WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Agreement") is made and entered into as
of January 27, 1998, between BETA OIL & GAS, INC., a Nevada corporation (the
"Company") and J. XXXXX XXXXXXXXXXX, an individual ("Holder").
R E C I T A L S
WHEREAS, the Company proposes to issue to Holder 100,000 warrants (the
"Warrants"), each such Warrant entitling the holder thereof to purchase one
share of Common Stock, $0.001 par value, of the Company (the "Shares" or the
"Common Stock"); and
WHEREAS, the Warrants which are the subject of this Agreement will be
issued by the Company to Holder as part of consideration payable to Holder in
connection with services rendered by the Holder to the Company as Chief
Financial Officer of the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
A G R E E M E N T
1. Warrant Certificates. The warrant certificates to be delivered
pursuant to this Agreement (the "Warrant Certificates") shall be in the form set
forth in Exhibit A, attached hereto and made a part hereof, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Warrant Agreement.
2. Vesting. The warrants shall vest as follows: (a) 25,000 warrants
shall be immediately vested upon the execution of this Agreement; (b) 25,000
warrants shall vest upon the date which is Holder's one year anniversary of
employment with the Company; (c) 25,000 warrants shall vest upon the date which
is Holder's two year anniversary of employment with the Company; and (d) 25,000
warrants shall vest upon the date which is Holder's three year anniversary of
employment with the Company. If Holder shall cease his employment with the
Company, for any reason, Holder shall be entitled only to those warrants which
vested as of the date of termination of employment. All nonvested warrants shall
be forfeited.
3. Right to Exercise Warrants. Subject to the provisions of paragraph 2
above, each Warrant may be exercised from the date of this Agreement until 11:59
P.M. (Los Angeles time) on the date that is five years after the date of this
Agreement (the "Expiration Date"). Each Warrant not exercised on or before the
Expiration Date shall expire.
Each Warrant shall entitle its holder to purchase from the Company one
share of Common Stock at an exercise price of $3.75 per share, subject to
adjustment as set forth below ("Exercise Price").
The Company shall not be required to issue fractional shares of capital
stock upon the exercise of this Warrant or to deliver Warrant Certificates which
evidence fractional shares of capital stock. In the event that a fraction of an
Exercisable Share would, except for the provisions of this paragraph 2, be
issuable upon the exercise of this Warrant, the Company shall pay to the Holder
exercising the Warrant an amount in cash equal to such fraction multiplied by
the current market value of the Exercise Share. For purposes of this paragraph
2, the current market value shall be determined as follows:
(a) if the Exercise Shares are traded in the over-the-counter
market and not on any national securities exchange and not in the NASDAQ
Reporting System, the average of the mean between the last bid and asked prices
per share, as reported by the National Quotation Bureau, Inc., or an equivalent
generally accepted reporting service, for the last business day prior to the
date on which this Warrant is exercised, or, if not so reported, the average of
the closing bid and asked prices for an Exercise Share as furnished to the
Company by any member of the National Association of Securities Dealers, Inc.,
selected by the Company for that purpose.
(b) if the Exercise Shares are listed or traded on a national
securities exchange or in the NASDAQ Reporting System, the closing price on the
principal national securities exchange on which they are so listed or traded or
in the NASDAQ Reporting System, as the case may be, on the last business day
prior to the date of the exercise of this Warrant. The closing price referred to
in this Clause (b) shall be the last reported sales price or, in case no such
reported sale takes place on such day, the average of the reported closing bid
and asked prices, in either case on the national securities exchange on which
the Exercise Shares are then listed on in the NASDAQ Reporting System; or
(c) if no such closing price or closing bid and asked prices
are available, as determined in any reasonable manner as may be prescribed by
the Board of Directors of the Company.
4. Mutilated or Missing Warrant Certificates. In case any of the
Warrant Certificates shall be mutilated, lost, stolen or destroyed prior to its
expiration date, the Company shall issue and deliver, in exchange and
substitution for and upon cancellation of the mutilated Warrant Certificate, or
in lieu of and in substitution for the Warrant Certificate lost, stolen or
destroyed, a new Warrant Certificate of like tenor and representing an
equivalent right or interest.
5. Reservation of Shares. The Company will at all times reserve and
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued Shares or its authorized and issued Shares held in its
treasury for the purpose of enabling it to satisfy its obligation to issue
Shares upon exercise of Warrants, the full number of Shares deliverable upon the
exercise of all outstanding Warrants.
The Company covenants that all Shares which may be issued upon exercise
of Warrants will be validly issued, fully paid and nonassessable outstanding
Shares of the Company.
6. Rights of Holder. The Holder shall not, by virtue of anything
contained in this Warrant Agreement or otherwise, prior to exercise of this
Warrant, be entitled to any right whatsoever, either in law or equity, of a
stockholder of the Company, including without limitation, the right to receive
dividends or to vote or to consent or to receive notice as a shareholder in
respect of the meetings of shareholders or the election of directors of the
Company of any other matter.
7. Investment Intent. Holder represents and warrants to the Company
that Holder is acquiring the Warrants for investment and with no present
intention of distributing or reselling any of the Warrants.
8. Certificates to Bear Language. The Warrants and the certificate or
certificates therefor shall bear the following legend by which each holder shall
be bound:
"THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES
OF COMMON STOCK (OR OTHER SECURITIES) ISSUABLE UPON EXERCISE
THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL THAT AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE."
The Shares and the certificate or certificates evidencing any
such Shares shall bear the following legend:
"THE SHARES (OR OTHER SECURITIES) REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL
THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE."
Certificates for Warrants without such legend shall be issued if such
warrants or shares are sold pursuant to an effective registration statement
under the Securities Act of 1933 (the "Act") or if the Company has received an
opinion from counsel reasonably satisfactory to counsel for the Company, that
such legend is no longer required under the Act.
9. Registration Rights. The Company is obligated to register the shares
of Common Stock underlying the Warrants in any subsequent registration statement
filed by the Company with the Securities and Exchange Commission, so that
holders of such Common Stock shall be entitled to sell the same simultaneously
with and upon the terms and conditions as the securities sold for the account of
the Company are being sold pursuant to any such registration statement, subject
to such lock-up provisions as may be proposed by the underwriter of said
registration statement and agreed to by the investors (the "Piggyback
Registration Right"). In such registration, the Company shall pay all its
expenses and filing fees and shall make a reasonable number of copies of the
registration statement and any prospectus available to holders. The Company will
not pay any selling commissions or similar expenses incurred by Seller or of any
counsel or other representative of a seller.
10. Adjustment of Number of Shares and Class of Capital Stock
Purchasable. The Number of Shares and Class of Capital Stock purchasable under
this Warrant Agreement are subject to adjustment from time to time as set forth
in this Section.
(a) Adjustment for Change in Capital Stock. If the Company:
(i) pays a dividend or makes a distribution on its Common
Stock, in each case, in shares of its Common Stock;
(ii) subdivides its outstanding shares of Common
Stock into a greater number of
shares;
(iii) combines its outstanding shares of Common Stock into
a smaller number of shares;
(iv) makes a distribution on its Common Stock in
shares of its capital stock other than Common Stock; or
(v) issues by reclassification of its shares of Common
Stock any shares of its capital stock;
then the number and classes of shares purchasable upon exercise of each Warrant
in effect immediately prior to such action shall be adjusted so that the holder
of any Warrant thereafter exercised may receive the number and classes of shares
of capital stock of the Company which such holder would have owned immediately
following such action if such holder had exercised the Warrant immediately prior
to such action.
For a dividend or distribution the adjustment shall become
effective immediately after the record date for the dividend or distribution.
For a subdivision, combination or reclassification, the adjustment shall become
effective immediately after the effective date of the subdivision, combination
or reclassification.
If after an adjustment the holder of a Warrant upon exercise
of it may receive shares of two or more classes of capital stock of the Company,
the Board of Directors of the Company shall in good faith determine the
allocation of the adjusted Exercise Price between or among the classes of
capital stock. After such allocation, that portion of the Exercise Price
applicable to each share of each such class of capital stock shall thereafter be
subject to adjustment on terms comparable to those applicable to Common Stock in
this Agreement. Notwithstanding the allocation of the Exercise Price between or
among shares of capital stock as provided by this Section 9, a Warrant may only
be exercised in full by payment of the entire Exercise Price currently in
effect.
(b) Consolidation, Merger or Sale of the Company. If the
Company is a party to a consolidation, merger or transfer of assets which
reclassifies or changes its outstanding Common Stock, the successor corporation
(or corporation controlling the successor corporation or the Company, as the
case may be) shall by operation of law assume the Company's obligations under
this Warrant Agreement. Upon consummation of such transaction the Warrants shall
automatically become exercisable for the kind and amount of securities, cash or
other assets which the holder of a Warrant would have owned immediately after
the consolidation, merger or transfer if the holder had exercised the Warrant
immediately before the effective date of such transaction. As a condition to the
consummation of such transaction, the Company shall arrange for the person or
entity obligated to issue securities or deliver cash or other assets upon
exercise of the Warrant to, concurrently with the consummation of such
transaction, assume the Company's obligations hereunder by executing an
instrument so providing and further providing for adjustments which shall be as
nearly equivalent as may be practical to the adjustments provided for in this
Section 9.
11. Successors. All the covenants and provisions of this Agreement by
or for the benefit of the Company or Holder shall bind and inure to the benefit
of their respective successor and assigns hereunder.
12. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all proposes be deemed to
be an original, and such counterparts shall together constitute by one and the
same instrument.
13. Notices. All notices or other communications under this Warrant
shall be in writing and shall be deemed to have been given if delivered by hand
or mailed by certified mail, postage prepaid, return receipt requested,
addressed as follows: if to the Company: Beta Oil & Gas, Inc., 000 Xxxx Xxxxxx,
Xxxxx Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx, 00000, Attention: Chief Executive
Officer, and to the Holder: at the address of the Holder appearing on the books
of the Company or the Company's transfer agent, if any.
Either the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Paragraph 12.
14. Supplements and Amendments. The Company may from time to time
supplement or amend this Warrant Agreement without the approval of any Holders
of Warrants in order to cure any ambiguity or to be correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provision, or to make any other provisions in regard to matters or questions
herein arising hereunder which the Company may deem necessary or desirable and
which shall not materially adversely affect the interest of the Holder.
15. Severability. If for any reason any provision, paragraph or term of
this Warrant Agreement is held to be invalid or unenforceable, all other valid
provisions herein shall remain in full force and effect and all terms,
provisions and paragraphs of this Warrant shall be deemed to be severable.
16. Governing Law and Venue. This Warrant shall be deemed to be a
contract made under the laws of the State of California and for all purposes
shall be governed and construed in accordance with the laws of said State. Any
proceeding arising under this Warrant Agreement shall be instituted in Orange
County, State of California.
17. Headings. Paragraphs and subparagraph headings, used herein are
included herein for convenience of reference only and shall not affect the
construction of this Warrant Agreement nor constitute a part of this Warrant
Agreement for any other purpose.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date and year first above written.
"COMPANY" "HOLDER"
BETA OIL & GAS, INC. J. XXXXX XXXXXXXXXXX
---------------------------------
BY: Xxxxx Xxxxx J. Xxxxx Xxxxxxxxxxx
ITS: President
EXHIBIT A
NUMBER __ WARRANT
Warrant to Purchase
Shares
BETA OIL & GAS, INC. see reverse for
COMMON STOCK PURCHASE WARRANT certain definitions
will be void if not exercised prior to 11:59 P.M. Pacific Time on __________, 2002
This Certifies that for value received,
the registered holder or assigns ("Holder"),
is entitled to purchase from Beta Oil & Gas, Inc., a Nevada corporation (the
"Company") at any time after 9:00 A.M. Eastern Time on January 27, 1998 at the
purchase price per share of $3.75 (the "Warrant Price"), the number of shares of
Common Stock of the Company set forth above (the "Shares"). The number of shares
purchasable upon exercise of each warrant evidenced hereby and the Warrant Price
per Share shall be subject to adjustment from time to time as set forth in the
Warrant Agreement referred to below. The Warrants expire on January 27, 2003.
Holders will not have any rights or privileges of shareholders of the Company
prior to exercise of the Warrants. Holders of the Warrants evidenced hereby and
the shares of Common Stock issuable upon exercise hereof have certain rights
with respect to registration with the Securities and Exchange Commission of the
Warrants and Common Stock issuable upon exercise hereof. These registration
rights are set forth in that certain Warrant Agreement of even date herewith
pursuant to which this Warrant Certificate has been issued. Further, the Warrant
Agreement includes certain vesting provisions which may affect the Holder's
right to exercise the Warrants. The Warrant evidenced hereby may be exercised in
whole or in part by presentation of this Warrant certificate with the Purchase
Form on the reverse side hereof fully executed (with a signature guarantee as
provided on the reverse side hereof) and simultaneous payment of the Warrant
Price (subject to adjustment) at the principal office of the Company. Payment of
such price shall be made at the option of the holder in cash or by certified
check or bank draft. The Warrants evidenced hereby are part of a duly authorized
issue of Common Stock Purchase Warrants with rights to purchase an aggregate of
up to 400,000 shares of Common Stock of the Company. Upon any partial exercise
of the Warrant evidenced hereby, there shall be countersigned and issued to the
Holder a new Warrant Certificate in respect of the Shares as to which the
Warrants evidenced hereby shall not have been exercised. This Warrant
Certificate may be exchanged at the office of the Company by surrender of this
Warrant Certificate properly endorsed with a signature guarantee either
separately or in combination with one or more other Warrants for one or more new
Warrants to purchase the same aggregate number of Shares as evidenced by the
Warrant or Warrants exchanged. No fractional Shares will be issued upon the
exercise of rights to purchase hereunder, but the Company shall pay the cash
value of any fraction upon the exercise of one or more Warrants. The Holder
hereof may be treated by the Company and all other persons dealing with this
Warrant Certificate as the absolute owner hereof for all purposes and as the
person entitled to exercise the rights represented hereby, any notice to the
contrary notwithstanding, and until such transfer is on such books, the Company
may treat the Holder as the owner for all purposes.
Dated: __________, 1998 BETA
OIL & GAS, INC.
Secretary
Chief Executive Officer
SEE LEGEND ON REVERSE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF
CERTAIN STATES, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE LAWS, (ii) TO THE EXTENT
APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE LAW IS AVAILABLE.
ELECTION TO PURCHASE
The undersigned hereby elects irrevocably to exercise the within
Warrant and to purchase _______________________ shares of Common Stock of Beta
Oil & Gas, Inc. and hereby makes payment of $_________ (at the rate of $________
per share) in payment of the Exercise Price pursuant hereto. Please issue the
shares as to which this Warrant is exercised in accordance with the instructions
given below.
The undersigned represents and warrants that the exercise of the within
Warrant was solicited by the member firm of the National Association of
Securities Dealers, Inc. ("NASD") listed below. If not solicited by an NASD
member, please write "unsolicited" in the space below.
------------------------------------------------------
(Insert Name of NASD Member or "Unsolicited")
Dated: ________________, 19______
Signature: _____________________________________________
INSTRUCTIONS FOR REGISTRATION OF SHARES
Name (print) __________________________________________________________________
Address (print) ________________________________________________________________
ASSIGNMENT
FOR VALUE RECEIVED, ____________________________________ does hereby
sell, assign and transfer unto
___________________________________________________, the right to purchase
________________shares of Common Stock of Beta Oil & Gas, Inc., evidenced by the
within Warrant, and does hereby irrevocably constitute and appoint
__________________________________________ attorney to transfer such right on
the books of Beta Oil & Gas, Inc., with full power of substitution on the
premises.
Dated: ________________, 19______
Signature: _____________________________________________
Notice: The signature of Election to Purchase or Assignment must correspond with the name as written upon the
face of the within Warrant in every particular without alteration or enlargement or any change whatsoever. The
signature(s) must by guaranteed by an eligible guarantor institution (Banks, Stockbrokers, Savings and Loan
Associations and Credit Unions with membership in an approved signature
guarantee Medallion Program), pursuant to S.E.C. Rule 17Ad-15.
-----------------------------------------
Signature Guarantee
