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
XXXXXXX EXPLORATION COMPANY
and
SHELL CAPITAL INC.
Dated as of
October 31, 2000
TABLE OF CONTENTS
Page
1. DEFINITIONS........................................................1
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........................................8
2.6 CONDITIONS TO EXERCISE....................................8
3. TRANSFERS, DIVISION AND COMBINATION................................8
3.1 TRANSFER..................................................8
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....................................15
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................................................17
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS................18
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...........................24
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.................25
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...................................27
15.6 COMPLETE AGREEMENT; AMENDMENT............................27
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
SCHEDULES:
Schedule A -Capital Stock of the Issuer, Including Shares Subject to
Outstanding Warrants, Options, Conversion Rights, Etc....Sch. A-1
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 October 31, 2000 (this "AGREEMENT"), is
entered into by and between Xxxxxxx Exploration Company, a Delaware corporation
("ISSUER"), and Shell Capital Inc. a Delaware corporation (the "WARRANT HOLDER"
or "SCI").
W I T N E S S E T H:
WHEREAS, Xxxxxxx 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 SCI, as agent for Lenders under the Credit
Agreement (in such capacity, the "AGENT"), are parties to that certain
Subordinated Credit Agreement, of even date herewith (as so amended and
restated, the "CREDIT AGREEMENT"); and
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
Credit Agreement, the Issuer has agreed to execute and deliver this Agreement
and to issue to SCI the warrants herein described;
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
Capitalized terms not otherwise defined herein shall have the meaning
set forth in the Credit Agreement. 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 or Common Stock issued pursuant to the Equity Conversion
Agreement or pursuant to the Other Warrants.
1
"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 prior to such date specified, based on the value of the
Issuer, as determined by an investment banking firm (selected pursuant
to 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 each day which is not a day on which banks in
Houston, Texas are generally authorized or obligated by law or
executive order to close.
"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.
"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
2
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, three dollars ($3.00) 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.
"EQUITY CONVERSION AGREEMENT" shall mean that certain Equity Conversion
Agreement dated as of February 17, 2000 among the Issuer, the Borrower
and SCI.
"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.
"EXPIRATION DATE" shall mean October 31, 2007.
"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.
3
"OTHER WARRANTS" shall mean the warrants to purchase Common Stock
originally represented by a Warrant Certificate dated February 17, 2000
issued to SCI.
"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 or pursuant to the Equity
Conversion Agreement or upon the exercise of the Other 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 by 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 no less than 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 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
4
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" of a Person means (i) a corporation, a majority of whose
stock with voting power, under ordinary circumstances, to elect
directors is at the time of determination, directly or indirectly,
owned by such Person or by one or more Subsidiaries of such Person, or
(ii) any other entity (other than a corporation) in which such Person
or one or more Subsidiaries of such Person, directly or indirectly, at
the date of determination thereof has at least a majority ownership
interest.
"TRANSFER NOTICE" shall have the meaning set forth in Section 9.2 of
this Agreement.
"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 SCI
is the Warrant Holder hereof.
5
"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 and the
Current Warrant Price. 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 ONE MILLION TWO HUNDRED FIFTY THOUSAND
(1,250,000) Warrants. On the Closing Date, the Issuer shall deliver to
the Warrant Holder a Warrant Certificate evidencing the Warrants issued
to the Warrant Holder.
2.2 MANNER OF EXERCISE.
(a) The Warrant Holder may, from and after the Closing Date until
11:59 p.m., Central Standard Time on the Expiration Date,
exercise the Warrants evidenced by a Warrant Certificate, on
any Business Day, for all or part of the number of shares of
Common Stock purchasable thereunder.
(b) In order to exercise the Warrants, in whole or in part, the
Warrant Holder shall either
(i) deliver to the Issuer at its principal office at 0000
Xxxxxx Xxxxx Xxxxxxx, Xxxxxxxx 0, Xxxxx 000, Xxxxxx,
Xxxxx 00000, Attention: Chief Financial Officer, or
at the office or agency designated by the Issuer
pursuant to Section 12 of this Agreement (the
"PRINCIPAL OFFICE"), (x) ----------------- a written
notice duly executed by the Warrant Holder or its
agent or attorney, substantially in the form of the
form of election to purchase appearing at the end of
the Warrant Certificate as Exhibit A thereto, of such
Warrant Holder's election to exercise the Warrants,
which notice shall specify the number of shares of
Common Stock to be purchased, (y) payment of the
Warrant Price in the manner provided below, and (z)
the Warrant Certificate or Warrant Certificates
evidencing the Warrants. Payment of the Warrant Price
shall be made in cash in an amount equal to the
Warrant Price; or
(ii) deliver to the Issuer on any Business Day at the
Principal Office (x) a Cashless Conversion Notice in
substantially the form appearing at the end
6
of the Warrant Certificate as Exhibit B thereto (the
"Cashless Conversion Notice"), duly executed by the
Warrant Holder and setting forth such Warrant
Holder's election to receive the number of shares of
Common Stock specified in the Cashless Conversion
Notice ("Cashless Conversion") and (y) the Warrant
Certificate or Warrant Certificates evidencing the
Warrants. Such presentation and surrender shall be
deemed a waiver of the Warrant Holder's obligation to
pay all or any portion (as the case may be) of the
Warrant Price in connection with such Cashless
Conversion. In the event of a Cashless Conversion,
the Issuer shall deliver to the Warrant Holder
(without payment by the Warrant Holder of any Warrant
Price), in respect of the Warrants being exercised,
that number of shares of Common Stock equal to: the
number of shares of Common Stock intowhich such
Warrants would have been converted if exercised under
clause (b)(1) above multiplied by a fraction, (x) the
numerator of which shall be the Current Market Price
on the date of such exercise less the Current Warrant
Price on the date of such exercise and (y) the
denominator of which shall be the Current Market
Price on the date of such exercise. The Warrant
Holder may exercise its Cashless Conversion rights,
at any time or from time to time, prior to the
Expiration Date.
Upon receipt of the items described above required for
exercise of the Warrants, the Issuer shall, as promptly as
practicable, and in any event within three (3) Business Days
thereafter, execute or cause to be executed and deliver or
cause to be delivered to such Warrant Holder a certificate or
certificates representing the aggregate number of full shares
of Common Stock issuable upon such exercise, together with
cash in lieu of any fraction of a share, as hereinafter
provided. The stock certificate or certificates so delivered
shall be, to the extent possible, in such denomination or
denominations as such Warrant Holder shall request in the
notice and shall be registered in the name of the Warrant
Holder or, subject to Section 9 of this Agreement, such other
name as shall be designated in the notice. The Warrants shall
be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and such
Warrant Holder or any other Person so designated to be named
therein shall be deemed to have become a holder of record of
such shares for all purposes, as of the date the notice,
together with payment of the Warrant Price (if applicable) and
the Warrant Certificate or Warrant Certificates, are received
by the Issuer as described above and all taxes required to be
paid by such Warrant Holder, if any, pursuant to Section 2.3
of this Agreement prior to the issuance of such shares have
been paid. If the Warrants evidenced by a Warrant Certificate
shall have been exercised, the Issuer shall, at the time of
delivery of the certificate or certificates representing the
Warrant Stock, deliver to the Warrant Holder a new Warrant
Certificate evidencing the rights of the Warrant Holder to
purchase the unpurchased shares of Common Stock represented by
the old Warrant Certificate, which new Warrant Certificate
shall in all other respects be identical to the old Warrant
Certificate.
7
2.3 PAYMENT OF TAXES. The Issuer shall pay all expenses in connection with,
and all transfer taxes and other governmental charges that may be
imposed with respect to, the issuance or delivery of Warrant Stock. The
Issuer shall not be required, however, to pay any tax or other charge
imposed in connection with any transfer involved in the issue of any
certificate for shares of Warrant Stock issuable upon exercise of
Warrants in any name other than that of Warrant Holder, and in such
case the Issuer shall not be required to issue or deliver any stock
certificate until such tax or other charge has been paid or it has been
established to the satisfaction of the Issuer that no such tax or other
charge is due.
2.4 FRACTIONAL SHARES. 2.5 The Issuer shall not be required to issue a
fractional share of Common Stock upon the exercise of Warrants as
provided in Section 2(b)(i) and (ii). As to any fraction of a share
which the Warrant Holder would otherwise be entitled to purchase upon
such exercise, the Issuer shall pay a cash adjustment in respect of
such fraction in an amount equal to the same fraction of the Current
Market Price per share of Common Stock on the date of exercise. If the
determination of Current Market Price for purposes of this Section 2.4
would otherwise require an appraisal to be made by an investment
banking firm, then Current Market Price for purposes of this Section
2.4 only shall mean Book Value per share of Common Stock on the date of
exercise, unless a determination of Appraised Value shall have been
made within six months prior to such date in which case such Appraised
Value shall be utilized for the purposes of determining Current Market
Price.
2.6 CONTINUED VALIDITY. A holder of Warrant Stock (other than a holder who
acquires such shares after the same have been publicly sold pursuant to
a Registration Statement under the Securities Act) shall continue to be
entitled with respect to such shares to all rights to which it would
have been entitled as a holder of Warrant Stock under Sections 9, 10
and 15 of this Agreement. The Issuer will, at the time of each exercise
of Warrants or upon the request of the holder of Warrant Stock issued
upon the exercise thereof, acknowledge in writing, in form reasonably
satisfactory to such holder of Warrant Stock, its continuing obligation
to afford to such holder of Warrant Stock all such rights; provided,
however, that if such holder of Warrant Stock shall fail to make any
such request, such failure shall not affect the continuing obligation
of the Issuer to afford to such holder of Warrant Stock all such
rights.
3. TRANSFERS, DIVISION AND COMBINATION
3.1 TRANSFER. Subject to compliance with Section 9 of this Agreement,
transfer of Warrants, in whole or in part, shall be registered on the
books of the Issuer to be maintained for such purposes, upon surrender
of the Warrant Certificate representing such Warrants at the principal
office of the Issuer referred to in Section 2.2 of this Agreement or
the office or agency designated by the Issuer pursuant to Section 12 of
this Agreement, together with a written assignment substantially in the
form of Exhibit C to the Warrant Certificate and a written agreement,
in form reasonably satisfactory to the Issuer, setting forth the new
Warrant Holder's agreement to be bound by all of the terms of this
Agreement each duly executed by the Warrant Holder or its agent or
attorney, and funds sufficient to pay any transfer taxes payable by
such Warrant Holder upon the making of such transfer.
8
Upon such surrender and, if required, such payment, the Issuer shall,
subject to Section 9 of this Agreement, execute and deliver a new
Warrant Certificate or Warrant Certificates in the name of the assignee
or assignees and in the denomination specified in such instrument of
assignment, and shall issue to the assignor a new Warrant Certificate
or Warrant Certificates evidencing the portion of the old Warrant
Certificate not so assigned, and the old Warrant Certificate shall
promptly be canceled. A Warrant, if properly assigned in compliance
with Section 9 of this Agreement, may be exercised by a new Warrant
Holder for the purchase of shares of Warrant Stock without having a new
Warrant Certificate or new Warrant Certificates issued.
3.2 DIVISION AND COMBINATION. Subject to the provisions of Section 9 of
this Agreement, any Warrant Certificate may be divided or combined with
other Warrant Certificates upon presentation thereof at the aforesaid
office or agency of the Issuer, together with a written notice
specifying the names and denominations in which new Warrant
Certificates are to be issued, signed by a Warrant Holder or its agent
or attorney. Subject to compliance with Section 3.1 of this Agreement
as to any transfer which may be involved in such division or
combination, the Issuer shall execute and deliver a new Warrant
Certificate or Warrant Certificates in exchange for the Warrant
Certificate or Warrant Certificates to be divided or combined in
accordance with such notice.
3.3 EXPENSES. The Issuer shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant Certificate or
Warrant Certificates provided for under this Section 3.
3.4 MAINTENANCE OF BOOKS. The Issuer agrees to maintain, at its aforesaid
office or agency, books for the registration of, and the registration
of transfer of, the Warrants.
4. ADJUSTMENTS
The number of shares of Warrant Stock for which Warrants are
exercisable, and the price at which such shares may be purchased upon
exercise of Warrants, shall be subject to adjustment from time to time
as set forth in this Section 4. The Issuer shall give each Warrant
Holder notice of any event described below which requires an adjustment
pursuant to this Section 4 within three (3) Business Days after such
event.
4.1 Stock Dividends, Subdivisions and Combinations. If at any time the
Issuer shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or
other distribution of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
9
then (i) the number of shares of Common Stock for which a
Warrant is exercisable immediately after the occurrence of any
such event shall be adjusted to equal the number of shares of
Common Stock which a record holder of the same number of
shares of Common Stock for which a Warrant is exercisable
immediately prior to the occurrence of such event would own or
be entitled to receive after the happening of such event, and
(ii) the Current Warrant Price shall be adjusted to equal the
Current Warrant Price multiplied by a fraction, the numerator
of which shall be the number of shares of Common Stock for
which a Warrant is exercisable immediately prior to the
adjustment and the denominator of which shall be the number of
shares for which a Warrant is exercisable immediately after
such adjustment.
4.2 CERTAIN OTHER DISTRIBUTIONS. If at any time the Issuer shall take a
record of the holders of its Common Stock for the purpose of entitling
them to receive any dividend or other distribution of:
(a) cash;
(b) any evidences of its indebtedness (other than Convertible
Securities), any shares of its stock (other than Additional
Shares of Common Stock or Convertible Securities) or any other
securities or property of any nature whatsoever (other than
cash); or
(c) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness (other than Convertible
Securities), any shares of its stock (other than Additional
Shares of Common Stock or Convertible Securities) or any other
securities or property of any nature whatsoever;
then (i) the number of shares of Common Stock for which a
Warrant is exercisable shall be adjusted to equal the product
obtained by multiplying the number of shares of Common Stock
for which a Warrant is exercisable immediately prior to such
adjustment by a fraction (A) the numerator of which shall be
the Current Market Price per share of Common Stock at the date
of taking such record and (B) the denominator of which shall
be such Current Market Price per share of Common Stock, minus
the amount allocable to one share of Common Stock of any such
cash so distributable and of the fair value (as determined
reasonably and in good faith by the board of directors of the
Issuer) of any and all such evidences of indebtedness, shares
of stock, other securities or property or warrants or other
subscription or purchase rights so distributable, and (ii) the
Current Warrant Price shall be adjusted to equal (A) the
Current Warrant Price multiplied by the number of shares of
Common Stock for which a Warrant is exercisable immediately
prior to the adjustment divided by (B) the number of shares
for which a Warrant is exercisable immediately after such
adjustment. A reclassification of the Common Stock (other than
a change in par value, or from par value to no par value or
from no par value to par value) into shares of Common Stock
and shares of any other class of stock shall be deemed a
distribution by the Issuer to the holders of its Common Stock
of such shares of
10
such other class of stock within the meaning of this Section
4.2 and, if the Outstanding shares of Common Stock shall be
changed into a larger or smaller number of shares of Common
Stock as a part of such reclassification, such change shall be
deemed a subdivision or combination, as the case may be, of
the Outstanding shares of Common Stock within the meaning of
Section 4.1 of this Agreement.
4.3 ISSUANCE OF ADDITIONAL SHARES OF STOCK.
(a) If at any time the Issuer shall (except as hereinafter
provided) issue or sell any Additional Shares of Common Stock,
other than Permitted Issuances, for consideration in an amount
per Additional Share of Common Stock less than the Current
Market Price, then the Current Warrant Price shall be adjusted
by multiplying the Current Warrant Price by a fraction, the
numerator of which shall be (A) an amount equal to the sum of
(X) the number of shares of Common Stock Outstanding
immediately prior to such issuance or sale multiplied by the
Current Market Price immediately prior to the first to occur
of (i) board action by the Issuer authorizing such action or
(ii) the public announcement of an intent to take such action,
plus (Y) the consideration, if any, received by the Issuer
upon such issuance or sale, and the denominator of which shall
be (B) the total number of shares of Common Stock Outstanding
immediately after such issuance or sale multiplied by the
Current Market Price as determined in clause (A) above.
(b) The provisions of Section 4.3(a) of this Agreement shall not
apply to any issuance of Additional Shares of Common Stock for
which an adjustment is provided under Sections 4.1 or 4.2 of
this Agreement. No adjustment of the number of shares of
Common Stock for which a Warrant shall be exercisable shall be
made under Section 4.3(a) of this Agreement upon the issuance
of any Additional Shares of Common Stock which are issued
pursuant to the exercise of any warrants or other subscription
or purchase rights or pursuant to the exercise of any
conversion or exchange rights in any Convertible Securities
(i) if any such adjustment shall previously have been made
upon the issuance of such warrants or other rights or upon the
issuance of such Convertible Securities (or upon the issuance
of any such warrants or other rights) pursuant to Section 4.4
or Section 4.5 of this Agreement, (ii) if no adjustment was
required pursuant to such sections upon the issuance of such
Convertible Securities, warrants or other rights or (iii) in
the event the issuance of such Convertible Securities,
warrants or other rights predates or is of the same date as
this Agreement, if no adjustment would have been required
pursuant to such sections upon such issuance had this
Agreement been in effect.
4.4 ISSUANCE OF WARRANTS OR OTHER RIGHTS. If at any time the Issuer shall
take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Issuer is
the surviving corporation) issue or sell, any warrants or other rights
to subscribe for or purchase any Additional Shares of Common Stock or
any Convertible Securities, other than Permitted Issuances, whether or
not the rights to exchange or convert thereunder are
11
immediately exercisable, and if the price per share for which Common
Stock is issuable upon the exercise of such warrants or other rights or
upon conversion or exchange of such Convertible Securities shall be
less than the Current Market Price in effect immediately prior to the
time of such distribution, issue or sale, then the Current Warrant
Price shall be adjusted as provided in Section 4.3(a) of this Agreement
on the basis that (A) the maximum number of Additional Shares of Common
Stock issuable pursuant to all such warrants or other rights or
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to be Outstanding immediately following such
issuance, (B) the price per share for such Additional Shares of Common
Stock shall be deemed to be the lowest possible price per share in any
range of prices per share at which such Additional Shares of Common
Stock are available to such holders, and (C) the Issuer shall be deemed
to have received all of the consideration payable therefor, if any, as
of the date of the actual issuance of such warrants or other rights. No
further adjustments of the Current Warrant Price shall be made upon the
actual issuance of such Common Stock or of such other rights or upon
exercise of such warrants or other rights or upon the actual issuance
of such Common Stock upon such conversion or exchange of such
Convertible Securities.
4.5 ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the Issuer shall
take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Issuer is
the surviving corporation) issue or sell, any Convertible Securities,
other than Permitted Issuances, whether or not the rights to exchange
or convert thereunder are immediately exercisable, and if the price per
share for which Common Stock is issuable upon such conversion or
exchange shall be less than the Current Market Price in effect
immediately prior to the time of such issue or sale of Convertible
Securities, then the Current Warrant Price shall be adjusted as
provided in Section 4.3(a) of this Agreement on the basis that (A) the
maximum number of Additional Shares of Common Stock necessary to effect
the conversion or exchange of all such Convertible Securities shall be
deemed to be Outstanding immediately following such issuance, (B) the
price per share of such Additional Shares of Common Stock shall be
deemed to be the lowest possible price in any range of prices at which
such Additional Shares of Common Stock are available to such holders,
and (C) the Issuer shall be deemed to have received all of the
consideration payable therefor, if any, as of the date of actual
issuance of such Convertible Securities. No adjustment of the Current
Warrant Price shall be made under this Section 4.5 upon the issuance of
any Convertible Securities which are issued pursuant to the exercise of
any warrants or other subscription or purchase rights therefor if any
such adjustments shall previously have been made upon the issuance of
such warrants or other rights pursuant to Section 4.4 of this
Agreement. No further adjustments of the Current Warrant Price shall be
made upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities and, if any issue or sale of
such Convertible Securities is made upon exercise of any warrant or
other right to purchase any such Convertible Securities for which
adjustments of the Current Warrant Price have been or are to be made
pursuant to other provisions of this Section 4, no further adjustments
of the Current Warrant Price shall be made by reason of such issue or
sale.
12
4.6 SUPERSEDING ADJUSTMENT. If, at any time after any adjustment of the
Current Warrant Price shall have been made pursuant to Section 4.4 or
Section 4.5 of this Agreement as the result of any issuance of
warrants, options, rights or Convertible Securities, and such warrants,
options or rights, or the right of conversion or exchange in such other
Convertible Securities, shall expire, and all or a portion of such
warrants, options or rights, or the right of conversion or exchange
with respect to all or a portion of such other Convertible Securities,
as the case may be, shall not have been exercised, then such previous
adjustment shall be rescinded and annulled and, if applicable, the
Current Warrant Price shall be recalculated as if all such expired and
unexercised warrants, options, rights or Convertible Securities had
never been issued.
4.7 OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION. The
following provisions shall be applicable to the making of adjustments
of the number of shares of Common Stock for which a Warrant is
exercisable provided for in this Section 4:
(a) COMPUTATION OF CONSIDERATION. To the extent that any
Additional Shares of Common Stock shall be issued for cash
consideration, the consideration received by the Issuer
therefor shall be the amount of the cash received by the
Issuer therefor, or, if such Additional Shares of Common Stock
are sold to underwriters or dealers for public offering
without a subscription offering, the initial public offering
price (in any such case subtracting any amounts paid or
receivable for accrued interest or accrued dividends, but not
subtracting any compensation, discounts or expenses paid or
incurred by the Issuer for and in the underwriting of, or
otherwise in connection with, the issuance thereof). To the
extent that such issuance shall be for a consideration other
than cash, then, except as herein otherwise expressly
provided, the amount of such consideration shall be deemed to
be the fair value of such consideration at the time of such
issuance as determined reasonably and in good faith by a
majority of the disinterested members of the board of
directors of the Issuer.
(b) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by this
Section 4 shall be made whenever and as often as any specified
event requiring an adjustment shall occur, except that any
adjustment to the number of shares for which the Warrants are
exercisable that would otherwise be required may be postponed
(except in the case of a subdivision or combination of shares
of the Common Stock, as provided for in Section 4.1 of this
Agreement) up to, but not beyond, the date and time of
exercise of any Warrants if such adjustment either by itself
or with other adjustments not previously made adds or
subtracts less than 1% to the number of shares of Common Stock
for which the Warrants initially issued pursuant to this
Agreement are exercisable immediately prior to the making of
such adjustment. Any adjustment representing a change of less
than such minimum amount (except as aforesaid) which is
postponed shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this
Section 4 and not previously made, would result in a minimum
adjustment or on the date of exercise. For the purpose of any
adjustment, any specified event shall be deemed to have
occurred at the close of business on the date of its
occurrence.
13
(c) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Stock resulting from
an issuance of additional Warrants to any Warrant Holder
pursuant to this Section 4 shall be taken into account to the
nearest 1/10th of a share, subject to Section 2.4 of this
Agreement.
(d) WHEN ADJUSTMENT NOT REQUIRED. If the Issuer shall take a
record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution or
subscription or purchase rights and shall, thereafter and
before the distribution to stockholders thereof, legally
abandon its plan to pay or deliver such dividend,
distribution, subscription or purchase rights, no adjustment
shall be required by reason of the taking of such record and
any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(e) ESCROW OF WARRANT STOCK. If after any property becomes
distributable pursuant to this Section 4 by reason of the
taking of any record of the holders of Common Stock, but prior
to the occurrence of the event for which such record is taken,
any Warrant Holder exercises Warrants, any Additional Shares
of Common Stock issuable upon exercise of such Warrant by
reason of such adjustment shall be held in escrow for a
Warrant Holder by the Issuer to be issued to such Warrant
Holder upon and to the extent that the event actually takes
place, upon payment of the balance, if any, of the Warrant
Price for such Warrant at such date (after taking into account
any overpayment of the Warrant Price made at any time of the
initial Warrant exercise). Notwithstanding any other provision
to the contrary herein, if the event for which such record was
taken fails to occur or is rescinded, then such escrowed
shares shall be canceled by the Issuer and escrowed property
returned.
4.8 REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR DISPOSITION
OF ASSETS. In the event the Issuer shall reorganize its capital,
reclassify its capital stock, consolidate or merge with and into
another corporation or entity (where the Issuer is not the surviving
corporation or where there is a change in or distribution with respect
to the Common Stock of the Issuer), or sell, transfer or otherwise
dispose of all or substantially all its property, assets or business to
another corporation or entity and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition
of assets, shares of common stock of the successor or acquiring
corporation or entity, or any cash, shares of stock or other securities
or property of any nature whatsoever (including warrants or other
subscription or purchase rights) in addition to or in lieu of common
stock of the successor or acquiring corporation or entity ("OTHER
PROPERTY"), are to be received by or distributed to the holders of
Common Stock of the Issuer, then the Issuer shall, as a condition
precedent to such transaction, cause effective provisions to be made so
that each Warrant Holder shall have the right thereafter to receive,
upon exercise of a warrant, solely the number of shares of "common
stock of the successor or acquiring corporation" or of the Issuer, if
it is the surviving corporation, and Other Property receivable upon or
as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets, by a holder of the number of
shares of Common Stock for which a Warrant is exercisable immediately
prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, such
provisions shall include the express assumption by the successor or
acquiring corporation
14
or entity (if other than the Issuer) of the due and punctual observance
and performance of each and every covenant and condition of this
Agreement to be performed and observed by the Issuer and all the
obligations and liabilities hereunder, subject to such modifications as
may be deemed appropriate (as determined by resolution of the board of
directors of the Issuer) to provide for adjustments of shares of the
Common Stock for which a Warrant is exercisable which shall be as
nearly equivalent as practicable to the adjustments provided for in
this Section 4. For purposes of this Section 4.8, "common stock of the
successor or acquiring corporation" shall include stock of such
corporation of any class which is not preferred as to dividends or
assets over any other class of stock or other securities of such
corporation or entity and which is not subject to redemption and shall
also include any evidences of indebtedness, shares of stock or other
securities which are convertible into or exchangeable for any such
stock or other securities, either immediately or upon the arrival of a
specified date or the happening of a specified event, and any warrants
or other rights to subscribe for or purchase any such stock or
securities. The foregoing provisions of this Section 4.8 shall
similarly apply to successive reorganizations, reclassifications,
mergers, consolidations or disposition of assets.
5. NOTICES TO WARRANT HOLDERS
5.1 NOTICE OF ADJUSTMENTS. Whenever the number of shares of Common Stock
for which a Warrant is exercisable, or whenever the price at which a
share of such Common Stock may be purchased upon exercise of the
Warrants, shall be adjusted pursuant to Section 4, the Issuer shall
forthwith prepare a certificate to be executed by the chief financial
officer of the Issuer setting forth, in reasonable detail, the event
requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which the board of
directors of the Issuer determined the fair value of any evidences of
indebtedness, shares of stock, other securities or property or warrants
or other subscription or purchase rights referred to in Section 4 of
this Agreement), specifying the number of shares of Common Stock for
which a Warrant is exercisable and (if such adjustment was made
pursuant to Section 4.8 of this Agreement) describing the number and
kind of any other shares of stock or Other Property for which a Warrant
is exercisable, and any change in the purchase price or prices thereof,
after giving effect to such adjustment or change. The Issuer shall
promptly cause a signed copy of such certificate to be delivered to
each Warrant Holder in accordance with Section 15.2 of this Agreement.
The Issuer shall keep at its office or agency designated pursuant to
Section 12 of this Agreement copies of all such certificates and cause
the same to be available for inspection at said office during normal
business hours by any Warrant Holder or any prospective purchaser of a
Warrant designated by a Warrant Holder thereof.
5.2 NOTICE OF CERTAIN CORPORATE ACTION. Each Warrant Holder shall be
entitled to the same rights to receive notice of corporate action as
any holder of Common Stock.
6. REPRESENTATIONS AND WARRANTIES
The Issuer makes the following representations and warranties, each and
all of which shall be true and correct as of the date of execution and
delivery of this Agreement and shall survive the execution and delivery
of this Agreement:
15
(a) DUE ORGANIZATION; ETC. The Issuer is a corporation duly
organized validly existing and in good standing under the laws
of the State of Delaware, and has the power and authority to
execute and deliver this Agreement and the Warrant
Certificates, to issue the Warrants and to perform its
obligations under this Agreement and the Warrant Certificates.
(b) DUE AUTHORIZATION; NO VIOLATION. The execution, delivery and
performance by the Issuer of this Agreement and the Warrant
Certificates, the issuance of the Warrants and the issuance of
the Warrant Stock upon exercise of the Warrants have been duly
authorized by all necessary corporate action and do not and
will not violate, or result in a breach of, or constitute a
default under or require any consent under, or result in the
creation of any lien or security interest upon the assets of
the Issuer pursuant to, any Requirement of Law or any
contractual obligation binding upon the Issuer.
(c) DUE EXECUTION; ETC. This Agreement has been duly executed and
delivered by the Issuer and constitutes a legal, valid and
enforceable obligation of the Issuer. When the Warrants and
the Warrant Certificates have been issued as contemplated
hereby, (i) the Warrants and the Warrant Certificates will
constitute legal, valid, binding and enforceable obligations
of the Issuer and (ii) the Warrant Stock, when issued upon
exercise of the Warrants in accordance with the terms hereof,
will be duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock with no personal
liability attaching to the ownership thereof.
(d) CAPITALIZATION. The total number of shares of all classes of
stock that the Issuer shall on the Closing Date have authority
to issue is 50,000,000 shares, consisting of (i) 40,000,000
shares of Common Stock, par value $0.01 per share, of which,
after giving effect to the transactions contemplated herein or
in the Credit Agreement and all other issuances of capital
stock of the Issuer on or prior to the Closing Date,
15,975,543 shares of Common Stock will be issued and
outstanding and 1,250,000 shares of Common Stock will be
reserved for future issuance pursuant to this Agreement and
(ii) 10,000,000 shares of Preferred Stock, par value $0.01 per
share (1,500,000 of which are designated as Series A
Preferred), of which, after giving effect to the other
issuances of capital stock of the Issuer on the Closing Date,
1,000,000 shares of Series A Preferred will be issued and
outstanding. Schedule A sets forth a complete list of the
outstanding capital stock of the Issuer, including any
options, warrants or rights to purchase the capital stock of
the Issuer (including the warrants issued on the Closing
Date). The delivery hereunder by the Issuer to the Warrant
Holder of the Warrants issued on the Closing Date will
transfer and convey to the Warrant Holder good and marketable
title to such Warrants and, upon exercise of such Warrants in
accordance with this Agreement, good and marketable title to
the Common Stock purchased upon such exercise, free and clear
of all preemptive rights, liens, charges and encumbrances,
except for restrictions on transfer referred to in this
Agreement, or arising under the Federal and state securities
laws. Except as otherwise disclosed on Schedule A, the Issuer
does not have outstanding any
16
stock or securities convertible into or exchangeable for any
shares of its stock, nor, except as so set forth, does it have
outstanding any agreements, rights or options entitling any
person to subscribe for or to purchase any capital stock or
securities convertible into or exchangeable for any of its
shares of stock.
(e) FULL DISCLOSURE. No information contained in this Agreement,
the financial statements referred to in the Credit Agreement
or any written statement furnished by or on behalf of the
Issuer pursuant to the terms of this Agreement to the Warrant
Holder contains any untrue statement of a material fact or
omits to state a material fact necessary to make the
statements contained herein or therein not misleading in light
of the circumstances under which made.
(f) WARRANT PRICE. The Issuer has taken all corporate action, and
obtained all necessary authorizations or exemptions from any
public regulatory body or bodies or governmental entity or
entities having jurisdiction thereof, as may be necessary in
order that the Issuer may validly and legally issue fully paid
and non-assessable shares of Common Stock upon to exercise of
the warrants at the Warrant Price, as the same may be adjusted
pursuant hereto.
(g) OTHER REPRESENTATIONS AND WARRANTIES. The Issuer hereby
affirms and reaffirms for the express benefit of the Warrant
Holders that the representations and warranties made by the
Issuer in that certain Subordinated Guaranty Agreement dated
of even date herewith are true and correct, as if made -- in
favor of the Warrant Holder on the date hereof.
7. CERTAIN COVENANTS
7.1 NO IMPAIRMENT. The Issuer shall not by any action including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this
Agreement, but will at all times in good faith assist in the carrying
out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of each Warrant Holder
against impairment. Without limiting the generality of the foregoing,
the Issuer will use reasonable good faith efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable it to perform
its obligations under this Agreement.
Upon the request of a Warrant Holder, the Issuer will, at any time
during the period this Agreement is in effect, acknowledge in writing,
in form satisfactory to such Warrant Holder, the continuing validity of
this Agreement and the obligations of the Issuer hereunder.
7.2 RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH, OR
APPROVAL OF, ANY GOVERNMENTAL AUTHORITY. From and after the Closing
Date, the Issuer shall at all times
17
reserve and keep available for issue upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants.
All shares of Common Stock which shall be so issuable, when issued upon
exercise of any Warrants and payment therefor in accordance with the
terms of this Agreement, shall be duly and validly issued and fully
paid and non-assessable, and not subject to preemptive rights.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which a Warrant is exercisable or
in the Current Warrant Price, the Issuer shall obtain all such
authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies or governmental
entity or entities having jurisdiction thereof.
If any shares of Common Stock required to be reserved for issuance upon
exercise of Warrants require registration or qualification with any
governmental authority under any federal or state law (otherwise than
as provided in Section 9 of this Agreement) before such shares may be
so issued, the Issuer will in good faith and as expeditiously as
possible and at its expense endeavor to cause such shares to be duly
registered.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Issuer to
the holders of its Common Stock with respect to which any provision of
Section 4 of this Agreement refers to the taking of a record of such
holders, the Issuer will in each such case take such a record as of the
close of business on a Business Day. The Issuer will not at any time,
except upon dissolution, liquidation or winding up of the Issuer, close
its stock transfer books or Warrant transfer books so as to result in
preventing or delaying the exercise or transfer of any Warrants.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred before
satisfaction of the conditions specified in this Section 9, which
conditions are intended to ensure compliance with the provisions of the
Securities Act and applicable state securities laws with respect to the
transfer of any Warrant or any Warrant Stock. Each Warrant Holder, by
entering into this Agreement and accepting the Warrants, agrees to be
bound by the provisions of this Section 9.
9.1 RESTRICTIVE LEGEND. Except as otherwise provided in this Section 9,
each certificate representing Warrants or Warrant Stock, shall be
stamped or otherwise imprinted with a legend in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM. SUCH
SECURITIES ARE SUBJECT TO THE RESTRICTIONS AND PRIVILEGES SPECIFIED IN
A WARRANT
18
AGREEMENT, DATED AS OF OCTOBER 31, 2000, BETWEEN XXXXXXX EXPLORATION
COMPANY AND THE INITIAL HOLDERS OF SECURITIES NAMED THEREIN, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF XXXXXXX EXPLORATION COMPANY AND
WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER HEREOF UPON WRITTEN
REQUEST, AND THE HOLDER OF THIS CERTIFICATE AGREES TO BE BOUND
THEREBY."
9.2 NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION. Prior to any
transfer of any Warrants or any shares of Restricted Common Stock, the
Warrant Holder of such Warrants or Restricted Common Stock shall give
five days prior written notice to the Issuer of such Warrant Holder's
intention to effect such transfer (a "TRANSFER NOTICE"). Each Warrant
Holder agrees that it will not sell, transfer or otherwise dispose of
Warrants or any shares of Restricted Common Stock, in whole or in part,
except pursuant to an effective registration statement under the
Securities Act or an exemption from registration thereunder. Each
certificate, if any, evidencing such shares of Restricted Common Stock
issued upon such transfer shall bear the restrictive legend set forth
in Section 9.1, and each Warrant Certificate issued upon such transfer
shall bear the restrictive legend set forth in Section 9.1 of this
Agreement, unless in the opinion of the transferee's or Warrant
Holder's counsel delivered to the Issuer in connection with such
transfer such legend is not required in order to ensure compliance with
the Securities Act.
The Warrant Holders of Warrants and Warrant Stock shall have the right
to request registration of such Warrant Stock pursuant to Section 9.3
of this Agreement.
9.3 INCIDENTAL REGISTRATION. If the Issuer at any time proposes to file on
its behalf and/or on behalf of any of its security holders (the
"DEMANDING SECURITY HOLDERS") a Registration Statement under the
Securities Act on any form (other than a Registration Statement (i)
filed pursuant to demand under the Company's Registration Rights
Agreement with Joint Energy Development Investments II Limited
Partnership, a Delaware limited partnership, and Enron Capital & Trade
Resources Corp., a Delaware corporation, dated August 20, 1998, as
amended, or (ii) on Form S-8 or any similar or successor form or any
other registration statement relating to an offering of securities
solely to the Issuer's existing security holders or employees) to
register the offer and sale of its Common Stock for cash, it will give
written notice to all Warrant Holders of Warrants or Warrant Stock at
least twenty (20) days before the anticipated date of initial filing
with the Commission of such Registration Statement, which notice shall
set forth the Issuer's intention to effect such a registration, the
class or series and number of equity securities proposed to be
registered and the intended method of disposition of the securities
proposed to be registered by the Issuer. The notice shall offer to
include in such filing all of the Warrant Holder's Registrable
Securities.
Each Warrant Holder desiring to have Registrable Securities registered
under this Section 9.3 shall advise the Issuer in writing within
fifteen (15) days after the date of receipt of such offer from the
Issuer, setting forth the amount of such Registrable Securities for
which registration is requested. The Issuer shall thereupon include in
such filing the number of shares of Registrable Securities for which
registration is so
19
requested, subject to the next sentence, and shall use its best efforts
to effect registration under the Securities Act of such securities. If
the managing underwriter of a proposed public offering shall advise the
Issuer in writing that, in its opinion, the distribution of the
Registrable Securities requested to be included in the registration
concurrently with the securities being registered by the Issuer or any
Demanding Security Holder would materially and adversely affect the
distribution of such securities by the Issuer or such Demanding
Security Holders, then all selling security holders (but not the Issuer
or the Demanding Security Holders) shall reduce the amount of
securities each intended to distribute through such offering on a pro
rata basis to the greatest aggregate amount which, in the opinion of
such managing underwriter, would not materially and adversely affect
the distribution of such securities.
Nothing in this Section 9.3 shall preclude the Issuer from
discontinuing the registration of its securities being effected on its
behalf under this Section 9.3 at any time prior to the effective date
of the registration relating thereto. Notwithstanding any provision
herein, the rights of the Warrant Holder under this Section 9.3 are
subject to the express limitations contained in registration rights
agreements in effect on the date hereof between the Issuer and other
parties; provided, however, that the Issuer shall not on or after the
date of this Agreement enter into any registration rights agreement
with respect to its securities that conflict with the registration
rights granted to the Warrant Holder herein.
9.4 REGISTRATION PROCEDURES. If the Issuer is required by the provisions of
this Section 9 to use its best efforts to effect the registration of
any of its securities under the Securities Act, the Issuer will, as
expeditiously as possible:
(a) prepare and file with the Commission a registration statement
with respect to such securities (a "REGISTRATION STATEMENT")
and use its best efforts to cause such Registration Statement
to become and remain effective for the period described in
paragraph (b) below;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such
Registration Statement effective and to comply with the
provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such
Registration Statement until the earlier of such time as all
of such securities have been disposed of in a public offering
or the expiration of 90 days;
(c) furnish to such selling security holders such number of copies
of a summary prospectus or other prospectus, including a
preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents, as such selling
security holders may reasonably request;
(d) use its best efforts to register or qualify the securities
covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions within the
United States as each holder of such securities shall
20
request (provided, however, the Issuer shall not be obligated
to qualify as a foreign corporation to do business under the
laws of any jurisdiction in which it is not then qualified or
to file any general consent to service or process), and do
such other reasonable acts and things as may be required of it
to enable such holder to consummate the disposition in such
jurisdiction of the securities covered by such Registration
Statement;
(e) enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as
are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities; and
(f) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable, but
not later than 18 months after the effective date of the
Registration Statement, an earnings statement covering the
period of at least 12 months beginning with the first full
month after the effective date of such Registration Statement,
which earnings statements shall satisfy the provisions of
Section 11(a) of the Securities Act.
It shall be a condition precedent to the obligation of the
Issuer to take any action pursuant to this Section 9 in
respect of the securities which are to be registered at the
request of any Warrant Holder of Registrable Securities that
such Warrant Holder shall furnish to the Issuer such
information regarding the securities held by such Warrant
Holder and the intended method of disposition thereof as the
Issuer shall reasonably request and as shall be required in
connection with the action taken by the Issuer.
9.5 EXPENSES. All expenses incurred in complying with this Section 9,
including, without limitation, all registration and filing fees
(including all expenses incident to filing with the NASD), printing
expenses, fees and disbursements of counsel for the Issuer, the
reasonable fees and expenses of one counsel for the selling security
holders (selected by the Person holding the plurality of the securities
being registered), expenses of any special audits incident to or
required by any such registration and expenses of complying with the
securities or blue sky laws of any jurisdictions pursuant to Section
9.4(d) of this Agreement (all of such expenses shall be collectively
referred to herein as "REGISTRATION EXPENSES"), shall be paid by the
Issuer; provided, however, the Issuer shall not be responsible for any
discount or commission or cost reimbursement to any underwriter in
respect of the securities sold by such Warrant Holder of Registrable
Securities.
9.6 INDEMNIFICATION AND CONTRIBUTION.
(a) In the event of any registration of any of the Registrable
Securities under the Securities Act pursuant to this Section
9, the Issuer shall indemnify and hold harmless each Warrant
Holder of such Registrable Securities, such Warrant Holder's
directors and officers, each Affiliate of such Warrant Holder,
and each other Person (including each underwriter) who
participated in the offering of such Registrable Securities
and each other Person, if any, who controls such Warrant
Holder or such participating Person, if any, who controls such
Warrant
21
Holder or such participating Person within the meaning of the
Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such Warrant Holder or
any such director or officer or participating Person or
Affiliate or controlling Person may become subject under the
Securities Act or any other statute or at common law, insofar
as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any
alleged untrue statement of any material fact contained, on
the effective date thereof, in any Registration Statement
under which such securities were registered under the
Securities Act, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, or
(ii) any alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading, and shall reimburse such
Warrant Holder or such director, officer or participating
Person or Affiliate or controlling Person for any legal or any
other expenses reasonably incurred by such Warrant Holder or
such director, officer or participating Person or Affiliate or
controlling Person in connection with investigating or
defending any such loss, claim, damage, liability or action;
provided, however, that the Issuer shall not be liable in any
such case to the extent that any such loss, claim, damage or
liability directly arises out of or is directly based upon any
alleged untrue statement or alleged omission made in such
Registration Statement, preliminary prospectus, prospectus or
amendment or supplement in reliance upon and in conformity
with written information furnished to the Issuer by such
Warrant Holder specifically for use therein. Such indemnity
shall remain in full force and effect regardless of any
investigation made by or on behalf of such Warrant Holder or
such director, officer or participating Person or Affiliate or
controlling Person, and shall survive the transfer of such
securities by such Warrant Holder.
(b) Each Warrant Holder of any Registrable Securities, by
acceptance thereof, agrees to indemnify and hold harmless the
Issuer, its directors and officers and each other Person, if
any, who controls the Issuer within the meaning of the
Securities Act against any losses, claims, damages or
liabilities, joint or several, to which the Issuer or any such
director or officer or any such Person may become subject
under the Securities Act or any other statute or at common
law, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) directly arise out of or are
directly based upon (i) information in writing provided to the
Issuer by such Warrant Holder of such Registrable Securities
contained, on the effective date thereof, in any Registration
Statement under which securities were registered under the
Securities Act at the request of such Warrant Holder, any
preliminary prospectus or final prospectus contained therein,
or any amendment or supplement thereto or (ii) that such
Warrant Holder's obligation under this Section 9.6(b) to
indemnify and hold harmless the Issuer shall in no event
exceed the lesser of (x) the damage attributable solely to the
inclusion of such written information in such Registration
Statement, preliminary prospectus, final prospectus, or
amendment or supplement suffered by the Person or Persons
whose claims gave rise to such losses, claims, damages or
liabilities and (y) the net
22
proceeds received by such Warrant Holder from the sale of
Registrable Securities giving rise to such indemnification.
(c) If the indemnification provided for in this Section 9 from the
indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to herein, then the
indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate
to reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions which
resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, has
been made by, or related to information supplied by, such
indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid
or payable by a party under this Section 9 as a result of the
losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such party in connection with
any investigation or proceeding.
The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 9.6(c)
were determined by pro rata allocation or by any other method
of allocation which does not take account of the equitable
considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this subsection
(c), no Warrant Holder shall be required to contribute any
amount in excess of the total amount received by it upon the
sale of its securities pursuant to the Registration Statement
to which the losses, claims, damages, liabilities and expenses
referred to above relate. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent
misrepresentation. The obligations of each of the Warrant
Holders under this subsection (c) to contribute are several
and not joint.
(d) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any person or entity
entitled to indemnification hereunder shall (i) give prompt
written notice to the indemnifying party after the receipt by
the indemnified party of a written notice of the commencement
of any action, suit, proceeding or investigation or threat
thereof made in writing for which such indemnified party will
claim indemnification or contribution pursuant to this
Agreement; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under
Section 9.6 hereof, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice,
and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest may exist between such
indemnified and indemnifying parties with
23
respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If the indemnifying
party is entitled to, and does, assume the defense of such
claim, the indemnified party shall have the right to employ
separate counsel and to participate in the defense thereof,
but the fees and expenses of such counsel shall be borne by
the indemnified party. Whether or not such defense is assumed
by the indemnifying party, the indemnifying party shall not be
subject to any liability for any settlement made without its
consent (but such consent will not be unreasonably withheld).
No indemnifying party shall be permitted to consent to the
entry of any judgment or to enter into any settlement that
does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such claim or
litigation. An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim shall not be
obligated to pay the fees and expenses of more than one
counsel in any one jurisdiction for all parties indemnified by
such indemnifying party with respect to such claim, unless in
the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any
other of such indemnified parties with respect to such claim,
in which event the indemnifying party shall be obligated to
pay the fees and expenses of such additional counsel or
counsels.
9.7 TERMINATION OF RESTRICTIONS. Notwithstanding the foregoing provisions
of this Section 9, the restrictions imposed by this Section 9 upon the
transferability of the Warrants, the Warrant Stock and the Restricted
Common Stock (or Common Stock issuable upon the exercise of the
Warrants) and the legend requirement of Section 9.1 of this Agreement
shall terminate as to any particular Warrant or share of Warrant Stock
or Restricted Common Stock (or Warrant Stock) (i) when and so long as
such security shall have been registered under the Securities Act and
disposed of pursuant thereto, or (ii) when the Warrant Holder thereof
shall have delivered to the Issuer the written opinion of counsel to
such Warrant Holder, stating that such legend is not required in order
to ensure compliance with the Securities Act. Whenever the restrictions
imposed by this Section 9 shall terminate as to any Warrants or any
Restricted Common Stock, as hereinabove provided, the Warrant Holder
thereof shall be entitled to receive from the Issuer, at the expense of
the Issuer, a new Warrant Certificate or a new certificate representing
such Common Stock, as the case may be, not bearing the restrictive
legend set forth in Section 9.1 of this Agreement.
9.8 LISTING ON SECURITIES EXCHANGE. If at any time the Issuer shall list
any shares of Common Stock on any securities exchange, it will, at its
expense, use its best efforts to list thereon, maintain and, when
necessary, increase such listing of, all shares of Common Stock issued
or, to the extent permissible under the applicable securities exchange
rules, issuable upon the exercise of the Warrants so long as any shares
of Common Stock shall be so listed during the Exercise Period.
24
10. SUPPLYING INFORMATION
The Issuer shall cooperate with each Warrant Holder of a Warrant and
each Warrant Holder of Restricted Common Stock in supplying such
information as may be reasonably necessary for such Warrant Holder to
complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the availability
of an exemption from the Securities Act for the sale of any Warrant or
Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Issuer from any Warrant Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of a certificate representing Warrants or
Warrant Stock and indemnity reasonably satisfactory to it (it being
understood that the written agreement of the Warrant Holder or an
Affiliate thereof shall be sufficient indemnity) and in case of
mutilation upon surrender and cancellation hereof or thereof, the
Issuer will execute and deliver in lieu hereof or thereof a new Warrant
or new stock certificate as the case may be, of like tenor to such
Warrant Holder; provided, in the case of mutilation, no indemnity shall
be required if the certificate representing Warrants or Warrant Stock
in identifiable form is surrendered to the Issuer for cancellation.
12. OFFICE OF THE ISSUER
As long as any of the Warrants remain outstanding, the Issuer shall
maintain an office or agency (which may be the principal executive
officers of the Issuer) where the Warrants may be presented for
exercise, registration or transfer, division or combination as provided
in this Agreement.
13. APPRAISAL
The determination of the Appraised Value per share of Common Stock
shall be made by an investment banking firm of nationally recognized
standing mutually agreed to by the Issuer and the Required Holders. If
the investment banking firm selected by the Issuer is not acceptable to
the Required Holders and the Issuer and the Required Holders cannot
agree on a mutually acceptable investment banking firm, then the
Required Holders and the Issuer shall each choose one such investment
banking firm and the respective chosen firms shall agree on another
investment banking firm which shall make the determination. The Issuer
shall retain, at its sole cost, such investment banking firm as may be
necessary for the determination of Appraised Value required by the
terms of this Agreement.
14. LIMITATION OF LIABILITY; NO RIGHTS AS STOCKHOLDER
No provision hereof, in the absence of affirmative action by any
Warrant Holder to purchase shares of Common Stock, and no enumeration
herein of the rights or privileges of any Warrant Holder, shall give
rise to any liability of such Warrant Holder for the purchase price of
any Common Stock or as a stockholder of the Issuer, whether such
25
liability is asserted by the Issuer or by creditors of the Issuer.
Except as may otherwise be provided by law or by separate agreement
between a Warrant Holder and the Issuer, no Warrant Holder, as such,
shall be entitled to vote or be deemed the holder of Common Stock or
any other securities (other than Warrants) of the Issuer which may at
any time be issuable on the exercise hereof, nor shall anything
contained herein be construed to confer upon any Warrant Holder the
rights of a stockholder of the Issuer or the right to vote for the
election of directors or upon any matters submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate
action or to receive notice of meetings or other actions affecting
stockholders (except as provided herein), or to receive dividends or
otherwise, until the Warrants shall have been exercised in accordance
with the terms and conditions hereof.
15. MISCELLANEOUS
15.1 NON-WAIVER AND EXPENSES. No course of dealing or any delay or failure
to exercise any right hereunder on the part of any holder of Warrant
Stock shall operate as a waiver of such right or otherwise prejudice
such holder of Warrant Stock's rights, powers or remedies. If the
Issuer fails to comply with any provision of this Agreement, the Issuer
shall pay to the applicable holder of Warrant Stock such amounts as
shall be sufficient to cover any costs and expenses including, but not
limited to, reasonable attorneys' fees, including those of appellate
proceedings, incurred by the holder of Warrant Stock in enforcing any
of its rights, powers or remedies hereunder.
15.2 NOTICE GENERALLY. Any notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Agreement shall be sufficiently
given or made if in writing and either delivered in person with receipt
acknowledged or sent by registered or certified mail, return receipt
requested, postage prepaid, telex, telecopier or overnight air courier
guaranteeing next day delivery, addressed as follows:
(a) If to SCI, as Warrant Holder, at:
Address: 000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx, Vice-President
Telecopier No. (000) 000-0000
(b) If to the Issuer at:
Xxxxxxx Exploration Company
0000 Xxxxxx Xxxxx Xxxxxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: President
Telecopier No.: (000) 000-0000
or at such other address as may be substituted by notice given
as herein provided. The giving of any notice required
hereunder may be waived in writing by the
26
party entitled to receive such notice. Every notice, demand,
request, consent, approval, declaration, delivery or other
communication hereunder shall be deemed to have been duly
given or served on the date on which personally delivered,
with receipt acknowledged, or three (3) Business Days after
the same shall have been deposited in the United States mail.
15.3 INDEMNIFICATION. Except to the extent otherwise provided in Section 9.6
of this Agreement, the Issuer agrees to indemnify and hold harmless
Warrant Holder and its officers, directors, employees, agents,
attorneys and Affiliates (each an "Indemnified Party") from and against
any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses and
disbursements of any kind which may be imposed upon, incurred by or
asserted against such Indemnified Party relating to or arising out of
(i) such Warrant Holder's exercise of the Warrants and/or ownership of
any shares of Warrant Stock issued in consequence thereof, or (ii) any
litigation to which such Warrant Holder is made a party in its capacity
as a stockholder or Warrant Holder of the Issuer; provided, however,
that the Issuer will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses or
disbursements (A) arise solely from any violation by such Warrant
Holder of any law or regulation applicable to it or (B) are found in a
final non-appealable judgment by a court to have resulted from such
Warrant Holder's bad faith or willful misconduct or violation of law.
The procedures to be followed for claims of indemnification under this
Section 15.3 shall be as set forth in Section 9.6(d) of this Agreement.
15.4 REMEDIES. Each Warrant Holder of Warrants and Warrant Stock, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance
of its rights under Section 9 of this Agreement. The Issuer agrees that
monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of Section 9 of
this Agreement, and hereby agrees to waive any defense to the contrary
in any action for specific performance that a remedy at law would be
adequate.
15.5 SUCCESSORS AND ASSIGNS. Subject to the provisions of Sections 3.1 and 9
of this Agreement, this Agreement and the rights evidenced hereby shall
inure to the benefit of and be binding upon the successor of the Issuer
and the successors and assigns of any Warrant Holder. The provisions of
this Agreement are intended to be for the benefit of all Warrant
Holders from time to time of the Warrants and Warrant Stock, and shall
be enforceable by any such Warrant Holder.
15.6 COMPLETE AGREEMENT; AMENDMENT. This Agreement, the Warrant
Certificates, the Credit Agreement and the Loan Documents constitute
the complete agreement among the parties with respect to the subject
matter hereof. This Agreement may be modified or amended or the
provisions hereof waived only with the written consent of the Issuer
and the Required Holders, provided that no Warrant may be modified or
amended to reduce the number of shares of Common Stock for which such
Warrant is exercisable or to increase the price at which such shares
may be purchased upon exercise of such Warrant (before giving effect to
any adjustment as provided herein) or to accelerate the Expiration
27
Date without the prior written consent of the Warrant Holder thereof,
and any amendment of Section 9 of this Agreement shall also require the
written consent of Warrant Holders of Warrants and/or Warrant Stock
representing more than 50% of the total of (i) all shares of Warrant
Stock then subject to purchase upon exercise of all Warrants then
Outstanding, and (ii) all shares of Warrant Stock then Outstanding.
15.7 SEVERABILITY. Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining
provisions of this Agreement.
15.8 HEADINGS. The headings used in this Agreement are for the convenience
of reference only and shall not, for any purpose, be deemed a part of
this Agreement.
15.9 GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. IN ALL RESPECTS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
TEXAS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT
REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
15.10 CONSENT TO JURISDICTION AND VENUE.
(a) THE ISSUER AND EACH WARRANT HOLDER HEREBY EXPRESSLY SUBMITS TO
THE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS OR THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
TEXAS. FINAL JUDGMENT AGAINST SUCH PARTY IN ANY SUCH SUIT
SHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR AS OTHERWISE
PERMITTED BY APPLICABLE LAW, A CERTIFIED OR TRUE COPY OF WHICH
SHALL BE CONCLUSIVE EVIDENCE OF THE FACTS AND OF THE AMOUNT OF
ANY INDEBTEDNESS OR LIABILITY OF SUCH PARTY THEREIN DESCRIBED;
PROVIDED, HOWEVER, EACH PARTY MAY AT ITS OPTION BRING SUIT, OR
INSTITUTE OTHER JUDICIAL PROCEEDINGS AGAINST THE OTHER PARTY
OR ANY OF ITS ASSETS, IN THE COURTS OF ANY COUNTRY OR PLACE
WHERE SUCH PARTY OR SUCH ASSETS MAY BE FOUND.
(b) THE ISSUER AND EACH WARRANT HOLDER HEREBY IRREVOCABLY WAIVES
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
COURTS OF THE STATE OF TEXAS OR THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF TEXAS
28
AND HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
15.11 COUNTERPARTS: This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
XXXXXXX EXPLORATION COMPANY, as Issuer
By: /s/Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Chief Financial Officer
SHELL CAPITAL INC.,
as Warrant Holder
By: /s/Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Vice President
30
