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EXHIBIT 99.1
RESTRUCTURING AGREEMENT
This RESTRUCTURING AGREEMENT is made this 24th day of September, 1997 by
and between ▇▇▇▇▇▇▇▇ ENERGY CORP. ("▇▇▇▇▇▇▇▇"), INFINITY INVESTORS LIMITED (the
"Investor"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ("▇. ▇▇▇▇▇▇▇▇▇"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ("▇.
▇▇▇▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ("▇. ▇▇▇▇▇▇▇▇▇," and together with ▇.
▇▇▇▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇▇▇▇, the "Tarricones").
WHEREAS, pursuant to a certain Offshore Securities Subscription Agreement
dated as of May 31, 1996, ▇▇▇▇▇▇▇▇ issued and sold to the Investor, and the
Investor purchased, 580,646 shares of ▇▇▇▇▇▇▇▇'▇ Series B 8% Cumulative
Convertible Redeemable Preferred Stock (the "Series B Preferred Stock");
WHEREAS, ▇▇▇▇▇▇▇▇ and the Investor have entered into a letter of intent
dated May 19, 1997 regarding, among other matters, the proposed terms of a
restructuring of the shares of Series B Preferred Stock owned by the Investor
and the modification of the terms of the Series B Preferred Stock; and
WHEREAS, the Tarricones are the holders of Options to purchase an
aggregate of 1,000,000 shares of ▇▇▇▇▇▇▇▇'▇ Common Stock having an exercise
price of $.3125 per share (the "▇▇▇▇▇▇▇▇▇ Options") and are willing to transfer
to the Investor or other third parties all or a portion of the ▇▇▇▇▇▇▇▇▇
Options upon the occurrence of the events described herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. Recapitalization of Series B Preferred Stock. The Investor represents
and warrants that, as of the date hereof, it is the record and beneficial owner
of 567,085 shares of Series B Preferred Stock (the "Investor Shares") free and
clear of any liens, claims, options or other encumbrances. As of the date
hereof, accrued and unpaid dividends on the Series B Preferred Stock aggregated
$467,813.91 and ▇▇▇▇▇▇▇▇ was indebted to the Investor in an additional amount
of $78,252.20. With respect to the Investor Shares, the Investor and ▇▇▇▇▇▇▇▇
agree as follows:
(a) In exchange for 77,419 shares of Series B Preferred Stock together
with all accrued and unpaid dividends on such shares, and the other amounts
owing hereunder, ▇▇▇▇▇▇▇▇ agrees to issue, and the Investor agrees to accept, a
$600,000 principal amount 12% Subordinated Note in the form of Exhibit A hereto
(the "Note");
(b) With respect to the balance of the 560,126 Investor Shares (the
"Remaining Investor Shares"), the Investor and ▇▇▇▇▇▇▇▇ hereby agree to amend
the Certificate to Set Forth Designations, Voting Powers, Preferences,
Limitations, Restrictions and Relative Rights of Series B 8% Cumulative
Convertible Redeemable Preferred Stock, $.001 par value (the
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"Certificate of Designation") to provide, among other things, (i) a fixed
Conversion Price (as defined in the Certificate of Designation) of $2.00 per
share of Series B Preferred Stock, (ii) a removal of certain limitations on the
rights of the holders of the Series B Preferred Stock to convert such shares
into ▇▇▇▇▇▇▇▇'▇ Common Stock and (iii) an increase in the dividend rate of the
Series B Preferred Stock on the Stated Value (as defined in the Certificate of
Designation). As so amended, the Certificate of Designation shall read in its
entirety as set forth in Exhibit B hereto.
2. Registration.
(a) Definitions. The following definitions shall apply with respect to
this Agreement and to a registration (a "Registration") pursuant to this
Section 2:
(i) "Conversion Shares" shall mean shares of ▇▇▇▇▇▇▇▇'▇ Common
Stock issuable upon conversion of the Remaining Investor Shares.
(ii) "Dividend Shares" shall mean shares of ▇▇▇▇▇▇▇▇'▇ Common Stock
issuable in lieu of cash dividends on the Remaining Investor Shares.
(iii) "Option Shares" shall mean shares of ▇▇▇▇▇▇▇▇'▇ Common Stock
issuable upon exercise of the ▇▇▇▇▇▇▇▇▇ Options.
(iv) "Public Offering" shall mean a public offering of equity
securities of ▇▇▇▇▇▇▇▇ pursuant to an effective registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), covering the
offer and sale of equity securities of ▇▇▇▇▇▇▇▇ to the public.
(v) The term "Registrable Shares" shall mean the Conversion Shares,
the Dividend Shares and the Option Shares and any securities issued or issuable
with respect to such securities by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. Registrable Shares shall
cease to be Registrable Shares when they may be sold under Rule 144(k) and all
requisite steps have been taken to remove any legends or restrictions on
transfer under the Securities Act with respect to such Registrable Shares;
provided, however, that Registrable Shares which are subject to the Option
shall not cease to be Registrable Shares unless the transfer pursuant to the
exercise of the Option can be made under Rule 144(k).
(vi) The term "Registration Statement" shall mean any registration
statement of ▇▇▇▇▇▇▇▇ that covers any of the Registrable Shares pursuant to the
provisions of this Agreement, including the prospectus included therein, any
amendment or supplement thereof, including post-effective amendments, and all
exhibits and all material incorporated by reference in such Registration
Statement.
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(vii) The term "SEC" shall mean the United States Securities and
Exchange Commission or any successor thereto.
(b) Agreement to Register Conversion Shares. Within seven (7) business
days after the closing of the transactions contemplated by this Agreement,
▇▇▇▇▇▇▇▇ shall prepare and file with the SEC a Registration Statement covering
the resale of the Conversion Shares and use its commercially reasonable efforts
to cause such Registration Statement to become effective not later than October
15, 1997. In this regard, ▇▇▇▇▇▇▇▇ shall respond to any SEC comments within
three (3) business days after the date of receipt thereof; provided however,
that in the event that any SEC response involves or requires the input of any
third party, including ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, and such input is not received by
the SEC within such three (3) business day period, the SEC response time shall
be extended for up to an additional (i) fifteen (15) business days in the event
that such SEC comments relate, in whole or in part, to ▇▇▇▇▇▇▇▇'▇ audited
financial statements for the fiscal year ended August 31, 1996 and (ii) five
(5) additional business days in all other cases. In the event that such
Registration Statement shall not have been declared effective on or before
October 15, 1997, within seven (7) business days after October 15, 1997, the
Company shall prepare and file an amendment to the Registration Statement
containing such unaudited interim financial statements as shall be necessary to
permit the Registration Statement to become effective and the Conversion Shares
to be sold thereunder; provided, however, that in the event that any such
amendment involves or requires the input of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, and such
involvement or input is not received within seven (7) business days, the time
period within which to file an amended Registration Statement shall be extended
for up to an additional eight (8) business days.
The offering contemplated by this Section 2(b) may be, at the option of a
majority (by number of securities) of the holders of the Conversion Shares so
included, an underwritten offering and the underwriter or underwriters thereof
shall be selected by the holders of at least a majority (by number of
securities) of the Registrable Shares as to which registration has been
requested who shall be reasonably acceptable to ▇▇▇▇▇▇▇▇.
(c) Piggyback Registration of Dividend Shares.
(i) If ▇▇▇▇▇▇▇▇ at any time after the second anniversary of the
effective date of the Registration Statement referred to in Section 2(b) hereof
proposes to register any of its shares of Common Stock under the Securities Act
(other than on Form S-4 or Form S-8 or other comparable form or pursuant to an
exchange offer or other offering of securities solely to ▇▇▇▇▇▇▇▇'▇
shareholders), ▇▇▇▇▇▇▇▇ shall give written notice to the Investor of its
intention to effect such registration within ten (10) days after making such
determination, and upon the request of the Investor delivered to ▇▇▇▇▇▇▇▇
within twenty (20) days after giving of such notice (which request shall
specify the number of Registrable Shares relating to Dividend Shares intended
to be disposed of by the Investor and the intended method of disposition
thereof), ▇▇▇▇▇▇▇▇ shall use its commercially reasonable efforts to cause such
Registrable Shares relating to Dividend Shares to be included in such
registration.
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(ii) In the event that a registration pursuant to this Section 2(c)
is for a Public Offering involving an underwriting, ▇▇▇▇▇▇▇▇ shall so advise
the Investor. In such event, the right of the Investor to registration pursuant
to this Section 2(c) shall be conditioned upon the approval of the managing
underwriter and the inclusion of the Dividend Shares in the underwriting shall
be subject to the following conditions: (A) the Investor shall enter into an
underwriting agreement in customary form with the managing underwriter selected
by ▇▇▇▇▇▇▇▇; (B) if the managing underwriter advises ▇▇▇▇▇▇▇▇ in writing (with
a copy to each holder of Registrable Shares) that marketing factors require a
limitation of the number of Dividend Shares to be underwritten, the number of
Dividend Shares shall be reduced to the number which ▇▇▇▇▇▇▇▇ is so advised can
be sold in such offering, pro rata among the holders on the basis of the number
of Registrable Shares held (or then acquirable) by such holders, provided that
no other holders of registration rights granted after the date hereof shall
have their shares included in such Registration Statement unless all of the
Registrable Shares relating to Dividend Shares shall be so included and,
provided, further, that the holders of Dividend Shares shall have priority to
all shares sought to be included by officers and directors of ▇▇▇▇▇▇▇▇ as well
as holders of ten percent (10%) or more of the ▇▇▇▇▇▇▇▇ Common Stock; and (C)
if the Investor disapproves of the terms of the underwriting, it may elect to
withdraw therefrom by written notice to ▇▇▇▇▇▇▇▇, in which case, the Dividend
Shares shall not be transferred in a public distribution prior to 90 days after
the effective date of such Registration Statement, or a shorter period (if
permitted by the managing underwriter), in each case as requested in writing by
the managing underwriter.
(d) Mandatory Registration of the Dividend Shares. At any time after the
second anniversary of the effective date of the Registration Statement referred
to in Section 2(b), upon the written request of the Investors owning not less
than a majority of the Dividend Shares, ▇▇▇▇▇▇▇▇ shall use its commercially
reasonable efforts to effect the registration of all Dividend Shares then
issued as soon as practicable, but no later than 90 days after the request for
registration pursuant to this Section 2(d); provided, however, that such period
may be extended or delayed by ▇▇▇▇▇▇▇▇ for one period of up to 45 days if, upon
the advice of counsel at the time such Registration Statement is required to be
filed, or at the time ▇▇▇▇▇▇▇▇ is required to exercise its commercially
reasonable efforts to cause such Registration Statement to become effective,
such delay is advisable and in the best interests of ▇▇▇▇▇▇▇▇ because of the
existence of non-public material information, or to allow ▇▇▇▇▇▇▇▇ to complete
any pending audit of its financial statements. The right to demand registration
pursuant to this Section 2(d) shall terminate after two Registration Statements
prepared pursuant to this Section 2(d) have been declared effective.
(e) Provisions Applicable to Registration. The following provisions shall
apply, as applicable, in connection with the Registrable Shares to be included
in the Registration Statement pursuant to this Section 2:
(i) the Investor, if reasonably requested by the underwriter with
respect to any Public Offering, shall agree not to sell, make any short sale
of, loan, grant any options for the purchase of, or otherwise dispose of any
Registrable Shares (other than those included in the Registration) without the
prior written consent of such underwriters, as the case
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may be, for such period of time (not to exceed one hundred twenty (120) days),
from the effective date of such Registration Statement, or the commencement of
the offering, as applicable, as may be requested by the underwriters;
(ii) ▇▇▇▇▇▇▇▇ shall prepare the Registration Statements utilizing,
the information set forth on Annex A attached hereto and such other information
provided to ▇▇▇▇▇▇▇▇ in writing by the Investor and shall not thereafter amend
the portion of the Registration Statement containing such information without
the Investor's consent, which consent shall not be unreasonably withheld or
delayed.
(iii) the Investor shall promptly provide ▇▇▇▇▇▇▇▇ upon written
request therefrom with such non-confidential and non-proprietary information as
it shall reasonably request and that is available to the Investor and necessary
in order to prepare the Registration Statement;
(iv) all reasonable and necessary expenses in connection with the
preparation of the Registration Statements contemplated by Sections 2(b) and
2(c) hereof and the first Registration Statement prepared pursuant to Section
2(d), including, without limitation, any and all legal, accounting and filing
fees (but not including fees and disbursements of experts, counsel, personnel
and other persons retained by the Investor or underwriting discounts and
commissions to be paid by the Investor) shall be borne by ▇▇▇▇▇▇▇▇; the
Investor shall bear all such fees, costs and expenses for any other
registrations;
(v) ▇▇▇▇▇▇▇▇ shall use its commercially reasonable efforts to effect
such Registration permitting the sale of such Registrable Shares in accordance
with the intended method or methods of distribution thereof, and pursuant
thereto, ▇▇▇▇▇▇▇▇ shall as expeditiously as possible:
(1) prepare and file with the SEC a Registration Statement by the
date required herein (the "Required Effectiveness Date") relating to the
applicable registration on any appropriate form under the Securities Act,
which form shall be available for the sale of the Registrable Shares in
accordance with the intended method or methods of distribution thereof and
use its commercially reasonable efforts to cause such Registration
Statement to become effective and keep such Registration Statement
effective in accordance with Section 2(e)(v)(2) below; provided, however
that before filing such Registration Statement or any amendments thereto,
▇▇▇▇▇▇▇▇ will furnish to the counsel selected by the holders of
Registrable Shares which are to be included in such registration, copies
of all such documents proposed to be filed;
(2) prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration effective until all such Registrable
Shares are sold or otherwise cease to be Registrable Shares (the
"Registration Maintenance Period"); cause the prospectus to be
supplemented by any required prospectus supplement, and as so supplemented
to be filed
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pursuant to Rule 424 under the Securities Act; and comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Shares covered by such Registration Statement during the
applicable period in accordance with the intended method or methods of
distribution by the sellers thereof as set forth in such Registration
Statement or supplement to the prospectus; provided, however that ▇▇▇▇▇▇▇▇
may, from time to time, request that the holders of the Registrable Shares
immediately discontinue the disposition of the Registrable Shares for a
period not to exceed thirty consecutive days or an aggregate of seventy
five (75) days in any year if ▇▇▇▇▇▇▇▇ determines, in the good faith
exercise of its reasonable business judgment, that the offering and
disposition of the Registrable Shares could materially interfere with bona
fide financing, acquisition or other material business plans of ▇▇▇▇▇▇▇▇
or would require disclosure of non-public information, the premature
disclosure of which could materially and adversely affect ▇▇▇▇▇▇▇▇ (it
being acknowledged that ▇▇▇▇▇▇▇▇ is not required to disclose in such
request any such transaction, plan or non-public information), so long as
▇▇▇▇▇▇▇▇ promptly after the disclosure of such transaction, plan or
non-public information complies with this section 2(e)(v)(2).
(3) notify the Investor and the underwriter, if any, promptly, and
(if requested by any such person) confirm such advice in writing, (A) when
the prospectus or any prospectus supplement or post-effective amendment
has been filed, and, with respect to the Registration Statement or any
post-effective amendment thereto, when the same has become effective, (B)
of any request by the SEC for amendments or supplements to the
Registration Statement or the prospectus or for additional information,
(C) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose, (D) of the receipt by ▇▇▇▇▇▇▇▇ of any
notification with respect to the suspension of the qualification of the
Registrable Shares for sale in any jurisdiction or the initiation of any
proceedings for such purpose and (E) subject to the proviso below, of the
happening of any event as a result of which the prospectus included in
such Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing and, subject to
Section 2(e)(v)(2) above, at the request of any such person, prepare and
furnish to such person 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 shares, 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 light of the circumstances then existing;
provided, however, ▇▇▇▇▇▇▇▇ need not disclose the event if it otherwise
has not disclosed such event to the public.
(4) if requested by the Investor or the underwriters, if any,
promptly incorporate in a prospectus supplement or post-effective
amendment such information as the underwriter and the Investor agree
should be included therein relating
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to the plan of distribution with respect to such Registrable Shares,
including, without limitation, the purchase price being paid therefor
by such underwriters and with respect to any other terms of the
underwritten offering of the Registrable Shares to be sold in such
offering; and make all required filings of such prospectus
supplements or post-effective amendments as soon as notified of the
matters to be incorporated in such prospectus supplements or
post-effective amendments;
(5) deliver to the Investor and the underwriters, if any,
without charge, as many copies of the prospectus (including each
preliminary prospectus) in conformity with the requirement of the
Securities Act and any amendments or supplements thereto as such
persons may reasonably request and such other documents as they may
reasonably request to facilitate the prior sale or other disposition
of such Registrable Shares;
(6) prior to any Public Offering of Registrable Shares, register
or qualify or cooperate with the Investor, or the underwriters, if
any, in connection with the registration or qualification of such
Registrable Shares for offer and sale under the securities or blue
sky laws of such jurisdictions as the Investor or underwriters, if
any, reasonably requests in writing and do any and all other acts or
things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Shares covered by the Registration
Statement; provided, however, that ▇▇▇▇▇▇▇▇ shall not be required to
qualify to do business in any jurisdiction where it is not then so
qualified or to take any action that would subject it to general
service of process in any such jurisdiction where it is not then so
subject or would subject ▇▇▇▇▇▇▇▇ to any tax in any such jurisdiction
where it is not then so subject or would require the directors,
officers or employees of ▇▇▇▇▇▇▇▇ to agree to a lock-up or to escrow
their shares or to relinquish any options or other rights to purchase
shares; and provided, further, that ▇▇▇▇▇▇▇▇ shall not be required to
expend more than $20,000 for registration fees in connection with any
single offering contemplated by this Section 2; and
(7) with a view to making available the benefits of certain
rules and regulations of the SEC which may at any time permit the
sale of Registrable Shares to the public without registration, during
such time as a public market exists for its equity securities,
▇▇▇▇▇▇▇▇ agrees to:
a) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities
Act, at all times after the effective date of the Registration
Statement;
b) use its commercially reasonable efforts to file with the
SEC in a timely manner all reports and other documents required of
▇▇▇▇▇▇▇▇ under the Securities Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act")(at any time after it has become
subject to such reporting requirements);
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c) furnish to the Investor forthwith upon the Investor's
request a written statement by ▇▇▇▇▇▇▇▇ as to ▇▇▇▇▇▇▇▇'▇ compliance
with the reporting requirements of said Rule 144, and of the
Securities Act and the Exchange Act, a copy of the most recent annual
or quarterly report of ▇▇▇▇▇▇▇▇ and such other reports and documents
of ▇▇▇▇▇▇▇▇ as the Investor may reasonably request in availing itself
of any rule or regulation of the SEC allowing a holder to sell any
such securities without registration; and
(8) list all Registrable Shares covered by such Registration
Statement on any securities exchange or automated quotation service
on which any of the Registrable Shares are then listed.
(vi) Notwithstanding the provisions of this Section 2 to the contrary
▇▇▇▇▇▇▇▇:
(1) may require the Investor to furnish to ▇▇▇▇▇▇▇▇ such
information regarding the distribution of such securities as ▇▇▇▇▇▇▇▇
may from time to time reasonably request; and
(2) The Investor will covenant that the Investor has not taken,
and will not take, directly, or indirectly, any action designed, or
which might reasonably be expected, to violate applicable law; and
(vii) the Investor agrees by acquisition of such Registrable Shares
that, upon receipt of the request referred to in the proviso of Section
2(e)(v)(2) or of any notice from ▇▇▇▇▇▇▇▇ of the happening of any event of the
kind described in Section 2(e)(v)(3) hereof (other than as provided in Section
2(e)(v)(3)(A) hereof), the Investor shall forthwith discontinue disposition of
Registrable Shares until it is advised in writing by ▇▇▇▇▇▇▇▇ that the use of
the prospectus may be resumed, and has received copies of any additional or
supplemental documents or filings that are incorporated by reference in the
prospectus, and, if so directed by ▇▇▇▇▇▇▇▇, the Investor shall deliver to
▇▇▇▇▇▇▇▇ (at ▇▇▇▇▇▇▇▇'▇ expense) all copies other than permanent file copies
then in the Investor's possession, of the prospectus covering such Registrable
Shares current prior to the time of receipt of such notice.
(f) Indemnification.
(i) In the event of a registration or qualification of any
Registrable Shares under the Securities Act pursuant to the provisions of this
Section 2, ▇▇▇▇▇▇▇▇ shall indemnify and hold harmless the Investor, the
officers and directors of the Investor and each director or officer of any
person or entity who controls the Investor, each underwriter of such
Registrable Shares and each other person or entity who controls the Investor or
such underwriter within the meaning of the Securities Act (collectively, the "
Investor Indemnitees"), from and against any and all losses, claims, damages or
liabilities, joint or several, to which any of the Investor Indemnitees, joint
or several, may become subject under the Securities Act or
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the applicable securities laws or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon (x) any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement under which such Registrable
Shares were registered or qualified under the Securities Act, or any amendment
or supplement thereto, any preliminary prospectus or final prospectus contained
therein, or any supplement thereto, or any document prepared and/or furnished
to the Investor incident to the registration or qualification of any
Registrable Shares, or (y) the omission or alleged omission to state in any
Registration Statement a material fact required to be stated therein or
necessary to make the statements therein not misleading or, with respect to any
prospectus, necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or (z) any violation
by ▇▇▇▇▇▇▇▇ of the Securities Act or state securities or "blue sky" laws
applicable to ▇▇▇▇▇▇▇▇ and relating to action or inaction required of ▇▇▇▇▇▇▇▇
in connection with registration or qualification under such state securities or
"blue sky" laws, and in each case shall reimburse the Investor Indemnitees for
any legal or other expenses reasonably incurred by such the Investor
Indemnitees in connection with investigating or defending any such loss, claim,
damage or liability (or action in respect thereof); provided, however, that
▇▇▇▇▇▇▇▇ shall not be liable in any such case to the extent that any such loss,
claim, damage or liability (or action in respect thereof) arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement in reliance upon and in
conformity with information furnished to ▇▇▇▇▇▇▇▇ by such Investor Indemnitees
in writing and expressly for use in the Registration Statement; and provided
further, that ▇▇▇▇▇▇▇▇ shall not be liable in any such case to the extent that
any such loss, claim, damage or liability (or action in respect thereof) arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission in such Registration Statement, which untrue
statement or alleged untrue statement or omission or alleged omission is
completely corrected in an amendment or supplement to the Registration
Statement and such Investor Indemnitees thereafter fail to deliver or cause to
be delivered such Registration Statement as so amended or supplemented prior to
or concurrently with the sale of the Registrable Shares to the person asserting
such loss, claim, damage or liability (or actions in respect thereof) or
expense after ▇▇▇▇▇▇▇▇ has furnished the Investor with the same.
(ii) In the event of the registration or qualification of any
Registrable Shares under the Securities Act pursuant to the provisions of this
Section 2, ▇▇▇▇▇▇▇▇ may require, as a condition to including any Registrable
Shares in any Registration Statement filed pursuant to this Agreement, and if
so required the Investor hereby agrees, that the Investor shall indemnify and
hold harmless ▇▇▇▇▇▇▇▇, each person who controls ▇▇▇▇▇▇▇▇ within the meaning of
the Securities Act, each officer and director of ▇▇▇▇▇▇▇▇ and any other selling
holder from and against any losses, claims, damages or liabilities to which
▇▇▇▇▇▇▇▇, such controlling person, any such officer or director or any other
selling holder may become subject under the Securities Act or the applicable
securities laws or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (x)
any untrue statement or alleged untrue statement of any material fact contained
in any Registration Statement under which such Registrable Shares were
registered or qualified under the Securities Act, or any
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10
amendment or supplement thereto, or (y) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, which untrue statement or alleged
untrue statement or omission or alleged omission was made therein in reliance
upon and in conformity with information furnished to ▇▇▇▇▇▇▇▇ by the Investor
in writing and expressly for use in the Registration Statement for use in
preparation thereof, and in each case shall reimburse ▇▇▇▇▇▇▇▇, such
controlling person, each such officer or director and any other selling holder
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage or liability (or action
in respect thereof). Notwithstanding the provisions of this subsection
2(f)(ii), no holder of Registrable Shares shall be liable to any person or
group of persons in any aggregate amount in excess of the gross proceeds of the
sale of Registrable Shares.
(iii) Promptly after receipt by a person entitled to indemnification
under this Section 2(f) (an "Indemnified Party") of notice of the commencement
of any action or claim relating to any Registration Statement filed under the
provisions of this Section 2 or as to which indemnity may be sought hereunder,
such Indemnified Party shall, if a claim for indemnification hereunder in
respect thereof is to be made against any other party hereto (an "Indemnifying
Party"), give written notice to such Indemnifying Party of the commencement of
such action or claim, but the omission so to notify the Indemnifying Party will
not relieve such person from any liability that such person may have to any
Indemnified Party otherwise than pursuant to the provisions of this Section
2(f) and shall also not relieve the Indemnifying Party of such party's
obligations under this Section 2(f), except to the extent that the omission so
to notify results in the Indemnifying Party being damaged solely as a result of
the failure to give timely notice. In case any such action is brought against
an Indemnified Party, and such party notifies an Indemnifying Party of the
commencement thereof, the Indemnifying Party shall be entitled (at such party's
own expense) to participate in and, to the extent that the Indemnifying Party
may wish, jointly with any other Indemnifying Party similarly notified, to
assume the defense, with counsel satisfactory to such Indemnified Party, of
such action and/or to settle such action and, after notice from the
Indemnifying Party to such Indemnified Party of its election so to assume the
defense thereof, the Indemnifying Party shall not be liable to such Indemnified
Party for any legal or other expenses subsequently incurred by such Indemnified
Party in connection with the defense thereof, other than the reasonable cost of
investigation; provided, however, that no Indemnifying Party and no Indemnified
Party shall enter into any settlement agreement that would impose any liability
on such other party or parties without the prior written consent of such other
party or parties, unless such other party or parties are fully indemnified to
such party's satisfaction, as the case may be, against any such liability.
(iv) If for any reason the indemnification provided for in this
Section 2 is unavailable to an Indemnified Party or is insufficient to hold it
harmless as contemplated by this Section 2, then the Indemnifying Party shall
contribute to the amount paid or payable by the Indemnified Party as a result
of such loss, claim, damage, liability or action in such proportion as is
appropriate to reflect to only the relative benefits received by the
Indemnified Party and the Indemnifying
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Party, but also the relative fault of the Indemnified Party and the
Indemnifying Party, as well as any other relevant equitable considerations. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
3. Option to Purchase Shares. Upon the execution of this Agreement, the
Investor shall grant to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and/or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ an option (the "Option") to purchase the Conversion
Shares pursuant to an Option Agreement in the form of Exhibit C hereto. The
Option shall provide, among other things, (i) an Option exercise price of $2.00
per share, (ii) an Option exercise period of 18 months from the effectiveness
of the Registration Statement described in Section 2(b) (the "Effective Date"),
(iii) the expiration of the Option in the event that the holders of the Option
fails to purchase at least an aggregate of (A) 250,000 Conversion Shares on or
prior to the 90th day following the Effective Date and (B) 400,000 Conversion
Shares on or prior to the last day of each succeeding 90 day period commencing
90 days after the Effective Date.
4.A Failure to Timely Effect Registration or Exercise of the Option. In
the event that (i) the Effective Date shall not have occurred on or before
December 15, 1997 or (ii) the Option terminates or expires prior to the
18-month anniversary of the Effective Date in accordance with its terms (any
such date being referred to herein as the "Trigger Date"), the Tarricones,
▇▇▇▇▇▇▇▇ and the Investor agree that, in lieu of any further obligations of
▇▇▇▇▇▇▇▇ and the Tarricones hereunder, the Investor shall have a period of 90
days after the Trigger Date to elect any one of the following compensation
alternatives:
(a) (i) The Investor shall have the right to cause the Tarricones to
transfer to the Investor such number of the ▇▇▇▇▇▇▇▇▇ Options (the "Investor
Call Option") determined by multiplying the ▇▇▇▇▇▇▇▇▇ Options (net of any
options previously transferred pursuant to Section 4B) by a fraction the
numerator of which is the number of Conversion Shares subject to the Option on
the Trigger Date minus number of Conversion Shares sold or otherwise purchased
pursuant to the Option after the Trigger Date and the denominator of which is
the total number of Conversion Shares subject to the Option on the date hereof.
Upon the transfer of the ▇▇▇▇▇▇▇▇▇ Options but in no event earlier than the
second anniversary of the Effective Date, ▇▇▇▇▇▇▇▇ shall prepare and file with
the SEC within thirty (30) days of such second anniversary a Registration
Statement covering the resale of the shares of Common Stock issuable upon
exercise of the Option Shares and use its commercially reasonable efforts to
cause such Registration Statement to become effective within ninety (90) days
of the filing thereof. Such registration shall be subject to all of the other
terms and conditions set forth in Section 2(e) hereof.
(ii) Upon exercise of the Investor Call Option and as a condition
to the delivery of the ▇▇▇▇▇▇▇▇▇ Options subject to the HW Finance Call Option
(defined below), the Certificate of Designation shall be promptly amended to
provide that dividends on the shares of Series B Preferred Stock shall cease to
accrue upon the exercise of the Investor Call Option in accordance with the
form of Certificate of Amendment to the Certificate of Designation set forth on
Exhibit D hereto.
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(b) (i) The Investor shall have the right to cause the Tarricones to
transfer to the Investor such number of ▇▇▇▇▇▇▇▇▇ Options (the "HW Finance Call
Option") determined by multiplying (x) the product of 500,000 and a fraction
the numerator of which is the number of ▇▇▇▇▇▇▇▇▇ Options minus the number of
▇▇▇▇▇▇▇▇▇ Options transferred to the Investor in accordance with Section 4B and
the denominator of which is the number of ▇▇▇▇▇▇▇▇▇ Options by (y) a fraction
the numerator of which is the number of Conversion Shares subject to the Option
on the Trigger Date minus the number of Conversion Shares sold or otherwise
purchased pursuant to the Option after the Trigger Date and the denominator of
which is the total number of Conversion Shares subject to the Option on the
date hereof. Upon the transfer of the ▇▇▇▇▇▇▇▇▇ Options subject to the HW
Finance Call Option, but in no event earlier than the second anniversary of the
Effective Date, ▇▇▇▇▇▇▇▇ shall prepare and file with the SEC within thirty (30)
days of such second anniversary a Registration Statement covering the resale of
the shares issuable upon exercise of the ▇▇▇▇▇▇▇▇▇ Options subject to the HW
Finance Call Option and use its commercially reasonable efforts to cause such
Registration Statement to become effective within ninety (90) days after the
filing thereof. Such registration shall be subject to all of the other terms
and conditions set forth in Section 2(e) hereof.
(ii) Upon exercise of the HW Finance Call Option and as a
condition to the delivery of the ▇▇▇▇▇▇▇▇▇ Options subject to the HW Finance
Call Option, the Certificate of Designation shall be amended to provide that
dividends on shares of Series B Preferred Stock shall be reduced to 10% per
annum on the Stated Value in accordance with the form of Certificate of
Amendment to the Certificate of Designation set forth on Exhibit E hereto.
(iii) Upon exercise of the HW Finance Call Option and as a
condition to the delivery of the ▇▇▇▇▇▇▇▇▇ Options subject to the HW Finance
Call Option, the interest rate on the Subordinated Note shall be reduced to 10%
and the Investor shall surrender to ▇▇▇▇▇▇▇▇ the Subordinated Note issued
pursuant to this Agreement in exchange for a new Subordinated Note containing
identical terms but reflecting the amended interest rate.
4.B Failure to Timely Comply with Registration Timetable. In the event
that ▇▇▇▇▇▇▇▇ fails to timely satisfy its obligations set forth in the first
paragraph of Section 2(b) hereof (other than the October 15, 1997 Effective
Date) within the time periods specified therein (other than the October 15,
1997 Effective Date), for each such failure which is not cured within five (5)
business days' notice of such failure, the Tarricones agree that the Investor
shall have the right to cause the Tarricones to transfer to the Investor
twenty-five percent (25%) of the ▇▇▇▇▇▇▇▇▇ Options subject to the Investor Call
Option. Upon the transfer of all or such other portion of the ▇▇▇▇▇▇▇▇▇ Options
but in no event earlier than the second anniversary following the Effective
Date, ▇▇▇▇▇▇▇▇ shall prepare and file with the SEC within thirty (30) days of
such second anniversary a Registration Statement covering the resale of the
shares of Common Stock issuable upon exercise of the transferred ▇▇▇▇▇▇▇▇▇
Options and use its commercially reasonable efforts to cause such Registration
Statement to become effective within ninety (90) days of the filing thereof.
Such registration shall be subject to all of the other terms and conditions set
forth in Section 2(e) hereof.
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5. Representations, Warranties and Covenants of ▇▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇▇
represents and warrants to, and agrees with, the Investor as follows:
(a) ▇▇▇▇▇▇▇▇ is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada and has all requisite
corporate power and authority to carry on its business as now conducted and as
proposed to be conducted.
(b) All corporate action on the part of ▇▇▇▇▇▇▇▇ necessary for the
authorization, execution and delivery of this Agreement and the performance of
all obligations of ▇▇▇▇▇▇▇▇ hereunder has been taken, and this Agreement
constitutes a valid and legally binding obligation of ▇▇▇▇▇▇▇▇ enforceable in
accordance with its terms.
(c) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby do not and will not conflict with or
result in a breach by ▇▇▇▇▇▇▇▇ of any of the terms or provisions of, or
constitute a default under, the Articles of Incorporation or By-Laws of
▇▇▇▇▇▇▇▇, or any indenture, mortgage, deed of trust or other material
instrument to which ▇▇▇▇▇▇▇▇ is a party or by which it or any of its properties
or assets are bound, or any applicable decree, judgment or order of any court,
federal or state regulatory body, administrative agency or other governmental
body having jurisdiction over ▇▇▇▇▇▇▇▇ or any of its properties or assets.
(d) Except as disclosed in ▇▇▇▇▇▇▇▇'▇ periodic reports filed pursuant
to the requirements of the Exchange Act, there is no action, suit or proceeding
before or by any court or governmental agency or body, domestic or foreign, now
pending against ▇▇▇▇▇▇▇▇ or any of its properties which could reasonably be
expected to result in any material adverse change in the business, financial
condition or results of operations of ▇▇▇▇▇▇▇▇, or which could reasonably be
expected to materially and adversely affect the properties or assets of
▇▇▇▇▇▇▇▇.
(e) For a period of 18 months from and after the Effective Date,
▇▇▇▇▇▇▇▇ shall not issue or grant, or contract to issue or grant, to any of the
Tarricones or any other officer or director of ▇▇▇▇▇▇▇▇ any equity securities
of ▇▇▇▇▇▇▇▇ or options to purchase equity securities of ▇▇▇▇▇▇▇▇ (or securities
convertible, exercisable or exchangeable for equity securities of ▇▇▇▇▇▇▇▇)
other than (i) securities which are compensatory in nature (i.e., securities or
options which are issued or granted at fair market value to compensate
individuals for the difference between contractual or other compensation,
including reasonable bonuses, which they are actually paid in cash and the
amount of any such compensation to which they are entitled but which is not
otherwise paid), (ii) securities which such persons purchase from third parties
in bona fide arms-length transactions, (iii) securities which such persons
purchase for cash from ▇▇▇▇▇▇▇▇ at fair market value, and (iv) securities
outstanding on the date hereof.
(f) The Company will reserve from its authorized but unissued shares of
Common Stock a sufficient number of shares of Common Stock to permit issuance
of the Conversion Shares, the Dividend Shares and the Option Shares.
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14
(g) The Company will maintain the listing of its Common Stock on the
Nasdaq SmallCap Stock Market so long as it meets the criteria for inclusion
thereon and will use its commercially reasonable efforts to comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the National Association of Securities Dealers, Inc. and
such exchanges, as applicable. The Company shall promptly provide to the
Investor copies of any notices it receives from Nasdaq regarding the continued
eligibility of the Common Stock for listing on Nasdaq.
(h) On or prior to the date that the SEC declares effective a
Registration Statement contemplated by Section 2 hereof, the Company shall
promptly secure the listing of the Common Stock to be issued or sold in
connection with such Registration Statement on any national securities exchange
or automated quotation system, if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance) and shall use commercially
reasonable efforts to maintain, so long as any other shares of Common Stock
shall be so listed, such listings of all such shares.
(i) Upon conversion of the Investor Shares in accordance with the terms
of the Series B Preferred Stock, and/or exercise of any Option in accordance
with the terms hereof, the Company will, and will use its commercially
reasonable efforts to cause the transfer agent to, issue one or more
certificates representing shares of Common Stock in such name or names and in
such denominations specified by the Investor in a notice of conversion or
notice of exercise, as the case may be, in accordance with the terms of this
Agreement and the Option. As long as any such Registration Statement shall
remain effective, the shares covered thereby shall be issued to any transferee
of such shares from the Investor without restrictive legend.
6. Representations, Warranties and Covenants of the Tarricones. Each of
the Tarricones represents and warrants to, and agrees with, the Investor as
follows:
(a) All action on the part of each of the Tarricones necessary for the
authorization, execution and delivery of this Agreement and the performance of
all obligations of each of the Tarricones hereunder has been taken, and this
Agreement constitutes a valid and legally binding obligation of each of the
Tarricones enforceable against each of them in accordance with its terms.
(b) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby do not and will not conflict with or
result in a breach by any of the Tarricones of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of trust or
other material instrument to which any of the Tarricones is a party or by which
any of the Tarricones is bound, or any applicable decree, judgment or order of
any court, federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over any of the Tarricones or any of the
Tarricones' properties or assets.
(c) There is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending against any of
the Tarricones
-14-
15
which could reasonably be expected to result in any material adverse change in
the financial condition of any of the Tarricones, or which could reasonably be
expected to materially and adversely affect the transactions contemplated by
this Agreement.
(d) Each of the Tarricones represents and warrants that, as of the date
hereof, such person is the record and beneficial holder of the number of
▇▇▇▇▇▇▇▇▇ Options held by such person free and clear of such liens, claims or
encumbrances of any kind. The Tarricones covenant and agree that they shall
not, directly or indirectly, sell, pledge, give, transfer, assign, encumber or
in any way dispose of (collectively, a "Transfer") such number of ▇▇▇▇▇▇▇▇▇
Options (or any interest therein) as the Tarricones would be required to hold
from time to time in order to comply with their potential obligations under
Sections 4(a) and (b) hereof except as may be expressly permitted by this
Agreement. Each of the Tarricones represents and warrants that, upon exercise
of the ▇▇▇▇▇▇▇▇▇ Options, assuming the payment in full of the exercise price
for the shares and the taking by ▇▇▇▇▇▇▇▇ of all requisite action required by
applicable law, the shares of Common Stock to be transferred thereunder will be
transferred to the Investor with good and marketable title thereto, free and
clear of any liens, claims or encumbrances of any kind.
7. Representation, Warranties and Covenants of the Investor. The Investor
represents and warrants to, and agrees with, ▇▇▇▇▇▇▇▇ and the Tarricones as
follows:
(a) The Investor is a corporation duly organized, validly existing and
in good standing under the laws of Nevis, West Indies and has all requisite
corporate power and authority to carry on its business as now conducted and as
proposed to be conducted.
(b) All corporate action on the part of the Investor necessary for the
authorization, execution and delivery of this Agreement and the performance of
all obligations of the Investor hereunder has been taken, and this Agreement
constitutes a valid and legally binding obligation of the Investor enforceable
in accordance with its terms.
(c) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby do not and will not conflict with or
result in a breach by the Investor of any of the terms or provisions of, or
constitute a default under, the Articles of Organization or By-Laws of the
Investor, or any indenture, mortgage, deed of trust or other material
instrument to which the Investor is a party or by which it or any of its
properties or assets are bound, or any applicable decree, judgment or order of
any court, federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over the Investor or any of its
properties or assets.
(d) The Investor shall not effect a Transfer of any of the Investor
Shares, the Conversion Shares, the ▇▇▇▇▇▇▇▇▇ Options, the Option Shares, the
Dividend Shares or the Note (or any interest therein) except as may be
expressly permitted by this Agreement. Notwithstanding the general prohibition
on Transfer, the Investor may transfer the Investor Shares, the Conversion
Shares, the ▇▇▇▇▇▇▇▇▇ Options, the Dividend Shares or the Note to an Affiliate
(as hereinafter defined) of the Investor that is reasonably acceptable to
▇▇▇▇▇▇▇▇,
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provided that any such transferee, as a condition to such Transfer, agrees to
be bound by the terms and conditions of this Agreement; and provided further,
that ▇▇▇▇▇▇▇▇ shall not transfer on its books any certificates for the Investor
Shares, the Conversion Shares, the Option Shares, the Dividend Shares or Note
nor issue any certificate in lieu of the Investor Shares, the Conversion
Shares, the Option Shares, the Dividend Shares or Note unless, in the
reasonable opinion of counsel to ▇▇▇▇▇▇▇▇, there has been compliance with all
of the material conditions hereof affecting the Investor Shares or the
Conversion Shares, the Option Shares, the Dividend Shares or the Note, and any
such attempted Transfer in violation of this Agreement shall be void and of no
effect. For purposes of this Agreement, the term "Affiliate" shall have the
meaning set forth in Section 405 of the Securities Act, except that the term
"control" as set forth in such definition shall mean the ownership of more than
50% of the voting securities of such person or the contractual power to direct
the business of such person.
(e) The Investor acknowledges that the Investor Shares, Conversion
Shares, the Dividend Shares and the Note have not been registered under the
Securities Act or under the securities laws of certain states and, therefore,
cannot be resold, pledged, assigned or otherwise disposed of unless the
securities are subsequently registered under the Securities Act and under the
applicable securities laws of such states or unless an exemption from such
registration, whether pursuant to Rule 144 under the Securities Act or
otherwise, is available in the opinion of counsel for the holder, which counsel
and opinion are reasonably satisfactory to counsel for ▇▇▇▇▇▇▇▇. The Investor
is acquiring and will be acquiring the Note, the Conversion Shares, the
▇▇▇▇▇▇▇▇▇ Options, the Option Shares or the Dividend Shares for the Investor's
own account, for investment and not with a view to resale or distribution
except in compliance with the Securities Act. The Investor hereby agrees that
the following legends shall be inscribed on all certificates representing the
Shares, the Note and the Conversion Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS AND CANNOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT OR AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT OR APPLICABLE STATES SECURITIES ACT WHICH, IN THE OPINION OF COUNSEL
FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO
COUNSEL FOR ▇▇▇▇▇▇▇▇, IS AVAILABLE.
THE SHARES REPRESENTED HEREBY ARE ALSO SUBJECT TO A RESTRUCTURING
AGREEMENT, DATED SEPTEMBER 24, 1997, BY AND AMONG ▇▇▇▇▇▇▇▇ ENERGY CORP.,
INFINITY INVESTORS LIMITED, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ AND
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
▇▇▇▇▇▇▇▇, AND ANY SALE, PLEDGE, GIFT, TRANSFER, ASSIGNMENT, ENCUMBRANCE OR
OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IN
VIOLATION OF SAID AGREEMENT SHALL BE VOID AND OF NO EFFECT."
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17
(f) The Investor is an accredited investor within the meaning of the
rules and regulations promulgated under the Securities Act.
(g) The Investor is not relying on ▇▇▇▇▇▇▇▇ with respect to the tax and
other economic considerations of an investment in securities issued pursuant to
this Agreement, and the Investor has relied on the advice of, or has consulted
with, only the Investor's own advisor(s).
(h) The Investor hereby authorizes ▇▇▇▇▇▇▇▇ to file the amended
Certificate of Designation described in Sections 4(a) and 4(b) immediately
after the required portion of the ▇▇▇▇▇▇▇▇▇ Options is transferred to the
Investor, HW Finance or their designees pursuant to the terms of Section 4.
8. Confidentiality. Each of the parties hereto hereby acknowledges that it
is aware, and agrees that it will advise the Permitted Persons (as defined
below), that federal and state securities laws prohibit certain persons who
possess material, non-public information concerning an issuer subject to the
reporting requirements of the Exchange Act from purchasing or selling
securities of such issuer or from communicating such information to any other
person under the circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities, and agrees that it will
not engage, and that it will cause all Permitted Persons not to engage, in any
such activities. Without the prior written consent of ▇▇▇▇▇▇▇▇, neither HW
Partners, L.P., HW Finance, L.L.C., the Investor nor any of their respective
officers, directors, employees, agents or representatives will use any
non-public, proprietary or confidential information of or concerning ▇▇▇▇▇▇▇▇
or disclose the terms hereof other than as required by applicable law or legal
process, nor will any of such information be disclosed to any person or entity
that is not a Permitted Person. For purposes of this Agreement, the term
"Permitted Persons" will mean ▇▇▇▇▇▇▇▇, ▇▇ Partners, L.P., HW Finance, L.L.C.,
the Investor and the respective directors, officers, employees, advisors,
lenders and representatives of such entity who need to know such information in
connection with the transactions contemplated by this Agreement.
9. Miscellaneous.
(a) This Agreement, together with all Exhibits, constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and
oral, among the parties or between any of them with respect to the transactions
contemplated hereby.
(b) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect unless
such enforceability causes this Agreement to fail in its essential purpose.
(c) All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given or made as of the date
delivered or mailed if
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18
delivered in person, by telecopy or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties as follows:
if to ▇▇▇▇▇▇▇▇ at:
▇▇▇▇▇▇▇▇ Energy Corp.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇ ▇▇▇▇
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
Attn: President and General Counsel
if to the Tarricones, to them at:
c/o ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
Piper & Marbury L.L.P.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
if to the Investor, to it at:
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
with a copy to:
H.W. Partners, L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(d) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York (without giving effect to principles of
conflicts of law).
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(e) The descriptive headings herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
(f) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, its successors and assigns.
(g) This Agreement may be executed by facsimile signature and in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed as of the day and year first above written.
▇▇▇▇▇▇▇▇ ENERGY CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
INFINITY INVESTORS LIMITED
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Director
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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ANNEX A
REGISTRATION STATEMENT INSERTS
[PROSPECTUS COVER PAGE]
The shares of common stock, par value $.001 per share (the "Common
Stock"), to which this Prospectus relates (the "Shares") are being offered,
from time to time, on behalf of and for the account of certain stockholders
(the "Selling Stockholders") of ▇▇▇▇▇▇▇▇ Energy Corp. (the "Company") as
identified herein under "Selling Stockholders." The distribution of the Shares
by the Selling Stockholders, or by pledgees, donees, distributees, transferees
or other successors in interest, may be affected from time to time by
underwriters who may be selected by the Selling Stockholders and/or
broker-dealers, in one or more transactions (which may involve crosses and
block transactions) on the or other over-the-counter markets or, in special
offerings, exchange distributions or secondary distributions pursuant to and in
accordance with rules of such over-the-counter markets or exchanges, in
negotiated transactions or otherwise, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices or at negotiated
prices. The Company has agreed to indemnify the Selling Stockholders,
underwriters who may be selected by the Selling Stockholders and certain other
persons against certain liabilities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act"). See "Plan of Distribution" and
"Selling Stockholders."
The Company has agreed to pay all expenses of registration in connection
with this offering but will not receive any of the proceeds from the sale of
the Shares being offered hereby. All brokerage commissions and other similar
expenses incurred by the Selling Stockholders will be borne by such Selling
Stockholders. The aggregate proceeds to the Selling Stockholders from the sale
of the Shares will be the purchase price of the Shares sold, less the aggregate
brokerage commissions and underwriters' discounts, if any, and other expenses
of issuance and distribution not borne by the Company.
USE OF PROCEEDS
The Shares being offered hereby are for the account of the Selling
Stockholders. Accordingly, the Company will not receive any of the proceeds
from the sale of the Shares by the Selling Stockholders. See "Selling
Stockholders."
SELLING STOCKHOLDERS
The following table sets forth the name of the Selling Stockholders, the
number of shares of Common Stock beneficially held by such Selling Stockholders
prior to the commencement of the offering made hereby and THE number of Shares
that may be offered by each. The number of Shares that may actually be sold by
each of the Selling Stockholders will be determined by each such Selling
Stockholder, and may depend upon a number of factors, including, among other
things, the market price of the Common Stock. The table below sets forth
information as of ____________, concerning the beneficial ownership of Common
Stock of each of the Selling
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Stockholders. All information concerning beneficial ownership has been
furnished by the Selling Stockholders.
----------------------------
Less than one percent (1%).
(1) Represents those shares of Common Stock held by the Selling
Stockholder, if any, together with those shares that such Selling Stockholder
has the right to acquire within 60 days. Each of the Selling Stockholders
specifically disclaims beneficial ownership of the shares of Common Stock held
(or acquirable upon exercise or conversion of any derivative securities held)
by the other Selling Stockholders and, as such, the number of shares of Common
Stock represented hereby does not reflect any shares of Common Stock
beneficially owned by any other Selling Stockholder.
(2) The percentages indicated are based on ______ shares of Common Stock
issued and outstanding as of 199_.
(3) Because each of the Selling Stockholders may sell all, some or none of
the Shares that each holds, and because the offering contemplated by this
Prospectus is not now a "firm commitment" underwritten offering, no estimate
can be given as to the number of Shares that will be held by each of the
Selling Stockholders upon or prior to termination of this offering. See "Plan
of Distribution."
The Selling Stockholders identified above may have sold, transferred or
otherwise disposed of all or a portion of their Shares since the date on which
they provided the information regarding their Common Stock in transactions
exempt from the registration requirements of the Securities Act. Additional
information concerning the above listed Selling Stockholders may be set forth
from time to time in prospectus supplements to this Prospectus. See "Plan of
Distribution."
Pursuant to the terms of that certain Restructuring Agreement dated
September 24, 1997 (the "Restructuring Agreement"), the Company has agreed to
file the Registration Statement to which this Prospectus forms a part for the
purpose of registering the potential resale of the Shares and to maintain the
effectiveness of such Registration Statement until [OR UNTIL THE SHARES HAVE
OTHERWISE ARE AVAILABLE FOR RESALE PURSUANT TO RULE 144(k) PROMULGATED UNDER
THE SECURITIES ACT], in each case, as contemplated by a certain Restructuring
Agreement dated September 24, 1997 by and among the Company, Infinity Investors
Limited, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (the
"Restructuring Agreement). In addition, the Company and the Selling
Stockholders agreed to indemnify each other and certain affiliated parties from
and against any losses or claims arising out of, among other things, (1) any
alleged untrue statement of a material fact or (2) any material omission
contained or referred to in the Registration Statement. Insofar as
indemnification for liabilities arising under the Securities Act
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may be permitted to directors, officers or persons controlling the Company,
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable. All of the registration and filing fees, printing expenses, blue
sky fees, if any, fees and disbursements of counsel for the Company, and
certain fees and disbursements of one counsel for the Selling Stockholders will
be paid by the Company; provided, however, that fees and disbursements of
experts and counsel retained by the Selling Stockholders and any underwriting
discounts and selling commissions will be borne by the Selling Stockholders.
Except as specifically set forth herein, none of the Selling Stockholders
has, or within the past three years has had, any position, office or other
material relationship with the Company or any of its predecessors or
affiliates.
PLAN OF DISTRIBUTION
Sales of the Shares may be made from time to time by the Selling
Stockholders, or, subject to applicable law, by pledgees, donees, distributees,
transferees or other successors in interest. Such sales may be made on the
____________________, in another over-the-counter market, on a national
securities exchange (any of which may involve crosses and block transactions),
in privately negotiated transactions or otherwise or in a combination of such
transactions at prices and at terms then prevailing or at prices related to the
then current market price, or at privately negotiated prices. In addition, any
Shares covered by this Prospectus which qualify for sale pursuant to Section
4(1) of the Securities Act or Rule 144 promulgated thereunder may be sold under
such provisions rather than pursuant to this Prospectus. Without limiting the
generality of the foregoing, the Shares may be sold in one or more of the
following types of transactions: (a) a block trade in which the broker-dealer
so engaged will attempt to sell the Shares as agent but may position and resell
a portion of the block as principal to facilitate the transaction; (b)
purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this Prospectus; (c) an exchange
distribution in accordance with the rules of such exchange; (d) ordinary
brokerage transactions and transactions in which the broker solicits
purchasers; and (e) face-to-face transactions between sellers and purchasers
without a broker-dealer. In effecting sales, brokers or dealers engaged by the
Selling Stockholders may arrange for other brokers or dealers to participate in
the resales.
In addition, the Shares are subject to a certain Option Agreement dated
September 24, 1997 between the Selling Stockholders and ___________.
Accordingly, all or a substantial portion of the Shares may be transferred to
__________.
In connection with distributions of the Shares or otherwise, the Selling
Stockholders may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the Shares registered hereunder in the course of hedging the positions they
assume with Selling Stockholders. The Selling
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Stockholders may also sell Shares short and deliver the Shares to close out
such short positions. The Selling Stockholders may also enter into option or
other transactions with broker-dealers which require the delivery to the
broker-dealer of the Shares registered hereunder, which the broker-dealer may
resell pursuant to this Prospectus.
The Selling Stockholders may also pledge the Shares registered hereunder
to a broker or dealer and upon a default, the broker or dealer may effect sales
of the pledged Shares pursuant to this Prospectus.
Brokers, dealers or agents may receive compensation in the form of
commissions, discounts or concessions from Selling Stockholders in amounts to
be negotiated in connection with the sale. Such brokers or dealers and any
other participating brokers or dealers may be deemed to be "underwriters"
within the meaning of the Securities Act in connection with such sales and any
such commission, discount or concession may be deemed to be underwriting
discounts or commissions under the Securities Act.
Information as to whether underwriters who may be selected by the Selling
Stockholders, or any other broker-dealers, is acting as principal or agent for
the Selling Stockholders, the compensation to be received by underwriters who
may be selected by the Selling Stockholders, or any broker-dealer, acting as
principal or agent for the Selling Stockholders and the compensation to be
received by other broker-dealers, in the event the compensation of such other
broker-dealers is in excess of usual and customary commissions, will, to the
extent required, be set forth in a supplement to this Prospectus (the
"Prospectus Supplement"). Any dealer or broker participating in any
distribution of the Shares may be required to deliver a copy of this
Prospectus, including the Prospectus Supplement, if any, to any person who
purchases any of the Shares from or through such dealer or broker.
The Company has advised the Selling Stockholders that during such time as
they may be engaged in a distribution of the Shares included herein they are
required to comply with Regulation M promulgated under the Exchange Act. With
certain exceptions, Regulation M precludes any selling shareholder, any
affiliated purchasers and any broker-dealer or other person who participates in
such distribution from bidding for or purchasing, or attempting to induce any
person to bid for or purchase any security which is the subject of the
distribution until the entire distribution is complete. Regulation M also
prohibits any bids or purchases made in order to stabilize the price of a
security in connection with the distribution of that security. All of the
foregoing may affect the marketability of the Common Stock.
It is anticipated that the Selling Stockholders will offer all of the
Shares for sale. Further, because it is possible that a significant number of
Shares could be sold at the same time hereunder, such sales, or the possibility
thereof, may have a depressive effect on the market price of the Company's
Common Stock.
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