Exhibit 4.1
WARRANT AGREEMENT
THIS WARRANT AGREEMENT, dated as of July 28, 2014, by and between PETRO
CAPITAL ENERGY CREDIT, LLC, AS ADMINISTRATIVE AGENT FOR THE LENDERS REFERRED TO
BELOW (the "Purchaser" or "Administrative Agent"), and BARON ENERGY, INC., a
Nevada corporation (the "Company"). Capitalized terms used herein shall have the
meanings given to such terms in Section IV(A) hereof.
WHEREAS, pursuant to and subject to the terms and conditions of that
certain Credit Agreement, dated as of the date hereof (as amended, restated,
supplemented or modified from time to time, the "Credit Agreement"), by and
among the Company, Baron Production LLC, a wholly owned subsidiary of the
Company ("BP"), the lenders party thereto (the "Lenders"), and the
Administrative Agent,, the Lenders are making loans to BP the aggregate sum of
$5,000,000 (the "Loans");
WHEREAS, the Company will directly and indirectly benefit from the Loans to
BP;
WHEREAS, the Purchaser is acquiring from the Company a Common Stock
Purchase Warrant in the form attached as Exhibit A hereto (the "Warrant"),
representing the right to purchase from the Company 5,675,204 Warrant Shares (as
adjusted from time to time pursuant to the provisions of the Warrant) on the
terms and conditions set forth in the Warrant; and
WHEREAS, the Warrant is being issued as an inducement and partial
consideration for the Lenders to enter into the Credit Agreement and to make the
Loans to BP, and without such issuance, the Purchaser will not enter into the
Credit Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
I. EXERCISE PRICE AND CLOSING.
A. EXERCISE PRICE. The exercise price of each $.001 par value Warrant
Share purchased under the Warrant shall be $0.0175 per share.
B. CLOSING. The closing of the issuance of the Warrant to the
Purchaser (the "Closing") shall take place simultaneously with the closing
pursuant to the Credit Agreement. The date of such Closing is hereinafter
referred to as the "Closing Date."
C. TRANSACTIONS ON CLOSING DATE. At the Closing, the Company shall
deliver to the Purchaser the duly issued Warrant.
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to, and covenants with, the Purchaser as follows:
A. GOOD STANDING. The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Nevada.
B. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all requisite
corporate power and authority and the legal right to enter into and perform
its obligations under this Agreement and to issue and deliver the Warrant
to the Purchaser. The execution, delivery, and performance by the Company
of its obligations under this Agreement, including the issuance and
delivery of the Warrant and the Warrant Shares to the Purchaser, have been
duly authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly executed and delivered by the Company
and (assuming due execution and delivery by the Purchaser) is a legal,
valid, and binding obligation of the Company and is enforceable against the
Company in accordance with its terms.
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C. NO CONFLICT OR VIOLATION. The execution and delivery of this
Agreement by the Company, the performance by the Company of its terms and
the issuance and delivery of the Warrant and the Warrant Shares to the
Purchaser do not and will not violate or conflict with (i) the Articles of
Incorporation or Bylaws of the Company , or (ii) any agreement, instrument,
law, rule, regulation, order, writ, judgment, or decree to which the
Company is a party or to which the Company or any of its assets is subject.
D. VALIDITY OF ISSUANCE. The Warrant to be issued to the Purchaser
pursuant to this Agreement and the Warrant Shares issued upon exercise of
the Warrant will, when issued, be duly and validly issued, fully paid and
nonassessable (assuming in the case of the Warrant Shares, payment of the
exercise price is made in accordance with the terms of the Warrant) and
issued without violation of any preemptive or similar rights of any
stockholder of the Company and free and clear of all taxes, liens and
charges.
E. OWNERSHIP. Immediately following the consummation of the
transactions contemplated by, referenced in or made in connection with the
Credit Agreement, and each of the documents, instruments and agreements
executed or delivered in connection therewith, the Warrant Shares
constitute 5.0% of the issued and outstanding Common Stock of the Company
on a fully diluted basis on the date of issue.
III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants to the Company as follows:
A. INVESTMENT INTENTION. The Purchaser is acquiring the Warrant, and
if any portion of the Warrant is exercised, the Warrant Shares, for
investment solely for its own account and not with a view to, or for resale
in connection with, the distribution or other disposition thereof. The
Purchaser agrees and acknowledges that it will not, directly or indirectly,
offer, transfer, or sell the Warrant or any Warrant Shares, or solicit any
offers to purchase or acquire the Warrant or any Warrant Shares, unless the
transfer or sale is permitted by the terms of the Warrant and such transfer
or sale is (i) pursuant to an effective registration statement under the
Securities Act of 1933, as amended, and the rules and regulations
thereunder (the "Securities Act") and has been registered under any
applicable state securities or "blue sky" laws, or (ii) pursuant to an
exemption from registration under the Securities Act and applicable state
securities or "blue sky" laws.
B. LEGEND. The Purchaser has been advised by the Company that
certificates representing the Warrant will bear any legend required
pursuant to the Stockholders Agreement and will bear the following legend:
NEITHER THIS WARRANT NOR THE UNDERLYING SHARES OF COMMON STOCK HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER ANY STATE SECURITIES LAWS. ANY OFFER TO SELL OR
TRANSFER, OR THE SALE OR TRANSFER OF THESE SECURITIES IS UNLAWFUL
UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT COVERING THE
UNDERLYING SHARES OF COMMON STOCK UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAW, (B) THE COMPANY RECEIVES AN OPINION OF COUNSEL IN
FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAW, OR (C) THE TRANSFER IS MADE PURSUANT TO RULE 144 AS
PROMULGATED UNDER THE ACT.
Upon reasonable request of the Company in connection with any permitted
transfer of the Warrant or any Warrant Shares (other than a transfer
pursuant to a public offering registered under the Securities Act, pursuant
to Rule 144 or Rule 144A promulgated under the Securities Act (or any
similar rules then in effect), or to an affiliate of the Purchaser), the
Purchaser will deliver, if requested by the Company, an opinion of counsel
knowledgeable in securities laws reasonably satisfactory to the Company to
the effect that such transfer may be effected without registration under
the Securities Act. The Company agrees to issue certificates evidencing the
Warrant Shares that do not contain such legend upon receipt of an opinion
of counsel, which opinion and counsel shall be reasonably satisfactory to
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the Company, to the effect that registration under the Securities Act is
not required because of the availability of an exemption from such
registration.
C. ADDITIONAL INVESTMENT REPRESENTATIONS. The Purchaser is an
"accredited investor" as such term is defined in Rule 501 promulgated under
the Securities Act as amended.
IV. MISCELLANEOUS.
A. DEFINITIONS. For the purposes of this Agreement, the following
terms shall have the following meanings:
"Business Day" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of Texas, or is a
day on which banking institutions located in such state are authorized
or required by law or other governmental action to close.
"Subsidiary" means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than
50% of the total voting power of shares of capital stock or other
interests (including partnership interests) entitled (without regard
to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (a) such Person, (b) such
Person and one or more Subsidiaries of such Person or (c) one or more
Subsidiaries of such Person.
"Warrant Shares" means shares of the Company's $.001 par value Common
Stock issuable upon exercise of this Warrant; provided, that if the
securities issuable upon exercise of the Warrant are issued by an
entity other than the Company or there is a change in the class or
series of securities so issuable, then the term "Warrant Shares" shall
mean shares of the security issuable upon exercise of the Warrant if
such security is not issuable in shares, or shall mean the equivalent
units in which such security is issuable if such security is not
issuable in shares.
B. NOTICES. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall
be in writing and delivered personally, mailed by certified or registered
mail, return receipt requested and postage prepaid, sent via a nationally
recognized overnight courier, or via facsimile. Such notices, demands and
other communications will be sent to the address indicated below:
if to the Company, to:
BARON ENERGY, INC.
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Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail:
if to the Purchaser, to:
PETRO CAPITAL ENERGY CREDIT, LLC
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
E-Mail:
or such other address or to the attention of such other Person as the
recipient party shall have specified by prior written notice to the sending
party; provided, that the failure to deliver copies of notices as indicated
above shall not affect the validity of any notice. Any such communication
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shall be deemed to have been received (i) when delivered, if personally
delivered, or sent by nationally-recognized overnight courier or sent via
facsimile, or (ii) on the third Business Day following the date on which
the piece of mail containing such communication is posted if sent by
certified or registered mail.
C. BENEFIT; ASSIGNMENT. This Agreement and all the provisions hereof
shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and permitted assigns, except that neither
this Agreement nor any rights or obligations hereunder shall be assigned by
the Company without the prior written consent of the Purchaser.
D. AMENDMENT. This Agreement may be amended only by a written
instrument signed by the Company and the Purchaser.
E. WAIVER. Either party hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other party
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, and (c)
waive compliance with any of the agreements or conditions herein. Any
agreement on the part of a party hereto to any such extension or waiver
shall be valid as to such party if set forth in an instrument in writing
signed by such party.
F. SEVERABILITY. In the event that any one or more of the provisions
hereof, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect
and of the remaining provisions hereof shall not be in any way impaired, it
being intended that all rights, powers and privileges of the parties hereto
shall be enforceable to the fullest extent permitted by law.
G. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS OR CHOICE OF LAWS
OF THE STATE OF TEXAS OR ANY OTHER JURISDICTION WHICH WOULD RESULT IN THE
APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THOSE OF THE STATE
OF TEXAS
H. EXPENSES. All reasonable fees and expenses incurred by the
Purchaser in connection with the preparation of this Agreement and the
transactions referred to herein, including the reasonable fees of the
Purchaser's counsel, shall be paid by the Company, whether or not the
issuance of the Warrant, the execution and delivery of the Credit Agreement
or any other transaction contemplated hereby is consummated. The Company
shall pay all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect to, the issuance or
delivery of Warrant Shares upon exercise of this Warrant..
I. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which when so executed and delivered shall be deemed
to be an original and all of which together shall be deemed to be one and
the same agreement. Delivery of an executed counterpart of a signature page
of this Agreement by facsimile or in electronic (i.e., "pdf" or "tif")
format shall be effective as delivery of a manually executed counterpart of
this Agreement.
J. DESCRIPTIVE HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of the terms contained herein.
IN WITNESS WHEREOF, each of the parties hereto have caused this Warrant
Agreement to be executed and delivered by its duly authorized officer as of the
date first written above..
[Signature Pages Follow]
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BARON ENERGY, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, President and CEO
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PETRO CAPITAL ENERGY CREDIT, LLC
as Administrative Agent
By: PCEC Management, LLC,
its Managing Member
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Authorized Signatory
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