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EXCHANGE AGREEMENT
LA/CAL ENERGY PARTNERS II AND CERTAIN OTHER PARTIES NAMED HEREIN,
XXXXXXXX ACQUISITION II, INC.
AND
XXXXXXXX PETROLEUM CORPORATION
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TABLE OF CONTENTS
ARTICLE I
ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.01 Agreement to Contribute Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.02 Forms of Contribution Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
CONSIDERATION FOR THE ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.01 Consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.02 Allocation of Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
TITLE AND OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.01 Title Examination Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.02 Title Defects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.03 Permitted Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.04 Other Defects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.05 Remedy for Title Defects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.06 Notice of Title or Other Defects; Power of Attorney. . . . . . . . . . . . . . . . . . . . . 6
Section 3.07 Valuation of Title and Other Defects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.08 Right of Offset and Cash Consideration Adjustment. . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE IV
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.01 Preferential Rights to Purchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.02 Consents to Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.03 Copies of Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.04 Conduct of Business Prior to Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.05 No Negotiations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.06 Books, Records and Files. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.07 Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.08 Appointment of Acquisition II as Operator. . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.09 Amendment of La/Cal II's Partnership Agreement; Consents. . . . . . . . . . . . . . . . . . 10
Section 4.10 Registration or Proxy Statement; Confidential Memorandum . . . . . . . . . . . . . . . . . 10
Section 4.11 Covenants of Acquisition II and Xxxxxxxx. . . . . . . . . . . . . . . . . . . . . . . . . . 11
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ARTICLE V
REPRESENTATIONS OF THE LA/XXX XX PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.01 Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.02 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.03 Litigation and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.04 Lease Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.05 Other Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.06 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.07 Gas Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.08 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.09 Consents, Waivers and Preferential Rights . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.10 Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.11 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.12 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.13 Adverse Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.14 Current Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.15 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.16 Organizational Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.17 Due Execution and Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.18 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.19 Xxxxx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.20 Evaluation Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.21 Well Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.22 Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.23 Reserve Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.24 Payout Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.25 Books and Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.26 Complete Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.27 No Affiliate or Business Limiting Agreements . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.28 Hydrocarbon Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.29 Employees; WARN Act Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.30. Limitation on Remedial Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.31 Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI
REPRESENTATIONS OF ACQUISITION II AND XXXXXXXX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 6.01 Corporate Existence of Acquisition II . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 6.02 Corporate Power of Acquisition II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.03 Due Execution and Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.04 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.05 Financial Statements of Xxxxxxxx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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Section 6.06 SEC Filings of Xxxxxxxx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.07 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.08 Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE LA/XXX XX PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.01 Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.02 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.03 Pending Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.04 Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.05 Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.06 Approval of the Partners of La/Xxx XX . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.07 Consummation of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.08 Approval of the Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF ACQUISITION II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 8.01 Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 8.02 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 8.03 Pending Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 8.04 Approval of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 8.05 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 8.06 La/Xxx XX Partners' Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 8.07 Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 8.08 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 8.09 No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 8.10 Registration or Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 8.11 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 8.12 Consents of Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 8.13 Prohibition of Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 8.14 Subscription Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE IX
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.01 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.02 Pre-Closing Review of Cash Consideration Adjustments . . . . . . . . . . . . . . . . . . . 23
Section 9.03 Adjustments to Cash Consideration at Closing . . . . . . . . . . . . . . . . . . . . . . . 23
Section 9.04 Post-Closing Adjustments and Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 9.05 Remittance of Certain Payments Received by the La/Xxx XX Parties . . . . . . . . . . . . . 24
Section 9.06 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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Section 9.07 Ad Valorem and Similar Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 9.08 Actions of the La/Xxx XX Parties at Closing . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 9.09 Actions of Acquisition II at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 9.10 Actions of Xxxxxxxx and Acquisition II Sub1 at Closing . . . . . . . . . . . . . . . . . . 26
Section 9.11 Further Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE X
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 10.01 Right of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 10.02 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XI
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 11.01 The La/Xxx XX Parties' Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 11.02 Acquisition II's Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 11.03 Indemnitee's Negligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 11.04 Limitation on Responsibility for Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . 27
Section 11.05 Directors', Officers' and Management Committee Indemnifications . . . . . . . . . . . . . . 27
Section 11.06 Survival of Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 12.01 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 12.02 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 12.03 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 12.04 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 12.05 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 12.06 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 12.07 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 12.08 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 12.09 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 12.10 Action by and Notice to Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 12.11 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Schedule I -- List of Working Interest Owners
Exhibit A -- Form of Contribution Agreement
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Exhibit B -- Form of Certificate of Designations for Acquisition II Series B Convertible
Preferred Stock
Exhibit C -- Form of Registration Rights Agreement
Exhibit D -- Form of Certificate of Merger between Xxxxxxxx and Newco Sub1
Exhibit E -- Form of Subscription Certificate
Schedule 1.01 -- Leases, Xxxxx and Contracts
Schedule 2.01(a) -- Allocation of Cash and Share Consideration among La/Cal Parties
Schedule 2.01(c) -- List of RIMCO Notes
Schedule 2.02 -- Allocation of Value among Assets
Schedule 5.02 -- Tax Matters
Schedule 5.03 -- Litigation and Claims
Schedule 5.07 -- Gas Imbalances and Take-or-Pay Obligations
Schedule 5.09 -- Preferential Rights to Purchase and Required Consents to Assignment
Schedule 5.13 -- Adverse Changes
Schedule 5.14 -- Outstanding AFE's and Commitments for Expenditures
Schedule 5.18 -- Insurance Coverage
Schedule 5.19 -- Well Operations
Schedule 5.20 -- Limitations on Rights regarding Evaluation Data
Schedule 5.21 -- Well Status
Schedule 5.23 -- Reserve Report Matters
Schedule 6.02 -- Consents Required by Acquisition II prior to Closing
Schedule 6.05 -- Financial Statement Xxxxxxxxxxx
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EXCHANGE AGREEMENT
This Exchange Agreement (this "Agreement") is made and entered into as
of the 22nd day of October, 1996, by and between La/Cal Energy Partners II
("La/Xxx XX"), a Louisiana general partnership, and certain working interest
owners named in Schedule I hereof (the "Working Interest Owners," and
collectively with La/Xxx XX, the "La/Xxx XX Parties"), Xxxxxxxx Acquisition II,
Inc., a Delaware corporation ("Acquisition II"), a wholly-owned subsidiary of
Xxxxxxxx Petroleum Corporation, a Delaware corporation ("Xxxxxxxx"), and
Xxxxxxxx. Acquisition II, Xxxxxxxx and the La/Xxx XX Parties are collectively
referred to herein as the "Parties" and sometimes individually referred to as a
"Party."
W I T N E S S E T H:
WHEREAS, the La/Xxx XX Parties wish to contribute to Acquisition II
and Acquisition II wishes to receive from the La/Xxx XX Parties, subject to the
terms and conditions set forth herein, certain oil and gas producing properties
in the states of Louisiana and Texas, together with certain other related
assets, referred to herein collectively as the "Assets.";
WHEREAS, the consideration to be received by the La/Xxx XX Parties in
exchange for the Assets is to consist of cash, shares of Acquisition II Series
B Convertible Preferred Stock (the "Preferred Shares") and the assumption of
the RIMCO Debt (as hereinafter defined);
WHEREAS, the partners of La/Xxx XX will be solicited to consent to the
exchange of the Assets in return for such consideration and to consent to the
subsequent dissolution of La/Xxx XX and the distribution of the Preferred
Shares and other consideration received by La/Xxx XX to such partners;
WHEREAS, Acquisition II has formed or will form two subsidiaries,
Acquisition II Sub1, a Delaware corporation formed solely for the purpose of
consummating the transactions contemplated by this Agreement, and Acquisition
II Sub2, a Nevada corporation, each of which is or shall be wholly-owned by
Acquisition II;
WHEREAS, concurrently with the contribution of the Assets from the
La/Xxx XX Parties to Acquisition II, Acquisition II Sub1 will merge with and
into Xxxxxxxx, in accordance with the provisions of Section 251(g) of the
Delaware General Corporation Law, with Xxxxxxxx being the surviving entity (the
"Merger");
WHEREAS, concurrently with or subsequent to the Merger, Acquisition II
will contribute the Assets to Acquisition II Sub2; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger and asset contribution shall qualify as an integrated plan for the
contribution of the Assets and the outstanding stock of Xxxxxxxx to Acquisition
II which qualifies for nonrecognition treatment under Section 351 of the United
States Internal Revenue Code of 1986, as amended;
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NOW, THEREFORE, in consideration of the mutual benefits derived and to
be derived from this Agreement by each Party, the receipt and sufficiency of
which are hereby acknowledged, the La/Xxx XX Parties, Acquisition II and
Xxxxxxxx hereby agree as follows:
ARTICLE I
ASSETS
Section 1.01 Agreement to Contribute Assets. Subject to the terms
and conditions of this Agreement, the La/Xxx XX Parties agree to contribute to
Acquisition II and Acquisition II agrees to receive from the La/Xxx XX Parties
all of the La/Xxx XX Parties' rights, title and interests in and to the
following assets (collectively, such interests in such assets are referred to
as the "Assets"):
(a) the oil and gas leases described in Schedule 1.01
attached hereto (collectively, the "Leases"), including, without
limitation, all overriding royalty interests and working interests,
production payments, net profits interests and the oil and gas xxxxx
located upon the lands covered by the Leases or pooled or unitized
therewith (collectively, the "Xxxxx");
(b) all rights, privileges, benefits and powers conferred
upon the La/Xxx XX Parties as the holder of any Leases with respect to
the use and occupation of the surface of, and the subsurface depths
under, the land covered by the Leases that may be necessary,
convenient or incidental to the possession and enjoyment of such
Leases;
(c) all of the La/Xxx XX Parties' rights in any pools or
units including all or any part of any Lease or including any Well
(the "Units"), including all right, title and interest in production
from any Unit;
(d) all platforms, water source xxxxx, injection xxxxx,
tubular goods, well equipment, lease equipment, production equipment,
pipelines and all other personal property, fixtures and facilities
appurtenant to or used in connection with the Leases, Units or the
Xxxxx (collectively, the "Facilities");
(e) all production sales contracts, transportation
agreements, pooling agreements, unitization agreements, operating
agreements, processing agreements, surface leases, easements, permits,
division orders, purchase orders, invoices, receipts, licenses and
rights-of-way, orders of governmental authorities, and all other
contracts, agreements and instruments related to or utilized in
connection with the Leases, Units, Xxxxx or Facilities, or the
production, storage, treatment, transportation, sale or disposal of
oil, gas, or other hydrocarbons, minerals or substances therefrom and
rights to insurance proceeds, and to the extent assignable, insurance
policies (collectively, the "Contracts"), including, without
limitation, the Contracts listed on Schedule 1.01;
(f) all of the La/Xxx XX Parties' original files, books,
records and data, or copies thereof, regarding the Leases, Units,
Xxxxx, Facilities and Contracts, including without
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limitation, all abstracts of title, title opinions, title curative
documents, title records, leases, assignments, contracts,
correspondence, geologic, geophysical and seismic records, data and
information, and production records, logs, core data, pressure data,
and decline curve and production curve data, tax and accounting
records, material technology and proprietary information relating to
the Assets and all related items, including, without limitation,
computer disks, tapes and data relating to the foregoing
(collectively, the "Files");
(g) all oil, gas, distillate, condensate, casinghead gas
or other liquid or vaporous hydrocarbons, or other minerals
(collectively, the "Hydrocarbons"), produced from or attributable to
the Leases from and after July 1, 1996 (the "Effective Time"), and all
Hydrocarbons produced prior to the Effective Time and in storage as of
the Closing Date;
(h) all rights of way, easements and servitudes used by
the La/Xxx XX Parties in connection with the Assets; and
(i) all other assets of whatever kind and nature of the
La/Xxx XX Parties relating to items (a) through (h) of this paragraph.
Section 1.02 Forms of Contribution Agreements. The contribution
of the Assets shall be made in accordance with the terms and provisions of the
forms of Contribution Agreements attached hereto as Exhibit A.
ARTICLE II
CONSIDERATION FOR THE ASSETS
Section 2.01 Consideration. Subject to the terms and conditions
of this Agreement, Acquisition II, in full consideration for the Assets shall,
at the Closing (as hereinafter defined):
(a) Pay to the La/Xxx XX Parties the sum of Two Million
and No/100 Dollars ($2,000,000.00)(the "Cash Consideration"), as
adjusted in accordance with the provisions of Article IX (the
"Adjusted Cash Consideration"). The Adjusted Cash Consideration shall
be delivered by Acquisition II to the La/Xxx XX Parties at the
Closing with each La/Xxx XX Party receiving the sum, subject to
adjustment, set forth opposite such La/Xxx XX Party's name on Schedule
2.01(a) attached hereto.
(b) Deliver to the La/Xxx XX Parties Seven Hundred Fifty
Thousand (750,000) shares of the Preferred Shares, as adjusted in
accordance with the provisions of Article IX (the "Adjusted Preferred
Shares"). The Adjusted Preferred Shares shall be delivered to the
La/Xxx XX Parties at the Closing with each La/Xxx XX Party receiving
the number of shares set forth opposite such La/Xxx XX Party's name on
Schedule 2.01(a) attached hereto. The Preferred Shares shall have
substantially the same rights, preferences, qualifications and
limitations and restrictions as contained in the form of the
Certificate of Designations for the Acquisition II Series B
Convertible Preferred Stock attached hereto as Exhibit B. The
conversion price for the Preferred Shares shall be equal to the
product of 1.25 times the
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average Closing Price (as defined in the Certificate of Designations)
for Xxxxxxxx common stock for the twenty (20) trading days prior to
the date of Closing of this Agreement; provided, however, that the
conversion price shall not be less than $0.9375.
(c) Assume from La/Xxx XX the obligation to repay in full
all sums, including principal and interest, then outstanding under the
terms of that certain Note Purchase Agreement dated as of July 14,
1995, by and between La/Xxx XX, as Issuer, and RIMCO Partners, L.P.,
RIMCO Partners, X.X. XX, RIMCO Partners, L.P. III, and RIMCO
Partners, X.X. XX, as Purchasers, including such sums as are
represented by the promissory notes listed on Schedule 2.01(c)
attached hereto (all of such obligations being collectively referred
to hereinafter as the "RIMCO Debt"); provided, however, that the
amount of the RIMCO Debt assumed pursuant hereto shall not exceed the
sum of $7,946,695.96.
Section 2.02 Allocation of Value. Schedule 2.02 sets forth the
initial allocation of the consideration, subject to adjustment, among the
Assets for all purposes, including financial accounting and tax purposes. The
Parties agree that they will not take any position inconsistent with such
allocation in preparing any tax returns or tax reports to governmental
authorities.
ARTICLE III
TITLE AND OTHER MATTERS
Section 3.01 Title Examination Period. During the period
commencing with the execution date of this Agreement and concluding forty-five
(45) days thereafter, the La/Xxx XX Parties shall provide Acquisition II and/or
its representatives access to and or use its best efforts to cause the operator
of any portion of the Assets to allow Acquisition II access to (i) all
abstracts of title, title opinions, title files, ownership maps, lease files,
assignments, division orders, operating records, agreements and other books,
records, contracts, correspondence, maps, data, reports, documents and
information of the La/Xxx XX Parties pertaining to the Assets, and (ii) the
Assets in order to conduct inspections thereof.
Section 3.02 Title Defects. The Assets shall be deemed to have a
"Title Defect" if the La/Xxx XX Parties have less than Good and Marketable
Title to any of the Assets. As used herein, the term "Good and Marketable
Title" means such record and beneficial title of the La/Xxx XX Parties that is
free and clear of all liens, charges, claims, defects and encumbrances, other
than Permitted Encumbrances (as hereinafter defined) and that, except (a) as
set forth in Schedule 1.01, (b) for changes therein under circumstances
customarily provided for in unitization and similar agreements, and (c) for
penalty provisions and contribution requirements customarily provided for in
operating and similar agreements, (i) entitles the La/Xxx XX Parties to receive
at least the undivided interest set forth on Schedule 1.01 as the "Net Revenue
Interest" of all Hydrocarbons produced, saved and marketed from each Well,
through the plugging, abandonment and salvage of such Well and (ii) obligates
the La/Xxx XX Parties to bear a portion of the costs and expenses relating to
the maintenance and development of, and operations relating to, such Well not
in excess of the undivided interest
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set forth on Schedule 1.01 as the "Working Interest" through the plugging,
abandonment and salvage of such Well.
Section 3.03 Permitted Encumbrances. For purposes of this
Agreement, the term "Permitted Encumbrances" shall mean any of the following:
(a) any liens for taxes and assessments not yet
delinquent or, if delinquent, that are being contested in good faith
in the ordinary course of business;
(b) any rights reserved to or vested in any municipality
or other governmental, statutory or public authority to control or
regulate any of the Assets in any manner, and all applicable laws;
(c) any easements, rights-of-way, servitudes, permits and
other rights in respect of surface operations, pipelines or the like,
and easements for pipelines, power lines and other similar
rights-of-way, and encroachments, on, over or in respect of any
property or lands of the La/Xxx XX Parties, or over which the La/Xxx
XX Parties own rights-of-way, easements, permits or licenses, that do
not unreasonably or materially interfere with the use of the Leases or
Units;
(d) all royalties, overriding royalties, net profits
interests, production payments, carried interests, reversionary
interests, calls on production and other similar burdens on or
deductions from the proceeds of production that do not operate to (i)
reduce the Net Revenue Interest of the La/Xxx XX Parties below that
set forth in Section 3.02(i); or (ii) increase the Working Interest of
the La/Xxx XX Parties above that set forth in Section 3.02(ii) without
a proportionate increase in the net revenue interest of the La/Xxx XX
Parties;
(e) division orders and oil sales contracts that contain
terms and conditions customary in the industry for the area in which
the affected Asset is located, that are terminable without penalty
upon 30 days notice and that do not operate to reduce the Net Revenue
Interest of the La/Xxx XX Parties below that set forth in Section
3.02(i) and that do not increase the Working Interest of the La/Xxx XX
Parties above that set forth in Section 3.02(ii) without a
corresponding and proportionate increase in the Net Revenue Interest
of the La/Xxx XX Parties;
(f) gas sales contracts that contain terms and conditions
customary in the industry for the geographical area in which the
affected Well is located;
(g) operating agreements containing terms and conditions
customary in the industry for the geographical area in which the
affected Well is located and that do not operate to reduce the Net
Revenue Interest of the La/Xxx XX Parties below that set forth in
Section 3.02(i) and that do not increase the Working Interest of the
La/Xxx XX Parties above that set forth in Section 3.02(ii) without a
corresponding and proportionate increase in the Net Revenue Interest
of the La/Xxx XX Parties;
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(h) unitization, pooling, communitization and spacing
agreements and orders that contain terms and conditions customary in
the industry for the area in which the affected Asset is located and
that do not operate to reduce the Net Revenue Interest of the La/Xxx
XX Parties below that set forth in Section 3.02(i) and that do not
increase the Working Interest of the La/Xxx XX Parties above that set
forth in Section 3.02(ii) without a corresponding and proportionate
increase in the Net Revenue Interest of the La/Xxx XX Parties;
(i) farmout and farm-in agreements that contain terms and
conditions that are customary in the industry for the area in which
the affected Asset is located and that have been taken into
consideration in setting forth the Net Revenue Interests and Working
Interests set forth in Section 3.02(i) and 3.02(ii);
(j) conventional rights of reassignment prior to
abandonment; and
(k) materialmen's, mechanics', repairmen's, employees',
contractors', operators', tax and other similar liens or charges
arising in the ordinary course of business incidental to construction,
maintenance or operation of any of the Assets (i) if they have not
been filed pursuant to law, (ii) if they have been filed pursuant to
law but they have not yet become due and payable or payment is being
withheld as provided by law or (iii) if their validity is being
contested in good faith in the ordinary course of business by
appropriate action.
Section 3.04 Other Defects. All claims, losses, damages, costs,
expenses and liabilities that result from or relate to or are attributable to
any representation of the La/Xxx XX Parties, Acquisition II or Xxxxxxxx
contained herein being untrue or being breached are hereinafter referred to as
"Other Defects."
Section 3.05 Remedy for Title Defects. The sole remedy for any
Title Defect shall be the right of offset, in the form of a Cash Consideration
Adjustment or a reduction in the number of Preferred Shares to be delivered
hereunder, pursuant to Article IX below; provided, however, that no adjustment
shall be made to the number of Preferred Shares to be delivered hereunder
unless and until the Cash Consideration has previously been exhausted by virtue
of adjustment. Any claim based on a Title Defect shall apply only to that
portion of the Assets affected by the Title Defect and shall be equal to the
applicable "Title Loss Amount," as determined in accordance with Section 3.07,
below.
Section 3.06 Notice of Title or Other Defects; Power of Attorney.
Acquisition II or La/Xxx XX shall, as soon as practicable after discovery, but
no later than forty-five (45) days after the execution of this Agreement, give
the other Party or its representative written notice of any Title Defects or
Other Defects which it believes to exist, ascribing a value thereto and
proposing the Cash Consideration Adjustment to be made. Xxxxxx X. Xxxxxxxx
shall serve as the La/Xxx XX Parties' attorney-in-fact and representative, with
full power and authority to act for and on behalf of the La/Xxx XX Parties for
the purpose of receiving the notices referred to above, serving on the
Adjustment Committee (as hereinafter defined), and agreeing to the Title or
Other Loss Amount. Xxxxxx X. Xxxxxxxxx and Xxxxx X. Xxxxxx shall serve as
Acquisition II's attorneys-in-fact and
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representatives, with full power and authority to act for and on behalf of
Acquisition II for the purpose of receiving the notices referred to above,
serving on the Adjustment Committee and agreeing to the Title or Other Loss
Amount. The Adjustment Committee shall consist of Xxxxxx X. Xxxxxxxxx and
Xxxxx Xxxxxx as the representatives of Acquisition II and Xxxxxx X. Xxxxxxxx as
the representative of the La/Cal Parties. Any decision made by the Adjustment
Committee must be unanimous. The authority herein conferred on the
representatives, each of whom shall enjoy the full power of substitution, shall
be irrevocable, shall be deemed coupled with an interest and shall be binding
on the heirs, personal representatives, successors and assigns of the party
whom each represents.
Section 3.07 Valuation of Title and Other Defects. For purposes
of this Article III, "Title Loss Amount" shall mean the amount by which the
value of an Asset is reduced due to a Title Defect. In the determination of
the Title Loss Amount, the following factors shall be taken into account: the
value assigned to the Asset involved; the portion of such Asset affected by the
Title Defect; the legal effect of the Title Defect and the potential economic
effect of the Title Defect over the life of such Asset; the length of time that
the Asset has been producing by all owners and holders thereof in privity of
title; and whether the Title Defect is of the type expected to be encountered
and is customarily acceptable to prudent purchasers in the area where such
Asset is located. For purposes of this Article III, "Other Loss Amount" shall
mean the amount by which the La/Xxx XX Parties or Acquisition II has been or
will be damaged as a result of any Other Defect. (Notwithstanding any other
provision of this Agreement, a Party's liability for breach of any
representation contained in this Agreement shall be limited to actual damages
and shall not include incidental, consequential, indirect or punitive damages,
except for attorney fees and costs. For purposes of determining the existence
of or evaluating an Other Defect, the Adjustment Committee shall ignore the
fact that any representation may be qualified or limited by reference to a
Party's knowledge.) All asserted Title Defects and Other Defects shall be
submitted to the Adjustment Committee, who shall determine, within ten (10)
business days, the actual Title Loss Amount or Other Loss Amount, and such
determination shall be binding on all parties. In the event the Adjustment
Committee members cannot agree on the Title Loss Amount or Other Loss Amount
with respect to any particular asserted Title Defect or Other Defect, they
shall select, within three business (3) days after such disagreement, an
arbitrator, who shall be a person recognized as possessing the expertise
necessary to opine as to the matters involved. The arbitrator shall, within
five business (5) days of appointment and receipt of all information requested
by the arbitrator, determine, after such consultation with legal counsel,
accountants and other expert consultants as may be necessary under the
circumstances, the actual Title Loss Amount or Other Loss Amount, if any, with
respect to the asserted Title Defect or Other Defect in dispute, and such
determination shall be binding on all parties. All costs and expenses incurred
in the arbitration process shall be shared equally by the parties.
Section 3.08 Right of Offset and Cash Consideration Adjustment.
If the cumulative total of all Title Loss Amounts and Other Loss Amounts is
equal to or less than the sum of $850,000.00, there shall be no adjustment to
the consideration payable pursuant to Section 2.01, above. If the cumulative
total of all Title Loss Amounts and Other Loss Amounts is greater than the sum
of $850,000.00, the Cash Consideration (and, if necessary, the number of
Preferred Shares ) payable to the La/Xxx XX Parties shall be increased or
decreased, as the case may be, to reflect the amount
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by which such cumulative total exceeds the sum of $850,000.00. Any decrease in
the Cash Consideration resulting from the application of this Section shall be
allocated among the Assets on the basis of a percentage determined by dividing
the Title Loss Amounts and Other Loss Amounts attributable to an Asset by the
total Title Loss Amounts and Other Loss Amounts attributable to all Assets.
The decrease in the Cash Consideration attributable to an Asset shall be
allocated among the La/Xxx XX Parties or among the partners of La/Xxx XX, as
the case may be, consistently with Schedule 2.01(a).
ARTICLE IV
COVENANTS
Section 4.01 Preferential Rights to Purchase. The La/Xxx XX
Parties shall use their best efforts to comply with all preferential right to
purchase provisions relating to the Assets. The La/Xxx XX Parties shall
promptly notify Acquisition II if any preferential right to purchase is
exercised or if the requisite period has elapsed without said right having been
exercised. If a third party who has been offered an interest in any portion of
the Assets pursuant to a preferential right to purchase elects to purchase any
portion of the Assets pursuant to the aforesaid offer, any amount received by a
La/Xxx XX Party in respect thereof shall be immediately transferred to
Acquisition II, and, in the event Acquisition II shall have received all of
the amount respecting the exercise of such preferential right as set forth on
Schedule 5.09, the exercise of such preferential right to purchase shall have
no effect on the Cash Consideration or the number of Preferred Shares payable
by Acquisition II hereunder.
Section 4.02 Consents to Assignment. The La/Xxx XX Parties shall
use their best efforts to obtain all consents to assignment of the Assets prior
to Closing, excluding governmental consents or approvals customarily obtained
post-closing. If any such consent to assignment has not been obtained by the
twentieth day prior to the expected date of Closing, the Adjustment Committee,
utilizing the procedures set forth in Section 3.07, shall determine a value
attributable to the portion of the Assets affected by the unobtained
consent(s), and the amount so determined shall be deducted from the Cash
Consideration to be paid by Acquisition II hereunder (or the number of the
Adjusted Preferred Shares to be delivered hereunder shall be appropriately
reduced), and such reduction shall be applied to the La/Xxx XX Parties in a
manner consistent with Schedules 2.01(a) and 2.02. If such consent is obtained
thereafter, any reduction of the Cash Consideration (or the number of Adjusted
Preferred Shares) resulting from the lack of such consent shall be paid (or
delivered) by Acquisition II to the appropriate La/Xxx XX Parties subsequent to
the effectiveness of the contribution of the Assets thereby affected.
Section 4.03 Copies of Contracts. Within seven (7) days from the
date of this Agreement, the La/Xxx XX Parties shall make available to
Acquisition II true copies of all of the Contracts.
Section 4.04 Conduct of Business Prior to Closing. The La/Xxx XX
Parties covenant that, from the date hereof to the Closing Date, the La/Xxx XX
Parties will:
(a) Not, without the prior written consent of Acquisition
II, (i) operate, consent to operate or in any manner deal with, incur
obligations with respect to, or undertake any
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transactions relating to, the Assets other than transactions that are
(A) within the control and determination of the operator under any
operating agreement affecting the Assets for which none of the La/Xxx
XX Parties is the named operator, or (B) voluntary or discretionary,
from the standpoint of the La/Xxx XX Parties and in an amount not
exceeding $10,000; (ii) acquire, dispose of, encumber, relinquish or
otherwise transfer any of the Assets; (iii) waive, compromise or
settle any right or claim that would, or could be likely to, adversely
affect the ownership, operation or value of any of the Assets; (iv)
take any action or fail to take any action that could reasonably be
expected to have a material adverse effect on the Assets after the
Effective Time, or that could reasonably be expected to adversely
affect the ability of the Parties to obtain consents of third parties
or approvals of governmental entities required to consummate the
transactions contemplated in this Agreement; (v) make capital
expenditures or workover expenditures with respect to the Assets,
unless the expenditure has been approved prior to the date of this
Agreement and the authority for expenditure ("AFE") for such
expenditure is described on Schedule 5.14; (vi) abandon any Well
capable of producing in paying quantities located on the Leases or
release or abandon all or any portion of any of the Leases; (vii)
modify or terminate any of the agreements relating to its Assets
(including gas sales agreements) that extend for a period of more than
thirty (30) days; (viii) enter into any farmout or farm in agreements
relating to the Assets other than in the ordinary course of business;
(ix) encumber, sell or otherwise dispose of any of its Assets, other
than personal property that is replaced by equivalent property or
consumed in the normal operation of the Assets; or (x) agree to do any
of the foregoing.
(b) (i) develop, maintain and operate the Assets in a
good and workmanlike manner; (ii) maintain, or use their best efforts
to cause operators of the Assets to maintain, all insurance now in
force with respect to the Assets and pay or cause to be paid all costs
and expenses incurred in connection therewith; (iii) keep the Leases
and the Contracts in full force and effect, unless Acquisition II
gives prior consent to the termination of any Lease or Contract (which
consent shall not be unreasonably withheld), and perform and comply
with all of the covenants and conditions contained therein and all
agreements relating to the Assets in all material respects; (iv)
maintain the books and records respecting the Assets in the usual,
regular and ordinary course on a basis consistent with prior years;
and (v) preserve the goodwill associated with their business
relationships.
(c) Notify, as reasonably requested by Acquisition II,
all governmental regulatory authorities of the transactions
contemplated hereby and cooperate with Acquisition II in obtaining the
issuance by each such authority of such permits, licenses and
authorizations as may be necessary for Acquisition II to own the
Assets following the consummation of the transactions contemplated in
this Agreement.
(d) Notify Acquisition II of the discovery by the La/Xxx
XX Parties that any representation or warranty of the La/Xxx XX
Parties contained in this Agreement is or becomes untrue or will be
untrue on the Closing Date.
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(e) Duly and timely file, or use its best efforts to
cause others to file, with governmental authorities all required
reports and duly observe and comply in all material respects with all
laws, rules, regulations, ordinances and orders relating to such
La/Xxx XX Party, in each instance where the failure of such filing or
observance and compliance could reasonably be expected to adversely
affect the likelihood of the consummation of the transactions
hereunder contemplated or could now or hereafter affect the ownership
or operation of any of the Assets.
(f) Promptly notify Acquisition II of (i) any suit,
action or other proceeding pending or threatened before any court or
governmental body, authority or agency and any cause of action or
dispute of which such La/Xxx XX Party has knowledge or has received
notice that directly affects or relates to such La/Xxx XX Party or any
partner, employee, consultant, agent or other representative thereof
in his capacity as such and that could now or hereafter affect the
ownership or operation of any of the Assets or that could reasonably
be expected to adversely affect the likelihood of the consummation of
the transactions hereunder contemplated, or (ii) any material failure
or reasonably likely inability of such La/Xxx XX Party to satisfy any
covenant, condition or agreement contained herein.
Section 4.05 No Negotiations. During the period beginning on the
date hereof and ending on the earlier of the Closing Date or the termination of
this Agreement as provided herein, the La/Xxx XX Parties will not (a) approve
or undertake any merger, consolidation, business combination or any transaction
involving directly or indirectly all or any portion of the Assets or that could
reasonably be expected to adversely affect, directly or indirectly, the
likelihood of consummation of the transactions hereunder contemplated; or (b)
directly or indirectly initiate, encourage, or solicit any inquiries, offers or
proposals by any person other than Acquisition II with respect to, or
participate in, facilitate, or encourage, any effort or attempt by any such
person to do or seek, any transaction described in (a) above, including by way
of furnishing information regarding the Assets to any person other than
Acquisition II and its affiliates and representatives.
Section 4.06 Books, Records and Files. Each La/Xxx XX Party shall
give Acquisition II, through its officers, attorneys, accountants, petroleum
engineers and authorized representatives ("Acquisition II's Agents"), free and
full access, for the purposes of inspection, review and photocopying, to the
facilities, properties, books, contracts, records and files of the La/Xxx XX
Parties in the possession of such La/Xxx XX Party, its agents or attorneys, to
permit Acquisition II to make such investigation as Acquisition II may deem
necessary or desirable. Such La/Xxx XX Party shall furnish Acquisition II's
Agents during such period with all such information and copies of such
documents concerning the Assets as such agents may reasonably request and cause
its officers, employees, consultants, agents, accountants and attorneys to
cooperate fully with such representatives in connection with such review and
examination and to make full disclosure to Acquisition II and Acquisition II's
Agents of all material facts affecting the Assets.
Section 4.07 Best Efforts. Upon the terms and subject to the
conditions hereof, each La/Xxx XX Party agrees to use its reasonable best
efforts to take or cause to be taken, all appropriate action, and to do, or
cause to be done, all things necessary, proper or advisable to
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satisfy its conditions to Closing and to consummate and make effective the
transactions contemplated by this Agreement.
Section 4.08 Appointment of Acquisition II as Operator. The
La/Xxx XX Parties shall use their reasonable best efforts to cause Acquisition
II or its designee, effective as of the Closing Date, to be appointed the
operator of all the Assets with respect to which a La/Xxx XX Party was operator
on the date hereof or becomes the operator prior to the Closing Date.
Section 4.09 Amendment of La/Cal II's Partnership Agreement;
Consents. La/Xxx XX shall not amend its partnership agreement subsequent to
the Effective Date except as otherwise contemplated herein and La/Cal II's
management committee will use its best efforts to obtain all partner and other
consents necessary to the consummation of the transactions hereunder
contemplated.
Section 4.10 Registration or Proxy Statement; Confidential
Memorandum. Acquisition II and Xxxxxxxx agree that, except with respect to
information concerning the La/Xxx XX Parties and furnished by or on behalf of
the La/Xxx XX Parties specifically for use therein, for which the La/Xxx XX
Parties shall be responsible, (a) the Registration or Proxy Statement,
whichever is applicable (the "Statement"), at the time the Statement is first
mailed to the stockholders, at the time of the stockholders' meeting, at the
Closing Date and at the time the Statement is declared effective, and (b) the
Confidential Memorandum used to solicit the partners of La/Xxx XX and the
Working Interest Owners (the "Memorandum"), at the time the Memorandum is
mailed to the partners of La/Xxx XX and the Working Interest Owners, and at the
time of the partners' meeting, (i) will comply as to form in all material
respects with the requirements of the Securities Act of 1933 and the rules and
regulations thereunder and the Securities Exchange Act of 1934 and the rules
and regulations thereunder, and (ii) will not contain any untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. Acquisition II and
Xxxxxxxx will advise the La/Xxx XX Parties promptly in writing if, prior to the
Closing Date they shall obtain knowledge of any facts that would make it
necessary to amend or supplement the Statement or the Memorandum in order to
make the statements therein not misleading or to comply with applicable law.
The La/Xxx XX Parties agree that, except with respect to information concerning
Acquisition II or Xxxxxxxx furnished by or on behalf of Acquisition II or
Xxxxxxxx specifically for use therein, for which Acquisition II and Xxxxxxxx
shall be responsible, (a) the Statement, at the time the Statement is first
mailed to the stockholders, at the time of the stockholder's meeting, at the
Closing Date and at the time the Statement is declared effective, and (b) the
Memorandum, at the time the Memorandum is first mailed to the partners of
La/Xxx XX and the Working Interest Owners and at the time of the partners'
meeting, (i) will comply as to form in all material respects with the
requirement of the Securities Act of 1933 and the rules and regulations
thereunder and the Securities Exchange Act of 1934 and the rules and
regulations thereunder, and (ii) will not contain any 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. The La/Xxx XX
Parties will advise Acquisition II and Xxxxxxxx promptly in writing, if prior
to the Closing Date the La/Xxx XX Parties shall obtain knowledge of any facts
that would make it
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necessary to amend or supplement the Statement or the Memorandum in order to
make the statements therein not misleading or to comply with applicable law.
Section 4.11 Covenants of Acquisition II and Xxxxxxxx.
Acquisition II and Xxxxxxxx shall:
(a) Promptly notify the La/Xxx XX Parties of (i) the
discovery by either of them that any representation or warranty by
either of them contained in this Agreement is or becomes untrue or
will be untrue on the Closing Date; and (ii) any material failure or
reasonably likely inability of Acquisition II or of Xxxxxxxx to
satisfy any covenant, condition or agreement contained herein;
(b) Duly and timely file, or use its best efforts to
cause others to file, with governmental authorities all required
reports and duly observe and comply in all material respects with all
laws, rules, regulations, ordinances and orders relating to
Acquisition II and to Xxxxxxxx, in each instance where the failure of
such filing or observance and compliance could reasonably be expected
to adversely affect the likelihood of the consummation of the
transactions hereunder contemplated; and
(c) Upon the terms and subject to the conditions hereof,
use their reasonable best efforts to take or cause to be taken, all
appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable to satisfy their conditions to Closing
and to consummate and make effective the transactions contemplated by
this Agreement.
ARTICLE V
REPRESENTATIONS OF THE LA/XXX XX PARTIES
Each of the La/Xxx XX Parties severally represents to Acquisition II
that, as of the Effective Date and the Closing Date with respect to that
portion of the Assets owned by such La/Xxx XX Party:
Section 5.01 Title. No warranty of title is given hereunder even
with respect to the return of the consideration, except for claims arising by,
through or under the La/Xxx XX Parties. Each La/Xxx XX Party represents that
there are no claims affecting Good and Marketable Title to the Assets arising
by, through or under such La/Xxx XX Party.
Section 5.02 Taxes. All ad valorem, property, occupation,
severance, production, gathering, pipeline, gross production, windfall profit,
Btu, energy, excise and other taxes, governmental charges and assessments
imposed, levied, assessed, and due with respect to, measured by, charged
against or attributable to the Assets have been duly paid. No waiver or
agreement is in force for the extension of time for the assessment or payment
of any tax described in the foregoing sentence, except for normal extensions.
Except as set forth on Schedule 5.02, there are no assessed tax deficiencies
against such La/Xxx XX Party respecting the Assets; there are no tax
deficiencies proposed or threatened; and no audit by any federal, state or
local taxing authority is in progress, or, to the best of such La/Xxx XX
Party's knowledge, is being proposed, threatened or discussed that could now or
hereafter affect the ownership or operation of any of the Assets
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or that could reasonably be expected to adversely affect the likelihood of the
consummation of the transactions hereunder contemplated.
Section 5.03 Litigation and Claims. Except as is set forth in
Schedule 5.03, no claim, demand, filing, cause of action, administrative
proceeding, lawsuit or other proceeding or litigation has been instituted, is
pending or, to the best knowledge of such La/Xxx XX Party, being investigated
or threatened that could now or hereafter affect the ownership or operation of
any of the Assets or that could reasonably be expected to adversely affect,
directly or indirectly, the likelihood of consummation of the transactions
hereunder contemplated. Except as set forth Schedule 5.03, such La/Xxx XX
Party is not party or subject to any injunction, judgment, order, notice of
violation or decree, whether or not still subject to appeal, of any court or
governmental body, authority or agency that could now or hereafter affect the
ownership or operation of any of the Assets or that could reasonably be
expected to adversely affect the likelihood of the consummation of the
transactions hereunder contemplated. To the best knowledge of such La/Xxx XX
Party, except as set forth on Schedule 5.03, there is no fact, event or
circumstance that may give rise to any suit, action, claim, investigation or
proceeding that could now or hereafter affect the ownership or operation of any
of the Assets or that could reasonably be expected to adversely affect the
likelihood of the consummation of the transactions hereunder contemplated.
Section 5.04 Lease Maintenance. To the best of such La/Xxx XX
Party's knowledge, the Leases are in full force and effect as to all lands and
depths described in such Leases and such La/Xxx XX Party is in full compliance
with the Leases.
Section 5.05 Other Maintenance. All rents and royalties with
respect to the Assets have been properly and timely paid, and, to the best of
such La/Xxx XX Party's knowledge, all liabilities of any kind or nature
incurred with respect to the Assets have been paid before delinquency; neither
such La/Xxx XX Party nor, to the best of such La/Xxx XX Party's knowledge, any
prior owners of the Assets have received any notice of default or claimed
default with respect to any obligations with respect to the Assets or any part
thereof.
Section 5.06 Equipment. To the best of such La/Xxx XX Party's
knowledge, all Xxxxx, Facilities, and other equipment that constitute part of
the Assets are in good repair and working condition and have been installed and
maintained in accordance with good industry standards and all applicable legal
requirements.
Section 5.07 Gas Matters.
(a) Except as set forth in Schedule 1.01, neither the
Assets nor the Hydrocarbons attributable thereto are subject,
committed or dedicated to any contract, agreement or arrangement
regarding the gathering, transportation, processing, storing,
delivering, sale, use or marketing thereof; such La/Xxx XX Party has
disclosed in writing to Acquisition II the existence of all such
contracts, arrangements or agreements, in Schedule 1.01, and no third
party has any call, right of first refusal or preferential right to
purchase such Hydrocarbons. Except as set forth in Schedule 1.01,
such La/Xxx XX Party is not a party to or bound by, and the Assets and
the Hydrocarbons attributable thereto, are not encumbered or affected
by any
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contract, production payment, gas balancing, deferred production, gas
banking or similar agreement or arrangement, and such La/Xxx XX Party
is not in an "overlift," "over produced," or similar status under any
such agreement or arrangement. Such La/Xxx XX Party's representation
in this Section 5.07 shall be limited to the best of its knowledge as
to periods of time prior to its ownership of the Assets.
(b) Except as set forth on Schedule 5.07 and except for
gas imbalances between (i) the La/Xxx XX Parties, and (ii) any third
party working interest owners or third party pipelines relative to the
Xxxxx and Leases (collectively, "Gas Imbalances"), to the knowledge of
such La/Xxx XX Party, such La/Xxx XX Party is not obligated by any gas
prepayment arrangement or by any "take-or-pay" requirement to deliver
any gas, or other Hydrocarbons from the Assets, at a future time
without then or thereafter receiving full payment therefor. Schedule
5.07 sets forth all Gas Imbalances affecting the interests of such
La/Xxx XX Party in and to the Xxxxx and Leases.
Section 5.08 Compliance with Laws. To the best knowledge of such
La/Xxx XX Party, the Assets have been operated in compliance with all laws,
orders, ordinances, rules and regulations of all governmental authorities
having or asserting jurisdiction relating to the ownership and operation
thereof, including the production of all Hydrocarbons attributable thereto.
All necessary or appropriate certificates, approvals, consents, permits,
licenses or other authorizations from any governmental or similar entity,
agency or subdivision thereof with regard to the ownership or operation of the
Assets have been obtained and no violations exist, have been recorded or are
known by such La/Xxx XX Party in respect of such licenses, permits or
authorizations, and no proceeding is pending or threatened to revoke or limit
any such permit or license. No application, notice, order, registration,
qualification, waiver, consent, approval or other action is required to be
filed, given, obtained or taken by such La/Xxx XX Party by virtue of the
execution, delivery and performance of this Agreement or the consummation of
the transactions contemplated hereby, other than the customary approval of the
transfer of interests in Leases on state-owned lands or waterbottoms.
Section 5.09 Consents, Waivers and Preferential Rights. Except as
disclosed on Schedule 5.09, to the best of such La/Xxx XX Party's knowledge,
there are no consents or waivers of preferential purchase or other rights
necessary to permit the valid contribution to Acquisition II of the Assets
(excluding governmental consents and approvals customarily obtained
post-closing and which are expected to be obtained).
Section 5.10 Environmental. To the best of such La/Xxx XX Party's
knowledge, such La/Xxx XX Party has obtained all permits, licenses and other
authorizations that are required under federal, state and local laws,
ordinances or regulations and all material reports have been timely filed under
all applicable federal, state and local laws, ordinances or regulations; and
the Assets are in substantial compliance with each federal, state or local law,
ordinance or regulation relating to the environmental conditions on, under or
about the Assets including, but not limited to, soil and groundwater
conditions, including laws relating to actual or threatened emissions,
discharges or releases of pollutants, raw materials, products, contaminants or
hazardous or toxic materials or hazardous or solid wastes into ambient air,
surface water, groundwater or land, or otherwise relating
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to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants or hazardous or
toxic materials or hazardous or solid wastes, and to the best of such La/Xxx XX
Party's knowledge, third parties operating the Assets are in compliance in all
material respects with all terms and conditions of such laws, ordinances,
regulations, permits, licenses and authorizations and also are in compliance in
all material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in such laws or contained in any ordinance, regulation, code, plan,
order, decree, judgment, notice or demand letter issued, entered, promulgated
or approved thereunder relating to the Assets, and such La/Xxx XX Party has not
(and to the best of such La/Xxx XX Party's knowledge no third party operator
has) received notice of any violation of or investigation relating to any
federal, state or local laws and no notices have been received advising such
La/Xxx XX Party that it is potentially responsible for response costs with
respect to a release or threatened release of "Hazardous Substances" on, into,
under or from the Assets. Such La/Xxx XX Party has furnished Acquisition II
copies of all environmental studies and reports prepared or obtained by such
La/Xxx XX Party relating to the Assets, if any.
Section 5.11 Brokers. No broker or finder is entitled to any
brokerage or finder's fee, or to any commission, based in any way on
agreements, arrangements or understandings made by or on behalf of such La/Xxx
XX Party for which Acquisition II has or will have any liabilities or
obligations (contingent or otherwise).
Section 5.12 Contracts. To the best knowledge of such La/Xxx XX
Party, such La/Xxx XX Party has performed in all material respects all
obligations required to be performed by it and is not in default, or alleged to
be in default, in any material respect under any of the Contracts. Schedule
1.01 sets forth all of the Contracts.
Section 5.13 Adverse Changes. Except as described on Schedule
5.13, since the Effective Date, (i) there has not been any material adverse
change in the assets, business, properties, operation, condition (financial or
otherwise) and future prospects of the Assets, taken as a whole, whether such
changes have occurred in the ordinary course of business or otherwise (except
for any changes affecting the oil and gas industry generally) and the La/Xxx XX
Parties know of no such change that is threatened including, without
limitation, any material adverse change or material reduction in the rate of
production of Hydrocarbons, other than changes in the ordinary course of
operation, changes that result from depletion in the ordinary course of
operation, and changes that result from variances in markets for the
Hydrocarbons; (ii) none of the Assets or the Xxxxx or the reservoirs covered
thereby has suffered any material destruction, damage or loss; (iii) such
La/Xxx XX Party knows of no such adverse change, destruction, damage, or loss
that is threatened; (iv) such La/Xxx XX Party has not waived any right of
material value to the Assets; (v) there has not been any disposition of, or
encumbrance or agreement to dispose of or to encumber, or any pledge or grant
of a security interest in, or agreement to pledge or grant a security interest
in, any Asset; and (vi) such La/Xxx XX Party has not been a party to (A) any
agreement to merge, consolidate or combine with any corporation or entity,
insofar as the same may affect the Assets, other than pursuant to this
Agreement, or (B) any sale or grant to any party or parties of any license,
option or other right of any nature to sell, distribute or otherwise deal in or
with the Assets, other than in the ordinary course of business.
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Section 5.14 Current Commitments. To the best of such La/Xxx XX
Party's knowledge, Schedule 5.14 contains a true and complete list of (i) all
AFEs to drill or rework Xxxxx or for capital expenditures pursuant to any of
the Contracts that have been proposed by such La/Xxx XX Party or any other
person on or after the Effective Date, whether or not accepted by such La/Xxx
XX Party or any other person, and (ii) all AFEs and oral or written commitments
to drill or rework Xxxxx or for other capital expenditures pursuant to any of
the Contracts for which all of the activities anticipated in such AFEs or
commitments have not been completed by the Effective Date. Except as set forth
on Schedule 1.01, no agreement applicable to the Assets contains express
provisions that require the drilling of additional xxxxx or other material
development operations in order to earn or to continue to hold all or any
portion of the Assets.
Section 5.15 Corporate Existence. Each La/Xxx XX Party that is a
corporation, partnership or limited liability company is duly organized,
validly existing and in good standing under the laws of its state of
organization, is duly qualified and in good standing under the laws of the
State of Louisiana, if required to do so, and has the legal right, power,
authority, and qualifications to conduct its business and own its respective
interest in the Assets.
Section 5.16 Organizational Power. The execution, delivery and
performance by such La/Xxx XX Party of (i) this Agreement, (ii) the
Contribution Agreement, and (iii) all other instruments to be executed in
connection with the this Agreement and the Contribution Agreement, (all such
other instruments, together with the Contribution Agreement, are collectively
referred to herein as the "Closing Documents") and the consummation of the
transactions hereunder contemplated are within such La/Xxx XX Party's
corporate, partnership or limited liability company powers, have been duly
authorized by all necessary corporate, partnership or limited liability company
action on the part of such La/Xxx XX Party and do not and will not (a) violate
or be in conflict with any provision of law or any rule, regulation, order,
judgment, decree, permit, license, consent, approval or determination currently
in effect having applicability to such La/Xxx XX Party or such La/Xxx XX
Party's articles of incorporation, bylaws, partnership agreement, articles of
organization, operating agreement or other governing documents, (b) result in
a breach of, constitute or cause a breach or default under any indenture,
credit agreement, operating agreement, or any other agreement or instrument to
which such La/Xxx XX Party is a party or by which such La/Xxx XX Party or the
Assets may be currently bound or affected, or (c) result in or require the
creation or imposition of any mortgage, lien, pledge, security interest,
charge, or other encumbrance upon any of the Assets under any such indenture,
credit agreement, operating agreement or other agreement or instrument; and
such La/Xxx XX Party is not in default under any such order, judgment, decree,
permit, license, consent, approval, determination, indenture, credit agreement,
operating agreement or other agreement, or instrument in any way that now or in
the future will materially adversely affect the ability of such La/Xxx XX Party
to perform its obligations under this Agreement or the Closing Documents; and
all consents or approvals under such indentures, agreements, and instruments
necessary to permit valid execution, delivery, and performance by such La/Xxx
XX Party of this Agreement, the Closing Documents and its obligations
thereunder have been obtained. In the case of La/Xxx XX, each representation
made in this Section 5.16 is subject to the approval of this Agreement by the
partners of La/Xxx XX pursuant to Section 7.06, below.
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Section 5.17 Due Execution and Enforceability. Subject to the
approval of this Agreement by the partners of La/Xxx XX pursuant to Section
7.06, below, this Agreement has been duly executed and delivered by such La/Xxx
XX Party, and as of the Closing, the Closing Documents will have been duly
executed and delivered by such La/Xxx XX Party, and this Agreement constitutes,
and as of the Closing, the Closing Documents will constitute, the legal, valid,
and binding acts and obligations of such La/Xxx XX Party enforceable against
such La/Xxx XX Party in accordance with their terms, subject, however, to
bankruptcy, insolvency, reorganization, and other laws affecting creditors'
rights generally and, with regard to any equitable remedies, to the discretion
of the court before which proceedings to obtain such remedies may be pending.
There are no bankruptcy, insolvency, reorganization, receivership or
arrangement proceedings pending, being contemplated by, or to the best
knowledge of such La/Xxx XX Party, threatened against such La/Xxx XX Party.
Section 5.18 Insurance Policies. Schedule 5.18 sets forth a list
of all insurance policies issued in favor of the La/Xxx XX Parties that relate
to the Assets and all such policies are currently in force and effect. True
and complete copies of all such policies will be made available to Acquisition
II within seven (7) days of the date of this Agreement.
Section 5.19 Xxxxx. During any period operated by the La/Xxx XX
Parties, as applicable, and to the knowledge of such La/Xxx XX Party, during
other periods (a) all of the Xxxxx have been drilled and completed within the
boundaries of the area described in the Leases or within the limits otherwise
permitted by contract, pooling or unitization agreement and by applicable law
and (b) all such Xxxxx have been produced in compliance with allowables
allocated thereto by the applicable governmental authority, except as set forth
in Schedule 5.19. All of such scheduled violations, taken together, would not
and could not reasonably be expected to have a Material Adverse Effect on the
Assets. As used herein, the term "Material Adverse Effect" means a material
adverse effect on the business prospects, assets, results of operations or
condition (financial or otherwise) of the Assets, taken as a whole.
Section 5.20 Evaluation Data. The La/Xxx XX Parties own and have
the right to transfer or have the right to use and the right to transfer such
right of use without any limitations or restrictions adversely affecting the
use of the same in the ordinary conduct of its business, the Files, and this
Agreement (including the consummation of the transactions hereunder
contemplated) has not altered or impaired, nor will alter or impair, any such
rights or has breached, or will breach, any agreements with third party vendors
or has required, or may require (whether in such La/Xxx XX Party's opinion or
the third party vendor's opinion) payments of additional sums thereto, or has
required, or may require (whether in such La/Xxx XX Party's opinion or the
third party vendor's opinion) the return of any records or information, except
as set forth in Schedule 5.20. All of such scheduled items, taken together,
would not and could not reasonably be expected to have a Material Adverse
Effect on the Assets. No person has any right to use or obtain access to any
of the Files, and no person has overtly challenged or questioned the validity
or effectiveness of any license or agreement relating to the same or the right
of the La/Xxx XX Parties, as applicable, to use the same, except as set forth
in Schedule 5.20. All of such scheduled items, taken together, would not and
could not reasonably be expected to have a Material Adverse Effect on the
Assets.
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Section 5.21 Well Status. Except as set forth in Schedule 5.21,
there are no Xxxxx that:
(i) the La/Xxx XX Parties are currently obligated by law
or contract to plug and abandon;
(ii) the La/Xxx XX Parties will be obligated by law or
contract to plug and abandon with the lapse of time or notice or both
because the Well is not currently capable of producing in commercial
quantities;
(iii) are subject to exceptions to a requirement to plug
and abandon issued by a regulatory authority having jurisdiction over
the Assets; or
(iv) to the best knowledge of such La/Xxx XX Party, have
been plugged and abandoned but have not been plugged or reclaimed in
accordance with all applicable requirements of each regulatory
authority having jurisdiction over the Assets.
Section 5.22 Royalties. All royalties, overriding royalties,
compensatory royalties and other payments due with respect to the Assets for
the period prior to the Closing have been properly and correctly paid.
Section 5.23 Reserve Report.
(a) The La/Xxx XX Parties have delivered to Acquisition
II a copy of the oil and gas reserve report for the Assets prepared by
Coutret & Associates, Inc. ("Reserve Engineers") as of July 1, 1996
(the "Reserve Report"). The factual information provided by the
La/Xxx XX Parties to the Reserve Engineers was based upon information
contained in the records and files of the La/Xxx XX Parties kept in
the ordinary course of business. Except with respect to the
corrections and matters set forth at Schedule 5.23, such La/Xxx XX
Party does not have knowledge of any facts which would make the
factual information provided by the La/Xxx XX Parties to the Reserve
Engineers, and on which the Reserve Report was based, inaccurate in
any material respect as of its date.
(b) OTHER THAN AS EXPRESSLY SET FORTH ABOVE IN THIS
SECTION 5.23, THE LA/XXX XX PARTIES MAKE NO REPRESENTATION OR WARRANTY
REGARDING THE RESERVE REPORT AND HEREBY DISCLAIM ANY REPRESENTATION OR
WARRANTY THAT THE RESERVE ESTIMATES, CASH FLOW ESTIMATES, PRICE
ESTIMATES, OR PRODUCTION OR FLOW RATE ESTIMATES CONTAINED IN THE
RESERVE REPORT OR IN ANY SUPPLEMENT THERETO OR UPDATE THEREOF (OR IN
ANY SIMILAR REPORT) ARE IN ANY WAY COMPLETE, ACCURATE OR NOT
MISLEADING, THE SAME BEING PREDICTIONS AS TO FUTURE EVENTS WHICH ARE
INHERENTLY SUBJECT TO INCOMPLETENESS AND INACCURACY.
Section 5.24 Payout Agreements. There are no Assets with respect
to which the Net Revenue Interests and Working Interests of the La/Xxx XX
Parties, as shown on Schedule 1.01
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are determined with respect to "Payout" and as to which "Payout" has not
occurred, except as shown on Schedule 1.01.
Section 5.25 Books and Accounts. The Files are complete and
accurate in all material respects, have been maintained on a consistent basis,
and fairly reflect all of the income, expenses, assets, liabilities,
obligations and commitments attributable to the Assets, in accordance with
generally accepted accounting principles applied on a consistent basis. Except
as and to the extent reflected or reserved against in the financial statements
for the Assets for the period ended June 30, 1996 (the "La/Xxx XX Financial
Statements"), there are, as of the date of such Financial Statements, no
material liabilities or obligations (absolute or contingent) respecting the
Assets. Such Financial Statements, together with the notes thereto, are
complete and correct in all material respects and present fairly the
consolidated financial position and the consolidated results of operations of
the Assets as of the date, and for the period, indicated, and all such
statements have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis.
Section 5.26 Complete Disclosure. Such La/Xxx XX Party has not
knowingly provided or made available to Acquisition II any information that is
misleading or inaccurate in any material respect. Such La/Xxx XX Party has not
knowingly withheld from or failed to disclose to Acquisition II any data,
documents or other information that a responsible seller would consider
necessary for a reasonable evaluation by a prospective purchaser of the Assets,
taken as a whole. There is no fact that such La/Xxx XX Party has not disclosed
to Acquisition II in writing that materially adversely affects, or so far as
such La/Cal party can now foresee will materially adversely affect, the Assets.
Section 5.27 No Affiliate or Business Limiting Agreements. Except
as otherwise disclosed to Acquisition II in a Schedule hereto, there is no
written agreement, instrument or other arrangement or any material unwritten
agreement, contract, commitment or other arrangement between or among any
La/Xxx XX Party that affects the Assets. There is no agreement, contract,
arrangement or commitment with any person that will be binding upon Acquisition
II following the Closing that limits the ability of Acquisition II to engage in
any line of business or compete in any location against any person.
Section 5.28 Hydrocarbon Receivables. The accounts receivable
reflected on the books of the La/Xxx XX Parties as of the Closing Date that are
attributable to any Hydrocarbons produced and sold prior to the Closing Date
(the "La/Xxx XX Hydrocarbon Receivables"), will represent bona fide amounts due
from debtors for Hydrocarbons delivered or sold on or before the Closing Date
and will not be subject to any valid defenses, counterclaims or rights of
setoff. At least 90% of the La/Xxx XX Hydrocarbon Receivables (other than
those relating to gas balancing obligations), will be collectible in the
ordinary course of business within 120 days after billing.
Section 5.29 Employees; WARN Act Notices. Any notice required
under the Federal Workers Adjustment and Retraining Notification Act ("WARN
Act") that is, has been or will be required of the La/Xxx XX Parties to its
employees or former employees by reason of its obligations under the WARN Act
resulting from the transactions contemplated by this
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Agreement has been or will be given by the La/Xxx XX Parties. As a result of
the transactions contemplated by this Agreement, Acquisition II will not have
any responsibility for any employee benefits, including without limitation,
severance payments that the La/Xxx XX Parties' employees may be entitled to
receive as a result of such transaction.
Section 5.30. Limitation on Remedial Costs. There are no
conditions relating to the Assets that could reasonably be expected to give
rise to any environmental-related remedial activities that would, in the
aggregate, cost more than $100,000.
Section 5.31 Survival of Representations. Except to the extent
necessary to give effect to the provisions of Section 11.01 (Indemnification),
no representation, warranty, covenant or agreement contained in this Article V
shall survive the Closing.
ARTICLE VI
REPRESENTATIONS OF ACQUISITION II AND XXXXXXXX
Acquisition II and Xxxxxxxx represent to the La/Xxx XX Parties that,
as of the Effective Date and the Closing Date:
Section 6.01 Corporate Existence of Acquisition II. Acquisition
II is a corporation duly organized, validly existing and in good standing under
the laws of the state of Delaware, will be duly qualified and in good standing
under the laws of the states of Texas and Louisiana, and has the legal right,
power, authority, and qualifications to conduct its business.
Section 6.02 Corporate Power of Acquisition II. The making and
performance by Acquisition II of this Agreement and the Closing Documents to
which it is a party are within Acquisition II's corporate powers, have been
duly authorized by all necessary corporate action on the part of Acquisition
II, except that the issuance of the Preferred Shares will require approval of
Xxxxxxxx'x stockholders under the Rules of the New York Stock Exchange, and do
not and will not (i) violate any provision of law or any rule, regulation,
order, judgment, or determination currently in effect having applicability to
Acquisition II or Acquisition II's certificate of incorporation, bylaws, or
other governing documents, or (ii) subject to obtaining the consents prior to
Closing listed on Schedule 6.02, result in a breach of or constitute a default
under any indenture, credit agreement, operating agreement, or any other
agreement or instrument to which Acquisition II is a party or by which
Acquisition II may be currently bound or affected; and Acquisition II is not in
default under any such order, judgment, decree, determination, indenture,
credit agreement, operating agreement or other agreement, or instrument in any
way that now or in the future will materially adversely affect the ability of
Acquisition II to perform its obligations under this Agreement or the Closing
Documents; and all consents or approvals under such indentures, agreements, and
instruments necessary to permit valid execution, delivery, and performance by
Acquisition II of this Agreement and the Closing Documents have been obtained
or will be obtained prior to Closing.
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Section 6.03 Due Execution and Enforceability. This Agreement has
been duly executed and delivered by Acquisition II, and, as of the Closing, the
Closing Documents will have been duly executed and delivered by Acquisition II,
and this Agreement constitutes, and as of the Closing, the Closing Documents
will constitute, the legal, valid, and binding acts and obligations of
Acquisition II enforceable against Acquisition II in accordance with their
terms, subject, however, to bankruptcy, insolvency, reorganization, and other
laws affecting creditors' rights generally and, with regard to any equitable
remedies, to the discretion of the court before which proceedings to obtain
such remedies may be pending. There are no bankruptcy, insolvency,
reorganization, receivership or arrangement proceedings pending, being
contemplated by, or to the best knowledge of Acquisition II, threatened against
Acquisition II.
Section 6.04 Brokers. No broker or finder is entitled to any
brokerage or finder's fee, or to any commission, based in any way on
agreements, arrangements or understandings made by or on behalf of Acquisition
II for which the La/Xxx XX Parties have or will have any liabilities or
obligations (contingent or otherwise).
Section 6.05 Financial Statements of Xxxxxxxx. Except as and to
the extent reflected or reserved against in the financial statements for
Xxxxxxxx for the period ending December 31, 1995, included in Xxxxxxxx'x annual
report on Form 10-K for such year (the "Financial Statements") or in Xxxxxxxx'x
SEC filings or as set forth in Schedule 6.05 attached hereto, Xxxxxxxx, as of
the date of such Financial Statements or SEC filings, had no material
liabilities or obligations (absolute or contingent). Such Financial
Statements, together with the notes thereto, are complete and correct in all
material respects and present fairly the consolidated financial position and
the consolidated results of operations of Xxxxxxxx as of the dates and for the
periods indicated, all such statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis, and, to
the best of Xxxxxxxx'x knowledge, such Financial Statements comply as to form
and substance in all material respects with Regulation S-X as promulgated by
the Securities and Exchange Commission.
Section 6.06 SEC Filings of Xxxxxxxx. Since August 15, 1995,
Xxxxxxxx has filed all periodic reports required to be filed with the SEC under
the Exchange Act. All such filings made and to be made by Xxxxxxxx with the
SEC prior to the Closing do and will, as of the Closing, comply with the
provisions of the Exchange Act and the rules and regulations of the SEC under
the Exchange Act, and did not, during the period of time to which any such
filings relate, (a) contain any untrue statement of material fact; or (b) omit
any statement of material fact required to be stated therein or necessary to
make the statements contained therein, in light of the circumstances under
which they were made, not misleading.
Section 6.07 Fairness Opinion. Xxxxxxxx has obtained from its
investment banker, Xxxxxx Xxxxxx, a written opinion ("Fairness Opinion"), a
copy of which has been delivered to La/Cal.
Section 6.08 Survival of Representations. No representation,
warranty, covenant or agreement contained in this Article VI shall survive the
Closing.
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ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE LA/XXX XX PARTIES
The obligations of the La/Xxx XX Parties to consummate the
transactions provided for herein are subject, at the option of the La/Xxx XX
Parties, to the fulfillment on or prior to the Closing Date of each of the
following conditions:
Section 7.01 Representations. All of the representations and
warranties of Acquisition II and Xxxxxxxx herein contained shall be true and
correct in all material respects, at the date made and at and as of the Closing
as if such representations and warranties were made at and as of the Closing.
Section 7.02 Performance. Acquisition II and Xxxxxxxx shall have
performed, in all material respects, all obligations, covenants and agreements
contained in this Agreement to be performed or complied with by them at or
prior to the Closing.
Section 7.03 Pending Matters. No suit, action or other proceeding
shall be pending or threatened that seeks to restrain, enjoin or otherwise
prohibit the consummation of the transactions contemplated by this Agreement
and the transactions shall not have been blocked by final judicial action.
Section 7.04 Tax Opinion. The La/Xxx XX Parties shall have
received a written opinion of Xxxxxxx & Xxxxx, L.L.P., in form and substance
reasonably satisfactory to them to the effect that the asset contribution will
generally qualify for nonrecognition treatment under Section 351 of the
Internal Revenue Code of 1986, as amended, and such opinion shall not have been
withdrawn. In rendering such opinions, Xxxxxxx & Xxxxx, L.L.P., shall be
entitled to rely upon representations of the La/Xxx XX Parties, the partners of
La/Xxx XX, Acquisition II and Xxxxxxxx.
Section 7.05 Registration Rights Agreement. Acquisition II shall
have entered into a Registration Rights Agreement with the La/Xxx XX Parties,
containing substantially the same terms and provisions as set forth in the form
of Registration Rights Agreement attached hereto as Exhibit C.
Section 7.06 Approval of the Partners of La/Xxx XX. La/Cal II's
obligation to consummate the transactions contemplated hereby is subject to
La/Xxx XX having obtained the necessary consent of its partners to the
consummation of such transactions.
Section 7.07 Consummation of the Merger. The Merger shall be
consummated concurrently with the consummation of the transactions contemplated
by this Agreement, on substantially the same terms and provisions as set forth
the form of Certificate of Merger attached hereto as Exhibit D.
Section 7.08 Approval of the Preferred Shares. The shareholders
of Acquisition II and Xxxxxxxx shall have given the requisite approval for the
issuance of the Preferred Shares containing substantially the same rights,
preferences, qualifications and limitations and restrictions as set forth
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in the form of Certificate of Designations for Acquisition II Series B
Convertible Preferred Stock attached hereto as Exhibit B.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF ACQUISITION II
The obligations of Acquisition II to consummate the transaction
provided for herein are subject, at the option of Acquisition II, to the
fulfillment on or prior to the Closing Date of each of the following
conditions:
Section 8.01 Representations. All of the representations and
warranties of the La/Xxx XX Parties herein contained shall be true and correct
in all material respects, at the date made and at and as of the Closing as if
such representations and warranties were made at and as of the Closing.
Section 8.02 Performance. The La/Xxx XX Parties shall have
performed, in all material respects, all obligations, covenants and agreements
contained in this Agreement to be performed or complied with by them at or
prior to the Closing.
Section 8.03 Pending Matters. No suit, action or other proceeding
shall be pending or threatened that seeks to restrain, enjoin, or otherwise
prohibit the consummation of the transactions contemplated by this Agreement,
the transactions shall not have been blocked by final judicial action, and
there shall be no legal proceedings or environmental proceedings with respect
to the Assets outstanding or threatened, other than those that have been
disclosed, which, either separately or in the aggregate, would materially and
adversely affect the Assets taken as a whole.
Section 8.04 Approval of Shareholders. Xxxxxxxx shall have
obtained any necessary consent of its shareholders for the issuance of the
Preferred Shares.
Section 8.05 Fairness Opinion. The Fairness Opinion shall not
have been materially changed or withdrawn.
Section 8.06 La/Xxx XX Partners' Consent. La/Xxx XX shall have
obtained all necessary consent of the partners to the transactions contemplated
hereby.
Section 8.07 Registration Rights Agreement. The La/Xxx XX Parties
shall have entered into a Registration Rights Agreement with Acquisition II,
containing substantially the same terms and provisions as set forth in the form
of Registration Rights Agreement attached hereto as Exhibit C.
Section 8.08 Assets. The La/Xxx XX Parties shall have transferred
the Assets to Acquisition II in exchange for the Adjusted Preferred Shares and
the other consideration set forth herein.
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Section 8.09 No Adverse Change. Since the date of this Agreement,
no material adverse change shall have occurred in the business, operations or
financial conditions of the Assets, taken as a whole.
Section 8.10 Registration or Proxy Statement. The Statement , if
it includes a registration statement, shall have become effective under the
Securities Act of 1933, as amended; no stop order suspending the effectiveness
of the Statement shall have been issued and no proceedings for that purpose
shall have been initiated or threatened by the SEC; and, in any event, such
Statement, as of the time the Merger becomes effective, shall not contain any
untrue statement of a material fact and shall not omit to state any material
fact required to be stated therein or necessary to make any statement therein,
in light of the circumstances under which the statements were made, not
misleading.
Section 8.11 Financing. Acquisition II shall have received
financing on terms reasonably satisfactory to it in an amount sufficient to
refinance the RIMCO Debt and to pay the Cash Consideration required hereunder.
Section 8.12 Consents of Third Parties. All necessary consents,
permissions, novations and approvals by third parties or governmental
authorities in connection with the transactions hereunder contemplated shall
have been obtained. This condition shall be applicable only to the extent that
the failure to obtain such consent or permit would have a material adverse
effect on the transactions hereunder contemplated.
Section 8.13 Prohibition of Transactions. No state or federal
statute, rule, regulation or action shall exist or shall have been adopted or
taken, and no judicial or administrative decision shall have been entered
(whether on a preliminary or final basis), and no action or proceeding by any
governmental, regulatory or administrative agency shall be pending that if
adversely decided would prohibit, restrict or unreasonably delay the
consummation of the transactions contemplated by this Agreement or make illegal
the consideration due hereunder.
Section 8.14 Subscription Certificates. Each La/Xxx XX Party
shall have executed and delivered to Acquisition II a Subscription Certificate
in the form attached hereto as Exhibit E.
ARTICLE IX
CLOSING
Section 9.01 Time and Place of Closing. The consummation of the
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of Xxxxxx & Xxxxxx L.L.P., 0000 Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx
00000, as soon as practicable following the satisfaction or waiver of the
conditions set forth in Articles VII and VIII, above (the "Closing Date").
Section 9.02 Pre-Closing Review of Cash Consideration Adjustments.
The La/Xxx XX Parties shall deliver to Acquisition II a written detailed
statement at least one week prior to Closing
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evidencing the Cash Consideration Adjustments for Acquisition II's review and
approval. The Parties shall use good faith efforts to agree upon these
adjustments.
Section 9.03 Adjustments to Cash Consideration at Closing.
(a) At Closing, the initial Cash Consideration shall be
increased by the following amounts:
(i) all costs and expenses paid by the La/Xxx XX
Parties pursuant to applicable operating agreements affecting
the Assets, to the extent such costs are attributable to the
Assets for the period of time from and after the Effective
Time (such calculation, being made in a manner consistent with
the La/Cal Parties' past practices);
(ii) if applicable, any adjustments for Other
Defects pursuant to Article III; and
(iii) any other amount provided for in this
Agreement or agreed upon by the La/Xxx XX Parties and
Acquisition II.
(b) At Closing, the initial Cash Consideration shall be
decreased by the following amounts:
(i) the amount of all proceeds of production
actually received by the Working Interest Owners that is
attributable to their interests in the Assets for the period
of time from and after the Effective Time;
(ii) the amount of all proceeds of production
actually received by La/Xxx XX, over and above the debt
service (attributable to the period of time from and after the
Effective Time) paid by La/Xxx XX on the RIMCO Debt, that is
attributable to its interest in the Assets for the period of
time from and after the Effective Time;
(iii) the portion of the Cash Consideration
attributable to the portion of the Assets owned by any Working
Interest Owner who fails or refuses to become a party hereto;
(iv) if applicable, any adjustments for Title or
Other Defects pursuant to Article III; and
(v) any other amount provided for in this
Agreement or agreed upon by the La/Xxx XX Parties and
Acquisition II.
(c) At Closing, the initial number of Preferred Shares
(valued at the liquidation preference) shall be decreased by the
following amounts, if any:
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(i) any amount by which the aggregate total of
the adjustments for Title or Other Defects pursuant to Article
III and any other matter for which any adjustment is provided
in Section 9.03(b) exceeds the Adjusted Cash Consideration;
and
(ii) the number of Preferred Shares attributable
to the portion of the Assets owned by any Working Interest
Owner who fails or refuses to become a party hereto;
(d) In the event the total amount of adjustments to be
made hereunder exceeds the Cash Consideration and the liquidation
preference value of the Preferred Shares to be delivered hereunder,
the amount of the RIMCO Debt to be assumed hereunder shall be reduced
by the amount of such excess.
(e) If the parties are unable, in good faith, to agree on
the appropriate adjustments at the time of Closing, the payment of the
amount of the Cash Consideration in dispute shall be deferred until
determined in accordance with Section 9.04.
Section 9.04 Post-Closing Adjustments and Audits.
Promptly after the Closing Date (but not later than 60 days thereafter), the
La/Xxx XX Parties shall prepare, and shall furnish to Acquisition II, a final
accounting statement setting forth any adjustments provided in Article IX or
elsewhere in this Agreement, allocating such adjustments among the various
La/Xxx XX Parties, and specifying the persons to whom the Adjusted Cash
Consideration and the Adjusted Preferred Shares should be paid or delivered. As
soon as reasonably practicable thereafter (but not later than 30 days
thereafter), Acquisition II shall deliver to the La/Xxx XX Parties a written
report containing any changes that Acquisition II proposes be made to such
statement. The Parties shall use good faith efforts to agree on the final
adjustment amount, and such final adjustment amount shall be paid by Acquisition
II or the La/Xxx XX Parties, as appropriate, not later than 10 days after such
final adjustment. For a period of six (6) months thereafter, Acquisition II may
at its own expense audit the La/Xxx XX Parties' books, accounts and records
relating to any item that may have affected the adjustments to the consideration
paid hereunder. Such audit shall be conducted so as to cause the least amount
of inconvenience to the La/Xxx XX Parties as is reasonably possible.
Notwithstanding any other provision of this Agreement, the Closing shall not
relieve either Party of its obligation to account to the other Party after the
Closing with respect to amounts that are received or become due at, before or
after the Closing or that are properly payable or chargeable to either Party
pursuant to any provision of this Agreement. Any matter for which the Parties
cannot reach agreement under this Section 9.04 shall be resolved by arbitration
in accordance with the provisions of Section 3.07.
Section 9.05 Remittance of Certain Payments Received by the La/Xxx
XX Parties. The amount of all payments received by the La/Xxx XX Parties (or
any affiliates thereof) relating to the ownership or operation of the Assets
after the Effective Time that have not been taken into account in Section 9.03
or 9.04 shall be remitted to Acquisition II in immediately available funds on a
timely basis.
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Section 9.06 Transfer Taxes. All sales, use or other taxes (other
than taxes on gross income, net income or gross receipts) and duties, levies or
other governmental charges incurred by or imposed with respect to the property
transfers undertaken pursuant to this Agreement shall be the responsibility of,
and shall be paid by, Acquisition II.
Section 9.07 Ad Valorem and Similar Taxes. Ad valorem, property
and similar taxes and assessments based upon or measured by the value of the
Assets and becoming due and payable after the Effective Time shall be the
responsibility of, and shall be paid by, Acquisition II.
Section 9.08 Actions of the La/Xxx XX Parties at Closing. At the
Closing, the La/Xxx XX Parties shall:
(a) Execute, acknowledge and deliver to Acquisition II
the Contribution Agreement in the forms set forth in Exhibit A, and
such other instruments, in form and substance reasonably requested by
Acquisition II as may be necessary or desirable to transfer the Assets
to Acquisition II;
(b) Deliver to Acquisition II possession of the Assets;
(c) Execute and deliver letters in lieu of transfer
orders addressed to each purchaser of production from the Assets
instructing such purchasers to make all future payments to Acquisition
II;
(d) Execute and deliver the Registration Rights
Agreement; and
(e) Execute, acknowledge and deliver any other agreements
provided for herein or that are reasonably requested and necessary or
desirable to effectuate the transactions contemplated hereby.
Section 9.09 Actions of Acquisition II at Closing. At the
Closing, Acquisition II shall:
(a) Deliver to the La/Xxx XX Parties the Adjusted Cash
Consideration by wire transfer;
(b) Deliver to the La/Xxx XX Parties the Adjusted
Preferred Shares;
(c) Execute, acknowledge and deliver the Contribution
Agreement;
(d) Take possession of the Assets;
(e) Execute and deliver letters in lieu of transfer
orders addressed to each purchaser of production from the Assets
instructing such purchasers to make all future payments to Acquisition
II;
(f) Execute and deliver the Registration Rights
Agreement; and
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(g) Execute, acknowledge and deliver any other agreements
provided for herein or that are reasonably requested and necessary or
desirable to effectuate the transactions contemplated hereby.
Section 9.10 Actions of Xxxxxxxx and Acquisition II Sub1 at
Closing. At the Closing, Xxxxxxxx and Acquisition II Sub1 will execute,
acknowledge and deliver the Certificate of Merger.
Section 9.11 Further Cooperation. After the Closing Date, each
Party at the request of the other, at its own expense and without additional
consideration, shall execute, acknowledge and deliver, or shall cause to be
executed, acknowledged and delivered from time to time such further
instruments, including, without limitation, instruments of conveyance and
transfer, and shall take such other action as may be necessary or advisable to
carry out its respective obligations under this Agreement and under any
Exhibit, document, certificate or other instrument delivered pursuant thereto
or that the other Party may reasonably request to convey and deliver the Assets
to Acquisition II and to accomplish the orderly transfer of the Assets to
Acquisition II in the manner contemplated by this Agreement. After the
Closing, the Parties will cooperate to have all proceeds received attributable
to the Assets to be paid, as promptly as practicable in immediately available
funds, to the proper Party hereunder and to have all expenditures to be made
with respect to the Assets to be made by the proper Party.
ARTICLE X
TERMINATION
Section 10.01 Right of Termination. This Agreement and the
transactions contemplated hereby may be completely terminated at any time at or
prior to the Closing:
(a) by mutual consent of the Parties;
(b) by the La/Xxx XX Parties, at their option, if the
conditions set forth in Article VII are not satisfied on or before
March 31, 1997;
(c) by Acquisition II, at its option, if the conditions
set forth in Article VIII are not satisfied on or before March 31,
1997;
(d) by either Acquisition II or the La/Xxx XX Parties if
the Closing has not occurred by March 31, 1997;
(e) by either Party if any court or governmental agency
shall have issued an order, judgment or decree or taken any other
action challenging, delaying, restraining, enjoining, prohibiting or
invalidating the consummation of any of the transactions contemplated
herein.
Section 10.02 Effect of Termination. In the event that this
Agreement is terminated as a result of either Party exercising its right not to
close pursuant hereto, then this Agreement shall be
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null and void and neither Party shall have any further rights or obligations
under this Agreement, except that nothing herein shall relieve any Party from
liability for any breach hereof. If either Party to this Agreement resorts to
legal proceedings to enforce this Agreement, the prevailing Party in such
proceedings shall be entitled to recover all costs incurred by such Party
including reasonable attorneys' fees, in addition to any other relief to which
such Party may be entitled.
ARTICLE XI
INDEMNIFICATION
Section 11.01 The La/Xxx XX Parties' Obligation. Each La/Xxx XX
Party severally agrees to release, indemnify, defend and hold harmless
Acquisition II, its subsidiaries, and their respective officers, directors,
employees and agents, from and against any and all claims, liabilities, losses,
costs and expenses (including, without limitation, damage to property, injury
or death of persons, court costs and reasonable attorneys' fees) caused by,
arising from or attributable to the Assets and arising from operations or other
facts or circumstances existing on or prior to the Effective Time.
Section 11.02 Acquisition II's Obligation. Acquisition II agrees
to release, indemnify, defend and hold harmless each La/Xxx XX Party and their
respective partners, subsidiaries, officers, directors, members, managers,
employees and agents, from and against any and all claims, liabilities, losses,
costs and expenses (including, without limitation, damage to property, injury
or death of persons, court costs and reasonable attorneys' fees) caused by,
arising from or attributable to the Assets and arising from operations or other
facts or circumstances existing after the Effective Time.
Section 11.03 Indemnitee's Negligence. THE INDEMNIFICATION
OBLIGATIONS IN THIS ARTICLE XI SHALL BE WITHOUT REGARD TO THE INDEMNITEE'S
SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT.
Section 11.04 Limitation on Responsibility for Attorneys' Fees.
Notwithstanding anything to the contrary contained herein, Acquisition II shall
only be responsible for the costs and expenses of one firm of counsel in any
one jurisdiction for all of the La/Xxx XX Parties.
Section 11.05 Directors', Officers' and Management Committee
Indemnifications.
(a) Acquisition II agrees that all rights to
indemnification and waivers of liability in favor of (i) the members
of the Management Committee of La/Xxx XX now existing and in effect on
the Closing Date as provided in its partnership agreement, and (ii)
the directors or officers of Xxxxxxxx now existing and in effect on
the Closing Date as provided in its charter documents as in effect on
the date hereof, shall survive the transactions contemplated hereby
and the Merger and shall continue in full force and effect.
(b) For a period of five years after the date hereof,
Xxxxxxxx, regardless of whether the Merger becomes effective, and
Acquisition II shall indemnify and hold harmless, to the fullest
extent permitted under applicable law and under their respective
certificates of incorporation and bylaws in effect on the date hereof,
each present and former director and
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officer of Xxxxxxxx and each member of the Management Committee of
La/Xxx XX (collectively, the "Indemnified Parties") against any costs
or expenses (including attorneys' fees), judgments, fines, losses,
claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation,
whether civil, criminal, administrative or investigative, arising out
of or pertaining to any action or omission occurring prior to the
Closing Date with respect to the transactions contemplated by this
Agreement (including, without limitation, actions relating to serving
on a Board of Directors' Committee or on the Adjustment Committee),
provided, however, that any Indemnified Parties shall be advanced any
legal costs and expenses until a final determination of such action,
and such Indemnified Party shall reimburse Acquisition II for any such
costs and expenses if it is ultimately determined that such person is
not entitled to indemnification; provided that, in the event any claim
or claims are asserted or made within such five-year period, all
rights to indemnification in respect to any such claim or claims shall
continue until final disposition thereof. After the Closing Date,
Acquisition II shall also advance expenses as incurred, to the fullest
extent permitted under applicable law, provided the person to whom
expenses are advanced provides and undertaking to repay such advances
if it is ultimately determined that such person is not entitled to
indemnification.
In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Closing Date),
Xxxxxxxx or Acquisition II shall have the right to assume the defense
thereof, except that, if Xxxxxxxx or Acquisition II elects not to
assume such defense, or counsel for the Indemnified Parties advises
that there are issues which may raise conflicts of interest between
Xxxxxxxx or Acquisition II and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and
Xxxxxxxx or Acquisition II, as the case may be, shall pay all
reasonable fees and expenses of such counsel for the Indemnified
Parties promptly as statements therefor are received; provided,
however, that (i) Xxxxxxxx or Acquisition II, as the case may be,
shall pay for only two firms of counsel for all Indemnified Parties in
any jurisdiction unless the use of one counsel for such Indemnified
Parties would present such counsel with a conflict of interest, (ii)
neither Xxxxxxxx nor Acquisition II shall be liable for any settlement
effected without its prior written consent, which consent shall not be
unreasonably withheld, and (iii) neither Xxxxxxxx nor Acquisition II
shall have any obligation hereunder to any Indemnified Party when and
if a court of competent jurisdiction shall ultimately determine, and
such determination shall have become final, that the indemnification
of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law. Any Indemnified Party wishing to claim
indemnification under this Section 11.05, upon learning of any such
claim, action, suit, proceeding or investigation, shall notify
Xxxxxxxx and Acquisition II thereof, but the failure to so notify
shall not relieve Xxxxxxxx or Acquisition II of any liability it may
have to such Indemnified Party if such failure does not materially
prejudice the indemnifying party. The parties intend, to the extent
not prohibited by applicable law, that the indemnification provided
for in this Section 11.05 shall apply to negligent acts or omissions
by the Indemnified Parties. If such indemnity is not available with
respect to any Indemnified Party, then Xxxxxxxx or Acquisition II and
the Indemnified Party shall contribute to the amount payable in such
proportion as is appropriate to reflect the relative faults and
benefits.
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(c) In the event any action, suit, proceeding or
investigation relating hereto or to the transactions contemplated
hereby is commenced by a third party, whether before or after the
Closing Date, the parties hereto agree to cooperate and use their
reasonable efforts to defend against and respond thereto.
(d) The Indemnified Parties shall not be entitled to the
indemnification herein in connection with any claim initiated by the
Indemnified Party against Xxxxxxxx or Acquisition II or any officer or
director thereof unless Xxxxxxxx or Acquisition II has joined in or
consented to the initiation of such claim.
Section 11.06 Survival of Indemnities. The indemnities set forth
in this Article XI shall survive the Closing.
ARTICLE XII
MISCELLANEOUS
Section 12.01 Entire Agreement. This Agreement, the Closing
Documents, and the exhibits attached hereto constitute the entire agreement
between the Parties pertaining to the subject matter hereof and supersede all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the Parties pertaining to the subject matter hereof. No
supplement, amendment, alteration, modification, waiver or termination of this
Agreement or the Closing Documents shall be binding unless executed in writing
by the Parties and specifically referring to this Agreement.
Section 12.02 Waiver. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
Section 12.03 Publicity. The La/Xxx XX Parties and Acquisition II
shall consult with each other with regard to all publicity and other releases
concerning this Agreement and the transactions contemplated hereby and, except
as required by applicable law or the applicable rules or regulations of any
governmental body or stock exchange, neither Party shall issue any such
publicity or disclose any aspect of this Agreement or the transactions
contemplated hereby without the prior written consent of the other Party
hereto.
Section 12.04 Captions. The captions in this Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement.
Section 12.05 No Third Party Beneficiaries. Other than with
respect to indemnified parties in Section 11.05, nothing in this Agreement
shall provide any benefit to any third party or entitle any third party to any
claim, cause of action, remedy or right of any kind, it being the intent of the
Parties that this Agreement shall not be construed as a third party beneficiary
contract.
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Section 12.06 Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the Parties hereto and their respective permitted
successors, assigns and legal representatives.
Section 12.07 Governing Law. This Agreement, the Closing Documents
and the legal relations between the Parties shall be governed and construed in
accordance with the laws of the State of Texas, without giving effect to
principles of conflicts of laws.
Section 12.08 Severability. If any term, condition or provision of
this Agreement is invalid, illegal or incapable of being enforced by any
applicable rule of law or public policy, all other terms, conditions and
provisions of this Agreement shall nevertheless remain in full force and
effect.
Section 12.09 Expenses. In the event this Agreement is terminated,
all fees, costs and expenses incurred by the La/Xxx XX Parties or Acquisition
II or Xxxxxxxx in negotiating this Agreement or in consummating the
transactions contemplated by this Agreement shall be paid by the Party
incurring the same, including, without limitation, legal, accounting, reserve
engineer and investment banker fees, costs and expenses. If this Agreement is
consummated, then all reasonable fees, costs and expenses incurred by the
La/Xxx XX Parties, including, without limitation, legal, accounting, reserve
engineer and investment banker fees, costs and expenses, up to a maximum of
$50,000.00, shall be paid or reimbursed by Acquisition II.
Section 12.10 Action by and Notice to Acquisition. Any action
or consent to be taken or given by Acquisition II hereunder must be taken or
given by, and any disclosure or notice to be given to Acquisition II hereunder
must be given to, the Special Committee of the Board of Xxxxxxxx.
Section 12.11 Notices. Any notice, communication, request,
instruction or other document required or permitted hereunder shall be given in
writing and delivered in person or sent by U.S. Mail postage prepaid, return
receipt requested, or by telex, facsimile or telecopy to the addresses of the
La/Xxx XX Parties (notice to La/Xxx XX as set forth below constituting notice
to all La/Cal Parties) and Acquisition II set forth below. Any such notice
shall be effective only upon receipt.
If to the La/Xxx XX Parties: La/Xxx XX Energy Partners II
c/o Xxxxxx X. Xxxxxxxx
333 Texas Street, Suite 1350
Xxxxxxxxxx, Xxxxxxxxx 00000
Fax Number: (000)000-0000
Telephone Number: (000)000-0000
With a copy to: Xxxxx X. Xxxxxxxx
Xxxxxxxx, Xxxxxxx & Xxxxx
Xxxx Xxxxxx Xxx 00
Xxxxxxxxxx, Xxxxxxxxx 00000-0000
Fax Number: (000)000-0000
Telephone Number: (000)000-0000
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If to Acquisition II: Special Committee of the Board
of Xxxxxxxx Petroleum Corporation
c/o Xxxxxx X. Xxxxxxxxx
c/o Xxxxxx X. Xxxxxxx
0000 Xxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Fax Number: (000)000-0000
Telephone Number: (000)000-0000
With a copy to: Xxxx X. Xxxxxx
Xxxxx & Xxxxx, L.L.P.
3000 One Shell Plaza
000 Xxxxxxxxx
Xxxxxxx, Xxxxx 00000
Fax Number: (000)000-0000
Telephone Number: (000)000-0000
And a copy to: Xxxxx X. Xxxxxxxxxxxx
Xxxxxx & Xxxxxx, L.L.P.
Suite 2300
0000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Fax Number: (000)000-0000
Telephone Number: (000)000-0000
Either Party may, by written notice so delivered, change its address for notice
purposes hereunder.
IN WITNESS WHEREOF, the La/Xxx XX Parties, Acquisition II and Xxxxxxxx
have executed and delivered this Agreement as of the date first set forth
above.
La/Xxx XX ENERGY PARTNERS II
By: /s/ XXXXXX X. XXXXXXXX
----------------------------
Xxxxxx X. Xxxxxxxx,
Management Committee Member
XXXXXXXX ACQUISITION II, INC.
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By: /s/ XXXXXX X. XXXXXXX, XX.
---------------------------
Name: Xxxxxx X. Xxxxxxx, Xx.
--------------------------
Title: Chief Operating Officer
-------------------------
XXXXXXXX PETROLEUM CORPORATION
By: /s/ XXXXXX X. XXXXXXX, XX.
----------------------------
Name: Xxxxxx X. Xxxxxxx, Xx.
--------------------------
Title: Chief Operating Officer
-------------------------
WORKING INTEREST OWNERS
/s/ XXXXXX X. XXXX /s/ XXXXX XXXXX
------------------------------------- --------------------------------
Xxxxxx Xxxx Xxxxx Xxxxx
Post Office Box 1806 333 Texas Street, Suite 1350
Xxxxxxxxxx, Xxxxxxxxx 00000 Xxxxxxxxxx, Xxxxxxxxx 00000
Date: 11-7-96 Date: 11-8-96
------------------------ ------------------------
/s/ XXXXX X. XXXXXXX, III /s/ X. XXXXXX MAY
------------------------------------- --------------------------------
Xxxxx X. Xxxxxxx, III X. Xxxxxx May
000 Xxxxx Xxxxxx, Xxxxx 0000 000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxxx 00000 Xxxxxxxxxx, Xxxxxxxxx 00000
Date: 11-11-96 Date: 11-6-96
------------------------ ------------------------
/s/ XXXXX X. XXXXX /s/ XXXXXXX X. XXXXXXX
------------------------------------- --------------------------------
Xxxxx X. Xxxxx Xxxxxxx X. Xxxxxxx
000 Xxxxx Xxxxxx, Xxxxx 0000 000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxxx Xxxxxxxxxx, Xxxxxxxxx 00000
Date: 11-6-96 Date: 11-6-96
------------------------ ------------------------
/s/ XXXXXXX XXXXX /s/ R.E. OSBORNE II
------------------------------------- --------------------------------
Xxxxxxx Xxxxx R. E. (Xxx) Osborne II
000 Xxxxx Xxxxxx, Xxxxx 0000 000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxxx 00000 Xxxxxxxxxx, Xxxxxxxxx 00000
Date: 11-8-96 Date: 11-8-96
------------------------ ------------------------
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/s/ XXX XXXXXXXX
---------------------------------- FIRST AUSTRALIAN RESOURCES, INC.
Xxx Xxxxxxxx
000 Xxxxx Xxxxxx, Xxxxx 0000 By: /s/ XXXXXXX XXXXX
Xxxxxxxxxx, Xxxxxxxxx 00000 ---------------------------------
Date: 11-6-96 000 Xxxxx Xxxxxx, Xxxxx 0000
------------------------ Xxxxxxxxxx, Xxxxxxxxx 00000
Date: 11-8-96
XXXXXXXX ENERGY, INC. ------------------------
/s/ XXXXXXX X. XXXXXX
By: /s/ XXXXXX X. XXXXXXXX -------------------------------------
------------------------------- Xxxxxxx Xxxxxx
000 Xxxxx Xxxxxx, Xxxxx 0000 000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxxx 00000 Xxxxxxxxxx, Xxxxxxxxx 00000
Date: 11-6-96 Date: 11-7-96
------------------------ ------------------------
/s/ XXXXXXX XXXXX
XXXXX CREEK RESOURCES-C.L.L.C. -------------------------------------
Xxxxxxx Xxxxx Company
By: /s/ X.X. XXXXXXX, XX. 000 Xxxxx Xxxxxx, Xxxxx 0000
------------------------------- Xxxxxxxxxx, Xxxxxxxxx 00000
000 Xxxxx Xxxxxx, Xxxxx 0000 Date: 00-0-00
Xxxxxxxxxx, Xxxxxxxxx 00000 ------------------------
Date: 11-7-96
------------------------ HGF PARTNERSHIP II
G & P IRREVOCABLE TRUST By: /s/ XXXXX XXXXXXXX
---------------------------------
By: /s/ XXX XXXXXXXX 000 Xxxxx Xxxxxx, Xxxxx 0000
-------------------------------- Xxxxxxxxxx, Xxxxxxxxx 00000
Xxx Xxxxxxxx, Trustee Date: 11-6-96
000 Xxxxx Xxxxxx, Xxxxx 0000 ------------------------
Xxxxxxxxxx, Xxxxxxxxx 00000
Date: 11-6-96 /s/ XXXX SCHLECHTEMIER
------------------------ -------------------------------------
/s/ XXXXXXXX XXXX Xxxx Xxxxxxxxxxxxx
---------------------------------- 000 Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxx Xxxxxxxxxx, Xxxxxxxxx 00000
000 Xxxxx Xxxxxx, Xxxxx 0000 Date: 00-0-00
Xxxxxxxxxx, Xxxxxxxxx 00000 ------------------------
Date: 11-7-96 /s/ XXXXXXX XXXXXX
------------------------ -------------------------------------
Xxxxxxx Xxxxxx
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxxx 00000
Date: 11-7-96
------------------------
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/s/ XXXXX XXXX
-------------------------------------
Xxxxx Xxxx
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxxx 00000
Date: 11-6-96
------------------------
/s/ XXXXX X. XXXXX
-------------------------------------
Xxxxx X. Xxxxx
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxxx 00000
Date: 11-6-96
------------------------
/s/ XXX XXXXXXXXX
-------------------------------------
Xxx Xxxxxxxxx
Xxxx Xxxxxx Xxx 0000
Xxxxxxxxxx, Xxxxx 00000
Date: 11-8-96
------------------------
/s/ XXXXX XXXXXXXXXX
-------------------------------------
Xxxxx Xxxxxxxxxx
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxxx 00000
Date: 11-8-96
------------------------
/s/ XXXXXX X. XXXXXXXX
-------------------------------------
Xxxxxx X. Xxxxxxxx
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxxx 00000
Date: 11-6-96
------------------------
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EXHIBIT A
FORM OF
CONTRIBUTION AGREEMENT
00
XXXXXX XXXXXX XX XXXXXXX
XXXXXX OF LOUISIANA and TEXAS
CONTRIBUTION AGREEMENT
THIS AGREEMENT is effective as of 7:00 a.m., _________________
(said date and time hereinafter referred to as the "Effective Date"), by and
between LA/CAL ENERGY PARTNERS II, a Louisiana general partnership, with a
permanent mailing address of 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxx,
Xxxxxxxxx 00000-0000, hereinafter called "ASSIGNOR," and XXXXXXXX ACQUISITION
II, INC., a Delaware corporation with a permanent mailing address of 000 Xxxxx
Xxxxxx, Xxxxx 0000, Xxxxxxxxxx, Xxxxxxxxx 00000-0000, hereinafter called
"ASSIGNEE;"
WITNESSETH:
That for and in consideration of the sum of One Hundred and
no/100 Dollars ($100.00), cash in hand paid, and other valuable consideration,
including the hereinbelow described assumption by ASSIGNEE of certain described
obligations and liabilities, the receipt and sufficiency of which are hereby
acknowledged, ASSIGNOR, subject to the terms, conditions and reservations
hereof, does hereby contribute, transfer, assign, convey, set over and deliver
all of its right, title and interest in and to the following described
interests and properties, hereinafter sometimes collectively referred to as the
"Assets," situated in the States of Louisiana and Texas, to-wit:
A. The oil and gas leases described in Exhibit A
attached hereto (collectively, the "Leases"), including, without
limitation, all overriding royalty interests and working interests,
production payments, net profits interests and the oil and gas xxxxx
located upon the lands covered by the Leases or pooled or unitized
therewith (collectively, the "Xxxxx");
B. All rights, privileges, benefits and powers conferred
upon ASSIGNOR as the holder of any Leases with respect to the use and
occupation of the surface of, and the subsurface depths under, the
land covered by the Leases that may be necessary, convenient or
incidental to the possession and enjoyment of such Leases;
C. All of ASSIGNOR'S rights in any pools or units
including all or any part of any Lease or including any Well (the
"Units"), including all right, title and interest in production from
any Unit;
D. All platforms, water source xxxxx, injection xxxxx,
tubular goods, well equipment, lease equipment, production equipment,
pipelines and all other personal property, fixtures and facilities
appurtenant to or used in connection with the Leases, Units or the
Xxxxx (collectively, the "Facilities");
45
E. All production sales contracts, transportation
agreements, pooling agreements, unitization agreements, operating
agreements, processing agreements, surface leases, easements, permits,
division orders, purchase orders, invoices, receipts, licenses and
rights-of-way, orders of governmental authorities, and all other
contracts, agreements and instruments related to or utilized in
connection with the Leases, Units, Xxxxx or Facilities, or the
production, storage, treatment, transportation, sale or disposal of
oil, gas, or other hydrocarbons, minerals or substances therefrom and
rights to insurance proceeds, and to the extent assignable, insurance
policies (collectively, the "Contracts"), including, without
limitation, the Contracts listed on Exhibit A;
F. All of ASSIGNOR'S original files, books, records and
data, or copies thereof, regarding the Leases, Units, Xxxxx,
Facilities and Contracts, including without limitation, all abstracts
of title, title opinions, title curative documents, title records,
leases, assignments, contracts, correspondence, geologic, geophysical
and seismic records, data and information, and production records,
logs, core data, pressure data, and decline curve and production curve
data, tax and accounting records, material technology and proprietary
information relating to the Assets and all related items, including,
without limitation, computer disks, tapes and data relating to the
foregoing (collectively, the "Files");
G. All oil, gas, distillate, condensate, casinghead gas
or other liquid or vaporous hydrocarbons, or other minerals
(collectively, the "Hydrocarbons"), produced from or attributable to
the Leases from and after the Effective Date, and all Hydrocarbons
produced prior to the Effective Date and in storage as of the
Effective Date;
H. All rights of way, easements and servitudes used by
ASSIGNOR in connection with the Assets; and
I. All other assets of whatever kind and nature of
ASSIGNOR relating to items A through H, above.
TO HAVE AND TO HOLD unto ASSIGNEE, its successors, sublessees, and assigns
forever, subject to the terms, conditions and reservations hereinbelow
recounted.
1. ASSUMPTION OF OBLIGATIONS AND LIABILITIES.
ASSIGNEE accepts this Contribution Agreement and acknowledges
delivery of the Assets. ASSIGNEE hereby assumes and acknowledges sole
responsibility for satisfaction and discharge, at its sole cost, risk and
expense, of all obligations and liabilities of ASSIGNOR caused by, arising from
or attributable to the Assets and arising from operations or other facts or
circumstances existing after the Effective Date, but specifically excluding all
obligations and liabilities of ASSIGNOR caused by, arising from or attributable
to the Assets and arising from operations or other facts or circumstances
existing on or prior to the Effective Date (except that the accounting and
reporting thereof shall be assumed immediately as of the Effective Date, and
except that any obligation associated with an agreement for
2
46
the supply of material or service shall be assumed only to the extent that the
material or service with respect to which such payment is due is received by
ASSIGNEE after the Effective Date hereof).
Specifically, but not by way of limitation, ASSIGNEE assumes
the following obligations:
1.1 ASSIGNEE shall plug and abandon all xxxxx located on
the lands or waterbottoms subject to the Leases, or on lands or waterbottoms
pooled therewith, whether or not said xxxxx were drilled prior to or subsequent
to the Effective Date hereof. Such plugging and abandonment, shall be
performed by ASSIGNEE within such time as required by, in conformance with, and
satisfying the terms and conditions of the Leases, Contracts, and/or any
permits or agreements pertinent thereto, or as required by law, order, rule or
regulation of any governmental authority having jurisdiction.
1.2 ASSIGNEE shall remove all abandoned or unused
personal property, equipment and facilities located on the lands or
waterbottoms subject to the Leases, or on lands or waterbottoms pooled
therewith, or appurtenant to the xxxxx referred to in Section 1.1 hereinabove,
whether or not said personal property, equipment and facilities were
constructed and/or located on the premises prior to or subsequent to the
Effective Date hereof. ASSIGNEE shall remove such facilities and equipment
within such time as required by, in conformance with, and satisfying the terms
and conditions of the Leases, Contracts and/or any permits or agreements
pertinent thereto, or as required by law, order, rule or regulation of any
governmental authority having jurisdiction.
1.3 ASSIGNEE shall restore associated or affected surface
areas or waterbottoms within such time as required by, in conformance with, and
satisfying the terms and conditions of the Leases, Contracts and/or any permits
or agreements pertinent thereto, or as required by law, order, rule or
regulation of any governmental authority having jurisdiction.
1.4 ASSIGNEE shall pay its prorata share of the costs, as
such costs relate to the Assets herein assigned, of all plugging and
abandonment of xxxxx, all removal of facilities, equipment and pipelines, and
all restoration of lands or waterbottoms, which may be performed by third
parties on any xxxxx, facilities, equipment or pipelines located on the lands
or waterbottoms subject to or affected by the Assets or on lands or
waterbottoms unitized therewith, on the Effective Date hereof or thereafter.
Such plugging and abandonment of xxxxx, removal of facilities
or equipment and restoration of surface areas or waterbottoms by ASSIGNEE shall
be performed in a good and workmanlike manner and in accordance with the rules
and regulations of the Louisiana Commissioner of Conservation, the Texas
Railroad Commission and all other laws, orders, rules and regulations of a
governmental body, agency, or department of competent jurisdiction.
3
47
1.5 ASSIGNEE shall assume and be fully responsible for
the repayment of all sums, up to the aggregate sum of $7,496,695.96, due to
RIMCO Partners, L. P., RIMCO Partners, X. X. XX, RIMCO Partners, L.P. III, and
RIMCO Partners, X.X. XX, pursuant to that certain Note Purchase Agreement,
dated as of July 14, 1995, as heretofore amended or modified (the "RIMCO
Debt").
2. ASSUMPTION OF LEASES AND CONTRACT OBLIGATIONS.
This agreement is made subject to the terms of all Leases, as
listed in Exhibit "A"; existing operating agreements and unit agreements; as
well as any and all other Contracts, whether recorded or unrecorded, affecting
the Leases herein transferred. ASSIGNEE shall assume and be responsible for
all obligations of ASSIGNOR accruing under such Leases and Contracts after the
Effective Date.
3. TAXES.
The 1996 ad valorem taxes on the Assets and any other taxes
(other than taxes on gross income, net income or gross receipts) or
governmental fees associated with this agreement, will be borne by ASSIGNEE.
4
48
4. WARRANTIES.
ASSIGNOR IS CONTRIBUTING AND ASSIGNING THE ASSETS TO THE
ASSIGNEE ON AN "AS IS, WHERE IS, WITH ALL FAULTS" BASIS, AND ASSIGNOR MAKES NO
WARRANTY WHATSOEVER (EVEN AS TO THE RETURN OF THE CONSIDERATION GIVEN BY
ASSIGNEE), WHETHER EXPRESS OR IMPLIED, IN FACT OR BY LAW, WITH RESPECT TO THE
ASSETS, INCLUDING, BUT NOT LIMITED TO, TITLE (EXCEPT FOR CLAIMS ARISING BY,
THROUGH OR UNDER ASSIGNOR), OPERATING CONDITION, SAFETY, COMPLIANCE WITH
GOVERNMENTAL REGULATIONS, MERCHANTABILITY, OR FITNESS FOR ANY PARTICULAR
PURPOSE.
5. INDEMNIFICATION.
5.1 ASSIGNOR agrees to release, indemnify, defend and
hold harmless ASSIGNEE from and against any and all claims, liabilities,
losses, costs and expenses (including, without limitation, damage to property,
injury or death of persons, court costs and reasonable attorneys' fees) caused
by, arising from or attributable to the Assets and arising from operations or
other facts or circumstances existing on or prior to the Effective Date.
5.2 ASSIGNEE agrees to release, indemnify, defend and
hold harmless ASSIGNOR and each of its partners from and against any and all
claims, liabilities, losses, costs and expenses (including, without limitation,
damage to property, injury or death of persons, court costs and reasonable
attorneys' fees) caused by, arising from or attributable to the Assets and
arising from operations or other facts or circumstances existing after the
Effective Date.
5.3 The indemnification obligations in this Section 5
shall be without regard to the indemnitee's sole, joint or concurrent
negligence, strict liability or other fault.
6. GOVERNING LAW.
This agreement shall be governed by the law of the State of
Texas, without regard to rules concerning conflicts of law.
IN WITNESS WHEREOF, each party hereto has executed this
agreement in the presence of the indicated witnesses, to be effective as of the
Effective Date.
WITNESSES:
LA/CAL ENERGY PARTNERS II
By:
-----------------------------------
Xxxxxx X. Xxxxxxxx, General Partner
XXXXXXXX ACQUISITION II, INC.
By:
-----------------------------------
5
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EXHIBIT B
CERTIFICATE OF DESIGNATIONS
OF
SERIES B CONVERTIBLE PREFERRED STOCK
($1.00 Par Value)
OF
XXXXXXXX PETROLEUM CORPORATION
------------------
Pursuant to Section 151(g) of the Delaware General Corporation Law
------------------
XXXXXXXX PETROLEUM CORPORATION, a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), HEREBY CERTIFIES
that the following resolutions were duly adopted by the Board of Directors of
the Corporation pursuant to authority conferred upon the Board of Directors by
the provisions of the Certificate of Incorporation of the Corporation, as
amended (the "Certificate of Incorporation"), which authorizes the issuance of
up to 10,000,000 shares of preferred stock, $1.00 par value per share
("Preferred Stock"), [by unanimous written consent] [at a special meeting] of
the Board of Directors on _____________, 1996
The Board of Directors on ___________, 1996 adopted the following
resolution authorizing the issuance of a series of preferred stock:
RESOLVED, that the issuance of a series of preferred stock, $1.00 par
value per share, which shall consist of 750,000 of the 10,000,000 shares of
preferred stock which the Corporation now has authority to issue, be, and the
same hereby is, authorized, and the powers, designations, preferences and
relative participating, optional and other special rights of the shares of such
series, and the qualifications, limitations and restrictions thereof are hereby
fixed as follows:
1. Number of Shares and Designation. Seven hundred and fifty
thousand (750,000) shares of the Preferred Stock, $1.00 par value per share, of
the Corporation are hereby constituted as a series of the preferred stock
designated as "Series B Convertible Preferred Stock."
2. Definitions. For purposes of the Series B Convertible
Preferred Stock, the following terms shall have the meanings indicated:
50
"Board of Directors" shall mean the Board of Directors of the
Corporation or any committee authorized by such Board of Directors to
perform any of its responsibilities with respect to the Series B
Convertible Preferred Stock.
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the City of New York
are authorized or obligated by law or executive order to close.
"Closing Price" with respect to a particular security on any
day shall mean on such day the last reported sales price, regular way,
for such security or, in case no sale takes place on such day, the
average of the reported closing bid and asked prices, regular way, for
such security in either case as reported on the New York Stock
Exchange, on the principal national securities exchange on which such
security is listed or admitted to trading or, if not listed or
admitted to trading on any national securities exchange, on the
National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ National Market
System") or, if such security is not quoted on the NASDAQ National
Market System, the average of the closing bid and asked prices for
such security in the over-the-counter market as reported by NASDAQ or,
if bid and asked prices for such security on each such date shall not
have been reported by NASDAQ, the average of the bid and asked prices
for such security for such day as furnished by any National
Association of Securities Dealers, Inc. ("NASD") member firm regularly
making a market in such security selected for such purpose by the
board of directors or similar governing body of the issuer of such
security or, if no such quotations are available, the fair market
value of such security furnished by any NASD member firm selected from
time to time by the board of directors or similar governing body of
the issuer of such security for that purpose.
"Common Stock" shall mean the Common Stock of the Corporation,
par value $.20 per share.
"Conversion Price" shall mean the conversion price per share
of Common Stock into which the Series B Convertible Preferred Stock is
convertible, as such Conversion Price may be adjusted pursuant to
Section 7 hereof. The initial Conversion Price will be $[___]
(equivalent to the rate of _______ shares of Common Stock for each
share of Series B Preferred Stock).
"Current Market Price" per share of Common Stock on any date
shall mean the average of the daily Closing Prices for the 30
consecutive Trading Dates commencing 45 Trading Dates before the date
of determination.
"Defaulted Preferred Stock" shall have the meaning set forth
in paragraph (a) of Section 9 hereof.
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51
"dividend payment date" shall have the meaning set forth in
paragraph (a) of Section 3 hereof.
"dividend payment record date" shall have the meaning set
forth in paragraph (a) of Section 3 hereof.
"Dividend Periods" shall mean quarterly dividend periods
commencing on the first day of January, April, July and October of
each year and ending on and including the day preceding the first day
of the next succeeding Dividend Period (other than the initial
Dividend Period which shall commence on the Issue Date and end on and
include [December 31, 1996]).
"Issue Date" shall mean the first date on which shares of
Series B Preferred Stock are issued.
"Person" shall mean any individual, firm, partnership,
corporation or other entity, and shall include any successor (by
merger or otherwise) of such entity.
"Preferred Stock" means the series of Preferred Stock of the
Corporation designated herein as the Series B Convertible Preferred
Stock.
"Redemption Price" shall have the meaning set forth in
paragraph (a) of Section 5 hereof.
"Securities" shall have the meaning set forth in paragraph
(d)(iii) of Section 7 hereof.
"Trading Date" with respect to any security means (i) if such
security is listed or admitted for trading on the New York Stock
Exchange or another national securities exchange, a day on which such
exchange is open for trading, (ii) if such security is quoted on the
NASDAQ National Market System, or any similar system of automated
dissemination of quotations of securities prices, a day on which
trades may be made on such system, (iii) if not quoted as described in
clause (ii), a day on which quotations are reported by the National
Quotation Bureau Incorporated or (iv) otherwise, any Business Day.
"Transaction" shall have the meaning set forth in paragraph
(e) of Section 7 hereof.
"Transfer Agent" means Xxxxxx Trust and Savings Bank, Chicago,
Illinois or such other agent or agents of the Corporation as may be
designated by the Board of Directors as the transfer agent or
conversion agent for the Series B Preferred Stock.
3. Dividends. (a) The holders of shares of the Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available
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52
therefor, cumulative cash dividends at an annual rate of $0.825 per share of
Preferred Stock. Such dividends shall be cumulative from the Issue Date,
whether or not in any Dividend Period or Periods there shall be funds of the
Corporation legally available for the payment of such dividends and whether or
not such dividends are declared, and shall be payable quarterly, when, as and
if declared by the Board of Directors, on March 31, June 30, September 30 and
December 31 in each year (each a "dividend payment date"), commencing on
[December 31, 1996]. If any dividend payment date shall be on a day other than
a Business Day, then the dividend payment date shall be on the next succeeding
Business Day. Each such dividend shall be payable in arrears to the holders of
record of shares of the Preferred Stock, as they appear on the stock records of
the Corporation at the close of business on those dates (each such date, a
"dividend payment record date"), not less than 10 days nor more than 60 days
preceding the dividend payment dates thereof, as shall be fixed by the Board of
Directors. Dividends on the Preferred Stock shall accrue (whether or not
declared) on a daily basis from the Issue Date and accrued dividends for each
Dividend Period shall accumulate to the extent not paid on the dividend payment
date first following the Dividend Period for which they accrue. As used
herein, the term "accrued" with respect to dividends includes both accrued and
accumulated dividends. Accrued and unpaid dividends for any past Dividend
Periods may be declared and paid at any time, without reference to any regular
dividend payment date, to holders of record on such date, not exceeding 45 days
preceding the payment date thereof, as may be fixed by the Board of Directors.
(b) The amount of dividends payable for each full Dividend Period
for the Preferred Stock shall be computed by dividing the annual dividend
amount by four (rounded down to the nearest cent). The amount of dividends
payable for the initial Dividend Period on the Preferred Stock and any other
period shorter or longer than a full Dividend Period on the Preferred Stock
shall be computed on the basis of a 360-day year consisting of twelve 30-day
months. Holders of shares of Preferred Stock called for redemption on a
redemption date falling between the close of business on a dividend payment
record date and the opening of business on the corresponding dividend payment
date shall, in lieu of receiving such dividend on the dividend payment date
fixed therefor, receive such dividend payment together with all other accrued
and unpaid dividends on the date fixed for redemption (unless such holder
converts such shares in accordance herewith). Holders of shares of Preferred
Stock shall not be entitled to any dividends, whether payable in cash, property
or securities, in excess of cumulative dividends, as herein provided, on the
Preferred Stock. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Preferred Stock
which are in arrears.
(c) So long as any shares of the Preferred Stock are outstanding,
no dividends, except as described in the next succeeding sentence, shall be
declared or paid or set apart for payment on any class or series of stock of
the Corporation ranking, as to dividends, on a parity with the Preferred Stock,
for any period unless full cumulative dividends on all outstanding shares of
Preferred Stock have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for such
payment for all Dividend Periods terminating on or prior to the date of
payment, or setting apart for payment, of such full cumulative dividends on
such parity stock. When dividends are not
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53
paid in full or a sum sufficient for such payment is not set apart, as
aforesaid, upon the shares of the Preferred Stock and any other class or series
of stock ranking on a parity as to dividends with the Preferred Stock, all
dividends declared upon shares of the Preferred Stock and all dividends
declared upon such other stock shall be declared and paid pro rata so that the
amounts of dividends per share declared and paid on the Preferred Stock and
such other stock shall in all cases bear to each other the same ratio that
accrued and unpaid dividends per share on the shares of the Preferred Stock and
on such other stock bear to each other.
(d) So long as any shares of the Preferred Stock are outstanding,
no other stock of the Corporation ranking on a parity with the Preferred Stock
as to dividends or upon liquidation, dissolution or winding up shall be
redeemed, purchased or otherwise acquired for any consideration (or any moneys
be paid to or made available for a sinking fund or otherwise for the purchase
or redemption of any shares of any such stock) by the Corporation (except by
conversion into or exchange for stock of the Corporation ranking junior to the
Preferred Stock as to dividends and upon liquidation, dissolution or winding
up) unless (i) the full cumulative dividends, if any, accrued on all
outstanding shares of the Preferred Stock shall have been paid or set apart for
payment for all past Dividend Periods and (ii) sufficient funds shall have been
set apart for the payment of the dividend for the current Dividend Period with
respect to the Preferred Stock.
(e) So long as any shares of the Preferred Stock are outstanding,
no dividends (other than dividends or distributions paid in shares of Common
Stock or other stock ranking junior to the Preferred Stock as to dividends and
upon liquidation, dissolution or winding up) shall be declared or paid or set
apart for payment and no other distribution shall be declared or made or set
apart for payment, in each case upon the Common Stock or any other stock of the
Corporation ranking junior to the Preferred Stock as to dividends or upon
liquidation, dissolution or winding up, nor shall any Common Stock nor any
other such stock of the Corporation ranking junior to the Preferred Stock as to
dividends or upon liquidation, dissolution or winding up be redeemed, purchased
or otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund or otherwise for the purchase or redemption of any
shares of any such stock) by the Corporation (except by conversion into or
exchange for stock of the Corporation ranking junior to the Preferred Stock as
to dividends and upon liquidation, dissolution or winding up) unless, in each
case (i) the full cumulative dividends, if any, accrued on all outstanding
shares of the Preferred Stock and any other stock of the Corporation ranking on
a parity with the Preferred Stock as to dividends shall have been paid or set
apart for payment for all past Dividend Periods and all past dividend periods
with respect to such other stock and (ii) sufficient funds shall have been set
apart for the payment of the dividend for the current Dividend Period with
respect to the Preferred Stock and for the current dividend period with respect
to any other stock of the Corporation ranking on a parity with the Preferred
Stock as to dividends.
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54
4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, before any payment or
distribution of the assets of the Corporation (whether capital or surplus)
shall be made to or set apart for the holders of Common Stock or any other
series or class or classes of stock of the Corporation ranking junior to the
Preferred Stock upon liquidation, dissolution or winding up, the holders of the
shares of Preferred Stock shall be entitled to receive $10.00 per share plus an
amount per share equal to all dividends (whether or not earned or declared)
accrued and unpaid thereon to the date of final distribution to such holders;
but such holders shall not be entitled to any further payment. No payment on
account of any liquidation, dissolution or winding up of the Corporation shall
be made to the holders of any class or series of stock ranking on a parity with
the Preferred Stock in respect of the distribution of assets upon dissolution,
liquidation or winding up unless there shall likewise be paid at the same time
to the holders of the Preferred Stock like proportionate amounts determined
ratably in proportion to the full amounts to which the holders of all
outstanding shares of Preferred Stock and the holders of all outstanding shares
of such parity stock are respectively entitled with respect to such
distribution. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds thereof, distributable
among the holders of the shares of Preferred Stock shall be insufficient to pay
in full the preferential amount aforesaid and liquidating payments on any other
shares of stock ranking, as to liquidation, dissolution or winding up, on a
parity with the Preferred Stock, then such assets, or the proceeds thereof,
shall be distributed among the holders of shares of Preferred Stock and any
such other stock ratably in accordance with the respective amounts which would
be payable on such shares of Preferred Stock and any such other stock if all
amounts payable thereon were paid in full. For the purposes of this Section 4,
neither a consolidation or merger of the Corporation with one or more
corporations or other entities nor a sale, lease, exchange or transfer of all
or any part of the Corporation's assets for cash, securities or other property
shall be deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary.
(b) Subject to the rights of the holders of shares of any series
or class or classes of stock ranking on a parity with or prior to the Preferred
Stock upon liquidation, dissolution or winding up, upon any liquidation,
dissolution or winding up of the Corporation, after payment shall have been
made in full to the holders of Preferred Stock, as provided in this Section 4,
any other series or class or classes of stock ranking junior to the Preferred
Stock upon liquidation, dissolution or winding up shall, subject to the
respective terms and provisions (if any) applying thereto, be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of Preferred Stock shall not be entitled to share therein.
(c) Written notice of any liquidation, dissolution or winding up
of the Corporation, stating the payment date or dates when and the place or
places where the amounts distributable in such circumstances shall be payable,
shall be given by first class mail, postage prepaid, not less than 30 days
prior to any payment date stated therein, to the
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55
holders of record of the Preferred Stock at their respective addresses as the
same shall appear on the stock records of the Corporation.
5. Redemption at the Option of the Corporation.
(a) Preferred Stock may not be redeemed by the Corporation prior
to the fourth anniversary of the Issue Date. On or after such date the
Corporation, at its option, may redeem the shares of Preferred Stock, in whole
or in part, out of funds legally available therefor, at any time or from time
to time, subject to the notice provisions and provisions for partial redemption
described below, at the redemption price of $10.00 per share, plus an amount
equal to accrued and unpaid dividends, if any, to (and including) the date
fixed for redemption, whether or not earned or declared (the "Redemption
Price").
(b) In the event the Corporation shall redeem shares of Preferred
Stock, notice of such redemption shall be given by first class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the redemption
date, to each holder of record of the shares to be redeemed, at such holder's
address as the same appears on the stock records of the Corporation. Each such
notice shall state: (i) the redemption date; (ii) the number of shares of
Preferred Stock to be redeemed and, if less than all the shares held by such
holder are to be redeemed, the number of such shares to be redeemed from such
holder; (iii) the Redemption Price; (iv) the place or places where certificates
for such shares are to be surrendered for payment of the redemption price; (v)
the then current Conversion Price; and (vi) that dividends on the shares to be
redeemed shall cease to accrue on such redemption date. If, on the date fixed
for redemption, funds necessary for the redemption shall be available therefor
and shall have been irrevocably deposited or set aside, then, notwithstanding
that the certificates evidencing any shares of Preferred Stock so called for
redemption shall not have been surrendered, the dividends with respect to the
shares so called shall cease to accrue after the date fixed for redemption,
such shares shall no longer be deemed outstanding, all rights of the holders of
such shares as stockholders of the Company shall cease, and all rights
whatsoever with respect to the shares so called for redemption (except the
right of the holders to receive the Redemption Price without interest upon
surrender of their certificates therefor) shall terminate.
Upon surrender in accordance with said notice of the certificates for
any such shares so redeemed (properly endorsed or assigned for transfer, if the
Board of Directors shall so require and the notice shall so state), such shares
shall be redeemed by the Corporation at the applicable Redemption Price
aforesaid. If fewer than all the outstanding shares of Preferred Stock are to
be redeemed, shares to be redeemed shall be selected by the Corporation from
outstanding shares of Preferred Stock not previously called for redemption by
lot or pro rata (as near as may be) or by any other method determined by the
Board of Directors of the Corporation in its sole discretion to be equitable.
If fewer than all the shares represented by any certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares without cost to
the holder thereof.
In the event that the Corporation has failed to pay accrued and unpaid
dividends on the Preferred Stock, it may not redeem less than all of the then
outstanding shares of the
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Preferred Stock until all such accrued and unpaid dividends and the then
current quarterly dividends have been paid in full.
Notwithstanding the foregoing, if notice of redemption has been given
pursuant to this Section 5 and any holder of shares of Preferred Stock shall,
prior to the close of business on the fifth business day prior to the
redemption date, give written notice to the Corporation pursuant to Section
7(b) hereof of the conversion of any or all of the shares to be redeemed held
by such holder (accompanied by a certificate or certificates for such shares,
duly endorsed or assigned to the Corporation), then (i) the Corporation shall
not have the right to redeem such shares, (ii) the conversion of such shares to
be redeemed shall become effective as provided in Section 7 and (iii) any funds
which shall have been deposited for the payment of the Redemption Price for
such shares shall be returned to the Corporation immediately after such
conversion (subject to declared dividends payable to holders of shares of
Preferred Stock on the dividend payment record date for such dividends being so
payable, to the extent set forth in Section 7 hereof, regardless of whether
such shares are converted subsequent to such dividend payment record date and
prior to the related dividend payment date).
6. Shares to be Retired. All shares of Preferred Stock
purchased, redeemed, exchanged or converted by the Corporation shall be retired
and canceled and shall be restored to the status of authorized but unissued
shares of preferred stock, without designation as to series, and may thereafter
be reissued.
7. Conversion. Holders of shares of Preferred Stock shall have
the right to convert all or a portion of such shares into shares of Common
Stock, as follows:
(a) Subject to and upon compliance with the provisions of this
Section 7, a holder of shares of Preferred Stock shall have the right, at such
holder's option, at any time to convert all or any of such shares into the
number of fully paid and nonassessable shares of Common Stock (calculated as to
each conversion to the nearest 1/100th of a share) obtained by dividing the
aggregate liquidation preference of the shares to be converted by the
Conversion Price and by surrender of such shares, such surrender to be made in
the manner provided in paragraph (b) of this Section 7; provided, however, that
the right to convert shares called for redemption pursuant to Section 5 hereof
shall terminate at the close of business on the fifth business day prior to the
date fixed for such redemption. No share of Preferred Stock may be converted in
part into Common Stock.
(b) In order to exercise the conversion right, the holder of each
share of Preferred Stock to be converted shall surrender the certificate
representing such share, duly endorsed or assigned to the Corporation or in
blank, at the office of the Transfer Agent in [the Borough of Manhattan, City
of New York], accompanied by written notice to the Corporation that the holder
thereof elects to convert such share of Preferred Stock. Unless the shares
issuable on conversion are to be issued in the same name as the name in which
such share of Preferred Stock is registered, each share surrendered for
conversion shall be accompanied by instruments of transfer, in form
satisfactory to the Corporation, duly executed by the holder or such holder's
duly authorized attorney and an amount sufficient
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to pay any transfer or similar tax (or evidence reasonably satisfactory to the
Corporation demonstrating that such taxes have been paid or are not required to
be paid).
Holders of shares of Preferred Stock at the close of business on a
dividend payment record date shall be entitled to receive the dividend payable
on such shares on the corresponding dividend payment date (except that holders
of shares called for redemption on a redemption date falling between the close
of business on such dividend payment record date and the opening of business on
the corresponding dividend payment date shall, in lieu of receiving such
dividend on the dividend payment date fixed therefor, receive such dividend
payment together with all other accrued and unpaid dividends on the date fixed
for redemption, unless such holders convert such shares called for redemption
pursuant to the Certificate of Designations relating to the Preferred Stock)
notwithstanding the conversion thereof following such dividend payment record
date and prior to such dividend payment date. However, shares of Preferred
Stock surrendered for conversion during the period between the close of
business on any dividend payment record date and the opening of business on the
corresponding dividend payment date (except shares of Preferred Stock called
for redemption on a redemption date during such period) must be accompanied by
payment of an amount equal to the dividend payment with respect to such shares
of Preferred Stock presented for conversion on such dividend payment date. A
holder of shares of Preferred Stock on a dividend payment record date who (or
whose transferee) surrenders any such shares for conversion into shares of
Common Stock on the corresponding dividend payment date will receive the
dividend payable by the Corporation on such shares of Preferred Stock on such
date and the converting holder need not include payment in the amount of such
dividend upon surrender of shares of Preferred Stock for conversion on the
dividend payment date. Except as provided in this paragraph, the Corporation
shall make no payment or allowance for unpaid dividends, whether or not in
arrears, on converted shares of Preferred Stock or for dividends on the shares
of Common Stock issued upon such conversion.
As promptly as practicable after the surrender of certificates for
shares of Preferred Stock as aforesaid, the Corporation shall issue and shall
deliver at such office to such holder, or on such holder's written order, a
certificate or certificates for the number of shares of Common Stock issuable
upon the conversion of such shares in accordance with the provisions of this
Section 7, and any fractional interest in respect of a share of Common Stock
arising upon such conversion shall be settled as provided in paragraph (c) of
this Section 7.
Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the certificates for shares
of Preferred Stock shall have been surrendered and such notice received by the
Corporation as aforesaid, and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder or holders of record
of the shares represented thereby at such time on such date and such conversion
shall be at the Conversion Price in effect at such time on such date, unless
the stock transfer books of the Corporation shall be closed on that date, in
which event such person or persons shall be deemed to have become such holder
or holders of record at the
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close of business on the next succeeding day on which such stock transfer books
are open, but such conversion shall be at the Conversion Price in effect on the
date upon which such shares shall have been surrendered and such notice
received by the Corporation. All shares of Common Stock delivered upon
conversion of the Preferred Stock will upon delivery be duly and validly issued
and fully paid and nonassessable.
(c) In connection with the conversion of any shares of Preferred
Stock, no fractional shares or scrip representing fractions of shares of Common
Stock shall be issued upon conversion of the Preferred Stock. Instead of any
fractional interest in a share of Common Stock which would otherwise be
deliverable upon the conversion of a share of Preferred Stock, the Corporation
shall pay to the holder of such share an amount in cash (computed to the
nearest cent) equal to the Closing Price of Common Stock on the Trading Date
immediately preceding the date of conversion multiplied by the fraction of a
share of Common Stock represented by such fractional interest. If more than
one share of Preferred Stock shall be surrendered for conversion at one time by
the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
shares of Preferred Stock so surrendered.
(d) The Conversion Price shall be adjusted from time to time as
follows:
(i) In case the Corporation shall after the Issue Date
(A) pay a dividend or make a distribution on its Common Stock that is
paid or made (1) in shares of its Common Stock or (2) in rights to
purchase stock or other securities if such rights are not separable
from the Common Stock except upon the occurrence of a contingency, (B)
subdivide or split its outstanding Common Stock into a greater number
of shares, (C) combine its outstanding Common Stock into a smaller
number of shares or (D) issue any shares of capital stock by
reclassification of its Common Stock, the Conversion Price in effect
immediately prior thereto shall be adjusted or (in the case of clause
(A)(2)) other provision shall be made so that the holder of any share
of Preferred Stock thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common Stock of the
Corporation and rights to purchase stock or other securities which
such holder would have owned or have been entitled to receive after
the occurrence of any of the events described above had such share
been surrendered for conversion immediately prior to the occurrence of
such event or the record date therefor, whichever is earlier. In the
event of the redemption of any rights referred to in clause (A), such
holder shall have the right to receive, in lieu of any such rights,
any cash, property or securities paid in respect of such redemption;
provided, however, that if the value of such cash, property or
securities is less than $.05 per share of Common Stock, such holder
shall not be entitled to such cash, property or securities. An
adjustment made pursuant to this subparagraph (i) shall become
effective immediately after the close of business on the record date
for determination of stockholders entitled to receive such dividend or
distribution in the case of a dividend or distribution (except as
provided in paragraph (h) below) and shall become effective
immediately after the close of business on the effective date in the
case of a subdivision, split, combination or reclassification. Any
shares of Common Stock issuable in payment of a dividend shall be
deemed to have been
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issued immediately prior to the close of business on the record date
for such dividend for purposes of calculating the number of
outstanding shares of Common Stock under clauses (ii) and (iii) below.
(ii) In case the Corporation shall issue after the Issue
Date rights or warrants to all holders of Common Stock entitling them
(for a period expiring within 45 days after the issuance date) to
subscribe for or purchase Common Stock at a price per share less than
the Current Market Price per share of Common Stock at the record date
for the determination of stockholders entitled to receive such rights
or warrants, then the Conversion Price in effect immediately prior
thereto shall be adjusted to equal the price determined by multiplying
(A) the Conversion Price in effect immediately prior to the date of
issuance of such rights or warrants by (B) a fraction, the numerator
of which shall be the sum of (1) the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants
(without giving effect to any such issuance) and (2) the number of
shares which the aggregate proceeds from the exercise of such rights
or warrants for Common Stock would purchase at such Current Market
Price, and the denominator of which shall be the sum of (1) the number
of shares of Common Stock outstanding on the date of issuance of such
rights or warrants (without giving effect to any such issuance) and
(2) the number of additional shares of Common Stock offered for
subscription or purchase. Such adjustment shall be made successively
whenever any such rights or warrants are issued, and shall become
effective immediately after such record date. In determining whether
any rights or warrants entitle the holders of Common Stock to
subscribe for or purchase shares of Common Stock at less than such
Current Market Price, there shall be taken into account any
consideration received by the Corporation upon issuance and upon
exercise of such rights or warrants, the value of such consideration,
if other than cash, to be determined by the Board of Directors (whose
determination shall, if made in good faith, be conclusive).
(iii) In case the Corporation shall pay a dividend or make
a distribution to all holders of its Common Stock after the Issue Date
of any shares of capital stock of the Corporation or its subsidiaries
(other than Common Stock) or evidences of its indebtedness or assets,
including securities (any of the foregoing being hereinafter in this
subparagraph (iii) called the "Securities"), but excluding rights,
warrants, dividends and distributions referred to in subparagraphs (i)
and (ii) above, regular periodic cash dividends payable out of the
Corporation's surplus that may from time to time be fixed by the Board
of Directors and dividends and distributions in connection with the
liquidation, dissolution or winding up of the Corporation, then in
each such case, the Conversion Price shall be adjusted so that it
shall equal the price determined by multiplying (A) the Conversion
Price in effect on the record date mentioned below by (B) a fraction,
the numerator of which shall be the Current Market Price per share of
the Common Stock on the record date mentioned below less the then fair
market value as determined by the Board of Directors (whose
determination shall, if made in good faith, be conclusive) as of such
record date of the portion of the Securities applicable to one share
of Common Stock, and the denominator of which shall be the Current
Market Price per share of the Common
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Stock on such record date; provided, however, that in the event the
then fair market value (as so determined) of the portion of Securities
so distributed applicable to one share of Common Stock is equal to or
greater than the Current Market Price per share of Common Stock on the
record date mentioned above, in lieu of the foregoing adjustment,
adequate provision shall be made so that each holder of shares of
Preferred Stock shall have the right to receive the amount and kind of
Securities such holder would have received had such holder converted
each such share of Preferred Stock immediately prior to the record
date for the distribution of the Securities. Except as provided in
paragraph (h) below, such adjustment shall become effective
immediately after the record date for the determination of
stockholders entitled to receive such distribution.
(iv) Notwithstanding anything in subparagraph (ii) above,
if such rights or warrants shall by their terms provide for an
increase or increases with the passage of time or otherwise in the
price payable to the Corporation upon the exercise thereof, the
Conversion Price upon any such increase becoming effective shall
forthwith be readjusted (but to no greater extent than originally
adjusted by reason of such issuance or sale) to reflect the same.
Upon the expiration or termination of such rights or warrants, if any
such rights or warrants shall not have been exercised, then the
Conversion Price shall forthwith be readjusted and thereafter be the
rate which it would have been had an adjustment been made on the basis
that (A) the only rights or warrants so issued or sold were those so
exercised and they were issued or sold for the consideration actually
received by the Corporation upon such exercise plus the consideration,
if any, actually received by the Corporation for the granting of all
such rights or warrants whether or not exercised and (B) the
Corporation issued and sold a number of shares of Common Stock equal
to those actually issued upon exercise of such rights or warrants, and
such shares were issued and sold for a consideration equal to the
aggregate exercise price in effect under the rights or warrants
actually exercised at the respective dates of their exercise. For
purposes of subparagraph (ii), the aggregate consideration received by
the Corporation in connection with the issuance of shares of Common
Stock or of rights or warrants shall be deemed to be equal to the sum
of the aggregate offering price (before deduction of underwriting
discounts or commissions and expenses payable to third parties) of all
such securities plus the minimum aggregate amount, if any, payable
upon the exercise of such rights or warrants into shares of Common
Stock.
(v) No adjustment in the Conversion Price shall be
required unless such adjustment would require an increase or decrease
of at least 1% in such price; provided, however, that any adjustments
which by reason of this subparagraph (v) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment; and provided, however, that any adjustment shall be
required and shall be made in accordance with the provisions of this
Section 7 (other than this subparagraph (v)) not later than such time
as may be required in order to preserve the tax-free nature of a
distribution to the holders of shares of Common Stock. All
calculations under this Section 7 shall be made to the nearest cent
(with $.005 being rounded upward) or to the nearest 1/100th of a share
(with .005 of a share being
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rounded upward), as the case may be. Anything in this paragraph (d)
to the contrary notwithstanding, the Corporation shall be entitled, to
the extent permitted by law, to make such reductions in the Conversion
Price, in addition to those required by this paragraph (d), as it in
its discretion shall determine to be advisable in order that any stock
dividend, subdivision of shares, distribution of rights or warrants to
purchase stock or securities, or distribution of other assets or any
other transaction which could be treated as any of the foregoing
transactions pursuant to Section 305 of the Internal Revenue Code of
1986, as amended, hereafter made by the Corporation to its
stockholders shall not be taxable to such stockholders.
(e) In case the Corporation shall be a party to any transaction
(including without limitation a merger, consolidation, statutory share
exchange, sale of all or substantially all of the Corporation's assets or
recapitalization of the Common Stock (each of the foregoing being referred to
as a "Transaction"), in each case as a result of which shares of Common Stock
shall be converted into the right to receive stock, securities or other
property (including cash or any combination thereof), then the Preferred Stock
remaining outstanding will thereafter no longer be subject to conversion into
Common Stock pursuant to Section 7, but instead shall be convertible into the
kind and amount of shares of stock and other securities and property receivable
(including cash) upon the consummation of such Transaction by a holder of that
number of shares or fraction thereof of Common Stock into which one share of
Preferred Stock was convertible immediately prior to such Transaction. The
Corporation shall not be a party to any Transaction unless the terms of such
Transaction are consistent with the provisions of this paragraph (e) and it
shall not consent or agree to the occurrence of any Transaction until the
Corporation has entered into an agreement with the successor or purchasing
entity, as the case may be, for the benefit of the holders of the Preferred
Stock which will contain provisions enabling the holders of the Preferred Stock
which remains outstanding after such Transaction to convert into the
consideration received by holders of Common Stock at the Conversion Price
immediately after such Transaction. In the event that at any time, as a result
of an adjustment made pursuant to this Section 7, the Preferred Stock shall
become subject to conversion into any securities other than shares of Common
Stock, thereafter the number of such other securities so issuable upon
conversion of the shares of Preferred Stock shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the shares of Preferred Stock contained in this
Section 7. The provisions of this paragraph (e) shall similarly apply to
successive Transactions.
(f) If:
(i) the Corporation shall declare a dividend (or any
other distribution) on the Common Stock that would cause an adjustment
to the Conversion Price of the Preferred Stock pursuant to the terms
of any of the paragraphs above (including such an adjustment that
would occur but for the terms of the first sentence of subparagraph
(d)(v) above);
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(ii) the Corporation shall authorize the granting to the
holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of any class or any other rights or warrants;
(iii) there shall be any reclassification or change of the
Common Stock (other than an event to which paragraph (d)(i) of this
Section 7 applies) or any consolidation, merger or statutory share
exchange to which the Corporation is a party and for which approval of
any stockholders of the Corporation is required, or the sale or
transfer of all or substantially all of the assets of the Corporation;
or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, the Corporation shall cause to be filed with the Transfer Agent and shall
cause to be mailed to the holders of shares of the Preferred Stock at their
addresses as shown on the stock records of the Corporation, as promptly as
possible, but at least 30 days prior to the applicable date hereinafter
specified, a notice stating (A) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights or warrants,
or, if a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution or rights or
warrants are to be determined or (B) the date on which such reclassification,
change, consolidation, merger, statutory share exchange, sale, transfer,
dissolution, liquidation or winding up is expected to become effective or
occur, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reclassification, change,
consolidation, merger, statutory share exchange, sale, transfer, dissolution,
liquidation or winding up. Failure to give such notice or any defect therein
shall not affect the legality or validity of the proceedings described in this
Section 7.
(g) Whenever the Conversion Price is adjusted as herein provided,
the Corporation shall promptly file with the Transfer Agent an officers'
certificate signed by the President or a Vice President and the Chief Financial
Officer or the Secretary of the Corporation setting forth the Conversion Price
after such adjustment, the method of calculation thereof and setting forth a
brief statement of the facts requiring such adjustment and upon which such
adjustment is based. If the calculation of the adjustment requires a
determination by the Board of Directors pursuant to paragraph (d)(iii) of this
Section 7 or any similar provision, such certificate shall include a copy of
the resolution of the Board of Directors relating to such determination.
Promptly after delivery of such certificate, the Corporation shall prepare a
notice of such adjustment of the Conversion Price setting forth the adjusted
Conversion Price, the facts requiring such adjustment and upon which such
adjustment is based and the date on which such adjustment becomes effective and
shall mail such notice of such adjustment of the Conversion Price to the holder
of each share of Preferred Stock at such holder's last address as shown on the
stock records of the Corporation.
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(h) In any case in which paragraph (d) of this Section 7 provides
that an adjustment shall become effective immediately after a record date for
an event and the date fixed for conversion pursuant to Section 7 occurs after
such record date but before the occurrence of such event, the Corporation may
defer until the actual occurrence of such event (i) issuing to the holder of
any share of Preferred Stock surrendered for conversion the additional shares
of Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon such
conversion before giving effect to such adjustment and (ii) paying to such
holder any amount in cash in lieu of any fraction pursuant to paragraph (c) of
this Section 7.
(i) For purposes of this Section 7, the number of shares of Common
Stock at any time outstanding shall not include any shares of Common Stock then
owned or held by or for the account of the Corporation or any corporation
controlled by the Corporation.
(j) If any single action would require adjustment pursuant to more
than one paragraph of this Section 7, only one adjustment shall be made and
such adjustment shall be the amount of adjustment which has the highest
absolute value to the holders of the Preferred Stock.
(k) In case the Corporation shall take any action affecting the
Common Stock, other than action described in this Section 7, which in the
opinion of the Board of Directors would materially adversely affect the
conversion rights of the holders of the shares of Preferred Stock, the
Conversion Price for the Preferred Stock may be adjusted, to the extent
permitted by law, in such manner, if any, and at such time, as the Board of
Directors may determine to be equitable in the circumstances. Subject to the
foregoing, there shall be no adjustment of the Conversion Price in case of the
issuance of any stock of the Corporation in a reorganization, acquisition or
other similar transaction except as specifically set forth in this Section 7.
(l) The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but
unissued shares of Common Stock or its issued shares of Common Stock held in
its treasury, or both, for the purpose of effecting conversion of the Preferred
Stock, the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Preferred Stock not theretofore
converted. For purposes of this paragraph (l), the number of shares of Common
Stock which shall be deliverable upon the conversion of all outstanding shares
of Preferred Stock shall be computed as if at the time of computation all such
outstanding shares were held by a single holder.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value of the shares of Common Stock
deliverable upon conversion of the Preferred Stock, the Corporation will take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Corporation may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Conversion Price.
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The Corporation will endeavor to make the shares of Common Stock
required to be delivered upon conversion of the Preferred Stock eligible for
trading upon the New York Stock Exchange, upon the NASDAQ National Market
System or upon any national securities exchange upon which the Common Stock
shall then be traded, prior to such delivery.
Prior to the delivery of any securities which the Corporation shall be
obligated to deliver upon conversion of the Preferred Stock, the Corporation
will endeavor to comply with all federal and state laws and regulations
thereunder requiring the registration of such securities with, or any approval
of or consent to the delivery thereof by, any governmental authority.
(m) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
the shares of Preferred Stock (or any other securities issued on account of the
Preferred Stock pursuant hereto) or shares of Common Stock on conversion of the
Preferred Stock pursuant hereto; provided, however, that the Corporation shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issue or delivery of shares of Preferred Stock (or any other
securities issued on account of the Preferred Stock pursuant hereto) or shares
of Common Stock in a name other than the name in which the shares of Preferred
Stock with respect to which such Common Stock shares are issued were registered
and the Corporation shall not be required to make any issue or delivery unless
and until the person requesting such issue or delivery has paid to the
Corporation the amount of any such tax or has established, to the reasonable
satisfaction of the Corporation, that such tax has been paid or is not required
to be paid.
(n) The Corporation shall not take any action which results in an
adjustment of the number of shares of Common Stock issuable upon conversion of
a share of Preferred Stock if the total number of shares of Common Stock
issuable after such action upon conversion of the Preferred Stock then
outstanding, together with the total number of shares of Common Stock then
outstanding, would exceed the total number of shares of Common Stock then
authorized under the Certificate of Incorporation. Subject to the foregoing,
the Corporation shall take all such actions as it may deem reasonable under the
circumstances to provide for the issuance of such number of shares of Common
Stock as would be necessary to allow for the conversion from time to time, and
taking into account adjustments as herein provided, of outstanding shares of
the Preferred Stock in accordance with the terms and provisions of the
Certificate of Incorporation.
8. Ranking.
(a) Any class or classes of stock of the Corporation shall be
deemed to rank:
(i) prior to the Preferred Stock, as to dividends or as
to the distribution of assets upon liquidation, dissolution or winding
up, if the holders of such class shall be entitled to the receipt of
dividends or of amounts distributable upon liquidation,
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dissolution or winding up, as the case may be, in preference or
priority to the holders of Preferred Stock;
(ii) on a parity with the Preferred Stock, as to dividends
or as to the distribution of assets upon liquidation, dissolution or
winding up, whether or not the dividend rates, dividend payment dates
or redemption or liquidation prices per share thereof be different
from those of the Preferred Stock, if the holders of such class of
stock and the Preferred Stock shall be entitled to the receipt of
dividends or of amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in proportion to their respective
amounts of accrued and unpaid dividends per share or liquidation
prices, without preference or priority of one over the other; and
(iii) junior to the Preferred Stock, as to dividends or as
to the distribution of assets upon liquidation, dissolution or winding
up, if such stock shall be the Common Stock or if the holders of
Preferred Stock shall be entitled to receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding up, as
the case may be, in preference or priority to the holders of shares of
such stock.
(b) The Preferred Stock shall rank junior to shares of the
Corporation's Series A Convertible Preferred Stock as to dividends and as to
the distribution of assets upon liquidation, dissolution or winding up.
9. Voting.
(a) Except as herein provided or as otherwise from time to time
required by law, holders of Preferred Stock shall have no voting rights.
Whenever, at any time or times, dividends payable on the shares of Preferred
Stock at the time outstanding have not been paid in an aggregate amount equal
to at least four quarterly dividends on such shares (whether or not
consecutive), the holders of Preferred Stock shall have the right, voting
separately as a class with the holders of shares of any one or more other
series of stock ranking on a parity as to dividends with the Preferred Stock
upon which like voting rights have been conferred and are exercisable (the
Preferred Stock and any such other stock, collectively for purposes hereof, the
"Defaulted Preferred Stock"), to elect two directors of the Corporation at the
Corporation's next annual meeting of the stockholders and at each subsequent
annual meeting of stockholders; provided, however, that if such voting rights
shall become vested more than 90 days or less than 20 days before the date
prescribed for the annual meeting of stockholders, thereupon the holders of the
shares of Defaulted Preferred Stock shall be entitled to exercise their voting
rights at a special meeting of the holders of shares of Defaulted Preferred
Stock as set forth herein. At elections for such directors, each holder of
Preferred Stock shall be entitled to one vote for each share held (the holders
of shares of any other series of Defaulted Preferred Stock ranking on such a
parity being entitled to such number of votes, if any, for each share of stock
held as may be granted to them.) Upon the vesting of such right of the holders
of Defaulted Preferred Stock, the then authorized number of members of the
Board of Directors shall automatically be increased by two and the two
vacancies so created shall be filled by vote of the holders of outstanding
Defaulted Preferred Stock as hereinafter set forth. The right of holders of
Defaulted
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Preferred Stock, voting separately as a class, to elect members of the Board of
Directors as aforesaid shall continue until such time as all dividends
accumulated on Defaulted Preferred Stock shall have been paid, or declared and
funds set aside for payment in full, at which time such right shall terminate,
except as herein or by law expressly provided, subject to revesting in the
event of each and every subsequent default of the character above mentioned.
As long as any shares of Preferred Stock shall remain outstanding, the number
of directors of the Corporation (excluding any directors elected by vote of the
holders of shares of Defaulted Preferred Stock) elected at any meeting of
stockholders of the Corporation at which directors are to be elected shall not
be such as would cause the number of directors in office after such meeting
(excluding any directors elected by vote of the holders of shares of Defaulted
Preferred Stock) to exceed the number which is two less than the maximum number
of directors permitted by the Certificate of Incorporation.
(b) Whenever such voting right shall have vested, such right may
be exercised initially either at a special meeting of the holders of shares of
Defaulted Preferred Stock called as hereinafter provided, or at any annual
meeting of stockholders held for the purpose of electing directors, and
thereafter at such meetings, or by the written consent of such holders pursuant
to Section 228 of the General Corporation Law of the State of Delaware.
(c) At any time when such voting right shall have vested in the
holders of shares of Defaulted Preferred Stock entitled to vote thereon, and if
such right shall not already have been initially exercised, an officer of the
Corporation shall, upon the written request of 10% of the holders of record of
shares of such Defaulted Preferred Stock then outstanding, addressed to the
Secretary of the Corporation, call a special meeting of holders of shares of
such Defaulted Preferred Stock. Such meeting shall be held at the earliest
practicable date upon the notice to holders of Defaulted Preferred Stock given
as required for annual meetings of stockholders at the place for holding annual
meetings of stockholders of the corporation or, if none, at a place designated
by the Secretary of the Corporation. If such meeting shall not be called by
the proper officers of the Corporation within 30 days after the personal
service of such written request upon the Secretary of the Corporation, or
within 30 days after mailing the same within the United States, by registered
mail, addressed to the Secretary of the Corporation at its principal office
(such mailing to be evidenced by the registry receipt issued by the postal
authorities), then the holders of record of 10% of the shares of Defaulted
Preferred Stock then outstanding may designate in writing any person to call
such meeting at the expense of the Corporation, and such meeting may be called
by such person so designated upon the notice to holders of Defaulted Preferred
Stock given as required for annual meetings of stockholders and shall be held
at the same place as is elsewhere provided in this paragraph. Any holder of
shares of Defaulted Preferred Stock then outstanding that would be entitled to
vote at such meeting shall have access to the stock books of the Corporation
for the purpose of causing a meeting of stockholders to be called pursuant to
the provisions of this paragraph. Notwithstanding the provisions of this
paragraph, however, no such special meeting shall be called or held during a
period within 45 days immediately preceding the date fixed for the next annual
meeting of stockholders.
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(d) The directors elected as provided herein shall serve until the
next annual meeting or until their respective successors shall be elected and
shall qualify; any director elected by the holders of Defaulted Preferred Stock
may be removed without cause by, and shall not be removed without cause
otherwise than by, the vote of the holders of a majority of the outstanding
shares of the Defaulted Preferred Stock who are entitled to participate in such
election of directors, voting separately as a class, at a meeting called for
such purpose or by written consent as permitted by law and the Certificate of
Incorporation and By-laws of the Corporation. If the office of any director
elected by the holders of Defaulted Preferred Stock, voting separately as a
class, becomes vacant by reason of death, resignation, retirement,
disqualification or removal from office or otherwise, the remaining director
elected by the holders of Defaulted Preferred Stock, voting separately as a
class, may choose a successor who shall hold office for the unexpired term in
respect of which such vacancy occurred. Upon any termination of the right of
the holders of Defaulted Preferred Stock to vote for directors as herein
provided, the term of office of all directors then in office elected by the
holders of Defaulted Preferred Stock, voting separately as a class, shall
terminate immediately. Whenever the terms of office of the directors elected
by the holders of Defaulted Preferred Stock, voting separately as a class,
shall so terminate and the special voting powers vested in the holders of
Defaulted Preferred Stock shall have expired, the number of directors shall be
reduced by the number of directors whose term of office shall have terminated
as provided hereinabove.
(e) So long as any shares of the Preferred Stock remain
outstanding, the affirmative vote or consent of the holders of at least 66-2/3%
of the shares of Preferred Stock outstanding at the time given either by
written consent or in person or by proxy at any special or annual meeting,
shall be necessary to permit, effect or validate any one or more of the
following:
(i) the authorization, creation or issuance, or any
increase in the authorized or issued amount, of any class or series of
stock, or any security convertible into stock of such class or series,
ranking prior to the Preferred Stock as to dividends or the
distribution of assets upon liquidation, dissolution or winding up;
(ii) the amendment, alteration or repeal of any of the
provisions of the Certificate of Incorporation (including the
Certificate of Designations relating to the Preferred Stock) which
would adversely affect any right, preference, privilege or voting
power of the Preferred Stock or of the holders thereof; provided,
however, that any increase in the amount of authorized preferred stock
or the creation and issuance of other series of preferred stock, or
any increase in the amount of authorized shares of any such other
series of preferred stock, in each case ranking on a parity with or
junior to the Preferred Stock with respect to the payment of dividends
and the distribution of assets upon liquidation, dissolution or
winding up, shall not be deemed to adversely affect such rights,
preferences, privileges or voting powers; or
(iii) the authorization of any reclassification of the
Preferred Stock.
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(f) So long as any shares of the Preferred Stock remain
outstanding, the affirmative vote or consent of the holders of at least 50% of
the shares of Preferred Stock outstanding at the time given either by written
consent or in person or by proxy at any special or annual meeting, shall be
necessary to permit, effect or validate any increase in the amount of
authorized Preferred Stock or the creation of additional classes of stock or
the issuance of any series of capital stock ranking on a parity with the
Preferred Stock with respect to the payment of dividends and the distribution
of assets upon liquidation, dissolution and winding up of the Company.
The foregoing voting provisions shall not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of Preferred Stock shall have been
redeemed.
10. Record Holders. The Corporation and the Transfer Agent may
deem and treat the record holder of any shares of Preferred Stock as the true
and lawful owner thereof for all purposes, and neither the Corporation nor the
Transfer Agent shall be affected by any notice to the contrary.
11. Notice. Except as may otherwise be provided by law or
provided for herein, all notices referred to herein shall be in writing, and
all notices hereunder shall be deemed to have been given upon receipt, in the
case of a notice of conversion given to the Corporation as contemplated in
Section 7(b) hereof, or, in all other cases, upon the earlier of receipt of
such notice or three Business Days after the mailing of such notice if sent by
registered mail (unless first-class mail shall be specifically permitted for
such notice under the terms hereof) with postage prepaid, addressed: if to the
Corporation, to its offices at 0000 Xxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000
(Attention: Corporate Secretary) or other agent of the Corporation designated
as permitted hereby; or, if to any holder of the Preferred Stock, to such
holder at the address of such holder of the Preferred Stock as listed in the
stock record books of the Corporation (which shall include the records of the
Transfer Agent), or to such other address as the Corporation or holder, as the
case may be, shall have designated by notice similarly given.
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IN WITNESS WHEREOF, this Certificate has been signed on behalf of the
Corporation by its President and attested to by its Secretary, all as of the
____ day of _______, 1996.
XXXXXXXX PETROLEUM CORPORATION
By:
--------------------------------------
Attest:
By:
-----------------------------------
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EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of _______
__, 1996 by and between Xxxxxxxx Petroleum Corporation, a Delaware corporation
(the "Company"), and each of the individuals whose signature appears on the
signature page hereto (individually, a "Stockholder" and collectively, the
"Stockholders").
R E C I T A L S:
WHEREAS, the Stockholders have acquired shares of the Company's Series
B Convertible Preferred Stock, par value $1.00 per share ("Series B Preferred
Stock"), pursuant to the terms of that certain Exchange Agreement dated October
__, 1996 between the Company, La/Cal Energy Partners II and certain of the
Stockholders;
WHEREAS, the shares of Series B Preferred Stock held by the
Stockholders are convertible at the option of the Stockholders into shares of
Common Stock, par value $.20 per share, of the Company ("Common Stock");
WHEREAS, the shares of Series B Preferred Stock held by the
Stockholders are, and any shares of Common Stock issued to the Stockholders
upon the conversion thereof will be, "restricted securities" as such term is
defined in Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act");
WHEREAS, pursuant to the Agreement, the Company has agreed to provide
the Stockholders with certain registration rights relating to any and all
shares of Common Stock issued after the date hereof to the Stockholders upon
conversion of shares of Series B Preferred Stock (such shares of Common Stock
being referred to herein as the "Registrable Shares").
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
REGISTRATION RIGHTS AND OBLIGATIONS
1.1 Demand Registration.
(a) Stockholders collectively owning at least 2,500,000
Registrable Shares (or the equivalent number in the event of a stock split,
reverse stock split, stock dividend or a
71
reclassification or recapitalization subsequent to the date hereof) shall have
the right, exercisable at any time after the date hereof, on any one occasion,
by written notice to the Company (the "Registration Notice") signed by
Stockholders requesting such registration (the "Requesting Stockholders"), to
require the Company to use its best efforts to register under the Securities
Act, all or part of the Registrable Shares held by the Stockholders (the
"Demand Registration"). The Company, upon receipt of the Registration Notice,
shall use its best efforts to effect the Demand Registration. The Company
shall send written notice of such Demand Registration to the remaining
Stockholders, if any (the "Notification"), within ten days of the Company's
receipt of the Registration Notice. Unless a remaining Stockholder shall
deliver a written request for inclusion in the Demand Registration of a
specified number of his Registrable Shares within ten days of the date of the
Notification by the Company, the right of such remaining Stockholder to
participate in such Demand Registration shall terminate. If such remaining
Stockholder so notifies the Company within the period specified above of his
desire to participate in the Demand Registration, such Stockholder's
Registrable Shares shall be included in the Demand Registration. Each of the
Stockholders participating in any Demand Registration is referred to herein as
a "Selling Stockholder" and collectively, as the "Selling Stockholders."
(b) The Registration Notice shall state whether the registration
shall be an underwritten offering or a shelf offering pursuant to Rule 415 of
the Securities Act. In the event that the shelf registration is requested, the
Company shall use its best efforts to maintain the effectiveness of such
registration for at least 90 days. In connection with such registration, the
Company shall be obligated as soon as practicable (but in any event within 90
days) to prepare and file a registration statement (the "Registration
Statement") upon receipt of any such Registration Notice and shall be further
obligated to have the Registration Statement declared effective under the
Securities Act and the rules and regulations promulgated thereunder, and the
applicable securities or "blue sky" laws of each state, as soon as practicable
after the filing date thereof. The Company shall be deemed to have completed a
Demand Registration if the Registration Statement is declared effective by the
Commission and the Company uses its best efforts to keep such Registration
Statement effective for 90 days or such lesser period of time as is necessary
for the Selling Stockholders to sell all of the Registrable Shares registered
thereunder. The registration rights contained herein with respect to the
Registrable Shares held by a Stockholder shall terminate upon the transfer,
sale or other disposition by a Stockholder of his Registrable Shares so
transferred, sold or disposed of unless such Registrable Shares are
transferred, sold or disposed of to an "affiliate" of a Stockholder, as such
term is defined in the Securities Act, or are transferred by gift or
inheritance in which case the registration rights contained herein shall
automatically be assigned to such affiliate or other transferee.
(c) The Company may include in the Registration Statement referred
to in Section 1(b) above a primary offering by the Company of a number of
shares of Common Stock that the Company proposes to issue and sell for its own
account, not to exceed three hundred percent (300%) of the number of
Registrable Shares included in such Registration Statement.
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(d) In connection with any underwritten registration hereunder, if
the managing underwriter shall advise the Company in writing (with a copy to
the Selling Stockholders) stating that, in its opinion, the number of shares of
Common Stock proposed to be included in such registration exceeds the number
which can be sold in such offering within the price range acceptable to the
Company and the Selling Stockholders (such writing to state the approximate
number of shares of Common Stock that may be included in such offering without
such effect and, if possible, the basis of such opinion), then the Company will
include in such registration, to the extent of the number of shares of Common
Stock that the Company is so advised can be sold in such offering, (i) first,
the Registrable Shares requested by the Selling Stockholders to be registered
pursuant to this Section, and (ii) second, all remaining shares of Common Stock
proposed to be included in such registration.
(e) In the event that the Company's Board of Directors reasonably
determines in good faith that the filing of the Registration Statement would be
significantly disadvantageous to the Company, notwithstanding anything to the
contrary contained herein, the Company may postpone the preparation and filing
of the Registration Statement for a period up to 120 days as the Company shall
in good xxxxx xxxx necessary.
(f) The Company shall not be obligated to take any action to
effect any such registration, qualification or compliance pursuant to this
Section 1.1 during the period starting with the date 60 days prior to the
Company's estimated date of filing of, and ending on the date 180 days
following the effective date of, any registration statement relating to
securities of the Company (other than a registration statement primarily
relating to an offering of securities to employees or a dividend reinvestment
plan), provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective.
1.2 PIGGYBACK REGISTRATION. If at any time prior to the third
anniversary of the date hereof, the Company proposes to file a registration
statement in connection with the public offering of shares of Common Stock to
be sold by the Company for its own account under the Securities Act (other than
in connection with a merger, acquisition or similar business combination
transaction, an offering of securities primarily to employees or a dividend
reinvestment plan), prior to such filing, the Company shall give the
Stockholders written notice of its intention to file such a registration
statement. Any Stockholder wishing to participate in such offering, within
seven days after such notice, shall deliver to the Company a notice of the
Stockholder's desire to sell Registrable Shares under such registration (a
"Participation Notice"). The Participation Notice shall state the number of
Registrable Shares which such Stockholder wishes to dispose of in such
registration. If the Company receives one or more Participation Notices within
the specified notice period it shall, subject to the provisions of this Section
1.2, use its best efforts to include the number of shares set forth in such
Participation Notices in its registration statement under the Securities Act.
The Company may, at any time prior to the effectiveness of any such
registration statement, in its sole discretion and without the Stockholders's
consent, abandon the proposed offering in which the Stockholder has requested
to participate. Notwithstanding the foregoing, the Company shall not be
obligated to include such
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Registrable Shares in such offering if the Company is advised by the managing
underwriter or underwriters of such offering that such offering would, in its
or their good faith judgment, be materially adversely affected by such
inclusion; provided however, that the Company shall in any case be obligated to
include such number or amount of Registrable Shares in such offering, if any,
as such underwriter or underwriters shall determine will not materially
adversely affect such offering.
ARTICLE II
REGISTRATION PROCEDURE AND EXPENSE
2.1 UNDERWRITER AND DISTRIBUTIONS. In connection with any
underwritten registration under the Securities Act pursuant to this Agreement,
the Company shall have the right, in its absolute discretion, to choose the
underwriter or underwriters (the "Underwriter") and the underwriting syndicate
who shall underwrite any offering of Registrable Shares. The Company shall
have the right to decide with the Underwriter the scope of the distribution
pursuant to any offering.
2.2 REGISTRATION PROCEDURES.
(a) In connection with any registration under the Securities Act
in which a Stockholder is participating pursuant to this Agreement, the Company
will furnish each Selling Stockholder a copy of the Registration Statement and
all amendments thereto and will supply each Selling Stockholder with copies of
any prospectus included therein (and, if necessary, with copies of a prospectus
meeting the requirements of Section 10(a)(3) of the Securities Act; provided,
however, that no such prospectus need be supplied more than 60 days after the
effective date of the Registration Statement) in such quantities as may be
necessary for the purposes of such proposed sale. The Company shall use its
reasonable best efforts to keep the Registration Statement effective under the
Securities Act during the period specified in Section 1.1(b) as may be
reasonably necessary to effect such sale or other disposition (the "Effective
Period"), including the filing of any post-effective amendments or supplements
thereto, and shall immediately notify the Stockholders when such Registration
Statement is no longer effective under the Securities Act.
(b) The Company will also use its best efforts to:
(i) register or qualify the Registrable Shares included
in the Registration Statement under the securities or blue sky laws of such
states as the Selling Stockholders shall reasonably request and shall keep such
registration or qualification in effect for the Effective Period, and do any
and all other acts and things which may be reasonably necessary or advisable to
enable the Selling Stockholders to consummate the disposition in such
jurisdictions of the Registrable Shares; and
(ii) notify each of the Selling Stockholders at any time
during the Effective Period when a prospectus relating thereto is required to
be delivered under the Securities Act
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of the occurrence of any event as a result of which the prospectus included in
a Registration Statement, as then in effect, includes an 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 in light of the
circumstances then existing, and at the request of any Selling Stockholder
promptly prepare and furnish to the Selling Stockholder a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing.
2.3 REGISTRATION EXPENSES. The Company shall pay all costs and
expenses incurred in connection with the registration of Registrable Shares
effected pursuant to this Agreement, including the fees and expenses of a
single counsel for the Selling Stockholders, provided that, in no event shall
the Company be responsible for the underwriting discounts and commissions
applicable to the Registrable Shares, which shall be borne by the Selling
Stockholders.
2.4 COOPERATION OF THE STOCKHOLDERS. In connection with any
registration of the Registrable Shares pursuant to this Agreement, each
Stockholder shall furnish the Company with such information concerning such
Selling Stockholder, as the Company may reasonably request for use in the
preparation of the Registration Statement and shall cooperate fully in the
preparation and filing of a Registration Statement. In connection with any
offering, the Company and each of the Selling Stockholders, if requested by the
Underwriter, shall become a party to the Underwriting Agreement, which
agreement shall contain representations and warranties concerning such Selling
Stockholders and the Registrable Shares held by them, covenants and conditions
and such other terms as are customarily contained in agreements of that type,
provided that no Selling Stockholder shall be required to make any
representation or warranty, or indemnify any persons therein concerning the
business or financial results or condition of the Company or regarding any
other Selling Stockholder. In connection therewith, if so requested by the
Underwriter, each Selling Stockholder will agree not to effect any public sale
or distribution of any securities of the Company during the seven days prior to
the date on which any Registration Statement has become effective and up to the
180 days thereafter, except as part of such offering.
2.5 STANDOFF AGREEMENT. Each Stockholder agrees that, if, in
connection with an underwritten public offering of the Company's securities,
the Company or the underwriters managing the offering so request, the
Stockholders shall not sell, make any short sale of a loan, grant any option
for the purchase of or otherwise dispose of any Company securities (other that
those included in the registration) other than intra-family transfers,
transfers to trusts for estate planning purposes, or transfers to affiliates
(in which case such transferee would be bound by the terms of this Section
2.5), without the prior written consent of the Company or such underwriters, as
the case may be, for such period of time
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not to exceed 90 days from the effective date of such registration as may be
requested by the Company or the underwriters.
ARTICLE III
INDEMNIFICATION
3.1 INDEMNIFICATION BY THE SELLING STOCKHOLDERS. (a) It shall be
a condition precedent to any right of registration under this Agreement that
each Selling Stockholder shall furnish to the Company in writing such
information as shall be reasonably requested by the Company concerning each
Selling Stockholder and the Registrable Shares held by him for use in a
Registration Statement or any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto
("Prospectus"), and each Selling Stockholder hereby agrees to indemnify the
Company, its officers and directors, each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act, and each
underwriter or broker of the Registrable Shares registered pursuant to such
request, and each person, if any, who controls such underwriter or broker
within the meaning of Section 15 of the Securities Act against any losses,
claims, expenses, damages or liabilities to which the Company or any such
officer or director or broker or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
expenses, damages or liabilities (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon any untrue
(or alleged untrue) statement of any material fact contained in, or any
material fact (necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading) omitted from (or
allegedly omitted from), a Registration Statement or Prospectus covering the
Registrable Shares, in each case to the extent, but only to the extent, that
such statement or omission was made in reliance upon and in conformity with
written information furnished to the Company by such Selling Stockholder
specifically for use in such Registration Statement. Each Selling Stockholder
hereby agrees upon the reasonable request of the Company to execute such
additional documents and instruments that set forth the indemnification
provision contained herein.
3.2 INDEMNIFICATION BY THE COMPANY. The Company hereby agrees to
indemnify, hold harmless and defend each Selling Stockholder and each
underwriter or broker of the Registrable Shares registered pursuant to such
request, and each person, if any, who controls such underwriter or broker
within the meaning of Section 15 of the Securities Act against any losses,
claims, expenses, damages or liabilities to which such Selling Stockholder,
underwriter or broker or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, expenses, damages
or liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue (or alleged untrue)
statement of any material fact contained or incorporated by reference in a
Registration Statement or Prospectus covering the Registrable Shares or any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein or incorporated by
reference therein, in light of the circumstances under which they were made,
not
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misleading, except insofar as such untrue (or alleged untrue) statement or
omission (or alleged omission) shall have been based upon information furnished
to the Company in writing by such Selling Stockholder or underwriter or broker
specifically for use in such Registration Statement or Prospectus, and the
Company will reimburse such Selling Stockholder or such underwriter or broker
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such claim, loss, damage, liability, action or
proceedings.
3.3 CONTRIBUTION. If the indemnification provided for in Section
3.1 or 3.2 above is unavailable or insufficient to hold harmless any party
entitled to indemnification thereunder in respect of any losses, claims,
damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof), then such party required to provide
indemnification hereunder ("Contributor") shall, in lieu of indemnifying such
other party entitled to indemnification hereunder ("Contributee"), contribute
to the amount paid or payable by Contributee as a result of such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) in such proportion as is appropriate to reflect
the relative fault of the Contributor and the Contributee, in connection with
the statements or omissions (or alleged statements or omissions) that resulted
in such losses, claims, damages or liabilities (or actions or proceedings,
whether commenced or threatened, in respect thereof). The relative fault of
such persons shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact, or omission or
alleged omission to state a material fact, relates to information supplied by
or concerning the Contributor or Contributee and such person's relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 3.3 were determined by pro
rata allocation or by any other allocation that does not take into account the
equitable considerations referred to above in this Section 3.3. No person
guilty of fraudulent misrepresentation within the meaning of the Securities Act
shall be entitled to contribution from any person that is not guilty of such
fraudulent misrepresentation.
ARTICLE IV
MISCELLANEOUS
4.1 CHOICE OF LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Texas, without regard to its rules
on conflict of laws.
4.2 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof, supersedes
any prior agreement on the subject matter hereof and may not be amended except
by a written agreement signed by all the parties hereto.
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4.3 NO ASSIGNMENT. The registration rights contained herein shall
not be transferable or assignable by any of the Stockholders except by will,
inheritance or intestate succession or to an "affiliate" of a Stockholder, as
such term is defined in the Securities Act, or to a transferee who receives the
Registrable Shares as a gift or charitable contribution.
4.4 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered by (i) personal
delivery, (ii) expedited overnight delivery service, (iii) certified or
registered mail, postage prepaid or (iv) telecopier. Any such notice shall be
deemed given upon its delivery or its being sent or dispatched, as the case may
be, to the following addresses:
(a) If to the Stockholders, at:
The address set forth on the
signature page hereof
(b) If to the Company, at:
Xxxxxxxx Petroleum Corporation
0000 Xxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: President
with a copy to:
Xxxxxx & Xxxxxx L.L.P.
0000 Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxxxxx
4.5 RELIANCE. The Company shall be entitled to rely on any
Registration Notice received by it and the contents contained therein.
4.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
4.7 AMENDMENT AND WAIVER. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged
or terminated other than by a written instrument signed by the party against
whom enforcement of any such amendment, waiver, discharge or termination is
sought; provided further, however, that any provisions in Article I may be
amended, waived, discharged or terminated upon the written consent of the
Company and the holders of a majority in interest of the aggregate of the
Registrable Shares.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized representative as of the date
first above written.
XXXXXXXX PETROLEUM CORPORATION
By:
------------------------------------
[_____________], Chairman of the Board
Address:
--------------------------------
Xxxxxx X. Xxxxxxxx
--------------------------------
Address:
--------------------------------
Xxxxx X. Xxxxxxx, III
--------------------------------
Address: XXXXXXXX ENERGY, INC.
--------------------------------
By:
-------------------------------- -----------------------------------
Xxxxxx X. Xxxxxxxx, President
Address:
--------------------------------
J. Xxxxxxx Xxxxx
--------------------------------
Address: HGF PARTNERSHIP II
--------------------------------
-------------------------------- By:
--------------------------------------
Xxxxx Xxxxxxxx, Managing Partner
Address:
--------------------------------
Xxxxxxxx Xxxx
--------------------------------
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Address:
--------------------------------
Xxx X. Xxxxxxxx
--------------------------------
Address:
--------------------------------
Xxx X. Xxxxxxxx, Trustee for G & P
--------------------------------
Address: [G & P IRREVOCABLE TRUST]
--------------------------------
-------------------------------- By:
--------------------------------------
Address: FIRST AUSTRALIAN RESOURCES, INC.
--------------------------------
-------------------------------- By:
--------------------------------------
[Name, Title]
Address: XXXXXXX XXXXX COMPANY
--------------------------------
-------------------------------- By:
--------------------------------------
[Name, Title]
Address: BH RESOURCES L.C.
--------------------------------
-------------------------------- By:
--------------------------------------
[Name, Title]
Address:
--------------------------------
Xxxxxxx X. Xxxxxxx
--------------------------------
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Address: RABOIL RESOURCES, L.L.C.
--------------------------------
-------------------------------- By:
--------------------------------------
[Name, Title]
Address:
--------------------------------
Xxxxx X. Xxxxx
--------------------------------
Address:
--------------------------------
Xxxxxx Xxxxxxxxx
--------------------------------
Address:
--------------------------------
Xxxxx X. Xxxx
--------------------------------
Address: HUNTINGFIELD CORPORATION
--------------------------------
-------------------------------- By:
--------------------------------------
[Name, Title]
Address: M & M INVESTMENTS
--------------------------------
-------------------------------- By:
--------------------------------------
[Name, Title]
Address:
--------------------------------
X. Xxxxxx May
--------------------------------
Address:
--------------------------------
Xxxxx Xxxxxxx
--------------------------------
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Address:
--------------------------------
Xxxxx X. Xxxxx
--------------------------------
Address:
--------------------------------
Xxxxxx Xxxx
--------------------------------
Address:
--------------------------------
Xxxxxx X. Xxxxxxx, XX
--------------------------------
Address:
--------------------------------
Xxxxxxx X. Xxxxxx
--------------------------------
Address:
--------------------------------
Xxx Xxxxxxxx
--------------------------------
Address:
--------------------------------
Xxx X. Xxxxxxxxx
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Address: XXXXX CREEK RESOURCES-A, L.L.C.
--------------------------------
-------------------------------- By:
---------------------------------------
[Name, Title]
Address: XXXXX CREEK RESOURCES-C, L.L.C.
--------------------------------
-------------------------------- By:
---------------------------------------
[Name, Title]
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Address:
--------------------------------
Xxxxx X. Xxxxxxxxxx
--------------------------------
Address:
--------------------------------
Xxxxxxx Xxxxxx
--------------------------------
Address:
--------------------------------
Xxxx Xxxxxxxxxxxxx
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Address:
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Xxxxx Xxxxxxxx Xxxxx
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EXHIBIT D
AGREEMENT AND PLAN
OF MERGER
DATED AS OF _________________, 1996
84
TABLE OF CONTENTS
ARTICLE I
THE MERGER
Section 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.4 Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.5 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.6 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.7 Additional Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.8 Conversion of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.9 No Surrender of Certificates; Stock Transfer Books . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II
ACTIONS TO BE TAKEN IN CONNECTION WITH THE MERGER
Section 2.1 Company Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.2 Assumption of Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.3 Reservation of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
CONDITIONS OF MERGER
Section 3.1 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV
COVENANTS
Section 4.1 Election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.2 Listing of Acquisition Common Stock and Acquisition Series A Preferred Stock 6
Section 4.3 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.4 Change in Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.5 Change of Name of Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
[Section 4.6 Contribution of Treasury Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
[Section 4.7 Repurchase of Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V
TERMINATION AND AMENDMENT
Section 5.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5.2 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 6.2 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 6.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Exhibit A -- Certificate of Designations of Series B Preferred Stock
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of
____________, 1996, is among Xxxxxxxx Petroleum Corporation, a Delaware
corporation (the "Company"), Xxxxxxxx Acquisition II, Inc., a Delaware
corporation ("Acquisition") and a direct, wholly owned subsidiary of the
Company, and Xxxxxxxx Sub I, Inc., a Delaware corporation (the "Merger Sub")
and a direct, wholly owned subsidiary of Acquisition.
RECITALS
A. As of the date hereof, the Company's authorized capital stock
consists of (i) 100,000,000 shares of common stock, par value $.20 per share
("Company Common Stock"), of which 41,804,510 shares are issued and
outstanding, and (ii) 10,000,000 shares of preferred stock, $1.00 par value, of
which 1,175,000 shares have been designated as the Company's Series A
Convertible Preferred Stock (the "Company Series A Preferred Stock") and
801,147 are issued and outstanding.
B. At the Effective Time (as hereafter defined) of the Merger (as
hereafter defined), Acquisition's authorized capital stock will be identical to
that of the Company, except (i) the Company Common Stock and the Company Series
A Preferred Stock will be named "Acquisition Common Stock" and "Acquisition
Series A Preferred Stock", respectively, and (ii) Acquisition will designate
750,000 shares as Series B Convertible Preferred Stock, $1.00 par value (the
"Acquisition Series B Preferred Stock").
C. The designations, rights and preferences, and the
qualifications, limitations and restrictions of Acquisition Series A Preferred
Stock, and the Acquisition Common Stock are the same as those of the Company
Series A Preferred Stock, and the Company Common Stock.
D. The certificate of incorporation and the bylaws of
Acquisition contain provisions identical to the certificate of incorporation
and bylaws of the Company (other than with respect to matters excepted by
Section 251(g) of the General Corporation Law of the State of Delaware (the
"DGCL")).
E. The directors of the Company immediately prior to the Merger
will be the directors of Acquisition immediately after the Merger.
F. Acquisition and the Merger Sub are newly formed corporations
organized for the purpose of participating in the transactions herein
contemplated.
G. The Company desires to create a new holding company structure
by merging the Merger Sub with and into the Company with the Company being the
surviving corporation, and converting each outstanding share of Company Common
Stock and Company Series A Preferred Stock into a like number of shares of
Acquisition Common Stock and Acquisition Series A Preferred Stock,
respectively, all in accordance with the terms of this Agreement.
H. The Boards of Directors of Acquisition, the Merger Sub and the
Company have
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approved this Agreement and the Merger of the Merger Sub with and into the
Company upon the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained in this Agreement, and intending to be legally bound
hereby, the Company, Acquisition and the Merger Sub hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. In accordance with Section 251(g) of the
DGCL and subject to and upon the terms and conditions of this Agreement, the
Merger Sub shall, at the Effective Time, be merged with and into the Company,
the separate corporate existence of the Merger Sub shall cease and the Company
shall continue as the surviving corporation. The Company as the surviving
corporation after the Merger is hereinafter sometimes referred to as the
"Surviving Corporation." At the Effective Time, the effect of the Merger shall
be as provided in Section 259 of the DGCL.
Section 1.2 Effective Time. The Merger shall become effective
upon the filing on or before _______________________, of a copy of this
Agreement with the Secretary of State of the State of Delaware (the time of
such filing being referred to herein as the "Effective Time").
Section 1.3 Certificate of Incorporation. From and after the
Effective Time, the Certificate of Incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation until thereafter amended as provided
by law; provided, however, that, from and after the Effective Time:
(a) Article One thereof shall be amended so as to read in its
entirety as follows:
"First: The name of this Corporation is [________________]"
(b) Article Fourth thereof shall be amended so as to read in its
entirety as follows:
"Fourth: The aggregate number of shares which the Corporation
shall have authority to issue shall be one thousand (1,000),
consisting of one thousand (1,000) shares of Common Stock, par value
$.20 per share."
(c) A new Article [____________] shall be added thereto which
shall be and read in its entirety as follows:
"____________: Any act or transaction by or involving the
Corporation that requires for its adoption under the General
Corporation Law of the State of Delaware or its certificate of
incorporation the approval of the stockholders of the Corporation
shall, by virtue of this reference to Section 251(g) of the General
Corporation Law of the State of Delaware, require, in addition, the
approval of the stockholders of Xxxxxxxx Petroleum Corporation, a
Delaware corporation, or any
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successor thereto by merger, so long as such corporation or its
successor is the ultimate parent, directly or indirectly, of this
Corporation, by the same vote that is required by the General
Corporation Law of the State of Delaware and/or the certificate of
incorporation of this Corporation. For the purposes of this Article
___________, the term "parent" shall mean a corporation that owns,
directly or indirectly, at least a majority of the outstanding capital
stock of this Corporation entitled to vote in the election of
directors of this Corporation without regard to the occurrence of any
contingency."
Section 1.4 Bylaws. From and after the Effective Time, the
bylaws of the Company, as in effect immediately prior to the Effective Time,
shall be the bylaws of the Surviving Corporation until thereafter amended as
provided by law; provided, however, that, from and after the Effective Time,
the bylaws shall be amended to provide that the number of directors which shall
constitute the entire Board shall be __________.
Section 1.5 Directors. The directors of the Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation and will hold office from the Effective Time until their
successors are duly elected or appointed and qualified in the manner provided
in the certificate of incorporation and the bylaws of the Surviving Corporation
or as otherwise provided by law.
Section 1.6 Officers. The officers of the Merger Sub immediately
prior to the Effective Time shall be the initial officers of the Surviving
Corporation and will hold office from the Effective Time until their successors
are duly elected or appointed and qualified in the manner provided in the
certificate of incorporation and the bylaws of the Surviving Corporation or as
otherwise provided by law.
Section 1.7 Additional Actions. Subject to the terms of this
Agreement, the parties hereto shall take all such reasonable and lawful action
as may be necessary or appropriate in order to effectuate the Merger. If, at
any time after the Effective Time, the Surviving Corporation shall consider or
be advised that any deeds, bills of sale, assignments, assurances or any other
actions or things are necessary or desirable to vest, perfect or confirm, of
record or otherwise, in the Surviving Corporation its right, title or interest
in, to or under any of the rights, properties or assets of either of the Merger
Sub or the Company acquired or to be acquired by the Surviving Corporation as a
result of, or in connection with, the Merger or otherwise to carry out this
Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of each of the
Merger Sub and the Company, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of each of the Merger
Sub and the Company or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out this Agreement.
Section 1.8 Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Acquisition, Merger
Sub, the Company or the holder of any of the following securities:
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(a) Each share of Company Common Stock and Company Series
A Preferred Stock, issued and outstanding immediately prior to the
Effective Time shall be converted into and thereafter represent one
duly issued, fully paid and nonassessable share of Acquisition Common
Stock and Acquisition Series A Preferred Stock, respectively.
(b) Each share of common stock, par value $.20 per
share, of the Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted into and thereafter represent
one duly issued, fully paid and nonassessable share of common stock,
par value $.20 per share, of the Surviving Corporation.
(c) From and after the Effective Time, holders of
certificates formerly evidencing Company Common Stock or Company
Series A Preferred Stock shall be cancelled and cease to have any
rights as stockholders of the Company, except as provided by law;
provided, however, that such holders shall have the rights set forth
in Section 1.9 herein.
Section 1.9 No Surrender of Certificates; Stock Transfer Books.
As a result of the provisions of Section 1.3 herein, in conjunction with the
provisions of a certificate of amendment of certificate of incorporation of
Acquisition to be filed with the Secretary of State of the State of Delaware
and to become effective at the Effective Time, the corporate name of
Acquisition immediately following the Effective Time will be the same as the
corporate name of the Company immediately prior to the Effective Time.
Accordingly, until thereafter surrendered for transfer or exchange in the
ordinary course, each outstanding certificate that, immediately prior to the
Effective Time, evidenced Company Common Stock shall be deemed and treated for
all corporate purposes to evidence the ownership of the number of shares of
Acquisition Common Stock into which such shares of Company Common Stock were
converted pursuant to the provisions of Section 1.8 herein.
ARTICLE II
ACTIONS TO BE TAKEN IN
CONNECTION WITH THE MERGER
Section 2.1 Company Indebtedness.
As of the Effective Time, Acquisition and the Company shall, with
respect to all outstanding indebtedness of the Company, (collectively, the
"Indebtedness") execute, acknowledge and deliver an assumption of liabilities
pursuant to which Acquisition shall assume and agree to perform all obligations
of the Company relating to the Indebtedness.
Section 2.2 Assumption of Benefit Plans. Acquisition hereby
agrees that from and after the Effective Time, Acquisition will assume and
agree to perform all obligations of the Company pursuant to the Xxxxxxxx
Petroleum Corporation 1995 Stock Option Plan and the 1995 Xxxxxxxx Petroleum
Corporation 1995 Nonemployee Directors Stock Option Plan (the "Benefit Plans")
except that the terms "Company" and "Stock" as used in the Benefit Plans shall,
from and after the Effective Time, be deemed to refer to Acquisition and
Acquisition Company Common Stock, respectively. Acquisition Common Stock into
which shares of Company Common Stock
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issued pursuant to the Benefit Plans are converted shall, to the extent such
Company Common Stock was then subject to restrictions imposed under the Benefit
Plan, also be subject to the same restrictions.
Section 2.3 Reservation of Shares. On or prior to the Effective
Time, Acquisition will reserve sufficient shares of Acquisition Common Stock to
provide for the issuance of Acquisition Common Stock upon exercise of options
outstanding under the Benefit Plan.
ARTICLE III
CONDITIONS OF MERGER
Section 3.1 Conditions Precedent. The obligations of the parties
to this Agreement to consummate the Merger and the transactions contemplated by
this Agreement shall be subject to fulfillment of each of the following
conditions:
(a) Prior to the Effective Time, the Acquisition Common
Stock to be issued pursuant to the Merger shall have been approved for
listing, upon official notice of issuance, by the New York Stock
Exchange and the Acquisition Series A Preferred Stock shall have been
approved for listing, upon official notice of issuance, by the [Nasdaq
Small Cap Market].
(b) Prior to the Effective Time, no order, statute, rule,
regulation, executive order, injunction, stay, decree, judgment or
restraining order shall have been enacted, entered, promulgated or
enforced by any court or governmental or regulatory authority or
instrumentality which prohibits or makes illegal the consummation of
the Merger or the transactions contemplated hereby.
ARTICLE IV
COVENANTS
Section 4.1 Election of Directors. Immediately prior to the
Effective Time, the Company, in its capacity as the sole stockholder of
Acquisition, will remove each of the then directors of Acquisition, will effect
such amendments to the bylaws of Acquisition as are necessary to increase the
number of directors of Acquisition to equal the number of directors of the
Company and will elect each person who is then a member of the board of
directors of the Company as a director of Acquisition, each of whom shall serve
until the next annual meeting of shareholders of Acquisition and until his
successor shall have been elected and qualified. Such actions shall be
effective as of the Effective Time.
Section 4.2 Listing of Acquisition Common Stock and Acquisition
Series A Preferred Stock. Acquisition will use its best efforts to obtain, at
or before the Effective time, authorization to list, upon official notice of
issuance, on the New York Stock Exchange Acquisition Common Stock and on the
Nasdaq Small Cap Market, Acquisition Series A Preferred Stock, issuable
pursuant to the Merger.
Section 4.3 Employee Benefit Plans. The Company and Acquisition
will take or cause
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to be taken all actions necessary or desirable in order for Acquisition to
assume the Benefit Plan and to assume (or become a participating employer in)
each other existing employee benefit plan and agreement of the Company, with or
without amendments, or to adopt comparable plans, all to the extent deemed
appropriate by the Company and Acquisition and permitted under applicable law.
Section 4.4 Change in Capitalization. Prior to the Effective
Time, Acquisition and the Company agree to take all action necessary or
desirable under the DGCL to amend the Certificate of Incorporation of
Acquisition to authorize 10,000,000 shares of Preferred Stock, $1.00 par value,
issuable in series and 100,000,000 shares of Common Stock, par value $.20, and
to designate 1,175,000 shares of Preferred Stock as Series A Convertible
Preferred Stock having terms and provisions substantially similar to those of
the Company's Series A Convertible Participating Preferred Stock and 750,000
shares of Preferred Stock as Series B Convertible Preferred Stock, having terms
and provisions as set forth in the Certificate of Designations attached as
Exhibit A hereto.
Section 4.5 Change of Name of Acquisition. Acquisition and the
Company will take or cause to be taken all such actions as may be necessary or
desirable to effect an amendment to the Certificate of Incorporation of
Acquisition at the Effective Time changing the name of Acquisition to "Xxxxxxxx
Petroleum Corporation."
ARTICLE V
TERMINATION AND AMENDMENT
Section 5.1 Termination. This Agreement may be terminated and
the Merger contemplated hereby may be abandoned at any time prior to the
Effective Time by action of the Board of Directors of the Company, Acquisition
or the Merger Sub if it should determine that for any reason the completion of
the transactions provided for herein would be inadvisable or not in the best
interest of such corporation or its stockholders. In the event of such
termination and abandonment, this Agreement shall become void and neither the
Company, Acquisition or the Merger Sub nor their respective stockholders,
directors or officers shall have any liability with respect to such termination
and abandonment.
Section 5.2 Amendment. This Agreement may be supplemented,
amended or modified by the mutual consent of the Boards of Directors of the
parties to this Agreement.
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.1 Governing Law. Except with respect to matters
contained herein governed by the DGCL, this Agreement has been executed and
delivered in the State of Texas and shall be governed by and construed and
enforced under the laws of the State of Texas, regardless of the laws that
might otherwise govern under applicable Texas principles of conflicts of law.
Section 6.2 Counterparts. This Agreement may be executed in one
or more counterparts, each of which when executed shall be deemed to be an
original but all of which
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shall constitute one and the same agreement.
Section 6.3 Entire Agreement. This Agreement, including the
documents and instruments referred to herein, constitutes the entire agreement
and supersedes all other prior agreements and undertakings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof.
IN WITNESS WHEREOF, The Company, Acquisition and the Merger Sub have
caused this Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.
XXXXXXXX PETROLEUM CORPORATION
By:
Name:
Title:
XXXXXXXX ACQUISITION II, INC.
By:
Name:
Title:
XXXXXXXX SUB I, INC.
By:
Name:
Title:
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EXHIBIT E
SUBSCRIPTION CERTIFICATE
Xxxxxxxx Acquisition II, Inc.
Xxxxxxxx Petroleum Corporation
0000 Xxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Ladies and Gentlemen:
Pursuant to that certain Exchange Agreement, dated October 22, 1996,
by and between La/Cal Energy Partners II ("La/Cal"), a Louisiana general
partnership, certain working interest owners named in Schedule I of the
Exchange Agreement (the "Working Interest Owners"), Xxxxxxxx Acquisition II,
Inc., a Delaware corporation (the "Company") and wholly owned subsidiary of
Xxxxxxxx Petroleum Corporation, a Delaware corporation ("Xxxxxxxx"), and
Xxxxxxxx (the "Exchange Agreement"), I, the undersigned, being a partner of
La/Cal or a Working Interest Owner, as the case may be, (a "Subscriber")
understand that in return for my consent to the exchange of the Assets I am to
receive, either directly or indirectly as a partner in La/Cal, consideration
consisting, in part, of shares of Company Series B Convertible Preferred Stock
(the "Preferred Shares"). I understand that the aggregate number of Preferred
Shares which I am to receive represents an equity interest in the Company,
subject to certain limitations set forth in the Exchange Agreement and the
Certificate of Designations of Series B Convertible Preferred Stock of Xxxxxxxx
Petroleum Corporation (the "Certificate of Designations"). I acknowledge that
the Company's distribution of the Preferred Shares is subject to certain terms
and conditions as set forth in the Company's Private Placement Confidential
Offering Memorandum dated November 4, 1996, as amended and supplemented from
time to time (the "Memorandum").
1. Representations and Warranties of the Subscriber. I hereby
represent and warrant to the Company and Xxxxxxxx as follows:
A. I am authorized to enter into this agreement and to
consummate the exchange of assets for the Preferred Shares and the other
consideration described in the Exchange Agreement; I am the sole party in
interest under this agreement and am not acquiring the Preferred Shares as an
agent or otherwise for any other person;
B. All information I have provided to the Company
concerning my investment in the Preferred Shares, including, without
limitation, the information contained herein, is true and correct as of the
date hereof.
C. I have examined before the date hereof all documents
I have requested from the Company to the extent such documents are (i) relevant
to this transaction, and (ii) possessed by the Company or obtainable by the
Company without unreasonable effort or expense.
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D. I ACKNOWLEDGE THAT NEITHER THE COMPANY NOR ANY OF ITS
AGENTS, EMPLOYEES OR AFFILIATES HAS MADE ANY REPRESENTATIONS OR WARRANTIES,
ORAL OR OTHERWISE, CONCERNING THE COMPANY OR THE OFFERING, OTHER THAN THOSE
CONTAINED IN THE MEMORANDUM. IN ACCEPTING THE PREFERRED SHARES, I AM NOT
RELYING UPON ANY INFORMATION, OTHER THAN THE RESULTS OF MY OWN INDEPENDENT
REVIEW OF THE MEMORANDUM AND EXHIBITS THERETO, THE EXCHANGE AGREEMENT, THE
CERTIFICATE OF DESIGNATIONS, AND ANY OTHER WRITTEN INFORMATION PROVIDED TO ME
AT MY REQUEST BY THE COMPANY.
E. I have received, analyzed and reviewed the
Memorandum, the Exchange Agreement, the Certificate of Designations and the
documents relating thereto and have had an opportunity to ask questions of and
receive answers from the Company, or a person or persons acting on its behalf,
concerning the terms and conditions of this investment, and all such questions
have been answered to my full satisfaction. I have had an opportunity to
obtain all additional information necessary to verify the accuracy of the
foregoing.
F. The address set forth below my signature is the true
and correct address of my residence and I have no present intention of becoming
a resident of any other state or jurisdiction. I understand that my statements
regarding my state of residence are material to the Company.
G. I agree that I will not attempt to dispose of my
Preferred Shares, or any shares of Common Stock or other securities issuable
upon conversion of the Preferred Shares, or any interest therein, unless and
until such securities have been validly registered under the Securities Act of
1933, as amended (the "Securities Act") or the Company has determined that the
intended disposition is exempt from registration under the Securities Act, the
rules and regulations promulgated thereunder, or any applicable state
securities laws or regulations, and the Company may require me to deliver an
opinion of counsel acceptable to it to such effect. Other than as described in
the Exchange Agreement, I understand that the Company is under no obligation to
me to register such offering under the Securities Act. I understand that in the
event I wish to transfer any interest in the Preferred Shares, or any shares
of Common Stock or other securities issuable upon conversion of the Preferred
Shares, I will be responsible for compliance with all conditions on transfer
imposed by any securities administrator of any state and under the Securities
Act and for any expenses incurred by the Company for legal or accounting
services in connection with reviewing any such proposed transfer or issuing
opinions in connection therewith. I understand that the stock certificates
evidencing the Preferred Shares or any shares of Common Stock or other
securities issuable upon conversion of the Preferred Shares, will bear the
following legend:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. WITHOUT SUCH
94
REGISTRATION, SUCH SHARES MAY NOT BE SOLD OR DISTRIBUTED, EXCEPT UPON
DELIVERY TO THE CORPORATION OF AN OPINION OF COUNSEL SATISFACTORY TO
THE CORPORATION THAT REGISTRATION IS NOT REQUIRED FOR SUCH SALE OR
DISTRIBUTION OR THE SUBMISSION TO COUNSEL FOR THE CORPORATION OF SUCH
OTHER EVIDENCE AS MAY DEMONSTRATE TO THE SATISFACTION OF SAID COUNSEL
THAT ANY SUCH SALE OR DISTRIBUTION WILL NOT VIOLATE THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE APPLICABLE STATE SECURITIES LAWS.
I also understand that stop transfer instructions will be given to the
Company's transfer agent in accordance with such restrictions.
H. I understand that no trading market for the Preferred
Shares currently exists or is likely to exist at any time in the future, that
there are substantial restrictions on the transferability of the Preferred
Shares, and that I must bear the economic risk of this investment for a period
of time because the Preferred Shares are not registered under the Securities
Act, and may not be re-sold unless subsequently registered under the Securities
Act or unless an exemption from such registration is available. I understand
that as a consequence of these limitations it may not be possible for me to
liquidate my investment in the event of an emergency, change in circumstances
or other immediate need for cash.
I. I am acquiring the Preferred Shares for my own
account, for investment only, and not with a view toward the resale or
distribution thereof.
J. I am (and in the case of an investor other than an
individual, each beneficial owner of such investor is) either an "accredited
investor," of the type indicated on the attached Accredited Investor
Certificate, or, if I (or such beneficial owners) do not qualify as an
"accredited investor," I (or such beneficial owners) (i) have knowledge of
finance, securities and investments, generally, and experience and skill in
investments based on actual participation, and (ii) my investment in the
Company does not exceed 20% of my (or such beneficial owner's) net worth (or my
joint net worth with my spouse) at the time of the investment.
K. I acknowledge that I have not purchased the
Preferred Shares as a result of any general solicitation or general advertising
(as those terms are used in Rule 502(a) under the Securities Act);
L. I understand that an investment in the Preferred
Shares represents a high degree of risk and is suitable only for those persons
having a substantial net worth, and who can afford to bear such risk. I have
considered carefully the risk factors discussed in the Memorandum attendant to
the purchase of Preferred Shares, and have consulted my own legal, tax and
financial advisors with respect thereto. I have read and understood all of the
risks discussed in the Memorandum and accept the same knowingly and willingly.
95
M. Upon the Company's request, I will execute any
documents as may be reasonably requested in connection with my receipt of the
Preferred Shares.
My representations and warranties set forth in this Section 1 shall
survive the receipt of the shares.
2. Indemnification. I hereby agree to indemnify and hold
harmless the Company and Xxxxxxxx, any corporation or entity affiliated with
the Company or Xxxxxxxx, their respective officers, directors and employees, or
any of their respective professional advisors, from and against any and all
loss, damage, liability or expense (including reasonable attorneys' fees) due
to or arising out of a breach of any of my representations or warranties
contained in this Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Certificate this ____ day of __________, 1996.
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Signature
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Printed Name
Address:
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96
ACCREDITED INVESTOR CERTIFICATE
The undersigned hereby certifies that he is an Accredited Investor as
that term is defined in Rule 501 of Regulation D adopted pursuant to the
Securities Act of 1933, as amended (the "Act"). The specific category(s) of
Accredited Investor applicable to the undersigned is checked below.
_____ a. a natural person whose individual net worth, or joint net
worth with that individual's spouse, at the time of his
purchase exceeds $1,000,000;
____ b. a natural person who had an individual income in excess of
$200,000 in 1994 and 1995 or joint income with that person's
spouse in excess of $300,000 in each of those years and who
reasonably expects to reach the same income level in 1996.
For purposes of this offering, individual income shall equal
adjusted gross income, as reported in the investor's federal
income tax return, less any income attributable to a spouse or
to property owned by the spouse, and as may be further
adjusted in accordance with the rules, regulations and
releases of the Commission;
____ c. a bank as defined in Section 3(a)(2) of the Act, or a savings
and loan association or other institution as defined in
Section 3(a)(5)(A) of the Act, whether acting in its
individual or fiduciary capacity; a broker or dealer
registered pursuant to section 15 of the Securities Exchange
Act of 1934; an insurance company as defined in Section 2(13)
of the Act; an investment company registered under the
Investment Company Act of 1940 (the "1940 Act") or a business
development company as defined in Section 2(a)(48) of the 1940
Act; a Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of
the Small Business Investment Act of 1958; a plan established
and maintained by a state, its political subdivisions, or any
agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan
has total assets in excess of $5,000,000; or an employee
benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974 ("ERISA") if the investment
decision is made by a plan fiduciary, as defined in Section
3(21) of ERISA, which is either a bank, savings and loan
association, insurance company or registered investment
adviser, or if the employee benefit plan has total assets in
excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are
Accredited Investors;
____ d. a private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
____ e. an organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business
trust, or partnership, not formed
97
for the specific purposes of acquiring the securities offered,
with total assets in excess of $5,000,000;
____ f. A director, executive officer, or general partner of the
issuer of the securities being offered or sold, or any
director, executive officer, or general partner of a general
partner of that issuer; or
____ g. A trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the securities offered,
whose purchase is directed by a sophisticated person as
described in Rule 506(b)(2)(ii) of Regulation D adopted
pursuant to the Act; or
____ h. an entity in which all of the equity owners are Accredited
Investors set forth above.
