EXHIBIT B
[FORM OF PARENT COMMON STOCK PURCHASE WARRANT]
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT
OR SUCH LAWS.
HALLWOOD ENERGY CORPORATION
Common Stock Purchase Warrant
PPN 40636X1138 New York, New York
No. RW-1 June 8, 1999
HALLWOOD ENERGY CORPORATION (the "Company"), a Delaware
corporation, for value received, hereby certifies that THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA or its registered assigns is entitled to purchase from the
Company 309,278 duly authorized, validly issued, fully paid and nonassessable
shares of the Company's common stock, par value $0.01 per share (the "Original
Common Stock"), at an initial exercise price per share determined in the manner
provided in section 1A, at any time or from time to time after the date hereof
and prior to 5:00 p.m., New York City time, on December 23, 2009 (the
"Expiration Date"), all subject to the terms, conditions and adjustments set
forth below in this Warrant.
This Warrant (the "Warrant", such term to include all Warrants
issued in substitution therefor) has been issued (i) pursuant to that certain
Amended and Restated Subordinated Note and Warrant Purchase Agreement dated as
of June 8, 1999 (the "Purchase Agreement") among the Company, Hallwood
Consolidated Resources Corporation ("HCRC") and The Prudential Insurance Company
of America (the "Purchaser") and (ii) in connection with the merger of HCRC
Acquisition Corp. with and into HCRC and as part of the overall plan of
reorganization (within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended, and the Treasury Regulations thereunder) of HCRC. The
applicable provisions of the Purchase Agreement are incorporated by reference,
and a conformed copy thereof will be furnished to the holder hereof by the
Company upon written request. Certain capitalized terms used in this Warrant are
defined in section 13.
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1. Exercise of Warrant.
1A. Manner of Exercise. This Warrant may be exercised by the
holder hereof, in whole or in part, for the purchase of the Common Stock or
Other Securities which such holder is then entitled to purchase, during normal
business hours on any Business Day after the date hereof to and including the
Expiration Date by surrender of this Warrant, with the form of subscription at
the end hereof (or a reasonable facsimile thereof) duly executed by such holder,
to the Company at its principal office (or, if such exercise shall be in
connection with an underwritten public offering of shares of Common Stock (or
Other Securities) subject to this Warrant, at the location at which the
underwriters shall have agreed to accept delivery thereof), accompanied by
payment, in cash or by certified or official bank check payable to the order of
the Company, in the amount obtained by multiplying (a) the number of shares of
Original Common Stock (without giving effect to any adjustment therein)
designated in such form of subscription by (b) the Initial Exercise Price (as
hereinafter defined). The number of duly authorized, validly issued, fully paid
and nonassessable shares of Common Stock which the holder of this Warrant shall
be entitled to receive upon each exercise hereof shall be determined by
multiplying the number of shares of Common Stock which would otherwise (but for
the provisions of section 2) be issuable upon such exercise, as designated by
the holder hereof pursuant to this section 1A, by a fraction of which (a) the
numerator is the Initial Exercise Price and (b) the denominator is the Exercise
Price in effect on the date of such exercise. The "Exercise Price" shall
initially be the last sale price of shares of Common Stock, regular way, on the
date hereof or, if there shall be no such last sale price, the last sale price
of shares of Common Stock, regular way, on the next Business Day after the date
hereof on which there shall be such a last sale price, in each case as published
by the National Quotation Bureau, Incorporated or any similar successor
organization, and in either case as reported by Prudential Securities
Incorporated (the "Initial Exercise Price"), and shall be adjusted and
readjusted from time to time as provided in section 2 and, as so adjusted and
readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by section 2. Promptly following the determination of the
Initial Exercise Price, the Company and the Purchaser shall execute an agreement
in the form of Exhibit A attached hereto, and made an integral part hereof, for
the purpose of documenting the Initial Exercise Price.
1B. When Exercise Effective. Each exercise of this Warrant
shall be deemed to have been effected and the Exercise Price shall be determined
immediately prior to the close of business on the Business Day on which this
Warrant shall have been surrendered to the Company as provided in section 1A,
and at such time the person or persons in whose name or names any certificate or
certificates for shares of Common Stock (or Other Securities) shall be issuable
upon such exercise as provided in section 1C shall be deemed to have become the
holder or holders of record thereof.
1C. Delivery of Stock Certificates, etc. Promptly after the
exercise of this Warrant, in whole or in part, and in any event within three (3)
Business Days thereafter (unless such exercise shall be in connection with an
underwritten public offering of shares of Common Stock (or Other Securities)
subject to this Warrant, in which event concurrently with such exercise), the
Company at
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its expense will cause to be issued in the name of and delivered to the holder
hereof or, subject to section 8, as such holder may direct,
(a) a certificate or certificates for the number of
duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such holder shall be
entitled upon such exercise, and
(b) in case such exercise is in part only, a new
Warrant or Warrants of like tenor, specifying the aggregate on the face
or faces thereof the number of shares of Common Stock equal to the
number of such shares specified on the face of this Warrant minus the
number of such shares designated by the holder upon such exercise as
provided in section 1A.
1D. Company to Reaffirm Obligations. The Company will, at the
time of or at any time after each exercise of this Warrant, upon the request of
the holder hereof or of any shares of Common Stock (or Other Securities) issued
upon such exercise, acknowledge in writing its continuing obligation to afford
to such holder all rights to which such holder shall continue to be entitled
after such exercise in accordance with the terms of this Warrant, provided that
if any such holder shall fail to make any such request, the failure shall not
affect the continuing obligation of the Company to afford such rights to such
holder.
1E. Fractional Shares. No fractional shares shall be issued
upon exercise of this Warrant and no payment or adjustment shall be made upon
any exercise on account of any cash dividends (except as provided in section 2B)
on the Common Stock or Other Securities issued upon such exercise. If any
fractional interest in a share of Common Stock would, except for the provisions
of the first sentence of this section 1E, be deliverable upon the exercise of
this Warrant, the Company shall, in lieu of delivering the fractional share
therefor, pay to the holder exercising this Warrant an amount in cash equal to
the Market Price of such fractional interest.
1F. Cashless Exercise. As an alternative to exercise of this
Warrant by payment in cash (or by certified or official bank check), as provided
above in section 1A, the holder of this Warrant may exercise its right to
purchase some or all of the shares of Common Stock pursuant to this Warrant, on
a net basis without the exchange of any funds (a "Cashless Exercise"), such that
the holder hereof receives that number of shares of Common Stock subscribed for
pursuant to this Warrant less that number of shares of Common Stock, valued at
Market Price, at the time of exercise equal to the aggregate Exercise Price that
would otherwise have been paid by the holder of this Warrant for such shares of
Common Stock.
2. Protection Against Dilution or Other Impairment of Rights;
Adjustment of Exercise Price.
2A. Issuance of Additional Shares of Common Stock. In case the
Company, at any time or from time to time after the date hereof (the "Initial
Date"), shall issue or sell Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued
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pursuant to section 2C or 2D) without consideration or for a consideration per
share (determined pursuant to section 2E) less than the greater of the Exercise
Price or the Market Price in effect, in each case, on the date of and
immediately prior to such issue or sale, then, and in each such case, subject to
section 2H, the Exercise Price shall be reduced, concurrently with such issue or
sale, to a price (calculated to the nearest .001 of a cent) determined by
multiplying such Exercise Price by a fraction,
(a) the numerator of which shall be the sum of (i) the number
of shares of Common Stock outstanding immediately prior to such issue
or sale and (ii) the number of shares of Common Stock which the
aggregate consideration received by the Company for the total number of
such Additional Shares of Common Stock so issued or sold would purchase
at the greater of such Market Price or such Exercise Price, and
(b) the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such issue or sale,
provided that, for the purposes of this section 2A, (x) immediately after any
Additional Shares of Common Stock are deemed to have been issued pursuant to
section 2C or 2D, such Additional Shares shall be deemed to be outstanding, and
(y) treasury shares shall not be deemed to be outstanding.
2B. Extraordinary Dividends and Distributions. In case the
Company at any time or from time to time after the date hereof shall declare,
order, pay or make a dividend or other distribution (including, without
limitation, any distribution of other or additional stock or other securities or
property or Options by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement and any redemption or
acquisition of any such stock or Options on the Common Stock), other than (a) a
dividend payable in Additional Shares of Common Stock or in Options for Common
Stock or (b) a regular periodic dividend payable in cash then, and in each such
case, the Company shall pay over to the holder of this Warrant, on the date on
which such dividend or other distribution is paid to the holders of Common
Stock, the securities and other property (including cash) which such holder
would have received if such holder had exercised this Warrant immediately prior
to the record date fixed in connection with such dividend or other distribution.
2C. Treatment of Options and Convertible Securities. In case
the Company, at any time or from time to time after the date hereof, shall
issue, sell, grant or assume, or shall fix a record date for the determination
of holders of any class of securities entitled to receive, any Options or
Convertible Securities, whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately exercisable, then, and
in each such case, the maximum number of Additional Shares of Common Stock (as
set forth in the instrument relating thereto, without regard to any provisions
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
therefor, issuable upon the conversion or exchange of such Convertible
Securities (or the exercise of such Options for Convertible Securities and
subsequent conversion or exchange of the Convertible Securities issued), shall
be deemed to be Additional Shares of Common Stock issued as of the time of such
issue, sale,
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grant or assumption or, in case such a record date shall have been fixed, as of
the close of business on such record date, provided, that such Additional Shares
of Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to section 2E) of such shares would be less than
the greater of the Exercise Price or the Market Price in effect, in each case,
on the date of and immediately prior to such issue, sale, grant or assumption or
immediately prior to the close of business on such record date or, if the Common
Stock trades on an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading, as the case may be, and provided, further, that in any such
case in which Additional Shares of Common Stock are deemed to be issued,
(a) if an adjustment of the Exercise Price shall be made upon
the fixing of a record date as referred to in the first sentence of
this section 2C, no further adjustment of the Exercise Price shall be
made as a result of the subsequent issue or sale of any Options or
Convertible Securities for the purpose of which such record date was
set;
(b) no further adjustment of the Exercise Price shall be made
upon the subsequent issue or sale of Additional Shares of Common Stock
or Convertible Securities upon the exercise of such Options or the
conversion or exchange of such Convertible Securities;
(c) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any change in the
consideration payable to the Company, or change in the number of
Additional Shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof (by change of rate or otherwise), the
Exercise Price computed upon the original issue, sale, grant or
assumption thereof (or upon the occurrence of the record date with
respect thereto), and any subsequent adjustments based thereon, shall,
upon any such change becoming effective, be recomputed to reflect such
change insofar as it affects such Options, or the rights of conversion
or exchange under such Convertible Securities, which are outstanding at
such time;
(d) upon the expiration of any such Options or of the rights
of conversion or exchange under any such Convertible Securities which
shall not have been exercised (or upon purchase by the Company and
cancellation or retirement of any such Options which shall not have
been exercised or of any such Convertible Securities the rights of
conversion or exchange under which shall not have been exercised), the
Exercise Price computed upon the original issue, sale, grant or
assumption thereof (or upon the occurrence of the record date with
respect thereto), and any subsequent adjustments based thereon, shall,
upon such expiration (or such cancellation or retirement, as the case
may be), be recomputed as if:
(i) in the case of Options for Common Stock or in the
case of Convertible Securities, the only Additional Shares of
Common Stock issued or sold (or deemed issued or sold) were
the Additional Shares of Common Stock, if any, actually issued
or sold upon the exercise of such Options or the conversion or
exchange of such Convertible Securities and the consideration
received therefor was (x) an amount equal to (A) the
consideration actually received by the Company for the issue,
sale,
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grant or assumption of all such Options, whether or not
exercised, plus (B) the consideration actually received by the
Company upon such exercise, minus (C) the consideration paid
by the Company for any purchase of such Options which were not
exercised, or (y) an amount equal to (A) the consideration
actually received by the Company for the issue, sale, grant or
assumption of all such Convertible Securities which were
actually converted or exchanged, plus (B) the additional
consideration, if any, actually received by the Company upon
such conversion or exchange, minus (C) the excess, if any, of
the consideration paid by the Company for any purchase of such
Convertible Securities, the rights of conversion or exchange
under which were not exercised, over an amount that would be
equal to the Fair Value of the Convertible Securities so
purchased if such Convertible Securities were not convertible
into or exchangeable for Additional Shares of Common Stock,
and
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually
issued or sold upon the exercise of such Options were issued
at the time of the issue, sale, grant or assumption of such
Options, and the consideration received by the Company for the
Additional Shares of Common Stock deemed to have then been
issued was an amount equal to (x) the consideration actually
received by the Company for the issue, sale, grant or
assumption of all such Options, whether or not exercised, plus
(y) the consideration deemed to have been received by the
Company (pursuant to section 2E) upon the issue or sale of the
Convertible Securities with respect to which such Options were
actually exercised, minus (z) the consideration paid by the
Company for any purchase of such Options which were not
exercised; and
(e) no recomputation pursuant to subsection (c) or (d) above
shall have the effect of increasing the Exercise Price then in effect
by an amount in excess of the amount of the adjustment thereof
originally made in respect of the issue, sale, grant or assumption of
such Options or Convertible Securities.
2D. Treatment of Stock Dividends, Stock Splits, Etc. In case
the Company, at any time or from time to time after the date hereof, shall
declare or pay any dividend or other distribution on any class of securities of
the Company payable in shares of Common Stock, or shall effect a subdivision of
the outstanding shares of Common Stock into a greater number of shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in Common
Stock), then, and in each such case, Additional Shares of Common Stock shall be
deemed to have been issued (a) in the case of any such dividend or other
distribution, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend or other distribution, or (b) in the case of any such subdivision, at
the close of business on the day immediately prior to the day upon which such
corporate action becomes effective.
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2E. Computation of Consideration. For the purposes of
this Warrant:
(a) The consideration for the issue or sale of any Additional
Shares of Common Stock or for the issue, sale, grant or assumption of
any Options or Convertible Securities, irrespective of the accounting
treatment of such consideration,
(i) insofar as it consists of cash, shall be computed
as the amount of cash received by the Company, and insofar as
it consists of securities or other property, shall be computed
as of the date immediately preceding such issue, sale, grant
or assumption as the Fair Value of such consideration (or, if
such consideration is received for the issue or sale of
Additional Shares of Common Stock and the Market Price thereof
is less than the Fair Value of such consideration, then such
consideration shall be computed as the Market Price of such
Additional Shares of Common Stock), in each case without
deducting any expenses paid or incurred by the Company, any
commissions or compensation paid or concessions or discounts
allowed to underwriters, dealers or other performing similar
services and any accrued interest or dividends in connection
with such issue or sale, and
(ii) in case Additional Shares of Common Stock are
issued or sold or Options or Convertible Securities are
issued, sold, granted or assumed together with other stock or
securities or other assets of the Company for a consideration
which covers both, shall be the proportion of such
consideration so received, computed as provided in clause (i)
above, allocable to such Additional Shares of Common Stock or
Options or Convertible Securities, as the case may be, all as
determined in good faith by the Board of Directors of the
Company.
(b) All Additional Shares of Common Stock, Options or
Convertible Securities issued in payment of any dividend or other
distribution on any class of stock of the Company and all Additional
Shares of Common Stock issued to effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of
Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock) shall be deemed to have been issued without
consideration.
(c) Additional Shares of Common Stock deemed to have been
issued for consideration pursuant to section 2C, relating to Options
and Convertible Securities, shall be deemed to have been issued for a
consideration per share determined by dividing
(i) the total amount, if any, received and receivable
by the Company as consideration for the issue, sale, grant or
assumption of the Options or Convertible Securities in
question, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for
a subsequent adjustment of such consideration) payable to the
Company upon the exercise in full of such Options or the
conversion or exchange of
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such Convertible Securities or, in the case of Options for
Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such
Convertible Securities, in each case computing such
consideration as provided in the foregoing subsection (a), by
(ii) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment
of such number) issuable upon the exercise of such Options or
the conversion or exchange of such Convertible Securities.
2F. Adjustments for Combinations, Etc. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Exercise Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
2G. Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in section 2I) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, in accordance with the standards established in this section
2, the exercise rights granted by this Warrant, then, and in each such case, the
computations do not apply, adjustments and readjustments provided for in this
Warrant with respect to the Exercise Price shall be made as nearly as possible
in the manner so provided and applied to determine the amount of Other
Securities from time to time receivable upon the exercise of this Warrant, so as
to protect the holder of this Warrant against the effect of such dilution.
2H. Minimum Adjustment of Exercise Price. If the amount of any
adjustment of the Exercise Price required hereunder would be less than one
percent of the Exercise Price in effect at the time such adjustment is otherwise
so required to be made, such amount shall be carried forward and adjustment with
respect thereto made at the time of and together with any subsequent adjustment
which, together with such amount and any other amount or amounts so carried
forward, shall aggregate at least one percent of such Exercise Price; provided,
that upon the exercise of this Warrant, all adjustments carried forward and not
theretofore made up to and including the date of such exercise shall be made to
the nearest .001 of a cent.
2I. Changes in Common Stock. In case at any time the Company
shall be a party to any transaction (including, without limitation, a merger,
consolidation, sale of all or substantially all of the Company's assets,
liquidation or recapitalization of the Common Stock) in which the previously
outstanding Common Stock shall be changed into or exchanged for different
securities of the Company or common stock or other securities of another
corporation or interests in a noncorporate entity or other property (including
cash) or any combination of any of the foregoing
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or in which the Common Stock ceases to be a publicly traded security either
listed on the New York Stock Exchange or the American Stock Exchange or quoted
by the Nasdaq National Market or any successor thereto or comparable system
(each such transaction being herein called the "Transaction", the date on which
the Transaction is first announced to the public being herein called the
"Announcement Date", the date of consummation of the Transaction being herein
called the "Consummation Date", the Company (in the case of a recapitalization
of the Common Stock or any other such transaction in which the Company retains
substantially all of its assets and survives as a corporation) or such other
corporation or entity (in each other case) being herein called the "Acquiring
Company", and the common stock (or equivalent equity interest) of the Acquiring
Company being herein called the "Acquirer's Common Stock"), then, as a condition
of the consummation of the Transaction, lawful and adequate provisions (in form
satisfactory to the Required Holders) shall be made so that the holder of this
Warrant, upon the exercise thereof at any time on or after the Consummation Date
(but subject, in the case of an election pursuant to subsection (b) or (c)
below, to the time limitation hereinafter provided for such election):
(a) shall be entitled to receive, and this Warrant shall
thereafter represent the right to receive, in lieu of the Common Stock
issuable upon such exercise prior to the Consummation Date, shares of
the Acquirer's Common Stock at an Exercise Price per share equal to the
lesser of (i) the Exercise Price in effect immediately prior to the
Consummation Date multiplied by a fraction the numerator of which is
the Market Price per share of the Acquirer's Common Stock determined as
of the Consummation Date and the denominator of which is the Market
Price per share of the Common Stock determined as of the Consummation
Date, or (ii) the Market Price per share of the Acquirer's Common Stock
determined as of the Consummation Date (subject in each case to
adjustments from and after the Consummation Date as nearly equivalent
as possible to the adjustments provided for in this Warrant), or at the
election of the holder of this Warrant pursuant to notice given to the
Company within six months after the Consummation Date; or
(b) shall be entitled to receive, and this Warrant shall
thereafter represent the right to receive, in lieu of each share of
Common Stock issuable upon such exercise prior to the Consummation
Date, either (i) the greatest amount of cash, securities or other
property given to any shareholder in consideration for any share of
Common Stock at any time during the period from and after the
Announcement Date to and including the Consummation Date by the
Acquiring Company, the Company or any Affiliate of either thereof, or
(ii) an amount in cash equal to the product obtained by multiplying (x)
the number of shares of the Acquirer's Common Stock purchasable upon
the exercise or conversion of such Warrant as shall result from
adjustments thereto that would have been required pursuant to
subsection (a) above times (y) the Market Price per share for the
Acquirer's Common Stock, determined as of the day within the period
from and after the Announcement Date to and including the Consummation
Date for which the amount determined as provided in the definition of
Market Price shall have been the greatest; or,
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(c) shall be entitled to receive, within 30 days after such
election, in full satisfaction of the exercise rights afforded under
this Warrant to the holder thereof, an amount equal to the fair market
value of such exercise rights as determined by an independent
investment banker (with an established national reputation as a valuer
of equity securities) selected by the Required Holders with the
approval of the Company, such fair market value to be determined with
regard to all material relevant factors but without regard to any
negative effects on such value of the Transaction.
The Company agrees to obtain, and deliver to each holder of Warrants a copy of
the determination of an independent investment banker (selected by the Required
Holders with the approval of the Company) necessary to permit elections under
subsection (c) above within 15 days after the Consummation Date of any
Transaction to which subsection (c) is applicable.
Notwithstanding anything contained herein to the contrary, the Company shall not
effect any Transaction unless prior to the consummation thereof each corporation
or entity (other than the Company) which may be required to deliver any
securities or other property upon the exercise of Warrants shall assume, by
written instrument delivered to each holder of Warrants, the obligation to
deliver to such holder such securities or other property as to which, in
accordance with the foregoing provisions, such holder may be entitled, and such
corporation or entity shall have similarly delivered to each holder of Warrants
an opinion of counsel for such corporation or entity, satisfactory to each
holder of Warrants, which opinion shall state that all the outstanding Warrants,
shall thereafter continue in full force and effect and shall be enforceable
against such corporation or entity in accordance with the terms hereof and
thereof, together with such other matters as such holders may reasonably
request.
2J. Certain Issuances Excepted. Anything herein to the
contrary notwithstanding, the Company shall not be required to make any
adjustment of the Exercise Price in the case of (i) the issuance of the Warrants
and the issuance of shares of Common Stock issuable upon exercise of the
Warrants or (ii) the grant of Options that may be granted to non-management
employees of the Company or any of its Affiliates pursuant to the 1999 Long
-Term Incentive Plan.
2K. Notice of Adjustment. Upon the occurrence of any event
requiring an adjustment of the Exercise Price, then and in each such case the
Company shall promptly deliver to the holder of this Warrant an Officer's
Certificate stating the Exercise Price resulting from such adjustment and the
increase or decrease, if any, in the number of shares of Common Stock issuable
upon the exercise of this Warrant, setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based. Within 90
days after each fiscal year in which any such adjustment shall have occurred, or
within 30 days after any request therefor by the holder of this Warrant stating
that such holder contemplates the exercise of such Warrant, the Company will
obtain and deliver to the holder of this Warrant the opinion of its regular
independent auditors or another firm of independent public accountants of
recognized national standing selected by the Company's Board of Directors, which
opinion shall confirm the statements in the most recent Officer's Certificate
delivered under this section 2K.
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2L. Other Notices. In case at any time:
(a) the Company shall declare to the holders of Common Stock
any dividend other than a regular periodic cash dividend or any
periodic cash dividend in excess of 115% of the cash dividend for the
comparable fiscal period in the immediately preceding fiscal year;
(b) the Company shall declare or pay any dividend upon Common
Stock payable in stock or make any special dividend or other
distribution (other than regular cash dividends) to the holders of
Common Stock;
(c) the Company shall offer for subscription pro rata to the
holders of Common Stock any additional shares of stock of any class or
other rights;
(d) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation
or merger of the Company with, or sale of all or substantially all of
its assets to, another corporation or other entity;
(e) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
(f) there shall be made any tender offer for any shares of
capital stock of the Company; or
(g) there shall be any other Transaction;
then, in any one or more of such cases, the Company shall give to the holder of
this Warrant (i) at least 15 days prior to any event referred to in subsection
(a) or (b) above, at least 30 days prior to any event referred to in subsection
(c), (d) or (e) above, and within five days after it has knowledge of any
pending tender offer or other Transaction, written notice of the date on which
the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights to vote
in respect of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, winding-up or Transaction or the date by which
shareholders must tender shares in any tender offer and (ii) in the case of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up or tender offer or Transaction known to the Company, at
least 30 days prior written notice of the date (or, if not then known, a
reasonable approximation thereof by the Company) when the same shall take place.
Such notice in accordance with the foregoing clause (i) shall also specify, in
the case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto, and such notice in
accordance with the foregoing clause (ii) shall also specify the date (if known
to the Company) on which the holders of Common Stock shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up, tender offer or Transaction, as the case may be. Such
notice shall also state that the action in question or the record date is
subject to the effectiveness
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of a registration statement under the Securities Act or to a favorable vote of
security holders, if either is required.
2M. Certain Events. If any event occurs as to which, in the
good faith judgment of the Board of Directors of the Company, the other
provisions of this Warrant are not strictly applicable or if strictly applicable
would not fairly protect the exercise rights of the holders of the Warrants in
accordance with the essential intent and principles of such provisions, then the
Board of Directors of the Company shall appoint its regular independent auditors
or another firm of independent public accountants of recognized national
standing which shall give their opinion upon the adjustment, if any, on a basis
consistent with such essential intent and principles, necessary to preserve,
without dilution, the rights of the holders of the Warrants. Upon receipt of
such opinion, the Board of Directors of the Company shall forthwith make the
adjustments described therein; provided, that no such adjustment shall have the
effect of increasing the Exercise Price as otherwise determined pursuant to this
Warrant. The Company may make such reductions in the Exercise Price as it deems
advisable, including any reductions necessary to ensure that any event treated
for Federal income tax purposes as a distribution of stock or stock rights not
be taxable to recipients.
2N. Prohibition of Certain Actions. The Company will not, by
amendment of its certificate of incorporation 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 hereunder by the
Company, 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 (a) 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, (b) will take all such action
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 all Warrants from time to time outstanding, (c) will not take any
action which results in any adjustment of the Exercise Price if the total number
of shares of Common Stock or Other Securities issuable after the action upon the
exercise of all of the Warrants would exceed the total number of shares of
Common Stock or Other Securities then authorized by the Company's certificate of
incorporation and available for the purpose of issue upon such conversion, and
(d) will not issue any capital stock of any class which has the right to more
than one vote per share or any capital stock of any class which is preferred as
to dividends or as to the distribution of assets upon voluntary or involuntary
dissolution, liquidation or winding-up, unless the rights of the holders thereof
shall be limited to a fixed sum or percentage (or floating rate related to
market yields) of par value or stated value in respect of participation in
dividends and a fixed sum or percentage of par value or stated value in any such
distribution of assets.
3. Stock to be Reserved. The Company will at all times reserve and keep
available out of the authorized Common Stock, solely for the purpose of issue
upon the exercise of the Warrants
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as herein provided, such number of shares of Common Stock as shall then be
issuable upon the exercise of all outstanding Warrants and the Company will
maintain at all times all other rights and privileges sufficient to enable it to
fulfill all its obligations hereunder. The Company covenants that all shares of
Common Stock which shall be so issuable shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, free from preemptive
or similar rights on the part of the holders of any shares of capital stock or
securities of the Company or any other Person, and free from all taxes, liens
and charges with respect to the issue thereof (not including any income taxes
payable by the holders of Warrants being exercised in respect of gains thereon),
and the Exercise Price will be credited to the capital and surplus of the
Company. The Company will take all such action as may be necessary to assure
that such shares of Common Stock may be so issued without violation of any
applicable law or regulation, or of any applicable requirements of the National
Association of Securities Dealers, Inc. and of any domestic securities exchange
upon which the Common Stock may be listed.
4. Registration of Common Stock. If any shares of Common Stock required
to be reserved for purposes of the exercise of Warrants require registration
with or approval of any governmental authority under any Federal or State law
(other than the Securities Act, registration under which is governed by the
Registration Rights Agreement), before such shares may be issued upon the
exercise thereof, the Company will, at its expense and as expeditiously as
possible, use its best efforts to cause such shares to be duly registered or
approved, as the case may be. Shares of Common Stock issuable upon exercise of
the Warrants shall be registered by the Company under the Securities Act or
similar statute then in force if required by the Registration Rights Agreement
and subject to the conditions stated in such agreement. At any such time as the
Common Stock is listed on any national securities exchange or quoted by the
Nasdaq National Market or any successor thereto or any comparable system, the
Company will, at its expense, obtain promptly and maintain the approval for
listing on each such exchange or quoting by the Nasdaq National Market or such
successor thereto or comparable system, upon official notice of issuance, the
shares of Common Stock issuable upon exercise of the then outstanding Warrants
and maintain the listing or quoting of such shares after their issuance so long
as the Common Stock is so listed or quoted; and the Company will also cause to
be so listed or quoted, will register under the Exchange Act and will maintain
such listing or quoting of, any Other Securities that at any time are issuable
upon exercise of the Warrants, if and at the time that any securities of the
same class shall be listed on such national securities exchange by the Company.
5. Issue Tax. The issuance of certificates for shares of Common Stock
upon exercise of this Warrant shall be made without charge to the holders hereof
for any issuance tax in respect thereto.
6. Closing of Books. The Company will at no time close its transfer
books against the transfer of any Warrant or of any share of Common Stock issued
or issuable upon the exercise of any Warrant in any manner which interferes with
the timely exercise of such Warrant.
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7. No Rights or Liabilities as Stockholders. This Warrant shall not
entitle the holder thereof to any of the rights of a stockholder of the Company,
except as expressly contemplated herein. No provision of this Warrant, in the
absence of the actual exercise of such Warrant and receipt by the holder thereof
of Common Stock issuable upon such conversion, shall give rise to any liability
on the part of such holder as a stockholder of the Company, whether such
liability shall be asserted by the Company or by creditors of the Company.
8. Restrictive Legends. Except as otherwise permitted by this section
8, each Warrant originally issued and each Warrant issued upon direct or
indirect transfer or in substitution for any Warrant pursuant to this section 8
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
"This Warrant and any shares acquired upon the exercise of this Warrant
have not been registered under the Securities Act of 1933, as amended,
or under state securities laws, and may not be transferred in the
absence of such registration or an exemption therefrom under such Act
or such laws."
Except as otherwise permitted by this section 8, (a) each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and (b)
each certificate issued upon the direct or indirect transfer of any such Common
Stock (or Other Securities) shall be stamped or otherwise imprinted with a
legend in substantially the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under state securities
laws, and may not be transferred in the absence of such registration or
an exemption therefrom under such Act or such laws."
The holder of any Restricted Securities shall be entitled to receive from the
Company, without expense, new securities of like tenor not bearing the
applicable legend set forth above in this section 8 when such securities shall
have been (a) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering such Restricted Securities,
(b) sold pursuant to Rule 144 or any comparable rule under the Securities Act,
(c) transferred to a limited number of institutional holders, each of which
shall have represented in writing that it is acquiring such Restricted
Securities for investment and not with a view to the disposition thereof, or (d)
when, in the opinion of counsel (which may include in-house counsel) for the
holder thereof experienced in Securities Act matters, such restrictions are no
longer required in order to insure compliance with the Securities Act.
9. Availability of Information. The Company will cooperate with each
holder of any Restricted Securities in supplying such information as may be
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 of any
Restricted Securities. The Company will furnish to each holder of any Warrants,
promptly upon their becoming
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available, copies of all financial statements, reports, notices and proxy
statements sent or made available generally by the Company to its stockholders,
and copies of all regular and periodic reports and all registration statements
and prospectuses filed by the Company with any securities exchange or with the
Commission.
10. Information Required By Rule 144A. The Company will, upon the
request of the holder of this Warrant, provide such holder, and any qualified
institutional buyer designated by such holder, such financial and other
information as such holder may reasonably determine to be necessary in order to
permit compliance with the information requirements of Rule 144A under the
Securities Act in connection with the resale of Warrants, except at such times
as the Company is subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act. For the purpose of this section 10, the term "qualified
institutional buyer" shall have the meaning specified in Rule 144A under the
Securities Act.
11. Registration Rights Agreement; Participation Rights Agreement. The
holder of this Warrant and the holders of any securities issued or issuable upon
the exercise hereof are each entitled to the benefits of the Registration Rights
Agreement and the Participation Rights Agreement.
12. Ownership, Transfer and Substitution of Warrants.
12A. Ownership of Warrants. Except as otherwise required by
law, the Company may treat the Person in whose name any Warrant is registered on
the register kept at the principal office of the Company as the true and lawful
owner and holder thereof for all purposes, notwithstanding any notice to the
contrary except that, if and when any Warrant is properly assigned in blank, the
Company, in its discretion, may (but shall not be obligated to) treat the bearer
thereof as the owner of such Warrant for all purposes, notwithstanding any
notice to the Company to the contrary. Subject to section 8, a Warrant, if
properly assigned, may be exercised by a new holder without first having a new
Warrant issued.
12B. Transfer and Exchange of Warrants. Upon the surrender of
any Warrant, properly endorsed, for registration of transfer or for exchange at
the principal office of the Company, the Company at its expense will (subject to
compliance with section 8, if applicable) execute and deliver to or upon the
order of the holder thereof a new Warrant or Warrants of like tenor, in the name
of such holder or as such holder (upon payment by such holder of any applicable
transfer taxes) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Original Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
12C. Replacement of Warrants. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction of any Warrant held by a Person other than the Purchaser or any
institutional investor reasonably satisfactory to the Company, upon delivery of
its unsecured indemnity reasonably satisfactory to the Company in form and
amount or, in the case of any such
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mutilation, upon surrender of such Warrant for cancellation at the principal
office of the Company, the Company at its expense will execute and deliver, in
lieu thereof, a new Warrant of like tenor.
13. Definitions. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:
"Additional Shares of Common Stock" shall mean all shares
(including treasury shares) of Common Stock issued or sold (or, pursuant to
section 2C or 2D) deemed to be issued) by the Company after the date hereof,
whether or not subsequently reacquired or retired by the Company, other than
shares of Common Stock issued upon the exercise or partial exercise of the
Warrants.
"Acquiring Company" shall have the meaning specified in
Section 2I.
"Acquirer's Common Stock" shall have the meaning specified in
Section 2I.
"Affiliate" shall have the meaning specified in the Purchase
Agreement.
"Announcement Date" shall have the meaning specified in
Section 2I.
"Business Day" shall mean any day on which banks are open for
business in New York City (other than a Saturday, a Sunday or a legal holiday in
the States of New York or New Jersey), provided, that any reference to "days"
(unless Business Days are specified) shall mean calendar days.
"Cashless Exercise" shall have the meaning specified in
section 1F.
"Commission" shall mean the Securities and Exchange Commission
or any successor federal agency having similar powers.
"Common Stock" shall mean the Original Common Stock, any stock
into which such stock shall have been converted or changed or any stock
resulting from any reclassification of such stock and all other stock of any
class or classes (however designated) of the Company the holders of which have
the right, without limitation as to amount, either to all or to a share of the
balance of current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference.
"Company" shall mean Hallwood Energy Corporation, a Delaware
corporation.
"Consummation Date" shall have the meaning specified in
section 2I.
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"Convertible Securities" shall mean any evidences of
indebtedness, shares of stock (other than Common Stock) or other securities
directly or indirectly convertible into or exchangeable for Additional Shares of
Common Stock.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Exercise Price" shall have the meaning specified in
section 1A.
"Fair Value" shall mean with respect to any securities or
other property, the fair value thereof as of a date which is within 15 days of
the date as of which the determination is to be made (a) determined by agreement
between the Company and the Required Holders, or (b) if the Company and the
Required Holders fail to agree, determined jointly by an independent investment
banking firm retained by the Company and by an independent investment banking
firm retained by the Required Holders, either of which firms may be an
independent investment banking firm regularly retained by the Company, or (c) if
the Company or the Required Holders shall fail so to retain an independent
investment banking firm within ten Business Days of the retention of such a firm
by the Required Holders or the Company, as the case may be, determined solely by
the firm so retained, or (d) if the firms so retained by the Company and by such
holders shall be unable to reach a joint determination within 15 Business Days
of the retention of the last firm so retained, determined by another independent
investment banking firm which is not a regular investment banking firm of the
Company chosen by the first two such firms.
"Initial Date" shall have the meaning specified in section 2A.
"Initial Exercise Price" shall have the meaning specified in
section 1A.
"Market Price" shall mean on any date specified herein, (a)
with respect to Common Stock or to common stock (or equivalent equity interests)
of an Acquiring Person or its Parent, the amount per share equal to (i) the last
sale price of shares of Common Stock, regular way, or of shares of such common
stock (or equivalent equity interests) on such date or, if no such sale takes
place on such date, the average of the closing bid and asked prices thereof on
such date, in each case as officially reported on the principal national
securities exchange on which the same are then listed or admitted to trading, or
(ii) if no shares of Common Stock or no shares of such common stock (or
equivalent equity interests), as the case may be, are then listed or admitted to
trading on any national securities exchange, the last sale price of shares of
Common Stock, regular way, or of shares of such common stock (or equivalent
equity interests) on such date, in each case or, if no such sale takes place on
such date, the average of the reported closing bid and asked prices thereof on
such date as quoted in the Nasdaq National Market or, if no shares of Common
Stock or no shares of such common stock (or equivalent equity interest), as the
case may be, are then quoted in the Nasdaq National Market, as published by the
National Quotation Bureau, Incorporated or any similar successor organization,
and in either case as reported by any member firm of the New York Stock Exchange
selected by the Company, or (iii) if no shares of Common Stock or no shares of
such common stock (or equivalent equity interests), as the case may be, are then
listed or admitted to
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trading on any national securities exchange or quoted or published in the
over-the-counter market, the higher of (x) the book value thereof as determined
by any firm of independent public accountants of recognized standing selected by
the Board of Directors of the Company, as of the last day of any month ending
within 60 days preceding the date as of which the determination is to be made or
(y) the Fair Value thereof; and (b) with respect to any other securities, the
Fair Value thereof.
"1999 Long-Term Incentive Plan" shall mean the 1999 Long-Term
Incentive Plan of the Company pursuant to which Options for up to 1,200,000
shares of Common Stock and 180,000 shares of preferred stock may be issued.
"Officer's Certificate" shall mean a certificate signed in the
name of the Company by its President, one of its Vice Presidents or its
Treasurer.
"Options" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.
"Original Common Stock" shall have the meaning specified in
the opening paragraphs of this Warrant.
"Other Securities" shall mean any stock (other than Common
Stock) and any other securities of the Company or any other Person (corporate or
otherwise) which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, in lieu of
or in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to section 2I or otherwise.
"Participation Rights Agreement" shall mean that certain
Participation Rights Agreement dated of even date herewith by and among the
Purchaser, the Company and certain holders of the Company's Common Stock that
are parties thereto.
"Person" shall mean and include an individual, a partnership,
an association, a joint venture, a corporation, a trust, a limited liability
company, an unincorporated organization and a government or any department or
agency thereof.
"Purchase Agreement" shall have the meaning specified in the
opening paragraphs of this Warrant.
"Purchaser" shall have the meaning specified in the opening
paragraphs of this Warrant.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement dated of even date herewith by and between the Company and the
Purchaser.
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"Required Holders" shall mean the holders of at least 66 2/3%
of all the Warrants at the time outstanding, determined on the basis of the
number of shares of Common Stock then purchasable upon the exercise of all
Warrants then outstanding.
"Restricted Securities" shall mean (a) any Warrants bearing
the applicable legend set forth in section 8 and (b) any shares of Common Stock
(or Other Securities) which have been issued upon the exercise of Warrants and
which are evidenced by a certificate or certificates bearing the applicable
legend set forth in such section, and (c) unless the context otherwise requires,
any shares of Common Stock (or Other Securities) which are at the time issuable
upon the exercise of Warrants and which, when so issued, will be evidenced by a
certificate or certificates bearing the applicable legend set forth in such
section.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Transaction" shall have the meaning specified in section 2I.
"Warrant" shall have the meaning specified in the opening
paragraphs of this Warrant.
14. Remedies. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
15. Notices. All notices and other communications under this Warrant
shall be in writing and shall be sent (a) by registered or certified mail,
return receipt requested, (b) by telecopy if the sender on the same day sends a
conforming copy of such notice by a recognized overnight delivery service, or
(c) by a recognized overnight delivery service, addressed (i) if to any holder
of any Warrant or any holder of any Common Stock (or Other Securities), at the
registered address of such holder as set forth in the applicable register kept
at the principal office of the Company, or (ii) if to the Company, to the
attention of the Legal Department at its principal office, provided that the
exercise of any Warrant shall be effected in the manner provided in section 1.
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16. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. The agreements of the Company contained in this Warrant other than
those applicable solely to the Warrants and the holders thereof shall inure to
the benefit of and be enforceable by any holder or holders at the time of any
Common Stock (or Other Securities) issued upon the exercise of Warrants, whether
so expressed or not. This Warrant shall be construed and enforced in accordance
with and governed by the laws of the State of New York. The section headings in
this Warrant are for purposes of convenience only and shall not constitute a
part hereof.
HALLWOOD ENERGY CORPORATION
By: /s/ Xxxxxxxx X. Xxxxxx
Name: Xxxxxxxx X. Xxxxxx
Title: Vice President
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FORM OF SUBSCRIPTION
(To be executed only upon exercise of Warrant)
To HALLWOOD ENERGY CORPORATION
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder, _____1 shares
of Common Stock of HALLWOOD ENERGY CORPORATION, [and herewith makes payment of
$_______________ therefor]2 [in a Cashless Exercise pursuant to Section 1F of
the within Warrant]3, and requests that the certificates for such shares be
issued in the name of, and delivered to _________________________ whose address
is _________________________.
Dated:
(Signature must conform in all respects to
name of holder as specified on the face of this
Warrant)
(Street Address)
(City) (State) (Zip Code)
1 Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any
adjustment for additional Common Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In the case
of a partial exercise, a new Warrant or Warrants will be issued and
delivered, representing the unexercised portion of this Warrant, to the
holder surrendering the same.
2 Use in connection with an exercise involving a delivery of funds to the
Company. 3 Use in connection with a Cashless Exercise.
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FORM OF ASSIGNMENT
(To be executed only upon transfer of Warrant)
For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto _________________________ the
right represented by such Warrant to purchase _________________________1 shares
of Common Stock of HALLWOOD ENERGY CORPORATION, to which such Warrant relates,
and appoints _________________________ Attorney to make such transfer on the
books of HALLWOOD ENERGY CORPORATION, maintained for such purpose, with full
power of substitution in the premises.
Dated:
(Signature must conform in all respects to
name of holder as specified on the face of this
Warrant)
(Street Address)
(City) (State) (Zip Code)
Signed in the presence of:
--------
1 Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any
adjustment for additional Common Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In the case
of a partial exercise, a new Warrant or Warrants will be issued and
delivered, representing the unexercised portion of this Warrant, to the
holder surrendering the same.
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EXHIBIT A
AGREEMENT REGARDING INITIAL EXERCISE PRICE
Reference is hereby made to that certain Common Stock Purchase Warrant
dated June ____, 1999 (the "Warrant"), relating to the right to purchase shares
of the common stock, $0.01 par value, of Hallwood Energy Corporation, a Delaware
corporation (the "Company"), and issued to The Prudential Insurance Company of
America ("Prudential"). Pursuant to the provisions of section 1A of the Warrant,
the Company and Prudential agree that the Initial Exercise Price (as defined in
the Warrant) has been determined as provided in such section 1A and is
$__________.
June __, 1999
HALLWOOD ENERGY CORPORATION
By:
Name:_______________________________
Title:__________________________
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
By:
Vice President
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