To: TXCO Resources, Inc.
To:
TXCO
Resources, Inc.
000 X. Xxxxxxxx Xxxx., Xxxxx 000
San
Antonio, TX 78258
Attention:
Xxxxx X. Xxxxxx, President
From:
Capital
Ventures International
By:
Heights Capital Management, Inc., Its Authorized Agent
000
Xxxxxxxxxx Xxxxxx, Xxxxx 0000
San
Francisco, CA 94111
Attention:
Xxxxxx Xxxxxxxx
Ladies
and Gentlemen:
The
purpose of this letter agreement (this “Confirmation”)
is to
confirm the terms and conditions of the Transaction entered into between Capital
Ventures International (“Party
A”)
and
TXCO Resources, Inc. (“Party
B”)
on the
Trade Date specified below (the “Transaction”).
This
Confirmation constitutes a “Confirmation” as referred to in the Agreement
specified below.
|
1.
|
This
Confirmation is subject to, and incorporates, the definitions and
provisions of the 2000 ISDA Definitions (including the Annex thereto)
(the
“2000
Definitions”)
and the definitions and provisions of the 2002 ISDA Equity Derivatives
Definitions (the “Equity
Definitions”,
and together with the 2000 Definitions, the “Definitions”),
in each case as published by the International Swaps and Derivatives
Association, Inc. (“ISDA”).
In the event of any inconsistency between the 2000 Definitions and
the
Equity Definitions, the Equity Definitions will govern.
|
This
Confirmation evidences a complete and binding agreement between Party A and
Party B as to the terms of the Transaction to which this Confirmation relates.
The parties may agree to negotiate an agreement in the form of the ISDA Form.
Until any such time, this Confirmation, together with all other documents
referring to the ISDA Form (each a “Confirmation”)
confirming Transactions entered into between us (notwithstanding anything to
the
contrary in a Confirmation), shall supplement, form a part of, and be subject
to
an agreement in the form of the ISDA Form as if we had executed an agreement
in
such form (but without any election in the Schedule) on the Trade Date of the
first such Transaction between us. This Confirmation shall be subject to an
agreement (the “Agreement”)
in the
form of the 2002 ISDA Master Agreement (the “ISDA
Form”)
as if
Party A and Party B had executed an agreement in such form (without any Schedule
but with the elections set forth in this Confirmation, it being understood
the
“Cross-Default” shall not apply to this Transaction). For the avoidance of
doubt, the Transaction shall be the only transaction under the
Agreement.
All
provisions contained in, or incorporated by reference to, the Agreement will
govern this Confirmation except as expressly modified herein. In the event
of
any inconsistency between this Confirmation and either the Definitions or the
Agreement, this Confirmation shall govern.
| 2. |
The
general terms relating to the Transaction are as
follows:
|
|
Option
Style:
|
European,
subject to the automatic early exercise provisions described
below.
|
||
|
Option
Seller:
|
Party
A
|
||
|
Option
Buyer:
|
Party
B
|
||
|
Option
Multiple Exercise:
|
Not
Applicable
|
||
|
Strike
Price:
|
$17.36
|
||
|
Trade
Date:
|
February
28, 2008
|
||
|
Effective
Date:
|
March
4, 2008
|
||
|
Option
Type:
|
Call
|
||
|
Issuer:
|
TXCO
Resources, Inc.
|
||
|
Shares:
|
The
shares of common stock of the Issuer, par value $0.01 per Share (Ticker
Symbol: TXCO)
|
||
|
Number
of Options:
|
1,152,074
less any Early Exercise Options.
|
||
|
Option
Entitlement:
|
One
Share per Option
|
||
|
Market
Disruption Event:
|
Section
6.3(a) of the Equity Definitions is hereby amended by replacing clause
(ii) thereof in its entirety with the following: “(ii) an Exchange
Disruption, or” and inserting immediately following clause (iii) thereof
the following: “; in each case that the Calculation Agent determines is
material.”
|
||
|
Relevant
Price:
|
VWAP
Price
|
||
|
VWAP
Price:
|
The
“Volume Weighted Average Price” per Share on such day, as displayed on
Bloomberg Page “TXCO UQ<equity>AQR” (or any successor thereto) for
the Issuer with respect to the period from 9:30 a.m. to 4:00 p.m.
(New
York City time) on such day, as determined by the Calculation Agent.
If no
price at such time is available, or there is a Market Disruption
Event on
such Expiration Date, the Calculation Agent shall determine the VWAP
Price
in a commercially reasonable manner.
|
||
|
Premium:
|
$6,175,116.64
|
||
|
Premium
Payment Date:
|
Effective
Date
|
2
|
Exchange:
|
The
Nasdaq Global Market
|
||
|
Related
Exchange:
|
Any
exchange on which options or futures on the relevant Shares are
traded.
|
||
|
Clearance
System:
|
DTC
|
||
|
Calculation
Agent:
|
Party
A. Whenever the Calculation Agent acts or makes a determination,
it will
do so in good faith and in a commercially reasonable manner consistent
with its obligations under the Equity Definitions.
|
||
|
Procedure
for Exercise:
|
|||
|
Expiration
Time:
|
The
close of trading on the Exchange
|
||
|
Expiration
Date:
|
Each
of the thirty (30) consecutive Scheduled Trading Days (the “Scheduled
Expiration Period”)
occurring immediately prior to February 28, 2013 or such earlier
date
specified by Party B in a written notice to Party A at least ten
(10)
calendar days prior to the Scheduled Expiration Period (an “Early
Exercise Notice”);
provided
that if Party A receives notice that any of the Preferred Shares
are
converted prior to the tenth (10th) calendar day prior to the Scheduled
Expiration Period (an “Early
Exercise Event”),
the Expiration Date with respect to a number of Options equal to
the
product of (x) the number of Preferred Shares converted and (y) the
conversion rate then applicable to the Preferred Shares, (such Options
being referred to herein as “Early
Exercise Options”)
shall occur on each of the thirty (30) consecutive Scheduled Trading
Days
occurring after the tenth (10th) calendar day after Party A receives
notice of such event, or such earlier date after the Early Exercise
Event
that the Calculation Agent shall deem appropriate. If any Expiration
Date
shall not be an Exchange Business Day, such Expiration Date shall
be
postponed to the immediately succeeding Exchange Business Day and
the
corresponding Expiration Date for each subsequent Daily Number of
Options
shall be moved back an equal number of Exchange Business Days reflecting
such postponement.
|
||
|
Daily
Number of Options:
|
One
thirtieth (1/30th) of the Number of Options; provided
that with respect to any Expiration Date resulting from an Early
Exercise
Event, one thirtieth (1/30th) of such Early Exercise
Options.
|
||
|
Automatic
Exercise:
|
Applicable
|
||
|
Settlement
Terms:
|
3
|
Settlement
Method Election:
|
Applicable;
provided
that (i) any such election shall apply to all Exercise Dates (in
accordance with the terms below) and may be for Cash Settlement or
Net
Share Settlement; (ii) references to “Physical Settlement” in Section 7.1
of the Equity Definitions shall be replaced by references to “Net Share
Settlement”; and (iii) Party B may elect Cash Settlement only if Party B
represents and warrants to Party A in writing on the date of such
election
that, as of such date, Party B is not aware of any material nonpublic
information concerning itself or the Shares and is electing Cash
Settlement in good faith and not as part of a plan or scheme to evade
compliance with the federal securities laws. At any time prior to
making a
Settlement Method Election, Party B may, without the consent of Party
A,
amend this Confirmation by notice to Party A to eliminate Party B’s right
to elect Cash Settlement.
|
||
|
Electing
Party
|
Party
B
|
||
|
Settlement
Method Election Date
|
The
30th Scheduled Trading Day preceding the first Expiration
Date
|
||
|
Default
Settlement Method
|
Net
Share Settlement
|
||
|
Settlement
Date:
|
For
all Daily Number Options exercised or deemed exercised on each Expiration
Date, the third Exchange Business Day following the final Expiration
Date.
|
||
|
Cash
Settlement
|
If
Cash Settlement applies, then, notwithstanding any contrary terms
of
Article 8 of the Equity Definitions, for any Daily Number of Options
exercised or deemed exercised on any Exercise Date, Party A shall
pay, on
the Settlement Date, the Cash Settlement Amount to Party B. The Cash
Settlement Amount shall be determined as follows:
(i)
If the Settlement Price is less than or equal to the Strike Price,
then
the Cash Settlement Amount shall equal zero.
(ii)
If the Settlement Price is greater than the Strike Price, then the
Cash
Settlement Amount shall equal the product of (i) the Daily Number
of
Options, (ii) the Option Entitlement and (iii) the Settlement Price
minus
the Strike Price.
|
4
|
Net
Share Settlement:
|
On
the Settlement Date, Party A shall deliver to Party B a number of
whole
Shares equal to the Number of Shares to be Delivered and will pay
to Party
B the Fractional Share Amount, if any.
|
||
|
Number
of Shares to be Delivered:
|
The
Cash Settlement Amount (determined as if Cash Settlement were applicable)
divided by
the Settlement Price, rounded down to the nearest whole
number.
|
||
|
Cash
Settlement Payment Date:
|
For
all Daily Number of Options exercised or deemed exercised on each
Exercise
Date, the third Exchange Business Day following the final Expiration
Date.
|
||
|
Settlement
Currency:
|
USD
|
||
|
Settlement
Price:
|
For
any Daily Number of Options, the VWAP Price of the Shares on the
relevant
Expiration Date determined by Calculation Agent at the Expiration
Time on
the relevant Expiration Date for such Daily Number of Options. If
no price
at such time is available, or there is a Market Disruption Event
on such
Expiration Date, the Calculation Agent shall determine the Settlement
Price in a commercially reasonable manner.
|
||
|
Failure
to Deliver:
|
Applicable
|
||
|
Other
Applicable Provisions:
|
To
the extent Party A is obligated to deliver Shares hereunder, the
provisions of Sections 9.1(c), 9.8, 9.9, 9.10, 9.11 (except that
the
Representation and Agreement contained in Section 9.11 of the Equity
Definitions shall be modified by excluding any representations therein
relating to restrictions, obligations, limitations or requirements
under
applicable securities laws as a result of the fact that Party B is
the
issuer of the Shares) and 9.12 of the Equity Definitions will be
applicable as if “Physical Settlement” applied to the
Transaction.
|
||
|
Restricted
Certificated Shares:
|
Notwithstanding
anything to the contrary in the Equity Definitions, Party A may deliver,
in whole or in part, any Shares required to be delivered to Party
B
hereunder in the form of restricted securities under the Securities
Act
(as defined below) and/or in certificated form in lieu of delivery
through
the Clearance System. With respect to any such certificated Shares,
the
Representation and Agreement contained in Section 9.11 of the Equity
Definitions shall be modified by deleting the remainder of the provision
after the word “encumbrance” in the fourth line
thereof.
|
5
|
Adjustments:
|
|||
|
Method
of Adjustment:
|
Calculation
Agent Adjustment
|
||
|
Extraordinary
Dividend:
|
Any
dividend or distribution that has an ex-dividend date occurring on
or
after the Trade Date and on or prior to the date on which Party A
satisfies all of its delivery obligations hereunder; provided
that no regular or periodic dividend on any of Party B’s outstanding
preferred stock (including the Preferred Shares) shall be an Extraordinary
Dividend.
|
||
|
Extraordinary
Events:
|
|||
|
Consequences
of Merger Events and Tender Offers:
|
|||
|
(a)
Share-for-Share:
|
Modified
Calculation Agent Adjustment, or at Party A’s election, Cancellation and
Payment (Calculation Agent Determination)
|
||
|
(b)
Share-for-Other:
|
Cancellation
and Payment (Calculation Agent Determination)
|
||
|
(c)
Share-for-Combined:
|
Component
Adjustment, or at Party A’s election, Cancellation and Payment
(Calculation Agent Determination)
|
||
|
Tender
Offer:
|
Applicable
|
||
|
Delisting,
Nationalization or Insolvency:
|
Cancellation
and Payment (Calculation Agent
Determination)
|
Additional
Disruption Events:
|
(a)
Change in Law:
|
Applicable;
provided
that Section 12.9(a)(ii) of the Equity Definitions is hereby amended
by
(i) replacing the phrase “the interpretation” in the third line thereof
with the phrase “or announcement or statement of the formal or informal
interpretation” and (ii) immediately following the word “Transaction” in
clause (X) thereof, adding the phrase “in the manner contemplated by the
Hedging Party on the Trade Date”.
|
|
|
(b)
Failure to Deliver:
|
Applicable
|
|
|
(c)
Insolvency Filing:
|
Applicable
|
6
|
(d)
Hedging Disruption:
|
Applicable
|
||
|
(e)
Increased Cost of Hedging:
|
Applicable
|
||
|
(f)
Loss of Stock Borrow:
|
Not
Applicable
|
||
|
Hedging
Party:
|
For
all applicable Additional Disruption Events, Party A
|
||
|
Determining
Party:
|
For
all applicable Additional Disruption Events, Party A
|
||
|
Non-Reliance:
|
Applicable
|
||
|
Agreements
and Acknowledgments Regarding Hedging Activities:
|
Applicable
|
||
|
Additional
Acknowledgments:
|
Applicable
|
||
|
Additional
Termination Events:
|
Applicable.
The following will constitute an Additional Termination
Event:
(a)
Such other events specified in this Confirmation as being Additional
Termination Events.
For
the purpose of the foregoing Termination Event, the sole Affected
Party
will be Party B.
|
||
|
Conversion
Notice
|
In
the event Party B shall elect a mandatory conversion of some or all
of its
Perpetual Convertible Preferred Stock pursuant to Article 2(d)(viii)
of
the Certificate of Designation, or if Party B receives a conversion
notice
under Section 2(b) of the Certificate of Designation, Party B shall
promptly notify Party A in writing of such event, and in any event
no
later than 2 Exchange Trading Days after such election or receipt
of such
conversion notice.
|
|
3.
|
If
any of the transactions contemplated by the Securities Purchase Agreement
dated as of February 28, 2008 (the “Purchase
Agreement”)
among Party B and each
of the Buyers specified therein relating to the sale of Perpetual
Convertible Preferred Stock (the “Preferred
Shares”)
of Party B, shall fail to close on the date specified therein for
any
reason, or any subsequent date allowed thereunder for postponements
permitted under the terms thereof , the entirety of this Transaction
shall
terminate automatically and Party B shall be the sole Affected Party
and
this Transaction shall be the sole Affected Transaction and
such termination shall be treated as an Additional Termination
Event.
|
|
4.
|
Calculations
and Payment on Early Termination and on Certain Extraordinary
Events.
If
Party A shall owe Party B any amount pursuant to Sections 12.2, 12.3,
12.6, 12.7 or 12.9 of the Equity Definitions (except in the event
of a
Merger Event, Tender Offer, Insolvency or a Nationalization, in each
case,
in which the consideration or proceeds to be paid to holders of Shares
consists solely of cash) or pursuant to Section 6(d)(ii) of the Agreement
(except in the event of an Event of Default in which Party B is the
Defaulting Party or a Termination Event in which Party B is the Affected
Party, that resulted from an event or events within Party B’s control) (a
“Payment
Obligation”),
Party B shall have the right, in its sole discretion, to require
Party A
to satisfy any such Payment Obligation by the Share Termination
Alternative (as defined below) by giving irrevocable telephonic notice
to
Party A, confirmed in writing within one Scheduled Trading Day, between
the hours of 9:00 A.M. and 12:00 P.M. New York City time on the relevant
Merger Date, Tender Offer Date, Announcement Date or Early Termination
Date, as applicable (“Notice
of Share Termination”).
Upon such Notice of Share Termination, the following provisions shall
apply on the Scheduled Trading Day immediately following the relevant
Merger Date, Tender Offer Date, Announcement Date or Early Termination
Date, as applicable:
|
7
|
Share
Termination Alternative:
|
Applicable
and means that Party A shall deliver to Party B the Share Termination
Delivery Property on the date on which the Payment Obligation would
otherwise be due pursuant to Section 12.7 or 12.9 of the Equity
Definitions or Section 6(d)(ii) of the Agreement, as applicable (the
“Share
Termination Payment Date”),
in satisfaction of the Payment Obligation.
|
| Share Termination Delivery Property: |
A
number of Share Termination Delivery Units, as calculated by
the
Calculation Agent, equal to the Payment Obligation divided by
the Share
Termination Unit Price. The Calculation Agent shall adjust the
Share
Termination Delivery Property by replacing any fractional portion
of a
security therein with an amount of cash equal to the value of
such
fractional security based on the values used to calculate the
Share
Termination Unit Price.
|
| Share Termination Unit Price: |
The
value of property contained in one Share Termination Delivery Unit
on the
date such Share Termination Delivery Units are to be delivered as
Share
Termination Delivery Property, as determined by the Calculation Agent
by
commercially reasonable means and notified by the Calculation Agent
to
Party A at the time of notification of the Payment Obligation.
|
| Share Termination Delivery Unit: |
In
the case of a Termination Event, Event of Default or Delisting, one
Share
or, in the case of a Merger Event, a Tender Offer, an Insolvency
or
Nationalization, a unit consisting of the number or amount of each
type of
property received by a holder of one Share (without consideration
of any
requirement to pay cash or other consideration in lieu of fractional
amounts of any securities) in such Merger Event, Tender Offer, Insolvency
or Nationalization. If such Merger Event, Tender Offer, Insolvency
or
Nationalization involves a choice of consideration to be received
by
holders, such holder shall be deemed to have elected to receive the
maximum possible amount of cash.
|
| FailuretoDeliver: |
Applicable
|
| Other applicable provisions: |
If
Share Termination Alternative is applicable, the provisions of Sections
9.8, 9.9, 9.10, 9.11 and 9.12 of the Equity Definitions will be applicable
as if “Physical Settlement” were applicable, except that all references to
“Shares” shall be read as references to “Share Termination Delivery
Units”; provided
that the Representation and Agreement contained in Section 9.11 of
the
Equity Definitions shall be modified by excluding any representations
therein relating to restrictions, obligations, limitations or requirements
under applicable securities laws as a result of the fact that Party
B is
the issuer of any Share Termination Delivery Units (or any part
thereof).
|
8
|
5.
|
Additional
Agreements, Representations and
Covenants:
|
| (a) |
Party
B hereby represents and warrants to Party A, on each day from the
Trade
Date to and including the business day following the date on which
Party A
is able to initially complete a hedge of its position created by
this
Transaction, that Party B has publicly disclosed all material information
necessary for Party B to be able to purchase or sell Shares in compliance
with applicable federal securities laws and that it has publicly
disclosed
all material information with respect to its condition (financial
or
otherwise).
|
| (b) |
If
Party B would be obligated to receive cash from Party A pursuant
to the
terms of this Agreement for any reason without having had the right
to
elect to receive Shares in satisfaction of such payment obligation,
then
Party B may elect that Party A deliver to Party B a number of Shares
having a cash value equal to the amount of such payment obligation
(such
number of Shares to be delivered to be determined by the Calculation
Agent
acting in a commercially reasonable manner to determine the number
of
Shares that could be purchased over a reasonable period of time with
the
cash equivalent of such payment obligation). Settlement relating
to any
delivery of Shares pursuant to this paragraph (b) shall occur within
a
reasonable period of time.
|
| (c) |
Party
B shall deliver to the Party A an opinion or opinions of counsel
with
respect to the matters set forth on Annex 1 hereto on or before the
Effective Date.
|
| (d) |
In
addition to the representations and warranties in the Agreement and
those
contained elsewhere herein, Party B represents and warrants to and
for the
benefit of, and agrees with, Party A as
follows:
|
(i) (A)
On
the Effective Date, the Shares or securities that are convertible into, or
exchangeable or exercisable for Shares, are not, and shall not be, subject
to a
“restricted period,” as such term is defined in Regulation M (“Regulation
M”)
under
the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)
and
(B) Party B shall not engage in any “distribution,” as such term is defined in
Regulation M, other than a distribution meeting the requirements of the
exceptions set forth in sections 101(b)(10) and 102(b)(7) of Regulation M,
until
the second Exchange Business Day immediately following the Trade
Date.
(ii) Party
B
is not entering into this Confirmation to create actual or apparent trading
activity in the Shares (or any security convertible into or exchangeable for
Shares) or to manipulate the price of the Shares (or any security convertible
into or exchangeable for Shares) or otherwise in violation of the Exchange
Act.
(iii) Without
limiting the generality of Section 3(a)(iii) of the Agreement, the Transaction
will not violate Rule 13e-1 or Rule 13e-4 under the Exchange Act.
(iv) Prior
to
the Effective Date, Party B shall deliver to Party A a resolution of Party
B’s
board of directors authorizing the Transaction and such other certificate or
certificates as Party A shall reasonably request.
(v) Party
B
is not, and after giving effect to the transactions contemplated hereby will
not
be, required to register as an “investment company” as such term is defined in
the Investment Company Act of 1940, as amended.
(vi) On
the
Trade Date (A) the assets of Party B at their fair valuation exceed the
liabilities of Party B, including contingent liabilities, (B) the capital of
Party B is adequate to conduct the business of Party B and (C) Party B has
the
ability to pay its debts and obligations as such debts mature and does not
intend to, or does not believe that it will, incur debt beyond its ability
to
pay as such debts mature.
(vii) Party
B
acknowledges its responsibilities under applicable federal securities laws,
including without limitation Rule 10b-5 under the Exchange Act, in relation
to
the Transaction.
9
| (e) |
Each
of Party A and Party B agrees and represents that it is an “eligible
contract participant” as defined in Section 1a(12) of the U.S. Commodity
Exchange Act, as amended. The parties hereto further agree and acknowledge
(A) that this Confirmation is (i) a “securities contract,” as such term is
defined in Section 741(7) of the Bankruptcy Code, with respect to
which
each payment and delivery hereunder is a “settlement payment,” as such
term is defined in Section 741(8) of the Bankruptcy Code, and (ii)
a “swap
agreement,” as such term is defined in Section 101(53B) of the Bankruptcy
Code, with respect to which each payment and delivery hereunder is
a
“transfer,” as such term is defined in Section 101(54) of the Bankruptcy
Code, and (B) that Party A is entitled to the protections afforded
by,
among other sections, Sections 362(b)(6), 362(b)(17), 546(e), 546(g),
555
and 560 of the Bankruptcy Code.
|
| (f) |
Party
B intends that all documentation with respect to this Transaction
is
intended to qualify this Transaction as an equity instrument for
purposes
of SFAS 150 and EITF 00-19. Party A acknowledges and agrees that
this
Confirmation is not intended to convey to it rights with respect
to the
Transaction that are senior to the claims of common stockholders
in the
event of Party B’s bankruptcy. For the avoidance of doubt, the parties
agree that the preceding sentence shall not apply at any time other
than
during Party B’s bankruptcy to any claim arising as a result of a breach
by Party B of any of its obligations under this Confirmation or the
Agreement.
|
|
6.
|
Staggered
Settlement:
|
If
Party
A determines reasonably and in good faith that the sum of (i) the number of
Shares required to be delivered to Party B hereunder on any Cash
Settlement
Payment Date, and (ii) any other Shares beneficially owned by Party A, would
exceed 9.9%
of
all outstanding Shares, then Party A may, by notice to Party B on or prior
to
such Cash Settlement Payment Date (a “Nominal
Settlement Date”),
elect
to deliver the Shares comprising the related Cash Settlement Amount (in the
case
of Net Share Settlement) on two or more dates (each, a “Staggered
Settlement Date”)
as
follows:
| (a) |
in
such notice, Party A will specify to Party B the related Staggered
Settlement Dates (the first of which will be such Nominal Settlement
Date
and the last of which will be no later than the twentieth (20th)
Exchange
Business Day following such Nominal Settlement Date) and the number
of
Shares that it will deliver on each Staggered Settlement Date;
|
| (b) |
the
aggregate number of Shares that Party A will deliver to Party B hereunder
on all such Staggered Settlement Dates will equal the number of Shares
that Party A would otherwise be required to deliver on such Nominal
Settlement Date; and
|
| (c) |
if
the Net Share Settlement terms set forth above were to apply on the
Nominal Settlement Date, then the Net Share Settlement terms will
apply on
each Staggered Settlement Date, except that the Shares comprising
the Cash
Settlement Amount will be allocated among such Staggered Settlement
Dates
as specified by Party A in the notice referred to in clause (a) above.
|
Notwithstanding
anything herein to the contrary, Party A shall be entitled to deliver Shares
to
Party B from time to time prior to the date on which Party A would be obligated
to deliver them to Party B pursuant to the Net Share Settlement terms set forth
above, and Party B agrees to credit all such early deliveries against Party
A’s
obligations hereunder in the direct order in which such obligations arise.
To
the extent Party A receives or is entitled to receive any distribution or
payment in respect of Shares by reason of Party A’s being a holder of record of
such Shares on any date after the Nominal Settlement Date which Party A would
have delivered to Party B on such Nominal Settlement Date but for the provisions
of this Section 6, Party A shall deliver such distribution or payment to Party
B
at the time Party A delivers the related Shares to Party B in accordance with
this Section 6, if such distribution or payment has already been received by
Party A at such time, or within a reasonable period of time following Party
A’s
receipt of the distribution or payment, if such distribution or payment has
not
already been received by Party A at the time Party A delivers the related Shares
to Party B in accordance with this Section 6.
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7.
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Transfer.
Party
B shall not transfer or assign its rights or obligations hereunder
and
under the Agreement without the prior written consent of Party A.
Party A
may transfer or assign without Party B’s consent its rights and
obligations hereunder and under the Agreement, in whole or in
part.
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8.
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Disposition
of Hedge Shares.
Party B hereby agrees that if, in the good faith reasonable judgment
of
Party A or Issuer, based on the advice of counsel, the Shares (the
“Hedge
Shares”)
acquired by Party A for the purpose of hedging its obligations pursuant
to
the Transaction
cannot be sold in the public market by Party A without registration
under
the Securities Act, Party B shall, at its election: (i) in order
to allow
Party A to sell the Hedge Shares in a registered offering, make available
to Party A an effective registration statement under the Securities
Act to
cover the resale of such Hedge Shares and (A) enter into an agreement,
in
form and substance satisfactory to Party A, substantially in the
form of
an underwriting agreement for underwritten follow-on offerings of
equity
securities of companies of comparable size, maturity and lines of
business, (B) provide accountant’s “comfort” letters in customary form for
underwritten follow-on offerings of equity securities of companies
of
comparable size, maturity and lines of business, (C) provide disclosure
opinions of nationally recognized outside counsel to Party B as are
customarily requested in connection with underwritten follow-on offers
of
equity securities of companies of comparable size, maturity and lines
of
business, (D) provide other customary opinions, certificates and
closing
documents customary in form for underwritten follow-on offers of
equity
securities of companies of comparable size, maturity and lines of
business
and (E) afford Party A a reasonable opportunity to conduct a “due
diligence” investigation with respect to Party B customary in scope for
underwritten follow-on offers of equity securities of companies of
comparable size, maturity and lines of business; provided,
however, that
if Party A, in its sole discretion, is not satisfied with access
to due
diligence materials, the results of its due diligence investigation,
or
the procedures and documentation for the registered offering referred
to
above, then clause (ii) of this Section 8(c) shall apply; provided
that Party A has given the Party B reasonable notice of its determination
and provided the Party B with reasonable opportunity to satisfy Party
A’s
concerns;
(ii) in order to allow Party A to sell the Hedge Shares in a private
placement enter into a private placement agreement substantially
similar
to private placement purchase agreements customary for private placements
of equity securities of companies of comparable size, maturity and
lines
of business, in form and substance reasonably satisfactory to Party
A,
including customary representations, covenants, blue sky and other
governmental filings and/or registrations, indemnities to Party A,
due
diligence rights (for Party A or any designated buyer of the Hedge
Shares
from Party A), opinions and certificates and such other documentation
as
is customary for private placements agreements, all reasonably acceptable
to Party A (in which case, the Calculation Agent shall make any
adjustments to the terms of the Transaction that are necessary, in
its
reasonable judgment, to compensate Party A for any discount from
the
public market price of the Shares incurred on the sale of Hedge Shares
in
a private placement).
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9.
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Account
Details:
|
|
Payments
to Party A:
|
To
be provided in writing upon request
|
|
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Payments
to Party B:
|
To
be advised in writing upon request
|
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Deliveries
to Party B:
|
To
be advised in writing upon request
|
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10.
|
Waiver
of Jury Trial. EACH
OF PARTY B AND PARTY A HEREBY IRREVOCABLY WAIVES (ON ITS OWN BEHALF
AND,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF ITS STOCKHOLDERS)
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING
TO THE TRANSACTION OR THE ACTIONS OF PARTY B OR ITS AFFILIATES OR
PARTY A
OR ITS AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT
HEREOF
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11.
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Governing
Law. THE AGREEMENT AND THIS CONFIRMATION AND ANY OTHER MATTERS ARISING
OUT
OF OR RELATING TO THE TRANSACTION OR THE ACTIONS OF PARTY B OR ITS
AFFILIATES OR PARTY A OR ITS AFFILIATES IN THE NEGOTIATION, PERFORMANCE
OR
ENFORCEMENT HEREOF SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK.
THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION
OF THE
COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH ALL MATTERS RELATING
HERETO AND WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN, AND ANY
CLAIM OF
INCONVENIENT FORUM WITH RESPECT TO, THESE COURTS.
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Please
confirm that the foregoing correctly sets forth the terms of your agreement
by
signing and returning this Confirmation.
|
Very
truly yours,
|
||
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||
|
CAPITAL
VENTURES INTERNATIONAL
|
||
|
BY:
HEIGHTS CAPITAL MANAGEMENT, INC,
|
||
|
Its
Authorized Agent
|
||
|
(Party
A)
|
||
|
|
||
|
By:
|
/s/
Xxxxxx Xxxxxxxx
|
|
|
Name:
Xxxxxx Xxxxxxxx
|
||
|
Title:
Investment Manager
|
||
Confirmed
as of the date first written above:
(Party
B)
|
By:
|
/s/
Xxxxx X. Xxxxxx
|
|
|
Name:
|
Xxxxx
X. Xxxxxx
|
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Title:
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President
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ANNEX
I
Matters
to be covered in Opinion of Counsel to Party B
1. Party
B
is validly existing as a corporation in good standing under the laws of the
State of Delaware.
2. Party
B
has the requisite corporate power and authority to enter into the Transaction
(for purposes of this Annex 1, the “Agreement”)
and to
carry out the Transactions contemplated thereby.
3. The
execution and delivery by Party B of the Transaction, and the performance by
Party B of its obligations under the Transaction, have been duly authorized
by
all necessary corporate action on the part of Party B.
4. The
Transaction has been duly authorized, executed and delivered by Party
B.
5. No
consent, approval or authorization of, or registration, filing or declaration
with, any governmental or public body or authority is required in connection
with the execution, delivery or performance by Party B of the Transaction.
6. The
execution, delivery and performance by Party B of the Transaction and compliance
by Party B with the terms and provisions thereof will not, whether with or
without the giving of notice or lapse of time or both, result in a breach or
violation of any of the terms and provisions of, or constitute a default under,
(A) any material indenture, mortgage, deed of trust, loan, purchase or credit
agreement, lease, corporate charter or by-laws, or any other agreement or
instrument to which Party B or any subsidiary is bound or by which Party B
or
any subsidiary or any of their respective properties may be bound or affected,
or (B) any Delaware or federal law, statute, rule, regulation or order or any
judgment, order, writ or decree of any governmental agency or body or any court
having jurisdiction over Party B or any of its properties.
7. Neither
Party B nor any subsidiary is an “investment company” or a company “controlled”
by an “investment company”, in each case within the meanings ascribed to such
terms in the Investment Company Act of 1940, as amended, nor is Party B or
any
subsidiary subject to regulation under said Act.
