UNDERWRITER'S WARRANT AGREEMENT
THIS UNDERWRITER'S WARRANT AGREEMENT (the "Agreement"), dated as of
_________ __, 1999 is made and entered into by and between BETA OIL & GAS
INCORPORATED, a Nevada corporation (the "Company"), and XXXXXXX XXXXXXX
("Xxxxxxx Xxxxxxx" or the "Warrantholder").
Concurrently herewith, the Company is consummating the sale, in a
public offering (the "Offering") of __,000 of shares (the "Public Offering
Shares") of the Company's Common Stock, par value $.001 per share (the "Common
Stock or the "Shares"). The Offering has been registered under the Securities
Act of 1933, as amended (the "Act") and has been underwritten by Xxxxxxx Xxxxxxx
pursuant to an Underwriting Agreement dated as of ______ __, 1999 (the
"Underwriting Agreement") between the Company and Xxxxxxx Xxxxxxx. The
Underwriting Agreement provides that, on consummation of the sale of any of
Public Offering Shares, the Company shall sell and issue to Xxxxxxx Xxxxxxx
warrants (the "Warrants") entitling Xxxxxxx Xxxxxxx to purchase, on the terms
and conditions hereinafter set forth, a number of shares of Company Common Stock
(hereinafter referred to as the "Warrant Shares") equal to ten percent (10%) of
the number of Public Offering Shares sold in the Offering.
In consideration of the foregoing and in satisfaction of the Company's
obligations contained in the Underwriting Agreement and for the purpose of
defining the terms and provisions of the Warrants and the respective rights and
obligations with respect thereto, the Company and the Warrantholder, for value
received, hereby agree as follows:
Section 1. Sale and Issuance of Warrants; Transferability and Form of Warrants.
1.1 Sale and Issuance of the Warrants. The Company agrees that it shall
issue and sell, and the Warrantholder agrees to purchase, on this date, a number
of Warrants equal to ten percent (10%) of the number of Shares that is sold in
the Offering, for a purchase price of $.001 per warrant. Each Warrant will
entitle the Warrantholder to purchase one share of the Company's Common Stock
(as hereinafter further defined in Subsection 8.1(h)__ hereof), at the Warrant
Price (as defined in Section 7 hereof). Accordingly, the number of Warrants to
be sold and issued on the date hereof by the Company to the Warrantholder, and
the number of Warrant Shares that may be purchased hereafter on exercise thereof
(before giving effect to any adjustments required by Section 8 hereof), shall be
___,000. The Warrants being sold and issued on the date hereof shall be
evidenced by a Warrant Certificate substantially in the form of Exhibit A hereto
(the "Warrant Certificate"). If additional Shares of Common Stock are sold
hereafter in the Offering, the Company shall sell and issue to Xxxxxxx Xxxxxxx,
on the terms and conditions set forth herein, a number of additional Warrants
equal to ten percent (10%) of such additional Shares that are sold by the
Company (the "Additional Warrants"). The Additional Warrants, if any, shall be
sold and issued on the Subsequent Closing Date (as defined in the Underwriting
Agreement and shall be evidenced by a separate Warrant Certificate substantially
in the form of Exhibit A hereto.
1.2 Registration. The Warrants shall be numbered and shall be
registered on the books of the Company when issued.
1.3 Transfer. The Warrants shall be transferable in whole or in part
only on the books of the Company maintained at its principal office in Newport
Beach, California, or wherever its principal office may then be located, upon
delivery thereof duly endorsed by the Warrantholder or by its duly authorized
attorney or representative, accompanied by proper evidence of succession,
assignment or authority to transfer. Upon any registration of transfer, the
Company shall execute and deliver new Warrants to the person or persons entitled
thereto.
1.4 Limitations on Transfer of the Warrants. Subject to the provisions
of Section 11, the Warrants shall not be sold, transferred, assigned or
hypothecated by the Warrantholder, until _________ __, 2000, except that the
Warrants may be transferred, in whole or in part, to (i) one or more persons,
each of whom on the date of transfer is an officer or partner of the
transferring Warrantholder; (ii) any other underwriting firm or member of the
selling group which participated in the Public Offering (or the officers or
partners of any such firm); (iii) a successor to the transferring Warrantholder
in merger or consolidation; (iv) a purchaser of all or substantially all of the
transferring Warrantholder's assets; or (v) any person receiving the Warrants
from one or more of the persons listed in this subsection 1.3 at such person's
or persons' death pursuant to a will or trust or the laws of intestate
succession. The Warrants may be divided or combined, upon request to the Company
by the Warrantholder, into a certificate or certificates representing the right
to purchase the same aggregate number of Warrant Shares. Unless the context
indicates otherwise, the term "Warrantholder" shall include any transferee or
transferees of the Warrants pursuant to this subsection 1.3, and the term
"Warrants" shall include any and all warrants outstanding pursuant to this
Agreement, including those evidenced by a certificate or certificates issued
upon division, exchange, substitution or transfer pursuant to this Agreement.
1.5 Form of Warrants. The text of the Warrants and of the form of
election to purchase Warrant Shares shall be substantially as set forth in
Exhibit A attached hereto. The number of Warrant Shares issuable upon exercise
of the Warrants is subject to adjustment upon the occurrence of certain events,
all as hereinafter provided. The Warrants shall be executed on behalf of the
Company by its President or by a Vice President. A Warrant bearing the signature
of an individual who was at the time of signature the proper officer of the
Company shall bind the Company, notwithstanding that such individual shall have
ceased to hold such office prior to the delivery of such Warrant or did not hold
such office on the date of this Agreement. The Warrants shall be dated as of the
date of signature thereof by the Company either upon initial issuance or upon
division, exchange, substitution or transfer.
1.6 Legend on Warrant Shares. Each Warrant certificate and certificate
for Warrant Shares initially issued upon exercise of the Warrants shall bear the
following legend, unless, at the time of exercise, such Warrant Shares are
subject to a currently effective registration statement under the Act:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, EXCHANGED, HYPOTHECATED
OR TRANSFERRED IN ANY MANNER EXCEPT PURSUANT TO A REGISTRATION
OR AN EXEMPTION FROM SUCH REGISTRATION AND IN COMPLIANCE WITH
SECTION 11 OF THE AGREEMENT PURSUANT TO WHICH THEY WERE
ISSUED."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the Act, of
the securities represented thereby) shall also bear the above legend unless, in
the opinion of the Company's counsel, the securities represented thereby need no
longer be subject to such restrictions.
Section 2. Exchange of Warrant Certificate. Any Warrant certificate may be
exchanged for another certificate or certificates entitling the Warrantholder to
purchase a like aggregate number of Warrant Shares as the certificate or
certificates surrendered then entitled such Warrantholder to purchase. Any
Warrantholder desiring to exchange a Warrant certificate shall make such request
in writing delivered to the Company, and shall surrender, properly endorsed,
with signatures guaranteed, the certificate evidencing the Warrant to be so
exchanged. Thereupon, the Company shall execute and deliver to the person or
persons entitled thereto a new Warrant certificate as so requested.
Section 3. Term of Warrants; Exercise of Warrants.
(a) Subject to the terms of this Agreement, each Warrantholder shall
have the right, at any time during the period commencing at 9:00 a.m., Pacific
Time, on ________ __, 2000 and ending at 5:00 p.m., Pacific Time, on __________
__, 2004 (the "Termination Date"), to purchase from the Company up to the number
of fully paid and nonassessable Shares to which the Warrantholder may at the
time be entitled to purchase pursuant to this Agreement, upon surrender to the
Company, at its principal office, of the certificate evidencing the Warrants to
be exercised, together with the purchase form on the reverse thereof duly filled
in and signed, with signatures guaranteed, and upon payment to the Company of
the Warrant Price (as defined in and determined in accordance with the
provisions of this section 3 and sections 7 and 8 hereof), for the number of
Warrant Shares in respect of which such Warrants are then exercised, but in no
event for less than 100 Warrant Shares (unless less than an aggregate of 100
Warrant Shares are then purchasable under all outstanding Warrants held by a
Warrantholder).
(b) Payment of the aggregate Warrant Price shall be made in cash, by
check, through the use of Appreciation Currency (as defined below), or any
combination thereof. Upon such surrender of the Warrants and payment of such
Warrant Price as aforesaid, the Company shall issue and cause to be delivered
with all reasonable dispatch to or upon the written order of the Warrantholder,
and in such name or names as the Warrantholder may designate, a certificate or
certificates for the number of full Warrant Shares so purchased upon the
exercise of the Warrant, together with cash, as provided in Section 9 hereof, in
respect of any fractional Warrant Shares otherwise issuable upon such surrender.
Such certificate or certificates shall be deemed to have been issued and any
person so designated to be named therein shall be deemed to have become a holder
of record of such securities as of the date of surrender of the Warrants and
payment of the Warrant Price, as aforesaid, notwithstanding that the certificate
or certificates representing such securities shall not actually have been
delivered or that the stock transfer books of the Company shall then be closed.
The Warrants shall be exercisable, at the election of each Warrantholder, either
in full or from time to time in part and, in the event that a certificate
evidencing the Warrants is exercised in respect of less than all of the Warrant
Shares specified therein at any time prior to the Termination Date, a new
certificate evidencing the remaining portion of the Warrants shall be issued by
the Company to such Warrantholder.
(c) As used herein, "Appreciation Currency" shall mean the
consideration given by the surrender to the Company of a Warrant (or portion
thereof) in an amount equal to the product of (i) the number of Warrant Shares
purchasable upon exercise of the Warrant (or portion thereof) surrendered for
exercise, and (ii) the excess of the Current Market Price (as defined in section
9) per share of Common Stock over the Warrant Price. For purposes of determining
Appreciation Currency, the Warrant Price shall mean the Warrant Price defined in
section 7 as adjusted and readjusted as set forth in Section 8.
Section 4. Payment of Taxes. The Company will pay all documentary stamp taxes,
if any, attributable to the initial issuance of the Warrants or the securities
comprising the Warrant Shares; provided, however, the Company shall not be
required to pay any tax which may be payable in respect of any secondary
transfer of the Warrants or the securities comprising the Warrant Shares.
Section 5. Mutilated or Missing Warrants. In case the certificate or
certificates evidencing the Warrants shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the Warrantholder, issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
certificate or certificates, or in lieu of and substitution for the certificate
or certificates lost, stolen or destroyed, a new Warrant certificate or
certificates of like tenor and representing an equivalent right or interest, but
only upon receipt of evidence reasonably satisfactory to the Company of such
loss, theft or destruction of such Warrant and payment of the reasonable
out-of-pocket expenses incurred by the Company in issuing a replacement Warrant
Certificate.
Section 6. Reservation of Warrant Shares. There has been reserved, out of its
authorized Capital Stock, such number of shares of Common Stock as shall be
subject to purchase under the Warrants, and the Company shall at all times keep
reserved, for so long as any of the Warrants remain outstanding, such shares of
Common Stock that from time to time are, and such additional Warrant Shares or
other securities that, pursuant to Section 8 hereof, become issuable on exercise
of the Warrants.
Section 7. Warrant Price. The price per Share at which Warrant Shares shall be
purchasable upon the exercise of the Warrants shall be $7.50, subject to any
adjustments thereto required pursuant to Section 8 hereof (and as so adjusted,
the "Warrant Price").
Section 8. Adjustment of Number of Warrant Shares. The number and kind of
securities purchasable upon the exercise of the Warrants and the Warrant Price
shall be subject to adjustment from time to time upon the happening of certain
events, as follows:
8.1 Adjustments. The number of Warrant Shares purchasable upon the
exercise of the Warrants shall be subject to adjustment as follows:
(a) In case the Company shall (i) pay a dividend in Common
Stock or make a distribution in Common Stock, (ii) subdivide its outstanding
Common Stock, (iii) combine its outstanding Common Stock into a smaller number
of shares of Common Stock, or (iv) issue by reclassification of its Common Stock
other securities of the Company, the number of Warrant Shares purchasable upon
exercise of the Warrants immediately prior thereto shall be adjusted so that the
Warrantholder shall be entitled to receive the kind and number of Warrant Shares
or other securities of the Company which it would have owned or would have been
entitled to receive immediately after the happening of any of the events
described above, had the Warrants been exercised immediately prior to the
happening of such event or any record date with respect thereto. Any adjustment
made pursuant to this subsection 8.1(a) shall become effective immediately after
the effective date of such event, retroactive to the record date, if any, for
such event.
(b) In case the Company shall sell any shares of its Common
Stock ("Below Market Shares"), or sell or issue rights, options, warrants or
convertible securities that are exercisable or convertible into or exchangeable
for, or that entitle the recipients thereof to subscribe for or purchase, shares
of Common Stock (collectively, "Common Stock Rights"), at a price per share
which is lower at the record date mentioned below than the then Current Market
Price (as defined in Section 9), then, the number of Warrant Shares thereafter
purchasable upon the exercise of each Warrant shall be determined by multiplying
the number of Warrant Shares theretofore purchasable upon exercise of the
Warrant by a fraction, of which (i) the numerator shall be the number of shares
of Common Stock outstanding immediately prior to the issuance of such Below
Market Shares or such Common Stock Rights (as the case may be) plus the number
of additional Below Market Shares sold or the number of shares that are
purchasable on exercise of such Common Stock Rights, and (ii) the denominator
shall be the number of shares of Common Stock outstanding immediately prior to
the issuance of such Below Market Shares or Common Stock Rights (as the case may
be) plus the number of Shares which could then be purchased, at such Current
Market Price, with the aggregate consideration that the Company will receive on
the sale of the Below Market Shares or the exercise or conversion of the Common
Stock Rights (as the case may be). Such adjustment shall be made whenever any
Below Market Shares or Common Stock Rights are issued, and shall become
effective immediately upon issuance of such Below Market Shares or Common Stock
Rights.
(c) In case the Company shall distribute to all or
substantially all holders of its Common Stock evidences of its indebtedness or
assets (excluding cash dividends or distributions out of earnings) or rights,
options, warrants or convertible securities containing the right to subscribe
for or purchase Common Stock (excluding those referred to in subsection 8.1(b)
above), then in each case the number of Warrant Shares thereafter purchasable
upon the exercise of the Warrants shall be determined by multiplying the number
of Warrant Shares theretofore purchasable upon exercise of the Warrants by a
fraction, of which the numerator shall be the then Current Market Price on the
date of such distribution, and of which the denominator shall be such Current
Market Price on such date minus the then fair value (determined as provided in
subsection (d) below) of the portion of the assets or evidences of indebtedness
so distributed or of such subscription rights, options, warrants or convertible
securities applicable to one share. Such adjustment shall be made whenever any
such distribution is made and shall become effective on the date of
distribution.
(d) For the purposes of the adjustments covered by subsections
8.1(b) or (c) hereof, the Common Stock which the holders of any Common Stock
Rights shall be entitled to subscribe for or purchase, whether by exercise,
exchange or conversion or otherwise, shall be deemed issued and outstanding as
of the date of such sale or issuance and the consideration received by the
Company therefor shall be deemed to be the consideration received by the Company
for such Common Stock Rights, plus the consideration or premiums stated in such
Common Stock Rights to be paid for the Common Stock covered thereby. In case the
Company shall sell or issue Below Market Shares, or Common Stock Rights
containing the right to subscribe for or purchase Common Stock, for a
consideration consisting, in whole or in part, of property other than cash or
its equivalent, then, in determining the "price per share" of Common Stock and
the "consideration received by the Company" for purposes of the first sentence
of this subsection 8.1(d), the Company's Board of Directors shall determine the
fair value of said property, and such determination, if reasonable and based
upon the Board of Directors' good faith business judgment, shall be binding upon
the Warrantholder. In determining the "price per share" of Common Stock, any
underwriting discounts or commissions shall not be deducted from the
consideration received by the Company for or in connection with any sales of
Below Market Shares or Common Stock Rights.
(e) No adjustment in the number of Warrant Shares purchasable
pursuant to the Warrants shall be required unless such adjustment would require
an increase or decrease of at least one percent in the number of Warrant Shares
then purchasable upon the exercise of the Warrants or, if the Warrants are not
then exercisable, the number of Warrant Shares purchasable upon the exercise of
the Warrants on the first date thereafter that the Warrants become exercisable;
provided, however, that any adjustments which by reason of this subsection
8.1(e) are not required to be made immediately shall be carried forward and
taken into account in any subsequent adjustment.
(f) Whenever the number of Warrant Shares purchasable upon the
exercise of the Warrant is adjusted, as herein provided, the Warrant Price
payable upon exercise of the Warrant shall be adjusted by multiplying such
Warrant Price immediately prior to such adjustment by a fraction, of which (i)
the numerator shall be the number of Warrant Shares purchasable upon the
exercise of the Warrant immediately prior to such adjustment, and (ii) the
denominator shall be the number of Warrant Shares so purchasable immediately
thereafter.
(g) Whenever the number of Warrant Shares purchasable upon the
exercise of the Warrants is adjusted as herein provided, the Company shall cause
to be promptly mailed to the Warrantholder by first class mail, postage prepaid,
notice of such adjustment and a certificate of the chief financial officer of
the Company setting forth the number of Warrant Shares purchasable upon the
exercise of the Warrants and the Warrant Price after such adjustment, a brief
statement of the transaction or transactions that required such adjustment and
the computation by which such adjustment was made.
(h) For the purpose of this subsection 8.1, the term "Common
Stock" shall mean (i) the class of stock designated as the Common Stock of the
Company at the date of this Agreement, or (ii) any other class of stock
resulting from successive changes or reclassifications of such Common Stock
consisting solely of changes in par value, or from par value to no par value, or
from no par value to par value. In the event that at any time, as a result of an
adjustment made pursuant to this Section 8, the Warrantholder shall become
entitled to purchase any securities of the Company other than Common Stock, (x)
if the Warrantholder' right to purchase is on any other basis than that
available to all holders of the Company's Common Stock, the Company shall obtain
an opinion of an independent investment banking firm valuing such other
securities, and (y) thereafter the number of such other securities so
purchasable upon exercise of the Warrants shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Warrant Shares contained in this Section 8.
(i) Upon the expiration of any Common Stock Rights, if such
shall not have been exercised prior thereto (the "Expired Rights"), the number
of Warrant Shares purchasable upon exercise of the Warrants then outstanding,
and the Warrant Price thereof, shall, upon such expiration, be readjusted to the
number of Warrant Shares that would have been issuable on exercise of such
outstanding Warrants, and the Warrant Price at which the Warrant Shares would
have been purchasable, if the Expired Rights had never been issued; provided,
however, that no such readjustment shall have the effect of decreasing the
number of Warrant Shares purchasable upon exercise of the Warrants by an amount
in excess of the amount of the adjustment initially made in respect of the
issuance, sale or grant of such Expired Rights.
8.2 No Adjustment for Dividends. Except as provided in subsection 8.1,
no adjustment in respect of any dividends or distributions out of earnings shall
be made during the term of the Warrants or upon the exercise of the Warrants.
8.3 Preservation of Purchase Rights upon Reclassification,
Consolidation, etc. In case of any consolidation of the Company with or merger
of the Company into another corporation or in case of any sale or conveyance to
another corporation of the property, assets or business of the Company as an
entirety or substantially as an entirety (a "Business Combination Transaction"),
the Company or such successor or purchasing corporation, as the case may be,
shall execute with the Warrantholder an agreement that the Warrantholder shall
have the right thereafter, exercisable at any time or from time to time during
the remaining term of the Warrant, upon payment of the Warrant Price in effect
immediately prior to the consummation of such Business Combination Transaction
(as the same may be adjusted thereafter pursuant to the adjustment provisions
referenced below in this section 8.3), to purchase the kind and number or amount
of shares and other securities and property which the Warrantholder would have
owned or have been entitled to receive immediately after the happening of such
consolidation, merger, sale or conveyance had the Warrants been exercised
immediately prior to such Business Combination Transaction. In the event of a
Business Combination Transaction that is implemented by means of a merger
described in Section 368(a)(2)(E) of the Internal Revenue Code of 1986, in which
the Company is the surviving corporation, the right to purchase Warrant Shares
under the Warrants shall terminate on the date of such merger and thereupon the
Warrants shall become null and void, but only if the controlling corporation
shall agree to substitute for the Warrants its warrants (the "Controlling
Corporation Warrants"), which entitle each Warrantholder to purchase upon the
exercise thereof, the kind and amount of shares and other securities and
property which the Warrantholder would have owned or been entitled to receive
had the Warrants been exercised immediately prior to such merger. Any such
agreements referred to in this subsection 8.3 shall provide for adjustments,
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in Section 8 hereof. The provisions of this subsection 8.3 shall
similarly apply to successive Business Combination Transactions. The Company
will not merge or consolidate with or into any other corporation or sell all or
substantially all of its property to another corporation, unless the provisions
of this section 8.3 are complied with.
8.4 Par Value of Warrant Shares of Common Stock. Before taking any
action which would cause an adjustment effectively reducing the portion of the
Warrant Price allocable to each Share below the then par value (if any) per
share of the Common Stock issuable upon exercise of the Warrants, the Company
will take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Common Stock upon exercise of the Warrants.
8.5 Independent Public Accountants. The Company may retain a firm of
independent public accountants of recognized national standing (which may be any
such firm regularly employed by the Company) to make any computation required
under this Section 8, and a certificate signed by such firm shall be conclusive
evidence of the correctness of any computation made under this Section 8.
8.6 Statement on Warrant Certificates. Irrespective of any adjustments
in the number of Shares or other securities issuable upon exercise of Warrants,
Warrant certificates theretofore or thereafter issued may continue to express
the same number of securities as are stated in the similar Warrant certificates
initially issuable pursuant to this Agreement. However, the Company may, at any
time in its sole discretion (which shall be conclusive), make any change in the
form of Warrant certificate that it may deem appropriate and that does not
affect the substance thereof; and any Warrant certificate thereafter issued,
whether upon registration of transfer of, or in exchange or substitution for, an
outstanding Warrant certificate, may be in the form so changed.
Section 9. Fractional Interests; Current Market Price. The Company shall not be
required to issue fractional Warrant Shares on the exercise of any of the
Warrants. If any fraction of a Warrant Share would, except for the provisions of
this Section 9, be issuable on the exercise of the Warrants (or any specified
portion thereof being exercised), the Company shall pay to the Warrantholder, in
lieu of the issuance of such fractional Warrant Share, an amount in cash equal
to the then Current Market Price multiplied by such fraction. For purposes of
this Agreement, the term "Current Market Price" shall mean (i) if the Common
Stock is traded in the over-the-counter market and not in the NASDAQ National
Market System nor on any national securities exchange, the average of the per
share closing bid prices of the Common Stock on the 30 consecutive trading days
immediately preceding the date in question, as reported by NASDAQ or an
equivalent generally accepted reporting service, or (ii) if the Common Stock is
traded in the NASDAQ National Market System or on a national securities
exchange, the average for the 30 consecutive trading days immediately preceding
the date in question of the daily per share closing prices of the Common Stock
in the NASDAQ National Market System or on the principal stock exchange on which
it is listed, as the case may be. For purposes of clause (i) above, if trading
in the Common Stock is not reported by NASDAQ, the bid price referred to in said
clause shall be the lowest bid price as reported in the "pink sheets" published
by National Quotation Bureau, Incorporated. The closing price referred to in
clause (ii) above shall be the last reported sale 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 in the NASDAQ National Market System or on the
national securities exchange on which the Common Stock is then listed.
Section 10. No Rights as Shareholder; Notices to Warrantholder. Nothing
contained in this Agreement or in the Warrants shall be construed as conferring
upon the Warrantholder or its transferees any rights as a shareholder of the
Company, including the right to vote, receive dividends, consent or receive
notices as a shareholder in respect of any meeting of shareholders for the
election of directors of the Company or any other matter, unless and until the
Warrantholder or such transferee (as the case may be) exercises the Warrants, in
whole or in part, and pays the Warrant Price thereof to the Company.
Notwithstanding the foregoing, however, if at any time prior to the earlier of
the expiration of the Warrants and or their exercise in full, any one or more of
the following events shall occur:
(a) any action which would require an adjustment pursuant to
Section 8.1; or
(b) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger or sale of its property,
assets and business as an entirety or substantially as an entirety) shall be
proposed;
then, the Company shall give notice in writing of such event to the
Warrantholder, in the manner provided in Section 14 hereof, at least 20 days
prior to the date fixed as a record date or the date of closing the transfer
books for the determination of the shareholders entitled to any relevant
dividend, distribution, subscription rights or other rights or for the
determination of shareholders entitled to vote on such proposed dissolution,
liquidation or winding up. Such notice shall specify such record date or the
date of closing of the transfer books, as the case may be.
Section 11. Restrictions on Transfer; Registration Rights.
11.1 Transfer Restrictions. The Warrantholder agrees that prior to
making any disposition of the Warrants or the Warrant Shares, other than to
persons or entities identified in clauses (i) through (v), inclusive, of Section
1.4, the Warrantholder shall give written notice to the Company describing
briefly the manner in which any such proposed disposition is to be made; and no
such disposition shall be made if the Company has notified the Warrantholder
that in the opinion of counsel reasonably satisfactory to the Warrantholder a
registration statement or other notification or post-effective amendment thereto
(hereinafter collectively a "Registration Statement") under the Act is required
with respect to such disposition and no such Registration Statement has been
filed by the Company with, and declared effective, if necessary, by, the
Securities and Exchange Commission (the "Commission").
11.2 Registration Rights. The Company shall be obligated to the
owners of the Warrants and the Warrant Shares to file a Registration Statement
as follows:
(a) Whenever during the six-year period beginning on _______
__, 2000 and ending on ________ __, 2006, the Company proposes to file with the
Commission a Registration Statement, whether to register shares to be sold by
the Company or by any of its securityholders, (but excluding any such filing the
purpose of registering securities issuable pursuant to an employee benefit plan
or a transaction subject to Rule 145 promulgated under the Act), the Company
shall, at least 30 days prior to each such filing, give written notice of such
proposed filing (a "Registration Notice") to the Warrantholder and each holder
of Warrant Shares at their respective addresses as they appear on the records of
the Company, and shall offer to include and shall include in such filing any
proposed disposition of the Warrant Shares upon receipt by the Company, not less
than 15 days after receipt of the Registration Notice, of a request therefor
setting forth the facts with respect to such proposed disposition and all other
information with respect to such person reasonably necessary to be included in
such Registration Statement. If any such registration relates to a underwritten
public offering of the Company's securities and the managing underwriter for
that offering advises the Company and the Warrantholders and each holder of
Warrants or Warrant Shares, in writing, that the inclusion of their Warrant
Shares in the offering would be detrimental to the offering, a number of such
Warrant Shares which constitute no less than 25% of the total number of Shares
or other securities offered in such offering shall nevertheless be included in
the Registration Statement, provided that the Warrantholder and each holder of
Warrants and Warrant Shares desiring to have their Warrant Shares included in
the Registration Statement agree in writing, for a period of 180 days following
the commencement of such offering, not to sell or otherwise dispose of such
Warrant Shares pursuant to such Registration Statement, which Registration
Statement the Company shall keep effective for a period of at least nine months
following the expiration of such 180-day period.
(b) In addition to any Registration Statement filed pursuant
to subsection 11.2(a) above, during the five-year period beginning on ______ __,
2000 and ending on ______ __, 2005, the Company will, as promptly as practicable
(but in any event within 60 days), after written request (a "Registration
Request") by Warrantholder, or by a person or persons holding (or having the
right to acquire by virtue of holding the Warrants) at least 50% of the shares
of Common Stock which have been (or may be) issued upon exercise of the
Warrants, prepare and file at the Company's expense a Registration Statement
with the Commission and appropriate Blue Sky authorities sufficient to permit
the public offering of the Warrant Shares and will use its best efforts at its
own expense through its officers, directors, auditors and counsel, in all
matters necessary or advisable, to cause such Registration Statement to become
effective as promptly as practicable and to maintain such effectiveness so as to
permit resale of the Warrant Shares covered by the Request until the earlier of
the time that all such Warrant Shares have been sold or the expiration of ninety
(90) days from the effective date of the Registration Statement (the "Minimum
Period"); provided, however, that the Company shall only be obligated to file
and have declared effective one such Registration Statement under this
subsection 11.2(b). Notwithstanding the foregoing, if a Registration Statement
is filed pursuant to this subsection 11.2(b) but is not declared effective, or
is not kept effective for the Minimum Period, then it shall not be deemed to be
a Registration Statement meeting the requirements under this section and the
Warrantholder, and any person or persons holding (or having the right to acquire
by virtue of holding the Warrants) at least 50% of the shares of Common Stock
which have been (or may be) issued upon exercise of the Warrants, shall be
entitled to again exercise the rights under this subsection 11.2(b) to require
the registration under the Act of their Warrant Shares.
(c) All fees, disbursements and out-of-pocket expenses (other
than Warrantholder' brokerage fees and commissions and reasonable legal fees of
counsel to the Warrantholder, if any) in connection with the filing of any
Registration Statement under section 11(b) (or obtaining the opinion of counsel
and any no-action position of the Commission with respect to sales under Rule
144) and in complying with applicable securities and Blue Sky laws shall be
borne by the Company. The Company at its expense will supply any Warrantholder
and any holder of Warrant Shares with copies of such Registration Statement and
the prospectus included therein and other related documents, and any opinions
and no-action letters in such quantities as may be reasonably requested by the
Warrantholder or holder of Warrant Shares.
(d) The Company shall not be required by this Section 11 to
file such Registration Statement if, in the opinion of counsel for the
Warrantholder and holders of Warrant Shares and the Company (or, should they not
agree, in the opinion of another counsel experienced in securities law matters
acceptable to counsel for such holders and the Company), the proposed public
offering or other transfer as to which such Registration Statement is requested
is exempt from applicable federal and state securities laws and would result in
all purchasers or transferees obtaining securities which are not "restricted
securities," as defined in Rule 144 under the Act.
(e) The Company agrees that until all Warrant Shares have been
sold under a Registration Statement or pursuant to Rule 144 under the Act, it
will keep current in filing all materials required to be filed with the
Commission in order to permit the holders of such securities to sell the same
under Rule 144.
Section 12. Indemnification.
12.1 Indemnification of Warrantholder. In the event of the filing of
any Registration Statement with respect to the Warrant Shares pursuant to
Section 11 hereof, the Company agrees to indemnify and hold harmless each
Warrantholder and any holder of such Warrant Shares and each person, if any, who
controls the Warrantholder or any holder of such Warrant Shares within the
meaning of the Act, against any losses, claims, damages or liabilities, joint or
several (which shall, for all purposes of this Agreement, include, but not be
limited to, all costs of defense and investigation and all attorneys' fees), to
which such Warrantholder or any holder of such Warrant Shares or such
controlling person may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any such Registration Statement, or any
related preliminary prospectus, final prospectus, or amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the Company will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such Registration
Statement, preliminary prospectus, final prospectus or amendment or supplement
thereto in reliance upon, and in conformity with, written information furnished
to the Company by such Warrantholder or the holder of such Warrant Shares
specifically for inclusion therein . This indemnity will be in addition to any
liability which the Company may otherwise have.
12.1 Indemnification of the Company. The Warrantholder and the holders
of the Warrant Shares agree that they will indemnify and hold harmless the
Company, each other person referred to in subparts (1), (2) and (3) of Section
11(a) of the Act in respect of the Registration Statement and each person, if
any, who controls the Company within the meaning of the Act, against any losses,
claims, damages or liabilities (which shall, for all purposes of this Agreement,
include but not be limited to, all costs of defense and investigation and all
attorneys' fees) to which the Company or any such director, officer or
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in such Registration Statement, or any related
preliminary prospectus, final prospectus or amendment or supplement thereto, or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in such Registration Statement, preliminary prospectus, final prospectus or
amendment or supplement thereto in reliance upon, and in conformity with,
written information furnished to the Company by the Warrantholder or such holder
of Warrant Shares specifically for inclusion therein. This indemnity agreement
will be in addition to any liability which the Warrantholder or such holder of
Warrant Shares may otherwise have.
12.3 Indemnification Procedures. Promptly after receipt by an
indemnified party under this Section 12 of notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section 12, notify the indemnifying
party of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve the indemnifying party from any liability
which it may have to any indemnified party. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish, jointly with any other indemnifying party
similarly notified, reasonably assume the defense thereof, subject to the
provisions herein stated, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 12 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation, unless the indemnifying party shall not pursue the
action to its final conclusion. The indemnified party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the expense
of the indemnifying party if the indemnifying party has assumed the defense of
the action with counsel reasonably satisfactory to the indemnified party;
provided, however, that if the indemnified party is a Warrantholder or a holder
of Warrant Shares or a person who controls a Warrantholder or a holder of
Warrant Shares within the meaning of the Act, the fees and expenses of such
counsel shall be at the expense of the indemnifying party if (i) the employment
of such counsel has been specifically authorized in writing by the indemnifying
party or (ii) the named parties to any such action, including any impleaded
parties, include both a Warrantholder or a holder of Warrant Shares or such
controlling person and the indemnifying party and a Warrantholder or a holder of
Warrant Shares or such controlling person shall have been advised by such
counsel that there may be one or more legal defenses available to a
Warrantholder or a holder of Warrant Shares or controlling person which are not
available to or in conflict with any legal defenses which may be available to
the indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of a Warrantholder or a
holder of Warrant Shares or such controlling person, it being understood,
however, that the indemnifying party shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys for the Warrantholder, the holders of the Warrant Shares and
controlling persons, which firm shall be designated in writing by a majority in
interest of such holders and controlling persons based upon the value of the
securities included in the Registration Statement). No settlement of any action
against an indemnified party shall be made without the consent of the
indemnified and the indemnifying parties, which shall not be unreasonably
withheld in light of all factors of importance to such parties.
Section 13. Contribution. In order to provide for just and equitable
contribution under the Act in any case in which (i) a Warrantholder or any
holder of the Warrant Shares or controlling person makes a claim for
indemnification pursuant to Section 12 hereof but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case notwithstanding the
fact that the express provisions of Section 12 hereof provide for
indemnification in such case or (ii) contribution under the Act may be required
on the part of any Warrantholder or any holder of the Warrant Shares or
controlling person, then the Company and any Warrantholder or any such holder of
the Warrant Shares or controlling person shall contribute to the aggregate
losses, claims, damages or liabilities to which they may be subject (which
shall, for all purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all attorneys' fees), in either such case
(after contribution from others) on the basis of relative fault as well as any
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
a Warrantholder or holder of Warrant Shares or controlling person on the other
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
such holders of such securities and such controlling persons agree that it would
not be just and equitable if contribution pursuant to this Section 13 were
determined by pro rata allocation or by any other method which does not take
account of the equitable considerations referred to in this Section 13. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this Section 13 shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
Section 14. Notices. Any notice pursuant to this Agreement by the Company or by
a Warrantholder or a holder of Warrant Shares shall be in writing and shall be
deemed to have been duly given on the date of delivery or refusal indicated on
the return receipt if delivered or mailed by certified mail, return receipt
requested:
14.1 Warrantholder Address. If to the Warrantholder or a holder
of Warrant Shares, addressed to Hagerty, Stewart, 0000 Xxxxxxxxx, Xxxxx 0000,
Xxxxxx, Xxxxxxxxxx, 00000 Attention: Corporate Finance Department.
14.2 Company Address. If to the Company addressed to it at 000 Xxxx
Xxxxxx, Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, Attention: President.
Each party may from time to time change the address to which notices to it are
to be delivered or mailed hereunder by notice in accordance herewith to the
other party.
Section 15. Survival of Representations and Warranties. All statements contained
in any schedule, exhibit, certificate or other instrument delivered by or on
behalf of the parties hereto, or in connection with the transactions
contemplated by this Agreement, shall be deemed to be representations and
warranties hereunder. Notwithstanding any investigations made by or on behalf of
the parties to this Agreement, all representations, warranties and agreements
made by the parties to this Agreement or pursuant hereto shall survive.
Section 16. Miscellaneous.
16.1 Applicable Law. This Agreement shall be deemed to be a contract
made under the laws of the State of California and for all purposes shall be
construed in accordance with the laws of said State.
16.2 Successors. All the covenants and provisions of this Agreement by
or for the benefit of the Company, the Warrantholder, or the holders of Warrant
Shares shall bind and inure to the benefit of their respective successors and
assigns hereunder. Notwithstanding the foregoing, however, nothing in this
Agreement shall be construed to give to any person or corporation other than the
Company, the Warrantholder and the holders of Warrant Shares, and their
respective permitted transferees (other than transferees who acquire any Warrant
Shares that are free of restrictions on transfer under this Agreement and under
the Act), any legal or equitable right, remedy or claim under this Agreement.
This Agreement shall be for the sole and exclusive benefit of the Company, the
Warrantholder and the holders of Warrant Shares and such permitted transferees
(other than transferees who acquire any Warrant Shares that are free of
restrictions on transfer under this Agreement and under the Act).
16.3 Amendments. This Agreement may be amended only by a written
instrument executed by duly authorized representatives of the Company and the
Warrantholder.
16.4 Severability. In the event any provision of this Agreement becomes
or is declared by a court of competent jurisdiction to be illegal, unenforceable
or void, this Agreement shall continue in full force and effect without said
provision, but only to the extent necessary to cure the infirmity that caused
such provision to be held illegal, unenforceable or void.
16.5 Interpretation. This Agreement is the result of arms'-length
negotiations between the parties hereto and no provision hereof, because of any
ambiguity found to be contained in any of the provisions hereof, shall be
construed against a party by reason of the fact that such party or its legal
counsel was the draftsman of those provisions. Unless otherwise indicated
elsewhere in this Agreement, (i) the term "or" shall not be exclusive, (ii) the
term "including" shall mean "including, but not limited to," and (iii) unless
the context indicates otherwise the terms "herein," "hereof," "hereto,"
"hereunder" and other terms similar to such terms shall refer to this Agreement
as a whole and not merely to the specific section, subsection, paragraph or
clause where such terms may appear.
16.6 Headings. The captions or headings of the sections and subsections
of this Agreement are for convenience of reference only and shall be disregarded
in interpreting, construing or applying any of the provisions of this Agreement.
16.7 Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be an original of and all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, all as of the day and year first above written.
BETA OIL & GAS INCORPORATED
By:
Name: Xxxxx Xxxxx
Title: Chairman and President
XXXXXXX, XXXXXXX & ASSOCIATES, INC.
By:
Name: Xxxxxxxx Xxxxxx
Title: Chief Executive
================================================================================
Exhibit A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, EXCHANGED, HYPOTHECATED OR
TRANSFERRED IN ANY
MANNER EXCEPT PURSUANT TO A REGISTRATION
OR AN EXEMPTION FROM SUCH REGISTRATION AND IN COMPLIANCE WITH SECTION 11 OF THE
AGREEMENT PURSUANT TO WHICH THEY WERE ISSUED.
Warrant Certificate No. _____
UNDERWRITERS' WARRANTS TO PURCHASE SHARES OF COMMON STOCK
VOID AFTER 5:00 P.M.,
PACIFIC TIME, ON _________, 2004
BETA OIL & GAS INCORPORATED
INCORPORATED UNDER THE LAWS
OF THE STATE OF NEVADA
This certifies that, for value received,
_____________________________________ the registered holder hereof
or assigns (the "Warrantholder"), is entitled to purchase from
BETA OIL & GAS INCORPORATED (the "Company"), at any time during
the period commencing at 9:00 a.m., Pacific Time, on _________ __,
2000, and before 5:00 p.m., Pacific Time, on _______ __, 2004 at
the purchase price per share of $7.50 (the "Warrant Price"), the
number of Shares of Common Stock of the Company set forth above
(the "Warrant Shares"). The number of Warrant Shares issuable upon
exercise of each Warrant evidenced hereby and the Warrant Price
shall be subject to adjustment from time to time as set forth in
the Underwriters' Warrant Agreement referred to below.
The Warrants evidenced hereby represent the
right to purchase an aggregate of up to ( )
Shares, subject to certain adjustments, and
are issued under and in
accordance with a Underwriters' Warrant Agreement, dated as of
________ __, 1999 (the "Underwriter's Warrant Agreement"), between
the Company and Xxxxxxx, Xxxxxxx & Associates, Inc. and are
subject to the terms and provisions contained in the Underwriters'
Warrant Agreement, to all of which the Warrantholder by acceptance
hereof consents.
The Warrants evidenced hereby may be exercised in whole
or in part by presentation of this Warrant Certificate with the
Purchase Form attached hereto duly executed (with a signature
guarantee as provided thereon) and simultaneous payment of the
Warrant Price at the principal office of the Company. Payment of
such price shall be made at the option of the Warrantholder in
cash, by check, through the use of Appreciation Currency (as
defined in the Underwriter's Warrant Agreement) or any combination
thereof.
Upon any partial exercise of the Warrants evidenced
hereby, there shall be signed and issued to the Warrantholder a
new Warrant Certificate in respect of the Warrant Shares as to
which the Warrants evidenced hereby shall not have been exercised.
These Warrants may be exchanged at the office of the Company by
surrender of this Warrant Certificate properly endorsed for one or
more new Warrants of the same aggregate number of Warrant Shares
as evidenced by the Warrant or Warrants exchanged. No fractional
Shares of Common Stock 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. These
Warrants are transferable at the office of the Company in the
manner and subject to the limitations set forth in the
Underwriter's Warrant Agreement.
This Warrant Certificate does not entitle any
Warrantholder to any of the rights of a stockholder of the Company
unless and until the Warrantholder exercises its rights to
purchase Warrant Shares hereunder.
BETA OIL & GAS INCORPORATED
Dated: _____________ __, 1999 By:
================================================================================
================================================================================
================================================================================
BETA OIL & GAS INCORPORATED
PURCHASE FORM
BETA OIL & GAS INCORPORATED 9O1 Dove Street, Suite __ Xxxxxxx Xxxxx, Xxxxxxxxxx
00000
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to purchase
thereunder, ____________ Warrant Shares of Common Stock (the "Warrant Shares")
provided for therein, and requests that certificates for the Warrant Shares be
issued in the name of:
(Please Print or Type Name)
(Address, including zip code)
(Social Security No. or Tax I.D. No.)
and, if said number of Warrant Shares shall not be all the Warrant Shares
purchasable hereunder, that a new Warrant Certificate for the balance of the
Warrant Shares purchasable under the within Warrant Certificate be registered in
the name of the undersigned Warrantholder or his Assignee as below indicated and
delivered to the address stated below.
Name of Warrantholder
or Assignee:
(Please Print)
Address:
Signature: Dated:
Note: The above signature must correspond with the name as written upon the face
of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, unless these Warrants have been assigned.
Signatures Guaranteed:
(Signature must be guaranteed by a bank or trust company having an office or
correspondent in the United States or by a member firm of a registered
securities exchange or the National Association of Securities Dealers, Inc.)
ASSIGNMENT
(To be signed only upon assignment of Warrants)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto the assignee named below all of the rights of the undersigned represented
by the attached Warrant with respect to the number of Warrant Shares covered by
the Warrant set forth below:
(Name and Address of Assignee Must Be Printed or Typewritten)
Social Security No.
Name of Assignee or Tax I.D. No. Address No. of Warrant
Shares
and does hereby irrevocably constitute and appoint __________________________
_______ Attorney to transfer said Warrants on the books of the Company, with
full power of substitution in the premises.
Dated: _____________________________
Signature of Registered Holder
Note: The signature on this assignment must correspond with the name as it
appears upon the face of the within Warrant Certificate in every
particular, without alteration or enlargement or any change whatever.
Signature Guaranteed:
(Signature must be guaranteed by a bank or trust company having an office or
correspondent in the United States or by a member firm of a registered
securities exchange or the National Association of Securities Dealers, Inc.)
SCHEDULE I
Initial Distribution of Warrants
Name................................................................. Amount
Xxxxxxx, Xxxxxxx & Associates, Inc.........................................100%
