|
Exhibit 10.5
NEITHER THIS WARRANT REPRESENTED BY THIS CERTIFICATE NOR THE SHARES
OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE
BEEN REGISTERED OR QUALIFIED FOR SALE UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY SECURITIES LAWS. NEITHER THIS
WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
OF THIS WARRANT MAY BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OF THE SECURITIES UNDER SAID ACT AND ANY OTHER
APPLICABLE SECURITIES LAWS, OR RECEIPT BY THE COMPANY OF AN OPINION
OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
SALE OR TRANSFER OF SUCH SECURITIES IS EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT AND ANY OTHER
APPLICABLE SECURITIES LAWS.
WARRANT TO PURCHASE COMMON SHARES OF
SARATOGA RESOURCES, INC.
July 14, 2008
THIS CERTIFIES that, for value received, WAYZATA
INVESTMENT PARTNERS LLC (together with its successors and assigns,
the “ Holder ”) is entitled, subject to the
terms and conditions set forth below, to subscribe for and purchase
805,515 fully paid and non-assessable Common Shares (as defined
below) of Saratoga Resources, Inc., a Texas corporation (together
with its successors and assigns, the “ Company
”), subject to adjustment in accordance with Section
2.7 , at a purchase price per Common Share equal to $0.01 per
share (the “ Exercise Price ”).
This warrant (this “ Warrant ”)
expires at 5:00 p.m., Houston, Texas time, on the Expiration Date
(as defined below).
ARTICLE I
DEFINITIONS
1.1
Definitions . As used herein, the
following terms shall have the meanings set forth below:
“ Commission ” shall mean the
U.S. Securities and Exchange Commission or any other United States
Federal agency administering the Securities Act and/or the Exchange
Act at the time.
“ Common Shares ” shall mean and
include the shares of common stock of the Company, par value $0.001
per share, or any such other securities (equity or debt) into which
or for which such shares are converted, substituted or
exchanged.
“ Company ” shall have the
meaning set forth in the introduction hereto.
“ Convertible Securities ” shall
mean debt instruments, units, interests or other securities which
are convertible into or exercisable or exchangeable for, with or
without payment of additional consideration in cash or property
into, Common Shares, either immediately or upon a specified date or
the happening of a specified event.
“ Exchange Act ” shall mean the
Securities Exchange Act of 1934, as amended, or any successor
Federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from
time to time.
“ Exercise Date ” shall have the
meaning set forth in Section 2.1 .
“ Exercise Price ” shall have
the meaning set forth in the preamble hereto, as may be adjusted
from time to time.
“ Expiration Date ” shall mean
the date that is 60 months from the date of issuance of this
Warrant.
“ Fair Market Value ” shall have
the meaning set forth in Section 2.9(b) .
“ Holder ” shall have the
meaning set forth in the preamble hereto.
“ Independent Financial Expert ”
shall have the meaning set forth in Section 2.9(b) .
“ Person ” shall mean any
individual, corporation, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
“ Registrable Securities ” shall
mean (i) the Warrant Shares (whether or not the related Warrants
have been exercised) and (ii) any other securities issued or
issuable with respect to the Warrants or Warrant Shares by way of
stock dividends or stock split or in connection with a combination
of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable
Securities, once issued such securities shall cease to be
Registrable Securities when (A) they are sold pursuant to an
effective Registration Statement under the Securities Act, (B) they
are sold pursuant to Rule 144 (or any similar provision then in
force under the Securities Act) and the transferee thereof does not
receive “restricted securities” as defined in Rule 144,
(C) they have been sold in a private transaction in which the
transferor’s rights under this Agreement are not assigned to
the transferee of the securities in accordance with Section 3.3 of
this Warrant, or (D) they become eligible for resale pursuant to
Rule 144(b) (or any similar rule then in effect). No
Registrable Securities may be registered under more than one
Registration Statement at any one time.
“ Securities Act ” shall mean
the United States Securities Act of 1933, as amended, or any
successor United States Federal statute, and the rules and
regulations of the Commission promulgated thereunder, all as the
same shall be in effect from time to time.
“ Warrant ” shall have the
meaning set forth in the introduction hereto.
“ Warrant Office ” shall have
the meaning set forth in Section 3.1 .
“ Warrant Shares ” shall mean
the Common Shares into which this Warrant may be exercised.
1.2
Accounting Terms and Determinations .
Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial
statements and certificates and reports as to financial matters
required to be delivered to the Holder hereunder shall be prepared,
in accordance with accounting principles generally accepted in the
United States (“GAAP”). All calculations made for
the purposes of determining compliance with the terms of this
Warrant shall (except as otherwise expressly provided herein) be
made by application of GAAP.
1.3
Rules of Construction . The title of
and the section and paragraph headings in this Warrant are for
convenience of reference only and shall not govern or affect the
interpretation of any of the terms or provisions of this Warrant.
The use herein of the masculine, feminine or neuter forms
shall also denote the other forms, as in each case the context may
require. Where specific language is used to clarify by
example a general statement contained herein, such specific
language shall not be deemed to modify, limit or restrict in any
manner the construction of the general statement to which it
relates. The language used in this Warrant has been chosen by
the parties to express their mutual intent, and no rule of strict
construction shall be applied against any party. In the case
of this Warrant, (a) the meanings of defined terms are equally
applicable to the singular and plural forms of the defined terms;
(b) Annex, Exhibit, Schedule and Section
references are to this Warrant unless otherwise specified; (c) the
term “including” is not limiting and means
“including but not limited to”; (d) in the computation
of periods of time from a specified date to a later specified date,
the word
“from” means “from and including” the words
“to” and “until” each mean “to but
excluding,” and the word
2
“through” means “to and
including”; (e) unless otherwise expressly provided in this
Warrant, (i) references to agreements and other contractual
instruments shall be deemed to include all subsequent amendments
and other modifications thereto, but only to the extent such
amendments and other modifications are not prohibited by the terms
of the Warrant, and (ii) references to any statute or regulation
shall be construed as including all statutory and regulatory
provisions amending, replacing, supplementing or interpreting such
statute or regulation; and (f) this Warrant may use several
different limitations, tests or measurements to regulate the same
or similar matters, all of which are cumulative and each shall be
performed in
accordance with its terms.
ARTICLE II
EXERCISE OF WARRANTS
2.1
Method of Exercise .
(a)
This Warrant may be exercised in whole or in part
by the Holder hereof at any time, and from time to time, before
5:00 p.m., Houston, Texas time, on the Expiration Date. To
exercise this Warrant, the Holder hereof shall deliver to the
Company, at the Warrant Office designated herein, (i) a written
notice in the form of the Subscription Notice attached as
Exhibit A hereto, stating therein the election of such
Holder to exercise this Warrant in the manner provided in the
Subscription Notice, (ii) payment in full of the Exercise Price as
provided in Section 2.1(b) , and (iii) this Warrant.
This Warrant shall be deemed to be exercised on the date of
receipt by the Company of the Subscription Notice, accompanied by
payment for the Warrant Shares and surrender of this Warrant, and
such date is referred to herein as the “ Exercise Date
.” If the Holder exercises this Warrant as set forth
herein, then the Company shall, as promptly as practicable and in
any event within 10 business days after the Exercise Date, issue
and deliver, or cause to be issued and delivered, to such Holder a
certificate or certificates for the full number of Warrant Shares
set forth in the Subscription Agreement. As permitted by
applicable law, the Person in whose name the certificates for
Common Shares are to be issued shall be deemed to have become a
holder of record of such Common Shares on the Exercise Date and
shall be entitled to all of the benefits of such holder on the
Exercise Date, including the right to receive dividends and other
distributions for which the record date falls on or after the
Exercise Date and to exercise voting rights.
(b)
At the discretion of the Holder, the Holder shall
pay the Exercise Price for all Warrant Shares purchased hereunder
in full (i) in cash or by certified check or wire transfer of
immediately available funds, (ii) by Cashless Exercise (as
described in Section 2.9 ), or (iii) pursuant to any
combination of (i) or (ii).
2.2
Warrant Shares . The maximum number of
Common Shares that Holder is entitled to purchase hereunder shall
be 805,505 shares, as may be adjusted, on the terms and conditions
set forth herein.
2.3
Expenses and Taxes . The Company shall
pay all expenses and taxes (including all documentary, stamp,
transfer or other transactional taxes) attributable to the
preparation, issuance or delivery of this Warrant and of the Common
Shares issuable upon exercise of this Warrant, other than income
taxes.
2.4
Reservation of Common Shares . So long
as this Warrant remains outstanding, the Company shall reserve,
free from preemptive or similar rights, out of its authorized but
unissued Common Shares, and solely for the purpose of effecting the
exercise of this Warrant, a sufficient number of Common Shares to
provide for the complete exercise of this Warrant.
2.5
Valid Issuance . All Common Shares
issued upon exercise of this Warrant will, upon payment of the
Exercise Price and issuance by the Company, be duly authorized,
validly and legally issued, fully paid and nonassessable and free
and clear of all taxes, liens, security interests, charges and
other encumbrances or restrictions with respect to the issuance
thereof and, without limiting the generality of the foregoing, the
Company shall take all actions necessary to ensure such result and
shall not take any action which will cause a contrary result.
3
2.6
Acknowledgment of Rights . At the time
of the exercise of this Warrant in accordance with the terms hereof
and upon the written request of the Holder hereof, the Company will
acknowledge in writing its continuing obligation to afford to such
Holder any rights to which such Holder shall continue to be
entitled after such exercise in accordance with the provisions of
this Warrant; provided, however , that if the Holder hereof
shall fail to make any such request, such failure shall not affect
the continuing obligation of the Company to afford to such Holder
any such rights.
2.7
Adjustment of Number of Shares . To
prevent dilution of the rights granted under this Warrant, the
Exercise Price and the number of Common Shares purchasable
hereunder are subject to adjustment from time to time as
follows:
(a)
Conversion or Redemption of Common Shares .
Should all of the Common Shares be at any time prior to the
Expiration Date redeemed, exchanged, substituted or converted into
shares or any other security of the Company, then this Warrant
shall become immediately exercisable prior to such event for that
number of Common Shares equal to the number of Common Shares that
would have been received if this Warrant had been exercised in full
and the Common Shares received thereupon had been simultaneously
converted immediately prior to such event, and the Exercise Price
shall immediately be adjusted to equal the quotient obtained by
dividing (i) the aggregate Exercise Price of the maximum number of
shares of Common Shares for which this Warrant was exercisable
immediately prior to such conversion, exchange, substitution or
redemption, by (ii) the number of shares of Common Shares for which
this Warrant is exercisable immediately after such conversion,
exchange, substitution or redemption.
(b)
Offer . If at any time while this
Warrant, or any portion hereof, is outstanding and unexpired there
shall be an offer for all of the Common Shares whether in the form
of cash, securities or otherwise, then, as a part of such offer,
lawful provision shall be made so that the Holder of this Warrant
shall thereafter be entitled to receive upon exercise of this
Warrant, during the period specified herein and upon payment of the
Exercise Price then in effect, the number of shares or other
securities of the offeror that a holder of the Common Shares
issuable upon exercise of this Warrant would have been entitled to
receive in such offer if this Warrant had been exercised
immediately before such offer, all subject to further adjustment as
provided in this Section 2.7 . The foregoing
provisions of this Section 2.7(b) shall similarly apply to
successive offers and to the shares that are at the time receivable
upon the exercise of this Warrant. If the per-share
consideration payable to the Holder hereof for shares in connection
with any such offer is in a form other than cash or marketable
securities, then the value of such consideration shall be
determined in good faith by the Company’s Board of Directors.
In all events, appropriate adjustment (as determined in good
faith by the Company’s Board of Directors) shall be made in
the application of the provisions of this Warrant with respect to
the rights and interests of the Holder after the transaction, to
the end that the provisions of this Warrant shall be applicable
after that event, as near as reasonably may be, in relation to any
shares or other property deliverable after that event upon exercise
of this Warrant.
(c)
Reclassification . If the Company, at
any time while this Warrant, or any portion hereof, remains
outstanding and unexpired by reclassification of securities or
otherwise, shall change any of the securities as to which purchase
rights under this Warrant exist into the same or a different number
of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change
with respect to the securities that were subject to the purchase
rights under this Warrant immediately prior to such
reclassification or other change and the Exercise Price therefor
shall be appropriately adjusted, all subject to further adjustment
as provided in this Section 2.7 . No adjustment shall
be made pursuant to this Section 2.7(c) , upon any
conversion, exchange, substitution or redemption of the Common
Shares that is the subject of Section 2.7(a) .
(d)
Split, Subdivision or Combination of Shares
. If the Company at any time while this Warrant, or any
portion hereof, remains outstanding and unexpired shall split,
subdivide or consolidate the securities as to which purchase rights
under this Warrant exist, into a different number of securities of
the same class, the Exercise Price for such securities shall be
proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
4
(e)
Adjustments for Dividends in Shares or Other
Securities or Property . If while this Warrant remains
outstanding and unexpired, the holders of the securities as to
which purchase rights under this Warrant exist at the time shall
have received, or, on or after the record date fixed for the
determination of eligible shareholders, shall have become entitled
to receive, without payment therefor, other or additional shares or
other securities or property (other than cash) of the Company by
way of dividend, then and in each case, this Warrant shall
represent the right to acquire, in addition to the number of shares
of the security receivable upon exercise of this Warrant, and
without payment of any additional consideration therefor, the
amount of such other or additional shares or other securities or
property (other than cash) of the Company that such holder would
hold on the date of such exercise had it been the holder of record
of the security receivable upon exercise of this Warrant on the
date hereof and had thereafter, during the period from the date
hereof to and including the date of such exercise, retained such
shares and/or all other additional shares available by it as
aforesaid during such period, giving effect to all adjustments
called for during such period by the provisions of this Section
2.7 .
(f)
Other Dilutive Events . In case any
event shall occur as to which the provisions of this Section
2.7 are not strictly applicable, but the failure to make any
adjustment would not fairly protect the purchase rights presented
by the Warrants in accordance with the essential intent and
principles of this Section 2.7 , then, in each such case,
the Company shall make a good faith adjustment to the Exercise
Price and the number of Common Shares in accordance with the intent
of this Section 2.7 and, upon the written request of the
Holder, shall appoint an independent financial expert, which shall
give their opinion upon the adjustment, if any, on a basis
consistent with the essential intent and principles of this
Section 2.7 .
(g)
Certificate as to Adjustments . Upon
the occurrence of each adjustment or readjustment pursuant to this
Section 2.7 , the Company at its expense shall promptly
compute such adjustment or readjustment in accordance with the
terms hereof and furnish to each Holder of this Warrant a
certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or
readjustment is based. The Company shall, upon the written
request, at any time, of any such Holder, furnish or cause to be
furnished to such Holder a like certificate setting forth: (i) such
adjustments and readjustments, (ii) the Exercise Price at the time
in effect, and (iii) the number of shares and the amount, if any,
of other property that at the time would be received upon the
exercise of the Warrant.
(h)
No Impairment . The Company will not,
by any voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of this Section
2.7 and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder of this
Warrant against impairment.
2.8
No Fractional Common Shares . The
Company shall not be required to issue any fractional Common Share
on the exercise of this Warrant. The number of full Common
Shares which shall be issuable upon such exer
|
