EXHIBIT 10.9
FORMATION AND CAPITALIZATION AGREEMENT
This Formation and Capitalization Agreement (this "Agreement") is
entered into as of the 30th day of December, 1996 by and between Xxxxxx Oil
Corporation, a Delaware corporation ("Xxxxxx"), SOCO International, Inc., a
Delaware corporation ("SOCO International"), SOCO International Holdings, Inc.,
a Delaware corporation ("Holdings"), SOCO International Operations, Inc., a
Delaware corporation ("Operations") and Xxxxxx X. Story, Jr., a resident of the
State of Texas ("Story").
WHEREAS, SOCO International is a wholly owned subsidiary of Xxxxxx;
WHEREAS, SOCO International has recently incorporated and organized
Operations and Holdings as wholly-owned subsidiaries of SOCO International;
WHEREAS, SOCO International owns beneficially and of record one share of
the common stock of Operations ("Operations Common Stock") and one share of the
common stock of Holdings ("Holdings Common Stock");
WHEREAS, pursuant to that certain agreement by and between Xxxxxx and
Story dated as of April 30, 1993 (the "1993 Agreement"), Story holds a
non-compensatory option (the "Option") to acquire 100 shares of common stock
(10% of the then outstanding shares) of SOCO International, which Option was
received in exchange for common stock of SOCO International then held by Story;
WHEREAS, Story and International desire to capitalize Operations and
Holdings by contributing the assets described herein to such corporations in the
manner set forth herein, subject to the assumption of the liabilities described
herein;
NOW THEREFORE, in consideration of the premises set forth above, the
mutual covenants set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS.
(a) "EFFECTIVE TIME" shall mean 9:00 a.m. (Houston time) on
the date first set forth above.
(b) "CAIRN SHARES" shall mean the shares of capital stock of
Cairn Energy Plc owned beneficially or of record by SOCO International
immediately prior to the Effective Time.
(c) "HOLDINGS ASSETS" shall mean SOCO International's right,
title and interest in any rights, privileges, powers, franchises,
properties or assets related to the Cairn Shares, (including any
dividends and distributions with respect thereto) immediately prior to
the Effective Time.
(d) "OPERATIONS ASSETS" shall mean SOCO International's
right, title and interest in any rights, privileges, powers,
franchises, properties or assets immediately prior to the Effective
Time, but specifically excluding the Holdings Assets.
1
(e) "LIABILITIES" shall mean all losses, claims, taxes,
fines, penalties, damages, costs (including costs of investigation)
expenses (including reasonable legal fees and expenses) and other
liabilities, whether joint or several.
(f) "INTERCOMPANY DEBT" shall mean the intercompany
indebtedness owed by SOCO International to Xxxxxx as of the Effective
Time, which had a balance of $34,504,390 as of November 30, 1996.
(g) "HOLDINGS LIABILITIES" shall mean SOCO International's
Liabilities related to the Holdings Assets and (ii) the Intercompany
Debt.
(h) "OPERATIONS LIABILITIES" shall mean SOCO International's
Liabilities relating to the Operations Assets, but specifically
excluding the Holdings Liabilities.
(i) "SOCO INTERNATIONAL INDEMNIFIED PARTIES" shall mean SOCO
International and its subsidiaries (other than Operations, Holdings
and their respective subsidiaries) and any officer, director,
employee, agent or other representative thereof (individually, a "SOCO
International Indemnified Party").
(j) "OPERATIONS INDEMNIFIED PARTIES" shall mean Operations
and its subsidiaries and any officer, director, employee, agent or
other representative thereof (individually, an "Operations Indemnified
Party").
(k) "HOLDINGS INDEMNIFIED PARTIES" shall mean Holdings and
its subsidiaries and any officer, director, employee, agent or other
representative thereof (individually, an "Holdings Indemnified
Party").
2. CAPITALIZATION OF OPERATIONS. (a) Effective as of the Effective Time,
SOCO International and Story hereby contribute to Operations the assets
described in paragraphs (b) and (c) hereof, respectively. In consideration for
such contributions, Operations hereby issues shares of Operations Common Stock
to SOCO International and Story in the respective amounts set forth below:
TOTAL SHARES
OF OPERATIONS
SHARES OF OPERATIONS SHARES OF OPERATIONS COMMON STOCK OWNED
COMMON STOCK COMMON STOCK TO BE IMMEDIATELY FOLLOWING
SHAREHOLDER CURRENTLY OWNED ISSUED AT EFFECTIVE TIME EFFECTIVE TIME
----------- --------------- ------------------------ ---------------------
SOCO 1 899 900
International
Story 0 100 100
- --- -----
Total 1 999 1,000
= === =====
(b) Effective as of the Effective Time, (i) SOCO International hereby
transfers, sells, assigns, bargains and conveys to Operations all of SOCO
International's right, title and interest in the Operations Assets, and (ii)
Operations hereby assumes all of the Operations Liabilities.
(c) Effective as of the Effective Time, Story hereby (i) transfers,
sells, assigns, bargains and conveys to Operations such portion of Story's
right, title and interest in the Option as it relates
2
to the right to purchase 45.65 shares of the common stock of SOCO International
(together with 45.65% of Story's remaining rights under the 1993 Agreement), and
(ii) delivers to Operations a recourse promissory note from Story in the
principal amount of $269,563.25 and substantially in the form attached hereto as
Exhibit A (the "Operations Note").
(d) Effective as of the Effective Time, Operations hereby delivers to
International and Story certificates for the shares of Operations Common Stock
issued pursuant to this Section 2.
3. CAPITALIZATION OF HOLDINGS. (a) Effective as of the Effective Time,
SOCO International and Story hereby contribute to Holdings the assets described
in paragraphs (b) and (c) hereof, respectively. In consideration for such
contributions, Holdings hereby issues shares of Holdings Common Stock to SOCO
International and Story in the respective amounts set forth below:
TOTAL SHARES
OF HOLDINGS
SHARES OF HOLDINGS SHARES OF HOLDINGS COMMON STOCK OWNED
COMMON STOCK COMMON STOCK TO BE IMMEDIATELY FOLLOWING
SHAREHOLDER CURRENTLY OWNED ISSUED AT EFFECTIVE TIME EFFECTIVE TIME
----------- --------------- ------------------------ ---------------------
SOCO
International 1 899 900
Story 0 100 100
- --- -----
Total 1 999 1,000
= === =====
(b) Effective as of the Effective Time, (i) SOCO International hereby
transfers, sells, assigns, bargains and conveys to Holdings all of SOCO
International's right, title and interest in all of the Holdings Assets, and
(ii) Holdings hereby assumes the Holdings Liabilities.
(c) Effective as of the Effective Time, Story hereby (i) transfers,
sells, assigns, bargains and conveys to Holdings such portion of Story's right,
title and interest in the Option as it relates to the right to purchase 54.35
shares of the common stock of SOCO International (together with 54.35% of
Story's remaining rights under the 1993 Agreement), and (ii) delivers to
Holdings a recourse promissory note from Story in the principal amount of
$320,936.75 and substantially in the form attached hereto as Exhibit A (the
"Holdings Note"). The parties hereto acknowledge that after the transfer of the
Option pursuant to Sections 2(c) and 3(c) hereof, Story shall have no further
rights under the Option or the 1993 Agreement, and all such rights shall be
transferred to Operations and Holdings in the respective amounts set forth
herein. In accordance with paragraph 8 of the 1993 Agreement, Xxxxxx hereby
consents to the assignments of the Option contemplated by this Agreement.
(d) Effective as of the Effective Time, Holdings hereby delivers to
International and Story certificates for the shares of Holdings Common Stock
issued pursuant to this Section 3.
4. INDEMNIFICATION.
(a) Operations shall defend, indemnify and hold harmless the SOCO
International Indemnified Parties and the Holdings Indemnified Parties against
any and all Operations Liabilities, whether or not the result of the sole or
partial negligence or otherwise culpable conduct or fault of one or more of the
SOCO International Indemnified Parties or the Holdings Indemnified Parties.
3
(b) Holdings shall defend, indemnify and hold harmless the SOCO
International Indemnified Parties and the Operations Indemnified Parties against
any and all Holdings Liabilities, whether or not the result of the sole or
partial negligence or otherwise culpable conduct or fault of one or more of the
SOCO International Indemnified Parties or the Operations Indemnified Parties.
5. INDEMNIFICATION PROCEDURE. Each person to be indemnified pursuant to
this Agreement (an "Indemnified Party") agrees to give prompt notice to the
indemnifying party of the assertion of any claim, or the commencement of any
suit, action or proceeding, brought against or sought to be collected from such
Indemnified Party (each a "Third Party Claim"), in respect of which indemnity
may be sought by such Indemnified Party under this Agreement; provided that the
omission so to promptly notify the indemnifying party with respect to a Third
Party Claim brought against or sought to be collected from such Indemnified
Party will not relieve the indemnifying party from any Liability that it may
have to such Indemnified Party under this Agreement except to the extent that
such failure has materially prejudiced such indemnifying party with respect to
the defense of such Third Party Claim. If any Indemnified Party shall seek
indemnity under this Agreement with respect to a Third Party Claim brought
against or sought to be collected from such Indemnified Party, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, to assume and direct the defense and settlement thereof with counsel
satisfactory to such Indemnified Party. After notice from the indemnifying party
to an Indemnified Party of its election to assume and direct the defense and
settlement of a Third Party Claim brought against or sought to be collected from
such Indemnified Party that such indemnifying party is entitled to assume and
direct under the terms hereof, the indemnifying party shall not be liable to
such Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation, unless the Indemnifying
Party and the Indemnified Party are both named parties to any such action, claim
or demand and representation of both parties by the same counsel would be
inappropriate due to actual or potential conflicts of interest between them.
Notwithstanding the foregoing provisions of this Section 5, the indemnifying
party shall not (A) without the prior written consent of an Indemnified Party,
effect any settlement of any pending or threatened proceeding in respect of
which such Indemnified Party is, or with reasonable foreseeability, could have
been a party and indemnity could have been sought hereunder by such Indemnified
Party for a Third Party Claim brought against or sought to be collected from
such Indemnified Party, unless such settlement includes an unconditional
release, in form and substance satisfactory to the Indemnified Party, of such
Indemnified Party from all Liability arising out of such proceeding (provided
that, whether or not such a release is required to be obtained, the indemnifying
party shall remain liable to such Indemnified Party in accordance with this
Agreement in the event that a Third Party Claim is subsequently brought against
or sought to be collected from such Indemnified Party) or (B) be liable for any
settlement of any Third Party Claim brought against or sought to be collected
from an Indemnified Party effected without such indemnifying party's written
consent (which shall not be unreasonably withheld), but if settled with such
indemnifying party's written consent, or if there is a final judgment for the
plaintiff in any such Third Party Claim, such indemnifying party agrees (to the
extent stated above) to indemnify the Indemnified Party from and against any
loss, liability, claim, damage or expense by reason or such settlement or
judgment. The indemnification required by this Agreement shall be made by
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or loss, liability, claim, damage or
expense is incurred.
4
6. REPRESENTATIONS. In order to induce each other party to enter into
this Agreement, each party hereto hereby represents and warrants to each other
party hereto that (a) this Agreement has been duly authorized by such party by
all necessary corporate action (to the extent such party is a corporation), (b)
such party has the legal capacity to enter into this Agreement (to the extent
such party is an individual), (c) the performance by such party of the
obligations contemplated hereby to be performed by such party do not conflict
with the organizational documents (to the extent such party is a corporation) or
any agreement, judgment, order, law, regulation, rule or instrument to which
such party is subject. Without limiting the generality of the foregoing, Xxxxxx
and Story each represent that the 1993 Agreement and the Option granted therein
are in full force and effect, that such party is not in breach thereof and that
such party has not assigned or transferred any rights thereunder, or attempted
to do so, except as expressly contemplated by this Agreement.
7. SECURITIES LAW MATTERS. SOCO International and Story represent to
each other and to Operations and Holdings that they are knowledgeable and
sophisticated investors with respect to the type of business to be conducted by
Operations and Holdings and that they have had access to such information as
they have requested in connection therewith. SOCO International and Story
acknowledge that the shares of Operations Common Stock and Holdings Common Stock
received by them will not be registered under the federal or any state
securities laws, that no party shall have any obligation to register such
shares, and that no sale, transfer or other disposition of such shares may be
made without registration or an exemption therefrom. The certificates for shares
of the Operations Common Stock and Holdings Common Stock shall bear such legends
as the issuer thereof shall deem appropriate with respect to the foregoing.
8. FURTHER ASSURANCES. (a)If at any time after the date hereof either
Operations or Holdings shall consider or be advised that any deeds, bills of
sale, stock powers, assignments, other documents or assurances or any other acts
or things are necessary, desirable or proper to vest, perfect or confirm, of
record or otherwise, any of the rights, privileges, powers, franchises,
properties or assets purported to be transferred pursuant hereto, SOCO
International or Story, as applicable, shall execute and deliver all such deeds,
bills of sale, stock powers, assignments, other documents and assurances and do
all such other acts and things necessary, desirable or proper to vest, perfect
or confirm the right, title or interest of Operations or Holdings, as the case
may be, in, to or under any of the rights, privileges, powers, franchises,
properties or assets purported to be transferred pursuant hereto.
(b) If at any time after the date hereof SOCO International shall
consider or be advised that assumptions, other documents, assurances or other
acts or other things are necessary, desirable or proper for Operations or
Holdings, as the case may be, to effectively assume any of the obligations or
liabilities purported to be assumed hereby, Operations or Holdings, as the case
may be, shall execute and deliver all such assumptions, other documents and
assurances and do all such other acts and things necessary, desirable or proper
to effectively assume any of the obligations or liabilities purported to be
assumed hereby.
(c) Notwithstanding the foregoing or the terms and conditions of
such additional documents, acts or things, such additional documents, acts or
things shall neither increase nor decrease the scope of the assignment and
assumption contemplated by this Agreement.
5
9. ASSIGNMENT. Except by operation of law or in connection with the sale
of all or substantially all the assets of a party hereto, this Agreement shall
not be assignable, in whole or in part, directly or indirectly, by any party
hereto without the written consent of the other parties, and any attempt to
assign any rights or obligations arising under this Agreement without such
consent shall be void; provided, however, that the provisions of this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
hereto and their respective successors and permitted assigns.
10. PARTIES IN INTEREST. Except as herein otherwise specifically
provided, nothing in this Agreement expressed or implied is intended to confer
any right or benefit upon any person, firm or corporation or other entity other
than the parties hereto, the SOCO International Indemnified Parties, the
Operations Indemnified Parties and the Holdings Indemnified Parties, and their
respective successors and permitted assigns.
11. WAIVERS, ETC. No failure or delay on the part of the parties hereto
in exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No modification or waiver of any provision of this Agreement nor
consent to any departure by any parties therefrom shall in any event be
effective unless the same shall be in writing and signed by all such parties,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given and only against those parties who have
executed such writing.
12. SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any
thereof which may be hereafter declared invalid, void or unenforceable. In the
event that any such term, provision, covenant or restriction is held to be
invalid, void or unenforceable, the parties hereto shall use their reasonable
efforts to find and employ an alternate means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction.
13. NOTICES. Any notices to be given hereunder shall be in writing and
shall be deemed to be sufficiently given when delivered personally or sent
certified or registered mail, postage prepaid and return receipt requested, or
by telecopy, and if intended for Story addressed to:
Xxxxxx X. Story, Jr.
SOCO International, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
6
or if intended for Xxxxxx, SOCO International, Operations or Holdings,
addressed to:
Xxxxxx Oil Corporation
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Attention: General Counsel
Telecopy No.: (000) 000-0000
Any party hereto may change the address for receiving notice upon notice to the
other parties given in the manner set forth in this Section 13.
14. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of law thereof.
15. AMENDMENT. This Agreement may be amended or otherwise modified
only by a writing duly executed by each of the parties hereto or their
respective successors or assigns.
16. HEADINGS. The section headings used in this Agreement are for
convenience only and shall not be considered a part of, or affect the
construction or interpretation of, any provisions of this
Agreement.
17. EXECUTION OF COUNTERPARTS. This Agreement may be executed in
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together for all purposes shall constitute
one agreement.
EXECUTED as of the day and year first written above.
XXXXXX OIL CORPORATION
By:/s/Xxxxxx X. Xxxxxxx
-----------------------
Name: Xxxxxx X. Xxxxxxx
Title: President
SOCO INTERNATIONAL, INC.
By:/s/Xxxxxx X. Story, Jr.
--------------------------
Name: Xxxxxx X. Story, Jr.
Title: President
7
SOCO INTERNATIONAL HOLDINGS, INC.
By:/s/Xxxxxx X. Story, Jr.
--------------------------
Name: Xxxxxx X. Story, Jr.
Title: President
SOCO INTERNATIONAL OPERATIONS, INC.
By:/s/Xxxxxx X. Story, Jr.
--------------------------
Name: Xxxxxx X. Story, Jr.
Title: President
/s/Xxxxxx X. Story, Jr.
-----------------------
XXXXXX X. STORY, JR.
8
