EXHIBIT 4.1
[FORM OF WARRANT]
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER THE 1933 ACT, OR AN OPINION OF COUNSEL,
SATISFACTORY TO THE ISSUER HEREOF, TO THE EFFECT THAT REGISTRATION IS NOT
REQUIRED UNDER THE 1933 ACT.
WARRANT TO PURCHASE
COMMON STOCK OF
THE AMERICAN ENERGY GROUP, LTD.
Date of Issuance: _______________ Warrant No. ______
This certifies that, for value received, THE AMERICAN ENERGY GROUP, LTD.,
a Nevada corporation (the "Company"), grants _______________________________, or
registered assigns (the "Registered Holder"), the right to subscribe for and
purchase from the Company, at the Exercise Price (as defined herein), from and
after 9:00 a.m. Texas time on _________________ (the "Exercise Commencement
Date") and to and including 5:00 p.m., Texas time on _________________ (the
"Expiration Date"), ________________________ (________) shares, as such number
of shares may be adjusted from time to time (the "Warrant Shares"), of the
Company's common stock, par value $.001 per share (the "Common Stock"), subject
to the provisions and upon the terms and conditions herein set forth. The
"Exercise Price" per share of Common Stock shall be $______; PROVIDED, that the
Exercise Price and the number of Warrant Shares purchasable upon exercise of
this Warrant are subject to adjustment from time to time as provided in Section
7 hereof.
SECTION 1. REGISTRATION. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Records"), in the name of the Registered Holder. The Company may deem and treat
the Registered Holder as the absolute owner of this Warrant for the purpose of
any exercise hereof or any distribution to the Registered Holder, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
SECTION 2. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) Subject to Section 11 hereof, the Company shall register the transfer
of this Warrant, in whole or in part, upon records to be maintained by the
Company for that purpose, upon surrender of this Warrant, with the Form of
Assignment attached hereto completed and duly endorsed by the Registered Holder,
to the Company at the office specified in or pursuant to Section 3(b). Upon any
such registration of transfer, a new Warrant, in substantially the form of this
Warrant, evidencing the Common Stock purchase rights so transferred shall be
issued to the transferee and a new Warrant, in similar form, evidencing the
remaining Common Stock purchase rights not so transferred, if any, shall be
issued to the Registered Holder.
(b) This Warrant is exchangeable, upon the surrender hereof by the
Registered Holder at the office of the Company specified in or pursuant to
Section 3(b) hereof, for new Warrants, in substantially the form of this Warrant
evidencing, in the aggregate, the right to purchase the number of Warrant Shares
which may then be purchased hereunder, each of such new Warrants to be dated the
date
1
<PAGE>
of such exchange and to represent the right to purchase such number of Warrant
Shares as shall be designated by the Registered Holder at the time of such
surrender.
SECTION 3. DURATION AND EXERCISE OF THIS WARRANT.
(a) This Warrant shall be exercisable by the Registered Holder, in whole,
or from time to time in part, on any business day before 5:00 p.m., Texas time,
during the period beginning on the Exercise Commencement Date and ending on the
Expiration Date. At 5:00 p.m., Texas time, on the Expiration Date, this Warrant,
to the extent not previously exercised, shall become void and of no further
force or effect.
(b) Subject to Sections 4, and 11(a) hereof, upon exercise or surrender of
this Warrant, with the Form of Election to Purchase attached hereto completed
and duly endorsed by the Registered Holder, to the Company at its office at 9315
FM 1489, Simonton, Texas 77476, Attention: President, or at such other address
as the Company may specify in writing to the Registered Holder, and upon payment
of the Exercise Price multiplied by up to the number of Warrant Shares then
issuable upon exercise of this Warrant in lawful money of the United States of
America (except as otherwise provided for in Section 3(c) hereof), all as
specified by the Registered Holder in the Form of Election to Purchase, the
Company shall promptly issue and cause to be delivered to or upon the written
order of the Registered Holder, and in such name or names as the Registered
Holder may designate, a certificate for the Warrant Shares issued upon such
exercise. Any person so designated in the Form of Election to Purchase, duly
endorsed by the Registered Holder, as the person to be named on the certificates
for the Warrant Shares, shall be deemed to have become holder of record of such
Warrant Shares, evidenced by such certificates, as of the Date of Exercise (as
hereinafter defined) of such Warrant.
(c) The Registered Holder may pay the applicable Exercise Price pursuant
to Section 3(b), at the option of the Registered Holder, either (i) in cash or
by cashier's or certified bank check payable to the Company in an amount equal
to the product of the Exercise Price multiplied by the number of Warrant Shares
being purchased upon such exercise (the "Aggregate Exercise Price"), (ii) by
wire transfer of immediately available funds to the account which shall be
indicated in writing by the Company to the Registered Holder, or (iii) by
written notice to the Company that the Registered Holder is exercising this
Warrant and is authorizing the Company to withhold from the issuance to such
Registered Holder that number of Warrant Shares which when multiplied by the
Market Price (as hereinafter defined) for the Common Stock as of the Date of
Exercise is equal to the Aggregate Exercise Price. Any Warrant Shares withheld
by the Company in connection with an exercise of this Warrant pursuant to clause
(iii) of this Section 3(c) shall no longer be issuable under this Warrant and
this Warrant shall be deemed to be automatically amended to reduce the number of
Warrant Shares issuable hereunder by an amount equal to the amount of such
withheld Warrant Shares.
(d) The "Date of Exercise" of any Warrant means the date on which the
Company shall have received (i) this Warrant, with the Form of Election to
Purchase attached hereto appropriately completed and duly endorsed, and (ii)
payment of the Aggregate Exercise Price as provided herein.
(e) This Warrant shall be exercisable either as an entirety or, from time
to time, for part only of the number of Warrant Shares which are issuable
hereunder. If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of the certificates for the Warrant Shares issued
pursuant to such exercise, deliver to the Registered Holder a new Warrant
evidencing the rights to purchase the remaining Warrant Shares, which Warrant
shall be substantially in the form of this Warrant.
2
<PAGE>
(f) DEFINITION OF MARKET PRICE. As used in this Warrant, the term "Market
Price" shall mean the average of the daily closing prices per share of the
Common Stock for the ten (10) consecutive trading days immediately preceding the
day as of which Market Price is being determined. The closing price for each day
shall be the last reported sale price or, in case no such sale takes place on
such day, the average of the reported closing bid and asked prices, in either
case on the New York Stock Exchange, or, if the Common Stock is not listed or
admitted to trading on the New York Stock Exchange, on the principal national
securities exchange on which the shares are listed or admitted to trading, or,
if the shares are not so listed or admitted to trading, the average of the
highest reported bid and lowest reported asked prices as furnished by the
National Association of Securities Dealers, Inc. (the "NASD") through NASDAQ or
through a similar organization if NASDAQ is no longer reporting such information
or as reported on the NASD's OTC Electronic Bulletin Board ("OTC"). If shares of
Common Stock are not listed or admitted to trading on any exchange or quoted
through NASDAQ or any similar organization or reported on OTC, the Market Price
shall be deemed to be the higher of (A) the book value of a share of the Common
Stock as determined by any firm of independent public accountants selected by
the Board of Directors of the Company and acceptable to the Registered Holder,
as of the end of the most recent fiscal quarter preceding the date as of which
the determination is to be made, or (B) the fair value thereof determined in
good faith by the Company's Board of Directors as expressed by a resolution of
such board as of a date which is within fifteen (15) days of the date as of
which the determination is to be made. The fees and expenses of any accounting
firm engaged pursuant to subclause (A) of this Section 3(f) shall be paid by the
Company.
SECTION 4. PAYMENT OF TAXES AND EXPENSES.
(a) The Company will pay all expenses and taxes (other than any federal or
state income tax or similar obligations of the Registered Holder) and other
governmental charges attributable to the preparation, execution, issuance and
delivery of this Warrant, any new Warrant and the Warrant Shares; PROVIDED,
HOWEVER, that the Company shall not be required to pay any tax in respect of the
transfer of this Warrant or the Warrant Shares, or the issuance or delivery of
certificates for Warrant Shares upon the exercise of this Warrant, to a person
or entity other than a Registered Holder or an Affiliate (as hereinafter
defined) of such Registered Holder.
(b) An "Affiliate" of any person or entity means any other person or
entity directly or indirectly controlling, controlled by or under direct or
indirect common control with such person or entity.
SECTION 5. MUTILATED OR MISSING WARRANT CERTIFICATE. If this Warrant shall
be mutilated, lost, stolen or destroyed, upon request by the Registered Holder,
the Company will issue, in exchange for and upon cancellation of the mutilated
Warrant, or in substitution for the lost, stolen or destroyed Warrant, a new
Warrant, in substantially the form of this Warrant, of like tenor, but, in the
case of loss, theft or destruction, only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction of this Warrant
and, if requested by the Company, indemnity also reasonably satisfactory to it.
SECTION 6. RESERVATION, LISTING AND ISSUANCE OF WARRANT SHARES.
(a) The Company will at all times have authorized, and reserve and keep
available, free from preemptive rights, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon the exercise of the rights
represented by this Warrant, the number of Warrant Shares deliverable upon
exercise of this Warrant. The Company will, at its expense, use it best efforts
to cause such shares to be included in or listed on (subject to issuance or
notice of issuance of Warrant Shares) all markets or stock exchanges in or on
which the Common Stock is included or listed not later than the date
3
<PAGE>
on which the Common Stock is first included or listed on any such market or
exchange and will thereafter maintain such inclusion or listing of all shares of
Common Stock from time to time issuable upon exercise of this Warrant.
(b) Before taking any action which could cause an adjustment pursuant to
Section 7 hereof reducing the Exercise Price below the par value of the Warrant
Shares, the Company will take any corporate action which may be necessary in
order that the Company may validly and legally issue at the Exercise Price, as
so adjusted, Warrant Shares that are fully paid and non-assessable.
(c) The Company covenants that all Warrant Shares will, upon issuance in
accordance with the terms of this Warrant, be (i) duly authorized, fully paid
and nonassessable, and (ii) free from all taxes with respect to the issuance
thereof and from all liens, charges and security interests.
SECTION 7. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
(a) ADJUSTMENT OF NUMBER OF WARRANT SHARES. The Exercise Price at which
Warrant Shares may be purchased hereunder, and the number of Warrant Shares to
be purchased upon exercise hereof, are subject to change or adjustment from time
to time as hereinafter provided. Upon each resulting adjustment of such Exercise
Price, the number of Warrant Shares issuable upon the exercise of this Warrant
shall be adjusted to the nearest full Warrant Share by multiplying a number
equal to the Exercise Price in effect immediately prior to such adjustment by
the number of Warrant Shares issuable upon exercise of this Warrant immediately
prior to such adjustment and dividing the product so obtained by the adjusted
Exercise Price.
(c) ADJUSTMENT OF EXERCISE PRICE UPON CERTAIN ISSUANCES OF COMMON STOCK.
IF AND WHENEVER AFTER THE DATE HEREOF, THE COMPANY SHALL ISSUE OR SELL ANY
SHARES OF COMMON STOCK FOR A CONSIDERATION PER SHARE LESS THAN THE EXERCISE
PRICE IN EFFECT IMMEDIATELY PRIOR TO THE TIME 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 FOLLOWS: BY DIVIDING (A) AN
AMOUNT EQUAL TO THE SUM OF (1) THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING
IMMEDIATELY PRIOR TO SUCH ISSUANCE OR SALE MULTIPLIED BY THE THEN EXISTING
EXERCISE PRICE, AND (2) THE CONSIDERATION, IF ANY, RECEIVED BY THE COMPANY UPON
SUCH ISSUANCE OR SALE, BY (B) THE TOTAL NUMBER OF SHARES COMMON STOCK
OUTSTANDING IMMEDIATELY AFTER SUCH ISSUANCE OR SALE.
NO ADJUSTMENT OF ANY EXERCISE PRICE, HOWEVER, SHALL BE MADE IN AN AMOUNT
LESS THAN ONE CENT PER SHARE, BUT ANY SUCH LESSER ADJUSTMENT SHALL BE CARRIED
FORWARD AND SHALL BE MADE UPON THE EARLIER OF (I) THE FIRST ANNIVERSARY OF THE
ISSUANCE (OR DEEMED ISSUANCE) OF THE SECURITIES REQUIRING SUCH ADJUSTMENT
HEREUNDER, AND (II) AT THE TIME OF, AND TOGETHER WITH, THE NEXT SUBSEQUENT
ADJUSTMENT WHICH TOGETHER WITH ANY ADJUSTMENTS SO CARRIED FORWARD SHALL AMOUNT
TO ONE CENT PER SHARE OR MORE.
(c) For the purposes of subsection (b) of this Section 7, the following
provisions shall also be applicable:
(i) ISSUANCE OF RIGHTS, OPTIONS OR WARRANTS. In case at any time the
Company shall grant (whether directly or by assumption in a merger or otherwise)
any rights to subscribe for or to purchase, or any options or warrants for the
purchase of, Common Stock or any stock or securities convertible into or
exchangeable for Common Stock (such convertible or exchangeable securities being
herein called "Convertible Securities") whether or not such rights or options or
warrants
4
<PAGE>
or the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such right or options or warrants or upon
conversion or exchange of such Convertible Securities (determined as provided
below) shall be less than the Exercise Price in effect immediately prior to the
time of the granting of such rights or options or warrants, then the total
maximum number of shares of Common Stock issuable upon the exercise of such
rights or options or warrants or upon conversion or exchange of the total
maximum amount of such Convertible Securities issuable upon the exercise of such
rights or options or warrants shall (as of the date of granting of such rights
or options or warrants) be deemed to be outstanding and to have been issued for
such price per share. Except as provided in clause (iii) of this subsection, no
further adjustments of any Exercise Price shall be made upon the actual issue of
such Common Stock or of such Convertible Securities upon the exercise of such
rights or options or warrants or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities. For the purposes of this
clause (i), the price per share for Common Stock is issuable upon the exercise
of any such rights or options or warrants or upon conversion or exchange of any
such Convertible Securities shall be determined by dividing (A) the total
amount, if any, received or receivable by the Company as consideration for the
granting of such rights or options or warrants, plus the minimum aggregate
amount of additional consideration payable to the Company upon the exercise of
all such rights or options or warrants, plus, in the case of such rights or
options or warrants which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the issue or
sale of such Convertible Securities and upon the conversion or exchange thereof,
by (B) the total maximum number of shares of Common Stock issuable upon the
exercise of such rights or options or warrants or upon the conversion or
exchange of all such Convertible Securities issuable upon the exercise of such
rights or options or warrants.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. In case the Company shall
issue (whether directly or by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for Common Stock
is issuable upon conversion or exchange of such Convertible Securities
(determined as provided below) shall be less than the Exercise Price in effect
immediately prior to the time of such issue or sale, then the total maximum
number of shares of Common Stock issuable upon 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 for
such price per share, provided that (1) except as provided in clause (iii) of
this subsection, no further adjustments of any Exercise Price shall be made upon
the actual issue of Common Stock upon conversion or exchange of such Convertible
Securities, and (2) if any such issue or sale of such Convertible Securities is
made upon the exercise of any rights to subscribe for or to purchase or any
option to purchase any such Convertible Securities for which adjustments of any
Exercise Price have been or are to be made pursuant to other provisions of this
subsection (c), no further adjustment of any Exercise Price shall be made by
reason of such issue or sale. For the purposes of this clause (ii), the price
per share for which Common Stock is issuable upon conversion or exchange of
Convertible Securities shall be determined by dividing (A) 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 (B) the total maximum number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the purchase
price provided for in any rights or options or warrants referred to in clause
(i) above, or the additional consideration, if any, payable upon the conversion
or exchange of Convertible Securities referred to in clause (i) or (ii) above,
or the rate at which any Convertible Securities referred to in clause (i) or
(ii) above are convertible into or exchangeable for Common Stock, shall change
(other than under or by reason of provisions designed to protect against
dilution), then the Exercise Price in effect at the time of
5
<PAGE>
such change shall forthwith be readjusted to the Exercise Price which would have
been in effect at such time had such rights or options or warrants or
Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold; and on the expiration of any such right
or option or warrant or the termination of any such right to convert or exchange
such Convertible Securities, the Exercise Price then in effect hereunder shall
forthwith be readjusted to the Exercise Price which would have been in effect at
the time of such expiration or termination had such right, option, warrant or
Convertible Security, to the extent outstanding, immediately prior to such
expiration or termination, never been issued, and the Common Stock issuable
thereunder shall no longer be deemed to be outstanding.
(iv) STOCK DIVIDENDS. In case the Company shall declare a dividend
or make any other distribution upon any security of the Company payable in
Common Stock or Convertible Securities, such issue of Common Stock or
Convertible Securities, as the case may be, shall be deemed to have been made
without consideration.
(v) CONSIDERATION FOR STOCK. In case any shares of Common Stock or
Convertible Securities or any rights or options or warrants to purchase any such
Common Stock or Convertible Securities 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 shares of Common Stock or Convertible
Securities or any rights or options or warrants to purchase any such Common
Stock or Convertible Securities shall be issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such consideration, as
determined, in good faith and in the exercise of reasonable business judgment,
by the Board of Directors of the Company, without deduction of any expenses
incurred or any underwriting commissions or concessions paid or allowed by the
Company in connection therewith. In case any shares of Common Stock or
Convertible Securities or any rights or options or warrants to purchase such
shares of Common Stock or Convertible Securities shall be issued in connection
with any merger or consolidation in which the Company is the surviving
corporation (other than any consolidation or merger in which the previously
outstanding shares of Common Stock of the Company shall be changed into or
exchanged for the stock or other securities of another corporation), the amount
of consideration therefor shall be deemed to be the fair value, as determined,
in good faith and in the exercise of reasonable business judgment, by the Board
of Directors of the Company, of such portion of the assets and business of the
non-surviving corporation as such board may determine to be attributable to such
shares of Common Stock, Convertible Securities, rights or options or warrants,
as the case may be. In the event of any consolidation or merger of the Company,
in which the Company is not the surviving corporation or in which the previously
outstanding shares of Common Stock of the Company shall be changed into or
exchanged for the stock or other securities of another corporation or in the
event of any sale of all or substantially all of the assets of the Company for
stock or other securities of any corporation, the Company shall be deemed to
have issued a number of shares of its Common Stock for stock or securities or
other property of the other corporation computed on the basis of the actual
exchange ratio on which the transaction was predicted and for a consideration
equal to the fair market value on the date of such transaction of all such stock
or securities or other property of the other corporation, and if any such
calculation results in adjustment of the Exercise Price, the determination of
the number of shares of Common Stock issuable upon exercise of the Warrants
immediately prior to such merger, consolidation or sale, for purposes of Section
7(e), shall be made after giving effect to such adjustment of the Exercise
Price.
(vi) RECORD DATES. In case the Company shall take a record of the
holders of Common Stock for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock or in Convertible
Securities, or (ii) to subscribe for or purchase Common Stock or in
6
<PAGE>
Convertible Securities, then such record date shall be deemed to be the date of
issue or sale of the shares of Common Stock deemed to have been issued upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
(vii) TREASURY STOCK. The number of shares of Common Stock
outstanding at any given time shall include shares owned or held by or for the
account of the Company, and the disposition of any such shares so owned or held
shall not be considered an issue of Common Stock.
(d) SUBDIVISIONS OR COMBINATIONS OF COMMON STOCK. In case the Company
shall at any time subdivide the outstanding shares of Common 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 Common Stock shall be combined into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination shall
be proportionately increased.
(e) ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS, REORGANIZATION,
ETC. In case the Company (i) consolidates with or mergers into any other
corporation and is not the continuing or surviving corporation of such
consolidation of merger, or (ii) permits any other corporation to consolidate
with or merge into the Company and the Company is the continuing or surviving
corporation but, in connection with such consolidation or merger, the Common
Stock is changed into or exchanged for stock or other securities of any other
corporation or cash or any other assets, or (iii) transfers all or substantially
all of its properties and assets to any other corporation, or (iv) effects a
capital reorganization or reclassification of the capital stock of the Company
in such a way that holders of Common Stock shall be entitled to receive stock,
securities, cash and/or assets with respect to or in exchange for Common Stock,
then, and in each such case, proper provision shall be made so that, upon the
basis and upon the terms and in the manner provided in this subsection (e), the
Registered Holder, upon the exercise of this Warrant at any time after the
consummation of such consolidation, merger, transfer, reorganization or
reclassification, shall be entitled to receive (at the aggregate Exercise Price
in effect for all shares of Common Stock issuable upon such exercise immediately
prior to such consummation as adjusted to the time of such transaction), in lieu
of shares of Common Stock issuable upon such exercise prior to such
consummation, the stock and other securities, cash and/or assets to which such
holder would have been entitled upon such consummation if the Registered Holder
had so exercised this Warrant immediately prior thereto (subject to adjustments
subsequent to such corporate action as nearly equivalent as possible to the
adjustments provided for in this Section).
(f) NOTICE OF ADJUSTMENT. Upon any adjustment of the Exercise Price, then
and in each case the Company shall promptly deliver a notice to the Registered
Holder and either (i) a certificate of the chief financial officer of the
Company or (ii) upon the request of the Registered Holder, the opinion of a firm
of independent certified public accountants (which may be the regular auditors
of the Company) of recognized national standing selected by the Board of
Directors, which notice or opinion 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 the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
(g) OTHER NOTICES. In case at any time:
(i) the Company shall declare any cash dividend on its Common Stock;
(ii) the Company shall pay any dividend payable in stock upon its
Common Stock or make any distribution (other than regular cash dividends) to the
holders of its Common Stock;
7
<PAGE>
(iii) the Company shall offer for subscription PRO RATA to the
holders of its Common Stock any additional shares of stock of any class or other
rights;
(iv) the Company shall authorize the distribution to all holders of
its Common Stock of evidences of its indebtedness or assets (other than cash
dividends or cash distributions payable out of earnings or earned surplus or
dividends payable in Common Stock);
(v) there shall be any capital reorganization, or reclassification
of the capital stock of the Company, or consolidation or merger of the Company
with another corporation (other than a subsidiary of the Company in which the
Company is the surviving or continuing corporation and no change occurs in the
Company's Common Stock), or sale of all or substantially all of its assets to
another corporation;
(vi) there shall be a voluntary or involuntary dissolution,
liquidation, bankruptcy, assignment for the benefit of creditors, or winding up
of the Company; or
(vii) the Company proposes to take any other action or an event
occurs which would require an adjustment of the Exercise Price pursuant to
subsection (h) of this Section 7;
then, in any one or more of said cases the Company shall give written notice,
addressed to the Registered Holder at the address of such Registered Holder as
shown on the books of the Company, of (1) the date on which the books of the
Company shall close or a record shall be taken for such dividend, distribution
or subscription rights, or (2) the date (or, if not then known, a reasonable
approximation thereof by the Company) on which such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
bankruptcy, assignment for the benefit of creditors, winding up or other action,
as the case may be, shall take place. Such notice shall also specify (or, if not
then known, reasonably approximate) the date as of which the holders of Common
Stock of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, bankruptcy, assignment
for the benefit of creditors, winding up, or other action, as the case may be.
Such written notice shall be given at least thirty (30) days prior to the action
in question and not less than thirty (30) days prior to the record date or the
date on which the Company's transfer books are closed in respect thereto. Such
notice shall also state that the action in question or the record date is
subject to the effectiveness of a registration statement under the 1933 Act, or
to a favorable vote of stockholders, if either is required.
(h) CERTAIN EVENTS. If any event occurs as to which in the reasonable
opinion of the Registered Holder, in good faith, the other provisions of this
Section 7 are not strictly applicable but the lack of any adjustment would not
in the opinion of the Registered Holder fairly protect the Registered Holder in
accordance with the basic intent and principles of such provisions, or if
strictly applicable would not fairly protect the purchase rights of the
Registered Holder in accordance with the basic intent and principles of such
provisions, then the Registered Holder shall give written notice thereof to the
Company. If the Company and the Registered Holder cannot agree with respect to
an adjustment of the Exercise Price hereof within fifteen (15) days of the
delivery of such notice by the Registered Holder to the Company, then the
Company shall appoint a firm of independent certified public accountants (which
may be the regular auditors of the Company) of recognized national standing,
which shall give their opinion upon the adjustment, if any, on a basis
consistent with the basic intent and principles established in the other
provisions of this Section 7, necessary to preserve, without dilution, the
exercise rights of the Registered Holder. Upon receipt of such opinion, the
Company shall forthwith make the adjustments
8
<PAGE>
described therein. The cost of the services performed by the firm of independent
certified public accountants shall be borne by the Company.
SECTION 8. CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the event that the
Company shall at any time prior to the exercise of this Warrant declare a
dividend (other than a dividend consisting solely of shares of Common Stock or a
cash dividend or distribution payable out of current or retained earnings) or
otherwise distribute to its stockholders any monies, assets, property, rights,
evidences of indebtedness, securities (other than shares of Common Stock),
whether issued by the Company or by another person or entity, or any other thing
of value, the Registered Holder shall thereafter be entitled, in addition to the
shares of Common Stock receivable upon the exercise of the Warrant, to receive,
upon the exercise of the Warrant, the same monies, property, assets, rights,
evidences of indebtedness, securities or any other thing of value that the
Registered Holder would have been entitled to receive at the time of such
dividend or distribution had the Registered Holder been an owner of record of
the shares of Common Stock into which the Warrant is then being exercised as of
the record date or other date of determination for such dividend or distribution
and an appropriate provision (which provision may include without limitation,
the establishment of an escrow agreement in favor of the Registered Holder in
which the portion of the dividend or distribution attributable to such warrants
is held) shall be made a part of any such dividend or distribution.
Notwithstanding any provision herein to the contrary, no adjustment under this
Section 8 shall be made with respect to any cash dividend or distribution
payable solely out of current or retained earnings of the Company.
SECTION 9. NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. The Registered
Holder shall not be entitled to vote or be deemed the holder of Common Stock or
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained herein be construed to confer upon
the holder of this Warrant, as such, the rights of a stockholder of the Company
or the right to vote for the election of directors or upon any matter submitted
to stockholders at any meeting thereof, or give or withhold consent to any
corporate action or to receive notice of meetings or other actions affecting
stockholders (except as provided herein), or to receive dividends or
subscription rights or otherwise, until the Date of Exercise shall have
occurred. No provision of this Warrant, in the absence of affirmative action by
the Registered Holder hereof to purchase shares of Common Stock, and no mere
enumeration herein of the rights and privileges of the Registered Holder, shall
give rise to any liability of such holder for the Exercise Price or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
SECTION 10. FRACTIONAL WARRANT SHARES. The Company shall not be required
to issue fractions of Warrant Shares upon exercise of the Warrant or to
distribute certificates which evidence fractional Warrant Shares. If any
fraction of a Warrant Share would, except for the provisions of this Section 10,
be issuable on the exercise of any Warrant (or specified portion thereof), the
Company shall pay to the Registered Holder an amount in cash equal to the Market
Price as of the Exercise Date, multiplied by such fraction.
SECTION 11. TRANSFER RESTRICTIONS; REGISTRATION OF THE WARRANT AND WARRANT
SHARES.
(a) Neither the Warrant nor the Warrant Shares have been registered under
the 1933 Act. The Registered Holder, by acceptance hereof, represents that it is
acquiring this Warrant to be issued to it for its own account and not with a
view to the distribution thereof, and agrees not to sell, transfer, pledge or
hypothecate this Warrant, any purchase rights evidenced hereby or any Warrant
Shares unless a registration statement is effective for this Warrant or the
Warrant Shares under the 1933 Act or in the opinion of such Registered Holder's
counsel reasonably satisfactory to the Company, a copy
9
<PAGE>
of which opinion shall be delivered to the Company, such transaction is exempt
from the registration requirements of the 1933 Act.
(b) Subject to the provisions of the following paragraph of this Section
11, each Certificate for Warrant Shares shall be stamped or otherwise imprinted
with a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER THE 1933 ACT, OR AN OPINION OF
COUNSEL, SATISFACTORY TO THE ISSUER HEREOF, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT.
(c) The restrictions and requirements set forth in the foregoing paragraph
shall apply with respect to Warrant Shares unless and until such Warrant Shares
are sold or otherwise transferred pursuant to an effective registration
statement under the 1933 Act or are otherwise no longer subject to the
restrictions of the 1933 Act, at which time the Company agrees to promptly cause
such restrictive legends to be removed and stop transfer restrictions applicable
to such Warrant Shares to be rescinded.
(d) The Company will use its best efforts to comply with the reporting
requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act") (whether or not it shall be required to do so pursuant
to such Sections) and will use its best efforts to comply with all other public
information reporting requirements of the Securities and Exchange Commission
(including, without limitation, Securities and Exchange Commission ("SEC") Rule
144 promulgated under the 1933 Act) from time to time in effect and relating to
the availability of an exemption from the 1933 Act for sale of restricted
securities. The Company also will cooperate with the Registered Holder and with
each holder of any Warrant Shares in supplying such information as may be
necessary for any such holders to complete and file any information reporting
forms presently or hereafter required by the SEC as a condition to the
availability of an exemption from the 1933 Act for the sale of restricted
securities.
Section 12. REGISTRATION RIGHTS.
The Company covenants and agrees as follows:
(a) DEFINITIONS. FOR PURPOSES OF THIS SECTION 12:
(i) THE TERM "1934 ACT" MEANS THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED.
(ii) THE TERM "HOLDER" MEANS EACH OF THE PERSONS WHO AT THE TIME
HOLDS REGISTRABLE SECURITIES OR A WARRANT OR WARRANTS (INCLUDING THIS WARRANT)
TO PURCHASE REGISTRABLE SECURITIES.
(iii) THE TERM "PUBLIC CORPORATION" MEANS A CORPORATION WHICH HAS A
CLASS OF EQUITY SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE 1934 ACT, OR
WHICH IS REQUIRED TO FILE PERIODIC REPORTS PURSUANT TO SECTION 15(D) OF THE 1934
ACT.
(iv) THE TERMS "REGISTER," "REGISTERED" AND "REGISTRATION" REFER TO
A REGISTRATION EFFECTED BY PREPARING AND FILING A REGISTRATION STATEMENT OR
SIMILAR DOCUMENT IN COMPLIANCE WITH
10
<PAGE>
THE 1933 ACT, AND SUCH REGISTRATION STATEMENT OR DOCUMENT BECOMING EFFECTIVE.
(v) THE TERM "REGISTRABLE SECURITIES" MEANS (I) THE WARRANT SHARES,
AND (II) ANY COMMON STOCK ISSUED AS (OR ISSUABLE UPON THE CONVERSION OR EXERCISE
OF ANY WARRANT, RIGHT OR OTHER SECURITY WHICH IS ISSUED AS) A DIVIDEND OR OTHER
DISTRIBUTION WITH RESPECT TO, OR IN EXCHANGE FOR OR IN REPLACEMENT OF, THE
WARRANT SHARES; PROVIDED, HOWEVER, THAT ANY SUCH SECURITIES SHALL CEASE TO BE
REGISTRABLE SECURITIES WHEN (I) ONE OR MORE REGISTRATION STATEMENTS WITH RESPECT
TO THE SALE OF SUCH SECURITIES SHALL HAVE BECOME EFFECTIVE UNDER THE 1933 ACT
AND ALL SUCH SECURITIES SHALL HAVE BEEN DISPOSED OF IN ACCORDANCE WITH THE PLAN
OF DISTRIBUTION SET FORTH THEREIN; (II) SUCH SECURITIES SHALL HAVE BEEN DISPOSED
OF IN ACCORDANCE WITH SEC RULE 144 PROMULGATED UNDER THE 1933 ACT, OR ANY
SUCCESSOR RULE OR REGULATION THERETO, OR ANY STATUTE HEREAFTER ADOPTED TO
REPLACE OR TO ESTABLISH THE EXEMPTION THAT IS NOW COVERED BY SAID RULE 144
("RULE 144"); (III) SUCH SECURITIES MAY BE SOLD BY A HOLDER IN A TRANSACTION
PURSUANT TO THE PROVISIONS OF RULE 144 PROVIDED THAT SUCH RULE SHALL BE AT SUCH
TIME AVAILABLE FOR THE SALE OF ALL SUCH SECURITIES WHICH THE HOLDER AT SUCH TIME
DESIRES TO SELL; OR (IV) SUCH SECURITIES MAY OTHERWISE BE SOLD TO THE PUBLIC IN
A TRANSACTION NOT REQUIRING REGISTRATION UNDER THE 1933 ACT.
(vi) THE TERM "REGISTRATION EXPENSES" MEANS ALL REGISTRATION,
QUALIFICATION AND FILING FEES, PRINTING EXPENSES, ESCROW FEES AND BLUE SKY FEES,
FEES AND DISBURSEMENTS OF COUNSEL FOR THE COMPANY AND OF THE COMPANY'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS, IN EACH CASE INCIDENT TO OR REQUIRED
BY THE REGISTRATION UNDER THIS WARRANT, AND ANY OTHER FEES AND EXPENSES OF THE
REGISTRATION UNDER THIS WARRANT WHICH ARE NOT SELLING EXPENSES.
(vii) THE TERM "SELLING EXPENSES" MEANS ALL UNDERWRITING DISCOUNTS,
SELLING COMMISSIONS AND STOCK TRANSFER TAXES APPLICABLE TO THE SECURITIES
REGISTERED BY THE HOLDERS AND ALL FEES AND DISBURSEMENTS OF COUNSEL FOR ANY
HOLDER.
(viii) ALL OTHER CAPITALIZED TERMS USED IN THIS SECTION THAT ARE NOT
DEFINED HEREIN SHALL HAVE THE MEANING OTHERWISE GIVEN IN THIS WARRANT.
(b) RESERVED.
(c) PIGGYBACK REGISTRATION RIGHTS.
(i) If, at any time or from time to time, the Company shall
determine to register any shares of its Common Stock, either for its own account
or for the account of a security holder or holders, other than (A) a
registration relating solely to stock option or employee benefit plans or (B) a
registration relating solely to a transaction covered by Rule 145 under the 1933
Act, the Company will (X) promptly give the Holders written notice thereof, and
(Y) include in such registration (and any related qualification under blue sky
or other state securities laws), and in any underwriting involved therein, all
of the Registrable Securities specified in a written request or requests made by
a Holder or Holders within twenty (20) days after receipt of such written notice
from the Company.
(ii) If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise the Holder as part of the written notice given pursuant to Section
12(c)(i). In such event, the right of each Holder to registration pursuant to
this Section 12(c) shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of the Registrable Securities owned by such
Holder in the underwriting to the extent provided under this Section 12(c). If a
Holder proposes to distribute its Registrable Securities through such
underwriting it shall (together with the Company and any other holders of
securities of the Company
11
<PAGE>
distributing their securities through such underwriting) enter into an
underwriting agreement with the managing or lead managing underwriter selected
by the Company in the form customarily used by such underwriter with such
changes thereto as the parties thereto shall agree. Notwithstanding any other
provision of this Section 12(c), if the managing or lead managing underwriter
determines that market factors require that the number of Registrable Securities
and other securities requested to be included in the registration be limited,
the managing or lead managing underwriter may reduce the number of Registrable
Securities and securities of any other holders of securities to be included in
the registration. If the registration includes an underwritten primary
registration on behalf of the Company, the reduction shall be taken (i) first
from and to the extent of the securities requested to be included in the such
registration by the Holders and the holders of any other securities PRO RATA
according to the number of securities requested by the Holders and such holders
to be included in the registration, and (ii) thereafter from the securities to
be registered on behalf of the Company. If the registration consists only of any
underwritten secondary registration on behalf of holders of securities of the
Company, the reduction shall be taken (i) first from and to the extent of the
securities requested to be included in the such registration by the Holders and
any other holders of securities included in the registration other than pursuant
to demand registration rights PRO RATA according to the number of securities
requested by the Holders and such other holders to be included in the
registration and (ii) thereafter from securities, if any, to be registered on
behalf of holders of securities included in the registration pursuant to demand
registration rights. The Company shall advise any Holders and other holders
participating in such underwriting as to any such limitation and the number of
shares that may be included in the registration and underwriting. If a Holder
disapproves of the terms of such underwriting, such Holder may elect to withdraw
therefrom by written notice to the Company and the managing or lead underwriter.
Any Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from the registration.
(iii) The Company may withdraw a registration for which registration
rights have been exercised pursuant to this Section 12(c) at any time prior to
the time it becomes effective.
(d) EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with a registration pursuant to this Section 12 shall be borne by the
Company. All Selling Expenses relating to the Registrable Securities registered
on behalf of a Holder shall be borne by such Holder.
(e) REGISTRATION PROCEDURES.
(i) In connection with the registration of Registrable
Securities pursuant to this Section 12, the Company shall as expeditiously as is
reasonable:
(A) PREPARE AND FILE WITH THE SEC ON ANY APPROPRIATE FORM A
REGISTRATION STATEMENT WITH RESPECT TO SUCH REGISTRABLE SECURITIES AND USE ITS
BEST EFFORTS TO CAUSE SUCH REGISTRATION STATEMENT TO BECOME EFFECTIVE;
(B) PREPARE AND FILE WITH THE SEC SUCH AMENDMENTS (INCLUDING
POST-EFFECTIVE AMENDMENTS) AND SUPPLEMENTS TO SUCH REGISTRATION STATEMENT AND
THE PROSPECTUS USED IN CONNECTION THEREWITH AS MAY BE NECESSARY TO KEEP SUCH
REGISTRATION STATEMENT EFFECTIVE AND TO COMPLY WITH THE PROVISIONS OF THE 1933
ACT WITH RESPECT TO THE DISPOSITION OF ALL REGISTRABLE SECURITIES AND OTHER
SECURITIES COVERED BY SUCH REGISTRATION STATEMENT UNTIL THE EXPIRATION OF A
PERIOD OF 90 DAYS AFTER THE EXPIRATION OF THE TERM OF THE WARRANTS OR UNTIL THE
HOLDER OR HOLDERS HAVE COMPLETED THE DISTRIBUTION DESCRIBED IN SUCH REGISTRATION
STATEMENT, WHICHEVER OCCURS FIRST;
(C) FURNISH TO EACH SELLER OF SUCH REGISTRABLE SECURITIES SUCH
NUMBER OF CONFORMED COPIES OF SUCH REGISTRATION STATEMENT AND OF EACH SUCH
AMENDMENT AND SUPPLEMENT THERETO (AT LEAST ONE OF WHICH SHALL INCLUDE ALL
EXHIBITS), SUCH NUMBER OF COPIES OF THE PROSPECTUS INCLUDED IN SUCH REGISTRATION
STATEMENT (INCLUDING EACH
12
<PAGE>
PRELIMINARY PROSPECTUS AND ANY SUMMARY PROSPECTUS), IN CONFORMITY WITH THE
REQUIREMENTS OF THE 1933 ACT, SUCH DOCUMENTS INCORPORATED BY REFERENCE IN SUCH
REGISTRATION STATEMENT OR PROSPECTUS, AND SUCH OTHER DOCUMENTS, AS SUCH SELLER
MAY REASONABLY REQUEST IN ORDER TO FACILITATE THE SALE OR DISPOSITION OF SUCH
REGISTRABLE SECURITIES;
(D) USE ITS BEST EFFORTS TO REGISTER OR QUALIFY ALL REGISTRABLE
SECURITIES AND OTHER SECURITIES COVERED BY SUCH REGISTRATION STATEMENT UNDER
SUCH OTHER SECURITIES OR "BLUE SKY" LAWS OF SUCH JURISDICTIONS AS THE
UNDERWRITER SHALL REASONABLY REQUEST, AND DO ANY AND ALL OTHER ACTS AND THINGS
AS MAY BE REASONABLY NECESSARY TO CONSUMMATE THE DISPOSITION IN SUCH
JURISDICTIONS OF THE REGISTRABLE SECURITIES COVERED BY SUCH REGISTRATION
STATEMENT, EXCEPT THAT THE COMPANY SHALL NOT FOR ANY SUCH PURPOSE BE REQUIRED TO
QUALIFY GENERALLY TO DO BUSINESS AS A FOREIGN CORPORATION IN ANY JURISDICTION
WHEREIN IT IS NOT SO QUALIFIED, OR TO SUBJECT ITSELF TO TAXATION IN RESPECT OF
DOING BUSINESS IN ANY SUCH JURISDICTION, OR TO CONSENT TO GENERAL SERVICE OF
PROCESS IN ANY SUCH JURISDICTION.
(E) IMMEDIATELY NOTIFY EACH SELLER OF REGISTRABLE SECURITIES, AT ANY
TIME WHEN A PROSPECTUS RELATING THERETO IS REQUIRED TO BE DELIVERED UNDER THE
1933 ACT, OF THE HAPPENING OF ANY EVENT AS A RESULT OF WHICH THE PROSPECTUS
INCLUDED IN SUCH REGISTRATION STATEMENT, AS THEN IN EFFECT, INCLUDES AN UNTRUE
STATEMENT OF A MATERIAL FACT OR OMITS TO STATE ANY MATERIAL FACT REQUIRED TO BE
STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING IN THE
LIGHT OF THE CIRCUMSTANCES THEN EXISTING OR IF IT IS NECESSARY, IN THE OPINION
OF COUNSEL TO THE COMPANY, TO AMEND OR SUPPLEMENT SUCH PROSPECTUS TO COMPLY WITH
LAW, AND AT THE REQUEST OF ANY SUCH SELLER PREPARE AND FURNISH TO ANY SUCH
SELLER A REASONABLE NUMBER OF COPIES OF A SUPPLEMENT TO OR AN AMENDMENT OF SUCH
PROSPECTUS AS MAY BE NECESSARY SO THAT, AS THEREAFTER DELIVERED TO THE
PURCHASERS OF SUCH REGISTRABLE SECURITIES, SUCH PROSPECTUS SHALL NOT INCLUDE AN
UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT REQUIRED TO
BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING IN
THE LIGHT OF THE CIRCUMSTANCES THEN EXISTING AND SHALL OTHERWISE COMPLY IN ALL
MATERIAL RESPECTS WITH LAW AND SO THAT SUCH PROSPECTUS, AS AMENDED OR
SUPPLEMENTED, WILL COMPLY WITH LAW.
(F) OTHERWISE USE ITS BEST EFFORTS TO COMPLY WITH ALL APPLICABLE
RULES AND REGULATIONS OF THE SEC, AND MAKE AVAILABLE TO ITS SECURITY HOLDERS, AS
SOON AS REASONABLY PRACTICABLE, AN EARNINGS STATEMENT COVERING THE PERIOD OF AT
LEAST TWELVE (12) MONTHS, BEGINNING WITH THE FIRST MONTH OF THE FIRST FISCAL
QUARTER AFTER THE EFFECTIVE DATE OF SUCH REGISTRATION STATEMENT, WHICH EARNINGS
STATEMENT SHALL SATISFY THE PROVISIONS OF SECTION 11(A) OF THE 1933 ACT;
(G) USE ITS BEST EFFORTS TO LIST SUCH SECURITIES ON EACH SECURITIES
EXCHANGE OR OVER-THE-COUNTER MARKET ON WHICH SHARES OF COMMON STOCK ARE THEN
LISTED, IF SUCH SECURITIES ARE NOT ALREADY SO LISTED AND IF SUCH LISTING IS THEN
PERMITTED UNDER THE RULES OF SUCH EXCHANGE AND, IF SHARES OF COMMON STOCK ARE
NOT THEN LISTED ON A SECURITIES EXCHANGE OR OVER- THE-COUNTER MARKET, TO USE IS
BEST EFFORTS TO CAUSE SUCH SECURITIES TO BE LISTED ON SUCH SECURITIES EXCHANGE
OR OVER-THE-COUNTER MARKET AS THE MANAGING OR LEAD MANAGING UNDERWRITER SHALL
REASONABLY REQUEST;
(H) USE ITS BEST EFFORTS TO PROVIDE A TRANSFER AGENT AND REGISTRAR
FOR SUCH REGISTRABLE SECURITIES NOT LATER THAN THE EFFECTIVE DATE OF SUCH
REGISTRATION STATEMENT; AND
13
<PAGE>
(I) ISSUE TO ANY UNDERWRITER TO WHICH ANY HOLDER OF REGISTRABLE
SECURITIES MAY SELL SUCH REGISTRABLE SECURITIES IN CONNECTION WITH ANY SUCH
REGISTRATION (AND TO ANY DIRECT OR INDIRECT TRANSFEREE OF ANY SUCH UNDERWRITER)
CERTIFICATES EVIDENCING SHARES OF COMMON STOCK WITHOUT RESTRICTIVE LEGENDS.
(II) IF REQUESTED BY THE MANAGING OR LEAD MANAGING UNDERWRITER
FOR ANY UNDERWRITTEN OFFERING OF REGISTRABLE SECURITIES ON BEHALF OF A HOLDER OR
HOLDERS OF REGISTRABLE SECURITIES, THE COMPANY WILL ENTER INTO AN UNDERWRITING
AGREEMENT WITH THE UNDERWRITERS OF SUCH OFFERING, SUCH AGREEMENT TO CONTAIN SUCH
REPRESENTATIONS AND WARRANTIES BY THE COMPANY AND EACH SUCH HOLDER AND SUCH
OTHER TERMS AND CONDITIONS AS ARE CONTAINED IN UNDERWRITING AGREEMENTS
CUSTOMARILY USED BY SUCH MANAGING OR LEAD MANAGING UNDERWRITER WITH SUCH CHANGES
AS THE PARTIES THERETO SHALL AGREE, INCLUDING, WITHOUT LIMITATION, PROVISIONS
RELATING TO INDEMNIFICATION AND CONTRIBUTION IN LIEU THEREOF.
(III) THE HOLDER OR HOLDERS OF REGISTRABLE SECURITIES INCLUDED
IN ANY REGISTRATION SHALL FURNISH TO THE COMPANY SUCH INFORMATION REGARDING SUCH
HOLDER OR HOLDERS, THE REGISTRABLE SECURITIES HELD BY THEM AND THE DISTRIBUTION
PROPOSED BY SUCH HOLDER OR HOLDERS AS THE COMPANY MAY FROM TIME TO TIME
REASONABLY REQUEST AND AS SHALL BE REASONABLY REQUIRED IN CONNECTION WITH ANY
REGISTRATION, QUALIFICATION OR COMPLIANCE REFERRED TO IN THIS AGREEMENT.
(IV) THE HOLDER OR HOLDERS OF REGISTRABLE SECURITIES INCLUDED
IN ANY REGISTRATION SHALL, UPON REQUEST BY THE COMPANY AND THE MANAGING OR LEAD
MANAGING UNDERWRITER, EXECUTE AND DELIVER CUSTODIAN AGREEMENTS AND POWERS OF
ATTORNEY IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY AND SUCH
HOLDER OR HOLDERS AND AS SHALL BE REASONABLY NECESSARY TO CONSUMMATE THE
OFFERING.
(F) INDEMNIFICATION. (I) THE COMPANY WILL INDEMNIFY EACH HOLDER WITH
RESPECT TO WHICH A REGISTRATION HAS BEEN EFFECTED PURSUANT TO THIS WARRANT, AND
EACH UNDERWRITER, IF ANY, AND EACH PERSON WHO CONTROLS ANY UNDERWRITER WITHIN
THE MEANING OF SECTION 15 OF THE 1933 ACT, AGAINST ANY AND ALL LOSSES, CLAIMS,
DAMAGES, LIABILITIES OR EXPENSES (OR ACTIONS IN RESPECT THEREOF), INCLUDING ANY
OF THE FOREGOING INCURRED IN SETTLEMENT OF ANY LITIGATION, COMMENCED OR
THREATENED, ARISING OUT OF OR BASED ON ANY UNTRUE STATEMENT (OR ALLEGED UNTRUE
STATEMENT) OF A MATERIAL FACT CONTAINED IN ANY REGISTRATION STATEMENT OR
PROSPECTUS, OR ANY AMENDMENT OR SUPPLEMENT THERETO, INCIDENT TO ANY SUCH
REGISTRATION, QUALIFICATION OR COMPLIANCE, OR BASED ON ANY OMISSION (OR ALLEGED
OMISSION) TO STATE THEREIN A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN, IN THE LIGHT OF THE CIRCUMSTANCES IN
WHICH THEY WERE MADE, NOT MISLEADING, OR ANY VIOLATION BY THE COMPANY OF THE
1933 ACT OR ANY RULE OR REGULATION PROMULGATED UNDER THE 1933 ACT APPLICABLE TO
THE COMPANY IN CONNECTION WITH ANY SUCH REGISTRATION, AND THE COMPANY WILL
REIMBURSE EACH SUCH HOLDER, EACH SUCH UNDERWRITER AND EACH PERSON WHO CONTROLS
ANY SUCH UNDERWRITER, FOR ANY LEGAL AND OTHER EXPENSES REASONABLY INCURRED, AS
SUCH EXPENSES ARE INCURRED, IN CONNECTION WITH INVESTIGATING, PREPARING OR
DEFENDING ANY SUCH CLAIMS, LOSS, DAMAGE, LIABILITY OR ACTION; PROVIDED, HOWEVER,
THAT THE COMPANY WILL NOT BE LIABLE IN ANY SUCH CASE TO THE EXTENT THAT ANY SUCH
CLAIM, LOSS, DAMAGE, LIABILITY OR EXPENSE ARISES OUT OF OR IS BASED ON ANY
UNTRUE STATEMENT OR OMISSION OR ALLEGED UNTRUE STATEMENT OR OMISSION, MADE IN
RELIANCE UPON AND IN CONFORMITY WITH WRITTEN INFORMATION FURNISHED TO THE
COMPANY BY AN INSTRUMENT DULY EXECUTED BY SUCH HOLDER OR UNDERWRITER AND STATED
TO BE SPECIFICALLY FOR USE THEREIN.
14
<PAGE>
(ii) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration is being
effected, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the 1933 Act and each other such holder of securities
included in the registration against any and all losses, claims, damages,
liabilities and expenses (or actions in respect thereof), arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement or prospectus, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statement therein, in the light of the circumstances
under which they were made, not misleading, and will reimburse the Company, such
holders, underwriters or control persons for any legal or any other expenses
reasonably incurred, as such expenses are incurred, in connection with
investigating or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement or prospectus in reliance upon and in conformity with
written information furnished to the Company by such Holder. Notwithstanding the
foregoing, the liability of each Holder under this Section 12(f) shall be
limited to an amount equal to the aggregate proceeds received by such Holder
from the sale of Registrable Securities hereunder, unless such liability arises
out of or is based on willful conduct by such Holder.
(III) EACH PARTY ENTITLED TO INDEMNIFICATION UNDER THIS
SECTION 12 (THE "INDEMNIFIED PARTY") SHALL GIVE NOTICE TO THE PARTY REQUIRED TO
PROVIDE INDEMNIFICATION (THE "INDEMNIFYING PARTY") PROMPTLY AFTER SUCH
INDEMNIFIED PARTY HAS ACTUAL KNOWLEDGE OF ANY CLAIM AS TO WHICH INDEMNITY MAY BE
SOUGHT, AND SHALL PERMIT THE INDEMNIFYING PARTY TO ASSUME THE DEFENSE OF ANY
SUCH CLAIMS OR ANY LITIGATION RESULTING THEREFROM; PROVIDED, HOWEVER, THAT
COUNSEL FOR THE INDEMNIFYING PARTY, WHO SHALL CONDUCT THE DEFENSE OF SUCH CLAIM
OR LITIGATION, SHALL BE APPROVED BY THE INDEMNIFIED PARTY (WHICH APPROVAL SHALL
NOT BE UNREASONABLY WITHHELD), AND THE INDEMNIFIED PARTY MAY PARTICIPATE IN SUCH
DEFENSE AT SUCH INDEMNIFIED PARTY'S EXPENSE; PROVIDED, HOWEVER, THAT THE FAILURE
OF ANY INDEMNIFIED PARTY TO GIVE NOTICE AS PROVIDED HEREIN SHALL NOT RELIEVE THE
INDEMNIFYING PARTY OF ITS OBLIGATIONS UNDER THIS AGREEMENT UNLESS THE FAILURE TO
GIVE SUCH NOTICE IS MATERIALLY PREJUDICIAL TO AN INDEMNIFYING PARTY'S ABILITY TO
DEFEND SUCH ACTION. NOTWITHSTANDING THE FOREGOING, THE INDEMNIFYING PARTY SHALL
NOT BE ENTITLED TO ASSUME THE DEFENSE FOR MATTERS AS TO WHICH THERE IS, IN THE
OPINION OF COUNSEL TO THE INDEMNIFYING PARTY, A CONFLICT OF INTEREST OR SEPARATE
AND DIFFERENT DEFENSES. NO INDEMNIFYING PARTY, IN THE DEFENSE OF ANY SUCH CLAIM
OR LITIGATION, SHALL, EXCEPT WITH THE CONSENT OF EACH INDEMNIFIED PARTY, CONSENT
TO ENTRY OF ANY JUDGMENT OR ENTER INTO ANY SETTLEMENT WHICH DOES NOT INCLUDE AS
AN UNCONDITIONAL TERM THEREOF THE GIVING BY THE CLAIMANT OR PLAINTIFF TO SUCH
INDEMNIFIED PARTY OF A RELEASE FROM ALL LIABILITY IN RESPECT OF SUCH CLAIM OR
LITIGATION. EACH INDEMNIFIED PARTY SHALL FURNISH SUCH INFORMATION REGARDING
ITSELF OR THE CLAIM IN QUESTION AS AN INDEMNIFYING PARTY MAY REASONABLY REQUEST
IN WRITING AND AS SHALL BE REASONABLY REQUIRED IN CONNECTION WITH THE DEFENSE OF
SUCH CLAIM AND THE LITIGATION RESULTING THEREFROM.
(G) CONTRIBUTION.
(I) IF THE INDEMNIFICATION PROVIDED FOR IN SECTION 12(F)
HEREOF IS UNAVAILABLE TO THE INDEMNIFIED PARTIES IN RESPECT OF ANY LOSSES,
CLAIMS, DAMAGES, LIABILITIES OR EXPENSES (OR ACTIONS IN RESPECT THEREOF)
REFERRED TO THEREIN, THEN EACH INDEMNIFYING PARTY, IN LIEU OF INDEMNIFYING SUCH
INDEMNIFIED PARTY, SHALL CONTRIBUTE TO THE AMOUNT PAID OR PAYABLE BY SUCH
INDEMNIFIED PARTY AS A RESULT OF SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR
EXPENSES (OR ACTIONS IN
15
<PAGE>
RESPECT THEREOF) IN SUCH PROPORTION AS IS APPROPRIATE TO REFLECT THE RELATIVE
FAULT OF THE INDEMNIFYING PARTY ON THE ONE HAND AND THE INDEMNIFIED PARTY ON THE
OTHER IN CONNECTION WITH THE STATEMENT OR OMISSION WHICH RESULTED IN SUCH
LOSSES, CLAIMS, DAMAGES, LIABILITIES OR EXPENSES (OR ACTIONS IN RESPECT
THEREOF), AS WELL AS ANY OTHER RELEVANT EQUITABLE CONSIDERATIONS. THE RELATIVE
FAULT SHALL BE DETERMINED BY REFERENCE TO, AMONG OTHER THINGS, WHETHER THE
UNTRUE STATEMENT (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 INDEMNIFYING PARTY OR THE INDEMNIFIED PARTY AND THE PARTIES'
RELATIVE INTENT, KNOWLEDGE, ACCESS TO INFORMATION AND OPPORTUNITY TO CORRECT OR
PREVENT SUCH STATEMENT OR OMISSION. THE COMPANY AND EACH HOLDER AGREE THAT IT
WOULD NOT BE JUST AND EQUITABLE IF CONTRIBUTION PURSUANT TO THIS SECTION 12(G)
WERE DETERMINED BY PRO RATA ALLOCATION OR BY ANY OTHER METHOD OF ALLOCATION
WHICH DOES NOT TAKE ACCOUNT OF THE EQUITABLE CONSIDERATIONS REFERRED TO ABOVE.
THE AMOUNT PAID OR PAYABLE BY AN INDEMNIFIED PARTY AS A RESULT OF THE LOSSES,
CLAIMS, DAMAGES, LIABILITIES OR EXPENSES (OR ACTIONS IN RESPECT THEREOF)
REFERRED TO ABOVE IN THIS SECTION 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.
(II) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED
HEREIN, THE OBLIGATION OF EACH HOLDER TO CONTRIBUTE PURSUANT TO THIS SECTION
12(F) IS SEVERAL AND NOT JOINT AND NO SELLING HOLDER SHALL BE REQUIRED TO
CONTRIBUTE ANY AMOUNT IN EXCESS OF THE AMOUNT BY WHICH THE TOTAL PRICE AT WHICH
THE REGISTRABLE SECURITIES OF SUCH HOLDER WERE OFFERED TO THE PUBLIC EXCEEDS THE
AMOUNT OF ANY DAMAGES WHICH SUCH SELLING HOLDER HAS OTHERWISE BEEN REQUIRED TO
PAY BY REASON OF SUCH UNTRUE STATEMENT (OR ALLEGED UNTRUE STATEMENT) OR OMISSION
(OR ALLEGED OMISSION).
(III) NO PERSON GUILTY OF FRAUDULENT MISREPRESENTATION (WITHIN
THE MEANING OF SECTION 11(F) OF THE 1933 ACT) SHALL BE ENTITLED TO CONTRIBUTION
FROM ANY PERSON WHO WAS NOT GUILTY OF SUCH FRAUDULENT MISREPRESENTATION.
(H) 1934 ACT REGISTRATION. THE COMPANY COVENANTS AND AGREES THAT
UNTIL SUCH TIME AS THERE SHALL BE NO REGISTRABLE SECURITIES OUTSTANDING:
(I) IT WILL, IF REQUIRED BY LAW, MAINTAIN AN EFFECTIVE
REGISTRATION STATEMENT (CONTAINING SUCH INFORMATION AND DOCUMENTS AS THE SEC
SHALL SPECIFY) WITH RESPECT TO THE COMMON STOCK UNDER SECTION 12(G) OF THE 1934
ACT AND WILL FILE IN A TIMELY MANNER SUCH INFORMATION, DOCUMENTS AND REPORTS AS
THE SEC MAY REQUIRE OR PRESCRIBE FOR COMPANIES WHOSE STOCK HAS BEEN REGISTERED
PURSUANT TO SAID SECTION 12(G);
(II) IT WILL, IF A REGISTRATION STATEMENT WITH RESPECT TO THE
COMMON STOCK UNDER SECTION 12(B) OR SECTION 12(G) OF THE 1934 ACT IS EFFECTIVE,
MAKE WHATEVER FILINGS WITH THE SEC OR OTHERWISE MAKE GENERALLY AVAILABLE TO THE
PUBLIC SUCH FINANCIAL AND OTHER INFORMATION AS MAY BE NECESSARY IN ORDER TO
ENABLE THE HOLDERS TO SELL SHARES OF COMMON STOCK PURSUANT TO THE PROVISIONS OF
RULE 144;
(III) IT WILL, IF NO LONGER REQUIRED TO FILE REPORTS PURSUANT
TO SECTION 12 (G) OF THE 1934 ACT, UPON THE REQUEST OF THE REGISTERED HOLDER,
MAKE PUBLICLY AVAILABLE THE INFORMATION SPECIFIED IN SUBPARAGRAPH (C)(2) OF RULE
144, AND WILL TAKE SUCH FURTHER ACTION AS ANY HOLDER MAY REASONABLY REQUEST, ALL
TO THE EXTENT REQUIRED FROM TIME TO TIME TO ENABLE SUCH HOLDER TO SELL
REGISTRABLE SECURITIES
16
<PAGE>
WITHOUT REGISTRATION UNDER THE 1933 ACT WITHIN THE LIMITATION OF THE EXEMPTIONS
PROVIDED BY RULE 144 OR ANY SIMILAR RULE OR REGULATION HEREAFTER ADOPTED BY THE
SEC; AND
(IV) UPON THE REQUEST OF ANY HOLDER, IT WILL DELIVER TO SUCH
HOLDER A WRITTEN STATEMENT AS TO WHETHER IT HAS COMPLIED WITH THE REQUIREMENTS
OF THIS SECTION 12(H).
THE COMPANY REPRESENTS AND WARRANTS THAT SUCH REGISTRATION STATEMENT OR
ANY INFORMATION, DOCUMENTS OR REPORT FILED WITH THE SEC IN CONNECTION THEREWITH
OR ANY INFORMATION SO MADE PUBLIC SHALL NOT CONTAIN ANY UNTRUE STATEMENT OF A
MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR
NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED THEREIN NOT MISLEADING. THE
COMPANY AGREES TO INDEMNIFY AND HOLD HARMLESS (OR TO THE EXTENT THE SAME IS NOT
ENFORCEABLE, MAKE CONTRIBUTION TO) THE HOLDERS, THEIR PARTNERS, ADVISORY
COMMITTEE MEMBERS, OFFICERS, DIRECTORS AND EMPLOYEES ACTING FOR ANY HOLDER IN
CONNECTION WITH ANY OFFERING OR SALE BY SUCH HOLDER OF REGISTRABLE SECURITIES OR
ANY PERSON, FIRM OR CORPORATION CONTROLLING (WITHIN THE MEANING OF EITHER
SECTION 15 OF THE 1933 ACT OR SECTION 20 OF THE 1934 ACT) SUCH HOLDER FROM AND
AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES OR EXPENSES (OR ACTIONS
IN RESPECT THEREOF) ARISING OUT OF OR RESULTING FROM ANY BREACH OF THE FOREGOING
REPRESENTATION OR WARRANTY, ALL ON TERMS AND CONDITIONS COMPARABLE TO THOSE SET
FORTH IN SECTION 12(F); PROVIDED, HOWEVER, THAT THE COMPANY SHALL BE GIVEN
WRITTEN NOTICE AND AN OPPORTUNITY TO ASSUME ON TERMS AND CONDITIONS COMPARABLE
TO THOSE SET FORTH IN SECTION 12(F) THE DEFENSE THEREOF.
SECTION 13. NOTICES. All notices, requests, demands and other
communications relating to this Warrant shall be in writing and shall be deemed
to have been duly given if delivered personally or sent by United States
certified or registered first-class mail, postage prepaid, return receipt
requested, to the parties hereto at the following addresses or at such other
address as any party hereto shall hereafter specify by notice to the other party
hereto:
(a) If to the Registered Holder of this Warrant or the holder of the
Warrant Shares, addressed to the address of such Registered Holder or holder as
set forth on books of the Company or otherwise furnished by the Registered
Holder or holder to the Company.
(b) If to the Company, addressed to:
The American Energy Group, Ltd.
9315 FM 1489
Simonton, Texas 77476
Attn: President
SECTION 14 BINDING EFFECT. This Warrant shall be binding upon and
inure to the sole and exclusive benefit of the Company, its successors and
assigns, and the holder or holders from time to time of this Warrant and the
Warrant Shares.
SECTION 15 SURVIVAL OF RIGHTS AND DUTIES. This Warrant shall
terminate and be of no further force and effect on the earlier of (i) 5:00 p.m.,
Texas time, on the Expiration Date and (ii) the date on which this Warrant and
all purchase rights evidenced hereby have been exercised, except that the
provisions of Sections 4, 6(c) 11 and 12 hereof shall continue in full force and
effect after such termination date.
17
<PAGE>
SECTION 16 GOVERNING LAW. This Warrant shall be construed in
accordance with and governed by the laws of the State of Texas.
SECTION 17 SECTION HEADINGS. The Section headings in this Warrant
are for purposes of convenience only and shall not constitute a part hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed under its corporate seal by its officers thereunto duly authorized as
of the date hereof.
THE AMERICAN ENERGY
GROUP, LTD.
By: ________________________________
Name:
Title:
ATTEST:
____________________________________
Name:
Title:
18
<PAGE>
FORM OF ELECTION TO PURCHASE
(To Be Executed Upon Exercise of this Warrant)
To The American Energy Group, Ltd.:
The undersigned, the record holder of this Warrant (Warrant No.
_____), hereby irrevocably elects to exercise the right, represented by this
Warrant, to purchase ___________ of the Warrant Shares and herewith either (MARK
ONLY ONE OF THE FOLLOWING boxes):
[ ] Tenders payment for such Warrant Shares to the order of The
American Energy Group, Ltd. of $_________ representing the full purchase price
for such shares at the price per share provided for in such Warrant and the
delivery of any applicable taxes payable by the undersigned pursuant to such
Warrant.
[ ] In lieu of paying the purchase price as provided in the
preceding paragraph, the undersigned elects to make a cashless exercise pursuant
to Section 3(c) of the attached Warrant.
The undersigned requests that certificates for such shares be issued
in the name of
_______________________________ PLEASE INSERT SOCIAL SECURITY
OR TAX IDENTIFICATION NUMBER
_______________________________
__________________________________________________________
_______________________________ __________________________________
(Please print name and address)
In the event that not all of the purchase rights represented by the
Warrant are exercised, a new Warrant, substantially identical to the attached
Warrant, representing the rights formerly represented by the attached Warrant
which have not been exercised, shall be issued in the name of and delivered to
________________________________________________________________________
(Please print name)
________________________________________________________________________
(Please print address)
Dated: ________________ Name of Holder (Print):
By: ________________________________
(Name): ____________________________
(Title): _____________________________
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, _______________________ hereby sells, assigns
and transfers to each assignee set forth below all of the rights of the
undersigned under the attached Warrant (Warrant No. _____) with respect to the
number of shares of Common Stock covered thereby set forth opposite the name of
such assignee unto:
NUMBER OF SHARES OF
NAME OF ASSIGNEE ADDRESS COMMON STOCK
---------------- ------- -------------------
If the total of said purchase rights represented by the Warrant
shall not be assigned, the undersigned requests that a new Warrant Certificate
evidencing the purchase rights not so assigned be issued in the name of and
delivered to the undersigned.
Dated: _______________ Name of Holder (Print):
By: ________________________________
(Name): ____________________________
(Title): _____________________________
