REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of June 8, 1999,
between HALLWOOD ENERGY CORPORATION, a Delaware corporation (the "Company"), and
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA (the "Purchaser").
1. Background. The Company, Hallwood Consolidated Resources Corporation
("HCRC") and the Purchaser have entered into that certain Amended and Restated
Subordinated Note and Warrant Purchase Agreement (the "Purchase Agreement"),
dated as of the date hereof, pursuant to which the Company has agreed, among
other things, to issue and sell its Common Stock Purchase Warrants (the
"Warrants"), evidencing rights to purchase an aggregate of 309,278 shares
(subject to adjustment as provided therein) of the Company's common stock, par
value $0.01 per share (the "Common Stock"), in exchange for, among other things,
the delivery by the Purchaser, for cancellation, of common stock purchase
warrants evidencing rights of the Purchaser to purchase shares of the common
stock, par value $0.01 per share, of HCRC. This agreement shall become effective
upon the issuance of the Warrants.
2. Registration under Securities Act, etc.
2.1 Registration on Request.
(a) Request by Holders of Warrants or Registrable Securities.
At any time after the date hereof any holder or holders of Warrants or
Registrable Securities may request in writing that the Company effect the
registration under the Securities Act of all or part of such holders'
Registrable Securities. Such request shall specify the number of shares of
Registrable Securities proposed to be sold by such holder or holders and the
intended method of disposition thereof. Promptly after receiving such request,
the Company will give written notice of such requested registration to all other
holders of Warrants or Registrable Securities and thereupon the Company will use
its best efforts to effect the registration under the Securities Act of:
(i)the Registrable Securities which the Company has
been so requested to register by such holders, and
(ii) all other Registrable Securities which the
Company has been requested to register by such other holders of
Warrants or Registrable Securities by written request given to the
Company within 30 days after the giving of such written notice by the
Company (which request shall specify the number of shares of
Registrable Securities proposed to be
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sold by such holder or holders and the intended method of disposition
of such Registrable Securities), all to the extent necessary to permit
the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be registered.
(b) Registration of Other Securities. Whenever the Company
shall effect a registration pursuant to this Section 2.1 in connection with an
underwritten offering by one or more holders of Registrable Securities, no
securities other than Registrable Securities shall be included among the
securities covered by such registration unless (a) the managing underwriter of
such offering shall have advised each holder of Registrable Securities to be
covered by such registration (and each holder of Warrants therefor) in writing
that the inclusion of such other securities would not adversely affect such
offering or (b) the holders of all Registrable Securities to be covered by such
registration (and the holders of all Warrants therefor) shall have consented in
writing to the inclusion of such other securities.
(c) Registration Statement Form. Registrations under this
Section 2.1 shall be on such appropriate registration form of the Commission (i)
as shall be selected by the Company and as shall be reasonably acceptable to the
Requisite Holders and (ii) as shall permit the disposition of such Registrable
Securities in accordance with the intended method or methods of disposition
specified in their request for such registration. The Company agrees to include
in any such registration statement all information which holders of Registrable
Securities being registered (or holders of Warrants therefor) shall reasonably
request.
(d) Expenses. The Company will pay all Registration Expenses
in connection with any registration requested pursuant to this Section 2.1 if
such registration has been requested in relation to at least 66 2/3% (by number
of shares) of Registrable Securities; provided, however, that the Company shall
in all events and at all times be responsible for the fees and disbursements of
counsel for the Requisite Holders in connection with the rendering of opinions
requested by the Company or any underwriter. The Registration Expenses (and
underwriting discounts and commissions and transfer taxes, if any) in connection
with each other registration requested under this Section 2.1 shall be allocated
on a pro rata basis among all Persons on whose behalf securities of the Company
are included in such registration, in accordance with the amount of the
securities then being registered on behalf of each such Person.
(e) Effective Registration Statement. A registration requested
pursuant to this Section 2.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective, (ii)
if after it has become effective, such effectiveness has been suspended for one
or more periods that equal or exceed ten (10) Business Days in the aggregate by
the issuance of any stop order, injunction or other order or requirement of the
Commission or other governmental agency or court for any reason, or (iii) if the
conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with such registration are not satisfied.
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(f) Selection of Underwriters. If a requested registration
pursuant to this Section 2.1 involves an underwritten offering, the underwriter
or underwriters thereof shall be selected by the Company and shall be reasonably
satisfactory to the Requisite Holders.
(g) Priority in Requested Registrations. If a requested
registration pursuant to this Section 2.1 involves an underwritten offering, and
the managing underwriter shall advise the Company in writing (with a copy to
each holder of Warrants or Registrable Securities requesting registration) that,
in its opinion, the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering within a
price range acceptable to the Requisite Holders, the Company will include in
such registration to the extent of the number which the Company is so advised
can be sold in such offering Registrable Securities requested to be included in
such registration, pro rata among the holders of Registrable Securities (or
Warrants therefor) requesting such registration on the basis of the percentage
of such Registrable Securities held by or issuable to such holders. In
connection with any registration as to which the provisions of this subdivision
(g) apply, no securities other than Registrable Securities shall be covered by
such registrations.
The holders of Warrants or Registrable Securities shall be
entitled to no more than two requested registrations pursuant to this Section
2.1.
2.2 Incidental Registration.
(a) Right to Include Registrable Securities. If the Company at
any time proposes to register any of its securities under the Securities Act
(other than by a registration on Form S-4 or S-8 or any successor or similar
form and other than pursuant to Section 2.1), whether or not for sale for its
own account, it will each such time give prompt written notice to all holders of
Warrants or Registrable Securities of its intention to do so and of such
holders' rights under this Section 2.2. Upon the written request of any such
holder made within 30 days after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed of by such
holder and the intended method of disposition thereof), the Company will use its
best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the holders thereof, provided that if, at any time after giving written notice
of its intention to register any securities and prior to the effective date of
the registration statement filed in connection with such registration, the
Company shall determine for any reason not to register or to delay registration
of such securities, the Company may, at its election, give written notice of
such determination to each holder of Warrants or Registrable Securities and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any holder
or holders of Warrants or Registrable Securities entitled to do so to request
that such registration be effected as a registration under Section 2.1, and (ii)
in the case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under this Section
2.2 shall be deemed to
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have been effected pursuant to Section 2.1 or shall relieve the Company of its
obligation to effect any registration upon request under Section 2.1. The
Company will pay all Registration Expenses in connection with each registration
of Registrable Securities requested pursuant to this Section 2.2.
(b) Priority in Incidental Registrations. If (i) a
registration pursuant to this Section 2.2 involves an underwritten offering of
the securities so being registered, whether or not for sale for the account of
the Company, to be distributed (on a firm commitment basis) by or through one or
more underwriters of recognized standing under underwriting terms appropriate
for such a transaction, and (ii) the managing underwriter of such underwritten
offering shall inform by letter the Company and the holders of Warrants or
Registrable Securities requesting such registration of its belief that the
number of securities requested to be included in such registration exceeds the
number which can be sold in (or during the time of) such offering, then the
Company may include all securities proposed by the Company to be sold for its
own account and may decrease the number of Registrable Securities and other
securities of the Company so proposed to be sold and so requested to be included
in such registration (pro rata among the holders thereof on the basis of the
number of such Registrable Securities and other securities held by such holders
and requested to be included therein) to the extent necessary to reduce the
number of securities to be included in the registration to the level recommended
by the managing underwriter.
2.3 Registration Procedures. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 2.1 and 2.2, the
Company will as expeditiously as possible:
(i) prepare and (as soon thereafter as possible or in any
event no later than 90 days after the end of the period within which
requests for registration may be given to the Company) file with the
Commission the requisite registration statement to effect such
registration and thereafter use its best efforts to cause such
registration statement to become effective, provided that the Company
may discontinue any registration of its securities which are not
Registrable Securities (and, under the circumstances specified in
Section 2.2(a), its securities which are Registrable Securities) at any
time prior to the effective date of the registration statement relating
thereto;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
registration statement until such time as all of such securities have
been disposed of in accordance with the intended methods of disposition
by the seller or sellers thereof set forth in such registration
statement (which period shall not exceed 270 days from the date the
registration statement is declared effective unless the effectiveness
thereof is suspended for any reason);
(iii) furnish to each seller of Registrable Securities covered
by such registration statement such number of conformed copies of such
registration statement and of each such
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amendment and supplement thereto (in each case including all exhibits),
such number of copies of the prospectus contained in such registration
statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities
Act, and such other documents, as such seller may reasonably request;
(iv) use its best efforts to register or qualify all
Registrable Securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as each
seller thereof shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement
remains in effect, and take any other action which may be reasonably
necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities covered
by the registration statement, except that the Company shall not for
any such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it would not but for
the requirements of this subdivision (iv) be obligated to be so
qualified, to subject itself to taxation in any jurisdiction or to
consent to general service of process in any such jurisdiction where it
is not then so subject;
(v) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(vi) furnish to each seller of Registrable Securities and each
Requesting Holder a signed counterpart, addressed to such seller and
such Requesting Holder (and underwriters, if any) of:
(x) an opinion of counsel for the Company, dated the effective
date of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of
the closing under the underwriting agreement), reasonably
satisfactory in form and substance to such seller and such
Requesting Holder, and
(y) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten public offering, dated the date of the closing
under the underwriting agreement), signed by the independent
public accountants who have certified the Company's financial
statements included in such registration statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of the accountants' letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to
the underwriters in underwritten public offerings of securities and, in
the case of the accountants' letter, such other financial
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matters, and, in the case of the legal opinion, such other legal
matters, as such seller or such Requesting Holder, if any, may
reasonably request;
(vii) notify each seller of Registrable Securities covered by
such registration statement and each Requesting Holder, at any time
when a prospectus relating thereto is required to be delivered under
the Securities Act, upon discovery that, or upon the happening of any
event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were
made, and at the request of any such seller or Requesting Holder
promptly prepare and furnish to such seller or Requesting Holder 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 Registrable Securities, such prospectus shall not include
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which
they were made;
(viii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, but not more
than eighteen months, beginning with the end of the fiscal quarter
after the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act, and will furnish to each such seller at least five
business days prior to the filing thereof a copy of any amendment or
supplement to such registration statement or prospectus and shall not
file any thereof to which any such seller shall have reasonably
objected on the grounds that such amendment or supplement does not
comply in all material respects with the requirements of the Securities
Act or of the rules or regulations thereunder;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of
such registration statement;
(x) use its best efforts to cause all Registrable Securities
covered by such registration statement to be listed on any securities
exchange on which any of the Registrable Securities are then listed or
to be quoted by the Nasdaq National Market (or any successor thereto or
any comparable system) on which any of the Registrable Securities are
then quoted; and
(xi) enter into such agreements and take such other actions as
the Requisite Holders shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities.
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The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in the subdivision (vii) of this
Section 2.3, such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
Section 2.3 or until it is advised in writing (the "Advice") by the Company that
the use of the prospectus may be resumed, and, if so directed by the Company,
such holders will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such holders' possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice. In the event the Company shall give any such notice to suspend
the offering and disposition of the Registrable Securities (including, without
limitation, pursuant to the next paragraph hereof), the time periods regarding
the maintenance of the applicable registration statement shall be extended by
the number of days during the period from and including the date of the giving
of such notice pursuant to subdivision (vii) of this Section 2.3 and including
the date when such holders shall have received the copies of the supplemented or
amended prospectus contemplated by subdivision (vii) of this Section 2.3 or the
Advice.
Notwithstanding the foregoing, (a) the Company may delay the filing of
any registration statement, any amendment thereof or any supplement to the
related prospectus, and may withhold efforts to cause any registration statement
to become effective, and (b) in the case of an effective registration statement,
upon the written request of the Company the holders of Registrable Securities
participating in such registration shall refrain from selling any shares
pursuant to such registration statement, if (i) the Company determines in good
faith that such registration or sale would (A) materially interfere with or
adversely affect in any material respect the negotiation or completion of any
material transaction that is being contemplated by the Company at the time the
right to delay is exercised or a request is made or (B) involve initial or
continuing disclosure obligations not otherwise required by law or the rules and
regulations of the Commission, which disclosure would have a material adverse
effect on the Company or (ii) in the written opinion of a nationally recognized
investment bank, that the Company is unable to consummate an underwritten
offering due to then currently prevailing market conditions; provided however,
that the duration of any such delay or period in which shares of Registrable
Securities may not be sold pursuant to an effective registration statement shall
not exceed a period of 90 days.
2.4 Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offering of Registrable Securities pursuant to
a registration requested under Section 2.1, the Company will enter into an
underwriting agreement with such underwriters for such offering, such agreement
to be reasonably satisfactory in substance and form to each holder of such
Registrable
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Securities (or Warrants therefor) and the underwriters and to contain such
representations and warranties by the Company and such other terms as are
generally customary in agreements of this type, including, without limitation,
indemnities to the effect and to the extent provided in Section 2.7. The holders
of Registrable Securities to be distributed by such underwriters shall be
parties to such underwriting agreement and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of such holders of Registrable Securities and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of such holders of Registrable Securities. Any such holder of
Registrable Securities shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such holder, such holder's
Registrable Securities and such holder's intended method of distribution and any
other representation required by law.
(b) Incidental Underwritten Offerings. If the Company at any
time proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any holder
of Warrants or Registrable Securities as provided in Section 2.2 and subject to
the provisions of Section 2.2(b), arrange for such underwriters to include all
the Registrable Securities to be offered and sold by such holder among the
securities to be distributed by such underwriters. The holders of Registrable
Securities to be distributed by such underwriters shall be parties to the
underwriting agreement between the Company and such underwriters and may, at
their option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. Any such
holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
holder, such holder's Registrable Securities and such holder's intended method
of distribution and any other representation required by law.
2.5 Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement (or the holders of
Warrants therefor), their underwriters, if any, and their respective counsel and
accountants, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the opinion of such holders' and such underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act;
provided, however, that such holder shall, if requested by the Company, cause
its
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counsel and accountants to execute confidentiality agreements in customary form
and such holder shall, consistent with its customary practices, use its best
efforts to keep confidential any records, information or documents that are
designated by the Company in writing as confidential, except that such records,
information and documents may be disclosed by such holder to (i) such holder's
directors, officers, employees, agents and professional consultants, (ii) any
other holder of any Registrable Security, (iii) any Person to which such holder
offers to sell Registrable Securities or any part thereof, (iv) any Person from
which such holder offers to purchase any other security of the Company, (v) any
federal or state regulatory authority having jurisdiction over such holder, (vi)
the National Association of Insurance Commissioners or any similar organization,
or (vii) any other Person to which such delivery or disclosure may be necessary
or appropriate (a) in compliance with any law, rule, regulation or order
applicable to such holder, (b) in response to any subpoena or other legal
process or other investigative demand, or (c) in connection with any litigation
to which such holder is a party; provided, further that such holder shall cause
the agents and professional consultants referred to in clause (i) and the
Persons referred to in clauses (iii) and (iv) to enter into confidentiality
agreements which shall contain provisions substantially identical to those
applicable to such holders under this Section 2.5.
2.6 Rights of Requesting Holders. The Company will not file
any registration statement under the Securities Act, unless it shall first have
given to all holders of Warrants or Registrable Securities at least 30 days
prior written notice thereof and, if so requested by the Requisite Holders,
shall have consulted with such holders concerning the selection of underwriters,
counsel and independent accountants for the Company for such offering and
registration. If such holders shall so request within 30 days after such notice,
each of them shall be a "Requesting Holder" hereunder and shall have the rights
of a Requesting Holder provided in this section 2.6 and in sections 2.3, 2.5 and
2.7. The Company further covenants that a Requesting Holder shall have the right
(a) to participate in the preparation of any such registration or comparable
statement and to require the insertion therein of material furnished to the
Company in writing, which in such Requesting Holder's judgment, reasonable
exercised, should be included, and (b) at the Company's expense, to retain
counsel and/or independent public accountants to assist such Requesting Holder
in such participation. In addition, if any such registration statement refers to
any Requesting Holder by name or otherwise as the holder of any securities of
the Company, then such Requesting Holder shall have the right to require (a) the
insertion therein of language, in form and substance satisfactory to such
Requesting Holder, to the effect that the holding by such Requesting Holder of
such securities does not necessarily make such Requesting Holder a "controlling
person" of the Company within the meaning of the Securities Act and is not to be
construed as a recommendation by such Requesting Holder of the investment
quality of the Company's debt or equity securities covered thereby and that such
holding does not imply that such Requesting Holder will assist in meeting any
future financial requirements of the Company, or (b) in the event that such
reference to such Requesting Holder by name or otherwise is not required by the
Securities Act or any rules and regulations promulgated thereunder, the deletion
of the reference to such Requesting Holder.
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2.7 Indemnification.
(a) Indemnification by the Company. The Company will, and
hereby does, in the case of any registration statement filed pursuant to Section
2.1 or 2.2 indemnify and hold harmless the seller of any Registrable Securities
covered by such registration statement, its directors and officers, each other
Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such seller or any such
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller or any
such director or officer or underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Securities were registered under the Securities
Act, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any other
noncompliance or alleged noncompliance with the Securities Act or the applicable
underwriting agreement, and the Company will reimburse such seller and each such
director, officer, underwriter and controlling person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by such seller
specifically stating that it is for use in the preparation thereof and, provided
further that the Company shall not be liable to any Person who participates as
an underwriter, in the offering or sale of Registrable Securities or any other
Person, if any, who controls such underwriter within the meaning of the
Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such Person's failure to send or give a copy of the final prospectus, as
the same may be then supplemented or amended, to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director, officer,
underwriter or controlling person and shall survive the transfer of such
Registrable Securities by such seller.
(b) Indemnification by the Sellers. The Company may require,
as a condition to including any Registrable Securities in any registration
statement filed pursuant to Section 2.3, that the Company shall have received an
undertaking satisfactory to it from the prospective seller of such Registrable
Securities, to indemnify and hold harmless (in the same manner and to the same
extent as set forth in subdivision (a) of this Section 2.7) the Company, each
director of the Company, each
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officer of the Company and each other Person, if any, who controls the Company
within the meaning of the Securities Act, with respect to any statement or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company through an
instrument duly executed by such seller specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. Such indemnity shall
remain in full force and effect, regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling Person and
shall survive the transfer of such securities by such seller.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 2.7,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 2.7, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, 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 the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) Other Indemnification. Indemnification similar to that
specified in the preceding subdivisions of this Section 2.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority other than the Securities Act.
(e) Indemnification Payments. The indemnification required by
this Section 2.7 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense as and when bills are received or
expense, loss, damage or liability is incurred.
2.8 Adjustments Affecting Registrable Securities. The
Company will not effect or permit to occur any combination or subdivision of
shares which would adversely affect the ability
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of the holders of Registrable Securities or Warrants therefor to include such
Registrable Securities in any registration of its securities contemplated by
this Section 2 or the marketability of such Registrable Securities under any
such registration.
3. Definitions. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:
Commission: The Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
Common Stock: As defined in Section 1.
Company: As defined in the introductory paragraph of this
Agreement.
Exchange Act: The Securities Exchange Act of 1934, or any
similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of
1934 shall include a reference to the comparable section, if any, of
any such similar Federal statute.
Person: A corporation, an association, a partnership, a
business, a joint venture, a limited liability company, an individual,
a governmental or political subdivision thereof or a governmental
agency.
Purchase Agreement: As defined in Section 1.
Purchaser: As defined in the introductory paragraph of this
Agreement.
Registrable Securities: (a) Any shares of Common Stock issued
or issuable upon exercise of any of the Warrants and (b) any securities
issued or issuable with respect to any such Common Stock by way of
stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization
or otherwise. As to any particular Registrable Securities, once issued
such securities shall cease to be Registrable Securities when (a) a
registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such
registration statement, (b) they shall have been sold pursuant to Rule
144 (or any successor provision) under the Securities Act, (c) they
shall have been otherwise transferred, new certificates for them not
bearing a legend restricting further transfer shall have been delivered
by the Company and subsequent disposition of them shall not require
registration or qualification of them under the Securities Act or any
similar state law then in force, or (d) they shall have ceased to be
outstanding.
Registration Expenses: All expenses incident to the Company's
performance of or compliance with Section 2, including, without
limitation, all registration, filing and National
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Association of Securities Dealers fees, all fees and expenses of
complying with securities or blue sky laws, all word processing,
duplicating and printing expenses, messenger and delivery expenses, the
fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any special
audits or "cold comfort" letters required by or incident to such
performance and compliance, the fees and disbursements incurred by the
holders of Registrable Securities to be registered and the holders of
Warrants therefor (including the fees and disbursements of any counsel
and accountants retained by the Requisite Holders), premiums and other
costs of policies of insurance against liabilities arising out of the
public offering of the Registrable Securities being registered and any
fees and disbursements of underwriters customarily paid by issuers or
sellers of securities, but excluding underwriting discounts and
commissions and transfer taxes, if any, provided that, in any case
where Registration Expenses are not to be borne by the Company, such
expenses shall not include salaries of Company personnel or general
overhead expenses of the Company, auditing fees, premiums or other
expenses relating to liability insurance required by underwriters of
the Company or other expenses for the preparation of financial
statements or other data normally prepared by the Company in the
ordinary course of its business or which the Company would have
incurred in any event.
Requesting Holder: As defined in Section 2.6.
Requisite Holders: With respect to any registration of
Registrable Securities by the Company pursuant to Section 2, any holder
or holders of 66 2/3% (by number of shares) of the Registrable
Securities to be so registered or of Warrants for such Registrable
Securities.
Securities Act: The Securities Act of 1933, or any similar
Federal statute, and the rules and regulations of the Commission
thereunder, all as of the same shall be in effect at the time.
References to a particular section of the Securities Act of 1933 shall
include a reference to the comparable section, if any, of any such
similar Federal Statute.
4. Rule 144: If the Company shall have filed a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act, the Company will
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the Commission thereunder
(or, if the Company is not required to file such reports, will, upon the request
of any holder of Warrants or Registrable Securities, make publicly available
other information) and will take such further action as any holder of Warrants
or Registrable Securities may reasonably request, all to the extent required
from time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time or (b) any similar rule or regulation hereafter adopted by the
Commission. Upon the request of any holder of Warrants or Registrable
Securities, the Company will deliver to such holder a written statement as to
whether it has complied with such requirements.
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5. Amendments and Waivers. This Agreement may be amended and the
Company may take any action herein prohibited or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the Requisite
Holders. Each holder of any Warrants or Registrable Securities at the time or
thereafter outstanding shall be bound by any consent authorized by this Section
5, whether or not such Registrable Securities shall have been marked to indicate
such consent.
6. Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Warrants or Registrable Securities for purposes of any request or other action
by any holder or holders of Warrants or Registrable Securities pursuant to this
Agreement or any determination of any number or percentage of shares of Warrants
or Registrable Securities held by any holder or holders of Warrants or
Registrable Securities contemplated by this Agreement. If the beneficial owner
of any Warrants or Registrable Securities so elects, the Company may require
assurances reasonably satisfactory to it of such owner's beneficial ownership of
such Warrants or Registrable Securities.
7. Notices. All communications provided for hereunder shall be sent by
first-class mail and (a) if addressed to a party other than the Company,
addressed to such party in the manner set forth in the Purchase Agreement, or at
such other address as such party shall have furnished to the Company in writing,
or (b) if addressed to the Company, at 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000,
Xxxxxx, Xxxxxxxx 00000 Attention: Legal Department, or at such other address, or
to the attention of such other officer, as the Company shall have furnished to
each holder of Warrants or Registrable Securities at the time outstanding;
provided, however, that any such communication to the Company may also, at the
option of any of the parties hereunder, be either delivered to the Company at
its address set forth above or to any officer of the Company.
8. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns. In addition, and whether or not any express assignment
shall have been made, the provisions of this Agreement which are for the benefit
of the parties hereto other than the Company shall also be for the benefit of
and enforceable by any subsequent holder of any Warrants or Registrable
Securities, subject to the provisions respecting the minimum numbers or
percentages of shares of Warrants or Registrable Securities required in order to
be entitled to certain rights, or take certain actions contained herein.
9. Descriptive Headings. The descriptive headings of the several
sections and subdivisions of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
10. Specific Performance. The parties hereto recognize and agree that
money damages may be insufficient to compensate the holders of any Warrants or
Registrable Securities for breaches by the Company of the terms hereof and,
consequently, that the equitable remedy of specific performance of the terms
hereof will be available in the event of any such breach.
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11. Governing Law. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York.
12. Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
HALLWOOD ENERGY CORPORATION
By: /s/ Xxxxxxxx X. Xxxxxx
Name: Xxxxxxxx X. Xxxxxx
Title: Vice President
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Xxx Xxxx
Name: Xxx Xxxx
Title: Vice President
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