SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): June 10, 1998
3DX TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
DELAWARE 000-21841 76-0386601
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation) File Number) Identification No.)
12012 WICKCHESTER
SUITE 250
HOUSTON, TEXAS 77079
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (281) 579-3398
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ITEM 5. OTHER EVENTS.
On June 10, 1998, 3DX Technologies Inc., a Delaware corporation
(the "Company"), entered into a Common Stock Subscription Agreement dated June
3, 1998 (the "Purchase Agreement") with CWS Limited-Liability Company,
Minnowburn Corp. and Susan Morrice, et al. (each, a "Purchaser" and collectively
the "Purchasers"). The Purchase Agreement provides for, among other things, the
purchase by the Purchasers of an aggregate of 1,462,044 shares (the "Shares") of
the Company's common stock, par value $.01 per share (the "Common Stock"), at a
purchase price of $1.50 per Share. The Purchase Agreement also grants to the
Purchasers an option (the "Option") to purchase, subject to stockholder
approval, up to an aggregate of 1,871,290 additional shares of Common Stock (the
"Option Shares"), at a purchase price of $1.50 per share. The Purchasers are
required to give notice to the Company of their intent to exercise this Option
within 60 days following the closing under the Purchase Agreement. The Option
may be reduced by an aggregate total of 935,645 shares in the event that the
Company receives on offer to purchase shares of Common Stock at or above $1.50
per share and the Purchasers do not elect to exercise their Option for an
equivalent number of shares.
The Purchase Agreement grants the Purchasers the right, subject
to stockholder approval, to receive certain additional shares of Common Stock
(the "Dilution Shares") in the event of certain dilutive issuances at less than
$1.50 per share of Common Stock (or per equivalent share of Common Stock in the
case of certain convertible or similar securities) which may be made by the
Company and grants to the Purchasers the right, subject to stockholder approval,
to receive additional shares of Common Stock (the "Penalty Shares") in the event
that the Company fails to meet certain timing requirements with respect to the
filing and effectiveness of the resale registration statement described below.
The Purchase Agreement also requires the Company to submit to its
stockholders, a proposal for the adoption and approval of a one-for-five reverse
stock split with respect to all of the outstanding Common Stock of the Company
(the "Reverse Stock Split") and to use its reasonable best efforts (consistent
with applicable fiduciary duties) to cause the stockholders to approve such
proposal. The Board of Directors of the Company has approved the Reverse Stock
Split. The Company is also required to hold a meeting of the Company's
stockholders (the "Special Meeting") that will include a stockholder vote on the
Reverse Stock Split and approval of the Purchase Agreement and the issuance of
the Option Shares, the Dilution Shares, and the Penalty Shares.
The Company has agreed to file a registration statement relating
to the resale of the Shares and the Option Shares, the Dilution Shares, and the
Penalty Shares in accordance with the terms of the Purchase Agreement. The
Company has agreed to pay the Registration Expenses (as defined in the Purchase
Agreement) associated with such registration and to indemnify the Purchasers
from certain liabilities associated therewith.
Under the Purchase Agreement, for so long as the Purchasers own
at least 80% of the shares purchased under the Purchase Agreement or 25% of the
outstanding shares of Common Stock,
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whichever is less, then, at the Purchasers' option, either (i) a designated
representative of the Purchasers is entitled to attend (but not to vote at) all
meetings of the Board of Directors of the Company and each meeting of any
committee thereof and receive information with respect thereto or (ii) the Board
of Directors of the Company will take all actions necessary to appoint to the
Board of Directors, one designee of the Purchasers who must be reasonably
acceptable to the Board of Directors.
Each Purchaser, other than Centennial Energy Partners, L.P.,
Tercentennial Energy Partners, L.P., Quadrennial Partners, L.P., Centennial
Overseas Fund, LTD and Investment 11, LLC (collectively "Centennial"), has
separately agreed that, for so long as the Purchasers in the aggregate own more
than 30% of the issued and outstanding Common Stock of the Company and until the
expiration of one year from the date of the Purchase Agreement, neither the
Purchaser nor any of its affiliates nor associates will, without the prior
consent of the Board of Directors, other than as specifically contemplated by
the Purchase Agreement (i) become the beneficial owner of any voting securities
or rights to acquire any voting securities of the Company other than the
acquisition of beneficial ownership of an additional 1,000,000 shares of Common
Stock in the aggregate for all Purchasers, or (ii) otherwise act, alone or in
concert with others seeking to control the management, Board of Directors or
policies of the Company. The Purchasers are released from these restrictions on
the first to occur of (i) the Company being in default (after expiration of all
grace periods) under its credit agreement with NationsBank of Texas, N.A., et.
al. dated December 18, 1997, and (ii) the Company's suffering certain material
adverse changes from the date of the Purchase Agreement.
The Purchase Agreement also provides that, for a period of 60
days from the date of the Purchase Agreement, the Company will not, directly or
indirectly, solicit, initiate or engage in any discussions or negotiations with
any person or entity regarding any merger, consolidation or business combination
involving the Company or the sale, transfer or assignment of all or
substantially all of the assets of the Company. The Company has also agreed,
subject to certain exceptions, that it will not enter into any agreement to sell
more than an additional 1,871,290 shares of Common Stock (which amount is
reduced by any shares for which the Purchasers have given a binding commitment
to purchase, in excess of 935,645) prior to the Option Closing Date (as defined
in the Purchase Agreement).
The Company has also granted the Purchasers a right of first
refusal (which right expires at the time of the Option Closing Date) with
respect to the sale of any project owned by the Company pursuant to a bona fide
written offer.
In connection with the Purchase Agreement, the Purchasers
required certain directors and officers of the Company and an affiliate of a
Purchaser to enter into a voting agreement (the "Voting Agreement") for the
benefit of the Purchasers whereby each of such persons agreed to vote Common
Stock beneficially owned by them in favor of the stock issuances and other
transactions contemplated by the Purchase Agreement at any and all meetings of
the stockholders of the Company and appointed certain representatives of the
Purchasers as their proxy to vote their shares. The parties to such agreement
agreed that until such transactions are consummated, they will not,
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directly or indirectly, (i) grant any proxies or enter into any voting trust or
similar agreement with respect to the voting of such party's Common Stock, (ii)
acquire or sell, assign, transfer or otherwise dispose of any of such party's
Common Stock, or (iii) enter into any contract, option or other arrangement or
understanding with respect to the direct or indirect acquisition or sale,
assignment, transfer or other disposition of any Shares. The parties to the
Voting Agreement and the number of outstanding shares of common stock
beneficially owned by each that are subject to the Voting Agreement are as
follows: C. Eugene Ennis - 269,267 shares; Peter M. Duncan - 355,448 shares;
Douglas C. Nester - 357,448 shares; Joseph Schuchardt, III - 41,699 shares; Jon
W. Bayless - 749,025 shares; Douglas C. Williamson - 721,903 shares; Ronald P.
Nowak - 50,000 shares; Charles E. Edwards - 17,002 shares; Peter K. Seldin -
365,159 shares. (2,926,951 shares in the aggregate). Such shares, when added to
the 1,462,044 shares purchased by the Purchasers prior to the Special Meeting,
would constitute approximately 49.8% of the 8,810,941 shares of Common Stock
expected to be outstanding after the initial issuance of Shares under the
Purchase Agreement.
The Company has also agreed to pay all account balances that the
Company has with Aspect Resources LLC, Esenjay Petroleum Corporation and Esenjay
Exploration, Inc. within ten days of the Closing Date. In addition, the Company
expects to use the proceeds of the offering for payment of certain other
obligations relating to exploration operations and to continue the drilling of
its prospect portfolio.
The descriptions of the Purchase Agreement and the Voting
Agreement set forth herein do not purport to be complete and are qualified in
their entirety by the provisions of each of the Purchase Agreement and the
Voting Agreement, a copy of each of which have been filed as Exhibit 99.1 and
Exhibit 99.2 hereto, respectively, and which are incorporated by reference
herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
99.1 Common Stock Subscription Agreement dated as of June 3, 1998
among the Company, Susan Morrice, Minnowburn Corp., CWS
Limited-Liability Company, Centennial Energy Partners, L.P.,
Tercentennial Energy Partners, L.P., Quadrennial Partners, L.P.,
Centennial Overseas Fund, LTD, and Investment 11, LLC, Donald D.
Wolf, Altira Group LLC, James R. Newell, Alex B. Campbell, Paul
D. Favret and Wayne W. Williamson.
99.2 Voting Agreement dated as of June 3, 1998 among C. Eugene Ennis,
Peter M. Duncan, Douglas C. Nester, Joseph Schuchardt, III, Jon
W. Bayless, Douglas C. Williamson, Ronald P. Nowak, Charles E.
Edwards and Peter K. Seldin.
99.3 Press Release dated June 10, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
3DX TECHNOLOGIES INC.
By: /s/ RUSSELL L. ALLEN
Name: Russell L. Allen
Title: Vice President of Finance
and Chief Financial Officer
Date: June 15, 1998
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EXHIBIT 99.1
3DX TECHNOLOGIES INC.
COMMON STOCK SUBSCRIPTION AGREEMENT
June 3, 1998
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TABLE OF CONTENTS
PAGE
SECTION 1 Authorization and Sale of Common Stock.........................1
1.1 Authorization..................................................1
1.2 Sale of Shares.................................................1
1.3 Antidilution Adjustment........................................1
1.4 Penalty Shares.................................................2
1.5 Reverse Stock Split............................................2
1.6 Stockholder Approval; Preparation of Proxy Statements.........2
1.7 Board Access. .................................................3
1.8 Standstill.....................................................4
1.9 Option.........................................................5
1.10 Exclusivity....................................................5
1.11 Right of First Refusal.........................................6
SECTION 2 Closing Date; Payment and Delivery.............................6
2.1 Closing Date...................................................6
2.2 Payment and Delivery...........................................6
2.3 Payment and Delivery for Option Shares.........................7
SECTION 3 Representations and Warranties of the Company..................7
3.1 Organization...................................................8
3.2 Capitalization.................................................8
3.3 Authorization..................................................8
3.4 No Conflict....................................................8
3.5 Accuracy of Reports............................................9
3.6 Registration Rights............................................9
3.7 Governmental Consents, etc.....................................9
3.8 Litigation.....................................................9
3.9 Investment Company.............................................9
3.10 Financial Statements...........................................9
3.11 Employee Benefits.............................................10
3.12 Environmental Condition.......................................12
3.13 Business......................................................12
3.14 Gas Contracts.................................................12
3.15 Patents, Trademarks and Other Intangible Assets...............13
3.16 Title to Properties; Liens and Encumbrances...................13
3.17 Taxes.........................................................14
3.18 Interested Party Transactions.................................15
3.19 Reserve Report................................................15
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PAGE
SECTION 4 Representations and Warranties of the Purchasers..............15
4.1 Investment....................................................15
4.2 Accredited Investor...........................................16
4.3 Authority.....................................................16
4.4 Government Consents, etc......................................16
4.5 Investigation.................................................17
4.6 Short Selling.................................................17
4.7 Affiliate Status..............................................17
SECTION 5 Conditions to Obligations of the Purchasers...................17
5.1 Conditions to Obligations of the Purchasers...................17
SECTION 6 Conditions to Obligations of Company..........................18
6.1 Conditions to Obligations of Company..........................18
SECTION 7 Definitions...................................................19
7.1 Certain Definitions...........................................19
SECTION 8 Covenants.....................................................20
8.1 Registration Rights...........................................20
8.2 Disposition...................................................27
8.3 Other Registration Rights.....................................27
SECTION 9 Miscellaneous.................................................28
9.1 Termination of Agreement......................................28
9.2 Governing Law.................................................28
9.3 Survival; Reliance............................................28
9.4 Successors and Assigns........................................28
9.5 Notices and Dates.............................................28
9.6 Specific Performance..........................................29
9.7 Further Assurances............................................29
9.8 Counterparts..................................................30
9.9 Severability..................................................30
9.10 Captions......................................................30
9.11 Public Statements.............................................30
9.12 Brokers.......................................................30
9.13 Costs and Expenses............................................31
9.14 No Third-Party Rights.........................................31
9.15 Entire Agreement; Amendment...................................31
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Exhibits
Exhibit A List of Purchasers
Exhibit B Schedule of Exceptions
Exhibit C Additional Information
Exhibit D Opinion of Company Counsel
Exhibit E Projects
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COMMON STOCK SUBSCRIPTION AGREEMENT
THIS COMMON STOCK SUBSCRIPTION AGREEMENT (the "Agreement") is made as of
June 3, 1998, by and among 3DX TECHNOLOGIES INC., a Delaware corporation (the
"Company"), and those persons set forth on EXHIBIT A (collectively the
"Purchasers" and each individually a "Purchaser").
SECTION 1
AUTHORIZATION AND SALE OF COMMON STOCK
1.1 AUTHORIZATION. The Company has authorized the sale and issuance of
up to 3,333,334 shares of its Common Stock, $.01 par value per share (the
"Common Stock") in accordance with the provisions of Sections 1.2 and 1.9, and
has authorized the potential issuances under Sections 1.3 and 1.4.
1.2 SALE OF SHARES. Subject to the terms and conditions hereof, the
Company will issue and sell to the Purchasers and the Purchasers severally will
buy from the Company: (a) the number of shares of Common Stock (the "Shares")
(an aggregate of 1,462,044 Shares) in the respective amounts set forth opposite
each Purchaser's name on EXHIBIT A at a purchase price of $1.50 per share, or an
aggregate purchase price as set forth on EXHIBIT A.
1.3 ANTIDILUTION ADJUSTMENT. The Company grants to the Purchasers pro
rata, based upon the number of Shares purchased, the right to receive additional
shares of Common Stock as set forth in this Section (the "Antidilution Rights").
If within six months following the Closing Date (as defined in Section 2.1), the
Company (i) issues shares of Common Stock (other than as contemplated by this
Agreement) in excess of 100,000 shares (and exclusive of share issuances
pursuant to the Company's existing benefit plans) or other securities
convertible into shares of Common Stock at a price, or in the case of
convertible securities with any conversion price, per share of Common Stock that
is less than $1.50, or (ii) participates in, or enters into negotiations for, a
merger, consolidation or other business combination transaction that is
consummated (even if consummated beyond such six-month period) whereby the other
party to such transaction acquires more than 50% of the Company's then issued
and outstanding Common Stock or substantially all of the Company's assets, which
transaction results in the Company's Common Stockholders receiving consideration
with a fair market value per share (determined in good faith by the Company's
Board of Directors after consultation with the Purchasers) that is less than
$1.50, then each Antidilution Right shall without further action on behalf of
any party, be automatically converted into the right to receive from the
Company, and the Company will issue, additional shares of Common Stock to each
Purchaser as a holder of an Antidilution Right (the "Dilution Shares") in an
amount equal to (a) the aggregate purchase price hereunder paid by such
Purchaser (including any amount paid by such Purchaser upon exercise of the
Option (as defined in Section 1.9 hereof)) divided by such lesser price, less
(b) the number of shares originally issued to such Purchaser at the Closing and
pursuant to the Option, if applicable. In the case of any issuance of additional
shares resulting from a
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transaction described in clause (i) hereof, such issuance shall be made promptly
after such transaction. In the case of any issuance of additional shares
resulting from a transaction described in clause (ii) hereof, such issuance
shall be made immediately prior to the closing of such transaction. The
Antidilution Rights are not transferable apart from the underlying Shares to
which they relate and the Dilution Shares shall only be issued in the event of
Stockholder Approval of such issuance.
1.4 PENALTY SHARES. The Company grants to the Purchasers pro rata based
upon the number of shares purchased, the right to receive additional shares of
Common Stock as set forth in this Section (the "Penalty Rights"). If the Company
is unable to cause a registration statement described in Section 8 to be filed
with the Securities and Exchange Commission (the "SEC") and to be declared
effective within 120 days following the Option Closing Date, at the expiration
of such 120-day period, then each Penalty Right shall without further action on
behalf of any party, be automatically converted into the right to receive from
the Company, and the Company will issue, additional shares of Common Stock (the
"Penalty Shares") to each Purchaser as a holder of a Penalty Right equal to (i)
the total aggregate consideration paid by such Purchaser pursuant to Section 1.2
and the Option, if applicable divided by $1.20 less (ii) the total number of
shares issued to such Purchaser pursuant to Section 1.2 and the total number of
shares issued pursuant to such Purchaser's Option, if applicable. The Penalty
Rights are not transferable apart from the Shares to which they relate and the
Penalty Shares shall only be issued in the event of Stockholder Approval of such
issuance.
1.5 REVERSE STOCK SPLIT. The Company shall submit to its stockholders, a
proposal for the adoption and approval of a one for five reverse stock split
with respect to all of the outstanding Common Stock (the "Reverse Stock Split")
and shall use its reasonable best efforts (consistent with applicable fiduciary
duties) to cause the stockholders to approve such proposal. The transactions
contemplated hereby are not conditioned in any manner whatsoever on stockholder
approval or implementation of the Reverse Stock Split; provided, however, that
in the event that the Company shall effectuate the Reverse Stock Split prior to
the consummation of a particular transaction contemplated hereby, the number of
shares of Common Stock sold and purchased hereunder or otherwise issued in
accordance with this Section 1, shall be adjusted accordingly and appropriate
adjustments shall be made in all other portions of this Agreement for stock
price and number of shares to take into account any Recapitalization. As used in
this Agreement, "Recapitalization" means any stock split, reverse stock split
(including the Reverse Stock Split), stock dividend, stock combination or
similar event.
1.6 STOCKHOLDER APPROVAL; PREPARATION OF PROXY STATEMENTS.
(a) The Company shall, as soon as practicable following the
Closing Date duly call, give notice of, convene and hold a meeting of the
Company's stockholders (the "Stockholders Meeting") that will include the
following agenda items: (i) approving this Agreement, the issuance of the Option
and the Common Stock issuable thereunder, the issuances of the Dilution Shares
and the Penalty Shares, if any, and transactions contemplated thereby and, if
desired by the Company, the other transactions contemplated by this Agreement
and (ii) approving the Reverse Stock Split.
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For purposes of this Agreement, any proposal or item submitted to the
stockholders of the Company for approval shall be approved by the stockholders
if, at the Stockholders Meeting at which a quorum is present, the proposal or
item receives the minimum vote required for approval of such proposal or item
under the Company's charter or Bylaws and under applicable laws and regulations
binding on the Company ("Stockholder Approval").
(b) The Company shall prepare and file with the SEC a proxy
statement relating to the Stockholders Meeting (such proxy statement as amended
or supplemented from time to time, the "Proxy Statement"). The Purchasers will
cooperate in the preparation of the Proxy Statement and will as promptly as
practicable after the date hereof furnish all such data and information relating
to them as the Company may reasonably request for the purpose of including such
data and information in the Proxy Statement. The Company shall notify the
Purchasers of the receipt of any comments of the SEC with respect to the Proxy
Statement and of any requests by the SEC for any amendment or supplement thereto
or for additional information and shall provide to the Purchasers promptly
copies of all correspondence to and from the SEC with respect to the Proxy
Statement. The Company shall give the Purchasers and their counsel the
opportunity to review the Proxy Statement and, to the extent it does not cause a
delay, all responses to requests for additional information by and replies to
comments of the SEC before their being filed with, or sent to, the SEC. The
Company agrees to use its commercially reasonable efforts to respond promptly to
all such comments of and requests by the SEC and to cause the SEC's review of
the Proxy Statement to be completed at the earliest practicable time. The
information included in the Proxy Statement shall not, on the date the Proxy
Statement is first mailed to stockholders of the Company, at the time of the
Stockholders Meeting, and at the Option Closing Date, contain any statement
which, at such time and in light of the circumstances under which it shall be
made, is false or misleading with respect to any material fact, or omit to state
any material fact necessary in order to make the statements made in the Proxy
Statement not false or misleading, or omit to state any material fact necessary
to correct any statement in any earlier communication with respect to the
solicitation of proxies for the Stockholders Meeting which has become false or
misleading. The Purchasers shall take such action as may be necessary to insure
that any information or data provided by them to the Company in connection with
the Proxy Statement does not contain any untrue statement of a material fact or
omit to state any material fact required to be stated in the Proxy Statement or
necessary to make the statements in the Proxy Statement, in light of the
circumstances under which they were made, not misleading. The Company will use
all commercially reasonable efforts to cause the Proxy Statement to be mailed to
the Company's shareholders promptly following the time that the SEC has advised
the Company that it has either decided not to review or has no further comments
on the Proxy Statement.
1.7 BOARD ACCESS.
(a) For so long as the Purchasers own at least 80% of the shares
purchased hereunder or 25% of the outstanding Common Stock, whichever is less,
then at the Purchasers' option (as specified in a written notice to the
Company), either (i) one person who shall be the Purchasers' designated
representative, shall receive notice of all meetings of the Board of Directors
of the Company and each meeting of any committee thereof and shall be permitted
to attend any or
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all of such board or committee meetings, but shall have no voting rights at any
such meetings or (ii) the Board of Directors of the Company will take all
actions necessary to appoint to the Board one designee of the Purchasers who
must be reasonably acceptable to the Board. In the event of the election of
clause (i), the Company shall provide to the Purchasers' designee copies of all
notices, reports, minutes and consents at the time and in the manner as they are
provided to the Board of Directors or any committee thereof; provided, however,
that the Company shall have the right to withhold any information and to exclude
such Purchaser's designee from any meeting or portion thereof if, in the
Company's reasonable discretion, access to such information or attendance at
such meeting could adversely affect the attorney-client privilege between the
Company and its counsel or would result in disclosure of trade secrets to such
representative or if a Purchaser or the Purchasers' designee is, as to a
particular matter, a direct competitor of the Company or such information to be
disclosed is of an extremely sensitive nature or is a matter in which the
Purchasers have a direct conflict of interest. Each Purchaser agrees that it
will not purchase or sell any securities of the Company or agree to such
purchase or sell securities that are exercisable, convertible or exchangeable
for securities of the Company at such time as it has any material nonpublic
information and that it will comply with all laws, rules and regulations
relating to the trading of securities while in possession of such information,
including without limitation Section 10b and Rule 10(b)-5 under the Exchange
Act. The Company shall be excused from compliance with this Section to the
extent that the Purchasers and their designee do not enter into any requested
confidentiality agreement requested by a third party relating to information
disclosed hereunder. The rights under this Section shall not be assignable.
During the period that the Purchasers are exercising their right to Board access
under this Section, they will comply with all "blackout dates" and other trading
restrictions that are generally applicable to executive officers and directors
of the Company. All designations by the Purchasers under this Section shall be
made by those Purchasers holding a majority of the shares purchased hereunder
that are still held at such time by any Purchaser.
(b) Each Purchaser will hold, and will cause its designee,
officers, directors, employees, accountants, counsel, consultants, advisors, and
agents to hold, in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law, all documents and
information (including without limitation, the information disclosed pursuant to
the preceding paragraph) concerning the Company furnished to the Purchaser in
connection with this Agreement except to the extent that such information can be
shown to have been in the public domain through no fault of the Purchaser;
provided that the Purchaser may disclose such information to its officers,
directors, employees, accountants, counsel, consultants, advisors, and agents in
connection with the transactions contemplated by this Agreement so long as such
Persons are informed by the Purchaser of the confidential nature of such
information and are directed by, and agree with, the Purchaser to treat such
information confidentially in accordance with this Agreement and (without
limiting or waiving the obligation of such other persons) the Purchaser remains
responsible for obligations of such other Persons. The Purchaser will use all
such documents and information solely for any proper purpose as a stockholder of
the Company. The Purchasers' failure to exercise any of its rights under this
Section 1.7 shall not constitute a lapse or waiver of such rights.
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1.8 STANDSTILL. For so long as the Purchasers in the aggregate own more
than 30% of the issued and outstanding Common Stock and subject to the
provisions of subparagraph (b) hereof, each Purchaser separately agrees as
follows: (a) Until the expiration of 1 year from the date hereof, neither the
Purchaser nor any of its affiliates nor associates shall, without the prior
consent or invitation of the Board of Directors of the Company, directly or
indirectly, other than as specifically contemplated by this Agreement (i)
acquire or otherwise become the beneficial owner of any voting securities or
rights to acquire any voting securities of the Company other than the
acquisition of beneficial ownership of any additional 1,000,000 shares of Common
Stock in the aggregate for all Purchasers; or (ii) otherwise act, alone or in
concert with others, to seek to control the management, Board of Directors or
policies of the Company. Each Purchaser (other than Centennial Energy Partners,
L.P., Tercentennial Energy Partners, L.P., Quadrennial Partners, L.P.,
Centenniel Overseas Fund, LTD and Investment II, LLC, collectively "Centennial")
represents that such Purchaser does not beneficially own any securities of the
Company (other that those to be purchased under this Agreement). The provisions
of this Section 1.8 shall not apply to Centennial.
(b) EXCEPTION. Notwithstanding the foregoing, beginning with the
time that is the first to occur of (i) the Company is in default (after
expiration of all grace periods) under the Credit Agreement (as defined herein),
and (ii) the Company has suffered a Material Adverse Change from the date hereof
(which for these purposes shall include, without limitation, the termination of
Ronald P. Nowak's employment (for any reason whatsoever) with the Company or the
termination of employment (for any reason whatsoever) of any three of the five
executive officers of the Company as of the date hereof), nothing in
subparagraph (a) shall apply to the Purchasers and the Purchasers shall not be
subject to the restrictions thereof.
1.9 OPTION. The Company hereby grants to the Purchasers (pro rata to
their acquisition of shares pursuant to Section 1.2 or in such other manner as
the Purchasers shall mutually agree) the option to purchase up to 1,871,290
additional shares of Common Stock at a per share price of $1.50 (the "Option").
The Option will be exercisable in whole or in part (but only upon one exercise)
for a period of 60 days immediately following the Closing Date (the "Option
Period") after which time it shall expire and be of no further effect (it being
understood that the closing of the sale contemplated by the Option will not
occur until among other things, the conditions thereto have been satisfied). The
Option may be exercised in whole or in part by delivering written notice to the
Company within the Option Period. Notwithstanding the foregoing, in the event
the Company receives an offer for the purchase of Common Stock, the Company may
give notice to the Purchasers that it has received an offer for the purchase of
its Common Stock detailing the name of the offeror (an "Offeror"), the number of
shares sought to be purchased, the purchase price per share (which must be at
least $1.50 per share) and any other relevant terms (the "Notice"). Upon receipt
of the Notice, the Purchasers shall have five (5) business days (or such fewer
number of days as remain in the Option Period) to commit to exercise the Option
(the consummation of which exercise will not occur until the Option Closing
Date) for the number of shares indicated in the Notice. In the event that the
Purchasers do not exercise the Option for the number of shares indicated in the
Notice, the Option originally granted to the Purchasers pursuant to this Section
1.9 hereof shall be reduced by the number of shares purchased pursuant to the
offer described in the Notice (but not by an amount in excess of 935,645
shares). Notwithstanding any other provision of this Agreement, the Option
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granted hereunder to the Purchasers shall be assignable or otherwise
transferable only to a transferee that can and does make to the Company the
representations in Section 4 and that agrees to be bound by the provisions of
this Agreement as a Purchaser and which transfer otherwise complies with Section
8.2.
1.10 EXCLUSIVITY. For a period of 60 days from the date of this
Agreement, the Company agrees that it will not (directly or indirectly through
its officers, directors, shareholders, agents, representatives or otherwise)
initiate contact with, continue any further contact with, solicit or encourage
any proposals by, or affirmatively participate in any discussions or
negotiations with or afford any access to the properties, books or records of
the Company to any corporation, natural person or entity regarding any merger,
consolidation or business combinations involving the Company or the sale,
transfer or assignment of all or substantially all of the assets of the Company.
In addition, the Company agrees that prior to the Option Closing Date it will
not enter into any agreement to sell more than 1,871,290 shares of Common Stock
(excluding the shares sold to the Purchasers under this Agreement), which amount
(i) shall include any shares issued to an Offeror pursuant to a Notice delivered
under Section 1.9 hereof, (ii) shall be reduced by any shares purchased under
the Option, or for which the Purchasers (whether one or more) have given a
binding commitment to purchase, in excess of 935,645, and (iii) shall not
include any shares issued under the Company's existing employee benefit plans.
1.11 RIGHT OF FIRST REFUSAL. For a period from the date hereof through
the Option Closing Date, the Company agrees that, after receiving a bona fide
written offer (a "Purchase Offer") with respect to and prior to selling any
project owned by it (whether now owned or hereafter assembled), it shall first
offer to sell such project to the Purchasers by delivering to the Purchasers a
copy of the Purchase Offer and a written notice specifying the right of the
Purchasers to purchase the subject project in accordance with the terms and
provisions of this Section 1.11. The Company's offer to the Purchasers shall be
irrevocable for a period of ten (10) business days from the effective date of
such notice (as specified in Section 9.5 hereof). The Purchasers (whether one or
more) shall exercise the right to purchase in accordance with the terms and
provisions of the Purchase Offer by delivering written notice of exercise within
such 10-day period and by promptly completing the closing (directly or through
an assignee of the Purchasers' rights and obligations hereunder) of the purchase
of such project. If the offer is not timely accepted by one or more of the
Purchasers, the Company shall be entitled to complete the closing in accordance
with the Purchase Offer.
SECTION 2
CLOSING DATE; PAYMENT AND DELIVERY
2.1 CLOSING DATE. The closing under this Agreement with respect to the
sale of the Shares pursuant to Section 1.2 hereof (the "Closing") shall take
place in Houston, Texas at 9:00 a.m. (Houston time) on June 10, 1998 at the
offices of counsel to the Company or at such other times, dates and places upon
which the Company and the Purchasers shall mutually agree (the date of the
Closing is hereinafter referred to as the "Closing Date"). The closing with
respect to the Option (the "Option Closing") shall take place in Houston, Texas
at 9:00 a.m. (Houston time) five days from the
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later of (i) the date the Company receives a binding commitment from the
Purchasers stating that they (whether one or more) elect to exercise the Option,
or (ii) the date of the Stockholders Meeting if the stock issuances under the
Option receive Stockholder Approval. The date of the Option Closing is
hereinafter referred to as the "Option Closing Date;" provided, however, that if
the Option expires unexercised the "Option Closing Date" shall be the last day
of the Option Period and if the stockholders of the Company fail to approve the
stock issuances contemplated by the Option the "Option Closing Date" shall be
the date of the Stockholders Meeting.
2.2 PAYMENT AND DELIVERY. At the Closing, the Purchasers shall transmit
the purchase price in immediately available funds by wire transfer to the
Company. At the Closing the Company will deliver to the Purchasers certificates
representing the Shares. The certificates for Shares shall be subject to a
legend restricting transfer under the Securities Act of 1933, as amended (the
"Securities Act"), and referring to restrictions on transfer herein, such legend
to be substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY AS TO THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION
THAT SUCH REGISTRATION IS NOT REQUIRED AND THAT ANY PROSPECTUS DELIVERY
REQUIREMENTS ARE NOT APPLICABLE.
The Shares may also include any legend required under the laws of any state or
other jurisdiction.
2.3 PAYMENT AND DELIVERY FOR OPTION SHARES. At the Option Closing, the
Purchasers shall transmit the purchase price in immediately available funds by
wire transfer to the Company. At the Option Closing, the Company will deliver to
the Purchasers acquiring the shares under the Option certificates representing
the shares to be issued pursuant to the Option (the "Option Shares") The
certificates for the Option Shares shall be subject to a legend restricting
transfer under the Securities Act of 1933, as amended (the "Securities Act"),
and referring to restrictions on transfer herein, such legend to be
substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY AS TO THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION
THAT SUCH REGISTRATION IS NOT REQUIRED AND THAT ANY PROSPECTUS DELIVERY
REQUIREMENTS ARE NOT APPLICABLE.
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The Option Shares may also include any legend required under the laws of any
state or other jurisdiction.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Schedule of Exceptions attached hereto as
EXHIBIT B, the Company hereby represents and warrants to the Purchasers as
follows:
3.1 ORGANIZATION. The Company is a corporation duly incorporated and
validly existing under the laws of the State of Delaware and is in good standing
under such laws. The Company has all requisite corporate power and authority to
own, lease and operate its properties and assets, and to carry on its business
as presently conducted and as proposed to be conducted. The Company is qualified
to do business as a foreign corporation in each jurisdiction in which the
ownership of its property or the nature of its business requires such
qualification, except where failure to so qualify would not have a material
adverse effect on the Company. The Company has no subsidiaries and owns no
equity interests, or rights convertible into equity interests in any entity.
3.2 CAPITALIZATION. The authorized capital stock of the Company consists
of 20,000,000 shares of Common Stock, $.01 par value per share, of which
7,348,897 shares are issued and outstanding as of the date hereof (prior to the
stock issuances contemplated hereby) and 1,000,000 shares of Preferred Stock,
$.01 par value per share, no shares of which are issued and outstanding as of
the date hereof. All such issued and outstanding shares of Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable and
were issued in compliance with all applicable Federal and state securities laws.
As of the date hereof, the Company has 2,004,937 shares of Common Stock reserved
for issuance under its 1994 Stock Option Plan and options to purchase 1,557,926
shares of Common Stock thereunder, as previously disclosed to the Purchasers,
have been granted and are outstanding. Except as described in this Agreement,
there are no other options, warrants, conversion privileges or other contractual
rights presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of the Company's capital stock or other securities.
3.3 AUTHORIZATION. The Company has all corporate right, power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. All corporate action on the part of the Company, its
directors and stockholders necessary for the authorization, execution, delivery
and performance of this Agreement by the Company, the authorization, sale,
issuance and delivery of the Shares and the performance of the Company's
obligations hereunder has been taken, except that the grant of the Option and
the sale of the Option Shares and the issuance of the Dilution Shares and the
Penalty Shares is subject to Stockholder Approval. This Agreement has been duly
executed and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies, and to limitations
of public policy
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(subject to receipt of Stockholder Approval in the case of the issuance of the
Option Shares, the Dilution Shares and the Penalty Shares). Upon the issuance
and delivery of the Shares and Option Shares as contemplated by this Agreement,
the Shares and Option Shares will be validly issued, fully paid and
nonassessable (subject to receipt of Stockholder Approval in the case of the
issuance of the Option Shares, the Dilution Shares and the Penalty Shares). The
issuance and sale of the Shares contemplated hereby will not give rise to any
preemptive rights or rights of first refusal on behalf of any person.
3.4 NO CONFLICT. Subject to receipt of Stockholder Approval in the case
of the issuance of the Option Shares, the Dilution Shares and the Penalty
Shares, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not result in any
violation of, or default (with or without notice or lapse of time, or both), or
give rise to a right of termination, cancellation or acceleration of any
obligation or to a loss of a benefit, under, any provision of the Company's
Certificate of Incorporation, as amended, or Bylaws of the Company, as amended,
or any mortgage, indenture, lease or other agreement or instrument, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company, its properties or assets, the effect of which would have a
material adverse effect on the Company, its financial condition, results of
operation or prospects, or impair or restrict its power to perform its
obligations as contemplated hereby.
3.5 ACCURACY OF REPORTS. All reports required to be filed by the Company
under the Exchange Act, copies of which have been furnished to the Purchasers,
have been duly filed with the SEC, complied at the time of filing, in all
material respects with the requirements of the Exchange Act and their respective
forms (collectively, the "Reports"), and, except to the extent updated or
superseded by any subsequently filed report, were complete and correct in all
material respects as of the dates at which the information was furnished, and
contained (as of such dates) no untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
3.6 REGISTRATION RIGHTS. Except as set forth in this Agreement, the
Company is not under any obligation to register any of its presently outstanding
securities or any of its securities which may hereafter be issued other than
under (i) the Series C Preferred Stock Purchase Agreement among the Company and
certain of its security holders dated as of July 26, 1995 and (ii) the Stock
Purchase Agreement among the Company and certain of its security holders dated
as of November 9, 1993.
3.7 GOVERNMENTAL CONSENTS, ETC. No consent, approval or authorization of
or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the execution and delivery of
this Agreement, the offer, sale or issuance of the Shares, or the consummation
of any other transaction contemplated hereby, except such filings as may be
required to be made with the SEC and the Nasdaq and with any state or foreign
blue sky or securities regulatory authority.
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3.8 LITIGATION. There is no pending or, to the best of the Company's
knowledge, threatened lawsuit, administrative proceeding, arbitration, labor
dispute or governmental investigation ("Litigation") to which the Company is a
party or by which any portion of its assets taken as a whole may be bound, and
which Litigation if adversely determined would have a material adverse effect on
the Company.
3.9 INVESTMENT COMPANY. The Company is not an "Investment Company"
within the meaning of such term under the Investment Company Act of 1940 and the
rules and regulations of the SEC thereunder.
3.10 FINANCIAL STATEMENTS. The audited balance sheet of the Company at
December 31, 1997, and the related audited statements of operations, cash flows,
and stockholders' equity of the Company for the fiscal year then ended, copies
of which have been furnished to Purchasers, and the balance sheet of the Company
at March 31, 1998, and the related statements of operations and cash flow of the
Company for the three months then ended, copies of which have been furnished to
the Purchasers, fairly present, subject, in the case of the balance sheet at
March 31, 1998, and said statements of income and cash flow for the three months
then ended, to year-end audit adjustments, the financial condition of the
Company at such dates and the results of the operations of the Company for the
periods ended on such dates, and such balance sheets and statements of
operations, cash flows, and stockholders' equity were prepared in accordance
with United States generally accepted accounting principles ("GAAP") (and in
compliance with the regulations promulgated by the SEC). As of April 30, 1998,
the total Long-Term debt of the Company was $2,000,000 determined consistently
with the audited financial statements as of December 31, 1997. Since December
31, 1997, no Material Adverse Change has occurred except as set forth in the
Reports or in this Agreement or on the Exhibits or Schedules hereto. The term
"MATERIAL ADVERSE CHANGE" shall mean (a) a material adverse change in the
business, financial condition, results of operations or prospects of the
Company, or (b) the occurrence and continuance of any event or circumstance
which could reasonably be expected to have a material adverse effect on the
Company's ability to perform its obligations under this Agreement or any
material Agreement of the Company.
3.11 EMPLOYEE BENEFITS.
(a) For purposes of this Section 3.11, the term "Employee Plan"
includes any pension, retirement, savings, disability, medical, dental, health,
life (including, without limitation, any individual life insurance policy under
which any persons currently or formerly employed by the Company ("Employees") is
the named insured and as to which the Company makes premium payments, whether or
not the Company is the owner, beneficiary or both of such policy), death
benefit, group insurance, profit-sharing, deferred compensation, stock option,
bonus, incentive, vacation pay, severance pay, or other employee benefit plan,
trust, arrangement, agreement, policy or commitment (including, without
limitation, any employee pension benefit plan as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") ("Pension
Plan"), and any employee welfare benefit plan as defined in Section 3(1) of
ERISA ("Welfare Plan")), whether or not any of the foregoing is funded or
insured and whether written or oral, which is intended to provide or does in
fact provide benefits to any or all current Employees,
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and (i) to which the Company is party or by which the Company (or any of the
rights, properties or assets of the Company) is bound, (ii) with respect to
which the Company has made any payments, contributions or commitments, or may
otherwise have any liability (whether or not the Company still maintains such
plan, trust, arrangement, contract, agreement, policy or commitment) or (iii)
under which any current director, Employee or agent of the Company is a
beneficiary as a result of his or her employment or affiliation with the
Company.
(b) With respect to any Employee, the Company has no obligation
to contribute to (or any other liability with respect to) any funded or unfunded
Welfare Plan, whether or not terminated, which provides medical, health, life
insurance or other welfare-type benefits for current or future retirees or
current, future or former Employees (including their dependents and spouses)
except for limited continued medical benefit coverage for former Employees,
their spouses and their other dependents as required to be provided under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
and the Company is in compliance in all material respects with the continued
medical and other welfare benefit coverage requirements of COBRA and all other
applicable laws.
(c) With respect to any Employee, the Company does not maintain,
contribute to or have any material liability under (or with respect to) any
Pension Plan which is a tax qualified "defined benefit plan" (as defined in
Section 3(35) of ERISA) or a tax-qualified "defined contribution plan" (as
defined in Section 3(34) of ERISA), or a non-qualified deferred compensation
plan for certain highly compensated or management employees whether or not
terminated. All contributions (including all employer contributions and employee
salary reduction contributions) which are due have been paid to each Employee
Plan or are reflected as a liability on the books of the Company and all
contributions for any period ending on or before the Closing Date which are not
yet due have been paid to each such Employee Plan or accrued in accordance with
the past custom and practice of the Company. All premiums or other payments for
all periods ending on or before the Closing Date have been paid with respect to
each such Employee Plan which is a Welfare Plan.
(d) Except as set forth on EXHIBIT B, the Company has, with
respect to all current and former Employee Plans (and all related trusts,
insurance contracts and funds), at all times complied in all material respects
with the applicable requirements of ERISA, the Internal Revenue Code of 1986, as
amended (the "Code") and all other applicable statutes, common law, regulations
and regulatory pronouncements, or has, in the exercise of its reasonable
judgment, determined that such statutes (including ERISA), common law,
regulations and regulatory pronouncements were and are not applicable to the
Company. The Company has not engaged in nor is it bound to enter into, any
transaction with respect to any Employee Plan which would subject the Company to
any material liability due to either a civil penalty assessed pursuant to
Section 502(l) of ERISA or the tax or penalty on prohibited transactions imposed
by Section 4975 of the Code. No actions, suits or claims with respect to the
assets of any Employee Plan (and all related trusts, insurance contracts and
funds), other than routine claims for benefits, are pending or threatened which
could result in a material adverse effect on the Company. There are not now, nor
have there been, any tax-qualified retirement plans sponsored or maintained by
the Company for Employees, nor are there any
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unfunded obligations with respect thereto. With respect to any Employee, the
Company has no obligation to contribute to (or any other liability with respect
to) any "multi-employer plan," as defined in the Multi-employer Pension Plan
Amendments Act of 1980, and the Company has not incurred any current or
potential withdrawal or termination liability as a result of a complete or
partial withdrawal from any multi-employer plan. Except as set forth on EXHIBIT
B, each Employee Plan intended to qualify under Section 401(a) of the Code has
been determined by the Internal Revenue Service to be qualified under the
requirements of Section 401(a) of the Code, the Internal Revenue Service has
issued a determination letter to that effect, and such letter remains effective
and has not been revoked. No unfulfilled obligation to contribute with respect
to an Employee Plan exists with respect to any Employee Plan year ending on or
before the Closing. There is no agreement or promise, written or oral, of the
Company to the effect that any Employee Plan may not be terminated at the
Company's discretion at any time, subject to applicable law.
3.12 ENVIRONMENTAL CONDITION.
(a) PERMITS, ETC. Except as set forth on EXHIBIT B, the Company
(i) has obtained all environmental permits necessary for the ownership and
operation of its properties and the conduct of its businesses, except where such
failure to obtain could not reasonably be expected to cause a Material Adverse
Change; (ii) is in compliance with all terms and conditions of such
environmental permits and with all other requirements of applicable
environmental laws, except where such failure to comply could not reasonably be
expected to cause a Material Adverse Change; (iii) has not received notice of
any violation or alleged violation of any environmental law or environmental
permit; and (iv) is not subject to any actual or contingent environmental claim
which could reasonably be expected to cause a Material Adverse Change.
(b) CERTAIN LIABILITIES. Except as set forth on EXHIBIT B, to the
Company's best knowledge, none of the present or previously owned or operated
properties of the Company or of any of its present or former subsidiaries,
wherever located, (i) has been placed on or proposed to be placed on the
National Priorities List, the Comprehensive Environmental Response Compensation
Liability Information System list, or their state or local analogs; (ii) is
subject to a lien, arising under or in connection with any Environmental Laws,
which could reasonably be expected to cause a Material Adverse Change; or (iii)
has been the site of any release of hazardous substances or hazardous wastes
from present or past operations which has caused at the site or at any
third-party site any condition that has resulted in or could reasonably be
expected to result in the need for Response (as defined in the Comprehensive
Environmental Response Compensation Liability Act or other environmental law)
that would cause a Material Adverse Change.
(c) CERTAIN ACTIONS. Without limiting the foregoing (i) all
necessary notices have been properly filed, and no further action is required
under current environmental law as to each Response or other restoration or
remedial project undertaken by the Company, or its present or former
subsidiaries on any of their presently or formerly owned or operated properties
and (ii) the present and, to the Company best knowledge, future liability, if
any, of the Company and its subsidiaries which could reasonably be expected to
arise in connection with requirements under environmental laws will not result
in a Material Adverse Change.
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3.13 BUSINESS. The Company has all franchises, permits, licenses,
patents and other rights and privileges necessary to permit it to own its
property and conduct its business, except for those, the non-obtainment of which
would not reasonably be expected to cause a Material Adverse Change. The Company
manages and operates its business in compliance with all applicable legal
requirements and in accordance with good industry practices, except where such
failure to manage or operate would not reasonably be expected to cause a
Material Adverse Change.
3.14 GAS CONTRACTS. The Company is not, as of the date hereof, (a)
obligated in any material respect by virtue of any prepayment made under any
contract containing a "take-or-pay" or "prepayment" provision or under any
similar agreement to deliver hydrocarbons produced from or allocated to any of
the Company's consolidated oil and gas properties at some future date without
receiving full payment therefor at the time of delivery, and (b) has not
produced gas, in any material amount, subject to, and none of the Company's
consolidated oil and gas properties is subject to, balancing rights of third
parties or subject to balancing duties under governmental requirements, except
as to such matters for which the Company has established monetary reserves
adequate in amount in accordance with GAAP to satisfy such obligations and has
segregated such reserves from its other accounts.
3.15 PATENTS, TRADEMARKS AND OTHER INTANGIBLE ASSETS. (a) Except as set
forth on EXHIBIT B or as is not material to the Company, the Company (i) uses,
owns or has the right to use, free and clear of all liens, claims and
restrictions, all patents, patent applications, trademarks, service marks, trade
names and copyrights, and licenses and rights with respect to the foregoing,
used in the conduct of its business as now conducted or proposed to be
conducted, without infringing upon or otherwise acting adversely to the right or
claimed right of any person, corporation or other entity under or with respect
to any of the foregoing and (ii) is not obligated or under any liability
whatsoever to make any payments by way of royalties, fees or otherwise to any
owner or licensor of, or other claimant to, any patent, trademark, service mark,
trade name, copyright or other intangible asset, with respect to the use thereof
or in connection with the conduct of its business or otherwise except for
obligations in the normal course of its exploration and production business.
(b) Except as set forth on EXHIBIT B or as is not material to the
Company, the Company owns or has the unrestricted right to use all trade
secrets, including know-how, inventions, designs, processes, works of
authorship, computer programs (with the exception of normal software purchased
and sold as such) and technical data and information (collectively herein
"Intellectual Property") required for or incident to the development, operation
and sale of all services or products sold or currently proposed to be sold by
the Company, free and clear of and without violating any right, lien, or claim
of others, including without limitation, former employees and former employers
of its past and present employees but excluding restrictions as are customary
for exploration and production companies.
(c) The Company has taken security measures to protect the
secrecy, confidentiality and value of all the Intellectual Property, which
measures are reasonable and customary in the industry in which it operates. Each
of the Company's employees and other persons who, either alone or in concert
with others, developed, invented, discovered, derived, programmed
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or designed the Intellectual Property, or who has knowledge of or access to
information about the Intellectual Property, has entered into a written
agreement with the Company which (i) provides that the Intellectual Property and
other information are proprietary to the Company and are not to be divulged or
misused and (ii) transfers to the Company, without any further consideration
being given therefor by the Company, all of such employee's or other person's
right, title and interest in and to such Intellectual Property and other
information and to all patents, trademarks, service marks, trade names,
copyrights, licenses and rights with respect to such Intellectual Property and
information. The Company is not aware that any of its employees, consultants or
prospective employees who have signed such agreements are in violation thereof,
nor is it aware or have any basis to believe, that any former employee or
consultant has made any claim of ownership in or rights with respect to any of
the Intellectual Property.
3.16 TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. Except as set forth on
EXHIBIT B and pursuant to the Credit Agreement by and between the Company and
NationsBank of Texas, N.A. dated December 18, 1997 (the "Credit Agreement"), the
Company has defensible title to all of the properties and assets, both real and
personal, tangible and intangible, that it purports to own, including the
properties and assets reflected in the Reports and including the lands and
leases and associated net revenue interests reflect in the Company's most recent
reserve report, as of December 31, 1997, as prepared by Ryder Scott Company (the
"Reserve Report"), other than dispositions or expirations since the date
thereof, and they are not subject to any mortgage, pledge, lien, security
interest, conditional sale agreement, encumbrance or charge ("Liens") except
routine statutory liens securing liabilities not yet due and payable and minor
liens, encumbrances, restrictions, exceptions, reservations, limitations and
other imperfections that do not materially detract from the value of the
specific asset affected or the present use of such asset and except (A) Liens
for taxes not yet due and payable or, if payable, that are being contested in
good faith in the ordinary course of business, (B) statutory Liens (including
materialmen's, mechanic's, repairmen's, landlord's, and other similar liens)
arising in the ordinary course of business to secure payments not yet due and
payable or, if payable, that are being contested in good faith in the ordinary
course of business, (C) such easements, restrictions, reservations or other
encumbrances, as well as imperfections or irregularities of title, if any, as do
not create a material adverse effect, (D) obligations or duties to any
municipality or public authority with respect to any franchise, grant, license
or permit and all applicable laws, rules, regulations and orders of any
governmental authority, (E) all lessors' royalties, overriding royalties, net
profits interests, production payments, carried interests, reversionary
interests and other burdens on or deductions from the proceeds of production
that do not operate to (x) reduce the net revenue interest of the Company below
that purported to be owned by the Company or as set forth in the Reserve Report,
(y) increase the proportionate share of costs and expenses of leasehold
operations attributable to or to be borne by the working interest of the Company
above that purported to be owned by the Company without a proportionate increase
in the net revenue interest of the Company or (z) increase the working interest
of the Company above that purported to be owned by the Company without a
proportionate increase in the net revenue interest of the Company, (F) the terms
and conditions of joint operating agreements and other oil and gas contracts,
(G) all rights to consent by, required notices to, and filings with or other
actions by governmental or tribal entities, if any, in connection with the
change of ownership or control of an interest in federal, state, tribal or other
domestic governmental oil and gas leases, if the same are customarily obtained
subsequent to such
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change of ownership or control, but only insofar as such consents, notices,
filings and other actions relate to the transactions contemplated by this
Agreement, (H) any preferential purchase rights, (I) required third party
consents to assignment, (J) conventional rights of reassignment prior to
abandonment and (K) the terms and provisions of oil and gas leases, unit
agreements, pooling agreements, communication agreements and other documents
creating interests comprising the oil and gas properties; insofar and only
insofar as such terms and provisions do not operate to (x) reduce the net
revenue interest of the Company below that purported to be owned by the Company,
(y) increase the proportionate share of costs and expenses of leasehold
operations attributable to or to be borne by the working interest of the Company
above that purported to be owned by the Company without a proportionate increase
in the net revenue interest of the Company or (z) increase the working interest
of the Company above that purported to be owned by the Company. EXHIBIT E lists
the current projects in which the Company has an interest.
3.17 TAXES. Except as set forth in EXHIBIT B, the Company has accurately
prepared and timely filed all federal income tax returns and all state and
municipal tax returns that are required to be filed by it (the "Tax Returns")
and has paid or made provision for the payment of all amounts due pursuant to
such returns. The Tax Returns are true and complete in all materials respects.
None of the Tax Returns have been audited by the Internal Revenue Service or any
state taxing authority, as the case may be, the Company has not been advised
that any of such Tax Returns will be so audited, and there are no waivers in
effect of the applicable statute of limitations for any period. No deficiency
assessment or proposed adjustment of federal income taxes or state or municipal
taxes of the Company is pending and the Company has no knowledge of any proposed
liability for any tax to be imposed.
3.18 INTERESTED PARTY TRANSACTIONS. Except as otherwise reflected in the
Reports, no executive officer, director or stockholder owning 5% of the
outstanding Common Stock of the Company or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Securities Act) of any
such person or entity or the Company has or has had, either directly or
indirectly, (a) an interest in any person or entity which (i) furnishes or sells
services or products that are furnished or sold or are proposed to be furnished
or sold by the Company, or (ii) purchases from or sells or furnishes to the
Company any goods or services, or (b) a beneficial interest in any contract or
agreement to which the Company is a party or by which it may be bound or
affected. Except as otherwise reflected in the Reports, there are no existing
arrangements or proposed transactions between the Company and any executive
officer, director, or holder of more than 5% of the capital stock of the
Company, or any affiliate or associate of any such person.
3.19 RESERVE REPORT. A true and correct copy of the Reserve Report has
been provided to the Purchasers. All information contained in the Reserve Report
is true and correct in all material respects as of the date thereof, except that
the Company does not warrant quantity of reserves, rate of recovery, productive
capacity, future prices, future operating costs, or other similar matters that
cannot be determined with certainty.
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SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
The Purchasers each hereby severally (with respect to himself or itself)
represent and warrant to the Company and if applicable, a Purchaser additionally
severally represents and warrants to the Company with respect to his purchase of
the Option Shares as follows:
4.1 INVESTMENT. The Purchaser is acquiring the Shares (and, if
applicable, is acquiring the Option Shares) for investment for its own account,
not as a nominee or agent, and not with a view to, or for resale in connection
with, any distribution thereof. The Purchaser acknowledges the Company's
obligation to file a registration statement with respect to the Shares (and the
Option Shares, if applicable) as set forth in Section 8 of this Agreement, the
effectiveness of which registration statement may be required for the resale of
the Shares or the Option Shares, as applicable. Without limiting the generality
of the first sentence of this Section, the Purchaser has not offered or sold any
portion of the Shares or the Option Shares, as applicable, to be acquired by it
and has no present intention of reselling or otherwise disposing of any portion
of such Shares or Option Shares, as applicable, either currently or after the
passage of a fixed or determinable period of time or upon the occurrence or
nonoccurrence of any predetermined event or circumstance, and in particular the
Purchaser has no current intention to resell the Shares or the Option Shares, as
applicable, under such registration statement nor would it have such intention
if such registration statement were effective as of the date of purchase. The
Purchaser understands that the investment in the Shares and the Option Shares,
as applicable, is subject to a high degree of risk and that neither the Shares
nor the Option Shares have been registered under the Securities Act, by reason
of a specific exemption from the registration provisions of the Securities Act
which depends upon, among other things, the bona fide nature of Purchaser's
investment intent and the accuracy of the Purchaser's representations as
expressed herein. The Purchaser acknowledges and understands that it must bear
the economic risk of this investment for an indefinite period of time because
the Shares and the Option Shares, as applicable, must be held indefinitely until
subsequently registered under the Securities Act and applicable state and other
securities laws or unless an exemption from registration is available. Purchaser
understands that any transfer agent of the Company will be issued stop-transfer
instructions with respect to the Shares and the Option Shares, as applicable,
unless such transfer is subsequently registered under the Securities Act and
applicable state and other securities laws or unless an exemption from such
registration is available. The Purchaser has experience in analyzing and
investing in entities like the Company, it can bear the economic risk of its
investment, including the full loss of its investment, and by reason of its
business or financial experience or the business or financial experience of its
professional advisors has the capacity to evaluate the merits and risks of its
investment and protect its own interest in connection with the purchase of the
Shares from the Company at the Closing and the purchase of the Option Shares at
the Option Closing, as applicable. The Purchaser is a resident of the
jurisdiction set forth opposite such Purchaser's name on EXHIBIT A. If other
than an individual, Purchaser was not organized for the purpose of acquiring the
Shares or the Option Shares, as applicable.
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4.2 ACCREDITED INVESTOR. Except in the case of Minnowburn Corporation,
Alex B. Campbell and Paul D. Favret, the Purchaser is an "accredited investor"
as such term is defined in SEC Regulation D.
4.3 AUTHORITY. The Purchaser has all right, power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Purchaser and constitutes
a legal, valid and binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
will not, conflict with or result in any violation of any obligation under any
provision of the charter documents, limited liability company agreement,
partnership agreement or Bylaws, if any, of the Purchaser or any mortgage,
indenture, lease or other agreement or instrument, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Purchaser.
4.4 GOVERNMENT CONSENTS, ETC. No consent, approval or authorization of
or designation, declaration or filing with any governmental authority on the
part of the Purchaser is required in connection with the valid execution and
delivery of this Agreement, the purchase of the Shares or the Option Shares, as
applicable, or the consummation of any other transaction contemplated hereby.
4.5 INVESTIGATION. The Purchaser has received a copy of the Reports and
the "Risk Factors" and "Description of Capital Stock" included as EXHIBIT C. The
Purchaser has had a reasonable opportunity to ask questions relating to and
otherwise discuss the terms and conditions of the offering and the other
information set forth in the Reports and this Agreement and the Company's
business, management and financial affairs with the Company's management,
customers and other parties, and the Purchaser has received satisfactory
responses to the Purchaser's inquiries. The Purchaser has relied solely upon the
information provided by the Company in the Reports and this Agreement in making
the decision to invest in the Shares and the Option Shares, as applicable. To
the extent necessary, the Purchaser has retained, at the expense of the
Purchaser, and relied upon appropriate professional advice regarding the
investment, tax and legal merits and consequences of this Agreement and its
purchase of the Shares and the Option Shares, as applicable, hereunder.
4.6 SHORT SELLING. Purchaser has not prior to the date hereof directly
or indirectly, through related parties, affiliates or otherwise (a) sold "short"
or "short against the box" (as those terms are generally understood) any equity
security of the Company; or (b) otherwise engaged in any transaction which
involves hedging of its position in the securities of the Company, and it will
not until the date the Registration Statement (as defined herein) is declared
effective by the SEC take any such actions described in (a) or (b) of this
Section 4.6.
4.7 AFFILIATE STATUS. The Purchaser is not, and has not been within the
90 days prior to the Closing Date, an officer, director, employee, agent or
affiliate of the Company. Except for Centennial, the Purchaser is not a broker
or dealer of securities, an employee, officer or director of
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the Company nor prior to the Closing Date of the transactions contemplated
hereby is the Purchaser the beneficial owner of 5% or more of the Common Stock
of the Company.
SECTION 5
CONDITIONS TO OBLIGATIONS OF THE PURCHASERS
5.1 CONDITIONS TO OBLIGATIONS OF THE PURCHASERS. The Purchasers'
obligation to purchase the Shares at the Closing is, at the option of each
Purchaser, which may waive any such conditions to the extent permitted by law,
subject to the fulfillment on or prior to the Closing Date of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES CORRECT. The representations
and warranties made by the Company in Section 3 hereof shall be true and correct
in all material respects when made, and shall be true and correct in all
material respects on the Closing Date with the same force and effect as if they
had been made on and as of said date and the foregoing shall be certified in
writing by an executive officer of the Company.
(b) COVENANTS. All covenants, agreements and conditions contained
in this Agreement to be performed by the Company on or prior to such purchase
shall have been performed or complied with in all respects and the foregoing
shall be certified in writing by an executive officer of the Company.
(c) NO LEGAL ORDER PENDING. There shall not then be in effect any
legal or other order enjoining or restraining the transactions contemplated by
this Agreement.
(d) NO LAW PROHIBITING OR RESTRICTING SUCH SALE. There shall not
be in effect any law, rule or regulation prohibiting or restricting such sale or
requiring any consent or approval of any person which shall not have been
obtained to issue the Shares (except as otherwise provided in this Agreement).
(e) OPINION OF COMPANY'S COUNSEL. The Purchasers shall have
received from Baker & Botts, L.L.P., counsel for the Company, an opinion dated
the Closing Date, in substantially the form set forth in EXHIBIT D.
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SECTION 6
CONDITIONS TO OBLIGATIONS OF COMPANY
6.1 CONDITIONS TO OBLIGATIONS OF COMPANY. The Company's obligation to
sell and issue the Shares at the Closing and the Option Shares at the Option
Closing is, at the option of the Company, which may waive any such conditions to
the extent permitted by law, subject to the fulfillment on or prior to the
Closing Date or the Option Closing Date, as applicable, of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES CORRECT. The representations
and warranties made by the Purchasers in Section 4 hereof shall be true and
correct in all material respects when made, and shall be true and correct in all
material respects on the Closing Date or the Option Closing Date, as applicable,
with the same force and effect as if they had been made on and as of said date
and the foregoing shall be certified in writing by the Purchaser.
(b) COVENANTS. All covenants, agreements and conditions contained
in this Agreement to be performed by the Purchasers on or prior to the Closing
Date or the Option Closing Date, as applicable, shall have been performed or
complied with in all material respects, and the foregoing shall be certified in
writing by the Purchaser.
(c) NO LEGAL ORDER PENDING. There shall not then be in effect any
legal or other order enjoining or restraining the transactions contemplated by
this Agreement.
(d) NO LAW PROHIBITING OR RESTRICTING SUCH SALE. There shall not
be in effect any law, rule or regulation prohibiting or restricting such sale or
requiring any consent or approval of any person which shall not have been
obtained to issue the Shares or the Option Shares, as applicable (except as
otherwise provided in this Agreement).
(e) SHAREHOLDER APPROVAL. The Company's obligation to issue the
Option Shares, the Dilution Shares and the Penalty Shares is expressly
conditioned upon the Stockholder Approval of such issuances or the Company being
granted an exemption by Nasdaq from the shareholder approval requirements of
Rule 4460(i) as promulgated by Nasdaq, and the Company having satisfied all of
the conditions for reliance on such exemption.
SECTION 7
DEFINITIONS
7.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
(a) "AFFILIATE" shall mean, with respect to any person, any other
person controlling, controlled by or under direct or indirect common control
with such person (for the
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purposes of this definition "control," when used with respect to any specified
person, shall mean the power to direct the management and policies of such
person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" shall
have meanings correlative to the foregoing).
(b) "BUSINESS DAY" shall mean a day Monday through Friday on
which banks are generally open for business in Texas.
(c) "HOLDERS" shall mean the Purchasers and any person holding
Registrable Securities to whom the rights under Section 8.1 have been
transferred in accordance with Section 8.1(g) hereof.
(d) "PERSON" shall mean any person, individual, corporation,
partnership, trust or other nongovernmental entity or any governmental agency,
court, authority or other body (whether foreign, federal, state, local or
otherwise).
(e) The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer
to the registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(f) "REGISTRABLE SECURITIES" shall mean (A) the Shares, (B) any
shares of Common Stock issued as (or issuable upon the conversion of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to or in replacement of the Shares, (C) if permitted
under applicable law and regulation, the Dilution Shares, (D) if permitted under
applicable law and regulation, the Option Shares and (E) if permitted under
applicable law and regulation, the Penalty Shares; provided, however, that
securities shall only be treated as Registrable Securities if and only for so
long as they (I) have not been disposed of pursuant to a registration statement
declared effective by the SEC, (II) have not been sold in a transaction exempt
from the registration and prospectus delivery requirements of the Securities Act
so that all transfer restrictions and restrictive legends with respect thereto
are removed upon the consummation of such sale, (III) may not be otherwise
transferred without restriction under Rule 144 (or any similar successor rule or
provision then in force) provided that the Company shall have delivered a new
certificate or other evidence of ownership for it not bearing any restrictive
legend and with all stop transfer orders withdrawn, or (IV) are held by a Holder
or a permitted transferee pursuant to subsection 8.1(g).
(g) "REGISTRATION EXPENSES" shall mean all expenses incurred by
the Company in complying with Section 8.1(a) hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and expenses of counsel for the Company and the Holders up to
$15,000 (aggregated for any other registration statement filed pursuant to
Section 8.1 other than an additional registration required because the Company
failed to keep the Registration Statement in effect as required under this
Agreement); blue sky fees and expenses (for a reasonable number of states) and
the expense of any special audits incident to or required by any such
registration.
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(h) "REGISTRATION STATEMENT" shall have the meaning ascribed to
such term in Section 8.1(a).
(i) "REGISTRATION PERIOD" shall have the meaning ascribed to such
term in Section 8.1(c).
(j) "SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions and transfer taxes applicable to the sale of Registrable
Securities and all fees and expenses of legal counsel for any Holder in excess
of those fees and expenses treated as Registration Expenses.
SECTION 8
COVENANTS
8.1 REGISTRATION RIGHTS.
(a) REGISTRATION. Within one month after the earlier of (i) the
Option Closing Date, or (ii) the date that the Purchasers deliver written notice
to the Company that they do not intend to exercise the Option, the Company will
file a registration statement (the "Registration Statement') with the SEC on
Form S-3 or any similar short form, if available, or, if such forms are
unavailable, on Form S-1 or any other appropriate form and will use its
reasonable best efforts for such Registration Statement to be declared effective
by the SEC. The Company will use its reasonable best efforts to promptly effect
the registration, qualifications or compliances (including, without limitation,
the execution of any required undertaking to file post-effective amendments,
appropriate qualifications under applicable blue sky or other state securities
laws and appropriate compliance with applicable securities laws, requirements or
regulations) as may be so reasonably requested and as would permit or facilitate
the sale and distribution of all Registrable Securities; provided that the
Company shall not be obligated to take any action to effect any such state
registration, qualification or compliance pursuant to this subsection 8.1(a) in
any particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service or
is required to qualify in such jurisdiction, as the case may be, and except as
may be required by the Securities Act. The Company shall be obligated to effect
only one registration pursuant to this Section 8.1 so long as the Registration
Statement is kept in effect by the Company for the period of time required
hereby (otherwise the Company shall be obligated to effect an additional
registration). The Penalty Shares and/or the Dilution Shares and/or the Option
Shares may, in the sole discretion of the Company (consistent with applicable
securities laws), either be included in the Registration Statement contemplated
by this Section or may be included in one or more separate registration
statements in which case the provisions of Section 8 shall apply to such
separate registration statements as if they were the Registration Statement.
(b) EXPENSES OF REGISTRATION. All Registration Expenses incurred
in connection with any registration, qualification or compliance pursuant to
subsection 8.1(a) shall be borne by the
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Company. All Selling Expenses relating to the sale of securities registered by
or on behalf of Holders shall be borne by such Holders pro rata on the basis of
the number of securities so registered.
(c) REGISTRATION PROCEDURES. In the case of the registration,
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will, upon reasonable request, inform each Holder as to the status
of such registration, qualification and compliance. At its expense the Company
will during such time as the Holder holds Registrable Securities:
(i) use its reasonable best efforts to keep such
registration, and any qualification or compliance under state securities laws
which the Company determines to obtain, effective until the shares included in
such registration statement are sold or are otherwise freely transferable and
all restrictive legends and stop transfer orders have been removed.
(ii) furnish such number of prospectuses and other
documents incident thereto as the Holders from time to time may reasonably
request;
(iii) use its reasonable best efforts to register or
qualify such Registrable Shares under such other securities or blue sky laws of
such jurisdictions as any Holder reasonably requests and do any and all other
acts and things which may be reasonably necessary or advisable to enable such
Holder to consummate the disposition of the Registrable Shares owned by such
Holder in such jurisdictions; provided, that the Company will not be required to
(A) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 8.1(c), or (B) subject
itself to income taxation in any such jurisdiction;
(iv) notify each Holder of such Registrable Shares, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such Holder, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Shares, such prospectus will not contain an
untrue statement of a material fact or omit to state any fact necessary to make
the statements therein not misleading;
(v) cause all such Registrable Shares to be listed or
quoted on each securities exchange or automated quotation system on which
similar securities issued by the Company are then listed or quoted;
(vi) appoint a transfer agent and registrar for all such
Registrable Shares not later than the effective date of such Registration
Statement;
(vii) make available for inspection by any Holder of
Registrable Shares, any underwriter participating in any disposition pursuant to
such registration statement, and any
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attorney, accountant or other agent retained by any such Holder or underwriter,
all financial and other records, pertinent corporate documents and properties of
the Company, and cause the Company's officers, employees and independent
accountants to supply all information reasonably requested by any such Holder,
underwriter, attorney, accountant or agent in connection with such registration
statement, subject in each case to appropriate confidentiality restrictions; and
(viii) use its best efforts to cause the Registrable
Shares covered by such registration statement to be registered with or approved
by such other United States or state governmental agencies or authorities as may
be necessary to enable the Holders thereof to consummate the disposition of such
Registrable Shares.
The period of time during which the Company is required hereunder to keep the
Registration Statement effective is referred to herein as "the Registration
Period."
(d) INDEMNIFICATION.
(i) To the extent permitted by law, the Company will
indemnify each Holder requesting or joining in a registration, each agent,
officer and director of such Holders, each person controlling such Holder and
each underwriter and selling broker of the securities so registered
(collectively, "Indemnitees") against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document incident to any
registration, qualification or compliance (or in any related registration
statement, notification or the like) or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act, the Exchange Act or state securities laws or any rule or
regulation promulgated under the Securities Act, the Exchange Act or a state
securities law, in each case applicable to the Company, and will reimburse each
such Indemnitee for any legal and any other fees and expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, provided, however, that the Company will not be
liable to any Indemnitee in any such case to the extent that any such claim,
loss, damage or liability is caused by any untrue statement or omission so made
in strict conformity with written information furnished to the Company by an
instrument duly executed by such Indemnitee and stated to be specifically for
use therein and except that the foregoing indemnity agreement is subject to the
condition that, insofar as it relates to any such untrue statement (or alleged
untrue statement) or omission (or alleged omission) made in the preliminary
prospectus but eliminated or remedied in the amended prospectus on file with the
SEC at the time the registration statement becomes effective or in the amended
prospectus filed with the SEC pursuant to Rule 424(b) (the "Final Prospectus"),
such indemnity agreement shall not inure to the benefit of any underwriter, or
any Indemnitee if there is no underwriter, if a copy of the Final Prospectus was
not furnished to the person or entity asserting the loss, liability, claim or
damage at or prior to the time such furnishing is required by the Securities
Act; provided, further, that this indemnity shall not be deemed to relieve any
underwriter of any of its due diligence obligations; provided, further, that the
indemnity agreement contained in this subsection 8.1(d)(i) shall not apply to
amounts paid in settlement of any such claim, loss, damage,
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liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld.
(ii) To the extent permitted by law, each Holder
requesting or joining in a registration and each underwriter and selling broker
of the securities so registered will indemnify the Company and its officers and
directors and each person, if any, who controls any thereof within the meaning
of Section 15 of the Securities Act and their respective successors against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other document
incident to any registration, qualification or compliance (or in any related
registration statement, notification or the like) or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading and will reimburse the
Company and each other person indemnified pursuant to this subsection 8.1(d)(ii)
for any legal and any other fees and expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, provided, however, that this subsection 8.1(d)(ii) shall apply only if
(and only to the extent that) such statement or omission was made in reliance
upon and in strict conformity with written information (including, without
limitation, written negative responses to inquiries) furnished to the Company by
an instrument duly executed by such Holder, underwriter or selling broker and
stated to be specifically for use in such prospectus, offering circular or other
document (or related registration statement, notification or the like) or any
amendment or supplement thereto; and except that the foregoing indemnity
agreement is subject to the condition that, insofar as it relates to any such
untrue statement (or alleged untrue statement) or omission (or alleged omission)
made in the preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the SEC at the time the registration statement becomes
effective or in the Final Prospectus, such indemnity agreement shall not inure
to the benefit of (i) the Company and (ii) any underwriter or Holder, if there
is no underwriter, if a copy of the Final Prospectus was not furnished to the
person or entity asserting the loss, liability, claim or damage at or prior to
the time such furnishing is required by the Securities Act; provided, further,
that this indemnity shall not be deemed to relieve any underwriter of any of its
due diligence obligations; provided, further, that the indemnity agreement
contained in this subsection 8.1(d)(ii) shall not apply to amounts paid in
settlement of any such claim, loss, damage, liability or action if such
settlement is effected without the consent of the Holder or underwriter, as the
case may be, which consent shall not be unreasonably withheld; and provided,
further, that the obligations of such Holders shall be limited to an amount
equal to the net proceeds received by such Holder from the sale of Registrable
Stock in such offering as contemplated herein, unless such claim, loss, damage,
liability or action resulted from such Holder's fraudulent misconduct.
(iii) Each party entitled to indemnification hereunder
(the "indemnified party") shall give notice to the party required to provide
indemnification (the "indemnifying party") promptly after such indemnified party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the indemnifying party (at its expense) to assume the defense of any
claim or any litigation resulting therefrom, provided that counsel for the
indemnifying party, who shall conduct the defense of such claim or litigation,
shall be reasonably satisfactory to the indemnified party, and the indemnified
party may participate in such defense at such party's expense,
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and provided further that the omission by any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under this Section 8.1(d) except to the extent that the omission results in a
failure of actual notice to the indemnifying party and such indemnifying party
is damaged solely as a result of the failure to give notice. No indemnifying
party, in the defense of any such claim or litigation, shall consent, except
with the consent of each indemnified party, to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation.
(iv) The reimbursement required by this Section 8.1(d)
shall be made by periodic payments during the course of the investigation or
defense, as and when bills are received or expenses incurred.
(v) The obligation of the Company under this Section
8.1(d) shall survive the redemption, if any, of the Series B Preferred and the
Series C Preferred, and the completion of any offering of Registrable Stock in a
registration statement under this Section 8 or otherwise.
(e) COVENANTS OF HOLDERS.
(i) Each Holder agrees that, upon receipt of any notice
from the Company of the happening of any event requiring the preparation of a
supplement or amendment to a prospectus relating to Registrable Securities so
that, as thereafter delivered to the Holders, such prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, each Holder will forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement contemplated by subsection
8.1(a) until its receipt of copies of the supplemented or amended prospectus
from the Company and, if so directed by the Company, each Holder shall deliver
to the Company all copies, other than permanent file copies then in such
Holder's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice.
(ii) Each Holder severally agrees for a period of time
(not to exceed 180 days) from the effective date of any registration (other than
a registration effected solely to implement an employee benefit plan) of
securities of the Company for any underwritten offering (upon request of the
Company or of the underwriters managing any underwritten offering to the
Company's securities) not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Registrable Securities
or any other stock of the Company held by such Holder, other than shares of
Registrable Securities included in such registration, without the prior written
consent of the Company or such underwriters, as the case may be; provided that
this obligation is subject to the condition that all officers and directors of
the Company and each holder of more than 2% of the outstanding Common Stock
shall enter into similar agreements; provided further that, each Holder
severally agrees that if and only if the Holder has not, at the date of the
effectiveness of a subsequently filed registration statement, been required to
comply with the preceding provisions of this Section, for a period of time (not
to exceed 90 days) from the effective date of any subsequent registration that
provides in whole or in part for the underwritten sale by the
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Company of securities of the Company (upon request of the Company or of the
underwriters managing any underwritten offering of the Company's securities) the
Holder will agree not to sell, make any short sale of, loan, grant any option
for the purchase of, or otherwise dispose of any Registrable Securities or any
other stock of the Company held by such Holder, other than shares of Registrable
Securities included in such registration, without the prior written consent of
the Company or such underwriters, as the case may be; provided that all officers
and directors of the Company shall enter into similar agreements. Each Holder
agrees to suspend, upon request of the Company, any disposition of Registrable
Securities pursuant to the Registration Statement and prospectus contemplated by
subsection 8.1(a) during any period, not to exceed one 30-day period per
circumstance or development and not to exceed 60 days in any 12-month period,
when the Company upon written advice of counsel determines in good faith that
offers and sales pursuant thereto should not be made by reason of the presence
of material, undisclosed circumstances or developments with respect to which the
disclosure that would be required in such a prospectus is premature, would have
an adverse effect on the Company.
(iii) Each Holder agrees to notify the Company, at any
time when a prospectus relating to the Registration Statement contemplated by
subsection 8.1(a) is required to be delivered by it under the Securities Act, of
the occurrence of any event relating to the Holder which requires the
preparation of a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading relating to the Holder, and each Holder shall
promptly make available to the Company the information to enable the Company to
prepare any such supplement or amendment. Each Holder also agrees that, upon
delivery of any notice by it to the Company of the happening of any event of the
kind described in the next preceding sentence of this subsection, the Holder
will forthwith discontinue disposition of Registrable Securities pursuant to
such Registration Statement until its receipt of the copies of the supplemental
or amended prospectus contemplated by this subsection, which the Company shall
promptly make available to each Holder and, if so directed by the Company, each
Holder shall deliver to the Company all copies, other than permanent file copies
then in such Holder's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
(iv) Each Holder shall furnish to the Company such
information regarding such Holder and the distribution proposed by such Holder
as the Company may reasonably request in writing or as shall be required in
connection with any registration, qualification or compliance referred to in
this Section 8.1.
(v) Each Holder hereby covenants with the Company (1) not
to make any sale of the Shares without effectively causing the prospectus
delivery requirements under the Securities Act to be satisfied, and (2) if such
Shares are to be sold by any method or in any transaction other than on a
national securities exchange, in the over-the-counter market, on the NASDAQ
National Market, in privately negotiated transactions, or in a combination of
such methods, to notify the Company at least five business days prior to the
date on which the Purchaser first offers to sell any such Shares.
26
<PAGE>
(vi) Each Holder acknowledges and agrees that the
Registrable Securities sold pursuant to the Registration Statement described in
this Section are not transferable on the books of the Company unless the stock
certificate submitted to the transfer agent evidencing such Shares is
accompanied by a certificate reasonably satisfactory to the Company to the
effect that (A) the Registrable Securities have been sold in accordance with
such registration statement and (B) the requirement of delivering a current
prospectus has been satisfied. Each Holder agrees that it will not effect any
disposition of the Registrable Securities that would constitute a sale within
the meaning of the Securities Act except as contemplated in the registration
statement referred to in this Section 8.1 or in a transaction exempt from
registration under the Securities Act. Each Holder agrees not to take any action
with respect to any distribution deemed to be made pursuant to such registration
statement that constitutes a violation of Regulation M under the Exchange Act or
any other applicable rule, regulation or law.
(f) RULE 144 REPORTING. With a view to making available to the
Holders the benefits of certain rules and regulations of the SEC which at any
time permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its reasonable best efforts to:
(i) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times;
(ii) file with the SEC in a timely manner all reports and
other documents required of the Company under the Exchange Act; and
(iii) so long as a Holder owns any unregistered
Registrable Securities, furnish to such Holder upon any reasonable request a
written statement by the Company as to its compliance with Rule 144 under the
Securities Act, and of the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Company as such Holder may reasonably request in availing itself of any rule or
regulation of the SEC allowing a Holder to sell any such securities without
registration.
(g) TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities granted to the Holders by the Company
under subsection 8.1(a) may be assigned in full by a Holder to an Affiliate of
such Holder or a transferee of at least 100,000 shares of Registrable Securities
provided that: (i) such transfer may otherwise be effected in accordance with
applicable securities laws; (ii) such Holder gives prior written notice to the
Company; and (iii) such transferee agrees to comply with the terms and
provisions of this Agreement including, without limitation, the restrictions in
Section 4.6 and such transfer is otherwise in compliance with this Agreement.
Except as specifically permitted by this paragraph (h), the rights of a Holder
with respect to Registrable Securities as set out herein shall not be
transferable to any other Person.
(h) WAIVERS AND AMENDMENTS. With the written consent of the
Company and the Holders holding at least a majority of the then outstanding
Registrable Securities, any provision of this Section 8.1 may be waived (either
generally or in a particular instance, either retroactively or
27
<PAGE>
prospectively and either for a specified period of time or indefinitely) or
amended. Upon the effectuation of each such waiver or amendment, the Company
shall promptly give written notice thereof to the Holders, if any, who have not
previously received notice thereof or consented thereto in writing.
8.2 DISPOSITION. The Purchaser has not and will not make any offer, sale
or other transfer of the Shares by any means which would not comply with
applicable law or this Agreement or which would otherwise impose upon the
Company any obligation to satisfy any public filing or registration requirement.
The Purchaser understands and agrees that any disposition of the Shares in
violation of this Agreement shall be null and void, and that no transfer of the
Shares shall be made by the Company or the transfer agent for the Shares upon
the Company's stock transfer books or records unless and until there has been
compliance with the terms of this Agreement, the Securities Act, any applicable
state and foreign securities law and any other laws. Purchaser will not sell or
transfer the Shares unless:
(a) there is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such Registration Statement; or
(b) except in the case of a transfer of all or a portion of the
option, it shall have notified the Company of the proposed disposition and shall
have furnished the Company with a statement of the circumstances surrounding the
proposed disposition, and, if requested by the Company, it shall have furnished
the Company with an opinion of counsel, reasonably satisfactory to the Company
that such disposition is exempt from registration of such shares under the
Securities Act or any applicable state, foreign or other securities laws.
The Purchaser will not transfer the Shares, other than pursuant to the
Registration Statement or in a transaction that complies with Rule 144, unless
the transferee agrees to be bound by the restrictions on transfer (including the
registration provisions) contained herein to the same extent as if it were the
original Purchaser. The provisions hereof shall apply to the Option, the Penalty
Rights and the Dilution Rights to the same extent as the Shares.
8.3 OTHER REGISTRATION RIGHTS. Each of the Company and the Purchasers
agrees that the holders of any securities of the Company which are entitled to
registration rights pursuant to (i) the Series C Preferred Stock Purchase
Agreement among the Company and certain of its security holders dated as of July
26, 1995 or (ii) the Stock Purchase Agreement among the Company and certain of
its security holders dated as of November 9, 1993 shall be entitled to
participate with respect to such securities in any registration effected
pursuant to Section 8.1 hereof upon the same terms and conditions as a Holder of
Registrable Securities.
28
<PAGE>
SECTION 9
MISCELLANEOUS
9.1 TERMINATION OF AGREEMENT The Company may terminate its obligation to
perform or observe any of its covenants and agreements hereunder to any
Purchaser if such Purchaser violates in a material respect any of the material
covenants or agreements of the Purchaser under this Agreement, and a Purchaser
may terminate its obligations to perform or observe any of its covenants and
agreements hereunder if the Company violates or fails to perform in any respect
any of the covenants or agreements of the Company under this Agreement to such
Purchaser; provided, however, that neither the Company nor the Purchaser, as the
case may be, may terminate any of its obligations under this Agreement pursuant
to this sentence unless it shall have delivered written notice of such default
to the other party and such default shall not have been cured within 30 days
after the delivery of such notice.
9.2 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS BY
THE LAWS OF THE STATE OF TEXAS AS APPLIED TO CONTRACTS ENTERED INTO SOLELY
BETWEEN RESIDENTS OF, AND TO BE PERFORMED ENTIRELY WITHIN, SUCH STATE.
9.3 SURVIVAL; RELIANCE. The representations and warranties in Sections 3
and 4 of this Agreement shall survive any investigation made by the Purchasers
or the Company for a period of two years after the Closing Date and all
covenants and agreements contained herein shall survive the execution and
delivery of this Agreement in accordance with their terms. Thereafter, such
representations and warranties shall expire and be of no further force and
effect, and no cause of action may be brought with respect to any breach thereof
unless a written notice specifying the nature and the amount of the claims shall
have been delivered by the Company or the Purchasers, as the case may be, with
respect thereto, on or before one year after the Closing Date. Any
representation or warranty contained herein may be relied upon by counsel to the
Company in connection with any opinion delivered in connection with the
transactions contemplated hereby.
9.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. Except as otherwise provided in this Agreement, this Agreement may
not be assigned by a party without the prior written consent of the other party
except by operation of law, in which case the assignee shall be subject to all
of the provisions of this Agreement.
9.5 NOTICES AND DATES. Any notice or other communication given under
this Agreement shall be sufficient if in writing and will be effective as of (a)
the date of receipt if delivered by hand, by messenger or by courier, or
transmitted by facsimile, to a party at its address set forth below (or at such
other address as shall be designated for such purpose by such party in a written
notice to the other party hereto) or (b) three days after the date when the same
shall have been posted by registered mail, return receipt requested, in any post
office in the United States of America, postage prepaid and addressed to the
party at such address:
29
<PAGE>
(i) if to the Company:
3DX Technologies Inc.
12012 Wickchester
Suite 250
Houston, Texas 77079
Attn: Chief Financial Officer
(Facsimile) (281) 579-9227
with a copy to:
Baker & Botts, L.L.P.
3000 One Shell Plaza
910 Louisiana
Houston, Texas 77009
Attn: Gene J. Oshman
(Facsimile) (713) 229-1522
(ii) if to Purchasers, then to the addresses set forth at
EXHIBIT A.
with a copy to:
Davis, Graham & Stubbs LLP
370 17th Street, Suite 4700
Denver, Colorado 80202
Attn: Charles D. Bybee
(Facsimile) (303) 893-1379
9.6 SPECIFIC PERFORMANCE. The parties hereto acknowledge and agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with its specific terms or were
otherwise breached and that such damage would not be compensable in money
damages and that it would be extremely difficult or impracticable to measure the
resultant damages. It is accordingly agreed that any party hereto shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Agreement and to enforce specifically the terms and provisions hereof,
in addition to any other remedy to which it may be entitled at law or in equity,
and such party that is sued for breach of this Agreement expressly waives any
defense that a remedy in damages would be adequate and expressly waives any
requirement in an action for specific performance for the posting of a bond by
the party bringing such action.
9.7 FURTHER ASSURANCES.
(a) The parties hereto shall do and perform or cause to be done
and performed all such further acts and things and shall execute and deliver all
such other agreements, certificates, instruments or documents as any other party
may reasonably request from time to time in order to
30
<PAGE>
carry out the intent and purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(b) The Company covenants and agrees that within ten (10) days of
the Closing Date it will remit sufficient funds to Aspect Resources LLC, Esenjay
Petroleum Corporation and Esenjay Exploration, Inc. to payoff all account
balances that the Company has with such parties. In addition, the Company agrees
that, after the Closing Date, it will use its reasonable best efforts to timely
satisfy any cash calls or other obligations it may have to Aspect Resources LLC
(including any obligations under the Participation Agreement, effective as of
May 1, 1998, for the Gillock project), Esenjay Petroleum Corporation or Esenjay
Exploration, Inc.
9.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be executed by fewer than all of the parties,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
9.9 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic impact of this Agreement on any party.
9.10 CAPTIONS. Headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be relied upon in
construing this Agreement. Use of any gender herein to refer to any person shall
be deemed to comprehend masculine, feminine and neuter unless the context
clearly requires otherwise.
9.11 PUBLIC STATEMENTS. The Purchasers severally agree not to issue any
public statement with respect to the Purchasers' investment or proposed
investment in the Company or the terms of any agreement or covenant between them
and the Company without the Company's prior written consent, except such
disclosures as may be required under applicable law or under any applicable
order, rule or regulation. In addition, at any time prior to the Option Closing
Date, the Company will not issue any press release or make any public statement
regarding the transactions contemplated hereby without providing the Purchasers
with prior notification of the contents of such press release or public
statement and consulting with the Purchasers prior to the issuance of such press
release or public statement, except as may be required by applicable law, court
process or by obligations pursuant to a listing agreement with NASDAQ.
9.12 BROKERS. Each of the Company and the Purchasers severally
represents and warrants to the others that it has not engaged, consented to or
authorized any broker, finder or intermediary to act on its behalf, directly or
indirectly, as a broker, finder or intermediary in connection with the
transactions contemplated by this Agreement. Each of the Company and the
Purchasers hereby severally agrees to indemnify and hold harmless the others
from and against all fees, commissions or other payments owing to any such
person or firm acting on behalf of such Person hereunder.
31
<PAGE>
9.13 COSTS AND EXPENSES. Each party hereto shall pay its own costs and
expenses incurred in connection herewith, including the fees of its counsel,
auditors and other representatives, whether or not the transactions contemplated
herein are consummated; provided, however, that assuming a successful completion
of the transactions contemplated hereby, the Company shall pay the reasonable
fees and disbursements of Purchaser's counsel in connection with such
transactions and any subsequent amendment, waiver, consent or enforcement
thereof; provided that, if such fees and expenses exceed $15,000, as to such
excess the Company shall only be obligated to pay fifty percent (50%) of such
fees and expenses.
9.14 NO THIRD-PARTY RIGHTS. Nothing in this Agreement shall create or be
deemed to create any rights in any person or entity not a party to this
Agreement except for such rights as may exist by virtue of any contract or other
agreement existing on the date hereof and except for certain registration rights
granted hereunder to Persons in accordance with Section 8.3 hereof.
9.15 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subject matter hereof and
thereof and supersede all prior agreements and understandings among the parties
relating to the subject matter hereof except that the provisions of the
Confidentiality Agreement between the Company and Aspect Resources LLC dated May
8, 1998, shall survive, and be applicable to the Company and the Purchasers. No
party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth
herein. Neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or termination
is sought except that any matter relating to registration rights hereunder may
be waived or amended on behalf of all of the Holders, by the consent of the
Company and the Holders holding a majority of the then outstanding Registrable
Securities. Any other provision of this Agreement may be waived or modified on
behalf of all of the Purchasers with the consent of those Purchasers owning
two-thirds of the shares purchased hereunder and that are still held (at the
time of such waiver or modification) by any Purchaser.
[SIGNATURES ON FOLLOWING PAGE]
32
<PAGE>
This Common Stock Subscription Agreement is agreed to and accepted as of
June 3, 1998.
3DX TECHNOLOGIES INC.
By:___________________________________
Ronald P. Nowak, President and
Chief Executive Officer
___________________________________
Susan Morrice
___________________________________
Donald D. Wolf
MINNOWBURN CORPORATION
By:___________________________________
Peter Unwin, Authorized Representative
CWS LIMITED-LIABILITY COMPANY
By: Ninth Floor Corporation, its Manager
By:___________________________________
Kevin Moore, Vice President
CENTENNIAL ENERGY PARTNERS, L.P.
By: Centennial Energy Partners, L.L.C.,
its General Partner
By:___________________________________
Peter K. Seldin, Member
[ADDITIONAL SIGNATURES ON FOLLOWING PAGE]
33
<PAGE>
TERCENTENNIAL ENERGY
PARTNERS, L.P.
By: Centennial Energy Partners, L.L.C.,
its General Partner
By:___________________________________
Peter K. Seldin, Member
QUADRENNIAL PARTNERS, L.P.
By: Centennial Energy Partners, L.L.C.,
its General Partner
By:___________________________________
Peter K. Seldin, Member
CENTENNIAL OVERSEAS FUND, LTD
By: Centennial Management, L.L.C.,
under Investment Management Agreement
By:___________________________________
Peter K. Seldin, Member
INVESTMENT 11, LLC
By: Joseph H. Reich & Co., Inc.,
under Investment Management Agreement
By:___________________________________
Peter K. Seldin, Vice President
[ADDITIONAL SIGNATURES ON FOLLOWING PAGE]
34
<PAGE>
ALTIRA GROUP LLC
By:___________________________________
Dirk W. McDermott, President
___________________________________
James R. Newell
___________________________________
Alex B. Campbell
___________________________________
Paul D. Favret
___________________________________
Wayne W. Williamson
35
<PAGE>
CERTIFICATE OF SIGNATORY
(To be completed if Shares are being subscribed for by an entity)
I, _________________, am the _______________ of ________________________ (the
"Entity").
I certify that I am empowered and duly authorized by the Entity to
execute and carry out the terms of the Common Stock Subscription
Agreement and to purchase and hold the Shares, and certify further that
the Common Stock Subscription Agreement has been duly and validly
executed on behalf of the Entity and constitutes a legal and binding
obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand this ____ day of ______________, 1998.
36
<PAGE>
EXHIBIT A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
Principal Address,
Number of Purchase Telephone Number,
Name shares price fax number
---- ------ ----- ----------
<S> <C> <C>
Susan Morrice 111,147 $166,720.50 c/o Morrice & Associates, Ltd.
511 16th Street, Suite 300
Denver, Colorado 80202
Telephone No. (303) 573-3909
Facsimile No. (303) 573-7340
Minnowburn Corporation 233,333 $349,999.50 c/o Coy Nominees Ltd.
49 Main St.
Road Town, Tortola
British Virgin Islands
Telephone No. (284) 494-3384
Facsimile No. (284) 494-2914
Donald D. Wolf 33,333 $49,999.50 c/o Westport Oil and Gas Company,
Inc. 410 17th Street, Suite 2300
Denver, Colorado 80202
Telephone No. (303) 575-0124
Facsimile No. (303) 573-5609
CWS Limited-Liability Company 877,228 $1,315,842.00 c/o The Clark Estates, Inc.
One Rockefeller Plaza, 31st Floor
New York, New York 10020
Telephone No. (212) 977-6900
Facsimile No. (212) 977-3425
Centennial Energy Partners, L.P. 66,204 $99,306.00 900 Third Avenue, Suite 1801
New York, New York 10022
Telephone No. (212) 753-5150
Facsimile No. (212) 753-5927
Tercentennial Energy Partners, L.P. 40,000 $60,000.00 900 Third Avenue, Suite 1801
New York, New York 10022
Telephone No. (212) 753-5150
Facsimile No. (212) 753-5927
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Quadrennial Partners, L.P. 10,000 $15,000.00 900 Third Avenue, Suite 1801
New York, New York 10022
Telephone No. (212) 753-5150
Facsimile No. (212) 753-5927
Centennial Overseas Fund, LTD 20,000 $30,000.00 900 Third Avenue, Suite 1801
New York, New York 10022
Telephone No. (212) 753-5150
Facsimile No. (212) 753-5927
Investment 11, LLC 10,000 $15,000.00 900 Third Avenue, Suite 1801
New York, New York 10022
Telephone No. (212) 753-5150
Facsimile No. (212) 753-5927
Altira Group LLC 16,667 $25,000.00 c/o Dirk W. McDermott
1625 Broadway, Suite 2150
Denver, Colorado 80202
Telephone No. (303) 623-0424
Facsimile No. (303) 623-3525
James R. Newell 13,333 $19,999.50 2165 South Parfet Ct.
Lakewood, Colorado 80227
Telephone No. (303) 988-6675
Facsimile No. (303) 988-6675
Alex B. Campbell 1,466 $2,199.00 c/o Aspect Resources LLC
511 16th Street, Suite 300
Denver, Colorado 80202
Telephone No. (303) 573-7011
Facsimile No. (303) 573-7340
Paul D. Favret 7,333 $10,999.50 c/o Aspect Resources LLC
511 16th Street, Suite 300
Denver, Colorado 80202
Telephone No. (303) 573-7011
Facsimile No. (303) 573-7340
Wayne W. Williamson 22,000 $33,000.00 c/o Aspect Resources LLC
511 16th Street, Suite 300
Denver, Colorado 80202
Telephone No. (303) 573-7011
Facsimile No. (303) 573-7340
</TABLE>
A-2
EXHIBIT 99.2
VOTING AGREEMENT
This Voting Agreement (this "Agreement"), dated as of June 3, 1998, is
made and entered into by and among those individuals and entities set forth on
the signature page hereof (the "Shareholders") for the benefit of the Purchasers
(as defined herein).
1. INTRODUCTION. This Agreement is being entered into in connection with
the execution and delivery of that Common Stock Subscription Agreement, dated as
of June 3, 1998 (the "Subscription Agreement"), by and among 3DX Technologies
Inc. (the "Company"), Minnowburn Corporation and Susan Morrice, among others
(the "Purchasers"), whereby the Company will issue shares of its common stock
("Common Stock") to the Purchasers and will grant an option to the Purchasers to
acquire additional shares of Common Stock upon the happening of certain events,
principal among which is the approval of the shareholders of the Company of the
stock issuance contemplated by the option. The stock issuances and other
transactions contemplated by the Subscription Agreement (including any issuance
of Dilutive Shares or Penalty Shares) are herein referred to as the
"Transactions." The Shareholders acknowledge and agree that their execution and
delivery of this Agreement and agreement to vote in favor of the Transactions is
a material inducement to the Purchasers to execute and deliver the Subscription
Agreement and that the Purchasers would not be willing to enter into the
Subscription Agreement but for the representations, warranties and covenants
contained herein. Capitalized terms used but not defined herein shall have the
meaning ascribed to them in the Subscription Agreement.
2. CONSENT. The Company has furnished to each Shareholder a copy of the
Subscription Agreement (including all Exhibits thereto). Subject to the terms
and conditions of the Subscription Agreement, the Shareholders consent to the
Subscription Agreement and the Transactions.
3. AGREEMENT TO VOTE. To induce the Purchasers to enter into the
Subscription Agreement, each of the Shareholders individually covenants and
agrees, subject to the limitations set forth in Section 9 hereof, to vote all
shares of Common Stock owned directly or indirectly by him (and any and all
securities issued or issuable in respect thereof) or which the Shareholder is
entitled to vote (collectively, the "Shares") FOR and in favor of the
Subscription Agreement and the Transactions at any and all meetings of the
shareholders of Company at which the Subscription Agreement and/or the
Transactions are considered and at any adjournment(s) thereof.
4. IRREVOCABLE PROXY. Each Shareholder hereby constitutes and appoints
Susan Morrice and Kevin Moore, and each of them (the "Proxy Holder," whether one
or both), with full power of substitution, its true and lawful proxy and
attorney-in-fact to vote the Shares of such Shareholder at the Stockholders
Meeting referred to in Section 1.6(a) of the Subscription Agreement or any
adjournment(s) thereof in favor of the approval of (i) the Subscription
Agreement, the issuance of the Option and the common stock issuable thereunder,
the issuance of the Dilution Shares and the Penalty Shares, if any, and the
Transactions and (ii) the Reverse Stock Split. Such proxy shall be limited
strictly to the power to vote such Shares in the manner set forth in the
preceding sentence and shall not extend to any other matters. Each Shareholder
acknowledges that the proxy granted hereby is coupled with an interest and is
irrevocable to the full extent permitted by Section 212 of the
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<PAGE>
Delaware General Corporation Law. In the event that any Shareholder for any
reason fails to vote its Shares in accordance with the requirements of Section 3
hereof, then the Proxy Holder shall have the right to vote such Shares in
accordance with the provisions of this Section 4. The vote of the Proxy Holder
shall control in any conflict between its vote of such Shares and a vote by any
Shareholder of such Shares. The irrevocable proxy granted pursuant to this
Section 4 shall continue in effect until the termination of this Agreement in
accordance with its terms.
5. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. Each of the
Shareholders hereby represents and warrants to the Purchasers, as to himself
only, as follows:
(a) Such Shareholder (i) has received a copy of the Subscription
Agreement, dated as of June 3, 1998, (ii) has had an opportunity to review the
Subscription Agreement to the satisfaction of such Shareholder, (iii) is
familiar with the terms of the Transactions and (iv) has had an opportunity to
ask questions of and receive satisfactory answers from the officers of the
Company concerning the Subscription Agreement and the terms of the Transactions.
(b) Such Shareholder is the beneficial owner of the shares of
Common Stock shown as owned by him on ANNEX A of this Agreement and has the
right to vote such shares. In the event the shares are held by a trust,
corporation, partnership, limited liability company or other entity, the
Shareholder is the duly authorized and acting agent or representative of such
entity (with full power and authority to enter into this Agreement) and this
Agreement has been duly authorized by all necessary entity action. None of the
shares of Common Stock owned by him are subject to any proxy, voting trust or
other agreement or arrangement with respect to the voting of such shares, other
than pursuant to this Agreement.
(c) This Agreement is the legal, valid and binding agreement of
such Shareholder, enforceable against him in accordance with its terms, except
as such validity, binding effect or enforceability may be limited by bankruptcy,
insolvency, or other similar laws relating to creditors' rights generally and
except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
(d) The execution and delivery of this Agreement by such
Shareholder do not, and the performance by him of his obligations hereunder will
not, constitute a violation of, conflict with or result in a default under any
contract, commitment, agreement, understanding, arrangement, statute or
restriction of any kind to which he is a party or by which he or any of his
property is bound or any judgment, decree or order applicable to him.
(e) Neither the execution and delivery of this Agreement, nor the
performance by such Shareholder of his obligations hereunder will violate any
provision of law applicable to him, except for the requirements, if any, of
federal and state securities laws.
-2-
<PAGE>
(f) The shares of Common Stock shown on ANNEX A as owned by such
Shareholder are the only securities of the Company owned by him, beneficially or
of record, other than options outstanding pursuant to the Company's existing
employee stock option plan, and he owns no other options to purchase or rights
to subscribe for or otherwise acquire any securities of the Company.
6. OPTION SHARES. Any shares of Common Stock of the Company issued to
the Shareholder upon the exercise of stock options or warrants that are
currently exerciseable or become exerciseable during the term of this Agreement
shall be deemed Shares for purposes of this Agreement.
7. COVENANT OF THE SHAREHOLDER. Each of the Shareholders hereby
covenants and agrees with the Purchasers that until the Transactions have been
consummated such Shareholder will not, without the prior written consent of the
Purchasers, directly or indirectly, (i) grant any proxies or enter into any
voting trust or other agreement or arrangement with respect to the voting of any
Shares, or (ii) except in the case of any pledge of the Shares pursuant to which
the Shareholder retains the voting rights with respect to the Shares, (a) sell,
assign, transfer or otherwise dispose of any Shares, or (b) enter into any
contract, option or other arrangement or understanding with respect to the
direct or indirect acquisition or sale, assignment, transfer or other
disposition of any Shares.
8. REMEDIES. The parties acknolwedge and agree that performance of their
respective obligations hereunder will confer a unique benefit on the other and
that a failure of performance will not be compensable by money damages. The
parties hereto agree that if for any reason any Shareholder shall fails to
perform his obligations under this Agreement, then any party hereto seeking to
enforce this Agreement against such nonperforming party shall be entitled to
specific performance and injunctive and other equitable relief, and the parties
hereto further agree to waive any requirement for the securing or posting of any
bond in connection with the obtaining of any such injunctive or other equitable
relief. This provision is without prejudice to any other rights that either
party hereto may have against the other party hereto for any failure to perform
its obligations under this Agreement. The failure by any of the Shareholders to
perform his obligations hereunder shall in no way affect the obligation of the
other Shareholders to perform their respective obligations hereunder.
9. LIMITATIONS. This Agreement relates only to each Shareholder's rights
and obligations as a holder of Shares and, to the extent such Sharehoder is a
member of the board of directors or an officer of the Company, shall not require
him to take any action whatsoever, nor shall it affect the fiduciary duties of
the Shareholder as a member of the board of directors or as an officer or
otherwise.
10. MISCELLANEOUS.
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<PAGE>
(a) ASSIGNMENT. Neither this Agreement nor the rights and
obligations hereunder shall be assignable by the parties hereto. This Agreement
shall be binding upon each of the Shareholders and such Shareholder's heirs,
distributees, successors and assigns by will or by the laws of descent.
(b) AMENDMENTS; WAIVERS. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto. The Proxy Holder, in his sole
discretion, shall be permitted to waive any of the terms and provisions hereof
intended for the benefit of the Purchasers.
(c) TERMINATION. This Agreement shall terminate in its entirety
upon the holding of the Stockholders Meeting.
(d) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAW OF THE STATE OF
DELAWARE WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
(e) SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
not in any way be affected, impaired or invalidated.
(f) 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 and the same agreement.
[SIGNATURES ON FOLLOWING PAGE]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
_______________________________
C. Eugene Ennis
_______________________________
Peter M. Duncan
_______________________________
Douglas C. Nester
_______________________________
Joseph Schuchardt, III
_______________________________
Jon W. Bayless
_______________________________
Douglas C. Williamson
_______________________________
Ronald P. Nowak
_______________________________
Charles E. Edwards
_______________________________
Peter K. Seldin
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<PAGE>
ANNEX A
SHAREHOLDER SHARES
----------- ------
C. Eugene Ennis 269,267
Peter M. Duncan (a) 355,448
Douglas C. Nester 357,448
Joseph Schuchardt, III 41,699
Jon W. Bayless (b) 749,025
Douglas C. Williamson (c) 721,903
Ronald P. Nowak (d) 50,000
Charles E. Edwards 17,002
Peter K. Seldin (e), (f) 516,363
(a) Includes 30,000 shares owned by trusts for the benefit of the minor
children of Mr. Duncan. Mr. Duncan is the trustee of those trusts.
(b) Includes 727,477 shares beneficially owned by Citi Growth Fund, L.P. Mr.
Bayless is the sole stockholder and director of Jon W. Bayless, Inc.,
the general partner of Atlantic Partners L.P., the general parter of
Citi Growth Fund L.P.
(c) Includes 721,903 shares held by NationsBanc Capital Corporation. Mr.
Williamson is a Managing Director in the Venture Capital Group of
NationsBanc Capital Corporation.
(d) Reflects shares granted under restricted stock award dated March 6,
1998. The company's transfer agent has been provided with instructions
regarding the issuance of such shares and is in the process of
completing the issuance.
(e) Includes (i) 198,468 shares owned beneficially by Centennial Associates,
L.P., a Delaware limited partnership of which Mr. Seldin is a general
partner; (ii) 82,041 shares owned beneficially by Centennial Energy
Partners, L.P., a Delaware limited partnership of which Centennial
Energy Partners, L.L.C. is the general partner and Mr. Seldin is a
member of such general partner; (iii) 64,350 shares owned beneficially
by Tercentennial Energy Partners, L.P., a Delaware limited partnership
of which Centennial Energy Partners, L.L.C. is the general partner and
Mr. Seldin is a member of such general partner; (iv) 16,150 shares owned
beneficially by Quadrennial Partners, L.P., a Delaware limited
partnership of which Centennial Energy Partners, L.L.C. is the general
partner and Mr. Seldin is a member of such general partner; and (v)
9,150 shares owned beneficially by Investment 11, LLC, which is managed
under an Investment Management Agreement by Joseph H. Reich & Co., Inc.,
a New York corporation of which Mr. Seldin is a vice president.
(f) Includes 146,204 shares being acquired under the Subscription Agreement,
which shares are being acquired by the following entities: (i) 66,204
shares by Centennial Energy Partners, L.P.; (ii) 40,000 shares by
Tercentennial Energy Partners, L.P.; (iii) 10,000 shares by Quadrennial
Partners, L.P.; (iv) 20,000 shares by Centennial Overseas Fund, LTD,
which is managed under an Investment Management Agreement by Centennial
Management, LLC of which Mr. Seldin is a member; and (v) 10,000 shares
by Investment 11, LLC,
<PAGE>
which is managed under an Investment Management Agreement by Joseph H.
Reich & Co., Inc., of which Mr. Seldin is a vice president.
EXHIBIT 99.3
Wednesday June 10, 5:06 pm Eastern Time
Company Press Release
3DX Technologies Inc. Announces Sale of Common Stock
HOUSTON--(BUSINESS WIRE)--June 10, 1998--3DX Technologies Inc. (NASDAQ:TDXT
news) today announced that it has signed an agreement with several investors
providing for the issuance and sale of up to $5,000,000 worth of its Common
Stock at a purchase price of $1.50 per share. The agreement calls for the
immediate sale of $2,200,000 worth of stock at the agreed price and giving the
investors a 60 day option to elect to purchase the remaining $2,800,000 worth of
stock upon stockholder approval. The first sale closed today while the second
transaction will close following a stockholder's meeting that will be held as
soon as possible.
Ronald P. Nowak, president and CEO of 3DX commented: "This infusion of capital
will allow 3DX to go forward with its business. The money is designated for
payment of certain obligations relating to current exploration operations and
particularly to continue the drilling of our prospect portfolio."
3DX Technologies Inc. is a knowledge-based oil and gas exploration company whose
core competence and strategic focus is the utilization of 3-D seismic imaging
and other advanced technologies in the search for commercial quantities of
hydrocarbons.
Certain statements in this news release regarding the timing of the offering,
future expectations and plans for oil and gas exploration, development and
production may be regarded as "forward looking statements" within the meaning of
the Securities Litigation Reform Act. They are subject to various risks, such as
required approvals and conditions under the stock purchase agreement, operating
hazards, drilling risks, and other uncertainties inherent in the business of
exploring for, developing and producing oil and gas which may be beyond the
Company's control. Certain of these risks are discussed in detail in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997, as
well as other filings with the Securities and Exchange Commission. There can be
no assurance as to the amount to be received by the Company in the offering or
that the Company's exploration activities will be successful in meeting the
Company's expectations. The securities being offered are not being registered
under the Securities Act of 1933, as amended, and may not be offered or sold in
the United States absent registration or an applicable exemption from
registration requirements.
Contact:
3DX Technologies, Houston
Ronald P. Nowak or Russell L. Allen, 281/579-3398
