3DX TECHNOLOGIES INC.
STOCK PURCHASE AGREEMENT
DATED AS OF NOVEMBER 9, 1993
TABLE OF CONTENTS
PAGE
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1. Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 First Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Second Closing. . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Closings of Purchase and Sale . . . . . . . . . . . . . . . . . . . . . 2
2.1 Closings; Closing Dates . . . . . . . . . . . . . . . . . . . . . 2
2.2 Transactions at Closings. . . . . . . . . . . . . . . . . . . . . 2
3. Representations and Warranties of the Company . . . . . . . . . . . . . 3
3.1 Organization, Standing and Qualification. . . . . . . . . . . . . 3
3.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Validity of Stock . . . . . . . . . . . . . . . . . . . . . . . . 4
3.4 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 4
3.6 Authorization; Approvals. . . . . . . . . . . . . . . . . . . . . 5
3.7 No Conflict with Other Instruments. . . . . . . . . . . . . . . . 6
3.8 Patents, Trademarks and Other Intangible Assets . . . . . . . . . 6
3.9 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.10 Title to Properties; Liens and Encumbrances . . . . . . . . . . . 7
3.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.12 Compliance with Other Instruments . . . . . . . . . . . . . . . . 8
3.13 Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.14 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.15 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.16 Private Offering. . . . . . . . . . . . . . . . . . . . . . . . . 9
3.17 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.18 Fees and Commissions. . . . . . . . . . . . . . . . . . . . . . . 9
3.19 Interested Party Transactions . . . . . . . . . . . . . . . . . . 9
3.20 Section 83(b) Elections . . . . . . . . . . . . . . . . . . . . . 10
4. Representations, Warranties and Covenants of the Investors. . . . . . . 10
4.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Investment Representations. . . . . . . . . . . . . . . . . . . . 10
4.3 Investment Experience; Access to Information. . . . . . . . . . . 10
4.4 Absence of Registration . . . . . . . . . . . . . . . . . . . . . 10
4.5 Restrictions on Transfer. . . . . . . . . . . . . . . . . . . . . 11
4.6 Transfer Instructions . . . . . . . . . . . . . . . . . . . . . . 11
4.7 Economic Risk . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 Fees and Commissions. . . . . . . . . . . . . . . . . . . . . . . 11
5. Conditions to Closings of the Investors.. . . . . . . . . . . . . . . . 12
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5.1 Conditions Precedent to each Investor's Investment
on the First Closing Date . . . . . . . . . . . . . . . . . . . . 12
5.2 Conditions Precedent to each Investor's Investment
on the Second Closing Date. . . . . . . . . . . . . . . . . . . . 13
6. Conditions to Closings of Company . . . . . . . . . . . . . . . . . . . 14
7. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.1 Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.2 Accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.3 Financial Statements; Reports . . . . . . . . . . . . . . . . . . 15
7.4 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.5 Public Information. . . . . . . . . . . . . . . . . . . . . . . . 17
7.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.7 Execution of Agreements by Employees of Company . . . . . . . . . 17
7.8 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.9 Right of First Refusal. . . . . . . . . . . . . . . . . . . . . . 18
7.10 Maintenance of Existence and Properties, etc. . . . . . . . . . . 20
8. Registration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.2 Required Registration . . . . . . . . . . . . . . . . . . . . . . 22
8.3 Registration Procedures . . . . . . . . . . . . . . . . . . . . . 22
8.4 Limitations on Required Registrations . . . . . . . . . . . . . . 24
8.5 Incidental Registration . . . . . . . . . . . . . . . . . . . . . 25
8.6 Limitations on Incidental Registration. . . . . . . . . . . . . . 25
8.7 Designation of Underwriter. . . . . . . . . . . . . . . . . . . . 26
8.8 Form S-3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.9 Cooperation by Prospective Sellers. . . . . . . . . . . . . . . . 27
8.10 Expenses of Registration. . . . . . . . . . . . . . . . . . . . . 27
8.11 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.12 Rights That May Be Granted to Subsequent Investors. . . . . . . . 30
8.13 Transfer of Registration Rights . . . . . . . . . . . . . . . . . 31
8.14 "Stand-Off" Agreement . . . . . . . . . . . . . . . . . . . . . . 31
8.15 Delay of Registration . . . . . . . . . . . . . . . . . . . . . . 31
9. Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10. Transfers of Securities by Investors. . . . . . . . . . . . . . . . . . 33
11. Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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13. Survival of Agreements. . . . . . . . . . . . . . . . . . . . . . . . . 35
14. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15. Modifications; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 36
16. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
17. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . 37
18. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
19. Execution and Counterparts. . . . . . . . . . . . . . . . . . . . . . . 38
20. Governing Law and Severability. . . . . . . . . . . . . . . . . . . . . 38
21. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SCHEDULES
1 - Investors
3.2 - Capitalization
3.5 - Financial Statements
3.8 - Patents, Trademarks, etc.
3.9 - Litigation
3.10 - Liens and Encumbrances
3.11 - Taxes
3.12 - Compliance
3.14 - Contracts
3.18 - Fees and Commissions
3.19 - Interested Party Transactions
EXHIBITS
A - Form of Restated Certificate of Incorporation
B - Form of Proprietary Information, Inventions and Non-Solicitation
Agreement
C - Form of Amended and Restated Co-Sale Agreement
D-1 - Form of Amendment No. 1 to Stock Purchase and Restriction Agreement
(C. Xxxxxx Xxxxx)
D-2 - Form of Amendment No. 1 to Stock Purchase and Restriction Agreements
(Xxxxxxx X. Xxxxxx and Xxxxx X. Xxxxxx)
E - Form of Xxxxxx Xxxx & Xxxxxx Opinion
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F - Form of Escrow Agreement
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STOCK PURCHASE AGREEMENT
Agreement, dated as of November 9, 1993, among 3DX TECHNOLOGIES INC.
(formerly Novera Energy Inc.), a Delaware corporation (the "Company"), with
an office at 00000 Xxxx Xxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000-0000, and
the investors identified on Schedule 1 hereto (individually an "Investor" and
collectively, the "Investors"), and (although they are also Investors
hereunder) as founders of the Company and not as Investors, solely for the
purposes of Sections 8, 11 and 15 hereof, C. Xxxxxx Xxxxx, Xxxxxxx X. Xxxxxx
and Xxxxx X. Xxxxxx (collectively, the "Founders").
W I T N E S S E T H:
WHEREAS, the Investors desire to purchase shares of Common Stock, $.01
par value (the "Common Stock"), and Redeemable Preferred Stock, Series B,
$.01 par value (the "Series B Preferred"), of the Company, having the rights,
preferences, privileges and restrictions set forth in the Company's Restated
Certificate of Incorporation in the form attached hereto as Exhibit A (the
"Restated Certificate") and incorporated herein by reference, and the Company
desires to sell to the Investors shares of Common Stock and Series B
Preferred (collectively, the "Stock") in units (the "Units") each consisting
of one share of Series B Preferred and 5.8442 shares of Common Stock;
NOW, THEREFORE, the parties agree as follows:
1. PURCHASE AND SALE.
1.1 FIRST CLOSING. Subject to the provisions of this Agreement, on
the First Closing Date (as hereinafter defined) the Company will sell to the
Investors, and the Investors will purchase from the Company, an aggregate of
up to 29,000 Units consisting of an aggregate of 29,000 shares of Series B
Preferred and 169,482 shares of Common Stock, each Investor to purchase the
number of Units set forth opposite such Investor's name under the heading
"Units to be Purchased at First Closing" on Schedule 1 annexed hereto, at a
purchase price per Unit consisting of $94.1558 per share of Series B
Preferred and $1.00 per share of Common Stock.
1.2 SECOND CLOSING. Subject to the provisions of this Agreement, on
the Second Closing Date (as hereinafter defined) the Company will sell to the
Investors, and the Investors will purchase from the Company, an aggregate of
25,000 Units consisting of an aggregate of 25,000 shares of Series B
Preferred and 146,105 shares of Common Stock, each Investor to purchase the
number of Units set forth opposite such Investor's name under the heading
"Units to be Purchased at Second Closing" on Schedule 1 annexed hereto, at a
purchase price per Unit consisting of $94.1558 per share of Series B
Preferred and $1.00 per share of Common Stock.
2. CLOSINGS OF PURCHASE AND SALE.
2.1 CLOSINGS; CLOSING DATES. (a) The purchase and sale of the Units
pursuant to Section 1.1 (the "First Closing") shall take place at the offices
of Xxxxxx Xxxx & Xxxxxx, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 1:00
p.m. local New York time on November 9, 1993 or at such other place and time
as may be agreed upon by the Company and the Investors (the "First Closing
Date").
(b) In the event the Company does not at the First Closing sell and
issue, and/or receive commitments to purchase, all 54,000 Units authorized
herein to be issued and sold to the Investors, the Company may sell and issue
additional Units at a subsequent closing (hereinafter referred to as the
"Deferred Closing"), PROVIDED that such sales occur within 15 days of the
First Closing described in Section 2.1 above at the same price and on the
same terms and conditions set forth herein and that the total number of Units
shall not exceed the number of Units authorized to be sold at the First
Closing and PROVIDED FURTHER that for purposes of such Deferred Closing, each
of the conditions precedent set forth in Section 5.1 hereof shall be deemed
to have been met without any further action necessary on the part of the
Company or its counsel. At the Deferred Closing, upon execution of this
Agreement, the Amended and Restated Co-Sale Agreement referred to in Section
5.1(g), and the Escrow Agreement (as defined in Section 5.1(q)), a purchaser
shall become a party hereto and shall be included within the meaning of
Investor hereunder and Schedule 1 shall be amended to include such Investor,
without any further consent or action on the part of the Investors.
(c) The purchase and sale of the Units pursuant to Section 1.2
(the "Second Closing") shall take place at the offices of Xxxxxx Xxxx &
Xxxxxx, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or such other place as may
be agreed upon by the Company and the Investors at 1:00 p.m. local New York
time on such date (following at least ten (10) business days' notice from the
Company) as all of the conditions set forth in Section 5.2 shall be satisfied
or waived by Investors holding at least 66-2/3% in interest of the Units
purchased by all Investors at the First Closing, but in no event later than
November 1, 1994 (the "Second Closing Date").
2.2 TRANSACTIONS AT CLOSINGS. (a) At the First Closing, the
Company shall deliver (i) to Xxxxxx Xxxx & Xxxxxx, as escrow agent (the
"Escrow Agent") under the Escrow Agreement (as defined in Section 5.1(q)
hereof), certificates representing the Stock being purchased hereunder by the
Investors other than Landmark Graphics Corporation ("Landmark") at such
Closing, to be held by the Escrow Agent under the terms of the Escrow
Agreement until the Second Closing and (ii) to Landmark, certificates
representing the Stock being purchased by Landmark at the First Closing, in
each case against delivery by the Investor of a wire transfer of immediately
available funds or a check in the amount of the purchase price therefor,
except as otherwise agreed to pursuant to Section 5.1(k) hereof. The parties
hereto agree that (i) performance by each of the Investors at the Second
Closing of his or its obligation to purchase the shares of Stock to be
purchased by such Investor at the Second Closing is critical to the Company,
(ii) the Company will be damaged by an Investor's non-
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compliance with its obligations hereunder; and (iii) damages are not readily
calculable. Accordingly, each Investor (other than Landmark) agrees that, in
the event such Investor does not fulfill his obligation to so purchase the
Stock at the Second Closing (the "Defaulting Investor"), the Company shall
repurchase all of the Stock purchased by the Defaulting Investor at the First
Closing for $1.00. The parties agree that the foregoing repurchase is an
appropriate remedy for and bears a reasonable relationship to the damage that
would be suffered by the Company as a result of the breach by a Defaulting
Investor of its obligations, and that such repurchase is not a penalty. Each
of the parties hereby agrees that at the Second Closing, the Escrow Agent
shall deliver to the Company certificates representing the Stock purchased by
each Defaulting Investor at the First Closing, against delivery by the
Company of an amount equal to the product of (x) $1.00 multiplied by (y) the
number of Defaulting Investors, all pursuant to the terms and conditions of
the Escrow Agreement.
(b) At the Second Closing, the Company shall deliver to each Investor
certificates representing the Stock being purchased hereunder at such
Closing, against delivery by the Investor of a wire transfer of immediately
available funds or a certified check in the amount of the purchase price
therefor, except as otherwise agreed to pursuant to Section 5.1(k) hereof.
In addition, at the Second Closing, the Escrow Agent shall deliver
certificates for the Stock purchased at the First Closing or the Deferred
Closing by each Investor (other than Landmark) to each Investor who at the
Second Closing purchases the Units to be purchased by him or it on the Second
Closing Date, all pursuant to the terms and conditions of the Escrow
Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants that:
3.1 ORGANIZATION, STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has full corporate power and authority to
own, lease and operate its property and assets and to conduct its business as
currently conducted and as proposed to be conducted by it as contemplated by
the Business Plan of the Company dated June 1, 1993, as modified by financial
statements dated September 27, 1993 (as so modified, the "Business Plan").
The Company has full corporate power and authority to enter into and perform
its obligations under this Agreement and to carry out the transactions
contemplated by this Agreement. The Company is duly qualified to do business
as a foreign corporation and is in good standing in Texas and the nature of
its business and its ownership or leasing of property do not require that the
Company become so qualified as a foreign corporation in any other state or
jurisdiction.
3.2 CAPITALIZATION. The authorized capital stock of the Company, as
of the Closing Date, will consist of (a) 300,000 shares of preferred stock
(the "Preferred Stock"), of which (i) 100,000 shares are designated
Convertible Preferred Stock, Series A ("Series A Preferred"), all of which
were issued and outstanding prior to the First Closing Date and all of which
will have been exchanged for shares of Common Stock prior to the First
Closing Date
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pursuant to the Exchange Agreement (as defined in Section 5.1(n) hereof), and
(ii) 200,000 shares will be designated Series B Preferred, of which no shares
will be issued and outstanding prior to the First Closing Date; (b) 100,000
shares of Class A Common Stock, par value of $.01 per share ("Class A Common
Stock"), of which no shares are issued or outstanding and all of which shares
are reserved for issuance upon conversion of the Series A Preferred; and (c)
1,000,000 shares of Common Stock, of which (i) 262,339 shares are issued and
outstanding as of the date of this Agreement and (ii) 100,000 shares are
reserved for issuance upon conversion of the Class A Common Stock. The list
set forth in Schedule 3.2 hereto is a complete and correct list of all
security holders of the Company, showing their holdings of issued and
outstanding shares of Company securities (including options) as of the date
of this Agreement. The outstanding shares of Common Stock and Series A
Preferred are duly authorized and validly issued in accordance with
applicable law (including federal and state securities laws), fully paid and
non-assessable. Except as set forth in this Agreement, holders of shares of
the Company's capital stock have no preemptive rights. Except for the
transactions contemplated by this Agreement and the Exchange Agreement, and
as set forth on Schedule 3.2 hereto, there are (a) no outstanding warrants,
options, convertible securities or rights to subscribe for or purchase any
capital stock or other securities from the Company, (b) no voting trusts or
voting agreements among, or irrevocable proxies executed by, stockholders of
the Company, (c) no existing rights of stockholders to require the Company to
register any securities of the Company or to participate with the Company in
any registration by the Company of its securities, (d) no agreements among
stockholders providing for the purchase or sale of the Company's capital
stock and (e) no obligations (contingent or otherwise) of the Company to
purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other distribution in
respect thereof.
3.3 VALIDITY OF STOCK. The Series B Preferred and the Common Stock,
when issued, sold, and delivered in accordance with the terms of this
Agreement, will be duly and validly issued, fully paid and non-assessable.
3.4 SUBSIDIARIES. The Company does not own or control, directly or
indirectly, any other corporation, partnership, association or business
entity.
3.5 FINANCIAL STATEMENTS. The Company has furnished the Investors
with its (i) an unaudited balance sheet as of August 31, 1993 (the "Unaudited
Balance Sheet") and (ii) unaudited statements of income (loss) for the period
then ended (the "Unaudited Statements of Income"), (all of which in (i) and
(ii) are collectively referred to as the "Financial Statements" and are
attached hereto as Schedule 3.5). Except as described in Schedule 3.5, the
Financial Statements are true and correct in all material respects, are in
accordance with the books and records of the Company and have been prepared
in accordance with generally accepted accounting principles ("GAAP") and
fairly and accurately present in all material respects the financial position
of the Company as of such date and the results of its operations for the
periods then ended, provided that the Financial Statements may not contain
all footnotes required by GAAP and the Unaudited Balance Sheet and Unaudited
Statements of
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Income are subject to normal year-end audit adjustments, which the Company
does not have reason to believe will be material in the aggregate. Except as
described in Schedule 3.5, the Company has no liabilities, debts or
obligations, whether accrued, absolute or contingent other than (i)
liabilities reflected or reserved against in the Unaudited Balance Sheet, and
(ii) liabilities incurred since August 31, 1993 in the ordinary and usual
course of business. Since August 31, 1993, except as contemplated by this
Agreement the Company has been operated in the ordinary and usual course of
business, and there has not been:
(i) any change in the (x) assets, liabilities, condition
(financial or otherwise) or business of the Company from that reflected in
the Unaudited Balance Sheet, or (y) the trend of operating results of the
Company from that reflected in the Unaudited Statements of Income;
(ii) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties,
condition (financial or otherwise), operating results, prospects or business
of the Company (as such business is presently conducted and as it is proposed
to be conducted as set forth in the Business Plan;
(iii) any waiver by the Company of a valuable right or of a
material debt owed to it;
(iv) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the
ordinary course of business and that is not individually or in the aggregate
adverse to the assets, properties, condition (financial or otherwise),
operating results or business of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(v) any change or amendment to a material contract or arrangement
by which the Company or any of its assets or properties is bound or subject;
(vi) any material change in any compensation arrangement or
agreement with any employee;
(vii) any payment of dividends or repurchase by the Company of
shares of its capital stock; or
(viii) to the Company's knowledge, any other event or condition
of any character that would materially adversely affect the assets,
properties, condition (financial or otherwise), operating results, prospects
or business of the Company (as such business is presently conducted and as it
is proposed to be conducted pursuant to the Business Plan.
3.6 AUTHORIZATION; APPROVALS. All corporate action on the part of the
Company necessary for the authorization, execution, delivery, and performance
of all its obligations under this Agreement and for the authorization,
issuance, and delivery of the
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Common Stock and the Series B Preferred being sold under this Agreement has
been (or will be) taken prior to the Closing. This Agreement, when executed
and delivered by or on behalf of the Company, shall constitute the valid and
legally binding obligation of the Company, legally enforceable against the
Company in accordance with its terms. The Company has obtained or will
obtain prior to the Closing Date all necessary consents, authorizations,
approvals and orders, and has made all registrations, qualifications,
designations, declarations or filings with all federal, state, or other
relevant governmental authorities required on the part of the Company in
connection with the consummation of the transactions contemplated by this
Agreement.
3.7 NO CONFLICT WITH OTHER INSTRUMENTS. The execution, delivery and
performance of this Agreement does not and will not, with or without the
passage of time or giving of notice or both, (i) result in any violation of,
be in conflict with, or constitute a default under, any terms or provisions
of (a) the Company's Restated Certificate or By-laws; (b) any agreement,
contract, understanding, indenture or other instrument to which the Company
is a party, the effect of which would have a material adverse effect on the
Company or would give rise to any right of termination, cancellation or
acceleration; or (c) any statute, rule or governmental regulation applicable
to the Company, or (ii) result in the creation of a security interest, lien,
or other encumbrance on the assets of the Company.
3.8 PATENTS, TRADEMARKS AND OTHER INTANGIBLE ASSETS. (a) Schedule
3.8 hereto is a true and complete list and summary description of all
patents, patent applications, trademarks, service marks, trade names and
copyrights, and licenses and rights to the foregoing presently owned or held
by the Company or used in the Company's business as currently conducted, none
of which is in dispute or in any conflict with the right of any other person
or entity. Except as set forth on Schedule 3.8, the Company (i) owns or has
the right to use, free and clear of all liens, claims and restrictions, all
patents, patent applications, trademarks, service marks, trade names and
copyrights, and licenses and rights with respect to the foregoing, used in
the conduct of its business as now conducted or proposed to be conducted, as
contemplated by the Business Plan, without infringing upon or otherwise
acting adversely to the right or claimed right of any person, corporation or
other entity under or with respect to any of the foregoing and (ii) is not
obligated or under any liability whatsoever to make any payments by way of
royalties, fees or otherwise to any owner or licensor of, or other claimant
to, any patent, trademark, service xxxx, trade name, copyright or other
intangible asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise.
(b) The Company owns or has the unrestricted right to use all
trade secrets, including know-how, inventions, designs, processes, works of
authorship, computer programs (with the exception of normal software
purchased and sold as such) and technical data and information (collectively
herein "Intellectual Property") required for or incident to the development,
operation and sale of all services or products sold or currently proposed to
be sold by the Company, free and clear of and without violating any right,
lien, or claim of
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others, including without limitation, former employees and former employers
of its past and present employees.
(c) The Company has taken security measures to protect the
secrecy, confidentiality and value of all the Intellectual Property, which
measures are reasonable and customary in the industry in which it intends to
operate. Each of the Company's employees and other persons who, either alone
or in concert with others, developed, invented, discovered, derived,
programmed or designed the Intellectual Property, or who has knowledge of or
access to information about the Intellectual Property, has entered into a
written agreement with the Company in the form of Exhibit B hereto, (i)
providing that the Intellectual Property and other information are
proprietary to the Company and are not to be divulged or misused and (ii)
transferring to the Company, without any further consideration being given
therefor by the Company, all of such employee's or other person's right,
title and interest in and to such Intellectual Property and other information
and to all patents, trademarks, service marks, trade names, copyrights,
licenses and rights with respect to such Intellectual Property and
information. The Company is not aware that any of its employees, consultants
or prospective employees who have signed such agreements are in violation
thereof, nor is it aware, or does it have any basis to believe, that any
former employee or consultant has made any claim of ownership in or rights
with respect to any of the Intellectual Property.
Neither the execution or delivery of this Agreement, nor the
carrying on of the Company's business by the employees of the Company as
currently conducted, nor the conduct of the Company's business as proposed to
be conducted as contemplated by the Business Plan, will, to the Company's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated.
3.9 LITIGATION. Except as set forth in Schedule 3.9 hereto, no
action, proceeding or governmental inquiry or investigation is pending or to
the best knowledge of the Company threatened against the Company or any of
its officers, directors or employees (in their capacity as such) or any of
the Company's properties before any court, arbitration board or tribunal or
administrative or other governmental agency, nor is the Company aware that
there is any basis for the foregoing. The foregoing includes, without
limiting its generality, actions pending or known to the Company to be
threatened involving the prior employment of any of the Company's employees
or use by any of them in connection with the Company's business of any
information, property or techniques allegedly proprietary to any of their
former employers. The Company is not a party to or subject to the provisions
of any order, writ, injunction, judgment or decree of any court or
governmental agency or instrumentality.
3.10 TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. Except as set forth
on Schedule 3.10 hereto, the Company has good and marketable title to all of
the properties and assets, both real and personal, tangible and intangible,
that it purports to own, including the properties and assets reflected on the
Financial Statements and they are not subject to any mortgage, pledge, lien,
security interest, conditional sale agreement, encumbrance or charge
7
except routine statutory liens securing liabilities not yet due and payable
and minor liens, encumbrances, restrictions, exceptions, reservations,
limitations and other imperfections that do not materially detract from the
value of the specific asset affected or the present use of such asset.
3.11 TAXES. Except as set forth on Schedule 3.11, the Company has
accurately prepared and timely filed all federal income tax returns and all
state and municipal tax returns that are required to be filed by it (the "Tax
Returns") and has paid or made provision for the payment of all amounts due
pursuant to such returns. The Tax Returns are true and complete in all
material respects. None of the Tax Returns have been audited by the Internal
Revenue Service or any state taxing authority, as the case may be, the
Company has not been advised that any of such Tax Returns will be so audited,
and there are no waivers in effect of the applicable statute of limitations
for any period. No deficiency assessment or proposed adjustment of federal
income taxes or state or municipal taxes of the Company is pending and the
Company has no knowledge of any proposed liability for any tax to be imposed.
3.12 COMPLIANCE WITH OTHER INSTRUMENTS. Except as set forth on
Schedule 3.12 hereto, the Company is not in default (a) under its Restated
Certificate or its By-laws or, in any material respect, under any material
note, indenture, mortgage, lease, agreement, contract, purchase order or
other instrument, document or agreement to which the Company is a party or by
which it or any of its property is bound or affected or (b) with respect to
any order, writ, injunction or decree of any court or any federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, which default, in any such case,
would materially and adversely affect or in the future is reasonably likely
to materially and adversely affect the Company's business, prospects,
condition (financial or otherwise), affairs, operations or assets. To the
best of the Company's knowledge, no third party is in material default under
any material agreement, contract or other instrument, document or agreement
to which the Company is a party or by which it or any of its property is
affected.
3.13 BUSINESS. The Company has all franchises, permits, licenses and
other rights and privileges necessary to permit it to own its property and to
conduct its business as presently conducted, except those the non-obtainment
of which would not have a material adverse effect on its business, properties
or prospects. The Company is not in material violation of any law,
governmental regulation, authorization or order of any public authority
relevant to the ownership of its properties or the carrying on of its
business as presently conducted.
3.14 CONTRACTS. Except as set forth on Schedule 3.14 hereto, the
Company is not a party to any contract, and has no obligation or commitment,
in each case (i) involving aggregate payments by the Company or having an
aggregate value of more than $50,000, or (ii) that is otherwise material to
the business of the Company. Except as set forth on Schedule 3.14 hereto,
the Company has no employment or consulting contracts, deferred compensation
8
agreements or bonus, incentive, profit-sharing, or pension plans currently in
force and effect, or any understanding with respect to any of the foregoing.
3.15 ERISA. The Company does not maintain, sponsor, or contribute to
any program or arrangement that is an "employee pension benefit plan," an
"employee welfare benefit plan," or a "multiemployer plan", as those terms
are defined in Sections 3(2), 3(1), and 3(37) of the Employee Retirement
Income Security Act of 1974, as amended. Except as listed in Schedule 3.14,
the Company has no incentive or benefit arrangements.
3.16 PRIVATE OFFERING. Neither the Company nor anyone acting on its
behalf has offered or will offer Units of the Company or any part thereof or
any similar securities for issuance or sale to, or solicit any offer to
acquire any of the same from, anyone so as to make the issuance and sale of
the Units not exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended (the "Securities Act"). The Company
agrees that neither the Company nor anyone acting on its behalf has offered
or will offer such securities of the Company or any part thereof or any
similar securities for issuance or sale to, or solicit any offer to acquire
any of the same from, anyone so as to make the issuance and sale of the Units
not exempt from the registration requirements of Section 5 of the Securities
Act. None of the shares of the Company's capital stock issued and
outstanding has been offered or sold in such a manner as to make the issuance
and sale of such shares not exempt from such registration requirements, and
all such shares of capital stock have been offered and sold in compliance
with all applicable federal and state securities laws. Assuming that the
Investors' representations and warranties contained in Section 4 of this
Agreement are true and correct at the First and Second Closing, the offer,
issuance and sale of the Stock are and will be exempt from the registration
and prospectus delivery requirements of the Securities Act, as currently in
effect, and have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws, as
currently in effect.
3.17 FULL DISCLOSURE. Neither this Agreement, the Business Plan nor
any other certificates made or delivered in connection herewith contains any
untrue statement of a material fact or omits to state a material fact
necessary to make the statements herein or therein not misleading, in view of
the circumstances in which they were made, PROVIDED, HOWEVER, that the
Company makes no representation or warranty (i) with respect to matters
specified in the Business Plan as based on a source other than the Company or
(ii) with respect to any projections, other than that such projections were
prepared in good faith and that the Company reasonably believes there is a
reasonable basis for such projections. There is no material fact known to
the Company relating to the business, prospects, condition (financial or
otherwise), affairs, operations, or assets of the Company that has not been
disclosed to the Investors in writing by the Company.
9
3.18 FEES AND COMMISSIONS. Except as set forth on Schedule 3.18 hereto, as
to which the Company shall be solely liable, the Company has not retained, or
otherwise authorized to act, any finder, broker, agent, financial advisor or
other intermediary (collectively "Intermediary") in connection with the
transactions contemplated by this Agreement and the Company and the Founders
shall jointly and severally indemnify and hold harmless the Investors from
liability for any compensation to any Intermediary retained or otherwise
authorized to act by, or on behalf of, the Company, other than those
Intermediaries set forth on Schedule 3.18, and the fees and expenses of
defending against such liability or alleged liability.
3.19 INTERESTED PARTY TRANSACTIONS. Except as set forth on Schedule 3.19,
no officer, director or stockholder of the Company or any "affiliate"
or "associate" (as these terms are defined in Rule 405 promulgated under the
Securities Act) of any such person or entity or the Company has or has had,
either directly or indirectly, (a) an interest in any person or entity which
(i) furnishes or sells services or products that are furnished or sold or are
proposed to be furnished or sold by the Company, or (ii) purchases from or
sells or furnishes to the Company any goods or services, or (b) a beneficial
interest in any contract or agreement to which the Company is a party or by
which it may be bound or affected. Except as set forth on Schedule 3.19
hereto, there are no existing arrangements or proposed transactions between
the Company and any officer, director, or holder of more than 5% of the
capital stock of the Company, or any affiliate or associate of any such
person.
3.20 SECTION 83(b) ELECTIONS. To the best of the Company's knowledge, all
elections and notices permitted by Section 83(b) of the Internal Revenue Code of
1986, as amended, and any analogous provisions of applicable state tax laws have
been timely filed by all individuals who have purchased shares of the Company's
Common Stock other than pursuant to any stock option plans of the Company. The
Company makes no representation or warranty regarding the content or accuracy of
any such election or notice.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTORS. Each
Investor, severally and not jointly, represents and warrants that:
4.1 AUTHORIZATION. It has full power and authority to enter into and to
perform this Agreement in accordance with its terms. This Agreement has been
duly executed and delivered by it and constitutes its valid and legally binding
obligation.
4.2 INVESTMENT REPRESENTATIONS. It is acquiring the Stock for its own
account, for investment purposes and not with a view to, or for sale in
connection with, any distribution of such Stock or any part thereof.
4.3 INVESTMENT EXPERIENCE; ACCESS TO INFORMATION. It (a) is an
"accredited investor" as that term is defined in Rule 501(a) promulgated under
the Securities Act, (b) is an investor experienced in the evaluation of
businesses similar to the Company, (c) is able to fend for itself in the
transactions contemplated by this Agreement, (d) has such knowledge and
10
experience in financial, business and investment matters as to be capable of
evaluating the merits and risks of this investment, (e) has the ability to bear
the economic risks of this investment, (f) has been furnished with or has had
access to such information as is specified in subparagraph (b)(2) of Rule 502
promulgated under the Securities Act, (g) was not organized or reorganized for
the specific purpose of acquiring the Stock purchased by it, and (h) has been
afforded prior to the Closing Date the opportunity to ask questions of, and to
receive answers from, the Company and to obtain any additional information, to
the extent the Company has such information or could have acquired it without
unreasonable effort or expense, all as necessary for the Investor to make an
informed investment decision with respect to the purchase of the Stock.
4.4 ABSENCE OF REGISTRATION. It understands that:
(a) The Stock to be sold and issued hereunder is unregistered and may
be required to be held indefinitely unless it is subsequently registered under
the Securities Act, or an exemption from such registration is available.
(b) Except as provided in Section 8, the Company is under no
obligation to file a registration statement with the Securities and Exchange
Commission (the "Commission") with respect to the Stock.
(c) Rule 144 promulgated under the Securities Act ("Rule 144"), which
provides for certain limited sales of unregistered securities, is not presently
available with respect to the Stock, and the Company is under no obligation to
make Rule 144 available except as otherwise provided in Section 7.5.
4.5 RESTRICTIONS ON TRANSFER. (a) It will not offer, sell, pledge,
hypothecate, or otherwise dispose of the Stock unless such offer, sale, pledge,
hypothecation or other disposition is (i) registered under the Securities Act,
or (ii) in compliance with an opinion of counsel to the Company to the effect
that such offer, sale, pledge, hypothecation or other disposition thereof does
not violate the Securities Act, and (b) the certificate(s) representing the
Stock shall bear a legend stating in substance:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER SAID ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION DOES NOT VIOLATE THE PROVISIONS THEREOF.
Upon request of a holder of Stock, the Company shall remove the legend set
forth above from the certificates evidencing such Stock, or issue to such holder
new
11
certificates therefor free of such legend, if with such request the Company
shall have received an opinion of counsel to the Company to the effect that
such Stock is not required by the Securities Act to continue to bear the
legend.
4.6 TRANSFER INSTRUCTIONS. It agrees that the Company may provide for
appropriate transfer instructions to implement the provisions of Section 4.5
hereof.
4.7 ECONOMIC RISK. It understands that it must bear the economic risk of
the investment represented by the purchase of Stock for an indefinite period.
4.8 FEES AND COMMISSIONS. It represents and warrants that it has not
retained, or otherwise authorized to act, any Intermediary in connection with
the transactions contemplated by this Agreement and agrees to indemnify and hold
harmless the Company from liability for any compensation to any Intermediary
retained or otherwise authorized to act by, or on behalf of, the Investor and
the fees and expenses of defending against such liability or alleged liability.
5. CONDITIONS TO CLOSINGS OF THE INVESTORS.
5.1 CONDITIONS PRECEDENT TO EACH INVESTOR'S INVESTMENT ON THE FIRST
CLOSING DATE. The obligation of each Investor on the First Closing Date to
purchase the Units to be purchased under this Agreement by it shall be subject
to each of the following conditions precedent, any one or more of which may be
waived by Investors purchasing at least 66-2/3% of the Units to be purchased at
the First Closing:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Company herein shall be true and accurate on and as of the First
Closing Date as if made on such Date.
(b) PERFORMANCE. The Company shall have performed and complied with all
agreements and conditions contained herein or in other ancillary documents
incident to the transactions contemplated by this Agreement required to be
performed or complied with by it prior to or at the First Closing.
(c) CONSENTS, ETC. The Company shall have secured all permits, consents
and authorizations that shall be necessary or required lawfully to consummate
this Agreement and to issue the Stock to be purchased by each Investor at the
First Closing and the Second Closing, except for those filings to be made after
the First Closing and/or the Second Closing, and the Restated Certificate shall
have been duly filed with the Secretary of State of the State of Delaware.
12
(d) COMPLIANCE CERTIFICATES. The Company shall have delivered to the
Investors or their representative at the First Closing an Officer's Certificate
to the effect that all conditions specified in Sections 5.1(a) through (c) (f),
(h) and (m) have been fulfilled.
(e) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Investors and their counsel, and the
Investors and their counsel shall have received all such counterpart originals
or certified or other copies of such documents as the Investors or their counsel
may reasonably request.
(f) PROPRIETARY INFORMATION, INVENTIONS AND NON-COMPETITION AGREEMENTS.
Each employee of and consultant to the Company shall have executed a proprietary
information, inventions and non-solicitation agreement (a "Proprietary
Information Agreement"), substantially in the form annexed hereto as Exhibit B,
or shall have executed an amendment to his existing form of Proprietary
Information Agreement in form and substance satisfactory to counsel to the
Investors.
(g) AMENDED AND RESTATED CO-SALE AGREEMENT. Each of the Founders and the
Company shall have entered into an Amended and Restated Co-Sale Agreement with
the Investors, substantially in the form annexed hereto as Exhibit C.
(h) AMENDMENT TO STOCK PURCHASE AND RESTRICTION AGREEMENT. Each of the
Founders and the Company shall have entered into an amendment to the various
Stock Purchase and Restriction Agreements, dated as of December 31, 1992,
between each such Founder and the Company, substantially in the form of
Exhibit D-1, in the case of C. Xxxxxx Xxxxx, and D-2, in the case of the other
Founders, providing for revised vesting of the Common Stock owned by such
Founder, restrictions on transfer of such stock, and repurchase by the Company
of such stock on termination of employment.
(i) COMPOSITION OF BOARD OF DIRECTORS. The Board of Directors shall
consist of C. Xxxxxx Xxxxx, Xxx X. Xxxxxxx and Xxxxxx X. Xxxxxx.
(k) FOUNDERS' STOCK PURCHASE. The Founders shall have purchased, in the
aggregate, 400 Units hereunder for an aggregate purchase price of $400,000, and
an additional 50,130 shares of Common Stock under Stock Purchase and Restriction
Agreements for an aggregate purchase price of $50,130, all payable in cash or
pursuant to promissory notes secured by collateral reasonably satisfactory to
the Investors in view of the financial assets of the Founders.
(l) ADDITIONAL DELIVERY BY THE COMPANY. The Company shall have delivered
to the Investors a summary of all accounting transactions that have taken place
in the Company from its inception to the First Closing Date.
13
(m) INSURANCE. The Company shall have obtained (i) catastrophe insurance
covering the Company's offices and material equipment and (ii) an umbrella
liability policy, each of which shall be acceptable to the Investors and each of
which shall be in full force and effect on the First Closing Date.
(n) LANDMARK AGREEMENT. Immediately prior to the First Closing, the
Company and Landmark Graphics Corporation ("Landmark") shall have executed,
delivered and consummated the transactions contemplated by the Purchase and
Exchange Agreement (the "Exchange Agreement") in form and substance reasonably
satisfactory to the Investors, pursuant to which Landmark will have exchanged
its 100,000 shares of Series A Preferred for 63,637 shares of the Company's
Common Stock.
(o) OPINION OF COUNSEL. The Company shall have delivered to the Investors
the opinion of Xxxxxx Xxxx & Xxxxxx, counsel to the Company, in the form annexed
hereto as Exhibit E.
(p) OPERATING CONCEPT PROPOSAL. The Company shall have delivered to the
Investors the Operating Concept Proposal in form and substance satisfactory to
Investors holding at least 66-2/3% of the Series B Preferred to be purchased at
the First Closing.
(q) ESCROW AGREEMENT. The Company, each of the Investors (other than
Landmark) and the Escrow Agent shall have executed and delivered the Escrow
Agreement in the form annexed hereto as Exhibit F (the "Escrow Agreement").
5.2 CONDITIONS PRECEDENT TO EACH INVESTOR'S INVESTMENT ON THE SECOND
CLOSING DATE. The obligation of each Investor on the Second Closing Date to
purchase the Units to be purchased under this Agreement by it shall be subject
to each of the following conditions precedent, any one or more of which may be
waived by Investors purchasing at least 66-2/3% of the Units purchased at the
Second Closing:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Company herein shall be true and accurate on and as of the Second
Closing Date as if made on such Date.
(b) PERFORMANCE. The Company shall have performed and complied with all
agreements and conditions contained herein or in other ancillary documents
incident to the transactions contemplated by this Agreement required to be
performed or complied with by it prior to or at the Second Closing.
(c) COMPLIANCE CERTIFICATES. The Company shall have delivered to the
Investors or their representative at the Second Closing an Officer's Certificate
to the effect that all conditions specified in Sections 5.2(a) and (b) have been
fulfilled.
14
(d) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Investors and their counsel, and the
Investors and their counsel shall have received all such counterpart originals
or certified or other copies of such documents as the Investors or their counsel
may reasonably request.
(e) NOTICE. The Board of Directors of the Company shall have determined,
by affirmative vote or consent of 66-2/3% of its members, that the Company (i)
reasonably anticipates that it will have $200,000 or less in available cash by
the Second Closing Date or (ii) has obligations or opportunities under its
various prospect agreements that it would not otherwise have sufficient
available cash to meet, and the Company shall have delivered a notice thereof to
the Investors.
6. CONDITIONS TO CLOSINGS OF COMPANY. The obligation of the Company on
each Closing Date to issue and sell the Stock to be purchased under this
Agreement shall be subject to each of the following conditions precedent, either
of which may be waived by the Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Investors herein shall be true and accurate on and as of the
applicable Closing Date as if made on such Date.
(b) ESCROW AGREEMENT. Each of the Investors (other than Landmark) and the
Escrow Agent shall have executed and delivered the Escrow Agreement on or prior
to the First Closing Date.
7. AFFIRMATIVE COVENANTS.
7.1 INSPECTION. The Company covenants and agrees that, for so long as an
Investor (together with its limited partners and affiliates) holds at least
4,000 shares of Series B Preferred, or 21,000 shares of Common Stock acquired
hereunder or under the Exchange Agreement, each as adjusted for stock splits,
stock dividends, recapitalizations, reclassifications and similar events
(together herein called "Recapitalization Events")
(a) the Company will permit any authorized representatives of such
Investor free and full access at all reasonable times and upon reasonable notice
to all of the books, records, personnel and properties of the Company, for any
purpose whatsoever, subject to Section 7.8 hereof; and
(b) the Investor shall be entitled to have one designee attend (but
not to vote at) meetings of the Board of Directors (and business discussions
immediately prior to such meeting) as an observer, PROVIDED that such designee
shall not be entitled to be present at those portions of any such meeting that
the Board of Directors will be discussing issues that
15
are competitive with the business of the Investor, such determination to be
made in the Board's good faith business judgment.
7.2 ACCOUNTING. The Company will maintain and cause each of its
Subsidiaries (other than inactive Subsidiaries) to maintain a system of
accounting established and administered in accordance with GAAP consistently
applied, and will set aside on its books and cause each of its operating
Subsidiaries to set aside on its books all such proper reserves as shall be
required by GAAP. For purposes of this Agreement, "Subsidiary" means any
corporation or entity at least a majority of whose voting securities are at the
time owned by the Company, or by one or more Subsidiaries, or by the Company and
one or more Subsidiaries.
7.3 FINANCIAL STATEMENTS; REPORTS. The Company will deliver to the
Investors:
(a) within 45 days after the end of each of the first three quarterly
fiscal periods in each fiscal year of the Company, an unaudited consolidated
balance sheet of the Company and its Subsidiaries as at the end of each such
period and unaudited consolidated statements of (i) income and (ii) cash flow of
the Company and its Subsidiaries for each period and, in the case of the first,
second and third quarterly periods, for the period from the beginning of the
current fiscal year to the end of such quarterly period, setting forth in each
case in comparative form the figures for the corresponding period of the
previous fiscal year, all in reasonable detail and certified, subject to changes
resulting from year-end audit adjustments, by the chief financial officer of the
Company or other appropriate officer, in the event the Company does not have a
chief financial officer (an "Appropriate Officer"), that such financial
statements were prepared in accordance with GAAP applied on a basis consistent
(except as otherwise disclosed therein and consented to by a majority of the
Board of Directors) with that of preceding periods, and except as otherwise
stated therein, fairly present the financial position of the Company as of their
date;
(b) within 90 days after the end of each fiscal year of the Company,
a consolidated balance sheet of the Company and its Subsidiaries as at the end
of such year and statements of income and of statements of cash flow of the
Company and its Subsidiaries for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail and accompanied by the opinion thereon of a "Big Six" firm of independent
public accountants, which opinion shall state that such balance sheet and
statements of income and cash flow have been prepared in accordance with GAAP
applied on a basis consistent with that of the preceding fiscal year (except as
otherwise approved by the Board of Directors), and present fairly and accurately
the financial position of the Company as of their date, and that the audit by
such accountants in connection with such financial statements has been made in
accordance with GAAP; and
(c) within 30 business days after the end of each month, an unaudited
consolidated balance sheet of the Company and its Subsidiaries as at the end of
such
16
month and unaudited consolidated statements of (i) income and (ii) cash flow
for such month and for the period from the beginning of the current fiscal
year to the end of such month, setting forth in each case in comparative form
the figures for the budget in respect of such period, all in reasonable
detail and certified, subject to changes resulting from year-end adjustments,
by the Appropriate Officer;
(d) within the first 30 days after the beginning of each fiscal year,
projections of the statements referred to in paragraph (c) of this Section 7.3
for each month in such year;
(e) within the first 30 days after the beginning of the third fiscal
quarter in each fiscal year either (i) a certificate of the Appropriate Officer
that the projections referred to in paragraph (d) of this Section 7.3 with
respect to the last six months of the fiscal year, made again as of the
certificate date, have not materially changed or (ii) revised projections of the
statements referred to in paragraph (c) of this Section 7.3 for each of the last
six months in the fiscal year;
(f) within 45 days after the end of each quarterly fiscal period, a
written statement executed by the Appropriate Officer as to whether the Company
is in compliance with its covenants under this Agreement.
(g) at least 30 days prior to the beginning of each fiscal year, a
budget for such fiscal year, in the form determined by the Board of Directors of
the Company, setting forth in detail reasonably acceptable to the Investors the
Company's budget for such fiscal year.
(h) within 90 days after the beginning of each fiscal year, an annual
reserve analysis covering oil and gas properties to which the Company has
rights, covering such properties as the Board of Directors of the Company shall
determine in good faith from time to time, prepared by a major reserve
engineering firm reasonably acceptable to the Board;
(i) promptly upon the filing thereof, reports and statements filed by
the Company or any of its Subsidiaries with the Commission (or any governmental
authority succeeding to any of its functions) or with any securities exchange;
and
(j) with reasonable promptness, such other information and data with
respect to the Company or any of its Subsidiaries as from time to time may be
reasonably requested.
7.4 USE OF PROCEEDS. The Company shall use the proceeds from the sale of
the Stock (i) for working capital purposes and (ii) to pay off in full its
revolving promissory note to Texas Commerce Bank National Association within ten
(10) business days after the First Closing, PROVIDED that no such proceeds may
be used to repurchase any of the Company's outstanding securities or to pay
dividends on any such securities.
17
7.5 PUBLIC INFORMATION. At any time and from time to time after the
earliest of the close of business on such date as (a) a registration statement
filed by the Company under the Securities Act becomes effective, (b) the Company
registers a class of securities under Section 12 of the Securities Exchange Act
of 1934, as amended, or any federal statute or code which is a successor thereto
(the "Exchange Act"), or (c) the Company issues an offering circular meeting the
requirements of Regulation A under the Securities Act, the Company shall
undertake to make publicly available and available to the Holders (as
hereinafter defined in Section 8), pursuant to Rule 144, such information as is
necessary to enable the Holders to make sales of Registrable Stock (as
hereinafter defined in Section 8) pursuant to that Rule. Thereafter, the
Company shall comply with the current public information requirements of
Rule 144 and shall furnish to any Holder, upon request, a written statement
executed by the Company as to the steps it has taken to so comply.
7.6 INSURANCE. The Company shall obtain and keep in effect so long as the
Board of Directors deems advisable, term life insurance on the lives of such key
employees as, and in the principal amounts as, the Board of Directors shall
determine, in each case with proceeds payable to the Company, including without
limitation a $2 million key man policy on the life of C. Xxxxxx Xxxxx. The
Company will keep and maintain in full force and effect fire, casualty and
umbrella liability insurance policies, with extended coverage, reasonably
sufficient in amount to allow it to replace any of its properties that might be
damaged or destroyed.
7.7 EXECUTION OF AGREEMENTS BY EMPLOYEES OF COMPANY. The Company shall
cause all of its current and future employees and consultants to execute
proprietary information, inventions and non-solicitation agreements
substantially in the form annexed hereto as Exhibit B. Except as specifically
approved by the Company's Board of Directors, all shares of Common Stock and all
options granted by the Company to employees, consultants, officers and
non-investor directors for shares of Common Stock (a) shall, until a
Qualified IPO (as defined in Section 7.12), be subject to a right of first
refusal in favor of the Company, (b) shall vest over a four-year period as
follows: (i) 1/4 at the end of the twelfth calendar month following the
commencement of such person's employment or other retention, (ii) 1/4 at the
end of the twenty-fourth calendar month following the commencement of such
person's employment or other retention, and (iii) 1/48 at the end of each
month for the next 24 months of such employment or other retention, and shall
be subject to the right of the Company to repurchase any non-vested stock at
the price paid by the employee prior to full vesting and (c) shall be subject
to a restriction against transfer of non-vested stock, other than to a family
trust. The rights of the Company in (a) and (b) hereof are assignable by the
Company, subject to the approval of a majority of the Board of Directors,
except that any assignment pursuant to Section 7.9(e) hereof shall not
require Board approval.
7.8 CONFIDENTIALITY. Any information disclosed at meetings of the Board
of Directors and any written information provided pursuant to Sections 7.1, 7.3
and 7.4 shall be used by each Investor solely in furtherance of its interests as
an investor in the Company, and each Investor shall (except as otherwise
required by law) maintain the confidentiality of all
18
non-public information of the Company obtained under said sections, PROVIDED
that the Company makes an appropriate written designation of any such written
confidential information, PROVIDED FURTHER that X. Xxxxxx & Partners - 1993,
L.P. may disclose such information to those of its limited partners as have
executed a confidentiality agreement in form and substance satisfactory to
the disinterested directors of the Company and PROVIDED FURTHER that, any
other term of this Agreement to the contrary notwithstanding, the Company
shall not be obligated to disclose any information, the disclosure of which
it believes in good faith would be detrimental to the business of the
Company. The term "confidential information" shall not include such
information that (i) is or becomes generally available to the public other
than as a result of a disclosure by an Investor or its agents, representatives
or employees; (ii) is or becomes available to an Investor on a
non-confidential basis from a source (other than the Company or one of its
directors, officers, agents, representative or employees) that is not
prohibited from disclosing such information by a legal, contractual or
fiduciary obligation; or (iii) was known to an Investor on a non-confidential
basis prior to its disclosure to such Investor by the Company.
In the event that an Investor, or anyone to whom an Investor transmits any
confidential information, becomes legally compelled to disclose any confidential
information, such person will provide the Company with prompt notice so that it
may seek a protective order or other appropriate remedy and/or waive compliance
with the provisions of this Section 7.8. In the event that such protective
order or other remedy is not obtained, or the Company waives compliance with the
provisions of this Section 7.8, the Investor will furnish only that portion of
the confidential information that it is advised by written opinion of counsel is
legally required and will exercise its best efforts to obtain reliable assurance
that confidential treatment will be accorded the confidential information.
7.9 RIGHT OF FIRST REFUSAL. The Company hereby grants to each Investor
the right of first refusal to purchase, pro-rata, all (or any part) of (x) New
Securities (as defined in Section 7.9(a) below) that the Company may, from time
to time, propose to sell and issue and (y) Employee Stock (as defined in
Section 7.9(d) below) that the Company is entitled to, but shall not, repurchase
from an employee. The Investor's pro rata share shall be the ratio of the
number of shares of Series B Preferred and Common Stock then held by the
Investor as of the date of the Rights Notice (as defined in Section 7.9(b)) or
the Repurchase Notice (as defined in Section 7.9(e)), as the case may be, to the
sum of the total number of shares of Series B Preferred and Common Stock then
held by all Investors (including for this purpose permitted transferees of the
Investor pursuant to Section 7.9(f) hereof) as of such date; PROVIDED that for
purposes of this Section 7.9, the shares of Common Stock held by the Founders
that are not purchased hereunder shall not be included in the calculation of
each Investor's pro rata share. This right of first refusal shall be subject to
the following provisions:
(a) "New Securities" shall mean any Common Stock or preferred shares
of any kind of the Company, whether now or hereafter authorized, and rights,
options, or warrants to purchase said Common Stock or preferred shares, and
securities of any type whatsoever that are, or may become, convertible into said
Common Stock or preferred shares;
19
provided, however, that "New Securities" shall not include (i) securities
issuable with respect to Series B Preferred; (ii) securities offered to the
public pursuant to a registration statement filed under the Securities Act;
(iii) securities issued in connection with the acquisition of another
corporation, business entity or line of business of another business entity
by the Company by merger, consolidation, purchase of all or substantially all
of the assets, or other reorganization as a result of which the Company owns
not less than fifty-one percent (51%) of the voting power of such
corporation; (iv) shares of the Company's Common Stock or preferred shares
issued in connection with any Recapitalization Event by the Company; (v)
securities authorized by the Company's Board of Directors to be issued in
connection with the leasing or acquisition of assets by the Company or supply
arrangements for the Company; (vi) securities reserved under employee stock
option or purchase plans or shares to be issued to consultants, vendors or
customers of the Company or in connection with an acquisition or the
formation of a joint venture, in each case as approved by the Board of
Directors; or (vii) securities issued pursuant to Section 18 hereof.
(b) If the Company proposes to issue New Securities, it shall give
the Investors written notice (the "Rights Notice") of its intention, describing
the New Securities, the price, and the general terms upon which the Company
proposes to issue them. Each Investor shall have twenty-five (25) days from
delivery of the Rights Notice to agree to purchase (i) all or any part of its
pro-rata share of such New Securities and (ii) all or any part of the pro-rata
share of any other Investor (including for this purpose any permitted transferee
of the Investor under Section 7.9(f) hereof) to the extent that such other
Investor does not elect to purchase its full pro-rata share, in each case for
the price and upon the general terms specified in the Rights Notice, by giving
written notice to the Company setting forth the quantity of New Securities to be
purchased. If the Investors who elect to purchase their full pro-rata shares
also elect to purchase in the aggregate more than 100% of the New Securities,
such New Securities shall be sold to such Investors in accordance with their
respective pro-rata shares.
(c) If the Investors fail to exercise in full the right of first
refusal within the period or periods specified in Section 7.9(b), the Company
shall have one hundred twenty (120) days after delivery of the Rights Notice to
sell the unsold New Securities at a price and upon general terms no more
favorable to the purchasers thereof than specified in the Company's notice. If
the Company has not sold the New Securities within said one hundred twenty (120)
day period the Company shall not thereafter issue or sell any New Securities
without first offering such securities to the Investors in the manner provided
above.
(d) "Employee Stock" shall mean any Common Stock of the Company,
whether now or hereafter authorized, that the Company has issued or sold to an
employee pursuant to an employee stock purchase, option or benefit plan,
agreement or other offering or arrangement, including, without limitation, all
shares sold by the Company to employees of the Company subject to agreements of
restriction by the Company.
20
(e) If the Company has the right to repurchase any Employee Stock
from any employee for any reason, including, without limiting the generality of
the foregoing, the termination of such employee's employment, and if it shall
not repurchase all of the shares of such Employee Stock, it shall promptly give
each Investor written notice (the "Repurchase Notice") of the Investor' right to
repurchase, describing the Employee Stock, the price and the general terms upon
which such Employee Stock is available for repurchase. Each Investor shall have
fifteen (15) days from delivery of any such notice in accordance with Section 14
to agree to purchase (i) all or any part of its pro-rata share of such Employee
Stock and (ii) all or any part of the pro-rata share of any other Investor to
the extent that such other Investor does not elect to purchase his full pro-rata
share, in each case for the price and upon the general terms specified in the
notice by giving written notice to the Company setting forth the quantity of
Employee Stock to be purchased. If the Investors who elect to purchase their
full pro-rata shares also elect to purchase in the aggregate more than 100% of
the Employee Stock, such Employee Stock shall be sold to such Investors in
accordance with their respective pro-rata shares.
(f) The rights of first refusal described in this Section 7.9 are
nonassignable except to an affiliate or limited partner of each Investor or to a
Transferee (as defined in Section 10 hereof) of an Investor who has acquired all
of the Series B Preferred and Common Stock purchased by such Investor hereunder.
7.10 MAINTENANCE OF EXISTENCE AND PROPERTIES, ETC. The Company will, and
will cause each of its Subsidiaries to (a) maintain its corporate existence,
rights, governmental approvals and franchises necessary to the conduct of its
business, (b) keep its properties in good repair, working order and condition,
reasonable wear and tear excepted, (c) give appropriate notice of events of
default pursuant to any agreements of the Company, (d) enter into transactions
with "affiliates" or "associates" (as those terms are defined in Rule 405
promulgated under the Securities Act) only on fair and reasonable terms and (e)
promptly pay and discharge, or cause to be paid and discharged, when due and
payable, all lawful taxes, assessments and governmental charges or levies
imposed upon the income, profits, property or business of the Company or any
Subsidiary; PROVIDED, however, that any such tax, assessment, charge or levy
need not be paid if the validity thereof shall at the time be contested in good
faith by appropriate proceedings and PROVIDED further that, unless otherwise
approved by the Board of Directors, the Company will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of proceedings to
foreclose any lien which may have attached as security therefor.
7.11 AMENDMENT OF RESTATED CERTIFICATE. Within 30 days after the First
Closing, each Investor and Founder shall execute an Action by Consent of
Stockholders of the Company approving an amendment to the Restated Certificate
that cancels the Series A Preferred and the Class A Common, and the Company
shall file a Restated Certificate of Incorporation effectuating such amendment.
21
7.12 TERMINATION OF COVENANTS. The covenants set forth in Sections 7.1
through 7.4, 7.9 and 7.10 shall terminate and be of no further force or effect
on the consummation of the first firm commitment underwritten public offering of
securities of the Company pursuant to a registration statement filed by the
Company under the Securities Act, where the aggregate sales price of such
securities (before deduction of underwriting discounts and expenses of sale) is
not less than $10,000,000 (a "Qualified IPO").
7.13 EQUITY TREATMENT. The Company and the Investors shall, for all
purposes, treat the Series B Preferred as equity and not as debt securities.
8. REGISTRATION. The following provisions govern the registration of
Common Stock:
8.1 DEFINITIONS. As used herein, the following terms have the following
meanings:
FORMS X-0, X-0 AND S-3: The forms so designated, promulgated by the
Commission for registration of securities under the Securities Act, and any
forms succeeding to the functions of such forms, whether or not bearing the
same designation.
HOLDER: A holder of Registrable Stock (subject to Section 8.13 hereof),
PROVIDED that anyone who acquires any Registrable Stock in a distribution
pursuant to a registration statement filed by the Company under the
Securities Act shall not thereby be deemed to be a "Holder".
KEY EMPLOYEES: The Founders (as to the Shares of Common Stock held by them
that were not purchased hereunder) and certain employees of the Company
unanimously designated in writing by the Board of Directors from time to
time as "Key Employees"; provided that a person shall immediately cease to
be a Key Employee for purposes of this Section 8 on the date that such
person is no longer employed by the Company.
"REGISTER", "REGISTERED" and "REGISTRATION" refer to a registration
effected by filing a registration statement in compliance with the
Securities Act and the declaration or ordering by the Commission of
effectiveness of such registration statement.
REGISTRABLE STOCK: All shares of Common Stock issued hereunder or under
the Exchange Agreement or held by a person to whom registration rights have
been transferred pursuant to the provisions of this Section 8, all shares
of Common Stock issued by the Company in respect of such shares and all
shares of Common Stock that the Investors may hereafter purchase pursuant
to their
22
rights of first refusal or otherwise, or Common Stock issued on conversion
or exercise of securities so purchased.
REQUIRED DEMAND AMOUNT: 51% of the Registrable Stock then outstanding.
SUBJECT STOCK: All Registrable Stock held by the Investors and the shares
of Common Stock held by the Key Employees other than shares acquired in a
distribution pursuant to a registration statement filed by the Company
under the Securities Act.
8.2 REQUIRED REGISTRATION. (a) If (i) the holder or holders of an
aggregate of at least the Required Demand Amount propose to dispose of at least
20% of the then outstanding Registrable Stock (such holder or holders being
herein called the "Initiating Holders"), and (ii) such disposition may not, in
the opinion of such Initiating Holders, be effected in the public marketplace
(as opposed to a private transaction under the Securities Act) on equally
favorable net terms to the Initiating Holders without registration of such
shares under the Securities Act, the Initiating Holders may request the Company
in writing to effect such registration, stating the number of shares of
Registrable Stock to be disposed of by such Initiating Holders (which, in the
aggregate, shall be not less than 20% of the then outstanding Registrable Stock)
and the intended method of disposition. Upon receipt of such request, the
Company will give prompt written notice thereof to all other Holders whereupon
such other Holders shall give written notice to the Company within 20 days after
the date of the Company's notice (the "Notice Period") if they propose to
dispose of any shares of Registrable Stock pursuant to such registration,
stating the number of shares of Registrable Stock to be disposed of by such
Holder or Holders and the intended method of disposition.
(b) The Key Employees may register securities for sale for their own
account in the registration requested pursuant to this Section 8.2, subject to
limitations on the number of shares which may be imposed by the underwriter as
set forth in Section 8.4(d) below. At the time the Company shall give the
notice to Holders required by Section 8.2(a), it shall also give the same notice
to the Key Employees whereupon each Key Employee shall give written notice to
the Company within the Notice Period if such Key Employee proposes to dispose of
any shares of Common Stock held by him or her pursuant to such registration,
stating the number of shares of Common Stock to be disposed of by such Key
Employee and the intended method of disposition.
(c) The Company will use its best efforts to effect promptly after
the Notice Period the registration under the Securities Act of all shares of
Subject Stock specified in the requests of the Initiating Holders, the requests
of the other Holders and the requests of the Key Employees, subject, however, to
the limitations set forth in Section 8.4.
8.3 REGISTRATION PROCEDURES. Whenever the Company is required by the
provisions of this Section 8 to use its best efforts to effect promptly the
registration of shares of Registrable Stock, the Company will:
23
(a) prepare and file with the Commission a registration statement
with respect to such shares and use its best efforts to cause such registration
statement to become and remain effective as provided herein;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
current and to comply with the provisions of the Securities Act with respect to
the disposition of all shares covered by such registration statement, including
such amendments and supplements as may be necessary to reflect the intended
method of disposition from time to time of the prospective seller or sellers of
such shares, but for no longer than one hundred twenty (120) days subsequent to
the effective date of such registration in the case of a registration statement
on Form S-1 or S-2 and for no longer than ninety (90) days in the case of a
registration statement on Form S-3;
(c) furnish to each prospective seller such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents, as such seller may
reasonably request in order to facilitate the public sale or other disposition
of the shares owned by such seller;
(d) use its best efforts to register or qualify the shares covered by
such registration statement under such other securities or blue sky or other
applicable laws of such jurisdiction within the United States as each
prospective seller shall reasonably request, to enable such seller to consummate
the public sale or other disposition in such jurisdictions of the shares owned
by such seller; provided, however, that in no event shall the Company be
obligated to qualify to do business in any jurisdiction where it is not at the
time so qualified or to take any action which would subject it to service of
process in suits other than those arising out of the offer or sale of the
Subject Stock covered by such registration statement in any jurisdiction where
it is not at the time so subject; and
(e) furnish to each prospective seller a signed counterpart,
addressed to the prospective sellers, of (i) an opinion of counsel for the
Company, dated the effective date of the registration statement, and (ii) a
"comfort" letter signed by the independent public accountants who have certified
the Company's financial statements included in the registration statement,
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and (in the case of the
"comfort" letter) with respect to events subsequent to the date of the financial
statements, as are customarily covered (at the time of such registration) in
opinions of issuer's counsel and in "comfort" letters delivered to the
underwriters in underwritten public offerings of securities.
(f) in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering; each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement:
24
(g) notify each Holder of Registrable Stock covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;
(h) apply for listing and use its best efforts to list the
Registrable Stock being registered on any national securities exchange on which
a class of the Company's equity securities are listed or, if the Company does
not have a class of equity securities listed on a national securities exchange,
apply for qualification and use its best efforts to qualify the Registrable
Stock being registered for inclusion on the automated quotation system of the
National Association of Securities Dealers, Inc. or on a national securities
exchange.
8.4 LIMITATIONS ON REQUIRED REGISTRATIONS.
(a) The Company shall not be required to effect more than three
registrations on behalf of the Investors pursuant to Section 8.2.
(b) The Company shall not be required to cause a registration
requested pursuant to Section 8.2 to become effective prior to the earlier of
[(i) January 2, 1998] and (ii) the expiration of six (6) months after the
effective date of the first registration statement initiated by the Company
(other than a registration effected solely to implement an employee benefit plan
or a transaction to which Rule 145 of the Commission is applicable).
(c) The Company shall not register securities for sale for its own
account in any registration requested pursuant to Section 8.2 unless permitted
to do so by the written consent of Holders who hold at least 51% of the
Registrable Stock as to which registration has been requested. The Company may
not cause any other registration of securities for sale for its own account
(other than a registration effected solely to implement an employee benefit
plan) to be initiated after a registration requested pursuant to Section 8.2 and
to become effective less than 120 days after the effective date of any
registration requested pursuant to Section 8.2.
(d) Whenever a requested registration is for an underwritten
offering, only shares which are to be included in the underwriting may be
included in the registration. Notwithstanding the provisions of Sections 8.2(b)
and 8.4(c), if the underwriter determines that (i) marketing factors require a
limitation of the total number of shares to be underwritten or a limitation of
the total number of shares of the Key Employees to be underwritten, or (ii) the
offering price per share would be reduced by the inclusion of the shares of the
Key Employees and/or the Company, then the number of shares to be included in
the registration and underwriting shall first be allocated among all Holders who
indicated to the Company their decision to distribute any of their Registrable
Stock through such underwriting, in proportion, as nearly as practicable, to the
respective numbers of shares of
25
Registrable Stock owned by such Holders at the time of filing the
registration statement, then to the Key Employees who have indicated to the
Company their decision to distribute any of their Subject Stock through such
underwriting, in proportion, as nearly as practicable, to the respective
numbers of shares of Subject Stock owned by the Key Employees at the time of
filing the registration statement, and the remainder, if any, to the Company;
PROVIDED, HOWEVER, that if the underwriter determines that marketing factors
require a limitation of the number of shares of the Key Employees to be
underwritten or that the offering price per share would be reduced by the
inclusion of the shares of the Key Employees, then the number of shares of
the Key Employees that may be so included shall be reduced, or eliminated
from registration, as the underwriter shall advise. No stock excluded from
the underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. If any Holder, Key Employee or the Company
disapproves of any such underwriting, such person may elect to withdraw
therefrom by written notice to the Initiating Holders and the underwriter.
The securities so withdrawn from such underwriting shall also be withdrawn
from such registration.
(e) The Company shall not be required to effect a registration
pursuant to Section 8.2 unless the proposed disposition of shares of Subject
Stock has an aggregate expected offering price (before deduction of underwriting
discounts and expenses of sale) of not less than $5,000,000.
(f) If at the time of any request to register Registrable Stock
pursuant to Section 8.2 hereof, the Company is engaged, or has fixed plans to
engage within 90 days of the time of the request, in a registered public
offering as to which the Holders may include such Stock pursuant to Section 8.5
hereof or is engaged in any other activity which, in the good faith
determination of the Company's Board of Directors, would be adversely affected
by the requested registration to the material detriment of the Company, then the
Company may at its option direct that such request be delayed for a period not
in excess of six months from the effective date of such offering, or the date of
commencement of such other material activity, as the case may be, such right to
delay a request to be exercised by the Company not more than once while the
rights set forth in Section 8.2 are in effect.
8.5 INCIDENTAL REGISTRATION. If the Company at any time proposes to
register any of its securities under the Securities Act (other than a
registration effected solely to implement an employee benefit plan or a
transaction to which Rule 145 of the Commission is applicable), it will each
such time give written notice to all Holders and to the Key Employees of its
intention so to do. Upon the written request of a Holder or Holders or a Key
Employee or Key Employees given within 20 days after receipt of any such notice
(stating the number of shares of Subject Stock to be disposed of by such Holder
or Holders or such Key Employee or Key Employees and the intended method of
disposition), the Company will use its best efforts to cause all such shares of
Subject Stock intended to be disposed of, the Holders or the Key Employees
owners of which shall have requested registration thereof, to be registered
under the Securities Act so as to permit the disposition (in accordance with the
methods in said
26
request) by such Holder or Holders or such Key Employee or Key Employees of
the shares so registered, subject, however, to the limitations set forth in
Section 8.6.
8.6 LIMITATIONS ON INCIDENTAL REGISTRATION. If the registration of which
the Company gives notice pursuant to Section 8.5 is for an underwritten
offering, only securities that are to be included in the underwriting may be
included in the registration. Notwithstanding any provision of Section 8.5, if
the underwriter determines that marketing factors require a limitation of the
number of shares to be underwritten, the underwriter may eliminate or reduce the
number of shares of Subject Stock to be included in the registration and
underwriting. The Company shall so advise all Holders and the Key Employees
(except those Holders and Key Employees who have not indicated to the Company
their decision to distribute any of their Subject Stock through such
underwriting), and the number of shares of Subject Stock that may be included in
the registration and underwriting shall be allocated among such Holders and Key
Employees in proportion, as nearly as practicable, to the respective amounts of
Subject Stock owned by such Holders and Key Employees at the time of filing the
registration statement. No Subject Stock excluded from the underwriting by
reason of the underwriter's marketing limitation shall be included in such
registration. If any Holder or Key Employee disapproves of any such
underwriting, such person may elect to withdraw therefrom by written notice to
the Company and the underwriter. The Subject Stock and/or other securities so
withdrawn from such underwriting shall also be withdrawn from such registration.
The registration rights granted under Section 8.5 shall terminate as to any Key
Employee or Holder or permissible transferees or assignee of such rights if such
person (a) holds one percent (1%) or less of the outstanding shares of Common
Stock of the Company and (b) would be permitted to sell all of the Subject Stock
held by him pursuant to Rule 144(k).
8.7 DESIGNATION OF UNDERWRITER. (a) In the case of any registration
effected pursuant to Section 8.2 or 8.8, a majority in interest of the
requesting Holders shall have the right to designate the managing underwriter(s)
in any underwritten offering.
(b) In the case of any registration initiated by the Company, the
Company shall have the right to designate the managing underwriter in any
underwritten offering.
8.8 FORM S-3. The Company shall register its Common Stock under the
Exchange Act as soon as legally permissible following the effective date of the
first registration of any securities of the Company on Form S-1 and the Company
shall thereafter file all reports and effect all qualifications and compliances
as would permit or facilitate the sale and distribution of its stock on
Form S-3. After the Company has qualified for the use of Form S-3, the Holders
shall have the right to request up to four registrations on Form S-3 (such
requests shall be in writing and shall state the number of shares of Registrable
Stock to be disposed of and the intended method of disposition) subject only to
the following:
27
(a) The Company shall not be required to effect a registration
pursuant to this Section 8.8 unless the Holder or Holders requesting
registration propose to dispose of shares of Registrable Stock having an
aggregate expected public offering price (before deduction of underwriting
discounts and expenses of sale) of at least $250,000.
(b) The Company shall not be required to effect a registration
pursuant to this Section 8.8 more frequently than once during any six month
period.
The Company shall give notice to all Holders and Key Employees of the receipt of
a request for registration pursuant to this Section 8.8 and shall provide a
reasonable opportunity for other Holders and Key Employees to participate in the
registration, provided that if the registration is for an underwritten offering,
the terms of paragraph (d) of Section 8.4 shall apply to all participants in
such offering. Subject to the foregoing, the Company will use its best efforts
to effect promptly the registration of all shares of Subject Stock on Form S-3
to the extent requested by the Holder or Holders thereof or by a Key Employee.
8.9 COOPERATION BY PROSPECTIVE SELLERS.
(a) Each prospective seller of Subject Stock, and each underwriter
designated by a majority in interest of the requesting Holders, will furnish to
the Company such information as the Company may reasonably require from such
seller or underwriter in connection with the registration statement (and the
prospectus included therein).
(b) Failure of a prospective seller of Subject Stock to furnish the
information and agreements described in this Section 8.9 shall not affect the
obligations of the Company under this Section 8 to remaining sellers who furnish
such information and agreements unless, in the reasonable opinion of counsel to
the Company or the underwriters, such failure impairs or may impair the
viability of the offering or the legality of the registration statement or the
underlying offering.
(c) The Holders of and the Key Employees holding shares included in
the registration statement will not (until further notice) effect sales thereof
after receipt of telegraphic or written notice from the Company to suspend sales
to permit the Company to correct or update a registration statement or
prospectus; but the obligations of the Company with respect to maintaining any
registration statement current and effective shall be extended by a period of
days equal to the period such suspension is in effect unless (i) such extension
would result in the Company's inability to use the financial statements in the
registration statement initially filed pursuant to the Holder or Holders'
request and (ii) such correction or update did not result from the Company's
acts or failures to act.
At the end of the period during which the Company is obligated to keep the
registration statement current and effective as described in paragraph (b) of
Section 8.3 (and any extensions thereof required by the preceding sentence), the
Holders and the Key Employees holding shares included in the registration
statement shall discontinue sales of
28
shares pursuant to such registration statement upon receipt of notice from
the Company of its intention to remove from registration the shares covered
by such registration statement which remain unsold, and such Holders and Key
Employees shall notify the Company of the number of shares registered which
remain unsold immediately upon receipt of such notice from the Company.
8.10 EXPENSES OF REGISTRATION. All expenses incurred in effecting any
registration pursuant to this Section 8 including, without limitation, all
registration and filing fees, printing expenses, expenses of compliance with
blue sky laws, fees and disbursements of counsel for the Company, expenses, fees
and disbursements of one special counsel retained by the Holders and/or the Key
Employees not to exceed $10,000, and expenses of any audits incidental to or
required by any such registration, shall be borne by the Company, except
(a) that all expenses, fees and disbursements of any additional counsel retained
by the Holders and/or the Key Employees, and all underwriting discounts and
commissions shall be borne by the Holders of and the Key Employees holding the
securities registered pursuant to such registration, pro rata according to the
quantity of their securities so registered; (b) the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 8.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 8.2; PROVIDED,
HOWEVER, that if immediately prior to the time of such withdrawal, the Holders
have learned of a materially adverse change in the condition, business or
prospects of the Company from that known to the Holders at the time of their
request, then the Holders shall not be required to pay any of such expenses and
shall retain their rights pursuant to Section 8.2; and (c) with respect to
registrations effectuated under Section 8.2, the Company shall be required to
pay expenses only in respect of the first two such registrations.
8.11 INDEMNIFICATION. (a) To the extent permitted by law, the Company
will indemnify each Holder and Key Employee requesting or joining in a
registration, each agent, officer and director of such Holders, each person
controlling such Holder and each underwriter and selling broker of the
securities so registered (collectively, "Indemnitees") against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out
of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other
document incident to any registration, qualification or compliance (or in any
related registration statement, notification or the like) or any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act, the Exchange Act or state
securities laws or any rule or regulation promulgated under the Securities
Act, the Exchange Act or a state securities law, in each case applicable to
the Company, and will reimburse each such Indemnitee for any legal and any
other fees and expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action, PROVIDED,
HOWEVER, that the Company will not be liable to any Indemnitee in any such
case to the extent that any such claim, loss, damage or
29
liability is caused by any untrue statement or omission so made in strict
conformity with written information furnished to the Company by an instrument
duly executed by such Indemnitee and stated to be specifically for use
therein and except that the foregoing indemnity agreement is subject to the
condition that, insofar as it relates to any such untrue statement (or
alleged untrue statement) or omission (or alleged omission) made in the
preliminary prospectus but eliminated or remedied in the amended prospectus
on file with the Commission at the time the registration statement becomes
effective or in the amended prospectus filed with the Commission pursuant to
Rule 424(b) (the "Final Prospectus"), such indemnity agreement shall not
inure to the benefit of any underwriter, or any Indemnitee if there is no
underwriter, if a copy of the Final Prospectus was not furnished to the
person or entity asserting the loss, liability, claim or damage at or prior
to the time such furnishing is required by the Securities Act; PROVIDED,
FURTHER, that this indemnity shall not be deemed to relieve any underwriter
of any of its due diligence obligations; PROVIDED, FURTHER, that the
indemnity agreement contained in this subsection 8.11(a) shall not apply to
amounts paid in settlement of any such claim, loss, damage, liability or
action if such settlement is effected without the consent of the Company,
which consent shall not be unreasonably withheld.
(b) To the extent permitted by law, each Holder and each Key Employee
requesting or joining in a registration and each underwriter and selling broker
of the securities so registered will indemnify the Company and its officers and
directors and each person, if any, who controls any thereof within the meaning
of Section 15 of the Securities Act and their respective successors against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other document
incident to any registration, qualification or compliance (or in any related
registration statement, notification or the like) or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading and will reimburse the
Company and each other person indemnified pursuant to this paragraph (b) for any
legal and any other fees and expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action,
PROVIDED, HOWEVER, that this paragraph (b) shall apply only if (and only to the
extent that) such statement or omission was made in reliance upon and in strict
conformity with written information (including, without limitation, written
negative responses to inquiries) furnished to the Company by an instrument duly
executed by such Holder, Key Employee, underwriter or selling broker and stated
to be specifically for use in such prospectus, offering circular or other
document (or related registration statement, notification or the like) or any
amendment or supplement thereto; and except that the foregoing indemnity
agreement is subject to the condition that, insofar as it relates to any such
untrue statement (or alleged untrue statement) or omission (or alleged omission)
made in the preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the Commission at the time the registration statement
becomes effective or in the Final Prospectus, such indemnity agreement shall not
inure to the benefit of (i) the Company and (ii) any underwriter, Holder or Key
Employee, if there is no underwriter, if a copy of the Final Prospectus was not
furnished to the person or entity asserting the loss, liability, claim or damage
at or prior to the time such furnishing is
30
required by the Securities Act; PROVIDED, FURTHER, that this indemnity shall
not be deemed to relieve any underwriter of any of its due diligence
obligations; PROVIDED, FURTHER, that the indemnity agreement contained in
this subsection 8.11(b) shall not apply to amounts paid in settlement of any
such claim, loss, damage, liability or action if such settlement is effected
without the consent of the Holder, Key Employee or underwriter, as the case
may be, which consent shall not be unreasonably withheld; and PROVIDED,
FURTHER, that the obligations of such Holders or Key Employees shall be
limited to an amount equal to the net proceeds received by such Holder or Key
Employee from the sale of Subject Stock in such offering as contemplated
herein, unless such claim, loss, damage, liability or action resulted from
such Holder's or Key Employee's fraudulent misconduct.
(c) Each party entitled to indemnification hereunder (the
"indemnified party") shall give notice to the party required to provide
indemnification (the "indemnifying party') promptly after such indemnified party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the indemnifying party (at its expense) to assume the defense of any
claim or any litigation resulting therefrom, PROVIDED that counsel for the
indemnifying party, who shall conduct the defense of such claim or litigation,
shall be reasonably satisfactory to the indemnified party, and the indemnified
party may participate in such defense at such party's expense, and PROVIDED
FURTHER that the omission by any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under this
Section 8.11 except to the extent that the omission results in a failure of
actual notice to the indemnifying party and such indemnifying party is damaged
solely as a result of the failure to give notice. No indemnifying party, in the
defense of any such claim or litigation, shall consent, except with the consent
of each indemnified party, to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.
(d) The reimbursement required by this Section 8.11 shall be made by
periodic payments during the course of the investigation or defense, as and when
bills are received or expenses incurred.
(e) The obligation of the Company under this Section 8.11 shall
survive the redemption, if any, of the Series B Preferred, and the completion of
any offering of Subject Stock in a registration statement under this Section 8
or otherwise.
8.12 RIGHTS THAT MAY BE GRANTED TO SUBSEQUENT INVESTORS. (a) Within the
limitations prescribed by this paragraph (a), but not otherwise, the Company may
grant to subsequent investors in the Company rights of incidental registration
(such as those provided in Section 8.5). Such rights may only pertain to shares
of Common Stock, including shares of Common Stock into which any other
securities may be converted. Such rights may be granted with respect to
(i) registrations actually requested by Initiating Holders pursuant to
Section 8.2, but only in respect of that portion of any such registration as
remains after inclusion of all Registrable Stock requested by Holders but before
inclusion of any Subject
31
Stock requested by the Key Employees and (ii) registrations initiated by the
Company, but only in respect of that portion of such registration as remains
after inclusion of all Subject Stock. With respect to registrations which
are for underwritten public offerings, "available portion" shall mean the
portion of the underwritten shares that is available as specified in clauses
(i) and (ii) of the third sentence of this paragraph (a). Shares not included
in such underwriting shall not be registered.
(b) The Company may not grant to subsequent investors in the Company
rights of registration upon request (such as those provided in Section 8.2)
unless (i) such rights are limited to shares of Common Stock, (ii) all Holders
and the Key Employees are given enforceable contractual rights to participate in
registrations requested by such subsequent investors (but subject to the right
of priority of registration in the following order: such subsequent investors
and the Holders on a pro-rata basis and then the Key Employees), such
participation to be on a pro-rata basis, and subject to the limitations,
described in the final three sentences of paragraph (a) of this Section 8.12,
(iii) such rights shall not become effective prior to 90 days after the
effective date of the first registration pursuant to Section 8.2 and (iv) such
rights shall not be more favorable than those granted to the Holders.
8.13 TRANSFER OF REGISTRATION RIGHTS. (a) The registration rights
granted to the Investors under this Section 8 may be transferred but only to
(i) a transferee who shall acquire not less than 21,000 shares of Registrable
Stock (as adjusted for Recapitalization Events), (ii) affiliates and limited
partners of the Investors, and (iii) any Transferee of an Investor that
acquires all of the shares of Series B Preferred and Common Stock purchased
by such Investor hereunder.
(b) Notwithstanding any provision of this Section 8.13, the registration
rights granted to the Investors under this Section 8 may not be assigned to any
person or entity that, in the Company's reasonable judgment, is a competitor of
the Company.
(c) The registration rights granted to the Key Employees under this
Section 8 may not be transferred, PROVIDED that each of C. Xxxxxx Xxxxx, Xxxxx
X. Xxxxxx and Xxxxxxx X. Xxxxxx may transfer registration rights granted
hereunder as to shares of Registrable Stock acquired in their capacity as
Investors hereunder, subject to Sections 8.13(a) and (b) hereof.
8.14 "STAND-OFF" AGREEMENT. In consideration for the Company performing
its obligations under this Section 8, each Investor and each Key Employee
severally agrees for a period of time (not to exceed 180 days) from the
effective date of any registration (other than a registration effected solely to
implement an employee benefit plan) of securities of the Company (upon request
of the Company or of the underwriters managing any underwritten offering of the
Company's securities) not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Subject Stock or any
other stock of the Company held by each Investor or Key Employee, other than
shares of Subject Stock included in the registration, without the prior written
consent of the Company or such underwriters, as
32
the case may be, provided that all officers and directors of the Company and
each holder of more than 2% of the outstanding Common Stock shall enter into
similar agreements.
8.15 DELAY OF REGISTRATION. The Investors and the Key Employees shall have
no right to take any action to restrain, enjoin, or otherwise delay any
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 8.
9. NEGATIVE COVENANTS. (a) So long as any shares of Series B Preferred
are outstanding, the Company shall not, without the affirmative vote of the
holders of record of at least 66-2/3% of the outstanding shares of Series B
Preferred, voting as a separate class:
(i) amend, repeal or modify any provision of, or add any provision
to, the Company's Certificate of Incorporation or By-laws if such action would
alter or change the rights, preferences, privileges or powers of, or the
restrictions provided for the benefit of, the Series B Preferred;
(ii) authorize, create or issue shares of any class or series of
stock having any preference or priority as to dividends, liquidation, redemption
or assets superior to or on a parity with any such preference or priority of the
Series B Preferred, or authorize, create or issue shares of any class or series
or any bonds, debentures, notes or other obligations convertible into or
exchangeable for, or having optional rights to purchase, any shares of capital
stock of the Company having any such preference or priority; or
(iii) reclassify the shares of Common Stock or any other shares of
stock hereafter created junior to the Series B Preferred as to dividends,
liquidation, redemption or assets into shares of Series B Preferred or into
shares having any preference or priority as to dividends or assets superior to
or on a parity with that of the Series B Preferred.
(b) So long as not less than 4,000 shares of Series B Preferred are
outstanding, the Company shall not, without the prior written consent or
affirmative vote of the holders of record of at least 66-2/3% of the outstanding
shares of Series B Preferred, voting as a separate class:
(i) declare or pay any dividends or make any other distributions on
shares of Common Stock, other than dividends payable solely in shares of Common
Stock;
(ii) repurchase any shares of Series B Preferred or Common Stock
(other than (i) shares of Common Stock issued or sold by the corporation to an
employee pursuant to an employee stock purchase option or benefit plan,
agreement or other offering or arrangement, includible without limitation all
shares sold to employees of the Company subject to agreements of restriction by
the Company or redemptions effected upon the terms contained in the Restated
Certificate);
33
(iii) make, or permit any corporation, firm or entity under its
control (a "Controlled Entity") to make, any loans or advances or create any
liens or contingent liabilities in excess of $250,000;
(iv) mortgage or pledge, or create a security interest in, or permit
any Controlled Entity to mortgage, pledge or create a security interest in, a
majority in value of the property of the Company or such Controlled Entity, in
any case to secure a debt in excess of $250,000;
(v) sell, convey or otherwise dispose of all or substantially all of
the property or business of the Company;
(vi) merge or consolidate the Company into or with any other
corporation, partnership or other entity unless upon consummation of such merger
or consolidation, the holders of voting securities of the Company own directly
or indirectly 51% or more of the voting power to elect directors of the
surviving, acquiring or consolidated corporation, partnership or other entity;
(vii) permit the assignment in whole or in part of amounts otherwise
due to the Company from the discovery and production of hydrocarbons to any
stockholder of the Company, or officer of the Company, or any founding
stockholder of the Company, unless such assignment has been approved by the
unanimous consent of the non-management members of the Board of Directors of the
Company; or
(viii) pay any agency, transaction or other fees to any stockholder
of the Company unless such payment has been approved by the unanimous consent of
the non-management members of the Board of Directors of the Company.
(c) So long as not less than 4,000 shares of Series B Preferred are
outstanding, the Company shall not, without the prior written consent or
affirmative vote of 66-2/3% of the entire Board of Directors:
(i) acquire, or permit any Controlled Entity to acquire, any stock or
other securities of any Controlled Entity or other corporation, partnership or
entity or acquire additional assets in any case for consideration in excess of
$500,000 unless the acquired entity is wholly owned by the Company, and except
certificates of deposit, high quality commercial paper, United States government
securities and other short-term, high quality liquid investment grade
securities;
(ii) acquire assets from or merge with one or more companies or merge
or consolidate one or more companies into a subsidiary of the Company for
consideration in excess of an aggregate of $500,000;
34
(iii) sell, lease, convey or otherwise dispose of any "material
assets" (which, for the purposes of this Section 9(c)(iii), are defined as
assets having an aggregate fair market value of at least $250,000) of the
Company or its subsidiaries or business operations of material subsidiaries of
the Company that in the aggregate constitute a material asset of the Company; or
(iv) replace the chief executive officer of the Company upon his
death, retirement or disability, or retain a chief financial officer.
10. TRANSFERS OF SECURITIES BY INVESTORS. The Investors shall have the
right, without the consent of the Company, to sell, or transfer or otherwise
dispose of all or a portion of their Stock to an affiliate of (i) Citicorp
Venture Capital Ltd. or Citi Growth Fund L.P., (ii) one or more limited partners
of X. Xxxxxx & Partners - 1993 L.P. or (iii) one or more partners of Centennial
Associates, L.P., PROVIDED that in any such case such partner transferee has
entered into a confidentiality agreement in form and substance satisfactory to
the disinterested directors of the Company. In addition, the Investors may
transfer all or any portion of their Stock to a non-affiliated third party with
the unanimous approval of the non-management members of the Board of Directors
of the Company, which approval shall not be unreasonably withheld (each of such
permitted transferees is hereafter referred to as a "Transferee").
11. BOARD OF DIRECTORS. (a) The Investors shall be entitled to appoint
(x) 66-2/3% of the members of the Board of Directors, so long as the Investors
hold at least 157,794 shares of the Common Stock acquired (or prior to the
Second Closing, to be acquired hereunder) hereunder or under the Exchange
Agreement, (y) 33-1/3% of the Board of Directors, so long as the Investors hold
less than 157,794 shares of Common Stock but at least 63,117 shares of the
Common Stock acquired (or prior to the Second Closing, to be acquired hereunder)
hereunder or under the Exchange Agreement, and (z) one director, so long as the
Investors hold less than 63,117 shares but at least 3,156 shares of the Common
Stock acquired (or prior to the Second Closing, to be acquired hereunder)
hereunder or under the Exchange Agreement (in each case as adjusted for
Recapitalization Events). The Board shall be limited to no more than five
members, so long as (i) not less than 8,800 shares of the Series B Preferred are
outstanding and (ii) the Investors or their Transferees hold at least 3,156
shares of the Common Stock acquired hereunder or under the Exchange Agreement
(each as adjusted for Recapitalization Events) (the "Requisite Shares").
Notwithstanding the foregoing, upon the occurrence of an Event of Noncompliance
(as defined in Article Fourth, Section B.4(b) of the Restated Certificate), the
Investors shall be entitled to appoint 66-2/3% of the members of the Board of
Directors.
(b) The Investors and the Founders shall act in all capacities and
vote the shares of capital stock of the Company now or hereafter owned or
controlled by them so as to cause and maintain the election to the Board of
Directors of (i) the chief executive officer of the Company from time to time;
and (ii) the persons designated by the holders of a majority in interest of the
Series B Preferred as will enable the Investors to designate the number of
35
members of the Board of Directors to which they are entitled under Section 11(a)
hereof. The designees set forth in clause (ii) above shall be determined by the
affirmative vote or consent of Investors holding 66-2/3% of the outstanding
shares of Stock purchased hereunder, with such shares having the voting rights
set forth in the Restated Certificate, as amended from time to time.
(c) The Investors and the Founders shall act in all capacities and
vote the shares of capital stock of the Company now or hereafter owned or
controlled by them so as to cause and maintain the number of directors on the
Board of Directors to be limited to the number of directors required by Section
11(a) above.
(d) Each certificate for shares of capital stock of the Company owned
by the Founders and the Investors shall bear thereon substantially the following
legend:
"THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS OF A
STOCK PURCHASE AGREEMENT DATED AS OF NOVEMBER 9, 1993, WITH RESPECT TO THE
VOTING OF THE SHARES, OR ANY INTEREST THEREIN, WHICH AGREEMENT MAY BE
EXAMINED AT THE OFFICES OF THE COMPANY."
(e) The provisions of this Section 11 shall continue in effect until the
earliest to occur of (i) the Investors no longer holding, in the aggregate, the
Requisite Shares, (ii) a Qualified IPO or (ii) ten years from the date hereof.
12. EXPENSES. The Company will pay (a) all the costs and expenses of the
reproduction of this Agreement, of all agreements and documents referred to
herein and of the certificates for the Stock; (b) all taxes (if any) payable
with respect to this Agreement and the issuance of its Stock; (c) all costs of
complying with the securities or Blue Sky laws of any jurisdiction with respect
to the offering or sale of the Stock; (d) the cost of delivering to such address
as each Investor shall specify the certificates for the Stock purchased by each
such Investor; (e) the reasonable fees of (x) special counsel for the Investors,
not to exceed $15,000 and (y) counsel to the Company, not to exceed $_________,
in each case plus actual expenses and disbursements, in each case in connection
with the subject matter of this Agreement and the transactions contemplated
hereby (other than events described in Section 8 hereof); and (f) the fees and
expenses incurred with respect to any amendments to this Agreement or the
Restated Certificate proposed by the Company (whether or not the same become
effective).
13. SURVIVAL OF AGREEMENTS. All representations and warranties contained
herein or made in writing by or on behalf of the Company in connection with the
transactions contemplated hereby shall survive the execution and delivery of
this Agreement (despite any investigation at any time made by the Investors or
on their behalf) for a period of twenty-four months and all covenants and
agreements contained herein by the Company shall survive the execution and
delivery of this Agreement in accordance with their terms. All statements
contained in any certificate or other instrument executed and delivered by the
Company or its
36
duly authorized officers or representatives pursuant hereto in connection
with the transactions contemplated hereby shall be deemed representations by
the Company hereunder.
14. NOTICES. All notices, requests, consents and other communications
herein (except as stated in the last sentence of this Section 14) shall be in
writing and shall be deemed to be delivered (i) on the date delivered, if
personally delivered or transmitted via facsimile with return confirmation of
such transmission; (ii) on the business day after the date sent, if sent by
recognized overnight courier service and (iii) on the fifth day after the date
sent, if mailed by first-class certified mail, postage prepaid and return
receipt requested, as follows:
(a) If to the Company:
3DX Technologies Inc.
00000 Xxxx Xxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000-0000
Attention: C. Xxxxxx Xxxxx, President
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxx X. Xxxxxxxxxx, Esq.
Xxxxxx Xxxx & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, X.X. 00000
Facsimile: (000) 000-0000
(b) If to the Investors other than Landmark, at their respective
addresses set forth in Schedule 1 hereto;
with a copy to:
Xxxxx X. Xxxxxxx, Esq.
Xxxxxx, Xxxxxxx Xxxxxxxx & Xxxxxx
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
37
(c) If to Landmark:
Landmark Graphics Corporation
00000 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxxxx, Xx., Esq.
Xxxxxxxx Xxxxxxxx & Xxxxxx
5400 Renaissance Tower
0000 Xxx Xxxxxx
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
or such other addresses as each of the parties hereto may provide from time to
time in writing to the other parties. The financial statements and other
reports required by Section 7 may be mailed by first-class regular mail.
15. MODIFICATIONS; WAIVER. (a) Except as set forth in Section 15(b),
neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally or in writing, except that any provision of this
Agreement (other than Section 10) may be amended and the observance of any such
provision may be waived (either generally or in a particular instance and either
retroactively or prospectively) with (but only with) the written consent of
(i) the Company, (ii) the holders of at least 66-2/3% of the aggregate voting
power of shares of the Series B Preferred and Registrable Stock (excluding from
both the numerator and denominator of the fraction from which such percentage is
derived all shares theretofore disposed of by the Investors or their Transferees
pursuant to one or more registration statements under the Securities Act or
pursuant to Rule 144) acting together as a single class, (iii) Landmark, as to
Sections 7.2, 7.3, 7.9, 7.13 and 8, and (iv) in the event the Key Employees'
registration rights in Section 8 are modified, waived or terminated, the holders
of at least 51% of the aggregate number of shares of Common Stock outstanding as
of the date of such modification, waiver or termination that are held by the Key
Employees who at such time are stockholders of the Company; PROVIDED that this
Section 15 may not be modified or amended without the written consent of all the
parties hereto (including, however, only those Key Employees who at the time of
such modification or waiver are stockholders of the Company); and PROVIDED,
FURTHER, that the Board of Directors shall be permitted to grant to any officer
of the Company registration rights that are the equivalent of the Key Employees'
registration rights and the granting of such officer registration rights shall
not be deemed a modification of the Key Employees' registration rights, for
purposes of this Section 16(a) if granted with the approval of the entire Board
of Directors.
38
(b) Notwithstanding anything to the contrary contained in
Section 16(a), the Board of Directors of the Company may, from time to time,
designate in writing additional employees of the Company as "Key Employees," as
such term is used in this Agreement. Each person so designated shall execute
all such documents as shall be necessary so that he or she shall be considered a
"Key Employee" within the meaning of this Agreement, and only after the
execution of all such documents by the Company and such Key Employee, all
references to "Key Employees" in this Agreement shall be deemed to include such
designee; PROVIDED that in no event shall a person be considered a Key Employee
if such person is no longer employed by the Company.
16. ENTIRE AGREEMENT. This Agreement, together with the schedules and
exhibits attached hereto and made a part hereof, contains the entire agreement
between the parties with respect to the transactions contemplated hereby, and
supersedes all negotiations, agreements, representations, warranties,
commitments, whether in writing or oral, prior to the date hereof.
17. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided in
this Agreement, all of the terms of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
Transferees of the parties hereto, except that the rights set forth in
Sections 7.1, 7.3, 7.4 and 8.13 hereof may be assigned but only to (i) a
Transferee who shall acquire not less than 4,000 shares (as adjusted for
Recapitalization Events) of Series B Preferred Stock and 21,000 shares of
Registrable Stock (as adjusted for Recapitalization Events) or (ii) a Transferee
of any Investor who shall acquire all of the Series B Preferred Stock and Common
Stock purchased by such Investor hereunder.
18. ENFORCEMENT.
(a) REMEDIES AT LAW OR IN EQUITY. If the Company shall default in
any of its obligations under this Agreement or if any representation or warranty
made by or on behalf of the Company in this Agreement or in any certificate,
report or other instrument delivered under or pursuant to any term hereof shall
be untrue or misleading in any material respect as of the date of this Agreement
or as of an applicable Closing Date or as of the date it was made, furnished or
delivered, the Investors may proceed to protect and enforce their rights by suit
in equity or action at law, whether for the specific performance of any term
contained in this Agreement or the Restated Certificate, injunction against the
breach of any such term or in furtherance of the exercise of any power granted
in this Agreement or the Restated Certificate, or to enforce any other legal or
equitable right of such Investors or to take any one or more of such actions.
In the event the Investors bring such an action against the Company, the
prevailing party in such dispute shall be entitled to recover from the losing
party all fees, costs and expenses of enforcing any right of such prevailing
party under or with respect to this Agreement or the Restated Certificate,
including without limitation such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.
39
(b) REMEDIES CUMULATIVE; WAIVER. No remedy referred to herein is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to the Investors at law or
in equity. No express or implied waiver by the Investors of any default shall
be a waiver of any future or subsequent default. The failure or delay of the
Investors in exercising any rights granted them hereunder shall not constitute a
waiver of any such right and any single or partial exercise of any particular
right by the Investors shall not exhaust the same or constitute a waiver of any
other right provided herein.
19. EXECUTION AND COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed an original, and all such counterparts together shall constitute one
instrument. Each party shall receive a duplicate original of the counterpart
copy or copies executed by it and by the Company.
20. GOVERNING LAW AND SEVERABILITY. This agreement shall be governed by
the internal laws of the state of Texas, without regard to principles of
conflicts of law and will, to the maximum extent practicable, be deemed to call
for performance in Xxxxxx County, Texas. In the event any provision of this
agreement or the application of any such provision to any party shall be held by
a court of competent jurisdiction to be contrary to law, the remaining
provisions of this agreement shall remain in full force and effect.
40
21. HEADINGS. The descriptive headings of the Sections hereof and the
Schedules and Exhibits hereto are inserted for convenience only and do not
constitute a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of the date first above written.
3DX TECHNOLOGIES INC.
By:
-----------------------------------
Name:
Title:
CITI GROWTH FUND L.P.
By:
-----------------------------------
Name:
Title:
X. XXXXXX & PARTNERS - 1993 L.P.
By:
-----------------------------------
Name:
Title:
LANDMARK GRAPHICS CORPORATION
By:
-----------------------------------
Name:
Title:
41
CENTENNIAL ASSOCIATES, L.P.
By:
-----------------------------------
Name:
Title:
---------------------------------------
Xxxxx Xxxxx
---------------------------------------
Xxxxxxxx X. Xxxxxxxxxx
---------------------------------------
Xxx X. Xxxxxxx
---------------------------------------
C. Xxxxxx Xxxxx
---------------------------------------
Xxxxxxx X. Xxxxxx
---------------------------------------
Xxxxx X. Xxxxxx
---------------------------------------
Xxxxxx Xxxxxx
42
---------------------------------------
Xxxxxxx Xxxxxxx
---------------------------------------
Xxxxxxx Xxxxxx
---------------------------------------
Xxxx X. Xxxxxxx
---------------------------------------
Xxxxxx "Buddy" Xxxxxxxxxx
---------------------------------------
Xxxxx Xxxxxxxxx
---------------------------------------
Xxxx X. Xxxxx
43
---------------------------------------
Xxxxx X. Xxxxx
---------------------------------------
Kilin To
---------------------------------------
Xxxxx X. Xxxxxxx
---------------------------------------
Xxxxxxx Xxxxxxx
---------------------------------------
Xxxxx X. Xxxx
---------------------------------------
Xxxxxx X. Xxxxxxxxxxx
44
Agreed to and accepted in their
capacity as Founders of the Company
as to Sections 8, 11 and 15 only:
------------------------------------
C. Xxxxxx Xxxxx
------------------------------------
Xxxxxxx X. Xxxxxx
------------------------------------
Xxxxx X. Xxxxxx
45
EXECUTED AND DELIVERED AS OF NOVEMBER 12, 1993
---------------------------------------
Xxxxxxx X. Xxxxxxxx
---------------------------------------
Xxxxxxx X. Xxxxx
---------------------------------------
Xxxx Xxxxx
---------------------------------------
Xxxxxx Xxxxx
---------------------------------------
Xxxxxxx Xxxxxxx
---------------------------------------
Xxxxx X. Xxxx
46
