EXHIBIT 10.21
THE SECURITIES REPRESENTED BY THIS WARRANT AND THE COMMON STOCK ISSUABLE
THEREBY HAVE NOT BEEN AND WILL NOT BE, EXCEPT AS PROVIDED IN THE
REGISTRATION RIGHTS AGREEMENT REFERRED TO BELOW, REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAW AND, ACCORDINGLY, THE SECURITIES REPRESENTED BY
THIS CERTIFICATE MAY NOT BE RESOLD, PLEDGED, OR OTHERWISE TRANSFERRED,
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER, THE SECURITIES ACT AND IN
ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIES LAWS
WARRANT
to Purchase Common Stock of
MILLER EXPLORATION COMPANY
Expiring on April 15, 2002
This Common Stock Purchase Warrant (the "WARRANT") certifies that for
value received, Veritas DGC Land, Inc., a Delaware corporation ("VERITAS"),
or its assigns, is entitled to subscribe for and purchase from Miller
Exploration Company, a Delaware corporation (the "COMPANY"), in whole or in
part, shares of Common Stock, par value $0.01 per share, of the Company
("COMMON STOCK") in an amount equal to the Warrant Shares (as hereinafter
defined) at the Exercise Price (as hereinafter defined), subject, however,
to the provisions and upon the terms and conditions hereinafter set forth.
The number Warrant Shares purchasable hereunder and the Exercise Price
therefor are subject to adjustment as hereinafter set forth. This Warrant
and all rights hereunder shall expire at 5:00 p.m., Houston, Texas time, on
April 15, 2002.
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the meanings set forth
below:
1.1 "MARKET PRICE" shall be equal to the weighted average of the
closing prices of Common Stock on the Nasdaq National Market System (as
reported in the Wall Street Journal), averaged over the five (5)
consecutive trading days immediately following the date hereof.
1.2 "MARKET VALUE" of the Common Stock shall mean:
(a) If the Common Stock is listed on any established stock
exchange or a national market system, including, without
limitation, the National Market System of the National
Association of Securities Dealers Automated Quotation System, the
closing sales price for the Common Stock, or the mean between the
high bid and low asked prices if no sales were reported, as
quoted on such system or exchange (or, if the Common Stock is
listed on more than one exchange, then on the largest such
exchange) for the five trading days preceding the date for which
the value is to be determined (or if there are no sales or bids
for any such date, then for the last preceding business day on
which there were sales or bids), as reported in The Wall Street
Journal or similar publication.
(b) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the mean
between the high bid and low asked prices for the Common Stock
for the five trading days preceding the date for which the value
is to be determined (or if there are no quoted prices for any
such date, then for the last preceding business day on which
there were quoted prices).
(c) In the absence of an established market for the Common
Stock, the Market Value shall be determined in good faith by the
Board of Directors of the Company, with reference to the
Company's net worth, prospective earning power, dividend-paying
capacity and other relevant factors, including the goodwill of
the Company, the economic outlook in the Company's industry, the
Company's position in its industry and its management, and the
values of stock of other corporations in the same or similar
lines of business.
1.3 "NOTE" shall mean that certain promissory note of the Company in
the principal amount of $4,696,040.60, payable to Veritas, executed
concurrently herewith.
1.4 "REGISTRATION RIGHTS AGREEMENT" shall mean that certain
Registration Rights Agreement between the Company and Veritas dated as of
the date hereof.
1.5 "WARRANT SHARES" shall initially be an amount equal to nine (9%)
percent of the outstanding principal amount of the Note as of the date
hereof, divided by the Market Price. On the six month anniversary hereof,
the number of Warrant Shares shall be increased by an amount equal to nine
(9%) percent of the outstanding principal amount of the Note as of such
date, divided by the Market Price. In addition, on each of the one year
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and 18 month anniversaries of the date hereof, the number of Warrant Shares
shall be increased by an amount equal to nine (9%) percent of the
outstanding principal amount of the Note as of such date, divided by the
Market Value of the Common Stock as of such date; PROVIDED, HOWEVER, that
the Company shall have the right to proportionately reduce or eliminate all
or any part of such obligation to issue additional Warrant Shares on such
one year and/or 18 month anniversaries hereof, by delivering to Veritas
and/or its assigns an aggregate amount in cash equal to nine (9%) percent
of such then current outstanding principal amount as of such date.
1.6 "WARRANT" shall mean the right upon exercise to purchase one
Warrant Share.
ARTICLE II
EXERCISE OF WARRANTS
2.1 TERM; EXERCISE PRICE. The Warrants represented hereby may be
exercised by the holder hereof, in whole or in part, at any time and from
time to time after the date hereof until 5:00 p.m., Houston, Texas time, on
April 15, 2002 ("Term"). Subject to adjustment as provided in ARTICLE IV
hereof, the exercise price of the Warrant shall be $0.01 per share of
Common Stock ("EXERCISE PRICE").
2.2 METHOD OF EXERCISE. To exercise the Warrants, the holder hereof
shall deliver to the Company, at the Warrant Office designated in SECTION
3.1 hereof, (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 the Warrants in the manner provided in the Subscription Notice;
and (ii) payment in full of the Exercise Price (A) in cash or by wire
transfer or check for all Warrant Shares purchased hereunder, or (B)
through a "cashless" or "net-issue" exercise of each such Warrant based on
the Market Value of the Common Stock on the trading day preceding the date
of exercise, or (C) a combination of (A) and (B) above. The Warrants 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, as aforesaid, and such date is referred to
herein as the "EXERCISE DATE." Upon such exercise, the Company shall, as
promptly as practicable and in any event within five business days, issue
and deliver to such holder a certificate or certificates for the full
number of the Warrant Shares purchased by such holder hereunder. As
permitted by applicable law, the person in whose name the certificates for
Common Stock are to be issued shall be deemed to have become a holder of
record of such Common Stock on the Exercise Date and shall be entitled to
all of the benefits of such holder on the Exercise Date, including without
limitation the right to receive dividends and other distributions for which
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the record date falls on or after the Exercise Date and to exercise voting
rights.
2.3 EXPENSES AND TAXES. The Company shall pay all expenses and taxes
(including, without limitation, all documentary, stamp, transfer or other
transactional taxes) attributable to the preparation, issuance or delivery
of the Warrants and of the shares of Common Stock issuable upon exercise of
the Warrants.
2.4 RESERVATION OF SHARES. The Company shall reserve at all times so
long as the Warrants remain outstanding, free from preemptive rights, out
of its treasury Common Stock or its authorized but unissued shares of
Common Stock, or both, solely for the purpose of effecting the exercise of
the Warrants, a sufficient number of shares of Company Stock to provide for
the exercise of the Warrants.
2.5 VALID ISSUANCE. All shares of Common Stock that may be issued
upon exercise of the Warrants will, upon issuance by the Company, be duly
and validly 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 (including,
without limitation, any action that would cause the Exercise Price to be
less than the par value, if any, of the Common Stock).
2.6 NO FRACTIONAL SHARE. The Company shall not be required to issue
fractional shares of Common Stock on the exercise of this Warrant. If more
than one Warrant shall be presented for exercise at the same time by the
same holder, the number of full shares of Common Stock which shall be
issuable upon such exercise shall be computed on the basis of the aggregate
number of whole shares of Common Stock purchasable on exercise of the
Warrants so presented. If any fraction of a share of Common Stock would,
except for the provisions of this SECTION 2.6, be issuable on the exercise
of this Warrant, the Company shall pay an amount in cash calculated by it
to be equal to the Market Value of one share of Common Stock at the time of
such exercise multiplied by such fraction computed to the nearest whole
cent.
2.7 CALCULATION OF WARRANT SHARES. Within fifteen (15) days after
the date hereof, the parties shall use their best efforts to agree on the
initial number of Warrant Shares covered by this Warrant, as shall be
evidenced by an acknowledgment executed by the Company and the holder.
Furthermore, within fifteen (15) days after each of the six month, one year
and 18 month anniversaries of the Note, the parties shall use their best
efforts to agree on the number of additional Warrant Shares covered by this
Warrant, as shall be evidenced by an acknowledgment executed by the Company
and the holder.
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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 Company's offices at 3104 Logan Valley Road, P.O. Box 348,
Traverse City, Michigan 49685-0343, 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 hereof. The Company shall maintain, at the Warrant
Office, a register for the Warrants in which the Company shall record the
name and address of the person in whose name this Warrant has been issued,
as well as the name and address of each permitted assignee of the rights of
the registered owner hereof.
3.2 TRANSFER OF WARRANTS. The Company agrees to maintain at the
Warrant Office books for the registration and transfer of the Warrants.
The Company, from time to time, shall register the transfer of the Warrants
in such books upon surrender of this Warrant at the Warrant Office properly
endorsed or accompanied by appropriate instruments of transfer and written
instructions for transfer satisfactory to the Company. Upon any such
transfer and upon payment by the holder or its transferee of any applicable
transfer taxes, new Warrants shall be issued to the transferee and the
transferor (as their respective interests may appear) and the surrendered
Warrant shall be canceled by the Company. The Company shall pay all taxes
(other than securities transfer taxes) and all other expenses and charges
payable in connection with the transfer of the Warrants hereunder.
ARTICLE IV
ANTI-DILUTION
4.1 ANTI-DILUTION PROVISIONS. The Exercise Price shall be subject to
adjustment from time to time as hereinafter provided. Upon each adjustment
of the Exercise Price, the holder of this Warrant shall thereafter be
entitled to purchase, at the Exercise Price resulting from such adjustment,
the number of shares of Common Stock obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Exercise Price resulting from such
adjustment.
4.2 ADJUSTMENT OF EXERCISE PRICE UPON ISSUANCE OF COMMON STOCK. If
and whenever after the date hereof the Company shall issue or sell any
Common Stock for no consideration or for a consideration per share less
than the Exercise Price then, forthwith, upon such issue or sale, the
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Exercise Price shall be reduced to the price (calculated to the nearest
one-ten thousandth of a cent) determined by dividing (x) an amount equal to
the sum of (i) the aggregate number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by then existing
Exercise Price plus (ii) the consideration received by the Company upon
such issue or sale by (y) the aggregate number of shares of Common Stock
outstanding immediately after such issue or sale. Notwithstanding the
provisions of this SECTION 4.2, no adjustment shall be made in the Exercise
Price in the event that the Company issues, in one or more transactions,
(I) Common Stock or convertible securities upon exercise of any options
issued to officers, directors or employees of the Company pursuant to a
stock option plan; (ii) Common Stock upon exercise of the Warrants; (iii)
Common Stock upon exercise of any stock purchase warrant or option (other
than the options referred to in clause (I) above) or other convertible
security outstanding on the date hereof; or (iv) Common Stock issued as
consideration in acquisitions.
4.3 STOCK DIVIDENDS. In case the Company shall declare a dividend or
make any other distribution upon any shares of the Company, payable in
Common Stock issuable in payment of such dividend or distribution, such
issuance shall be deemed to have been issued or sold without consideration.
4.4 STOCK SPLITS AND REVERSE SPLITS. In the event that the Company
shall at any time subdivide its 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 the number of
Warrant Shares purchasable pursuant to this Warrant immediately prior to
such subdivision shall be proportionately increased. Conversely, in the
event that the outstanding shares of Common Stock shall at any time be
combined into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination shall be proportionately increased
and the number of Warrant Shares purchasable upon the exercise of this
Warrant immediately prior to such combination shall be proportionately
reduced.
4.5 REORGANIZATIONS AND ASSET SALES. If the Company shall effect any
reorganization, reclassification or similar change of outstanding shares of
the Common Stock (other than as set forth SECTION 4.3 or SECTION 4.4
above), or a consolidation or merger of the Company with another
corporation or entity, or a conveyance of all or substantially all of the
assets of the Company, this Warrant shall, after such capital
reorganization, reclassification, consolidation, merger or conveyance, be
exercisable only for the number of shares of stock or other properties,
including cash, to which a holder of the number of shares of the Common
Stock deliverable upon exercise of this Warrant would have been entitled
upon such capital reorganization, reclassification, change, consolidation,
merger or conveyance if this Warrant had been exercised immediately prior
to the effective date of such event; and, in any such case, appropriate
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adjustments (as determined by the Company's Board of Directors) shall be
made in the application of the provisions set forth herein with respect to
the rights and interests thereafter of the holders of this Warrant to the
end that the provisions set forth in herein shall thereafter be applicable,
as nearly as may be reasonable, in relation to any shares of stock or other
securities thereafter deliverable upon the exercise of this Warrant.
4.6 NOTICE OF ADJUSTMENT. Whenever the Exercise Price or the number
of Warrant Shares issuable upon the exercise of the Warrants shall be
adjusted as herein provided, or the rights of the holder hereof shall
change by reason of other events specified herein, the Company shall
compute the adjusted Exercise Price and the adjusted number of Warrant
Shares in accordance with the provisions hereof and shall prepare an
Officer's Certificate setting forth the adjusted Exercise Price and the
adjusted number of Warrant Shares issuable upon the exercise of the
Warrants or specifying the other shares of stock, securities or assets
receivable as a result of such change in rights, and showing in reasonable
detail the facts and calculations upon which such adjustments or other
changes are based. The Company shall cause to be mailed to the holder
hereof copies of such Officer's Certificate together with a notice stating
that the Exercise Price and the number of Warrant Shares purchasable upon
exercise of the Warrants have been adjusted and setting forth the adjusted
Exercise Price and the adjusted number of Warrant Shares purchasable upon
the exercise of the Warrants.
4.7 COMPANY TO PREVENT DILUTION. If any event or condition occurs as
to which other provisions of this ARTICLE IV are not strictly applicable or
if strictly applicable would not fairly protect the exercise or purchase
rights of the Warrants evidenced hereby in accordance with the essential
intent and principles of such provisions, or that might materially and
adversely affect the exercise or purchase rights of the holder hereof under
any provisions of this Warrant, then the Company shall make such
adjustments in the application of such provisions, in accordance with such
essential intent and principles, so as to protect such exercise and
purchase rights as aforesaid, and any adjustments necessary with respect to
the Exercise Price and the number of Warrant Shares purchasable hereunder
so as to preserve the rights of the holder hereunder. In no event shall any
such adjustment have the effect of increasing the Exercise Price as
otherwise determined hereunder.
ARTICLE V
MISCELLANEOUS
5.1 ENTIRE AGREEMENT . This Warrant, together with the Note and the
Registration Rights Agreement, contain the entire agreement between the
holder hereof and the Company with respect to the Warrant Shares
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purchasable upon exercise hereof and the related transactions and
supersedes all prior arrangements or understandings with respect thereto.
5.2 GOVERNING LAW; VENUE. The Company hereby irrevocably agrees that
any legal proceeding in respect of this Warrant may be brought in the
district courts of Harris County, Texas, or in the United States District
Court for the Southern District of Texas, Houston Division (collectively,
the "SPECIFIED COURTS"). The Company hereby irrevocably submits to the
nonexclusive jurisdiction of the state and federal courts of the State of
Texas. The Company hereby irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or
relating to this Warrant, the Note or the Registration Rights Agreement,
brought in any Specified Court, and hereby further irrevocably waives any
claims that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum. The Company further irrevocably
consents to the service of process out of any of the Specified Courts in
any such suit, action or proceeding by the mailing of copies thereof by
certified mail, return receipt requested, postage prepaid, to the Company.
THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
APPLICABLE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA FROM
TIME TO TIME IN EFFECT.
.
5.3 WAIVER AND AMENDMENT. Any term or provision of this Warrant may
be waived at any time by the party which is entitled to the benefits
thereof and any term or provision of this Warrant may be amended or
supplemented at any time by agreement of the holder hereof and the Company,
except that any waiver of any term or condition, or any amendment or
supplementation, of this Warrant shall be in writing. A waiver of any
breach or failure to enforce any of the terms or conditions of this Warrant
shall not in any way effect, limit or waive a party's rights hereunder at
any time to enforce strict compliance thereafter with every term or
condition of this Warrant.
5.4 ILLEGALITY. In the event that any one or more of the provisions
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for whom
the benefit of the provision exists, be in any way impaired.
5.5 COPY OF WARRANT. A copy of this Warrant shall be filed among the
records of the Company.
5.6 NOTICE. Any notice or other document required or permitted to be
given or delivered to the holder hereof shall be in writing and delivered
at, or sent by telecopy or certified or registered mail to such holder at,
the last address shown on the books of the Company maintained at the
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Warrant Office for the registration of this Warrant or at any more recent
address of which the holder hereof shall have notified the Company in
writing. Any notice or other document required or permitted to be given or
delivered to the Company shall be delivered at, or sent by telecopy or
certified or registered mail to, the Warrant Office, or such other address
within the continental United States of America as shall have been
furnished by the Company to the holder of this Warrant.
5.7 LIMITATION OF LIABILITY; NOT STOCKHOLDERS. No provision of this
Warrant shall be construed as conferring upon the holder hereof the right
to vote, consent, receive dividends or receive notices (other than as
herein expressly provided) in respect of meetings of stockholders for the
election of directors of the Company or any other matter whatsoever as a
stockholder of the Company. No provision hereof, in the absence of
affirmative action by the holder hereof to purchase shares of Common Stock,
and no mere enumeration herein of the rights or privileges of the holder
hereof, shall give rise to any liability of such holder for the purchase
price of any shares of Common Stock or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
5.8 EXCHANGE LOSS, DESTRUCTION, ETC, OF WARRANT. Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutilation or
destruction of this Warrant, and in the case of any such loss, theft or
destruction upon delivery of a bond of indemnity or such other security in
such form and amount as shall be reasonably satisfactory to the Company, or
in the event of such mutilation upon surrender and cancellation of this
Warrant, the Company will make and deliver a new Warrant of like tenor, in
lieu of such lost, stolen, destroyed or mutilated Warrant. Any Warrant
issued under the provisions of this SECTION 5.8 in lieu of any Warrant
alleged to be lost, destroyed or stolen, or in lieu of any mutilated
Warrant, shall constitute an original contractual obligation on the part of
the Company. This Warrant shall be promptly canceled by the Company upon
the surrender hereof in connection with any exchange or replacement. The
Company shall pay all taxes (other than securities transfer taxes) and all
other expenses and charges payable in connection with the preparation,
execution and delivery of Warrants pursuant to this SECTION 5.8.
5.9 COMPLIANCE WITH SECURITIES ACT AND APPLICABLE LAW. The Company
shall not be required to transfer this Warrant or to sell or issue Warrant
Shares if such transfer or issuance would constitute a violation by the
Company of any provisions of any law or regulation of any governmental
authority. While the Company is required to register the resale of the
Warrant Shares by holder(s) pursuant to the Registration Rights Agreement,
in the event the Warrant Shares issuable on exercise of this Warrant are
not then registered under the Act, the Company may imprint the following
legend or any other legend which counsel for the Company considers
necessary or advisable to comply with the Securities Act of 1933:
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"The shares of stock represented by this certificate
have not been registered under the Securities Act of
1933 or under the securities laws of any State and may
not be sold, transferred or otherwise disposed of
except upon such registration or upon receipt by the
issuer, in form and substance satisfactory to the
issuer, of an opinion of the issuer's counsel that
registration is not required for such disposition."
5.10 REGISTRATION RIGHTS. The Warrants Shares shall be entitled to
such registration rights under the Securities Act and under applicable
state securities laws as are specified in the Registration Rights
Agreement.
5.11 HEADINGS. The Article and Section and other headings herein are
for convenience only and are not a part of this Warrant and shall not
affect the interpretation thereof.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
in its name.
Dated: April 15, 1999
MILLER EXPLORATION COMPANY
By: /S/ KELLY E. MILLER
Name: KELLY E. MILLER
Title: PRESIDENT
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