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EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into this 18th day of August, 1998, by and among Encore Acquisition
Partners, Inc., a Delaware corporation (together with its successors and
assigns, the "Company"), and each of the parties listed as Subscribers on the
execution page hereof (collectively, the "Subscribers" and, individually, a
"Subscriber").
1. Background. The Company has agreed to issue (i) shares of its Class
A Common Stock, par value $0.01 per share (the "Class A Common Stock"), and (ii)
shares of its Class B Common Stock, par value $.01 per share (the "Class B
Common Stock," and, together with the Class A Stock, the "Capital Stock"),
pursuant to that certain Stock Purchase Agreement (the "Stock Purchase
Agreement") dated as of August 18, 1998 and made by and among the Company and
the Subscribers (the "Proposed Transaction"). The execution and delivery of this
Agreement is a condition to consummation of the Proposed Transaction.
2. Registration under Securities Act, etc.
2.1. Registration on Request.
(a) Registration of Immediate Offering. At any time after the
Initial Registration Date, Holders of Registrable Securities (the "Requisite
Holders") in compliance with Section 2.1(f) hereof may request registration by
the Company under the Securities Act of the resale by such Holders of all or any
portion of their Registrable Securities (an "Immediate Offering Registration");
provided, however, that such request for registration includes such number of
shares having an aggregate dollar value equal to or greater than 20% of the
Total Commitments (as defined in the Stock Purchase Agreement) funded during the
Takedown Period (as defined in the Stock Purchase Agreement), on the date of
request, for a Form S-1 registration and 10% of the Total Commitments funded
during the Takedown Period, on the date of request, for a Form S-3 registration.
A request for an Immediate Offering Registration shall specify the approximate
number of Registrable Securities requested to be registered by the requesting
Holders. Within 15 days after receipt of such request, the Company shall give
written notice of such requested registration to all other Holders of
Registrable Securities and shall include in such registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within 30 days after delivery of the Company's notice.
(b) Registration of Delayed or Continuous Offering. At any
time after the Initial Registration Date, the Requisite Holders may request
registration by the Company under the Securities Act of all or any portion of
their Registrable Securities for resale in a delayed or continuous offering to
the extent permitted by Rule 415 (or any successor rule thereto) under the
Securities Act (a "Shelf Registration"). A registration statement for a Shelf
Registration shall provide for resale by the Holders in the manner or manners
designated in writing to the Company by them (including, without limitation, one
or more underwritten offerings). Within 15 days after the receipt of such
request, the Company shall give similar written notice of such requested
registration to all other Holders of Registrable Securities and shall include in
such registration all Registrable Securities with respect to which the Company
has received written requests for inclusion therein within 30 days after
delivery of the Company's notice.
(c) Notwithstanding anything to the contrary set forth in
Sections 2.1(a) and 2.1(b), the Company shall not be obligated to take any
action to notify holders or to effect any Immediate Offering Registration or
Shelf Registration (collectively, "Demand Registration") pursuant to Section
2.1(a) or
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2.1(b) if the Company shall have furnished to the Holders requesting
registration a certificate signed by both the President and the Chief Financial
Officer of the Company stating that, in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company (with
a brief explanation for the basis for such conclusion) for a registration
statement to be filed within the ninety (90) day period following receipt of the
request for registration and that it is therefore essential and in the best
interests of the Company and its stockholders to defer the filing of such
registration statement, provided that such filing shall neither be deferred
beyond the earlier to occur of ninety (90) days after receipt of the request
notice or the discontinuance of the perceived detriment to the Company nor more
than one (1) time in any continuous twelve (12) month period.
(d) Registration of Other Securities. Whenever the Company
shall effect a Demand Registration pursuant to this Section 2.1 in connection
with an underwritten offering by one or more holders of Registrable Securities,
no securities other than Registrable Securities shall be included among the
securities covered by such registration unless (i) the managing underwriter of
such offering shall have advised each holder of Registrable Securities to be
covered by such registration in writing that the inclusion of such other
securities would not adversely affect such offering or (ii) the Requisite
Holders shall have consented in writing to the inclusion of such other
securities.
(e) Registration Statement Form. Demand Registrations under
this Section 2.1 shall be on such appropriate registration form of the
Commission (i) as shall be selected by the Company and as shall be reasonably
acceptable to the Requisite Holders and (ii) as shall permit the disposition of
such Registrable Securities in accordance with the intended method or methods of
disposition specified in their request for such registration (provided, however,
that, the Company shall use Form S-3, if it shall qualify for the use of such
form). The Company agrees to include in any such registration statement all
information that holders of Registrable Securities being registered shall
reasonably request.
(f) Limitations on Requested Registrations. The Company's
obligation to take or continue any action to effect a requested registration
under this Section 2.1 shall be subject to the proviso that the Company shall
not be required to effect more than: (i) three (3) Immediate Offering
Registrations (provided, however, that no more than one (1) such registration
request shall be effected on Form S-1 and the remainder shall be effected on
Form S-3 or as Shelf Registrations) as requested by Warburg, ▇▇▇▇▇▇ Equity
Partners, L.P., (ii) two (2) Immediate Offering Registrations provided however,
that no more than one (1) such registration request shall be effected on Form
S-1 and the remainder shall be effected on Form S-3 or as Shelf Registrations)
as requested by Chase Venture Capital Associates, L.P., (iii) one (1) Immediate
Offering Registration on Form S-3 or Shelf Registration as requested by Natural
Gas Partners V, L.P. and (iv) one (1) Immediate Offering Registration on Form
S-3 or Shelf Registration as requested by First Union Capital Partners, Inc.;
provided that, a Demand Registration requested pursuant to this Section 2.1
shall not be deemed to have been effected (A) unless a registration statement
with respect thereto has been declared effective for a period of at least ninety
(90) days, (B) if after a registration statement has become effective, such
registration is interfered with by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court for any
reason, or (C) if the conditions to closing specified in the purchase agreement
or underwriting agreement entered into in connection with such registration are
not satisfied, other than as a result of the voluntary termination of such
offering by the Requisite Holders (which shall include the failure of the
Requisite Holders to take action or to refrain from taking action necessary for
the conditions to closing to be satisfied).
(g) Selection of Underwriters. If a requested Demand
Registration pursuant to this Section 2.1 involves an underwritten offering, the
underwriter or underwriters thereof shall be selected by the Company, subject to
the approval of the Requisite Holders which shall not be unreasonably withheld.
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(h) Priority in Requested Registrations. If a Demand
Registration pursuant to this Section 2.1 involves an underwritten offering, and
the managing underwriter shall advise the Company in writing (with a copy to
each holder of Registrable Securities requesting registration) that, in its
opinion, the number of securities requested to be included in such registration
exceeds the number that can be sold in such offering within a price range
acceptable to the Requisite Holders, the Company will include in such
registration to the extent of the number that the Company is so advised can be
sold in such offering, Registrable Securities requested to be included in such
Demand Registration, pro rata among the Holders thereof requesting such
registration on the basis of the percentage of the Registrable Securities of the
Company held by the Holders of Registrable Securities that have requested that
such securities be included. In connection with any Demand Registration as to
which the provisions of this subsection (h) apply, no securities other than
Registrable Securities shall be covered by such Demand Registration; moreover,
such registration shall not reduce the number of available registrations under
subsection (f) of this Section 2.1 in the event that the managing underwriter
excludes from registration more than fifty percent (50%) of the aggregate number
of Registrable Securities requested to be included.
(i) Holdback Period. If required by the underwriter or
underwriters selected by the Company for such underwriting (collectively, the
"Underwriter"), then (i) all Holders proposing to distribute their Registrable
Securities through such underwriting shall, to the extent required by the
Underwriter, enter into an underwriting agreement with the Underwriter in
customary form, and (ii) all Holders (whether or not they propose to distribute
their Registrable Securities through such underwriting) shall agree not to sell
publicly any of their Registrable Securities for such period as the Underwriter
may reasonably request; provided that such period shall not exceed one hundred
eighty (180) continuous days.
2.2. Incidental Registration.
(a) Right to Include Registrable Securities. At any time after
the Initial Registration Date, if the Company proposes to register any of its
securities under the Securities Act (other than (i) in connection with a
registration of securities issuable under any employee benefit, retirement or
similar plan, or (ii) with respect to a Rule 145 transaction, or (iii) pursuant
to Section 2.1), whether or not for sale for its own account (an "Incidental
Registration"), it will each such time give prompt written notice to all Holders
of Registrable Securities of its intention to effect such a registration and of
such holders' rights under this Section 2.2. Upon the written request of any
such Holder made within thirty (30) days after the receipt of any such notice
(which request shall specify the Registrable Securities intended to be disposed
of by such Holder and the intended method of disposition thereof), the Company
will use its best efforts to effect the registration under the Securities Act of
all Registrable Securities that the Company has been so requested to register by
the Holders thereof, to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities so to be registered, provided that if, at any time after giving
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to each Holder of Registrable Securities
and, thereupon, (i) in the case of a determination not to register, shall be
relieved of its obligation to register any Registrable Securities in connection
with such registration (but not from its obligation to pay the Registration
Expenses in connection therewith), without prejudice, however, to the rights of
any Holder or Holders of Registrable Securities entitled to do so to request
that such registration be effected as a Demand Registration under Section 2.1,
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities, for the same period as the
delay in registering such other securities. No registration effected under this
Section 2.2 shall be deemed to have been effected pursuant to Section
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2.1 or shall relieve the Company of its obligation to effect any Demand
Registration upon request under Section 2.1.
(b) Priority in Incidental Registrations. If the Incidental
Registration is for a registered public offering involving an underwriting, the
Company shall so advise the Holders of Registrable Securities as a part of such
notice. In such event, the right of any Holder to registration pursuant to this
Section 2.2 shall be conditioned upon, and shall not be exercisable by any
Holder without, such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. If required by the Underwriter then (i) all Holders
proposing to distribute their Registrable Securities through such underwriting
shall, to the extent required by the Underwriter, enter into an underwriting
agreement with the Underwriter in customary form, and (ii) all Holders shall
agree not to sell publicly any of their Registrable Securities for such period
as the Underwriter may reasonably request, provided that such period shall not
exceed one hundred eighty (180) days. Notwithstanding any other provision of
this Section 2.2, if the Underwriter determines that marketing or other factors
require a limitation of the number of securities to be underwritten, then the
Underwriter in its sole discretion may exclude from such registration and
underwriting some or all of the securities requested to be included in such
registration and underwriting by Holders of Registrable Securities and other
parties other than the Company; provided, however, that if all securities
requested to be included in such registration and underwriting by holders of
Registrable Securities and parties other than the Company are not so excluded by
the Underwriter, then the number of such included securities shall be allocated
proportionately among all parties (prorated in proportion to the number of
shares of Class A Common Stock or Class B Common Stock owned by such parties)
having the right to request registration of securities (including Holders of
Registrable Securities). If securities requested to be registered by Holders of
Registrable Securities are excluded pursuant to this Section 2.2(b), such
exclusion shall be apportioned among such Holders pro rata based upon such
requesting Holder's total holdings of Registrable Securities, and not total
shares requested for inclusion in the registration. If any Holder of Registrable
Securities disapproves of the terms of any underwriting subject to this Section
2.2(b), then such Holder may elect to withdraw therefrom by written notice to
the Company and the Underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration. The Company shall advise
all persons seeking to include their securities in such registration and
underwriting of the number of each such person's securities that may be so
included.
2.3. Registration Procedures. If and whenever the Company is required
to use its best efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in Sections 2.1 and 2.2, the Company will
as expeditiously as possible:
(i) prepare and (as soon thereafter as possible or in any
event no later than ninety (90) days after the end of the period within
which requests for registration may be given to the Company) file with
the Commission the requisite registration statement to effect such
registration and thereafter use its best efforts to cause such
registration statement to become effective, provided that the Company
may discontinue any registration of its securities that are not
Registrable Securities (and, under the circumstances specified in
Section 2.2(a), its securities that are Registrable Securities) at any
time prior to the effective date of the registration statement relating
thereto;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
registration statement until such time as all of such securities have
been disposed of in accordance with the intended methods of disposition
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by the seller or sellers thereof set forth in such registration
statement; provided, however, that the Company shall not be required to
maintain the effectiveness of any registration statement for more than
one hundred twenty (120) days (or, with respect to a Shelf
Registration, until such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof);
(iii) furnish to each seller of Registrable Securities covered
by such registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement
thereto, such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the
Securities Act, and such other documents, as such seller may reasonably
request;
(iv) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky laws of
such jurisdictions as each seller thereof shall reasonably request, to
keep such registration or qualification in effect for so long as such
registration statement remains in effect, and take any other action
that may be reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the securities
owned by such seller, except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for the
requirements of this subdivision (iv) be obligated to be so qualified
or to consent to general service of process in any such jurisdiction;
(v) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(vi) furnish to each seller of Registrable Securities a signed
counterpart, addressed to such seller (and underwriters, if any) of:
(A) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated
the date of the closing under the underwriting agreement),
reasonably satisfactory in form and substance to such seller,
and
(B) a "comfort" letter, dated the effective date of
such registration statement (and, if such registration
includes an underwritten public offering, dated the date of
the closing under the underwriting agreement), signed by the
independent public accountants who have certified the
Company's financial statements included in such registration
statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of the accountants' letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to
the underwriters in underwritten public offerings of securities and, in
the case of the accountants' letter, such other financial matters, and,
in the case of the legal opinion, such other legal matters, as such
seller may reasonably request;
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(vii) notify each seller of Registrable Securities covered by
such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon
discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances under which they were made, and at the request of any
such seller promptly prepare and furnish to such seller a reasonable
number of copies of a supplement to or an amendment of such prospectus
as may be necessary so that, as thereafter delivered to the purchasers
of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were
made;
(viii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, but not more
than eighteen months, beginning with the first full calendar month
after the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11 (a) of the
Securities Act, and will furnish to each such seller at least five (5)
business days prior to the filing thereof a copy of any amendment or
supplement to such registration statement or prospectus and shall not
file any thereof to which any such seller shall have reasonably
objected on the grounds that such amendment or supplement does not
comply in all material respects with the requirements of the Securities
Act or of the rules or regulations thereunder;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of
such registration statement;
(x) use its best efforts to list all Registrable Securities
covered by such registration statement on any securities exchange on
which any of the Registrable Securities is then listed; and
(xi) enter into such agreements and take such other actions as
the Requisite Holders shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing.
Each Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in the subdivision (vii) of this
Section 2.3, such Holder will forthwith discontinue such Holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
Section 2.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice; provided, however that
the Company shall extend the time periods under Section 2.3(ii) by the amount of
time such Holder is required to discontinue such Holder's disposition of
Registrable Securities.
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2.4 Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offering by Holders of Registrable Securities
pursuant to a Demand Registration, the Company and all sellers will enter into
an underwriting agreement with such underwriters for such offering, such
agreement to be satisfactory in substance and form to each such Holder and the
underwriters and to contain such representations and warranties by the Company
and such other terms as are generally prevailing in agreements of this type,
including, without limitation, indemnities to the effect and to the extent
provided in Section 2.6. The Holders of Registrable Securities to be distributed
by such underwriters shall be parties to such underwriting agreement and may, at
their option, require that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such Holders of Registrable Securities. Any such
Holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
holder, such holder's Registrable Securities and such holder's intended method
of distribution and any other representation required by law.
(b) Incidental Underwritten Offerings. If the Company at any
time proposes to register any of its securities under the Securities Act
pursuant to an Incidental Registration and such securities are to be distributed
by or through one or more underwriters, the Company will, if requested by any
Holder of Registrable Securities as provided in Section 2.2 and subject to the
provisions of Section 2.2(b), arrange for such underwriters to include all the
Registrable Securities to be offered and sold by such Holder among the
securities to be distributed by such underwriters. The Holders of Registrable
Securities to be distributed by such underwriters shall be parties to the
underwriting agreement between the Company and such underwriters and may, at
their option, require that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such Holders of Registrable Securities. Any such
Holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
Holder, such Holder's Registrable Securities and such Holder's intended method
of distribution and any other representation required by law.
2.5 Preparation: Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the Holders of Registrable
Securities registered under such registration statement, and their counsel and
accountants, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such reasonable access to its books and records and such reasonable
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such Holders' counsel, to conduct a
reasonable investigation within the meaning of the Securities Act.
2.6 Indemnification.
(a) Indemnification by the Company. To the extent permitted by
law, the Company will indemnify each Holder, each of their respective officers
and directors and partners, and each person controlling a Holder within the
meaning of the Securities Act, with respect to which registration, qualification
or compliance has been effected pursuant to this Agreement, and each
underwriter, if any, each person who controls any underwriter within the meaning
of the Securities Act, and all Representatives (as defined in Section 3) of the
foregoing parties, against all expenses, claims, losses, damages or liabilities
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(or actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, to the extent such
expenses, claims, losses, damages or liabilities arise out of or are based on
any untrue statement (or alleged untrue statement) of a material fact contained
in any registration statement, prospectus, offering circular or other similar
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 the Company of the
Securities Act or any rule or regulation promulgated under the Securities Act
applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse each Holder and each
person controlling a Holder, each such underwriter, each person who controls any
such underwriter, and each Representative of such parties 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,
however, that the indemnity contained herein shall not apply to amounts paid in
settlement of any claim, loss, damage, liability or expense if settlement is
effected without the consent of the Company (which consent shall not
unreasonably be withheld); provided, further, that the Company will not be
liable to a particular Holder or any controlling person of such Holder or their
respective Representatives 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, in reliance upon
and in conformity with written information furnished to the Company by such
Holder or such controlling person specifically for use therein. Notwithstanding
the foregoing, insofar as the foregoing indemnity relates to any such untrue
statement (or alleged untrue statement) or omission (or alleged omission) made
in the preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the Commission at the time the registration statement
becomes effective or in the final prospectus filed with the Commission pursuant
to the applicable rules of the Commission or in any supplement or addendum
thereto and such new prospectus is delivered to the underwriter, the indemnity
agreement herein shall not inure to the benefit of such underwriter, any
controlling person of such underwriter and their respective Representatives, if
a copy of the final prospectus filed pursuant to such rules, together with all
supplements and addenda thereto, was not furnished to the person or entity
asserting the loss, liability, claim or damage at or prior to the time such
furnishing is required by the Securities Act.
(b) Indemnification by the Holders. To the extent permitted by
law, each Holder will, if securities held by such Holder are included in the
securities as to which such registration, qualification or compliance is being
effected pursuant to terms hereof, severally but not jointly, indemnify the
Company, each person who controls the Company or such underwriter within the
meaning of the Securities Act, and each other person selling the Company's
securities covered by such registration statement, and each of the
Representatives of the foregoing parties, each person controlling such persons
within the meaning 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, or any violation by such Holder of any rule or regulation
promulgated under the Securities Act applicable to such Holder and relating to
action or inaction required of such Holder in connection with any such
registration, qualification or compliance, and will reimburse such persons for
any legal or 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 the Company by such Holder
specifically for use therein; provided, however, that the indemnity contained
herein shall not apply to amounts paid in settlement of any claim, loss, damage,
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liability or expense if settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld). Notwithstanding the
foregoing, the liability of such Holder under this subsection (b) shall be
limited in an amount equal to the net proceeds from the sale of Registrable
Securities sold by such Holder, unless such liability arises out of or is based
on willful conduct by such Holder. In addition, insofar as the foregoing
indemnity relates to any such untrue statement (or alleged untrue statement) or
omission (or alleged omission) made in the preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the Commission at the time
the registration statement becomes effective or in the final prospectus filed
pursuant to applicable rules of the Commission or in any supplement or addendum
thereto and such new prospectus is delivered to the underwriter, the indemnity
agreement herein shall not inure to the benefit of such underwriter, any
controlling person of such underwriter and their respective Representatives, if
a copy of the final prospectus filed pursuant to such rules, together with all
supplements and addenda thereto was not furnished to the person or entity
asserting the loss, liability, claim or damage at or prior to the time such
furnishing is required by the Securities Act.
(c) Notices of Claims, etc. Notwithstanding the foregoing
subsections (a) and (b), each party entitled to indemnification under this
Section 2.6 (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 Agreement 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 as
to which the Indemnifying Party is asserting separate or different defenses,
which defenses are inconsistent with the defenses of the Indemnified Party (in
which case the Indemnifying Party shall pay for one separate lead counsel (and
appropriate local counsel) for those Indemnified Parties with whom such conflict
exists). 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 or as a result of which injunctive or other equitable relief would be
imposed. No Indemnified Party shall consent to entry of any judgment or enter
into any settlement without the consent of each Indemnifying Party (not to be
unreasonably withheld). The failure of an Indemnifying Party to give notice to
the Indemnified Party of its election to assume and control the defense of any
action for which notice has been given to the Indemnifying Party in accordance
with this paragraph within 30 days after receipt of such notice shall constitute
an election by the Indemnifying Party not to assume and control the defense of
such action. An Indemnifying Party who is not entitled to, or elects not to,
assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one lead counsel (and appropriate local counsel) for all
parties indemnified by such Indemnifying Party with respect to such claim,
unless in the reasonable judgment of any Indemnified Party a conflict of
interest may exist between such Indemnified Party and any other of such
Indemnified Parties or the Indemnifying Party with respect to such claim, in
which event the Indemnifying Party shall be obligated to pay the fees and
expenses of one separate lead counsel (and appropriate local counsel) for such
Indemnified Parties.
(d) If the indemnification provided for in this Section 2.6 is
unavailable to an Indemnified Party in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
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payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities 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, in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party on the one hand,
and the Indemnified Party on the other, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Indemnifying Party or by such Indemnified Party and
the parties' relevant intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and each Selling
Security Holder agree that it would not be just and equitable if contribution
pursuant to this Section were based solely upon the number of entities from whom
contribution was requested or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section.
Notwithstanding the provisions of this Section, no Selling Security Holder shall
be required to contribute any amount or make any other payments under this
Agreement which in the aggregate exceed the proceeds received by such Selling
Security Holder. No person guilty of fraudulent misrepresentation (within the
meaning of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e) The indemnification provided for under this Agreement
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Indemnified Party or any officer, director or controlling
person of such Indemnified Party and shall survive the transfer of securities.
2.8 Certain Information.
(a) Each Holder agrees, with respect to any Registrable
Securities included in any registration, to furnish to the Company such
information regarding such Holder, the Registrable Securities and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be required in connection with any registration,
qualification or compliance referred to herein.
(b) The failure of a Holder to furnish the information
requested pursuant to this Section 2.8 shall not affect the obligation of the
Company to any other selling security holders who furnish such information
unless, in the reasonable opinion of counsel to the Company, such failure
impairs or may impair the legality of the registration statement or the
underlying offering.
2.9 Expenses. All Registration Expenses shall be paid by the Company.
All Selling Expenses shall be borne by the Holders of the Registrable Securities
in proportion to the number of Registrable Securities sold by such Holders.
2.10 Holdback Agreement. If the Company at any time pursuant to Section
2.1 or 2.2 of this Agreement shall register under the Securities Act Registrable
Securities held by Investors for sale to the public pursuant to an underwritten
offering, the Company shall not, without the prior written consent of a majority
of Holders of Registrable Securities, effect any public sale or distribution of
securities similar to those being registered, or any securities convertible into
or exercisable or exchangeable for such securities, for such period as shall be
determined by the managing underwriters, which period shall not begin more than
ten (10) days prior to the effectiveness of the Registration Statement pursuant
to which such public offering shall be made and shall not last more than one
hundred eighty (180) days after the closing of sale of securities pursuant to
such Registration Statement.
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2.11 Lock-Up Period. If the Company at any time shall register shares
of Common Stock under the Securities Act in a primary underwritten offering
pursuant to Section 2.2 hereof (i) pursuant to the initial public offering on
the Initial Registration Date or (ii) pursuant to any other registration, the
Holders shall not sell, make any short sale of, grant any option for the
purchase of, or otherwise dispose of any Registrable Securities (other than
those Registrable Securities included in such registration pursuant to Section
2.2) without the prior written consent of the Company for a period as shall be
determined by the managing underwriters, which period cannot begin more than ten
(10) days prior to the effectiveness of such Registration Statement and cannot
last more than one hundred eighty (180) days after the effective date of such
Registration Statement for the Company's initial public offering and ninety (90)
days for all other registrations (provided, however, that the Holders shall not
be prevented from selling their respective Registrable Securities more than once
in any twelve (12) consecutive month period).
3. Definitions. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:
"Affiliate" of any specified Person means any other Person
which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under
common control with, such specified Person. For purposes of
this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by" and "under
common control with"), as used with respect to any Person,
means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting
securities, by agreement or otherwise; provided, however, that
beneficial ownership of at least 10% of the voting securities
of a Person shall be deemed to be control.
Commission: The Securities and Exchange Commission or any
other Federal agency at the time administering the Securities
Act.
Exchange Act: The Securities Exchange Act of 1934, 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. Reference to a particular section of the Securities
Exchange Act of 1934 shall include a reference to the
comparable section, if any, of any such similar Federal
statute.
Holder: Each of the Subscribers, their Affiliates and any of
their successors and assigns who hold Registrable Securities.
Initial Registration Date: The first to occur of the
following: (i) the date on which the Company consummates an
offering of its equity securities under a registration
statement to be filed with the Commission with respect to an
initial public offering of the Company's securities pursuant
to the Securities Act, or (ii) the sixth anniversary of the
date hereof.
Person: A corporation, an association, a partnership, a
business, an individual, a governmental or political
subdivision thereof or a governmental agency.
Register, registered, and registration: A registration
effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or
ordering by the Commission of the effectiveness of such
registration statement.
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Registrable Securities: (i) The Class A Common Stock; (ii) the
Class B Common Stock and (iii) any Common Stock issued or
issuable at any time or from time to time in respect of any of
the interests specified in (i) through (iii) hereof upon a
stock split, stock dividend, recapitalization or other similar
event involving the Company, of any Holder, until such
Registrable Securities are registered pursuant to a
Registration Statement or until such securities are able to be
sold under Rule 144(k) (or successor Rule) under the
Securities Act without restriction.
Registration Expenses: All expenses incident to the Company's
performance of or compliance with Section 2.1 or 2.2,
including, without limitation, all registration, filing and
National Association of Securities Dealers, Inc. fees, all
fees and expenses of complying with securities or blue sky
laws, the fees and disbursements of counsel for the Company
and of its independent public accountants, including the
expenses of any special audits or "cold comfort" letters
required by or incident to such performance and compliance,
premiums and other costs of policies of insurance against
liabilities arising out of the public offering of the
Registrable Securities being registered, the fees and
disbursements of one counsel for Holders of Registrable
Securities for the first three (3) requested registrations
pursuant to Section 2.1 and any fees and disbursements of
underwriters customarily paid by issuers or sellers of
securities, but excluding Selling Expenses, if any.
Representative: The Representative of a Person shall be
broadly construed and shall include such Person's partners,
members, officers, directors, employees, agents, counsel,
accountants and other representatives.
Securities Act: The Securities Act of 1933, or any similar
federal statute, and the rules and regulations of the
Commission thereunder, all as of the same shall be in effect
at the time.
Selling Expenses: Underwriting discounts and selling
commissions and stock transfer taxes relating to securities
owned by selling Holders of Registrable Securities being
registered by the Company and the fees and disbursements paid
to Representatives retained by the Holders of Registrable
Securities to be registered (including, without limitation,
the fees and disbursements of legal counsel to the Holders of
such Registrable Securities, other than one counsel referred
to in the definition of Registration Expenses).
4. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not entered
into nor will the Company on or after the date of this Agreement enter into any
agreement which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Company's other issued and outstanding securities, if any, under any such
agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this paragraph, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of (x)
Holders of at least 66 2/3% in aggregate number of the outstanding Registrable
Securities affected by such amendment, modification, supplement, waiver or
consent and (y) so long as he remains chief executive officer of the Company, I.
▇▇▇ ▇▇▇▇▇▇▇ (provided, however, that any such amendments,
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modifications or waivers that would adversely affect the rights hereunder of any
Holder, in its capacity as a Holder, without similarly affecting the rights
hereunder of all Holders of the same class, in their capacities as Holders of
such class, shall not be effective as to such Holder without its prior written
consent); provided, however, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders of Registrable Securities may be given by the Holders of
a majority of the Registrable Securities proposed to be sold.
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery to such party at the address set forth opposite such party's name on
the signature page hereof and thereafter at such other address, notice of which
is given in accordance with the provisions of this Section 4(c).
All such notices and communications shall be deemed to have
been duly given: (i) at the time delivered by hand, if personally delivered,
five (5) business days after being deposited in the mail, postage prepaid, if
mailed; (ii) when answered back, if telexed; (iii) when receipt is acknowledged,
if telecopied; and (iv) on the next business day, if timely delivered to an air
courier guaranteeing overnight delivery.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of any successor, assign or transferee of any Holder so long as such
holder agrees in writing to be bound by this Agreement; provided however, that
nothing herein shall be deemed to permit any assignment, transfer or other
disposition of Registrable Securities in violation of the terms and conditions
of this Agreement, the Stock Purchase Agreement or the Stockholders' Agreement.
(e) Rule 144 and Rule 144A: If the Company shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act, the Company will file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder (or, if the Company is not required to file
such reports, will, upon the request of any holder of Registrable Securities,
make publicly available other information) and will take such further action as
any holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time or (b) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether it has complied with such requirements. In order to permit the holders
of Registrable Securities to sell the same, if they so desire, pursuant to Rule
144A promulgated by the Commission (or any successor to such rule), the Company
will comply with all rules and regulations of the Commission applicable in
connection with use of Rule 144A (or any successor thereto). Prospective
transferees of Registrable Securities that are Qualified Institutional Buyers
(as defined in Rule 144A) that would be purchasing such Registrable Securities
in reliance upon Rule 144A may request from the Company information regarding
the business, operations and assets of the Company. Within five (5) business
days of any such request, the Company shall deliver to any such prospective
transferee copies of annual audited and quarterly unaudited financial statements
of the Company and such other information as may be required to be supplied by
the Company for it to comply with Rule 144A.
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(f) Counterparts. This Agreement may be executed by the
parties hereto in any number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same agreement. Each
counterpart may consist of a number of copies hereof each signed by less than
all, but together signed by all, the parties hereto.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF DELAWARE, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
(i) (i) The parties hereto hereby irrevocably submit to the
exclusive jurisdiction of the courts of the State of Delaware and the federal
courts of the United States of America located in Delaware, and appropriate
appellate courts therefrom, over any dispute arising out of or relating to this
Agreement or any of the transactions contemplated hereby, and each party hereby
irrevocably agrees that all claims in respect of such dispute or proceeding may
be heard and determined in such courts. The parties hereby irrevocably waive, to
the fullest extent permitted by applicable law, any objection which they may now
or hereafter have to the laying of venue of any dispute arising out of or
relating to this Agreement or any of the transactions contemplated hereby
brought in such court or any defense of inconvenient forum for the maintenance
of such dispute. Each of the parties hereto agrees that a judgment in any such
dispute may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided bylaw. This consent to jurisdiction is being given solely
for purposes of this Agreement and is not intended to, and shall not, confer
consent to jurisdiction with respect to any other dispute in which a party to
this Agreement may become involved.
(ii) Each of the parties hereto hereby consents to process
being served by any party to this Agreement in any suit, action, or proceeding
of the nature specified in subsection (a) above by the mailing of a copy thereof
in the manner specified by the provisions of Section 12.1 of the Stock Purchase
Agreement.
(iii) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS AGREEMENT.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement, together with the
Subscription Agreement, is intended by the parties as a final expression of
their agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein.
(l) Termination. This Agreement shall terminate when no
Registrable Securities remain outstanding.
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(m) Descriptive Headings. The descriptive headings of the
several sections and paragraphs of this Agreement are inserted for reference
only and shall not limit or otherwise affect the meaning hereof.
(n) Specific Performance. The parties hereto recognize and
agree that money damages may be insufficient to compensate the holders of any
Registrable Securities for breaches by the Company of the terms hereof and,
consequently, that the equitable remedy of specific performance of the terms
hereof will be available in the event of any such breach.
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IN WITNESS WHEREOF, the parties have executed this Agreement, or caused
this Agreement to be executed and delivered by their respective representatives
thereunto duly authorized, as of the date first above written.
COMPANY:
ENCORE ACQUISITION PARTNERS
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
------------------------------
Name: I. ▇▇▇ ▇▇▇▇▇▇▇
Title. Chairman of the Board and Chief
Executive Officer
SUBSCRIBERS:
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: General Partner
WARBURG, ▇▇▇▇▇▇ EQUITY PARTNERS, L.P.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
NATURAL GAS PARTNERS V, L.P.
By: G.F.W. Energy V, L.P., its general
partner
By: GFW V, L.L.C., its general partner
By: /s/
-----------------------------------
Name:
Title:
FIRST UNION CAPITAL PARTNERS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
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/s/ I. ▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
I. ▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
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