Execution Copy
THIS WARRANT AGREEMENT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THE WARRANTS HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS PROMULGATED THEREUNDER, ANY SUCH STATE SECURITIES LAWS OR THE PROVISIONS OF THIS WARRANT AGREEMENT.
WARRANT AGREEMENT
for the
Purchase of Common Stock
By and Between
BRIGHAM EXPLORATION COMPANY
and
BANK OF MONTREAL
Dated as of
July 19, 1999
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TABLE OF CONTENTS
Page
1. DEFINITIONS.............................................................................................2
2. ISSUANCE AND EXERCISE OF WARRANTS.......................................................................6
2.1 Issuance of Warrants...........................................................................6
2.2 Manner of Exercise.............................................................................6
2.3 Payment of Taxes...............................................................................8
2.4 Fractional Shares..............................................................................8
2.5 Continued Validity.............................................................................9
3. TRANSFERS, DIVISION AND COMBINATION.....................................................................9
3.1 Transfer.......................................................................................9
3.2 Division and Combination.......................................................................9
3.3 Expenses.......................................................................................9
3.4 Maintenance of Books...........................................................................9
4. ADJUSTMENTS.............................................................................................9
4.1 Stock Dividends, Subdivisions and Combinations.................................................9
4.2 Certain Other Distributions...................................................................10
4.3 Issuance of Additional Shares of Stock........................................................11
4.4 Issuance of Warrants or Other Rights..........................................................11
4.5 Issuance of Convertible Securities............................................................12
4.6 Superseding Adjustment........................................................................13
4.7 Other Provisions Applicable to Adjustments Under This Section.................................13
4.8 Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets..............14
5. NOTICES TO WARRANT HOLDERS.............................................................................15
5.1 Notice of Adjustments.........................................................................15
5.2 Notice of Certain Corporate Action............................................................15
6. REPRESENTATIONS AND WARRANTIES.........................................................................16
7. CERTAIN COVENANTS......................................................................................17
7.1 No Impairment.................................................................................17
7.2 Reservation and Authorization of Common Stock; Registration with, or Approval of, any
Governmental Authority........................................................................18
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS.....................................................18
i 3 9. RESTRICTIONS ON TRANSFERABILITY........................................................................18
9.1 Restrictive Legend............................................................................18
9.2 Notice of Proposed Transfers; Requests for Registration.......................................19
9.3 Incidental Registration.......................................................................19
9.4 Registration Procedures.......................................................................20
9.5 Expenses......................................................................................21
9.6 Indemnification and Contribution..............................................................21
9.7 Termination of Restrictions...................................................................24
9.8 Listing on Securities Exchange................................................................25
10. SUPPLYING INFORMATION..................................................................................25
11. LOSS OR MUTILATION.....................................................................................25
12. OFFICE OF THE ISSUER...................................................................................25
13. APPRAISAL..............................................................................................25
14. LIMITATION OF LIABILITY; NO RIGHTS AS STOCKHOLDER......................................................26
15. MISCELLANEOUS..........................................................................................26
15.1 Non-waiver and Expenses.......................................................................26
15.2 Notice Generally..............................................................................26
15.3 Indemnification...............................................................................27
15.4 Remedies......................................................................................27
15.5 Successors and Assigns........................................................................28
15.6 Complete Agreement; Amendment.................................................................28
15.7 Severability..................................................................................28
15.8 Headings......................................................................................28
15.9 Governing Law; Consent to Jurisdiction and Venue..............................................28
15.10 Consent to Jurisdiction and Venue.............................................................28
15.11 Counterparts..................................................................................29
EXHIBITS:
Exhibit A -Form of Warrant Certificate...................................................................Exh. A-1
Exhibit B -Form of Cashless Conversion Notice............................................................Exh. B-1
SCHEDULES:
Schedule A -Capital Stock of the Issuer, Including Shares Subject to
Outstanding Warrants, Options, Conversion Rights, Etc..........................................Sch. A-1
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THIS WARRANT AGREEMENT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THE WARRANTS HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS PROMULGATED THEREUNDER, ANY SUCH STATE SECURITIES LAWS OR THE PROVISIONS OF THIS WARRANT AGREEMENT.
WARRANT AGREEMENT
THIS WARRANT AGREEMENT, dated as of July 19, 1999 (this "Agreement"), is entered into by and between Brigham Exploration Company, a Delaware corporation ("Issuer"), and Bank of Montreal, a Canadian chartered bank (the "Warrant Holder" or the "Bank of Montreal").
W I T N E S S E T H:
WHEREAS, Brigham Oil & Gas, L.P., a limited partnership formed under the laws of the State of Delaware (the "Borrower"), the financial institutions party to the Credit Agreement referred to below (each a "Lender" and collectively, the "Lenders"), and the Bank of Montreal, as agent for Lenders under the Credit Agreement (in such capacity, the "Agent"), are parties to that certain Credit Agreement, dated as of January 26, 1998, as amended by that certain First Amendment to Credit Agreement, dated as of August 20, 1998, and that certain Second Amendment to Credit Agreement, dated as of March 26, 1999 (as so amended, the "Credit Agreement"); and
WHEREAS, the Borrower advised the Lenders and the Agent that it desired to amend certain provisions of the Credit Agreement, and the Borrower requested that the Lenders and the Agent agree to various amendments to certain provisions of the Credit Agreement; and
WHEREAS, the Lenders and the Agent have agreed to so amend certain provisions of the Credit Agreement upon the terms and subject to the conditions and limitations of the Third Amendment to the Credit Agreement dated as of July 19, 1999 (the "Third Amendment");
WHEREAS, the Issuer has guaranteed the obligations of the Borrower to the Lenders and the Agent;
WHEREAS, as a consequence of the contractual relationships between the Borrower and the Lenders, the Issuer has and will continue to receive substantial benefits from the Lenders;
WHEREAS, in order to induce the Lenders to enter into the Third Amendment, the Issuer has agreed to execute and deliver this Agreement and to issue to Bank of Montreal the warrants herein described;
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NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the receipt and sufficiency of which is hereby acknowledged, the parties hereby stipulate and agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Issuer after the Closing Date, other than Warrant
Stock.
"Affiliate" shall mean as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. For purposes of this definition,
"control" (including the terms "controlled by" and "under common
control with"), as used with respect to any Person, means the power to
direct or cause the direction of the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities or by contract or otherwise; and the terms "controlled" and
"controlling" have the meanings correlative to the foregoing.
"Appraised Value" shall mean, in respect of any share of Common Stock
on any date herein specified, the fair saleable value of such share of
Common Stock (determined without giving effect to the discount for (i)
a minority interest or (ii) any lack of liquidity of the Common Stock
or to the fact that the Issuer may have no class of equity registered
under the Exchange Act) as of the last day of the most recent fiscal
month to end within 60 days prior to such date specified, based on the
value of the Issuer, as determined by an investment banking firm
(selected pursuant to the terms of Section 13 of this Agreement) in
accordance with such firm's customary practices, divided by the number
of Outstanding shares of Common Stock, after giving pro forma effect to
the exercise or conversion of all exercisable or Convertible Securities
(including the Warrants) for Common Stock and the payment of the
exercise or conversion price therefor.
"Book Value" shall mean, in respect of any share of Common Stock on any
date herein specified, the consolidated book value of the Issuer as of
the last day of any month immediately preceding such date, divided by
the number of Outstanding shares of Common Stock, after giving pro
forma effect to the exercise or conversion of all exercisable or
Convertible Securities (including the Warrants) for Common Stock and
the payment of the exercise or conversion price therefor, as determined
in accordance with GAAP by any firm of independent certified public
accountants of recognized national standing selected by the Issuer and
reasonably acceptable to the Required Holders.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State
of New York or California.
"Cashless Conversion" shall have the meaning set forth in Section
2.2(b)(ii) hereof.
"Cashless Conversion Notice" shall have the meaning set forth in
Section 2.2(b)(ii) hereof.
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"Closing Date" shall mean the date hereof.
"Commission" shall mean the Securities and Exchange Commission, or any
other federal agency then administering the Securities Act and other
federal securities laws.
"Common Stock" shall mean the common stock, $0.01 par value per share,
of the Issuer, as constituted on the Closing Date, and any capital
stock into which such Common Stock may thereafter be changed, and shall
also include (i) capital stock of the Issuer of any other class
(regardless of how denominated) issued to the holders of shares of
Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of
the Issuer and which is not subject to redemption and (ii) shares of
common stock of any successor or acquiring corporation (as defined in
Section 4.8 of this Agreement) received by or distributed to the
holders of Common Stock of the Issuer in the circumstances contemplated
by Section 4.8 of this Agreement.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or
exchangeable, with or without payment of additional consideration in
cash or property, for Additional Shares of Common Stock, either
immediately or upon the occurrence of a specified date or a specified
event.
"Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, (a) if there shall then be a public
market for the Common Stock, the average Price per share for the 20
trading days preceding such date; or (b) at any time that there is no
public market for the Common Stock, the fair market value per share of
Common Stock on such date as determined reasonably and in good faith by
the board of directors of the Issuer (determined without giving effect
to any discount for a minority interest, any restrictions on
transferability or any lack of liquidity of the Common Stock or to the
fact that the Issuer has no class of equity registered under the
Exchange Act), such fair market value to be determined by reference to
the cash price that would be paid between a fully informed buyer and
seller under no compulsion to buy or sell, provided that (i) if Current
Market Price is being determined in connection with an issuance of
shares of Common Stock, solely to one or more Affiliates of the Issuer,
then if so requested by the Required Holders, Current Market Price
shall be the Appraised Value; and (ii) Current Market Price shall never
be less than Book Value.
"Current Warrant Price" shall mean, in respect of a share of Common
Stock at any date herein specified, two and 25/100 dollars ($2.25) per
share of Common Stock, subject to adjustment from time to time as
provided in this Agreement.
"Demanding Security Holder" shall have the meaning set forth in Section
9.3.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect from
time to time.
"Exercise Period" shall mean the period during which the Warrants are
exercisable pursuant to Section 2.2.
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"Expiration Date" shall mean July 19, 2004.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, as from time to time in effect.
"Material Adverse Effect" shall mean, as to the Issuer, any material
adverse effect on the business, assets, operations, prospects or
financial or other condition of the Issuer and its Subsidiaries, taken
as a whole.
"NASD" shall mean the National Association of Securities Dealers, Inc.,
or any successor thereto.
"Other Property" shall have the meaning set forth in Section 4.8.
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by
or for the account of the Issuer or any Subsidiary, and shall include
all shares issuable in respect of outstanding scrip or any certificates
representing fractional interests in shares of Common Stock.
"Permitted Issuances" shall mean (i) the issuance of shares of Common
Stock upon exercise of the Warrants, (ii) the issuance of shares
relating to any benefit plan, stock option plan or any other
compensation plan offered solely to the Issuer's officers, directors
and/or employees, (iii) the issuance of shares of Common Stock as
consideration for the purchase of any property, stock, business or
securities from any Person who is not an Affiliate of the Issuer or any
Subsidiary immediately prior to such transaction whether such shares
are issued directly by the Issuer or a Subsidiary of the Issuer in
connection with any merger, consolidation or other business
combination, (iv) if there shall then be a public market for the Common
Stock, the issuance of shares of Common Stock upon receipt by the
Issuer of the Current Market Price therefor as described in clause (a)
of the definition of "Current Market Price" and (v) if there shall then
be no public market for the Common Stock, the issuance of shares of
Common Stock, warrants or Convertible Securities on terms that are at
least as favorable to the Issuer as terms that could be obtained in an
arm's length transaction with third Persons not Affiliates of the
Issuer or any Subsidiary and for consideration equal to the fair value
of such shares as determined in good faith by a majority of
disinterested members of the board of directors of the Issuer.
"Person(s)" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, limited liability company,
incorporated organization, association, corporation, institution,
public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or department
thereof).
"Price" means the average of the "high" and "low" prices as reported in
The Wall Street Journal's listing for such day (corrected for obvious
typographical errors) or if such shares are not reported in such
listing, the average of the reported "high" and "low" sales prices on
the largest national securities exchange (based on the aggregate dollar
value of
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securities listed) on which such shares are listed or traded, or if
such shares are not listed or traded on any national securities
exchange, then the average of the reported "high" and "low" sales
prices for such shares in the over-the-counter market, as reported on
the National Association of Securities Dealers Automated Quotations
System, or, if such prices shall not be reported thereon, the average
of the closing bid and asked prices so reported, or, if such prices
shall not be reported, then the average of the closing bid and asked
prices reported by the National Quotations Bureau Incorporated. The
"average" Price per share for any period shall be determined by
dividing the sum of the Prices determined for the individual trading
days in such period by the number of trading days in such period.
"Registrable Securities" shall mean, at any particular time and as to
each Warrant Holder, (i) all shares of common stock issuable upon the
exercise of such Warrant Holder's Warrants and (ii) all of such Warrant
Holder's issued and outstanding Warrant Stock.
"Registration Expenses" shall have the meaning set forth in Section 9.5
of this Agreement.
"Registration Statement" shall have the meaning set forth in Section
9.4 of this Agreement.
"Required Holders" shall mean the Warrant Holders of Warrants
exercisable for an amount exceeding 50% of the aggregate number of
shares of Common Stock then purchasable upon exercise of all Warrants,
whether or not exercisable.
"Requirement of Law" shall mean, as to any Person, any requirement
contained in any certificate of incorporation, bylaws, or other
organizational or governing documents of such Person, and any law,
treaty, rule or regulation or determination of an arbitrator or a court
or other governmental authority, in each case applicable to or binding
such Person or any of the property or to which such Person or any of
its property is subject.
"Restricted Common Stock" shall mean shares of Common Stock which are,
or which upon their issuance on the exercise of a Warrant would be,
evidenced by a certificate bearing the restrictive legend set forth in
Section 9.1 of this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Subsidiary" shall mean any Person of which an aggregate of more than
50% of the outstanding sock or other ownership interests having
ordinary voting power to elect a majority of the board of directors or
other managers of such Person (irrespective of whether, at the time,
stock or other ownership interests of any other class or classes of
such Person shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly,
owned legally or beneficially by the Issuer and/or one or more
Subsidiaries of the Issuer.
"Transfer Notice" shall have the meaning set forth in Section 9.2 of
this Agreement.
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"Warrant Certificate" shall mean a certificate evidencing one or more
Warrants, substantially in the form of Exhibit A hereto, with such
changes therein as may be required to reflect any adjustments made
pursuant to Section 4 of this Agreement.
"Warrant Holder" shall mean such Person in whose name the Warrants are
registered on the books of the Issuer maintained for such purpose or
each Person holding any Warrant Stock. As of the Closing Date, the Bank
of Montreal is the Warrant Holder hereof.
"Warrant Price" shall mean, for any exercise of Warrants pursuant to
Section 2.2 of this Agreement, an amount equal to (i) the number of
shares of Common Stock being purchased upon such exercise multiplied by
(ii) the Current Warrant Price for each share of Common Stock as of the
date of such exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
Warrant Holders upon the exercise thereof.
"Warrants" shall mean the Warrants issued pursuant to this Agreement
and all Warrants issued upon transfer, division or combination of, or
in substitution for, such Warrants. All Warrants shall at all times be
identical as to terms and conditions and date, except as to the number
of shares of Common Stock for which they may be exercised. A Warrant
shall entitle the record holder thereof to purchase from the Issuer one
share of Common Stock (subject to adjustment as provided in Section 4
of this Agreement).
2. ISSUANCE AND EXERCISE OF WARRANTS
2.1 Issuance of Warrants. The Issuer hereby agrees to issue to the Warrant
Holder on the Closing Date, SIX HUNDRED SIXTY-ONE THOUSAND FIVE HUNDRED
THIRTY-EIGHT (661,538) Warrants. On the Closing Date, the Issuer shall
deliver to the Warrant Ho ...
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