NEITHER THIS WARRANT NOR THE SECURITIES RECEIVED UPON EXERCISE OF THIS
WARRANT HAS BEEN REGISTERED OR QUALIFIED UNDER THE UNITED STATES SECURITIES ACT
OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, THIS WARRANT
AND THE SECURITIES RECEIVED UPON EXERCISE OF THIS WARRANT MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED OR QUALIFIED UNDER SAID ACT AND ALL APPLICABLE STATE SECURITIES LAWS
OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
OF THESE WARRANTS AND THE SECURITIES RECEIVED UPON EXERCISE OF THIS WARRANT, AN
EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS AVAILABLE AND SUCH OFFER,
SALE, TRANSFER, PLEDGE OR HYPOTHECATION DOES NOT VIOLATE THE PROVISIONS OF THE
ACT OR APPLICABLE LAWS.
NATIONAL ENERGY GROUP, INC.
WARRANT TO PURCHASE
300,000 SHARES OF
COMMON STOCK OF
NATIONAL ENERGY GROUP, INC.
This Warrant (the "Warrant") is issued to Xxxxxx Partners, a New York
general partnership ("Holder") and Xxxxxx agrees by acceptance hereof that
this Warrant is subject to the terms and conditions contained herein and the
terms and conditions of that certain Letter Agreement dated July 11, 1997
between National Energy Group, Inc. (the "Company") and Holder (the "Letter
Agreement").
This Warrant is a warrant to purchase THREE HUNDRED THOUSAND (300,000)
shares of Common Stock, $0.01 par value (the "Common Stock") of the Company
at a price of THREE DOLLARS ($3.00) per share (the "Exercise Price"), subject
to adjustment as provided herein.
This Warrant shall expire on July 11, 2002 (the "Expiration Date") and
shall become exercisable on the earlier of (i) December 31, 1997, or (ii) as
to each block of ONE HUNDRED FIFTY THOUSAND (150,000) warrants where FIVE
MILLION DOLLARS ($5,000,000) has been invested by Xxxxxx Partnership, a New
York partnership, as provided in the Letter Agreement. This Warrant shall
be void and all rights of Holder under this Warrant shall cease if this
Warrant shall not have been duly exercised on or prior to the Expiration Date.
This Warrant shall not entitle Holder to any rights other than as set
forth herein, and Holder will not have any of the rights, privileges or
liabilities of a stockholder of the Company prior to the exercise of this
Warrant.
The number of shares of Common Stock as to which this Warrant may be
exercised and the Exercise Price from time to time in effect shall be
adjusted from time to time as follows:
(A) In case the Company shall (i) subdivide its shares of outstanding
Common Stock into a larger number of shares of Common Stock, (ii) combine
shares of its outstanding Common Stock into a smaller number of shares of
Common Stock or (iii) issue stock as a dividend on its Common Stock; then
Holder, after the close of business on the effective date of such
subdivision, combination or stock dividend, as the case may be (the close of
business time being hereinafter in this subparagraph (A) referred to as "such
record date"), shall be entitled to receive, upon actual exercise of this
Warrant, the aggregate number and kind of shares of capital stock of the
Company which, if this Warrant had been exercised immediately prior to such
record date at the Exercise Price then in effect, it would have been entitled
to receive by virtue of such subdivision, combination or stock dividend; and
the Exercise Price shall be deemed to have been adjusted after such record
date to apply to such aggregate number and kind of shares. Such adjustment
shall be made whenever any of the events listed above shall occur.
(B) No notification to Holder of any adjustment in the exercise price
otherwise required by this subparagraph (B) to be made must be made, if such
adjustment (plus any other adjustments not heretofore made since the time of
the last notice to Holder of an adjustment, if any) would not require any
increase or decrease of five percent (5%) or more in the Exercise Price;
provided, however, that upon exercise of this Warrant, all adjustments shall
be made in calculating the exercise rights of Holder. Whenever the Exercise
Price is adjusted by five percent (5%) or more since the time of the last
notice to Holder of an adjustment, if any, as herein provided, the Company
shall promptly mail to Holder a notice setting forth the Exercise Price after
such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
(C) In the event that at any time, as a result of an adjustment, Holder
shall become entitled to receive any shares of capital stock of the Company
other than shares of Common Stock, the number of such other shares so
receivable upon exercise of this Warrant shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the shares of Common Stock contained in
subparagraphs (A) and (B), above, and the other provisions of this
subparagraph (C) with respect to the shares of Common Stock shall apply on
like terms to any such other shares.
(D) In case of any reclassification of the Common Stock (other than a
change in par value, or from par value to no par value, or from no par value
to par value), any consolidation of the Company with, or merger of the
Company into, any other person, any merger of any person into the Company
(other than a merger that does not result in any reclassification of, or
change in the outstanding shares of Common Stock), any sale or transfer of
all or substantially all of the assets of the Company (other than a
sale-lease back, collateral assignment, mortgage or other similar financing
transaction), or any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or other properties, then Holder shall
have the right thereafter, during the period this Warrant shall be
exercisable, to exercise this Warrant for the kind and amount of securities,
cash or other property receivable upon such reclassification, consolidation,
merger, sale, transfer or share exchange by a holder of the number of shares
of Common Stock into which this Warrant might have been exercised immediately
prior to such reclassification, consolidation, merger, sale, transfer or
share exchange.
(E) In case the Company, at any time while this Warrant is outstanding,
shall issue shares of Common Stock, warrants or rights to acquire Common
Stock or securities convertible into Common Stock (excluding (i) those issued
as a dividend or distribution with respect to Series B, Series C, Series D or
Series E Preferred Stock so long as the securities are additional shares of
Series B, Series C, Series D or
Page 2
Series E Preferred Stock and (ii) options or shares of Common Stock or other
common stock issued to officers, employees or directors so long as the number
issued to officers, employees and directors in any one year does not exceed
five percent (5%) of the number of shares of Common Stock outstanding on
January 1st of such year) at a price per Common Stock share purchased,
purchasable, or issuable upon conversion that is less than the Exercise
Price, then the Exercise Price at which each share of Common Stock at which
this Warrant shall thereafter be exercisable shall be reduced by multiplying
the Exercise Price in effect on the date of issuance of such shares,
warrants, rights or convertible securities by a fraction, of which the
denominator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding on the date of issuance of such shares, warrants,
rights or convertible securities plus the number of additional shares of
Common Stock issued, offered for subscription or purchase or issuable upon
conversion, and of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding on the date of
issuance of such shares, warrants, rights or convertible securities plus the
number of shares of Common Stock that the aggregate offering price of the
total number of shares so offered, issued, or issuable, or, with respect to
convertible securities, the aggregate consideration received by the Company
for the convertible securities, would purchase at the prior Exercise Price.
Such adjustment shall be made whenever shares, warrants, rights or
convertible securities are issued, and shall become effective immediately
after such issuance date. However, upon the expiration of any warrant, right
or conversion right to purchase Common Stock, the issuance of which resulted
in an adjustment in the Exercise Price of this Warrant pursuant to this
subparagraph (E), if any such warrant, right or convertible rights shall
expire and shall not have been exercised, the Exercise Price per share of
Common Stock at which this Warrant shall thereafter be exercisable shall
immediately upon such expiration be recomputed and effective immediately upon
such expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Exercise Price made pursuant to the
provisions of this subparagraph (E) after the issuance of such warrants,
rights or convertible securities) had the adjustment of the Exercise Price
made upon the issuance of such warrants, rights or convertible securities
been made on the basis of offering for subscription or purchase only that
number of shares of Common Stock actually purchased upon the exercise of the
warrants or rights actually exercised or the conversion of the convertible
securities actually converted. For purposes of this subparagraph (E), the
term Common Stock shall include (i) any common equity security into which the
Common Stock is reclassified or for which it is exchanged, or (ii) any common
equity security of the Company that has equal or superior voting rights with
the Common Stock.
(F) In case the Company, at any time while this Warrant is outstanding,
shall distribute to all holders of Common Stock evidences of its indebtedness
or assets (excluding cash dividends or cash distributions paid out of earned
surplus) or rights to subscribe (excluding those referred to in subparagraph
(E) above) then in each such case the Exercise Price per share of Common
Stock at which this Warrant shall thereafter be exercisable shall be
determined by multiplying the Exercise Price in effect prior to the record
date fixed for determination for stockholders entitled to receive such
distribution by a fraction, of which the denominator shall be the Closing
Price of a share of Common Stock determined as of the record date mentioned
above, and (of which the numerator shall be such Closing Price of a share of
Common Stock, less the then fair market value per share (as determined by the
Board of Directors of the Company in good faith, whose determination shall be
conclusive if made in good faith and shall be described in a statement
provided to Holder) of the portion of assets or evidences of indebtedness so
distributed or of such subscription rights. Such adjustment shall be made
whenever any such distribution is made and shall become effective immediately
after the record date mentioned above.
(G) Upon each adjustment of the Exercise Price as provided for herein,
the Holder of this Warrant shall thereafter (until another such adjustment)
be entitled to purchase, at the adjusted Exercise Price on the date purchase
rights under this Warrant are exercised, the number of shares of Common Stock
Page 3
determined by (a) multiplying the number of purchasable shares hereunder
immediately prior to the adjustment of the Exercise Price by the Exercise
Price in effect immediately prior to such adjustment, and (b) dividing the
product so obtained by the adjusted Exercise Price in effect on the date of
such exercise.
(H) In case:
1. the Company shall declare a dividend (or any other distribution) on
the Common Stock payable otherwise than in cash out of its earned
surplus; or
2. the Company shall declare a special nonrecurring cash dividend on or a
redemption of its Common Stock; or
3. the Company shall authorize the granting to the holders of the Common
Stock of rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any other rights; or
4. the approval of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock of the
Company (other than a subdivision or combination of the outstanding
shares of Common Stock), any consolidation or merger to which the
Company is party or any sale or transfer of all or substantially
all of the assets of the Company; or
5. of the voluntary or involuntary dissolution, liquidation or winding up
of the affairs of the Company; then the Company shall, at least 10
days prior to the applicable record date hereinafter specified,
contact by telephone and cause to be mailed to Holder at its last
address as it shall appear upon the stock books of the Company, a
notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or
warrants, or, if a record is not to be taken, the date as of which
the holders of Common Stock of record to be entitled to such
dividend, distribution, redemption, rights or warrants are to be
determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or
winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall
be entitled to exchange their shares of Common Stock for securities
or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or
winding up.
(I) In case at any time conditions shall arise by reason of action taken
by the Company, which, in the opinion of the Board of Directors of the
Company, are not adequately covered by the other provisions hereof and which
might materially and adversely affect the rights of Holder, or in case at any
time any such conditions are expected to arise by reason of any action
contemplated by the Company, the Board of Directors of the Company shall
appoint a firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial
statements of the Company), who shall give their opinion as to the
adjustment, if any (not inconsistent with the standards herein), of the
Exercise Price (including, if necessary, any adjustment as to the securities
to be received thereafter upon exercise of this Warrant) which is or would be
required to preserve without dilution the rights of Holder. The Board of
Directors of the Company may, in its judgment, make the adjustment
recommended upon the receipt of such opinion; provided, however, that no
adjustment pursuant to this subparagraph (I) of the Exercise Price shall be
made which in the opinion of the accountant or firm of
Page 4
accountants giving the aforesaid opinion would result in an increase of the
Exercise Price to more than the Exercise Price then in effect.
As used above, the term "Closing Price" on any day shall mean the higher
of (i) the reported closing sales price per share of Common Stock on the
principal national securities exchange or the NASDAQ National Market on which
the shares of Common Stock are at the time listed or traded on such day or
(ii) the average of the closing sales prices for the twenty Trading Days
prior to such day. In case no such sale takes place on a day, the Closing
Price shall be the average of the reported closing bid and asked prices, or,
if the shares of Common Stock shall not be so listed, the average of the high
bid and low ask prices in the over-the-counter market as reported by the
National Association of Securities Dealers' Automated Quotation System, or,
if not so reported, as reported by the National Quotation Bureau,
Incorporated, or any successor thereof, or, if not so reported, the average
of the closing bid and asked prices as furnished by any member of the
National Association of Securities Dealers, Inc. selected from time to time
by the Company for that purpose. The term "Trading Day" shall mean a day on
which the principal national securities exchange or the NASDAQ National
Market on which the shares of Common Stock are listed or admitted to trading
is open for the transaction of business or, if the shares of Common Stock are
not listed or admitted to, trading on any national securities exchange or the
NASDAQ National Market, a Monday, Tuesday, Wednesday, Thursday, or Friday on
which banking institutions in the City of Dallas, State of Texas, are not
authorized or obligated by law or executive order to close.
The Company shall at all times after July 11, 1997, reserve and keep
available, free from preemptive rights, out of its authorized but unissued
shares of Common Stock solely for the purpose of issuance upon the exercise
of this Warrant the full number of shares of Common Stock then deliverable
upon the exercise of this Warrant. The Company covenants and agrees that all
shares which may be issued upon the exercise of this Warrant will, upon
issuance, be legally and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges of any nature whatsoever.
This Warrant may be exercised by filling out and signing the Warrant
Exercise Notice and mailing or delivering the Warrant Exercise Notice to the
Company in time to reach the Company by the Expiration Date, accompanied by
payment of the full applicable Exercise Price. Payment of the Exercise Price
must be made in United States funds (by certified check) payable to the order
of the Company. Common Stock certificates will be issued as soon as
practicable after exercise and payment of the Exercise Price for the shares
of Common Stock so purchased. If the Warrant Exercise Notice is mailed by
first class mail, registered or certified, postage prepaid, and properly
addressed to National Energy Group, Inc., 0000 Xxxxxxxxxx Xxx., Xxxxx 0000,
Xxxxxx, Xxxxx, 00000, or, to such other address as the Company may have
specified in a notice duly given to Holder, then the Warrant Exercise Notice
will be presumed to be received by the Company three (3) business days after
the date so mailed.
Subject to the provisions of the legend on the first page of this
Warrant, this Warrant is transferable by Xxxxxx, in whole or in part
(provided that any partial transfer shall be for a whole number of shares of
Common Stock), and upon delivery of this Warrant to the Company with evidence
of such transfer by Holder reasonably satisfactory to the Company, the
Company shall issue a replacement Warrant in a form similar to this Warrant,
in the name of such transferee (and in the case of such partial transfer, the
Company shall issue a new Warrant to Holder to purchase the balance of the
shares of Common Stock that is not the subject of transfer). Holder shall
indemnify the Company against any loss, claim or damages arising from or
related to such transfer and shall sign a written instrument of indemnity in
a form acceptable to the Company.
Page 5
This Warrant shall be deemed to be a contract made under the laws of the
State of Texas and shall for all purposes be governed by and construed in
accordance with the laws of such State.
Dated: July 11, 1997.
NATIONAL ENERGY GROUP, INC.
By: /s/ Xxxxx X. Xxxxxx
-----------------------------
Xxxxx X. Xxxxxx, President and
Chief Executive Officer
Page 6
WARRANT EXERCISE NOTICE
INSTRUCTIONS
IN ORDER FOR WARRANTS TO BE EXERCISED, THIS NOTICE
MUST BE RECEIVED BY THE COMPANY ON OR PRIOR TO THE
EXPIRATION DATE SPECIFIED IN THE WARRANT.
This Warrant Exercise Notice, dated _______________ (the "Notice"),
relates to this Warrant, dated July 11, 1997 (the "Warrant"), issued by
National Energy Group, Inc., a Delaware corporation whose address is 0000
Xxxxxxxxxx Xxx., Xxx. 0000, Xxxxxx, Xxxxx, 00000 (the "Company"), to the
undersigned. This Warrant initially represented the right to purchase the
aggregate number of shares as indicated in this Warrant, which number will be
reduced by this Warrant Exercise Notice and by any prior or future Warrant
Exercise Notices.
The undersigned hereby exercises the portion of this Warrant to purchase,
and hereby purchases, ________ shares of the Company's Common Stock, at the
current exercise price of $_______ per share, which is the price, as
adjusted, indicated in this Warrant. The undersigned acknowledges that the
number of shares of Common Stock must be divisible by 100 for an effective
exercise of any portion or all of this Warrant. The full amount of
$__________ in United States funds, by certified check payable to the order
of the Company is attached hereto. The undersigned acknowledges that a
certificate for the shares of Common Stock purchased by the undersigned
through the exercise of this Warrant pursuant to this Notice will be
delivered to the undersigned, at the address indicated below (unless the
Company has received written notice of a different address) as soon as
practicable after receipt of this notice and the full payment of the
applicable purchase price.
"HOLDER"
By:
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Title:
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Address:
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Social Security or
Taxpayer Identification Number:
Business Phone Number:
Home Phone Number:
