EXHIBIT 10.31
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY STATE SECURITIES
OR BLUE SKY LAWS. NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD,
ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION
UNDER SAID ACT AND UNDER APPLICABLE STATE SECURITIES OR BLUE SKY LAWS OR
EXEMPTIONS FROM SUCH REGISTRATION. THIS WARRANT MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT UPON THE CONDITIONS SPECIFIED IN
THIS WARRANT, AND NO SALE, ASSIGNMENT, TRANSFER, OR OTHER DISPOSITION OF THIS
WARRANT SHALL BE VALUED OR EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS SHALL HAVE
BEEN COMPLIED WITH.
No. -003- Right to Purchase 167,500 Shares
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, First Union Capital Partners,
Inc., or registered assigns, is entitled to purchase from Cliffwood Oil & Gas
Corp., a Texas corporation (the "Company"), at any time or from time to time
during the period specified in PARAGRAPH 3 hereof, One Hundred Sixty-Seven
Thousand Five Hundred (167,500) fully paid and nonassessable shares of the
Company's Class B Non-Voting Common Stock, par value $0.01 per share (the "Class
B Common"), at a price per share of $4.25 (the "Exercise Price"). The term
"Warrant Shares", as used herein, refers to the shares of Class B Common
purchasable hereunder. The Warrant Shares and the Exercise Price are subject to
adjustment as provided in PARAGRAPH 5 hereof.
This Warrant is subject to the terms of a Common Stock and Warrant
Purchase Agreement dated as of May 30, 1997 (the "Purchase Agreement") between
the Company and First Union Capital Partners, Inc., and to the following terms,
provisions, and conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES. 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, to the Company during normal
business hours on any business day at the Company's principal office in Houston,
Texas (or such other office or agency of the Company as it may designate by
notice to the holder hereof), and upon payment to the Company in cash or by
certified or official bank check of the Exercise Price for the Warrant Shares
specified in said Exercise Agreement. The Warrant Shares so purchased shall be
deemed to be issued to the holder hereof or its designee as the record owner of
such shares as of the close of business on the date on which this Warrant shall
have been surrendered, the completed Exercise Agreement delivered, and payment
made for such shares as
aforesaid. Certificates for the Warrant Shares so purchased, representing the
aggregate number of shares specified in said Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding seven
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 said holder or such other name as
shall be designated by said holder. If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of said certificates, deliver to said holder a
new Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised. The Company shall pay all taxes and other
expenses and charges payable in connection with the preparation, execution, and
delivery of stock certificates (and any new Warrants) pursuant to this PARAGRAPH
1 except that, in case such stock certificates shall be registered in a name or
names other than the holder of this Warrant, funds sufficient to pay all stock
transfer taxes which shall be payable in connection with the execution and
delivery of such stock certificates shall be paid by the holder hereof to the
Company at the time of the delivery of such stock certificates by the Company as
mentioned above.
2. CASHLESS EXERCISE. The holder of this Warrant shall have the right to
pay all or a portion of the Exercise Price by making a cashless exercise, in
which case such holder shall not pay the Exercise Price in cash and the number
of shares of Class B Common otherwise issuable pursuant to the Exercise
Agreement shall be reduced by the total number of shares of Class B Common
otherwise issuable to such holder multiplied by the Exercise Price and divided
by the fair market value per share of a share of Class B Common on the date of
the Exercise Notice, as such fair market value shall be determined in good faith
by the Board of Directors of the Company.
3. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from
time to time after May 31, 1997, and before 5:00 p.m., local time on May 31,
2002.
4. 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, be
validly issued, fully paid, and nonassessable and free from all taxes, liens,
and charges with respect to the issue thereof.
(b) RESERVATION OF SHARES. During the period within which this Warrant may
be exercised, the Company will at all times have authorized, and reserved for
the purpose of issue upon exercise of this Warrant, (i) a sufficient number of
shares of Class B Common to provide for the exercise of this Warrant, and (ii) a
sufficient number of shares of Class A Common Stock to provide for the
conversion of the Warrant Shares.
(c) 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, (i) the Company will not increase the
par value of the shares of Class B Common receivable upon the exercise of this
Warrant above the Exercise Price then in effect, and (ii) before taking any
action which would cause an adjustment reducing the Exercise Price below the
then par value of the shares of Class B Common so receivable, the Company will
take all such corporate action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Class B Common at such adjusted Exercise Price upon the exercise of this
Warrant.
(d) REGISTRATION. If the issuance of any Warrant Shares required to be
reserved for purposes of exercise of this Warrant requires registration with or
approval of any governmental authority under any federal or state law (other
than any registration under the Securities Act of 1933, as amended, or under
applicable state securities or blue sky laws) or listing on any national
securities exchange, before such shares may be issued upon exercise of this
Warrant, the Company will, at its expense, use its best efforts to cause such
shares to be duly registered or approved, or listed on the relevant national
securities exchange, as the case may be, at such time, so that such shares may
be issued in accordance with the terms hereof.
5. ANTIDILUTION PROVISIONS. The Exercise Price shall be subject to
adjustment from time to time as provided in this PARAGRAPH 5. Upon each
adjustment of the Exercise Price, the holder of this Warrant shall thereafter be
entitled to purchase, at the Exercise Price resulting from such adjustment, the
largest number of Warrant Shares obtained by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
purchasable hereunder immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment. For
purposes of this PARAGRAPH 5, the term "Capital Stock", as used herein, includes
the Class B Common, the Class A Voting Common Stock of the Company, and any
additional class of stock of the Company having no preference as to dividends or
distributions on liquidation which may be authorized in the future, provided
that the shares purchasable pursuant to this Warrant shall include only shares
of Class B Common, or shares resulting from any subdivision or combination of
the Class B Common, or in the case of any reorganization, reclassification,
consolidation, merger, or sale of the character referred to in PARAGRAPH 5(G)
hereof, the stock or other securities or property provided for in said
Paragraph. For purposes of this PARAGRAPH 5, the term "Net Asset Value" shall
mean, at a point in time, an amount determined by dividing X by Y, where "X" is
(i) the total assets of the Company and its subsidiaries which would be shown as
assets on a consolidated balance sheet of the Company and its subsidiaries as of
such time prepared in accordance with generally accepted accounting principles
(exclusive, however, of oil and gas properties), PLUS (ii) the "Calculated
Market Value" (as defined below) of such oil and gas properties, MINUS (iii) the
total liabilities of the Company and its subsidiaries which would be shown as
liabilities on a consolidated balance sheet of the Company and its subsidiaries
as of such time prepared in accordance with generally accepted accounting
principles, and where "Y" is the total number of shares of Capital Stock
outstanding as of such time. In computing Net Asset Value, the "Calculated
Market Value" of oil and gas properties of the Company and its consolidated
subsidiaries shall be the value determined in accordance with ss. 210.4-10 of
Regulation S-X, as promulgated by the Securities and Exchange Commission, with
the following adjustments to certain parameters: (i) applicable future
prices for commodities shall be determined as follows: (A) for crude oil the
beginning price shall be calculated using the average of one full calendar year
forward prices, and (B) for natural gas the beginning price shall be calculated
using the average of the first twelve month forward prices, each as reported on
the New York Mercantile Exchange; PROVIDED, that such prices shall be adjusted
for product quality and for basis differentials resulting from product location,
as determined by the holder of this Warrant by obtaining market quotes from at
least two mutually agreeable major independent third party dealers for each
pipeline or point of delivery; PROVIDED, FURTHER, that such prices shall
escalate at 3% per annum thereafter; (ii) beginning lease operating expenses, as
determined by ss. 210.4-10 of Regulation S-X, shall escalate at 3% per annum
thereafter; (iii) the resulting cashflow stream, as determined by ss. 210.4-10
of Regulation S-X, after giving effect to the adjustments to commodity price and
lease operating expense assumptions, shall be discounted for a present value at
a 12% discount rate; and (iv) that in making such computation, only the
following categories (and portions of such categories) of reserves shall be
utilized: 100% of proved developed producing reserves; 80% of proved developed
non-producing reserves; and 50% of proved undeveloped reserves.
(a) ISSUANCE OF CAPITAL STOCK. Other than securities issued (x) in a
transaction described in Sections 8.4(a) or 8.4(e) of the Purchase Agreement, or
(y) pursuant to the private offering which was authorized by the Board of
Directors of the Company pursuant to resolutions dated February 13, 1997
(provided such securities are offered for at least $3.00 per share and such sale
of securities is closed and funded no later than July 31, 1997), if and whenever
the Company shall issue or sell any shares of Capital Stock without
consideration or for a consideration per share less than the Exercise Price in
effect immediately prior to the time of such issue or sale, and/or the Company
shall issue or sell any shares of its Capital Stock for a consideration per
share less than the Net Asset Value on the date of such issue or sale, then,
forthwith upon such issue or sale, the Exercise Price shall be reduced to a
price (calculated to the nearest cent) determined as provided in PARAGRAPH (I)
below (in the case of a consideration per share less than the Exercise Price),
or the price (calculated to the nearest cent) determined as provided by
PARAGRAPH (II) below (in the case of a consideration per share less than the Net
Asset Value), or the lower of the prices (calculated to the nearest cent)
determined as provided in PARAGRAPHS (I) and (II) below (in the case of a
consideration per share which is less than both the Exercise Price and the Net
Asset Value):
(i) by dividing X by Y, where "X" is an amount equal to the sum
of (A) the total number of shares of Capital Stock outstanding immediately
prior to such issue or sale multiplied by the then existing Exercise
Price, and (B) the consideration, if any, received by the Company upon
such issue or sale, and where "Y" is the total number of shares of Capital
Stock outstanding immediately after such issue or sale; and
(ii) by multiplying the Exercise Price in effect immediately prior
to the time of such issue or sale by X/Y, where "X" is an amount equal to
the sum of (A) the number of shares of Capital Stock outstanding
immediately prior to such issue or sale multiplied by the Net Asset Value
immediately prior to such issue or sale and (B) the consideration received
by the Company upon such issue or sale, and where "Y" is equal to the
product of (A) the total number of shares of Capital Stock outstanding
immediately after such issue or sale and (B) the Net Asset Value
immediately prior to such issue or sale.
(b) TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES; COMPUTATION OF
CONSIDERATION. For purposes of PARAGRAPH 5(A) hereof, the following provisions
shall also be applicable:
(i) In case the Company shall grant any rights to subscribe for
or purchase, or any options for the purchase of, Capital Stock or
securities convertible into or exchangeable for Capital Stock (such rights
and options being herein called "Options" and such convertible or
exchangeable securities being herein called "Convertible Securities"),
whether or not such Options or the rights to convert or exchange any such
Convertible Securities are immediately exercisable, and the price per
share for which Capital Stock is issuable upon the exercise of such
Options or upon the conversion or exchange of such Convertible Securities
(as determined in accordance with the following sentence) shall be less
than the greater of (A) the Exercise Price in effect immediately prior to
the time of the granting of such Options and (B) the Net Asset Value,
determined as of the date of granting such Options, then the total maximum
number of shares of Capital Stock issuable upon the exercise of such
Options or upon the conversion or exchange of the total maximum amount of
such Convertible Securities issuable upon the exercise of such Options
shall (as of the date of granting of such Options) be deemed to be
outstanding and to have been issued and sold for such price per share. The
price per share for which the Capital Stock is issuable, as provided in
the preceding sentence, shall be determined by dividing (x) the total
amount, if any, received or receivable by the Company as consideration for
the granting of such Options, plus the minimum aggregate amount of
additional consideration payable to the Company upon the exercise of such
Options, plus, in the case of any such Options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange of such
Convertible Securities, by (y) the total maximum number of shares of
Capital Stock issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities issuable upon
the exercise of such Options. Except as provided in PARAGRAPH 5(B)(VI)
hereof, no further adjustments of the Exercise Price shall be made upon
the actual issue of such Capital Stock or of such Convertible Securities
upon the exercise of such Options or upon the actual issue of such Capital
Stock upon the conversion or exchange of such Convertible Securities.
(ii) In case the Company shall issue or sell Convertible
Securities, whether or not the rights to convert or exchange such
Convertible Securities are immediately exercisable, and the price per
share for which Capital Stock is issuable upon the conversion or exchange
of such Convertible Securities (as determined in accordance with the
following sentence) shall be less than the greater of (A) the Exercise
Price in effect immediately prior to the time of the issue or sale of such
Convertible Securities or (B) the Net Asset Value, determined as of the
date of such issue or sale of such Convertible Securities, then the total
maximum number of shares of Capital Stock issuable upon the conversion or
exchange of all such Convertible Securities shall (as of the date of the
issue or sale of such Convertible Securities) be deemed to be outstanding
and to have been issued and sold for such price per share, provided that
(a) except as provided in PARAGRAPH 5(B)(VI) hereof, no further
adjustments of the Exercise Price shall be made upon the actual issue of
such Capital Stock upon the conversion or exchange of such Convertible
Securities, and (b) if any such issue or
sale of such Convertible Securities is made upon exercise of any Options
for which adjustments of the Exercise Price have been or are to be made
pursuant to other provisions of this PARAGRAPH 5(B), no further adjustment
of the Exercise Price shall be made by reason of such issue or sale. The
price per share for which the Capital Stock is issuable, as provided in
the preceding sentence, shall be determined by dividing (x) the total
amount received or receivable by the Company as consideration for the
issue or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company upon
the conversion or exchange thereof, by (y) the total maximum number of
shares of Capital Stock issuable upon the conversion or exchange of all
such Convertible Securities.
(iii) In case at any time the Company shall pay a dividend or make
any other distribution upon the Capital Stock payable in Capital Stock,
Options or Convertible Securities, any Capital Stock, Options or
Convertible Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued without
consideration.
(iv) In case at any time any Capital Stock, Convertible
Securities, or Options shall be issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the Company
therefor, without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in
connection therewith. In case any Capital Stock, Convertible Securities,
or Options shall be issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Company
therefor shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors of the Company, except
where such consideration consists of securities, in which case the amount
of consideration received by the Company shall be the market price thereof
(determined as provided in PARAGRAPH 5(E) hereof) as of the date of
receipt, but in each such case without deduction therefrom of any expenses
incurred or any underwriting commissions or concessions paid or allowed by
the Company in connection therewith. In computing the market price of a
note or other obligation that is not listed or admitted to trading on any
securities exchange or quoted in the National Association of Securities
Dealers, Inc. Automated Quotation System or reported by the National
Quotation Bureau, Inc. or a similar reporting organization, the total
consideration to be received by the Company thereunder (including
interest) shall be discounted to present value at the prime rate of
interest of NationsBank of Texas, N.A., in effect at the time the note or
obligation is deemed to have been issued. In case any Capital Stock,
Convertible Securities, or Options shall be issued in connection with any
merger of another corporation into the Company, the amount of
consideration therefor shall be deemed to be the fair value as determined
in good faith by the Board of Directors of the Company of such portion of
the assets of such merged corporation as the Board shall determine to be
attributable to such Capital Stock, Convertible Securities, or Options.
(v) In case at any time the Company shall take a record of the
holders of Capital Stock for the purpose of entitling them (A) to receive
a dividend or other distribution
payable in Capital Stock, Options or Convertible Securities, or (B) to
subscribe for or purchase Capital Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the
issue or sale of such Capital Stock, Options or Convertible Securities.
(vi) If the purchase price provided for in any Option referred to
in PARAGRAPH 5(B)(I) hereof, or the price at which any Convertible
Securities referred to in PARAGRAPH 5(B)(I) or (II) hereof are convertible
into or exchangeable for Capital Stock, shall change at any time (whether
by reason of provisions designed to protect against dilution or
otherwise), the Exercise Price then in effect hereunder shall forthwith be
increased or decreased to such Exercise Price as would have obtained had
the adjustments made upon the issuance of such Options or Convertible
Securities been made upon the basis of (A) the issuance of the number of
shares of Capital Stock theretofore actually delivered upon the exercise
of such Options or upon the conversion or exchange of such Convertible
Securities, and the total consideration received therefor, and (B) the
number of shares of Capital Stock to be issued for the consideration, if
any, received by the Company therefor and to be received on the basis of
such changed price.
(vii) If any adjustment has been made in the Exercise Price because
of the issuance of Options or Convertible Securities and if any of such
Options or rights to convert or exchange such Convertible Securities
expire or otherwise terminate, then the Exercise Price shall be readjusted
to eliminate the adjustments previously made in connection with the
Options or rights to convert or exchange Convertible Securities which have
expired or terminated.
(viii) The number of shares of Capital Stock outstanding at any
given time shall not include shares owned or held by or for the account of
the Company, and the disposition of any such shares shall be considered an
issue or sale of Capital Stock.
(c) SUBDIVISIONS AND COMBINATIONS. In case at any time the Company shall
subdivide the outstanding shares of Capital Stock into a greater number of
shares, the Exercise Price in effect immediately prior to such subdivision shall
be proportionately reduced, and conversely, in case the outstanding shares of
Capital Stock shall be combined into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination shall be proportionately
increased. An adjustment made pursuant to this PARAGRAPH 5(C) shall become
effective immediately after the effective date of such subdivision or
combination.
(d) EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS. In case at any time the
Company shall pay a dividend or make a distribution to all holders of Capital
Stock, as such, of shares of its stock, evidences of its indebtedness, assets,
or rights, options, or warrants to subscribe for or purchase such shares,
evidences of indebtedness, or assets, other than (i) a dividend or distribution
payable in Capital Stock, Options, or Convertible Securities or (ii) a dividend
or distribution payable in cash out of earnings or earned surplus, then in each
such case the Exercise Price shall be adjusted so that the same shall equal the
price determined by multiplying the Exercise Price in effect immediately prior
to the record date mentioned below by a fraction, the numerator of which shall
be the total number
of shares of Capital Stock outstanding on such record date multiplied by the
market price per share of Capital Stock (determined as provided in PARAGRAPH
5(E) hereof) on such record date, less the fair market value (as determined in
good faith by the Board of Directors of the Company) as of such record date of
such shares of stock, evidences of indebtedness, assets, or rights, options, or
warrants so paid or distributed, and the denominator of which shall be the total
number of shares of Capital Stock outstanding on such record date multiplied by
the market price per share of Capital Stock (determined as provided in PARAGRAPH
5(E) hereof) on such record date. Such adjustment shall be made whenever such
dividend is paid or such distribution is made and shall become effective
immediately after the record date for the determination of shareholders entitled
to receive such dividend or distribution.
(e) COMPUTATION OF MARKET PRICE. For the purpose of any computation under
PARAGRAPH 5(B) or (D) hereof, the market price of the security in question on
any day shall be deemed to be the average of the last reported sale prices for
the security for the twenty (20) consecutive Trading Days (as defined below)
commencing thirty (30) Trading Days before the day in question. The last
reported sale price for each day shall be (i) the last reported sale price of
the security on the National Market of the National Association of Securities
Dealers, Inc. Automated Quotation System, or any similar system of automated
dissemination of quotations of securities prices then in common use, if so
quoted, or (ii) if not quoted as described in CLAUSE (I) above, the mean between
the high bid and low asked quotations for the security as reported by the
National Quotation Bureau, Inc. if at least two securities dealers have inserted
both bid and asked quotations for such security on at least ten (10) of such
twenty (20) consecutive Trading Days, or (iii) if the security is listed or
admitted for trading on any national securities exchange, the last sale price,
or the closing bid price if no sale occurred, of such class of security on the
principal securities exchange on which such class of security is listed or
admitted to trading. If the security is quoted on a national securities or
central market system, in lieu of a market or quotation system described above,
the last reported sale price shall be determined in the manner set forth in
CLAUSE (II) of the preceding sentence if bid and asked quotations are reported
but actual transactions are not, and in the manner set forth in CLAUSE (III) of
the preceding sentence if actual transactions are reported. If none of the
conditions set forth above is met, the last reported sale price of the security
on any day or the average of such last reported sale prices for any period shall
be the fair market value of such security as determined by a member firm of the
New York Stock Exchange, Inc. selected by the Company. The term "Trading Days",
as used herein, means (i) if the security is quoted on the National Market of
the National Association of Security Dealers, Inc. Automated Quotation System,
or any similar system of automated dissemination of quotations of securities
prices, days on which trades may be made on such system or (ii) if the security
is listed or admitted for trading on any national securities exchange, days on
which such national securities exchange is open for business.
(f) RECORD DATE ADJUSTMENTS. In any case in which this PARAGRAPH 5
requires that a downward adjustment of the Exercise Price shall become effective
immediately after a record date for an event, the Company may defer until the
occurrence of such event issuing to the holder of this Warrant exercised after
such record date and before the occurrence of such event the additional Warrant
Shares issuable upon such exercise by reason of the adjustment required by such
event over and above the Warrant Shares issuable upon such exercise before
giving effect to such adjustment.
(g) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER, OR SALE. If
any capital reorganization of the Company, or any reclassification of the
Capital Stock, or any consolidation or merger of the Company with or into
another corporation or entity, or any sale of all or substantially all the
assets of the Company to another corporation or entity, shall be effected in
such a way that the holders of Class B Common (or any other securities of the
Company then issuable upon the exercise of this Warrant) shall be entitled to
receive stock or other securities or property (including cash) with respect to
or in exchange for Class B Common (or such other securities), then, as a
condition of such reorganization, reclassification, consolidation, merger, or
sale, lawful and adequate provision shall be made whereby the holder of this
Warrant shall thereafter have the right to purchase and receive upon the basis
and upon the terms and conditions specified in this Warrant, and in lieu of the
shares of Class B Common (or such other securities) immediately theretofore
purchasable and receivable upon the exercise hereof, such stock or other
securities or property (including cash) as may be issuable or payable with
respect to or in exchange for a number of outstanding shares of Class B Common
(or such other securities) equal to the number of shares of Class B Common (or
such other securities) immediately theretofore purchasable and receivable upon
the exercise of this Warrant, had such reorganization, reclassification,
consolidation, merger, or sale not taken place. In any such case appropriate
provision shall be made with respect to the rights and interests of the holder
of this Warrant to the end that the provisions hereof (including, without
limitation, the provisions for adjustments of the Exercise Price and of the
number of Warrant Shares purchasable upon exercise hereof) shall thereafter be
applicable, as nearly as reasonably may be, in relation to the stock or other
securities or property thereafter deliverable upon the exercise hereof
(including an immediate adjustment of the Exercise rice if by reason of or in
connection with such consolidation, merger, or sale any securities are issued or
event occurs which would, under the terms hereof, require an adjustment of the
Exercise Price). In the event of a consolidation or merger of the Company with
or into another corporation or entity as a result of which a greater or lesser
number of shares of common stock of the surviving corporation or entity are
issuable to holders of Capital Stock in respect of the number of shares of
Capital Stock outstanding immediately prior to such consolidation or merger,
then the Exercise Price in effect immediately prior to such consolidation or
merger shall be adjusted in the same manner as though there were a subdivision
or combination of the outstanding shares of Capital Stock. The Company shall not
effect any such consolidation, merger, or sale unless prior to or simultaneously
with the consummation thereof the successor corporation or entity (if other than
the Company) resulting from such consolidation or merger or the corporation or
entity purchasing such assets and any other corporation or entity the shares of
stock or other securities or property of which are receivable thereupon by the
holder of this Warrant shall expressly assume, by written instrument executed
and delivered (and satisfactory in form) to the holder of this Warrant, (i) the
obligation to deliver to such holder such stock or other securities or property
as, in accordance with the foregoing provisions, such holder may be entitled to
purchase and (ii) all other obligations of the Company hereunder.
(h) NO FRACTIONAL SHARES. No fractional shares of Class B Common 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 current market value of a share
of Class B Common, which current market value shall be the last reported sale
price (determined as provided in PARAGRAPH 5(E) hereof) on the Trading Day
immediately preceding the date of the exercise.
(i) 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, if any, in the number of 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.
(j) OTHER NOTICES. In case at any time:
(i) the Company shall declare any dividend upon the Capital Stock
payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of earnings or
earned surplus) to the holders of the Capital Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Capital 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 Capital 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 Capital Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Capital 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 Capital Stock shall be entitled to receive such
dividend, distribution, or subscription rights or to exchange their Capital
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 20 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 proceeding referred to in CLAUSES
(I), (II), (III), and (IV) above.
(k) 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
PARAGRAPH 5 are not strictly applicable or if strictly applicable would not
fairly protect the exercise rights of the holder of this Warrant in accordance
with the essential intent and principles of such provisions, then the Board of
Directors of the Company shall appoint the Company's regular independent
auditors or another firm
of independent public accountants of recognized national standing who are
satisfactory to the holder of this Warrant 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 holder of
this Warrant. 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 PARAGRAPH 5. The Company may make such
reductions in the Exercise Price or increase in the number of shares of Class B
Common purchasable hereunder as it deems advisable, including any reductions or
increases, as the case may be, necessary to ensure that any event treated for
federal income tax purposes as a distribution of stock rights not be taxable to
recipients.
6. 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 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.
7. AVAILABILITY OF INFORMATION. The Company will cooperate with the holder
of this Warrant and each holder of any Warrant Shares 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 Securities
and Exchange Commission as a condition to the availability of an exemption from
the Securities Act of 1933, as amended, for the sale of this Warrant or any
Warrant Shares. Nothing in this Section 7 obligates the Company to register any
Warrant Shares or other securities under federal or state securities laws or
incur any other unreasonable expense. The Company will deliver to the holder of
this Warrant, promptly upon their becoming available, copies of all financial
statements, reports, notices, and proxy statements sent or made available
generally by the Company to its shareholders, 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 Securities and Exchange
Commission.
8. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
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 shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
9. TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT.
(a) WARRANT TRANSFERABLE. The transfer of this Warrant and all rights
hereunder, in whole or in part, is registrable at the office or agency of the
Company referred to in PARAGRAPH 9(E) hereof by the holder hereof in person or
by his duly authorized attorney, upon surrender of this Warrant properly
endorsed. Each taker and holder of this Warrant, by taking or holding the same,
consents and agrees that this Warrant, when endorsed in blank, shall be deemed
negotiable, and that the holder hereof, when this Warrant shall have been so
endorsed, may be treated by the Company and all other
persons dealing with this Warrant as the absolute owner and holder hereof for
any purpose and as the person entitled to exercise the rights represented by
this Warrant and to the registration of transfer hereof on the books of the
Company; but until due presentment for registration of transfer on such books
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.
(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 PARAGRAPH 9(E) hereof, for new Warrants of
like tenor representing in the aggregate the right to purchase the number of
shares of Class B Common 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 said 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
PARAGRAPH 9, this Warrant shall be promptly canceled by the Company. The Company
shall pay all taxes (other than securities transfer taxes) and all other
expenses and charges payable in connection with the preparation, execution, and
delivery of Warrants pursuant to this PARAGRAPH 9.
(e) REGISTER. The Company shall maintain, at its principal office in
Houston, Texas, (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. Anything in this
Warrant to the contrary notwithstanding, if, at the time of the surrender of
this Warrant in connection with any exercise, transfer, or exchange of this
Warrant, this Warrant shall not be registered under the Securities Act of 1933,
as amended, and under applicable state securities or blue sky laws, the Company
may require, as a condition of allowing such exercise, transfer, or exchange,
that (i) 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
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 and (ii) the holder or transferee execute and
deliver to the Company an investment letter in form and substance acceptable to
the Company. 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.
10. NOTICES. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant or to
the holder of shares acquired upon exercise of this Warrant shall be in writing,
and shall be personally delivered, or shall be sent by certified or registered
mail, 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, postage prepaid and addressed,
to the office of the Company at 000 Xxxxxxx Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx,
Xxxxx 00000, Attention: President, or at such other address as shall have been
furnished to the holder of this Warrant or to the holder of shares acquired upon
exercise of this Warrant by notice from the Company. Any such notice, request,
or other communication may be sent by telegram or telex, but shall in such case
be subsequently confirmed by a writing personally delivered or sent by certified
or registered mail as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the time of the
delivery thereof to (or the receipt by, in the case of a telegram or telex) the
person entitled to receive such notice at the address of such person for
purposes of this PARAGRAPH 10, or, if mailed, at the completion of the third
full day following the time of such mailing thereof to such address, as the case
may be.
11. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
12. MISCELLANEOUS.
(a) AMENDMENTS. This Warrant and any provision hereof may not be changed,
waived, discharged, or terminated orally, but only by an instrument in writing
signed by the party (or any predecessor in interest thereof) against which
enforcement of the same is sought.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs 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) SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon any entity
succeeding to the Company by merger, consolidation, or acquisition of all or
substantially all the Company's assets.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer under its corporate seal, on this ____ day of June,
1997.
CLIFFWOOD OIL & GAS CORP.
By: /S/ XXXXX X. XXXXXXXXX
Name: Xxxxx X. Xxxxxxxxx
Title: President
[CORPORATE SEAL]
FORM OF EXERCISE AGREEMENT
Dated: ___________, ____.
To:
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby (A) agrees to purchase _________ shares of Class B 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 in the amount of $_________, and/or (B) agrees to exercise this
Warrant for the purchase of __________ shares of Class B Common Stock, pursuant
to the cashless exercise provisions of Paragraph 2 of the within Warrant. Please
issue a certificate or certificates for such shares of Class B Common Stock in
the name of and pay any cash for any fractional share to:
Name:
Signature:
Title of Signing Officer or Agent (if any):
Note: The above signature should correspond exactly with the name on the
face of the within Warrant or with the name of the assignee
appearing in the assignment form.
and, if said number of shares of Class B 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.
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 Class B 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: _______________, ____.
In the presence of
Name:
Signature:
Title of Signing
Officer or Agent (any):
Address:
Note: The above signature should correspond
exactly with the name on the face of the
within Warrant.
