THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF
ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, PLEDGED,
TRANSFERRED OR OTHERWISE ASSIGNED IN VIOLATION OF SUCH ACT AND
LAWS OR THE PROVISIONS OF THIS WARRANT.
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF
ARE SUBJECT TO ADDITIONAL AGREEMENTS SET FORTH IN A REGISTRATION
RIGHTS AGREEMENT, BY AND AMONG THE PARTIES THERETO. COPIES OF SUCH
AGREEMENTS MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S
PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE.
WARRANT A-2
To Purchase Shares of
Baseline Oil and Gas Corp.
THIS CERTIFIES THAT, for value received, ▇.▇. ▇▇▇▇▇ Special Opportunities
Fund, L.P., a Delaware limited partnership, ("Lender") or its registered and
permitted assigns, is entitled, at any time and from time to time prior to the
Expiration Date (as hereinafter defined), to purchase from Baseline Oil and Gas
Corp., a Nevada corporation (the "Company"), an aggregate of ONE MILLION SIX
HUNDRED THOUSAND (1,600,000) shares ("Warrant Grant") of common stock, par value
$0.001 per share, of the Company (the "Shares"), in whole or in part, at a
purchase price of $0.50 per Share (the "Exercise Price"), all on the terms and
conditions and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS. As used in this Warrant, the following terms have the
respective meanings set forth below:
"Additional Shares" means all Shares issued by the Company after the
Closing Date, other than Permitted Shares.
"Affiliate" of, or a Person "Affiliated" with, a specified Person means
any other Person directly or indirectly controlling, controlled by, or under
common control with, that Person or any other Related Fund. For the purposes of
this definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as applied to
any Person, means the possession, directly or indirectly, of the power (i) to
vote 5% or more of the securities having ordinary voting power for the election
of directors of such Person, or (ii) to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities or by contract or otherwise.
"Board" means the Board of Directors of the Company.
"Business Day" means any day that is not a Saturday, Sunday or other day
when banks are required or permitted to be closed in the State of Texas.
"Closing Date" means April __, 2007.
"Commission" means the U.S. Securities and Exchange Commission.
"Company" has the meaning set forth in the opening paragraph of this
Warrant.
"Conversion Right" has the meaning set forth in Section 2.3 of this
Warrant.
"Conversion Shares" has the meaning set forth in Section 2.3 of this
Warrant.
"Convertible Securities" means any security convertible into Shares.
"Current Market Price" means, in respect of any Share on any date herein
specified, the Current Market Value per Share as at such date, or if there shall
then be a public market for the Shares, the average of the daily market prices
for the 30 consecutive Business Days commencing 45 days before such date or, at
the time of an initial public offering of the Company's Shares, the initial
public offering price. The daily market price for each such Business Day shall
be (i) the last sale price on such date on the principal securities exchange on
which the Shares are then listed or admitted to trading, (ii) if no sale takes
place on such day on any such exchange, the average of the last reported closing
bid and asked prices on such day as officially quoted on any such exchange,
(iii) if the Shares are not then listed or admitted to trading on any stock
exchange, the average of the last reported closing bid and asked prices on such
day in the over-the-counter market, as furnished by the National Association of
Securities Dealers Automatic Quotation System or the National Quotation Bureau,
Inc., (iv) if neither such entity at the time is engaged in the business of
reporting such prices, as furnished by any similar firm then engaged in such
business, or (v) if there is no such firm, as furnished by any member of the
NASD selected mutually by the Majority Holders and the Company or, if they
cannot agree upon such selection, as selected by two such members of the NASD,
one of which shall be selected by the Majority Holders and one of which shall be
selected by the Company.
"Current Market Value" means, in respect of any Share on any date herein
specified, the current fair market value of each such Share determined without
giving effect to the discount for a minority interest as of the last day of the
most recent fiscal month to end within 60 days prior to such date specified,
based on the equity value of the Company, as determined in good faith by an
Independent Financial Expert, divided by the number of Fully Diluted Outstanding
Shares. If the Independent Financial Expert selected by the Company is not
acceptable to the Majority Holders and the Company and the Majority Holders
cannot agree on a mutually acceptable Independent Financial Expert, then the
Majority Holders and the Company shall each choose one Independent Financial
Expert, and the respective chosen Independent Financial Experts shall agree on
another Independent Financial Expert that shall make the determination. The
Company shall retain, at its sole cost, such Independent Financial Experts as
may be necessary for determining Current Market Value required by the terms of
this Warrant. Notwithstanding the foregoing, if the Current Market Value is to
be determined as a result of or in connection with a cash transaction for the
sale or purchase of Shares with a non-Affiliate third party as a result of the
exercise of "drag along" or "tag along" rights, then the Current Market Value
shall be the value of the Shares in such transaction.
"Default" has the meaning ascribed to such term in the Credit Agreement.
2
"Credit Agreement" means the Credit Agreement of the Company dated April
__, 2007, as amended to date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Price" has the meaning set forth in the opening paragraph of
this Warrant and as adjusted as provided herein.
"Expiration Date" means the seventh anniversary of the Closing Date.
"Fiscal Quarter" means a fiscal quarter of any Fiscal Year.
"Fiscal Year" means the fiscal year of Company and its Subsidiaries ending
on December 31 of each calendar year.
"Fully Diluted Outstanding Shares" means at any date when the number of
Shares is to be determined, the total number of Shares outstanding at such date
plus any unexercised Warrant Shares outstanding on such date, plus the number of
Shares convertible from any other options or warrants to purchase, or securities
convertible into, Shares outstanding on such date.
"GAAP" means generally accepted accounting principles in the United States
of America as from time to time in effect.
"Holder" means the Person in whose name the Warrant set forth herein is
registered on the books of the Company maintained for such purpose.
"Independent Financial Expert" means an investment banking firm of
nationally recognized standing mutually chosen by the Company and the Majority
Holders or otherwise selected pursuant to the procedures specified under
"Current Market Value" above.
"Majority Holders" means holders of Warrants exercisable for in excess of
50% of the aggregate number of Shares then purchasable upon exercise of all
Warrants, whether or not then exercisable.
"NASD" means the National Association of Securities Dealers, Inc., or any
successor corporation thereto.
"Option" means rights, options or warrants to subscribe for, purchase or
otherwise acquire Shares, Convertible Securities or other membership interests
in the Company.
"Other Property" has the meaning set forth in Section 4.8.
"Permitted Shares" means (i) Warrant Shares, (ii) Shares issued or
issuable on conversion or exercise of Convertible Securities or options or
warrants outstanding on the Closing Date, and (iii) all warrants issued
concurrently herewith issued by the Company to _______ and dated as of April __,
2007.
"Person" shall mean any individual, corporation, general partnership,
limited partnership, limited liability partnership, joint venture, association,
joint-stock company, trust, limited liability company, unincorporated
organization or government or any agency or political subdivision thereof.
3
"Privilege Waiver" shall mean, as reasonably determined by Company counsel
and communicated by such counsel to the relevant Holders or Board Observers, as
applicable, the waiver of any attorney-client privilege (or similar doctrine,
including work product doctrine), the waiver of which the Board of Directors
determines in good faith is not in the Company's interest.
"Related Funds" means, with respect to any Person that is an investment
fund, any other investment fund that invests in commercial loans and that is
managed or advised by the same investment advisor as such Person or by an
Affiliate of such investment advisor. With respect to Lender or any Affiliate,
Related Fund shall also include any special purpose vehicles purchasing or
acquiring security interests in collateralized loan obligations or any other
vehicle through which such Person may leverage its investments from time to
time.
"Rights" means any restricted stock, restricted stock unit, option,
warrant, convertible security or any other right to acquire Shares.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" has the meaning set forth in the recitals.
"Subsidiary" means any corporation, association, trust, limited liability
company, partnership, joint venture or other business association or entity (i)
at least 50% of the Outstanding voting securities of which are at the time owned
or controlled, directly or indirectly, by the Company; or (ii) with respect to
which the Company possesses, directly or indirectly, the power to direct or
cause the direction of the affairs or management of such Person.
"Transfer" means any disposition of any Warrant or Warrant Shares or of
any interest in either thereof, which would constitute a sale thereof within the
meaning of the Securities Act.
"Warrant Price" means an amount equal to (i) the number of Shares being
purchased upon any exercise of this Warrant pursuant to Section 2.1, multiplied
by (ii) the Exercise Price as adjusted pursuant to the terms of this Warrant as
of the date of such exercise.
"Warrant Shares" means the Shares purchased by Holders of the Warrants
upon the exercise thereof.
"Warrants" means this Warrant and all warrants issued upon transfer,
division or combination of, or in substitution for, any thereof; provided that
all Warrants shall at all times be identical as to terms and conditions and
date, except as to the number of Shares for which they may be exercised.
4
2. EXERCISE OF WARRANT
2.1 General. From time to time after the date hereof and until 5:00
p.m., Houston, Texas time, on the Expiration Date, Holder may exercise this
Warrant, on any Business Day, for all or any part of the number of Shares
purchasable hereunder.
2.2 Cash Exercise. Holder may exercise this Warrant, in whole or in
part, by delivering to the Company at the Company's principal offices at ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ or at such other office or agency
designated by the Company pursuant to Section 12 the following: (i) a written
notice of Holder's election to exercise this Warrant specifying the number of
Shares to be purchased, (ii) payment of the Warrant Price and (iii) this
Warrant. Holder's exercise notice shall be substantially in the form of the
subscription form appearing at the end of this Warrant as Exhibit A, duly
executed by Holder or its agent or attorney. Upon receipt thereof, the Company
shall, as promptly as practicable, and in any event within five (5) Business
Days thereafter, execute or cause to be executed and deliver or cause to be
delivered to Holder a certificate or certificates reflecting Holder's ownership
of the aggregate number of Shares issuable upon such exercise, together with
cash in lieu of any fraction of a Share, as hereinafter provided in Section 2.4.
The Share certificate or certificates so delivered shall be in such denomination
or denominations as such Holder shall request in the notice and shall be
registered in the name of Holder or, subject to any restrictions on transfer,
such other name as shall be designated in the notice. This Warrant shall be
deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued, and Holder or any other Person so designated to be
named therein (provided that evidence reasonably satisfactory to the Company has
been provided that the transfer of such Shares to such Person does not violate
any transfer restrictions applicable to the Warrant or the Warrant Shares) shall
be deemed to have become a holder of record of such Shares for all purposes, as
of the date the notice, together with the cash or check or checks and this
Warrant, is received by the Company as described above and all taxes required to
be paid by Holder, if any, pursuant to Section 2.4 prior to the issuance of such
Shares have been paid. If this Warrant has been exercised in part, the Company
shall, at the time of delivery of the certificate or certificates representing
Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder
to purchase the unpurchased Shares called for by this Warrant, which new Warrant
shall in all other respects be identical with this Warrant, or, at the request
of Holder, appropriate notation may be made on this Warrant and the same
returned to Holder. Payment of the Warrant Price shall be made at the option of
Holder by certified or official bank check or by wire transfer.
2.3 Cashless Exercise.
(a) In lieu of the payment of the Warrant Price, the Holder shall have
the right (but not the obligation), to require the Company to convert this
Warrant, in whole or in part, into Shares (the "Conversion Right") as provided
for in this Section 2.3. Upon exercise of the Conversion Right, the Company
shall deliver to the Holder (without payment by the Holder of any of the Warrant
Price) that number of Shares (the "Conversion Shares") equal to the quotient
obtained by dividing (x) the value of this Warrant (or portion thereof as to
which the Conversion Right is being exercised if the Conversion Right is being
exercised in part) at the time the Conversion Right is exercised (determined by
subtracting the aggregate Warrant Price of the Warrant Shares as to which the
Conversion Right is being exercised in effect immediately prior to the exercise
of the Conversion Right from the aggregate Current Market Price of the Warrant
Shares as to which the Conversion Right is being exercised immediately prior to
the exercise of the Conversion Right) by (y) the Current Market Price of one
Share immediately prior to the exercise of the Conversion Right.
5
(b) The Conversion Rights provided under this Section 2.3 may be
exercised in whole or in part and at any time and from time to time while any
Warrant Shares remain outstanding. In order to exercise the Conversion Right,
the Holder shall surrender to the Company, at its offices, this Warrant with
Holder's exercise notice substantially in the form of the subscription form
appearing at the end of this Warrant as Exhibit A, duly executed by Holder along
with a written statement providing that such exercise is in accordance with this
Section 2.3. The presentation and surrender of such notice and this Warrant
shall be deemed a waiver of the Holder's obligation to pay all or any portion of
the aggregate purchase price payable for the Warrant Shares as to which such
Conversion Right is being exercised. This Warrant (or so much thereof as shall
have been surrendered for conversion) shall be deemed to have been converted
immediately prior to the close of business on the day of surrender of such
Warrant for conversion in accordance with the foregoing provisions.
2.4 Payment of Taxes. When the Warrant Price is paid to the Company, all
such Warrant Shares shall be validly issued, fully paid and nonassessable and
without any preemptive rights. The Company shall pay all expenses in connection
with, and all taxes and other governmental charges that may be imposed with
respect to, the issue or delivery thereof, unless such tax or charge is imposed
by law upon Holder, in which case, Holder shall pay such taxes or charges. The
Company shall not be required to pay any tax or other charge imposed in
connection with any transfer involved in the issue or delivery of any
certificate for Shares issuable upon exercise of this Warrant in any name other
than that of Holder, and in such case, the Company shall not be required to
register such Shares in any name other than Holder until such tax or other
charge has been paid or it has been established to the reasonable satisfaction
of the Company that no such tax or other charge is due.
2.5 Fractional Shares. The Company shall not be required to issue a
fractional Share upon the exercise of this Warrant. As to any fraction of a
Share which the Holder would otherwise be entitled to purchase upon such
exercise, the Company shall pay a cash adjustment in respect of such fraction in
an amount equal to the same fraction of the Current Market Price per Share of
such Share on the date of exercise.
3. TRANSFER, DIVISION AND COMBINATION
3.1 Transfer. Transfer of this Warrant and all rights hereunder, in
whole or in part, shall be registered on the books of the Company to be
maintained for such purpose, upon surrender of this Warrant at the principal
office of the Company referred to in Section 2.2 or the office or agency
designated by the Company pursuant to Section 12, together with (i) a written
assignment of this Warrant substantially in the form of Exhibit B hereto duly
executed by Holder or its agent or attorney and (ii) evidence reasonably
satisfactory to the Company that the transfer of the Warrant to such person does
not violate any transfer restrictions applicable to the Warrant. Upon such
surrender the Company shall execute and deliver a new Warrant or Warrants
substantially in the form hereof in the name of the assignee or assignees and in
the denomination specified in such instrument of assignment, and shall issue to
the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled. Such Warrant, if
properly assigned in compliance with any restrictions on transfer and properly
registered on the books of the Company, may be exercised by a new Holder for the
purchase of Shares without having a new Warrant issued.
6
3.2 Division and Combination. This Warrant may be divided or combined
with other Warrants with the same terms and conditions upon presentation hereof
at the aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Holder. Subject to compliance with Section 3.1, as to any Transfer
that may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to
be divided or combined in accordance with such notice.
3.3 Expenses. The Company shall prepare, issue and deliver at its own
cost and expense (other than transfer taxes) the new Warrant or Warrants under
this Section 3.
3.4 Maintenance of Books. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration of Transfer of the
Warrants.
4. ADJUSTMENTS. The number of Shares for which this Warrant is exercisable,
or the price at which such Shares may be purchased upon exercise of this
Warrant, shall be subject to adjustment from time to time as set forth in this
Section 4. The Company shall give each Holder notice of any event described
below, which requires an adjustment pursuant to this Section 4 at the time of
such event.
4.1 Distributions, Subdivisions and Combinations. If, at any time, the
Company:
(a) takes a record of Holders of its Shares for the purpose of entitling
them to receive a distribution payable in, or other distribution of, Additional
Shares,
(b) subdivides its outstanding Shares into a larger number of Shares, or
(c) combines its outstanding Shares into a smaller number of Shares,
then (i) the number of Shares for which this Warrant is exercisable immediately
after the occurrence of any such event shall be adjusted to equal the number of
Shares that a record holder of the same number of Shares for which this Warrant
is exercisable immediately prior to the occurrence of such event would own or be
entitled to receive after the happening of such event, and (ii) the Exercise
Price shall be adjusted to equal (A) the Exercise Price multiplied by the number
of Shares for which this Warrant is exercisable immediately prior to the
adjustment divided by (B) the number of Shares for which this Warrant is
exercisable immediately after such adjustment; provided that if any adjustment
would reduce the Exercise Price to below the par value of the Shares, the
Company will first reduce the par value to below such adjusted Exercise Price.
4.2 Certain Other Distributions. If at any time the Company takes a
record of Holders of its Shares for the purpose of entitling them to receive any
distribution of:
(a) any evidences of its indebtedness, or any other securities of any
nature whatsoever (other than Additional Shares), or
7
(b) any Options to subscribe for or purchase any evidences of its
indebtedness, or any other securities of any nature whatsoever (other than
Additional Shares),
then (i) the number of Shares for which this Warrant is exercisable shall be
adjusted to equal the product of the number of Shares for which this Warrant is
exercisable immediately prior to such adjustment multiplied by a fraction (A)
the numerator of which shall be the Current Market Price per Share at the date
of taking such record and (B) the denominator of which shall be such Current
Market Price per Share minus the amount allocable to one Share of the fair value
(as determined in good faith by the Board and supported by an opinion from an
Independent Financial Expert) of any and all such evidences of indebtedness,
Shares, other securities or property or warrants or other subscription or
purchase rights so distributable, and (ii) the Exercise Price shall be adjusted
to equal (A) the Exercise Price multiplied by the number of Shares for which
this Warrant is exercisable immediately prior to the adjustment divided by (B)
the number of Shares for which this Warrant is exercisable immediately after
such adjustment; provided that if any adjustment would reduce the Exercise Price
to below the par value of the Shares, the Company will first reduce the par
value to below such adjusted Exercise Price. A reclassification of the Shares
into Shares of any other class of equity shall be deemed a distribution by the
Company to Holders of its Shares of such shares or Shares of such other class of
equity within the meaning of this Section 4.2 and, if the outstanding Shares
shall be changed into a larger or smaller number of Shares as a part of such
reclassification, such change shall be deemed a subdivision or combination, as
the case may be, of the outstanding Shares within the meaning of Section 4.1.
4.3 Issuance of Additional Shares. If at any time Company (except as
hereinafter provided) issues or sells any Additional Shares other than Permitted
Shares, in exchange for consideration in an amount per Additional Share less
than the Current Market Price at the time the Additional Shares are issued, then
(a) the Exercise Price for which this Warrant is exercisable shall be reduced to
a price equal to the price obtained by multiplying (i) the Exercise Price in
effect immediately prior to the issuance of such Additional Shares by (ii) a
fraction of which (x) the numerator equals the sum of (i) the number of Fully
Diluted Outstanding Shares immediately prior to such issue or sale and (ii) the
number of additional Shares that the aggregate consideration received by Company
upon such issue or sale would purchase at the Current Market Price in effect
immediately prior to such issuance and (y) the denominator equals the total
number of Shares outstanding immediately after such issue or sale; provided that
if any adjustment would reduce the Exercise Price to below the par value of the
Shares, the Company will first reduce the par value to below such adjusted
Exercise Price; and (b) the number of Shares for which this Warrant is
exercisable shall be adjusted to equal the product obtained by multiplying the
Exercise Price in effect immediately prior to such issue or sale by the number
of Shares for which this Warrant is exercisable immediately prior to such issue
or sale and dividing the product thereof by the Exercise Price resulting from
the adjustment made pursuant to clause (i) above.
4.4 Issuance of Warrants or Other Rights. If at any time Company shall
take a record of Holders of its Shares for the purpose of entitling them to
receive a distribution of, or shall in any manner (whether directly or by
assumption in a merger where Company is the surviving corporation) issue or
sell, any warrants or other rights to subscribe for or purchase any Additional
Shares or any Convertible Securities other than Permitted Shares, whether or not
the rights to exchange or convert thereunder are immediately exercisable, and
the price per Share for which Shares are issuable upon the exercise of such
Warrants or other rights or upon conversion or exchange of such Convertible
Securities shall be less than the Exercise Price in effect immediately prior to
the time of such issue or sale, then the number of Shares for which this Warrant
is exercisable and the Exercise Price shall be adjusted as provided in Section
4.3 on the basis that the maximum number of Additional Shares issuable pursuant
to all such warrants or other rights or necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
and outstanding and Company shall have received all of the consideration payable
therefor, if any, as of the date of the actual issuance of the number of Shares
for which this Warrant is exercisable and such warrants or other rights;
provided that if any adjustment would reduce the Exercise Price to below the par
value of the Shares, the Company will first reduce the par value to below such
adjusted Exercise Price. No further adjustments of the Exercise Price shall be
made upon the actual issue of such Shares or of such Convertible Securities upon
exercise of such warrants or other rights or upon the actual issue of such
Shares upon such conversion or exchange of such Convertible Securities.
8
4.5 Issuance of Convertible Securities. If at any time Company shall
take a record of Holders of its Shares for the purpose of entitling them to
receive a distribution of, or shall in any manner (whether directly or by
assumption in a merger where Company is the surviving corporation) issue or
sell, any Convertible Securities other than Permitted Shares, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per Share for which Shares are issuable upon such conversion or exchange
shall be less than the Exercise Price in effect immediately prior to the time of
such issue or sale, then the number of Shares for which this Warrant is
exercisable and the Exercise Price shall be adjusted as provided in Section 4.3
on the basis that the maximum number of Additional Shares necessary to effect
the conversion or exchange of all such Convertible Securities shall be deemed to
have been issued and outstanding and Company shall have received all of the
consideration payable therefor, if any, as of the date of actual issuance of
such Convertible Securities; provided that if any adjustment would reduce the
Exercise Price to below the par value of the Shares, the Company will first
reduce the par value to below such adjusted Exercise Price. No adjustment of the
number of Shares for which this Warrant is exercisable and the Exercise Price
shall be made under this Section 4.5 upon the issuance of any Convertible
Securities that are issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights
pursuant to Section 4.4. No further adjustments of the number of Shares for
which this Warrant is exercisable and the Exercise Price shall be made upon the
actual issue of such Shares upon conversion or exchange of such Convertible
Securities and, if any issue or sale of such Convertible Securities is made upon
exercise of any warrant or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the number of Shares for which
this Warrant is exercisable and the Exercise Price have been or are to be made
pursuant to other provisions of this Section 4, no further adjustments of the
number of Shares for which this Warrant is exercisable and the Exercise Price
shall be made by reason of such issue or sale.
4.6 Superseding Adjustment. If, at any time after any adjustment of the
number of Shares for which this Warrant is exercisable and the Exercise Price
has been made pursuant to Section 4.4 or Section 4.5 as the result of any
issuance of warrants, rights or Convertible Securities:
9
(a) such warrants or rights, or the right of conversion or exchange in
such other Convertible Securities, shall expire, and all or a portion of such
warrants or rights, or the right of conversion or exchange with respect to all
or a portion of such other Convertible Securities, as the case may be, shall not
have been exercised, or
(b) the consideration per Share for which Shares are issuable pursuant
to such warrants or rights, or the terms of such other Convertible Securities,
shall be increased solely by virtue of provisions therein contained for an
automatic increase in such consideration per Share upon the occurrence of a
specified date or event,
then for each outstanding Warrant such previous adjustment shall be rescinded
and annulled and the Additional Shares that were deemed to have been issued by
virtue of the computation made in connection with the adjustment so rescinded
and annulled shall no longer be deemed to have been issued by virtue of such
computation. Thereupon, a recomputation shall be made of the effect of such
rights or options or other Convertible Securities on the basis of:
(i) treating the number of Additional Shares or other property, if
any, theretofore actually issued or issuable pursuant to the previous exercise
of any such warrants or rights or any such right of conversion or exchange, as
having been issued on the date or dates of any such exercise and for the
consideration actually received and receivable therefor, and
(ii) treating any such warrants or rights or any such other
Convertible Securities that then remain outstanding as having been granted or
issued immediately after the time of such increase of the consideration per
Share for which Shares or other property are issuable under such warrants or
rights or other Convertible Securities, whereupon a new adjustment of the number
of Shares for which this Warrant is exercisable and the Exercise Price shall be
made, which new adjustment shall supersede the previous adjustment so rescinded
and annulled.
4.7 Other Provisions Applicable to Adjustments under this Section. The
following provisions shall be applicable to making adjustments to the number of
Shares for which this Warrant is exercisable and the Exercise Price provided for
in this Section 4:
(a) Computation of Consideration. To the extent that any Additional
Shares or any Convertible Securities or any warrants or other rights to
subscribe for or purchase any Additional Shares or any Convertible Securities
are issued for cash consideration, the consideration received by Company
therefor shall be the amount of the cash received by Company therefor, or, if
such Additional Shares or Convertible Securities are offered by Company for
subscription, the subscription price, or, if such Additional Shares or
Convertible Securities are sold to underwriters or dealers for public offering
without a subscription offering, the initial public offering price (in any such
case subtracting any amounts paid or receivable for accrued interest or accrued
distributions and without taking into account any compensation, discounts or
expenses paid or incurred by Company for and in the underwriting of, or
otherwise in connection with, the issuance thereof). To the extent that such
issuance is for a consideration other than cash, then, except as herein
otherwise expressly provided, the amount of such consideration shall be deemed
to be the fair market value of such consideration at the time of such issuance
as determined in good faith by the Board and supported by an opinion from an
Independent Financial Expert. In case any Additional Shares or any Convertible
Securities or any warrants or other rights to subscribe for or purchase such
Additional Shares or Convertible Securities shall be issued in connection with
any merger where Company issues any securities, the amount of consideration
therefor shall be deemed to be the fair market value, as determined in good
faith by the Board and supported by an opinion from an Independent Financial
Expert of such portion of the assets and business of the nonsurviving
corporation as the Board in good faith shall determine to be attributable to
such Additional Shares, Convertible Securities, warrants or other rights, as the
case may be. The consideration for any Additional Shares issuable pursuant to
any warrants or other rights to subscribe for or purchase the same shall be the
consideration received by Company for issuing such warrants or other rights plus
the additional consideration payable to Company upon exercise of such warrants
or other rights. The consideration for any Additional Shares issuable pursuant
to the terms of any Convertible Securities shall be the consideration received
by Company for issuing warrants or other rights to subscribe for or purchase
such Convertible Securities, plus the consideration paid or payable to Company
in respect of the subscription for or purchase of such Convertible Securities,
plus the additional consideration, if any, payable to Company upon the exercise
of the right of conversion or exchange in such Convertible Securities. If any
Additional Shares or Convertible Securities are issued at any time in payment or
satisfaction of any distributions upon any class of Shares other than Shares,
Company shall be deemed to have received for such Additional Shares or
Convertible Securities a consideration equal to the amount of such distribution
so paid or satisfied.
10
(b) When Adjustments to Be Made. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except that any adjustment of the number of Shares
for which this Warrant is exercisable that would otherwise be required may be
postponed (except in the case of a subdivision or combination of the Shares, as
provided for in Section 4.1) up to, but not beyond the date of exercise if such
adjustment either by itself or with other adjustments not previously made adds
or subtracts less than 1% of the Shares for which this Warrant is exercisable
immediately prior to the making of such adjustment. Any adjustment representing
a change of less than such minimum amount (except as aforesaid) that is
postponed shall be carried forward and made as soon as such adjustment, together
with other adjustments required by this Section 4 and not previously made, would
result in a minimum adjustment on the date of exercise. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the close of
business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under this Section 4,
fractional interests in Shares shall be taken into account to the nearest 1/10th
of a Share.
(d) When Adjustment Not Required. If the Company takes a record of
holders of its Shares for the purpose of entitling them to receive a
distribution or subscription or purchase rights and, thereafter and before the
distribution to holders thereof, legally abandons its plan to pay or deliver
such distribution, subscription or purchase rights, then thereafter no
adjustment shall be required by reason of the taking of such record and any such
adjustment previously made in respect thereof shall be rescinded and annulled.
(e) Challenge to Good Faith Determination. Whenever the Board is
required to make a determination in good faith of the fair market value of any
item under this Section 4, the Majority Holders may challenge such determination
in good faith, and an Independent Financial Expert shall resolve any such
dispute.
11
4.8 Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. If the Company reorganizes its capital, reclassifies its
capital securities, consolidates or merges with or into another Person (where
the Company is not the surviving Person or where there is a change in or
distribution with respect to the Shares of the Company), or sells, transfers or
otherwise disposes of all or substantially all its property, assets or business
to another Person and, pursuant to the terms of such reorganization,
reclassification, merger, consolidation or disposition of assets, Shares or
stock of the successor or acquiring Person, or any cash, units or shares of
stock or other securities or property of any nature whatsoever (including
warrants or other subscription or purchase rights) in addition to or in lieu of
the units or shares of stock of the successor or acquiring Person ("Other
Property"), are to be received by or distributed to Holders of the Shares of the
Company, then each Holder shall have the right thereafter to receive, upon
exercise of a Warrant, the number of Shares, units or shares of stock of the
successor or acquiring Person or of the Company, if it is the surviving Person,
and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of Shares for which this Warrant is exercisable immediately prior to
such event. If any such reorganization, reclassification, merger, consolidation
or disposition of assets occurs, the successor or acquiring Person (if other
than the Company) shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Warrant to be
performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such modifications as may be deemed appropriate (as
determined by the Board and supported by an opinion from an Independent
Financial Expert) in order to provide for adjustments of the Shares for which
this Warrant is exercisable, which shall be as nearly equivalent as practicable
to the adjustments provided for in this Section 4. For purposes of this Section
4.8, "units or shares of stock of the successor or acquiring Person" includes
units or shares of stock of such Person of any class that is not preferred as to
distributions or assets over any other class of units or shares of stock of such
corporation and that is not subject to redemption and shall also include any
evidences of indebtedness, units or shares of stock or other securities that are
convertible into or exchangeable for any such units or shares of stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such units or shares of stock. The foregoing provisions of this Section 4.8
shall similarly apply to successive reorganizations, reclassifications, mergers,
consolidations, or disposition of assets.
5. NOTICES TO WARRANT HOLDERS
5.1 Notice of Adjustments. Whenever the number of Shares for which this
Warrant is exercisable, or whenever the price at which such Shares may be
purchased upon exercise of the Warrants, is adjusted pursuant to Section 4, the
Company shall prepare a certificate to be executed by its chief financial
officer, if any, or its principal financial officer(s) in case there is no chief
financial officer, setting forth, in reasonable detail, the event requiring the
adjustment and the method by which such adjustment was calculated (including a
description of the basis on which the Board determined the fair market value of
any evidences of indebtedness, Shares or stock, other securities or property or
warrants or other subscription or purchase rights referred to in Section 4.2),
specifying the number of Shares for which this Warrant is exercisable and
describing the number and kind of any other Shares or Other Property for which
this Warrant is exercisable, and any change in the purchase price or prices
thereof, after giving effect to such adjustment or change. The Company shall
promptly cause a signed copy of such certificate to be delivered to each Holder
in accordance with Section 15.2. The Company shall keep at its office or agency
designated pursuant to Section 12 copies of all such certificates and cause the
same to be available for inspection at said office during normal business hours
by any Holder or any prospective purchaser of a Warrant designated by a Holder
thereof.
12
5.2 Notice of Company Action. If at any time:
(a) the Company takes a record of Holders of its Shares for the purpose
of entitling them to receive a distribution of any type including cash,
property, or any right to subscribe for or purchase any evidences of its
indebtedness, any Shares of any class or series or any other securities or
property, or to receive any other right, or
(b) there is any capital reorganization of the Company, any
reclassification or recapitalization of the Company or any consolidation or
merger of the Company with, or any sale, transfer or other disposition of all or
substantially all the property, assets or business of the Company to, another
business entity not affiliated with the Company, or
(c) there is a voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder: (i) at
least 20 days' prior written notice of the record date selected for such
distribution or right or for determining rights to vote in respect of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, and (ii) if any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up occurs, at least 20 days'
prior written notice of the date when the same shall take place. Such notice
also shall specify: (i) the date on which any such record is to be taken for the
purpose of such distribution or right, the date on which Holders of Shares shall
be entitled to any such distribution or right, and the amount and character
thereof, and (ii) the date on which any such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, dissolution, liquidation or
winding up is to take place and the time, if any such time is to be fixed, as of
which Holders of Shares shall be entitled to exchange their Shares for
securities or other property deliverable upon such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up. Each such written notice shall be deemed
sufficiently given if addressed to Holder at the last address of Holder
appearing on the books of the Company and delivered in accordance with Section
15.2.
6. NO IMPAIRMENT. The Company shall not by any action, including, without
limitation, through any amendment to its Articles of Incorporation 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 of this Warrant, but will at all
times in good faith assist in carrying out all such actions as may be reasonably
necessary or appropriate to protect the rights of Holder against impairment.
Without limiting the generality of the foregoing, the Company will (a) take all
such action as may be reasonably necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable Shares upon
the exercise of this Warrant, and (b) use its reasonable efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
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7. RESERVATION AND AUTHORIZATION OF COMMON SHARES. From and after the
Closing Date, the Company shall at all times reserve and keep available for
issue upon the exercise of Warrants such number of its authorized but unissued
Shares as will be sufficient to permit the exercise in full of all outstanding
Warrants. All Shares, when issued upon exercise of any Warrant and payment
therefor in accordance with the terms of such Warrant, shall be duly and validly
issued and fully paid and nonassessable, and not subject to preemptive rights.
Before taking any action that would result in an adjustment in the number
of Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.
If any Shares required to be reserved for issuance upon exercise of
Warrants require registration or qualification with any governmental authority
or other governmental approval or filing under any federal or state law before
such Shares may be so issued, the Company will in good faith and as
expeditiously as possible and at its expense endeavor to cause such Shares to be
duly registered.
8. TAKING OF RECORD; COMMON SHARES AND WARRANT TRANSFER BOOKS. In the case of
all distributions by the Company to Holders of its Shares with respect to which
any provision of Section 4 refers to the taking of a record of such holders, the
Company will in each such case take such a record as of the close of business on
a Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its transfer books so as to
result in preventing or delaying the exercise or transfer of any Warrant.
9. RESTRICTIVE LEGEND. This Warrant and any Warrant issued upon transfer or
partial exercise of this Warrant shall be imprinted with the following legend,
in addition to any legend required under applicable state securities laws:
"THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION AND MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR OTHERWISE
ASSIGNED IN VIOLATION OF SUCH ACT AND LAWS OR THE PROVISIONS OF THIS
WARRANT."
"THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF
ARE SUBJECT TO ADDITIONAL AGREEMENTS SET FORTH IN A REGISTRATION RIGHTS
AGREEMENT, BY AND AMONG THE PARTIES THERETO. A COPY OF SUCH AGREEMENT MAY
BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE."
Each Share certificate representing Warrant Shares shall bear the following
legend:
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"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED
UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT
BE SOLD, PLEDGED, TRANSFERRED OR OTHERWISE ASSIGNED IN VIOLATION OF SUCH
ACT AND LAWS OR THE PROVISIONS OF THIS WARRANT."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO ADDITIONAL
AGREEMENTS SET FORTH IN A REGISTRATION RIGHTS AGREEMENT, BY AND AMONG THE
PARTIES THERETO. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER
HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
Upon request of the holder of a Share certificate, the Company shall issue to
that holder a new certificate free of the foregoing legend, if, with such
request, such holder provides the Company with an opinion of counsel (including
in-house counsel) reasonably acceptable to the Company to the effect that the
securities evidenced by such certificate may be sold without restriction under
Rule 144 (or any other rule permitting resales of securities without
restriction) promulgated under the Securities Act.
10. SUPPLYING INFORMATION. The Company shall cooperate with each Holder of a
Warrant and each holder of Warrant Shares in supplying such information as may
be reasonably necessary for such holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale or
transfer of any Warrant or Warrant Shares.
11. LOSS OR MUTILATION. Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant (which evidence shall be, in the case of an
institutional investor, registration of such Holder on the books of the Company,
notice from such institutional investor of such ownership and such loss, theft,
destruction or mutilation), and
(a) in the case of loss, theft or destruction, upon receipt of indemnity
reasonably satisfactory to the Company (provided that if the Holder of such
Warrant has a minimum net worth of at least $500,000, such Holder's own
unsecured agreement of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Warrant, dated the date of the original Warrant.
12. OFFICE OF THE COMPANY. As long as any of the Warrants remain outstanding,
the Company shall maintain an office or agency (which may be the principal
executive offices of the Company) where a registry showing the name and address
of the Holder will be kept, and the Warrants may be presented for exercise,
registration of transfer, division or combination as provided in this Warrant.
The Company shall be entitled to rely in all respects, prior to written notice
to the contrary, upon such registry.
15
13. SECURITIES ACT MATTERS.
13.1 Representations and Warranties of Holder. The Holder hereby
represents and warrants to the Company as of the date hereof that:
(a) it is acquiring this Warrant and, upon exercise of this Warrant, the
Warrant Shares, for its own account, without a view to the distribution thereof.
(b) it is an "accredited investor" within the meaning of Regulation D,
promulgated by the Commission pursuant to under the Securities Act.
13.2 Representations and Warranties of the Company. The Company
represents and warrants to Holder as of the date hereof and on the date of
issuance of any additional rights to additional Warrant Shares that:
(a) The Company is duly organized, validly existing and in good standing
under the laws of its jurisdiction of formation or organization and has the
requisite corporate or similar power and authority to own and operate its
properties and assets and to carry on its business as presently conducted.
(b) The Company has the requisite corporate power and authority and has
taken the requisite corporate action, necessary in order to execute, deliver and
perform its obligations under this Warrant. The Warrant has been duly executed
and delivered by the Company the Warrant (assuming due and valid authorization,
execution and delivery hereof by the counterparties hereto) constitutes the
valid and binding obligation of the Company and is enforceable against the
Company, in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(c) The authorized capital stock of the Company consists of one hundred
forty million (140,000,000) shares of common stock, par value $0.001 per share,
and ten million (10,000,000) shares of preferred stock, par value $0.001 per
share. There are no shares of any other class or series of stock authorized by
the Company's Articles of Incorporation, as amended. As of the date hereof,
there are thirty one million three hundred forty two thousand seven hundred
thirty eight (31,342,738) Shares issued and outstanding and no Shares are held
as treasury stock. As of the date hereof and after giving effect to the issuance
of any other Shares pursuant to any other Rights there are fifty four million
ninety nine thousand three hundred twenty eight (54,099,328) Fully Diluted
Outstanding Shares. The authorization, execution and delivery of the Warrant,
and the performance by the Company of its obligations under the Warrant,
including the issuance of the Warrants in accordance with this Warrant or the
issuance of Shares upon exercise of the Warrants in accordance with the terms
hereof, will not result in or trigger any adjustment or modification of the
rights of any holder of outstanding Rights, including without limitation any
anti-dilution provisions relating to such securities. All of the outstanding
Shares are duly authorized, validly issued, fully paid and non-assessable. All
Warrant Shares, when issued in accordance with the terms of the Warrants and for
the consideration contemplated thereby, which is not less per share than the par
value thereof, will be duly authorized, validly issued fully paid and
non-assessable. Except as set forth in this Section or in Schedule 13.2(c),
there are no existing (i) Rights, agreements, arrangements or commitments of any
character obligating the Company to issue, transfer or sell any shares of
capital stock or other equity interest in, the Company or securities convertible
into or exchangeable for such shares or equity interests; (ii) contractual
obligations of the Company to repurchase, redeem or otherwise acquire any
capital stock of the Company (except for any cashless exercise provisions that
are substantially similar to those set forth in the Warrant); or (iii)
stockholder agreements, registration rights agreements, stock transfer
restriction agreements (other than restrictions arising in connection with the
Securities Act), voting trusts or similar agreements to which the Company or, to
the knowledge of the Company, any other person is a party with respect to Common
Stock.
16
(d) Except as set forth in Schedule 13.2(d), neither the execution,
delivery or performance of any the Warrant by the Company, nor the consummation
by it of the obligations and transactions contemplated hereby (including,
without limitation, the issuance, the reservation for issuance and the delivery
of the Warrant Stock) requires any consent of, authorization by, exemption from,
filing with or notice to any governmental authority or any other Person,
excluding the Company or any Holder, but including, without limitation, any
stock exchange or quotation system on which the Common Stock is listed or
traded.
(e) The execution, delivery and performance of the Warrant and the
consummation of the transactions contemplated hereby (including, without
limitation, the issuance and reservation for issuance, as applicable, of the
Warrant Stock) will not (i) result in a violation of the certificate of
incorporation or bylaws of the Company, in each case as amended, (ii) conflict
with or result in the breach of the terms, conditions or provisions of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give rise to any right of termination,
acceleration or cancellation under, any material contract to which the Company
or any Subsidiary is a party, (iii) assuming the accuracy of the representations
and warranties set forth in Section 3.1 of the Warrant, result in a violation of
any law, rule, regulation, order, judgment or decree (including, without
limitation, U.S. federal and state securities laws and regulations) applicable
to the Company or any Subsidiary or by which any property or asset of the
Company or any Subsidiary is bound or affected, or (iv) result in the creation
of any material Lien (as defined in the Credit Agreement) upon any of their
assets.
(f) Assuming the truth and accuracy of Holder's representations and
warranties contained in Section 13.1, the issuance of this Warrant and the
issuance of Warrant Shares pursuant to this Warrant are exempt from the
registration and prospectus delivery requirements of the Securities Act.
(g) The Company agrees that neither it nor any Person acting on its
behalf has offered or will offer this Warrant or the Warrant Shares or any part
thereof or any similar securities for issue or sale to, or has solicited or will
solicit any offer to acquire any of the same from, any Person so as to bring the
issuance and sale of this Warrant or the Warrant Shares hereunder within the
provisions of the registration and prospectus delivery requirements of the
Securities Act.
17
14. SHAREHOLDER AND BUSINESS INFORMATION
14.1 Shareholder Documents. At the request of the Holder, at any time
after the Credit Agreement has been terminated, Company shall deliver to the
Holder simultaneously with any distribution of any document to the shareholders
of the Company generally, any such document so distributed.
14.2 Access. Except to the extent it would constitute a Privilege Waiver,
the Company shall permit Holders, who together with their Affiliates, own
Warrants to acquire a number of shares of Warrant Stock constituting more than
4.0% of the then outstanding Shares, reasonable access, upon reasonable advance
notice, to the Holder, the Affiliates of the Holder and each of their respective
officers, employees, advisors, counsel and other authorized representatives,
during normal business hours, to all of the books, records and properties of the
Company and its Subsidiaries and all of the officers and employees of the
Company and such Subsidiaries.
14.3 Board Rights. At any time that the Credit Agreement has been
terminated, if requested by a majority-in-interest of the Holders at any time
when the Holders so requesting, together with their Affiliates, in the
aggregate, own Warrants to acquire more than 4.0% of the then outstanding
Shares, the Company shall give such Holders all notices of (in the same manner
as notice is given to directors), and permit one Person designated by a
majority-in-interest of such Holders of all Warrants to attend as observer (the
"Board Observer"), all meetings of the Company's Board of Directors and all
executive and other committee meetings of the Board of Directors. If requested
by such Holders, the Company shall provide to the Board Observer, the same
information concerning the Company, and access thereto, provided to the members
of the Company's Board of Directors and such committees; provided, that the
Board Observer shall not be entitled to participate in a meeting or receive any
information to the extent such meeting or information relates to the Company's
arrangements with the Holders (or their Affiliates) or to the extent it would
constitute a Privilege Waiver. The reasonable travel expenses incurred by the
Board Observer in attending any board or committee meetings shall be reimbursed
by the Company to the extent consistent with the Company's then existing policy
of reimbursing directors generally for such expenses. The Holders rights under
this Section 14.3 shall terminate at any time when the Holders do not, together
with their Affiliates, in the aggregate, own Warrants to acquire more than 4.0%
of the then outstanding Shares.
15. MISCELLANEOUS
15.1 Nonwaiver and Expenses. If either party (the "Defaulting Party")
fails to comply with any provision of this Warrant, it shall pay to the other
party such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees, including those of
appellate proceedings, incurred by the other party in enforcing any of its
rights, powers or remedies hereunder. No course of dealing or any delay or
failure to exercise any right hereunder on the part of a party shall operate as
a waiver of such right or otherwise prejudice its rights, powers or remedies.
15.2 Notice Generally. Any notice, demand, request, consent, approval,
declaration, delivery or other communication to be made pursuant to the
provisions of this Warrant shall be deemed sufficiently given or made if in
writing and either delivered in person with receipt acknowledged or sent by
registered or certified mail, return receipt requested, postage prepaid, or by
facsimile and confirmed by facsimile answerback, addressed as follows:
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(a) If to any Holder or holder of Warrant Shares, at its last known
address appearing on the books of the Company maintained for such purpose.
(b) If to the Company at:
Baseline Oil and Gas Corp.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
or at such address as may be substituted by written notice given as herein
provided. The party entitled to receive any notice required hereunder may waive
such notice in writing. Every notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder shall be deemed to have
been duly given or served on the date on which personally delivered, with
receipt acknowledged, faxed and confirmed by fax answerback, or three (3)
Business Days after the same shall have been deposited in the United States
mail. Notice by electronic mail shall not constitute effective notice hereunder.
15.3 Successors and Assigns. Subject to the provisions of Sections 3.1,
this Warrant and the rights evidenced hereby shall inure to the benefit of and
be binding upon the successors of the Company and the successors and assigns of
Holder (provided that this Warrant would otherwise be eligible for Transfer to
such successor or assign). This Warrant and all rights evidenced hereby may be
transferred by Holder to any Person in accordance with law, including without
limitation, the Securities Act.
15.4 Remedies. Each Holder of a Warrant or Warrant Shares, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under Section 11
of this Warrant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by the Company of the
provisions of Section 11 of this Warrant and hereby agrees to waive the defense
in any action for specific performance that a remedy at law would be adequate.
15.5 Amendment. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the Majority Holders; provided that no such Warrant may be modified or
amended to reduce the number of Shares for which such Warrant is exercisable or
to increase the price at which such Shares may be purchased upon exercise of
such Warrant (before giving effect to any adjustment as provided therein)
without the prior written consent of the Holder thereof.
15.6 Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
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15.7 Headings. The headings used in this Warrant are for the convenience
of reference only and shall not, for any purpose, affect the meaning or
interpretation of this Warrant.
15.8 Governing Law. This Warrant shall be governed by the laws of the
State of New York, without regard to the provisions thereof relating to conflict
of laws.
15.9 Facsimile Signature. The signature on this Warrant may be delivered
by telecopy, facsimile or other electronic transmission, with original signature
page to be subsequently substituted therefor.
15.10 Non-Survival. The parties hereby agree that all the provisions of
this Warrant shall terminate and be of no further force or effect on the earlier
of the exercise in full of this Warrant and the Expiration Date.
15.11 Counterparts. This Warrant may be executed in any number of separate
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
[Signature page follows.]
20
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer.
Dated: Effective as of April 12, 2007
BASELINE OIL AND GAS CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
SIGNATURE PAGE TO WARRANT A-2
▇. ▇. ▇▇▇▇▇ SPECIAL OPPORTUNITIES FUND, L.P.
By: ▇.▇. ▇▇▇▇▇ Partners, LLC,
its general partner
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
SIGNATURE PAGE TO WARRANT A-2
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered Holder of the attached Warrant irrevocably
elects to exercise such Warrant for purchase of ____________ Shares of Baseline
Oil and Gas Corp., a Nevada corporation, and [herewith makes payment therefor,
all at the price] [hereby elects to make a cashless exercise pursuant to Section
2.2 of the Warrant] and on the terms and conditions specified in this Warrant
and requests that certificates for the Shares hereby purchased (and any
securities or property issuable upon such exercise) to be issued in the name of
the undersigned and delivered to the undersigned as follows:
Name Address
---- -------
If the certificates representing the Shares being purchased pursuant
hereto are to be registered in a name or names other than the name of the holder
of this Warrant, all transfer taxes payable upon such transfer shall be paid by
the undersigned at the time of delivering the notice of exercise and such
request.
The undersigned acknowledges that each certificate for Warrant Shares
issued upon exercise of the Warrant shall bear a legend to the effect that such
Warrant Shares may not be transferred except upon compliance with the provisions
of the Securities Act and applicable state securities laws, and each certificate
for Warrant Shares transferred shall bear such a legend unless, in the opinion
of counsel for the Company, such legend is not required.
If the number of Shares shall not be all the Warrant Shares purchasable
under this Warrant, a new Warrant of like tenor is to be issued in the name of
and delivered to the undersigned for the remaining balance of the Shares
purchasable thereunder. Capitalized terms used herein but not defined herein
shall have the meanings set forth for such terms in the attached Warrant.
------------------------------------------------------------
(Name of Registered Owner)
------------------------------------------------------------
(Signature of Registered Owner)
------------------------------------------------------------
(Street Address)
------------------------------------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the names as
written upon the face of the attached Warrant.
Exhibit A
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered Holder of the attached
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under such Warrant, with respect to the number of
Shares set forth below:
Name and Address of Assignee No. of Shares
--------------------------------------- -----------------------------------
and does hereby irrevocably constitute and appoint _______________
attorney-in-fact to register such transfer on the books of Baseline Oil and Gas
Corp., with full power of substitution in the premises.
If the number of Shares is not all of the Warrant Shares represented by
the Warrant, a new Warrant of like tenor is to be issued in the name of and
delivered to the undersigned for the balance remaining of the Shares represented
by such Warrant.
Capitalized terms used herein but not defined herein shall have the
meanings set forth for such terms in the attached Warrant.
Dated: Print Name:
-------------------- -----------------------
Signature:
------------------------
Witness:
--------------------------
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the attached Warrant.
Exhibit B
Schedule 13.2(c)
CAPITALIZATION
(i) As of the date hereof, there are currently outstanding:
o Options to purchase 10,745,000 shares of common stock of the Company
o Warrants to purchase 4,074,090 shares of common stock of the Company
o Convertible Notes which are convertible unto 4,937,500 shares of
common stock of the Company
(ii) None
(iii) All holders of options and warrant to purchase shares of common stock of
the Company, and all holders of the Company's Convertible Notes, have
piggy-back registration rights. The Company has satisfied its registration
rights obligation to those investors in its February 2006 offering, to the
holders of the Company's Convertible Notes and certain option holders and
warrant holders by filing its Registration Statement which was deemed
effective as of October 20, 2006 and continues to be effective as of the
date hereof.
Schedule 13.2(c)