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EXHIBIT 10.2
STOCKHOLDERS AGREEMENT
among
ORACLE CORPORATION,
TORCH ENERGY ADVISORS INCORPORATED
and
NOVISTAR, INC.
February 18, 2000
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TABLE OF CONTENTS
PAGE
1. Definitions........................................... 1
2. Registration Rights................................... 3
2.1 Request for Registration.............................. 3
2.2 Novistar Registration................................. 5
2.3 Form S-3 Registration................................. 6
2.3 Registration Procedures............................... 7
2.5 Furnish Information................................... 8
2.6 Expenses of Demand Registration....................... 9
2.7 Expenses of Company Registration...................... 9
2.8 Indemnification....................................... 9
2.9 Reports............................................... 12
2.10 Assignment of Registration Rights..................... 12
2.11 "Market Stand-Off" Agreement.......................... 13
2.12 Termination of Registration Rights.................... 13
3. Right of First Offer.................................. 13
3.1 Right................................................. 13
3.2 Procedure............................................. 13
3.3 Exempt Issuances...................................... 14
3.4 Assignment............................................ 14
4. Right of First Refusal and Co-Sale.................... 15
4.1 Holder Notice......................................... 15
4.2 Procedure............................................. 15
4.3 Termination of Rights................................. 15
4.4 Assignment............................................ 15
5. Other Covenants and Agreements........................ 16
5.1 No Public Announcement................................ 16
5.2 Delivery of Financial Statements...................... 16
5.3 Inspection............................................ 17
5.4 Termination of Information and Inspection Covenants... 17
5.5 Board of Directors of Novistar........................ 17
6. General Provisions.................................... 17
6.1 Amendment and Waiver.................................. 17
6.2 No Assignment......................................... 17
6.3 Severability.......................................... 18
6.4 Entire Agreement...................................... 18
6.5 Expenses.............................................. 18
6.6 Governing Law......................................... 18
6.7 Notices............................................... 18
6.8 Headings.............................................. 19
6.9 Counterparts.......................................... 19
6.10 Construction.......................................... 19
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6.11 No Agency............................................. 19
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STOCKHOLDERS AGREEMENT
This Stockholders Agreement (the "Agreement") by and among Oracle Corporation, a
Delaware corporation ("Oracle"), Torch Energy Advisors Incorporated, a Delaware
corporation ("Torch"), and Novistar, Inc., a Delaware corporation ("Novistar"),
is made to be effective as of February 18, 2000 (the "Effective Date").
RECITALS
A. Prior to the Effective Date, Oracle and Novistar entered into that certain
Asset Purchase Agreement (the "Asset Agreement") pursuant to which Oracle
is selling to Novistar certain of its assets (the "Assets").
B. As part of the purchase price for the Assets, Novistar is issuing to Oracle
2,484,395 shares of its Series A Preferred Stock, pursuant to the Series A
Preferred Stock Purchase Agreement in the form set forth in Exhibit A
hereto (the "Oracle Agreement").
C. Torch owns 9,076,675 shares of Novistar's Common Stock.
D. Torch and Oracle wish to agree upon their rights and duties as stockholders
of Novistar.
AGREEMENT
In light of the foregoing recitals and in consideration of the mutual covenants
set forth below, the parties hereto hereby agree as follows:
1. DEFINITIONS. In this Agreement, the following definitions shall apply:
1.1. "Act" shall mean the Securities Act of 1933, as amended.
1.2. "Affiliates" shall mean a Person that directly, or indirectly through
one or more intermediaries, Controls, or is Controlled by, or is in
common Control with, the Person specified.
1.3. "Agreement" shall mean this Stockholders Agreement together with all
exhibits and schedules attached hereto, as amended from time to time
as provided herein.
1.4. "Common Stock" shall mean the common stock, $0.01 par value, of
Novistar.
1.5. "Control" shall mean the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies
of a Person, whether through ownership of voting securities, by
contract, through members of a board of directors, or otherwise.
1.6. "Effective Date" shall have the meaning set forth in the introductory
paragraph of this Agreement.
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1.7. "Form S-3" shall mean such form under the Act as in effect on the
date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by
Novistar with the SEC.
1.8. "GAAP" shall mean United States generally accepted accounting
principles.
1.9. "Governmental Authority" shall mean any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-
governmental authority, court, regulatory, administrative or other
agency, or any political or other subdivision, department or branch
of any of the foregoing.
1.10. "Holder" means any Person owning or having the right to acquire
Registrable Securities or any assignee or transferee thereof in
accordance with the terms of this Agreement.
1.11. "Novistar" shall have the meaning set forth in the introductory
paragraph of this Agreement.
1.12. "Novistar Securities" shall mean any capital stock of Novistar, any
security convertible into capital stock of Novistar, or any security
the holder of which is entitled to receive capital stock of Novistar
upon exercise of the security.
1.13. "Holder Notice" shall have the meaning set forth in Section 4.1 of
this Agreement.
1.14. "Offer Notice" shall have the meaning set forth in Section 3.2(a) of
this Agreement.
1.15. "Oracle" shall have the meaning set forth in the introductory
paragraph of this Agreement.
1.16. "Torch" shall have the meaning set forth in the introductory
paragraph of this Agreement.
1.17. "Person" shall mean an association, corporation, individual,
partnership, trust or any other entity or organization, including a
Governmental Authority.
1.18. "Public Offering" shall have the meaning set forth in Section 2.2
of this Agreement.
1.19. "Register", "registered" and "registration" refer to (a) a
registration effected in the United States by the preparing and
filing of a registration statement or similar document in compliance
with the Act, or a registration effected in a country other than the
United States resulting in a public trading market for the underlying
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securities by the preparing and filing of a registration statement or
similar document in compliance with applicable securities laws, and
(b) the declaration or ordering of effectiveness of such registration
statement or document.
1.20. "Registrable Securities" means (i) the Common Stock owned by Torch as
of the date of this Agreement (ii) the Common Stock of Novistar
issuable or issued upon conversion of the Series A Preferred Stock of
Novistar, and (ii) any Common Stock of Novistar issued as (or
issuable upon the conversion or exercise of any warrant, right, or
other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of the shares
referenced in (i) and (ii) above, excluding in all cases, however,
any Registrable Securities sold by a Person in a transaction in which
such Person's rights are not assigned in accordance with the terms of
this Agreement.
1.21. "Oracle Agreement" shall have the meaning set forth in Recital B of
this Agreement.
1.22. "SEC" shall mean Securities and Exchange Commission.
1.23. "Selling Holder" shall have the meaning set forth in Section 4.1 of
this Agreement.
1.24. "Violation" shall have the meaning set forth in Section 2.8(a) of
this Agreement.
1.25. "1934 Act" shall mean the Securities and Exchange Act of 1934, as
amended.
2. REGISTRATION RIGHTS.
2.1. REQUEST FOR REGISTRATION.
(a) If Novistar shall receive at any time after the earlier of: February
28, 2003, or 180 days following the date Novistar is first required
to register its securities under Section 12(b) or 12(g) of the 1934
Act, a written request from any Holder or Holders of five percent
(5%) of Registrable Securities that Novistar file a registration
statement under the Act, covering the registration of the Registrable
Securities held by such Holder or Holders, then Novistar shall:
(i) within ten (10) days after the receipt thereof, give written
notice of such request to all Holders; and
(ii) use all reasonable efforts to effect, as soon as practicable, the
registration under the Act or other applicable securities laws of
(x) all Registrable Securities held by such Holders which the
Holders request to be registered, subject to the limitations of
subsection 2.1(b), within twenty (20) days after the mailing of
such notice, referenced in (a)(i) above, by Novistar in
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accordance with Section 6.7 and (y) securities proposed to be
issued and sold by Novistar.
(b) If the Holders requesting registration intend to distribute the
Registrable Securities covered by their request by means of an
underwriting, they shall so advise Novistar as a part of their request
made pursuant to subsection 2.1(a) and Novistar shall include such
information in the written notice referred to in subsection 2.1(a)(i).
The underwriter will be selected by Novistar and shall be reasonably
acceptable to a majority of the Holders requesting registration. In
such event, the right of any Holder to include such Holder's
Registrable Securities in such registration shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of
such Holder's Registrable Securities in the underwriting to the extent
provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with Novistar as provided in
subsection 2.4(d)) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such
underwriting. Notwithstanding any other provision of this Section
2.1, if the underwriter advises the Holders requesting registration in
writing that marketing factors require a limitation of the number of
shares to be underwritten, then such Holders shall so advise all
Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable
Securities that may be included in the underwriting shall be allocated
among all Holders thereof in proportion (as nearly as practicable) to
the amount of Registrable Securities of Novistar owned by each Holder;
provided, however, that the number of shares of Registrable Securities
to be included in such underwriting by persons or entities other than
Novistar shall not be reduced unless all other securities are first
entirely excluded from the underwriting.
(c) Notwithstanding the foregoing, if Novistar shall furnish to Holders
requesting registration pursuant to this Section 2.1, a certificate
signed by the Chief Executive Officer or President of Novistar stating
that in the judgment of the Board of Directors of Novistar, it would
be detrimental to Novistar and its business objectives due to a
pending transaction for such registration to be effected, Novistar
shall have the right to defer taking action with respect to such
registration for a period of not more than ninety (90) days after
receipt of the request of the Holders; provided, however, that
Novistar may not utilize this right more than once in any twelve-month
period.
(d) In addition, Novistar shall not be obligated to effect, or to take any
action to effect, any registration pursuant to this Section 2.1:
(i) After Novistar has effected two (2) registrations pursuant to
this Section 2.1 and such registrations have been declared or
ordered effective;
(ii) If the registration statement to be filed by Novistar does not
cover at least ten percent (10%) of the Registrable Securities;
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(iii) During the period starting with the date thirty (30) days prior
to Novistar's good faith estimate of the date of filing of, and
ending on a date one hundred eighty (180) days after the
effective date of, a registration subject to Section 2.2
hereof; provided that Novistar is actively employing in good
faith all reasonable efforts to cause such registration
statement to become effective; or
(iv) If the Holders requesting registration propose to dispose of
shares of Registrable Securities that may be immediately
registered on Form S-3 pursuant to a request made pursuant to
Section 2.3 below.
2.2. NOVISTAR REGISTRATION.
(a) If (but without any obligation to do so) Novistar proposes to
register any of its Common Stock or any securities convertible into
Common Stock under the Act, in connection with the public offering of
such securities solely for cash (other than a registration on Form S-
4 or Form S-8 or a registration relating solely to the sale of
securities to participants in a Novistar stock plan, a registration
on any form which does not include substantially the same information
as would be required to be included in a registration statement
covering the sale of the Registrable Securities or a registration in
which the only Common Stock of Novistar being registered is Common
Stock issuable upon conversion of debt securities which are also
being registered) (a "Public Offering"), Novistar shall, at such
time, promptly give each Holder written notice of such registration.
Upon the written request of each Holder given within twenty (20) days
after mailing of such notice by Novistar in accordance with Section
6.7, Novistar shall, subject to the provisions of this Section 2.2,
cause to be registered in the Public Offering all of the Registrable
Securities that each such Holder has requested to be registered;
provided, however, that if the underwriter managing such registration
delivers written notification to Novistar that market or economic
conditions limit the amount of securities which may reasonably be
expected to be sold, the underwriter may limit or exclude all
Registrable Securities from the registration and underwriting, unless
the registration is the second or any subsequent Novistar-initiated
Public Offering, in which case the underwriter may not reduce the
aggregate value of Registrable Securities to be included in such
registration by Holders to less than twenty-five percent (25%) of the
total value of all securities included in such registration. Novistar
shall so advise all Holders of securities requesting registration,
and the number of shares that are entitled to be included in the
registration shall be allocated first to Novistar for all securities
being sold for its own account and second to all Holders of
Registrable Securities for which registration is requested. The
number of shares of Registrable Securities that are included in such
registration shall be allocated among all Holders thereof in
proportion to the amount of Registrable Securities held by each
Holder.
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(b) If any Person does not agree to the proposed price range at which the
Registrable Securities are proposed to be sold or the proposed terms
of any underwriting agreement within ten (10) days of notice of such
price range and the terms of such underwriting agreement, said Person
shall be excluded from the underwriting upon written notice from
Novistar or the underwriter. If any shares of Registrable Securities
are so excluded from the registration and if the number of shares of
Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, Novistar shall
then offer to all Persons who have retained the right to include
Registrable Securities in the registration the right to include
additional Registrable Securities in an aggregate amount equal to the
number of shares excluded, with such shares to be allocated among the
Persons requesting additional inclusion on a pro rata basis.
(c) Novistar shall have the right to terminate or withdraw any
registration initiated by it under this Section 2.2 prior to the
effectiveness of such registration whether or not any Holder has
elected to include Registrable Securities in such registration. The
registration expenses of such withdrawn registration shall be borne by
Novistar in accordance with Section 2.7 hereof.
2.3. FORM S-3 REGISTRATION. In case Novistar shall receive from any
Holder or Holders a written request or requests that Novistar effect a
registration on Form S-3 and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, Novistar will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion
of such Holder's or Holders' Registrable Securities as are specified
in such request, together with all or such portion of the Registrable
Securities of any other Holder or Holders joining in such request as
are specified in a written request given within fifteen (15) days
after receipt of such written notice, referenced in (a) above, from
Novistar; provided, however, that Novistar shall not be obligated to
effect any such registration, qualification or compliance, pursuant to
this Section 2.3: (1) if Form S-3 is not available for such offering
by the Holders; (2) if the Holders, together with the holders of any
other securities of Novistar entitled to inclusion in such
registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $1,000,000; (3)
if Novistar shall furnish to the Holders a certificate signed by the
Chief Executive Officer or President of Novistar stating that in the
judgment of the Board of Directors of Novistar, it would be
detrimental to Novistar and its business objectives due to a pending
transaction for such Form S-3 registration to be effected at such
time, in which event Novistar shall have the right to defer the filing
of the Form S-3 registration statement for a period of not more than
ninety
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(90) days after receipt of the request of the Holder or Holders
under this Section 2.3; provided, however, that Novistar shall not
utilize this right more than once in any twelve (12) month period; (4)
if Novistar has, within the twelve 12 month period preceding the date
of such request, already effected more than one (1) other registration
on Form S-3 for the Holders pursuant to this Section 2.3; or (5)
Novistar has filed a registration statement within the past one
hundred eighty 180 days.
(c) Subject to the foregoing, Novistar shall file a registration statement
covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request
or requests of the Holders. All expenses incurred in connection with
two (2) registrations requested pursuant to this Section 2.3,
including (without limitation) all registration, filing,
qualification, printer's and accounting fees and the reasonable fees
and disbursements of counsel for the selling Holder or Holders and
counsel for Novistar, but excluding any underwriters' discounts or
commissions associated with Registrable Securities, shall be borne by
Novistar. All expenses incurred in connection with subsequent
registrations requested pursuant to this Section 2.3, including
(without limitation) all registration, filing, qualification,
printer's and accounting fees and the reasonable fees and
disbursements of counsel for the selling Holder or Holders and counsel
for Novistar, but excluding any underwriters' discounts or commissions
associated with Registrable Securities, shall be borne pro rata by the
Holder or Holders participating in the Form S-3 Registration.
Registrations effected pursuant to this Section 2.3 shall not be
counted as demands for registration or registrations effected pursuant
to Sections 2.1 or 2.2.
2.4. REGISTRATION PROCEDURES. Whenever required under this Section 2 to
effect the registration of any Registrable Securities, Novistar shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use its reasonable best efforts (i) to
cause such registration statement to become effective and (ii) to keep
such registration statement effective for a period of up to the
earlier of one hundred twenty (120) days or until the distribution
contemplated in the registration statement has been completed;
provided, however, that such 120-day period shall be extended for a
period of time equal to the period the Holder refrains from selling
any securities included in such registration at the request of the
underwriter in the Public Offering.
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the
provisions of the Act and/or other applicable securities laws with
respect to the disposition of all securities covered by such
registration statement.
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(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the
requirements of the Act and/or other applicable securities laws, and
such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) In the event of any underwritten Public Offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each
Holder participating in such underwriting shall also enter into and
perform its obligations under such an agreement.
(e) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto
is required to be delivered under the Act or other applicable
securities laws 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 the light of the circumstances
then existing.
(f) Use its best efforts to cause all such Registrable Securities
registered pursuant hereunder to be listed on each securities exchange
on which similar securities issued by Novistar are then listed.
(g) Provide a transfer agent and registrar for all Registrable Securities
registered pursuant hereunder not later than the effective date of
such registration.
(h) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Section 2, on the date that
such Registrable Securities are delivered to the underwriters for sale
in connection with a registration pursuant to this Section 2, if such
securities are being sold through underwriters, or, if such securities
are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes
effective, (i) any opinions, dated such date, of the counsel
representing Novistar for the purposes of such registration, in the
form given to underwriters in the offering, addressed to the Holders
requesting registration of Registrable Securities and (ii) a copy of
any letters dated such date, from the independent certified public
accountants of Novistar, in form given by independent certified public
accountants to the underwriters and to the Holders requesting
registration of Registrable Securities.
2.5. FURNISH INFORMATION. It shall be a condition precedent to the
obligations of Novistar to take any action pursuant to this Section 2
with respect to the Registrable Securities of any selling Holder that
such Holder shall furnish to Novistar such information regarding
itself, the Registrable Securities held by it, and the intended method
of disposition of such securities as Novistar may
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reasonably request in writing and as shall be required to effect the
registration of such Holder's Registrable Securities.
2.6. EXPENSES OF DEMAND REGISTRATION. Novistar shall bear all expenses
other than underwriting discounts and commissions incurred in
connection with one (1) demand registration, pursuant to Section 2.1,
including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, fees and
disbursements of counsel for Novistar and the reasonable fees and
disbursements of one (1) counsel for the selling Holders; provided,
however that if the Holders bear all registration expenses for any
registration begun pursuant to Section 2.1 hereof and subsequently
withdrawn by the Holders, such registration shall not be counted as a
requested registration pursuant to Section 2.1; and provided further,
that if at the time of such withdrawal, the Holders have learned of a
material adverse change in the condition, business, or prospects of
Novistar from that known to the Holders at the time of their request
and have withdrawn the request with reasonable promptness following
disclosure by Novistar of such material adverse change, then the
Holders shall not be required to pay any of such expenses and shall
retain their rights pursuant to Section 2.1.
2.7. EXPENSES OF COMPANY REGISTRATION. Novistar shall bear and pay all
expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the
registrations pursuant to Section 2.2 for each Holder, including
(without limitation) all registration, filing, and qualification fees,
printers and accounting fees relating or apportionable thereto and the
reasonable fees and disbursements of one (1) counsel for the selling
Holders selected by them, but excluding underwriting discounts and
commissions relating to Registrable Securities.
2.8. INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 2:
(a) To the extent permitted by law, Novistar will indemnify and hold
harmless each Holder, any underwriter for such Holder and each Person,
if any, who Controls such Holder or underwriter against any losses,
claims, damages, or liabilities (joint or several) to which they may
become subject under the Act, the 1934 Act or other applicable laws,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the 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 (iii) any violation or alleged
violation by Novistar of the Act, the 1934 Act, or any other
applicable securities laws, rules, or regulations; and Novistar will
pay to each such Holder, underwriter or controlling
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Person, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 2.8(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of Novistar
(which consent shall not be unreasonably withheld), provided further
that Novistar shall not be liable in any such case for any such loss,
claim, damage, liability, or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in
connection with such registration by any such Holder, underwriter or
controlling Person; provided, further, that Novistar shall not be
liable to any Person who participates as an underwriter in the
offering or sale of Registrable Securities or any other person, if
any, who controls such underwriter within the meaning of the Act, in
any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense
arises out of such Person's failure to send or give a copy of the
final prospectus, as the same may be then supplemented or amended, to
the Person asserting a violation, at or prior to the written
confirmation of the sale of Registrable Securities to such Person, if
such statement or omission would have been corrected in such final
prospectus.
(b) To the extent permitted by law, each selling Holder will indemnify and
hold harmless Novistar, each of its directors, each of its officers
who has signed the registration statement, each Person, if any, who
controls Novistar, any underwriter, any other Holder selling
securities in such registration statement and any controlling Person
of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the
foregoing Persons may become subject, under the Act, the 1934 Act or
other applicable securities laws, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of
or are based upon any Violation, in each case to the extent (and only
to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder
will pay, any legal or other expenses reasonably incurred by any
Person intended to be indemnified pursuant to this Section 2.8(b), in
connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 2.8(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the
Holder, which consent shall not be unreasonably withheld; provided,
that, in no event shall any indemnity under this Section 2.8(b) exceed
the gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section 2.8
of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any
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indemnifying party under this Section 2.8, deliver to the indemnifying
party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof
with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party (together with all other indemnified parties
which may be represented without conflict by one (1) counsel) shall
have the right to retain one (1) separate counsel, with the fees and
expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying
party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of
the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 2.8, but the
omission so to deliver written notice to the indemnifying party will
not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 2.8.
(d) If the indemnification provided for in this Section 2.8 is held by a
court of competent jurisdiction or an arbitrator to be unavailable to
an indemnified party with respect to any loss, liability, claim,
damage, or expense referred to therein, then the indemnifying party,
in lieu of indemnifying such indemnified party hereunder, shall
contribute to the amount paid or payable by such indemnified party as
a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the
other in connection with the statements or omissions that resulted in
such loss, liability, claim, damage, or expense as well as any other
relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access
to information, and opportunity to correct or prevent such statement
or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public
offering are in conflict with the foregoing provisions, the provisions
in the underwriting agreement shall control.
(f) The obligations of Novistar and Holders under this Section 2.8 shall
survive the completion of any offering of Registrable Securities in a
registration statement under this Section 2, and otherwise.
2.9. REPORTS. With a view to making available to the Holders the benefits
of Rule 144 promulgated under the Act and any other rule or regulation
of the SEC or other
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Governmental Authority that may at any time permit a Holder to sell
securities of Novistar to the public without registration, Novistar
agrees to:
(a) make and keep public information available, (i) as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90)
days after the effective date of the first registration statement
filed by Novistar with the SEC for the offering of its securities to
the general public, and (ii) as is otherwise required under applicable
securities laws which permit a Holder to sell Registrable Securities
without registration;
(b) file with the SEC and other applicable Governmental Authorities in a
timely manner all reports and other documents required of Novistar
under the Act, the 1934 Act and/or other applicable securities laws
at all times after Novistar has become subject to such reporting
requirements; and
(c) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by Novistar
that it has complied with the reporting requirements of SEC Rule 144
(at any time after ninety (90) days after the effective date of the
first registration statement filed by Novistar with the SEC), the Act
and the 1934 Act (at any time after Novistar has become subject to
such reporting requirements), (ii) a copy of the most recent annual or
quarterly report of Novistar and such other reports and documents so
filed by Novistar with the SEC, and (iii) such other information as
may be reasonably requested in availing any Holder of any rule or
regulation of the SEC or other Governmental Authority which permits
the selling of any such securities without registration.
2.10. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause Novistar to
register Registrable Securities pursuant to this Section 2 may be
assigned (but only with all related obligations) by a Holder to a
transferee or assignee of (a) any such securities where the transferee
or assignee is an Affiliate of such Holder, or (b) all such securities
ever held by Holder and its Affiliates, provided: (i) Novistar is,
within thirty (30) days after such transfer, furnished with written
notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being
assigned; (ii) such transferee or assignee agrees in writing to be
bound by and subject to the terms and conditions of this Agreement;
and (iii) such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by
the transferee or assignee is restricted under the Act or other
applicable securities laws.
2.11. "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that,
during the period of duration specified by Novistar and an underwriter
of Common Stock or other securities of Novistar, following the date of
the first sale to the public pursuant to the first registration
statement of Novistar filed under the Act or other applicable
securities laws, it shall not, to the extent requested by Novistar and
such underwriter, directly or indirectly sell, offer to sell, contract
to sell
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(including, without limitation, any short sale), grant any option to
purchase or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any securities of Novistar held by it at
any time during such period except Common Stock included in such
registration; provided, however, that:
(a) such market stand-off time period shall not exceed the greater of (i)
one hundred eighty (180) days or (ii) such other longer period of time
as may be required under applicable securities laws; and
(b) all officers and directors of Novistar and all other Persons with
registration rights (whether or not pursuant to this Agreement) enter
into similar agreements.
In order to enforce the foregoing covenant, Novistar may impose stop-
transfer instructions with respect to the Registrable Securities of
each Holder until the end of such period. If requested to do so by
Novistar, each Holder shall execute an underwriter's letter in the
customary form prior to the registration of Novistar's initial public
offering.
2.12. TERMINATION OF REGISTRATION RIGHTS. No Holder shall be entitled to
exercise any right provided for in this Section 2 at such time as all
Registrable Securities held by such Holder may be sold pursuant to
Rule 144 or otherwise without restriction under comparable securities
laws, rules or regulations.
3. RIGHT OF FIRST OFFER.
3.1. RIGHT. Subject to the terms and conditions specified in this Section
3, Novistar hereby grants to each Holder a right of first offer with
respect to future sales by Novistar of Novistar Securities. A Holder
shall be entitled to apportion the right of first offer hereby granted
to it among itself and its Affiliates in such proportions as it deems
appropriate.
3.2. PROCEDURE. Each time Novistar proposes to offer any Novistar
Securities, Novistar shall first make an offering of such Novistar
Securities to each Holder in accordance with the following provisions:
(a) Novistar shall deliver a notice pursuant to Section 6.7 ("Novistar
Notice") to the Holders stating (i) its bona fide intention to offer
such Novistar Securities, (ii) the number of such Novistar Securities
to be offered, and (iii) the price and terms, if any, upon which it
proposes to offer such Novistar Securities.
(b) By written notification delivered to Novistar within twenty (20) days
after receipt of the Novistar Notice, the Holder may elect to purchase
or obtain, at the price and on the terms specified in the Novistar
Notice, up to that portion of such Novistar Securities which equals
the proportion that the number of shares of common stock of Novistar
then held by such Holder or issuable upon conversion and exercise of
all convertible and exercisable securities then held by such Holder
bears to the
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total number shares of Common Stock of Novistar then outstanding
(assuming full conversion and exercise of all convertible or
exercisable securities).
(c) If all Novistar Securities referred to in the Novistar Notice are not
elected to be obtained as provided in Section 3.2(b) hereof, Novistar
may, during the one hundred twenty (120) day period following the
expiration of the period provided in Section 3.2(b) hereof, offer the
remaining unsubscribed portion of such Novistar Securities to any
Person or Persons at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Novistar Notice;
provided that each purchaser of the Novistar Securities agrees in
writing to be bound by and subject to the terms of this Agreement. If
Novistar does not enter into an agreement for the sale of the Novistar
Securities within such period, or if such agreement is not consummated
within thirty (30) days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Novistar Securities
shall not be offered unless first reoffered to the Holders in
accordance herewith.
3.3. EXEMPT ISSUANCES. The right of first offer in this Section 3 shall
not be applicable to (a) the issuance or sale of shares of Common
Stock (or options therefor) to employees, consultants and directors
for the primary purpose of soliciting or retaining their employment,
(b) a Public Offering, (c) the issuance of securities pursuant to the
conversion or exercise of convertible or exercisable securities, (d)
the issuance of securities in connection with a bona fide business
acquisition of or by Novistar, whether by merger, consolidation, sale
of assets, sale or exchange of stock or otherwise, (e) the issuance of
stock, warrants or other securities or rights to Persons in connection
with a bank line of credit or equipment financing, or (f) the issuance
of stock, warrants or other securities, other than for cash, to
customers of Novistar.
3.4. ASSIGNMENT. The right of first offer set forth in this Section 3 may
be assigned or transferred by a Holder to a transferee or assignee of
(a) any Registrable Securities where the transferee or assignee is an
Affiliate of such Holder, or (b) all Registrable Securities ever held
by such Holder and its Affiliates, provided: (i) Novistar is, within
thirty (30) days after such transfer, furnished with written notice of
the name and address of such transferee or assignee and the securities
with respect to which such right of first offer is being assigned, and
(ii) such transferee or assignee agrees in writing to be bound by and
subject to the terms and conditions of this Agreement.
4. RIGHT OF FIRST REFUSAL AND CO-SALE.
4.1. HOLDER NOTICE. If any Holder proposes to sell or transfer any
Novistar Securities (the "Selling Holder"), then the Selling Holder
shall deliver a notice in accordance with Section 6.7 (the "Holder
Notice") to Novistar and the other Holders stating (i) its bona fide
intention to sell or transfer such Novistar Securities, (ii) the
number of shares of Novistar Securities to be sold or transferred,
(iii) the name
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and address of each prospective purchaser or transferee, and (iv) the
price and terms upon which the Selling Holder proposes to sell or
transfer such Novistar Securities.
4.2. PROCEDURE. By written notification delivered to the Selling Holder
and Novistar within thirty (30) days after receipt of the Holder
Notice, the Holder may elect to:
(a) Purchase or obtain, at the price and upon the terms specified in the
Holder Notice, up to that portion of such Novistar Securities which
equals the proportion that the number of shares of Common Stock of
Novistar then held by such Holder or issuable upon conversion and
exercise of all convertible or exercisable securities then held by
such Holder bears to the total number of shares of common stock of
Novistar then outstanding (assuming full conversion and exercise of
all convertible or exercisable securities), or
(b) Participate in such sale or transfer on the same terms and conditions
as specified in the Holder Notice, by selling or transferring up to
that portion of such Novistar Securities which equals the proportion
that the number of shares of Common Stock of Novistar then held by
such Holder or issuable upon conversion and exercise of all
convertible or exercisable securities then held by such Holder bears
to the total number of shares of common stock of Novistar then
outstanding (assuming full conversion and exercise of all convertible
or exercisable securities). The proceeds of any sale made by the
Selling Holder without compliance with this Section 4(b) shall be
deemed to be held in constructive trust in such amount as would have
been due the other Holders if the Selling Holder had complied with
this Section 4(b).
4.3. TERMINATION OF RIGHTS. All rights of first refusal and co-sale
granted under this Section 4 shall terminate upon the earliest to
occur of (a) the closing of the Public Offering, (b) the dissolution
of Novistar, or (c) the effective date of a consolidation or merger
with or into another corporation as a result of which the stockholders
of Novistar prior to such transaction own less than 50% of the
outstanding stock of the surviving corporation.
4.4. ASSIGNMENT. The rights of first refusal and co-sale set forth in
this Section 4 may be assigned or transferred by a Holder to a
transferee or assignee of (a) any Registrable Securities where the
assignee or transferee is an Affiliate of such Holder, or (b) all
Registrable Securities ever held by such Holder and its Affiliates,
provided (i) Novistar and the other Holders are, within thirty (30)
days after such transfer, furnished with written notice of the name
and address of such transferee or assignee and the securities with
respect to which such right of first refusal is being assigned, and
(ii) such transferee or assignee agrees in writing to be bound by and
subject to the terms and conditions of this Agreement.
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5. OTHER COVENANTS AND AGREEMENTS.
5.1. NO PUBLIC ANNOUNCEMENT. The parties shall make no public announcement
concerning this Agreement, their discussions or any other memos,
letters or agreements, between the parties relating to their ownership
of or involvement in Novistar until such time as they agree to the
contents of a mutually satisfactory press release. Any of the parties,
but only after reasonable consultation with the others, may make
disclosure to the extent required under applicable laws.
5.2. DELIVERY OF FINANCIAL STATEMENTS. So long as a Holder holds at least
ten percent (10%) of the outstanding Series A Preferred Stock,
Novistar shall deliver to each such Holder:
(a) as soon as is practicable, but in any event within ninety (90)
days after the end of each fiscal year of Novistar, financial
statements for such fiscal year including, but not limited to, a
balance sheet of Novistar as of the end of such year, and income
and cash flow statements for such fiscal year period, with such
year-end financial reports to be in reasonable detail, prepared
in accordance with GAAP, and audited and certified by independent
public accountants of internationally recognized standing
selected by Novistar;
(b) within thirty (30) days of the end of each monthly account
period, unaudited monthly reports including, but not limited to,
a balance sheet, income and cash flow statements and comparison
to year earlier results and to projected results on a monthly and
year-to-date basis;
(c) as soon as practicable, but in any event thirty (30) days prior
to the end of each fiscal year, a budget and business plan for
the next fiscal year, and, as soon as prepared, any other
budgets, revised budgets or, business plans or revised business
plans prepared by Novistar;
(d) such other information relating to the financial condition,
business, prospects or corporate affairs of Novistar as the
Holder may from time to time reasonably request, provided,
however, that Novistar shall not be obligated under this
subsection (d) to provide information which it deems in good
faith to be a trade secret, similar confidential information,
unreasonably burdensome to provide, or would interfere with its
business operations.
5.3. INSPECTION. Novistar shall permit each Holder, at such Holder's
expense, to visit and inspect Novistar's properties, to examine its
books of account and records and to discuss Novistar's affairs,
finances and accounts with its officers, all at such reasonable times
during normal business hours as may be requested by the Holder;
provided, however, that Novistar shall not be obligated pursuant to
this Section 5.3 to provide access to any information which it
reasonably considers to be a trade secret or similar confidential
information.
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5.4. TERMINATION OF INFORMATION AND INSPECTION COVENANTS. The covenants
set forth in Section 5.2 and Section 5.3 shall terminate as to Holders
and be of no further force or effect when a Public Offering is
consummated.
5.5. BOARD OF DIRECTORS OF NOVISTAR. So long as Oracle and its Affiliates
hold more than two percent (2%) of Common Stock or securities
convertible into Common Stock on a fully-diluted basis, Oracle shall
be entitled to nominate and have elected to the Board of Directors of
Novistar the higher of: one (1) director, or the number of directors
equal to its percentage of ownership of Common Stock or securities
convertible into Common Stock on a fully-diluted basis, and the
parties to this Agreement shall each vote such number of Novistar
securities owned by them as may be necessary to elect the director or
directors nominated by Oracle.
6. GENERAL PROVISIONS.
6.1. AMENDMENT AND WAIVER. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of Novistar, Holders of
at least fifty (50%) percent of the then outstanding Registrable
Securities beneficially owned by Holders, and Oracle for as long as
Oracle owns more than five percent (5%) of Registrable Securities
originally issued to Oracle at the Closing as defined in the Asset
Agreement. Any amendment or waiver effected in accordance with this
Section 6.1 shall be binding upon each holder of any Registrable
Securities then outstanding, each future holder of all such
Registrable Securities, and Novistar.
6.2. NO ASSIGNMENT. Except as expressly permitted in this Agreement, no
party may assign or otherwise transfer any rights, interests or
obligations under this Agreement without the prior written consent of
the other parties, which consent may be withheld in the sole and
absolute discretion of such parties for any reason whatsoever or for
no reason, and any attempted assignment in violation of this provision
shall be void and of no effect.
6.3. SEVERABILITY. If any provision of this Agreement, or the application
thereof, shall for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such
provision to other Persons or circumstances shall be interpreted so as
best to reasonably effect the intent of the parties hereto. The
parties further agree to replace such void or unenforceable provision
of this Agreement with a valid and enforceable provision which will
achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
6.4. ENTIRE AGREEMENT. This Agreement, the exhibits hereto, the documents
and agreements referred to herein (as amended hereunder) and the
exhibits thereto, constitute the entire understanding and agreement of
the parties hereto with respect to the subject matter hereof and
thereof and supersede all prior and
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contemporaneous agreements or understandings, inducements or
conditions, express or implied, written or oral, between the parties
with respect hereto and thereto. To the extent that the terms of this
Agreement conflict with the terms of any document or agreement
referred to herein, the terms of this Agreement shall control.
6.5. EXPENSES. Except as provided to the contrary herein, each party
shall pay all of its own costs and expenses with respect to the
negotiation, execution and delivery of this Agreement and exhibits
hereto.
6.6. GOVERNING LAW. This Agreement shall be governed by, and construed in
all respects in accordance with, the laws of Delaware, without regard
to the principles of conflicts of laws thereof.
6.7. NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and shall be delivered by personal
delivery, an internationally recognized courier such as DHL or Federal
Express, facsimile or first class registered or certified mail,
postage prepaid, addressed as follows:
If to Torch to: Torch Energy Advisors Incorporated
1221 Lamar, Suite 1600
Houston, Texas 77010
Attention: Roland E. Sledge, Esq.
Facsimile: (713) 655-1711
If to Oracle to: Oracle Corporation
500 Oracle Parkway 5op7
Redwood Shores, California 94065
Attention: General Counsel
Facsimile No.: (650) 506-7114
If to Novistar to:
Novistar, Inc.
1331 Lamar, Suite 1650
Houston, Texas 77010
Attention: Roland E. Sledge, Esq.
Facsimile No.: (713) 655-1711
or at such other address as the intended recipient previously shall have
designated by written notice to the other party. Notice by registered
or certified mail shall be effective on the date it is officially
recorded as delivered to the intended recipient by return receipt or
equivalent, and in the absence of such record of delivery, the
effective date shall by presumed to have been the fifth (5th) business
day after it was deposited in the mail. All notices and other
communications required or contemplated by this Agreement delivered in
person or sent by an internationally recognized courier shall be
deemed to have been delivered to and received by the
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addressee and shall be effective on the date of personal delivery.
Notices delivered by confirmed facsimile shall be deemed delivered to
and received by the addressee and effective on the date sent. Notice
not given in writing shall be effective only if acknowledged in
writing by a duly authorized representative of the party to whom it
was given.
6.8. HEADINGS. The titles of the Sections of this Agreement are for
convenience of reference only and are not to be considered in
construing this Agreement.
6.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which
together shall constitute one instrument. Execution and delivery of
this Agreement by exchange of facsimile copies bearing the facsimile
signature of a party hereto shall constitute a valid and binding
execution and delivery of this Agreement by such party. Such
facsimile copies shall constitute enforceable original documents.
6.10. CONSTRUCTION. This Agreement has been negotiated by the respective
parties hereto and their attorneys and the language hereof shall not
be construed for or against any party.
6.11. NO AGENCY. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party
shall have any power or authority to bind or commit any other. No
party shall hold itself out as having any authority or relationship in
contravention of this Section 6.11.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first written above.
ORACLE CORPORATION,
a Delaware corporation
By: /s/ Matt Mosman
-------------------------
Its: Senior Vice President, Corporate Development
TORCH ENERGY ADVISORS INCORPORATED
a Delaware corporation
By: /s/ Jean M. Gallagher
-------------------------
Its: Managing Director and Chief Administrative Officer
NOVISTAR, INC.
a Delaware corporation
By: /s/
----------------------
Its: President and CEO
