RESTRUCTURING AGREEMENT
This RESTRUCTURING AGREEMENT is made this 24th day of September, 1997
by and between XXXXXXXX ENERGY CORP. ("Xxxxxxxx"), INFINITY INVESTORS LIMITED
(the "Investor"), XXXXXX X. XXXXXXXXX ("X. Xxxxxxxxx"), XXXXXXX X. XXXXXXXXX
("X. Xxxxxxxxx"), XXXXXX X. XXXXXXXXX ("X. Xxxxxxxxx," and together with X.
Xxxxxxxxx and X. Xxxxxxxxx, the "Tarricones").
WHEREAS, pursuant to a certain Offshore Securities Subscription
Agreement dated as of May 31, 1996, Xxxxxxxx issued and sold to the Investor,
and the Investor purchased, 580,646 shares of Xxxxxxxx'x Series B 8%
Cumulative Convertible Redeemable Preferred Stock (the "Series B Preferred
Stock");
WHEREAS, Xxxxxxxx and the Investor have entered into a letter of intent
dated May 19, 1997 regarding, among other matters, the proposed terms of a
restructuring of the shares of Series B Preferred Stock owned by the Investor
and the modification of the terms of the Series B Preferred Stock; and
WHEREAS, the Tarricones are the holders of Options to purchase an
aggregate of 1,000,000 shares of Xxxxxxxx'x Common Stock having an exercise
price of $.3125 per share (the "Xxxxxxxxx Options") and are willing to
transfer to the Investor or other third parties all or a portion of the
Xxxxxxxxx Options upon the occurrence of the events described herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. Recapitalization of Series B Preferred Stock. The Investor
represents and warrants that, as of the date hereof, it is the record and
beneficial owner of 567,085 shares of Series B Preferred Stock (the "Investor
Shares") free and clear of any liens, claims, options or other encumbrances.
As of the date hereof, accrued and unpaid dividends on the Series B Preferred
Stock aggregated $467,813.91 and Xxxxxxxx was indebted to the Investor in an
additional amount of $78,252.20. With respect to the Investor Shares, the
Investor and Xxxxxxxx agree as follows:
(a) In exchange for 77,419 shares of Series B Preferred Stock
together with all accrued and unpaid dividends on such shares, and the other
amounts owing hereunder, Xxxxxxxx agrees to issue, and the Investor agrees to
accept, a $600,000 principal amount 12% Subordinated Note in the form of
Exhibit A hereto (the "Note");
(b) With respect to the balance of the 560,126 Investor Shares
(the "Remaining Investor Shares"), the Investor and Xxxxxxxx hereby agree to
amend the Certificate to Set Forth Designations, Voting Powers, Preferences,
Limitations, Restrictions and Relative Rights of Series B 8% Cumulative
Convertible Redeemable Preferred Stock, $.001 par value (the
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"Certificate of Designation") to provide, among other things, (i) a
fixed Conversion Price (as defined in the Certificate of Designation) of
$2.00 per share of Series B Preferred Stock, (ii) a removal of certain
limitations on the rights of the holders of the Series B Preferred Stock to
convert such shares into Xxxxxxxx'x Common Stock and (iii) an increase in the
dividend rate of the Series B Preferred Stock on the Stated Value (as defined
in the Certificate of Designation). As so amended, the Certificate of
Designation shall read in its entirety as set forth in Exhibit B hereto.
2. Registration.
(a) Definitions. The following definitions shall apply with
respect to this Agreement and to a registration (a "Registration") pursuant
to this Section 2:
(i) "Conversion Shares" shall mean shares of Xxxxxxxx'x
Common Stock issuable upon conversion of the Remaining Investor Shares.
(ii) "Dividend Shares" shall mean shares of Xxxxxxxx'x
Common Stock issuable in lieu of cash dividends on the Remaining Investor
Shares.
(iii) "Option Shares" shall mean shares of Xxxxxxxx'x
Common Stock issuable upon exercise of the Xxxxxxxxx Options.
(iv) "Public Offering" shall mean a public offering of
equity securities of Xxxxxxxx pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), covering
the offer and sale of equity securities of Xxxxxxxx to the public.
(v) The term "Registrable Shares" shall mean the
Conversion Shares, the Dividend Shares and the Option Shares and any
securities issued or issuable with respect to such securities by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or
otherwise. Registrable Shares shall cease to be Registrable Shares when they
may be sold under Rule 144(k) and all requisite steps have been taken to
remove any legends or restrictions on transfer under the Securities Act with
respect to such Registrable Shares; provided, however, that Registrable
Shares which are subject to the Option shall not cease to be Registrable
Shares unless the transfer pursuant to the exercise of the Option can be made
under Rule 144(k).
(vi) The term "Registration Statement" shall mean any
registration statement of Xxxxxxxx that covers any of the Registrable Shares
pursuant to the provisions of this Agreement, including the prospectus
included therein, any amendment or supplement thereof, including
post-effective amendments, and all exhibits and all material incorporated by
reference in such Registration Statement.
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(vii) The term "SEC" shall mean the United States Securities and
Exchange Commission or any successor thereto.
(b) Agreement to Register Conversion Shares. Within seven (7)
business days after the closing of the transactions contemplated by this
Agreement, Xxxxxxxx shall prepare and file with the SEC a Registration
Statement covering the resale of the Conversion Shares and use its
commercially reasonable efforts to cause such Registration Statement to
become effective not later than October 15, 1997. In this regard, Xxxxxxxx
shall respond to any SEC comments within three (3) business days after the
date of receipt thereof; provided however, that in the event that any SEC
response involves or requires the input of any third party, including Xxxxxxx
& Xxxxxx LLP, and such input is not received by the SEC within such three (3)
business day period, the SEC response time shall be extended for up to an
additional (i) fifteen (15) business days in the event that such SEC comments
relate, in whole or in part, to Xxxxxxxx'x audited financial statements for
the fiscal year ended August 31, 1996 and (ii) five (5) additional business
days in all other cases. In the event that such Registration Statement
shall not have been declared effective on or before October 15, 1997, within
seven (7) business days after October 15, 1997, the Company shall prepare and
file an amendment to the Registration Statement containing such unaudited
interim financial statements as shall be necessary to permit the Registration
Statement to become effective and the Conversion Shares to be sold
thereunder; provided, however, that in the event that any such amendment
involves or requires the input of Xxxxxxx & Xxxxxx LLP, and such involvement
or input is not received within seven (7) business days, the time period
within which to file an amended Registration Statement shall be extended for
up to an additional eight (8) business days.
The offering contemplated by this Section 2(b) may be, at the option of
a majority (by number of securities) of the holders of the Conversion Shares
so included, an underwritten offering and the underwriter or underwriters
thereof shall be selected by the holders of at least a majority (by number of
securities) of the Registrable Shares as to which registration has been
requested who shall be reasonably acceptable to Xxxxxxxx.
(c) Piggyback Registration of Dividend Shares.
(i) If Xxxxxxxx at any time after the second anniversary
of the effective date of the Registration Statement referred to in Section
2(b) hereof proposes to register any of its shares of Common Stock under the
Securities Act (other than on Form S-4 or Form S-8 or other comparable form
or pursuant to an exchange offer or other offering of securities solely to
Xxxxxxxx'x shareholders), Xxxxxxxx shall give written notice to the Investor
of its intention to effect such registration within ten (10) days after
making such determination, and upon the request of the Investor delivered to
Xxxxxxxx within twenty (20) days after giving of such notice (which request
shall specify the number of Registrable Shares relating to Dividend Shares
intended to be disposed of by the Investor and the intended method of
disposition thereof), Xxxxxxxx shall use its commercially reasonable efforts
to cause such Registrable Shares relating to Dividend Shares to be included
in such registration.
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(ii) In the event that a registration pursuant to this Section
2(c) is for a Public Offering involving an underwriting, Xxxxxxxx shall so
advise the Investor. In such event, the right of the Investor to
registration pursuant to this Section 2(c) shall be conditioned upon the
approval of the managing underwriter and the inclusion of the Dividend Shares
in the underwriting shall be subject to the following conditions: (A) the
Investor shall enter into an underwriting agreement in customary form with
the managing underwriter selected by Xxxxxxxx; (B) if the managing
underwriter advises Xxxxxxxx in writing (with a copy to each holder of
Registrable Shares) that marketing factors require a limitation of the number
of Dividend Shares to be underwritten, the number of Dividend Shares shall be
reduced to the number which Xxxxxxxx is so advised can be sold in such
offering, pro rata among the holders on the basis of the number of
Registrable Shares held (or then acquirable) by such holders, provided that
no other holders of registration rights granted after the date hereof shall
have their shares included in such Registration Statement unless all of the
Registrable Shares relating to Dividend Shares shall be so included and,
provided, further, that the holders of Dividend Shares shall have priority to
all shares sought to be included by officers and directors of Xxxxxxxx as
well as holders of ten percent (10%) or more of the Xxxxxxxx Common Stock;
and (C) if the Investor disapproves of the terms of the underwriting, it may
elect to withdraw therefrom by written notice to Xxxxxxxx, in which case, the
Dividend Shares shall not be transferred in a public distribution prior to 90
days after the effective date of such Registration Statement, or a shorter
period (if permitted by the managing underwriter), in each case as requested
in writing by the managing underwriter.
(d) Mandatory Registration of the Dividend Shares. At any time
after the second anniversary of the effective date of the Registration
Statement referred to in Section 2(b), upon the written request of the
Investors owning not less than a majority of the Dividend Shares, Xxxxxxxx
shall use its commercially reasonable efforts to effect the registration of
all Dividend Shares then issued as soon as practicable, but no later than 90
days after the request for registration pursuant to this Section 2(d);
provided, however, that such period may be extended or delayed by Xxxxxxxx
for one period of up to 45 days if, upon the advice of counsel at the time
such Registration Statement is required to be filed, or at the time Xxxxxxxx
is required to exercise its commercially reasonable efforts to cause such
Registration Statement to become effective, such delay is advisable and in
the best interests of Xxxxxxxx because of the existence of non-public
material information, or to allow Xxxxxxxx to complete any pending audit of
its financial statements. The right to demand registration pursuant to this
Section 2(d) shall terminate after two Registration Statements prepared
pursuant to this Section 2(d) have been declared effective.
(e) Provisions Applicable to Registration. The following
provisions shall apply, as applicable, in connection with the Registrable
Shares to be included in the Registration Statement pursuant to this Section
2:
(i) the Investor, if reasonably requested by the
underwriter with respect to any Public Offering, shall agree not to sell,
make any short sale of, loan, grant any options for the purchase of, or
otherwise dispose of any Registrable Shares (other than those included in the
Registration) without the prior written consent of such underwriters, as the
case
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may be, for such period of time (not to exceed one hundred twenty (120)
days), from the effective date of such Registration Statement, or the
commencement of the offering, as applicable, as may be requested by the
underwriters;
(ii) Xxxxxxxx shall prepare the Registration Statements
utilizing, the information set forth on Annex A attached hereto and such
other information provided to Xxxxxxxx in writing by the Investor and shall
not thereafter amend the portion of the Registration Statement containing
such information without the Investor's consent, which consent shall not be
unreasonably withheld or delayed.
(iii) the Investor shall promptly provide Xxxxxxxx upon
written request therefrom with such non-confidential and non-proprietary
information as it shall reasonably request and that is available to the
Investor and necessary in order to prepare the Registration Statement;
(iv) all reasonable and necessary expenses in connection
with the preparation of the Registration Statements contemplated by Sections
2(b) and 2(c) hereof and the first Registration Statement prepared pursuant
to Section 2(d), including, without limitation, any and all legal, accounting
and filing fees (but not including fees and disbursements of experts,
counsel, personnel and other persons retained by the Investor or underwriting
discounts and commissions to be paid by the Investor) shall be borne by
Xxxxxxxx; the Investor shall bear all such fees, costs and expenses for any
other registrations;
(v) Xxxxxxxx shall use its commercially reasonable
efforts to effect such Registration permitting the sale of such Registrable
Shares in accordance with the intended method or methods of distribution
thereof, and pursuant thereto, Xxxxxxxx shall as expeditiously as possible:
(1) prepare and file with the SEC a Registration
Statement by the date required herein (the "Required Effectiveness
Date") relating to the applicable registration on any appropriate form
under the Securities Act, which form shall be available for the sale of
the Registrable Shares in accordance with the intended method or
methods of distribution thereof and use its commercially reasonable
efforts to cause such Registration Statement to become effective and
keep such Registration Statement effective in accordance with Section
2(e)(v)(2) below; provided, however that before filing such
Registration Statement or any amendments thereto, Xxxxxxxx will furnish
to the counsel selected by the holders of Registrable Shares which are
to be included in such registration, copies of all such documents
proposed to be filed;
(2) prepare and file with the SEC such amendments
and post-effective amendments to the Registration Statement as may be
necessary to keep the Registration effective until all such Registrable
Shares are sold or otherwise cease to be Registrable Shares (the
"Registration Maintenance Period"); cause the prospectus to be
supplemented by any required prospectus supplement, and as so
supplemented to be filed
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pursuant to Rule 424 under the Securities Act; and comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Shares covered by such Registration Statement during the
applicable period in accordance with the intended method or methods of
distribution by the sellers thereof as set forth in such Registration
Statement or supplement to the prospectus; provided, however that
Xxxxxxxx may, from time to time, request that the holders of the
Registrable Shares immediately discontinue the disposition of the
Registrable Shares for a period not to exceed thirty consecutive days
or an aggregate of seventy five (75) days in any year if Xxxxxxxx
determines, in the good faith exercise of its reasonable business
judgment, that the offering and disposition of the Registrable Shares
could materially interfere with bona fide financing, acquisition or
other material business plans of Xxxxxxxx or would require disclosure
of non-public information, the premature disclosure of which could
materially and adversely affect Xxxxxxxx (it being acknowledged that
Xxxxxxxx is not required to disclose in such request any such
transaction, plan or non-public information), so long as Xxxxxxxx
promptly after the disclosure of such transaction, plan or non-public
information complies with this section 2(e)(v)(2).
(3) notify the Investor and the underwriter, if
any, promptly, and (if requested by any such person) confirm such
advice in writing, (A) when the prospectus or any prospectus supplement
or post-effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment thereto, when
the same has become effective, (B) of any request by the SEC for
amendments or supplements to the Registration Statement or the
prospectus or for additional information, (C) of the issuance by the
SEC of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose, (D) of
the receipt by Xxxxxxxx of any notification with respect to the
suspension of the qualification of the Registrable Shares for sale in
any jurisdiction or the initiation of any proceedings for such purpose
and (E) subject to the proviso below, of the happening of any event as
a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances then existing and, subject to Section
2(e)(v)(2) above, at the request of any such person, prepare and
furnish to such person a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such shares, such prospectus
shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances then existing; provided, however, Xxxxxxxx need not
disclose the event if it otherwise has not disclosed such event to the
public.
(4) if requested by the Investor or the
underwriters, if any, promptly incorporate in a prospectus supplement
or post-effective amendment such information as the underwriter and the
Investor agree should be included therein relating
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to the plan of distribution with respect to such Registrable Shares,
including, without limitation, the purchase price being paid therefor
by such underwriters and with respect to any other terms of the
underwritten offering of the Registrable Shares to be sold in such
offering; and make all required filings of such prospectus supplements
or post-effective amendments as soon as notified of the matters to be
incorporated in such prospectus supplements or post-effective
amendments;
(5) deliver to the Investor and the underwriters,
if any, without charge, as many copies of the prospectus (including
each preliminary prospectus) in conformity with the requirement of the
Securities Act and any amendments or supplements thereto as such
persons may reasonably request and such other documents as they may
reasonably request to facilitate the prior sale or other disposition of
such Registrable Shares;
(6) prior to any Public Offering of Registrable
Shares, register or qualify or cooperate with the Investor, or the
underwriters, if any, in connection with the registration or
qualification of such Registrable Shares for offer and sale under the
securities or blue sky laws of such jurisdictions as the Investor or
underwriters, if any, reasonably requests in writing and do any and all
other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Registrable Shares covered by the
Registration Statement; provided, however, that Xxxxxxxx shall not be
required to qualify to do business in any jurisdiction where it is not
then so qualified or to take any action that would subject it to
general service of process in any such jurisdiction where it is not
then so subject or would subject Xxxxxxxx to any tax in any such
jurisdiction where it is not then so subject or would require the
directors, officers or employees of Xxxxxxxx to agree to a lock-up or
to escrow their shares or to relinquish any options or other rights to
purchase shares; and provided, further, that Xxxxxxxx shall not be
required to expend more than $20,000 for registration fees in
connection with any single offering contemplated by this Section 2; and
(7) with a view to making available the benefits of
certain rules and regulations of the SEC which may at any time permit
the sale of Registrable Shares to the public without registration,
during such time as a public market exists for its equity securities,
Xxxxxxxx agrees to:
a) make and keep public information
available, as those terms are understood and defined in Rule 144 under
the Securities Act, at all times after the effective date of the
Registration Statement;
b) use its commercially reasonable efforts
to file with the SEC in a timely manner all reports and other documents
required of Xxxxxxxx under the Securities Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act")(at any time after
it has become subject to such reporting requirements);
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c) furnish to the Investor forthwith upon
the Investor's request a written statement by Xxxxxxxx as to Xxxxxxxx'x
compliance with the reporting requirements of said Rule 144, and of the
Securities Act and the Exchange Act, a copy of the most recent annual
or quarterly report of Xxxxxxxx and such other reports and documents of
Xxxxxxxx as the Investor may reasonably request in availing itself of
any rule or regulation of the SEC allowing a holder to sell any such
securities without registration; and
(8) list all Registrable Shares covered by such
Registration Statement on any securities exchange or automated
quotation service on which any of the Registrable Shares are then
listed.
(vi) Notwithstanding the provisions of this Section 2 to
the contrary Xxxxxxxx:
(1) may require the Investor to furnish to Xxxxxxxx
such information regarding the distribution of such securities as
Xxxxxxxx may from time to time reasonably request; and
(2) The Investor will covenant that the Investor
has not taken, and will not take, directly, or indirectly, any action
designed, or which might reasonably be expected, to violate applicable
law; and
(vii) the Investor agrees by acquisition of such
Registrable Shares that, upon receipt of the request referred to in the
proviso of Section 2(e)(v)(2) or of any notice from Xxxxxxxx of the happening
of any event of the kind described in Section 2(e)(v)(3) hereof (other than
as provided in Section 2(e)(v)(3)(A) hereof), the Investor shall forthwith
discontinue disposition of Registrable Shares until it is advised in writing
by Xxxxxxxx that the use of the prospectus may be resumed, and has received
copies of any additional or supplemental documents or filings that are
incorporated by reference in the prospectus, and, if so directed by Xxxxxxxx,
the Investor shall deliver to Xxxxxxxx (at Xxxxxxxx'x expense) all copies
other than permanent file copies then in the Investor's possession, of the
prospectus covering such Registrable Shares current prior to the time of
receipt of such notice.
(f) Indemnification.
(i) In the event of a registration or qualification of
any Registrable Shares under the Securities Act pursuant to the provisions of
this Section 2, Xxxxxxxx shall indemnify and hold harmless the Investor, the
officers and directors of the Investor and each director or officer of any
person or entity who controls the Investor, each underwriter of such
Registrable Shares and each other person or entity who controls the Investor
or such underwriter within the meaning of the Securities Act (collectively,
the " Investor Indemnitees"), from and against any and all losses, claims,
damages or liabilities, joint or several, to which any of the Investor
Indemnitees, joint or several, may become subject under the Securities Act or
the
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applicable securities laws or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon (x) any untrue statement or alleged untrue statement of any
material fact contained in any Registration Statement under which such
Registrable Shares were registered or qualified under the Securities Act, or
any amendment or supplement thereto, any preliminary prospectus or final
prospectus contained therein, or any supplement thereto, or any document
prepared and/or furnished to the Investor incident to the registration or
qualification of any Registrable Shares, or (y) the omission or alleged
omission to state in any Registration Statement a material fact required to
be stated therein or necessary to make the statements therein not misleading
or, with respect to any prospectus, necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, or
(z) any violation by Xxxxxxxx of the Securities Act or state securities or
"blue sky" laws applicable to Xxxxxxxx and relating to action or inaction
required of Xxxxxxxx in connection with registration or qualification under
such state securities or "blue sky" laws, and in each case shall reimburse
the Investor Indemnitees for any legal or other expenses reasonably incurred
by such the Investor Indemnitees in connection with investigating or
defending any such loss, claim, damage or liability (or action in respect
thereof); provided, however, that Xxxxxxxx shall not be liable in any such
case to the extent that any such loss, claim, damage or liability (or action
in respect thereof) arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
Registration Statement in reliance upon and in conformity with information
furnished to Xxxxxxxx by such Investor Indemnitees in writing and expressly
for use in the Registration Statement; and provided further, that Xxxxxxxx
shall not be liable in any such case to the extent that any such loss, claim,
damage or liability (or action in respect thereof) arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission in such Registration Statement, which untrue statement or alleged
untrue statement or omission or alleged omission is completely corrected in
an amendment or supplement to the Registration Statement and such Investor
Indemnitees thereafter fail to deliver or cause to be delivered such
Registration Statement as so amended or supplemented prior to or concurrently
with the sale of the Registrable Shares to the person asserting such loss,
claim, damage or liability (or actions in respect thereof) or expense after
Xxxxxxxx has furnished the Investor with the same.
(ii) In the event of the registration or qualification of
any Registrable Shares under the Securities Act pursuant to the provisions of
this Section 2, Xxxxxxxx may require, as a condition to including any
Registrable Shares in any Registration Statement filed pursuant to this
Agreement, and if so required the Investor hereby agrees, that the Investor
shall indemnify and hold harmless Xxxxxxxx, each person who controls Xxxxxxxx
within the meaning of the Securities Act, each officer and director of
Xxxxxxxx and any other selling holder from and against any losses, claims,
damages or liabilities to which Xxxxxxxx, such controlling person, any such
officer or director or any other selling holder may become subject under the
Securities Act or the applicable securities laws or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (x) any untrue statement or alleged untrue
statement of any material fact contained in any Registration Statement under
which such Registrable Shares were registered or qualified under the
Securities Act, or any
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amendment or supplement thereto, or (y) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, which untrue statement or alleged
untrue statement or omission or alleged omission was made therein in reliance
upon and in conformity with information furnished to Xxxxxxxx by the Investor
in writing and expressly for use in the Registration Statement for use in
preparation thereof, and in each case shall reimburse Xxxxxxxx, such
controlling person, each such officer or director and any other selling
holder for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage or
liability (or action in respect thereof). Notwithstanding the provisions of
this subsection 2(f)(ii), no holder of Registrable Shares shall be liable to
any person or group of persons in any aggregate amount in excess of the gross
proceeds of the sale of Registrable Shares.
(iii) Promptly after receipt by a person entitled to
indemnification under this Section 2(f) (an "Indemnified Party") of notice of
the commencement of any action or claim relating to any Registration
Statement filed under the provisions of this Section 2 or as to which
indemnity may be sought hereunder, such Indemnified Party shall, if a claim
for indemnification hereunder in respect thereof is to be made against any
other party hereto (an "Indemnifying Party"), give written notice to such
Indemnifying Party of the commencement of such action or claim, but the
omission so to notify the Indemnifying Party will not relieve such person
from any liability that such person may have to any Indemnified Party
otherwise than pursuant to the provisions of this Section 2(f) and shall also
not relieve the Indemnifying Party of such party's obligations under this
Section 2(f), except to the extent that the omission so to notify results in
the Indemnifying Party being damaged solely as a result of the failure to
give timely notice. In case any such action is brought against an
Indemnified Party, and such party notifies an Indemnifying Party of the
commencement thereof, the Indemnifying Party shall be entitled (at such
party's own expense) to participate in and, to the extent that the
Indemnifying Party may wish, jointly with any other Indemnifying Party
similarly notified, to assume the defense, with counsel satisfactory to such
Indemnified Party, of such action and/or to settle such action and, after
notice from the Indemnifying Party to such Indemnified Party of its election
so to assume the defense thereof, the Indemnifying Party shall not be liable
to such Indemnified Party for any legal or other expenses subsequently
incurred by such Indemnified Party in connection with the defense thereof,
other than the reasonable cost of investigation; provided, however, that no
Indemnifying Party and no Indemnified Party shall enter into any settlement
agreement that would impose any liability on such other party or parties
without the prior written consent of such other party or parties, unless such
other party or parties are fully indemnified to such party's satisfaction, as
the case may be, against any such liability.
(iv) If for any reason the indemnification provided for in
this Section 2 is unavailable to an Indemnified Party or is insufficient to
hold it harmless as contemplated by this Section 2, then the Indemnifying
Party shall contribute to the amount paid or payable by the Indemnified Party
as a result of such loss, claim, damage, liability or action in such
proportion as is appropriate to reflect to only the relative benefits
received by the Indemnified Party and the Indemnifying Party, but also the
relative fault of the Indemnified Party and the Indemnifying
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Party, as well as any other relevant equitable considerations. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
3. Option to Purchase Shares. Upon the execution of this Agreement,
the Investor shall grant to Xxxxx Xxxxxxxx, Xxxxx Xxxxxxxxxx, Xxxxxxxxx X.
Xxxxxx and/or Xxxxxxx Xxxxxx an option (the "Option") to purchase the
Conversion Shares pursuant to an Option Agreement in the form of Exhibit C
hereto. The Option shall provide, among other things, (i) an Option exercise
price of $2.00 per share, (ii) an Option exercise period of 18 months from
the effectiveness of the Registration Statement described in Section 2(b)
(the "Effective Date"), (iii) the expiration of the Option in the event that
the holders of the Option fails to purchase at least an aggregate of (A)
250,000 Conversion Shares on or prior to the 90th day following the Effective
Date and (B) 400,000 Conversion Shares on or prior to the last day of each
succeeding 90 day period commencing 90 days after the Effective Date.
4.A Failure to Timely Effect Registration or Exercise of the Option.
In the event that (i) the Effective Date shall not have occurred on or before
December 15, 1997 or (ii) the Option terminates or expires prior to the
18-month anniversary of the Effective Date in accordance with its terms (any
such date being referred to herein as the "Trigger Date"), the Tarricones,
Xxxxxxxx and the Investor agree that, in lieu of any further obligations of
Xxxxxxxx and the Tarricones hereunder, the Investor shall have a period of 90
days after the Trigger Date to elect any one of the following compensation
alternatives:
(a) (i) The Investor shall have the right to cause the
Tarricones to transfer to the Investor such number of the Xxxxxxxxx Options
(the "Investor Call Option") determined by multiplying the Xxxxxxxxx Options
(net of any options previously transferred pursuant to Section 4B) by a
fraction the numerator of which is the number of Conversion Shares subject to
the Option on the Trigger Date minus number of Conversion Shares sold or
otherwise purchased pursuant to the Option after the Trigger Date and the
denominator of which is the total number of Conversion Shares subject to the
Option on the date hereof. Upon the transfer of the Xxxxxxxxx Options but in
no event earlier than the second anniversary of the Effective Date, Xxxxxxxx
shall prepare and file with the SEC within thirty (30) days of such second
anniversary a Registration Statement covering the resale of the shares of
Common Stock issuable upon exercise of the Option Shares and use its
commercially reasonable efforts to cause such Registration Statement to
become effective within ninety (90) days of the filing thereof. Such
registration shall be subject to all of the other terms and conditions set
forth in Section 2(e) hereof.
(ii) Upon exercise of the Investor Call Option and as a
condition to the delivery of the Xxxxxxxxx Options subject to the HW Finance
Call Option (defined below), the Certificate of Designation shall be promptly
amended to provide that dividends on the shares of Series B Preferred Stock
shall cease to accrue upon the exercise of the Investor Call Option in
accordance with the form of Certificate of Amendment to the Certificate of
Designation set forth on Exhibit D hereto.
- 11 -
(b) (i) The Investor shall have the right to cause the
Tarricones to transfer to the Investor such number of Xxxxxxxxx Options (the
"HW Finance Call Option") determined by multiplying (x) the product of
500,000 and a fraction the numerator of which is the number of Xxxxxxxxx
Options minus the number of Xxxxxxxxx Options transferred to the Investor in
accordance with Section 4B and the denominator of which is the number of
Xxxxxxxxx Options by (y) a fraction the numerator of which is the number of
Conversion Shares subject to the Option on the Trigger Date minus the number
of Conversion Shares sold or otherwise purchased pursuant to the Option after
the Trigger Date and the denominator of which is the total number of
Conversion Shares subject to the Option on the date hereof. Upon the
transfer of the Xxxxxxxxx Options subject to the HW Finance Call Option, but
in no event earlier than the second anniversary of the Effective Date,
Xxxxxxxx shall prepare and file with the SEC within thirty (30) days of such
second anniversary a Registration Statement covering the resale of the shares
issuable upon exercise of the Xxxxxxxxx Options subject to the HW Finance
Call Option and use its commercially reasonable efforts to cause such
Registration Statement to become effective within ninety (90) days after the
filing thereof. Such registration shall be subject to all of the other terms
and conditions set forth in Section 2(e) hereof.
(ii) Upon exercise of the HW Finance Call Option and as a
condition to the delivery of the Xxxxxxxxx Options subject to the HW Finance
Call Option, the Certificate of Designation shall be amended to provide that
dividends on shares of Series B Preferred Stock shall be reduced to 10% per
annum on the Stated Value in accordance with the form of Certificate of
Amendment to the Certificate of Designation set forth on Exhibit E hereto.
(iii) Upon exercise of the HW Finance Call Option and as a
condition to the delivery of the Xxxxxxxxx Options subject to the HW Finance
Call Option, the interest rate on the Subordinated Note shall be reduced to
10% and the Investor shall surrender to Xxxxxxxx the Subordinated Note issued
pursuant to this Agreement in exchange for a new Subordinated Note containing
identical terms but reflecting the amended interest rate.
4.B Failure to Timely Comply with Registration Timetable. In
the event that Xxxxxxxx fails to timely satisfy its obligations set forth in
the first paragraph of Section 2(b) hereof (other than the October 15, 1997
Effective Date) within the time periods specified therein (other than the
October 15, 1997 Effective Date), for each such failure which is not cured
within five (5) business days' notice of such failure, the Tarricones agree
that the Investor shall have the right to cause the Tarricones to transfer to
the Investor twenty-five percent (25%) of the Xxxxxxxxx Options subject to
the Investor Call Option. Upon the transfer of all or such other portion of
the Xxxxxxxxx Options but in no event earlier than the second anniversary
following the Effective Date, Xxxxxxxx shall prepare and file with the SEC
within thirty (30) days of such second anniversary a Registration Statement
covering the resale of the shares of Common Stock issuable upon exercise of
the transferred Xxxxxxxxx Options and use its commercially reasonable efforts
to cause such Registration Statement to become effective within ninety (90)
days of the filing thereof. Such registration shall be subject to all of the
other terms and conditions set forth in Section 2(e) hereof.
- 12 -
5. Representations, Warranties and Covenants of Xxxxxxxx. Xxxxxxxx
represents and warrants to, and agrees with, the Investor as follows:
(a) Xxxxxxxx is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada and has all
requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted.
(b) All corporate action on the part of Xxxxxxxx necessary for
the authorization, execution and delivery of this Agreement and the
performance of all obligations of Xxxxxxxx hereunder has been taken, and this
Agreement constitutes a valid and legally binding obligation of Xxxxxxxx
enforceable in accordance with its terms.
(c) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby do not and will not
conflict with or result in a breach by Xxxxxxxx of any of the terms or
provisions of, or constitute a default under, the Articles of Incorporation
or By-Laws of Xxxxxxxx, or any indenture, mortgage, deed of trust or other
material instrument to which Xxxxxxxx is a party or by which it or any of its
properties or assets are bound, or any applicable decree, judgment or order
of any court, federal or state regulatory body, administrative agency or
other governmental body having jurisdiction over Xxxxxxxx or any of its
properties or assets.
(d) Except as disclosed in Xxxxxxxx'x periodic reports filed
pursuant to the requirements of the Exchange Act, there is no action, suit or
proceeding before or by any court or governmental agency or body, domestic or
foreign, now pending against Xxxxxxxx or any of its properties which could
reasonably be expected to result in any material adverse change in the
business, financial condition or results of operations of Xxxxxxxx, or which
could reasonably be expected to materially and adversely affect the
properties or assets of Xxxxxxxx.
(e) For a period of 18 months from and after the Effective
Date, Xxxxxxxx shall not issue or grant, or contract to issue or grant, to
any of the Tarricones or any other officer or director of Xxxxxxxx any equity
securities of Xxxxxxxx or options to purchase equity securities of Xxxxxxxx
(or securities convertible, exercisable or exchangeable for equity securities
of Xxxxxxxx) other than (i) securities which are compensatory in nature
(i.e., securities or options which are issued or granted at fair market value
to compensate individuals for the difference between contractual or other
compensation, including reasonable bonuses, which they are actually paid in
cash and the amount of any such compensation to which they are entitled but
which is not otherwise paid), (ii) securities which such persons purchase
from third parties in bona fide arms-length transactions, (iii) securities
which such persons purchase for cash from Xxxxxxxx at fair market value, and
(iv) securities outstanding on the date hereof.
(f) The Company will reserve from its authorized but unissued
shares of Common Stock a sufficient number of shares of Common Stock to
permit issuance of the Conversion Shares, the Dividend Shares and the Option
Shares.
- 13 -
(g) The Company will maintain the listing of its Common Stock
on the Nasdaq SmallCap Stock Market so long as it meets the criteria for
inclusion thereon and will use its commercially reasonable efforts to comply
in all respects with the Company's reporting, filing and other obligations
under the bylaws or rules of the National Association of Securities Dealers,
Inc. and such exchanges, as applicable. The Company shall promptly provide
to the Investor copies of any notices it receives from Nasdaq regarding the
continued eligibility of the Common Stock for listing on Nasdaq.
(h) On or prior to the date that the SEC declares effective a
Registration Statement contemplated by Section 2 hereof, the Company shall
promptly secure the listing of the Common Stock to be issued or sold in
connection with such Registration Statement on any national securities
exchange or automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance) and shall use
commercially reasonable efforts to maintain, so long as any other shares of
Common Stock shall be so listed, such listings of all such shares.
(i) Upon conversion of the Investor Shares in accordance with
the terms of the Series B Preferred Stock, and/or exercise of any Option in
accordance with the terms hereof, the Company will, and will use its
commercially reasonable efforts to cause the transfer agent to, issue one or
more certificates representing shares of Common Stock in such name or names
and in such denominations specified by the Investor in a notice of conversion
or notice of exercise, as the case may be, in accordance with the terms of
this Agreement and the Option. As long as any such Registration Statement
shall remain effective, the shares covered thereby shall be issued to any
transferee of such shares from the Investor without restrictive legend.
6. Representations, Warranties and Covenants of the Tarricones.
Each of the Tarricones represents and warrants to, and agrees with, the
Investor as follows:
(a) All action on the part of each of the Tarricones necessary
for the authorization, execution and delivery of this Agreement and the
performance of all obligations of each of the Tarricones hereunder has been
taken, and this Agreement constitutes a valid and legally binding obligation
of each of the Tarricones enforceable against each of them in accordance with
its terms.
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby do not and will not
conflict with or result in a breach by any of the Tarricones of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust or other material instrument to which any of the
Tarricones is a party or by which any of the Tarricones is bound, or any
applicable decree, judgment or order of any court, federal or state
regulatory body, administrative agency or other governmental body having
jurisdiction over any of the Tarricones or any of the Tarricones' properties
or assets.
(c) There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending
against any of the Tarricones
- 14 -
which could reasonably be expected to result in any material adverse change
in the financial condition of any of the Tarricones, or which could
reasonably be expected to materially and adversely affect the transactions
contemplated by this Agreement.
(d) Each of the Tarricones represents and warrants that, as of the
date hereof, such person is the record and beneficial holder of the number of
Xxxxxxxxx Options held by such person free and clear of such liens, claims or
encumbrances of any kind. The Tarricones covenant and agree that they shall
not, directly or indirectly, sell, pledge, give, transfer, assign, encumber
or in any way dispose of (collectively, a "Transfer") such number of
Xxxxxxxxx Options (or any interest therein) as the Tarricones would be
required to hold from time to time in order to comply with their potential
obligations under Sections 4(a) and (b) hereof except as may be expressly
permitted by this Agreement. Each of the Tarricones represents and warrants
that, upon exercise of the Xxxxxxxxx Options, assuming the payment in full of
the exercise price for the shares and the taking by Xxxxxxxx of all requisite
action required by applicable law, the shares of Common Stock to be
transferred thereunder will be transferred to the Investor with good and
marketable title thereto, free and clear of any liens, claims or encumbrances
of any kind.
7. Representation, Warranties and Covenants of the Investor. The
Investor represents and warrants to, and agrees with, Xxxxxxxx and the
Tarricones as follows:
(a) The Investor is a corporation duly organized, validly
existing and in good standing under the laws of Nevis, West Indies and has
all requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted.
(b) All corporate action on the part of the Investor necessary
for the authorization, execution and delivery of this Agreement and the
performance of all obligations of the Investor hereunder has been taken, and
this Agreement constitutes a valid and legally binding obligation of the
Investor enforceable in accordance with its terms.
(c) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby do not and will not
conflict with or result in a breach by the Investor of any of the terms or
provisions of, or constitute a default under, the Articles of Organization or
By-Laws of the Investor, or any indenture, mortgage, deed of trust or other
material instrument to which the Investor is a party or by which it or any of
its properties or assets are bound, or any applicable decree, judgment or
order of any court, federal or state regulatory body, administrative agency
or other governmental body having jurisdiction over the Investor or any of
its properties or assets.
(d) The Investor shall not effect a Transfer of any of the
Investor Shares, the Conversion Shares, the Xxxxxxxxx Options, the Option
Shares, the Dividend Shares or the Note (or any interest therein) except as
may be expressly permitted by this Agreement. Notwithstanding the general
prohibition on Transfer, the Investor may transfer the Investor Shares, the
Conversion Shares, the Xxxxxxxxx Options, the Dividend Shares or the Note to
an Affiliate (as hereinafter defined) of the Investor that is reasonably
acceptable to Xxxxxxxx,
- 15 -
provided that any such transferee, as a condition to such Transfer, agrees to
be bound by the terms and conditions of this Agreement; and provided further,
that Xxxxxxxx shall not transfer on its books any certificates for the
Investor Shares, the Conversion Shares, the Option Shares, the Dividend
Shares or Note nor issue any certificate in lieu of the Investor Shares, the
Conversion Shares, the Option Shares, the Dividend Shares or Note unless, in
the reasonable opinion of counsel to Xxxxxxxx, there has been compliance with
all of the material conditions hereof affecting the Investor Shares or the
Conversion Shares, the Option Shares, the Dividend Shares or the Note, and
any such attempted Transfer in violation of this Agreement shall be void and
of no effect. For purposes of this Agreement, the term "Affiliate" shall
have the meaning set forth in Section 405 of the Securities Act, except that
the term "control" as set forth in such definition shall mean the ownership
of more than 50% of the voting securities of such person or the contractual
power to direct the business of such person.
(e) The Investor acknowledges that the Investor Shares,
Conversion Shares, the Dividend Shares and the Note have not been registered
under the Securities Act or under the securities laws of certain states and,
therefore, cannot be resold, pledged, assigned or otherwise disposed of
unless the securities are subsequently registered under the Securities Act
and under the applicable securities laws of such states or unless an
exemption from such registration, whether pursuant to Rule 144 under the
Securities Act or otherwise, is available in the opinion of counsel for the
holder, which counsel and opinion are reasonably satisfactory to counsel for
Xxxxxxxx. The Investor is acquiring and will be acquiring the Note, the
Conversion Shares, the Xxxxxxxxx Options, the Option Shares or the Dividend
Shares for the Investor's own account, for investment and not with a view to
resale or distribution except in compliance with the Securities Act. The
Investor hereby agrees that the following legends shall be inscribed on all
certificates representing the Shares, the Note and the Conversion Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAWS AND CANNOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT OR APPLICABLE STATES SECURITIES ACT WHICH, IN THE
OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO COUNSEL FOR XXXXXXXX, IS AVAILABLE.
THE SHARES REPRESENTED HEREBY ARE ALSO SUBJECT TO A RESTRUCTURING
AGREEMENT, DATED SEPTEMBER 24, 1997, BY AND AMONG XXXXXXXX ENERGY CORP.,
INFINITY INVESTORS LIMITED, XXXXXX X. XXXXXXXXX, XXXXXXX X. XXXXXXXXX AND
XXXXXX X. XXXXXXXXX, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
XXXXXXXX, AND ANY SALE, PLEDGE, GIFT, TRANSFER, ASSIGNMENT, ENCUMBRANCE OR
OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IN
VIOLATION OF SAID AGREEMENT SHALL BE VOID AND OF NO EFFECT."
- 16 -
(f) The Investor is an accredited investor within the meaning
of the rules and regulations promulgated under the Securities Act.
(g) The Investor is not relying on Xxxxxxxx with respect to the
tax and other economic considerations of an investment in securities issued
pursuant to this Agreement, and the Investor has relied on the advice of, or
has consulted with, only the Investor's own advisor(s).
(h) The Investor hereby authorizes Xxxxxxxx to file the amended
Certificate of Designation described in Sections 4(a) and 4(b) immediately
after the required portion of the Xxxxxxxxx Options is transferred to the
Investor, HW Finance or their designees pursuant to the terms of Section 4.
8. Confidentiality. Each of the parties hereto hereby acknowledges
that it is aware, and agrees that it will advise the Permitted Persons (as
defined below), that federal and state securities laws prohibit certain
persons who possess material, non-public information concerning an issuer
subject to the reporting requirements of the Exchange Act from purchasing or
selling securities of such issuer or from communicating such information to
any other person under the circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell such securities,
and agrees that it will not engage, and that it will cause all Permitted
Persons not to engage, in any such activities. Without the prior written
consent of Xxxxxxxx, neither HW Partners, L.P., HW Finance, L.L.C., the
Investor nor any of their respective officers, directors, employees, agents
or representatives will use any non-public, proprietary or confidential
information of or concerning Xxxxxxxx or disclose the terms hereof other than
as required by applicable law or legal process, nor will any of such
information be disclosed to any person or entity that is not a Permitted
Person. For purposes of this Agreement, the term "Permitted Persons" will
mean Xxxxxxxx, XX Partners, L.P., HW Finance, L.L.C., the Investor and the
respective directors, officers, employees, advisors, lenders and
representatives of such entity who need to know such information in
connection with the transactions contemplated by this Agreement.
9. Miscellaneous.
(a) This Agreement, together with all Exhibits, constitutes the
entire agreement among the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written
and oral, among the parties or between any of them with respect to the
transactions contemplated hereby.
(b) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect
unless such enforceability causes this Agreement to fail in its essential
purpose.
(c) All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made as of
the date delivered or mailed if
- 17 -
delivered in person, by telecopy or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties as follows:
if to Xxxxxxxx at:
Xxxxxxxx Energy Corp.
00 Xxxxxxxx Xxxxx
Xx. Xxxxx, Xxx Xxxx
Telecopy No. (000) 000-0000
Attn: President and General Counsel
if to the Tarricones, to them at:
c/o Xxxxxx X. Xxxxxxxxx
000 Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
with a copy to:
Piper & Marbury L.L.P.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy No. (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
if to the Investor, to it at:
00 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx X0X 0XX
Attn: Xxxxx X. Xxxxxxxx, Esq.
with a copy to:
H.W. Partners, L.P.
0000 Xxx Xxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Telecopy: (000) 000-0000
Attn: Xxxxxx Xxxxxxxxx, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(d) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York (without giving effect to
principles of conflicts of law).
- 18 -
(e) The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
(f) This Agreement shall be binding upon and inure solely to
the benefit of each party hereto, its successors and assigns.
(g) This Agreement may be executed by facsimile signature and
in two or more counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement.
[Signature Page Follows]
- 19 -
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed as of the day and year first above written.
XXXXXXXX ENERGY CORP.
By:
/s/ Xxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxxxx
President and Chief Executive Officer
INFINITY INVESTORS LIMITED
By:
/s/
Name:
Title:
/s/ Xxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxxxx
/s/ Xxxxxxx X. Xxxxxxxxx
Xxxxxxx X. Xxxxxxxxx
/s/ Xxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxxxx
- 20 -
ANNEX A
REGISTRATION STATEMENT INSERTS
[PROSPECTUS COVER PAGE]
The shares of common stock, par value $.001 per share
(the "Common Stock"), to which this Prospectus relates (the "Shares") are
being offered, from time to time, on behalf of and for the account of certain
stockholders (the "Selling Stockholders") of Xxxxxxxx Energy Corp. (the
"Company") as identified herein under "Selling Stockholders." The
distribution of the Shares by the Selling Stockholders, or by pledgees,
donees, distributees, transferees or other successors in interest, may be
affected from time to time by underwriters who may be selected by the Selling
Stockholders and/or broker-dealers, in one or more transactions (which may
involve crosses and block transactions) on
the or other
over-the-counter markets or, in special offerings, exchange distributions or
secondary distributions pursuant to and in accordance with rules of such
over-the-counter markets or exchanges, in negotiated transactions or
otherwise, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. The Company has
agreed to indemnify the Selling Stockholders, underwriters who may be
selected by the Selling Stockholders and certain other persons against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended (the "Securities Act"). See "Plan of Distribution" and "Selling
Stockholders."
The Company has agreed to pay all expenses of registration in
connection with this offering but will not receive any of the proceeds from
the sale of the Shares being offered hereby. All brokerage commissions and
other similar expenses incurred by the Selling Stockholders will be borne by
such Selling Stockholders. The aggregate proceeds to the Selling
Stockholders from the sale of the Shares will be the purchase price of the
Shares sold, less the aggregate brokerage commissions and underwriters'
discounts, if any, and other expenses of issuance and distribution not borne
by the Company.
USE OF PROCEEDS
The Shares being offered hereby are for the account of the Selling
Stockholders. Accordingly, the Company will not receive any of the proceeds
from the sale of the Shares by the Selling Stockholders. See "Selling
Stockholders."
SELLING STOCKHOLDERS
The following table sets forth the name of the Selling Stockholders,
the number of shares of Common Stock beneficially held by such Selling
Stockholders prior to the commencement of the offering made hereby and the
number of Shares that may be offered by each. The number of Shares that may
actually be sold by each of the Selling Stockholders will be determined by
each such Selling Stockholder, and may depend upon a number of factors,
including, among other things, the market price of the Common Stock. The
table below sets forth information as of ____________, concerning the
beneficial ownership of Common Stock of each of the Selling Stockholders.
All information concerning beneficial ownership has been furnished by the
Selling Stockholders.
Less than one percent (1%).
(1) Represents those shares of Common Stock held by the Selling
Stockholder, if any, together with those shares that such Selling Stockholder
has the right to acquire within 60 days. Each of the Selling Stockholders
specifically disclaims beneficial ownership of the shares of Common Stock
held (or acquirable upon exercise or conversion of any derivative securities
held) by the other Selling Stockholders and, as such, the number of shares of
Common Stock represented hereby does not reflect any shares of Common Stock
beneficially owned by any other Selling Stockholder.
(2) The percentages indicated are based on shares
of Common Stock issued and outstanding as of 199_.
(3) Because each of the Selling Stockholders may sell all, some or
none of the Shares that each holds, and because the offering contemplated by
this Prospectus is not now a "firm commitment" underwritten offering, no
estimate can be given as to the number of Shares that will be held by each of
the Selling Stockholders upon or prior to termination of this offering. See
"Plan of Distribution."
The Selling Stockholders identified above may have sold, transferred or
otherwise disposed of all or a portion of their Shares since the date on
which they provided the information regarding their Common Stock in
transactions exempt from the registration requirements of the Securities
Act. Additional information concerning the above listed Selling Stockholders
may be set forth from time to time in prospectus supplements to this
Prospectus. See "Plan of Distribution."
Pursuant to the terms of that certain Restructuring Agreement dated
September 24, 1997 (the "Restructuring Agreement"), the Company has agreed to
file the Registration Statement to which this Prospectus forms a part for the
purpose of registering the potential resale of the Shares and to maintain the
effectiveness of such Registration Statement until [or
until the Shares have otherwise are available for resale pursuant to Rule
144(k) promulgated under the Securities Act], in each case, as contemplated
by a certain Restructuring Agreement dated September 24, 1997 by and among
the Company, Infinity Investors Limited, Xxxxxx X. Xxxxxxxxx, Xxxxxxx X.
Xxxxxxxxx and Xxxxxx X. Xxxxxxxxx (the "Restructuring Agreement). In
addition, the Company and the Selling Stockholders agreed to indemnify each
other and certain affiliated parties from and against any losses or claims
arising out of, among other things, (1) any alleged untrue statement of a
material fact or (2) any material omission contained or referred to in the
Registration Statement. Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers or persons
controlling the Company, pursuant to the foregoing provisions, the Company
has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. All of the registration and
filing fees, printing expenses, blue sky fees, if any, fees and disbursements
of counsel for the Company, and certain fees and disbursements of one counsel
for the Selling Stockholders will be paid by the Company; provided, however,
that fees and disbursements of experts and counsel retained by the Selling
Stockholders and any underwriting discounts and selling commissions will be
borne by the Selling Stockholders.
Except as specifically set forth herein, none of the Selling
Stockholders has, or within the past three years has had, any position,
office or other material relationship with the Company or any of its
predecessors or affiliates.
PLAN OF DISTRIBUTION
Sales of the Shares may be made from time to time by the Selling
Stockholders, or, subject to applicable law, by pledgees, donees,
distributees, transferees or other successors in interest. Such sales may be
made on the ____________________, in another over-the-counter market, on a
national securities exchange (any of which may involve crosses and block
transactions), in privately negotiated transactions or otherwise or in a
combination of such transactions at prices and at terms then prevailing or at
prices related to the then current market price, or at privately negotiated
prices. In addition, any Shares covered by this Prospectus which qualify for
sale pursuant to Section 4(1) of the Securities Act or Rule 144 promulgated
thereunder may be sold under such provisions rather than pursuant to this
Prospectus. Without limiting the generality of the foregoing, the Shares may
be sold in one or more of the following types of transactions: (a) a block
trade in which the broker-dealer so engaged will attempt to sell the Shares
as agent but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this
Prospectus; (c) an exchange distribution in accordance with the rules of such
exchange; (d) ordinary brokerage transactions and transactions in which the
broker solicits purchasers; and (e) face-to-face transactions between sellers
and purchasers without a broker-dealer. In effecting sales, brokers or
dealers engaged by the Selling Stockholders may arrange for other brokers or
dealers to participate in the resales.
In addition, the Shares are subject to a certain Option Agreement dated
September 24, 1997 between the Selling Stockholders and ___________.
Accordingly, all or a substantial portion of the Shares may be transferred to
__________.
In connection with distributions of the Shares or otherwise, the
Selling Stockholders may enter into hedging transactions with
broker-dealers. In connection with such transactions, broker-dealers may
engage in short sales of the Shares registered hereunder in the course of
hedging the positions they assume with Selling Stockholders. The Selling
Stockholders may also sell Shares short and deliver the Shares to close out
such short positions. The Selling Stockholders may also enter into option or
other transactions with broker-dealers which require the delivery to the
broker-dealer of the Shares registered hereunder, which the broker-dealer may
resell pursuant to this Prospectus.
The Selling Stockholders may also pledge the Shares registered
hereunder to a broker or dealer and upon a default, the broker or dealer may
effect sales of the pledged Shares pursuant to this Prospectus.
Brokers, dealers or agents may receive compensation in the form of
commissions, discounts or concessions from Selling Stockholders in amounts to
be negotiated in connection with the sale. Such brokers or dealers and any
other participating brokers or dealers may be deemed to be "underwriters"
within the meaning of the Securities Act in connection with such sales and
any such commission, discount or concession may be deemed to be underwriting
discounts or commissions under the Securities Act.
Information as to whether underwriters who may be selected by the
Selling Stockholders, or any other broker-dealers, is acting as principal or
agent for the Selling Stockholders, the compensation to be received by
underwriters who may be selected by the Selling Stockholders, or any
broker-dealer, acting as principal or agent for the Selling Stockholders and
the compensation to be received by other broker-dealers, in the event the
compensation of such other broker-dealers is in excess of usual and customary
commissions, will, to the extent required, be set forth in a supplement to
this Prospectus (the "Prospectus Supplement"). Any dealer or broker
participating in any distribution of the Shares may be required to deliver a
copy of this Prospectus, including the Prospectus Supplement, if any, to any
person who purchases any of the Shares from or through such dealer or broker.
The Company has advised the Selling Stockholders that during such time
as they may be engaged in a distribution of the Shares included herein they
are required to comply with Regulation M promulgated under the Exchange Act.
With certain exceptions, Regulation M precludes any selling shareholder, any
affiliated purchasers and any broker-dealer or other person who participates
in such distribution from bidding for or purchasing, or attempting to induce
any person to bid for or purchase any security which is the subject of the
distribution until the entire distribution is complete. Regulation M also
prohibits any bids or purchases made in order to stabilize the price of a
security in connection with the distribution of that security. All of the
foregoing may affect the marketability of the Common Stock.
It is anticipated that the Selling Stockholders will offer all of the
Shares for sale. Further, because it is possible that a significant number
of Shares could be sold at the same time hereunder, such sales, or the
possibility thereof, may have a depressive effect on the market price of the
Company's Common Stock.
EXHIBIT A
NOTE
THE SECURITY REPRESENTED HEREBY WAS ORIGINALLY ISSUED
ON SEPTEMBER 24, 1997 AND HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS
SECURITY CANNOT BE SOLD OR OTHERWISE TRANSFERRED
UNLESS THIS SECURITY IS REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE ISSUER IS
FURNISHED WITH AN ACCEPTABLE OPINION OF COUNSEL THAT
AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
12% SUBORDINATED PROMISSORY NOTE
September 24, 1997 $600,000
XXXXXXXX ENERGY CORP., a Nevada corporation (the "Company"), hereby
promises to pay to the order of Infinity Investors Limited ("Payee") the
principal amount of $600,000, together with interest thereon calculated from
the date hereof in accordance with the provisions of this 12% Subordinated
Promissory Note (this "Note").
By accepting this Note, Payee agrees that this Note shall be
subordinated to Senior Debt of the Company (as defined in paragraph 3 hereto)
upon the terms set forth in paragraph 3.
1. Payment of Interest. Interest will accrue from the date hereof
at the rate of twelve percent (12%) per annum on the unpaid principal amount
of this Note outstanding from time to time (calculated on the basis of a 360
day year consisting of 12 30-day months). Interest shall be compounded
quarterly from the date hereof through and including September 24, 1999 and
thereafter shall be computed on the basis of simple interest. Subject to
paragraph 3 hereof, the Company will pay to the Payee all accrued interest
commencing on September 30, 1999, and thereafter quarterly in arrears
beginning after September 30 1999. Any accrued interest which for any reason
has not theretofore been paid will be paid in full on the date on which the
final principal payment on this Note is paid.
2. Payment of Principal of Note.
(a) Scheduled Payments. Subject to paragraph 3 hereof, the
Company will repay in full the principal amount of this Note and any accrued
and unpaid interest thereon on September 24, 2002.
(b) Optional Prepayment. Subject to paragraph 3 hereof, the
Company may at any time prepay, without premium or penalty, all or any
portion of the outstanding principal amount of this Note, together with
interest accrued on such prepaid amount to the date of payment. A prepayment
of less than all of the outstanding principal amount of this Note will be
applied against the Company's obligation to make the repayment of principal
at maturity.
(c) Mandatory Prepayment. Subject to paragraph 3 hereof, the
Company shall (i), if it enters into a Senior Debt financing facility after
the date hereof which, after giving effect to the refinancing of any
indebtedness of the Company which is required to be repaid by the terms of
the relevant documents or such new holder, results in or makes available to
the Company proceeds (the "New Money") in excess of $4,250,000, prepay,
without premium or penalty, the outstanding amount hereunder and (ii) within
thirty (30) days after the delivery of audited financial statements of the
Company for each fiscal year after the fiscal year ended August 31, 1997
prepay, without premium or penalty, an amount equal to fifty percent (50%) of
the Company's Excess Cash Flow (as defined below), but in no event more that
the then principal balance of this Note and any accrued interest hereon. For
purposes of this Note, "Excess Cash Flow" shall mean, with respect to each of
the Company's fiscal years after the fiscal year ended August 31, 1997, (i)
the Company's after tax net income (excluding any extraordinary items) for
such fiscal period, plus (ii) the sum of the Company's amortization and
depreciation expenses used in the calculation of consolidated after tax net
income for such fiscal period, minus (iii) capital expenditures made during
such fiscal period, minus (iv) any required payments of Senior Debt, minus
$100,000; provided however, that the definition of Excess Cash Flow shall be
subject to amendment or modification at the reasonable request of any lender
or other financial institution (a "Senior Lender") which commits, after the
date hereof, to advance to the Company New Money in excess of $1,500,000 but
less than $4,250,000; provided, however, that no such amendment or
modification shall result in a greater than 35% decrease in the amount that
would otherwise be deemed Excess Cash Flow or lengthen the one-year period
referred to in Section 3(c)(ii) hereof.
(d) Notice of Prepayment. The Company will give written notice
of its election to prepay this Note to the Payee in person or by registered
or certified mail, return receipt requested, at least 10 days prior to the
date of prepayment. On the date of prepayment specified in the Company's
notice, the Company will pay to the Payee, by wire transfer of immediately
available funds, the entire outstanding principal amount being prepaid,
together with all accrued interest thereon through the date of prepayment.
3. Subordination. The Company's payment of this Note shall be
subject to the following restrictions:
(a) Anything in this Note to the contrary notwithstanding, the
obligations of the Company in respect of the principal of and interest on
this Note shall be subordinate and junior in right of payment, to the extent
and in the manner hereinafter set forth, to the Company's Senior Debt. For
purposes of this Agreement, the "Senior Debt" shall mean (i) the maximum
principal amount of the secured indebtedness which any financial institution
or other lender is committed, from time to time, to make or has made
available to the Company pursuant to its loan agreement(s) with the Company
(its "Loan Agreement"), (ii) all interest, commitment fees, collection fees
and audit, servicing and other fees and expenses which may from time to time
be due under its Loan Agreement accrued to the date of payment, regardless of
whether proceedings for collection of the same or other proceedings under
Title 11 of the United States Code have been commenced, (iii) all
reimbursements and other fees and obligations of the Company to the bank
under the Loan Agreement and (iv) any deferrals, renewals, extensions or
refundings of the Senior Debt and any indebtedness which refinances the
Senior Debt. For purposes of this Section 3 and Section 5 hereof, the term
"Company" shall mean the Company and its subsidiaries.
(b) In the event of any insolvency or bankruptcy proceedings,
and any receivership, liquidation, reorganization, arrangement, readjustment,
composition or other similar proceedings in connection therewith, relative to
the Company, or to its creditors, as such, or to its property, or in the
event of any proceedings for voluntary liquidation, dissolution or other
winding-up of the Company, whether or not involving insolvency or bankruptcy,
or in the event of any assignment by the Company for the benefit of creditors
or in the event of any other marshaling of the assets of the Company
(collectively referred to as an "Insolvency Event"), subject to clauses (i)
and (ii) of subparagraph 3(e) hereof, the holders of the Senior Debt shall be
entitled to receive payment in full of all Senior Debt (including interest
thereon accruing after the commencement of any such proceedings) before the
Payee is entitled to receive any payment on account of principal, interest or
other amounts due upon this Note, and to that end the holders of Senior Debt
shall be entitled to receive for application in payment thereof any payment
or distribution of any kind or character, whether in cash or property or
securities, which may be payable or deliverable in any such proceedings in
respect of this Note.
(c) After the occurrence and during the continuance of any
payment or financial covenant default with respect to the Senior Debt which
gives the holder of such Senior Debt the right to accelerate the maturity of
its Senior Debt, including any default which may arise after giving effect to
any payment made or to be made hereunder, no payment of principal or interest
will be made on this Note and the holder of this Note will take no action to
recover any such amounts until the earlier of (i) the date such default has
been remedied or the Senior Debt shall have been discharged or (ii) six
months from the occurrence of such default; provided, however, that at the
request of a Senior Lender for New Money, the period set forth in clause (ii)
shall be extended to a period of a maximum of one year.
(d) Each holder of Senior Debt may at any time, in their
discretion, renew or extend the time of payment of Senior Debt so held or
exercise any of their rights under the Senior Debt including, without
limitation, the waiver of defaults thereunder, the release, foreclosure or
any other transactions with respect to collateral, and the amendment of any
of the terms or provisions thereof (or any notice evidencing or creating the
same), all without notice to or assent from the Payee. No compromise,
alteration, amendment, renewal or other change of, or waiver, consent or
other action in respect of any liability or obligation under or in respect
of, any terms, covenants or conditions of the Senior Debt (or any instrument
evidencing or creating the same), whether or not such release is in
accordance with the provisions of the Senior Debt (or any instrument
evidencing or creating the same), shall in any way alter or affect any of the
subordination provisions of this Note.
(e) If, notwithstanding the provisions of this paragraph 3, any
payment or distribution of any character (whether in cash, securities or
other property) or any security shall be received by the Payee in
contravention of this paragraph 3, and before all the Senior Debt shall have
been paid in full, such payment, distribution or security shall be held in
trust for the benefit of, and shall be immediately paid over or delivered or
transferred to, the holders of the Senior Debt, or their duly appointed
agents, for application of the payment of all Senior Debt remaining unpaid,
until all of the Senior Debt shall have been paid in full, or such payment
has been provided for; provided:
(i) no delivery will be made of stock or obligations which are
issued by the Company or any corporation succeeding to the Company or
acquiring its property and assets, pursuant to reorganization
proceedings or dissolution or liquidation proceedings or upon any
merger, consolidation, sale, lease, transfer or other disposal, if such
stock or obligations are subordinate and junior at least to the extent
provided hereunder to the payment of Senior Debt to the extent then
outstanding and to the payment of any stock or obligations which are
issued in exchange for Senior Debt to the extent then outstanding; and
(ii) the Payee will (after all principal and interest owing on such
Senior Debt has been paid in full) be subrogated to the rights of the
holders of such Senior Debt to receive distributions applicable to the
Senior Debt to the extent that distributions otherwise payable to the
Payee have been applied to the payment of Senior Debt.
(f) No holder of Senior Debt shall be prejudiced in its right
to enforce the subordination of this Note by any act or failure to act on the
part of the Company.
(g) The provisions of paragraph 3 are for the purpose of
defining the relative rights of holders of Senior Debt, on the one hand, and
the Payee, on the other hand. No provision of such paragraph will be
construed to prevent the Payee from exercising all remedies otherwise
available under this Note or under applicable law upon the occurrence of any
Event of Default, subject to the rights of the Payee or holders of the Senior
Debt as set forth above to receive cash, assets, stock or obligations
otherwise payable or deliverable to the Payee. No provision of such
paragraph will be deemed to subordinate to any extent, any claim or right of
the Payee to any claim against the Company by any creditor or any other
Person except to the extent expressly provided in such paragraph.
4. Covenants.
The Company hereby agrees that, from and after the date hereof
until such time as the Note has been paid in full:
(a) Information. The Company will deliver to the Payee:
(i) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and reports on Forms 10-KSB,
10-QSB and 8-K (or their equivalents) which the Company or any
subsidiary of the Company has filed with the Securities Exchange
Commission (the "Commission");
(ii) within ten (10) days after any officer of the Company obtains
knowledge of an Event of Default, a certificate of the chief financial
officer or the chief accounting officer of the Company setting forth
the details thereof and the action which the Company is taking or
proposes to take with respect thereto;
(iii) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and
proxy statements so mailed and any other document generally distributed
to shareholders; and
(iv) promptly following the commencement thereof, notice and a
description in reasonable detail of any litigation or proceeding to
which the Company or any subsidiary of the Company is a party in which
the amount involved is $100,000 or more.
(b) Payment of Obligations. The Company and its subsidiaries
will maintain, in accordance with generally accepted accounting principles,
appropriate reserves for the accrual of any of the same.
(c) Maintenance of Property; Insurance. The Company and each
subsidiary of the Company will use commercially reasonable efforts keep all
property useful and necessary in its business in working order and condition,
ordinary wear and tear excepted. In addition, the Company and each such
subsidiary will maintain insurance in at least such amounts and against such
risks as it has insured against as of the date hereof.
(d) Maintenance of Existence. Subject to applicable laws
regarding business judgment and the Company's business plan from time to time
in effect, the Company will continue, and shall cause each subsidiary to
continue, to engage in business of the same general type as now conducted by
the Company and such subsidiaries, and will preserve, renew and keep in full
force and effect its respective corporate existence and their respective
material rights, privileges and franchises necessary or desirable in the
normal conduct of business.
(e) Compliance with Laws. The Company and each subsidiary of
the Company will comply, in all material respects, with all federal, state,
municipal, local or foreign applicable laws, ordinances, rules, regulations,
municipal by-laws, codes and requirements of governmental authorities
(including, without limitation, environmental and employee pension and
benefit laws and the rules and regulations thereunder) except where
non-compliance therewith could not reasonably be expected, in the aggregate,
to have a material adverse effect on the business, condition (financial or
otherwise), operations or properties of the Company or such subsidiary.
(f) Inspection of Property, Books and Records. The Company and
each subsidiary of the Company will keep proper books of record and account
in which full, true and correct entries shall be made of all dealings and
transactions in relation to their respective businesses and activities; and
will permit, during normal business hours Payee or its representative, to
visit and inspect any of their respective properties, upon reasonable prior
notice once per annum, to examine and make abstracts from any of their
respective books and records and to discuss their respective affairs,
finances and accounts with their respective executive officers and
independent public accountants.
(g) Supplemental Information. If at any time the Company is
not subject to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Company will promptly furnish at its
expense, upon request, for the benefit of the Payee, information satisfying
the information requirements of Rule 144 of the Securities Act of 1933, as
amended.
(h) Compliance with Terms and Conditions of Material
Contracts. The Company and each subsidiary of the Company will comply, in
all material respects, with all terms and conditions of all material
contracts to which it is subject, except where such non-compliance could not
reasonably be expected, in the aggregate, to have a material adverse effect
on the business, condition (financial or otherwise), operations or properties
of the Company or such subsidiary.
5. Events of Default.
(a) Definition. For the purposes of this Note, an "Event of
Default" will be deemed to have occurred if:
(i) the Company fails to pay when due the interest then due and
payable on this Note, whether or not such payment is prohibited by
paragraph 3 hereof, and such failure has continued for a period of five
(5) days after the Company's receipt of written notice thereof, or the
Company fails to pay when due the full amount of any principal payment
of this Note, whether or not such payment is prohibited by paragraph 3
hereof;
(ii) the Company fails to perform or observe any other provision
contained in this Note or any material failure to perform any material
covenant or obligation set forth in the Restructuring Agreement (as
defined below), including without limitation the provisions of Section
2 thereof, and such failure continues for a period of 30 days after the
Company's receipt of written notice thereof; provided, however, that if
such failure cannot be cured within 30 days, it shall be extended for a
reasonable period of time thereof for so long as the Company promptly
takes steps to cure such default.
(iii) any representation, warranty or information contained in any
writing furnished herein by the Company to the Payee is false or
misleading in any material respect on the date made or furnished;
(iv) the Company makes an assignment for the benefit of creditors
or admits in writing its inability to pay its debts generally as they
become due; or an order, judgment or decree is entered adjudicating the
Company bankrupt or insolvent or any order for relief with respect to
the Company is entered under the Federal Bankruptcy Code; or the
Company petitions or applies to any tribunal for the appointment of a
custodian, trustee, receiver or liquidator of the Company or of any
substantial part of the assets of the Company, or commences any
proceeding or any such petition or application is filed, or any such
proceeding is commenced, against the Company and either (A) the Company
by any act indicates its approval thereof, consents thereto or
acquiesces therein or (B) such petition, application or proceeding is
not dismissed within 90 days; or
(v) The Company fails to pay any dividends when due on the shares
of Series B 8% Cumulative Convertible Redeemable Preferred Stock owned
by the Payee and such failure shall have continued for a period of five
(5) days after the Company's receipt of written notice thereof.
(b) Consequences of Events of Default.
(i) After the occurrence and during the continuation of any Event
of Default the Payee may demand (by written notice delivered to the
Company) immediate payment of all or any portion of the outstanding
principal amount of the Note owed by such Payee, together with accrued
and unpaid interest.
(ii) The Payee will also have any other rights which such Payee may
have pursuant to applicable law.
6. Amendment and Waiver. Except as otherwise expressly provided
herein, the provisions of this Note may only be amended by written agreement
between the Company and the Payee. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon the Payee at the time
and each future Payee.
7. Cancellation. After all principal and accrued interest at any
time owed on this Note has been paid in full, this Note will be surrendered
to the Company for cancellation and will not be reissued.
8. Place of Payment. Payments of principal and interest are to be
delivered to the Payee at 00 Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxx X0X 0XX, Attn:
Xxxxx X. Xxxxxxxx, Esq. or to such other address or to the attention of such
other Person as specified by prior written notice to the Company. At the
request of the Payee, all payments of principal and interest on this Note
will be made by wire transfer of immediately available funds to an account
which the Payee may designate from time to time.
9. Waiver of Presentment, Demand and Dishonor. Except as expressly
set forth herein, the Company hereby waives presentment for payment, protest,
demand, notice of protest, notice of nonpayment, notice of intention to
accelerate, notice of acceleration, and diligence with respect to this Note,
and waives and renounces all rights to the benefits of any statute of
limitations or any moratorium, appraisement, exemption or homestead.
No failure on the part of the Payee hereof to exercise any right or
remedy hereunder with respect to the Company, whether before or after the
happening of an Event of Default, shall constitute waiver of any future Event
of Default or of any other Event of Default. No failure to accelerate the
debt of the Company evidenced hereby by reason of an Event of Default or
indulgence granted from time to time shall be construed to be a waiver of the
right to insist upon prompt payment thereafter; or shall be deemed to be a
notation of this Note or a reinstatement of such debt evidenced hereby or a
waiver of such right of acceleration or any other right, or be construed so
as to preclude the exercise of any right the Payee may have, whether by the
laws of the state governing this Note, by agreement or otherwise; and the
Company hereby expressly waives the benefit of any statute or rule of law or
equity that would produce a result contrary to or in conflict with the
foregoing.
10. Usury. Notwithstanding any provision to the contrary contained
in this Note, or any and all other instruments or documents executed in
connection herewith, the Payee and the Company intend that the obligations
evidenced by this Note conform strictly to the applicable usury laws from
time to time in force. All agreements between the Company and Payee, whether
now existing or hereafter arising and whether oral or written, hereby are
expressly limited so that in no case, contingency or event whatsoever,
whether by acceleration of maturity hereof or otherwise, shall the amount
paid or agreed to be paid to Payee, or collected by Payee, by or on behalf of
the Company for the use, forbearance or detention of the money to be loaned
to the Company hereunder or otherwise, or for the payment or performance of
any covenant or obligation contained herein of the Company to Payee, or in
any other document evidencing, securing or pertaining to such indebtedness
evidenced hereby, exceed the maximum amount permissible under applicable
usury law. If, under any circumstances whatsoever, fulfillment of any
provisions thereof or any other document, at the time performance of such
provisions shall be due, shall involve transcending the limit of validity
prescribed by law, then, ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity; and if under any circumstances Payee
ever shall receive from or on behalf of the Company an amount deemed
interest, by applicable law, which would exceed the highest lawful rate, such
amount that would be excessive interest under applicable usury laws shall be
applied to the reduction of the Company's unpaid principal amount owing
hereunder and not to the payment of interest, or if such excessive interest
exceeds the unpaid balance of principal and such other indebtedness, the
excess shall be deemed to have been a payment as a result of an error on the
part of the Payee and the Company and the party receiving such excess payment
shall promptly, upon discovery of such error or upon notice thereof from the
party making such payment, refund to the Company or to any other person
making such payment on the Company's behalf, and this Note shall be
automatically deemed reformed so as to permit only the collection of the
maximum non-usurious rate and amount of interest allowed by applicable law.
All sums paid or agreed to be paid to the Payee or any other holders hereof
for the use, forbearance or detention of the indebtedness evidenced hereby
shall, to the full extent permitted by applicable law, be amortized,
prorated, allocated and spread through the full term of this Note.
11. Assignment. This Note is the Note referred to in that
certain Restructuring Agreement dated September 24, 1997 by and between the
Company, Payee, Xxxxxx X. Xxxxxxxxx, Xxxxxxx X. Xxxxxxxxx and Xxxxxx X.
Xxxxxxxxx (the "Restructuring Agreement"). Infinity shall not sell, assign
or transfer the Note (or any interest therein) except as may be expressly
permitted by the Restructuring Agreement. Any such attempted transfer in
violation of this Agreement or the Restructuring Agreement shall be void and
of no effect.
12. Governing Law. The validity, construction and interpretation of
this Note will be governed, construed, and enforced in accordance with the
laws, of the State of New York (without giving effect to principles of
conflicts of law).
IN WITNESS WHEREOF, the Company has executed and delivered this Note on
the date first above written.
XXXXXXXX ENERGY CORP.
By:___________________________________
Xxxxxx X. Xxxxxxxxx
President
EXHIBIT B
CERTIFICATE OF DESIGNATION
Certificate of Amendment and Restatement to
Certificate to Set Forth Designations,
Voting Powers, Preferences, Limitations,
Restrictions, and Relative Rights of
Series B 8% Cumulative Convertible
Redeemable Preferred Stock, $.001 Par Value
Pursuant to Section 78.1955 of the Nevada General Corporation Law,
Xxxxxxxx Energy Corp. adopts the following Amended and Restated Certificate
of Designation by stating the following:
I. The name of the corporation is Xxxxxxxx Energy Corp. (the
"Corporation").
II. The current designation of a series of Preferred Stock of the
Corporation is Series B 8% Cumulative Convertible Redeemable Preferred
Stock. As amended and restated as hereinafter provided, the new designation
of said series of the Series Preferred Stock shall be Series B Cumulative
Convertible Redeemable Preferred Stock (as amended and restated, the "Series
B Preferred Stock").
III. The approval by all shareholders required pursuant to the
provisions of Section 78.1955 of the Nevada General Corporation Law of the
amendment and restatement of the designation of the Series B Preferred Stock
was obtained in accordance with the Nevada General Corporation Law.
IV. Set forth hereafter is the amended and restated terms of the
preferences, limitations, restrictions and relative rights of shares of
Series B Preferred Stock, as contained in a resolution of the Board of
Directors of the Corporation, pursuant to a provision of the Articles of
Incorporation of the Corporation.
1. Designation; Number of Shares.
The designation of said series of Preferred Stock shall be Series
B 8% Cumulative Convertible Redeemable Preferred Stock (the "Series B
Preferred Stock"). The number of shares of Series B Preferred Stock shall be
560,126. Each share of Series B Preferred Stock shall have a stated value
equal to $7.75 (as adjusted for any stock dividends, combinations or splits
with respect to such shares)(the "Stated Value").
- 1 -
2. Dividends.
(a) The holders of outstanding shares of Series B Preferred
Stock shall be entitled to receive preferential dividends in cash, out of any
funds of the Corporation legally available after dividends shall have been
paid or declared and set apart for payment on shares of the Corporation's
Series A 7.5% Cumulative Convertible Redeemable Preferred Stock (the "Series
A Preferred Stock"), but before any dividend or other distribution will be
paid or declared and set apart for payment on any shares of any Common Stock
or other class of stock junior to the Series B Preferred Stock (the Common
Stock and such junior stock being hereinafter collectively the "Junior
Stock") at the rate of 12% per annum on the Stated Value payable quarterly on
the last day of each calendar quarter; provided, however, that in the event
that dividend payments are not made when due in cash, to the extent permitted
by applicable law, dividend payments shall be made, in the sole discretion of
the Board of Directors of the Corporation, in additional fully paid and
nonassessable shares of the Corporation's Common Stock at a rate of one share
of Common Stock for each $2.00 of such dividend not paid in cash and the
issuance of such additional shares shall constitute full payment of such
dividend.
(b) The dividends on the Series B Preferred Stock at the rates
provided above shall be cumulative whether or not earned, so that if at any
time full cumulative dividends at the rate aforesaid on all shares of the
Series B Preferred Stock then outstanding from the date from and after which
dividends thereon are cumulative to the end of the quarterly dividend period
next preceding such time shall not have been paid or declared and set apart
for payment, or if the full dividend on all such outstanding Series B
Preferred Stock for the then current dividend period shall not have been paid
or declared and set apart for payment, the amount of the deficiency shall be
paid or declared and set apart for payment (but without interest thereon)
before any sum shall be set apart for or applied by the Corporation or a
subsidiary of the Corporation to the purchase, redemption or other
acquisition of the Series B Preferred Stock or any shares of any other class
of stock ranking on a parity with the Series B Preferred Stock ("Parity
Stock") and before any dividend or other distribution shall be paid or
declared and set apart for payment on any Junior Stock and before any sum
shall be set aside for or applied to the purchase, redemption or other
acquisition of Junior Stock.
(c) Dividends on all shares of the Series B Preferred Stock
shall begin to accrue and be cumulative from and after the date of issuance
thereof at the rate then provided. A dividend period shall be deemed to
commence on the day following a quarterly dividend payment date herein
specified and to end of the next succeeding quarterly dividend payment date
herein specified.
3. Liquidation Rights.
(a) Upon the dissolution, liquidation or winding-up of the
Corporation, whether voluntary or involuntary, the holders of the Series B
Preferred Stock shall be entitled to receive, after any required payment or
distribution shall be made on the Series A Preferred Stock,
- 2 -
but before any payment or distribution shall be made on the Junior Stock, out
of the assets of the Corporation available for distribution to stockholders,
the Stated Value per share of Series B Preferred Stock and all accrued and
unpaid dividends to and including the date of payment thereof. Upon the
payment in full of all amounts due to holders of the Series B Preferred
Stock, the holders of the Common Stock of the Corporation and any other class
of Junior Stock shall receive all remaining assets of the Corporation legally
available for distribution. If the assets of the Corporation available for
distribution to the holders of the Series B Preferred Stock shall be
insufficient to permit payment in full of the amounts payable as aforesaid to
the holders of Series B Preferred Stock upon such liquidation, dissolution or
winding-up, whether voluntary or involuntary, then all such assets of the
Corporation shall be distributed, to the exclusion of the holders of shares
of Junior Stock, ratably among the holders of the Series B Preferred Stock.
(b) Neither the purchase nor the redemption by the Corporation of
shares of any class of stock, nor the merger or consolidation of the
Corporation with or into any other corporation or corporations, nor the sale
or transfer by the Corporation of all or any part of its assets, shall be
deemed to be a liquidation, dissolution or winding-up of the Corporation for
the purposes of this paragraph 3. Holders of the Series B Preferred Stock
shall not be entitled, upon the liquidation, dissolution or winding-up of the
Corporation, to receive any amounts with respect to such stock other than the
amounts referred to in this paragraph 3.
4. Redemption.
(a) The shares of Series B Preferred Stock may be redeemed, in
whole or from time to time in part, at the election of the Corporation,
expressed by resolution of the Board, at any time or from time to time at a
redemption price per share equal to 129% of the Stated Value per share (as
adjusted for any stock dividends, stock combinations or splits with respect
to such shares) and all accrued and unpaid dividends on such shares of Series
B Preferred Stock to and including the Redemption Date (as hereinafter
defined).
(b) Notice of every redemption of Series B Preferred Stock
pursuant to this paragraph 4 shall be given by mail or in such other manner
as may be prescribed by resolution of the Board not less than thirty (30)
days prior to the applicable date of redemption ("Redemption Date"). As
applicable, the notice shall specify the number of shares to be redeemed, the
date fixed for redemption, the redemption price per share and the address
where payment of the redemption price per share is to be paid upon the
surrender of certificates representing shares of Series B Preferred Stock.
The giving of such notice shall obligate the Corporation to redeem the shares
to which the notice relates on the Redemption Date. If less than all the
outstanding Series B Preferred Stock is to be redeemed, the selection of
shares for redemption may be made either by lot or pro rata in such manner as
may be prescribed by resolution of the Board.
(c) On and after the applicable Redemption Date and
notwithstanding that any certificate for shares of Series B Preferred Stock
so called for redemption shall not have been surrendered for cancellation,
all dividends on the Series B Preferred Stock called for redemption
- 3 -
shall cease to accrue and the shares represented thereby shall no longer be
deemed outstanding and all rights of the holders thereof as stockholders of
the Corporation shall cease and terminate, except the right to receive the
redemption price per share as hereinafter provided and except any conversion
rights not theretofore expired.
(d) At any time on or after the applicable Redemption Date, the
holders of record of the Series B Preferred Stock to be redeemed shall be
entitled to receive the redemption price per share upon actual delivery of
the certificates for the shares to be redeemed to the place so specified in
the redemption notice, such certificates, if required, to be duly endorsed in
blank or accompanied by proper instruments of assignment and transfer, or
duly endorsed in blank. If less than all of the shares represented by any
such certificate are redeemed, a new certificate representing the unredeemed
shares shall be issued.
5. Conversion into Common Stock. Shares of Series B Preferred
Stock shall have the following conversion rights and obligations:
(a) Subject to the further provisions of this paragraph 5, each
holder of shares of Series B Preferred Stock shall have the right, at any
time and from time to after forty-five (45) days from the date on which a
share of Series B Preferred Stock was issued, to convert some or all such
shares into fully paid and non-assessable shares of Common Stock of the
Corporation (as defined in subparagraph 5(j) below) determined in accordance
with the Conversion Price provided in paragraph 5(c) below.
(b) Subject to the further provisions of this paragraph 5, the
Corporation shall have the right, at its option at any time after forty-five
(45) days from the date on which a share of Series B Preferred Stock was
issued, to cause each holder of such shares of Series B Preferred Stock to
convert such shares into fully paid and non-assessable shares of Common Stock
of the Corporation at the Conversion Price during the thirty (30) day period
beginning on the day after the fifth consecutive day the Closing Bid Price
equals or exceeds 150% of the Stated Value per share (the "Mandatory
Conversion Period"). Notice of such mandatory conversion of the Series B
Preferred Stock pursuant to this paragraph 5(b) shall be given by mail or in
such other manner as may be prescribed by resolution of the Board of
Directors of the Corporation not later than the expiration of the Mandatory
Conversion Period. As applicable, the notice shall specify the number of
shares to be converted, the date of conversion and the Conversion Price per
share.
(c) The number of shares of Common Stock issuable upon
conversion of each share of Series B Preferred Stock shall equal (i) the sum
of (A) the Stated Value per share and (B) accrued and unpaid dividends on
such share divided by (ii) the Conversion Price. The "Conversion Price"
shall be equal to $2.00 per share of Common Stock, subject to adjustment as
herein provided.
(d) The holder of any certificate for shares of Series B
Preferred Stock desiring to convert any of such shares or whose shares where
converted at the election of the
- 4 -
Corporation pursuant to the provisions of this paragraph 5 shall surrender
such certificate, at the principal office of any transfer agent for said
stock (the "Transfer Agent"), with a written notice of such election to
convert (if such conversion is voluntary) such shares into Common Stock duly
filled out and executed, and if necessary under the circumstances of such
conversion, with such certificate properly endorsed for, or accompanied by
duly executed instruments of, transfer (and such other transfer papers as
said Transfer Agent may reasonably require). The holder of the shares so
surrendered for conversion shall be entitled to receive within three (3)
business days of the Notice of Conversion (except as otherwise provided
herein) a certificate or certificates, which shall be expressed to be fully
paid and non-assessable, for the number of shares of Common Stock to which
such stockholder shall be entitled upon such conversion, registered in the
name of such holder or in such other name or names as such stockholder in
writing may specify. In the case of any Series B Preferred Stock which is
converted in part only, the holder of shares of Series B Preferred Stock
shall upon delivery of the certificate or certificates representing Common
Stock also receive a new share certificate representing the unconverted
portion of the shares of Series B Preferred Stock. Nothing herein shall be
construed to give any holder of shares of Series B Preferred Stock
surrendering the same for conversion the right to receive any additional
shares of Common Stock or other property which results from an adjustment in
conversion rights under the provisions of subparagraphs (e) or (f) of this
paragraph 5 until holders of Common Stock are entitled to receive the shares
or other property giving rise to the adjustment.
In the case of the exercise of the conversion rights set forth in
paragraphs 5(a) and 5(b), the conversion privilege shall be deemed to have
been exercised, and the shares of Common Stock issuable upon such conversion
shall be deemed to have been issued, upon the date of receipt by such
Transfer Agent for conversion of the certificate for such shares of Series B
Preferred Stock. In the case of the automatic conversion set forth in
paragraph 5(b), conversion shall be deemed to have occurred as provided in
paragraph 5(b). The person or entity entitled to receive Common Stock
issuable upon such conversion shall on the date such conversion privilege is
deemed to have been exercised and thereafter be treated for all purposes as
the record holder of such Common Stock and shall on the same date cease to be
treated for any purpose as the record holder of such shares of Series B
Preferred Stock so converted.
Notwithstanding the foregoing, if the stock transfer books are
closed on the date such shares are received by the Transfer Agent, the
conversion privilege shall be deemed to have been exercised, and the person
or entity shall be treated as a record holder of shares of Common Stock, on
the next succeeding date on which the transfer books are open, but the
Conversion Price shall be that in effect on the date such conversion
privilege was exercised. The Corporation shall not be required to deliver
certificates for shares of its Common Stock or new certificates for
unconverted shares of its Series B Preferred Stock while the stock transfer
books for such respective classes of stock are duly closed for any purpose;
but the right of surrendering shares of Series B Preferred Stock for
conversion shall not be suspended during any period that the stock transfer
books of either of such classes of stock are closed.
- 5 -
Upon the conversion of any shares of Series B Preferred Stock, no
adjustment or payment shall be made with respect to such converted shares on
account of any dividend on shares of such stock or on account of any dividend
on the Common Stock, except that the holder of such converted shares shall be
entitled to be paid any dividends declared on shares of Common Stock after
conversion thereof.
The conversion privilege shall also be subject to the following
terms and conditions:
(i) if any shares of Series B Preferred Stock shall be
called for redemption, the conversion privilege in respect of
such shares shall terminate at the close of business on the last
business day next preceding the applicable Redemption Date; and
(ii) if the Corporation shall at any time be liquidated,
dissolved or wound-up, the conversion privilege shall terminate
at the close of business on the last business day next preceding
the effective date of such liquidation, dissolution or
winding-up.
The Corporation shall not be required, in connection with any
conversion of Series B Preferred Stock, to issue a fraction of a share of its
Common Stock nor to deliver any stock certificate representing a fraction
thereof, but in lieu thereof the Corporation may make a cash payment equal to
such fraction multiplied by the Closing Bid Price on the date the conversion
right was triggered.
(e) The Conversion Price shall be subject to adjustment from
time to time as follows:
(i) In case the Corporation shall at any time (A) declare
any dividend or distribution on its Common Stock or other
securities of the Corporation other than the Series A Preferred
Stock, (B) split or subdivide the outstanding Common Stock, (C)
combine the outstanding Common Stock into a smaller number of
shares or (D) issue by reclassification of its Common Stock any
shares or other securities of the Corporation, then, in each such
event, the Conversion Price shall be adjusted proportionately so
that the holders of Series B Preferred Stock shall be entitled to
receive the kind and number of shares or other securities of the
Corporation which such holders would have owned or have been
entitled to receive after the happening of any of the events
described above had such shares of Series B Preferred Stock been
converted immediately prior to the happening of such event (or
any record date with respect thereto). Such adjustment shall be
made whenever any of the events listed above shall occur. An
adjustment made to the Conversion pursuant to this paragraph
5(e)(i) shall become effective immediately after the effective
date of the event retroactive to the record date, if any, for the
event.
- 6 -
(f)(i) In case of any consolidation or merger of the
Corporation with or into any other corporation (other than a
merger or consolidation in which the Corporation is the surviving
or continuing corporation and which does not result in any
reclassification, conversion or change of the outstanding shares
of Common Stock), then, unless the right to convert shares of
Series B Preferred Stock shall have terminated, as part of such
consolidation or merger, lawful provision shall be made so that
holders of Series B Preferred Stock shall thereafter have the
right to convert each share of Series B Preferred Stock into the
kind and amount of shares of stock and/or other securities or
property receivable upon such consolidation or merger by a holder
of the number of shares of Common Stock into which such shares of
Series B Preferred Stock might have been converted immediately
prior to such consolidation or merger. Such provision shall also
provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in paragraph
(e) of this paragraph 5. The foregoing provisions of this
paragraph 5(f) shall similarly apply to successive consolidations
and mergers.
(ii) In case of any sale or conveyance to another person
or entity of the property of the Corporation as an entirety, or
substantially as an entirety, in connection with which shares or
other securities or cash or other property shall be issuable,
distributable, payable or deliverable for outstanding shares of
Common Stock, then, unless the right to convert such shares shall
have terminated, lawful provision shall be made so that the
holders of Series B Preferred Stock shall thereafter have the
right to convert each share of the Series B Preferred Stock into
the kind and amount of shares of stock or other securities or
property that shall be issuable, distributable, payable or
deliverable upon such sale or conveyance with respect to each
share of Common Stock immediately prior to such conveyance.
(g) Whenever the number of shares to be issued upon conversion
of the Series B Preferred Stock is required to be adjusted as provided in
this paragraph 5, the Corporation shall forthwith compute the adjusted number
of shares to be so issued and prepare a certificate setting forth such
adjusted conversion amount and the facts upon which such adjustment is based,
and such certificate shall forthwith be filed with the Transfer Agent for the
Series B Preferred Stock and the Common Stock; and the Corporation shall mail
to each holder of record of Series B Preferred Stock notice of such adjusted
conversion price.
- 7 -
(h) In case at any time the Corporation shall propose:
(i) to pay any dividend or distribution payable in shares
upon its Common Stock or make any distribution (other than cash
dividends) to the holders of its Common Stock; or
(ii) to offer for subscription to the holders of its
Common Stock any additional shares of any class or any other
rights; or
(iii) any capital reorganization or reclassification of its
shares, or the consolidation or merger of the Corporation with
another corporation; or
(iv) the voluntary dissolution, liquidation or winding-up
of the Corporation;
then, and in any one or more of said cases, the Corporation shall cause at
least fifteen (15) days prior notice of the date on which (A) the books of
the Corporation shall close, or a record be taken for such stock dividend,
distribution or subscription rights, or (B) such capital reorganization,
reclassification, consolidation, merger, dissolution, liquidation or
winding-up shall take place, as the case may be, to be mailed to the Transfer
Agent for the Series B Preferred Stock and for the Common Stock and to the
holders of record of the Series B Preferred Stock.
(i) So long as any shares of Series B Preferred Stock shall
remain outstanding and the holders thereof shall have the right to convert
the same in accordance with provisions of this paragraph 5, the Corporation
shall at all times reserve from the authorized and unissued shares of its
Common Stock a sufficient number of shares to provide for such conversions.
(j) The term "Common Stock" as used in this paragraph 5 shall
mean Common Stock of the Corporation as such stock is constituted at the date
of issuance thereof or as it may from time to time be changed, or shares of
stock of any class, other securities and/or property into which the shares of
Series B Preferred Stock shall at any time become convertible pursuant to the
provisions of this paragraph 5.
(k) The Corporation shall pay the amount of any and all issue
taxes which may be imposed in respect of any issue or delivery of stock upon
the conversion of any shares of Series B Preferred Stock, but all transfer
taxes that may be payable in respect of any change of ownership of Series B
Preferred Stock, or any rights represented thereby, or of stock receivable
upon conversion thereof, shall be paid by the person or persons surrendering
such stock for conversion.
- 8 -
6. Voting Rights.
Except as required by applicable law, shares of Series B
Preferred Stock shall not entitle its holder to any voting rights, but such
holder shall be entitled to a notice of any stockholders' meeting in
accordance with the By-laws of the Corporation.
7. Status of Converted or Redeemed Stock.
In case any shares of Series B Preferred Stock shall be redeemed
or converted pursuant to paragraphs 4 or 5 hereof, or otherwise repurchased
or reacquired, the shares so redeemed, converted or reacquired shall resume
the status of authorized but unissued shares of Preferred Stock and shall no
longer be designated as Series B Preferred Stock.
Signed as of this 24nd day of September, 1997.
XXXXXXXX ENERGY CORP.
By:
Xxxxxx X. Xxxxxxxxx
President
By:
Xxxxxxx X. Xxxxxxxxx
Secretary
STATE OF NEW YORK )
) SS.:
COUNTY OF WESTCHESTER )
On September 24, 1997, Xxxxxx X. Xxxxxxxxx and Xxxxxxx X.
Xxxxxxxxx, personally appeared before me, a Notary Public for the State and
County aforesaid, as President and Secretary, respectively, of Xxxxxxxx
Energy Corp., who acknowledged that each of them executed the above
instrument.
__________________________
Notary Public
EXHIBIT C
OPTION AGREEMENT
AGREEMENT made as of this 24th day of September, 1997 by and between
INFINITY INVESTORS LIMITED ("Infinity"), and _____________________ (the
"Optionee").
W I T N E S S E T H:
WHEREAS, Infinity is the holder of 560,126 shares of Series B
Convertible Redeemable Preferred Stock (the "Series B Preferred Stock") of
Xxxxxxxx Energy Corp. (the "Company"), which shares are convertible into
shares of the Company's Common Stock (the "Shares") in accordance with that
certain Certificate to Set Forth Designations, Voting Powers, Preferences,
Limitations, Restrictions and Relative Rights of the Series B Preferred
Stock, as amended and restated; and
WHEREAS, pursuant to the terms of a certain Restructuring Agreement
dated September 24, 1997 by and between Infinity, the Company, Xxxxxx X.
Xxxxxxxxx, Xxxxxxx X. Xxxxxxxxx and Xxxxxx X. Xxxxxxxxx (the "Restructuring
Agreement"), Infinity has agreed to grant to the Optionee and/or certain
other option holders (the "Option Holders") the right and option to purchase
2,170,488 Shares (the "Conversion Shares").
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained and those contained in the Restructuring Agreement, the parties
hereto hereby agree as follows:
1. Grant of Option and Stock Appreciation Rights. (a) Upon the
terms and subject to the conditions set forth herein, Infinity hereby grants
to the Optionee the right and option (the "Option") to purchase from
Infinity, at a price of $2.00 per share, all of the Conversion Shares during
the period commencing on the effectiveness of the Registration Statement
contemplated by Section 2(b)(i) of the Restructuring Agreement (the
"Effective Date") and ending on the 18-month anniversary of the Effective
Date; provided, however that the unexercised portion of the Option shall
earlier terminate as follows:
(i) In the event that the Option Holders fail to purchase at
least 250,000 Conversion Shares on or prior to the 90th day following
the Effective Date, the Option shall terminate on such 90th day;
(ii) In the event that the Option Holders fail to purchase at
least an additional 400,000 Conversion Shares on or prior to the 181st
day following the Effective Date, the Option shall terminate on such
181st day;
(iii) In the event that the Option Holders fail to purchase at
least an additional 400,000 Conversion Shares on or prior to the 271st
day following the Effective Date, the Option shall terminate on such
271st day;
(iv) In the event that the Option Holders fail to purchase at
least an additional 400,000 Conversion Shares on or prior to the 361st
day following the Effective Date, the Option shall terminate on such
361st day;
(v) In the event that the Option Holders fail to purchase at
least an additional 400,000 Conversion Shares on or prior to the 451st
day following the Effective Date, the Option shall terminate on such
451st day; and
(vi) In the event that the Option Holders fail to purchase the
balance of the Conversion Shares during the period beginning with the
451st day following the Effective Date and ending on the eighteen-month
anniversary of the Effective Date, the Option shall terminate on such
eighteen-month anniversary.
In addition, in the event that Infinity exercises its rights under
Sections 4A(a) or 4A(b) of the Restructuring Agreement, the Option shall
automatically terminate in its entirety.
2. Method of Exercising Option. The Optionee may exercise the
Option by delivering to Infinity (i) a written notice stating the number of
Conversion Shares that the Optionee has elected to purchase at that time from
Infinity and (ii) full payment of the purchase price of the Conversion Shares
then to be purchased. Payment of the purchase price for the Conversion
Shares shall be made by wire transfer of immediately available funds to a
bank designated by Infinity.
3. Issuance of Stock Upon Exercise. As promptly as practicable
after receipt of such written notification of the Optionee's election to
exercise the Option and full payment of such purchase price, but in no event
more than three days after receipt, Infinity shall transfer to the Optionee
the number of Conversion Shares with respect to which the Option has been so
exercised and shall deliver to the Optionee a certificate or certificates
therefor, duly endorsed with signatures guaranteed in a form acceptable to
the Company's transfer agent or shall cause the transfer agent to issue the
Conversion Shares directly to the Optionee.
Notwithstanding any provision of this Agreement to the contrary, the
Optionee acknowledges and agrees that Infinity's right to receive the
Conversion Shares is dependent upon Infinity delivering a duly completed
Notice of Conversion to the Company, which must be honored by the Company,
with the Company's stock transfer agent promptly delivering Conversion Shares
to Infinity in connection therewith. Further, in order for Infinity to sell
the Conversion Shares to the Optionee following exercise of the Option, the
Company must maintain the effectiveness of the Registration Statement
contemplated by Section 2(b)(i) of the Restructuring Agreement. Accordingly,
the Optionee acknowledges and agrees that its right to exercise the Option
shall be subject to the Company maintaining the effectiveness of such
Registration Statement. Further, subject to Infinity's performance of its
obligations hereunder, the Optionee fully releases and discharges Infinity
from any liability associated with the failure of Infinity to deliver
Conversion Shares to the Optionee upon exercise of the Option prior to the
time such Conversion Shares are delivered to Infinity by the Company and its
stock transfer agent upon receipt by the Company of a duly completed Notice
of Conversion from Infinity.
4. Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and
oral, among the parties or between any of them with respect to the
transactions contemplated hereby.
5. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force
and effect unless such enforceability causes this Agreement to fail in its
essential purpose.
6. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made as of
the date delivered or mailed if delivered in person, by telecopy or by
registered or certified mail (postage prepaid, return receipt requested) to
the respective parties as follows:
if to Infinity to it at:
00 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx X0X 0XX
Attn: Xxxxx X. Xxxxxxxx, Esq.
with a copy to:
H.W. Partners, L.P.
0000 Xxx Xxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Telecopy: (000) 000-0000
Attn: Xxxxxx Xxxxxxxxx, Esq.
if to the Optionee, to it at:
copies of all notices to:
Xxxxxxxx Energy Corp.
00 Xxxxxxxx Xxxxx
Xx. Xxxxx, Xxx Xxxx
Telecopy No. (000) 000-0000
Attn: President and General Counsel
and
Piper & Marbury L.L.P.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy No. (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
or to such other address as the person to whom notices is given may have
previously furnished to the others in writing in the manner set forth above.
7. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York (without giving effect
to principles of conflicts of law).
8. Headings. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
9. Binding Agreement. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, its successors and assigns.
10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
INFINITY INVESTORS LIMITED
By:___________________________
[Optionee]
By:___________________________
EXHIBIT D
CERTIFICATE OF DESIGNATION
Certificate of Amendment to
Certificate to Set Forth Designations,
Voting Powers, Preferences, Limitations,
Restrictions, and Relative Rights of
Series B 12% Cumulative Convertible
Redeemable Preferred Stock, $.001 Par Value
Pursuant to Section 78.1955 of the Nevada General Corporation Law,
Xxxxxxxx Energy Corp. adopts the following Amended Certificate of Designation
by stating the following:
I. The name of the corporation is Xxxxxxxx Energy Corp. (the
"Corporation").
II. The current designation of a series of Preferred Stock of the
Corporation is Series B 12% Cumulative Convertible Redeemable Preferred Stock
(the "Series B Preferred Stock").
III. The approval by all shareholders required pursuant to the
provisions of Section 78.1955 of the Nevada General Corporation Law of the
amendment of the designation of the Series B Preferred Stock was obtained in
accordance with the Nevada General Corporation Law.
IV. Paragraph 2(a) of terms of the preferences, limitations,
restrictions and relative rights of shares of Series B Preferred Stock is
hereby amended, as contained in a resolution of the Board of Directors of the
Corporation, pursuant to a provision of the Articles of Incorporation of the
Corporation and, as so amended, shall read in its entirety as follows.
"2. Dividends.
(a) From and after the date hereof, the outstanding shares of
Series B Preferred Stock shall cease to accrue dividends on such shares."
Signed as of this ___ day of ___________.
XXXXXXXX ENERGY CORP.
By:_____________________
Xxxxxx X. Xxxxxxxxx
President
By:_____________________
Xxxxxxx X. Xxxxxxxxx
Secretary
STATE OF NEW YORK )
) SS.:
COUNTY NEW YORK )
On _________, Xxxxxx X. Xxxxxxxxx and Xxxxxxx X. Xxxxxxxxx,
personally appeared before me, a Notary Public for the State and County
aforesaid, as President and Secretary, respectively, of Xxxxxxxx Energy
Corp., who acknowledged that each of them executed the above instrument.
__________________________
Notary Public
EXHIBIT E
CERTIFICATE OF DESIGNATION
Certificate of Amendment to
Certificate to Set Forth Designations,
Voting Powers, Preferences, Limitations,
Restrictions, and Relative Rights of
Series B 12% Cumulative Convertible
Redeemable Preferred Stock, $.001 Par Value
Pursuant to Section 78.1955 of the Nevada General Corporation Law,
Xxxxxxxx Energy Corp. adopts the following Amended Certificate of Designation
by stating the following:
I. The name of the corporation is Xxxxxxxx Energy Corp. (the
"Corporation").
II. The current designation of a series of Preferred Stock of the
Corporation is Series B 12% Cumulative Convertible Redeemable Preferred Stock
(the "Series B Preferred Stock").
III. The approval by all shareholders required pursuant to the
provisions of Section 78.1955 of the Nevada General Corporation Law of the
amendment of the designation of the Series B Preferred Stock was obtained in
accordance with the Nevada General Corporation Law.
IV. Paragraph 2(a) of terms of the preferences, limitations,
restrictions and relative rights of shares of Series B Preferred Stock is
hereby amended, as contained in a resolution of the Board of Directors of the
Corporation, pursuant to a provision of the Articles of Incorporation of the
Corporation and, as so amended, shall read in its entirety as follows.
"2. Dividends.
(a) From and after the date hereof, the holders of outstanding
shares of Series B Preferred Stock shall be entitled to receive preferential
dividends in cash, out of any funds of the Corporation legally available at
the time for declaration of dividends, after dividends shall have been paid
or declared and set apart for payment on shares of the Corporation's Series A
Cumulative Convertible Redeemable Preferred Stock (the "Series A Preferred
Stock"), but before any dividend or other distribution will be paid or
declared and set apart for payment on any shares of any Common Stock or other
class of stock junior to the Series B Preferred Stock (the Common Stock and
such junior stock being hereinafter collectively the "Junior Stock") at the
rate of 10% per annum on the Stated Value payable quarterly on the last day
of each calendar quarter; provided, however, that in the event that dividend
payments are not made when due in cash, to the extent permitted by applicable
law, dividend payments shall be made, in the sole discretion of the Board of
Directors of the Corporation, in additional fully paid and nonassessable
shares of the Corporation's Common Stock at a rate of one share of Common
Stock for each $2.00 of such dividend not paid in cash and the issuance of
such additional shares shall constitute full payment of such dividend."
Signed as of this ___ day of ___________.
XXXXXXXX ENERGY CORP.
By:_____________________
Xxxxxx X. Xxxxxxxxx
President
By:_____________________
Xxxxxxx X. Xxxxxxxxx
Secretary
STATE OF NEW YORK )
) SS.:
COUNTY NEW YORK )
On _________, Xxxxxx X. Xxxxxxxxx and Xxxxxxx X. Xxxxxxxxx,
personally appeared before me, a Notary Public for the State and County
aforesaid, as President and Secretary, respectively, of Xxxxxxxx Energy
Corp., who acknowledged that each of them executed the above instrument.
__________________________
Notary Public
