable
upon exercise of the Warrants, as the number of such shares may be adjusted from
time to time pursuant to Section 11 and the provisions of the Company's
Certificate of Incorporation.
"Warrants" means the stock purchase warrants issued pursuant to the
Note Purchase Agreement and this Agreement entitling the Holders to purchase,
subject to Section 5, from the Company at the Warrant Office an aggregate of
175,000 shares of Common Stock (subject to adjustment as provided in Section 11)
at the Exercise Price;
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2. Issuance of Warrants. The Company hereby agrees to issue and
deliver to each Holder, on the Closing Date, the Warrants and one or more
Warrant Certificates evidencing the Warrants to which it is entitled. No
consideration other than Holder's advance of funds under the Note Purchase
Agreement shall be required from the Holder in consideration of the receipt of
the Warrants.
3. Registration, Transfer and Exchange of Certificates.
(a) The Company shall maintain, at the Warrant Office, the
Warrant Register for registration of the Warrants and Warrant Certificates and
transfers thereof. On the Closing Date, the Company shall register the Warrants
and Warrant Certificates in the Warrant Register in the name of the Holder. The
Company may deem and treat the registered holders of the Warrant Certificates as
the absolute owners thereof and the Warrants represented thereby
(notwithstanding any notation of ownership or other writing on the Warrant
Certificates made by any Person) for the purpose of any exercise thereof or any
distribution to the holders thereof, and for all other purposes, and the Company
shall not be affected by any notice to the contrary.
(b) Subject to Section 13, the Company shall register the
transfer of any outstanding Warrants in the Warrant Register upon surrender of
the Warrant Certificates evidencing such Warrants to the Company at the Warrant
Office, accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company, duly executed by the registered holder or holders
thereof or by the duly appointed legal representative thereof. Upon any such
registration of transfer, new Warrant Certificates evidencing such transferred
Warrants shall be issued to the transferee, and the surrendered Warrant
Certificates shall be canceled. If less than all the Warrants evidenced by
Warrant Certificates surrendered for transfer are to be transferred, new Warrant
Certificates shall be issued to the holder surrendering such Warrant
Certificates evidencing such remaining number of Warrants.
(c) Warrant Certificates may be exchanged at the option of the
holders thereof, when surrendered to the Company at the Warrant Office, for
another Warrant Certificate or other Warrant Certificates of like tenor and
representing, in the aggregate, a like number of Warrants. Warrant Certificates
surrendered for exchange shall be canceled.
(d) No charge shall be made for any such transfer or exchange,
except for any tax or other governmental charge imposed in connection therewith.
Except as provided in Section 13(b), each Warrant Certificate issued upon
transfer or exchange shall bear the legend set forth in Section 13(b) if the
Warrant Certificate presented for transfer or exchange bore such legend.
4. Mutilated or Missing Warrant Certificates. If any Warrant
Certificate shall be mutilated, lost, stolen or destroyed, the Company shall
issue, in exchange and substitution for and upon cancellation of the mutilated
Warrant Certificate, or in lieu of and substitution for the Warrant Certificate
lost, stolen or destroyed, a new Warrant Certificate of like tenor and
representing an equivalent number of Warrants, but only upon receipt of evidence
satisfactory to the Company of such loss, theft or destruction of such Warrant
Certificate and, if requested, indemnity satisfactory to it. The Company
acknowledges that a written indemnity by a Holder
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or, if an Affiliate of a Holder is the holder of such lost, stolen or destroyed
Warrant Certificate, by such Holder or such Affiliate shall be satisfactory to
the Company for such purpose. No service charge shall be made for any such
substitution; however, all expenses and reasonable charges associated with
procuring such indemnity and all stamp, tax and other governmental duties that
may be imposed in relation thereto shall be borne by the holder of such Warrant
Certificate. Each Warrant Certificate issued in any such substitution shall bear
the legend set forth in Section 13(b) if the Warrant Certificate for which such
substitution was made bore such legend.
5. Duration and Exercise of Warrants.
(a) The Warrants issued hereto evidenced by a Warrant
Certificate shall be exercisable in whole or in part by the
registered holder thereof on any Business Day after the Closing Date and prior
to the Expiration Date.
(b) Subject to the provisions of this Agreement, the Warrants
evidenced by a Warrant Certificate may be exercised at any time by the
registered holder thereof by either (i) the surrender of the Warrant Certificate
evidencing the Warrants to be exercised, with the form of election to purchase
on the reverse thereof or attached thereto duly completed and signed, to the
Company at the Warrant Office, and upon payment of the aggregate Exercise Price
for the number of Warrant Shares in respect of which such Warrants are being
exercised in lawful money of the United States of America and/or by surrender to
the Company of shares of Common Stock then owned by the Warrant Holder and
valued for purposes hereof at their Current Market Price Per Share at the time
of exercise; or (ii) if the Current Market Price Per Share is greater than the
Exercise Price (at the date of calculation, as set forth below), in lieu of
exercising the Warrants as permitted in Section 5 (b) (i) hereinabove, the
holder of a Warrant Certificate may elect to receive shares of Common Stock
equal to the value (as determined below) of the Warrants (or the portion thereof
being canceled) by surrender of the Warrant Certificate, together with the
election to purchase (a form of which is attached to each Warrant Certificate)
attached thereto duly executed, to the Company at the Warrant Office referred to
herein, in which event the Company shall issue to the holder of the Warrant
Certificate that number of shares of Common Stock computed using the following
formula:
CS = WCS x (CMPPS - EP)
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CMPPS
Where CS equals the number of shares of Common Stock to be
issued to the holder of the Warrant Certificate
WCS equals the number of shares of Common Stock
purchasable under the Warrants being exercised (at
the date of such calculation)
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CMPPS equals the Current Market Price Per Share (at
the date of such calculation)
EP equals the Exercise Price (as adjusted to the date
of such calculation).
For purposes of Rule 144 under the Securities Act, 17 C.F.R. ss. 230.144, the
parties hereto agree that the exercise of any Warrants in accordance with this
Section 2.2 shall be deemed to be a conversion of such Warrants, pursuant to the
terms of this Agreement and the Warrants, into Common Stock.
(c) Upon exercise of any Warrants hereunder, the Company shall
issue and cause to be delivered to or upon the written order of the registered
holders of such Warrants and in such name or names as such registered holders
may designate, a certificate for the Warrant Shares issued upon such exercise of
such Warrants. Any Persons so designated to be named therein shall be deemed to
have become holders of record of such Warrant Shares as of the date of exercise
of such Warrants.
(d) Warrants shall be deemed to have been exercised or converted
immediately prior to the close of business on the date of its surrender for
exercise or conversion as provided herein, and the Person entitled to receive
the Warrant Shares issuable upon such exercise shall be treated for all purposes
as the holder of record of such shares as of the close of business on such date.
(e) If less than all of the Warrants evidenced by a Warrant
Certificate are exercised at any time, a new Warrant Certificate or Certificates
shall be issued for the remaining number of Warrants evidenced by such Warrant
Certificate. Each new Warrant Certificate so issued shall bear the legend set
forth in Section 13(b) if the Warrant Certificate presented in connection with
partial exercise thereof bore such legend, unless the transfer restrictions
referred to in such legend are no longer applicable pursuant to Section 13(d).
All Warrant Certificates surrendered upon exercise of Warrants shall be
canceled.
6. No Fractional Shares. The Company shall not be required to issue
fractional shares of Common Stock upon exercise of any Warrants, but shall pay
for any such fraction of a share an amount in cash equal to the then Current
Market Price Per Share of one such share of Common Stock multiplied by such
fraction.
7. Payment of Taxes. The Company shall pay all taxes (other than
income taxes) attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants; provided, however, that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance of any Warrant Certificate or any certificate for Warrant Shares in a
name other than that of the registered holder of a Warrant Certificate
surrendered upon the exercise of a Warrant, and the Company shall not be
required to issue or deliver such certificate unless or until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
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8. Stockholder Rights. Nothing contained in this Agreement or in any
of the Warrant Certificates shall be construed as conferring upon the holders
thereof the right to vote or to consent or to receive notice as a stockholder in
respect of the meetings of stockholders or the election of directors of the
Company or any other matter, or any rights whatsoever as a stockholder of the
Company. Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as imposing any obligation on the registered
holders thereof to purchase any securities or as imposing any liabilities on
such holders as stockholders of the Company, whether such obligation or
liabilities are asserted by the Company or by creditors of the Company.
9. Reservation and Issuance of Warrant Shares; Certain Corporate
Actions.
(a) The Company will at all times reserve and keep available,
free from preemptive rights, or any other actual contingent purchase rights of
persons other than the Holders out of the aggregate of its authorized but
unissued Common Stock, for the purpose of enabling it to satisfy any obligation
to issue Warrant Shares upon exercise of Warrants, the maximum number of shares
of Common Stock which may then be deliverable upon the exercise of all
outstanding Warrants.
(b) Before taking any action which would cause an adjustment
pursuant to Section 11 hereof to reduce the Exercise Price below the then par
value (if any) of the Warrant Shares, the Company will take all corporate action
necessary, in the opinion of its counsel (which may be in-house counsel employed
by the Company), in order that the Company may validly and legally issue fully
paid and nonassessable Warrant Shares at the Exercise Price as so adjusted.
(c) The Company covenants that all Warrant Shares which may be
issued upon exercise of Warrants will be, upon payment of the Exercise Price and
issuance thereof, fully paid, nonassessable, free of preemptive rights and free
from all taxes, liens, charges and security interests with respect to the issue
thereof.
10. Registration Rights. The Warrant Shares shall have the
registration rights provided for in the Registration Rights Agreement, dated as
of the Closing Date, by and among the Company, the Holder and the noteholders
listed on Schedule I to the Note Purchase Agreement.
11. Adjustment of Exercise Price and Number of Warrant Shares
Issuable. The Exercise Price and the number of Warrant Shares issuable upon the
exercise of each Warrant are subject to adjustment from time to time upon the
occurrence of the events enumerated in this Section 11.
(a) Adjustment for Change in Common Stock.
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If the Company :
(1) pays a dividend or makes a distribution on its outstanding
Common Stock in shares of its capital stock or any other class of capital stock
exchangeable for or convertible into Common Stock;
(2) splits or subdivides its outstanding Common Stock into a
greater number of shares;
(3) combines its outstanding Common Stock into a smaller number
of shares; or
(4) issues by reclassification of its Common Stock any shares of
any class of its capital stock,
then the Exercise Price and the number and kind of shares of
capital stock of the Company issuable upon the exercise of a Warrant (as in
effect immediately prior to such action) shall be proportionately adjusted so
that the Holder may receive the aggregate number and kind of shares of capital
stock of the Company which he would have owned immediately following such action
if such Warrant had been exercised immediately prior to such action.
Such adjustment shall be made successively whenever any event
listed above shall occur and shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
(b) Adjustment for Rights Issue.
If the Company shall issue any rights, options or warrants
entitling all of the holders of Common Shares to subscribe for or purchase
Common Stock at a price per share less than the Exercise Price as of the record
date in respect of such issuance, then, and in such event, the Exercise Price
shall be reduced to such lower price.
The adjustment shall be made successively whenever any such
rights, options or warrants are issued and shall become effective at the opening
of business on the day next following the record date for the determination of
shareholders entitled to receive the rights, options or warrants. If at the end
of the period during which such rights, options or warrants are exercisable,
none of the rights, options or warrants shall have been exercised, the Exercise
Price shall be immediately readjusted to what it would have been if the
adjustment provided for in this paragraph had not been made.
In determining whether any rights, options or warrants entitle
the holders to subscribe for or purchase Common Stock at a price per share less
than the applicable Exercise Price, there shall be taken into account any cash
or other consideration received by the Company upon exercise of such rights,
options or warrants. The value of such consideration, if other than cash, shall
be determined by the good faith business judgment of the Company's Board of
Directors, whose determination shall be conclusive.
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(c) Adjustment for Other Distributions.
If the Company distributes to all holders of its Common Stock any
of its assets or debt securities or any rights or warrants to purchase debt
securities, assets or other securities of the Company (other than distributions
referred to in subsection 11(a) or rights, options or warrants referred to in
subsection 11(b)), the Exercise Price shall be adjusted (but only downward) in
accordance with the following formula:
E' = E x M - F
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M
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
M = the Current Market Price Per Share of Common Stock on the record
date of the distributions mentioned in subsection 11(c).
F = the fair market value on the record date of the assets,
securities, rights or warrants distributed by the Company
applicable to one share of Common Stock. The fair market value
shall be determined by the good faith judgment of the Company's
Board of Directors, whose determination shall be conclusive.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective at the opening of business on
the day next following the record date for the determination of shareholders
entitled to receive such dividend or distribution.
(d) Adjustment for Common Stock Issue.
If the Company issues Common Stock (other than in any of the
transactions described in subsections 11(a), (b) and (c) or upon exercise of any
securities issued pursuant to such transactions) for consideration per share
which is less than the Exercise Price as of the date (the "Pricing Date") the
Company fixes the offering price of such additional Common Stock, then and in
such event, the Exercise Price shall be adjusted to such lower price.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective on the day next following the date
of issuance of such additional shares.
(e) Adjustment for Convertible Securities Issue.
If the Company issues any securities convertible into or
exchangeable for Common Stock (other than securities issued in transactions
described in subsections (a), (b) and (c) of this Section 11) or securities
entitling the recipient to subscribe for or purchase Common Stock or securities
convertible into Common Stock (collectively, "Convertible Securities") at a
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price per share of Common Stock (assuming immediate conversion) less than the
Exercise Price as of the date (the "Pricing Date") the Company fixes the
offering price of such securities, then, and in such event, the Exercise Price
shall be reduced to such lower price.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective at the opening of business on the
day following the date of issuance of such Convertible Securities.
If none of the shares of Common Stock deliverable upon conversion
or exchange of such securities have been issued when such securities are no
longer outstanding, then the Exercise Price shall promptly be readjusted to what
it would have been if the adjustment provided for in this paragraph had not been
made.
In determining whether any Convertible Securities entitle the
holders to subscribe for or purchase Common Stock at a price per share less than
the applicable Exercise Price, there shall be taken into account any cash or
other consideration received by the Company upon conversion of such convertible
securities. The value of such consideration, if other than cash, shall be
determined by the good faith business judgment of the Company's Board of
Directors, whose determination shall be conclusive.
(f) Events pursuant to which this Section 11 does not apply.
(1) Subsections 11(b), (d) and (e) do not apply to:
(i) the issuance of Common Stock pursuant to employee share
purchase plans approved by the Company's Board of Directors, or
(ii) the issuance of Common Stock issuable upon exercise of
warrants or options outstanding as of the date hereof or upon exercise of the
Warrants, or
(iii) options (or shares of Common Stock underlying such
options) issued pursuant to employee stock options plans approved by the
Company's Board of Directors or otherwise to employees pursuant to individually
negotiated employment agreements approved by the Company's board of directors;
or
(iv) options to purchase up to 500,000 shares of Common Stock
(or such underlying shares of Common Stock) issued after the date hereof to
independent contractors pursuant to individually negotiated independent
contractor agreements.
(g) When De Minimis Adjustment May Be Deferred.
No adjustment in the Exercise Price need be made unless the
adjustment would require an increase or decrease of at least 1% in the Exercise
Price. Any adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment.
All calculations under this Section 11 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be.
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(h) When No Adjustment Required.
No adjustment need be made for a change in the par value, or from
par value to no par value, or from no par value to par value, of the Common
Stock.
(i) Notice of Adjustment.
Whenever the Exercise Price is adjusted, the Company shall
provide the notices required by Section 12 hereof.
(j) Reorganization of the Company.
(1) If the Company consolidates or merges with or into, or
transfers or leases all or substantially all of its assets to, any person or
reclassifies its Common Stock, upon consummation of such event (a
"Reorganization Event"), the Warrants shall automatically become exercisable for
the kind and amount of securities, cash or other assets which the Holder would
have owned immediately after such Reorganization Event if the Holder had
exercised the Warrants immediately before the effective date of the
Reorganization Event. In connection with any such Reorganization Event, the
Company may, upon at least fifteen (15) business days' prior written notice to
the Holders, accelerate the Expiration Date to a date which is no earlier than
five (5) business days after the effective date of such Reorganization Event;
provided, however, that in the event of such acceleration:
(A) the Company shall be deemed, immediately prior to the
effectiveness of such Reorganization Event, to have issued to each Holder
additional Warrants exercisable for such number of shares of Common Stock as is
equal to ten percent (10%) of the Warrant Shares issuable under such Holder's
existing Warrants; and
(B) in the event that any Warrants have not been exercised
immediately prior to the Expiration Date and the Current Market Price Per Share
immediately prior to the effectiveness of such Reorganization Event is greater
than the Exercise Price, then such Warrants shall be deemed to have been
automatically exercised by the Holders thereof immediately prior to the
Expiration Date pursuant to Section 5(b)(ii) hereof, but without regard to any
requirement in such Section 5(b)(ii) of such Holders to surrender such Warrants
or to deliver an election to purchase under such Warrants.
(2) If, and at the time that, this subsection (j) applies,
then subsections (a), (b), (c) (d) and (e) of this Section 11 and the adjustment
events thereunder do not apply with respect to the Reorganization Event
specified in this subsection (j); provided, however, that all prior downward
adjustments to the Exercise Price shall be effective.
(k) Company Determination Final.
Any determination that the Company or the Company's Board of
Directors must make pursuant to this Section 11 shall to the extent made in the
exercise of its good faith and reasonable judgment be conclusive to the extent
provided in this Section 11.
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12. Notices to Warrant Holders; Notices of Issuances and
Dividends.
Whenever there is an adjustment in the number of Warrant Shares
or other securities or assets to which each Warrant Holder is entitled, the
Company shall promptly mail to all Warrant Holders a notice of adjustment. Such
notice shall be accompanied by (i) a certificate briefly stating the facts
requiring the adjustment and the manner of computing the adjustment and (ii) a
certificate from the Chief Financial Officer of the Company that the adjustment
is correct.
13. Restrictions on Transfer.
(a) The Holder (i) represents that it is an "accredited investor"
within the meaning of the Securities Act and the rules and regulations
promulgated thereunder, (ii) represents that it has received adequate
information about the Company to determine the advisability of a purchase of the
Company's securities, (iii) represents that it is acquiring the Warrants and
will acquire any Warrant Shares for its own account for investment and not with
a view to any distribution or public offering within the meaning of the
Securities Act, except with respect to Warrant Shares, pursuant to the
registration of the offer and sale thereof under the Securities Act, (iv)
acknowledges that the Warrants and any Warrant Shares issuable upon exercise
thereof have not been registered under the Securities Act and (v) agrees that it
will not sell or otherwise transfer any of its Warrants or Warrant Shares except
pursuant to the terms and conditions specified herein and that it will cause any
permitted transferee thereof to agree to take and hold the same subject to the
terms and conditions specified herein (including, without limitation, Section
13(c)).
(b) Except as provided in Section 13(d), each Warrant Certificate
and each certificate for the Warrant Shares issued to the Holder or to a
subsequent transferee thereof pursuant to Section 13(c) shall include a legend
in substantially the following form (with such changes therein as may be
appropriate to reflect whether such legend refers to Warrants or Warrant
Shares); provided, however, that such legend shall not be required if such
transfer is being made in connection with a sale which is exempt from
registration pursuant to Rule 144 under the Securities Act or other applicable
exemption from registration or if the opinion of counsel referred to in Section
13(c) is to the further effect that neither such legend nor the restrictions on
transfer in this Section 13 are required in order to ensure compliance with the
Securities Act:
THE WARRANTS AND SHARES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT OR LAW. SUCH WARRANTS AND SHARES MAY BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN AND
ARE SUBJECT TO OTHER PROVISIONS OF THE WARRANT AGREEMENT, DATED AS
OF MAY 3, 2000, BETWEEN THE COMPANY AND CERTAIN HOLDERS (AS SUCH
AGREEMENT MAY BE SUPPLEMENTED, MODIFIED, AMENDED OR RESTATED FROM
TIME TO TIME), A COMPLETE AND CORRECT COPY OF WHICH IS AVAILABLE FOR
INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
-12-
FURNISHED TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT
CHARGE.
(c) Prior to any assignment, transfer or sale of any Warrant or
any Warrant Shares , the holder thereof shall give written notice to the Company
of such holder's intention to effect such assignment, transfer or sale, which
notice shall set forth the date of such proposed assignment, transfer or sale
and the identity of the proposed transferee. Each holder wishing to effect such
a transfer of any Warrant or Warrant Shares shall also furnish to the Company an
agreement by the transferee thereof that it is taking and holding the same
subject to the terms and conditions specified herein and a written opinion of
such holder's counsel, in form reasonably satisfactory to the Company, to the
effect that the proposed transfer may be effected without registration under the
Securities Act.
(d) The restrictions set forth in this Section 13 shall terminate
and cease to be effective with respect to any Warrants or Warrant Shares when
the offer and sale of which are registered under the Securities Act or upon
receipt by the Company of an opinion of counsel knowledgeable as to securities
matters, in form reasonably satisfactory to the Company, to the effect that
compliance with such restrictions is not necessary in order to comply with the
Securities Act with respect to the transfer of the Warrants and the Warrant
Shares; provided, however, that after two years from the date of issuance of any
Warrants (or such shorter period as may be provided by Rule 144(k) promulgated
under the Securities Act), such restrictions shall automatically terminate with
respect to the Holder if not an Affiliate of the Company(without the necessity
of any opinion of counsel) as to such Warrants and as to any Warrant Shares
issued in respect of such Warrants upon exercise of the Conversion Right set
forth in Section 5(b). Whenever such restrictions shall so terminate the holder
of such Warrants and/or Warrant Shares shall be entitled to receive from the
Company, without expense (other than transfer taxes, if any), Warrant
Certificates or certificates for such Warrant Shares not bearing the legend set
forth in Section 13(b), at which time the Company will rescind any transfer
restrictions relating thereto.
14. Amendments and Waivers. Any provision of this Agreement may
be amended, supplemented, waived, discharged or terminated by a written
instrument signed by the Company and the holders of not less than a majority of
the outstanding Warrants (or in the case of Section 13, the holders of a
majority of the aggregate outstanding Warrants and Non-Public Warrant Shares,
voting as a single group); provided, however, that (i) this Agreement may not be
amended, supplemented or waived so as to increase the Exercise Price, reduce the
number of Warrant Shares issuable upon exercise of any Warrants, or alter the
period during which any Warrants may be exercised (except to provide for a later
Expiration Date), in each case without the consent of the Holder, and (ii) this
Section 14 may not be amended or supplemented without the consent of the Holder.
15. Specific Performance. The parties agree that irreparable
damage will result in the event that the obligations of each party under this
Agreement are not specifically enforced, and that any damages available at law
for a breach of any such obligations would be inadequate. Therefore, the holders
of the Warrants and/or Non-Public Warrant Shares and the Company shall have the
right to seek specific performance by the Company and the holders of the
Warrants
-13-
and/or Non-Public Warrant Shares, respectively, of the provisions of this
Agreement, and appropriate injunctive relief may be applied for and granted in
connection therewith. The Company and the holders of the Warrants and/or
Non-Public Warrant Shares hereby irrevocably waive, to the extent that each of
them may do so under applicable law, any defense based on the adequacy of a
remedy at law which may be asserted as a bar to the remedy of specific
performance in any action brought against such party for specific performance of
this Agreement. Such remedies and all other remedies provided for in this
Agreement shall, however, be cumulative and not exclusive and shall be in
addition to any other remedies which may be available under this Agreement.
16. Notices. Any notice, request, instruction or other document
to be given under this Agreement after the date hereof by any party hereto to
any other party shall be in writing and shall be deemed to have been duly given
on the date of service if delivered personally or by telecopier with confirmed
receipt, or on the third day after mailing if sent by certified mail, postage
prepaid, at the addresses set forth below:
If to or on the Company, addressed to the Company at the
Warrant Office.
If to or on a Warrant Holder or holder of Warrant
Shares, addressed to such holder as such holder's name and address
shall appear on the Warrant Register or the Common Stock registry of
the Company, as the case may be.
17. Binding Effect. This Agreement shall be binding upon and
inure to the sole and exclusive benefit of the Company, its successors and
assigns, the Holders, Affiliates of the Holders and the registered holders from
time to time of the Warrants and the Warrant Shares.
18. Continued Validity. A holder of Warrant Shares shall continue
to be entitled with respect to such Warrant Shares to all rights and subject to
all obligations to which it would have been entitled or subject as a Warrant
Holder under Sections 13 through 25 of this Agreement. Such rights and
obligations shall terminate as to any such holder upon the sale of the Warrant
Shares held by such holder. The Company will, at the time of each exercise of
any Warrant, in whole or in part, upon the request of the holder of the Warrant
Shares issued upon such exercise thereof, acknowledge in writing, in form
reasonably satisfactory to such holder, its continuing obligation to afford to
such holder all such rights; provided, however, that if such holder shall fail
to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such holder all such rights.
19. GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT CERTIFICATE
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS, OTHER THAN
CHOICE OF LAW RULES, OF THE STATE OF OKLAHOMA. THE FEDERAL AND STATE COURTS OF
COMPETENT JURISDICTION LOCATED IN OKLAHOMA COUNTY, OKLAHOMA, SHALL HAVE PERSONAL
JURISDICTION OVER THE PARTIES TO THIS AGREEMENT, AND NO ACTION TO INTERPRET OR
ENFORCE THIS AGREEMENT SHALL BE INSTITUTED IN ANY OTHER JURISDICTION. EACH PARTY
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO ANY
-14-
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT BEING
BROUGHT IN THE FEDERAL OR STATE COURTS OF COMPETENT JURISDICTION LOCATED IN
OKLAHOMA COUNTY, OKLAHOMA, AND HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.
20. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company and the registered
holders of the Warrants and the Warrant Shares any legal or equitable right,
remedy or claim under this Agreement.
21. Voting and Consents to be on an As-Converted Basis. Wherever
this Agreement calls for the written consent or vote of any combinations of the
holders of the Warrants or any of the Warrant Shares, voting as a single group,
the Warrants shall be counted as if they had been exercised for Common Stock.
22. Multiple Counterparts. This Agreement may be executed in one
or more counterparts for the convenience of the parties hereto, all of which
together shall constitute one and the same instrument.
23. Entire Agreement. This Agreement contains the entire
understanding of the parties relating to the subject matter contained herein and
supersedes all prior agreements and understandings, written or oral, relating to
the subject matter hereof.
24. Headings; Pronouns. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or plural,
as the identity of the entities or persons referred may require. The headings of
the sections of this Agreement are inserted for convenience only and shall not
constitute a part hereof nor affect in any way the meaning or interpretation of
this Agreement. "Herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular section or
other subdivision. All references herein to any action(s) which are to be taken
(or which are prohibited from being taken) by any Person, the Company or any
Subsidiary shall apply to such Person, the Company or such Subsidiary, as the
case may be, whether such action is taken directly or indirectly. All references
herein to actions by the Company or any Subsidiary (including, without
limitation, actions denoted by terms such as "create," "sell," "transfer" or
"dispose of") mean such action whether voluntary or involuntary, by operation of
law or otherwise.
25. Exhibits. All exhibits attached hereto are incorporated
herein by reference.
26. Severability. In the event that any provision contained
herein shall be held to be invalid, illegal or unenforceable for any reason,
such invalidity, illegality or unenforceability shall not affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.
[the next page is the execution page]
-15-
IN WITNESS WHEREOF the parties hereto have caused this Agreement
to be duly executed and delivered by their proper and duly authorized officers,
as of the date first above written.
COMPANY:
GMX RESOURCES INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
-----------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
Title: Chief Financial Officer
Address: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (___) ________
Attn: Chief Executive Officer
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
X-MEN, LLC
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Member
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-16-
EXHIBIT A
TO
WARRANT AGREEMENT
-----------------
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAW AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR LAW. SUCH WARRANTS MAY
BE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN AND ARE
SUBJECT TO OTHER PROVISIONS OF THE WARRANT AGREEMENT, DATED AS OF JANUARY 16,
2004, BETWEEN THE COMPANY AND CERTAIN HOLDERS (AS SUCH AGREEMENT MAY BE
SUPPLEMENTED, MODIFIED, AMENDED OR RESTATED FROM TIME TO TIME), A COMPLETE AND
CORRECT COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE
COMPANY AND WILL BE FURNISHED TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND
WITHOUT CHARGE.
WARRANT CERTIFICATE
January 16, 2004 Certificate No.: ____
This Warrant Certificate certifies that _________________________
(the "Holder"), or registered assigns, is the registered holder of __________
Warrants (the "Warrants") to purchase shares of common stock, par value $0.001
per share ("Common Stock"), of GMX Resources, Inc., an Oklahoma corporation (the
"Company"). Each Warrant entitles the holder, but only subject to the conditions
set forth herein and in the Warrant Agreement referred to below, to purchase
from the Company before the "Expiration Date" as defined in the Warrant
Agreement, one fully paid and nonassessable share of Common Stock (the "Warrant
Shares") to the extent set forth in the Warrant Agreement, at a price equal to
the Exercise Price (as defined in the Warrant Agreement), payable in the manner
specified in the Warrant Agreement, upon surrender of this Warrant Certificate,
execution of the annexed Form of Election to Purchase and payment of the
Exercise Price at the office of the Company at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other address as the Company may specify
in writing to the registered holder of the Warrants evidenced hereby (the
"Warrant Office"). The Exercise Price and number of Warrant Shares purchasable
upon exercise of the Warrants are subject to adjustment prior to the Expiration
Date as set forth in the Warrant Agreement.
A-1
No Warrant may be exercised after the Expiration Date and (except as
otherwise provided in the Warrant Agreement) all rights of the registered
holders of the Warrants shall cease after the Expiration Date.
The Company may deem and treat the registered holder of the Warrants
evidenced hereby as the absolute owner thereof (notwithstanding any notation of
ownership or other writing hereon made by any person), for the purpose of any
exercise hereof and of any distribution to the holder hereof and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Warrant Certificates, when surrendered at the office of the Company
at the above-mentioned address by the registered holder hereof in person or by a
legal representative duly authorized in writing, may be exchanged, in the manner
and subject to the limitations provided in the Warrant Agreement, but without
payment of any service charge, for another Warrant Certificate or Warrant
Certificates of like tenor evidencing, in the aggregate, a like number of
Warrants.
Upon due presentment for registration of transfer of this Warrant
Certificate at the office of the Company at the above-mentioned address, a new
Warrant Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued in exchange for this Warrant
Certificate to the transferee(s) and, if less than all the Warrants evidenced
hereby are to be transferred, to the registered holder hereof, subject to the
limitations provided in the Warrant Agreement, without charge except for any tax
or other governmental charge imposed in connection therewith.
This Warrant Certificate is one of the Warrant Certificates referred
to in the Warrant Agreement, dated as of January 16, 2004, between the Company
and the Holder (as such Warrant Agreement may be supplemented, modified, amended
or restated from time to time, the "Warrant Agreement"). The Warrant Agreement
is hereby incorporated by reference in and made a part of this instrument and is
hereby referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Company and the holders.
IN WITNESS WHEREOF the Company has caused this Warrant Certificate
to be signed by its duly authorized officer.
GMX RESOURCES INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
A-2
FORM OF ELECTION TO PURCHASE
(To be executed upon exercise of Warrants)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ______________ Warrant
Shares and herewith (i) tenders payment for such Warrant Shares to the order of
the Company in the amount of $ in accordance with Section 5(b)(i) of the
Agreement, or (ii) receives Warrant Shares in accordance with the terms of
Section 5(b)(ii) of the Agreement. The undersigned requests that a certificate
for such Warrant Shares be registered in the name of
_______________________________ whose address is _______________________________
and that such certificate be delivered to _______________________________ whose
address is ________________________________. If such number of Warrant Shares is
less than all of the Warrant Shares purchasable hereunder, the undersigned
requests that a new Warrant Certificate representing the remaining balance of
the Warrant Shares be registered in the name of ______________________________
whose address is ________________________________ and that such Warrant
Certificate be delivered to _______________________________ whose address is
______________________________.
Signature:
----------------------------------------------
(Signature must conform in all respects to name of holder
as specified on the face of the Warrant Certificate)
----------------------------------------------
(Printed Name)
Date: _________________________
A-3
EXHIBIT B
TO
WARRANT AGREEMENT
-----------------
WARRANT REGISTER
----------------
Warrant Original Number Number of Names and
Certificate of Warrants and Warrants Addresses of
Number Warrant Shares Expired Warrant Holders
------ -------------- ------- ---------------
1 55,000 ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
2 41,250 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
3 20,625 ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
4 20,625 X-Men LLC
c/o Charter Holdings
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
B-1
Warrant Original Number Number of Names and
Certificate of Warrants and Warrants Addresses of
Number Warrant Shares Expired Warrant Holders
------ -------------- ------- ---------------
5 37,500 ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
B-2
