EXHIBIT 10.42
AGREEMENT FOR CONVERSION OF
PREFERRED STOCK, SALE OF COMMON STOCK
AND SETTLEMENT OF PREFERRED STOCK DIVIDENDS
THIS AGREEMENT is made as of September 30, 1996 by and among TIPPERARY
CORPORATION, a Texas corporation ("Tipperary"), UNITED STATES EXPLORATION, INC.,
a Colorado corporation ("USXP"), Xxxx Xxxxxx, and Xxxxxx X. Xxxxx and Xxxxx X.
Xxxxx, JTEN (the latter two parties collectively shall be referred to hereafter
as "Purchasers").
RECITALS
A. Tipperary and USXP entered into that certain Purchase Agreement, dated
July 18, 1994, under which Tipperary acquired 250,000 shares of USXP's 1994
Series A Convertible Preferred Stock and 104,000 shares of USXP's 1994 Series B
Convertible Preferred Stock (the foregoing Series A and Series B stock together
shall hereafter be referred to as the "Preferred Stock"). The Preferred Stock
is convertible into 786,667 shares of the common stock of USXP ("Common Stock").
B. USXP has failed to declare or pay dividends on the Preferred Stock.
C. Tipperary and USXP wish to resolve USXP's obligation to pay
cumulative, unpaid dividends on the Preferred Stock, which will involve the
conversion by Tipperary of the Preferred Stock into Common Stock and issuance by
USXP of Common Stock to Tipperary as payment of the Preferred Stock dividends;
and Tipperary wishes to sell, and Purchasers wish to purchase, 636,667 shares of
the Common Stock which Tipperary will receive upon conversion of the Preferred
Stock.
AGREEMENT
In consideration of the mutual promises and consideration as set forth
herein, the parties agree as follows:
SECTION 1
CONVERSION OF PREFERRED STOCK; SALE OF COMMON STOCK;
ISSUANCE OF COMMON STOCK IN EXCHANGE FOR PREFERRED DIVIDENDS
1.1 CONVERSION OF PREFERRED STOCK. Effective upon the Closing (as defined
in Section 2.1), Tipperary shall exercise its option to convert all of the
Preferred Stock into shares of Common Stock; and Tipperary and USXP agree that
the 354,000 shares of Preferred Stock shall be converted into 786,667 shares of
Common Stock (said 786,667 shares hereafter shall be referred to as the
"Conversion Stock"), which thereupon will be issued by USXP.
1.2 SALE OF CONVERSION STOCK. At the Closing (as defined in Section 2.1
hereof), subject to the terms and conditions hereof, Tipperary will sell to
Purchasers and Purchasers will purchase from the Tipperary 636,667 shares of the
Conversion Stock, for which Purchasers will pay a price of $1.25 per share,
amounting to $795,833.75, payable immediately.
1.3 SETTLEMENT OF UNPAID, CUMULATIVE DIVIDENDS. Tipperary and USXP agree
that the total amount of accrued and unpaid cumulative dividends on the
Preferred Stock is and will remain at $190,000 if the conditions and
transactions set forth herein are fulfilled and consummated. As provided
hereafter, USXP will issue Common Stock in payment of said $190,000 of accrued
dividends, at a price per share of Common Stock equal to the average of the
closing bid and asked prices of the Common Stock on the Nasdaq SmallCap Market
on each of the first five trading days in November 1996. Thus, for instance, if
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the average of such prices was $2.00, then 95,000 shares of Common Stock would
be issued to Tipperary in payment of the preferred dividends ($190,000 DIVIDED
BY $2.00 = 95,000 shares). The shares of Common Stock to be issued in payment
of the preferred dividends (the "Dividend Shares") shall be restricted within
the meaning in the Securities Act of 1933, as amended (the "1933 Act") and
issued by USXP to Tipperary on or before November 15, 1996.
SECTION 2
CLOSING; DELIVERY
2.1 CLOSING DATE. The closing of the conversion of the Preferred Stock
into the Conversion Stock and the purchase and sale 636,667 shares of the
Conversion Stock shall be held at the offices of Xxxxxxx, Xxxxxxx & Xxxxx, 0000
Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000, at 11:00 a.m.,
local time on September 30, 1996 (the "Closing") or at such other time and place
upon which the parties shall agree (the date of the Closing is hereinafter
referred to as the "Closing Date").
2.2 DELIVERY.
a. At the Closing, Tipperary will deliver its certificates for the
Preferred Stock, duly endorsed conversion, and in consummation of the conversion
of the Preferred Stock into the Conversion Stock, USXP will deliver three
certificates for the Conversion Stock. Two of the Conversion Stock Certificates
will be for the respective number of shares to be purchased by Purchasers and
issued to Purchasers, totaling 636,667 shares; and the third certificate, for
150,000 shares of Common Stock, will be issued to Tipperary. The Conversion
Stock shall be restricted within the meaning in the 1933 Act and be registered
in the respective names of Purchasers and Tipperary.
b. At the Closing, in consideration of the conveyance and delivery by
Tipperary of 636,667 shares of the Conversion Stock, Purchasers will deliver, in
certified funds, their respective portions of the $795,833.75 payable to
Tipperary.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF USXP
Except as set forth on Exhibit 3 attached hereto, USXP represents and
warrants to Tipperary and Purchasers as follows:
3.1 ORGANIZATION AND STANDING; ARTICLES AND BYLAWS. USXP is a corporation
duly organized and existing under, and by virtue of, the laws of the State of
Colorado and is in good standing under such laws. USXP has requisite corporate
power and authority to own and operate its properties and assets, and to carry
on its business as presently conducted and as proposed to be conducted. USXP is
not presently qualified to do business as a foreign corporation in any
jurisdiction except Kansas, and the failure to be so qualified will not have a
material adverse effect on USXP business as now conducted or as now proposed to
be conducted. USXP has furnished the other parties with copies of its Articles
of Incorporation and Bylaws, as amended. Said copies are true and correct and
complete and contain all amendments through the Closing Date.
3.2 CORPORATE POWER. USXP has or will have at the Closing Date all
requisite legal and corporate power and authority to execute and deliver this
Agreement, to issue the Conversion Stock upon conversion of the Preferred Stock,
to issue the Dividend Stock, and to carry out and perform its obligations under
the terms of this Agreement.
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3.3 SUBSIDIARIES. All of the subsidiaries of USXP are as disclosed in its
Form 10-KSB for the fiscal year ended March 31, 1996, and all such subsidiaries
are duly organized and existing and by virtue of the laws of the state of their
incorporation and are in good standing under such laws. Each such subsidiary
has requisite corporate power and authority to own and operate its properties
and assets, and to carry on its business as presently conducted and as proposed
to be conducted. Each such subsidiary is not presently qualified to do business
as a foreign corporation in any jurisdiction and the failure to be so qualified
will not have a material adverse effect on the business of USXP as now conducted
or as now proposed to be conducted. USXP has no other subsidiaries or
affiliated companies and does not otherwise own or control, directly or
indirectly, any equity interest in any corporation, association or business
entity.
3.4 CAPITALIZATION. The authorized capital stock of USXP consists of
500,000,000 shares of Common Stock, of which 6,780,504 shares are issued and
outstanding; and 100,000,000 shares of Preferred Stock, of which 250,000 have
been designated "1994 Series A Convertible Preferred Stock" and 104,000 have
been designated "1994 Series B Convertible Preferred Stock" and are issued,
outstanding and currently held by Tipperary. Also, USXP has established a 1996
Series C Convertible Preferred Stock under which a total of up to 4,000,000
shares may be issued; USXP has reserved sufficient common shares in respect of
conversion of said preferred stock. USXP has reserved 786,667 shares of Common
Stock for issuance upon conversion of the Preferred Stock. USXP has made
reservation for all shares which may be issued under options it has outstanding,
and USXP has disclosed in all material respects the amounts and terms of options
it has outstanding in the aforementioned Form 10-KSB; since the date of the Form
10-KSB there have been no grants of options or exercises of options that are
material. All outstanding securities of USXP have been duly and validly issued
and are fully paid and nonassessable and were issued in compliance with
applicable federal and state securities laws. The Preferred Stock has the
rights, preferences, privileges and restrictions set forth in the statement
establishing the two series of the Preferred Stock. Except as set forth above,
there are no options, warrants or other rights to purchase any of USXP's
authorized and unissued capital stock. USXP has no treasury shares.
3.5 AUTHORIZATION. All corporate action on the part of USXP, its
directors and shareholders necessary for the authorization, execution, delivery
and performance of this Agreement by USXP, the issuance of the Conversion Stock
at Closing upon conversion of the Preferred Stock, the issuance of the Dividend
Stock, and the performance of all of USXP's obligations hereunder has been taken
or will be taken prior to the Closing. This Agreement, when executed and
delivered by USXP, shall constitute a valid and binding obligation of USXP,
enforceable in accordance with its terms. The Conversion Stock and Dividend
Stock have been duly and validly reserved and, when issued in compliance with
the provisions of this Agreement and the Articles of Incorporation of USXP, will
be validly issued, fully paid and nonassessable; and the Preferred Stock is and
Conversion Stock and Dividend Stock will be free of any liens or encumbrances,
other than any liens or encumbrances created by or imposed upon the holders
thereof through no action of USXP; provided, however, that the Preferred Stock
is and the Conversion Stock and Dividend Stock will be subject to restrictions
on transfer under state and federal securities laws as set forth herein. The
Preferred Stock is not, and the Conversion Stock and Dividend Stock when issued
will not be, subject to any preemptive rights or rights of first refusal.
3.6 FINANCIAL STATEMENTS. USXP has delivered to the other parties copies
of its Form 10-KSB, including any amendments, for the year ended March 31, 1996,
and its Form 10-QSB, including any amendments, for the quarter ended June 30,
1996, including the audited financial statements of USXP as of March 31, 1996
and March 31, 1995 and for the two years then ended and interim financial
statements for the quarter ended June 30, 1996 (the "Financial Statements").
The Financial Statements are complete and correct in all material respects and
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated. The Financial
Statements accurately set out and describe the financial condition and operating
results of USXP as of the dates, and during the periods, indicated therein.
Since June 30, 1996, there has not been any change in
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the assets, liabilities, financial condition or operations of USXP from that
reflected in the Financial Statements, except changes in the ordinary course
of business which have not been, either in any case or in the aggregate,
materially adverse.
3.7 ABSENCE OF CHANGES. Since June 30, 1996 and other than as disclosed
in writing to Tipperary and Purchaser: (a) USXP has not entered into any
transaction which was not in the ordinary course of business, (b) there has been
no material adverse change in the condition (financial or otherwise), business,
property, assets or liabilities of USXP other than changes in the ordinary
course of business, none of which, individually or in the aggregate, has been
materially adverse, (c) there has been no damage to, destruction of or loss of
physical property (whether or not covered by insurance) materially adversely
affecting the business or operations of USXP, (d) USXP has not declared or paid
any dividend or made any distribution of its stock, or redeemed, purchased or
otherwise acquired any of its stock, (e) USXP has not increased the compensation
of any of its officers, or the rate of pay of its employees as a group, except
as part of regular compensation increases in the ordinary course of business,
(f) there has been no resignation or termination of employment of any key
officer or employee of USXP, with the exception of the resignation of Xxxxx X.
Xxxxxxx, the former President of USXP, which has been fully disclosed to the
other parties, and USXP does not know of the impending resignation or
termination of employment of any such officer or employee that if consummated
would have a material adverse effect on its business, (g) there has been no
labor dispute involving USXP or its employees and none is pending or, to the
best of USXP's knowledge, threatened, (h) there has not been any change, except
in the ordinary course of business, in the contingent obligations of USXP, by
way of guaranty, endorsement, indemnity, warranty or otherwise, (i) there have
not been any loans made by USXP to any of its employees, officers or directors
other than travel advances and office advances made in the ordinary course of
business, and (i) to the best knowledge of USXP, there has been no other event
or condition of any character pertaining to and materially adversely affecting
the assets or business of USXP.
3.8 MATERIAL LIABILITIES. USXP has no material liabilities or
obligations, absolute or contingent (individually or in the aggregate), except
(i) the liabilities and obligations set forth in the Financial Statements, (ii)
liabilities and obligations which have been incurred subsequent to June 30, 1996
in the ordinary course of business which have not been in the aggregate,
materially adverse, (iii) liabilities and obligations under leases for its
principal offices and for equipment, and (iv) liabilities and obligations under
sales, procurement and other contracts and arrangements entered into in the
normal course of business.
3.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. USXP has good and
marketable title to its properties and assets, and has good title to all its
leasehold interests, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (i) the lien of current taxes not yet due and
payable, (ii) possible minor liens and encumbrances which do not in any case
materially detract from the value of the property subject thereto or materially
impair the operations of USXP, and which have not arisen otherwise than in the
ordinary course of business, and (iii) the liens to its commercial bank as
disclosed in its Securities and Exchange Commission ("SEC") filings.
3.10 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. USXP is not
in violation of any term of its Articles of Incorporation or Bylaws, or, in any
material respect, of any term or provision of any material mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment or decree,
and is not in violation of any order, statute, rule or regulation applicable to
USXP where such violation would materially and adversely affect USXP. The
execution, delivery and performance of and compliance with this Agreement, and
the conversion of the Preferred Stock and issuance of the Conversion Stock and
Dividend Stock, will not result in any violation of, or conflict with, or
constitute a material default under, USXP's Articles of Incorporation or Bylaws
or any of its agreements or result in the creation of, any mortgage, pledge,
lien, encumbrance or charge upon any of the properties or assets of USXP; and
there
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is no such violation or default which materially and adversely affects the
business of USXP or any of its properties or assets.
3.11 CONDUCT OF BUSINESS. The business and operations conducted by USXP
are being conducted in compliance in all material respects with all applicable
laws, rules and regulations of all public and private authorities, foreign or
domestic, having jurisdiction over USXP. USXP owns or licenses all material
patents, patent applications, trademarks, service marks, trade names, trademark
registrations, service xxxx registrations, copyrights, licenses, inventions,
trade secrets and other similar rights necessary for the conduct of its business
as currently conducted.
3.12 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending against USXP or its properties before any court or
governmental agency.
3.13 EMPLOYEES. To the best of USXP's knowledge, no employee of USXP is in
violation of any term of any employment contract, or any other contract or
agreement relating to the relationship of such employee with USXP or any other
party because of the nature of the business conducted or to be conducted by
USXP.
3.14 CERTAIN TRANSACTIONS. Other than as set forth in filings with the
Securities and Exchange Commission ("SEC"), USXP is not indebted, directly or
indirectly, to any of its officers, directors or shareholders or to their
respective spouses or children, in any material amount whatsoever; none of said
officers, directors or, to the best of USXP's knowledge, shareholders, or any
members of their immediate families, are indebted to USXP or have any direct or
indirect ownership interest in any firm or corporation with which USXP is
affiliated or with which USXP has a business relationship, or any firm or
corporation which competes with USXP except that officers, directors and/or
shareholders of USXP may own less than 1% of the stock of publicly traded
companies which may compete with USXP. No officer, director or shareholder, or
any member of their immediate families, is, directly or indirectly, interested
in any material contract with USXP. USXP is not a guarantor or indemnitor of
any indebtedness of any other person, firm or corporation.
3.15 MATERIAL CONTRACTS AND OBLIGATIONS. Attached hereto as Exhibit 3.15
is a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which USXP is a party or by which it is bound that are material
to the conduct and operations of its business and properties and which are not
disclosed in USXP's SEC filings; or which involve transactions or proposed
transactions between USXP and its officers, directors, affiliates or any
affiliate thereof and are not disclosed in USXP's filings. Copies of such
agreements and contracts and documentation evidencing such liabilities and other
obligations have been made available for inspection by Purchasers. All of such
agreements and contracts are valid, binding and in full force and effect in all
material respects, assuming due execution by the other parties to such
agreements and contracts.
3.16 REGISTRATION RIGHTS. Except as set forth in this Agreement and those
rights existing as of the date hereof to X.X. Xxxxxxx Enterprises and Producers
Services Incorporated, USXP is not under any contractual obligation to register
(as defined in Section 8.1 below) any of its presently outstanding securities or
any of its securities which may hereafter be issued.
3.17 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of
(or designation, declaration of filing with) any governmental authority on the
part of USXP is required in connection with the valid execution and delivery of
this Agreement, the conversion of the Preferred Stock, or the offer, sale or
issuance of the Conversion Stock and Dividend Stock, or the consummation of any
other transaction contemplated hereby, except for such filings at the offices of
the Colorado Secretary of State which may be required in conjunction with the
retirement of the Preferred Stock.
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3.18 OFFERING. Based upon representations and warranties of Tipperary and
Purchasers, the conversion of the Preferred Stock, the offer, sale and issuance
of the Conversion Stock upon conversion of the Preferred and sale to the
Purchasers, and the issuance of the Dividend Stock, constitute transactions
exempt from the registration requirements of Section 5 of the Securities Act of
1933, as amended (the "Securities Act") and exempt from the Colorado Securities
Act, as amended 00-00-000, C.R.S., ET SEQ.
3.19 BROKERS OR FINDERS; OTHER OFFERS. USXP has not incurred, and will not
incur, directly or indirectly, as a result of any action taken by USXP, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement, except as provided in Section 8.
3.20 SECURITIES AND EXCHANGE COMMISSION ("SEC") REPORTING. USXP has filed
all reports or other documents required to be filed with the SEC and all such
documents do not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained
therein not misleading.
3.21 TAXES. USXP has filed all federal, state, local and foreign income,
withholding and franchise tax returns which have been required to be filed and
have paid all taxes indicated by said returns and all assessments received by
them to the extent that such taxes have become due and payable except for a
claim or assessment which USXP has reasonable grounds to dispute and which in
the aggregate would not have a material adverse effect on the business, business
prospects, financial condition, results of operations or properties of USXP,
taken as a whole.
3.22 INTERNAL CONTROLS. USXP maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
3.23 DISCLOSURE. This Agreement with the Exhibits hereto when taken as a
whole, do not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which they were made.
All transactions during USXP's current fiscal year and last three full fiscal
years between USXP and any person who is or was during such time period an
officer, director or 5% stockholder of USXP have been accurately disclosed in
all material respects under the circumstances under which they were made in
applicable reports to the SEC to the extent required and the terms of each such
transaction are and were in all material respects fair to USXP.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF TIPPERARY AND PURCHASERS
Each of Tipperary and Purchasers hereby represents and warrants as follows
with respect to its respective receipt upon issuance or purchase of a portion of
the Conversion Stock or Dividend Stock:
4.1 EXPERIENCE. It has substantial experience in evaluating and investing
in private placement transactions of securities in companies similar to USXP so
that it is capable of evaluating the merits and risks of its investment in USXP
and has the capacity to protect its own interests.
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4.2 INVESTMENT. It is acquiring the Conversion Stock or Dividend Stock
for investment for its own account, not as a nominee or agent, and not with the
view to, or for resale in connection with, any distribution thereof. It
understands that the Conversion Stock and Dividend Stock have not been, and,
except as provided in Section 8 below, will not be, registered under the
Securities Act, and is sold to Tipperary and Purchasers by reason of specific
exemptions from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of Tipperary and Purchasers'
representations.
4.3 RULE 144. It acknowledges that the Conversion Stock and Dividend
Stock must be held indefinitely unless subsequently registered under the
Securities Act or unless an exemption from such registration is available. It
is aware of the provisions of Rule 144 promulgated under the Securities Act
which permit limited resale of shares purchased in a private placement subject
to the satisfaction of certain conditions, including, among other things, the
existence of a public market for the shares, the availability of certain current
public information about USXP, the resale occurring not less than two years
after a party has purchased and paid for the security to be sold, the sale being
effected through a "broker's transaction" or in transactions directly with a
"market maker" and the number of shares being sold during any three-month period
not exceeding specified limitations.
4.4 ACCESS TO DATA. It has had an opportunity to discuss USXP's business
with USXP's management. It has also had an opportunity to ask questions of
officers of USXP.
4.5 AUTHORIZATION. This Agreement when executed and delivered
respectively by Tipperary and Purchasers will constitute a valid and legally
binding obligation respectively of Tipperary and Purchasers, enforceable in
accordance with its terms.
4.6 BROKERS OR FINDERS. Except as provided in Section 8 below, USXP has
not, and will not, incur, directly or indirectly, as a result of any action
taken by Tipperary or Purchasers, any liability for brokerage or finders' fees
or agents' commissions in connection with this Agreement.
SECTION 5
TIPPERARY'S AND PURCHASERS' CONDITIONS TO CLOSING
Tipperary's obligations to convert the Preferred Stock into the Conversion
Stock and sell 636,667 shares of the Conversion Stock to Purchasers, Purchasers'
obligations to purchase the 636,667 shares of the Conversion Stock at the
Closing, and Tipperary's purchase and acceptance of the Dividend Stock in
payment of the accrued and unpaid cumulative dividends on the Preferred Stock
are subject to the fulfillment of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by USXP in Section 3 hereof shall be true and correct when made,
and shall be true and correct on the Closing Date.
5.2 COVENANTS. All covenants, agreements and conditions contained in this
Agreement to be performed by USXP on or prior to the Closing Date shall have
been performed or complied with in all material respects. The occurrence of a
closing shall constitute an acknowledgment by the Tipperary and Purchasers that
they are satisfied that, based upon the representations and warranties of USXP
herein, USXP has ratified all conditions, covenants and agreements required
prior to the Closing.
5.3 COMPLIANCE WITH STATE SECURITIES LAWS. USXP shall have obtained all
permits and qualifications required by any state for the conversion of the
Preferred Stock and for the offer, sale and
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issuance of the Conversion Stock and Dividend Stock to Tipperary and
Purchasers, or shall have the availability of exemptions therefrom.
5.4 LEGAL MATTERS. All material matters of a legal nature which pertain
to this Agreement and the transactions contemplated hereby shall have been
reasonably approved by the respective counsel to Tipperary and Purchasers.
5.5 OPINION OF USXP'S COUNSEL. Tipperary and Purchasers shall have
received from Xxxxxxx, Xxxxxxx & Xxxxx, counsel to USXP, an opinion dated the
Closing Date, in form and substance satisfactory to Tipperary and Purchasers, to
the effect that:
(a) USXP is a corporation duly organized, validly existing and in
good standing under the laws of the State of Colorado, and USXP has the
requisite corporate power and authority to own its properties and to conduct its
business.
(b) USXP is not presently required to be qualified to do business as
a foreign corporation in any state or jurisdiction of the United States, other
than Texas.
(c) USXP has the requisite corporate power and authority to execute,
deliver and perform this Agreement. The Agreement has been duly and validly
authorized by USXP, duly executed and delivered by an authorized officer of USXP
and constitutes a legal, valid and binding obligation of USXP. Subject to
bankruptcy and other laws of general application affecting the rights and
remedies of creditors, the Agreement is enforceable according to its terms,
except insofar as the enforceability of the indemnification provisions of
Section 8.11 of the Agreement may be limited by applicable laws and except that
no opinion need be given as to the availability of equitable remedies.
(d) The capitalization of USXP is as follows:
(i) Preferred Stock. 100,000,000 shares of Preferred Stock,
of which 250,000 shares have been designated "1994 Series A Convertible
Preferred Stock" and 104,000 shares have been designated "1994 Series B
Convertible Preferred Stock" and are issued, outstanding and held by Tipperary.
The Preferred Stock has been duly authorized, issued and delivered, and is
validly outstanding, fully paid and nonassessable. The respective rights,
privileges and preferences of the Preferred Stock are as stated in the statement
establishing the two series of the Preferred Stock. The Conversion Stock and
Dividend Stock have been duly and validly reserved for issuance and the
Conversion Stock, when issued in accordance with the statement establishing the
Preferred Stock, and the Dividend Stock, when issued, will be validly issued,
fully paid and nonassessable.
(ii) Common Stock. 500,000,000 shares of Common Stock, of
which 6,780,504 shares have been duly authorized, issued and delivered and are
validly outstanding, fully paid and nonassessable and were issued in compliance
with all applicable federal and state securities laws.
(iii) Except for (A) the conversion privileges of the Preferred
Stock and (B) 2,900,00 shares of Common Stock reserved for issuance to
prospective employees upon exercise of outstanding employee stock options, there
are no preemptive rights or, to the best of such counsel's knowledge, options,
warrants, conversion privileges or other rights (or agreements for any such
rights) outstanding to purchase or otherwise obtain any of USXP's securities.
(e) The certificates representing the Preferred Stock and shares of
Common Stock are in due and proper form and have been duly and validly executed
by the officers of USXP named thereon.
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(f) The execution, delivery, performance and compliance with the
terms of this Agreement do not violate any provision of any applicable federal,
state or local law, rule or regulation or of any judgment, writ, decree or other
binding upon USXP or any provision of USXP's amended Articles of Incorporation
or Bylaws and, to the best of such counsel's knowledge, do not conflict with or
constitute a default under the provision of any agreement to which USXP is a
party or by which it is bound.
(g) All consents, approvals, orders or authorizations of, and all
qualifications, registrations, designations, declarations or filings with, any
federal or statement governmental authority on the part of USXP required in
connection with the consummation of the transactions contemplated by this
Agreement have been obtained and are effective as of the Closing, and such
counsel is not aware of any proceedings, or threat thereof, which question the
validity thereof.
(h) The conversion of the Preferred Stock and the offer, sale and
issuance of the Conversion Stock and Dividend Stock pursuant to the terms of
this Agreement are exempt from the registration requirements of Section 5 of the
Securities Act by virtue of Section 4(2) thereof and/or other applicable
exemptions and from the qualification requirements of the securities laws of the
state of Colorado, and/or all requisite permits, qualifications and orders have
been obtained.
(i) Except as set forth on the schedule of exceptions attached to the
Agreement as Exhibit 5.6, such counsel is not aware that there is any action,
proceeding or investigation pending, against USXP or any of its officers,
directors or employees, or that any of the foregoing has received any threat
thereof, which questions the validity of the Agreement or which might result,
either individually or in the aggregate, in any material adverse change in the
assets, condition, affairs or prospects of USXP, nor is such counsel aware of
any litigation pending against USXP or any of its officers, directors or
employees, or that any of the foregoing has received any threat thereof, by
reason of the proposed activities of USXP, the past employment relationships of
its officers, directors or employees, or negotiations by USXP or any of its
officers or directors with possible investors in USXP or its business.
(j) USXP is not in violation of any provisions of its Articles of
Incorporation or Bylaws, and neither of such documents is in violation of any
provision of Colorado law.
SECTION 6
USXP'S CONDITIONS TO CLOSING
USXP's obligations at the Closing Date are subject to the fulfillment as of
the Closing Date of the following conditions, provided, however, that nothing in
this Section 6 shall affect or diminish Tipperary's rights under Section 1.4:
6.1 REPRESENTATIONS. The representations made by Tipperary and Purchasers
in Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date.
6.2 LEGAL MATTERS. All material matters of a legal nature which pertain
to this Agreement, and the transactions contemplated hereby, shall have been
reasonably approved by counsel to USXP.
SECTION 7
AFFIRMATIVE COVENANTS OF USXP
USXP hereby covenants and agrees as follows:
7.1 TAXES AND OTHER LIABILITIES. USXP will pay and discharge, before the
same become delinquent and before penalties accrue thereon, all taxes,
assessments and governmental charges upon
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or against it or any of its properties which may be material to the
operations of USXP, and all its other material liabilities at any time
existing, except to the extent and so long as (a) the same are being
contested in good faith and by appropriate proceedings in such manner as not
to cause any materially adverse effect upon the financial condition of USXP
or the loss of any right of redemption from any sale thereunder and (b) USXP
shall have set aside on its books reserves (segregated to the extent required
by generally accepted accounting principles) deemed by it adequate with
respect thereto.
7.2 NOTICE OF LITIGATION AND DISPUTES. USXP will promptly notify the
other parties of any suits or litigation instituted against it, or disputes that
have a high probability of resulting in a suit of significance against it.
7.3 RULE 144 REPORTING. With a view to making available to Tipperary and
Purchasers the benefits of certain rules and regulations of the SEC which may
permit the sale of the Conversion Stock and Dividend Stock to the public without
registration, USXP agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times;
(b) Use its best efforts to file with the SEC in a timely manner all
reports and other documents required of USXP under the Securities Act and the
Exchange Act of 0000 (xxx "Xxxxxxxx Xxx"); and
(c) So long as the Tipperary or Purchasers own any Restricted
Securities (as defined in Section 8.1 hereof), furnish to Tipperary and
Purchasers forthwith upon request a written statement by USXP as to its
compliance with the reporting requirements of Rule 144, and of the Securities
Act and the Exchange Act, a copy of the most recent annual or quarterly report
of USXP filed with the SEC, and such other reports and documents of USXP and
other information in the possession of or reasonably obtainable by USXP as
Tipperary and Purchasers may reasonably request in availing themselves of any
rule or regulation of the SEC allowing Tipperary and Purchasers to sell any such
securities without registration. Additionally, at the request of Tipperary or
Purchasers, USXP also agrees to furnish Tipperary or the requesting Purchaser,
as the case may be, with quarterly financial statements of USXP.
SECTION 8
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT; REGISTRATION RIGHTS
8.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Conversion Stock" means the Common Stock issued or issuable pursuant to
conversion of the Preferred Stock.
"Dividend Stock" means the Common Stock issued or issuable pursuant to this
Agreement in payment to Tipperary for the accrued and unpaid cumulative
dividends on the Preferred Stock.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
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"Holder" shall mean Tipperary holding Registrable Securities and any person
holding Registrable Securities to whom the rights under this Section 8 have been
transferred in accordance with Section 8.12 hereof.
"Initiating Holders" shall mean Tipperary or transferees of Tipperary under
Section 8.12 hereof who in the aggregate are Holders of greater than 5% of the
Registrable Securities.
"Registrable Securities" means (i) the 150,000 shares of the Conversion
Stock retained by Tipperary following the Closing and the Dividend Stock to be
received by Tipperary hereunder in payment of accrued and unpaid cumulative
dividends on the Preferred Stock; and (ii) any Common Stock of USXP issued or
issuable in respect of the Common Stock set forth in the preceding clause (i)
upon any stock split, stock dividend, recapitalization, or similar event, or any
Common Stock otherwise issued or issuable with respect to the Common Stock set
forth in the preceding clause (i); provided, however, that shares of Common
Stock or other securities shall only be treated as Registrable Securities if and
so long as they have not been (A) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction, or (B)
sold or are available for sale in the opinion of counsel to USXP in a single
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act so that all transfer restrictions and restrictive legends
with respect thereto are or may be removed upon the consummation of such sale.
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing with the Commission a registration
statement in compliance with the Securities Act, and the declaration or ordering
of the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, except Selling Expenses as
defined below, incurred by USXP in complying with Sections 8.4, 8.5 and 8.6
hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
for USXP, blue sky fees and expenses, the expense of any special audits incident
to or required by any such registration (but excluding the compensation of
regular employees of USXP which shall be paid in any event by USXP) and the
reasonable fees and disbursements of one counsel for all Holders in the event of
exercise of requested registrations provided for in Sections 8.5, 8.6 and 8.7
hereof.
"Restricted Securities" shall mean the securities of USXP required to bear
the legend set forth in Section 8.2 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and, except as set forth in the definition of Registration Expenses,
all reasonable fees and disbursements of counsel for any Holder.
8.2 RESTRICTIONS ON TRANSFERABILITY. The Conversion Stock and Dividend
Stock shall not be sold, assigned, transferred or pledged except upon
satisfaction of the conditions specified in this Section 8, which conditions are
intended to ensure compliance with the provisions of the Securities Act.
Tipperary and each of Purchasers will cause any proposed purchaser, assignee,
transferee, or pledgee of the Conversion Stock or Dividend Stock respectively
held by Tipperary or either of Purchasers to agree to take and hold such
securities subject to the provisions and conditions of this Section 8.
8.3 RESTRICTIVE LEGEND. Each certificate representing the Conversion
Stock or Dividend Stock and (iii) any other securities issued in respect of the
Conversion Stock or Dividend Stock upon any stock
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split, stock dividend, recapitalization, merger, consolidation or similar
event, shall (unless otherwise permitted by the provisions of Section 8.3
below) be stamped or otherwise imprinted with a legend in the following form
(in addition to any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED IN A
TRANSACTION OUTSIDE OF THE UNITED STATES UNDER REGULATION S.
Tipperary, Purchasers and each Holder consents to USXP making a notation on its
records and giving instructions to any transfer agent of the Conversion Stock or
Dividend Stock in order to implement the restrictions on transfer established in
this Section 8.
8.4 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. In case USXP shall receive from
Initiating Holders a written request that USXP effect a registration under the
Securities Act with respect to not less than 50,000 shares (as adjusted for
recapitalization) of Registrable Securities, USXP will:
(i) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect
such registration (including, without limitation, appropriate qualification
under applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Securities Act and any
other governmental requirements or regulations) as may be so requested and as
would permit or facilitate the sale and distribution of all or such portion of
such Registrable Securities as are specified in such request, together with all
or such portion of the Registrable Securities of any Holder or Holders joining
in such request as are specified in a written request received by USXP within 20
days after receipt of such written notice from USXP;
Provided, however, that USXP shall not be obligated to take any action to
effect any such registration, qualification or compliance pursuant to this
Section 8.4 prior to March 1, 1997; and provided further that any sale of
Registrable Securities pursuant to such registration shall not be permitted
before June 2, 1997.
Subject to the foregoing clause, USXP shall file a registration statement
covering the Registrable Securities so requested to be registered as soon as
practicable after receipt of the request or requests of the Initiating Holders.
(b) UNDERWRITING. In the event that a registration pursuant to this
Section 8.4 is for a registered public offering involving an underwriting, USXP
shall so advise the Holders as part of the notice given pursuant to Section
8.4(a)(i). In such event, the right of any Holder to registration pursuant to
this Section 8.4 shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this Section 8.4, and the inclusion of
such Holder's Registrable Securities in the underwriting to the extent requested
shall be limited as provided herein.
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USXP shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter(s) selected for such underwriting
by a majority in interest of the initiating Holders, but subject to USXP's
reasonable approval. Notwithstanding any other provision of this Section 8.4,
if the managing underwriter(s) advise(s) the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then USXP shall so advise all Holders participating and the number
of shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders thereof in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such Holders at the time of filing the registration statement. No
Registrable Securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration. To
facilitate the allocation of shares in accordance with the above provisions,
USXP or the underwriters may round the number of shares allocated to any Holder
to the nearest 100 shares.
If any Holder disapproves of the terms of the underwriting, such person may
elect to withdraw therefrom by written notice to USXP, the managing underwriter
and the Initiating Holders. The Registrable Securities so withdrawn shall also
be withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to 90 days after the effective date
of such registration, or such other shorter period of time as the underwriters
may require.
8.5 COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from time to time USXP
shall determine to register any of its securities, either for its own account or
the account of a security holder or holders, other than (i) a registration
relating solely to employee benefit plans or (ii) a registration relating solely
to a Commission Rule 145 transaction, USXP will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within 20 days after receipt of such written notice from USXP,
by any Holder.
(b) UNDERWRITING. If the registration of which USXP gives notice is
for a registered public offering involving an underwriting, USXP shall so advise
the Holders as a part of the written notice given pursuant to Section 8.5(a)(i).
In such event the right of any Holder to registration pursuant to Section 8.5
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with USXP and any other shareholders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by USXP. Notwithstanding any other provision of this
Section 8.5, if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter may limit the Registrable Securities to be included in such
registration. USXP shall so advise all Holders and the number of shares of
Registrable Securities that may be included in the registration and underwriting
shall be allocated among all Holders in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities held by such Holders at the
time of filing the registration statement, it being understood that USXP is
under no obligation to reduce the number of shares that may be underwritten for
USXP. To facilitate the allocation of shares in accordance with the above
provisions, USXP may round the number of shares allocated to any Holder or other
shareholder to the nearest 100 shares. If any Holder or other shareholder
disapproves
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of the terms of any such underwriting, he may elect to withdraw therefrom by
written notice to USXP and the managing underwriter. Any securities excluded
or withdrawn from such underwriting shall be withdrawn from such
registration, and shall not be transferred in a public distribution prior to
90 days after the effective date of the registration statement relating
thereto, or such other shorter period of time as the underwriters may
require. USXP may include shares of Common Stock held by shareholders other
than Holders in a registration statement pursuant to Sections 8.4 or 8.5 if,
and to the extent that, the amount of Registrable Securities otherwise
included in such registration statement would not thereby be diminished.
(c) RIGHT TO TERMINATE REGISTRATION. USXP shall have the right to
terminate or withdraw any registration initiated by it under this Section 8.5
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration.
8.6 REGISTRATION ON FORM S-3.
(a) If any Holder or Holders holding in the aggregate not less than
5% of the then outstanding Registrable Securities request that USXP file a
registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of the Registrable Securities the reasonably anticipated
aggregate price to the public of which, net of underwriting discounts and
commissions, would exceed $100,000, USXP shall use its best efforts to cause
such Registrable Securities to be registered for the offering on such form and
to cause such Registrable Securities to be qualified in such jurisdictions as
the Holder or Holders may reasonably request; provided, however, that USXP shall
not be required to effect more than one registration pursuant to this Section
8.6 in any six month period or in excess of five registrations under this
Section 8.6. The substantive provisions of Section 8.4(b) shall be applicable
to each registration initiated under this Section 8.6, provided, however, that
USXP shall not be obligated to take any action to effect such registration
before March 1, 1997; and provided further that any sale of Registrable
Securities pursuant to such registration shall not be permitted before June 2,
1997.
8.7 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
Closing Date, USXP shall not enter into any agreement granting any holder or
prospective holder of any securities of USXP registration rights with respect to
such securities unless (i) such new registration rights, including standoff
obligations, are on a pari passu basis with those rights of the Holders
hereunder; or (ii) such new registration rights, including standoff obligations,
are subordinate to the registration rights granted Holders hereunder.
8.8 EXPENSES OF REGISTRATION.
(a) All Registration Expenses incurred pursuant to Sections 8.4, 8.5
and 8.6 will be borne by USXP. All Selling Expenses relating to securities
registered on behalf of the Holders shall be borne by the USXP, except that if
the average gross sales price per share with respect to a particular offering
with respect to shares sold by Holders is $7.00 or more, then the Selling
Expenses of such securities shall be born pro rata on the basis of the number of
shares so registered by each Holder.
8.9 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by USXP pursuant to this Section 8, USXP
will keep each Holder advised in writing as to the initiation of each
registration, qualification and compliance and as to the completion thereof.
USXP will:
(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least six months
(except 18 months for a Registration Statement on Form S-3), and prepare and
file with
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the Commission such amendments to such registration statement and supplements
to the prospectus contained therein as may be necessary to keep such
registration statement effective for the periods as specified above;
(b) Enter into a written underwriting agreement in customary form and
substance reasonably satisfactory to USXP, the Holders and the managing
underwriter or underwriters of the public offering of such securities, if the
offering is to be underwritten in whole or in part;
(c) Furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
(d) Use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or blue sky
laws of such jurisdictions as such participating Holders may reasonably request
within 10 days prior to the original filing of such registration statement;
(e) Notify the Holders (or if they have appointed an attorney-in-
fact, such attorney-in-fact) participating in such registration, promptly after
it shall receive notice thereof, of the time when such registration statement
has become effective or a supplement to any prospectus forming a part of such
registration statement has been filed;
(f) Notify such Holders or their attorney-in-fact promptly of any
request by the Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(g) Prepare and file with the Commission promptly upon the request of
any such Holders, any amendments or supplements to such registration statement
or prospectus which, in the reasonable opinion of counsel for such Holders, is
required under the Securities Act or the rules and regulations thereunder in
connection with the distribution of the Registrable Securities by such Holders
within the time frame in Subsection (a) above;
(h) Prepare and promptly file with the Commission, and promptly
notify such Holders or their attorney-in-fact of the filing of, such amendment
or supplement to such registration statement or prospectus as may be necessary
to correct any statements or omissions if, at the time when a prospectus
relating to such securities is required to be delivered under the Securities
Act, any event has occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances in which they
were made;
(i) In case any of such Holders or any underwriter for any such
Holders is required to deliver a prospectus at a time when the prospectus then
in effect may no longer be used under the Securities Act, prepare promptly upon
request such amendment or amendments to such registration statement and such
prospectuses as may be necessary to permit compliance with the requirements of
the Securities Act;
(j) Advise such Holders or their attorney-in-fact, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for that purpose
and promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued; and
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(k) At the request of any such Holder, furnish on the effective date
of the registration statement and, if such registration includes an underwritten
public offering, at the closing provided for in the underwriting agreement, (i)
an opinion, dated each such date, of the counsel representing USXP for the
purposes of such registration, addressed to the underwriters, if any, and to the
Holder or Holders making such request, covering such matters with respect to the
registration statement, the prospectus and each amendment or supplement thereto,
proceedings under state and federal securities laws, other matters relating to
USXP, the securities being registered and the offer and sale of such securities
as are customarily the subject of opinions of issuer's counsel provided to
underwriters in underwritten public offerings, and (ii) to the extent USXP's
accounting firm is willing to do so, a letter dated each such date, from the
independent certified public accountants of USXP, addressed to the underwriters,
if any, and to the Holder or Holders making such request, stating that they are
independent certified public accountants within the meaning of the Securities
Act and that in the opinion of such accountants the financial statements and
other financial data of USXP included in the registration statement or the
prospectus or any amendment or supplement thereto comply in all material
respects with the applicable accounting requirements of the Securities Act, and
additional covering such other financial matters, including information as to
the period ending not more than five business days prior to the date of such
letter with respect to the registration statement and prospectus, as the
underwriters or such requesting Holder or Holders may reasonably request.
8.10 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish USXP such information
regarding such Holder or Holders, the Registrable Securities held by them and
the distribution proposed by such Holder or Holders as USXP may request in
writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 8.
8.11 INDEMNIFICATION.
(a) USXP will indemnify each Holder, each of its officers, directors,
partners, employees, agents and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 8, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, incident to
any such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, or any violation by USXP of the Securities
Act or any rule or regulation promulgated under the Securities Act applicable to
USXP in connection with any such registration, qualification or compliance, and
USXP will reimburse each such Holder, each of its officers, directors, partners,
employees, agents and each person controlling such Holder, each such underwriter
and each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, provided that USXP
will not be liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission or alleged untrue statement or omission, made in reliance upon and
in conformity with written information furnished to USXP by an instrument duly
executed by such Holder, controlling person or underwriter and stated to be
specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify USXP,
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each of its directors and officers, each underwriter, if any, of USXP's
securities covered by such a registration statement, each person who controls
USXP or such underwriter within the meaning of Section 15 of the Securities
Act, and each other such Holder, each of its officers, directors, partners,
employees, agents and each person controlling such Holder within the meaning
of Section 15 of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained
in any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse USXP, such Holders, such
directors, officers, persons, underwriters or control persons for any legal
or any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to USXP by
an instrument duly executed by such Holder and stated to be specifically for
use therein. Notwithstanding the foregoing, the liability of each Holder
under this subsection (b) shall be limited to an amount equal to the initial
public offering price of the shares sold by such Holder.
(c) Each party entitled to indemnification under this Section 8.11
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 8 unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or separate and
different defenses. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
8.12 TRANSFER OF REGISTRATION RIGHTS. The rights to cause USXP to register
securities granted to Tipperary under Sections 8.4, 8.5 and 8.6 may be assigned
to a transferee or assignee reasonably acceptable to USXP in connection with any
transfer or assignment of Registrable Securities by Tipperary provided that:
(i) such transfer may otherwise be effected in accordance with applicable
securities laws, and (ii) such assignee or transferee acquires at least 5% of
the Registrable Securities (appropriately adjusted for Recapitalizations).
SECTION 9
MISCELLANEOUS
9.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the internal laws of the State of Colorado.
9.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by the Tipperary or Purchasers
and the closing of the transactions contemplated hereby.
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9.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
9.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents
delivered pursuant hereto at the Closing constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.
9.5 NOTICES, ETC.. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed:
(a) if to the Tipperary,
Attn: Xxxxx X. Xxxxxxxx, President and CEO
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000,
with a copy to
Xxxx X. Xxxxxxx, Esq.
Xxxxx & Xxxxxx, P.C.
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
(b) if to USXP,
Attn: Xxxxxxxx X. Xxxxxx, Chairman/President/CEO
United States Exploration, Inc.
0000 Xxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxx 00000
with a copy to
Xxxxx X. Xxxxxxx, Esq.
Xxxxxxx, Xxxxxxx & Xxxxx
0000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
(c) if to Xxxx Xxxxxx:
(d) if to Xxxxxx X. Xxxxx and Xxxxx X. Xxxxx:
or to such address as a party may have designated in writing to the other
parties.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle for
the deposit of the United States mail, addressed and mailed as aforesaid.
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9.6 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay or
omission to exercise any right, power or remedy accruing to any holder of the
Preferred Stock, the Conversion Stock, the Dividend Stock or Registrable
Securities, upon breach or default by USXP, shall impair any such right, power
or remedy of such holder nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Except as provided in Section 9.4 hereof, any waiver,
permit, consent or approval of any kind or character on the part of any holder
of any breach or default under this Agreement, or any waiver on the part of any
holder of any provisions or conditions of this agreement, must be in writing and
shall be effective only to the extent specifically set forth in such writing.
All remedies, either under this Agreement or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.
9.7 EXPENSES. USXP, Tipperary and Purchasers shall bear their own
expenses incurred on their behalf with respect to this Agreement and the
transactions contemplated hereby, except as provided with respect to
registration rights in Section 8..
9.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and all of which together shall constitute one instrument.
9.9 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
9.10 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not considered in construing or
interpreting this Agreement.
The foregoing Agreement is hereby executed as of the date first above
written.
UNITED STATES EXPLORATION, INC. TIPPERARY CORPORATION
By: /s/ Xxxxxxxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxxxxx
---------------------------- ---------------------------
Xxxxxxxx X. Xxxxxx Xxxxx X. Xxxxxxxx
Chairman/President/CEO President and Chief
Executive Officer
[PURCHASER] [PURCHASER]
By:____________________________ By:___________________________
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EXHIBIT INDEX
3 Exceptions to Section 3
3.15 List of Material Contracts of USXP not disclosed in SEC Filings
