Document:

Exhibit

AMENDMENT NO. 1 TO AMENDED AND RESTATED 
REVOLVING CREDIT AGREEMENT

This AMENDMENT NO. 1 TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (this “Amendment”), dated as of March 3, 2017, by and among the Borrowers (as defined below), the Lenders (as defined below), PNC Bank, National Association, as administrative agent (in such capacity, the “Administrative Agent”) and collateral agent (in such capacity, the “Collateral Agent”) for the Lenders, and Wells Fargo Bank, National Association, as syndication agent (in such capacity, the “Syndication Agent” and together with the Administrative Agent and the Collateral Agent, the “Agents”) for the Lenders.
WHEREAS, pursuant to the Amended and Restated Revolving Credit Agreement, dated as of July 8, 2016 (as in effect on the date hereof and as amended, supplemented and otherwise modified from time to time, the “Credit Agreement”), the financial institutions which are now or which hereafter become a lender party thereto (collectively, the “Lenders” and each individually, a “Lender”) and the Agents have agreed to provide financial accommodations to NEW ENTERPRISE STONE & LIME CO., INC., a Delaware corporation (“NESL”), Asti Transportation Systems, Inc., a Delaware corporation (“ASTI”), EII Transport Inc., a Pennsylvania corporation (“EII”), Gateway Trade Center Inc., a New York corporation (“Gateway”), Precision Solar Controls Inc., a Texas corporation (“Precision”), Protection Services Inc., a Pennsylvania corporation (“Protection”), SCI Products Inc., a Pennsylvania corporation (“SCI”), and Work Area Protection Corp., an Illinois corporation (“Work Area”) (NESL, ASTI, EII, Gateway, Precision, Protection, SCI, Work Area and each Person joined thereto as a borrower from time to time, collectively, the “Borrowers”, and each a “Borrower”), all as more fully set forth in the Credit Agreement; and
WHEREAS, the Borrowers have requested that the Agents and the Lenders agree to amend the Credit Agreement as set forth herein, and the Agents and the Lenders are willing to agree to do so, subject to the terms and conditions and to the extent set forth herein; 
NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.Definitions. Capitalized terms used and not defined in this Amendment shall have the respective meanings given to such terms in the Credit Agreement.
2.Amendments. Subject to the satisfaction of the conditions precedent set forth in Section 3 below, the Borrowers, the Agents and the Lenders each agree that as of the First Amendment Effective Date (as defined below):
(a)The definition of “Trigger Event” now appearing in Section 1.2 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:
““Trigger Event” shall mean the occurrence of (i) any Event of Default or (ii) Undrawn Availability plus unrestricted cash of the Borrowers held at PNC (not to exceed $10,000,000 of such unrestricted cash) is at any time less than $20,000,000; provided, however, that, in the 2017 and 2018 calendar years, such minimum threshold amount may be reduced to $10,500,000 during any 90 consecutive day period commencing no earlier than March 1 and ending no later than August 31, as specified to the Administrative Agent by NESL in writing (a “Trigger Reduction Notice”).”
(b)    Section 4.7 of the Credit Agreement shall be amended to add a second proviso to the end of the second sentence thereof that reads as follows:
“; provided further, that, with respect to the two (2) year period commencing on January 1, 2017 and ending on December 31, 2018, an updated appraisal shall be obtained at Borrower’s 

expense at the earlier to occur of (i) June 30, 2017 and (ii) NESL’s issuance of a Trigger Reduction Notice.”
3.Conditions to Effectiveness of This Amendment. The terms and provisions of this Amendment shall become effective as of the date first written above upon the satisfaction or waiver by the Required Lenders of each of the following conditions precedent in a manner reasonably satisfactory to the Agents and the Required Lenders (the “First Amendment Effective Date”):
(a)the Borrowers shall have paid the Agents and the Lenders (or their designees) all fees then then due and payable as provided in the Credit Agreement or any Other Documents (including, without limitation, an amendment fee payable to the Lenders on pro rata basis in the amount of $25,000 and the fees, costs, disbursements and expenses of Otterbourg P.C. and any other legal counsel to the Lenders and the Agents);
(b)receipt by the Administrative Agent of this Amendment, in form and substance satisfactory to the Agents in their sole discretion, duly authorized, executed and delivered by each Borrower, each Agent and the Lenders constituting the Required Lenders;
(c)as of the date hereof, after giving effect to this Amendment, each of the representations and warranties contained in Section 4(f) hereof shall be true and correct in all respects;
(d)each Loan Party shall have obtained all material consents necessary or advisable in connection with this Amendment; and
(e)the Administrative Agent and the Required Lenders shall have received any other documents, instruments and agreements as the Administrative Agent and the Required Lenders shall have reasonably requested in connection with this Amendment.
4.Provisions of General Application. 
(a)Effect of This Amendment. Except as modified pursuant hereto, and pursuant to the other documents, instruments and agreements executed and delivered in connection herewith, no other changes or modifications to the Credit Agreement are intended or implied, and in all other respects the Obligations, Credit Agreement and Other Documents are hereby specifically ratified, restated and confirmed by all parties hereto as of the effective date hereof. The Borrowers hereby agree that this Amendment shall in no manner affect or impair the Obligations or the Liens securing the payment and performance thereof. Except as expressly provided herein, this Amendment shall not, by implication or otherwise, limit, impair, constitute a waiver of or otherwise affect any rights or remedies of any Agent or any Lender under the Credit Agreement or the Other Documents, nor alter, modify, amend or in any way affect any of the obligations or covenants contained in the Credit Agreement or any of the Other Documents, all of which are ratified and confirmed in all respects and shall continue in full force and effect. Each Loan Party hereto hereby ratifies and confirms all of its respective obligations and liabilities under the Credit Agreement and each Other Document to which it is party, as expressly modified herein. On and after the date hereof, this Amendment shall for all purposes constitute an Other Document. It shall be an Event of Default under the Credit Agreement if any Borrower fails to perform, keep or observe any term, provision, condition, covenant or agreement contained in this Amendment or if any representation or warranty made by any Borrower under or in connection with this Amendment shall be untrue, false or misleading in any respect when made. By entering into this Amendment, the Agents and the Lenders have not waived any breach of the Credit Agreement or any Event of Default, and have no intention of waiving any right, power or remedy of any Agent or Lender under the Credit Agreement, any Other Document or Applicable Law. To the extent of conflict between the terms of this Amendment and the Credit Agreement, the terms of this Amendment shall control. The Credit Agreement as amended hereby shall be read and construed with this Amendment as one agreement. On and after the date hereof, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement, and each reference in each of the Other Documents to “the Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended by this Amendment.

(b)No Third Party Beneficiaries. The terms and provisions of this Amendment shall be for the benefit of the parties hereto and their respective successors and assigns; no other person, firm, entity or corporation shall have any right, benefit or interest under this Amendment.
(c)Further Assurances. The Borrowers shall execute and deliver such additional documents and take such additional action as may be reasonably necessary to effectuate the provisions and purposes of this Amendment.
(d)Binding Effect. This Amendment shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns.
(e)Merger. This Amendment sets forth the entire agreement and understanding of the parties with respect to the matters set forth herein. This Amendment cannot be changed, modified, amended or terminated except in a writing executed by the party to be charged.
(f)Representations and Warranties. 
(i)All representations and warranties made in this Amendment or any other document furnished in connection with this Amendment shall survive the execution and delivery of this Amendment and the other documents, and no investigation by the Agents or any closing shall affect the representations and warranties or the right of the Agents to rely upon them.
(ii)In order to induce the Lenders and the Agents to agree to amend the Credit Agreement in the manner set forth herein, each Borrower hereby makes the following representations and warranties, which shall survive the execution and delivery of this Amendment: 
(A)as of the date hereof, both before and after giving effect to the amendments herein, no Default or Event of Default has occurred and is continuing; 
(B)each of the representations and warranties of such Borrower made in the Credit Agreement and in the Other Documents is true and correct in all respects (or in all material respects if any such representation or warranty is not by its terms already qualified as to materiality) both before and after giving effect to the amendments contemplated hereby as though each such representation and warranty were made at and as of the date hereof unless relating solely to an earlier date, in which case such representation and warranty shall be true and correct in all respects as of such earlier date (or in all material respects as of such earlier date if any such representation or warranty is not by its terms qualified as to materiality); 
(C)the execution, delivery and performance by it of this Amendment and the consummation of the transactions contemplated hereby do not and will not require any registration with, consent, or approval of, or notice to, or any other action with or by, any third party, including, without limitation, any Governmental Body, other than registrations, consents, approvals, notices or other actions that have been obtained and that are still in force and effect where the failure to obtain the foregoing has or could reasonable expected to have a Material Adverse Effect; 
(D)such Borrower has all requisite power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment, and the Other Documents;
(E)this Amendment, and the performance of the Credit Agreement, as amended hereby, and the Other Documents, has been duly authorized, executed and delivered by all necessary action by such Borrower, and upon execution by the parties set forth on the signature lines below, this Amendment will constitute the legal, valid and binding obligation of such Borrower, enforceable against it in accordance with the terms hereof;
(F)such Borrower has no existing claims or causes of action against the Agents or any of the Lenders in connection with the Credit Agreement, the Other Documents or the Obligations; 
(G)each of the Collateral Documents, and all of the Liens and security interests granted thereunder, do and shall continue to secure the payment of all Obligations as set forth in such 

Collateral Documents, and constitute valid and perfected Liens and security interests with the priorities set forth in the Collateral Documents and the Intercreditor Agreements; and
(H)the execution, delivery, and performance by such Borrower of this Amendment and the transactions contemplated hereby do not and will not (A) violate any provision of federal, provincial, state, or local law or regulation applicable to such Borrower, any other Loan Party, or any of their Subsidiaries, or any injunction, restraining order, writ, order, judgment, or decree of any court or other Governmental Body binding on such Borrower, any other Loan Party or any of their Subsidiaries, where such violation has or could reasonably be expected to have a Material Adverse Effect, (B) violate any provisions of the Organizational Documents of such Borrower, any other Loan Party or any of their Subsidiaries, (C) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any Material Contract of such Borrower, any other Loan Party or any of their Subsidiaries where any such conflict, breach or default has or could individually or in the aggregate reasonably be expected to have a Material Adverse Effect, (D) result in or require the creation or imposition of any Lien of any nature whatsoever upon any assets of such Borrower or any other Loan Party, other than Permitted Encumbrances, or (E) require any approval of any holders of Equity Interests of such Borrower or any other Loan Party, or any approval or consent of any Person under any Material Contract of such Borrower or any other Loan Party, other than consents or approvals that have been obtained and that are still in force and effect and except, in the case of Material Contracts, for consents or approvals, the failure to obtain could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect. 
(g)Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment.
(h)Counterparts; Electronic Signatures. This Amendment may be executed in any number of counterparts, each of which shall be an original, and all of which, when taken together, shall constitute one agreement. Delivery of an executed signature page of this Amendment by facsimile transmission or scanned electronic transmission shall be effective as delivery of a manually executed counterpart hereof.
(i)Governing Law. This Amendment and all matters relating hereto shall, in accordance with Section 5-1401 of the General Obligations Law of the State of New York, be governed by and construed in accordance with the laws of the State of New York. 
(j)Release. Each Borrower, on behalf of itself, the other Loan Parties and their Affiliates, hereby acknowledges and agrees that it does not have any defenses, counterclaims, offsets, cross-complaints, claims or demands of any kind or nature whatsoever that can be asserted to reduce or eliminate all or any part of the liability of such Borrower and the other Loan Parties to repay the Lenders as provided in this Amendment, the Credit Agreement and the Other Documents or to seek affirmative relief or damages of any kind or nature from any Agent or Lender party hereto. Each Borrower, on behalf of itself, the Other Loan Parties and their Affiliates, hereby voluntarily and knowingly releases and forever discharges the Agent and the Lenders party hereto and Agent’s and each Lender party hereto’s predecessors, agents, employees, successors and assigns, from any and all possible claims, demands, actions, causes of action, damages, costs, or expenses, and liabilities whatsoever, of every kind, nature and character whatsoever, whether known or unknown, anticipated or unanticipated, suspected or unsuspected, fixed, contingent, or conditional, at law or in equity, originating in whole or in part on or before the date this Amendment is fully executed, which any Borrower, the other Loan Parties, and their Affiliates may now or hereafter have against any Agent or Lender party hereto in their capacities as such, and any Agent’s or any Lender party hereto’s predecessors, agents, employees, successors and assigns, if any, in their capacities as such, and irrespective of whether any such claims arise out of contract, tort, violation of law or regulations, or otherwise, including, without limitation, the exercise of any rights and remedies under this Amendment, the Credit Agreement or Other Documents, and negotiation and execution of this Amendment.

(k)Complete Agreement. This Amendment, the Credit Agreement and the Other Documents represent the final agreement among the parties and may not be contradicted by evidence of prior, contemporaneous or oral agreements of the parties.
(l)Headings. Section and Subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect.

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. 

	
		
	 
	NEW ENTERPRISE STONE & 
LIME CO., INC.

By: /s/ Albert L. Stone
Name:Albert L. Stone
Title:Executive Vice President, Chief Financial Officer & Treasurer

	 
	 

	 
	ASTI TRANSPORTATION 
SYSTEMS, INC.
EII TRANSPORT INC.
GATEWAY TRADE CENTER INC.
PRECISION SOLAR CONTROLS INC.
PROTECTION SERVICES INC.
SCI PRODUCTS INC.
WORK AREA PROTECTION CORP.

By: /s/ Paul I. Detwiler, III
Name:Paul I. Detwiler, III
Title:Vice President, Secretary & Treasurer

	 
	 

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	PNC BANK, NATIONAL ASSOCIATION, as the Administrative Agent, the Collateral Agent and a Lender

By: /s/Glenn D. Kreutzer
Name:Glenn D. Kreutzer
Title:Vice President

	 
	 

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	WELLS FARGO BANK, NATIONAL ASSOCIATION, as the Syndication Agent and a Lender

By: /s/Greg Feldmus
Name: Greg Feldmus
Title: Duly Authorized Signer 

	 
	 

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	ALOSTAR BANK OF COMMERCE, as a Lender

By: /s/Daryn Veney
Name: Daryn Veney
Title: Vice PresidentExhibit 4.1

 

Execution Version

 

SANCHEZ ENERGY CORPORATION

 

WARRANT TO PURCHASE COMMON SHARES

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION.  THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD OR OFFERED FOR SALE, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OR OTHER JURISDICTIONS, AND IN THE CASE OF A TRANSACTION EXEMPT FROM REGISTRATION, SUCH WARRANTS AND THE SECURITIES ISSUABLE UPON EXERCISE OF SUCH WARRANTS MAY ONLY BE TRANSFERRED IF THE ISSUER AND, IF APPLICABLE, THE TRANSFER AGENT FOR SUCH WARRANTS AND THE SECURITIES ISSUABLE UPON EXERCISE OF SUCH WARRANTS HAS RECEIVED DOCUMENTATION SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT.

 

THIS WARRANT AGREEMENT, dated as of March 1, 2017 (this “Agreement”), is by and between (a) SANCHEZ ENERGY CORPORATION, a Delaware corporation (the “Corporation”), and (b) Gavilan Resources Holdings - A, LLC, a Delaware limited liability company (the “Holder”).  The Corporation and the Holder are sometimes referred to herein collectively as the “Parties” or individually as a “Party.”

 

R E C I T A L S:

 

WHEREAS, the Corporation and the other parties thereto have entered into an Interim Investors Agreement, dated as of January 12, 2017 (the “Investors Agreement”); and

 

WHEREAS, in connection with the closing of the transactions contemplated by the Investors Agreement, the Corporation has agreed to issue to the Holder warrants to purchase up to an aggregate of 4,713,927 shares of common stock, par value $0.01 per share of the Corporation, subject to adjustment as set forth herein; and

 

WHEREAS, this Agreement is intended to set forth the terms and conditions of the Warrants (defined below).

 

AGREEMENT:

 

NOW, THEREFORE, in consideration of the premises and the covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

 

ARTICLE 1
  Definitions and References

 

Section 1.01.                         Definitions.  As used herein, the following terms have the respective meanings:

 

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person.  For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”) with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Aggregate Exercise Price” means an amount equal to the product of (a) the number of Warrant Shares in respect of which this Warrant is then being exercised pursuant to Section 2.02, multiplied by (b) the Exercise Price.

 

“Agreement” has the meaning set forth in the preamble.

 

“Board” means the board of directors of the Corporation.

 

“Business Day” means any day, except a Saturday, Sunday or legal holiday, on which banking institutions in the city of Houston, Texas are authorized or obligated by law or executive order to close.

 

“Common Shares” means the shares of common stock, par value $0.01 per share, of the Corporation, including a Right associated with each Common Share.

 

“Corporation” has the meaning set forth in the preamble.

 

“Equity Interests” means shares of capital stock (including, with respect to the capital stock of the Corporation, Preferred Stock), partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such Equity Interest.

 

“Exercise Agreement” has the meaning assigned to such term in Section 3.01(a).

 

“Exercise Date” means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 3.01 shall have been satisfied at or prior to 5:00 p.m., Central Time, on a Business Day, including, without limitation, the receipt by the Corporation of the Exercise Agreement, the Warrant and the Aggregate Exercise Price.

 

“Exercise Price” means $10.00 per Common Share, subject to adjustment as set forth in this Agreement.

 

“Expiration Date” means March 1, 2022.

 

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“Fair Market Value” means, as of any particular date: (a) the VWAP Price of the Common Shares for such day on all domestic securities exchanges on which the Common Shares may at the time be listed; (b) if there have been no sales of the Common Shares on any such exchange on any such day, the average of the highest bid and lowest asked prices for the Common Shares on all such exchanges at the end of such day; (c) if on any such day the Common Shares are not listed on a domestic securities exchange, the VWAP Price of the Common Shares as quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association for such day; or (d) if there have been no sales of the Common Shares on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association on such day, the average of the highest bid and lowest asked prices for Common Shares quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association at the end of the day; in each case, averaged over the fifteen consecutive Business Days ending on the Business Day immediately prior to the day as of which “Fair Market Value” is being determined; provided that, if the Common Shares are listed on any domestic securities exchange, the term “Business Day” as used in this sentence means Business Days on which such exchange is open for trading.  If at any time the Common Shares are not listed on any domestic securities exchange or quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association, the “Fair Market Value” of the Common Shares shall be the fair market value per Common Share as determined in good faith by the Board.

 

“GAAP” means generally accepted accounting principles in the United States, including those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, the opinions and pronouncements of the Public Company Accounting Oversight Board and in the statements and pronouncements of the Financial Accounting Standards Board, as in effect from time to time.

 

“Holder” has the meaning set forth in the preamble.

 

“Investors Agreement” has the meaning set forth in the recitals.

 

“NYSE” means New York Stock Exchange.

 

“Original Issue Date” means March 1, 2017.

 

“OTC Bulletin Board” means the Financial Industry Regulatory Authority OTC Bulletin Board electronic inter-dealer quotation system.

 

“Parties” has the meaning set forth in the preamble.

 

“Person” means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.

 

“Pink OTC Markets” means the OTC Markets Group Inc. electronic inter-dealer quotation system, including OTCQX, OTCQB and OTC Pink.

 

“Right” has the meaning assigned to such term in the Rights Agreement.

 

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“Rights Agreement” means that certain Rights Agreement, dated as of July 28, 2015, between the Corporation and Continental Stock Transfer & Trust Company, as rights agent, including the exhibits attached thereto, as such Rights Agreement may be amended, modified or supplemented from time to time.

 

“Securities” has the meaning assigned to such term in Section 5.01.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“VWAP Price” as of a particular date means the volume-weighted average trading price, as adjusted for splits, combinations and other similar transactions, of a Common Share.

 

“Warrant” means this warrant and all warrants issued upon division or combination of, or in substitution for, this warrant.

 

“Warrant Register” has the meaning assigned to such term in Section 6.06.

 

“Warrant Shares” means the Common Shares purchasable upon exercise of this Warrant in accordance with the terms of this Agreement (without taking into account any limitations or restrictions on the exercisability of this Warrant, other than with respect to Section 2.02, Section 2.03 or Section 3.01 of this Warrant).  Each Warrant Share issued upon the exercise in whole or in part, of this Warrant shall include a Right.

 

Section 1.02.                         Rules of Construction.  Unless the context otherwise requires or except as otherwise expressly provided:

 

(i)                                     an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

 

(ii)                                  “herein,” “hereof” and other words of similar import refer to this Agreement as a whole and not to any particular Section, Article or other subdivision;

 

(iii)                               all references to Sections or Articles or Exhibits refer to Sections or Articles or Exhibits of or to this Agreement unless otherwise indicated; and

 

(iv)                              references to agreements or instruments, or to statutes or regulations, are to such agreements or instruments, or statutes or regulations, as amended from time to time (or to successor statutes and regulations).

 

ARTICLE 2
 ISSUANCE, EXERCISE AND EXPIRATION OF WARRANT

 

Section 2.01.                         Issuance of Warrant.  Subject to the terms and conditions hereof, this Warrant shall represent the right to purchase from the Corporation 4,713,927 Warrant Shares (subject to adjustment as provided herein) in whole or in part.

 

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Section 2.02.                         Exercise of Warrant.  Subject to the terms and conditions hereof, at any time on any Business Day and from time to time beginning on the Original Issue Date and until 5:00 p.m., Central Time, on the Expiration Date, the Holder may exercise this Warrant in whole or in part for any number of the Warrant Shares purchasable hereunder in respect thereof (subject to adjustment as provided herein) as provided in Section 3.01.

 

Section 2.03.                         Expiration of Warrant.  This Warrant shall terminate and become void as of 5:00 p.m., Central Time, on the Expiration Date.

 

ARTICLE 3
 EXERCISE PROCEDURE

 

Section 3.01.                         Conditions to Exercise.  The Holder may exercise this Warrant only upon:

 

(a)                                 surrender of this Warrant to the Corporation at its then principal executive offices, together with an Exercise Agreement in the form attached hereto as Exhibit A (each, an “Exercise Agreement”), duly completed (including specifying the number of Warrant Shares to which the Holder is entitled to purchase hereunder and the number of Warrant Shares to be purchased) and executed;

 

(b)                                 payment to the Corporation of the Aggregate Exercise Price in accordance with Section 3.02; and

 

(c)                                  to the extent any withholding tax on the exercise of a Warrant is required, the Holder shall nonetheless be entitled to exercise the Warrant; provided that the Holder shall make a cash payment to the Corporation in an amount sufficient to satisfy any such applicable withholding tax.

 

Section 3.02.                         Payment of the Aggregate Exercise Price.  Payment of the Aggregate Exercise Price shall be made by delivery to the Corporation of a certified or official bank check payable to the order of the Corporation or by wire transfer of immediately available funds to an account designated in writing by the Corporation, in the amount of such Aggregate Exercise Price; provided, that the Corporation may elect, within one Business Day of receipt of the duly completed and executed Exercise Agreement, to (a) withhold from the Holder a number of Warrant Shares then issuable upon exercise by the Holder of this Warrant with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price (and such withheld Warrant Shares shall no longer be issuable under this Warrant) and (b) refund to the Holder (by delivery to the Holder of a certified or official bank check payable to the order of the Holder or by wire transfer of immediately available funds to an account designated in writing by the Holder) the amount of such Aggregate Exercise Price that the Holder delivered to the Corporation.

 

In the event of any withholding of Warrant Shares pursuant to this Section 3.02 where the number of Common Shares whose Fair Market Value is equal to the Aggregate Exercise Price is not a whole number, the number of Common Shares withheld by the Corporation shall be rounded up to the nearest whole Common Share and the Corporation shall make a cash payment to the Holder (by delivery of a certified or official bank check or by wire transfer of immediately

 

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available funds) based on the incremental fraction of a Common Share being so withheld by the Corporation from the Holder in an amount equal to the product of (x) such incremental fraction of a Common Share being so withheld multiplied by (y) the Fair Market Value of one Warrant Share on the Exercise Date.

 

Section 3.03.                         Delivery of Certificates.  To the extent any Common Shares of the Corporation are at the time of exercise represented in certificated form, then, at the election of the Holder as set forth in the Exercise Agreement, the Corporation shall, as promptly as practicable on or after the Exercise Date, and in any event within three Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a Common Share, as provided in Section 3.04 hereof.  Such certificate(s) shall be delivered to the address specified by the Holder in the applicable Exercise Agreement.  The certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the Holder shall reasonably request in the Exercise Agreement and shall be registered in the name of the Holder or, subject to compliance with Section 3.06(f) and Section 6.05, such other Person’s name as shall be designated in the Exercise Agreement.  Upon the exercise of this Warrant by the Holder, this Warrant shall be deemed to have been exercised by the Holder and such certificate or certificates for Warrant Shares shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein in compliance with Section 3.06(f) and Section 6.05 shall be deemed to have become the holder of record of such Warrant Shares for all purposes, immediately prior to the close of business on the Exercise Date.

 

Section 3.04.                         Fractional Shares.  The Corporation shall not be required to issue a fractional Warrant Share upon exercise of any Warrant.  As to any fraction of a Warrant Share that the Holder would otherwise be entitled to purchase upon such exercise, the Corporation shall pay to the Holder an amount in cash (by delivery of a certified or official bank check or by wire transfer of immediately available funds) equal to the product of (i) such fraction of a Warrant Share multiplied by (ii) the Fair Market Value of one Warrant Share on the Exercise Date.

 

Section 3.05.                         Delivery of New Warrant.  Unless the purchase rights represented by this Warrant shall have been fully exercised, the Corporation shall, at the time of delivery of the Warrant Shares being issued in accordance with this Article 3, provide by notation in the Warrant Register the number, if any, of Warrant Shares that remain subject to purchase by the Holder upon exercise.

 

Section 3.06.                         Valid Issuance of Warrant and Warrant Shares; Payment of Taxes.  With respect to each exercise of this Warrant, the Corporation hereby represents, covenants and agrees:

 

(a)                                 This Warrant is, and any warrant issued in substitution for or replacement of this Warrant shall be, upon issuance, duly authorized and validly issued.

 

(b)                                 Each Warrant Share (including the Right associated therewith) issuable upon the exercise of this Warrant pursuant to the terms hereof shall be, upon issuance, and the Corporation shall take all such actions as may be necessary or appropriate in order that each Warrant Share is, validly issued, fully paid and non-assessable, issued

 

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without violation of any preemptive or similar rights of any stockholder of the Corporation and free and clear of all taxes, liens and charges.

 

(c)                                  The Corporation shall take all such actions as may be necessary to ensure that all such Warrant Shares are issued without violation by the Corporation of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which Common Shares or other securities constituting Warrant Shares may be listed at the time of such exercise (except for official notice of issuance which shall be immediately delivered by the Corporation upon each such issuance).

 

(d)                                 The Corporation shall use commercially reasonable efforts to cause the Warrant Shares, immediately upon such exercise, to be listed on the NYSE or any domestic securities exchange upon which Common Shares or other securities constituting Warrant Shares are listed at the time of such exercise.

 

(e)                                  The Corporation has taken such action as is necessary to reserve for issuance such number of Common Shares as are subject to issuance upon the exercise in whole of the Warrant.

 

(f)                                   The Corporation shall pay all expenses in connection with, and all taxes (other than income taxes) and other governmental charges that may be imposed with respect to, the issuance or delivery of Warrant Shares upon exercise of this Warrant; provided that the Corporation shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable withholding or the issuance or delivery of the Warrant Shares to any Person other than the Holder, and no such issuance or delivery shall be made unless and until the Person requesting such issuance has paid to the Corporation the amount of any such tax, or has established to the satisfaction of the Corporation that such tax has been paid.

 

Section 3.07.                         Conditional Exercise.  Notwithstanding any other provision hereof, if an exercise of any portion of this Warrant by the Holder is to be made in connection with a sale of the Corporation (pursuant to a merger, sale of Common Shares, or otherwise), such exercise may at the election of the Holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

 

ARTICLE 4
 ADJUSTMENT TO NUMBER OF WARRANT SHARES

 

Section 4.01.                         Adjustment to Number of Warrant Shares.  In order to prevent dilution of the purchase rights granted under this Warrant, the number of Warrant Shares issuable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as provided in this Article 4 (in each case, after taking into consideration any prior adjustments pursuant to this Article 4).  If, at any time as a result of the provisions of this Article 4, the Holder shall become entitled upon subsequent exercise to receive any shares of Equity Interests of the Corporation other than Common Shares, the number of such other Equity Interests so receivable upon exercise of this Warrant shall thereafter be subject to adjustment from time to

 

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time in a manner and on terms as nearly equivalent as practicable to the provisions contained herein.

 

Section 4.02.                         Adjustment to Number of Warrant Shares Upon Dividend, Subdivision, Combination or Reclassification of Common Shares.

 

(a)                                 If the Corporation shall, at any time or from time to time after the Original Issue Date and prior to the exercise in whole or expiration of the Warrant, (i) pay a dividend or make any other distribution upon the Common Shares or any other capital stock of the Corporation payable in Common Shares, (ii) subdivide (by any split, recapitalization or otherwise) its outstanding Common Shares into a greater number of Common Shares, or (iii) combine (by combination, reverse split or otherwise) its outstanding Common Shares into a smaller number of Common Shares, then the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to any such dividend, distribution, subdivision or combination shall be proportionately adjusted so the Holder will thereafter receive upon exercise of this Warrant the aggregate number and kind of shares of Equity Interests of the Corporation that the Holder would have owned immediately following such action if the Warrant had been exercised immediately before the record date for such action.  Any adjustment under this Section 4.02 shall become effective at the close of business on the date the dividend, distribution, subdivision or combination becomes effective.

 

(b)                                 If the Corporation shall, at any time or from time to time after the Original Issue Date and prior to the exercise in whole or expiration of the Warrant, issue by reclassification of its Common Shares any shares of its capital stock, then such a reclassification shall be deemed to be (i) a distribution by the Corporation to the holders of its Common Shares of such shares of such other class of capital stock for the purposes and within the meaning of Section 4.04(a) and (ii) if the outstanding Common Shares shall be changed into a larger or smaller number of Common Shares as part of such reclassification, such change shall be deemed to be a subdivision or combination, as the case may be, of the outstanding Common Shares for the purposes and within in the meaning of Section 4.02(a).

 

Section 4.03.                         Adjustment for Rights Issue.

 

(a)                                 If the Corporation, prior to the exercise in whole or in part of this Warrant, distributes any rights, options or warrants (excluding Rights issued under the Rights Agreement) to all holders of its Common Shares entitling them for a period expiring within 45 days after the record date specified below to purchase Common Shares, at a price per share less than the Fair Market Value per share on that record date, then the number of Warrant Shares issuable upon the exercise of this Warrant shall be adjusted in accordance with the formula:

 

 

8

 

where:

 

W’ =                      the adjusted number of Warrant Shares issuable upon exercise of the Warrant;

 

W =                          the number of Warrant Shares then issuable upon exercise of the Warrant;

 

O =                             the number of Common Shares outstanding on the applicable record date;

 

N =                             the number of additional Common Shares issuable pursuant to such rights, options or warrants;

 

P =                               the price per share of the additional Common Shares issuable pursuant to such rights, options or warrants; and

 

M =                          the Fair Market Value per Common Share on the applicable record date.

 

(b)                                 The adjustment pursuant to this Section 4.03 shall be made successively whenever any such rights, options or warrants are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive the rights, options or warrants.  If at the end of the period during which such rights, options or warrants are exercisable, not all rights, options or warrants shall have been exercised, the number of Warrant Shares subject to issuance under the Warrant shall be immediately readjusted to what it would have been if “N” in the above formula had been the number of shares actually issued.

 

Section 4.04.                         Adjustment for Other Distributions.

 

(a)                                 If the Corporation, prior to the exercise in whole or expiration of this Warrant, pays a cash distribution to all holders of its Common Shares or distributes to all holders of its Common Shares any shares of its capital stock, evidences of its indebtedness, or any of its assets or any rights, warrants or other securities of the Corporation (other than distributions to which Section 4.02 or Section 4.03 apply), then the number of Warrant Shares issuable upon the exercise of this Warrant shall be adjusted in accordance with the formula:

 

where:

 

W’ =                      the adjusted number of Warrant Shares issuable upon exercise of the Warrant;

 

W =                          the number of Warrant Shares then issuable upon exercise of the Warrant;

 

M =                          the Fair Market Value per Common Share on the record date specified below; and

 

F =                               the amount of cash or fair market value on the record date specified below of the evidences of its indebtedness, assets, rights, warrants or other securities to be distributed in respect of one Common Share as determined in good faith by the Board.

 

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(b)                                 The adjustment pursuant to this Section 4.04 shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of holders entitled to receive the distribution.

 

(c)                                  This Section 4.04 does not apply to rights, options or warrants referred to in Section 4.03 hereof.

 

Section 4.05.                         Dissolution, Liquidation or Winding Up

 

If, on or prior to the Expiration Date, the Corporation (or any other Person controlling the Corporation) shall propose a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, the Holder of this Warrant shall receive the kind and number of other securities or assets which the Holder would have been entitled to receive if the Holder had exercised this Warrant in full and acquired the applicable number of Warrant Shares then issuable hereunder as a result of such exercise (without taking into account any limitations or restrictions on the exercisability of this Warrant) immediately prior to the time of such dissolution, liquidation or winding up and the right to exercise this Warrant shall terminate on the date on which the holders of record of Common Shares shall be entitled to exchange their Common Shares for securities or assets deliverable upon such dissolution, liquidation or winding up.

 

Section 4.06.                         When De Minimis Adjustment May Be Deferred.  No adjustment in the number of Warrant Shares subject to a Warrant need be made unless the adjustment would require an increase or decrease of at least 1% of the then applicable number of Warrant Shares subject to a Warrant.  Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment.  All calculations under this Article 4 shall be made to the nearest 1/10,000th of a whole Common Share, it being understood that no such rounding shall be made under Section 4.12 (and, in calculations made pursuant to such paragraph, the adjusted number of Warrant Shares subject to a Warrant shall refer to such adjusted number before rounding).

 

Section 4.07.                         When No Adjustment Required.  No adjustment need be made for a transaction referred to in Sections 4.02 through 4.04, if the Holder is to participate (without being required to exercise the Warrants) in the transaction on a basis and with notice that the Board and the Holder determine to be fair and appropriate in light of the basis and notice on which holders of Common Shares participate in the transaction.  No adjustment need be made for rights to purchase Common Shares pursuant to a Corporation plan for reinvestment of dividends or interest.  To the extent the Warrants become convertible into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash.

 

Section 4.08.                         Notice of Adjustment.  Whenever the number of Warrant Shares subject to the Warrant is adjusted, the Corporation shall provide the notices required by Section 6.01.

 

Section 4.09.                         Reorganization of Corporation.  If the Corporation, prior to the exercise in whole or expiration of this Warrant, consolidates or merges with or into, or transfers or leases all or substantially all its assets to, any Person, upon consummation of such transaction, the Warrants shall automatically become exercisable for the kind and amount of securities, cash or

 

10

 

other assets which the Holder of this Warrant would have owned immediately after the consolidation, merger, transfer or lease if the Holder had exercised this Warrant immediately before the effective date of the transaction, assuming that the Holder failed to exercise its rights of election, if any, as to the kind of amount of securities, cash or other assets receivable upon such a transaction.  Concurrently with the consummation of such transaction, the Person formed by or surviving any such consolidation or merger if other than the Corporation, or the Person to which such transfer or lease shall have been made, shall enter into a supplemental Agreement so providing and further providing for adjustments that shall be as nearly equivalent as may be practical to the adjustments provided for in this Article 4.  The successor to the Corporation shall mail to the Holder a notice describing the supplemental Agreement.  If the issuer of securities deliverable upon exercise of Warrants under the supplemental Agreement is an Affiliate of the formed, surviving, transferee or lessee Person, that issuer shall join in the supplemental Agreement.  If this Section 4.09 applies to a transaction, Sections 4.02 through 4.04 shall not apply.

 

Section 4.10.                         Company Determination Final.  Any determination that the Corporation or the Board must make pursuant to Sections 4.02 through 4.09 hereof is conclusive in the absence of manifest error or bad faith.

 

Section 4.11.                         When Issuance or Payment May Be Deferred.  In any case in which this Article 4 shall require that an adjustment in number of Warrant Shares subject to a Warrant be made effective as of a record date for a specified event, the Corporation may elect to defer until the occurrence of such event issuing to the Holder of any Warrant exercised after such record date the Warrant Shares and other Equity Interests of the Corporation, if any, issuable upon such exercise over and above the Warrant Shares and other Equity Interests of the Corporation, if any, issuable upon such exercise on the basis of the then applicable number of Warrant Shares subject to a Warrant; provided that the Corporation shall deliver to the Holder a due bill or other appropriate instrument evidencing the Holder’s right to receive such additional Warrant Shares, other capital stock and cash upon the occurrence of the event requiring such adjustment.

 

Section 4.12.                         Exercise Price in the Event of an Adjustment in Number of Warrant Shares.  Upon any adjustment of the number of Warrant Shares subject to the Warrant pursuant to this Article 4, the Exercise Price per Warrant Share subject to issuance upon exercise of the Warrant shall be adjusted concurrently thereto to equal the product of (a) $10.00 (or if the Exercise Price has been previously adjusted, then such as adjusted Exercise Price) times (b) a fraction, of which the numerator is the total number of Warrant Shares subject to issuance upon the exercise of the Warrant before giving effect to the adjustment, and the denominator is the total number of Warrant Shares subject to issuance upon the exercise of the Warrants as so adjusted.

 

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ARTICLE 5
 REPRESENTATIONS OF HOLDER

 

Section 5.01.                         Investment Intent.  The Holder is acquiring this Warrant and the Common Shares underlying this Warrant (collectively, the “Securities”), solely for its beneficial account, for investment purposes, and not with a view to, or for resale in connection with, any distribution of the Securities in violation of applicable securities laws.

 

Section 5.02.                         Unregistered Securities.  The Holder understands that the Securities have not been registered under the Securities Act or any state securities laws by reason of specific exemptions under the provisions thereof, the availability of which depend in part upon the bona fide nature of its investment intent and upon the accuracy of its representations made herein.

 

Section 5.03.                         Reliance.  The Holder understands that the Corporation is relying in part upon the representations and agreements of the Holder contained herein for the purpose of determining whether the offer, sale and issuance of the Securities meet the requirements for such exemptions described in Section 5.03.

 

Section 5.04.                         Accredited Investor.  The Holder is an “accredited investor” as defined in Rule 501(a) under the Securities Act.

 

Section 5.05.                         Sophisticated Investor.  The Holder has such knowledge, skill and experience in business, financial and investment matters that it is capable of evaluating the merits and risks of an investment in the Securities, including experience in and knowledge of the oil, gas, and energy industry.

 

Section 5.06.                         Restricted Securities.  The Holder understands that the Securities will be “restricted securities” under applicable federal securities laws and that the Securities Act and the rules of the U.S. Securities and Exchange Commission provide in substance that it may dispose of the Securities only pursuant to an effective registration statement under the Securities Act or an exemption therefrom, and it understands that the Corporation has no obligation or intention to register any of the Securities thereunder (except the Common Shares pursuant to a Registration Rights Agreement entered into between the Corporation and the Holder on the date hereof).

 

Section 5.07.                         Information.  The Holder has been furnished by the Corporation all information (or provided access to all information) regarding the business and financial condition of the Corporation, its expected plans for future business activities, the attributes of the Securities, and the merits and risks of an investment in such Securities which it has requested or otherwise needs to evaluate the investment in such Securities; that in making the proposed investment decision, the Holder is relying solely on such information, the representations, warranties and agreements of the Corporation contained herein and on investigations made by it and its representatives; that the offer to sell the Securities hereunder was communicated to the Holder in such a manner that it was able to ask questions of and receive answers from the management of the Corporation concerning the terms and conditions of the proposed transaction and that at no time was it presented with or solicited by or through any leaflet, public promotional meeting, television advertisement or any other form of general or public advertising or solicitation; and the Holder recognizes that the participation in the exploration and

 

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development of oil and gas properties involves very high risks and can result in a total loss of all funds invested

 

ARTICLE 6
 NOTICES TO WARRANT HOLDER

 

Section 6.01.                         Notice of Adjustment.  (a) Upon any adjustment of the number of Warrant Shares subject to a Warrant and the Exercise Price pursuant to Article 4 hereof, the Corporation shall promptly thereafter cause to be given to the Holder written notice of such adjustments by email or by first-class mail, postage prepaid.  Where appropriate, such notice may be given in advance and included as a part of the notice required to be mailed under the other provisions of this Section 6.01.

 

(b)                                 In case:

 

(i)                                     the Corporation shall authorize the issuance to all holders of Common Shares of rights, options or warrants to subscribe for or purchase shares of Common Shares or of any other subscription rights or warrants;

 

(ii)                                  the Corporation shall authorize the distribution to all holders of Common Shares of evidences of its indebtedness or assets;

 

(iii)                               of any consolidation or merger to which the Corporation is a party, or of the transfer or lease of all or substantially all assets of the Corporation, or of any reclassification or change of Common Shares issuable upon exercise of the Warrants, or any tender offer or exchange offer for shares of Common Shares by the Corporation;

 

(iv)                              of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation; or

 

(v)                                 the Corporation proposes to take any action which would require an adjustment of the number of Warrant Shares subject to a Warrant pursuant to Article 4 hereof;

 

then the Corporation shall cause to be given to the Holder, at least 10 days prior to any applicable record date, or promptly in the case of events for which there is no record date, by first-class mail, postage prepaid, a written notice stating (x) the date as of which the holder of record of Common Shares shall be entitled to receive any such rights, options, warrants or distribution are to be determined, (y) the initial expiration date set forth in any tender offer or exchange offer for Common Shares, or (z) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that holders of record of Common Shares shall be entitled to exchange such shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up.  The failure to give the notice required by this Section 6.01 or any defect therein shall not affect the legality or validity of any distribution, right, option, warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up, or the vote upon any action.

 

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Section 6.02.                         Transfer of Warrant.  Subject to Section 6.05, this Warrant and all rights hereunder are transferable, in whole or in part, by the Holder without charge to the Holder, upon surrender of this Warrant to the Corporation at its then principal executive offices with a properly completed and duly executed Assignment in the form attached hereto as Exhibit B.  Notwithstanding the foregoing, any such transferring Holder shall be liable for any and all taxes, fees and third party expenses incurred by the Corporation as a result of such transfer and the Holder shall pay the Corporation, in cash or by wire transfer of immediately available funds any amounts necessary to pay any such taxes, fees and third party expenses incurred by the Corporation in connection with the making of such transfer.  Upon such compliance, surrender and delivery and, if required, such payment, the Corporation shall execute and deliver a new warrant or warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled.

 

Section 6.03.                         Holder Not Deemed a Stockholder; Limitations on Liability.  Except as described in the certificate of incorporation or bylaws of the Corporation, or otherwise specifically provided herein, prior to the issuance to any Holder of any Warrant Shares upon the due exercise by the Holder of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of Common Shares for any purpose, nor shall anything contained in this Warrant be construed to confer upon any Holder, as such, any of the rights of a stockholder of the Corporation or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of capital stock, reclassification of capital stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise.  In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on any Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Corporation, whether such liabilities are asserted by the Corporation or by creditors of the Corporation.  Notwithstanding this Section 6.03, the Corporation shall provide the Holder with copies of the same notices and other information given to the holders of Common Shares generally, contemporaneously with the giving thereof to such holders.

 

Section 6.04.                         Replacement on Loss; Division and Combination.

 

(a)                                 Replacement of Warrant on Loss.  Upon receipt of evidence reasonably satisfactory to the Corporation of the loss, theft, destruction or mutilation of this Warrant and upon delivery of an indemnity reasonably satisfactory to it (it being understood that a written indemnification agreement with an affidavit of loss of the Holder shall be a sufficient indemnity) and, in case of mutilation, upon surrender of such Warrant for cancellation to the Corporation, the Corporation at its own expense shall execute and deliver to the Holder, in lieu hereof, a new warrant of like tenor and exercisable for an equivalent number of Warrant Shares as this Warrant so lost, stolen, mutilated or destroyed; provided that, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Corporation for cancellation.

 

(b)                                 Division and Combination of Warrant.  Subject to compliance with the applicable provisions of this Warrant as to any transfer or other assignment which may be involved in such division or combination, this Warrant may be divided or, following any such division of this Warrant, subsequently combined with other Warrants, upon the surrender of this

 

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Warrant and other warrants to the Corporation at its then principal executive offices, together with a written notice specifying the names and denominations in which new warrants are to be issued, signed by the respective Holder or their agents or attorneys.  Subject to compliance with the applicable provisions of this Warrant as to any transfer or assignment which may be involved in such division or combination, the Corporation shall at its own expense execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants so surrendered in accordance with such notice.  Such new Warrant or Warrants shall be of like tenor to the surrendered Warrant or Warrants and shall be exercisable in the aggregate for an equivalent number of Warrant Shares as the Warrant or Warrants so surrendered in accordance with such notice.

 

Section 6.05.                         Agreement to Comply with the Securities Act; Legend.  The Holder, by acceptance of this Warrant, agrees to comply in all respects with the provisions of this Section 6.05 and the restrictive legend requirements set forth on the face of this Warrant and further agrees that the Holder shall not offer, sell, assign, transfer, pledge or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act.  The Holder will cause any proposed purchaser, assignee, transferee or pledgee of this Warrant or any Warrant Shares to agree to take and hold such securities subject to the provisions of this Section 6.05.  All Warrant Shares issued upon exercise of this Warrant (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form:

 

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION.  THESE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OR OTHER JURISDICTIONS, AND IN THE CASE OF A TRANSACTION EXEMPT FROM REGISTRATION, SUCH SECURITIES MAY ONLY BE TRANSFERRED IF THE ISSUER AND, IF APPLICABLE, THE TRANSFER AGENT FOR SUCH SECURITIES HAS RECEIVED DOCUMENTATION SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT.”

 

Section 6.06.                         Warrant Register.  The Corporation shall keep and properly maintain at its principal executive offices books for the registration of this Warrant and any transfers thereof (the “Warrant Register”).  The Corporation may deem and treat the Person in whose name this Warrant is registered on the Warrant Register as the holder thereof for all purposes, and the Corporation shall not be affected by any notice to the contrary, except any assignment, division, combination or other transfer of this Warrant effected in accordance with the provisions of this Warrant.

 

Section 6.07.                         Notices.  All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given:

 

15

 

(a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third Business Day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid.  Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 6.07).

 

If to the Corporation:                                                                                                                           Sanchez Energy Corporation
 1000 Main Street, Suite 3000

Houston, Texas 77002
 Attention:                 Antonio R. Sanchez, III
 Email:                                    tony@sanchezog.com

 

with a copy to (which shall not constitute notice):

 

Kirkland & Ellis LLP

600 Travis Street, Suite 3300

Houston, Texas 77002

Attention:                 Matthew R. Pacey

Email:                                    matt.pacey@kirkland.com

 

If to the Holder:                                                                                                                                                        Gavilan Resources Holdings - A, LLC
 c/o The Blackstone Group
 345 Park Avenue, 31st Floor
 New York, NY 10154
 Attention:  Angelo Acconcia
 Email:  aacconcia@blackstone.com

 

Section 6.08.                         Cumulative Remedies.  The rights and remedies provided in this Warrant are cumulative and are not exclusive of, and are in addition to and not in substitution for, any other rights or remedies available at law, in equity or otherwise.

 

Section 6.09.                         Equitable Relief.  Each of the Corporation and the Holder acknowledges that a breach or threatened breach by such party of any of its obligations under this Warrant would give rise to irreparable harm to the other party hereto for which monetary damages would not be an adequate remedy and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, the other party hereto shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to equitable relief, including a restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction.

 

Section 6.10.                         Entire Agreement.  This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained

 

16

 

herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

 

Section 6.11.                          Successor and Assigns.  This Warrant and the rights evidenced hereby shall be binding upon and shall inure to the benefit of the parties hereto and the successors of the Corporation and the successors and permitted assigns of the Holder.  Such successors and/or permitted assigns of the Holder shall be deemed to be the Holder for all purposes hereunder.

 

Section 6.12.                         No Third-Party Beneficiaries.  This Warrant is for the sole benefit of the Corporation and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

 

Section 6.13.                         Headings.  The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant.

 

Section 6.14.                         Amendment and Modification; Waiver.  Except as otherwise provided herein, this Warrant may only be amended, modified or supplemented by an agreement in writing signed by each party hereto.  No waiver by the Corporation or the Holder of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving.  No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver.  No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

Section 6.15.                         Severability.  Any term or provision of this Warrant is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Warrant or invalidate or render unenforceable such term or provision in any other jurisdiction.

 

Section 6.16.                         Governing Law.  This Warrant shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Delaware.

 

Section 6.17.                         Submission to Jurisdiction.  The parties hereby submit to the exclusive jurisdiction of any U.S. federal or state court located in the State of Delaware in any legal suit, action or proceeding arising out of or based upon this Warrant or the transactions contemplated hereby, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding.  Service of process, summons, notice or other document by certified or registered mail to such party’s address for receipt of notices pursuant to Section 6.07 shall be effective service of process for any suit, action or other proceeding brought in any such court.  The parties irrevocably and unconditionally waive any objection to the laying of venue of

 

17

 

any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

 

Section 6.18.                         Waiver of Jury Trial.  Each party acknowledges and agrees that any controversy which may arise under this Warrant is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Warrant or the transactions contemplated hereby.

 

Section 6.19.                         Counterparts.  This Warrant may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement.  A signed copy of this Warrant delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Warrant.

 

Section 6.20.                         No Strict Construction.  This Warrant shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

 

[Signature pages follow.]

 

18

 

IN WITNESS WHEREOF, the Corporation has duly executed this Warrant on the Original Issue Date.

 

 

	
 
    	
SANCHEZ ENERGY CORPORATION
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Antonio R. Sanchez, III
    
	
 
    	
 
    	
Name:
    	
Antonio R. Sanchez, III
    
	
 
    	
 
    	
Title:
    	
Chief Executive Officer
    
					

 

SIGNATURE PAGE
 TO
 WARRANT AGREEMENT

 

 

Accepted and agreed by:

 

	
GAVILAN RESOURCES HOLDINGS   - A, LLC
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Angelo Acconcia
    	
 
    
	
Name: 
    	
Angelo Acconcia
    	
 
    
	
Title:
    	
President
    	
 
    
				

 

SIGNATURE PAGE
 TO
 WARRANT AGREEMENT

 

 

EXHIBIT A

 

SANCHEZ ENERGY CORPORATION
  WARRANT EXERCISE AGREEMENT

 

To [Name]:

 

As of the date hereof, the undersigned Holder has the right under the Warrant to Purchase Common Shares, dated as of March 1, 2017, by and between Sanchez Energy Corporation and Gavilan Resources Holdings - A, LLC (the “Warrant”) to purchase            Warrant Shares (as defined in the Warrant).  Upon payment of the applicable Aggregate Exercise Price (as defined in the Warrant) and surrender of the Warrant included herewith, the undersigned Holder hereby irrevocably, except as set forth in Section 3.07 of the Agreement, elects to exercise its right represented by the Warrant to purchase                             Warrant Shares, and requests that the Warrant Shares be issued in the following name:

 

	
Name
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Address
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
Federal Tax Identification or Social   Security No.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
and delivered by
    	
(certified mail to the above address, or
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
(other                  )   (specify);
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Aggregate Exercise Price paid by:
    	
o Certified   or official bank check
    	
 
    
	
 
    	
o Wire   transfer
    	
 
    
				

 

A-1

 

and, if the number of Warrant Shares shall not be all the Warrant Shares purchasable by the undersigned Holder upon exercise of the Warrant, that the Corporation make appropriate notation in the Warrant Register (as defined in the Warrant) to reflect the Warrant Shares that remain subject to purchase upon exercise of the Warrant after giving effect to this Warrant Exercise Agreement.

 

Yes / No (Please Circle):  The undersigned Holder requests that certificates be issued for the Warrant Shares.

 

If the undersigned Holder would like more than one certificate, please indicate the number of certificates and the number of shares to be represented by each certificate:

 

	
Number of Certificates:
    	
 
    	
 
    

 

Number of Warrant Shares to be represented by each certificate:

 

	
 
    	
 
    	
Certificate 1
    	
 
    	
Certificate 2
    	
 
    	
Certificate 3
    	
 
    	
Certificate 4
    	
 
    
	
Number of   Warrant Shares
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

Dated:                                                   ,        

 

Note:                                          The signature must correspond with the name of the Holder as set forth on the signature page of the Warrant Agreement in every particular, without alteration or enlargement or any change whatever, unless this Warrant has been assigned.

 

	
Signature:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name (please print)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Address
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Federal Tax Identification or Social   Security No.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Assignee:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

A-2

 

EXHIBIT B

 

SANCHEZ ENERGY CORPORATION
 ASSIGNMENT

 

For value received                                                 hereby sells, assigns and transfers unto                                      its rights under the Warrant to Purchase Common Shares, dated as of March 1, 2017, by and between Sanchez Energy Corporation and Gavilan Resources Holdings - A, LLC (the “Warrant”) to purchase Warrant Shares (as defined in the Warrant) on the terms and subject to the conditions set forth therein(1), together with all right, title and interest therein, and does hereby irrevocably constitute and appoint attorney, to transfer said rights to purchase Warrant Shares under the Warrant on the books of the within-named Corporation, with full power of substitution in the premises.

 

The contact information of the assignee is as follows:

 

[·]

[Address]

[City, State,  Zip]

	
Attention:
    	
[·]
    
	
Facsimile:
    	
[·]
    
	
Email:
    	
[·]
    

 

with a copy to (which shall not constitute notice):

 

[·]

[Address]

[City, State,  Zip]

	
Attention:
    	
[·]
    
	
Facsimile:
    	
[·]
    
	
Email:
    	
[·]
    

 

	
Date:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Signature:
    	
 
    	
 
    

 

Note:  The above signature must correspond with the name as written upon the face of the enclosed Warrant in every particular, without alteration or enlargement or any change whatever.

 

(1)   For partial assignment, indicate portion assigned.

 

B-1

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