1
STOCKHOLDERS' AGREEMENT
between
ENRON CAPITAL & TRADE RESOURCES CORP.,
a Delaware corporation,
MYSTERY ACQUISITION, INC.,
a Delaware corporation,
and
XXXXXX X. XXXXXXXXX
XXXXXXX X. XXXXX
XXXXXXX X. XXXXXXXXX
and
X. X. XXXXX
April 2, 1996
2
TABLE OF CONTENTS
This Table of Contents is solely for convenience of reference and shall
be given no effect in the construction or interpretation of this Agreement.
Page
A. MATTERS RELATING TO CORPORATE GOVERNANCE,
MANAGEMENT AND OPERATION OF NEWCO . . . . . . . . . . 1
A.1. CHARTER DOCUMENTS OF NEWCO AND SUBSIDIARIES . . . . . . . . . 1
(a) Certificate of Incorporation of Newco . . . . . 1
(b) Bylaws of Newco . . . . . . . . . . . . . . . . 2
(c) Indemnification and Director Quorum Provisions
in Charter Documents of Subsidiaries . . . . . . . . . 2
(d) Changes to Indemnification and Director Quorum
Provisions . . . . . . . . . . . . . . . . . . . . . . 2
A.2. OFFICERS AND DIRECTORS OF NEWCO AT THE CLOSING TIME . . . . . 3
A.3. BOARDS OF DIRECTORS OF NEWCO AND SUBSIDIARIES . . . . . . . . 3
(a) Election of Management Nominees Generally . . . 3
(b) Election of Replacement Directors . . . . . . . 3
(c) Removal of Directors . . . . . . . . . . . . . . 3
(d) Selection of Management Directors . . . . . . . 3
(e) Election of Other Directors . . . . . . . . . . 4
(f) Committees of the Board of Directors . . . . . . 4
(g) Election of Management Directors of Newco's
Subsidiaries . . . . . . . . . . . . . . . . . . . . . 4
A.4. BUSINESS OPPORTUNITIES . . . . . . . . . . . . . . . . . . . . 5
(a) Enron Party . . . . . . . . . . . . . . . . . . 5
(b) Newco . . . . . . . . . . . . . . . . . . . . . 5
(c) Definition of Business Opportunity . . . . . . . 5
B. MATTERS RELATING TO CAPITALIZATION OF NEWCO . . . . . . 5
B.1. STOCK OWNERSHIP . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Stockholders at the Closing Time . . . . . . . . 5
(b) Designation of Certain Stock Purchasers . . . . 5
(c) Purchase of Stock . . . . . . . . . . . . . . . 6
B.2. CERTAIN INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . 7
B.3. PAYMENT OF EXPENSES . . . . . . . . . . . . . . . . . . . . . 8
B.4. Indemnification of Management Stockholders Regarding Certain
Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 8
(a) Indemnity . . . . . . . . . . . . . . . . . . . 8
(ii) Determination of Amounts. . . . . . . . . . . . 8
(iii) Timing of Payments. . . . . . . . . . . . . . . 9
(b) (i) Tax Refunds. . . . . . . . . . . . . . . 9
(ii) Tax Benefits. . . . . . . . . . . . . . . . . . 9
(iii) Actually Realized. . . . . . . . . . . . . . . . 9
(c) Tax Reporting . . . . . . . . . . . . . . . . . 9
(d) (i) Procedures Relating to Indemnification
of Tax Claims. . . . . . . . . . . . . . . . . . . . . 10
(i)
3
(ii) Settlement. . . . . . . . . . . . . . . . . . . 10
(iii) Definition of Tax. . . . . . . . . . . . . . . . 11
C. MATTERS RELATING TO CERTAIN EMPLOYMENT AGREEMENTS
AND BENEFITS . . . . . . . . . . . . . . . 11
C.1. AGREEMENTS WITH REPRESENTATIVES . . . . . . . . . . . . . . . 11
(a) Employment Agreements of Xxxxxxxxx, Xxxxx and
Xxxxxxxxx . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Consulting Agreement with Xxxxx . . . . . . . . 11
(c) Representatives' Change in Control Agreements . 11
C.2. AGREEMENTS WITH OTHER MANAGEMENT MEMBERS . . . . . . . . . . . 11
(a) Changes in Existing Employment Agreements and
Independent Consulting Agreements . . . . . . . . . . . 11
(b) Change in Control Agreements with Employees Not
Having Existing Agreements . . . . . . . . . . . . . . 12
(c) New Employment Agreements and Consulting Services
Agreements . . . . . . . . . . . . . . . . . . . . . . 12
C.3. EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . 12
C.4. STOCK OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . 12
C.5. OVERRIDING ROYALTY INTERESTS . . . . . . . . . . . . . . . . . 13
D. MATTERS RELATING TO ACQUISITION AND DISPOSITION OF SHARES . . . 13
D.1. COMPLIANCE WITH SECURITIES LAWS . . . . . . . . . . . . . . . 13
(a) Representations . . . . . . . . . . . . . . . . 13
(b) Agreements . . . . . . . . . . . . . . . . . . . 14
(c) Stock Certificates. . . . . . . . . . . . . . . 14
D.2. PREEMPTIVE RIGHTS TO ACQUIRE ADDITIONAL SECURITIES . . . . . 14
(a) Offer to Certain Stockholders . . . . . . . . . 14
(b) Responses to Offer . . . . . . . . . . . . . . . 15
(c) Issuance of Unaccepted Securities . . . . . . . 15
(d) Exceptions . . . . . . . . . . . . . . . . . . . 15
D.3. TRANSFERABILITY OF COMMON STOCK . . . . . . . . . . . . . . . 15
(a) Transferability by Non-Management Stockholders . 15
(b) Transferability by Management Stockholders . . . 15
D.4. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . 15
(a) Demand Registration Rights of the Enron Party . 16
(b) Piggy-Back Registration Rights of the Enron
Party and the Management Stockholders . . . . . . . . . 16
(c) Special Demand Registration Right of the Enron
Party . . . . . . . . . . . . . . . . . . . . . . . . . 17
(d) Registration Responsibilities of Newco . . . . . 18
(e) Indemnification by Newco . . . . . . . . . . . . 20
(f) Indemnification by Selling Persons . . . . . . . 21
(g) Procedures for Indemnification . . . . . . . . . 21
(h) Newco Indemnification of Underwriters . . . . . 21
(i) Transferability of Registered Shares . . . . . . 22
D.5. AGREEMENT TO APPLY TO TRANSFERRED AND NEWLY ISSUED SHARES . . 22
D.6. POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . 22
(ii)
4
E. GENERAL MATTERS RELATING TO THIS AGREEMENT . . . . . . . . 22
E.1. AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 22
E.2. WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
E.3. INCLUSIVENESS . . . . . . . . . . . . . . . . . . . . . . . . 23
E.4. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
E.5. ASSIGNABILITY AND BINDING EFFECT . . . . . . . . . . . . . . . 23
E.6. NO THIRD PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . 24
E.7. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . 24
E.8. HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
E.9. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . 24
E.10. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 24
E.11. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 24
E.12. AGREEMENT OF SPOUSES . . . . . . . . . . . . . . . . . . . . . 25
E.13. ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . 25
(a) Conduct of Arbitration . . . . . . . . . . . . . 25
(b) Injunctive Relief . . . . . . . . . . . . . . . 26
(c) Payment of Expenses . . . . . . . . . . . . . . 26
E.14. INDEMNIFICATION OF OFFICERS AND DIRECTORS . . . . . . . . . . 26
(iii)
5
INDEX TO DEFINITIONS
This Index to Definitions is solely for convenience of reference and
shall be given no effect in the construction or interpretation of this
Agreement.
Terms Defined in This Agreement Where Defined
------------------------------- -------------
AAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E.13
Accredited offeree . . . . . . . . . . . . . . . . . . . . . . . . . . D.2(a)
Actually realized . . . . . . . . . . . . . . . . . . . . . . . . . . . . B.4(b)
Addendum Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . B.1(b)
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . [Introduction]
Business opportunity . . . . . . . . . . . . . . . . . . . . . . . . . A.4(c)
Capital stock equivalents . . . . . . . . . . . . . . . . . . . . . . D.2(a)
Xxxxx . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Introduction]
Closing Time . . . . . . . . . . . . . . . . . . . . . . . . . . . [Recitals]
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B.4(a)
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D.4(d)
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.2
Delaware Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.1(a)
Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D.1(a)
Disputing Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E.13
ECT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Introduction]
ECT Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . B.1(c)
Enron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.4(a)
Enron Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . A.3(e)
Enron Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.3(e)
Hardy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Recitals]
Xxxxxxxxx . . . . . . . . . . . . . . . . . . . . . . . . . . [Introduction]
Xxxxx . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Introduction]
Indemnified Management Stockholder . . . . . . . . . . . . . . . . . . . B.4(a)
Initial Management Directors . . . . . . . . . . . . . . . . . . . . . A.3(d)
Initial Public Offering . . . . . . . . . . . . . . . . . . . . . . . D.2(d)
Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D.2(a)
Management Stockholders . . . . . . . . . . . . . . . . . . . . . . . A.3(a)
Management Directors . . . . . . . . . . . . . . . . . . . . . . . . . A.3(a)
Newco . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Introduction]
Other Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . D.4(b)
Other Management Stockholders . . . . . . . . . . . . . . . . . . . . B.1(b)
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.1(c)
PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Recitals]
Registration Expenses . . . . . . . . . . . . . . . . . . . . . . . . D.4(d)
Relevant Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . B.4(a)
Representatives . . . . . . . . . . . . . . . . . . . . . . . . . [Recitals]
Restated Certificate of Incorporation . . . . . . . . . . . . . . . . A.1(a)
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . D.4(a)
Selling Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . D.4(d)
Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.2
(iv)
6
Stock Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.4
Stock Purchase Agreement . . . . . . . . . . . . . . . . . . . . . [Recitals]
Xxxxxxxxx . . . . . . . . . . . . . . . . . . . . . . . . . . [Introduction]
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.1(c)
Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B.4(a), B.4(d)
Tax Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B.4(b)
Tax Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B.4(d)
Tax Refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B.4(b)
30% Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D.4(c)
(v)
7
INDEX TO EXHIBITS
This Index to Exhibits is solely for convenience of reference and shall
be given no effect in the construction or interpretation of this Agreement.
Exhibit Name Exhibit Description Where Referred To
------------ ------------------- -----------------
EXHIBIT 1 -- Form of Certificate of Incorporation . . . . . . . . . . . . . . . . . . Sections A.1(a), A.1(c),
of Newco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.1(d)
EXHIBIT 2 -- Form of Bylaws of Newco . . . . . . . . . . . . . . . . . . . . . . . . Sections A.1(b), A.1(c),
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.1(d)
EXHIBIT 3 -- List of Officers of Newco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section A.2
EXHIBIT 4 -- Form of notice of election to purchase
shares of Newco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section B.1(b)
EXHIBIT 5 -- Form of Addendum Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section B.1(b)
EXHIBIT 6 -- Terms of Bridge Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section B.2
EXHIBIT 7 -- New provisions for employment and . . . . . . . . . . . . . . . . . . . . Sections C.1(a), C.1(b)
consulting agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.2(a), C.2(c),
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.5
EXHIBIT 8 -- Employee benefit plans to be continued . . . . . . . . . . . . . . . . . . . . . . . Section C.3
EXHIBIT 9 -- Form of Stock Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section C.4
EXHIBIT 10 -- Form of Nonstatutory Stock Option
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section C.4
EXHIBIT 11 -- Form of Incentive Stock Option
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section C.4
(vi)
8
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT dated April 2, 1996 (this "Agreement"),
among ENRON CAPITAL & TRADE RESOURCES CORP., a Delaware corporation ("ECT"),
XXXXXX X. XXXXXXXXX ("Xxxxxxxxx"), XXXXXXX X. XXXXX ("Xxxxx"), XXXXXXX X.
XXXXXXXXX ("Xxxxxxxxx"), X. X. XXXXX ("Xxxxx"), and MYSTERY ACQUISITION, INC.,
a Delaware corporation ("Newco").
WHEREAS, ECT and HARDY OIL & GAS PLC, a company incorporated in England
as a public limited company ("PLC"), have entered into, or concurrently with
the execution and delivery of this Agreement are entering into, a letter of
understanding pursuant to which ECT, Newco, PLC and HARDY HOLDINGS INC., a
Delaware corporation, will enter into a stock purchase agreement (the "Stock
Purchase Agreement") under which Newco will purchase all of the outstanding
stock of HARDY OIL & GAS USA INC., a Delaware corporation ("Hardy"); and
WHEREAS, ECT has formed and organized Newco and is currently the sole
stockholder of Newco; and
WHEREAS, Henderson, Clark, Xxxxxxxxx and Xxxxx (together, the
"Representatives"), ECT and Newco wish to provide for certain obligations and
rights with respect to each of them regarding the capitalization of Newco and
certain obligations, rights and restrictions with respect to each of them from
and after the time of closing of the purchase of stock pursuant to the Stock
Purchase Agreement (the "Closing Time");
NOW, THEREFORE, in consideration of the premises and the agreements
contained in this Agreement and subject to the conditions set forth in this
Agreement, the parties agree as follows:
A. MATTERS RELATING TO CORPORATE GOVERNANCE,
MANAGEMENT AND OPERATION OF NEWCO
A.1. CHARTER DOCUMENTS OF NEWCO AND SUBSIDIARIES.
(a) Certificate of Incorporation of Newco. Before the Closing Time,
ECT, as the sole stockholder of Newco, shall adopt the amended and restated
certificate of incorporation of Newco (the "Restated Certificate of
Incorporation") in substantially the form attached to this Agreement as EXHIBIT
1, and shall take all actions necessary to cause the Restated Certificate of
Incorporation to be filed with the Secretary of State of the State of Delaware
in accordance with the General Corporation Law of the State of Delaware (the
"Delaware Law"). Before the Closing Time, ECT shall not further amend the
Restated Certificate of Incorporation without the written consent of the
Representatives. From and after the Closing Time, the restated certificate of
incorporation of Newco shall be the Restated Certificate of Incorporation so
filed with
9
the Secretary of State of the State of Delaware until further amended in
accordance with the Delaware law.
(b) Bylaws of Newco. Before the Closing Time, ECT, as the sole
stockholder of Newco, shall adopt, or shall cause the board of directors of
Newco to adopt, the bylaws of Newco in substantially the form attached to this
Agreement as EXHIBIT 2. Before the Closing Time, ECT shall not further amend
those bylaws without the written consent of the Representatives. From and
after the Closing Time, the bylaws so adopted shall be the bylaws of Newco
until amended in accordance with the Delaware Law, the provisions of Newco's
certificate of incorporation and the provisions of those bylaws.
(c) Indemnification and Director Quorum Provisions in Charter
Documents of Subsidiaries. Immediately after the Closing Time, the parties to
this Agreement will take all actions necessary to amend the certificate of
incorporation and the bylaws of Hardy to the extent necessary to cause the
provisions of new Sections X.4, X.5, X.6 and X.7 of EXHIBIT 1 (relating to
indemnification of certain persons) and Sections III.2 and IV.2 of EXHIBIT 2
(relating to the requirements for a quorum of a meeting of the board of
directors and committees) to be included in the certificate of incorporation
and the bylaws of Hardy and to otherwise refer to this Agreement as
appropriate. Upon the formation or acquisition of any new direct or indirect
subsidiary of Hardy or Newco, the parties to this Agreement will take all
actions necessary to amend or adopt the certificate of incorporation (or
analogous document) and the bylaws (or analogous document) of the new
subsidiary so that the above-described indemnification and quorum provisions
are included in the new subsidiary's certificate of incorporation (or analogous
document) and bylaws (or analogous document) and so that this Agreement is
referred to therein as appropriate. For purposes of this Agreement a
"subsidiary" shall mean, with respect to any person (the "parent"), (i) any
corporation, association, joint venture, partnership or other business entity
of which securities or other ownership interests representing more than 50% of
the ordinary voting power or beneficial interest are, at the time as of which
any determination is being made, owned or controlled by the parent or one or
more subsidiaries of the parent or by the parent and one or more subsidiaries
of the parent and (ii) any joint venture or partnership of which the parent or
any subsidiary of the parent is a general partner or has responsibility for its
management (provided, however, that the term "subsidiary" shall not include
joint operating agreements).
(d) Changes to Indemnification and Director Quorum Provisions. The
indemnification and director quorum provisions described in subparagraph (c)
above and contained in the certificate of incorporation (or analogous document)
or the bylaws (or analogous document) of Newco, Hardy or any direct or indirect
subsidiary of Newco or Hardy (i.e., those amendments related thereto described
in EXHIBIT 1 and EXHIBIT 2 and analogous provisions in the documents of any
subsidiary) shall not be amended without the written consent of a majority of
the Management Directors (as defined in Section A.3 of this Agreement). The
amendments to new Articles VII, X and XI of Newco's certificate of
incorporation reflected in EXHIBIT 1 and to Articles III, IV, VII and VIII of
Newco's bylaws reflected in EXHIBIT 2 (and analogous provisions in the
documents of any subsidiary) shall not be amended without the written consent
of a majority of the Management Directors.
-2-
10
A.2. OFFICERS AND DIRECTORS OF NEWCO AT THE CLOSING TIME. The officers of
Newco at the Closing Time shall be the persons designated as officers on
EXHIBIT 3 to this Agreement. The parties purchasing shares of common stock,
$.01 par value, of Newco (the "Common Stock") pursuant to Section B.1 of this
Agreement before the Closing Time (together, the "Stockholders"), as the
holders of all issued and outstanding shares of Newco immediately before the
Closing Time, shall take all necessary actions to effect the election of a new
board of directors of Newco in accordance with the provisions of Section A.3 of
this Agreement, including without limitation the execution of a unanimous
written consent to that election, and shall take all such actions, or cause the
directors of Newco to take such actions, as may be necessary to elect the
officers designated on EXHIBIT 3.
A.3. BOARDS OF DIRECTORS OF NEWCO AND SUBSIDIARIES.
(a) Election of Management Nominees Generally. Membership on the
board of directors of Newco shall at all times include at least three nominees
of the group consisting of the Representatives and the Other Management
Stockholders as defined in Section B.1 of this Agreement (together, the
"Management Stockholders"), subject to the provisions of clause (d)(iv) of this
Section A.3. At any annual or special election of a new board of directors,
the Management Stockholders shall nominate three individuals to serve as
directors of Newco (the "Management Directors"), to be selected by the
Management Stockholders in accordance with subsection (d) of this Section A.3.
Each Stockholder shall vote all of its or his shares of voting stock issued by
Newco in favor of the nominees so nominated.
(b) Election of Replacement Directors. If any Management Director
shall cease to serve as a director as a result of his resignation, removal,
death or incapacity, then the vacancy created by that director's absence shall
be filled by an individual selected by the Management Stockholders in
accordance with subsection (d) of this Section A.3. Each Stockholder shall
vote all of its or his shares of voting stock issued by Newco in favor of the
nominees so nominated.
(c) Removal of Directors. The removal from office as a director of
any Management Director shall, in addition to any other requirement by Newco's
certificate of incorporation or bylaws, require the approval of two of the
Management Directors.
(d) Selection of Management Directors. The persons who shall
constitute the nominees for Management Directors shall be determined as
follows:
(i) The initial Management Directors shall be Xxxxxxxxx, Xxxxx
and Xxxxxxxxx ("Initial Management Directors");
(ii) As long as each Initial Management Director is an employee
of Newco, Hardy or a direct or indirect subsidiary of Newco or Hardy, is
willing to serve as a director of Newco and is able to serve as a
director of Newco, he shall be named as a nominee for election as a
Management Director;
(iii) If any Initial Management Director (or his successor
selected in accordance with this subsection (d)) shall cease to serve as
a director as a result
-3-
11
of his resignation, removal, death or incapacity or because he no longer
meets the requirements of subparagraph (ii) above, then his directorship
shall be filled by the then-highest ranking executive officer of Newco
who is not then serving as a director of Newco; provided, however, if as
a result of such selection there would then be no Management Director
who was or became a Stockholder at the Closing Time, then instead the
vacant directorship (and each successor) shall be filled by the then-
highest ranking executive officer of Newco who is not then serving as a
director and who was or became a Stockholder at the Closing Time, and if
there is no such person, then the vacant directorship (and each
successor) shall be filled by a person who is then the holder of the
highest number of shares of Common Stock and who became a Stockholder at
the Closing Time and is not currently serving as a director of Newco;
any such replacement (or his successor) shall serve as long as he is
willing to serve as a director of Newco and is able to serve as a
director of Newco;
(iv) If any directorship to be held by a Management Director
cannot be filled as described above for any reason, then the provisions
of subparagraphs (a), (b) and (c) this Section A.3 shall no longer apply
to that directorship, which shall be filled by a person nominated and
elected in accordance with law and the provisions of Newco's bylaws.
(e) Election of Other Directors. At any annual or special election
of directors and except with respect to the Management Directors, each
Stockholder shall vote all of its or his shares of voting stock issued by Newco
in favor of nominees (the "Enron Directors") named by ECT or its assignee
permitted by Section 5 of this Agreement (the "Enron Party"). If any Enron
Director shall cease to serve as a director as a result of his resignation,
removal, death or incapacity, then each Stockholder shall vote all of its or
his shares of voting stock issued by Newco in favor of a replacement nominee
named by the Enron Party.
(f) Committees of the Board of Directors. If any executive committee
(or committee having similar functions) of the board of directors of Newco is
appointed, at least two members of that committee shall be Management
Directors. If any compensation committee (or committee having similar
functions) of the board of directors of Newco is appointed, at least one member
of that committee shall be a Management Director. At least one member of the
committee appointed pursuant to the stock option plan described in Section C.4
of this Agreement shall be a person who is a Management Director. No
Management Director shall be appointed to any audit committee of the board of
directors of Newco.
(g) Election of Management Directors of Newco's Subsidiaries. The
provisions of this Section A.3 regarding the nomination, election, replacement
and removal of the Management Directors shall apply with respect to each direct
and indirect subsidiary of Newco, it being intended that the Management
Stockholders shall have the same representation on the boards of directors of
each such subsidiary as they have on the board of directors of Newco. The
provisions of this Section A.3 regarding the appointment of Management
Directors on committees of the board of directors of Newco shall apply with
respect to each direct and indirect subsidiary of Newco, it being intended that
the Management Stockholders shall have the same representation on
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committees of the boards of directors of each such subsidiary as they have on
the board of directors of Newco.
A.4. BUSINESS OPPORTUNITIES.
(a) Enron Party. Neither Enron Corp., a Delaware corporation
("Enron") nor any affiliate of Enron shall have any obligation to bring, or
otherwise share, any business opportunities with Newco or its subsidiaries.
Enron and its affiliates may compete directly with Newco or its subsidiaries.
Newco and each Stockholder acknowledge that, agree to, and waive any right to
complain as a result of the fact that, ECT and its affiliates will, among other
things, (i) continue to engage in oil and gas exploration and development in
competition with Newco and Hardy, (ii) will continue to engage in oil and gas
marketing activities, (iii) will continue to engage in financing other entities
or in furnishing services in connection therewith (including financing of or
services in connection with business opportunities pursued by others in
competition with Newco and Hardy), and (iv) may acquire other entities engaged
in oil and gas exploration and production that will compete with Newco and
Hardy.
(b) Newco. Neither Newco nor any of its subsidiaries shall have any
obligation to bring, or otherwise share, any business opportunities with ECT,
Enron or any affiliate of ECT or Enron. Newco and its subsidiaries may compete
directly with ECT, Enron and their affiliates. ECT and each Stockholder
acknowledge that, agree to, and waive any right to complain as a result of the
fact that, Newco and Hardy may, among other things, engage in oil and gas
exploration and development in competition with Enron, ECT and their
affiliates.
(c) Definition of Business Opportunity. For purposes of this Section
A.4, a "business opportunity" means any opportunity for a person (i) to enter
into any transaction pursuant to which the person would acquire (whether by
purchase, lease or other transaction), own, invest in, finance, lend funds to,
contribute capital to, manage, operate or otherwise participate in any person,
assets or transaction, or (ii) to act as a broker, finder, financial adviser or
investment banker with respect to any such transaction by any other person.
B. MATTERS RELATING TO CAPITALIZATION OF NEWCO
B.1. STOCK OWNERSHIP.
(a) Stockholders at the Closing Time. Immediately before the Closing
Time, the sole stockholders of Newco shall be the Enron Party, assignees, if
any, of ECT under Section E.5 of this Agreement, the Representatives and the
Other Management Stockholders (as such term is defined in subparagraph (b)
below). If ECT is not the Enron Party, then before the Closing Time, ECT shall
cause its shares of stock of Newco currently held by ECT to be canceled or to
be transferred to the Enron Party.
(b) Designation of Certain Stock Purchasers. As soon as practicable
after the execution and delivery of this Agreement, the group of employees
(other than the
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Representatives) who have change in control agreements with Hardy (the "Other
Management Stockholders") will be offered the right to purchase up to 23,575
shares of Common Stock. Each such employee may purchase a proportion of such
23,575 shares equal to the proportion of the payment such employee would
individually receive under such change in control agreement to the total
payments that would be made to all such employees under such agreements, with
shares not purchased by employees who do not elect to terminate their change in
control agreements and shares not purchased by employees who do not fully
purchase their allocable shares not being reoffered unless ECT otherwise
agrees. Only employees who agree to terminate their change in control
agreements with Hardy pursuant to Section C.2 of this Agreement and who have
either amended their existing employment agreement with Hardy or entered into
new employment agreements with Hardy pursuant to Section of this Agreement may
purchase shares. A person may become an Other Management Stockholder only if,
at least five days before the Closing Time, that person has executed and
delivered to ECT and to Xxxxxxxxx (i) written notice of his election to
purchase shares of the Common Stock pursuant to this Section B.1 in the form
attached to this Agreement as EXHIBIT 4 and (ii) unless the Other Management
Stockholder is a Representative, an addendum agreement ("Addendum Agreement")
in the form attached to this Agreement as EXHIBIT 5. Newco, on its own behalf
and on behalf of the other Stockholders pursuant to the power of attorney
granted in Section D.6 of this Agreement, shall execute and deliver all
Addendum Agreements so delivered by the Other Management Stockholders.
(c) Purchase of Stock. Before the Closing Time, each person named
below shall purchase from Newco, and Newco shall issue and sell to each such
person, the number of shares of Common Stock set forth below for a purchase
price of $100 per share.
Name of Stockholder Number of Shares
------------------- ----------------
Enron Party a minimum of 855,000 and a maximum of
1,045,000 (such number to be
determined by the Enron Party), less
the number of shares purchased by the
Other Management Stockholders
Xxxxxxxxx 5,400
Xxxxx 3,795
Xxxxxxxxx 3,435
Xxxxx 3,795
Other Management Stockholders Up to an aggregate of 23,575 as
(individually, and not as a group) determined pursuant to this
Section B.1
The purchase price for the shares to be purchased by the Enron Party shall be
paid in cash. The parties to this Agreement recognize that ECT Securities
Corp., a Delaware corporation ("ECT Securities"), is acting as the placement
agent in connection with the
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Enron Party's purchase of shares of the Common Stock, and in such capacity is
entitled to a fee of 3% of the total purchase price of those shares. The
purchase price for the shares to be purchased by the Management Stockholders
shall be payable, at the option of each Management Stockholder, in cash or by
means of an assignment by the Management Stockholder to Newco of overriding
royalty interests held by the Management Stockholder under the terms of Article
9 of the employment agreement or Article 7 of the consulting services agreement
between Hardy and the Management Stockholder, having a value (as defined below)
equal to the purchase price of the shares of Common Stock. Which overriding
royalty interests are to be assigned to Newco by a particular Management
Stockholder shall be determined by the Management Stockholder but must consist
of overriding royalty interests acceptable to ECT; for purposes of this
Agreement, any overriding royalty interests in the following areas (or any
combination thereof) shall be deemed to be acceptable to ECT, although other
fields may be acceptable to ECT, at ECT's sole discretion:
Xxxxxx Xxxxx X-000
Xxxxxxxxx Xxxxxx 683/703
Garden Banks Xxxxx 000
Xxxx Xxxxxx Xxxxx 00
Xxxxx Xxxxxx Xxxxx 136
Brazos Block 375
For purposes of this Agreement, the value of the overriding royalty interests
to be so assigned will be determined and calculated in accordance with the
following formula:
100% of the value of the overriding royalty interest using the March 31,
1996, Xxxxx Xxxxx Report, with volumes and costs adjusted to the last
day of the month preceding the Closing Time; no price or cost
escalation; flat pricing based on the average 12-month forward NYMEX
closing price for natural gas (Xxxxx Hub -- $/MMBTU) and crude oil (WTI
-- $/bbl) as of the last trading day of the calendar month preceding the
Closing Time, adjusted for basis differential, transportation, gravity,
quality and BTU factor and other price adjustments per the Xxxxx Xxxxx
Report on a property-by-property basis, category risking as follows:
PDP -- 100% of PV10, PDBP -- 100% of PV10, PUD -- 100% of PV20 and
Probables -- 50% of PV10.
Such assignment shall contain a warranty of title against claims and
encumbrances created by, through or under the Management Stockholder, but not
otherwise, shall be otherwise in form satisfactory to Newco and the Enron
Party, and shall be executed by the Management Stockholder and (if necessary to
transfer title to the overriding royalty interests) his spouse.
B.2. CERTAIN INDEBTEDNESS. Before the Closing Time, the Enron Party will
arrange for bridge loan financing of Newco or Hardy on the terms described in
EXHIBIT 6 to this Agreement. The principal amount of the bridge loan will be
at least an amount equal to the difference between (a) the cash purchase price
described in the Stock Purchase Agreement and (b) the difference between (i)
the amount paid by the Enron Party for
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its shares of Common Stock pursuant to Section B.1 of this Agreement and (ii)
the amount paid by the Management Stockholders for their shares of Common Stock
pursuant to Section B.1 of this Agreement. At the Closing Time, Newco shall
pay ECT Securities a fee of 1 1/2% of the total principal amount of the bridge
loan financing and such other fees as specified on EXHIBIT 6. The placement
agent and financial advisor for any refinancing or substitution of the bridge
loan financing described in this Section B.2 shall be ECT Securities. In
connection with any such refinancing or substitution, Newco shall pay ECT
Securities a fee of 2 1/2% of the total principal amount of the refinancing or
substitution loan if ECT Securities is the sole placement agent or financial
advisor and otherwise shall pay such fees that are commercially reasonable and
typical for a transaction of the nature of the refinancing or substitution of
the bridge loan financing. However, the obligations described in the preceding
two sentences shall only apply to one refinancing or substitution of the bridge
loan financing.
B.3. PAYMENT OF EXPENSES. In addition to the fees described in Section B.2
of this Agreement, if the transactions described in the Stock Purchase
Agreement shall be consummated, Newco shall, as promptly as practical
thereafter, pay or reimburse the Enron Party and the Management Stockholders
for all reasonable fees and expenses of third parties incurred by them in
connection with the Stock Purchase Agreement, this Agreement and the bridge
loan financing described in Section B.2 of this Agreement (and the transactions
contemplated thereby) and not paid or otherwise reimbursed by another party.
If the transactions described in the Stock Purchase Agreement are not
consummated, then each party to this Agreement shall be responsible for paying
its or his own fees and expenses incurred in connection with the Stock Purchase
Agreement, this Agreement and the bridge loan financing.
B.4. INDEMNIFICATION OF MANAGEMENT STOCKHOLDERS REGARDING CERTAIN TAX
MATTERS.
(a) Indemnity. (i) Newco shall indemnify, protect, save and hold
harmless, on a fully grossed-up, after tax basis, the Management Stockholders
(each an "Indemnified Management Stockholder") from and against any and all
federal, state and local income taxes, together with any interest thereon, any
penalties, additions to tax, fines and additional amounts with respect thereto
and any interest in respect of such penalties, additions to tax, fines or
additional amounts (each, a "Tax" and collectively, "Taxes") imposed on him or
her and caused by or resulting from the failure of the transactions described
in Section B.1(c) of this Agreement (the "Relevant Transactions") to qualify
for any reason as a tax-free exchange under Section 351 of the Internal Revenue
Code of 1986, as amended (the "Code").
(ii) Determination of Amounts. The amount of Taxes for which
indemnification is provided under this Section B.4(a)(i): (A) shall be
determined on a marginal basis, by comparing the amount of Taxes that the
Indemnified Management Stockholder would have paid if the Relevant Transactions
had qualified as a Tax-free exchange under Section 351 of the Code and the
amount of Taxes that such Indemnified Management Stockholder actually pays; and
(B) shall be increased to take account of any net Tax cost incurred by the
Indemnified Stockholder arising from the receipt, payment or accrual of
indemnity payments hereunder. In computing the amount of any such Tax cost,
the Indemnified Management Stockholder shall be
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deemed to recognize all other items of income, gain, loss, deduction or credit
before recognizing any item arising from the receipt or accrual of any
indemnity payment hereunder.
(iii) Timing of Payments. Newco shall make indemnity payments under
this Section B.4 to the relevant Indemnified Management Stockholder five days
prior to the date on which the Indemnified Management Stockholder is required
to pay the relevant Tax to the relevant taxing authority, but in no case
earlier than 20 days after the date the relevant Indemnified Management
Stockholder notifies Newco in writing that such Tax is due and the amount
thereof.
(b) (i) Tax Refunds. If a refund, credit or other offset to Tax
(a "Tax Refund") of any Taxes for which an Indemnified Management Stockholder
has been indemnified by Newco pursuant to Section B.4(a) is actually realized
by such Indemnified Management Stockholder, such Indemnified Management
Stockholder shall pay over to Newco the amount of such Tax Refund (together
with interest received from the relevant taxing authority with respect thereto)
no later than five days after such Tax Refund is actually realized by such
Indemnified Management Stockholder.
(ii) Tax Benefits. If the amount of Taxes payable by an Indemnified
Management Stockholder (or transferee of such Indemnified Management
Stockholder) with respect to a subsequent transaction or with respect to a
subsequent taxable period is less than the amount of Taxes such Indemnified
Management Stockholder (or transferee) would have paid absent the Relevant
Transactions as a result of a step-up in tax basis in the shares of Common
Stock resulting from the Relevant Transactions failing to qualify as a tax-free
exchange under Section 351 of the Code (such reduction in Taxes payable, a "Tax
Benefit"), then such Indemnified Management Stockholder shall pay (or cause
such transferee to pay) to Newco the amount of such Tax Benefit no later than
five days after the date such Tax Benefit is actually realized by such
Indemnified Management Stockholder (or transferee, as the case may be).
(iii) Actually Realized. For purposes of this subsection B.4(b), an
Indemnified Management Stockholder shall be deemed to have "actually realized"
a Tax Refund, and an Indemnified Management Stockholder (or a transferee of an
Indemnified Management Stockholder, as the case may be), shall be deemed to
have actually realized" a Tax Benefit, at the earlier of (i) the time such Tax
Refund or Tax Benefit is realized by such Indemnified Management Stockholder
(or transferee, as the case may be) in the form of a payment from the relevant
taxing authority or (ii) the time the Indemnified Management Stockholder (or
transferee, as the case may be) files a Tax return reflecting, or makes a
payment of, Taxes in an amount that is less than the amount of Taxes that would
have been payable by such Indemnified Management Stockholder (or transferee, as
the case may be).
(c) Tax Reporting. Except as otherwise provided in subsection B.4(d)
with respect to the resolution of a Tax Claim (as defined in subsection B.4(d))
in accordance with the procedures set forth therein, the parties jointly and
severally agree and acknowledge that the Relevant Transactions are intended to
qualify as a tax-free exchange under Section 351 of the Code, and shall not
take any position before any taxing authority that is inconsistent with such
position.
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(d) (i) Procedures Relating to Indemnification of Tax Claims. If
any taxing authority shall notify a party hereto that it is making a claim
which, if successful, might result in an indemnity payment by Newco to an
Indemnified Management Stockholder pursuant to subsection B.4(a) (a "Tax
Claim"), then such party shall give notice to Newco (or, if such party is
Newco, Newco shall give notice to each Management Stockholder) in writing of
such Tax Claim within five days of becoming aware of the existence of such Tax
Claim. Newco shall thereafter control at its sole risk and expense all
proceedings and may make all decisions taken in connection with such Tax Claim
(including selection of counsel and settlement thereof) and, without limiting
the foregoing, may in its sole discretion and at its sole risk and expense
pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with any taxing authority with respect thereto, and may, in its
sole discretion, either pay the Tax claimed on behalf of the relevant
Indemnified Management Stockholder and xxx for a refund where applicable law
permits such refund suits or contest or settle such Tax Claim in any other
permissible manner; provided, however, that (i) Newco shall not have the
authority to extend the statute of limitations with respect to any Tax without
the relevant Indemnified Management Stockholder's consent (which consent shall
not be unreasonably withheld) and (ii) Newco's control of any contest or
proceeding shall be limited to issues with respect to the Tax Claim and the
relevant Indemnified Management Stockholder shall be entitled to settle or
contest, in his or her sole and absolute discretion, any other issue raised by
the Internal Revenue Service or any other taxing authority. If Newco elects to
pay the relevant Tax on behalf of an Indemnified Management Stockholder and xxx
for a refund, Newco shall indemnify and hold harmless the Indemnified
Management Stockholder (on a fully grossed-up, after-tax basis, determined in a
manner analogous to that described in subsection B.4(a)) for any "taxes" (as
defined in subsection B.4(d)(iii)) arising from such payment on such
Indemnified Management Stockholder's behalf. In addition, Newco shall
indemnify and hold harmless the Indemnified Management Stockholder (on a fully
grossed-up, after-tax basis, determined in a manner analogous to that described
in subsection B.4(a)) for any taxes arising from the payment of expenses by
Newco incident to such contest or proceeding of such Tax Claim (including
without limitation fees and disbursements of counsel and experts retained by
Newco. If a claim by a taxing authority involves multiple issues, the contest
of some of which are controlled by Newco hereunder, and the contest of others
of which are controlled by an Indemnified Management Stockholder hereunder, and
it is impossible to sever such issues, the choice of whether to pay the taxes
relating to such multiple issues and xxx for a refund (where available) or,
instead, to contest such multiple issues without payment (such as in United
States Tax Court), shall be made by the party (Newco or the Indemnified
Management Stockholder) controlling the contest of the issues involving the
larger potential liability for taxes.
(ii) Settlement. An Indemnified Management Stockholder shall not
settle any Tax Claim without the prior written consent of Newco. Each party
hereunder shall cooperate with the others in contesting any Tax Claim, which
cooperation shall include the granting of appropriate powers of attorney to
Newco, the retention and, upon request, the provision of records and
information that are relevant to such Tax Claim, and making himself or herself
available to provide additional information or explanation of any material
provided hereunder or to testify at proceedings relating to such Tax Claim, and
keeping the other parties reasonably informed of all developments,
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written materials, and events relating to such Tax Claim. If Newco requests an
Indemnified Management Stockholder pursuant to this subsection B.4(d) to
perform a particular task, Newco shall reimburse such Indemnified Management
Stockholder (on a fully grossed-up, after-tax basis determined in a manner
analogous to that described in subsection B.4(a)) for any necessary, reasonable
and customary out-of-pocket expenses incurred by such Indemnified Management
Stockholder in complying with such request.
(iii) Definition of Tax. For purposes of this subsection B.4(d), the
terms "tax" and "taxes" mean any and all Federal, state and local taxes of any
kind whatsoever (including, but in no way limited to, income taxes), together
with any interest thereon, any penalties, additions to tax, fines or additional
amounts with respect thereto and any interest in respect to such penalties,
additions to tax, fines or additional amounts.
C. MATTERS RELATING TO CERTAIN EMPLOYMENT AGREEMENTS
AND BENEFITS
C.1. AGREEMENTS WITH REPRESENTATIVES.
(a) Employment Agreements of Xxxxxxxxx, Xxxxx and Xxxxxxxxx. From
and after the Closing Time, the employment agreements between Hardy and each of
Xxxxxxxxx, Xxxxx and Xxxxxxxxx, shall be in substantially the appropriate form
included in EXHIBIT 7 to this Agreement. As soon as practicable after the date
of this Agreement, each of Xxxxxxxxx, Xxxxx and Xxxxxxxxx shall, and the
parties to this Agreement shall cause Hardy to, enter into an amended and
restated employment agreement in such form, to be effective at the Closing
Time.
(b) Consulting Agreement with Xxxxx. From and after the Closing
Time, the consulting services agreement between Xxxxx and Hardy shall be in
substantially the appropriate form included in EXHIBIT 7 with respect to Xxxxx.
As soon as practicable after the date of this Agreement, Xxxxx shall, and the
parties to this Agreement shall cause Hardy to, enter into an amended and
restated agreement in such form, to be effective at the Closing Time.
(c) Representatives' Change in Control Agreements. At the Closing
Time, each change in control Agreement dated February 12, 1996, between each of
the Representatives and Hardy shall be terminated. As soon as practicable
after the date of this Agreement, each Representative shall, and each party to
this Agreement shall cause Hardy to, enter into an agreement terminating his
change in control agreement to be effective at the Closing Time.
C.2. AGREEMENTS WITH OTHER MANAGEMENT MEMBERS.
(a) Changes in Existing Employment Agreements and Independent
Consulting Agreements. As soon as practicable after the date of this
Agreement, the Representatives and ECT shall conduct discussions with those
eight individuals (which do not include the Representatives) who have written
employment agreements with
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Hardy, and those four individuals (who do not include Xxxxx) who have written
consulting services agreements with Hardy in an effort to encourage those
individuals to agree to enter into amended and restated agreements in
substantially the appropriate form included in EXHIBIT 7 to this Agreement and
to terminate their change in control agreements with Hardy. To the extent each
such individual agrees to those matters, the parties to this Agreement shall
cause Hardy to enter into such an amended and restated agreement with each such
individual, to be effective at the Closing Time.
(b) Change in Control Agreements with Employees Not Having Existing
Agreements. As soon as practicable after the date of this Agreement, the
parties to this Agreement shall conduct discussions with those individuals
(other than the Representatives and the individuals subject to subsection (a)
of this Section C.2) who have entered into change in control agreements with
Hardy to encourage those individuals to terminate their change in control
agreements. To the extent each such individual agrees to terminate his change
in control agreement, the parties to this Agreement shall cause Hardy to enter
into an appropriate termination agreement with those individuals, to be
effective at the Closing Time.
(c) New Employment Agreements and Consulting Services Agreements. As
soon as practicable after the date of this Agreement, the parties to this
Agreement shall cause Hardy to enter into employment agreements with those
individuals who have agreed to terminate their change in control agreements
with Hardy and who do not have an existing written employment agreement or
consulting services agreement with Hardy as of the date of this Agreement.
Those agreements shall be in substantially the appropriate form included in
EXHIBIT 7 to this Agreement and shall be effective as of the Closing Time.
C.3. EMPLOYEE BENEFIT PLANS. For at least three years after the Closing
Time, the parties to this Agreement shall cause Hardy to continue the employee
benefit plans described on EXHIBIT 8 to this Agreement on the same terms and
conditions as in effect at the Closing Time; provided, however, that those
plans may be amended, revised, merged and replaced if such action is required
(or required to maintain the plan's qualified status, if applicable) under the
Internal Revenue Code, the Employment Retirement Income Security Act or other
applicable federal or state law and regulations promulgated thereunder;
provided further, however, that if any such amendment, revision, merger or
replacement results in a reduction in, discontinuance of or disallowance of any
Management Stockholder's participation in or continued participation in, any
plan, Newco shall take such steps as are necessary or advisable to provide such
Management Stockholders, in the aggregate, with benefits reasonably comparable
to those provided to such Management Stockholder prior to such reduction,
discontinuance or disallowance. In addition, after the Closing Time, the
parties to this Agreement shall cause Hardy to adopt the employee retention
bonus program described on EXHIBIT 8.
C.4. STOCK OPTIONS. As soon as practicable after the date of this Agreement
and before the Closing Time, the parties to this Agreement shall cause Newco to
adopt a stock option plan in substantially the form of EXHIBIT 9 to this
Agreement (the "Stock Option Plan"), to be effective as of the Closing Time.
At the Closing Time, Newco shall grant stock options to the Management
Stockholders pursuant to the Stock Option
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Plan, and each Management Stockholder and Newco shall enter into a stock option
agreement in the form attached as EXHIBIT 10 to this Agreement (for
nonstatutory stock options) or in the form attached as EXHIBIT 11 to this
Agreement (for incentive stock options). To the fullest extent possible, the
options granted to the Management Stockholders shall be incentive stock
options, and otherwise shall be non-qualified stock options. The number of
shares that each Management Stockholder shall be entitled to purchase pursuant
to a stock option agreement entered into pursuant to the foregoing sentence
shall be the number of shares purchased or to be purchased by that person
pursuant to Section B.1 of this Agreement multiplied by 3.57; any fractional
number of shares shall be rounded to the nearest whole number as follows: a
fraction of .50 or more shall be rounded upward to the next whole number, and a
fraction of less than .50 shall be rounded down to the next whole number.
C.5. OVERRIDING ROYALTY INTERESTS. At all times while this Agreement is in
effect, the aggregate overriding royalty interests to be held by or due to
Xxxxx and employees of Hardy (excluding Xxxx X. Xxxxxxxx) pursuant to the
applicable employment agreement described in EXHIBIT 7 to this Agreement or
otherwise shall not exceed an aggregate of 1-1/2% before Payout (as defined in
EXHIBIT 7) and an aggregate of 6% after Payout, proportionately reduced to the
Company Group's Working Interest (as defined in EXHIBIT 7) and the aggregate
overriding royalty interest to be held by or due to Xxxx X. Xxxxxxxx and
consultants (excluding Xxxxx) pursuant to the consulting services agreement
described in EXHIBIT 7 to this Agreement or otherwise shall not exceed an
aggregate of 1-1/2% before Payout and an aggregate of 1-1/2% after Payout,
proportionately reduced to the Company Group's Working Interest, in each case
subject to the adjustments, including without limitation those described in
Sections 9.4.8(a), 9.4.8(b), 9.4.9 and 9.5, provided for in such employment
agreements and the comparable provisions in such consulting services
agreements; provided, however, that the aggregate overriding royalty interests
held by and due to employees and consultants in a prospect owned by Hardy as of
the date hereof shall not be increased except as provided in such employment or
consulting services agreement. The division from time to time while this
Agreement is in effect among employees and consultants of the percentages
described in the foregoing sentence will be determined by the mutual agreement
of the Representatives at the Closing Time and thereafter will be determined by
the Compensation Committee of the board of directors of Hardy based on the
recommendation of the chief executive officer of Hardy.
D. MATTERS RELATING TO ACQUISITION AND DISPOSITION OF SHARES
D.1. COMPLIANCE WITH SECURITIES LAWS.
(a) Representations. Each of the Stockholders represents to Newco
and to all other Stockholders that as of the date the Stockholder acquires any
shares of the Common Stock, (i) those shares are being acquired for that
Stockholder's own account, for investment and not with a view to any
distribution (except as set forth below with respect to the Enron Party's
shares), (ii) the Stockholder's financial and other circumstances are such that
the Stockholder can foresee no situation in which the Stockholder may be
required to sell the shares, and (iii) Newco has furnished the Stockholder with
such financial and other information as the Stockholder may
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reasonably request to enable the Stockholder to make an informed decision
concerning the acquisition. Each Stockholder understands that the Common Stock
has not been registered under the Securities Act of 1933 or under the
securities laws of any other jurisdiction. Each Stockholder understands that,
except with respect of the provisions of Section D.4. of this Agreement, Newco
is under no obligation to take any action to register any shares of the Common
Stock under any securities laws and that exemptions under applicable securities
laws may not be available in connection with any Disposition (as defined below)
of shares of the Common Stock. For purposes of this Agreement, a "Disposition"
means any transfer, pledge, mortgage or other encumbrance, or any other
disposition, of the Common Stock (or any interest in the Common Stock), whether
voluntary or involuntary, whether during the lifetime of the Stockholder making
the Disposition or on the death of the Stockholder, as applicable. The Enron
Party may make a Disposition of its shares of Common Stock from time to time in
accordance with the provisions of Section D.3. of this Agreement, but any such
Disposition shall be made in compliance with the provisions of this Section
D.1.
(b) Agreements. No Stockholder shall make a Disposition of any
shares of the Common Stock unless there is furnished to Newco an opinion of
counsel reasonably satisfactory in form and substance to Newco that
registration of the shares which are the subject of the Disposition is not
required under applicable securities laws or unless the requirement contained
in this subparagraph (b) is waived in writing by Newco.
(c) Stock Certificates. Each certificate representing shares of the
Common Stock shall bear an appropriate legend covering the matters described in
this Section D.1. and other provisions of this Agreement.
D.2. PREEMPTIVE RIGHTS TO ACQUIRE ADDITIONAL SECURITIES.
(a) Offer to Certain Stockholders. If Newco proposes to issue, sell
or grant any of its capital stock or any right, warrant, option, convertible
security or exchangeable security, or indebtedness or other rights exercisable
for or convertible into, or exchangeable for, directly or indirectly, any
capital stock of Newco ("capital stock equivalents"), then Newco shall, no
later than 16 days before the consummation of any such issuance, sale or grant
(collectively, any "Issuance") give written notice to each Stockholder of the
proposed Issuance. The notice shall describe the proposed Issuance, identify
the proposed purchasers, and contain an offer to each Stockholder that in the
reasonable judgment of Newco is an accredited investor (as that term is defined
in Rule 501 promulgated under the Securities Act of 1933) (an "accredited
offeree") to sell to such accredited offeree, at the same price and for the
same consideration to be paid by the proposed purchasers, the accredited
offeree's pro rata portion (which is the ratio of the number of shares of fully
diluted Common Stock owned by the accredited offeree immediately before such
Issuance to the total number of shares of fully diluted Common Stock owned by
all accredited offerees immediately before such Issuance) of such capital stock
and capital stock equivalents included in such Issuance. Each accredited
offeree shall have a right of over-allotment to the effect that if any
accredited offeree fails to exercise its or his rights under this Section D.2.
to purchase its or his pro rata portion, the other accredited offerees may
purchase the nonpurchasing accredited offeree's portion on a pro rata basis or
on such other basis
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as the accredited offerees who are purchasing securities pursuant to the offer
shall agree.
(b) Responses to Offer. Any accredited offeree desiring to exercise
an over-allotment right shall so indicate in its response to Newco. Any
accredited offeree desiring to purchase a portion or all of the Issuance shall
indicate its or his acceptance of Newco's offer by written notice within 15
days after its or his receipt of Newco's notice pursuant to this Section D.2.
The Issuance of and payment for the securities so accepted shall be consummated
at a time (but no more than 60 days following the expiration of such 15-day
period) and place within Houston, Texas, to be designated by Newco.
(c) Issuance of Unaccepted Securities. If the accredited offerees
collectively fail, after taking into account exercises of over-allotment
rights, to elect to purchase all of the capital stock proposed to be issued,
then Newco may, within the 60 days following the expiration of such 15-day
period, proceed with that portion of the Issuance that the accredited offerees
did not elect to purchase, free of any right on the part of such accredited
offeree under this Section D.2. in respect thereof.
(d) Exceptions. This Section D.2. shall not apply to (i) Issuances
of options to employees pursuant to the Stock Option Plan and the exercise of
those options, (ii) capital stock or capital stock equivalents issued pursuant
to the acquisition of a business entity or assets by way of merger, purchase of
assets or otherwise, and (iii) Common Stock issued in an offering (an "Initial
Public Offering") that is underwritten on a firm commitment basis by a
nationally recognized investment banking firm or in a merger or other business
combination involving Newco pursuant to which Newco becomes (or its successor
becomes or is) subject to the reporting requirements of Section 13 or Section
15 of the Securities Exchange Act of 1934.
D.3. TRANSFERABILITY OF COMMON STOCK.
(a) Transferability by Non-Management Stockholders. Each Stockholder
who is not a Management Stockholder has the right to transfer shares of Common
Stock, subject only to the provisions of Section D.1 of this Agreement.
(b) Transferability by Management Stockholders. Commencing with the
fifth anniversary of the Closing Time, a Management Stockholder shall have the
right to transfer his shares, subject only to the provisions of D.1 of this
Agreement. Until the expiration of that five-year period, a Management
Stockholder may not voluntarily transfer his shares of the Common Stock unless
they are transferred to a family member or to another Management Stockholder.
However, a Management Stockholder shall have the right at any time to make a
bona fide pledge or mortgage of his shares. Any transfer of shares of the
Common Stock resulting from the death, divorce, bankruptcy or foreclosure of
any pledged shares shall not be deemed to be a voluntary transfer. The
Management Stockholders may enter into any such agreement among themselves
regarding their rights to purchase and sell each other's stock as they deem
appropriate.
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D.4. REGISTRATION RIGHTS.
(a) Demand Registration Rights of the Enron Party. At any time after
the expiration of 90 days after the consummation of an Initial Public Offering,
the Enron Party may request Newco to register under the Securities Act of 1933
(the "Securities Act") all or any portion of its shares of Common Stock.
Promptly following the receipt of a notice from the Enron Party pursuant to
this subparagraph (a), Newco shall notify each other Stockholder of the receipt
of the notice and shall use its best efforts to register under the Securities
Act the shares of Common Stock specified in the notice from the Enron Party and
any shares of the Common Stock then held by the other Stockholders as specified
in any notices received from those other Stockholders not later than the fifth
day after receipt of the notice sent by Newco. Newco shall be obligated to
register shares of Common Stock pursuant to this subparagraph (a) on three
occasions only. However, Newco shall not be obligated to prepare and file any
registration statement pursuant to this subparagraph (a), or to prepare or file
any amendment or supplement thereto, at any time when Newco, in the good faith
judgment of its board of directors, expressed by resolution specifying the
reason therefor, reasonably believes that the filing thereof at the time
requested, or the offering of securities pursuant thereto, would materially
adversely affect a pending or proposed public offering of Newco's securities,
or an acquisition, merger, recapitalization, consolidation, reorganization or
similar transaction or negotiations, discussions or pending proposals with
respect thereto. The filing of a registration statement, or any amendment or
supplement thereto, by Newco may not be deferred pursuant to the provisions of
the preceding sentence on more than one occasion with respect to each demand
registration right, nor may it be deferred for more than 30 days after the
abandonment or consummation of any of the foregoing proposals or transactions
or, in any event, for more than 90 days after Newco's receipt of notice from
the Enron Party under this subparagraph (a). However, if the deferral is with
respect to any effective registration statement the deferral may not extend
beyond such date as would reasonably be necessary to permit any post-effective
amendment thereto to become effective, and the time period set forth in clause
(vii) of subparagraph (d) below shall be extended for a period equal to the
length of time of that deferral.
(b) Piggy-Back Registration Rights of the Enron Party and the
Management Stockholders. If Newco proposes to register any shares of the
Common Stock under the Securities Act (except with the respect to registration
statements filed on Form S-8 or Form S-4 or such other forms as shall be
prescribed under the Securities Act for the same purposes as of those forms),
it will at each such time, before the filing of a registration statement in
connection therewith give written notice to all of the Stockholders of its
intention so to do and, on the written request (which must specify the number
of shares of Common Stock and the proposed manner of their distribution for
inclusion in the registration) of any of the Stockholders delivered to Newco
within five days of receipt of Newco's notice, Newco will use its best efforts
to cause any Common Stock then held by the requesting Stockholders to be
included in the shares to be registered by the registration statement proposed
to be filed by Newco, all to the extent requisite to permit the sale or other
disposition (in accordance with the written request of the requesting
stockholders) by such of the Stockholders as have so requested registration.
Nothing contained in this subparagraph (b) shall, however, limit Newco's right
to cancel, postpone or withdraw any proposed registration. If any registration
pursuant to this subparagraph (b) shall be, in whole or in part, in connection
with an underwritten offering of Common Stock, any request by the
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Stockholders to register Common Stock may, but need not, request that the
Common Stock be included in the underwriting on the same terms and conditions
as the shares of Common Stock to be registered, if any, and sold through
underwriters under the registration. However, as a condition to that inclusion
the requesting Stockholders shall execute an underwriting agreement having such
customary terms as the underwriters shall request and if the managing
underwriter determines and advises in writing that the inclusion in the
underwriting of all Common Stock proposed to be included by the requesting
Stockholders and any other shares of Common Stock sought to be registered by
any other stockholder of Newco exercising rights comparable to those of the
Stockholders under this subsection (b) ("Other Common Stock") would interfere
with the successful marketing of the securities proposed to be registered for
underwriting by Newco or by any holder of Common Stock having the right to
require Newco to file a registration statement to register Common Stock, then
the number of shares of Common Stock and Other Common Stock requested to be
included in the underwriting shall be reduced pro rata among the Stockholders
and the holders of Other Common Stock requesting such registration and
inclusion in the underwriting and may, in the determination of the managing
underwriter and consistent with the pro rata reduction, be reduced to zero. If
Newco has an underwritten offering of Common Stock and the requesting
Stockholders' Common Stock is registered in the registration statement for the
offering but the requesting Stockholders do not for any reason sell any of
their Common Stock to the underwriter for Newco in connection with the
offering, the Stockholders shall refrain from selling their Common Stock during
the period of distribution of Newco's equity securities by the underwriter and
the period in which the underwriter participates in the after-market. However,
any such Stockholders shall be entitled to sell their shares in connection with
the registration commencing on the 90th day after the effective date of the
registration.
(c) Special Demand Registration Right of the Enron Party. If no
Initial Public Offering has been consummated by the fifth anniversary of the
Closing Time, then at any time thereafter, any person who at the time of the
request described below owns at least 30% of the outstanding Common Stock and
who is the Enron Party or an assignee of the Enron Party (the "30%
Stockholder") may request Newco to register under the Securities Act all or any
portion of its shares of Common Stock. Promptly following receipt of a notice
from the 30% Stockholder pursuant to this subparagraph (c), Newco shall notify
each other Stockholder of the receipt of the notice and shall use its best
efforts to register under the Securities Act, for public sale pursuant to such
distribution, the shares of Common Stock specified in the notice from the 30%
Stockholder and any shares of Common Stock issued to the other Stockholders as
specified in any notices received from the other Stockholders no later than the
fifth day after receipt of the notice sent by Newco. Newco shall be obligated
to register stock pursuant to this subparagraph (c) on one occasion only.
However, Newco shall not be obligated to prepare any registration statement
pursuant to this subparagraph (c) or to prepare or file any amendment or
supplement thereto, at any time when Newco, in the good faith judgment of its
board of directors, expressed by resolutions specifying the reason therefor,
reasonably believes that the filing thereof at the time of request, or the
offering of securities pursuant thereto, would materially adversely affect a
pending or proposed public offering of Newco's securities, or an acquisition,
merger, recapitalization, consolidation, reorganization or similar transaction
or negotiations, discussions, or pending proposals with respect thereto. The
filing of a registration
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statement, or any amendment or supplement thereto, by Newco may not be deferred
pursuant to the provisions of the preceding sentence on more than one occasion
nor may it be deferred for more than 30 days after the abandonment or
consummation of any of the foregoing proposals or transactions or, in any
event, for more than 90 days after Newco's receipt of notice from the 30%
Stockholder under this subparagraph (c). However, if the deferral is with
respect to any effective registration statement the deferral may not extend
beyond such date as would reasonably be necessary to permit any post-effective
amendment thereto to become effective, and the time period set forth in clause
(vii) of subparagraph (d) below shall be extended for a period equal to the
length of time of that deferral.
(d) Registration Responsibilities of Newco. Whenever Newco is
required by the provisions of this Section D.4 to use its best efforts to
effect the registration of stock under the Securities Act, Newco will, subject
to the other provisions of this Section D.4:
(i) as expeditiously as practicable, prepare and file with the
Securities and Exchange Commission (the "Commission") a registration
statement on the appropriate form with respect to the shares to be
registered and seek to cause the registration statement to become and
remain effective;
(ii) as expeditiously as practicable, prepare and file with the
Commission such amendments and supplements to the registration statement
and the prospectus used in connection therewith as may be necessary to
keep the registration statement effective and to comply with the
provisions of the Securities Act;
(iii) as expeditiously as practicable, furnish to each of the
persons registering shares pursuant to the registration statement and to
each underwriter, if any, such number of copies of a prospectus and a
preliminary prospectus in conformity with the requirements of the
Securities Act, and such other documents as such persons and underwriter
may reasonably request to facilitate the public sale or other
disposition of the stock to be sold; however, the obligation of Newco to
deliver copies of prospectuses or preliminary prospectuses to the
sellers shall be subject to the receipt by Newco of reasonable
assurances from them that they will comply with the applicable
provisions of the Securities Act and of such other securities laws as
may be applicable in connection with any use by them of any prospectuses
or preliminary prospectuses;
(iv) as expeditiously as practicable, furnish at the request of
the Stockholders requesting registration, on the date that the Common
Stock is to be delivered to the underwriters for sale pursuant to the
registration or if the Common Stock is not being sold through
underwriters, on the date the registration statement with respect to the
Common Stock becomes effective (A) an opinion, dated such date, of the
independent counsel representing Newco for the purposes of the
registration, addressed to the underwriters, if any, and to the
Stockholders making the request, stating that the registration statement
has become effective under the Securities Act and that (1) to the best
of
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counsel's notice, no stop order suspending the effectiveness of the
registration statement has been instituted or is pending or contemplated
under the Securities Act; (2) the registration statement, the related
prospectus and each amendment or supplement thereto, including all
documents incorporated by reference therein, comply as to form in all
material respects with the requirements of the Securities Act and the
applicable rules and regulations of the Commission thereunder (except
that counsel need express no opinion as to financial statements or other
financial or reserve data contained or incorporated by reference
therein); (3) no facts have come to the attention of counsel that cause
counsel to believe (with customary qualifications) that either the
registration statement or the prospectus, or amendment or supplement
thereto, including all documents incorporated by reference therein, in
light of the circumstances under which they were made, contains any
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 (except that counsel need express no belief as to
financial statements or other financial or reserve data contained or
incorporated by reference therein or as to any information provided by
the selling Stockholders or any underwriter for inclusion therein); (4)
counsel does not know of any legal or governmental proceedings, pending
or contemplated required to be described in the registration statement
or prospectus, or any amendment or supplement thereto, including all
documents incorporated by reference therein, that are not described as
required, or of any contracts or documents or instruments of a character
required to be described in the registration statement or prospectus, or
any amendment or supplement thereto, including all documents
incorporated by reference therein, or to be filed as exhibits to the
registration statement that are not described and filed as required; and
(5) as to such other customary matters as the underwriter or the selling
Stockholders shall reasonably request; and (B) a letter dated such date,
from the independent certified public accountants of Newco, addressed to
the underwriters, if any, and to the selling Stockholders making the
request, stating that they are independent certified public accountants
within the meaning of the Securities Act and that in the opinion of the
accountants, the financial statements and other financial data of Newco
included in the registration statement or the prospectus, or any
amendment or supplement thereto, including all documents incorporated by
reference therein, comply as to form in all material respects with the
applicable accounting requirements of the Securities Act. The letter
from the independent certified public accountants shall cover also such
other customary financial matters (including information as to the
period ending not more than five business days before the date of the
letter) with respect to the registration in respect of which the letter
is being given as the underwriters, if any, or the selling Stockholders
making request may reasonably request;
(v) as expeditiously as practicable, use its best efforts to
register or qualify the Common Stock registered by the registration
statement under such other securities laws of such U.S. jurisdictions as
the underwriters, if any, or the selling Stockholders
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making the request shall reasonably request (considering the nature and
size of the offering) and do any and all other acts and things that may
be necessary or desirable to enable the selling Stockholders making the
request to consummate the public sale or other disposition of the Common
Stock being registered in those jurisdictions. However, Newco shall not
be required to qualify to transact business as a foreign corporation in
any jurisdiction in which it otherwise would not be required to be so
qualified or to take any action that would subject it to general service
of process in any jurisdiction in which it has not been so subject;
(vi) bear all Registration Expenses (as defined below) in
connection with all registrations under this Section D.4. However, all
Selling Expenses (as defined below) of Common Stock held by selling
Stockholders and all fees and disbursements of counsel for selling
Stockholders in connection with each registration pursuant to this
Section D.4 shall be born by the selling Stockholders pro rata in
proportion to the number of shares of Common Stock covered by the
registration or in such other proportion as the selling Stockholders may
agree. For purposes of this subparagraph (d), expenses incurred by
Newco in complying with this Section D.4, including without limitation
all registration and filing fees, all printing expenses, all fees and
disbursements of counsel for Newco, all blue sky fees and expenses and
all fees and expenses of accountants for Newco are referred to as
"Registration Expenses". All underwriting fees and discounts and
selling commissions and fees and expenses of any underwriters applicable
to the sales in connection with the registration are referred to as
"Selling Expenses";
(vii) keep each registration pursuant to this Section D.4
effective for a period of 90 days or such shorter period of time until
the transfer or sale of all Common Stock so registered has been
completed; and
(viii) take such other action as is customary and reasonable in
connection with such registration.
(e) Indemnification by Newco. If Newco registers any Common Stock
under the Securities Act pursuant to this Section D.4, Newco will indemnify and
hold harmless each selling Stockholder, and any other person who controls a
selling Stockholder within the meaning of Section 15 of the Securities Act,
against any losses, claims, damages or liabilities, joint or severally, to
which the selling Stockholder or the controlling person may become subject
under the Securities Act or otherwise, insofar as the losses, claims, damages
or liabilities or actions in respect thereof arise out of or are based on any
untrue statement or alleged statement of any material fact contained, on the
effective date thereof, in any registration statement under which the Common
Stock was registered under the Securities Act, any preliminary prospectus or
final prospectus contained therein, or any amendment thereof or supplement
thereto, including all documents incorporated by reference therein, or arise
out of or are based on the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
not misleading, and will reimburse each such Stockholder and each such
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
damage, liability or action; however, Newco will not be liable in any such case
to the extent that such loss, claim, damage, or liability arises out of or is
based on an untrue statement or alleged untrue statement or omission or alleged
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omission made in the registration statement, preliminary prospectus, final
prospectus or amendment or supplement, including all documents incorporated by
reference therein, in reliance on and in conformity with written information
furnished to Newco through an instrument duly executed by or on behalf of any
of the selling Stockholders or a controlling person of any of the selling
Stockholders specifically for use in the preparation thereof.
(f) Indemnification by Selling Persons. If Newco registers shares of
the Common Stock under the Securities Act pursuant to this Section D.4, each
selling Stockholder will severally indemnify and hold harmless Newco and each
person, if any, who controls Newco within the meaning of Section 15 of the
Securities Act, each officer of Newco who signs the registration statement,
each director of Newco, and each underwriter, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against any
and all such losses, claims, damages, liabilities or actions that Newco or such
officer, director, underwriter or controlling person may become subject to
under the Securities Act or otherwise, and will reimburse Newco, each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by such party in connection with investigating or
defending such loss, claim, damage, liability or action, if such loss, claim,
damage, liability or action relates to a statement or omission that was made in
reliance on and in conformity with information furnished in writing to Newco by
or on behalf of such selling Stockholder specifically for use in connection
with the preparation of the registration statement or prospectus. The selling
Stockholders shall also indemnify each such underwriter and each person who
controls any such underwriter within the meaning of Section 15 of the
Securities Act as may reasonably and customarily be requested by the
underwriters in connection with any underwritten offering of Common Stock, but
in no event shall any selling Stockholder be required to pay more under any
circumstances than the amount he or it receives from the proceeds of the sale
of his or its Common Stock pursuant to such indemnification provisions.
(g) Procedures for Indemnification. Promptly after receipt by any
indemnified person of notice of any claim or commencement of any action in
respect of which indemnity is to be sought against an indemnifying person
pursuant to subparagraph (e) or subparagraph (f) under this Section D.4, the
indemnified person shall notify the indemnifying person in writing of the claim
or commencement of an action and, subject to the provisions hereinafter stated,
in case any such action shall be brought against an indemnified person and the
indemnifying person shall have been notified of the same, the indemnifying
person shall be entitled to participate therein and, to the extent it shall
wish to assume the defense thereof, with counsel reasonably satisfactory to the
indemnified person, and after notice from the indemnifying person to the
indemnified person of its election to assume the defense thereof, the
indemnifying person shall not be liable to the indemnified person in connection
with the defense thereof. However, if there exists or will exist a conflict of
interest that would make it inappropriate in the reasonable judgment of the
indemnified person for the same counsel to represent both the indemnified
person and the indemnifying person, then the indemnified person shall be
entitled to retain its own counsel at the expense of the indemnifying person.
(h) Newco Indemnification of Underwriters. To the extent necessary
to facilitate the sale of Common Stock and an underwritten offering pursuant to
a
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registration statement registering shares pursuant to this Section D.4, Newco
shall, in connection with any such sale, enter into an agreement indemnifying
the underwriter or underwriters and each other person, if any, who controls the
underwriter or underwriters in the registration from liability under the
Securities Act; however, the agreement shall be reasonable and customary in
scope and effect.
(i) Transferability of Registered Shares. The provisions of Section
D.1 of this Agreement relating to the transfer of Common Stock shall cease and
terminate as to any shares of Common Stock that have been effectively
registered under the Securities Act and sold or otherwise disposed of in
accordance with the intended method of disposition by the selling Stockholder
set forth in the registration statement covering those shares. Whenever the
time period limitations and other conditions imposed by Rule 144(k) promulgated
under the Securities Act or any successor or similar rule or statute shall
allow free transferability of Common Stock, the Stockholder holding the Common
Stock bearing the restrictive legend as to which such conditions have
terminated shall be entitled to receive from Newco, without expense, a new
stock certificate not bearing the restrictive legend representing the Common
Stock, and the rights of the Stockholders as to registration provided for in
this Section D.4 shall terminate immediately upon their becoming so entitled
with respect to those shares.
D.5. AGREEMENT TO APPLY TO TRANSFERRED AND NEWLY ISSUED SHARES. No transfer
of any shares of the Common Stock shall be effected and no shares of capital
stock of Newco or capital stock equivalents shall be issued unless the
transferee or issuee shall have simultaneously entered into an Addendum
Agreement with Newco on its own behalf and on behalf of the other Stockholders
pursuant to the power of attorney granted in Section D.6. of this Agreement.
All provisions of this Agreement shall continue to apply to any holders of
those securities, it being the intention of the parties to this Agreement that
the provisions of this Agreement shall be applicable to the securities issued
by Newco, as well as to the holders of those securities. However, the
foregoing sentence shall not apply to the Enron Party's right to name non-
Management Directors pursuant to subsection (f) of Section A.3 of this
Agreement.
D.6. POWER OF ATTORNEY. For the purpose of executing an Addendum Agreement,
the Stockholders appoint Newco as their agent and attorney to execute the
Addendum Agreement on their behalf and expressly bind themselves to the
Addendum Agreement by Newco's execution of that Agreement without further
action on their part.
E. GENERAL MATTERS RELATING TO THIS AGREEMENT
E.1. AMENDMENT. This Agreement may be amended by the parties only by an
instrument in writing signed by (a) the holders of two-thirds of the Common
Stock, (b) each Stockholder who holds, as of the effective date of the
amendment, at least 10% of the then-outstanding shares of the Common Stock, (c)
a majority of the Management Directors and (d) at least one Management Director
who became a Stockholder at the Closing Time and, if there is no such person,
at least one Stockholder who became a Stockholder at the Closing Time (unless
no such person exists, in which case the amendment need not be signed by the
person described in this clause (d)). However,
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no amendment shall impose any additional material obligation on any party to
this Agreement without that party's written consent.
E.2. WAIVER. A party to this Agreement may (without the consent of any other
person) waive in writing any (i) obligation owed to him or it under this
Agreement by any other party to this Agreement or (ii) right he or it has in
this Agreement. A waiver may be made prospectively or retroactively. Any term
or provision of this Agreement may be waived in writing at any time by the
party entitled to its benefits. Any waiver of any term or condition of this
Agreement by any party shall not be construed as a waiver of any subsequent
breach or failure of the same term or condition, or waiver of any other term or
condition of this Agreement.
E.3. INCLUSIVENESS. This Agreement and the exhibits to this Agreement set
forth the entire understanding of the parties to this Agreement with respect to
the subject matter of this Agreement. This Agreement and the exhibits to this
Agreement supersede all existing agreements concerning the subject matter of
this Agreement.
E.4. NOTICES. Any notice or other communication required or permitted to be
given under this Agreement shall be in writing and may be mailed by certified
mail, return receipt requested (or by the most nearly comparable method if
mailed from or to a location outside of the United States), to the party to
whom it is to be given at the address of that party set forth at the end of
this Agreement under the signature of that party (or to another address that
the party shall have furnished in writing in accordance with the provisions of
this Section E.4), or sent by other means, with a copy to each of the other
parties to this Agreement. Any notice or other communication shall be dated as
of the date it is sent and shall be deemed given when sent in accordance with
the provisions of this Agreement.
E.5. ASSIGNABILITY AND BINDING EFFECT. The Enron Party and the Management
Stockholders may transfer their shares of the Common Stock pursuant to the
provisions of Section D.3 of this Agreement, subject only to the provisions of
Section D.1 of this Agreement (relating to compliance with securities laws) and
Section D.6 of this Agreement (relating to transferees' execution and delivery
of Addendum Agreements). Any person becoming a holder of shares of the Common
Stock shall be subject to the provisions of this Agreement, in accordance with
the terms of Section D.5 of this Agreement. Before the Enron Party purchases
its shares of Common Stock pursuant to Section B.1 of this Agreement, ECT may
assign any other person its rights under this Agreement if the assignee becomes
a party to this Agreement and executes and delivers to each other party to this
Agreement an appropriate agreement to such effect pursuant to which the
assignee assumes the obligations of the "Enron Party" under this Agreement.
Upon any such assignment, however, ECT shall remain responsible for the Enron
Party's obligations under Sections B.1 and B.2 of this Agreement, and ECT
hereby guarantees the performance of this Agreement by the Enron Party pursuant
to those sections. Before the Management Stockholders purchase their shares of
Common Stock pursuant to Section B.1 of this Agreement, they may not assign
their rights under this Agreement without the prior written consent of the
other parties to this Agreement. Subject to the foregoing, the provisions of
this Agreement shall be binding on and inure to the benefit of the successors
and assigns of the parties to this Agreement.
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E.6. NO THIRD PARTY BENEFICIARIES. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person who is
not or has not become a party to this Agreement, except with respect to Enron
and its affiliates pursuant to subsection A.4(a) of this Agreement.
E.7. SEVERABILITY. If any provision of this Agreement is invalid, illegal or
unenforceable, the balance of this Agreement shall remain in full force and
effect, and if any provision is inapplicable to any person or circumstance, it
shall, nevertheless, remain applicable to all other persons and circumstances.
E.8. HEADINGS. The headings in this Agreement are solely for convenience
of reference and shall be given no effect in the construction or interpretation
of this Agreement.
E.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
E.10. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Texas, without giving effect to
principles of conflict of laws (recognizing that Delaware corporate law will
apply to matters relating to the internal affairs of each party that is a
Delaware corporation).
E.11. TERMINATION. This Agreement shall terminate automatically upon (a)
April 16, 1996, if the Stock Purchase Agreement has not been executed and
delivered by all parties thereto by 5:00 p.m. Houston time on that date, (b)
July 16, 1996, if the purchase of Hardy stock described in the Stock Purchase
Agreement has not been consummated by 5:00 p.m. Houston time on that date, (c)
any termination of the Stock Purchase Agreement before the consummation of the
transactions contemplated by the Stock Purchase Agreement, (d) the bankruptcy
(whether by a court of competent jurisdiction or voluntarily) or dissolution of
Newco, (e) the occurrence of any event that reduces the number of Stockholders
to one, (f) the merger or consolidation of Newco with another corporation, if
Newco is not the surviving corporation and if the Stockholders do not hold,
directly or indirectly, at least 50% of the outstanding voting stock of the
surviving corporation, (g) the sale of substantially all of the assets of Newco
or Hardy, (h) the acquisition by one person (or group of affiliated persons),
not affiliated with the Enron Party, of more than two-thirds of the outstanding
Common Stock unless (i) the holders of at least 90 percent of the then-
outstanding Common Stock elect not to terminate this Agreement and (ii) the
non-termination of this Agreement is approved by the Management Directors, (i)
the consummation of an Initial Public Offering, (j) the consummation of a
business combination pursuant to which Newco (or its successor) becomes (or its
successor becomes or is) a reporting company under Section 13 or Section 15 of
the Securities Exchange Act of 1934, or (k) 10 years from the Closing Time;
provided, however, that if this Agreement is terminated pursuant to clause (i)
above, then Sections D.4 (regarding registration rights) and, to the extent
applicable, Section E shall continue in full force and effect until terminated
pursuant to another clause of this Section E.11; and provided further that if
this Agreement is terminated pursuant to any of clauses (d) through (k) above,
then Section B.4 (relating to certain tax payments) and, to the extent
applicable,
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Section E shall continue in full force and effect. If this Agreement is
terminated pursuant to clause (a), (b) or (c) above, then no party to this
Agreement shall be obligated to continue any arrangements with the other
parties to this Agreement with respect to any acquisition of the stock or
assets of Hardy or any business combination with Hardy; upon any such
termination, each party to this Agreement may enter into other agreements with
other parties with respect to those matters. No termination of this Agreement
shall affect any other agreement (including without limitation any employment
agreements with employees of Hardy and any stock option agreements with
employees of Hardy), except pursuant to the specific terms of such other
agreement.
E.12. AGREEMENT OF SPOUSES. The spouses of the Stockholders who are
individuals are fully aware of, understand and fully consent and agree to the
provisions of this Agreement and its binding effect on any community property
interests they may now or hereafter own, and agree that the termination of
their marital relationship for any reason shall not have the effect of removing
any shares of the Common Stock otherwise subject to the coverage this Agreement
and that their awareness, understanding, consent and agreement are evidenced by
their signing this Agreement.
E.13. ARBITRATION. If a dispute arises between any two or more parties to
this Agreement ("Disputing Parties") with respect to matters related to this
Agreement and the dispute cannot be settled through direct discussions, the
Disputing Parties shall first endeavor to settle the dispute in an amicable
fashion. If such efforts fail to resolve the dispute, the dispute shall,
except as otherwise provided in Section B.4 of this Agreement, be resolved as
follows:
(a) Conduct of Arbitration. Except as provided in subsection (b)
below, any and all claims, demands, causes of action, disputes, controversies
and other matters in question arising out of or relating to this Agreement, any
provision hereof, the alleged breach thereof, or in any way relating to the
subject matter of this Agreement, whether such claims sound in contract, tort
or otherwise, at law or in equity, under state or federal law, whether provided
by statute or the common law, for damages or any other relief, shall be
resolved by binding arbitration pursuant to the Federal Arbitration Act in
accordance with the Commercial Arbitration Rules then in effect with the
American Arbitration Association (the "AAA"). The arbitration proceeding shall
be conducted in Houston, Texas. The arbitration may be initiated by any
Disputing Party by providing to the other Disputing Party or Parties a written
notice of arbitration specifying the claims, and the parties shall thereafter
endeavor to agree on an arbitrator. If within 30 days of the notice of
initiation of the arbitration procedure, the parties are unable to agree on an
arbitrator, the party requesting arbitration shall file a request with the AAA
that the Houston office of the AAA provide a list of potential arbitrators to
each Disputing Party. The Disputing Parties shall thereafter have 60 days to
select an arbitrator from such list, with such selection to be by mutual
agreement. If the Disputing Parties fail to select an arbitrator within such
time by mutual agreement, then any Disputing Party may request that the Chief
Judge of the U.S. District Court for the Southern District of Texas appoint an
arbitrator and any such appointment shall be binding. The arbitrator,
utilizing the Commercial Arbitration Rules of the AAA, shall within 120 days of
his or her selection, resolve all disputes between the parties. There shall be
no transcript of the hearings before the arbitrator. The
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33
arbitrator's decision shall be in writing, but shall be as brief as possible.
The arbitrator shall not assign the reasons for his or her decision. The
arbitrators' decision shall be final and non-appealable to the maximum extent
permitted by law. Judgment upon any award rendered in any such arbitration
proceeding may be entered by any federal or state court having jurisdiction.
This agreement to arbitrate shall be enforceable in either federal or state
court. The enforcement of this agreement to arbitrate and all procedural
aspects of this agreement to arbitrate, including but not limited to, the
construction and interpretation of this agreement to arbitrate, the issues
subject to arbitration (i.e., arbitrability), the scope of the arbitrable
issues, allegations of waiver, delay or defenses to arbitrability and the rules
governing the conduct of the arbitration, shall be governed by and construed
pursuant to the Federal Arbitration Act and shall be decided by the arbitrator.
In deciding the substance of any such claims, the arbitrator shall apply the
substantive laws of the State of Texas (excluding Texas choice-of-law
principles that might call for the application of some other State's law). It
is expressly agreed that the arbitrator shall have no authority to award
treble, exemplary, or punitive damages under any circumstances regardless of
whether such damages may be available under Texas law, the parties hereby
waiving their right, if any, to recover treble, exemplary or punitive damages
in connection with any such claims.
(b) Injunctive Relief. Notwithstanding the agreement to arbitrate
contained in subsection (a) above, if any party wishes to seek a temporary
restraining order, a preliminary or temporary injunction or other injunctive
relief in connection with any or all such claims, demands, cause of action,
disputes, controversies and other matters in question arising out of or
relating to this Agreement, any provision hereof, the alleged breach thereof,
or in any way relating to the subject matter of this Agreement, whether such
claims sound in contract, tort or otherwise, at law or in equity, under state
or federal law, whether provided by statute or the common law, for damages or
any other relief, each party shall have the right to pursue such injunctive
relief in court, rather than by arbitration. The parties agree that such
action for a temporary restraining order, a preliminary or temporary injunction
or other injunctive relief will be brought in the State or federal courts
residing in Houston, Xxxxxx County, Texas.
(c) Payment of Expenses. Newco shall pay all costs and expenses of
any party to this Agreement (including, but not limited to, attorneys' fees,
the fees of the arbitrator and the AAA and any other related costs) for any
arbitration proceeding or legal action; provided, however, that if in any such
arbitration proceeding or legal action, the arbitrator or court, respectively,
determines that a Disputing Party has prosecuted or defended any issue in such
proceeding or action in bad faith, the arbitrator or court, respectively, may
allocate the portion of such costs and expenses relating to such issue between
the parties in any other manner deemed fair, equitable and reasonable by the
arbitrator or court, respectively.
E.14. INDEMNIFICATION OF OFFICERS AND DIRECTORS. Newco shall indemnify each
of the Representatives for all reasonable expenses incurred by him in defending
any suit, action or proceeding (or any suit, action or proceeding threatened to
be made) brought by or in the right of PLC, any of its affiliates or any of
their stockholders, whether civil, administrative or investigative, by reason
of the fact that the Representatives entered into this Agreement or otherwise
participated in the transactions contemplated by this
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34
Agreement or the Stock Purchase Agreement. In no event shall Newco be
responsible for (a) any judgments, losses, damages, fines and penalties
actually incurred by the Representatives in connection with any such suit,
action or proceeding, except as expressly stated in the preceding sentence or
(b) the payment of any of the expenses contemplated by the preceding sentence
if the Representative is found guilty of, or pleads no contest to, or is
finally determined to be liable in, an action for willful misconduct, gross
negligence or a knowing violation of any duty, contractual or otherwise, owing
by the Representative to PLC or any of its affiliates. Expenses incurred by a
Representative may be paid in advance of the final disposition of any action,
suit or proceeding, but it shall be a condition to receipt of any amounts paid
or payable in advance pursuant to this Section E.14 that the Representative to
whom the advance is to be made undertake to repay all amounts so advanced if it
shall ultimately be determined that the Representative is not entitled to be
indemnified hereunder. If more than one Representative is involved in the same
suit, action or proceeding, the Representatives so involved will endeavor to
use the same legal counsel in that suit, action or proceeding insofar as
practicable, as long as no conflict of interest exists as a result thereof and
as long as such counsel would not be ethically prohibited from representing
more than one Representative.
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IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be executed on the date first above written.
ENRON CAPITAL & TRADE
Address for delivery RESOURCES CORP. ("ECT")
of Notice:
By: /s/ XXXX X. XXXXXXXX
------------------------------------------
0000 Xxxxx Xxxxxx Name: Xxxx X. Xxxxxxxx
Xxxxxxx, Xxxxx 00000 --------------------------------
Attention: Xxxxxx XxXxx, Specialist Title: Managing
-------------------------------
MYSTERY ACQUISITION, INC. ("Newco")
Address for delivery
of Notice:
By: /s/ XXXX X. XXXXXXXX
------------------------------------------
0000 Xxxxx Xxxxxx Name: Xxxx X. Xxxxxxxx
Xxxxxxx, Xxxxx 00000 --------------------------------
Attention: Xxxxxx XxXxx, Specialist Title: Vice President
-------------------------------
Address for delivery
of Notice:
c/o Hardy Oil & Gas USA Inc. /s/ XXXXXX X. XXXXXXXXX
0000 Xxxxx Xxxxxx -------------------------------------
Suite 0000 XXXXXX X. XXXXXXXXX
Xxxxxxx, Xxxxx 00000-0000
/s/ XXXXXXXX XXXXXXXXX
-------------------------------------
[Spouse]
Address for delivery
of Notice:
c/o Hardy Oil & Gas USA Inc. /s/ XXXXXXX X. XXXXX
0000 Xxxxx Xxxxxx -------------------------------------
Suite 1400 XXXXXXX X. XXXXX
Xxxxxxx, Xxxxx 00000
/s/ XXXXX XXXXX
-------------------------------------
[Spouse]
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36
Address for delivery
of Notice:
c/o Hardy Oil & Gas USA Inc. /s/ XXXXXXX X. XXXXXXXXX
0000 Xxxxx Xxxxxx -------------------------------------
Suite 0000 XXXXXXX X. XXXXXXXXX
Xxxxxxx, Xxxxx 00000-0000
/s/ XXXXXXX XXXXXXXXX
-------------------------------------
[Spouse]
Address for delivery
of Notice:
c/o Hardy Oil & Gas USA Inc. /s/ X. X. XXXXX
0000 Xxxxx Xxxxxx -------------------------------------
Suite 1400 X. X. XXXXX
Xxxxxxx, Xxxxx 00000-0000
/s/ XXXXXXX X. XXXXX
-------------------------------------
[Spouse]
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37
EXHIBIT 1
TO STOCKHOLDERS' AGREEMENT
[The Form of Certificate of Incorporation that was adopted by Mariner Energy,
Inc. has been filed as Exhibit 3.1 to the Registrant's Registration Statement
on Form S-4 (Registration No. 333-12707).]
38
EXHIBIT 2
TO STOCKHOLDERS' AGREEMENT
[The Bylaws of Mariner Energy, Inc. have been filed as Exhibit 3.2 to the
Registrant's Registration Statement on Form S-4 (Registration No. 333-12707) and
are expected to be amended in accordance with this Stockholders' Agreement.]
39
EXHIBIT 3
TO STOCKHOLDERS' AGREEMENT
[Information relating to the executive officers of Mariner Energy, Inc. and
Mariner Holdings, Inc. is contained under "Management" in the Registrant's
Registration Statement on Form S-4 (Registration No. 333-12707).]
40
EXHIBIT 4
TO STOCKHOLDERS' AGREEMENT
__________________________, 1996
Enron Capital & Trade Resources Corp.
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Xx. Xxxxxx X. Xxxxxxxxx
c/o Hardy Oil & Gas U.S.A. Inc.
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Gentlemen:
The undersigned hereby elects to purchase ___ shares of the common
stock, $.01 par value, of Mystery Acquisition, Inc., a Delaware corporation
("Newco"), for a purchase price of $100 per share, as described in Section B.1
of the Stockholders' Agreement dated April 2, 1996, among Enron Capital & Trade
Resources Corp., a Delaware corporation, Xxxxxx X. Xxxxxxxxx, Xxxxxxx X. Xxxxx,
Xxxxxxx X. Xxxxxxxxx, X.X. Xxxxx and Newco (the "Stockholders' Agreement").
The undersigned has received a copy of, has read and understands the provisions
of the Stockholders' Agreement.
The undersigned agrees to be a party to the Stockholders' Agreement
and (together with the spouse of the undersigned, if applicable) has executed a
Addendum Agreement in the form attached to the Stockholders' Agreement as an
exhibit and, concurrently with the delivery of this letter, is delivering an
executed Addendum Agreement to each of you.
Very truly yours,
_________________________
41
EXHIBIT 5
TO STOCKHOLDERS' AGREEMENT
ADDENDUM AGREEMENT
Addendum Agreement made this ______ day of _________________, _____ by
and between ______________________________________ (the "New Stockholder") and
Mystery Acquisition, Inc., a Delaware corporation (the "Company"), on behalf of
the stockholders (the "Stockholders") of the Company who are parties to that
certain Stockholders' Agreement dated April 2, 1996 (the "Agreement"), between
the Stockholders and the Company.
WHEREAS, the Stockholders entered into the Agreement to provide for
certain obligations and rights with respect to each of them and to the shares
of stock of the Company; and
WHEREAS, the New Stockholder wants to become a stockholder of the
Company; and
WHEREAS, the Stockholders have required in the Agreement that all
persons who are to acquire any shares of the Company's stock must enter into an
Addendum Agreement binding the New Stockholder to the Agreement to the same
extent as if the New Stockholder was an original party to the Agreement, to
promote the mutual interests of the Stockholders and the New Stockholder by
imposing the same restrictions and obligations on the New Stockholder and the
shares of the Company's stock to be acquired by the New Stockholder as were
imposed on the Stockholders under the Agreement;
NOW, THEREFORE, in consideration of the mutual promises of the parties
to this Addendum Agreement, and as a condition to the purchase of the shares of
stock of the Company, the New Stockholder acknowledges that the New Stockholder
has read the Agreement. The New Stockholder shall be bound by, and shall have
the benefit of, all the terms and conditions set out in the Agreement to the
same extent as if the New Stockholder was a "Stockholder" as defined in the
Agreement. This Addendum Agreement shall be attached to and become a part of
the Agreement.
NEW STOCKHOLDER
42
[To be completed if applicable:]
The spouse of the New Stockholder is fully aware of, understands and
fully consents and agrees to the provisions of this Addendum Agreement and its
binding effect on any community property interests that the spouse may now or
hereafter own, and agrees that the termination of the spouse's marital
relationship for any reason shall not have the effect of removing any shares of
stock otherwise subject to this Addendum Agreement and the Agreement from the
coverage of this Addendum Agreement and the Agreement and that the spouse's
awareness, understanding, consent and agreement are evidenced by the spouse's
signing this Addendum Agreement.
Spouse
AGREED TO on behalf of the Stockholders pursuant to Section D.6 of the
Agreement.
[THE COMPANY]
By
Name:
Title:
43
EXHIBIT 6
TO STOCKHOLDERS' AGREEMENT
[Exhibit 6 was deleted in it's entirety by Amendment No. 2 to this
Stockholders' Agreement.]
44
EXHIBIT 7
TO STOCKHOLDERS' AGREEMENT
[Exhibits 7a-g contain the terms of the employment and consulting agreements
that were filed as Exhibits 10.4 through 10.11 to the Registrant's Registration
Statement on Form S-4 (Registration No. 333-12707).]
45
EXHIBIT 8
TO STOCKHOLDERS' AGREEMENT
[List of Hardy's Employee Benefit Plans To Be Continued]
401(k) Employee Capital Accumulation Plan
(Including Profit-Sharing Plan)
Health Insurance Plans (Great West Life)
1996 Severance/Stay-On Bonus Program
Vacation Policy
Split-Dollar Life Insurance Policy (Xxxxxxxxx)
Automobile Allowance Policy
Short-Term Disability Plan (Self-Insured)
Long-Term Disability Plan (CNA and UNUM)
Employee Retention Bonus Program (under which those employees who are not
parties to change in control agreements and who remain as employees of Hardy
after the Closing Time for a period of time such that they are not entitled to
any severance payments under the 1996 Severance Stay-On Bonus Program will be
entitled to receive as retention pay the amount of severance pay they would
otherwise have been entitled to receive had they terminated their employment
with Hardy at the Closing Time under Option 1 of such 1996 Severance Stay-On
Bonus Program; 25% of such amount is payable on December 31, 1996, and equal
amounts are payable on each of December 31, 1997, December 31, 1998 and
December 31, 1999, but no payment is required to be made after any termination
by Hardy of an employee's employment with Hardy for cause or any termination by
an employee of his employment with Hardy)
46
EXHIBIT 9
TO STOCKHOLDERS' AGREEMENT
[Exhibit 9 contains the terms of the stock option plan that was filed as
Exhibit 10.12 to the Registrant's Registration Statement on Form S-4
(Registration No. 333-12707).]
47
EXHIBIT 10
TO STOCKHOLDERS' AGREEMENT
[Exhibit 10 contains the terms of the stock option plan that was filed as
Exhibit 10.15 to the Registrant's Registration Statement on Form S-4
(Registration No. 333-12707).]
48
EXHIBIT 11
TO STOCKHOLDERS' AGREEMENT
[Exhibit 11 contains the terms of the stock option agreement that was filed as
Exhibit 10.13 to the Registrant's Registration Statement on Form S-4
(Registration No. 333-12707).]
49
STOCKHOLDERS' AGREEMENT
AMENDMENT NO. 1
This STOCKHOLDERS' AGREEMENT AMENDMENT NO. 1 dated May 16, 1996 (this
"First Amendment"), among ENRON CAPITAL & TRADE RESOURCES CORP., a Delaware
corporation ("ECT"), XXXXXX X. XXXXXXXXX ("Xxxxxxxxx"), XXXXXXX X. XXXXX
("Xxxxx"), XXXXXXX X. XXXXXXXXX ("Xxxxxxxxx"), X. X. XXXXX ("Xxxxx"), MARINER
HOLDINGS, INC. (formerly named "MYSTERY ACQUISITION, INC."), a Delaware
corporation ("Newco"), and JOINT ENERGY DEVELOPMENT INVESTMENTS LIMITED
PARTNERSHIP, a Delaware limited partnership ("JEDI").
WHEREAS, ECT, Henderson, Clark, Xxxxxxxxx, Xxxxx and Newco entered into
a Stockholders' Agreement dated April 2, 1996 (the "Original Agreement"); and
WHEREAS, the parties to the Original Agreement wish to amend the
Original Agreement as set forth in this First Amendment to, among other things,
permit the closing of the purchase of stock by members of management of Hardy
Oil & Gas USA Inc. on May 31, 1996, instead of May 16, 1996, to give the
parties adequate time to comply with applicable securities laws;
NOW, THEREFORE, the parties hereby amend the Original Agreement as set
forth below:
1. Except as set forth in this First Amendment, capitalized terms
used in this First Amendment shall have the meanings ascribed to them in the
Original Agreement.
2. The second sentence of Section A.2 of the Original Agreement is
amended to read as follows in its entirety:
"The Enron Party, as the sole holder of all issued and
outstanding shares of common stock, $.01 par value, of Newco (the
"Common Stock") immediately before the Closing Time, shall take all
necessary actions to effect the election of a new board of directors of
Newco in accordance with the provisions of Section A.3 of this
Agreement, including without limitation the execution of a unanimous
written consent to that election, and shall take all such actions, or
cause the directors of Newco to take such actions, as may be necessary
to elect the officers designated on EXHIBIT 3."
3. The last sentence of subsection A.3(a) of the Original Agreement
is amended to read as follows in its entirety:
"The Enron Party and each person who becomes a stockholder of
Newco under this Agreement (the "Stockholders") shall vote all or its or
his shares of voting stock issued by Newco in favor of the nominees so
nominated."
50
4. Clause (iii) of subsection A.3(d) of the Original Agreement is
amended to read as follows in its entirety:
"(iii) If any Initial Management Director (or his successor
selected in accordance with this subsection (d)) shall cease to serve as
a director as a result of his resignation, removal, death or incapacity
or because he no longer meets the requirements of subparagraph (ii)
above, then his directorship shall be filled by the then-highest ranking
executive officer of Newco who is not then serving as a director of
Newco; provided, however, that if as a result of such selection there
would then be no Management Director who was or became a Stockholder at
the Management Closing Time (as that term is defined in Section B.1 of
this Agreement), then instead the vacant directorship (and each
successor) shall be filled by the then-highest ranking executive officer
of Newco who is not then serving as a director and who was or became a
Stockholder at the Management Closing Time, and if there is no such
person, then the vacant directorship (and each successor) shall be
filled by a person who is then the holder of the highest number of
shares of Common Stock and who became a Stockholder at the Management
Closing Time and is not currently serving as a director of Newco; any
such replacement (or its successor) shall serve as long as he is willing
to serve as a director of Newco and is able to serve as a director of
Newco;"
5. The first sentence of subsection A.3(e) of the Original Agreement
is amended to read as follows in its entirety:
"At any annual or special election of directors and except with
respect to the Management Directors, each Stockholder shall vote all of
its or his shares of voting stock issued by Newco in favor of nominees
(the "Enron Directors") named by ECT or its assignees permitted by
Section E.5 of this Agreement (the "Enron Party")."
6. Subsection B.1(a) of the Original Agreement is amended to read as
follows in its entirety:
"(a) Stockholders. Immediately before the Closing Time, the
sole stockholder of Newco shall be the Enron Party. At the time of the
closing of the purchases of stock by the Representatives and the Other
Management Stockholders (as such term is defined in subparagraph (b)
below) and, if applicable, the additional purchase of stock by the Enron
Party, which closing shall be held at 10:00 a.m. on Friday, May 31, 1996
(the "Management Closing Time"), the sole stockholders of Newco shall be
the Enron Party, the Representatives and the Other Management
Stockholders. Before the Closing Time, ECT shall transfer its shares of
stock of Newco held by it to JEDI, and JEDI shall pay ECT $1,000 in cash
consideration therefor."
7. The first four sentences of subsection B.1(b) of the Original
Agreement are amended to read as follows in its entirety:
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51
"The group of employees and consultants (other than the
Representatives) who have change in control agreements with Hardy (the
"Other Management Stockholders") will be offered to right to purchase up
to 23,215 shares of Common Stock. Each such employee or consultant may
purchase a proportion of such 23,215 shares equal to the proportion of
the payment such employee or consultant would individually receive under
such change in control agreement to the total payments that would be
made to all such employees and consultants under such agreements, with
shares not purchased by employees and consultants who do not elect to
terminate their change in control agreements and shares not purchased by
employees and consultants who do not fully purchase their allocable
shares not being reoffered unless ECT otherwise agrees. Only employees
and consultants who agree to terminate their change in control
agreements with Hardy pursuant to Section C.2 of this Agreement and who
have either amended their existing employment or consulting agreements
with Hardy or entered into new employment or consulting agreements with
Hardy pursuant to Section C.2 of this Agreement may purchase shares. A
person may become an Other Management Stockholder only if at least two
days before the Management Closing Time, that person has executed and
delivered to ECT and to Xxxxxxxxx (i) written notice of his election to
purchase shares of the Common Stock pursuant to this Section B.1 in the
form attached to this Agreement as EXHIBIT 4 and (ii) unless the Other
Management Stockholder is a Representative, an addendum agreement
("Addendum Agreement") in the form attached to this Agreement as EXHIBIT
5."
8. The first sentence of subsection B.1(c) of the Original Agreement
and the table contained immediately following that first sentence are amended
to read as follows in their entirety:
"Before the Closing Time, the Enron Party shall purchase from
Newco, and Newco shall issue and sell to the Enron Party 949,990 shares
of the Common Stock for a purchase price of $100 per share; at the
Management Closing Time, (a) each person named below shall purchase from
Newco, and Newco shall issue and sell to each such person, the number of
shares of the Common Stock set forth below for a purchase price of $100
per share and (b) the Enron Party may, at its option, purchase up to
95,000 additional shares of the Common Stock for a purchase price of
$100 per share:
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52
================================================================================
NAME OF STOCKHOLDER NUMBER OF SHARES
--------------------------------------------------------------------------------
Xxxxxxxxx 5,400
--------------------------------------------------------------------------------
Xxxxx 3,795
--------------------------------------------------------------------------------
Xxxxxxxxx 3,795
--------------------------------------------------------------------------------
Xxxxx 3,795
--------------------------------------------------------------------------------
Other Management Stockholders Up to an aggregate of 23,215 as
(individually, and not as a group) determined pursuant to this Section
B.1"
================================================================================
9. EXHIBIT 6 to the Original Agreement is deleted. The first three
sentences of Section B.2 of the Original Agreement are deleted and are replaced
by the following two sentences:
"Before the Closing Time, the Enron Party will arrange for a
bridge loan financing of Newco on the terms described in that certain
Credit, Subordination and Further Assurances Agreement between Newco and
JEDI dated May 16, 1996. At the Closing Time, Newco shall pay, or shall
cause a subsidiary to pay, JEDI such fees as specified therein."
10. Section C.1 of the Original Agreement is amended to read as
follows in its entirety:
"C.1. AGREEMENTS WITH REPRESENTATIVES.
(a) Employment Agreement of Xxxxxxxxx, Xxxxx and Xxxxxxxxx.
From and after the Management Closing Time, the employment agreements
between Hardy and each of Xxxxxxxxx, Xxxxx and Xxxxxxxxx, shall be in
substantially the appropriate form included in EXHIBIT 7 to this
Agreement. Each of Xxxxxxxxx, Xxxxx and Xxxxxxxxx shall, and the
parties to this Agreement shall cause Hardy to, enter into an amended
and restated employment agreement in such form, to be effective at the
Management Closing Time.
(b) Consulting Agreement with Xxxxx. From and after the
Management Closing Time, the consulting services agreement between Xxxxx
and Hardy shall be in substantially the appropriate form included in
EXHIBIT 7 with respect to Xxxxx. Xxxxx shall, and the parties to this
Agreement shall cause Hardy to, enter into an amended and restated
agreement in such form, to be effective at the Management Closing Time.
(c) Representatives' Change in Control Agreements. At the
Management Closing Time, each change in control Agreement dated February
12,
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53
1996, between each of the Representatives and Hardy shall be terminated.
Each Representative shall, and each party to this Agreement shall cause
Hardy to, enter into an agreement terminating his change in control
agreement to be effective at the Management Closing Time."
11. The last sentence of subsection C.2(a) of the Original Agreement
is amended to read as follows in its entirety:
"To the extent each such individual agrees to those matters, the
parties to this Agreement shall cause Hardy to enter into such an
amended and restated agreement with each such individual, to be
effective at the Management Closing Time."
12. The last sentence of subsection C.2(b) of the Original Agreement
is amended to read as follows in its entirety:
"To the extent each such individual agrees to terminate his
change in control agreement, the parties to this Agreement shall cause
Hardy to enter into an appropriate termination agreement with those
individuals, to be effective at the Management Closing Time."
13. The last sentence of subsection C.2(c) of the Original Agreement
is amended to read as follows in its entirety:
"Those agreements shall be in substantially the appropriate form
included in EXHIBIT 7 to this Agreement and shall be effective as of the
Management Closing Time."
14. The first sentence of Section C.3 of the Original Agreement is
amended to read as follows in its entirety:
"For at least three years after the Management Closing Time, the
parties to this Agreement shall cause Hardy to continue the employee
benefit plans described on EXHIBIT 8 to this Agreement on the same terms
and conditions as in effect at the Closing Time; provided, however, that
those plans may be amended, revised, merged and replaced if such action
is required (or required to maintain the plan's qualified status, if
applicable) under the Internal Revenue Code, the Employee Retirement
Income Security Act or applicable federal or state law and regulations
promulgated thereunder; provided further, however, that if any such
amendment, revision, merger or replacement results in a reduction in,
discontinuance of or disallowance of any Management Stockholders'
participation in or continued participation in, any plan, Newco shall
take such steps as are necessary or advisable to provide such Management
Stockholders, in the aggregate, with benefits reasonably comparable to
those provided to such Management Stockholder prior to such reduction,
discontinuance or disallowance."
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15. The first two sentences of Section C.4 of the Original Agreement
are amended to read as follows in their entirety:
"Before the Closing Time, the parties to this Agreement shall
cause Newco to adopt a stock option plan in substantially the form of
EXHIBIT 9 to this Agreement (the "Stock Option Plan"), to be effective
as of the Management Closing Time. At the Management Closing Time,
Newco shall grant stock options to the Management Stockholders pursuant
to the Stock Option Plan, and each Management Stockholder and Newco
shall enter into a stock option agreement in the form attached as
EXHIBIT 10 to this Agreement (for non-statutory stock options) or in the
form attached as EXHIBIT 11 to this Agreement (for incentive stock
options)."
16. The last sentence of Section C.5 of the Original Agreement is
amended to read as follows in its entirety:
"The division from time to time while the Agreement is in effect
among employees and consultants of the percentages described in the
foregoing sentence will be determined by the mutual agreement of the
Representatives at the Management Closing Time and thereafter will be
determined by the Compensation Committee of the board of directors of
Hardy based on the recommendation of the chief executive officer of
Hardy."
17. The provisions of Section D.2 shall not apply to shares of the
Common Stock and options with respect to the Common Stock to be issued at the
Management Closing Time. The Enron Party specifically waives any preemptive
rights it may have pursuant to the Agreement with respect to such issuance.
18. The first sentence of Section E.1 of the Original Agreement is
amended to read as follows in its entirety:
"After the Management Closing Time, this Agreement may be amended
by the parties only by an instrument in writing signed by (a) the
holders of two-thirds of the Common Stock, (b) each Stockholder who
holds, as of the effective date of the amendment, at least ten percent
of the then-outstanding shares of the Common Stock, (c) a majority of
the Management Directors and (d) at least one Management Director who
became a Stockholder at the Management Closing Time and, if there is no
such person, at least one Stockholder who became a Stockholder at the
Management Closing Time (unless no such person exists, in which case the
amendment need not be signed by the person in this clause (d))."
19. ECT hereby assigns to JEDI its rights under the Agreement
pursuant to Section E.5 of the Agreement. In consideration for such
assignment, (a) JEDI agrees to be bound by, and shall have the benefit of, all
the terms and conditions set out in the Agreement to the same extent as ECT
would have been or would have had if ECT had not made such assignment, and JEDI
shall be deemed to be a "Stockholder" for purposes of the Agreement, and
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55
(b) JEDI assumes the obligations of the "Enron Party" under the Agreement.
However, such agreement and assumption by JEDI does not affect ECT's
responsibility for the Enron Party's obligations under Sections B.1 and B.2 of
the Agreement.
20. It is acknowledged that any payment of fees or expenses required
in the Agreement to be made by Newco may be made by Newco or any subsidiary of
Newco.
21. All references to "Agreement" contained in the Original Agreement
(including without limitation its exhibits) and in this First Amendment shall
be deemed to be a reference to the Original Agreement, as amended by the First
Amendment.
IN WITNESS WHEREOF, the parties to this First Amendment have caused this
First Amendment to be executed on the date first above written.
Enron Capital & Trade Resources Corp.
By: /s/ Xxxxx Xxxxxxx
-----------------------------------------
Name: Xxxxx Xxxxxxx
------------------------------------
Title: Vice President
-----------------------------------
Mariner Holdings, Inc.
(formerly "Mystery Acquisition, Inc.")
By: /s/ Xxxxx Xxxxxxx
-----------------------------------------
Name: Xxxxx Xxxxxxx
------------------------------------
Title: Vice President
-----------------------------------
/s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
Xxxxxx X. Xxxxxxxxx
/s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------------
Spouse
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/s/ Xxxxxxx X. Xxxxx
-------------------------------------
Xxxxxxx X. Xxxxx
/s/ Xxxxx X. Xxxxx
-------------------------------------
Spouse
/s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxxxxx
/s/ Xxxxxxx Xxxxxxxxx
-------------------------------------
Spouse
/s/ X. X. Xxxxx
-------------------------------------
X. X. Xxxxx
/s/ Xxxxxxx X. Xxxxx
-------------------------------------
Spouse
ADDRESS FOR NOTICES: Joint Energy Development Investments
Limited Partnership
c/o Enron Corp.
0000 Xxxxx Xxxxxx By: Enron Capital Management Limited
Xxxxxxx, Xxxxx 00000 Partnership, Its General Partner
Telecopier No. (000) 000-0000
Telephone No. (000) 000-0000 By: Enron Capital Corp.,
Attention: Xxxxxx XxXxx - 29th Floor Its General Partner
By: /s/ Xxxxx Xxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxx
----------------------------
Title: Agent and Attorney-in-Fact
---------------------------
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57
STOCKHOLDERS' AGREEMENT
AMENDMENT NO. 2
This STOCKHOLDERS' AGREEMENT AMENDMENT NO. 2 dated as of May 31, 1996
(this "Second Amendment"), among ENRON CAPITAL & TRADE RESOURCES CORP., a
Delaware corporation ("ECT"), XXXXXX X. XXXXXXXXX ("Xxxxxxxxx"), XXXXXXX X.
XXXXX ("Xxxxx"), XXXXXXX X. XXXXXXXXX ("Xxxxxxxxx"), X. X. XXXXX ("Xxxxx"),
MARINER HOLDINGS, INC. (formerly named "MYSTERY ACQUISITION, INC."), a Delaware
corporation ("Newco"), and JOINT ENERGY DEVELOPMENT INVESTMENTS LIMITED
PARTNERSHIP, a Delaware limited partnership ("JEDI").
WHEREAS, ECT, Henderson, Clark, Xxxxxxxxx, Xxxxx and Newco entered into
a Stockholders' Agreement dated April 2, 1996 (the "Original Agreement"); and
WHEREAS, ECT, Henderson, Clark, Strickler, Huber, Newco and JEDI entered
into a Stockholders' Agreement Amendment No. 1 dated May 16, 1996 (the "First
Amendment") to amend the Original Agreement; and
WHEREAS, the parties to the Original Agreement and the First Amendment
wish to amend the Original Agreement, as amended by the First Amendment (the
"Amended Agreement"), as set forth in this Second Amendment to, among other
things, permit the closing of the purchase of stock by members of management of
Hardy Oil & Gas USA Inc. on June 27, 1996, instead of May 31, 1996, to give the
parties adequate time to comply with applicable securities laws;
NOW, THEREFORE, the parties hereby amend the Original Agreement as set
forth below:
1. Except as otherwise set forth in this Second Amendment,
capitalized terms used in this Second Amendment shall have the meanings
ascribed to them in the Amended Agreement.
2. Subsection B.1(a) of the Amended Agreement is amended to change
the date of the Management Closing Time from May 31, 1996, to June 27, 1996.
3. The second sentence of subsection B.1(b) of the Amended Agreement
is amended to read as follows in its entirety:
"Each such employee or consultant may purchase such proportion of
such 23,215 shares as shall be provided for in a list prepared and
agreed to by the Representatives and ECT, a copy of which has been
delivered to each party to this Second Amendment; shares not purchased
by employees and consultants who do not elect to terminate their change
in control agreements and shares not purchased by employees and
consultants who do not purchase all of the shares they are entitled to
purchase shall not be reoffered unless ECT otherwise agrees."
58
4. The formula for determining the value of certain overriding
royalty interests contained in Section B.1(c) of the Amended Agreement is
amended to read as follows in its entirety:
"100% of the value of the overriding royalty interests using the
March 31, 1996, Xxxxx Xxxxx Report, with volumes and costs adjusted to
May 31, 1996; no price or cost escalation; flat pricing based on the
average 12-month forward NYMEX closing price for natural gas (Xxxxx
Hub--$/MMBTU) and crude oil (WTI-$/bbl) as of May 31, 1996, adjusted for
basis differential, transportation, gravity, quality and BTU factor and
other price adjustments per the Xxxxx Xxxxx Report on a property-by-
property basis, category risking as follows: PDP--100% of PV10,
PDBP--100% of XX00, XXX--000% of PV20 and Probables--50% of PV10."
5. Section D.2 of the Amended Agreement is amended to read as
follows:
D.2 PREEMPTIVE RIGHTS TO ACQUIRE ADDITIONAL SECURITIES.
(a) Offer to Certain Stockholders. If Newco proposes
to issue, sell or grant any of its capital stock or any right,
warrant, option, convertible security or exchangeable security,
or indebtedness or other rights exercisable for or convertible
into, or exchangeable for, directly or indirectly, any capital
stock of Newco ("capital stock equivalents"), then Newco shall,
no later than 16 days before the consummation of any such
issuance, sale or grant (collectively, any "Issuance") give
written notice to each Stockholder of the proposed Issuance. The
notice shall describe the proposed Issuance, identify the
proposed purchasers, and contain an offer to each Stockholder to
sell to such Stockholder, at the same price and for the same
consideration to be paid by the proposed purchasers, the
Stockholder's pro rata portion (which is the ratio of the number
of shares of fully diluted Common Stock owned by the Stockholder
immediately before such Issuance to the total number of shares of
fully diluted Common Stock owned by all Stockholders immediately
before such Issuance) of such capital stock and capital stock
equivalents included in such Issuance subject, to the provisions
of this Section D.2. Each Stockholder shall have a right of
over-allotment to the effect that if any Stockholder fails to
exercise its or his rights under this Section D.2. to purchase
its or his pro rata portion, the other Stockholders may purchase
the nonpurchasing Stockholder's portion on a pro rata basis or on
such other basis as the Stockholders who are purchasing
securities pursuant to the offer shall agree.
(b) Responses to Offer. Any Stockholder desiring to
exercise an over-allotment right shall so indicate in its
response to Newco. Any Stockholder desiring to purchase a
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59
portion or all of the Issuance shall indicate its or his
acceptance of Newco's offer by written notice within 15 days
after its or his receipt of Newco's notice pursuant to this
Section D.2. The Issuance of and payment for the securities so
accepted shall be consummated at a time (but no more than 60 days
following the expiration of such 15-day period) and place within
Houston, Texas, to be designated by Newco.
(c) Compliance with Securities Laws. If any
Stockholder who has elected to purchase a portion or all of the
Issuance is not an accredited investor (as that term is defined
by applicable federal securities laws), then Newco shall use all
reasonable efforts to permit that Stockholder to exercise his
rights under this Section D.2 in compliance with applicable
securities laws, but Newco shall not be required to register the
Issuance to permit that Stockholder to purchase any part of the
Issuance. To the extent a Stockholder who wishes to purchase
part of the Issuance is not able to do so notwithstanding such
reasonable efforts by Newco, that Stockholder will not have the
right to purchase any part of the Issuance, notwithstanding the
provisions of this Section D.2.
(d) Issuance of Unaccepted Securities. If the
Stockholders collectively fail, after taking into account
exercises of over-allotment rights, to elect to purchase all of
the capital stock proposed to be issued, then Newco may, within
the 60 days following the expiration of such 15-day period,
proceed with that portion of the Issuance that the Stockholders
did not elect to purchase, free of any right on the part of such
Stockholder under this Section D.2. in respect thereof.
(e) Exceptions. This Section D.2. shall not apply to
(i) Issuances of options to employees pursuant to the Stock
Option Plan and the exercise of those options, (ii) capital stock
or capital stock equivalents issued pursuant to the acquisition
of a business entity or assets by way of merger, purchase of
assets or otherwise, and (iii) Common Stock issued in an offering
that is underwritten on a firm commitment basis by a nationally
recognized investment banking firm or in a merger or other
business combination involving Newco if immediately thereafter
Newco (or its successor) is subject to the reporting requirements
of Section 13 or Section 15 of the Securities Exchange Act of
1934 (in either case, an "Initial Public Offering")."
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6. The Amended Agreement is amended to add the following Section
D.3(c):
(c) Tagalong Rights.
1. Requirement to Send Tagalong Notice. If any
Stockholder or group of Stockholders proposes to sell or exchange
shares of Common Stock in one transaction or a series of related
transactions that will result in any person who is not a
Financial Participant (as defined below), together with that
person's affiliates, or any group (as such term is used under
Section 13(d)(3) of the Securities Exchange Act of 1934 and
provided that no person shall be deemed a member of a group
solely because he is a party to this Agreement) of persons that
has any member that is not a Financial Participant, together with
the affiliates of the members of the group (the "Acquiring
Persons"), beneficially owning at least 30 percent of the
outstanding Common Stock, then the proposing Stockholder or
Stockholders (the "Selling Stockholders") shall give a written
notice (the "Tagalong Notice") to each Management Stockholder
describing the consideration proposed to be paid per share of
Common Stock in the proposed transaction and including a true and
complete copy of the agreement (the "Acquisition Agreement")
pursuant to which the shares would be acquired. A "Financial
Participant" shall mean an entity that represents and warrants in
writing to the Selling Stockholders and to Newco that (i) as to
that part of the entity's business engaged in or relating to,
directly or indirectly, the oil and gas industry, the entity is
primarily engaged in investing, including without limitation by
way of purchase of debt or equity securities, in other entities,
which may include oil and gas companies, and (ii) the entity is
not the operator of any oil and gas xxxxx and does not have a
significant oil and gas management team, including geologists and
production engineers.
2. Exceptions to Requirements. The provisions of this
Section D.3(c) shall not apply (1) if the Acquiring Person is ECT
or Newco or any entity controlled, directly or indirectly, by ECT
or Newco or (2) if Newco has consummated an Initial Public
Offering.
3. Tagalong Rights. Notwithstanding Section D.3(b)
hereof,
(1) If the proposed transaction would result in
the beneficial ownership by the Acquiring Persons of at
least 30 percent but less than 50 percent of the
outstanding Common Stock, then each Management
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61
Stockholder shall have the right to include in the
proposed transaction a number of shares equal to the
product of (a) the aggregate number of shares to be sold
by the Selling Stockholders in the proposed transaction
and (b) a fraction with a numerator equal to the number of
shares of Common Stock owned by such Management
Stockholder plus the number of shares of Common Stock
acquirable by such Management Stockholder upon the
exercise of stock options granted to such Management
Stockholder under the Stock Option Plan (whether then
vested or not) and a denominator equal to the number of
shares of Common Stock owned in the aggregate by all
Stockholders plus all the shares acquirable by the
Management Stockholders under the Stock Option Plan
(whether then vested or not); and
(2) if the proposed transaction would result in
the beneficial ownership by the Acquiring Persons of at
least 50 percent of the outstanding Common Stock, then
each Management Stockholder shall have the right to
include in the proposed transaction a number of shares
equal to the total number of shares of Common Stock owned
by such Management Stockholder at the time of the closing
of the proposed transaction plus the number of shares of
Common Stock acquirable by such Management Stockholder
upon the exercise of stock options granted to such
Management Stockholder under the Stock Option Plan
(whether vested or not), to the extent such options are
exercised at the time of the closing of the proposed
transaction; provided, that, if the proposed transaction
would result in the beneficial ownership by the Acquiring
Persons of at least 50 percent of the outstanding Common
Stock, in no event shall a Management Stockholder be
entitled to sell more than the number of shares such that
after such sale such Management Stockholder would
beneficially own (after taking into account shares of
Common Stock acquirable by such Management Stockholder
upon the exercise of stock options granted to such
Management Stockholder under the Stock Option Plan
(whether then vested or not)) less
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than the number of shares that, when divided by the total
number of shares of Common Stock owned at the Management
Closing Time or thereafter acquired by such Management
Stockholder plus the number of shares of Common Stock
acquirable by such Management Stockholder upon the
exercise of stock options granted to such Management
Stockholder under the Stock Option Plan (whether then
vested or not), would equal the quotient of (x) the number
of shares of Common Stock owned by ECT, JEDI or any entity
controlled, directly or indirectly, by ECT, immediately
after the proposed transaction, divided by (y) the number
of shares of Common Stock owned by JEDI at the Management
Closing Time.
4. Consideration in the Form of Securities. If the
consideration to be received in the proposed transaction includes
any securities and if any Management Stockholder who has
exercised his right to include shares of the Common Stock in the
proposed transaction is not an accredited investor (as that term
is defined by applicable federal securities laws), then Newco and
the Stockholders who are participating in the proposed
transaction shall use all reasonable efforts to permit that
Management Stockholder to participate in the proposed transaction
in compliance with applicable securities laws; to the extent such
participation is not possible notwithstanding such reasonable
efforts, then Newco and the Stockholders who are participating in
the proposed transaction shall cause the shares to be acquired by
the Management Stockholder that is not an accredited investor to
be registered to enable the Management Stockholder to acquire
such securities. Notwithstanding the obligations described in
the immediately preceding sentence, the Stockholders
participating in the proposed transaction may, instead of
satisfying such obligations, require the purchaser in the
proposed transaction to pay one or more such nonaccredited
investors the cash value of the securities otherwise issuable in
the proposed transaction, such value to be determined by an
independent investment banking company engaged by Newco, at its
expense.
5. Acceptance of Tagalong Offer. Each Management
Stockholder who wishes to include his or its shares of Common
Stock in the proposed transaction in accordance with the terms of
this Section D.3(c) shall so notify the Selling Stockholders not
more than 14 days after the date the Tagalong Notice is sent to
the Management
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63
Stockholders. The participation of any Management Stockholder in
the proposed transaction shall be conditioned upon the Management
Stockholder's (i) execution of an agreement substantially similar
to the Acquisition Agreement whereby the Management Stockholder
would make representations and warranties comparable to those to
be made by the Selling Stockholders, but with respect to
representations and warranties particular to the Selling
Stockholders or the shares of Common Stock owned by them, a
Management Stockholder shall be required only to provide
comparable representations and warranties concerning such
Management Stockholder and the shares owned by such Management
Stockholder and (ii) agreeing to use his reasonable efforts to
assist in consummating the proposed transaction.
6. Obligations of Selling Stockholders upon Acceptance
of Tagalong Offer. If any Management Stockholder elects to
participate in the proposed transaction, the Selling Stockholders
shall use their reasonable efforts to cause the other party or
parties to the transaction to acquire from such Management
Stockholder the number of shares of Common Stock that such
Management Stockholder is entitled to include in the transaction
under this Section D.3(c), on the same terms and conditions
applicable to the Selling Stockholders. If, however, such other
parties are for any reason unwilling or unable to purchase the
aggregate number of shares from the Selling Stockholders as well
as such Management Stockholder, then the Selling Stockholders
shall reduce, to the extent necessary, the number of shares they
otherwise would have sold in the proposed transaction so as to
permit the Management Stockholders who have properly elected to
participate in such transaction to sell the number of shares they
are entitled to sell under this Section D.3(c).
7. Alternative Pricing in Certain Events. If the
proposed transaction would result in the beneficial ownership by
the Acquiring Persons of 50 percent or more of the outstanding
shares of the Common Stock, and if that transaction is one of two
or more related transactions, the purpose of which is to minimize
the benefits otherwise available to the Management Stockholders
under this Section D.3(c), then each Management Stockholder
participating in the proposed transaction shall be entitled to
receive, and the Selling Stockholders shall pay to each
Management Stockholder participating in the proposed transaction,
the excess, if any, of (a) the product of (i) the number of
shares to be acquired from a Management Stockholder in the
proposed transaction and (ii) the average
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64
per-share price (or value) received or to be received by the
Selling Stockholders for all shares of the Common Stock sold or
exchanged in all such related transactions, over (b) the product
of (i) the number of shares to be acquired from the Management
Stockholder in the proposed transaction and (ii) the per-share
price (or value) to be received by the Selling Stockholders in
the proposed transaction.
8. Closing. At the closing of the proposed
transaction, each participating Stockholder shall deliver to the
acquiring party in the transaction certificates representing the
shares to be purchased duly endorsed for transfer or accompanied
by duly executed stock powers or assignments, free and clear of
all liens, encumbrances and adverse claims with respect thereto.
9. Special Provisions for Stock Options.
Notwithstanding the terms of the Stock Option Plan or the option
agreements issued thereunder, each Management Stockholder shall
be entitled to exercise unvested options to the extent, but only
to the extent, necessary to allow the Management Stockholder to
sell shares of Common Stock such Management Stockholder is
actually selling pursuant to this Section D.3(c) (it being the
intent of the parties that a participating Management Stockholder
first sell shares of Common Stock he already owns, then shares of
Common Stock issuable on exercise of options then vested, and
finally, if necessary, shares of Common Stock issuable on
exercise of options not then vested)."
7. All references to "Agreement" contained in the Amended Agreement
(including without limitation its exhibits) and in this Second Amendment shall
be deemed to be a reference to the Amended Agreement, as further amended by
this Second Amendment.
8. This Second Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
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65
IN WITNESS WHEREOF, the parties to this Second Amendment have caused
this Second Amendment to be executed on the date first above written.
Enron Capital & Trade Resources Corp.
By: /s/ XXXXX XXXXXXX
-----------------------------------------
Name: Xxxxx Xxxxxxx
------------------------------------
Title: Vice President
-----------------------------------
Mariner Holdings, Inc.
(formerly "Mystery Acquisition, Inc.")
By: /s/ XXXXXX X. XXXXXXXXX
-----------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
------------------------------------
Title: President and CEO
-----------------------------------
/s/ XXXXXX X. XXXXXXXXX
---------------------------------------------
Xxxxxx X. Xxxxxxxxx
/s/ XXXXXXX XXXXXXXXX
---------------------------------------------
Spouse
/s/ XXXXXXX X. XXXXX
---------------------------------------------
Xxxxxxx X. Xxxxx
/s XXXXX XXXXX
---------------------------------------------
Spouse
/s/ XXXXXXX X. XXXXXXXXX
---------------------------------------------
Xxxxxxx X. Xxxxxxxxx
/s/ XXXXXXX XXXXXXXXX
---------------------------------------------
Spouse
[SIGNATURES CONTINUED ON
FOLLOWING PAGE]
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/s/ X. X. XXXXX
---------------------------------------------
X. X. Xxxxx
/s/ XXXXXXX X. XXXXX
---------------------------------------------
Spouse
Joint Energy Development Investments
Limited Partnership
By: Enron Capital Management Limited
Partnership, Its General Partner
By: Enron Capital Corp.,
Its General Partner
By: /s/ XXXXX XXXXXXX
---------------------------------
Name: Xxxxx Xxxxxxx
----------------------------
Title: Agent and Attorney-in-Fact
---------------------------
/s/ X. XXXX XXXXX
---------------------------------------------
[Stockholder]
/s/ XXXXXXX X. XXXXX
---------------------------------------------
Spouse
/s/ XXXXXX X. XXXXXXXX
---------------------------------------------
[Stockholder]
/s/ XXX X. XXXXXXXX
---------------------------------------------
Spouse
[SIGNATURES CONTINUED ON
FOLLOWING PAGE]
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/s/ XXXXXXX X. XXXXX
-------------------------------------
[Stockholder]
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Spouse
/s/ XXXXXXXX X. XXXXXX
-------------------------------------
[Stockholder]
/s/ XXXXX XXXXX XXXXX
-------------------------------------
Spouse
/s/ XXXXX X. XXXXXXXXXXX
-------------------------------------
[Stockholder]
-------------------------------------
Spouse
/s/ XXXXXXX X. XXXX
-------------------------------------
[Stockholder]
-------------------------------------
Spouse
/s/ XXXXX X. XXXXXX
-------------------------------------
[Stockholder]
/s/ XXXXX X. XXXXXX
-------------------------------------
Spouse
[SIGNATURES CONTINUED ON
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/s/ XXXX X. XXXXXXXX
-------------------------------------
[Stockholder]
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Spouse
/s/ XXXX X. XXXXXXXXX
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[Stockholder]
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/s/ XXXXXX X. XXXXXXX
-------------------------------------
[Stockholder]
/s/ XXXXXXX X. XXXXXXX
-------------------------------------
Spouse
/s/ XXXXXX X. XXXXX
-------------------------------------
[Stockholder]
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/s/ XXXXX X. XXXXX
-------------------------------------
[Stockholder]
/s/ XXXXX X. XXXXX
-------------------------------------
Spouse
[SIGNATURES CONTINUED ON
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/s/ XXXXXXXXXX X. XXXXXX
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[Stockholder]
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/s/ XXXXXXX XXXXXXXX
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[Stockholder]
/s/ XXXX XXXX XXXXXX XXXXXXXX
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Spouse
/s/ [SIGNATURE ILLEGIBLE]
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/s/ [SIGNATURE ILLEGIBLE]
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/s/ [SIGNATURE ILLEGIBLE]
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[Stockholder]
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