Contract
THIS
WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. EXCEPT AS OTHERWISE
SET
FORTH HEREIN OR IN THE CREDIT AGREEMENT DATED AS OF MAY 4, 2005, NEITHER THIS
WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID
ACT OR, AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE, CUSTOMARY FOR
OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT
REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 OR REGULATION S
UNDER SUCH ACT.
Issued
March 31, 2006
THIS
CERTIFIES THAT, for value received, Petro Capital III, L.P or its registered
assigns, is entitled to purchase from Xxxxxx Petroleum, Inc., a Tennessee
corporation (the "Company"), at any time or from time to time during the period
specified in Section 2 hereof, nine thousand six hundred and thirty-nine (9,639)
fully paid and nonassessable shares of the Company's Common Stock, $0.0001
par
value per share (the "Common Stock"), at an exercise price per share equal
to
one dollar and fifteen cents ($1.15) (the "Exercise Price"). The term "Warrant
Shares," as used herein, refers to the shares of Common Stock purchasable
hereunder. The Warrant Shares and the Exercise Price are subject to adjustment
as provided in the next paragraph of this Warrant and in Section 4 hereof.
The
term "Warrants" means this Warrant and the other warrants issued pursuant to
that certain Credit Agreement, dated May 4, 2005 by and among the Company and
the Lenders listed on the execution page thereof (the "Credit
Agreement").
This
Warrant is subject to the following terms, provisions, and
conditions:
1.
Manner
of Exercise
(a)
Procedure. Subject to the provisions hereof, this Warrant may be exercised
by
the holder hereof, in whole or in part, by the surrender of this Warrant,
together with a completed exercise agreement in the form attached hereto (the
"Exercise Agreement"), to the Company during normal business hours on any
business day at the Company's principal executive offices (or such other office
or agency of the Company as it may designate by notice to the holder hereof),
and upon (i) payment to the Company in cash, by certified or official bank
check
or by wire transfer for the account of the Company of the Exercise Price for
the
Warrant Shares specified in the Exercise Agreement or (ii) if the resale of
the
Warrant Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), delivery to the Company of a written notice of an election
to
effect a Cashless Exercise (as defined in Section 1(c) below) for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee,
as
the record owner of such shares, as of the close of business on the date on
which the completed Exercise Agreement shall have been delivered and payment
shall have been made for such shares as set forth above. Certificates for the
Warrant Shares so purchased, representing the aggregate number of shares
specified in the Exercise Agreement, shall be delivered to the holder hereof
(with an appropriate restrictive legend until properly sold under the
Registration Statement, and without restrictive legend thereon when such
exercise occurs while such Warrant Shares so purchased may be resold by the
holder pursuant to Rule 144(k) or any similar successor rule) within a
reasonable time, not exceeding three (3) business days, after this Warrant
shall
have been so exercised. The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of such holder or such other name as shall be designated by such
holder, and shall be subject to all other applicable securities laws. If this
Warrant shall have been exercised only in part, then, at the option of the
holder (i) the holder may surrender this Warrant to the Company and, unless
this
Warrant has expired, the Company shall, at its expense, at the time of delivery
of such Warrant, deliver to the holder a new Warrant representing the number
of
shares with respect to which this Warrant shall not then have been exercised,
or
(ii) the holder may retain this certificate and the Warrant Shares purchasable
under this Warrant shall be reduced by such number of Warrant Shares so
exercised by the holder and properly delivered by the Company
hereunder.
(b)
Cashless Exercise. Notwithstanding anything to the contrary contained in this
Warrant, if the resale of the Warrant Shares by the holder is not then
registered pursuant to an effective registration statement under the Securities
Act, this Warrant may be exercised by presentation and surrender of this Warrant
to the Company at its principal executive offices with a written notice of
the
holder's intention to effect a cashless exercise, including a calculation of
the
number of shares of Common Stock to be issued upon such exercise in accordance
with the terms hereof (a "Cashless Exercise"). In the event of a Cashless
Exercise, in lieu of paying the Exercise Price in cash, the holder shall
surrender this Warrant for that number of shares of Common Stock determined
by
multiplying the number of Warrant Shares to which it would otherwise be entitled
by a fraction, the numerator of which shall be the difference between (i) the
average Market Price per share of the Common Stock for the five (5) Trading
Days
immediately prior to the date the completed Exercise Agreement shall have been
delivered to the Company (the "Cashless Exercise Market Price") and (ii) the
Exercise Price, and the denominator of which shall be the Cashless Exercise
Market Price.
2.
Period
of Exercise.
This
Warrant is exercisable at any time or from time to time on or after March 31,
2006, and before 6:00 p.m., Dallas, Texas time on ----March 31, 2011 (the
“Exercise Period").
3.
Certain Agreements of the Company.
The
Company hereby covenants and agrees as follows:
(a)
Shares to be Fully Paid. All Warrant Shares will, upon issuance in accordance
with the terms of this Warrant, be validly issued, fully paid, and nonassessable
and free from all taxes, liens, and charges with respect to the issue
thereof.
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(b)
Reservation of Shares. During the Exercise Period, the Company shall at all
times have authorized, and reserved for the purpose of issuance upon exercise
of
this Warrant, a sufficient number of shares of Common Stock to provide for
the
exercise of this Warrant.
(c)
Listing. The Company shall promptly secure the listing of the shares of Common
Stock issuable upon exercise of the Warrant upon each national securities
exchange or automated quotation system, if any, upon which shares of Common
Stock are then listed, or, if not so listed, on the NASD Over-the-Counter
Bulletin Board, (subject to official notice of issuance upon exercise of this
Warrant) and shall maintain, so long as any other shares of Common Stock shall
be so listed, such listing of all shares of Common Stock from time to time
issuable upon the exercise of this Warrant; and the Company shall so list on
each national securities exchange or automated quotation system, as the case
may
be, and shall maintain such listing of, any other shares of capital stock of
the
Company issuable upon the exercise of this Warrant if and so long as any shares
of the same class shall be listed on such national securities exchange or
automated quotation system.
(d)
Certain Actions Prohibited. The Company will not, by amendment of its charter
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 by it hereunder, 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
(i)
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, and (ii)
will take all such actions 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 this Warrant.
(e)
Successors and Assigns. This Warrant will be binding upon any entity succeeding
to the Company by merger, consolidation, or acquisition of all or substantially
all the Company's assets.
(f)
Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical
certificates representing the Common Stock issuable upon exercise, provided
the
Company's transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of
the
holder and its compliance with the provisions contained in Section 1, the
Company shall use its best efforts to cause its transfer agent to electronically
transmit the Common Stock issuable upon exercise to the holder by crediting
the
account of holder's broker with DTC through its Deposit Withdrawal Agent
Commission ("DWAC") system.
4.
Antidilution Provisions. During the Exercise Period, the Exercise Price and
the
number of Warrant Shares shall be subject to adjustment from time to time as
provided in this Section 4. In the event that any adjustment of the Exercise
Price as required herein results in a fraction of a cent, such Exercise Price
shall be rounded up to the nearest cent.
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(a)
Adjustment of Exercise Price upon Issuance of Common Stock. Except as otherwise
provided in Sections 4(c) and 4(e) hereof, if and whenever on or after the
date
of issuance of this Warrant, the Company issues or sells, or in accordance
with
Section 4(b) hereof is deemed to have issued or sold, any shares of Common
Stock
for no consideration or for a consideration per share (before deduction of
reasonable expenses or commissions or underwriting discounts or allowances
in
connection therewith) less than the Exercise Price on the date of issuance
(a
"Dilutive Issuance"), then immediately upon the Dilutive Issuance, the Exercise
Price will be reduced to the amount of the consideration per share received
by
the Company in such Dilutive Issuance; provided that only one adjustment will
be
made for each Dilutive Issuance. No adjustment to the Exercise Price shall
have
the effect of increasing the Exercise Price above the Exercise Price in effect
immediately prior to such adjustment.
(b)
Effect on Exercise Price of Certain Events. For purposes of determining the
adjusted Exercise Price under Section 4(a) hereof, the following will be
applicable:
(i)
Issuance of Rights or Options. If the Company in any manner issues or grants
any
warrants, rights or options, whether or not immediately exercisable, to
subscribe for or to purchase Common Stock or other securities convertible into
or exchangeable for Common Stock ("Convertible Securities") such warrants,
rights and options to purchase Common Stock or Convertible Securities are
hereinafter referred to as "Options") and the price per share for which Common
Stock is issuable upon the exercise of such Options is less than the Exercise
Price on the date of issuance or grant of such Options, then the maximum total
number of shares of Common Stock issuable upon the exercise of all such Options
will, as of the date of the issuance or grant of such Options, be deemed to
be
outstanding and to have been issued and sold by the Company for such price
per
share. For purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon the exercise of such Options" is determined by
dividing (i) the total amount, if any, received or receivable by the Company
as
consideration for the issuance or granting of all such Options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the exercise of all such Options, plus, in the case of Convertible
Securities issuable upon the exercise of such Options, the minimum aggregate
amount of additional consideration payable upon the conversion or exchange
thereof at the time such Convertible Securities first become convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise of all such Options (assuming full conversion of
Convertible Securities, if applicable). No further adjustment to the Exercise
Price will be made upon the actual issuance of such Common Stock upon the
exercise of such Options or upon the conversion or exchange of Convertible
Securities issuable upon exercise of such Options.
(ii)
Issuance of Convertible Securities. If the Company in any manner issues or
sells
any Convertible Securities, whether or not immediately convertible (other than
where the same are issuable upon the exercise of Options) and the price per
share for which Common Stock is issuable upon such conversion or exchange is
less than the Exercise Price on the date of issuance, then the maximum total
number of shares of Common Stock issuable upon the conversion or exchange of
all
such Convertible Securities will, as of the date of the issuance of such
Convertible Securities, be deemed to be outstanding and to have been issued
and
sold by the Company for such price per share. For the purposes of the preceding
sentence, the "price per share for which Common Stock is issuable upon such
conversion or exchange" is determined by dividing (i) the total amount, if
any,
received or receivable by the Company as consideration for the issuance or
sale
of all such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the conversion
or
exchange thereof at the time such Convertible Securities first become
convertible or exchangeable, by
4
(ii)
the
maximum total number of shares of Common Stock issuable upon the conversion
or
exchange of all such Convertible Securities. No further adjustment to the
Exercise Price will be made upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
(iii)
Change in Option Price or Conversion Rate. If there is a change at any time
in
(i) the amount of additional consideration payable to the Company upon the
exercise of any Options; (ii) the amount of additional consideration, if any,
payable to the Company upon the conversion or exchange of any Convertible
Securities; or (iii) the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock (other than under or by reason
of provisions designed to protect against dilution), the Exercise Price in
effect at the time of such change will be readjusted to the Exercise Price
which
would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed additional consideration
or changed conversion rate, as the case may be, at the time initially granted,
issued or sold.
(iv)
Treatment of Expired Options and Unexercised Convertible Securities. If, in
any
case, the total number of shares of Common Stock issuable upon exercise of
any
Option or upon conversion or exchange of any Convertible Securities is not,
in
fact, issued and the rights to exercise such Option or to convert or exchange
such Convertible Securities shall have expired or terminated, the Exercise
Price
then in effect will be readjusted to the Exercise Price which would have been
in
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual number of shares
of Common Stock issued upon exercise or conversion thereof), never been
issued.
(v)
Calculation of Consideration Received. If any Common Stock, Options or
Convertible Securities are issued, granted or sold for cash, the consideration
received therefor for purposes of this Warrant will be the amount received
by
the Company therefor, before deduction of reasonable commissions, underwriting
discounts or allowances or other reasonable expenses paid or incurred by the
Company in connection with such issuance, grant or sale. In case any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
part or all of which shall be other than cash, the amount of the consideration
other than cash received by the Company will be the fair value of such
consideration, except where such consideration consists of securities, in which
case the amount of consideration received by the Company will be the average
Market Price thereof for the five (5) Trading Days immediately prior to the
date
of receipt. In case any Common Stock, Options or Convertible Securities are
issued in connection with any acquisition, merger or consolidation in which
the
Company is the surviving corporation, the amount of consideration therefor
will
be deemed to be the fair value of such portion of the net assets and business
of
the non-surviving corporation as is attributable to such Common Stock, Options
or Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined in good faith
by
the Board of Directors of the Company.
5
(vi)
Exceptions to Adjustment of Exercise Price. No adjustment to the Exercise Price
will be made (i) upon the exercise of any warrants, options or convertible
securities granted, issued and outstanding on the date of issuance of this
Warrant or (ii) upon the exercise of the Warrants.
(c)
Subdivision of or Combination of Common Stock. If the Company at any time
subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date
of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at
any
time combines (by any reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a smaller number of shares, then, after the date of record for effecting
such combination, the Exercise Price in effect immediately prior to such
subdivision will be proportionately increased.
(d)
Adjustment of Number of Shares. Upon each adjustment of the Exercise Price
pursuant to the provisions of this Section 4, the number of shares of Common
Stock issuable upon exercise of this Warrant shall be adjusted by multiplying
a
number equal to the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock issuable upon exercise of
this Warrant immediately prior to such adjustment and dividing the product
so
obtained by the adjusted Exercise Price.
(e)
Consolidation, Merger or Sale. In case of any consolidation of the Company
with,
or merger of the Company into any other corporation, or in case of any sale
or
conveyance of all or substantially all of the assets of the Company other than
in connection with a plan of complete liquidation of the Company, then as a
condition of such consolidation, merger or sale or conveyance, adequate
provision will be made whereby the holder of this Warrant will have the right
to
acquire and receive upon exercise of this Warrant in lieu of the shares of
Common Stock immediately theretofore acquirable upon the exercise of this
Warrant, such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for the number of shares of Common Stock
immediately theretofore acquirable and receivable upon exercise of this Warrant
had such consolidation, merger or sale or conveyance not taken place. In any
such case, the Company will make appropriate provision to insure that the
provisions of this Section 4 hereof will thereafter be applicable as nearly
as
may be in relation to any shares of stock or securities thereafter deliverable
upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Section 4 and the obligations
to
deliver to the holder of this Warrant such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the holder may be entitled
to
acquire.
(f)
Distribution of Assets. In case the Company shall declare or make any
distribution of its assets (including cash) to holders of Common Stock as a
partial liquidating dividend, by way of return of capital or otherwise, then,
after the date of record for determining shareholders entitled to such
distribution, but prior to the date of distribution, the holder of this Warrant
shall be entitled upon exercise of this Warrant for the purchase of any or
all
of the shares of Common Stock subject hereto, to receive the amount of such
assets which would have been payable to the holder had such holder been the
holder of such shares of Common Stock on the record date for the determination
of shareholders entitled to such distribution.
6
(g)
Notice of Adjustment. Upon the occurrence of any event which requires any
adjustment of the Exercise Price, then, and in each such case, the Company
shall
give notice thereof to the holder of this Warrant, which notice shall state
the
Exercise Price resulting from such adjustment and the increase or decrease
in
the number of Warrant Shares purchasable at such price upon exercise, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based. Such calculation shall be certified by the Chief
Financial Officer of the Company.
(h)
Minimum Adjustment of Exercise Price. No adjustment of the Exercise Price shall
be made in an amount of less than 1% of the Exercise Price in effect at the
time
such adjustment is otherwise required to be made, but any such lesser adjustment
shall be carried forward and shall be made at the time and together with the
next subsequent adjustment which, together with any adjustments so carried
forward, shall amount to not less than 1% of such Exercise Price.
(i)
No
Fractional Shares. No fractional shares of Common Stock are to be issued upon
the exercise of this Warrant, but the Company shall pay a cash adjustment in
respect of any fractional share which would otherwise be issuable in an amount
equal to the same fraction of the average Market Price per share of Common
Stock
for the five (5) Trading Days immediately prior to the date of such
exercise.
(j)
Other
Notices. In case at any time:
(i)
the
Company shall declare any dividend upon the Common Stock payable in shares
of
stock of any class or make any other distribution(including dividends or
distributions payable in cash out of retained earnings) to the holders of the
Common Stock;
(ii)
the
Company shall offer for subscription pro rata to the holders of the Common
Stock
any additional shares of stock of any class or other rights;
(iii)
there shall be any capital reorganization of the Company, or reclassification
of
the Common Stock, or consolidation or merger of the Company with or into, or
sale of all or substantially all its assets to, another corporation or entity;
or
(iv)
there shall be a voluntary or involuntary dissolution, liquidation or winding
up
of the Company; then, in each such case, the Company shall give to the holder
of
this Warrant (a) notice of the date on which the books of the Company shall
close or a record shall be taken for determining the holders of Common Stock
entitled to receive any such dividend, distribution, or subscription rights
or
for determining the holders of Common Stock entitled to vote in respect of
any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, notice of the date (or, if not then known, a reasonable
approximation thereof by the Company) when the same shall take place. Such
notice shall also specify the date on which the holders of Common Stock shall
be
entitled to receive such dividend, distribution, or subscription rights or
to
exchange their Common Stock for stock or other securities or property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, or winding-up, as the case may be. Such notice
shall be given at least 30 days prior to the record date or the date on which
the Company's books are closed in respect thereto. Failure to give any such
notice or any defect therein shall not affect the validity of the proceedings
referred to in clauses (i), (ii), (iii) and (iv) above.
7
(k)
Certain Events. If any event occurs of the type contemplated by the adjustment
provisions of this Section 4 but not expressly provided for by such provisions,
the Company will give notice of such event as provided in Section 4(g) hereof,
and the Company's Board of Directors will make an appropriate adjustment in
the
Exercise Price and the number of shares of Common Stock acquirable upon exercise
of this Warrant so that the rights of the holder shall be neither enhanced
nor
diminished by such event.
(l)
Certain Definitions.
(i)
"Market Price" means, as of any date, (i) the average of the high and low
trading price on such date for the shares of Common Stock on the OTCBB as
reported by Bloomberg, or (ii) if the OTCBB is not the principal trading market
for the shares of Common Stock, the closing bid price on the principal trading
market for the Common Stock as reported by Bloomberg, or
(iii)
if
market value cannot be calculated as of such date on any of the foregoing bases,
the Market Price shall be the fair market value as reasonably determined in
good
faith by (a) the Board of Directors of the Company or, at the option of a
majority-in-interest of the holders of the outstanding Warrants by (b) an
independent investment bank of nationally recognized standing in the valuation
of businesses similar to the business of the corporation. The manner of
determining the Market Price of the Common Stock set forth in the foregoing
definition shall apply with respect to any other security in respect of which
a
determination as to market value or market price must be made
hereunder.
(ii)
"Common Stock," for purposes of this Section 4, includes the Common Stock,
par
value $0.0001 per share, and any additional class of stock of the Company having
no preference as to dividends or distributions on liquidation, provided that
the
shares purchasable pursuant to this Warrant shall include only shares of Common
Stock, par value $0.0001 per share, in respect of which this Warrant is
exercisable, or shares resulting from any subdivision or combination of such
Common Stock, or in the case of any reorganization, reclassification,
consolidation, merger, or sale of the character referred to in Section 4(e)
hereof, the stock or other securities or property provided for in such
Section.
(iii)
"Trading Day" shall mean any day on which the Common Stock is traded for any
period on the OTCBB, or on the principal securities exchange or other securities
market on which the Common Stock is then being traded. The foregoing definition
of "Trading Day" shall apply with respect to any other security to which a
Trading Day is referred.
5.
Issue
Tax.
The
issuance of certificates for Warrant Shares upon the exercise of this Warrant
shall be made without charge to the holder of this Warrant or such shares for
any issuance tax or other costs in respect thereof, provided that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than the holder of this Warrant.
8
6.
No
Rights or Liabilities as a Stockholder.
This
Warrant shall not entitle the holder hereof to any voting rights or other rights
as a stockholder of the Company. No provision of this Warrant, in the absence
of
affirmative action by the holder hereof to purchase Warrant Shares, and no
mere
enumeration herein of the rights or privileges of the holder hereof, shall
give
rise to any liability of such holder for the Exercise Price or as a stockholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
7.
Transfer, Exchange, and Replacement of Warrant.
(a)
Restriction on Transfer. This Warrant and the rights granted to the holder
hereof are transferable, in whole or in part, upon surrender of this Warrant,
together with a properly executed assignment in the form attached hereto, at
the
office or agency of the Company referred to in Section 7(e) below, provided,
however, that any transfer or assignment shall be subject to the conditions
set
forth in Section 7(f) hereof and to the applicable provisions of the Credit
Agreement. Until due presentment for registration of transfer on the books
of
the Company, the Company may treat the registered holder hereof as the owner
and
holder hereof for all purposes, and the Company shall not be affected by any
notice to the contrary. Notwithstanding anything to the contrary contained
herein, the registration rights described in Section 8 are assignable only
in
accordance with the provisions of the Registration Rights Agreement, dated
May
4, 2005 (the “Registration Rights Agreement”) and as amended December 1, 2005
(the “Amendment to Registration Rights Agreement” and together with the
Registration Rights Agreement, the “Registration Rights Agreement, as
amended”).
(b)
Warrant Exchangeable for Different Denominations. This Warrant is exchangeable,
upon the surrender hereof by the holder hereof at the office or agency of the
Company referred to in Section 7(e) below, for new Warrants of like tenor
representing in the aggregate the right to purchase the number of shares of
Common Stock which may be purchased hereunder, each of such new Warrants to
represent the right to purchase such number of shares as shall be designated
by
the holder hereof at the time of such surrender.
(c)
Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to
the
Company of the loss, theft, destruction, or mutilation of this Warrant and,
in
the case of any such loss, theft, or destruction, upon delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company, or, in
the
case of any such mutilation, upon surrender and cancellation of this Warrant,
the Company, at its expense, will execute and deliver, in lieu thereof, a new
Warrant of like tenor.
(d)
Cancellation; Payment of Expenses. Upon the surrender of this Warrant in
connection with any transfer, exchange, or replacement as provided in this
Section 7, this Warrant shall be promptly canceled by the Company. The Company
shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Section 7.
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(e)
Register. The Company shall maintain, at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to
the
holder hereof), a register for this Warrant, in which the Company shall record
the name and address of the person in whose name this Warrant has been issued,
as well as the name and address of each transferee and each prior owner of
this
Warrant.
(f)
Exercise or Transfer Without Registration. If, at the time of the surrender
of
this Warrant in connection with any exercise, transfer, or exchange of this
Warrant, this Warrant (or, in the case of any exercise, the Warrant Shares
issuable hereunder), shall not be registered under the Securities Act and under
applicable state securities or blue sky laws, the Company may require, as a
condition of allowing such exercise, transfer, or exchange, (i) that the holder
or transferee of this Warrant, as the case may be, furnish to the Company a
written opinion of counsel, which opinion and counsel are reasonably acceptable
to the Company, to the effect that such exercise, transfer, or exchange may
be
made without registration under said Act and under applicable state securities
or blue sky laws, (ii) that the holder or transferee execute and deliver to
the
Company an investment letter in form and substance acceptable to the Company
and
(iii) that the transferee be an "accredited investor" as defined in Rule 501(a)
promulgated under the Securities Act; provided that no such opinion, letter
or
status as an "accredited investor" shall be required in connection with a
transfer pursuant to Rule 144 under the Securities Act. The first holder of
this
Warrant, by taking and holding the same, represents to the Company that such
holder is acquiring this Warrant for investment and not with a view to the
distribution thereof.
8.
Registration Rights.
The
initial holder of this Warrant (and certain assignees thereof) is entitled
to
the benefit of such registration rights in respect of the Warrant Shares as
are
set forth in Section 2 of the Registration Rights Agreement, as
amended.
9.
Notices.
All
notices, requests, and other communications required or permitted to be given
or
delivered hereunder to the holder of this Warrant shall be in writing, and
shall
be personally delivered, or shall be sent by certified or registered mail or
by
recognized overnight mail courier, postage prepaid and addressed, to such holder
at the address shown for such holder on the books of the Company, or at such
other address as shall have been furnished to the Company by notice from such
holder. All notices, requests, and other communications required or permitted
to
be given or delivered hereunder to the Company shall be in writing, and shall
be
personally delivered, or shall be sent by certified or registered mail or by
recognized overnight mail courier, postage prepaid and addressed, to the office
of the Company at 0000 Xxxxx Xxxxxxx, Xxxxxxxxxx, Xxxxxxxxx 00000, Attention:
Chief Executive Officer, or at such other address as shall have been furnished
to the holder of this Warrant by notice from the Company. Any such notice,
request, or other communication may be sent by facsimile, but shall in such
case
be subsequently confirmed by a writing personally delivered or sent by certified
or registered mail or by recognized overnight mail courier as provided above.
All notices, requests, and other communications shall be deemed to have been
given either at the time of the receipt thereof by the person entitled to
receive such notice at the address of such person for purposes of this Section
9, or, if mailed by registered or certified mail or with a recognized overnight
mail courier upon deposit with the United States Post Office or such overnight
mail courier, if postage is prepaid and the mailing is properly addressed,
as
the case may be.
10
10.
Governing Law.
This
Warrant shall be enforced, governed by and construed in accordance with the
laws
of the State of Texas applicable to agreements made and to be performed entirely
within such state, without regard to the principles of conflict of laws. The
Company hereby submits to the exclusive jurisdiction of the United States
Federal Courts located in Dallas, Texas with respect to any dispute arising
under this Warrant, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby. The Company irrevocably waives
the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
The Company further agrees that service of process upon it mailed by first
class
mail shall be deemed in every respect effective service of process upon it
in
any such suit or proceeding. Nothing herein shall affect the holder's right
to
serve process in any other manner permitted by law. The parties agree that
a
final non-appealable judgment in any such suit or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on such judgment or in any
other lawful manner. The party which does not prevail in any dispute arising
under this Warrant shall be responsible for all fees and expenses, including
attorneys' fees, incurred by the prevailing party in connection with such
dispute.
11.
Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise.
In
addition to any other rights available to the holder, if the Company fails
for
any reason to deliver to the holder such certificate or certificates pursuant
to
Section 1 by the third (3rd) business day after exercise, and if after such
third (3rd) business day after exercise the holder is required by its brokerage
firm to purchase (in an open market transaction or otherwise) Common Stock
to
deliver in satisfaction of a sale by such holder of Common Stock which the
holder anticipated receiving upon such exercise (a "Buy-In"), then the Company
shall (a) pay in cash to the holder (in addition to any remedies available
to or
elected by the holder) the amount by which (i) the holder's total purchase
price
(including brokerage commissions, if any) for the Common Stock so purchased
exceeds (ii) the product of (A) the aggregate number of shares of Common Stock
that such holder anticipated receiving from the exercise at issue multiplied
by
(B) the actual sale price of the Common Stock at the time of the sale (including
brokerage commissions, if any) giving rise to such purchase obligation and
(b)
at the option of the holder, either reissue an identical Warrant to purchase
such number of shares of Common Stock equal to the attempted exercise or deliver
to the holder the number of shares of Common Stock that would have been issued
had the Company timely complied with its delivery requirements under Section
1.
The Holder shall provide the Company written notice indicating the amounts
payable to the holder in respect of the Buy-In.
12.
Miscellaneous.
(a)
Amendments. This Warrant and any provision hereof may only be amended by an
instrument in writing signed by the Company and the holder hereof.
11
(b)
Descriptive Headings. The descriptive headings of the several sections of this
Warrant are inserted for purposes of reference only, and shall not affect the
meaning or construction of any of the provisions hereof.
(c)
Remedies. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the holder, by vitiating the intent
and
purpose of the transaction contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Warrant will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Warrant, that the holder shall
be entitled, in addition to all other available remedies at law or in equity,
and in addition to the penalties assessable herein, to an injunction or
injunctions restraining, preventing or curing any breach of this Warrant and
to
enforce specifically the terms and provisions thereof, without the necessity
of
showing economic loss and without any bond or other security being
required.
IN
WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly
authorized officer.
|
XXXXXX
PETROLEUM, INC.
By:
_______________________________
Xxxxx
Xxxxxx
President
and CEO
Dated
as of _____________
|
12
FORM
OF
EXERCISE AGREEMENT
Dated:
________ __,200_
To:
______________________
The
undersigned, pursuant to the provisions set forth in the within Warrant, hereby
agrees to purchase ________ shares of Common Stock covered by such Warrant,
and
makes payment herewith in full therefor at the price per share provided by
such
Warrant in cash or by certified or official bank check or by wired funds in
the
amount of, or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under
the
Securities Act of 1933, as amended, by surrender of securities issued by the
Company (including a portion of the Warrant) having a market value (in the
case
of a portion of this Warrant, determined in accordance with Section 1(c) of
the
Warrant) equal to $_________. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:
|
Name:______________________________
Signature:
Address:
___________________________
___________________________
Note:
The above signature should correspond exactly with the name on the
face of
the within Warrant, if applicable.
|
and,
if
said number of shares of Common Stock shall not be all the shares purchasable
under the within Warrant, a new Warrant is to be issued in the name of said
undersigned covering the balance of the shares purchasable thereunder less
any
fraction of a share paid in cash.
13
FORM
OF
ASSIGNMENT
FOR
VALUE
RECEIVED, the undersigned hereby sells, assigns, and transfers all the rights
of
the undersigned under the within Warrant, with respect to the number of shares
of Common Stock covered thereby set forth hereinbelow, to:
| Name of Assignee | Address | No of Shares |
,
and
hereby irrevocably constitutes and appoints_____________________________ as
agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the
premises.
Dated:
________ __, 200_
|
In
the presence of:
|
___________________________________
___________________________________
|
|
| Name: | __________________________ | |
| Signature: | __________________________ | |
| Title of Signing Officer or Agent (if any): | ||
| ____________________________________ | ||
| Address: | ____________________________ | |
| ____________________________ | ||
| ____________________________ | ||
|
Note:
The above signature should correspond exactly with the name on the
face of
the within Warrant, if applicable.
|
||
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