CONSOLIDATION AGREEMENT EXHIBIT 7.1
This Agreement dated this 13th day of September, 1996, by and between:
Xxxxxxxx Energy, Inc. (the "Company") - a Delaware
corporation;
Xxxxxxxx Energy, L.L.C. (the "LLC") - a Texas limited
liability company;
CSL Management Corporation ("CSL") - a Texas corporation;
Valley Gathering Company ("Valley") - a Texas corporation;
Cadell X. Xxxxxxx ("Xxxxxxx") - an individual of Midland
County, Texas;
Xxxxxxx X. Xxxxxx ("Xxxxxx") - an individual of Midland
County, Texas;
Xxxxx X. Xxxxxxxxx ("Xxxxxxxxx") - an individual of Midland
County Texas; and
NationsBanc Capital Corporation ("NBCC") - a Texas
corporation.
R E C I T A L S
WHEREAS, the Company has been formed to acquire and consolidate (the
"Consolidation") the following assets or entities:
(1) the outstanding common stock of Valley through a cash purchase;
(2) the assets of CSL through a cash purchase;
(3) the LLC (following the redemption by the LLC of NBCC's redeemable
interest in the LLC (the "Redeemable Interest") owned by NBCC), including: (a)
the stock of the three corporate subsidiaries of the LLC, being Statewide
Minerals, Inc. ("Statewide"); Xxxxxxxx Petroleum Corporation ("CPC"); and
Xxxxxxxx Pipeline Corporation ("Pipeline"), all Texas corporations, and (b) the
membership interests of the LLC in two Texas limited liability companies,
Xxxxxxxx Redeco Energy, L.L.C. ("Energy") and Xxxxxxxx Redeco Operating, L.L.C.
("Operating") through a merger (the "Merger") of the LLC into the Company
pursuant to Part Ten of Art. 1528n V.A.T.S., and Section 264 of the Delaware
General Corporation Laws;
WHEREAS, immediately prior to the Merger, the LLC will distribute
$4,218,215 in cash to the Members of the LLC in the amounts set forth herein;
WHEREAS, concurrently with the Consolidation, the Company will close
offerings (collectively, the "Offerings") of $100,000,000 ____% senior
subordinated notes due 2006, and 4,000,000 shares of its common stock par value
$.10 per share (the "Company Common Stock") pursuant to the Securities Act of
1933, as amended (the "Securities Act"), as described in those certain
Registration Statements on Form S-1, Registration Nos. 333-08909 and 333-08913,
respectively, (as amended at the time each becomes effective, the "Registration
Statements") of the Company, each filed with the Securities and Exchange
Commission on July 26, 1996; and
WHEREAS, the parties hereto desire to set forth the terms and conditions of
the Consolidation and provide for certain relationships and obligations among
the parties hereto following the Effective Date (as defined herein).
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the aforesaid parties hereby agree as follows:
I. REDEMPTION, DISTRIBUTIONS AND ACQUISITIONS
A. REDEMPTION OF REDEEMABLE INTERESTS OF NBCC
1. Immediately prior to the Merger, NBCC shall convey, transfer,
assign and sell to the LLC its Redeemable Interest for $15,486,914 (the
"Redemption") payable in cash. The source of the cash payment required by this
Section I.A.1. shall be an advance to the LLC by the Company from the net
proceeds from the Offerings.
2. The Redemption shall be accomplished pursuant to an Assignment of
NBCC's Redeemable Interest substantially in the form attached hereto as Exhibit
"A" (the "Assignment").
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3. NBCC represents that
(a) the Redeemable Interest is free and clear of all
encumbrances, security interests and liens and is subject only to those
obligations arising from its membership in the LLC, as defined in the LLC's
Regulations.
(b) NBCC will, upon execution of the Assignment, convey good and
indefeasible title to the Redeemable Interest as well as all rights to profits
and capital in respect thereof.
(c) NBCC further represents that it has taken all required
corporate action to convey the Redeemable Interest and has acquired all
necessary consents and approvals to consummate the Assignment. No notice to or
approval by any other person, firm, entity (including governmental authorities),
is required by NBCC to execute and deliver the Assignment.
B. CASH DISTRIBUTION TO MEMBERS
Immediately prior to the Merger, the LLC shall make a cash
distribution to each of its Members as follows:
NBCC $ 759,279
Xxxxxxx $1,936,669
Xxxxxx $1,051,244
Xxxxxxxxx $ 471,023
The source of the cash payment required by this Section I.B. shall be an
advance to the LLC by the Company from the net proceeds from the Offerings.
C. PURCHASE OF VALLEY STOCK
1. At the Closing and concurrently with the consummation of the
other transactions contemplated by the Consolidation, the Company shall purchase
all of the issued and outstanding shares of common stock of Valley from each of
Xxxxxxx, Xxxxxx and Xxxxxxxxx (collectively, the "Selling Shareholders") for the
cash consideration of $660 per share ($660,000, in the aggregate) as follows:
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SELLING SHAREHOLDER NO. OF SHARES CASH PAYMENT PRICE
Xxxxxxx 540 $ 356,400
Xxxxxx 317 $ 209,220
Xxxxxxxxx 143 $ 94,380
2. Valley and the Selling Shareholders represent, jointly and
severally, that:
a. Valley is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas. Valley has all requisite
power and authority to own, operate and carry on its business as now being
conducted. Valley's capitalization consists of 1,000,000 shares of common
stock, par value $1.00 per share (the "Valley Common Stock"), of which 1,000
shares are issued and outstanding. There are no other classes of stock
authorized or outstanding. The issued and outstanding shares of Valley Common
Stock have been validly issued, and are fully paid and non-assessable. There
are no outstanding options, warrants or similar rights to purchase or convert
any obligation into Valley Common Stock or other securities of Valley.
b. Valley has good and marketable title to all of its assets
and properties, tangible and intangible, that are material to Valley's business
and future prospects. All of Valley's assets are free and clear of all
mortgages, liens, pledges, security interests, encumbrances, equities, claims,
easements, covenants, conditions and restrictions, except as set forth in the
financial statements previously delivered to the Company.
c. The Valley Common Stock is owned by each of the Selling
Shareholders free and clear of all liens, security interests or encumbrances.
Each of the Selling Shareholders has all requisite authority to sell, convey and
assign such shares of Valley Common Stock without the consent of any other
person, firm, agency or other entity, other than such consents as have been
obtained.
d. The financial statements of Valley previously delivered to
the Company (i) present fairly the financial position of Valley as at the date
indicated and the results of its operations for the periods specified and (ii)
have been prepared in conformity with generally accepted accounting principles
applied on a consistent basis during the periods involved, except as indicated
therein, for the
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absence of footnotes and for closing adjustments which would not be material
in amount. Since the date of such financial statements there has been no
material adverse change in the financial condition of Valley.
3. The sale and assignment of the Valley Common Stock shall be
effectuated by the delivery, at Closing, by each of the Selling Shareholders to
the Company, of the original common stock certificates endorsed in blank.
D. PURCHASE OF CSL ASSETS
1. At the Closing and concurrently with the consummation of the
other transactions contemplated by the Consolidation, the Company shall purchase
all of the assets of CSL for $40,000 payable in cash to CSL. The source of the
cash payment required by this Section I.D.1. shall be net proceeds from the
Offerings.
2. CSL and the Selling Shareholders represent, jointly and severally
that:
a. CSL is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas. CSL has all requisite power
and authority to own, operate and carry on its business as now being conducted.
b. CSL is the sole owner of the assets conveyed hereunder and
has full power and authority to dispose of its assets. CSL has good and
marketable title to all of its assets and properties, tangible and intangible,
that are material to CSL's business and future prospects. All of CSL's assets
are free and clear of all mortgages, liens, pledges, security interests,
encumbrances, equities, claims, easements, covenants, conditions and
restrictions, except as set forth in the financial statements previously
delivered to the Company.
c. The financial statements of CSL previously delivered to the
Company (i) present fairly the financial position of CSL as at the date
indicated and the results of its operations for the periods specified and (ii)
have been prepared in conformity with generally accepted accounting principles
applied on a consistent basis during the periods involved, except as indicated
therein, for the
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absence of footnotes and for closing adjustments which would not be material
in amount. Since the date of such financial statements there has been no
material adverse change in the financial condition of CSL.
3. This conveyance shall be accomplished by the execution, by a duly
authorized officer of CSL, of a xxxx of sale and assignment substantially in the
form attached hereto as Exhibit "B" with a complete description of the assets
conveyed attached thereto, including the assets identified on the attachment to
Exhibit "B". CSL shall also deliver a certified copy of Directors' and
Shareholders' Resolutions authorizing the sale of all its assets.
II. THE SECTION 351 TRANSACTIONS
At the Closing and concurrently with the other transactions contemplated by
the Consolidation, there shall be consummated two transactions pursuant to
Section 351 of the Internal Revenue Code of 1986, as amended (the "Code") as
follows:
A. THE MERGER OF LLC INTO THE COMPANY
1. ACTIONS TO BE TAKEN. As a part of the Consolidation, the
following actions shall be taken by the LLC and the Company:
a. Simultaneous with the execution of this Agreement, the
Company and the LLC shall adopt and enter into a Plan and Agreement of Merger
(the "Merger Agreement"), a copy of which is attached hereto as Exhibit "C",
providing for the Merger of the LLC with and into the Company effective on the
Effective Date. For the purposes of this Agreement, the "Effective Date" shall
be the date appropriate certificates of merger are filed with the secretaries of
the States of Texas and Delaware, which date shall be the same date as the date
of Closing, and the "Effective Time" shall be the time the later of such filings
is made on the Effective Date. For tax purposes, the Merger will be treated as
a contribution of the LLC's assets and liabilities to the Company solely in
exchange for Company Common Stock pursuant to Section 351 of the Code, and a
distribution of the Company Common Stock from the Company to the former Members
of the LLC.
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b. At the Effective Time the LLC shall be merged with and into
the Company in accordance with the terms and conditions of the Merger Agreement
and Section 351 of the Code; and the separate existence of the LLC shall cease
and the Company shall continue as the surviving entity. The Company and the LLC
will cause the Merger to be consummated by filing a Certificate of Merger (the
"Merger Certificate") with the secretary of the States of Texas and Delaware as
required by the Delaware General Corporation Laws and the Texas Limited
Liability Company Act.
c. At the Effective Time, by virtue of the Merger and without
any action on the part of any person, the membership interests in the LLC, all
of which are owned by Liedtke, Grella, Xxxxxxxxx and NBCC, shall be converted
into and shall become the number of shares of Common Stock of the Company
determined pursuant to the Merger Agreement and Section II.A.1.e. below. From
and after the Effective Time, the Company shall possess all of the rights,
privileges and powers of the LLC; all property, rights, privileges, powers and
other interests of the LLC shall be thereafter as effectively the property of
the Company as they were of the LLC; the title to any and all real or personal
property or other interest vested by deed or otherwise in LLC shall vest in the
Company and shall not revert or be in any way impaired by reason of the Merger;
and all rights of creditors and all liens upon any property of the LLC shall be
preserved unimpaired, and all debts, liabilities and duties of the LLC shall
thereafter attach to the Company, and may be enforced against it to the same
extent as if such debts, liabilities and duties had been contracted by it.
d. On and after the Effective Time by virtue of the Merger and
without any further action, the Company shall become the owner of all issued and
outstanding shares of Statewide, CPC and Pipeline, and shall become a member in
Energy and Operating.
e. Pursuant to the Merger, at the Closing, the Company shall
issue an aggregate of 6,000,000 shares of Company Common Stock to the holders of
the membership interests in the LLC (the "LLC Members") as follows and all
previously issued shares of the Company's Common Stock, if any, in connection
with its organization shall be cancelled:
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LLC MEMBER NO. OF SHARES OF COMMON STOCK TO BE ISSUED
---------- ------------------------------------------
Xxxxxxx 2,656,796
Xxxxxx 1,558,161
Xxxxxxxxx 705,035
NBCC 1,080,008
Upon the issuance of such shares of Common Stock, they shall be
validly issued, fully paid and nonassessable. Such number of shares may be
adjusted prior to the Effective Time by an agreement executed by all of the
members, subject to consent of the representatives of the underwriters in the
Offerings.
2. Representations and Warranties of the LLC and the LLC Members.
The LLC and the LLC Members (other than NBCC), jointly and severally, represent
that:
a. The LLC is a limited liability company, duly organized,
validly existing and in good standing under the laws of the State of Texas. The
LLC has all requisite power and authority (including all licenses, franchises,
permits and other governmental authorizations as are legally required) to carry
on its business as now being conducted, to own, lease and operate its properties
and assets, and to enter into and carry out its obligations under this
Agreement. The LLC is qualified to do business in all states other than the
State of Texas wherein such qualification is required, except when the failure
to be so qualified does not have a material adverse effect on the financial
condition or results of operation of the LLC. The LLC has taken all action
necessary to authorize the execution, delivery and performance of this Agreement
and the other agreements and documents contemplated hereby to which it is a
party.
b. This Agreement has been, and the other agreements and
documents contemplated hereby have been or at Closing will be, duly executed by
the LLC and each constitutes the legal, valid and binding obligation of the LLC,
enforceable in accordance with its respective terms and conditions, except as
enforceability may be limited by bankruptcy, conservatorship, insolvency,
moratorium, reorganization, receivership or similar laws and judicial decisions
affecting the rights of creditors generally and by general principals of equity.
The LLC has full power and authority to execute,
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deliver and perform this Agreement which will not violate any requirement of
law or its articles of association, regulations or other organizational
documents, nor will it violate any applicable law, regulation or order of any
governmental authority nor any agreement, indenture, mortgage, deed of trust,
voting agreement, loan agreement, note agreement or other evidence of
indebtedness, lease, contract or other instrument to which it is a party or
by which its property is bound.
c. The LLC has good and defensible title to its assets to be
vested in the Company pursuant to the Merger except for:
i. undeveloped oil and gas leases;
ii. personal property and equipment located on property
subject to oil and gas leases and used in connection with the operation and
development of oil and gas leases; and
iii. defects which collectively would not have a material
adverse effect on the business, properties, business prospects, condition
(financial or otherwise) or results of operation of the Company.
For purposes of this Agreement, good and defensible title shall mean
title that is free from defects as would cause a reasonable doubt in the mind of
a reasonable and prudent purchaser in the area where the property interest is
situated and cause him, if he were purchasing such interest, to refuse to accept
the same at its full agreed value. The title to certain assets may be subject
to drilling obligations in leases, farmout agreements, operating agreements, gas
purchase contracts, covenants, restrictions, rights, easements, liens and
encumbrances which are valid and in full force and effect as to such properties,
and minor irregularities in title which, collectively, do not interfere with the
operation, use and enjoyment of any such asset in the normal course of business
as presently conducted by the LLC or materially impair the value thereof for
such business.
d. The LLC's assets (except for undeveloped oil and gas leases
and personal property and equipment located on property subject to oil and gas
leases and used in connection with the operation and development of oil and gas
leases) are held by the LLC free and clear of any security
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interests, mortgages, pledges, liens, encumbrances, charges, defects or
restrictions of any kind or character other than (i) those described in the
preceding paragraph c and; (ii) those granted to NationsBridge, L.L.C. and
its affiliates pursuant to security agreements, mortgages, assignments and
other instruments to secure the obligation of the LLC under various loan
arrangements. The oil and gas interests of the LLC were acquired in a manner
customary in the oil and gas industry using reasonable diligence used by
prudent purchasers in the area, and the developed portion of the oil and gas
leases are valid, subsisting and enforceable against each of the parties
thereof and are in full force and effect in accordance with their respective
terms (except for such leases that have partially terminated as to certain
nonproducing lands and/or depths pursuant to the terms thereto) and where the
failure of such leases to be enforceable or to be in full force and effect
would not, in either instance, have a material adverse effect on the LLC or
its business, properties, business prospects, conditions (financial or
otherwise) or results of operations, taken as a whole.
e. There are no actions, suits or proceedings pending or
threatened against or affecting the LLC, or its officers, directors or members
in their capacities as such, before any federal, state or local body or
authority, domestic or foreign, wherein an unfavorable ruling, decision or
finding would have a material adverse effect on its business, properties,
business prospects, conditions (financial or otherwise) or results of
operations.
B. THE PUBLIC OFFERING
Concurrently with the other transactions contemplated by the Consolidation,
and as a condition precedent thereto, the Company shall have closed an initial
public offering (the "Common Stock Offering") of shares of the Company Common
Stock pursuant to the Securities Act, as described in that certain Registration
Statement on Form S-1, Registration No. 333-08913 filed with the Securities and
Exchange Commission. Proceeds from the Common Stock Offering shall constitute
"property" contributed to the Company solely in exchange for common stock as
defined in Code Section 351 and
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shall be the result of an "underwriting" as described in the Regulations to
the Code at Section 1.351-1(a)(3).
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In connection with transactions contemplated under Article I and II hereof,
the Company represents to each of the LLC, Valley, CSL, Liedtke, Grella,
Xxxxxxxxx and NBCC that the following representations and warranties are true
and correct as of the closing:
A. The Company is a corporation duly organized and validly existing, in
good standing, under the laws of the State of Delaware, with all requisite
corporate power and authority to own and to lease its property and to carry on
its business as now conducted, and is duly qualified and authorized to do
business as a foreign corporation and is in good standing in each jurisdiction
wherein the failure to be so qualified and authorized would have a material
adverse effect on the financial condition or results of operations of the
Company.
B. It has full requisite corporate and other power and authority to enter
into this Agreement and to perform its obligations hereunder. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of the Company and no other corporate proceeding on the part of the
Company is necessary for the execution and delivery of this Agreement by it.
This Agreement has been duly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company, enforceable
against it in accordance with its terms.
IV. REGISTRATION RIGHTS
A. INCIDENTAL REGISTRATION.
1. REQUEST FOR REGISTRATION. If at any time the Company proposes to
file a registration statement under the Securities Act (other than a
registration statement on Form S-4 or Form S-8 or other similar forms providing
for the registration of employee benefits plans) with respect to an offering of
shares of Company Common Stock (the "Shares") for its own account or for the
account of any of
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Liedtke, Grella, Xxxxxxxxx or NBCC (collectively, the "Affiliated Holders")
(including, without limitation, a "Demand Registration" pursuant to Section
IV.B.), then the Company shall give written notice of such proposed filing
and its distribution plan to each Affiliated Holder owning more than five
percent (5%) of the total outstanding Company Common Stock (each, an
"Eligible Holder") as soon as practicable (but in no event less than twenty
(20) days before the anticipated filing date of such registration statement).
Such notice shall offer each Eligible Holder the opportunity to have all or
any part of the Shares owned by such Eligible Holder included in the
registration statement proposed to be filed by the Company, and thereby be
registered under the Securities Act (and any related qualification under any
applicable state securities or "blue sky" laws or other compliance) or, at
the Company's option, in a separate registration statement to be filed
concurrently with such registration statement (in either case, "Incidental
Registration"). Within fifteen (15) days after receiving such notice, each
Eligible Holder may make a written request to the Company that any or all of
the Eligible Holder's Shares be included in the Incidental Registration,
which notice shall specify the precise portion of such Eligible Holder's
Shares to be so included. Subject to the provisions of Section IV.A.2., the
Company shall include in the Incidental Registration all Shares in the
Company with respect to which the Company has received such a written request
by an Eligible Holder. Any Eligible Holder shall be permitted to withdraw
all or part of his Shares in the Company from an Incidental Registration at
any time prior to the effective date of the registration statement filed with
respect to such Incidental Registration.
2. PRIORITY ON INCIDENTAL REGISTRATION. The Company shall use its
best efforts to cause the managing underwriter or underwriters of a proposed
underwritten offering by the Company, in connection with which Incidental
Registration is requested, to permit the inclusion of all Shares in the Company
requested by the Eligible Holders (the "Selling Incidental Holders") to be
included in the Incidental Registration on the same terms and conditions as
similar securities of the Company included therein to the extent appropriate.
Notwithstanding the foregoing, if the managing underwriter or underwriters of
such offering deliver a written opinion to the Company that, because of the size
of the
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offering which the Selling Incidental Holders, the Company and any other
security holders of the Company intend to make, the success of the offering
would be materially and adversely affected by inclusion of more than a
specific number of the Shares requested to be so included, then such
registration shall be comprised of the following Shares:
a. PRIMARY REGISTRATION. If such Incidental
Registration is incident to a primary registration on behalf
of the Company, then the Shares to be included in such
primary registration shall be as follows:
(i) first, the Shares intended to be offered by the
Company;
(ii) second, the Shares owned and requested to be
registered by NBCC; and
(iii) third, the Shares owned, and requested to be
registered, by the other Selling Incidental
Holders in proportion to the ratio that the
number of Shares owned by each such remaining
Selling Incidental Holder (excluding any
Shares to be registered pursuant to
subparagraph IV.A.2(a)(ii)) bears to the
total number of Shares owned by all such
Selling Incidental Members (excluding any
Shares to be registered pursuant to
subparagraph IV.A.2.(a)(ii)) (or as otherwise
agreed); and
b. SECONDARY REGISTRATIONS. If such Incidental
Registration is incident to a secondary registration on behalf of
Affiliated Holders owning Shares (including, a Demand
Registration under Section IV.B.), then the total number of
Shares to be included in such secondary registration (the
"Available Shares") shall be allocated as follows: (i) up to 50%
to Shares owned, and requested to be registered by, NBCC; and
(ii) the remainder (to the extent not requested to
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be registered by NBCC) to all other Selling Incidental Holders
requesting the Company to have their Shares included in such
registration, with such remaining Available Shares being
allocated among such other Selling Incidental Holders in
proportion to the total number of Shares owned by each such
other Selling Incidental Holder bears to the total number of
Shares owned by all such other Selling Incidental Holders.
3. ASSIGNMENTS, ETC.. All rights under this Section IV.A.
shall be freely assignable and such rights are not intended to create
rights in any person not a party to this Agreement or its assigns.
B. DEMAND REGISTRATION.
1. REQUEST FOR REGISTRATION. NBCC may make written requests for
registration under the Securities Act ("Demand Registration") of all or part of
NBCC's Shares, subject to the conditions of this Article IV. Each such request
shall specify the precise number of Shares proposed to be sold and shall also
specify the intended method of disposition thereof. Upon receiving a request for
a Demand Registration, the Company shall give written notice of such request to
all other Eligible Holders at least twenty (20) days before the anticipated
filing date of such registration statement, and each such Eligible Holder shall
be entitled to participate in such Demand Registration as a Selling Incidental
Holder pursuant to the terms, conditions and limitations set forth in Section
IV.A. As soon as practicable after receipt of a request for a Demand
Registration, the Company shall file a registration statement on an appropriate
form under the Securities Act for the number of Shares requested by NBCC and any
Selling Incidental Holders, subject to the conditions of this Article IV.
2. LIMITATION ON DEMAND REGISTRATION. No Demand Registration may be
requested by NBCC at any time during which a registration statement filed by the
Company in which NBCC was entitled to participate is effective under the
Securities Act (or would have been entitled but for the delivery by the managing
underwriter or underwriters of the opinion set forth in the second sentence of
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Section IV.A.2.) or within ninety (90) days after the closing of any offering
effected pursuant to any such registration statement. Notwithstanding anything
to the contrary in this Article IV, the Company shall not be obligated to effect
more than two Demand Registrations for NBCC. A registration shall not count as
a Demand Registration: (a) unless a registration statement with respect thereto
has become effective; (b) if, after such registration statement has become
effective, such registration is interfered with by any stop order, injunction or
other order or requirement of the Securities and Exchange Commission ("SEC") or
other governmental agency or court for any reason not attributable to NBCC, and
such registration statement has not thereafter again become effective; or (c) if
the conditions to closing specified in the underwriting agreement, if any,
entered into in connection with such registration are not satisfied or waived,
other than by reason of a failure on the part of NBCC.
3. EFFECTIVE REGISTRATION AND EXPENSES. The Company shall use its
reasonable best efforts to cause each registration statement filed pursuant to a
Demand Registration to become effective under the Securities Act and thereafter
to keep it effective under the Securities Act for a period of ninety (90) days
(subject to extension pursuant to the last paragraph of Section IV.D. hereof).
The Company shall pay all Registration Expenses (as defined in Section IV.E.17)
in connection with any Demand Registration, whether or not it becomes effective,
except (a) as provided in Section IV.E. or (b) if such Demand Registration is
expected to become effective within the price range estimated by the underwriter
but is withdrawn due to the decision of NBCC.
4. SELECTION OF UNDERWRITERS. If NBCC so elects, the offering
pursuant to such Demand Registration shall be in the form of an underwritten
offering. If any Demand Registration is in the form of an underwritten offering,
the Company shall select and obtain the investment banker or investment bankers
and manager or managers that will administer the offering, subject to the
approval of NBCC (which approval shall not be unreasonably withheld).
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D. HOLDBACK AGREEMENTS.
1. RESTRICTIONS ON PUBLIC SALE BY ELIGIBLE HOLDERS. Upon the offer
by the Company to include any Affiliated Holders' Shares ("Selling Holders") in
a registration statement filed pursuant to an Incidental Registration or a
Demand Registration (or in case the Company files a registration statement for
Common Stock and the managing underwriters deliver the opinion set forth in the
second sentence of Section IV.A.2.), each Eligible Holder agrees not to effect
any public sale or distribution of the same type of securities being registered
or a similar security of the Company or any securities convertible into or
exchangeable or exercisable for such securities, including a sale pursuant to
Rule 144 under the Securities Act, during the fourteen (14) days prior to, and
during a 90-day period beginning on, the effective date of such registration
statement (except as part of such registration), if and to the extent requested
by the Company in the case of a non-underwritten public offering or if and to
the extent requested by the managing underwriter or underwriters in the case of
an underwritten public offering.
2. RESTRICTIONS ON PUBLIC SALE BY THE COMPANY. The Company agrees
that during the fourteen (14) days prior to, and during a 180-day period
beginning on, the effective date of any registration statement filed pursuant to
a Demand Registration, it shall not effect any public or private sale or
distribution of the same type of securities being registered or a similar
security of the Company, or any securities convertible into or exchangeable or
exercisable for securities of the nature of such securities (except as part of
such registration or pursuant to a registration statement on Form S-4 or S-8 or
other similar forms providing for the registration of employee benefits plans).
E. REGISTRATION PROCEDURES. Subject to the other provisions and
limitations contained in this Article IV, whenever any Eligible Holder has
requested that any of its Shares be registered pursuant to an Incidental
Registration or whenever NBCC has requested that any of its Shares be registered
pursuant to a Demand Registration, the Company shall use its best efforts to
effect the registration and the sale of such Shares in accordance with the
intended method of disposition thereof, as soon as practicable, and in
connection with any such request, the Company shall as expeditiously as
possible:
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1. REGISTRATION STATEMENT. Prepare and file with the SEC a
registration statement on any form for which the Company then qualifies or which
counsel for the Company shall deem appropriate and which form shall be available
for the sale of the Selling Holders' Shares to be registered thereunder in
accordance with the intended method of distribution thereof, and use its best
efforts to cause such filed registration statement to become effective under the
Securities Act; provided that: (a) in the case of an Incidental Registration, at
least five (5) days before filing a registration statement or prospectus, or as
promptly as practicable prior to filing any amendments or supplements thereto,
the Company shall furnish to one (1) counsel, selected by the Selling Holders,
copies of all such documents proposed to be filed, which documents shall be
subject to the review of the Selling Holders and such counsel; (b) in the case
of a Demand Registration, NBCC and one (1) counsel selected by it shall have the
right to participate in the preparation of such documents; and (c) after the
filing of the registration statement, the Company shall promptly notify each
such Selling Holder and such counsel of comments received from, or any stop
order issued or threatened by, the SEC and take all reasonable actions required
to respond to such comments or, as the case may be, prevent the entry of such
stop order or to remove it, if it has been entered;
2. AMENDMENTS AND SUPPLEMENTS TO REGISTRATION STATEMENT. Prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective for the applicable period required by
the terms hereof, which period shall terminate when all Shares covered by such
registration statement have been sold or, in the case of an Incidental
Registration, for such time period as the Company shall determine in its sole
discretion (but not before the expiration of the 90-day period referred to in
Section 4(3) of the Securities Act and Rule 174 thereunder, if applicable) and
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during such period in
accordance with the intended methods of disposition as set forth in such
registration statement;
17
3. PROPOSED REGISTRATION DOCUMENTS. Furnish to each Selling Holder,
prior to filing the registration statement, if requested, copies of such
registration statement as proposed to be filed, and thereafter furnish to each
Selling Holder such number of copies of such registration statement, each
amendment and supplement thereto (in each case including all exhibits thereto
and documents incorporated or deemed to be incorporated therein by reference),
the prospectus included in such registration statement (including each
preliminary prospectus), and such other documents as each Selling Holder may
reasonably request in order to facilitate the disposition of the Shares owned by
each Selling Holder;
4. BLUE SKY QUALIFICATION. Use its best efforts to register or
qualify such Shares under such other securities or blue sky laws of such
jurisdictions as each Selling Holder reasonably (in light of each Selling
Holder's intended plan of distribution) requests and do any and all other acts
and things which may be reasonably necessary to enable each Selling Holder to
consummate the disposition in such jurisdictions of the Shares owned by each
Selling Holder and keep each such registration or qualification (or exemption
therefrom) effective during the period such registration statement is effective;
provided that the Company shall not be required to: (a) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this subsection; (b) subject itself to taxation in any such
jurisdiction; or (c) consent to general service of process in any such
jurisdiction;
5. APPROVAL BY OTHER GOVERNMENTAL AUTHORITIES. Use its best efforts
to cause such Shares to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable each Selling Holder to
consummate the disposition of such Shares, provided that the Company shall not
be required to: (a) qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify, but for this subsection; (b)
subject itself to taxation in any such jurisdiction; or (c) consent to general
service of process in any such jurisdiction;
6. NOTICE; AMENDMENT OF PROSPECTUS. At any time when a prospectus
relating to Shares is required to be delivered under the Securities Act: (a)
notify each Selling Holder of the occurrence of an event requiring the
preparation of a supplement or amendment to such prospectus; (b)
18
prepare and file such supplement, amendment or any other required document,
so that as thereafter delivered to the purchasers of such Shares, such
prospectus shall not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading; and (c) promptly make available to
each Selling Holder any such supplement, amendment or other document;
7. EXECUTION OF CUSTOMARY AGREEMENTS; FURTHER ACTION. Enter into
and perform customary agreements (including an underwriting agreement in
customary form with the managing underwriter or underwriters, if any), use its
best efforts to obtain any necessary consents in connection with any proposed
registration and sale of Shares, and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of such Shares;
8. INSPECTION AND AVAILABILITY OF RECORDS. Make available for
inspection by each Selling Holder, any underwriter participating in any
disposition pursuant to such registration statement, and any attorney,
accountant, or other professional retained by any Selling Holder or such
underwriter (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents, and properties of the Company (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's Officers and employees to
supply all information reasonably requested by any such Inspectors in connection
with such registration statement; provided, however, records which the Company
determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless: (a)
in the reasonable judgment of counsel to the Company, the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in such
registration statement or (b) the release of such Records is ordered pursuant to
a subpoena or other order from a court of competent jurisdiction; with each
Selling Holder hereby agreeing that information obtained by him, or on his
behalf, as a result of such inspections shall be deemed confidential and shall
not be used by him as the basis for any market transactions in the securities of
the Company unless and until such is made generally available to the public; and
each Selling Holder hereby further agrees that he shall, upon learning that
disclosure by such
19
Selling Holder of such Records is sought in a court of competent jurisdiction,
give prompt notice to the Company and allow the Company, at the Company's
expense, to undertake appropriate action to prevent disclosure of the Records
deemed confidential;
9. COMFORT LETTER. If such sale is pursuant to an underwritten
offering, use its best efforts to obtain a comfort letter or comfort letters
from the Company's independent public accountants in customary form and covering
such matters of the type customarily covered by comfort letters as any Selling
Holder or the managing underwriter or underwriters reasonably request;
10. OTHER COMPLIANCE; EARNINGS STATEMENT. Otherwise use its best
efforts to comply with all applicable rules and regulations of the SEC, and make
available to its security holders as soon as reasonably practicable, an earnings
statement covering a period of twelve (12) months, beginning within three (3)
months after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act;
11. PROSPECTUS SUPPLEMENT; POST-EFFECTIVE AMENDMENT. If requested by
the managing underwriter or underwriters, if any, or any Selling Holder in
connection with an underwritten offering pursuant to an Incidental Registration
or a Demand Registration: (i) promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter or
underwriters, if any, and/or any Selling Holder reasonably requests to be
included therein, as may be required by applicable laws; and (ii) make all
required filings of such prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of the
matters to be incorporated in such prospectus supplement or post-effective
amendment; provided, however, that the Company shall not be required to take any
action pursuant to this Section IV.E.11. that is not, in the reasonable opinion
of counsel for the Company, in compliance with applicable law;
12. REMOVAL OF SUSPENSIONS. Use its reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of a registration statement
filed in connection herewith, or the lifting of any suspension of the
qualification (or exemption from qualification) of any of the Shares for sale in
any jurisdiction, at the earliest possible moment;
20
13. SHARE CERTIFICATES. Cooperate with each Selling Holder and the
managing underwriters, if any, to facilitate the timely preparation and delivery
of certificates, if any, representing Shares to be sold, which certificates or
notes shall not bear any restrictive legends and shall be in a form eligible for
deposit with The Depository Trust Company or other appropriate depository; and
enable such certificates representing Shares to be in such denominations and
registered in such names as the managing underwriters, if any, or holders may
request at least two (2) Business Days prior to any sale of Shares;
14. SECURITIES EXCHANGE LISTING. Cause all such Shares to be listed
on any securities exchange (or on The Nasdaq Stock Market's National Market) on
which similar securities issued by the Company are then listed or traded;
provided, that the applicable listing requirements are satisfied in the opinion
of the Company and its counsel;
15. LEGAL OPINION. Furnish, at the request of any Selling Holder on
the date such securities are delivered to the underwriters for sale pursuant to
such registration or, if such securities are not being sold through
underwriters, on the date the registration statement with respect to such
securities becomes effective, an opinion, dated such date, of counsel
representing the Company for the purposes of such registration, addressed to the
underwriters, if any, and to the Selling Holder making such request, covering
such legal matters with respect to the registration in respect of which such
opinion is being given as such Selling Holder or underwriters may reasonably
request and as are customarily included in such opinions; and
16. FURTHER ACTION. Take such other actions as are reasonably
required in order to expedite or facilitate the disposition of such Shares.
Notwithstanding the provisions of this Section IV, the Company shall
be entitled to postpone, for a reasonable period of time, the filing of any
registration statement under an Incidental Registration if the Company
determines, in the good faith exercise of its reasonable business judgment, that
such registration and offering could materially interfere with any bona fide
financing, acquisition, or other material business plans of the Company
(including a proposed primary offering by the Company of its own securities) or
would require disclosure of non-public information, the premature disclosure of
21
which could materially adversely affect the business, properties, operations or
financial results of the Company; provided, however, that the Company shall
disclose to the Selling Incidental Holders any such transaction, plan or non-
public information, at the request of the Selling Incidental Holders. If the
Company postpones the filing of a registration statement pursuant hereto, it
shall promptly notify in writing the Selling Incidental Holders when the events
or circumstances permitting such postponement have ended and at such time shall
proceed with the filing of the registration statement as requested. If the
Company shall postpone the filing of a registration statement pursuant hereto,
then the Selling Incidental Holders shall have the right to withdraw their
request for registration by giving written notice to the Company at any time
within five (5) days after the date the Company notifies such Selling Incidental
Holders of its willingness to proceed with the filing of the registration
statement. The Company may require each Selling Holder to furnish promptly in
writing to the Company such information regarding the distribution of the Shares
as the Company may from time to time reasonably request and such other
information as may be legally required in connection with such registration.
Each Selling Holder shall cooperate with the Company and, if
applicable, the underwriter or underwriters in providing such information and
executing and delivering such documents as the Company or the underwriter or
underwriters reasonably shall request in connection with any such registration,
and the Company shall not be obligated to include in any such registration any
Shares of any Eligible Holder who does not comply with this paragraph.
Each Selling Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section IV.E.6.,
such Selling Holder shall forthwith discontinue disposition of Shares pursuant
to the registration statement covering such Shares, until such Selling Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section IV.E.6. and, if so directed by the Company, such Selling Holder shall
deliver to the Company all copies, other than permanent file copies then in such
Selling Holder's possession, of the most recent prospectus covering such Shares
at the time of receipt of such notice. If the Company shall give such notice,
the Company shall extend the period during which such registration statement
shall be maintained effective
22
(including the period referred to in Section IV.E.2.) by the number of days
during the period from and including the date of the giving of notice
pursuant to Section IV.E.6. hereof to the date when the Company shall make
available to such Selling Holder a prospectus supplemented or amended to
conform with the requirements or Section IV.E.6.
17. REGISTRATION EXPENSES. In connection with any registration
statement required to be filed under this Article IV, the Company shall pay the
following registration expenses (the "Registration Expenses"): (a) all
registration and filing fees; (b) fees and expenses relating to compliance with
securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of the Shares requested to be
registered); (c) printing expenses (including expenses of printing certificates,
if any, for Shares requested to be registered); (d) internal expenses
(including, without limitation, all salaries and expenses of its Officers and
employees performing legal or accounting duties); (e) any fees and expenses
incurred in connection with the listing of the Shares requested to be registered
on any national securities exchange or automated quotation system on which the
Company's Shares are listed; (f) reasonable fees and disbursements of counsel
for the Company and customary fees and expenses for independent certified public
accountants retained by the Company (including the costs associated with the
delivery by independent certified public accountants of a comfort letter or
comfort letters requested pursuant to Section IV.E.9. hereof); (g) the
reasonable fees and expenses of any special experts or other Persons retained by
the Company in connection with such registration; (h) reasonable fees and
expenses of one counsel (who shall be reasonably acceptable to the Company) for
the Selling Holders incurred in connection with any Incidental Registration
hereunder and reasonable fees and expenses of one counsel (who shall be
reasonably acceptable to the Company) for NBCC incurred in connection with any
Demand Registration hereunder; and (i) messenger, courier, delivery and
telephone expenses related to any registration contemplated hereunder. The
Company shall not have any obligation to pay any underwriting fee discounts or
commissions attributable to the sale of Shares pursuant to any Incidental
Registration or Demand Registration, or any out-of-pocket expenses
23
of any Selling Holder (or the agents who manage his accounts) incurred in
connection therewith, which amounts shall be the responsibility of the
Selling Holder or Selling Holders.
F. SPECIAL PROVISIONS RELATING TO REGISTRATION RIGHTS.
1. ASSIGNMENT. Rights relating to Incidental Registration and Demand
Registration rights granted pursuant to this Article IV are transferable to
transferees of Shares permitted under this Agreement who execute and deliver to
the Company an Addendum to this Agreement in which such transferee agrees to be
bound by this Agreement and to observe and comply with this Agreement and with
all obligations and restrictions imposed hereby.
2. LIMITED DEMAND REGISTRATION RIGHTS. Except as set forth in this
Agreement, the Company has not granted to any Person the right to require the
Company to register the Shares in the Company or any other securities of the
Company. The Company will not, directly or indirectly, grant to any person or
agree to or otherwise become obligated in respect of any registration rights
with respect to Shares, which registration rights are more favorable than those
granted to NBCC by this Article IV.
G. INDEMNIFICATION; CONTRIBUTION.
1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify
and hold harmless each Selling Holder and, if applicable, its directors and
officers and each Person who controls such Selling Holder within the meaning of
either Section 15 of the Securities Act or Section 20 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), from and against any and all
losses, claims, damages, liabilities and expenses (including reasonable legal
and other costs of investigation and defense) (collectively, "Losses") arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact contained in any such registration statement or prospectus
relating to Shares or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon 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, except insofar as such
losses, claims, damages, liabilities, or expenses arise out of, or are based
upon, any such untrue statement or omission or allegation thereof based upon
information furnished in writing to the Company by such Selling Holder
24
or on such Selling Holder's behalf for use therein. The Company also agrees to
indemnify any underwriters of the Shares, their officers and directors, and each
Person who controls such underwriters within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act on substantially the same
basis as the indemnification of Selling Holders provided in this Section IV.G.
2. INDEMNIFICATION BY SELLING HOLDERS. Each Selling Holder agrees to
indemnify and hold harmless the Company, the Affiliated Holders, its Officers,
Directors and each Person, if any, who controls the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act
(other than the Selling Holder) to the fullest extent lawful, from and against
all Losses arising out of or based upon any untrue or alleged untrue statement
of a material fact contained in any registration statement or prospectus
relating to the Shares of the Company or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or based upon any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, to the extent, but only
to the extent, that such information was furnished in writing by such Selling
Holder or on such Selling Holder's behalf, in such Selling Holder's capacity as
a Selling Holder and not in his capacity as an Officer, expressly for use in any
registration statement or form of prospectus relating to the Shares or any
amendment or supplement thereto, provided, however, that (a) with respect to any
untrue statement or omission or alleged untrue statement or omission made in any
preliminary or final prospectus, the indemnity agreement contained in this
subsection shall not apply to the extent that any such Losses result from the
fact that a current copy of the prospectus was not sent or given to the Person
asserting any such Losses at or prior to the written confirmation of the sale of
the Shares concerned to such Person, if it is determined that it was the
responsibility of the Company or any other Person or entity (other than the
Selling Holder) to provide such Person with a current copy of the prospectus and
such current copy of the prospectus would have cured the defect giving rise to
such Losses and (b) no Selling Holder shall be liable for indemnity in an amount
in excess of the gross proceeds received by such Selling Holder in any
Incidental Registration or Demand Registration. Each Selling Holder also agrees
to indemnify and hold harmless underwriters of the Shares, their officers and
25
directors, and each Person who controls such underwriters on substantially the
same basis as the indemnification of the Company provided in this Section IV.G.
3. CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any action or
proceeding (including any governmental investigation) shall be brought or
asserted against any Person entitled to indemnification under Section IV.G.1. or
Section IV.G.2. above ("Indemnified Party") with respect to which indemnity may
be sought from any party who has agreed to provide such indemnification
("Indemnifying Party"), the Indemnified Party shall promptly notify the
Indemnifying Party in writing, and the Indemnifying Party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Party, and shall assume the payment of all expenses relating to
such defense, including without limitation reasonable attorneys' fees. The
Indemnified Party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Party unless: (a) the
Indemnifying Party has agreed to pay such fees and expenses; (b) the
Indemnifying Party shall have failed to promptly assume the defense of such
action or proceeding and to employ counsel reasonably satisfactory to the
indemnified Party; or (c)(i) the named parties to any such action or proceeding
(including any impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been advised by
counsel that there is a conflict of interest on the part of counsel employed by
the Indemnifying Party to represent such Indemnified Party, or (ii) the
Indemnified Party's counsel shall have advised the Indemnified Party that there
may be defenses available to the Indemnified Party that are different from or in
addition to those available to the Indemnifying Party and that the Indemnifying
Party is not able to assert on behalf of or in the name of the Indemnified Party
(in which case of either of (i) or (ii), if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of such action or proceeding on behalf of such
Indemnified Party); it being understood, however, that the Indemnifying Party
shall not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same jurisdiction
26
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such Indemnified Parties, which
firm shall be designated in writing by one or more Indemnified Parties that hold
a majority of the Shares held by all of the Indemnified Parties. The
Indemnifying Party shall not be liable for any settlement of any such action or
proceeding effected without its written consent, which consent shall not be
unreasonably withheld, but if settled with its written consent, or if there be a
final judgment for the plaintiff in any such action or proceeding, the
Indemnifying Party shall indemnify and hold harmless such Indemnified Parties
from and against any loss or liability (to the extent stated above) by reason of
such settlement or judgment.
4. CONTRIBUTION. If the indemnification provided for in this
Section IV.G. is unavailable to the Indemnified Parties in respect of any Losses
(other than by reason of exceptions provided in Section IV.G.1. or Section
IV.G.2.), then each Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such Losses: (a) in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party, on the one hand, and the
Indemnified Party, on the other hand, with respect to the statements or
omissions which resulted in such Losses, or action in respect thereof, as well
as any other relevant equitable considerations; or (b) if the allocation
provided by clause (a) above is not permitted by applicable law, in such
proportion as shall be appropriate to reflect the relative benefits received by
the Indemnifying Party, on the one hand, and the Indemnified Party, on the other
hand, from the offering of the securities covered by such registration
statement; provided, however, that under no circumstances shall the allocation
set forth in this clause (b) be applicable to any Losses arising out of a Demand
Registration effected at the request of NBCC. The relative fault of the
Indemnifying Party, on the one hand, and of the Indemnified Party, on the other
hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such party,
and such party's relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or
27
omission. The relative benefits received by the Indemnifying Party, on the
one hand, and the Indemnified Party, on the other hand, shall be deemed to be
in the same proportion as the total proceeds from the offering (net of
underwriting discounts and commissions, but before deducting expenses)
received by the Indemnifying Party bears to the total proceeds (net of
underwriting discounts and commissions, but before deducting expenses)
received by the Indemnified Party.
The Company and each Selling Holder agree that it would not be just
and equitable if contribution pursuant to this Section IV.G.4. were determined
by pro rata allocation (even if the underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section IV.G.4., no Selling
Holder shall be required to contribute any amount in excess of the amount by
which the total price at which the Shares of such Selling Holder were offered to
the public exceeds the amount of any damages which such Selling Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Subsection 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
5. SURVIVAL. The indemnity and contribution agreements contained in
this Section IV.G. shall remain operative and in full force and effect
regardless of: (a) any amendment, restatement or termination of this Agreement
or any underwriting agreement; (b) any investigation made by or on behalf of any
Indemnified Party or by or on behalf of the Company; and (c) the consummation of
the sale or successive resale of the Shares, until the expiration of all periods
during which any suit or proceeding of the type for which indemnity may be
claimed under this Section IV.G. ("Indemnifiable Claims") have elapsed, and
thereafter until the final and non-appealable resolution of any and all
Indemnifiable Claims commenced during such periods and the final resolution
between the Company and any Selling Holder of any and all claims made by either
party under this Section IV.G. hereof with respect to those Indemnifiable
Claims.
28
G. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Selling Holder may
participate in any underwritten registration hereunder unless such Selling
Holder: (a) agrees to sell his Shares on the basis provided in any underwriting
arrangements approved by the Persons or entities entitled hereunder to approve
such arrangements; and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements, and other documents reasonably
required under the terms of such underwriting arrangements and this Agreement.
H. RULE 144 AND RULE 144A. The Company covenants that it shall file any
reports required to be filed by it under the Securities Act and the Securities
Exchange Act of 1934 and the rules and regulations thereunder, and it shall take
such further action, that any Affiliated Holder may reasonably request to enable
such Affiliated Holder to sell Shares, from time to time, without registration
under the Securities Act but within the limitation of the exemptions provided by
(1) Rule 144 or Rule 144A (to the extent Rule 144A is available) under the
Securities Act, as such Rules may be amended from time to time, or (2) any
similar rule or regulation hereafter adopted by the SEC. Upon the request of any
Affiliated Holder, the Company shall deliver to such Affiliated Holder a written
statement as to whether it has complied with such requirements.
V. CLOSING.
A. TIME AND LOCATION. The closing of the transactions contemplated by
this Agreement (the "Closing") shall be subject to the accuracy in all material
respects of the representations and warranties of the parties hereto as though
made on and as of the date of Closing and shall take place contemporaneously
with and as an integral part of, the closing of the Offerings, at such time and
place as the parties hereto may mutually agree.
B. OBLIGATIONS AT THE CLOSING. Subject to the conditions set forth in
this Agreement, at the Closing:
1. the LLC shall have redeemed NBCC's Redeemable Interest as
contemplated by Section I.A. hereof, and made the distribution contemplated by
Section I.B. hereof;
29
2. the sale of the Valley Common Stock shall be consummated in
accordance with Section I.C. hereof;
3. the sale of CSL assets shall be consummated in accordance with
Section I.D. hereof;
4. the Company shall issue and deliver the shares of Company Common
Stock to the LLC Members and the Merger shall be consummated in accordance with
Section II.A. hereof;
5. Valley, CSL, the LLC and the Affiliated Holders shall perform,
satisfy and comply in all material respects all other covenants and conditions
required by this Agreement to be performed, satisfied or complied with on or
before the Effective Date; and
6. the Company shall perform, satisfy and comply in all material
respects all other covenants and conditions required by this Agreement to be
performed, satisfied or complied with on or before the Effective Date.
VI. REMEDIES.
A. Each of the parties to this Agreement shall be entitled to enforce its
rights under this Agreement specifically, to recover damages by reason of any
breach of any provision of this Agreement and to exercise all of the rights
existing in its favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any such breach or threatened breach
of the provisions of this Agreement and that any party may in its sole
discretion, in addition to any other available remedies, apply to any court of
law or equity of competent jurisdiction for and be entitled to receive or be
entitled to, specific performance and injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement, without the
necessity of demonstrating that it has been irreparably harmed. The
representations and warranties in this Agreement shall survive the Closing.
B. In the event a party brings an action under this Agreement, the
prevailing party in such dispute shall be entitled to recover from the losing
party any fees, costs and expenses of enforcing any right of such prevailing
party under or with respect to this Agreement, including, without limitation,
the reasonable fees and expenses of its attorneys and accountants and all fees,
costs and expenses of appeals.
30
VII. MISCELLANEOUS.
A. NOTICES. All notices and other communications required or permitted
to be given hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally, mailed by certified mail (return receipt
requested) or sent by overnight delivery service, facsimile transmission or
telex to the parties at the following addresses or at such other addresses as
shall be specified by the parties by like notice:
If to the LLC, Valley, CSL or the Company:
000 X. Xxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
If to Xxxxxxx, Xxxxxx or Xxxxxxxxx, to each of such persons at the
following address:
000 X. Xxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
If to NBCC:
000 X. Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx Xxxx and Xxxxxx X. Xxxxxxxx, III
Notice so given shall, in the case of notice so given by mail, be deemed to be
given and received on the third calendar day after posting; in the case of
notice so given by overnight delivery services, on the date of actual delivery
and, in the case of notice so given by facsimile transmission, telex or personal
delivery, on the date of actual transmission or, as the case may be, on the day
of personal delivery.
B. TERMINATION OF PRIOR AGREEMENTS. This Agreement fully replaces and
supersedes all prior agreements relating to the common stock of, or the
membership interest or other interest in, the LLC, CSL, Valley or their
respective predecessors, including, but not limited to, (i) the Regulations of
the LLC dated February 17, 1995; (ii) the Membership Subscription Agreement
dated February 17, 1995 among the LLC, NBCC and each other holder of the within-
mentioned purchase interest; (iii) the Buy-Sell Agreement dated February 17,
1995 (the "LLC Buy-Sell Agreement") by and between the LLC and Xxxxxxx, Xxxxxx
and Xxxxxxxxx and their respective spouses, being Xxxxxx Xxxxxxx, Xxxxxxxxx
Xxxxx
31
Xxxxxx and Xxxxxxx Xxxxxxxxx (collectively, "Spouses"); and (iv) the Buy-Sell
Agreement dated February 17, 1995 by and between Xxxxxxx, Xxxxxx and
Xxxxxxxxx and their respective Spouses, CSL Management Corporation, Valley
Gathering Company and 511 TEX L.C. (collectively, the "Prior Agreements").
As a result of the execution of this Agreement, the parties hereto declare
the Prior Agreements to be of no further force and effect and any notices
required thereunder shall be superseded hereby; provided, however, that if
the Closing does not incur on or before October 9, 1996, the Prior Agreements
shall be revived in their entirety.
C. SEVERABILITY AND REFORMATION. The parties hereto intend all of the
provisions of this Agreement to be enforced to the fullest extent permitted by
law. If, however, any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future law, then such illegality,
invalidity or unenforceability shall not invalidate the entire Agreement. Such
provision shall be deemed modified to the extent necessary to render it legal,
valid and enforceable, and if no such modification shall render it legal, valid,
and enforceable, then this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision were never a part thereof, and the
remaining provisions shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its
severance.
D. ENTIRE AGREEMENT; AMENDMENT. This Agreement, together with the
Exhibits attached hereby and those documents expressly referred to herein,
contains the entire understanding and agreement among the parties to this
Agreement, and supersedes any other agreement among such parties,
whether oral or in writing, with respect to the subject matter hereof. This
Agreement may not be altered, amended, rescinded or revoked, nor may any of its
provisions be waived, except by an instrument in writing signed by all of the
parties hereto or, in the case of an asserted waiver, by the party or parties
against whom the waiver is sought to be enforced.
E. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same
32
document. All such counterparts shall be deemed an original, shall be
construed together and shall constitute one and the same instrument.
F. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure
to the benefit of, and be enforceable by and against, each of the parties hereto
and their respective successors and assigns.
G. GOVERNING LAW AND VENUE. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE
OF TEXAS. THIS AGREEMENT IS PERFORMABLE IN MIDLAND COUNTY, TEXAS, AND VENUE OF
ANY ACTION RELATED OR PERTAINING TO THIS AGREEMENT SHALL LIKE IN MIDLAND COUNTY,
TEXAS.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written, to be effective, however, at the Closing.
33
XXXXXXXX ENERGY, INC.
By: /s/
-------------------------------------
Name: Cadell X. Xxxxxxx
Title: Chairman of the Board
XXXXXXXX ENERGY, L.L.C.
By: /s/
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
/s/
----------------------------------------
Cadell X. Xxxxxxx, Individually
/s/
----------------------------------------
Xxxxxxx X. Xxxxxx, Individually
/s/
----------------------------------------
Xxxxx X. Xxxxxxxxx, Individually
NATIONSBANC CAPITAL CORPORATION
By: /s/
-------------------------------------
Name:
Title:
CSL MANAGEMENT CORPORATION
By: /s/
-------------------------------------
Name:
Title:
VALLEY GATHERING COMPANY
By: /s/
-------------------------------------
Name:
Title:
34
AMENDMENT TO CONSOLIDATION AGREEMENT
This Amendment ("Amendment") to Consolidation Agreement dated and effective
October 8, 1996, by and between:
Xxxxxxxx Energy Inc. (the "Company") - a Delaware
corporation;
Xxxxxxxx Energy, L.L.C. (the "LLC") - a Texas limited
liability company;
CSL Management Corp. ("CSL") - a Texas corporation;
Valley Gathering Company ("Valley") - a Texas corporation;
Cadell X. Xxxxxxx ("Xxxxxxx") - an individual of Midland
County, Texas
Xxxxxxx X. Xxxxxx ("Xxxxxx") - an individual of Midland
County, Texas;
Xxxxx X. Xxxxxxxxx ("Xxxxxxxxx") - an individual of Midland
County Texas; and
NationsBank Capital Corporation ("NBCC") - a Texas
corporation.
R E C I T A L S
WHEREAS, the parties hereto have previously executed a Consolidation
Agreement (the "Consolidation Agreement") agreement dated the 13th of September,
1996;
WHEREAS, the parties hereto have mutually agreed to amend the Consolidation
Agreement to more particularly describe the Offerings; and
WHEREAS, the defined terms utilized herein shall have the meaning ascribed
to them in the Consolidation Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the aforesaid parties hereby agree unanimously to amend the
Consolidation Agreement as follows:
1. The third recital, page 2 of the Consolidation Agreement, shall be
amended to read as follows:
WHEREAS, concurrently with the Consolidation, the
Company will close offerings (collectively, the "Offerings")
of $100,000,000, 10 1/4% senior subordinated notes due
2006, and 4,800,000 shares of its common stock par value
$.10 per share (the "Company Common Stock") pursuant to the
Securities Act of 1933, as amended (the
"Securities Act"), as described in those certain Registration
Statements on Form S-1, Registration Nos. 333-08909 and 333-08913,
respectively, (as amended at the time each becomes
effective, the "Registration Statements") of the Company,
each filed with the Securities and Exchange Commission on
July 26, 1996; and
2. Section II., A.1.e. of the Consolidation Agreement shall be amended to
read as follows:
e. Pursuant to the Merger, at the Closing, the
Company shall issue an aggregate of 5,200,000 shares of its
Common Stock to the holders of the membership interests in
the LLC (the "LLC Members") as follows:
Name of Member No. of Shares of Common Stock to be Issued
-------------- ------------------------------------------
Xxxxxxx 2,302,560
Xxxxxx 1,350,440
Xxxxxxxxx 611,000
NBCC 936,000
All other provisions of the Consolidation Agreement not amended herein are
hereby confirmed and ratified with the same force and effect as if this
Amendment had not been executed.
XXXXXXXX ENERGY, INC.
By: /s/
--------------------------------------
Name: Cadell X. Xxxxxxx
Title: Chairman of the Board
XXXXXXXX ENERGY, L.L.C.
By: /s/
--------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
/s/
-----------------------------------------
Cadell X. Xxxxxxx, Individually
/s/
-----------------------------------------
Xxxxxxx X. Xxxxxx, Individually
/s/
-----------------------------------------
Xxxxx X. Xxxxxxxxx, Individually
2
NATIONSBANC CAPITAL CORPORATION
By: /s/
--------------------------------------
Name:
Title:
CSL MANAGEMENT CORPORATION
By: /s/
--------------------------------------
Name:
Title:
VALLEY GATHERING COMPANY
By: /s/
--------------------------------------
Name:
Title:
3
