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WARRANTS TO PURCHASE SHARES OF COMMON STOCK OF SONORAN ENERGY, INC

Warrant Agreement

WARRANTS TO PURCHASE SHARES OF COMMON STOCK
OF 
SONORAN ENERGY, INC | Document Parties: NGP Capital Resources Company | SONORAN ENERGY, INC You are currently viewing:
This Warrant Agreement involves

NGP Capital Resources Company | SONORAN ENERGY, INC

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Title: WARRANTS TO PURCHASE SHARES OF COMMON STOCK OF SONORAN ENERGY, INC
Governing Law: New York     Date: 12/7/2006

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Warrant

 

Exhibit 4.21

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE " SECURITIES ACT "), OR ANY STATE SECURITIES LAWS.  SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

THESE WARRANTS ARE BEING ISSUED IN CONNECTION WITH A CREDIT AGREEMENT DATED NOVEMBER 28, 2006 BY AND AMONG SONORAN ENERGY, INC., NGPC ASSET HOLDINGS, LP, AS ADMINISTRATIVE AGENT, AND THE LENDERS REFERRED TO THEREIN.


No. W-[1]


WARRANTS TO PURCHASE SHARES OF COMMON STOCK
OF
SONORAN ENERGY, INC.

These Warrants to Purchase Shares of Common Stock (these " Warrants ") certify that for value received, NGP Capital Resources Company or its successors or assigns (the " Holder "), is entitled to subscribe for and purchase from Sonoran Energy, Inc. , a Washington corporation (the " Company "), up to the Aggregate Total Shares (as defined below), on a Fully Diluted Basis, at the Exercise Price (as defined below), subject to the provisions and upon the terms and conditions hereinafter set forth.  The Exercise Price and the Aggregate Total Shares are each subject to adjustment as hereinafter set forth.  These Warrants and all rights hereunder shall expire at 5:00 p.m., Houston, Texas time, on the Expiration Date (as defined below).

ARTICLE I

Definitions

As used herein, the following terms shall have the meanings set forth below:

1.1

" Aggregate Total Shares " means, (a) on the Effective Date, 2,870,000 shares of Common Stock or (b) any time after the Effective Date, (i) 2,870,000 shares of Common Stock or (ii) such greater number of shares of Common Stock following any adjustment to such amount in accordance with the terms of Article IV hereof.

1.2

" Articles of Incorporation " means the Articles of Incorporation of the Company, dated as of [        ], and filed with the Secretary of State of the State of Washington on [          ] as hereafter amended, modified, restated or replaced from time to time.

 

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1.3

" Board of Directors " means at any time the board of directors of the Company as elected pursuant to the Bylaws.

1.4

" Business Day " means any day other than a Saturday, Sunday or a day on which banks are authorized or required to be closed in Houston, Texas or New York, New York.

1.5

" Bylaws " means the Bylaws of the Company, dated as of  [           ], as hereafter amended, modified, restated or replaced from time to time.

1.6

" Company " is defined in the introductory paragraph, and shall also include any successor to such entity by merger, consolidation or otherwise.

1.7

" Common Stock " shall mean authorized shares of Common Stock of the Company, par value $0.165 per share, as constituted on the Effective Date, and any stock into which such Common Stock may thereafter be converted or changed, and also shall include any other stock of the Company of any other class that is not preferred as to dividends or distributions in liquidation over any other class of any other stock of the Company.

1.8

" Company Offering " means the closing of the sale and issuance of any of the shares of Common Stock to the general public in a public offering pursuant to an effective registration statement under the Securities Act.

1.9

" Convertible Securities " means evidences of indebtedness, units, interests, preferred stock, or other securities (including these Warrants) that are convertible into or exercisable or exchangeable for, with or without payment of additional consideration, shares of Common Stock, either immediately or upon a specified date or the happening of a specified event.

1.10

" Credit Agreement " means the Credit Agreement dated November 28, 2006 by and among the Company, NGPC Asset Holdings, LP, as administrative agent, and the lenders referred to therein.

1.11

" Current Market Price " means, with respect a security or any other item, the fair value of such security or item as determined in writing in good faith by the Board of Directors.  Notwithstanding the foregoing, in the event these Warrants are exercised in connection with a Company Offering, the fair market value per share of Common Stock shall be equal to the offering price per share of Common Stock to the public in the Company Offering.

1.12

" Effective Date " means November 28, 2006.

1.13

" Exercise Price " means in the event that the Holder or a Holder Designee exercises all or a portion of these Warrants (i) $0.20 per share of Common Stock, as adjusted from time to time pursuant to Article IV or (ii) the equivalent thereof in the case of a Cashless Exercise.

 

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1.14

" Expiration Date " means the seventh (7 th ) anniversary of the Payoff Date.

1.15

" Fully Diluted Basis " means, as applied to the calculation of shares of Common Stock outstanding at any time, (a) all shares of Common Stock outstanding at the time of determination and (b) all shares of Common Stock issuable upon exercise, conversion or exchange of all Options and Convertible Securities, regardless of exercise price.

1.16

" Holder Designee " is defined in Section 3.2 .

1.17

" Investor Rights Agreement " means that certain Investor Rights Agreement of even date herewith by and between the Company and the Holder.

1.18

" Options " means any options or other rights to subscribe for or to purchase shares of Common Stock or Convertible Securities, including all authorized but unissued options.

1.19

" Payoff Date " means the earlier to occur of (a) the date on which all Obligations (as defined in the Credit Agreement) have been paid in full or (b) an Event of Default has occurred pursuant to, and as defined in, the Credit Agreement, and the Commitments, as defined in the Credit Agreement (if not theretofore terminated), have been terminated.

1.20

" Person " means any individual, partnership, limited partnership, corporation, limited liability company, trust, association, entity or other organization.

1.21

" Subscription Notice " is defined in Section 2.1 .

1.22

" Triggering Event " is defined in Section 5.1(a) .

1.23

" Warrant Office " is defined in Section 3.1 .

1.24

" Warrant Common Stock " means shares of Common Stock issued or issuable by the Holder upon the exercise of these Warrants, as adjusted in accordance with the terms of these Warrants.

1.25

" Warrants " is defined in the introductory section hereof, and shall also include any warrants issued in substitution or exchange therefor as provided herein.

ARTICLE II

Exercise of Warrants

2.1

Method of Exercise .  The Warrants represented hereby may be exercised by the Holder in whole or in part, at any time and from time to time, beginning on the Payoff Date and ending at 5:00 p.m., Houston, Texas time, on the Expiration Date.  To exercise these Warrants, the Holder shall deliver to the Company, at the Warrant Office:

 

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(i)

a written subscription notice substantially in the form attached as Exhibit A hereto (the " Subscription Notice "), duly completed and executed on behalf of the Holder, stating therein the election of such Holder to exercise these Warrants in the manner provided in the Subscription Notice;

(ii)

payment in full of the aggregate Exercise Price for all shares of Warrant Common Stock to be purchased pursuant thereto payable:

(A)

in cash or by certified check or wire transfer,

(B)

through a "cashless" or "net-issue" exercise (" Cashless Exercise "), pursuant to which the Holder shall exchange the Warrants (or the portion thereof to be cancelled) subject to a Cashless Exercise for that number of shares of Warrant Common Stock determined by multiplying the number of shares of Warrant Common Stock issuable on exercise of the Warrants (or the portion thereof to be cancelled) by a fraction, the numerator of which shall be the difference between (x) the Current Market Price of the shares of Common Stock on the date of exercise and (y) the Exercise Price, and the denominator of which shall be the Current Market Price of a share of Common Stock on the date of exercise; the Subscription Notice shall set forth the calculation upon which the Cashless Exercise is based, or

(C)

pursuant to a combination of clauses (A) and (B) above; and

(iii)

this Warrant.

These Warrants shall be deemed to be exercised immediately prior to the close of business on the date of receipt by the Company of the items listed above (such date, the " Exercise Date ") and the person entitled to receive the shares of Warrant Common Stock issuable upon such exercise shall be treated for all purposes as the holder of record of such shares of Warrant Common Stock as of the close of business on such date.  In the event that these Warrants are exercised in part, within two (2) business days after the Exercise Date, the Company at its expense shall execute and deliver new Warrants of like tenor exercisable for the percentage of shares of Warrant Common Stock for which these Warrants may thereafter be exercised.  Within two (2) Business Days after the Exercise Date, the Company shall issue and deliver to the Holder stock certificates for the number of shares of Common Stock issuable upon exercise by the Holder pursuant to this Section 2.1 .  

2.2

Expenses and Taxes .  The Company shall pay all expenses and taxes (including, without limitation, all documentary, stamp, transfer or other transactional taxes) other than income taxes attributable to the preparation, issuance or delivery of these Warrants and of the shares of Warrant Common Stock.

2.3

Reservation of Common Stock .  The Company covenants that, for so long as any Warrants remain outstanding, the Company shall reserve, free from all preemptive rights, out of its authorized but unissued Common Stock, and solely for the

 

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purpose of effecting the exercise of these Warrants, a sufficient number of shares of Common Stock to provide for the exercise of these Warrants.

2.4

Valid Issuance .  All shares of Warrant Common Stock issued upon exercise of these Warrants will, upon (i) submission of a Subscription Notice, (ii) surrender of these Warrants (or any portion thereof), (iii) payment of the Exercise Price therefor and (iv) the issuance of such shares of Warrant Common Stock by the Company, be duly authorized, validly and legally issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issuance thereof and, without limiting the generality of the foregoing, the Company shall take no action or fail to take any action which will cause a contrary result.

2.5

No Fractional Shares of Common Stock .  No fractional shares of Common Stock shall be issued upon exercise of these Warrants, but the Company shall pay the Holder an amount equal to the Current Market Price of such fractional share of Common Stock in lieu of each fraction of a share of Common Stock otherwise called for upon any exercise of a Warrant.

ARTICLE III

Transfer

3.1

Warrant Office .  The Company shall maintain an office for certain purposes specified herein (the " Warrant Office "), which office shall initially be the office of Transfer Agent of the Company if one exists on the Effective Date, and may subsequently be such other office of the Company or of any transfer agent of the Common Stock in the continental United States as to which written notice has previously been given to the Holder.  The Company shall maintain, at the Warrant Office, a register for these Warrants in which the Company shall record the name and address of the person in whose name these Warrants have been issued, as well as the name and address of each permitted assignee of the rights of the registered owner hereof.

3.2

Ownership of Warrants .  The Company may deem and treat the Person in whose name these Warrants are registered as the Holder until provided with written notice by the registered Holder in the form of the Assignment/Transfer Notice attached hereto as Exhibit B (the " Assignment/Transfer Notice ") to the contrary.  These Warrants may be exercised by any assignee of the Holder (a " Holder Designee ") for the purchase of shares of Warrant Common Stock, and for purposes of these Warrants, any such assignee shall also constitute the "Holder" hereunder.  

3.3

Restrictions on Transfer of Warrants .  Subject to compliance with applicable federal and state securities laws, these Warrants and all rights hereunder are transferable, in whole or in part, without charge (except for securities transfer taxes or income taxes), upon (i) surrender of these Warrants properly endorsed, (ii) submission of a properly executed Assignment/Transfer Notice and (iii) payment to the Company of funds sufficient to pay any transfer tax.

 

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3.4

Exchange of Warrant Upon a Transfer .  On surrender of this Warrant for exchange, properly endorsed on the Assignment Form and subject to the provisions of these Warrants with respect to compliance with the Securities Act, the Company at its expense shall issue to or on the order of the Holder a new warrant or warrants of like tenor, in the name of the Holder or as the Holder (on payment by the Holder of any applicable transfer taxes) may direct, for the percentage of Warrant Common Stock issuable upon exercise hereof.  The Company hereby agrees to extend the benefit of these Warrants to any assignee and any such assignee may specifically enforce the provisions of these Warrants as if an original party hereto.

ARTICLE IV

Antidilution Provisions and Preemptive Rights

4.1

General .  The Exercise Price and the number of shares of Warrant Common Stock shall be subject to adjustment from time to time in accordance with this Article IV .

4.2

Dividends, Subdivisions and Combinations .  If, at any time after the date of this Agreement, the Company shall:

(i)

pay a dividend or make a distribution, in each case payable in Common Stock;

(ii)

subdivide, split or reclassify its outstanding Common Stock into a larger number of shares of Common Stock; or

(iii)

combine its outstanding Common Stock into a smaller number of shares of Common Stock,

then (A) the number of shares of Warrant Common Stock shall be adjusted so as to equal the number of shares of Warrant Common Stock that the Holder would have held immediately after the occurrence of such event if the Holder had exercised such Warrants immediately prior to the occurrence of such event and (B) the Exercise Price shall be adjusted to be equal to (x) the Exercise Price immediately prior to the occurrence of such event multiplied by (y) a fraction (1) the numerator of which is the number of shares of Warrant Common Stock immediately prior to the adjustment in clause (A) , and (2) the denominator of which is the number of shares of Warrant Common Stock immediately after the adjustment in clause (A) .  An adjustment made pursuant to this Section 4.2 shall become effective immediately after the occurrence of such event retroactive to the record date, if any, for such event.

4.3

Issuance of Additional Common Stock.

(a)

General .  If, at any time after the date of this Warrant, the Company shall issue or sell any shares of Common Stock (or, in accordance with Section 4.3(b) , shall be deemed to have issued or sold) any shares of Common Stock (other than any

 

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issuance for which an adjustment is made pursuant to Section 4.2 , 4.4 , or 4. 5) without consideration or for a consideration per share of Common Stock less than the Current Market Price on the Business Day immediately preceding the date of such issuance or sale, or less than the Exercise Price in effect immediately prior to such issuance or sale, then, effective immediately upon such issuance or sale (or deemed issuance or sale), the Exercise Price and the number of shares of Warrant Common Stock issuable upon exercise of these Warrants shall be adjusted as follows:

(i)

The Exercise Price shall be reduced to the amount obtained by multiplying the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale), by a fraction, (A) the numerator of which shall be (1) the number of shares of Common Stock outstanding prior to such issuance or sale plus (2) the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of such shares of Common Stock so issued or sold would purchase at the higher of (x) the Current Market Price per share of Common Stock on the Business Day immediately preceding the date of such issuance or sale and (y) the Exercise Price in effect immediately prior to such issuance or sale and (B) the denominator of which shall be the number of shares of Common Stock outstanding immediately after such issuance or sale.  

(ii)

The number of shares of Warrant Common Stock shall be increased to the number of shares of Common Stock obtained by multiplying the number of shares of Warrant Common Stock immediately prior to such issuance or sale by a fraction, (A) the numerator of which shall be the Exercise Price in effect immediately prior to the adjustment in clause (i) of this Section 4.3(a) , and (B) the denominator of which shall be the Exercise Price in effect immediately after such adjustment.

Notwithstanding anything in the foregoing Section 4.3(a) to the contrary, the parties hereby acknowledge and agree that (x) no adjustment pursuant to this Section 4.3(a) shall be made as a result of the issuance on the date hereof of up to 30,000,000 shares of Common Stock to Cubus APS pursuant to that certain Common Stock Subscription Agreement (the " Agreement ") entered into on December 1, 2006, by and among the Company and Cubus APS, (the " Subscription Agreement "); and (y) the provisions of this Article IV shall be applicable to the issuance of shares of Common Stock pursuant to or in connection with (x) any Convertible Securities, Options or other warrants issued to Cubus, (whether or not such Convertible Securities, Options or other warrants are issued in connection with the Subscription Agreement, including without limitation any Convertible Securities, Options or other warrants issued to Cubus on or prior to the date of this Agreement and (y) any other Convertible Securities, Options or other similar instruments issued by the Company prior to the date of this Agreement.

(b)

Issuance of Options or Convertible Securities .  The issuance or sale of Options or Convertible Securities shall be deemed, in accordance with this Section 4.3(b) , to be the issuance of shares of Common Stock.

 

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(i)

Issuance of Options .  If the Company in any manner issues or grants any Options, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options (or upon conversion or exchange of the total maximum amount of Convertible Securities issuable upon the exercise of such Options) shall be deemed, for purposes of Section 4.3(a) , to be outstanding and to have been issued and sold by the Company on the actual date of issuance.  For purposes of Section 4.3(a) , the shares of Common Stock issuable upon exercise of Options or upon conversion or exchange of Convertible Securities issuable upon exercise of Options for Convertible Securities shall be deemed to have been issued and sold at a price per share of Common Stock equal to (A) the sum of (x) the total amount, if any, received or receivable by the Company as consideration for the issuance or granting of such Options plus (y) the minimum aggregate amount of additional consideration payable to the Company upon the exercise of all such Options plus (z) in the case of such Options for Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Company upon issuance or sale of such Convertible Securities and the conversion or exchange thereof divided by (B) the total maximum number of shares of Common Stock issuable upon exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options.

(ii)

Issuance of Convertible Securities .  If the Company in any manner issues or sells any Convertible Securities, then the maximum number of shares of Common Stock issuable upon the conversion or exchange of such Convertible Securities shall be deemed, for purposes of Section 4.3(a) to be outstanding and to have been issued and sold by the Company on the act


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