Exhibit 10.9
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. EXCEPT AS
OTHERWISE SET FORTH HEREIN OR IN THE CREDIT AGREEMENT DATED AS OF MAY 4, 2005,
NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER SAID ACT OR, AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND
SCOPE, CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE
144 OR REGULATION S UNDER SUCH ACT.
STOCK PURCHASE WARRANT
Issued May 4, 2005
THIS CERTIFIES THAT, for value received, Petro Capital III, L.P. or its
registered assigns, is entitled to purchase from ▇▇▇▇▇▇ Petroleum, Inc., a
Tennessee corporation (the "Company"), at any time or from time to time during
the period specified in Section 2 hereof, two hundred thousand and 00/100
(200,000) fully paid and nonassessable shares of the Company's Common Stock,
$0.0001 par value per share (the "Common Stock"), at an exercise price per
share equal to fifty cents ($0.50) (the "Exercise Price"). The term "Warrant
Shares," as used herein, refers to the shares of Common Stock purchasable
hereunder. The Warrant Shares and the Exercise Price are subject to
adjustment as provided in the next paragraph of this Warrant and in Section 4
hereof. The term "Warrants" means this Warrant and the other warrants issued
pursuant to that certain Credit Agreement, dated May 4, 2005 by and among the
Company and the Lenders listed on the execution page thereof (the "Credit
Agreement").
If the Registration Statement (the "Registration Statement") covering the
Registrable Securities (as such term is defined in that certain Registration
Rights Agreement, dated May 4, 2005, by and among the Company and the
investors listed on the execution page thereof (the "Registration Rights
Agreement")) required to be filed pursuant to Section 2(a) of the Registration
Rights Agreement is not filed by July 31, 2005 or is not declared effective by
October 30, 2005, then, for each 30 day period after the date that the
Registration Statement has not been filed in accordance with Section 2(a) of
the Registration Rights Agreement or is not declared effective in accordance
with Section 2(c) of the Registration Rights Agreement, this Warrant shall
entitle Petro Capital III, L.P. or its registered assigns, the right to
purchase from the Company at any time or from time to time during the period
specified in Section 2 hereof, an additional two thousand (2,000) fully paid
and nonassessable shares of Common Stock at the Exercise Price. Additionally,
the Company shall be assessed certain additional penalties as set forth in
Section 2(c) of the Registration Rights Agreement upon the occurrence of any
such events.
This Warrant is subject to the following terms, provisions, and
conditions:
1. Manner of Exercise
(a) Procedure. Subject to the provisions hereof, this Warrant may
be exercised by the holder hereof, in whole or in part, by the surrender of
this Warrant, together with a completed exercise agreement in the form
attached hereto (the "Exercise Agreement"), to the Company during normal
business hours on any business day at the Company's principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), and upon (i) payment to the Company in cash, by
certified or official bank check or by wire transfer for the account of the
Company of the Exercise Price for the Warrant Shares specified in the Exercise
Agreement or (ii) if the resale of the Warrant Shares by the holder is not
then registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), delivery to the
Company of a written notice of an election to effect a Cashless Exercise (as
defined in Section 1(c) below) for the Warrant Shares specified in the
Exercise Agreement. The Warrant Shares so purchased shall be deemed to be
issued to the holder hereof or such holder's designee, as the record owner of
such shares, as of the close of business on the date on which the completed
Exercise Agreement shall have been delivered and payment shall have been made
for such shares as set forth above. Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the
Exercise Agreement, shall be delivered to the holder hereof (with an
appropriate restrictive legend until properly sold under the Registration
Statement, and without restrictive legend thereon when such exercise occurs
while such Warrant Shares so purchased may be resold by the holder pursuant to
Rule 144(k) or any similar successor rule) within a reasonable time, not
exceeding three (3) business days, after this Warrant shall have been so
exercised. The certificates so delivered shall be in such denominations as
may be requested by the holder hereof and shall be registered in the name of
such holder or such other name as shall be designated by such holder, and
shall be subject to all other applicable securities laws. If this Warrant
shall have been exercised only in part, then, at the option of the holder (i)
the holder may surrender this Warrant to the Company and, unless this Warrant
has expired, the Company shall, at its expense, at the time of delivery of
such Warrant, deliver to the holder a new Warrant representing the number of
shares with respect to which this Warrant shall not then have been exercised,
or (ii) the holder may retain this certificate and the Warrant Shares
purchasable under this Warrant shall be reduced by such number of Warrant
Shares so exercised by the holder and properly delivered by the Company
hereunder.
(b) Cashless Exercise. Notwithstanding anything to the contrary
contained in this Warrant, if the resale of the Warrant Shares by the holder
is not then registered pursuant to an effective registration statement under
the Securities Act, this Warrant may be exercised by presentation and
surrender of this Warrant to the Company at its principal executive offices
with a written notice of the holder's intention to effect a cashless exercise,
including a calculation of the number of shares of Common Stock to be issued
upon such exercise in accordance with the terms hereof (a "Cashless
Exercise"). In the event of a Cashless Exercise, in lieu of paying the
Exercise Price in cash, the holder shall surrender this Warrant for that
number of shares of Common Stock determined by multiplying the number of
Warrant Shares to which it would otherwise be entitled by a fraction, the
numerator of which shall be the difference between (i) the average Market
Price per share of the Common Stock for the five (5) Trading Days immediately
prior to the date the completed Exercise Agreement shall have been delivered
to the Company (the "Cashless Exercise Market Price") and (ii) the Exercise
Price, and the denominator of which shall be the Cashless Exercise Market
Price.
2. Period of Exercise.
This Warrant is exercisable at any time or from time to time on or after May
4, 2005, and before 6:00 p.m., Dallas, Texas time on May 4, 2010 (the
"Exercise Period").
3. Certain Agreements of the Company.
The Company hereby covenants and agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon issuance
in accordance with the terms of this Warrant, be validly issued, fully paid,
and nonassessable and free from all taxes, liens, and charges with respect to
the issue thereof.
(b) Reservation of Shares. During the Exercise Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock
to provide for the exercise of this Warrant.
(c) Listing. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of the Warrant upon each
national securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed, or, if not so listed, on the NASD
Over-the-Counter Bulletin Board, (subject to official notice of issuance upon
exercise of this Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock
from time to time issuable upon the exercise of this Warrant; and the Company
shall so list on each national securities exchange or automated quotation
system, as the case may be, and shall maintain such listing of, any other
shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on such
national securities exchange or automated quotation system.
(d) Certain Actions Prohibited. The Company will not, by amendment
of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed by it hereunder, but will at all
times in good faith assist in the carrying out of all the provisions of this
Warrant and in the taking of all such action as may reasonably be requested by
the holder of this Warrant in order to protect the exercise privilege of the
holder of this Warrant against dilution or other impairment, consistent with
the tenor and purpose of this Warrant. Without limiting the generality of the
foregoing, the Company (i) will not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Exercise
Price then in effect, and (ii) will take all such actions as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of Common Stock upon the exercise of this
Warrant.
(e) Successors and Assigns. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of
all or substantially all the Company's assets.
(f) Delivery of Common Stock by Electronic Transfer. In lieu of
delivering physical certificates representing the Common Stock issuable upon
exercise, provided the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST")
program, upon request of the holder and its compliance with the provisions
contained in Section 1, the Company shall use its best efforts to cause its
transfer agent to electronically transmit the Common Stock issuable upon
exercise to the holder by crediting the account of holder's broker with DTC
through its Deposit Withdrawal Agent Commission ("DWAC") system.
4. Antidilution Provisions. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from
time to time as provided in this Section 4. In the event that any adjustment
of the Exercise Price as required herein results in a fraction of a cent, such
Exercise Price shall be rounded up to the nearest cent.
(a) Adjustment of Exercise Price upon Issuance of Common Stock.
Except as otherwise provided in Sections 4(c) and 4(e) hereof, if and whenever
on or after the date of issuance of this Warrant, the Company issues or sells,
or in accordance with Section 4(b) hereof is deemed to have issued or sold,
any shares of Common Stock for no consideration or for a consideration per
share (before deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith) less than the Exercise Price
on the date of issuance (a "Dilutive Issuance"), then immediately upon the
Dilutive Issuance, the Exercise Price will be reduced to the amount of the
consideration per share received by the Company in such Dilutive Issuance;
provided that only one adjustment will be made for each Dilutive Issuance. No
adjustment to the Exercise Price shall have the effect of increasing the
Exercise Price above the Exercise Price in effect immediately prior to such
adjustment.
(b) Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 4(a) hereof, the
following will be applicable:
(i) Issuance of Rights or Options. If the Company in any manner
issues or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other securities
convertible into or exchangeable for Common Stock ("Convertible Securities")
(such warrants, rights and options to purchase Common Stock or Convertible
Securities are hereinafter referred to as "Options") and the price per share
for which Common Stock is issuable upon the exercise of such Options is less
than the Exercise Price on the date of issuance or grant of such Options, then
the maximum total number of shares of Common Stock issuable upon the exercise
of all such Options will, as of the date of the issuance or grant of such
Options, be deemed to be outstanding and to have been issued and sold by the
Company for such price per share. For purposes of the preceding sentence, the
"price per share for which Common Stock is issuable upon the exercise of such
Options" is determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the issuance or granting of all
such Options, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise of all such Options, plus, in
the case of Convertible Securities issuable upon the exercise of such Options,
the minimum aggregate amount of additional consideration payable upon the
conversion or exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total number of shares
of Common Stock issuable upon the exercise of all such Options (assuming full
conversion of Convertible Securities, if applicable). No further adjustment
to the Exercise Price will be made upon the actual issuance of such Common
Stock upon the exercise of such Options or upon the conversion or exchange of
Convertible Securities issuable upon exercise of such Options.
(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities, whether or not immediately
convertible (other than where the same are issuable upon the exercise of
Options) and the price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Exercise Price on the date of
issuance, then the maximum total number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible Securities will, as of
the date of the issuance of such Convertible Securities, be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share. For the purposes of the preceding sentence, the "price per share for
which Common Stock is issuable upon such conversion or exchange" is determined
by dividing (i) the total amount, if any, received or receivable by the
Company as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange thereof at the
time such Convertible Securities first become convertible or exchangeable, by
(ii) the maximum total number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible Securities. No
further adjustment to the Exercise Price will be made upon the actual issuance
of such Common Stock upon conversion or exchange of such Convertible
Securities.
(iii) Change in Option Price or Conversion Rate. If there is a
change at any time in (i) the amount of additional consideration payable to
the Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
of any Convertible Securities; or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed
additional consideration or changed conversion rate, as the case may be, at
the time initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. If, in any case, the total number of shares of Common Stock
issuable upon exercise of any Option or upon conversion or exchange of any
Convertible Securities is not, in fact, issued and the rights to exercise such
Option or to convert or exchange such Convertible Securities shall have
expired or terminated, the Exercise Price then in effect will be readjusted to
the Exercise Price which would have been in effect at the time of such
expiration or termination had such Option or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination (other
than in respect of the actual number of shares of Common Stock issued upon
exercise or conversion thereof), never been issued.
(v) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the
amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or
sale. In case any Common Stock, Options or Convertible Securities are issued
or sold for a consideration part or all of which shall be other than cash, the
amount of the consideration other than cash received by the Company will be
the fair value of such consideration, except where such consideration consists
of securities, in which case the amount of consideration received by the
Company will be the average Market Price thereof for the five (5) Trading Days
immediately prior to the date of receipt. In case any Common Stock, Options
or Convertible Securities are issued in connection with any acquisition,
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or
securities will be determined in good faith by the Board of Directors of the
Company.
(vi) Exceptions to Adjustment of Exercise Price. No adjustment
to the Exercise Price will be made (i) upon the exercise of any warrants,
options or convertible securities granted, issued and outstanding on the date
of issuance of this Warrant or (ii) upon the exercise of the Warrants.
(c) Subdivision of or Combination of Common Stock. If the Company
at any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect
immediately prior to such subdivision will be proportionately reduced. If the
Company at any time combines (by any reverse stock split, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a smaller number of shares, then, after the date of
record for effecting such combination, the Exercise Price in effect
immediately prior to such subdivision will be proportionately increased.
(d) Adjustment of Number of Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be
adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such adjustment
and dividing the product so obtained by the adjusted Exercise Price.
(e) Consolidation, Merger or Sale. In case of any consolidation of
the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of
the Company other than in connection with a plan of complete liquidation of
the Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this Warrant
will have the right to acquire and receive upon exercise of this Warrant in
lieu of the shares of Common Stock immediately theretofore acquirable upon the
exercise of this Warrant, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon exercise
of this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision to
insure that the provisions of this Section 4 hereof will thereafter be
applicable as nearly as may be in relation to any shares of stock or
securities thereafter deliverable upon the exercise of this Warrant. The
Company will not effect any consolidation, merger or sale or conveyance unless
prior to the consummation thereof, the successor corporation (if other than
the Company) assumes by written instrument the obligations under this Section
4 and the obligations to deliver to the holder of this Warrant such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
the holder may be entitled to acquire.
(f) Distribution of Assets. In case the Company shall declare or
make any distribution of its assets (including cash) to holders of Common
Stock as a partial liquidating dividend, by way of return of capital or
otherwise, then, after the date of record for determining shareholders
entitled to such distribution, but prior to the date of distribution, the
holder of this Warrant shall be entitled upon exercise of this Warrant for the
purchase of any or all of the shares of Common Stock subject hereto, to
receive the amount of such assets which would have been payable to the holder
had such holder been the holder of such shares of Common Stock on the record
date for the determination of shareholders entitled to such distribution.
(g) Notice of Adjustment. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case,
the Company shall give notice thereof to the holder of this Warrant, which
notice shall state the Exercise Price resulting from such adjustment and the
increase or decrease in the number of Warrant Shares purchasable at such price
upon exercise, setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based. Such calculation shall be
certified by the Chief Financial Officer of the Company.
(h) Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise
Price in effect at the time such adjustment is otherwise required to be made,
but any such lesser adjustment shall be carried forward and shall be made at
the time and together with the next subsequent adjustment which, together with
any adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) No Fractional Shares. No fractional shares of Common Stock are
to be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the average Market Price
per share of Common Stock for the five (5) Trading Days immediately prior to
the date of such exercise.
(j) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution
(including dividends or distributions payable in cash out of retained
earnings) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or
other rights;
(iii) there shall be any capital reorganization of the Company,
or reclassification of the Common Stock, or consolidation or merger of the
Company with or into, or sale of all or substantially all its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a
record shall be taken for determining the holders of Common Stock entitled to
receive any such dividend, distribution, or subscription rights or for
determining the holders of Common Stock entitled to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up and (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, notice of the date (or, if not then known, a
reasonable approximation thereof by the Company) when the same shall take
place. Such notice shall also specify the date on which the holders of Common
Stock shall be entitled to receive such dividend, distribution, or
subscription rights or to exchange their Common Stock for stock or other
securities or property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, or winding-up, as the
case may be. Such notice shall be given at least 30 days prior to the record
date or the date on which the Company's books are closed in respect thereto.
Failure to give any such notice or any defect therein shall not affect the
validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv)
above.
(k) Certain Events. If any event occurs of the type contemplated by
the adjustment provisions of this Section 4 but not expressly provided for by
such provisions, the Company will give notice of such event as provided in
Section 4(g) hereof, and the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of shares of
Common Stock acquirable upon exercise of this Warrant so that the rights of
the holder shall be neither enhanced nor diminished by such event.
(l) Certain Definitions.
(i) "Market Price" means, as of any date, (i) the average of the
high and low trading price on such date for the shares of Common Stock on the
OTCBB as reported by Bloomberg, or (ii) if the OTCBB is not the principal
trading market for the shares of Common Stock, the closing bid price on the
principal trading market for the Common Stock as reported by Bloomberg, or
(iii) if market value cannot be calculated as of such date on
any of the foregoing bases, the Market Price shall be the fair market value as
reasonably determined in good faith by (a) the Board of Directors of the
Company or, at the option of a majority-in-interest of the holders of the
outstanding Warrants by (b) an independent investment bank of nationally
recognized standing in the valuation of businesses similar to the business of
the corporation. The manner of determining the Market Price of the Common
Stock set forth in the foregoing definition shall apply with respect to any
other security in respect of which a determination as to market value or
market price must be made hereunder.
(ii) "Common Stock," for purposes of this Section 4, includes
the Common Stock, par value $0.0001 per share, and any additional class of
stock of the Company having no preference as to dividends or distributions on
liquidation, provided that the shares purchasable pursuant to this Warrant
shall include only shares of Common Stock, par value $0.0001 per share, in
respect of which this Warrant is exercisable, or shares resulting from any
subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 4(e) hereof, the stock or other securities or
property provided for in such Section.
(iii) "Trading Day" shall mean any day on which the Common
Stock is traded for any period on the OTCBB, or on the principal securities
exchange or other securities market on which the Common Stock is then being
traded. The foregoing definition of "Trading Day" shall apply with respect to
any other security to which a Trading Day is referred.
5. Issue Tax.
The issuance of certificates for Warrant Shares upon the exercise of this
Warrant shall be made without charge to the holder of this Warrant or such
shares for any issuance tax or other costs in respect thereof, provided that
the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. No Rights or Liabilities as a Stockholder.
This Warrant shall not entitle the holder hereof to any voting rights or other
rights as a stockholder of the Company. No provision of this Warrant, in the
absence of affirmative action by the holder hereof to purchase Warrant Shares,
and no mere enumeration herein of the rights or privileges of the holder
hereof, shall give rise to any liability of such holder for the Exercise Price
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
7. Transfer, Exchange, and Replacement of Warrant.
(a) Restriction on Transfer. This Warrant and the rights granted to
the holder hereof are transferable, in whole or in part, upon surrender of
this Warrant, together with a properly executed assignment in the form
attached hereto, at the office or agency of the Company referred to in Section
7(e) below, provided, however, that any transfer or assignment shall be
subject to the conditions set forth in Section 7(f) hereof and to the
applicable provisions of the Credit Agreement. Until due presentment for
registration of transfer on the books of the Company, the Company may treat
the registered holder hereof as the owner and holder hereof for all purposes,
and the Company shall not be affected by any notice to the contrary.
Notwithstanding anything to the contrary contained herein, the registration
rights described in Section 8 are assignable only in accordance with the
provisions of the Registration Rights Agreement.
(b) Warrant Exchangeable for Different Denominations. This Warrant
is exchangeable, upon the surrender hereof by the holder hereof at the office
or agency of the Company referred to in Section 7(e) below, for new Warrants
of like tenor representing in the aggregate the right to purchase the number
of shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be
designated by the holder hereof at the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant 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 this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided
in this Section 7, this Warrant shall be promptly canceled by the Company.
The Company shall pay all taxes (other than securities transfer taxes) and all
other expenses (other than legal expenses, if any, incurred by the holder or
transferees) and charges payable in connection with the preparation,
execution, and delivery of Warrants pursuant to this Section 7.
(e) Register. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in
which the Company shall record the name and address of the person in whose
name this Warrant has been issued, as well as the name and address of each
transferee and each prior owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the
Securities Act and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such exercise, transfer, or
exchange, (i) that the holder or transferee of this Warrant, as the case may
be, furnish to the Company a written opinion of counsel, which opinion and
counsel are reasonably acceptable to the Company, to the effect that such
exercise, transfer, or exchange may be made without registration under said
Act and under applicable state securities or blue sky laws, (ii) that the
holder or transferee execute and deliver to the Company an investment letter
in form and substance acceptable to the Company and (iii) that the transferee
be an "accredited investor" as defined in Rule 501(a) promulgated under the
Securities Act; provided that no such opinion, letter or status as an
"accredited investor" shall be required in connection with a transfer pursuant
to Rule 144 under the Securities Act. The first holder of this Warrant, by
taking and holding the same, represents to the Company that such holder is
acquiring this Warrant for investment and not with a view to the distribution
thereof.
8. Registration Rights.
The initial holder of this Warrant (and certain assignees thereof) is entitled
to the benefit of such registration rights in respect of the Warrant Shares as
are set forth in Section 2 of the Registration Rights Agreement.
9. Notices.
All notices, requests, and other communications required or permitted to be
given or delivered hereunder to the holder of this Warrant shall be in
writing, and shall be personally delivered, or shall be sent by certified or
registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be
sent by certified or registered mail or by recognized overnight mail courier,
postage prepaid and addressed, to the office of the Company at ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Executive Officer, or
at such other address as shall have been furnished to the holder of this
Warrant by notice from the Company. Any such notice, request, or other
communication may be sent by facsimile, but shall in such case be subsequently
confirmed by a writing personally delivered or sent by certified or registered
mail or by recognized overnight mail courier as provided above. All notices,
requests, and other communications shall be deemed to have been given either
at the time of the receipt thereof by the person entitled to receive such
notice at the address of such person for purposes of this Section 9, or, if
mailed by registered or certified mail or with a recognized overnight mail
courier upon deposit with the United States Post Office or such overnight mail
courier, if postage is prepaid and the mailing is properly addressed, as the
case may be.
10. Governing Law.
This Warrant shall be enforced, governed by and construed in accordance with
the laws of the State of Texas applicable to agreements made and to be
performed entirely within such state, without regard to the principles of
conflict of laws. The Company hereby submits to the exclusive jurisdiction of
the United States Federal Courts located in Dallas, Texas with respect to any
dispute arising under this Warrant, the agreements entered into in connection
herewith or the transactions contemplated hereby or thereby. The Company
irrevocably waives the defense of an inconvenient forum to the maintenance of
such suit or proceeding. The Company further agrees that service of process
upon it mailed by first class mail shall be deemed in every respect effective
service of process upon it in any such suit or proceeding. Nothing herein
shall affect the holder's right to serve process in any other manner permitted
by law. The parties agree that a final non-appealable judgment in any such
suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner. The
party which does not prevail in any dispute arising under this Warrant shall
be responsible for all fees and expenses, including attorneys' fees, incurred
by the prevailing party in connection with such dispute.
11. Compensation for Buy-In on Failure to Timely Deliver Certificates
Upon Exercise. In addition to any other rights available to the holder, if
the Company fails for any reason to deliver to the holder such certificate or
certificates pursuant to Section 1 by the third (3rd) business day after
exercise, and if after such third (3rd) business day after exercise the holder
is required by its brokerage firm to purchase (in an open market transaction
or otherwise) Common Stock to deliver in satisfaction of a sale by such holder
of Common Stock which the holder anticipated receiving upon such exercise (a
"Buy-In"), then the Company shall (a) pay in cash to the holder (in addition
to any remedies available to or elected by the holder) the amount by which (i)
the holder's total purchase price (including brokerage commissions, if any)
for the Common Stock so purchased exceeds (ii) the product of (A) the
aggregate number of shares of Common Stock that such holder anticipated
receiving from the exercise at issue multiplied by (B) the actual sale price
of the Common Stock at the time of the sale (including brokerage commissions,
if any) giving rise to such purchase obligation and (b) at the option of the
holder, either reissue an identical Warrant to purchase such number of shares
of Common Stock equal to the attempted exercise or deliver to the holder the
number of shares of Common Stock that would have been issued had the Company
timely complied with its delivery requirements under Section 1. The Holder
shall provide the Company written notice indicating the amounts payable to the
holder in respect of the Buy-In.
12. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder
hereof.
(b) Descriptive Headings. The descriptive headings of the several
sections of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.
(c) Remedies. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the holder, by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly,
the Company acknowledges that the remedy at law for a breach of its
obligations under this Warrant will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this
Warrant, that the holder shall be entitled, in addition to all other available
remedies at law or in equity, and in addition to the penalties assessable
herein, to an injunction or injunctions restraining, preventing or curing any
breach of this Warrant and to enforce specifically the terms and provisions
thereof, without the necessity of showing economic loss and without any bond
or other security being required.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
▇▇▇▇▇▇ PETROLEUM, INC.
By: _______________________________
▇▇▇▇▇ ▇▇▇▇▇▇
President and CEO
Dated as of May 4, 2005
FORM OF EXERCISE AGREEMENT
Dated: _______, 200_
To: ______________________
The undersigned, pursuant to the provisions set forth in the within Warrant,
hereby agrees to purchase ________ shares of Common Stock covered by such
Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check or by
wired funds in the amount of, or, if the resale of such Common Stock by the
undersigned is not currently registered pursuant to an effective registration
statement under the Securities Act of 1933, as amended, by surrender of
securities issued by the Company (including a portion of the Warrant) having a
market value (in the case of a portion of this Warrant, determined in
accordance with Section 1(c) of the Warrant) equal to $_________. Please
issue a certificate or certificates for such shares of Common Stock in the
name of and pay any cash for any fractional share to:
Name: _____________________________
Signature: ________________________
Address:___________________________
___________________________
Note: The above signature should
correspond exactly with the name on
the face of the within Warrant, if
applicable.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the
name of said undersigned covering the balance of the shares purchasable
thereunder less any fraction of a share paid in cash.
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to
the number of shares of Common Stock covered thereby set forth hereinbelow,
to:
Name of Assignee Address No of Shares
, and hereby irrevocably constitutes and appoints_____________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated: ________ __, 200_
In the presence of: ______________________________
Name:______________________________
Signature:_________________________
Title of Signing Officer or Agent (if any):
Address:_________________________________
______________________________
______________________________
Note: The above signature should
correspond exactly with the name on
the face of the within Warrant, if
applicable.