SUBSCRIPTION AGREEMENT BETWEEN CRIMSON EXPLORATION INC. AND AMERICA CAPITAL ENERGY CORPORATION DATED AS OF SEPTEMBER 24, 2010
Exhibit 99.2
Execution Version
BETWEEN
CRIMSON EXPLORATION INC.
AND
AMERICA CAPITAL ENERGY CORPORATION
DATED AS OF SEPTEMBER 24, 2010
TABLE OF CONTENTS
ARTICLE I THE COMMON SHARES; THE OPTION |
1 | |||
Section 1.01 Issuance, Sale and Delivery of Shares to Purchaser |
1 | |||
Section 1.02 Effectiveness; Closing |
2 | |||
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY |
2 | |||
Section 2.01 Organization, Qualifications and Corporate Power |
2 | |||
Section 2.02 Authorization; No Conflict; No Violation |
2 | |||
Section 2.03 Consents and Approvals |
3 | |||
Section 2.04 Validity |
3 | |||
Section 2.05 Authorized Capital Stock |
4 | |||
Section 2.06 Reports and Financial Statements |
4 | |||
Section 2.07 No Undisclosed Liabilities |
5 | |||
Section 2.08 Subsequent Events |
5 | |||
Section 2.09 Litigation; Compliance with Law |
5 | |||
Section 2.10 Intellectual Property |
6 | |||
Section 2.11 Real Property |
6 | |||
Section 2.12 Insurance |
6 | |||
Section 2.13 Taxes |
6 | |||
Section 2.14 Agreements |
6 | |||
Section 2.15 Offering of the Common Shares, Option and Preferred Shares |
7 | |||
Section 2.16 Brokers; Financial Advisors |
7 | |||
Section 2.17 Environmental and Safety Laws |
7 | |||
Section 2.18 Employee Benefits |
7 | |||
Section 2.19 Oil and Gas Properties |
8 | |||
Section 2.20 Marketing of Production |
8 | |||
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER |
8 | |||
Section 3.01 Investment Representations and Warranties |
8 | |||
Section 3.02 Organization, Qualifications and Corporate Power |
9 | |||
Section 3.03 Authorization; No Conflict; No Violation |
10 | |||
Section 3.04 Consents and Approvals |
10 | |||
Section 3.05 Validity |
10 | |||
Section 3.06 Financing |
10 | |||
Section 3.07 Solvency |
11 | |||
Section 3.08 Brokers; Financial Advisors |
11 | |||
Section 3.09 Certain Covenants of Purchaser |
11 | |||
ARTICLE IV ADDITIONAL AGREEMENTS |
12 | |||
Section 4.01 Confidentiality |
12 | |||
Section 4.02 Notification of Certain Matters |
12 | |||
Section 4.03 Regulatory and Other Authorizations; Notices and Consents |
12 | |||
Section 4.04 Public Announcements |
13 | |||
Section 4.05 IRS Forms |
13 |
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Section 4.06 Certain Approvals |
13 | |||
Section 4.07 Fees and Expenses |
14 | |||
Section 4.08 Registration Rights Agreement |
14 | |||
ARTICLE V CONDITIONS TO THE OBLIGATIONS OF PURCHASER AND THE COMPANY |
14 | |||
Section 5.01 Conditions to Purchaser’s Obligations at the Closing |
14 | |||
Section 5.02 Conditions to the Company’s Obligations at the Closing |
15 | |||
ARTICLE VI INDEMNIFICATION |
16 | |||
Section 6.01 Survival |
16 | |||
Section 6.02 Indemnity |
16 | |||
ARTICLE VII MISCELLANEOUS |
17 | |||
Section 7.01 Brokerage |
17 | |||
Section 7.02 Parties in Interest |
18 | |||
Section 7.03 Specific Performance |
18 | |||
Section 7.04 Further Assurances |
18 | |||
Section 7.05 Arbitration |
18 | |||
Section 7.06 Notices |
19 | |||
Section 7.07 Governing Law |
20 | |||
Section 7.08 Entire Agreement |
21 | |||
Section 7.09 Counterparts |
21 | |||
Section 7.10 Amendments and Waivers |
21 | |||
Section 7.11 Successors and Assigns |
21 | |||
Section 7.12 Severability |
21 | |||
Section 7.13 Titles and Subtitles |
22 | |||
Section 7.14 Adjustments for Stock Splits, Etc. |
22 | |||
Section 7.15 Aggregation of Stock |
22 | |||
Section 7.16 Construction |
22 | |||
Section 7.17 Remedies |
22 | |||
Section 7.18 Assignment |
23 | |||
Section 7.19 Certain Defined Terms |
23 |
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This SUBSCRIPTION AGREEMENT (this “Agreement”), is executed as of
September 24, 2010, to be effective according to Section 1.02(a), by and between
Crimson Exploration Inc., a Delaware corporation (the “Company”), and America Capital Energy
Corporation, a New York corporation (the “Purchaser”). Certain capitalized terms used herein are
defined in Section 7.19 of this Agreement.
WHEREAS, the Company wishes to issue and sell to Purchaser, and Purchaser desires to purchase,
(i) shares of the Company’s authorized but unissued shares of common stock, par value US$0.001 per
share (the “Common Stock”) and (ii) an option (the “Option”) to acquire a newly created class of
preferred stock having the rights and preferences as summarized on Exhibit A (the
“Preferred Stock”), in each case on the terms and conditions set forth in this Agreement;
WHEREAS, Purchaser has disclosed to the Company that, while it has no current arrangements,
understandings or agreements to do so, Purchaser may from time to time purchase additional shares
of the Company’s common stock for investment purposes through open market purchases, negotiated
private acquisitions or otherwise.
NOW, THEREFORE, in consideration of the premises, representations, warranties and the mutual
covenants contained in this Agreement, the parties agree as follows:
ARTICLE I
THE COMMON SHARES; THE OPTION
Section 1.01 Issuance, Sale and Delivery of Shares to Purchaser.
(a) On the terms and subject to the conditions of this Agreement the Company shall issue and
sell to Purchaser, and Purchaser shall purchase from the Company, (i) 4,250,000 shares of the
Common Stock (the “Common Shares”) and (ii) the Option to acquire an additional 1,750,000 shares of
the Preferred Stock (the “Preferred Shares”) which shall be automatically convertible into a like
number of shares of Common Stock as described herein, for an aggregate cash payment of
US$21,250,000 (the “Purchase Price”). The Common Shares and the Option will be issued and sold to
Purchaser on the Closing Date, and the Purchase Price will be paid on the Closing Date as set forth
in Section 1.02.
(b) The Option shall be exercisable in full and not in part by Purchaser for a period
beginning on the date of the Closing and ending on and including the 60 calendar days from the
Closing Date (the “Exercise Period”). Subject to such additional requirements for exercise as may
be set forth in the Option Agreement (as defined below), Purchaser may exercise the Option during
the Exercise Period by providing to the Company written notice of exercise in accordance with
Section 7.06 together with delivery of a cash payment of US$8,750,000 in immediately
available funds to the Deposit Account (as defined in the Deposit Agreement) of the Company. For
the avoidance of doubt, after the expiration of the Exercise Period, the Option shall lapse and
shall no longer be exercisable by Purchaser. Upon valid exercise of the Option, (i) the Preferred
Shares will be deemed issued and sold to Purchaser and (ii) the Company shall promptly issue
and deliver to Purchaser a stock certificate or certificates in definitive form, registered in
the name of Purchaser, representing the Preferred Shares (or if such Preferred Shares have
automatically converted to shares of Common Stock, such shares of Common Stock), bearing such
restrictive legends as may be customarily required under United States securities laws.
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Section 1.02 Effectiveness; Closing.
(a) This Agreement shall become effective at the time the conditions to each party’s
obligations to consummate the Closing as set forth in Article V have been satisfied or,
with respect to such conditions which by their terms must be satisfied at the Closing, the time in
which each party is capable of performing such conditions.
(b) The closing of the issuance and sale of the Common Shares and the Option (the “Closing”)
shall take place at the offices of Xxxxxx & Xxxxxx LLP in Houston, Texas on the date (such date,
the “Closing Date”) determined pursuant to Section 1(a) of the Deposit Agreement, dated September
24, 2010, by and between the Company and Purchaser (the “Deposit Agreement”).
ARTICLE II
The Company represents and warrants to Purchaser that, as of the Closing Date:
Section 2.01 Organization, Qualifications and Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of Delaware. The
Company is duly licensed or qualified to transact business as a foreign corporation and is in good
standing in each jurisdiction in which the nature of the business transacted by it or the character
of the properties owned or leased by it requires such licensing or qualification, except as such
failures, individually or in the aggregate, would not reasonably be expected to cause a Material
Adverse Change. The Company has full corporate power and authority to own and hold its properties
and to carry on its business as now conducted, except as such failures, individually or in the
aggregate, would not reasonably be expected to cause a Material Adverse Change, and to execute,
deliver and perform each Transaction Document to which it is a party, and to issue, sell and
deliver the Common Shares, the Option and the Preferred Shares.
Section 2.02 Authorization; No Conflict; No Violation. The Company’s execution and delivery of each
Transaction Document to which it is a party and performance of its obligations thereunder, and the
issuance, sale and delivery of the Common Shares, the Option and the Preferred Shares, have been
duly authorized by all requisite corporate action and will not (a) result in a violation of the
Certificate of Incorporation of the Company filed with the Delaware Secretary of State on June 13,
2005, as amended by (i) the Certificate of Designation of Series D Preferred Stock of the Company,
par value US$0.01 per share (the “D Shares”), filed with the Delaware Secretary of State on June
27, 2005, (ii) the Certificate of Designation of Series E Cumulative Convertible Preferred Stock of
the Company, par value US$0.01 per share (the “E Shares”), filed with the Delaware Secretary of
State on June 27,
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2005, (iii) the Certificate of Designation of Series G Convertible Preferred Stock of the Company,
par value US$0.01 per share (the “G Shares”), filed with the Delaware Secretary of State on June
27, 2005, as amended and restated in its entirety by that certain Certificate of Amendment filed
with the Delaware Secretary of State on December 8, 2009, (iv) the Certificate of Designation of
Series H Convertible Preferred Stock of the Company, par value US$0.01 per share (the “H Shares”),
filed with the Delaware Secretary of State on June 27, 2005, (v) the Certificate of Ownership and
Merger Merging GulfWest Energy Inc., a Texas corporation, into the Company, filed with the Delaware
Secretary of State on June 28, 2005, and (vi) the Certificate of Amendment of Certificate of
Incorporation of the Company filed with the Delaware Secretary of State on September 15, 2006 (as
amended, the “Charter”) or the Company’s Bylaws, as amended to the date of this Agreement (the
“Bylaws”), (b) result in a violation of any applicable law, rule or regulation, or any order,
injunction, judgment or decree of any court or other agency of government, (c) conflict with,
result in a breach of, or constitute (or, with due notice or lapse of time or both, would
constitute) a default under, or give rise to any right of termination, acceleration or cancellation
under, any material indenture, agreement, contract, evidence of indebtedness, note, lease or other
instrument to which the Company or any of its properties or assets is bound and filed as an exhibit
to any of the Company SEC Documents, (d) result in the creation or imposition of any Lien upon the
Company or any of the Company’s properties or assets or (e) require any consent, approval,
notification, waiver or other similar action from any third party, except as such violation,
conflict, breach, default, right, Lien or failure would not, individually or in the aggregate, in
the case of (b), (c), (d) or (e), be reasonably expected to cause a Material Adverse Change and as
would not, individually or in the aggregate, prevent consummation of any of the transactions
contemplated hereby or otherwise prevent the Company from performing its obligations under the
Transaction Documents to which it is a party.
Section 2.03 Consents and Approvals. Subject to the accuracy of Purchaser’s representations and
warranties set forth in Article III, no registration or filing with, or consent or approval
of or other action by, any federal, state or other governmental agency or instrumentality or any
third party is or will be necessary for the Company’s valid execution, delivery and performance of
the Transaction Documents to which it is a party and the issuance, sale and delivery of the Common
Shares, the Option or the Preferred Shares, other than (a) those which have previously been
obtained or made, (b) those which are required to be made under federal or state securities laws,
which will be obtained or made, and will be effective within the time periods required by law, and
(c) as would not, individually or in the aggregate, prevent consummation of any of the transactions
contemplated hereby or otherwise prevent the Company from performing its obligations under the
Transaction Documents to which it is a party.
Section 2.04 Validity. Each Transaction Document to which the Company is a party has been duly executed
and delivered by the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms except as may be limited by
(a) applicable bankruptcy, insolvency, reorganization or other laws of general application relating
to or affecting the enforcement of creditors’ rights generally and (b) the effect of rules of law
governing the availability of equitable remedies.
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Section 2.05 Authorized Capital Stock.
(a) As of the date hereof, the Company’s authorized capital stock consists of 200,000,000
shares of Common Stock, 38,822,859 shares of which were outstanding on July 30, 2010, and
10,000,000 shares of Preferred Stock, par value US$0.01 per share, (i) 12,000 shares of which have
been designated D Shares, none of which are outstanding, (ii) 9,000 shares of which have been
designated E Shares, none of which are outstanding, (iii) 81,000 shares of which have been
designated G Shares, none of which are outstanding, and (iv) 6,500 shares of which have been
designated H Shares, none of which are outstanding. Except as disclosed in the Company SEC
Documents, all the shares of capital stock of each Subsidiary of the Company are owned directly by
the Company or a wholly owned Subsidiary of the Company. Except as set forth in the Company SEC
Documents or the Charter: (i) no subscription, warrant, option, convertible security, or other
right (contingent or other) to purchase or otherwise acquire equity securities of the Company is
authorized or outstanding and (ii) there is no commitment by the Company to issue shares,
subscriptions, warrants, options, convertible or exchangeable securities, or other such rights or
to distribute to holders of any of its equity securities any evidence of indebtedness or asset.
Except as set forth in the Company SEC Documents, the Company has no obligation (contingent or
other) to purchase, repurchase, redeem, retire or otherwise acquire any of its equity securities or
any interest therein or to pay any dividend or make any other distribution in respect thereof. To
the Company’s knowledge, except as set forth in the Company SEC Documents, there are no voting
trusts or agreements, shareholders’ agreements, pledge agreements, buy-sell agreements, rights of
first refusal, preemptive rights or other similar rights or proxies relating to any of the
Company’s securities, or agreements relating to the issuance, sale, redemption, transfer or other
disposition of the Company’s securities. All of the outstanding securities of the Company were
issued in compliance with all applicable federal and state securities laws.
(b) The Common Shares and the Preferred Shares have been duly authorized and, when issued in
accordance with this Agreement and the Option Agreement, will be duly and validly issued, fully
paid and nonassessable shares of the applicable sort and will be free and clear of all Liens, other
than Liens that were created by Purchaser and restrictions on transfer imposed by the Transaction
Documents, the Securities Act of 1933, as amended (the “Securities Act”), and applicable state
securities laws. The issuance, sale and delivery of the Common Shares and the Preferred Shares is
not subject to any preemptive right of the Company’s shareholders or to any right of first refusal
or other right in favor of any Person.
Section 2.06 Reports and Financial Statements. As of their respective filing dates, the reports,
registration statements and other documents the Company has filed with the Securities and Exchange
Commission (the “SEC”) under the Securities Act and the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), for all periods subsequent to December 31, 2005, all in the form so filed
(collectively the “Company SEC Documents”) complied in all material respects with the requirements
of the Securities Act or the Exchange Act, as applicable, and no Company SEC Document filed under
the Exchange Act contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made therein, in light of
the circumstances in which they were made, not misleading, except to the extent corrected by a
subsequently filed document with
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the SEC. No Company SEC Document filed under the Securities Act
contained an untrue statement of material fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading at the time such Company SEC Documents
became effective under the Securities Act. The Company’s financial statements, including the notes
thereto, included in the Company SEC Documents (the “Financial Statements”) comply as to form in
all material respects with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles consistently applied (“GAAP”) and present fairly the Company’s
consolidated financial position at the dates thereof and of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal audit adjustments).
Since the date of the most recent Company SEC Document, the Company has not effected any change in
any method of accounting or accounting practice, except for any such change required because of a
concurrent change in GAAP. Since January 1, 2009, the Company has timely filed all material
reports, registration statements and other filings required by the SEC. Notwithstanding the
foregoing, the Company makes no representations or warranties with respect to any information
provided by Purchaser for inclusion in any Company SEC Documents.
Section 2.07 No Undisclosed Liabilities. Except as set forth in the Company SEC Documents, the Company
has no liabilities (whether accrued, absolute, contingent or otherwise, known or unknown, and
whether due or to become due or asserted or unasserted), except (a) liabilities provided for in the
Financial Statements, (b) liabilities (including accounts payable) incurred since December 31, 2009
(the “Audited Balance Sheet Date”) in the ordinary course of business consistent with past practice
and (c) such other liabilities that would not reasonably be expected to cause a Material Adverse
Change.
Section 2.08 Subsequent Events. Since June 30, 2010 and except as disclosed in the Company SEC
Documents, there has been no Material Adverse Change nor, to the Company’s knowledge, has any event
occurred which could reasonably be expected to result in any Material Adverse Change.
Section 2.09 Litigation; Compliance with Law.
(a) Except as set forth in the Company SEC Documents, there is no (i) action, suit, claim,
proceeding or investigation pending or, to the Company’s knowledge, threatened, against or
affecting the Company or its properties or assets, at law or in equity, or before or by any
federal, state, municipal or other governmental body, department, commission, board, bureau, agency
or instrumentality, domestic or foreign, (ii) arbitration proceeding pending or, to the Company’s
knowledge, threatened, against or affecting the Company or its properties or assets or (iii)
governmental inquiry pending or, to the Company’s knowledge, threatened, against or affecting the
Company or its properties or assets, and to the Company’s knowledge, there is no basis for any of
the foregoing, except for such proceedings, investigations or inquiries as would not, individually
or in the aggregate, reasonably be expected to cause a Material Adverse Change. The Company is not
in default with respect to any order, writ, judgment, injunction or decree known to or served upon
the Company of any court or of any federal, state, municipal or other governmental body,
department, commission, board, bureau, agency or instrumentality, domestic or foreign, except for
such defaults as would not, individually or in the aggregate, reasonably be expected to cause a
Material Adverse Change. There is no action, suit, proceeding
or investigation by the Company pending, threatened or contemplated against others, except for
such actions, suits, proceedings or investigations as would not, individually or in the aggregate,
reasonably be expected to cause a Material Adverse Change.
5
(b) The Company has complied, in all material respects, with all material laws, rules,
regulations and orders applicable to its business, operations, properties, assets, products and
services, the Company has all necessary permits, licenses and other authorizations required to
conduct its business as conducted and as proposed to be conducted and the Company has been
operating its business pursuant to and in compliance with the terms of all such permits, licenses
and other authorizations in all material respects, except, in each case, as such failures would
not, individually or in the aggregate, be reasonably be expected to cause a Material Adverse
Change.
Section 2.10 Intellectual Property. The Company owns, or possesses adequate rights to use, all material
patents and patent rights, seismic data, well log data, inventions, processes, formulae, copyrights
and copyright rights, trade dress, business and product names, logos, slogans, trade secrets,
industrial models, processes, designs, methodologies, computer programs (including all source
codes) and related documentation, technical information, manufacturing, engineering and technical
drawings, know-how, concepts and all pending applications for and registrations of patents,
trademarks, service marks and copyrights (together, “Intellectual Property”) used in its business
as currently conducted. To the Company’s knowledge, the Company’s use of such Intellectual
Property in its business as currently conducted does not infringe upon any rights any other Person
owns or holds.
Section 2.11 Real Property. Except for interests in Oil and Gas Properties and incidental real property
interests held in connection with its oil and gas operations, the Company owns no real property.
Section 2.12 Insurance. All material policies of insurance of any kind or nature of the Company,
including policies of fire, theft, product liability, public liability, property damage, other
casualty, employee fidelity, workers’ compensation and employee health and welfare insurance, are
in full force and effect and are of a nature and provide such coverage as is customarily carried by
businesses of the size and character of the Company. The Company has not been refused insurance
for any material coverage for which it had applied or had any policy of insurance terminated (other
than at its request).
Section 2.13 Taxes. The Company has accurately and timely filed all material federal, state, county and
local tax returns and reports required to be filed by it within the applicable period, and the
Company has paid all taxes shown to be due by such returns. Such returns and reports are true and
correct in all material respects. The Company has established adequate reserves on the Financial
Statements for all taxes accrued but not yet payable with respect to the periods covered by such
Financial Statements. All material tax elections of any type that the Company has made as of the
date hereof are set forth in the Financial Statements.
Section 2.14 Agreements. Except as set forth in the Company SEC Documents, the Company has received no
notice of default and is not in default (or, with due notice or lapse of time or both, would be in
default) under any material agreement to which it is a party filed as an exhibit to the Company SEC
Documents, except such defaults under such
agreements which, individually or in the aggregate, would not be reasonably be expected to cause a
Material Adverse Change.
6
Section 2.15 Offering of the Common Shares, Option and Preferred Shares. Assuming, with respect to the
Common Shares and the Preferred Shares, the accuracy of Purchaser’s representations and warranties
set forth in Article III, the Company has complied with all applicable federal and state
securities laws in connection with the offer, issuance and sale of the Common Shares, the Option
and the Preferred Shares. Neither the Company nor any Person acting on its behalf has taken any
other action (including any offer, issuance or sale of any security of the Company under
circumstances which might require the integration of such security with the Common Shares, the
Option or the Preferred Shares under the Securities Act or the rules and regulations of the SEC
promulgated thereunder), in either case so as to subject the offering, issuance or sale of the
Common Shares, the Option or the Preferred Shares to the registration provisions of the Securities
Act. Neither the Company nor any Person acting on its behalf has offered the Common Shares, the
Option or the Preferred Shares to any Person by means of general or public solicitation or general
or public advertising, such as by newspaper or magazine advertisements, by broadcast media, or at
any seminar or meeting whose attendees were solicited by such means.
Section 2.16 Brokers; Financial Advisors. No agent, broker, investment banker, finder, financial
advisor or other Person is or will be entitled to any broker’s or finder’s fee or any other
commission or similar fee from the Company, directly or indirectly, in connection with the
transactions contemplated by the Transaction Documents to which it is party, and no Person is
entitled to any fee or commission or like payment from the Company in respect thereof based in any
way on agreements, arrangements or understandings made by or on the Company’s behalf.
Section 2.17 Environmental and Safety Laws. The Company, the operation of its business, and any real
property that the Company owns, leases or otherwise occupies or uses (the “Premises”) are in
compliance with all applicable Environmental Laws, except as such non-compliance would not,
individually or in the aggregate, reasonably be expected to cause a Material Adverse Change. The
Company has obtained and is maintaining in full force and effect all material permits, licenses and
approvals required by all Environmental Laws applicable to the Premises and the business operations
conducted thereon and is in compliance with all such permits, licenses and approvals, except as
such non-compliance would not, individually or in the aggregate, reasonably be expected to cause a
Material Adverse Change. Except as permitted by all Environmental Laws, the Company has not caused
or allowed a release, or a threat of release, of any Hazardous Substance onto, at or near the
Premises, except as such event would not, individually or in the aggregate, reasonably be expected
to cause a Material Adverse Change. The term “Environmental Laws” means any federal, state or
local law or ordinance or regulation pertaining to the protection of human health or the
environment. The term “Hazardous Substances” includes oil, gas and other hydrocarbons, asbestos,
polychlorinated biphenyls, urea formaldehyde and any materials classified as hazardous or toxic
under any Environmental Laws.
7
Section 2.18 Employee Benefits. For each employment agreement, consulting agreement with individuals,
deferred compensation, incentive compensation, stock
option or other equity-based stock award, pension, or retirement welfare benefit (including group
insurance) plan or agreement whether or not subject to the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”), or bonus, incentive or profit-sharing plan or arrangement, other
than oral at-will employment agreements that is intended to satisfy the provisions of Section
401(a) of the Internal Revenue Code of 1986, as amended (the “Code”), (i) the Company has obtained
a favorable determination letter from the Internal Revenue Service to such effect, (ii) to the
knowledge of the Company, none of the determination letters has been revoked by the Internal
Revenue Service, (iii) no such employee pension benefit plan is subject to Title IV of ERISA or
Section 412 of the Code, and (iv) no prohibited transaction within the meaning of Section 406 of
ERISA has occurred with respect to any employee pension benefit plan and no tax has been imposed
pursuant to Section 4975 of the Code in respect thereof, except in each case as would not
reasonably be expected to cause a Material Adverse Change.
Section 2.19 Oil and Gas Properties. The Company has defensible title to all of the oil, gas and other
mineral properties owned, or otherwise held in the name of, the Company (collectively, the “Oil and
Gas Properties”), free and clear of all Liens and defects other than Permitted Encumbrances or as
such failures would not, individually or in the aggregate, reasonably be expected to cause a
Material Adverse Change. All proceeds from the sale of the Company’s share of the hydrocarbons
being produced from its oil and gas properties are currently being paid in full to such party by
the purchasers thereof on a timely basis and none of such proceeds are currently being held in
suspense by such purchaser or any other party other than in immaterial amounts.
Section 2.20 Marketing of Production. There exist no material agreements for the sale of production
from the leasehold and other interests in the Oil and Gas Properties (including calls on, or other
rights to purchase, production, whether or not the same are currently being exercised) other than
(i) agreements or arrangements pertaining to the sale of production at a price equal to or greater
than a price that is the market price from time to time existing in the areas where the Oil and Gas
Properties subject to such agreement or arrangement are located and (ii) agreements or arrangements
that are cancelable on 90 days notice or less without penalty or detriment.
ARTICLE III
Purchaser represents and warrants to the Company that, as of the Closing Date:
Section 3.01 Investment Representations and Warranties.
(a) Purchaser is an “accredited investor” within the meaning of Rule 501 of Regulation D under
the Securities Act.
(b) Purchaser has sufficient knowledge and experience in investing in companies similar to the
Company in terms of the Company’s stage of development so as to be able to evaluate the risks and
merits of its investment in the Company and it is able financially to bear the risks thereof.
8
(c) Based on the terms of this Agreement and in reliance on the representations and warranties
of the Company herein, Purchaser has received all the information it considers necessary or
appropriate for deciding whether to purchase the Common Shares, the Option and the Preferred
Shares. Purchaser has conducted all due diligence and has received or has had full access to all
the information it considers necessary or appropriate to enter into this Agreement and consummate
the transactions contemplated hereby, and to make an informed investment decision with respect to
the Common Shares, the Option and the Preferred Shares to be issued to Purchaser. Purchaser
further has had an opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Common Shares, the granting of the Option and the
offering of the Preferred Shares and to obtain additional information necessary to verify any
information furnished to Purchaser or to which Purchaser had access. The foregoing, however, does
not in any way limit or modify the representations and warranties made by the Company in
Article II.
(d) The Common Shares and the Preferred Shares to be issued to Purchaser, and the Option to be
granted to Purchaser, are being acquired for its own account for the purpose of investment and not
with a view to, or for resale in connection with, any distribution thereof within the meaning of
the Securities Act. There are no other agreements, arrangements or understandings pursuant to
which Purchaser has agreed to purchase shares of the Company’s Common Stock.
(e) Purchaser understands that (i) neither of the Common Shares, the Option nor the Preferred
Shares have not been registered under the Securities Act because of their issuance in a transaction
exempt from the registration requirements of the Securities Act, (iii) the Common Shares, the
Preferred Shares and the shares of Common Stock issuable upon conversion of the Preferred Shares
can only be disposed of if such disposition is either registered under the Securities Act or is
exempt from such registration, (iv) the Common Shares, the Preferred Shares and the shares of
Common Stock issuable upon the conversion of the Preferred Shares will bear the legends to such
effect set forth or described in Section 3.09, and (v) Purchaser may be, as a result of its
due diligence investigations and negotiations for this Agreement, in possession of material
non-public information concerning the Company and its subsidiary, their assets, operations and
financial condition, and accordingly may be subject to liabilities under the Exchange Act if
Purchaser, its officers, directors, affiliates and controlling persons engage in trading in
securities of the Company while in possession of such material non-public information.
Section 3.02 Organization, Qualifications and Corporate Power. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of New York.
Purchaser is duly licensed or qualified to transact business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of the business transacted by it or the
character of the properties owned or leased by it requires such licensing or qualification, except
as such failures, individually or in the aggregate, would not reasonably be expected to cause a
material adverse change in the business, operations, assets, liabilities, properties or condition
(financial or otherwise) or results of operations of Purchaser. Purchaser has full corporate power
and authority to own and hold its properties and to carry on its business as now conducted, except
as such failures, individually or in the aggregate, would not reasonably be expected to cause a
material adverse change in the business, operations, assets,
liabilities, properties or condition (financial or otherwise) or results of operations of
Purchaser, and to execute, deliver and perform each Transaction Document to which it is a party.
9
Section 3.03 Authorization; No Conflict; No Violation. Purchaser’s execution and delivery of each
Transaction Document to which it is a party and performance of its obligations thereunder has been
duly authorized by all requisite corporate action and, assuming the registrations, approvals,
filings, consents and other actions contemplated by Section 3.04 are obtained or made, will
not (v) result in a violation of Purchaser’s organizational documents, (w) result in a violation of
any applicable law, rule or regulation, or any order, injunction, judgment or decree of any court
or other agency of government, (x) conflict with, result in a breach of, or constitute (or, with
due notice or lapse of time or both, would constitute) a default under, or give rise to any right
of termination, acceleration or cancellation under, any material indenture, agreement, contract,
license, arrangement, understanding, evidence of indebtedness, note, lease or other instrument to
which Purchaser or any of its properties or assets is bound, (y) result in the creation or
imposition of any Lien upon Purchaser or any of Purchaser’s properties or assets or (z) require any
consent, approval, notification, waiver or other similar action from any third party, except as
such violation, conflict, breach, default, right, Lien or failure would not, individually or in the
aggregate, in the case of (w), (x), (y) or (z), be reasonably expected to cause a material adverse
change in the business, operations, assets, liabilities, properties or condition (financial or
otherwise) or results of operations of Purchaser and as would not, individually or in the
aggregate, prevent consummation of any of the transactions contemplated hereby or otherwise prevent
Purchaser from performing its obligations under the Transaction Documents to which it is a party.
Section 3.04 Consents and Approvals. No registration or filing with, or consent or approval of or other
action by, any federal, state or other governmental agency or instrumentality or any third party is
or will be necessary for Purchaser’s valid execution, delivery and performance of the Transaction
Documents to which it is a party other than (a) those which have previously been obtained or made,
(b) those which are required to be made under federal or state securities laws, which will be
obtained or made, and will be effective within the time periods required by law, and (c) as would
not, individually or in the aggregate, prevent consummation of any of the transactions contemplated
hereby or otherwise prevent Purchaser from performing its obligations under the Transaction
Documents to which it is a party.
Section 3.05 Validity. Each Transaction Document to which Purchaser is a party has been duly executed
and delivered by Purchaser and constitutes the legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms except as may be limited by (a)
applicable bankruptcy, insolvency, reorganization or other laws of general application relating to
or affecting the enforcement of creditors’ rights generally and (b) the effect of rules of law
governing the availability of equitable remedies.
Section 3.06 Financing. Purchaser has sufficient cash, available lines of credit or other sources of
immediately available funds (in United States dollars), exclusive of any cash, lines of credit or
other sources related directly or indirectly to, or associated or affiliated with, the People’s
Republic of China or any Person or Governmental Entity related directly or indirectly to, or
associated or affiliated with, the People’s Republic of China, to enable it to pay the applicable
portion of the Purchase Price in good funds at the Closing if, as and when payable.
10
Section 3.07 Solvency. Purchaser is not entering into the transaction contemplated hereby with the
actual intent to hinder, delay or defraud either present or future creditors. Assuming that the
representations and warranties of the Company contained in this Agreement are true and correct in
all material respects, on the Closing Date and after giving effect to the transactions contemplated
by this Agreement, each of the representations in the following clauses (a)-(d) will be true and
correct: (a) the sum of the Company’s debts, including contingent and unliquidated debts, will not
be greater than the Company’s property, at a fair valuation; (b) the present fair salable value of
the Company’s assets will not be less than the amount required to pay its probable liability on its
existing debts, including contingent and unliquidated debts, as they become absolute and matured;
(c) the Company will not have unreasonably small capital with which to conduct any business in
which it is or is about to become engaged; and (d) the Company will not intend to incur, and will
not believe and should not reasonably believe that it will incur, debts beyond its ability to pay
as they mature.
Section 3.08 Brokers; Financial Advisors. No agent, broker, investment banker, finder, financial
advisor or other Person is or will be entitled to any broker’s or finder’s fee or any other
commission or similar fee from Purchaser, directly or indirectly, in connection with the
transactions contemplated by the Transaction Documents to which it is a party, and no Person is
entitled to any fee or commission or like payment from Purchaser in respect thereof based in any
way on agreements, arrangements or understandings made by or on Purchaser’s behalf.
Section 3.09 Certain Covenants of Purchaser.
(a) Without in any way limiting the representations set forth in Section 3.01,
Purchaser agrees not to make any disposition of all or any portion of the Common Shares, the
Preferred Shares or any shares of Common Stock issuable upon the conversion of the Preferred Shares
unless and until:
(i) there is then in effect a registration statement under the Securities Act covering
such proposed disposition and such disposition is made in accordance with such registration
statement; or
(ii) Purchaser has notified the Company of the proposed disposition and has furnished
the Company with (A) a statement of the circumstances surrounding the proposed disposition
and (B) an opinion of counsel that such security can be freely transferred without such
registration statement being in effect and that such transfer will not jeopardize the
exemption or exemptions from registration pursuant to which the Company issued the Common
Shares and the Preferred Shares.
(b) Accordingly, Purchaser acknowledges that the certificates evidencing the Common Shares,
the Preferred Shares and any shares of Common Stock issuable upon conversion of the Preferred
Shares will bear the following legend:
11
The securities represented hereby have not been registered under
the securities act of 1933, as amended (the “act”), or under the
securities laws of certain states. These securities are subject to
restrictions on transferability and resale and may not be
transferred or resold except as permitted under the act and the
applicable state securities laws, pursuant to registration or
exemption therefrom. The issuer of these securities may require an
opinion of counsel (which may be counsel for the company) in form
and substance satisfactory to the issuer to the effect that any
proposed transfer or resale is in compliance with the act and any
applicable state securities laws.
ARTICLE IV
Section 4.01 Confidentiality. Purchaser shall, and shall cause its Affiliates and
their respective directors, officers, employees and agents to, keep confidential, not disclose in
any manner and use only in connection with the transactions contemplated by this Agreement all data
and information obtained by them from the Company and the Subsidiaries and their respective
directors, officers, employees, auditors and agents (other than data or information that is or
becomes ascertainable from public or published information or trade sources, except as a result of
disclosure by Purchaser in violation of this Section 4.01) (“Confidential Information”) and shall
insure that such Affiliates, directors, officers, employees and agents do not disclose Confidential
Information to third parties, other than in connection with the transactions contemplated by this
Agreement, or make any public release or announcement containing any Confidential Information,
without the prior written consent of the Company, unless disclosure of Confidential Information is
required by law or any order, decree or ruling by a Governmental Entity.
Section 4.02 Notification of Certain Matters. The Company shall give prompt notice to Purchaser, and
Purchaser shall give prompt notice to the Company, of any failure of the Company or Purchaser, as
the case may be, to comply with or satisfy any covenant or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this
Section 4.02 shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
Section 4.03 Regulatory and Other Authorizations; Notices and Consents. Each of Purchaser and the
Company shall use its reasonable best efforts to obtain all authorizations, consents, orders and
approvals of all Governmental Entities and officials or other third parties that may be or become
necessary for its execution and delivery of, and the performance of its obligations pursuant to,
the Transaction Documents to which it is a party and will cooperate fully with the other party in
promptly seeking to obtain all such authorizations, consents, orders and approvals.
12
Section 4.04 Public Announcements. Purchaser and the Company agree that no public release or
announcement concerning the transactions contemplated by this Agreement shall be issued by any
party or any of such party’s Affiliates without the prior consent of the Company or Purchaser, as
the case may be, (which consent shall not be unreasonably withheld), except as such release or
announcement may be required by law, in which case the party required to make the release or
announcement shall use its reasonable best efforts to allow the other party reasonable time to
comment on such release or announcement in advance of such issuance.
Section 4.05 IRS Forms. On the Closing Date, Purchaser shall execute and deliver to the Company (i) if
it is not a “United States person” (as such term is defined in Section 7701(a)(30) of the Code),
two original copies of the applicable Internal Revenue Service Form W-8 or other applicable form,
certificate or document prescribed by the United States Internal Revenue Service certifying as to
such Purchaser’s entitlement to an exemption from or entitlement to a reduced rate of withholding
or deduction of taxes and (ii) if it is a “United States person” (as such term is defined in
Section 7701(a)(30) of the Code), two original copies of Internal Revenue Service Form W-9 (or
substitute or successor form).
Section 4.06 Certain Approvals.
(a) In the event any Governmental Entity determines to conduct an investigation of the
transactions contemplated by this Agreement at any time, including after the Closing, each of the
Company and Purchaser shall use their respective reasonable best efforts to comply with any
reasonable requests of such Governmental Entity, include providing in accordance with relevant
regulatory timeframes any information requested by such Governmental Entity in connection with its
review of the transactions contemplated hereby. With respect to the Company, such reasonable best
efforts shall include compliance with any reasonable request from any Governmental Entity or
Purchaser, including assistance in Purchaser’s compliance with any mitigation or remediation
requirements that may be imposed by such Governmental Entity, provided that such compliance and
assistance is in the best interest of the Company and consistent with the fiduciary duties of the
Company’s officers and Board of Directors. Furthermore, such reasonable best efforts solely with
respect Purchaser shall include Purchaser or Parent agreeing to any remediation or mitigation
agreement with the Governmental Entity, if any, on such reasonable terms and conditions as may be
required by such Governmental Entity, or to any other terms and conditions that may be imposed by
such Governmental Entity, including the waiver or modification of, or amendment to, any conditions
under Section 5.01 or other provisions of this Agreement for the benefit of Purchaser under
this Agreement.
(b) In no event will any failure to make any necessary or voluntary filings with, or obtain
any required or requested clearance or approval from, any Governmental Entity, or any consequences
resulting from any of such failures, including, but not limited to, action by any Governmental
Entity to suspend, modify or prohibit, or require divestment of, the transactions contemplated by
this Agreement, or any remediation or mitigation agreement or other terms or conditions that may
be required by any Governmental Entity referred to in Section 4.06(a), require the Company
to return any of the Purchase Price once paid to the Company.
13
(c) Purchaser will bear the cost of, and reimburse the Company for, any fees, expenses or
other Losses associated with making any filing or obtaining any clearance or approval from any
Governmental Entity or any of the other matters arising out of or referred to in this Section
4.06, including the expenses incurred necessary to implement a mitigation agreement or any
other terms and conditions that may be imposed by such Governmental Entity.
Section 4.07 Fees and Expenses. Except as otherwise provided in the Deposit Agreement, all fees and
expenses incurred in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses.
Section 4.08 Registration Rights Agreement. Upon valid exercise of the Option by Purchaser, the Company
and Purchaser agree to mutually execute and deliver a mutually acceptable registration rights
agreement including the rights, covenants and terms set forth on Exhibit B attached hereto.
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF PURCHASER AND THE COMPANY
Section 5.01 Conditions to Purchaser’s Obligations at the Closing. Purchaser’s obligation to purchase
and pay for the Common Shares and the Option being purchased by it is, at its option, subject to
the satisfaction, on or before the Closing Date, of the following conditions, any of which may be
waived in whole or in part by Purchaser:
(a) Performance. The Company shall have performed and complied in all material respects with
all agreements and covenants contained herein required to be performed or complied with by it prior
to the Closing Date.
(b) Registration Rights Agreement. The Company and Purchaser shall have approved a final form
of definitive registration rights agreement pursuant to Section 4.08.
(c) Option. The Company and Purchaser shall have executed and delivered a definitive Option
Agreement (the “Option Agreement”) setting forth the terms of the Option consistent with the terms
described herein.
(d) Approvals. The Company shall have obtained any and all consents, waivers, registrations,
approvals or authorizations necessary for the Company’s valid execution and delivery of this
Agreement and the other Transaction Documents to which it is a party and the Company’s performance
of the transactions contemplated hereby and thereby.
(e) No Injunction. Subject to compliance by Purchaser with its obligations under Section
4.06, no Governmental Entity or any other Person shall have issued an order, injunction,
judgment, decree, ruling or assessment which shall then be in effect restraining or prohibiting the
completion of the transactions contemplated hereby or under any of the other Transaction Documents,
nor, shall any such order, injunction, judgment, decree, ruling or assessment be pending or, to the
Company’s knowledge, threatened.
14
(f) Filing of the Certificate of Designations. A Certificate of Designations evidencing the
terms of the Preferred Stock, including the director designation right associated therewith, as set
forth on Exhibit A attached hereto and authorizing sufficient shares to issue the Preferred
Shares shall have been filed with the Delaware Secretary of State.
(g) Supporting Documents. As of the Closing Date, Purchaser and its counsel shall have
received copies of the following documents:
(i) (A) the Charter, certified as of a recent date by the Secretary of State of
Delaware, and (B) a certificate of said Secretary dated as of a recent date as to the
Company’s due incorporation and listing all documents of the Company on file with said
Secretary and a certificate of said Secretary as to the good standing of the Company; and
(ii) a certificate of the Company’s Secretary dated as of the Closing Date,
certifying: (A) that attached thereto is a true, correct and complete copy of the Bylaws as
in effect on the date of such certification and that no amendments or modifications to such
Bylaws have been authorized; (B) that attached thereto is a true, correct and complete copy
of all resolutions adopted by the Board of Directors authorizing the execution, delivery and
performance of each of the Transaction Documents, the issuance, sale and delivery of the
Common Shares, and that all such resolutions are in full force and effect, have not been
amended, modified or rescinded and are the only resolutions adopted in connection with the
transactions contemplated by the Transaction Documents; (C) that the Charter has not been
amended since the date of the last amendment referred to in the certificate delivered
pursuant to clause (i)(A) above; and (D) to the incumbency and specimen signature of
each officer of the Company executing any of the Transaction Documents, the stock
certificates representing the Common Shares and any certificate or instrument furnished
pursuant thereto, and a certification by another authorized officer of the Company as to the
incumbency and signature of the officer signing the certificate referred to in this
clause (ii).
Section 5.02 Conditions to the Company’s Obligations at the Closing. The Company’s obligation to sell
and issue the Common Shares and the Option being sold and issued by it on the Closing Date is, at
its option, subject to the satisfaction, on or before the Closing Date, of the following conditions
(unless such condition is required by its terms to be satisfied at or prior to the Closing Date),
any of which may be waived in whole or in part by the Company:
(a) Performance. Purchaser shall have performed and complied in all material respects with
all agreements and covenants contained herein required to be performed or complied with by it prior
to or at the Closing Date.
(b) Option. The Company and Purchaser shall have executed and delivered the Option Agreement
setting forth the terms of the Option.
(c) Approvals. Purchaser shall have obtained any and all consents, waivers, registrations,
approvals or authorizations necessary for Purchaser’s valid execution and delivery
of this Agreement and the other Transaction Documents to which it is a party and Purchaser’s
performance of the transactions contemplated hereby and thereby.
15
(d) No Injunction. No Governmental Entity or any other Person shall have issued an order,
injunction, judgment, decree, ruling or assessment which shall then be in effect restraining or
prohibiting the completion of the transactions contemplated hereby, nor shall any such order,
injunction, judgment, decree, ruling or assessment be pending or, to the Company’s knowledge,
threatened.
(e) Purchase Price Paid. Purchaser shall have paid the Purchase Price for the Common Shares
and the Option to be purchased on the Closing Date to the Company as set forth in Section
1.01.
ARTICLE VI
The Company covenants and agrees with Purchaser that:
Section 6.01 Survival. The representations and warranties of the Company and Purchaser made in this
Agreement shall survive for one year from the Closing Date; provided, however, the representations
and warranties of the Company set forth in Section 2.01, Section 2.02 and
Section 2.05 and the representations of Purchaser set forth in Section 3.01,
Section 3.02 and Section 3.03 shall survive indefinitely. All of the covenants of
the parties hereto that are intended to be performed after Closing, including Section 4.01
and Section 4.04, shall survive the Closing.
Section 6.02 Indemnity.
(a) The Company agrees to indemnify, defend and hold harmless Purchaser (and its partners (and
each officer and director thereof), directors, managers, officers, members, shareholders,
employees, Affiliates, agents and permitted assigns) (collectively, “Indemnified Parties”) from and
against any and all losses, claims, liabilities, damages, deficiencies, costs or expenses
(including interest, penalties, reasonable attorneys’ fees, disbursements and related charges and
any costs or expenses that an Indemnified Party incurs to enforce its right to indemnification)
(collectively, “Losses”) based upon, arising out of or otherwise in respect of any inaccuracy in or
breach of any representations, warranties, covenants or agreements of the Company contained in this
Agreement or any of the other Transaction Documents. Notwithstanding the above provisions, the
Company shall have no obligation to indemnify the Indemnified Parties under this Section
6.02, unless and until the Indemnified Parties incur Losses in excess of US$1,500,000 in the
aggregate, at which time the Company shall be obligated to the Indemnified Parties for all such
Losses in the aggregate, in excess of such aggregate, but not to exceed the Purchase Price paid to
the Company, up to US$21,250,000 in total.
16
(b) Purchaser agrees to indemnify, defend and hold harmless the Company (and its partners (and
each officer and director thereof), directors, managers, officers, members, shareholders,
employees, Affiliates, agents and permitted assigns) (collectively, “Purchaser Indemnified
Parties”) from and against any and all Losses based upon, arising out of or
otherwise in respect of (i) any inaccuracy in or breach of any representations, warranties,
covenants or agreements of Purchaser contained in this Agreement or any of the other Transaction
Documents, or (ii) any failure to make any necessary filings with, or obtain any required clearance
or approval from, any Governmental Entity, or any consequences resulting from any of such failures,
including, but not limited to, action by any Governmental Entity to suspend, modify or prohibit, or
require divestment of, the transactions contemplated by this Agreement, or any mitigation agreement
or other terms or conditions that may be required by any Governmental Entity referred to in
Section 4.06(a). Notwithstanding the above provisions, Purchaser shall have no obligation
to indemnify the Purchaser Indemnified Parties with respect to any Losses incurred under clause (i)
relating to any in accuracy of any representations or warranties of Purchaser contained in this
Agreement unless and until the Purchaser Indemnified Parties incur Losses in excess of US$1,500,000
in the aggregate, at which time the Company shall be obligated to the Indemnified Parties for all
such Losses in the aggregate, in excess of such aggregate.
(c) In addition to any other remedy provided by law, injunctive relief may be obtained to
enjoin the breach, or threatened breach, of any provision of this Agreement and each party shall be
entitled to specific performance by the others of their obligations hereunder and thereunder. All
remedies, either under this Agreement, by law or as may otherwise be afforded to Purchaser or the
Company, as the case may be, shall be cumulative.
(d) If an Indemnified Party seeks indemnification hereunder, the Indemnified Party shall
notify the Company by providing a written description of the claim and the amount of Losses
asserted. If a Purchaser Indemnified Party seeks indemnification hereunder, the Purchaser
Indemnified Party shall notify Purchaser by providing a written description of the claim and the
amount of Losses asserted.
(e) NO INDEMNIFYING PARTY WILL BE ENTITLED TO RECOVER FROM AN INDEMNIFYING PARTY FOR ANY
LOSSES, COSTS, EXPENSES OR DAMAGES AS TO WHICH INDEMNIFICATION IS PROVIDED UNDER THIS AGREEMENT ANY
AMOUNT IN EXCESS OF THE ACTUAL DAMAGES, COURT OR ARBITRATION COSTS AND REASONABLE ATTORNEY FEES
SUFFERED BY SUCH PARTY, AND THE PARTIES WAIVE ANY RIGHT TO RECOVER CONSEQUENTIAL, SPECIAL,
PUNITIVE, INDIRECT, INCIDENTAL OR EXEMPLARY DAMANGES ARISING IN CONNECTION WITH OR WITH RESPECT TO
THE INDEMNIFICATION PROVISIONS HEREOF; PROVIDED THAT SUCH WAIVER SHALL NOT APPLY TO ANY SUCH
DAMAGES THAT ARE PAYABLE BY AN INDEMNIFIED PARTY IN CONNECTION WITH A THIRD PARTY CLAIM.
ARTICLE VII
Section 7.01 Brokerage. Each party hereto will indemnify and hold harmless the others against and in
respect of any claim for brokerage or other commissions relative to this Agreement or to the
transactions contemplated hereby, based in any way on
agreements, arrangements or understandings made or claimed to have been made by such party with any
third party.
17
Section 7.02 Parties in Interest. All representations, warranties, covenants and agreements contained
in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto whether so expressed or not.
Nothing in this Agreement shall create or be deemed to create any third-party beneficiary rights in
any Person not a party to this Agreement except as provided below and except with respect to any
Indemnified Parties under Section 6.02.
Section 7.03 Specific Performance. Each party hereto acknowledges and agrees that the other parties
hereto would be irreparably damaged if any provision of this Agreement is not performed in
accordance with its specific terms or is otherwise breached. Accordingly, each party hereto agrees
that the other parties hereto will be entitled to an injunction or injunctions to prevent breaches
of the provisions of this Agreement and to specifically enforce this Agreement and its terms and
provisions in any action instituted in any court of the United States or any state thereof having
jurisdiction over the parties in the matter, subject to Section 7.05 and Section
7.07, in addition to any other remedy to which they may be entitled, at law or in equity.
Section 7.04 Further Assurances. The Company and Purchaser each agree to take such actions and execute
and deliver such other documents or agreements as may be necessary or desirable for the
implementation of the Transaction Documents and the consummation of the transactions contemplated
hereby and thereby.
Section 7.05 Arbitration. Any and all claims, counterclaims, demands, causes of action, disputes,
controversies, and other matters in question arising out of or relating to this Agreement or in any
way relating to the subject matter of this Agreement or the relationship between the parties hereto
created by this Agreement, involving the parties hereto or their respective representatives
(collectively, “Disputes”) even though all or some of the Disputes allegedly are extra-contractual
in nature, whether such Disputes sound in contract, tort or otherwise, at law or in equity, under
state, provincial or federal law, for damages or any other relief will be resolved as follows:
first, representatives of the Company and Purchaser will meet to attempt to resolve such Dispute;
provided that the foregoing shall not preclude equitable or other judicial relief to enforce the
provisions hereof or to preserve the status quo pending resolution of Disputes; and provided
further that resolution of Disputes with respect to claims by third Persons will be deferred until
any judicial proceedings with respect thereto are concluded. If the Dispute cannot be resolved by
agreement of the parties hereto, any party may at any time make a written demand for binding
arbitration of the Dispute in accordance with this Section 7.05. Subject to the provisions
of this Section 7.05, Purchaser and the Company will agree upon the rules of the
arbitration prior to the arbitration and based upon the nature of the Dispute; provided that to the
extent that the parties hereto cannot agree on the rules of the arbitration, then the Commercial
Arbitration Rules of the American Arbitration Association in effect on the date hereof, and except
as the applicable rules are modified by this Agreement, will apply. As a minimum set of rules in
the arbitration the parties hereto agree as follows: To the extent the claims asserted are in
excess of US$3.0 million, the arbitration will be held before a panel of three arbitrators
consisting of one arbitrator selected by Purchaser, the other selected by the
Company, and the third then selected by those two arbitrators (such third arbitrator to be
neutral). If agreement cannot be reached on a third arbitrator within 30 days of the need
therefor, the Chief Judge of the U.S. District Court for the Southern District of Texas shall
appoint an arbitrator. If the claims asserted are less than US$3.0 million, the Chief Judge of the
U.S. District Court for the Southern District of Texas shall appoint a sole arbitrator. All
arbitrators shall be attorneys with at least ten years experience in oil and gas transactions.
18
(a) The arbitrator(s) will deliver their decision in writing within 20 days after the
termination of the arbitration hearings.
(b) The non-prevailing party will bear the costs and fees of the arbitration.
(c) The arbitrator(s) final decision will be in writing but will not specify the basis for
their decision, the basis for the damages award or the basis of any other remedy. The
arbitrator(s)’ decision will be considered as a final and binding resolution of the disagreement,
will not be subject to appeal and may be entered as an order in any court of competent jurisdiction
in the United States; provided that this Agreement confers no power or authority upon the
arbitrator(s) (i) to render any decision that is based on clearly erroneously findings of fact,
(ii) that manifestly disregards the law, or (iii) that exceeds the powers of the arbitrator(s), and
no such decision will be eligible for confirmation. No party will xxx the other except for
enforcement of the arbitrator(s)’ decision if the other party is not performing in accordance with
the arbitrator(s)’ decision. The provisions of this Agreement will be binding on the arbitrator(s).
(d) Any arbitration proceeding will be conducted on a confidential basis.
(e) Any arbitration proceeding shall be held in Houston, Texas.
Any arbitration proceeding, including discovery, shall be conducted in accordance with the
Texas Rules of Civil Procedure and the Texas Rules of Evidence.
Section 7.06 Notices. Any notice, request, demand or other communication required or permitted to be
given to a party pursuant to the provisions of this Agreement will be in writing and will be
effective and deemed given under this Agreement on the earliest of: (a) the date of personal
delivery, (b) the date of transmission by facsimile, with confirmed transmission and receipt, (c)
two days after deposit with a nationally-recognized courier or overnight service such as Federal
Express, or (d) five days after mailing via certified mail, return receipt requested. All notices
not delivered personally or by facsimile will be sent with postage and other charges prepaid and
properly addressed to the party to be notified at the address set forth for such party:
19
If to Depositor:
America Capital Energy Corporation
Chrysler Building
000 Xxxxxxxxx Xxx., 00xx Xxxxx
Xxx Xxxx, XX 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx
Chrysler Building
000 Xxxxxxxxx Xxx., 00xx Xxxxx
Xxx Xxxx, XX 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx
Senior Vice President, Finance
with a copy to (which does not constitute notice):
Kane, Russell, Xxxxxxx & Xxxxx P.C.
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxx
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxx
If to the Company:
Crimson Exploration Inc.
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: E. Xxxxxx Xxxxx
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: E. Xxxxxx Xxxxx
Senior Vice President
& Chief Financial Officer
& Chief Financial Officer
with a copy to (which does not constitute notice):
Xxxxxx & Xxxxxx LLP
0000 Xxxxxx Xxxxxx Xxxxx 0000
Xxxxxxx, XX 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: T. Xxxx Xxxxx
0000 Xxxxxx Xxxxxx Xxxxx 0000
Xxxxxxx, XX 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: T. Xxxx Xxxxx
Any party hereto (and such party’s permitted assigns) may change such party’s address for receipt
of future notices hereunder by giving written notice to the Company and the other parties hereto.
20
Section 7.07 Governing Law. This Agreement and the performance of the transactions and the obligations
of the parties hereunder will be governed by and construed
and enforced in accordance with the laws of the State of Delaware, without giving effect to any
choice of law principles. Subject to Section 7.05, all actions and proceedings arising out
of or relating to this Agreement shall be heard and determined exclusively in any Texas state or
federal court sitting in Xxxxxx County, Texas. The parties hereto hereby (a) submit to the
exclusive jurisdiction of any state or federal court sitting in Xxxxxx County, Texas for the
purpose of any action or proceeding arising out of or relating to this Agreement brought by any
party hereto, and (b) irrevocably waive, and agree not to assert by way of motion, defense, or
otherwise, in any such action or proceeding, any claim that it is not subject personally to the
jurisdiction of the above-named courts, that its property is exempt or immune from attachment or
execution, that the action or proceeding is brought in an inconvenient forum, that the venue of the
action or proceeding is improper, or that this Agreement or the transactions may not be enforced in
or by any of the above-named courts. Nothing in this Agreement shall affect the right to serve
process in any other manner permitted by law.
Section 7.08 Entire Agreement. This Agreement, together with the certificates, documents, instruments
and writings that are delivered pursuant hereto and each Transaction Document, constitutes the
entire agreement and understanding of the parties hereto in respect of its subject matters and
supersedes all prior understandings, agreements, or representations by or among the parties hereto,
written or oral, to the extent they relate in any way to the subject matter hereof or the
transactions contemplated hereby.
Section 7.09
Counterparts. This Agreement may be executed in two or more counterparts, each of which
will be deemed an original but all of which together will constitute one and the same instrument.
Section 7.10 Amendments and Waivers. This Agreement may not be amended or modified, and no provisions
hereof may be waived, without the written consent of the Company and Purchaser. No action taken
pursuant to this Agreement, including without limitation, any investigation by or on behalf of any
party, shall be deemed to constitute a waiver by the party taking such action of compliance with
any representation, warranty, covenant or agreement contained herein. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be construed as a
further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No
failure on the part of any party to exercise, and no delay in exercising, any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of
such right, power or remedy by such party preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not
exclusive of any other remedies provided by law.
Section 7.11 Successors and Assigns. This Agreement and the rights and obligations of the parties
hereunder shall inure to the benefit of, and be binding upon, their respective successors, assigns
and legal representatives.
21
Section 7.12 Severability. The provisions of this Agreement will be deemed severable and the invalidity
or unenforceability of any provision hereof will not affect the validity or enforceability of the
other provisions hereof; provided that if any provision of this Agreement, as applied to any party
or to any circumstance, is adjudged by a court, governmental
body or arbitrator not to be enforceable in accordance with its terms, the parties hereto agree
that the court, governmental body, or arbitrator making such determination will have the power to
modify the provision in a manner consistent with its objectives such that it is enforceable, and/or
to delete specific words or phrases, and in its reduced form, such provision will then be
enforceable and will be enforced.
Section 7.13 Titles and Subtitles. The article and section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or interpretation of this
Agreement.
Section 7.14 Adjustments for Stock Splits, Etc.. Wherever in this Agreement there is a reference to a
specific number of shares of Common Stock of any class or series, then, upon the occurrence of any
subdivision, combination or stock dividend of such class or series of Common Stock, the specific
number of shares so referenced in this Agreement will automatically be proportionally adjusted to
reflect the effect of such subdivision, combination or stock dividend on the outstanding shares of
such class or series of Common Stock.
Section 7.15 Aggregation of Stock. All shares held or acquired by an Affiliate will be aggregated
together for the purpose of determining the availability of any rights under this Agreement.
Section 7.16 Construction. The parties hereto have jointly participated in the negotiation and drafting
of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement
will be construed as if drafted jointly by the parties hereto and no presumption or burden of proof
will arise favoring or disfavoring any party hereto because of the authorship of any provision of
this Agreement. Any reference to any federal, state, local or foreign law will also be deemed to
refer to such law as amended and all rules and regulations promulgated thereunder, unless the
context otherwise requires. The words “include,” “includes” and “including” will be deemed to be
followed by “without limitation.” Pronouns in masculine, feminine and neuter genders will be
construed to include any other gender, and words in the singular form will be construed to include
the plural and vice versa, unless the context otherwise requires. The words “this Agreement,”
“herein,” “hereof,” “hereby,” “hereunder” and words of similar import refer to this Agreement as a
whole and not to any particular subdivision unless expressly so limited. The parties hereto intend
that each representation, warranty and covenant contained herein will have independent
significance. If any party hereto has breached any representation, warranty or covenant contained
herein in any respect, the fact that there exists another representation, warranty or covenant
relating to the same subject matter (regardless of the relative levels of specificity) which such
party has breached, will not detract from or mitigate the fact that such party is in breach of the
first representation, warranty or covenant.
Section 7.17 Remedies. The parties hereto shall have all remedies for breach of this Agreement
available to them as provided by law or equity; provided, however, that the indemnification
provisions in Article VII shall be the parties’ exclusive remedy with respect to a breach
of a representation or warranty in this Agreement.
22
Section 7.18 Assignment. Neither the Company nor Purchaser may assign or transfer any of its rights or
obligations hereunder (including by operation of law or otherwise) except with the prior written
consent of Purchaser (in the case of the Company) or the Company (in the case of Purchaser), as
applicable; provided, however, that Purchaser shall have the right to assign its rights or
obligations hereunder to Parent without the consent of the Company.
Section 7.19 Certain Defined Terms. As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
“Affiliate” means, with respect to any Person, (i) any other Person of which securities or
other ownership interests representing more than 10% of the voting interests are, at the time such
determination is being made, owned, Controlled or held, directly or indirectly, by such Person, or
(ii) any other Person which, at the time such determination is being made, is Controlling,
Controlled by or under common Control with, such Person. As used herein.
“Agreement” has the meaning set forth in the preamble hereto.
“Audited Balance Sheet Date” has the meaning set forth in Section 2.07.
“Business Day” means any date that is not a Saturday or Sunday or other day on which banks are
required or authorized by law to be closed in the city of Houston, Texas.
“Bylaws” has the meaning set forth in Section 2.02.
“Charter” has the meaning set forth in Section 2.02.
“Closing” has the meaning set for in Section 1.02(a).
“Closing Date” has the meaning set for in Section 1.02(a).
“Code” has the meaning set forth in Section 2.18.
“Company” has the meaning set forth in the preamble hereto.
“Common Shares” has the meaning set forth in the Section 1.01(a).
“Common Stock” has the meaning set forth in the recitals hereto.
“Company SEC Documents” has the meaning set forth in Section 2.06.
“Confidential Information” shall have the meaning set forth in Section 4.01.
“Control”, whether used as a noun or verb, refers to the possession, directly or indirectly,
of the power to direct, or cause the direction of, the management or policies of a Person, whether
through the ownership of voting securities or otherwise.
“Deposit Agreement” has the meaning set forth in Section 1.02(a).
23
“Disputes” shall have the meaning set forth in Section 7.05.
“D Shares” has the meaning set forth in Section 2.02.
“E Shares” has the meaning set forth in Section 2.02.
“Environmental Laws” has the meaning set forth in Section 2.17.
“ERISA” has the meaning set forth in Section 2.18.
“Exercise Period” has the meaning set forth in Section 1.01(b).
“Exchange Act” has the meaning set forth in Section 2.06.
“Financial Statements” has the meaning set forth in Section 2.06.
“GAAP” has the meaning set forth in Section 2.06.
“G Shares” has the meaning set forth in Section 2.02.
“Governmental Entity” means any (i) region, state, county, municipality, city, town, village,
district, foreign or other jurisdiction, (ii) federal, state, local, municipal, foreign or other
government, (iii) governmental or quasi-governmental authority of any nature (including any
governmental agency, branch, department, self-regulatory organization or other entity and any court
or other tribunal), (iv) body exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, policy, regulatory or taxing authority or power of any nature or (v)
official of any of the foregoing.
“Hazardous Substances” has the meaning set forth in Section 2.17.
“H Shares” has the meaning set forth in Section 2.02.
“Indemnified Parties” has the meaning set forth in Section 6.02.
“Intellectual Property” has the meaning set forth in Section 2.10.
“Lien” means a mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, lien
(statutory or otherwise, including any lien for taxes), security interest, preference,
participation interest, priority or security agreement or preferential arrangement of any kind or
nature whatsoever, including any conditional sale or other title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing and the filing of any
document under the law of any applicable jurisdiction to evidence any of the foregoing.
“Losses” shall have the meaning set forth in Section 6.02.
24
“Material Adverse Change” means a material adverse change in the business, operations, assets,
liabilities, properties, condition (financial or otherwise) or results of operations of the Company
and its Subsidiaries taken as a whole, it being understood that none of the following
alone or in combination shall be deemed, in and of itself, to constitute a Material Adverse
Change: (i) changes attributable to the public announcement or pendency of the transactions
contemplated hereby or compliance with this Agreement, (ii) changes in general United States or
foreign economic, financial or geopolitical conditions or events in general, (iii) changes in U.S.
GAAP, (iv) changes in interest rates, (v) changes in the capital markets, (vi) changes in the
Company’s and its Subsidiaries’ industries in general, (vii) military conflicts or acts of foreign
or domestic terrorism or (viii) (a) the seasonality of the Company’s business or (b) the failure,
in and of itself, of the Company to meet any expected or projected financial or operating
performance target disclosed to Purchaser prior to the date of this Agreement as well as any
change, in and of itself, by the Company in any expected or projected financial or operating
performance target as compared with any target disclosed to Purchaser prior to the date of this
Agreement; provided, however, that any change, effect, development, event or occurrence described
in each of clauses (iii), (vi) and (viii)(a) above shall not constitute or give rise to a Material
Adverse Change only if and to the extent that such change, effect, development, event or occurrence
does not have a disproportionate effect on such Person and its Subsidiaries as compared to other
Persons in the oil and gas industry and provided further that the facts, circumstances or events
underlying the change or failure in clause (viii)(b) above shall not be excluded to the extent such
facts, circumstances or events would otherwise constitute a Material Adverse Change.
“Oil and Gas Properties” has the meaning set forth in Section 2.19.
“Option” has the meaning set forth in the recitals hereto.
“Option Agreement” has the meaning set forth in Section 5.01(c).
“Parent” means Shanghai Xxxxx Xxxx Property Group, Ltd., a company organized under the laws of
the People’s Republic of China.
“Permitted Encumbrances” means:
(i) Third-party consents to assignment of leases and contracts and preferential purchase
rights which are customary in the oil and gas business;
(ii) Liens for taxes or assessments or other governmental charges or levies not yet delinquent
or, if delinquent, that are being contested in good faith in the normal course of business (which
are not applicable to the transactions contemplated in the Transaction Documents);
(iii) All rights to consent by, required notices to, filings with, or other actions by
federal, state, local governmental entities or tribal entities in connection with the sale or
conveyance of the Oil and Gas Properties if the same are customarily required in the oil and gas
business;
(iv) Rights of reassignment upon the surrender or expiration of any lease;
25
(v) Easements, rights-of-way, servitudes, permits, conditions, covenants, exceptions,
reservations, surface leases and other rights with respect to surface operations, pipelines,
grazing,
logging, canals, ditches, reservoirs or the like, and easements for streets, alleys, highways,
pipelines, telephone lines, power lines, railway and other easements and rights of way, on, over or
in respect of any of the properties or any restriction on access thereto and that do not materially
interfere with the ownership, operation or value of the affected property for the purposes of
exploration and production of oil and gas;
(vi) Landlord’s Liens, operators’, vendors’, carriers’, warehousemen’s, repairmen’s,
mechanics’, suppliers’, workers’, materialmen’s, construction or other like liens arising by
operation of law in the ordinary course of business consistent with past practice or incident to
the exploration, development, construction, operation and maintenance of Oil and Gas Properties
consistent with past practice each of which is in respect of obligations that are not delinquent or
which are being contested in good faith by appropriate proceedings;
(vii) Rights reserved to or vested in any municipality or governmental, statutory, public or
tribal authority to control or regulate any of the Oil and Gas Properties in any manner; and all
applicable laws, rules, regulations and orders of general applicability in the area which do not
materially interfere with the ownership, operation or value of the affected property for the
purposes of exploration and production of oil and gas;
(viii) Liens arising under operating agreements, unitization and pooling agreements and
production sales contracts containing terms and conditions customary in the industry securing
amounts not yet due or, if due, being contested in good faith in the ordinary course of business;
(ix) Statutory liens securing the payment of production proceeds to Persons entitled thereto
not yet due or if due, being contested in good faith in the ordinary course of business;
(x) Such other defects or irregularities in the title to the Oil and Gas Properties that would
be considered not material by a Person engaged in the business of acquiring, ownership or operation
of oil and gas properties in accordance with generally accepted industry standards;
(xi) Liens in connection with workers’ compensation, unemployment insurance or other social
security, old age pension or public liability obligations which are not delinquent or which are
being contested in good faith by appropriate proceedings;
(xii) Liens arising solely by virtue of any statutory or common law provision relating to
banker’s liens, rights of set-off or similar rights and remedies and burdening only deposit
accounts or other funds maintained with a creditor depository institution; and
(xiii) Any indenture, mortgage, loan, note, credit, sale-leaseback or similar agreement for
borrowed money to which the Company or its assets are subject (whether the Company or any of its
Subsidiaries is the borrower or lender) and all security agreements or similar agreements
associated therewith, in each case relating to any financing arrangement disclosed in the Company
SEC Documents.
“Person” means an individual, corporation, trust, partnership, limited liability company,
joint venture, unincorporated organization, government body or any agency or political subdivision
thereof, or any other entity.
26
“Preferred Shares” has the meaning set forth in Section 1.01(a).
“Preferred Stock” has the meaning set forth in the recitals hereto.
“Premises” has the meaning set forth in Section 2.17.
“Purchase Price” has the meaning set forth in Section 1.01.
“Purchaser” has the meaning set forth in the preamble hereto.
“Purchaser Indemnified Parties” has the meaning set forth in Section 6.02(b).
“SEC” has the meaning set forth in Section 2.06.
“Securities Act” has the meaning set forth in Section 2.05(b).
“Subsidiary” means, as to the Company, any Person of which more than 50% of the outstanding
voting power of such Person (irrespective of whether or not at the time stock of any other class or
classes of such Person shall have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly controlled by the Company, or by one or more of
its subsidiaries, or by the Company and one or more of its subsidiaries.
“Transaction Documents” means this Agreement and the Deposit Agreement.
[Signature Page to Follow]
27
COMPANY: |
CRIMSON EXPLORATION INC. |
|||
By: | /s/ Xxxxx X. Xxxx | |||
Name: | Xxxxx X. Xxxx | |||
Title: | President & Chief Executive Officer | |||
PURCHASER: | AMERICA CAPITAL ENERGY CORPORATION |
|||
By: | /s/ Ni Zhaoxing | |||
Name: | Ni Zhaoxing | |||
Title: | Chairman and Chief Executive Officer | |||
Signature Page to Subscription Agreement
EXHIBIT A
1.
|
Economic and Voting Rights | The Preferred Stock will
provide for economic and voting
rights identical to the Common
Stock on an as-converted basis
and will vote as a single class
with the Common Stock, except
as otherwise provided by law.
The Preferred Stock will be
entitled only to such dividends
as may be declared on the
Common Stock and shall not have
any preference in dividends or
in liquidation and will rank
pari passu in liquidation with
the Common Stock on an
as-converted basis. |
||
2.
|
Director Designation Rights | Holders of a majority of the
issued and outstanding shares
of the Preferred Stock will
provide a holder thereof with
the right to designate and
appoint a director to serve on
the Company’s Board of
Directors to serve until the
Company’s next annual meeting
of shareholders, and thereafter
if such director may be
nominated and elected by the
stockholders of the Company. |
||
3.
|
Conversion | Each share of Preferred Stock
will convert on a one-for-one
basis into a share of the
Common Stock.
|
||
All of the outstanding shares
of Preferred Stock will
automatically convert to an
equivalent number of shares of
Common Stock upon the earlier
of (i) the exercise of the
Preferred Stock holder’s right
to designate and appoint a
director to serve on the
Company’s Board of Directors
pursuant to the terms thereof
and (ii) December 31, 2010. |
||||
4.
|
Transferability | The Preferred Stock will not be
transferable by a holder,
provided, however, that
Purchaser as holder shall have
the right to assign its rights
or obligations hereunder to
Parent without the consent of
the Company. |
Exhibit A-1
EXHIBIT B
1.
|
Registrable Securities | The Common Shares (and the shares of
Common Stock issuable upon conversion of
the Preferred Stock) will constitute
“Registrable Securities” for so long as
Purchaser (i) owns at least 10% of the
issued and outstanding shares of the
Company’s Common Stock and (ii) a director
that is an officer or director of
Purchaser or an Affiliate of Purchaser
serves on the Board. The Common Shares
will also cease to be “Registrable
Securities” under customary circumstances,
including when the Common Shares are sold
pursuant to an effective registration
statement or pursuant to Rule 144 and when
the Common Shares cease to be outstanding. |
||
2.
|
Demand Rights | Purchaser will be entitled to exercise two
demand rights with respect to registration
of the Common Shares. Subject to the
priority provisions and exceptions to its
obligations, the Company will be obligated
to effect the registration of the Common
Shares as soon as reasonably practicable
upon receipt of a demand request.
|
||
The Company will be entitled to defer the
registration of the Common Shares pursuant
to a demand request for a period of 60
days once in a 12-month period if the
Board determines in good faith that filing
the registration statement would be
seriously detrimental to the Company or
would materially and adversely affect a
prospective or pending material
transaction. |
||||
3.
|
Piggyback Rights | Subject to the priority provisions,
Purchaser will be entitled to piggyback
rights with respect to any registration
statement the Company proposes to file,
with customary exceptions including
registration statements on Form S-4 and
Form S-8. |
||
4.
|
Lock-up Period | Purchaser will not be entitled to exercise
its registration rights until the one year
anniversary of the Closing under the
Subscription Agreement. In addition, in
the event of any underwritten public
offering of Common Stock by the Company,
Purchaser shall agree to execute and
deliver customary lock-up agreements for
the same post-offering period as may apply
to executive officers and directors of the
Company. |
Exhibit B-1
5.
|
Blackout Period | As an insider, Purchaser will be subject
to restrictions on sales of the Common
Shares during blackout periods imposed by
the Company as a result of material
information or developments known to the
Company and not yet known to the public. |
||
7.
|
Priority | If the managing underwriter of an
underwritten public offering determines
that the inclusion of all registrable
securities in the registration statement
will materially and adversely interfere
with the marketing of the offering, the
Company and OCM GW Holdings, LLC
(“Oaktree”) will be entitled to priority
over the rights of Purchaser to include
the Common Shares in such registration
statement. Purchaser will acknowledge the
priority rights of Oaktree in the
definitive registration rights agreement
that includes these provisions. |
||
8.
|
Expenses | Purchaser will be responsible for costs
and expenses incurred by Purchaser and the
Company as a result of the exercise of its
demand rights. Purchaser will be
responsible for its own direct costs
(e.g., registration fees and any
underwriting discount) in connection with
the exercise of its piggyback rights. |
||
9.
|
Transferability | Purchaser will be entitled to transfer its
registration rights to any of its
affiliates if the transfer is in
accordance with applicable securities laws
and prior written notice is provided to
the Company. |
Exhibit B-2