EX-10.13 26 d96705ex10-13.txt FORM OF WARRANT ISSUED 4/02 FOR GUARANTEEING DEBT Exhibit 10.13 THE WARRANTS AND UNDERLYING SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), AND ARE "RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY. Warrant Certificate No. DG-___ Issue Date: April 24, 2002 WARRANT TO PURCHASE ________ SHARES VOID AFTER 5:00 P.M., MOUNTAIN TIME, ON APRIL 23, 2007 NATURAL GAS SERVICES GROUP, INC. WARRANT AGREEMENT AND CERTIFICATE This certifies that, for value received, _____________, the registered holder hereof (the "Warrant Holder"), is entitled to purchase from Natural Gas Services Group, Inc., a Colorado corporation (the "Company") with its principal office located in Midland, Texas, at any time commencing on the Issue Date set forth above, and before 5:00 P.M., Mountain Time, on April 23, 2007 (the "Termination Date") at the purchase price of $3.25 per share (the "Exercise Price"), the number of shares of the Company's Common Stock (the "Shares") set forth above. The number of Shares purchasable upon exercise of this Warrant and the Exercise Price per Share shall be subject to adjustment from time to time as set forth in Section 5 below. Section 1. Sale and Delivery of Warrant. The Warrants represented hereby were issued as consideration for guaranty of additional corporate debt in the amount of $___________ by the Warrant Holder. Section 2. Transfer or Exchange of Warrant. 2.1 The Company shall be entitled to treat the registered owner of any Warrant (the "Warrant Holder") as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person, and shall not be liable for any registration of transfer of Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration of transfer, or with such knowledge of such facts that its participation therein amounts to gross negligence or bad faith. 2.2 This Warrant may not be sold, transferred, assigned or hypothecated except pursuant to all applicable federal and state securities laws. 2.3 A Warrant shall be transferable only on the books of the Company upon delivery of this Warrant Certificate duly endorsed by the Warrant Holder or by his duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment or authority to transfer. Upon any registration of transfer, the Company shall deliver a new Warrant Certificate to the persons entitled thereto. Section 3. Term of Warrants; Exercise of Warrants. 3.1 Subject to the terms of this Agreement and Certificate, the Warrant Holder has the right, which may be exercised commencing immediately and ending at 5:00 p.m. Mountain Time on the Termination Date, to purchase from the Company the number of Shares which the Warrant Holder may at that time be entitled to purchase on exercise of this Warrant. 3.2 A Warrant shall be exercised by surrender to the Company, at its principal office, of this Warrant Agreement and Certificate, together with the form of election to purchase attached hereto as Exhibit A, duly completed and signed, and payment to the Company of the Exercise Price (as defined in accordance with the provisions of Section 4 hereof) for the number of Shares in respect of which such Warrant is then exercised. Except as provided in Section 3.3, payment of the aggregate Exercise Price shall be made in cash or certified funds. 3.3 In addition to and without limiting the rights of the Holder under the terms of this Warrant, the Holder shall have the right (the "Conversion Right") to convert this Warrant or any portion thereof into Shares as provided in this Section 3.3 at any time prior to the Termination Date. a. Upon exercise of the Conversion Right with respect to a particular number of Shares (the "Converted Shares"), the Company shall deliver to the Holder, without payment by the Holder of any Exercise Price or any cash or other consideration, that number of Shares equal to the quotient obtained by dividing the Net Value (as hereinafter defined) of the Converted Shares by the fair market value (as defined in paragraph 3.3(c) below) of a single Share, determined in each case as of the close of business on the Conversion Date (as hereinafter defined). The "Net Value" of the Converted Shares shall be determined by subtracting the aggregate Exercise Price of the Converted Shares from the aggregate fair market value of the Converted Shares. No fractional securities shall be issuable upon exercise of the Conversion Right, and if the number of securities to be issued in accordance with the foregoing formula is other than a whole number, the Company shall pay to the Holder an amount in cash equal to the fair market value of the resulting fractional Share. b. The Conversion Right may be exercised by the Holder by the surrender of this Warrant at the principal office of the Company or at the office of the Company's stock transfer agent, if any, together with a written statement specifying that the Holder thereby intends to exercise the Conversion Right and indicating the number of Shares subject to the Warrant which are being surrendered (referred to in subparagraph 3.3(a) above as the Converted Shares), in the form attached to and by this reference incorporated in this Warrant as Exhibit B, in exercise of the Conversion Right. Such conversion shall be effective upon receipt by the Company of this Warrant together with the aforesaid written statement, or on such later date as is specified therein (the "Conversion Date"), but not later than the expiration date of the Warrant. Certificates for the Converted Shares issuable upon exercise of the Conversion Right, together with a check in payment of any fractional Warrant Share and, in the case of a partial exercise a 2 new warrant evidencing the Warrant Shares remaining subject to the Warrant, shall be issued as of the Conversion Date and shall be delivered to the Holder within twenty-one days following the Conversion Date. c. For purposes of this Section 2.3, the "fair market value" of a Share as of a particular date shall be its "market price," which, for purposes of this Section 2.3 shall mean, if the Shares are traded on a securities exchange or on Nasdaq, the closing price of the Shares on such exchange or the last sale price on Nasdaq, or, if the Shares are otherwise traded in the over-the-counter market, the average of the closing bid and ask price, in each case averaged over a period of five consecutive trading days prior to the date as of which "market price" is being determined. If at any time the Shares are not traded on an exchange or Nasdaq, or otherwise traded in the over-the-counter market, the "market price" shall be deemed to be the fair value thereof determined in good faith by the Board of Directors of the Company as of a date which is within 15 days of the date as of which the determination is to be made. 3.4 Subject to Section 5 hereof, upon surrender of a Warrant Agreement and Certificate and payment of the Exercise Price as aforesaid, the Company shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the Warrant Holder exercising such Warrant and in such name or names as such Warrant Holder may designate, certificates for the number of Shares so purchased upon the exercise of such Warrant. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such Shares as of the date of receipt by the Company of such Warrant Agreement and Certificate and payment of the Exercise Price. The rights of purchase represented by the Warrants shall be exercisable, at the election of the Warrant Holders thereof, either in full or from time to time in part and, in the event that a Warrant Agreement and Certificate is exercised to purchase less than all of the Shares purchasable on such exercise at any time prior to the Termination Date, a new Warrant Agreement and Certificate evidencing the remaining Warrant or Warrants will be issued. 3.5 The Warrant Holder will pay all documentary stamp taxes, if any, attributable to the initial issuance of the Shares upon the exercise of Warrants. 4. REGISTRATION RIGHTS 4.1 The Warrant Holder shall have the following rights with respect to registration by the Company of the shares of Common Stock issuable upon exercise of this Warrant. Such shares are referred to hereafter as the "Warrant Shares." a. At any time within the period commencing one year from the date hereof and expiring six years from the date hereof, whenever the Company files a registration statement under the Securities Act of 1933 which relates to an initial public offering of the Company's Common Stock, the Company shall offer to the Warrant Holder the opportunity to register or qualify the Warrant Shares for public sale, and the Company shall be required to include the Warrant Shares in the registration statement if the holders of a majority of the Warrant Shares (calculated as if all placement agent warrants had been exercised) request that their Warrant Shares be included; provided, however, that if the offering to which the proposed registration 3 statement relates is an underwritten offering and such underwriter objects to the inclusion of the Warrant Shares in such registration statement, the Company shall be under no obligation to include any Warrant Shares, except that the Warrant Holder shall be entitled to have its Warrant Shares included pro rata with all other selling Warrant Holders. The Company will pay all fees of such registration, other than underwriters' discounts or commissions relating to Warrant Shares registered on behalf of the Warrant Holder and fees of separate counsel, if any, engaged by the Warrant Holder. The Company shall give 20 days' prior written notice to the Warrant Holder of the Company's intention to file a registration statement under the Act, which notice shall constitute an offer to the Warrant Holder to have its Warrant Shares included in such registration statement as long as a majority of the Warrant Holders so elect, and the Warrant Holder shall notify the Company in writing within ten days after receipt of such notice if the Warrant Holder desires to accept such offer. Neither the delivery of such notice nor the acceptance by the Warrant Holder of such offer such Warrant Holder a "Participating Warrant Holder") shall obligate the Company to file such registration statement and, notwithstanding the actual filing of the registration statement, the Company may at any time prior to its effectiveness elect not to pursue the registration without liability to the Warrant Holder. b. In the event the underwriter for the Company's initial public offering of its Common Stock objects to the inclusion of all Warrant Shares held by Warrant Holders who elected to be included in the registration statement under the preceding paragraph, then not less than a majority of the Warrant Holders of those Warrant Shares excluded due to the underwriter's objection may demand that the Company effect a registration on Form S-3 to include the previously excluded Warrant Shares. The Company will use commercially reasonable efforts to effect as soon as practicable the registration under the Act of all such previously excluded Warrant Shares. This right to demand registration on Form S-3 is effective only if the Company is eligible to use Form S-3. c. The Company's contractual obligation to include the Warrant Shares on behalf of the Warrant Holder in a registration statement filed on behalf of the Company shall be subject to the reasonable cooperation of the Warrant Holder with the Company. The Warrant Shares held by the Warrant Holder may be excluded from a registration statement at the election of the Company in the event all information essential for the Company and its counsel to prepare the registration statement is not furnished by the Warrant Holder, after the Warrant Holder, upon written request of the Company or its counsel, has been given a reasonable amount of time (not less than ten business days from the date such request has been sent to the Warrant Holder) to transmit the requested information to the Company and/or its counsel. 4.2 A Participating Warrant Holder will provide the Company such information relating to the Participating Warrant Holder and its plan of distribution as may be necessary for the completion of the registration statement. 4.3 In the event of any registration under the Act of any of the Warrant Shares pursuant to this Agreement, the Company will use its best efforts to obtain blue sky qualification of the Warrant 4 Shares in such states as the Company may agree upon reasonable request of the Participating Warrant Holder. 4.4 In the event of any registration under the Act of any of the Warrant Shares pursuant to this Agreement, the Participating Warrant Holder will be responsible for ensuring that the Warrant Shares are sold in strict compliance with the registration statement (including, without limitation, the plan of distribution to be included therein) and all other applicable federal and state securities laws and regulations. 4.5 In the event of any registration under the Act of any of the Warrant Shares pursuant to this Agreement, the Company will agree to indemnify and hold harmless each Participating Warrant Holder and each underwriter, and each other affiliate of a Participating Warrant Holder or such underwriter within the meaning of the Act against any losses, claims, damages or liabilities, joint or several, to which any Participating Warrant Holder or such underwriter or such controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained, on the effective date thereof, in any such registration statement, any preliminary prospectus or final prospectus contained therein or any amendment thereof or supplement thereto, or any document incident to registration or qualification of the Warrant Shares covered thereby under state securities or blue sky laws, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein, or any violation by the Company of the Act or state securities or blue sky laws applicable to the Company and relating to any action or inaction required by the Company in connection with such registration or qualification under such state securities or blue sky laws; provided, however that the Company will not be liable in any such case to any indemnified person to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, said preliminary prospectus or said prospectus or said amendment or supplement, or any document incident to registration or qualification under state securities or blue sky laws, in reliance upon and in conformity with any information furnished in writing to the Company or its counsel by such indemnified person specifically for use in the preparation thereof or if such loss, claim, damage, liability or action arose out of the violation of any duty to which the Participating Warrant Holder may be subject, including the obligation to deliver a copy of any prospectus, supplement or amendment to a purchaser of the Warrant Shares and such prospectus, supplement or amendment was made available to the Participating Warrant Holder by the Company. 4.6 In the event of any registration of the Warrant Shares under the Act pursuant to this Agreement, each Participating Warrant Holder will agree to indemnify and hold harmless the Company and each affiliate and controlling person, as defined by the Act, of the Company, each officer or employee of the Company who signs the registration statement, each director of the Company, any agent of the Company and each underwriter, and any and all affiliates and controlling persons, as defined by the Act, of such persons against any and all such losses, claims, damages or liabilities as the Participating Warrant Holders and others are indemnified against by the Company and will reimburse the Company and each of the foregoing persons for any losses, claims, damages or liabilities (or actions in respect thereof) and for any legal or any 5 other expenses incurred by each such person, if the statement or omission in respect of which such loss, claim, damage or liability is asserted was made in reliance upon and in conformity with information furnished to the Company in writing by such Participating Warrant Holder or on its behalf specifically for use in connection with the preparation of such registration statement or prospectus. Section 5. Adjustment of Exercise Price and Shares. 5.1 If the Company shall at any time subdivide its outstanding Common Stock by recapitalization, reclassification or split-up thereof, the number of Shares of Common Stock subject to this Warrant immediately prior to such subdivision shall be proportionately increased, and if the Company shall at any time combine the outstanding Common Stock by recapitalization, reclassification or combination thereof, the number of Shares of Common Stock subject to this Warrant immediately prior to such combination shall be proportionately decreased. Any corresponding adjustment to the Exercise Price shall become effective at the close of business on the record date for such subdivision or combination. 5.2 In the event of a dividend (other than in shares of Common Stock of the Company), the proposed dissolution or liquidation of the Company, or any corporate separation or division, including, but not limited to, a split-up, split-off or spin-off, or a merger or consolidation of the Company with another Company, or the sale of all or substantially all of the assets of the Company, the Board may provide that each Warrantholder will have the right to exercise this Warrant (at its then current Exercise Price) solely for the kind and amount of shares of stock and other securities, property, cash or any combination thereof receivable upon such dissolution, liquidation, corporate separation or division, or merger or consolidation by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such dissolution, liquidation, corporate separation or division, or merger or consolidation; or, in the alternative, the Board may provide that this Warrant will terminate as of a date fixed by the Board; provided, however that not less than 30 days' written notice of the date so fixed must be given to the Warrantholder, who will have the right, during the period of 30 days preceding such termination, to exercise this Warrant as to all or any part of the shares of Common Stock covered by this Warrant. 5.3 The preceding paragraph will not apply to a merger or consolidation in which the Company is the surviving Company and shares of Common Stock are not converted into or exchanged for stock, securities of any other Company, cash or any other thing of value. Notwithstanding the preceding sentence, in case of any consolidation or merger of another Company into the Company in which the Company is the surviving Company and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (excluding a change in par value, or from no par value to par value, or any change as a result of a subdivision or combination, but including any change in such shares into two or more classes or series of shares), the Board may provide that the holder of this Warrant will have the right to exercise this Warrant solely for the kind and amount of shares of stock and other securities (including those of any new direct or indirect parent of the Company), property, cash or any combination thereof receivable upon such reclassification, change, consolidation or merger by the holder of the number of shares of Common Stock for which this Warrant might have been exercised. 6 5.4 In the event of a change in the Common Stock of the Company as presently constituted into the same number of shares with a different par value, the shares resulting from any such change will be deemed to be the Common Stock of the Company within the meaning of this agreement. 5.5 The Company agrees that without the Warrant Holder's consent or absent consent, without a reasonable adjustment to the Exercise Price of this Warrant, no shares of Common Stock, and no securities convertible into shares of Common Stock, will be issued at a price per share (or a conversion price, if applicable) less than the fair market value of the Company's Common Stock on the date of issuance; provided, however that this paragraph will not apply to: (i) options granted under the Company's 1998 Stock Option Plan; or (ii) securities issued in connection with any merger or acquisition. 5.6 To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustments will be made in good faith by the Board. 5.7 Except as expressly provided in this Warrant, the Warrantholder will have no rights by reason of any subdivision or consolidation of shares of stock of any class, or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class, or by reason of any dissolution, liquidation, merger, or consolidation or spin-off of assets or stock of another Company; and any issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, will not affect, and no adjustment will be made with respect to, the number or price of shares of Common Stock subject to this Warrant. The grant of this Warrant will not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structures, or to merge or consolidate, or to dissolve, liquidate, or sell or transfer all or any part of its business or assets. Section 6. Mutilated or Missing Warrant Certificates. In case any Warrant Certificate shall be mutilated, lost, stolen or destroyed, the Company shall, at the request of the holder of such Certificate, issue and deliver, in exchange and substitution for and upon cancellation of the mutilated Certificate, or in lieu of and substitution for the Certificate, lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of such Warrant Certificate and indemnity, if requested, also satisfactory to the Company. An applicant for such a substitute Warrant Certificate shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. Section 7. Reservation of Shares of Common Stock. There has been reserved, and the Company shall at all times keep reserved so long as any of the Warrants remain outstanding, out of its authorized Common Stock a number of shares of Common Stock sufficient to provide for the exercise of the rights of purchase represented by the outstanding Warrants and the underlying securities. Section 8. No Fractional Shares. The Company shall not be required to issue fractional shares or scrip representing fractional shares upon the exercise of the Warrants. As to any final 7 fraction of a Share which the Warrant Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the market price of a share of Common Stock on the business day preceding the day of exercise. Section 9. Transfer and Exercise to Comply With the Securities Act of 1933. 9.1 Neither the Warrants nor the Warrant Shares may be sold, transferred or otherwise disposed of except to a person, who, in the opinion of counsel for the Company, is a person to whom such securities may legally be transferred pursuant to the provisions of this Agreement without registration, and without the delivery of a current prospectus, under the Act with respect thereto. 9.2 Unless the Company has on file with the Securities and Exchange Commission a current registration statement to permit the Company to issue registered shares upon exercise of the Warrants, the Warrants may not be exercised except in a transaction exempt from registration under the Act. 9.3 The Company shall cause the following legend to be set forth on each Warrant Certificate and certificates representing the Warrant Shares, unless counsel for the Company is of the opinion as to any such Certificates that such legend is unnecessary: The securities represented by this certificate may not be offered for sale, sold or otherwise transferred except pursuant to an effective registration statement made under the Securities Act of 1933 (the "Act"), or pursuant to an exemption from registration under the Act the availability of which is to be established to the satisfaction of the Company. Section 10. Notices. Any notice pursuant to this Agreement by the Company or by the Warrant Holders shall be in writing and shall be deemed to have been duly given if delivered or mailed certified mail, return receipt requested, (a) if to the Company, to Natural Gas Services Group, Inc., 2911 So. County Road 1260, Midland, TX 79706, attn: President; and (b) if to the Warrant Holder, to the address set forth above. Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in accordance herewith to the other party. Section 11. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Holders shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 12. Applicable Law. This Warrant Agreement and Certificate and any replacement Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Colorado and for all purposes shall be construed in accordance with the laws of said State. Section 13. Benefits of This Agreement. Nothing in this Agreement shall be construed to give to any person or Company other than the Company and the Warrant Holders any legal or 8 equitable right, remedy or claim under this Agreement and this Agreement shall be for the sole and exclusive benefit of the Company and the Warrant Holders. DATED: April 24, 2002 NATURAL GAS SERVICES GROUP, INC. By: ------------------------------------------ Wayne Vinson, President 9 EXHIBIT A PURCHASE FORM DATED _______________, ____ THE UNDERSIGNED HEREBY IRREVOCABLY ELECTS TO EXERCISE THE WARRANT REPRESENTED BY THIS WARRANT CERTIFICATE TO THE EXTENT OF PURCHASING __________ SHARES OF NATURAL GAS SERVICES GROUP, INC. AND HEREBY MAKES PAYMENT OF $3.25 PER SHARE IN PAYMENT OF THE EXERCISE PRICE THEREOF. INSTRUCTIONS FOR REGISTRATION OF STOCK NAME: -------------------------------------------------------------------------------- (PLEASE TYPE OR PRINT IN BLOCK LETTERS) ADDRESS: -------------------------------------------------------------------------------- SIGNATURE ------------------------------------------------------ DATED: ------------------,------- -------------------------------------------------------------------------------- ASSIGNMENT FORM FOR VALUE RECEIVED, __________________________, HEREBY SELLS, ASSIGNS AND TRANSFERS UNTO NAME: -------------------------------------------------------------------------------- (PLEASE TYPE OR PRINT IN BLOCK LETTERS) ADDRESS: -------------------------------------------------------------------------------- THE RIGHT TO PURCHASE SHARES OF NATURAL GAS SERVICES GROUP, INC. REPRESENTED BY THIS WARRANT CERTIFICATE TO THE EXTENT OF _________ SHARES AS TO WHICH SUCH RIGHT IS EXERCISABLE AND DOES HEREBY IRREVOCABLY CONSTITUTE AND APPOINT NATURAL GAS SERVICES GROUP, INC. TO TRANSFER THE SAME ON THE BOOKS OF THE COMPANY WITH FULL POWER OF SUBSTITUTION IN THE PREMISES. SIGNATURE ------------------------------------------------------ DATED: ------------------,------- NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS IT APPEARS UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. EXHIBIT B WARRANT CONVERSION EXERCISE FORM TO: NATURAL GAS SERVICES GROUP, INC. Pursuant to Section 2.3 of the Warrant Certificate from Natural Gas Services Group, Inc. (the "Company") to the undersigned Holder, the Holder hereby irrevocably elects to convert Warrants with respect to Shares of the Company into ___________ Shares of the Company. A conversion calculation is attached hereto as Exhibit B-1. The undersigned requests that certificates for such Shares be issued as follows: Name: ------------------------------------------ Address: ------------------------------------------ Deliver to: ------------------------------------------ and that a new Warrant Certificate for the balance remaining of the Warrants, if any, subject to the Warrant be registered in the name of, and delivered to, the undersigned at the address stated above. Dated: -------------------------- ------------------------ [NAME OF WARRANT HOLDER] EXHIBIT B-1 CALCULATION OF WARRANT CONVERSION Shares to be Delivered by Company = Net Value _________ fmv fmv = $____________ Net Value = aggregate fmv of Converted Shares - aggregate Exercise Price of Converted Shares = $____________ - $____________ = $____________ Shares to be Delivered by Company = _____________ Fractional Shares = ____________