REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and entered
into as of [ ], 2006 (the "Effective Date") among Dune Energy, Inc., a Delaware
corporation (the "Company"), the parties set forth Exhibit A hereto (each, a
"Purchaser" and collectively, the "Purchasers"), and the parties set forth on
the signature page.
R E C I T A L S:
A. The Purchasers have purchased shares of common stock (the "Shares")
from the Company pursuant to Subscription Agreements (each, a "Subscription
Agreement" and collectively, the "Subscription Agreements") by and between the
Company and each Purchaser.
B. The Company has issued a warrant (the "Placement Agent Warrant") to
purchase shares of the Company's Common Stock to Xxxxxxx Xxxxxx Xxxxxx Inc., a
Texas corporation ("SMH").
C. The Company, the Purchasers, and SMH desire to set forth the
registration rights to be granted by the Company to the Purchasers and SMH.
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants, and conditions set forth herein, in the Subscription
Agreements, or otherwise, the parties mutually agree as follows:
A G R E E M E N T:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Approved Market" means the Nasdaq National Market, the Nasdaq SmallCap
Market, the New York Stock Exchange, Inc., the American Stock Exchange, Inc., or
the OTC Bulletin Board.
"Blackout Period" means, with respect to a registration, a period in each
case commencing on the day immediately after the Company notifies the Purchasers
and SMH that they are required, pursuant to Section 4(f), to suspend offers and
sales of Registrable Securities during which the Company, in the good faith
judgment of its Board of Directors, determines (because of the existence of, or
in anticipation of, any acquisition, financing activity, or other transaction
involving the Company, or the unavailability for reasons beyond the Company's
control of any required financial statements, disclosure of information which is
in its best interest not to publicly disclose, or any other event or condition
of similar significance to the Company) that the registration and distribution
of the Registrable Securities to be covered by such registration statement, if
any, would be seriously detrimental to the Company and its shareholders and
ending on the earlier of (1) the date upon which the material non-public
information commencing the Blackout Period is disclosed to the public or ceases
to be material and (2) such time as the Company notifies the selling Holders
that the Company will no longer delay such filing of the Registration Statement,
recommence taking steps to make such Registration Statement effective, or allow
sales pursuant to such Registration Statement to resume; provided, however, that
(a) the Company shall limit its use of Blackout Periods, in the aggregate, to 60
Trading Days in any 12-month period and (b) no Blackout Period may commence
sooner than 60 days after the end of a prior Blackout Period.
"Business Day" means any day of the year, other than a Saturday, Sunday,
or other day on which the Commission is required or authorized to close.
"Closing Date" means [__], 2006, or such other time as is mutually agreed
between the Company and the Purchasers for the closing of the sale referred to
in Recital A above.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Common Stock" means the common stock, $.001 par value per share, of the
Company and any and all shares of capital stock or other equity securities of:
(i) the Company which are added to or exchanged or substituted for the Common
Stock by reason of the declaration of any stock dividend or stock split, the
issuance of any distribution or the reclassification, readjustment,
recapitalization, or other such modification of the capital structure of the
Company; and (ii) any other corporation, now or hereafter organized under the
laws of any state or other governmental authority, with which the Company is
merged, which results from any consolidation or reorganization to which the
Company is a party, or to which is sold all or substantially all of the shares
or assets of the Company, if immediately after such merger, consolidation,
reorganization, or sale, the Company or the stockholders of the Company own
equity securities having in the aggregate more than 50% of the total voting
power of such other corporation.
"Equity Securities" means (i) any Common Stock, (ii) any security
convertible, with or without consideration, into any Common Stock (including any
option to purchase such a convertible security), (iii) any security carrying any
warrant or right to subscribe to or purchase any Common Stock, or (iv) any such
warrant or right.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Family Member" means (a) with respect to any individual, such
individual's spouse, any descendants (whether natural or adopted), any trust all
of the beneficial interests of which are owned by any of such individuals or by
any of such individuals together with any organization described in Section
501(c)(3) of the Internal Revenue Code of 1986, as amended, the estate of any
such individual, and any corporation, association, partnership, or limited
liability company all of the equity interests of which are owned by those above
described individuals, trusts, or organizations and (b) with respect to any
trust, the owners of the beneficial interests of such trust.
"Form S-1" and "Form S-3" mean such forms under the Securities Act as in
effect on the date hereof.
"Holder" means each Purchaser, SMH, or any successor or Permitted Assignee
of a Purchaser, or SMH who acquire rights in accordance with this Agreement with
respect to the Registrable Securities directly or indirectly from a Purchaser or
SMH, including from any Permitted Assignee.
"Inspector" means any attorney, accountant, or other agent retained by a
Purchaser for the purposes provided in Section 4(j).
"Offering Price" means the price per share at which the Shares have been
sold to the Purchasers pursuant to the Subscription Agreements.
"Permitted Assignee" means (a) with respect to a partnership, its partners
or former partners in accordance with their partnership interests, (b) with
respect to a corporation, its shareholders in accordance with their interest in
the corporation, (c) with respect to a limited liability company, its members or
former members in accordance with their interest in the limited liability
company, (d) with respect to an individual party, any Family Member of such
party, (e) an entity that is controlled by, controls, or is under common control
with a transferor, or (f) a party to this Agreement.
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The terms "register," "registered," and "registration" refers to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registrable Securities" means (i) shares of Common Stock issued to each
Purchaser pursuant to the Subscription Agreements, and (ii) shares of Common
Stock issued or issuable to SMH pursuant to the Placement Agent Warrant, but in
each case excluding (A) any Registrable Securities that have been publicly sold
or may be publicly sold immediately without registration under the Securities
Act either pursuant to Rule 144(k) of the Securities Act or otherwise; (B) any
Registrable Securities sold by a person in a transaction pursuant to a
registration statement filed under the Securities Act; or (C) any Registrable
Securities that are at the time subject to an effective registration statement
under the Securities Act.
"Registration Default Date" means the date which is the earlier to occur
of (i) 60 days after the date on which the Registration Statement is filed with
the Commission and (ii) 120 days after the Closing Date.
"Registration Default Period" means the period following the Registration
Default Date during which any Registration Event occurs and is continuing.
"Registration Event" means the occurrence of any of the following events:
(a) the Registration Statement covering Registrable Securities is
not declared effective by the Commission on or before the Registration
Default Date,
(b) after the SEC Effective Date, sales cannot be made pursuant to
the Registration Statement for any reason (including without limitation by
reason of a stop order, or the Company's failure to update the
Registration Statement) but except as excused pursuant to Section 3(a) or
for the reasons specified in clause (c), or
(c) the Common Stock generally or the Registrable Securities
specifically are not listed or included for quotation on an Approved
Market, or trading of the Common Stock is suspended or halted on the
Approved Market, which at the time constitutes the principal market for
the Common Stock, for more than two full, consecutive Trading Days;
provided, however, a Registration Event shall not be deemed to occur if
all or substantially all trading in equity securities (including the
Common Stock) is suspended or halted on the Approved Market for any length
of time.
"Registration Statement" means the registration statement required to be
filed by the Company pursuant to Section 3(a).
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute promulgated in replacement thereof, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
"SEC Effective Date" means the date the Registration Statement is declared
effective by the Commission.
"Trading Day" means a day on whichever (a) the national securities
exchange, (b) the Nasdaq Stock Market, or (c) such other securities market, in
any such case which at the time constitutes the principal securities market for
the Common Stock, is open for general trading of securities.
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2. Term. This Agreement shall continue in full force and effect for a
period of two (2) years from the Effective Date, unless terminated sooner
hereunder.
3. Registration.
(a) Registration on Form S-1 or Form S-3. As promptly as reasonably
practicable after the date hereof, and within 60 days following the Closing
Date, the Company shall file with the Commission a shelf registration statement
on Form S-1, or, if available, Form S-3 relating to the resale by the Holders of
all of the Registrable Securities; provided, however, that the Company shall not
be obligated to effect any such registration, qualification, or compliance
pursuant to this Section 3(a), or keep such registration effective pursuant to
Section 4: (i) in any particular jurisdiction in which the Company would be
required to qualify to do business as a foreign corporation or as a dealer in
securities under the securities or blue sky laws of such jurisdiction or to
execute a general consent to service of process in effecting such registration,
qualification, or compliance, in each case where it has not already done so; or
(ii) during any Blackout Period.
(b) Failure to File Registration Statement. If a Registration Event
occurs, then the Company will make payments to each Purchaser and SMH (to the
extent that it has exercised the Placement Agent Warrant)(a "Qualified
Purchaser"), as partial liquidated damages for the minimum amount of damages to
the Qualified Purchaser by reason thereof, and not as a penalty, at a rate equal
to one and one-half percent (1.5%) of the Offering Price per Share or, with
respect to SMH, one-tenth of one and one-half percent (0.15%) of the Offering
Price for each share of Common Stock acquired upon exercise of the Warrant, held
by such Qualified Purchaser per month, for each calendar month of the
Registration Default Period (pro rated for any period less than 30 days). Each
such payment shall be due and payable within five days after the end of each
calendar month of the Registration Default Period until the termination of the
Registration Default Period and within five days after such termination. Such
payments shall be in partial compensation to the Qualified Purchaser, and shall
not constitute the Qualified Purchaser's exclusive remedy for such events. The
Registration Default Period shall terminate upon (i) the SEC Effective Date in
the case of clause (a) of the definition of "Registration Event," (ii) the
ability of the Qualified Purchaser to effect sales pursuant to the Registration
Statement in the case of clause (b) of the definition of "Registration Event,"
and (iii) the listing or inclusion and/or trading of the Common Stock on an
Approved Market, as the case may be, in the case of clause (c) of the definition
of "Registration Event." The amounts payable as partial liquidated damages
pursuant to this paragraph shall be payable in lawful money of the United
States. Amounts payable as partial liquidated damages to each Qualified
Purchaser hereunder with respect to each share of Registrable Securities shall
cease when the Qualified Purchaser no longer holds such share of Registrable
Securities. SMH acknowledges and agrees that the partial liquidated damages
provided for in this Section 3(f) shall apply to Registrable Securities of SMH
only to the extent SMH has exercised the Warrant.
4. Registration Procedures. In the case of each registration,
qualification, or compliance effected by the Company pursuant to Section 3
hereof, the Company will keep each Holder including securities therein
reasonably advised in writing (which may include e-mail) as to the initiation of
each registration, qualification, and compliance and as to the completion
thereof. With respect to any registration statement filed pursuant to Section 3,
the Company will use its commercially reasonable best efforts to:
(a) prepare and file with the Commission with respect to such Registrable
Securities, a registration statement on Form S-1, or any other form for which
the Company then qualifies or which counsel for the Company shall deem
appropriate, and which form shall be available for the sale of the Registrable
Securities in accordance with the intended method(s) of distribution thereof,
and use its commercially reasonable efforts to cause such registration statement
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to become effective as soon as possible and remain effective at least for a
period ending with the first to occur of (i) the sale of all Registrable
Securities covered by the registration statement, (ii) the availability under
Rule 144 for the Holder to immediately, freely resell without restriction all
Registrable Securities covered by the registration statement, (iii) one year
after expiration of the term of the Warrants, or (iv) 90 days after a Piggyback
Registration is declared effective by the Commission (in each case, the
"Effectiveness Period"); provided, however, if at the end of the one-year period
referred to in clause (iii), any Holder is not able to immediately, freely
resell all Registrable Securities that it owns, the Effectiveness Period shall
continue until terminated pursuant to clause (i) or (ii); and provided that no
later than two business days before filing with the Commission a registration
statement or prospectus or any amendments or supplements thereto, the Company
shall (i) furnish to (A) one special counsel ("Holders Counsel") selected by the
Company for the benefit of the Holders, copies of all such documents proposed to
be filed (excluding any exhibits other than applicable underwriting documents),
in substantially the form proposed to be filed, which documents shall be subject
to the review of such Holders Counsel, and (ii) notify each Holder of
Registrable Securities covered by such registration statement of any stop order
issued or threatened by the Commission and take all reasonable actions required
to prevent the entry of such stop order or to remove it if entered;
(b) if a registration statement is subject to review by the Commission,
promptly respond to all comments and diligently pursue resolution of any
comments to the satisfaction of the Commission;
(c) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective during the
Effectiveness Period (but in any event at least until expiration of the 90-day
period referred to in Section 4(3) of the Securities Act and Rule 174, or any
successor thereto, thereunder, if applicable), and comply with the provisions of
the Securities Act with respect to the disposition of all securities covered by
such registration statement during such period in accordance with the intended
method(s) of disposition by the sellers thereof set forth in such registration
statement;
(d) furnish, without charge, to each Holder of Registrable Securities
covered by such registration statement (i) a reasonable number of copies of such
registration statement (including any exhibits thereto other than exhibits
incorporated by reference), each amendment and supplement thereto as such Holder
may request, (ii) such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus and any other
prospectus filed under Rule 424 under the Securities Act) as such Holders may
request, in conformity with the requirements of the Securities Act, and (iii)
such other documents as such Holder may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such Holder,
but only during the Effectiveness Period;
(e) use its commercially reasonable best efforts to register or qualify
such Registrable Securities under such other applicable securities or blue sky
laws of such jurisdictions as any Holder of Registrable Securities covered by
such registration statement reasonably requests as may be necessary for the
marketability of the Registrable Securities (such request to be made by the time
the applicable registration statement is deemed effective by the Commission) and
do any and all other acts and things which may be reasonably necessary or
advisable to enable such Holder to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such Holder; provided that
the Company shall not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
paragraph (e), (ii) subject itself to taxation in any such jurisdiction, or
(iii) consent to general service of process in any such jurisdiction;
(f) as promptly as practicable after becoming aware of such event, notify
each Holder of such Registrable Securities at any time when a prospectus
relating thereto is required to be delivered under the Securities Act of the
happening of any event which comes to the Company's attention if as a result of
such event the prospectus included in such registration statement contains an
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untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
and the Company shall promptly prepare and furnish to such Holder a supplement
or amendment to such prospectus (or prepare and file appropriate reports under
the Exchange Act) so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not contain an untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, unless suspension of
the use of such prospectus otherwise is authorized herein or in the event of a
Blackout Period, in which case no supplement or amendment need be furnished (or
Exchange Act filing made) until the termination of such suspension or Blackout
Period;
(g) comply, and continue to comply during the period that such
registration statement is effective under the Securities Act, in all material
respects with the Securities Act and the Exchange Act and with all applicable
rules and regulations of the Commission with respect to the disposition of all
securities covered by such registration statement, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least 12 months, but not more than 18 months,
beginning with the first full calendar month after the SEC Effective Date, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act.
(h) as promptly as practicable after becoming aware of such event, notify
each Holder of Registrable Securities being offered or sold pursuant to the
Registration Statement of the issuance by the Commission of any stop order or
other suspension of effectiveness of the Registration Statement at the earliest
possible time;
(i) permit the Holders of Registrable Securities being included in the
Registration Statement and their legal counsel, at such Holders' sole cost and
expense (except as otherwise specifically provided in Section 6) to review and
have a reasonable opportunity to comment on the Registration Statement and all
amendments and supplements thereto at least two Business Days prior to their
filing with the Commission;
(j) make available for inspection by any Holder and any Inspector retained
by such Holder, at such Holder's sole expense, all records as shall be
reasonably necessary to enable such Holder to exercise its due diligence
responsibility, and cause the Company's officers, directors, and employees to
supply all information which such Holder or any Inspector may reasonably request
for purposes of such due diligence; provided, however, that such Holder shall
hold in confidence and shall not make any disclosure of any record or other
information which the Company determines in good faith to be confidential, and
of which determination such Holder is so notified at the time such Holder
receives such information, unless (i) the disclosure of such record is necessary
to avoid or correct a misstatement or omission in the Registration Statement and
a reasonable time prior to such disclosure the Holder shall have informed the
Company of the need to so correct such misstatement or omission and the Company
shall have failed to correct such misstatement of omission, (ii) the release of
such record is ordered pursuant to a subpoena or other order from a court or
governmental body of competent jurisdiction, or (iii) the information in such
record has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential information in such records to any Inspector until
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and unless such Inspector shall have entered into a confidentiality agreement
with the Company with respect thereto, substantially in the form of this Section
4(j), which agreement shall permit such Inspector to disclose records to the
Holder who has retained such Inspector. Each Holder agrees that it shall, upon
learning that disclosure of such records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the records deemed confidential. The Company shall hold in confidence
and shall not make any disclosure of information concerning a Holder provided to
the Company pursuant to this Agreement unless (i) disclosure of such information
is necessary to comply with federal or state securities laws, (ii) disclosure of
such information to the Staff of the Division of Corporation Finance is
necessary to respond to comments raised by the Staff in its review of the
Registration Statement, (iii) disclosure of such information is necessary to
avoid or correct a misstatement or omission in the Registration Statement, (iv)
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (v) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning a Holder
is sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to such Holder and allow such Holder, at
such Holder's expense, to undertake appropriate action to prevent disclosure of,
or to obtain a protective order for, such information;
(k) use its best efforts to cause all the Registrable Securities covered
by the Registration Statement to be listed or quoted on the principal securities
market on which securities of the same class or series issued by the Company are
then listed or traded;
(l) provide a transfer agent and registrar, which may be a single entity,
for the Registrable Securities at all times;
(m) cooperate with the Holders of Registrable Securities being offered
pursuant to the Registration Statement to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends) representing
Registrable Securities to be offered pursuant to the Registration Statement and
enable such certificates to be in such denominations or amounts as the Holders
may reasonably request and registered in such names as the Holders may request;
and
(n) take all other reasonable actions necessary to expedite and facilitate
disposition by the Holders of the Registrable Securities pursuant to the
Registration Statement.
5. Suspension of Offers and Sales. Each Holder of Registrable Securities
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 4(f) hereof or of the commencement of an
Blackout Period, such Holder shall discontinue disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 4(f) hereof or notice of the end of
the Blackout Period, and, if so directed by the Company, such Holder shall
deliver to the Company (at the Company's expense) all copies (including, without
limitation, any and all drafts), other than permanent file copies, then in such
Holder's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice. In the event the Company shall
give any such notice, the period mentioned in Section 4(a)(iii) hereof shall be
extended by the greater of (i) ten business days or (ii) the number of days
during the period from and including the date of the giving of such notice
pursuant to Section 4(f) hereof to and including the date when each Holder of
Registrable Securities covered by such registration statement shall have
received the copies of the supplemented or amended prospectus contemplated by
Section 4(f) hereof.
6. Registration Expenses. The Company shall pay all expenses in connection
with any registration, including, without limitation, all registration, filing,
stock exchange and NASD fees, printing expenses, all fees and expenses of
complying with securities or blue sky laws, the fees and disbursements of
counsel for the Company and of its independent accountants, and the reasonable
fees and disbursements of a Holders Counsel; provided that, in any underwritten
registration, each party shall pay for its own underwriting discounts and
commissions and transfer taxes. Except as provided above in this Section 6 and
in Section 10, the Company shall not be responsible for the expenses of any
attorney or other advisor employed by a Holder of Registrable Securities.
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7. Assignment of Rights. No Holder may assign its rights under this
Agreement to any party without the prior written consent of the Company;
provided, however, that a Holder may assign its rights under this Agreement
without such restrictions to a Permitted Assignee as long as (a) such transfer
or assignment is effected in accordance with applicable securities laws; (b)
such transferee or assignee agrees in writing to become subject to the terms of
this Agreement; and (c) the Company is given written notice by such Holder of
such transfer or assignment, stating the name and address of the transferee or
assignee and identifying the Registrable Securities with respect to which such
rights are being transferred or assigned.
8. Information by Holder. The Holder or Holders of Registrable Securities
included in any registration shall furnish to the Company such information
regarding such Holder or Holders and the distribution proposed by such Holder or
Holders as the Company may request in writing.
9. Delay of Registration. No Holder shall have any right to obtain or seek
an injunction restraining or otherwise delaying any registration pursuant to
this Agreement as the result of any controversy that might arise with respect to
the interpretation or implementation of this Agreement.
10. Indemnification.
(a) In the event of the offer and sale of Registrable Securities held by
Holders under the Securities Act, the Company shall, and hereby does, indemnify
and hold harmless, to the fullest extent permitted by law, each Holder, its
directors, officers, partners, each other person who participates as an
underwriter in the offering or sale of such securities, and each other person,
if any, who controls or is under common control with such Holder or any such
underwriter within the meaning of Section 15 of the Securities Act, against any
losses, claims, damages, or liabilities, joint or several, and expenses to which
the Holder or any such director, officer, partner, or underwriter or controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages, liabilities, or expenses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such shares were registered
under the Securities Act, any preliminary prospectus, final prospectus, or
summary prospectus contained therein, or any amendment or supplement thereto, or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading, and the Company shall
reimburse the Holder, and each such director, officer, partner, underwriter, and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating, defending, or settling any such loss,
claim, damage, liability, action, or proceeding; provided that the foregoing
shall not apply to, and the Company shall not be liable, in any such case (i) to
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof), or expense arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or alleged omission from
such registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment, or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by or on behalf of such Holder specifically stating that it is for use
in the preparation thereof, (ii) provided that the Company has complied with its
obligations hereunder to furnish such Holder with copies of the applicable
prospectus, if the person asserting any such loss, claim, damage, or liability
(or action or proceeding in respect thereof) who purchased the Registrable
Securities that are the subject thereof did not receive a copy of an amended
preliminary prospectus or the final prospectus (or the final prospectus as
amended or supplemented) at or prior to the written confirmation of the sale of
such Registrable Securities to such person because of the failure of such Holder
or underwriter to so provide such amended preliminary or final prospectus and
the untrue statement or alleged untrue statement or omission or alleged omission
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of a material fact made in such preliminary prospectus was corrected in the
amended preliminary or final prospectus (or the final prospectus as amended or
supplemented), or (iii) provided that the plan of distribution mechanics
described in the applicable prospectus are, in form and substance, reasonable
and customary for transactions of this type, to the extent that the Holders
failed to comply with the terms of such plan of distribution mechanics. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Holders, or any such director, officer, partner,
underwriter, or controlling person and shall survive the transfer of such shares
by the Holder.
(b) As a condition to including any Registrable Securities to be offered
by a Holder in any registration statement filed pursuant to this Agreement, each
such Holder agrees to be bound by the terms of this Section 10 and to indemnify
and hold harmless, to the fullest extent permitted by law, the Company, its
directors and officers, and each other person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act, legal counsel and
accountants for the Company, any underwriter, any other Holder selling
securities in such registration statement, and any controlling person within the
meaning of the Securities Act of any such underwriter or other Holder, against
any losses, claims, damages, or liabilities, joint or several, to which the
Company or any such director or officer or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages,
or liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon (i) an untrue statement or
alleged untrue statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus, or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information about such Holder as a
Holder of the Company furnished to the Company, (ii) provided that the Company
has complied with its obligations hereunder to furnish such Holder with copies
of the applicable prospectus, if the person asserting any such loss, claim,
damage, or liability (or action or proceeding in respect thereof) who purchased
the Registrable Securities that are the subject thereof did not receive a copy
of an amended preliminary prospectus or the final prospectus (or the final
prospectus as amended or supplemented) at or prior to the written confirmation
of the sale of such Registrable Securities to such person because of the failure
of such Holder or underwriter to so provide such amended preliminary or final
prospectus and the untrue statement or alleged untrue statement or omission or
alleged omission of a material fact made in such preliminary prospectus was
corrected in the amended preliminary or final prospectus (or the final
prospectus as amended or supplemented), or (iii) provided that the plan of
distribution mechanics described in the applicable prospectus are, in form and
substance, reasonable and customary for transactions of this type, to the extent
that the Holders failed to comply with the terms of such plan of distribution
mechanics. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Holders, or any such director,
officer, partner, underwriter, or controlling person and shall survive the
transfer of such shares by the Holder, and such Holder shall reimburse the
Company, and each such director, officer, legal counsel and accountants,
underwriter, other Holder, and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating,
defending, or settling and such loss, claim, damage, liability, action, or
proceeding; provided, however, that such indemnity agreement found in this
Section 10(b) shall in no event exceed the gross proceeds from the offering
received by such Holder. Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of the Company or any such
director, officer, or controlling person and shall survive the transfer by any
Holder of such shares.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in
Section 10(a) or (b) hereof (including any governmental action), such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the indemnifying party of the
commencement of such action; provided that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under Section 10(a) or (b) hereof, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in the
9
reasonable judgment of counsel to such indemnified party a conflict of interest
between such indemnified and indemnifying parties may exist or the indemnified
party may have defenses not available to the indemnifying party in respect of
such claim, the indemnifying party shall be entitled to participate in and to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties arises in
respect of such claim after the assumption of the defenses thereof or the
indemnifying party fails to defend such claim in a diligent manner, other than
reasonable costs of investigation. Neither an indemnified nor an indemnifying
party shall be liable for any settlement of any action or proceeding effected
without its consent. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any
settlement, which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation. Notwithstanding anything to
the contrary set forth herein, and without limiting any of the rights set forth
above, in any event any party shall have the right to retain, at its own
expense, counsel with respect to the defense of a claim.
(d) In the event that an indemnifying party does or is not permitted to
assume the defense of an action pursuant to Section 10(c) or in the case of the
expense reimbursement obligation set forth in Section 10(a) and (b), the
indemnification required by Section 10(a) and (b) hereof shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills received or expenses, losses, damages, or
liabilities are incurred.
(e) If the indemnification provided for in this Section 10 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage, or expense referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall (i) contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
as is appropriate to reflect the proportionate relative fault of the
indemnifying party on the one hand and the indemnified party on the other
(determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission relates to information supplied
by the indemnifying party or the indemnified party and the parties' relative
intent, knowledge, access to information, and opportunity to correct or prevent
such untrue statement or omission), or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, not only the
proportionate relative fault of the indemnifying party and the indemnified
party, but also the relative benefits received by the indemnifying party on the
one hand and the indemnified party on the other, as well as any other relevant
equitable considerations. No indemnified party guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any indemnifying party who was not guilty
of such fraudulent misrepresentation.
(f) Other Indemnification. Indemnification similar to that specified in
the preceding subsections of this Section 10 (with appropriate modifications)
shall be given by the Company and each Holder of Registrable Securities with
respect to any required registration or other qualification of securities under
any federal or state law or regulation or governmental authority other than the
Securities Act.
11. Preemptive Rights.
(a) Subsequent Offerings. In the event the Company issues and sells Equity
Securities other than the Equity Securities excluded by Section 11(e) hereof at
a price per share or conversion or exercise price per share, as the case may be,
10
that is less than the Offering Price, each Holder who qualifies as an
"accredited investor" within the meaning of Rule 501(a) of Regulation D under
the Securities act (an "Eligible Holder") shall have a preemptive right to
purchase such number of shares of Equity Securities necessary for such Eligible
Holder to maintain its percentage ownership position in the Company. Each
Eligible Holder's preemptive share is equal to the ratio of (a) the number of
shares of the Company's Common Stock of which such Eligible Holder is deemed to
be a holder immediately prior to the issuance of such Equity Securities to (b)
the total number of shares of the Company's outstanding Common Stock (including
all shares of Common Stock issued or issuable upon conversion of any security of
the Company or upon the exercise of any outstanding warrants, options, or rights
to subscribe to or purchase any Common Stock or other security of the Company)
immediately prior to the issuance of the Equity Securities.
(b) Exercise of Preemptive Rights. If the Company issues any Equity
Securities in a transaction to which the preemptive rights set forth in
paragraph (a) apply, it shall give each Eligible Holder written notice of such
issuance, describing the Equity Securities and the price and the terms and
conditions upon which the Company issued the same and shall provide each
Eligible Holder with access to any information regarding such offering and the
Company, provided to the purchasers of Equity Securities. Each Eligible Holder
shall have 10 Business Days from the giving of such notice to exercise its
preemptive right to purchase Equity Securities for the price and upon the terms
and conditions specified in the notice by giving written notice to the Company
and stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Holder who would cause the Company to be in
violation of applicable federal securities laws by virtue of such offer or sale.
(c) Issuance of Equity Securities to Other Persons. The Company shall have
90 days after expiration of the 10-Business Day period set forth in paragraph
(b) above to sell the Equity Securities in respect of which the Holders' rights
were not exercised, at a price and upon general terms and conditions materially
no more favorable to the purchasers thereof than specified in the Company's
notice to the Eligible Holders pursuant to paragraph (b) above. If the Company
has not sold such Equity Securities within 90 days of the notice provided
pursuant to paragraph (b), the Company shall not thereafter issue or sell any
Equity Securities, without first offering such securities to the Eligible
Holders in the manner provided above.
(d) Termination and Waiver of Preemptive Rights. The preemptive rights
established by this Section 11 shall terminate upon the earlier of (i) the
effective date of a registration statement pursuant to Section 3(a) or (ii)
twelve months after the Closing Date.
(e) Excluded Securities. The preemptive rights established by this Section
11 shall have no application to any of the following Equity Securities:
(i) shares of Common Stock (and/or options, warrants or other Common
Stock purchase rights issued pursuant to such options, warrants or other
rights) issued or to be issued after the date hereof to employees,
officers or directors of, or consultants or advisors to the Company or any
subsidiary, pursuant to stock purchase or stock option plans or other
arrangements that are approved by the board of directors of the Company;
(ii) capital stock of the Company issued or issuable pursuant to any
rights or agreements outstanding as of the date of this Agreement, options
and warrants outstanding as of the date of this Agreement, and capital
stock issued pursuant to or upon the exercise of any such rights or
agreements granted after the date of this Agreement; provided that in the
case of rights or agreements granted after the date of this Agreement, the
pre-emptive right established by this Section 11 applied with respect to
the initial sale or grant by the Company of such rights or agreements and
such rights or agreements were approved by the board of directors of the
Company;
11
(iii) shares of Common Stock issued in connection with any stock
split, dividend, combination, distribution, or recapitalization; or
(iv) any Equity Securities issued (i) for consideration other than
cash in connection with any merger, consolidation, strategic alliance,
acquisition, or similar business combination approved by the board of
directors of the Company or (ii) any public offering registered with the
Commission under the Securities Act.
12. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas and the United States of America,
both substantive and remedial. Any judicial proceeding brought against either of
the parties to this agreement or any dispute arising out of this Agreement or
any matter related hereto shall be brought in the courts of the State of Texas,
Xxxxxx County, or in the United States District Court for the Southern District
of Texas and, by its execution and delivery of this agreement, each party to
this Agreement accepts the jurisdiction of such courts. The foregoing consent to
jurisdiction shall not be deemed to confer rights on any person other than the
parties to this Agreement.
(b) Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, Permitted Assigns, executors, and administrators of the parties
hereto. In the event the Company merges with, or is otherwise acquired by, a
direct or indirect subsidiary of a publicly traded company, the Company shall
condition the merger or acquisition on the assumption by such parent company of
the Company's obligations under this Agreement.
(c) Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof.
(d) Notices, etc. All notices or other communications which are required
or permitted under this Agreement shall be in writing and sufficient if
delivered by hand, by facsimile transmission, by registered or certified mail,
postage pre-paid, by electronic mail, or by courier or overnight carrier, to the
persons at the addresses set forth below (or at such other address as may be
provided hereunder), and shall be deemed to have been delivered as of the date
so delivered:
If to the Company: Dune Energy, Inc.
0000 Xxxx Xxx Xxxx., Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxxx
Facsimile: (000) 000-0000
e-mail: xxxx@xxxxxxxxxx.xxx
If to the Purchasers: To each Purchaser at the address
set forth on Exhibit A
with a copy to: Xxxxxxx Xxxxxx Xxxxxx Inc.
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxxxxxx
Facsimile: (000) 000-0000
e-mail: xxx.xxxxxxxxxxx@xxxxxxxx.xxx
12
or at such other address as any party shall have furnished to the other parties
in writing.
(e) Delays or Omissions. No delay or omission to exercise any right,
power, or remedy accruing to any Holder of any Registrable Securities, upon any
breach or default of the Company under this Agreement, shall impair any such
right, power, or remedy of such Holder nor shall it be construed to be a waiver
of any such breach or default, or an acquiescence therein, or of or in any
similar breach or default thereunder occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent, or approval of
any kind or character on the part of any Holder of any breach or default under
this Agreement, or any waiver on the part of any Holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement, or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
(f) Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
(h) Severability. In the case any provision of this Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
(i) Amendments. The provisions of this Agreement may be amended at any
time and from time to time, and particular provisions of this Agreement may be
waived, with and only with an agreement or consent in writing signed by the
Company and by the holders of a majority of the number of shares of Registrable
Securities outstanding as of the date of such amendment or waiver. The
Purchasers acknowledge that by the operation of this Section 12(i), the holders
of a majority of the outstanding Registrable Securities may have the right and
power to diminish or eliminate all rights of the Purchasers under this
Agreement.
(j) Limitation on Subsequent Registration Rights. After the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of at least a majority of the Registrable Share then outstanding, enter
into any agreement with any holder or prospective holder of any securities of
the Company that would grant such holder registration rights senior to those
granted to the Holder hereunder.
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This Registration Rights Agreement is hereby executed as of the date first
above written.
COMPANY:
DUNE ENERGY, INC.
By:___________________________________
Name:_________________________________
Title:________________________________
XXXXXXX XXXXXX XXXXXX INC.,
Individually and as Agent and Attorney
in Fact for the Purchasers listed on
Exhibit A attached hereto
By:___________________________________
Name:_________________________________
Title:________________________________
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Exhibit A
Purchaser Information
15
