STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of April 29, 1999 between Comstock
Resources, Inc., a Nevada corporation (the "Company"), and TCW DEBT AND ROYALTY
FUND VI, L.P., a California limited partnership ("Fund VI"); TCW DEBT AND
ROYALTY FUND VIB, L.P., a California limited partnership ("Fund VIB"); TRUST
COMPANY OF THE WEST, a California trust company ("Trustco"), in its capacity as
Investment Manager pursuant to the Investment Management Agreement dated as of
June 6, 1988 between General Mills, Inc. and Trustco and as Custodian pursuant
to the Custody Agreement dated as of February 6, 1989 among General Mills, Inc.,
Trustco and State Street Bank and Trust Company, as trustee; TCW ASSET
MANAGEMENT COMPANY, a California corporation ("Tamco"), as Investment Manager
pursuant to the Investment Management Agreement dated as of July 7, 1997 between
Morgan Stanley Asset Management Inc. as Fiduciary Advisor on behalf of, inter
alia, Eugenia III Investment Holdings Limited and Tamco as amended by amendment
dated as of October 15, 1998 between Bessemer Trust Company, N.A., in the
capacity discussed therein, and Tamco; Tamco, as Investment Manager pursuant to
the Investment Management and Custody Agreement dated as of May 19, 1997 between
Allmerica Asset Management, Inc. as agent for First Allmerica Financial Life
Insurance Company, Tamco and Trustco; Tamco as Investment Manager pursuant to
the Investment Management and Custody Agreement dated as of October 27, 1997
between University of Chicago, Tamco and Trustco; Tamco, as Investment Manager
pursuant to the Investment Management and Custodian Agreement dated as of
October 27, 1997 between University of Notre Dame du Lac, Tamco and Trustco;
Tamco, as Investment Manager dated as of October 24, 1997 between William N.
Pennington Separate Property Trust dated January 1, 1991, Tamco and Trustco;
Tamco, as Investment Manager pursuant to the Investment Management Agreement
dated as of October 27, 1997 between Delta Air Lines, Inc., Tamco and Trustco;
Pacific Life Insurance Company, a California stock insurer ("Pacific"); and
Aquila Energy Capital Corporation, a Delaware corporation ("Aquila"). (Trustco
and Tamco, in the respective capacities designated above, Fund VI and Fund VIB
are hereinafter collectively referred to as "TCW"; TCW, Pacific and Aquila are
hereinafter collectively referred to as "Purchasers"). In consideration of the
mutual promises, representations, warranties, covenants, conditions and
agreements contained herein, the parties hereto, intending to be legally bound
by the terms hereof, agree as follows:
TCW, on behalf of each of the TCW related parties set forth on
Schedule A hereto (together with their successors and assigns, the "TCW
Holders"), Pacific (together with its successors and assigns, "Pacific
Holders"), and Aquila (together with its successors and assigns, the "Aquila
Holders", collectively with the TCW Holders and the Pacific Holders, the
"Holders") hereby subscribe for an aggregate of 1,948,001 shares of the
Company's Series A 1999 Convertible Preferred Stock and 1,051,999 shares of
Series B 1999 Non-Convertible Preferred Stock (the "Series B Preferred Shares"),
$10.00 par value per share (collectively, the "Preferred Stock"), at a purchase
price of $10.00 per share, with the rights, restrictions, preferences and
privileges as stated in the Certificate of Designation with respect to the
Preferred Stock attached hereto as Exhibit A (the "Certificate of Designation")
and as provided by law. As used herein, "Series A Preferred Shares" shall mean
the shares of the Company's Series A 1999 Convertible Preferred Stock subscribed
to by Purchasers on behalf of the parties set forth on Schedule A attached
hereto and such shares of the Company's Series A 1999 Convertible Preferred, if
any, as shall be issued by the Company in exchange for the Series B Preferred
Shares in the event that the Company converts the Series B Preferred Shares
pursuant to the terms of the Certificate of Designation and Articles of
Incorporation of the Company (the "Series B Conversion Shares") and "Preferred
Shares" shall mean the Series A Preferred Shares and the Series B Preferred
Shares collectively. The Series A Preferred Shares are convertible into, and the
Preferred Shares are redeemable for, and dividends on the Preferred Shares may
be payable in, shares of the Company's common stock, $0.50 par value per share
(the "Common Stock"), as stated in the Certificate of Designation. Accordingly,
the parties hereto agree as follows:
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SECTION 1. DEFINITIONS
As used herein, the following terms shall have the following meanings.
"Actual Directors" shall have the meaning set forth in Section 5.8.
"Affiliate" shall mean, with respect to a specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person and, with respect to any fund
or trust, any Person which is a participant in or beneficiary of such fund or
trust. For purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. Notwithstanding the foregoing provisions of this
definition in no event shall any Holder (or any Affiliate thereof) be deemed to
be an Affiliate of the Company.
"Articles of Incorporation" shall mean the Restated Articles of
Incorporation of the Company, as amended and in effect on the date hereof and as
at any time hereafter amended or otherwise modified.
"Available Director Seats" shall have the meaning set forth in Section
5.8.
"Commission" shall mean the Securities and Exchange Commission or any
other similar or successor agency of the federal government administering the
Securities Act.
"Common Shares" means the Dividend Shares and the Conversion Shares.
"Controlling Person" shall have the meaning defined in Section 4.8.
"Conversion Shares" shall mean the shares of Common Stock into which
the Series A Preferred Shares are convertible or converted at the option of the
Holders.
"Dividend Shares" shall mean the shares of Common Stock for which the
Preferred Shares are redeemed or in which dividends on the Preferred Shares are
paid.
"Indemnitee" and "Indemnitor" shall have the meanings defined in
Section 4.8.
"Permitted Transferee" shall have the meaning set forth in the
introductory paragraph of Section 4 hereof.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, limited liability company,
unincorporated organization or government or agency or political subdivision
thereof.
"Piggy Back Right" shall have the meaning defined in Section 4.3.
"Requisite Holders" shall mean the holders of Preferred Shares and
Conversion Shares representing at least 80% of the Conversion Shares.
"Restricted Certificate" shall mean a certificate for Preferred Shares
or Conversion Shares bearing the restrictive legend set forth in Section 4.1.
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"Restricted Securities" shall mean Preferred Shares or Conversion
Shares evidenced by a Restricted Certificate and the Dividend Shares.
"Securities Act" shall mean the Securities Act of 1933, as amended, 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.
"Shelf Registration Statement" shall have the meaning set forth in
Section 4.5.
"Seller" shall mean a holder of Restricted Securities for which the
Company shall be required to file a registration statement or which shall be
registered under the Securities Act pursuant to any of the provisions of Section
4. Neither the Company nor any Affiliate of the Company shall be deemed a
"Seller" for any purposes of this Agreement.
"Transfer" shall mean any sale, transfer or other disposition of any
Restricted Securities, or of any interest in any thereof, which would constitute
an offer or sale thereof within the meaning of the Securities Act.
SECTION 2. PURCHASE AND SALE OF SECURITIES
2.1. Authorization and Issuance of Preferred Shares and Conversion
Shares. The Company has authorized: (a) the issue of one or more certificates
for issuance to the Holders pursuant to this Agreement, and (b) the issue of
such number of Conversion Shares, Series B Conversion Shares and Dividend Shares
as will permit the compliance by the Company with its obligations to issue
Conversion Shares or at its option to issue Series B Conversion Shares and
Dividend Shares pursuant to the Articles of Incorporation and Certificate of
Designation.
2.2. The Closing. Subject to the conditions set forth in Section
3.1.7, the Company hereby agrees to issue to each Holder, and each Holder hereby
agrees to purchase, the number of shares of Preferred Stock set out opposite
such Holder's name on Schedule A attached hereto, at a purchase price of $10.00
per share. The Company will deliver to each Holder certificates for such number
of Preferred Shares, registered in the name of such Holder, except that, if any
such Holder shall notify the Company in writing prior to such issuance that it
desires certificates for Preferred Shares to be issued in other denominations or
registered in the name or names of any Person or Persons referred to in the
proviso at the end of the first sentence of Section 4 or any nominee or nominees
for its or their benefit, then the certificates for Preferred Shares shall be
issued to such Holder in the denominations and registered in the name or names
specified in such notice.
2.3. Purchase for Holder's Account. Each Holder represents and
warrants to the Company that such Holder is purchasing and will purchase the
Preferred Shares as of the date hereof solely for investment purposes, for its
own account, with no present intention of distributing or reselling the
Preferred Shares, the Conversion Shares or the Dividend Shares or any part
thereof in violation of applicable securities laws, and that such Holder is
prepared to bear the economic risk of retaining the Preferred Shares, the
Conversion Shares and the Dividend Shares for an indefinite period, all without
prejudice, however, to the right of such Holder at any time, in accordance with
this Agreement, lawfully to sell or otherwise dispose of all or any part of the
Preferred Shares, the Conversion Shares or the Dividend Shares held by it. It is
understood that, in making the representations set forth in Section 3.1, 3.2 and
3.3, the Company is relying, to the extent applicable, upon the representations
and warranties of each such Holder. Each Holder represents and warrants that it
is an accredited investor, as such term is defined in Rule 501 of Regulation D
promulgated under the Securities Act.
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2.4. Compliance. Further in reliance upon the representations and
warranties of each Holder in Section 2.3, the Company has not registered the
Preferred Shares, the Dividend Shares or the Conversion Shares under the
Securities Act and each Holder agrees that none of the Preferred Shares, the
Dividend Shares or the Conversion Shares will be sold or offered for sale
without registration under said Act or the availability of an exemption
therefrom or if said Act is not applicable, all as more fully provided in
Section 4, nor in violation of any other law of the United States of America or
any state.
2.5. Expenses. Whether or not the Preferred Shares are sold to any
Holder, the Company will pay all costs and expenses incurred by the Holders (a)
relating to the negotiation, execution and delivery of this Agreement and the
issuance of the Preferred Shares (including, without limitation, reasonable
fees, office charges and expenses of Milbank, Tweed, Hadley & McCloy, counsel to
certain of the Holders and $25,000 to TCW for its other out-of-pocket costs),
(b) provided for in Sections 4.7, 4.8, 5.1 and 5.2, (c) relating to printing the
instruments evidencing the Preferred Shares or the Common Shares, (d) expenses
relating to any amendments, waivers or consents under this Agreement and (e)
incident to the enforcement by any Holder of, or the protection or preservation
of any right or remedy of any Holder under, this Agreement, the Articles of
Incorporation or any other agreement furnished pursuant hereto or thereto or in
connection herewith or therewith (including, without limitation, fees and
expenses of counsel). The Company shall pay such costs and expenses, to the
extent then payable, on the date of issuance of the Preferred Shares and
thereafter from time to time upon demand by any Holder against presentation, in
each such case, of a statement thereof.
2.6. Conversion Option. The Company will have the option, at any time,
to convert the Preferred Shares, on the same terms and conditions set forth
herein, to convertible subordinated debt of the Company, provided that all of
the following conditions are satisfied: (i) the Company shall have delivered to
the Holders all necessary approvals, subordination agreements and other
documentation, in form and substance satisfactory to Purchasers in their sole
and absolute discretion, required in connection with such conversion (which will
provide for an increase in the number of demand registrations, the reasonable
costs and expenses of which shall be payable by the Company, to a number
acceptable to Purchasers in their sole and absolute discretion) and (ii) the
Holders shall have received an opinion of counsel to the Company (a) that such
conversion neither breaches nor violates any existing agreement to which the
Company is a party or any other obligation of the Company, (b) such conversion
shall not cause an adjustment in the conversion price, option price or exercise
price in any convertible security issued by the Company, and (c) such other
matters as Purchasers may request.
SECTION 3. WARRANTIES, REPRESENTATIONS AND COVENANTS OF THE COMPANY
The Company hereby represents, warrants and covenants to each Holder
that as of the date of the Company's execution of this Agreement:
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3.1. Sale is Legal, etc.
3.1.1. Upon the issuance of the Preferred Shares under this Agreement,
the total number of shares of capital stock which the Company has authority to
issue is 55,000,000 shares, consisting of 50,000,000 shares of Common Stock and
5,000,000 shares of Preferred Stock. The Company has the power and authority and
has taken all actions (corporate or other) necessary to authorize it to enter
into and perform its obligations and undertakings under this Agreement.
Immediately prior to the issuance of the Preferred Shares under this Agreement,
24,350,452 shares of Common Stock will be issued and outstanding. Upon the
issuance of the Preferred Shares under this Agreement, the Company does not have
outstanding any stock or securities convertible into or exchangeable for any
shares of capital stock nor does it have outstanding any rights to subscribe for
or to purchase, or any options for the purchase of, or any agreements providing
for the issuance (contingent or otherwise) of, or any calls, commitments or
claims of any character relating to, any capital stock or stock or securities
convertible into or exchangeable for any capital stock other than (i) the
Preferred Shares to be issued pursuant to this Agreement, and (ii) options and
warrants to purchase an aggregate of 5,111,030 shares of Common Stock as set
forth on Schedule 3.1.1 hereto.
3.1.2. The Preferred Shares will, when issued, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges.
3.1.3. The Company will at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
the conversion of the Series A Preferred Shares, such number of Conversion
Shares issuable upon the conversion of all outstanding Series A Preferred
Shares. All Conversion Shares, Series B Conversion Shares and Dividend Shares
will, when issued, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges. The Company will take all such actions
as may be necessary to assure that all Conversion Shares, Series B Conversion
Shares and Dividend Shares may be so issued without violation of any applicable
law or governmental regulation or any requirements of any domestic securities
exchange or national market upon which the Conversion Shares and Dividend Shares
may be listed.
3.1.4. None of the execution and delivery of this Agreement, or the
issue and sale of the Preferred Shares, the Conversion Shares and the Dividend
Shares, or the consummation of the transactions herein or therein contemplated
or compliance with the terms and provisions hereof and thereof will conflict
with or result in a breach of, or require any consent under, the Articles of
Incorporation of the Company, or any applicable law or regulation, or any order,
writ, injunction or decree of any court or governmental authority or agency
(other than filings which will be made by the Company as required by applicable
state securities laws), or any agreement or instrument to which the Company is a
party or by which it is bound or to which it is subject, or constitute a default
under any such agreement or instrument, or result in the creation or imposition
of any lien upon any of the revenues or assets of the Company pursuant to the
terms of any such agreement or instrument.
3.1.5. There is not in effect on the date hereof any agreement by the
Company (other than this Agreement) pursuant to which any holders of securities
of the Company have a right to cause the Company to register such securities
under the Securities Act other than as set forth on Schedule 3.1.5 hereto.
3.1.6. The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Nevada and has the
corporate power and authority to execute and deliver this Agreement, the
Preferred Shares, the Conversion Shares and the Dividend Shares and to perform
the terms hereof and thereof. The Company has taken all action necessary to
authorize the execution, delivery and performance of this Agreement, the
issuance of the Preferred Shares, the Conversion Shares and the Dividend Shares.
This Agreement has been duly authorized and executed and constitutes the legal,
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valid and binding obligations of the Company, enforceable against the Company in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable principles
relating to or limiting creditors' rights generally.
3.1.7. As a condition to the obligations of the Holders hereunder and
prior to the issuance of the Preferred Shares subscribed for by Purchasers on
behalf of the parties to this Agreement listed on Schedule A, the Company shall
have delivered to the Holders (in form and substance satisfactory to Holders and
their counsel):
(a) a certificate, dated the date hereof, of the Secretary
or an Assistant Secretary of the Company, (A) attaching a true and
complete copy of the resolutions of the Board of Directors of the
Company, and of all documents evidencing other necessary corporate or
shareholder action (in form and substance satisfactory to the Holders
and to their counsel) taken by the Company in connection with the
matters contemplated by this Agreement, (B) attaching a true and
complete copy of the Articles of Incorporation and by-laws of the
Company and each of its subsidiaries and (C) setting forth the
incumbency of the officer or officers of the Company who sign this
Agreement, any document delivered by the Company pursuant hereto and
each certificate for the Preferred Shares, including therein a
signature specimen of such officer or officers;
(b) certificates of good standing (including tax status, if
applicable) of the Company and each of its subsidiaries under the laws
of their respective states of incorporation and as foreign
corporations in every state in which they own property or conduct
business;
(c) an opinion of Locke Liddell & Sapp LLP in the form
attached hereto as Exhibit B;
(d) a copy of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998, which report shall contain
audited financial statements of the Company for such fiscal year
prepared in accordance with generally accepted accounting principles
which fairly present the information included therein, accompanied by
an opinion of the Company's certified public accountants;
(e) such other documents and evidence relating to the
matters contemplated by this Agreement as the Holders or their counsel
shall reasonably require, including without limitation, evidence that
(i) the Company has sufficient authorized and reserved shares of
Common Stock on the date hereof to meet the Company's obligations
herein and in the Certificate of Designation and (ii) the Rights
Agreement between the Company and American Stock Transfer and Trust
Company, as successor Rights Agent, dated December 10, 1990, as the
same may be amended from time to time (the "Rights Agreement"), has
been amended to exclude the Preferred Shares, the Conversion Shares,
the Dividend Shares and the Holders thereof, under certain
circumstances, from the definitions of "Acquiring Person" or "Adverse
Person" under such Rights Agreement;
(f) a fully executed copy of the Credit Agreement,
substantially in the form of Exhibit D attached hereto (the "Credit
Agreement"), dated as of April 29, 1999, between, on the one hand, the
Company and certain of its subsidiaries, and, on the other hand, the
banks party thereto, The First National Bank of Chicago, as
administrative agent, and Toronto Dominion (Texas), Inc., as
syndication agent (as amended, the "Credit Agreement") and such other
documents delivered pursuant thereto as requested by the Purchasers;
and
(g) evidence that the Company has consummated the sale of
$150,000,000 of the Company's senior unsecured notes on the terms set
forth in Exhibit E attached hereto (the "Notes").
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3.2. Governmental Consent. Other than filings required by applicable
state securities laws which shall be made by the Company, neither the nature of
the Company or of any its subsidiaries, or of any of their respective businesses
or properties, nor any relationship between the Company or any subsidiary and
any other Person, nor (except as expressly provided for in this Agreement) any
circumstance in connection with the offer, issue or sale of the Preferred
Shares, the Conversion Shares and the Dividend Shares is such as to require
consent, approval or authorization of, or filing, registration or qualification
with, any governmental authority on the part of the Company as a condition to
the execution and delivery of this Agreement or the execution and filing of the
Certificate of Designation or any amendment of the Articles of Incorporation
required in connection with the authorization, offer, sale and/or issuance of
the Preferred Shares, the Conversion Shares or the Dividend Shares.
3.3. Private Offering. Neither the Company nor any other Person acting
on behalf of the Company has offered any of the Preferred Shares or any similar
securities of the Company for sale to, or solicited offers to buy any thereof
from, or otherwise approached or negotiated with respect thereto with any
prospective purchasers who are not accredited investors, as defined in Rule 501
of Regulation D promulgated under the Securities Act. The Company agrees that
neither the Company nor anyone acting on its behalf has offered or will offer
the Preferred Shares or any part thereof or any similar securities for issue or
sale to, or has solicited or will solicit any offer to acquire any of the same
from, anyone so as to bring the issuance and sale of the Preferred Shares within
the provisions of Section 5 of the Securities Act. Based in part on the
representations of the Holders set forth herein, the offer, sale and issuance of
the Preferred Shares in conformity with the terms of this Agreement are exempt
from the registration requirements of the Securities Act and any applicable
state securities laws.
3.4. Litigation. There is no action, suit, proceeding or investigation
pending or currently threatened against the Company that questions the validity
of this Agreement or the Company's right to enter into this Agreement, or to
consummate the transactions contemplated hereby or which, if decided in a manner
adverse to the Company, would have a material adverse effect on the Company or
on any of its subsidiaries or the ability of the Company to consummate the
transactions contemplated hereby.
3.5. No Material Misstatements. No representation, warranty, or
statement by Company in this Agreement or in any written statement or
certificate furnished or to be furnished to the Holders pursuant to this
Agreement contains any untrue statement of a material fact or, when taken
together, omits a material fact necessary to make the statements made herein or
therein not misleading.
3.6. Ownership of Subsidiaries. The Company has good and marketable
title to all the outstanding stock of each of its subsidiaries free and clear of
all liens other than as set forth on Schedule 3.6 hereof. None of the Company's
subsidiaries have outstanding (i) any stock or securities convertible into or
exchangeable for any shares of capital stock or (ii) any rights to subscribe for
or to purchase, or any options for the purchase of, or any agreements providing
for the issuance (contingent or otherwise) of, or any calls, commitments or
claims of any character relating to any capital stock or stock or securities.
3.7. Material Adverse Change. There has been no material adverse
change in the business, prospects or financial standing of the Company since the
filing of the Company's most recent Annual Report on Form 10-K.
SECTION 4. RESTRICTIONS ON TRANSFERABILITY; REGISTRATION RIGHTS
The Restricted Securities shall not be transferable except upon the
conditions specified in this Section 4; provided that, notwithstanding any other
provisions of this Section 4, each Holder (and each other Person mentioned below
in this clause) shall have the right to transfer any Restricted Securities to
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any Affiliate, fund participant, trust beneficiary, or limited partner of such
Holder, any party to any investment management or other similar agreement with
Trustco or Tamco, any fund, foundation, trust or other Person for whose benefit
any such agreement with Trustco or Tamco relates or any trustee, custodian or
nominee of or for any such Person (each a "Permitted Transferee"). Each such
transferee shall be subject to the same transfer restrictions imposed on the
Holders by this Agreement. All rights and obligations of the Holders set forth
in this Section 4 will inure to the benefit of and be binding upon any
transferee of the Restricted Securities.
4.1. Restrictive Legend. Unless and until otherwise permitted by this
Section 4, each certificate for Preferred Shares issued under this Agreement,
each certificate for any Preferred Shares issued to any subsequent transferee of
any such certificate, each certificate for any Conversion Shares issued upon
exercise of any Preferred Shares and each certificate for any Conversion Shares
issued to any subsequent transferee of any such certificate, shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"The shares evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended, and may be reoffered and sold only
if registered pursuant to the provisions of said Securities Act or if an
exemption from registration is available."
4.2. Notice of Proposed Transfers. Prior to any transfer or attempted
transfer of any Restricted Securities not subject to an effective registration
statement and not covered by the proviso contained in the introductory paragraph
to Section 4, the holder of such Restricted Certificate shall give written
notice to the Company of such holder's intention to effect such transfer. Each
such notice (i) shall describe the manner and circumstances of the proposed
transfer in sufficient detail, and shall contain an undertaking by the Person
giving such notice to furnish such other information as may be required, to
enable counsel to render the opinions referred to below, and (ii) shall
designate the counsel for the Person giving such notice. Except as otherwise set
forth herein, such Person shall obtain the services of counsel described below
at its own expense. The Person giving such notice shall submit a copy thereof to
the counsel designated in such notice. If in the opinion of such counsel, which
is reasonably satisfactory to the Company, the proposed transfer of such
Restricted Securities evidenced by such Restricted Certificate may be effected
without registration of such Restricted Securities under the Securities Act, the
Company shall, within ten (10) business days after delivery of such opinion to
the Company, so notify the holder of such Restricted Certificate and such holder
shall thereupon be entitled to transfer such Restricted Securities in accordance
with the terms of the notice delivered by such holder to the Company. Each
certificate evidencing the Restricted Securities thus to be transferred (and
each certificate evidencing any untransferred balance of the Restricted
Securities evidenced by such Restricted Certificate) shall bear the restrictive
legend set forth in Section 4.1.
4.3. Demand Registration.
(a) Subject to the limitations contained in Section 4.7, at
any time and from time to time, the holders of at least 51% of the
outstanding Series A Preferred Shares and Conversion Shares held by
the TCW Holders and the holders of at least 51% of the outstanding
Series A Preferred Shares and Conversion Shares held by the Pacific
Holders and the Aquila Holders may give written notice to the Company
(i) of their intention to convert all or part of the Series A
Preferred Shares held by them and to transfer the Conversion Shares
held or obtained by conversion of the Series A Preferred Shares and
(ii) requesting the registration of said Conversion Shares.
(b) Whenever the Company shall have received a demand to
effect a registration pursuant to Section 4.3(a), the Company shall
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promptly give written notice of such proposed registration to all
other Holders. Any such Holder may request in writing that all of such
Holder's Conversion Shares, or any portion thereof, designated by such
Holder, be included in the registered offering.
(c) The Company shall, as expeditiously as possible
following receipt of a demand pursuant to Section 4.3(a), effect the
registration of such Conversion Shares under the Securities Act. The
Sellers of the Conversion Shares shall have the right to select the
managing underwriter or underwriters for the offering of such
Conversion Shares.
(d) In the case of an underwritten public offering of
Restricted Securities to be so registered, if the managing underwriter
advises in its opinion that (i) the inclusion in such registration of
some or all of such Common Stock requested to be registered (including
without limitation, securities to be included pursuant to incidental
or "piggyback" rights heretofore or hereafter granted by the Company
to other Persons) will cause the proceeds or price per share to the
Sellers to be reduced or (ii) that the number of securities to be
registered at the request of the Sellers pursuant to this Section 4.3
plus the number of securities sought to be registered by such other
Persons is too large a number to be reasonably sold, then the number
of securities to be included in such registration will be reduced as
set forth below:
(i) the number of shares of Common Stock sought to be
registered by any Holders of Common Stock, other than the Conversion
Shares, shall be reduced pro rata to the extent necessary to reduce
the number of securities to be registered to the number recommended by
the managing underwriter (the "Recommended Number");
(ii) if the reduction provided for in clause (i) does not
reduce the number of shares of Common Stock to be registered to the
Recommended Number, then the number of Conversion Shares sought to be
registered by Holders other than the Holders that exercised the demand
to effect such registration pursuant to Section 4.3(a) shall be
reduced pro rata, in proportion to the number of Conversion Shares
sought to be registered by such Holders of Conversion Shares, to the
extent necessary to reduce the number of shares of Common Stock to be
registered to the Recommended Number; and
(iii) if the reduction provided for in clauses (i) and (ii)
above does not reduce the number of shares of Common Stock to be
registered to the Recommended Number, then the number of Conversion
Shares sought to be registered shall be reduced pro rata, in
proportion to the number of Conversion Shares sought to be registered
by the Holders of such Conversion Shares, to the extent necessary to
reduce the number of shares of Common Stock to be registered to the
Recommended Number;
provided, that in no event shall the holders of the Conversion Shares so
included in such registration be required to pay any expenses relating to such
registration, including, without limitation, all the expenses described in the
first paragraph of Section 4.7, which are related to the inclusion of any other
holders' Common Stock in the registration.
(e) The Company will not grant to any Person at any time on
or after the date hereof the right (a "Piggyback Right") to request
the Company to register any securities of the Company under the
Securities Act by reason of the exercise by any Holder of its rights
under this Section 4.3 unless such Piggyback Right provides that such
securities shall not be registered and sold at the same time if the
managing underwriter for the respective Sellers believes that sale of
such securities would adversely affect the amount of, or price at
which, the respective Conversion Shares being registered under this
Section 4.3 can be sold.
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(f) The Company agrees (1) not to effect any public or
private sale or distribution of its equity securities, including a
sale pursuant to Regulation D under the Securities Act, during the
10-day period prior to, and during the 120-day period beginning on,
the closing date of an underwritten offering made pursuant to a
registration statement filed pursuant to this Section 4.3 and (2) to
cause each holder of its privately placed equity securities purchased
from the Company at any time on or after the date of this Agreement to
agree not to effect any public sale or distribution of any such
securities during such period, including a sale pursuant to Rule 144
under the Securities Act (except as part of such underwritten
registration, if permitted).
Except pursuant to a registration statement filed pursuant
to this Section 4.3, each Holder agrees not to effect any public sale
or distribution, including a sale pursuant to Rule 144 or 144A under
the Securities Act, of any Restricted Securities during the 10-day
period prior to, and during the 120-day period beginning on, the
closing date of an underwritten offering made pursuant to a
registration statement filed pursuant to this Section 4.3.
(g) The Company recognizes that money damages may be
inadequate to compensate Holders for a breach by the Company of its
obligations under this Section 4.3, and the Company agrees that in the
event of such a breach the Holders may apply for an injunction of
specific performance or the granting of such other equitable remedies
as may be awarded by a court of competent jurisdiction in order to
afford Holders the benefits of this Section 4.3 and that the Company
shall not object to such application, entry of such injunction or
granting of such other equitable remedies on the grounds that money
damages will be sufficient to compensate the Holders.
4.4. Piggy-Back Registration.
(a) Subject to the limitations contained in Section 4.7, if
the Company at any time proposes to register any of its securities
under the Securities Act (other than a registration effected solely to
implement an employee benefit plan, a registration of the Notes or any
other registration on Form S-4), whether of its own accord or at the
request of any holder or holders of such securities, it will each such
time give written notice to all holders of outstanding Preferred
Shares and Conversion Shares of its intention so to do.
(b) Upon the written request of a holder or holders of any
such Preferred Shares and Conversion Shares given within 30 days after
receipt of any such notice (stating the intended method of disposition
of such securities by the prospective Seller or Sellers), the Company
will use its best efforts to cause all Conversion Shares, the holders
of which shall have so requested registration thereof, to be
registered under the Securities Act, all to the extent requisite to
permit the sale or other disposition (in accordance with the intended
methods thereof as aforesaid) by the prospective Seller or Sellers of
the Conversion Shares so registered; provided, however, the Company
may elect not to file a registration statement pursuant to this
Section 4.4 or may withdraw any registration statement filed pursuant
to this Section 4.4 at any time prior to the effective date thereof.
In the case of an underwritten public equity offering by the Company,
each Seller shall, if requested by the managing underwriter, agree not
to sell publicly any equity securities of the Company held by such
Seller (other than the Conversion Shares so registered) for a period
of up to 120 days following the effective date of the registration
statement relating to such offering.
(c) If the managing underwriter for the respective offering
advises that the inclusion in such registration of some or all of the
Conversion Shares sought to be registered by the Seller in its opinion
will cause the proceeds or price per unit the Company or the
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requesting or demanding holder of securities will derive from such
registration to be reduced or that the number of securities to be
registered at the instance of the Company or such requesting or
demanding holder plus the number of securities sought to be registered
by the Sellers is too large a number to be reasonably sold, then the
number of securities to be included in such registration will be
reduced as set forth below:
(i) the number of shares of Common Stock sought to be
registered by any holders of Common Stock, other than the Conversion
Shares, shall be reduced pro rata to the extent necessary to reduce
the number of securities to be registered to the Recommended Number;
(ii) if the reduction provided for in clause (i) above does
not reduce the number of securities to be registered to the
Recommended Number, then the number of shares of the Common Stock
sought to be issued and registered on account of the Company shall be
reduced to the extent necessary to reduce the number of shares of
Common Stock to be registered to the Recommended Number; provided,
however, that this clause (ii) shall be of no effect with respect to
the registration and sale of such Common Stock by the Company which is
necessary to repay any debt or obligation of the Company or its
subsidiaries then becoming due and payable or which is necessary to
finance the acquisition of assets or a majority of the outstanding
stock of another corporation by the Company or its subsidiaries which
acquisition will be consummated within 6 months of the effective date
of such registration; and (iii) if the reduction provided for in
clauses (i) and (ii) above does not reduce the number of shares of
Common Stock to be registered to the Recommended Number, then the
number of Conversion Shares sought to be registered shall be reduced
pro rata, in proportion to the number of Conversion Shares sought to
be registered by the holders thereof, to the extent necessary to
reduce the number of shares of Common Stock to be registered to the
Recommended Number.
(d) The Company will not grant to any Person at any time on
or after the date hereof the right to request the Company to register
any securities of the Company under the Securities Act unless such
right provides that such securities shall not be registered and sold
at the same time if the managing underwriter for the respective
sellers believes that sale of such securities would adversely affect
the amount of, or price at which, the respective Conversion Shares
being registered under this Section 4.4 can be sold.
4.5. Registration of Dividend Shares. The Company shall cause a
registration statement to be filed pursuant to Rule 415 under the Securities Act
(the "Shelf Registration Statement") and to be declared effective prior to the
issuance of Dividend Shares to any Holder, which Shelf Registration Statement
shall provide for resales of all Dividend Shares that are issued by the Company
to the Holders and which Shelf Registration Statement shall remain effective
until the earlier of (a) the date all such Dividend Shares have been sold under
such Shelf Registration Statement or (b) the date such Dividend Shares can be
sold pursuant to Rule 144(k) promulgated under the Securities Act.
4.6. Registration Procedures. (a) If and whenever the Company is
required by the provisions of this Section 4 to use its best efforts to effect
the registration of any of the Conversion Shares or to effect the registration
of the Dividend Shares under the Securities Act, the Company will (except as
otherwise provided in this Agreement), as expeditiously as possible:
(i) cooperate with any underwriters for, and the Sellers of,
such Common Shares, and will enter into a usual and customary
underwriting agreement with respect thereto and take all such other
reasonable actions as are necessary or advisable to permit, expedite
and facilitate the disposition of such Common Shares in the manner
contemplated by the related registration statement in each case to the
same extent as if all the securities then being offered were for the
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account of the Company and the Company will provide to any Seller of
Common Shares, any underwriter participating in any distribution
thereof pursuant to a registration statement, and any attorney,
accountant or other agent retained by any Seller or underwriter,
reasonable access to appropriate Company officers and employees to
answer questions and to supply information reasonably requested by any
such Seller, underwriter, attorney, accountant or agent in connection
with such registration statement;
(ii) furnish or cause to be furnished to each Seller of
Common Shares covered by such registration statement and the
underwriters, if any, addressed to such Sellers and the underwriters,
if any, such opinion of counsel for the Company, and a "comfort"
letter signed by the independent public accountants who have certified
the Company's financial statements included in the registration
statement in each case covering matters customarily covered in
opinions and "comfort" letters requested in underwritten offerings and
such other matters as may be reasonably requested by the Sellers and
underwriters, if any;
(iii) prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to
cause such registration statement to become and remain continuously
effective and provide all requisite financial statements for the
period specified in paragraph (b) of this Section 4.6; and prepare and
file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith
(including without limitation such amendments and supplements as the
Sellers may deem necessary in their reasonable discretion) as may be
necessary to keep such registration statement continuously effective
and to comply with the provisions of the Securities Act with respect
to the sale or other disposition of all securities covered by such
registration statement whenever the Seller or Sellers of such
securities shall desire to sell or otherwise dispose of the same;
provided that no such registration statement will be filed by the
Company until counsel for the Sellers of securities included therein
shall have had a reasonable opportunity to review the same and to
exercise their rights under clause (i) above with respect thereto and
no amendment to any such registration statement naming such Sellers as
selling shareholders shall be filed with the Commission until such
Sellers shall have had at least seven days to review such registration
statement as originally filed and theretofore amended, to exercise
their rights under clause (i) above and to approve or disapprove any
portion of such registration statement describing or referring to such
Sellers;
(iv) furnish to each Seller such numbers of copies of a
summary prospectus or other prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act,
and such other documents, as such Seller may reasonably request in
order to facilitate the public sale or other disposition of the
securities owned by such Seller;
(v) use its best efforts to register or qualify the
securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each Seller shall
request, and do any and all other acts and things which may be
necessary or advisable to enable such Seller to consummate the public
sale or other disposition in such jurisdictions of the securities
owned by such Seller, except that the Company shall not for any such
purpose be required to qualify to do business as a foreign corporation
in any jurisdiction wherein it is not so qualified or to file therein
any general consent to service;
(vi) in the event of the issuance of any stop order
suspending the effectiveness of any registration statement or of any
order suspending or preventing the use of any prospectus or suspending
the qualification of any Common Shares for sale in any jurisdiction,
use its best efforts promptly to obtain its withdrawal;
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(vii) 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,
beginning with the first fiscal quarter beginning after the effective
date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act; and
(viii) list such securities on any securities exchange on
which any stock of the Company is then listed, if the listing of such
securities is then permitted under the rules of such exchange;
(b) Notwithstanding any other provision of this Section 4,
the Company shall not be required to maintain the effectiveness of (i)
any registration statement filed by the Company pursuant to Section
4.3 or Section 4.4 hereof for a period in excess of two years (plus
any period during which the effectiveness of such registration has
been suspended) or (ii) any registration statement filed by the
Company pursuant to Section 4.5 for a period in excess of two years
(plus any period during which the effectiveness of such registration
has been suspended) following the later of (a) the date on which the
Company issues shares of Common Stock in payment of a dividend on the
Preferred Shares for the last dividend payment made in Common Stock by
the Company with respect to the Preferred Shares and (b) the date on
which the Company issues shares of Common Stock to redeem all of the
then issued and outstanding Preferred Shares. From time to time after
a transfer of Shares pursuant to a registration statement the Company
will file all reports required to be filed by it under the Securities
Act and the Securities Exchange Act of 1934, as amended, and the rules
and regulations adopted by the Commission thereunder, and will take
such further action as any holder or holders of Common Shares may
reasonably request, all to the extent required to enable such holders
to sell Common Shares pursuant to Rule 144 and Rule 144A promulgated
under the Securities Act (or any successor thereto). Upon written
request, the Company will deliver to such holders a written statement
as to whether it has complied with such requirements.
4.7. Expenses; Limitations on Registration. The Company shall pay all
expenses incident to the Company's performance of its obligations in connection
with any registration of the Sellers' Common Shares under this Agreement
including, without limitation, (i) printing expenses, (ii) fees and
disbursements of counsel for the Company, (iii) fees of the National Association
of Securities Dealers, Inc. in connection with its review of any offering
contemplated in any registration statement, (iv) expenses of any special audits
to which the Company shall agree or which shall be necessary to comply with
governmental requirements in connection with any such registration, (v) all
registration and filing fees for the Sellers' Common Shares under Federal and
State securities laws, (vi) expenses of complying with the securities or blue
sky laws of any jurisdictions pursuant to Section 4.6(a)(v), and (vii) fees and
expenses of not more than one special counsel for the Seller or Sellers whose
Common Shares are included in such registration, such special counsel to be
selected by the Holder(s) of a majority of such Common Shares included in such
registration.
It shall be a condition precedent to the obligation of the Company to
take any action pursuant to this Section 4 in respect of the Conversion Shares
which are to be registered at the request of any prospective Seller that (i)
subject to the immediately preceding paragraph, the Company shall have received
an undertaking satisfactory to it from such prospective Seller to pay, or have
deducted from the proceeds from the sale of Conversion Shares pursuant to a
registration, all expenses to be incurred by or for the account of and required
to be paid by such Seller, and (ii) such prospective Seller shall furnish to the
Company such information regarding the securities held by such Seller and the
intended method of disposition thereof as the Company shall reasonably request
and as shall be required in connection with the action to be taken by the
Company.
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The TCW Holders of Preferred Shares and Conversion Shares shall be
entitled to an aggregate of two effective registrations pursuant to requests
made under Section 4.3; provided that in the case any TCW Holder shall acquire
any Conversion Shares by conversion of such Preferred Stock following a Notice
of Redemption (as defined in the Certificate of Designation) the holders of
Preferred Shares and Conversion Shares shall be entitled to an aggregate of
three effective registrations pursuant to requests made under Section 4.3;
provided, further, that any registration request made by the requisite number of
Holders, as set forth in the first paragraph of Section 4.3, which request shall
be withdrawn (other than by reason of the Company's failure to perform its
obligations hereunder or a material adverse change in its financial position or
business) by the holders of at least 75% of the shares evidenced or covered by
the Conversion Shares sought to be registered, after the respective registration
statement shall have become effective, shall be treated as an "effective"
registration for purposes hereof.
The Pacific Holders and the Aquila Holders of Preferred Shares and
Conversion Shares shall be entitled to an aggregate of one effective
registration pursuant to a request made under Section 4.3; provided that in the
case any Pacific Holder or Aquila Holder shall acquire any Conversion Shares by
conversion of such Preferred Stock following a Notice of Redemption (as defined
in the Certificate of Designation) the holders of Preferred Shares and
Conversion Shares shall be entitled to an aggregate of two effective
registrations pursuant to requests made under Section 4.3; provided, further,
that any registration request made by the requisite number of Holders, as set
forth in the first paragraph of Section 4.3, which request shall be withdrawn
(other than by reason of the Company's failure to perform its obligations
hereunder or a material adverse change in its financial position or business) by
the holders of at least 75% of the shares evidenced or covered by the Conversion
Shares sought to be registered, after the respective registration statement
shall have become effective, shall be treated as an "effective" registration for
purposes hereof.
The Company agrees that it will not file a registration statement
under the Securities Act, either for securities held by any of the Company's
securityholders other than holders of Preferred Shares and Common Shares or for
securities newly issued by the Company, until 30 days after the effective date
of any registration statement filed pursuant to the request of a Seller or
Sellers made under Section 4.3.
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4.8. Indemnification.
4.8.1. In the event of any registration of any of its securities under
the Securities Act pursuant to this Section 4, the Company shall indemnify and
hold harmless the Seller of such Common Shares, such Seller's directors,
officers, employees, agents, and each other person, if any, who controls such
Seller within the meaning of the Securities Act (a "Controlling Person"),
against any losses, claims, damages or liabilities, joint or several, to which
such Seller or any such director or officer or Controlling Person may become
subject under the Securities Act or any other statute or at common law, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) alleged untrue statement of any material fact
contained, on the effective date thereof, in any registration statement under
which such securities were registered under the Securities Act, or in any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or (ii) alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and shall reimburse such Seller or such director, officer or
Controlling Person for any legal or any other expenses reasonably incurred by
such Seller or such director, officer or Controlling Person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any alleged untrue statement or alleged omission made in such registration
statement, preliminary prospectus, prospectus, or 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 for use
therein. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Seller or such director, officer or
Controlling Person, and shall survive the transfer of such securities by such
Seller.
4.8.2. Each holder of any Common Shares shall, by acceptance thereof,
indemnify and hold harmless the Company, its directors and officers and each
other person, if any, who controls the Company against any losses, claims,
damages or liabilities, joint or several, to which the Company or any such
director or officer or any such person may become subject under the Securities
Act or any other statute or at common law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon (i) any untrue statement or omission of any material fact contained, on the
effective date thereof, in any registration statement under which securities
were registered under the Securities Act, or in any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereto, or
(ii) any omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent that such untrue statement or omission was
contained in written information furnished to the Company through an instrument
duly executed by such holder specifically for use therein, and shall reimburse
the Company or such director, officer or other person for any legal or any other
expenses reasonably incurred in connection with investigating or defending any
such loss, claim, damage, liability or action.
4.8.3. Indemnification similar to that specified in Subsections 4.8.1
and 4.8.2 shall be given by the Company and each holder of any Common Shares
(with such modifications as shall be appropriate) to any underwriter with
respect to any required registration or other qualification of any Common Shares
under any Federal or state law or regulation of governmental authority. The
indemnity and expense reimbursements obligations of the Company and the Holders
under Subsections 4.8.1 and 4.8.2 shall be in addition to any liability the
Company and the Holders may otherwise have.
4.8.4. Each Person (an "Indemnitor") who under the preceding
provisions of this Section 4.8 agrees to indemnify another Person (an
"Indemnitee") shall have the right, subject to the provisions hereto, to
designate counsel (acceptable to the Indemnitee) to defend any case or
proceeding against the Indemnitee arising in respect of any claim of liability
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for which such indemnification may be claimed, to the end that duplication of
legal expense may be minimized; provided that, if the Indemnitee notifies the
Indemnitor that the former has been advised by its counsel that any single
counsel in such case or proceeding would have a conflict of interest in
representing both the Indemnitor and the Indemnitee, the Indemnitee may
designate its own counsel in such case or proceeding and, to the extent so
provided above in this Section 4.8, shall be entitled to be reimbursed for its
legal expenses reasonably incurred in connection with defending itself in such
case or proceeding.
4.9. Termination of Restrictions. Notwithstanding the foregoing
provisions of this Section 4, the restrictions imposed by this Section 4 upon
the transferability of the Restricted Securities shall cease and terminate as to
any particular Restricted Security when such Restricted Security shall have been
effectively registered under the Securities Act and sold by the holder thereof
in accordance with such registration or sold under Rule 144 or 144A promulgated
by the Commission. Whenever the restrictions imposed by this Section 4 shall
terminate as to any Restricted Certificate, as hereinabove provided, the holder
thereof shall be entitled to receive from the Company, without expense, a new
certificate not bearing the restrictive legend otherwise required to be borne
thereby.
4.10. Rule 144. At all times, in order to permit the holders of
Preferred Shares and Common Shares to sell the same, if they so desire, pursuant
to Rule 144 or 144A promulgated by the Commission (or any successor to such
rule), the Company will comply with all rules and regulations of the Commission
applicable in connection with use of Rule 144 and 144A (or any successor rules
thereto), including the provision of information concerning the Company and the
timely filing of all reports with the Commission in order to enable such
holders, if they so elect, to utilize Rule 144 or 144A, and the Company will
cause any restrictive legends to be removed and any transfer restrictions to be
rescinded with respect to any sale of Preferred Shares or Common Shares which is
exempt from registration under the Securities Act pursuant to Rule 144 or 144A.
SECTION 5. COVENANTS OF THE COMPANY
5.1. Delivery Expenses. If any Holder surrenders any certificate for
Preferred Shares, Conversion Shares or Dividend Shares to the Company or a
transfer agent of the Company for exchange for instruments of other
denominations or registered in another name or names, the Company will, subject
to the provisions of Section 4, cause such new instruments to be issued and will
pay the cost of delivering to or from the office of the Holder from or to the
Company or its transfer agent, duly insured, the surrendered instrument and any
new instruments issued in substitution or replacement for the surrendered
instrument.
5.2. Taxes. The Company will pay all taxes (other than Federal, State
or local income taxes) which may be payable in connection with the execution and
delivery of this Agreement or the issuance and sale of the Preferred Shares, the
Conversion Shares and the Dividend Shares hereunder or in connection with any
modification of the Preferred Shares, Conversion Shares or Dividend Shares and
will save the Holders harmless without limitation as to time against any and all
liabilities with respect to or resulting from any delay in paying, or omission
to pay such taxes. The obligations of the Company under this Section 5.2 shall
survive any redemption, repurchase or acquisition of Preferred Shares,
Conversion Shares or Dividend Shares by the Company and the termination of this
Agreement. 5.3. Replacement of Instruments. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any certificate or instrument evidencing any
Preferred Shares, Conversion Shares or Dividend Shares, and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that, if the owner of the same
is a commercial bank or an institutional lender or investor, its own
agreement of indemnity shall be deemed to be satisfactory), or
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(b) in the case of mutilation, upon surrender and
cancellation thereof,
the Company, at its expense, will execute, register and deliver, in lieu
thereof, a new certificate or instrument for (or covering the purchase of) an
equal number of shares of Preferred Shares, Conversion Shares or Dividend Shares
.
5.4. Restrictions on Certain Actions. Prior to the day next following
the issuance of Preferred Shares hereunder the Company will not:
(a) pay or declare any dividend payable in shares of its
common stock or take any other action which, if taken after the date
of such issuance, would result under the terms of the Preferred Stock
in a change in the number of Conversion Shares into which the
Preferred Shares may be converted; or
(b) make any amendment to the Articles of Incorporation of
the Company, or file any resolution of the board of directors with the
Nevada Secretary of State containing any provisions, which would
materially and adversely affect or otherwise impair the rights of the
holders of the Preferred Shares.
5.5. Use of Proceeds. The Company shall use the proceeds of the sale
of the Preferred Shares to repay amounts outstanding under the Credit Agreement.
5.6. Rights Agreement. The Company will not, without the affirmative
vote or consent of the Requisite Holders, supplement, amend or repeal any
provision of the Rights Agreement, or adopt any other agreement or plan similar
to the Rights Agreement, which could materially adversely affect the Holders of
the Preferred Stock, the Conversion Shares or Dividend Shares, in their sole
discretion.
5.7. Maintenance of NYSE Listing. For as long as any Purchaser holds
any Preferred Shares, Conversion Shares or Dividend Shares, the Company shall
cause the Common Stock to be continuously listed on the New York Stock Exchange
or, if the Common Stock is delisted from the New York Stock Exchange, the NASDAQ
National Market System or the American Stock Exchange; provided, that the
Company shall not be liable for a failure to maintain such listing if the Common
Stock of the Company fails to meet the eligibility requirements of the
particular exchange if and only if the failure to meet such eligibility
requirements shall not have been caused by any action of the Company.
5.8. Election of Directors; Maintenance of Directors and Officers
Insurance.
(a) The Company and its Board of Directors shall cause the
Board of Directors of the Company following the redemption of the
Series A Preferred Shares pursuant to the terms of the Articles of
Incorporation and Certificate of Designation to at all times include
as members of the Board of Directors a number of individuals
designated as directors by Purchasers on behalf of the initial
purchasers of the Preferred Shares pursuant to this Agreement and
their Permitted Transferees equal to the number of directors that the
Holders of Preferred Shares were entitled to elect prior to such
redemption pursuant to the terms of the Articles of Incorporation and
the Certificate of Designation. The obligations of the Company and the
Board of Directors to cause the Board of Directors of the Company to
be so constituted shall continue for so long as the initial purchasers
of the Preferred Shares pursuant to this Agreement and their Permitted
Transferees hold at least 20% of the issued and outstanding shares of
Common Stock of the Company; provided, that in calculating the
percentage of Common Stock held by such initial purchasers and their
Permitted Transferees, only Common Stock (x) issued by the Company
upon the conversion or redemption of the Preferred Shares or (y) paid
by the Company as a dividend on the Preferred Shares shall be included
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in such calculation. In the event that such Holders at anytime hold less than
20% of the issued and outstanding shares of Common Stock of the Company, the
Company and its Board of Directors shall cause the Board of Directors to include
as members of the Board of Directors one director designated by Purchasers on
behalf of such Holders for each 5% of the issued and outstanding shares of
Common Stock of the Company held by such Holders; provided, that in calculating
the percentage of Common Stock held by such initial purchasers and their
Permitted Transferees, only Common Stock (x) issued by the Company upon the
conversion or redemption of the Preferred Shares or (y) paid by the Company as a
dividend on the Preferred Shares shall be included in such calculation. The
Company and the Board of Directors of the Company agree that at all times that
the Holders have the right to designate directors pursuant to this Section
5.8(a), the number of directors constituting the whole Board of Directors shall
be no greater than six directors plus the number of Directors that the Holders
are entitled to elect pursuant to the terms of this Section 5.8(a). If such
Holders designate fewer directors than allowed by this Section 5.8(a), the
directors designated by such Holders shall nonetheless have the number of votes
equal to the number of directors that such Holders could have designated
pursuant this Section 5.8(a) so that at any meeting of the Board of Directors of
the Company each director designated by such Holders pursuant to this Section
5.8(a) shall have the number of votes equal to the number of directors that such
Holders could have designated pursuant to this Section 5.8(a) (the "Available
Director Seats") divided by the actual number of directors designated by such
Holders pursuant to this Section 5.8(a) and attending such meeting (the "Actual
Directors") and, for purposes of determining whether a quorum is present at such
meeting, each such director that was designated by such Holders and is present
at such meeting shall be counted as a number of directors equal to the number of
Available Director Seats divided by the number of Actual Directors.
(b) So long as the Holders are entitled to elect one or more
directors pursuant to the terms of this Section 5.8 and for a period
of three years after such time as the Holders are no longer entitled
to elect any directors, the Company shall maintain director's and
officer's insurance providing for such amount of coverage and such
terms as shall be satisfactory to Purchasers. In the event that the
Company (i) consolidates with or merges with or into any other person
and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any person then, in each case,
proper provision shall be made such that the successors and assigns
shall assume the obligations set forth in this Section 5.8(b).
5.9. Shareholder Approval. The Company shall call a meeting of its
shareholders to be held no later than July 31, 1999 for the purpose of voting
upon the approval of the issuance of the Series B Conversion Shares, the
Conversion Shares and the Dividend Shares. The Company will through its Board of
Directors recommend to its shareholders the approval of such matters and shall
not withdraw, modify or change its recommendation in any manner that would
adversely effect the ability of the Company to issue the Series B Conversion
Shares, Conversion Shares or the Dividend Shares. The Purchasers agree to vote
all of their Series A Preferred Shares in favor of such recommendation of the
Board of Directors authorizing the issuance of the Series B Conversion Shares,
the Conversion Shares and the Dividend Shares.
5.10 Issuance of Additional Series A Preferred Shares. The Company
shall not issue any additional shares of Series A Preferred Shares other than
the Series B Conversion Shares.
SECTION 6. MISCELLANEOUS
6.1. Notices.
6.1.1. All communications under this Agreement shall be in writing and
shall be mailed by first class mail, postage prepaid:
(a) if to any party hereto at its address for notices
specified beneath its name on the signature page hereof, or at such
other address as it may have furnished in writing to each other party
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hereto and all other holders of Preferred Shares, Conversion Shares
and Dividend Shares at the time outstanding, or
(b) if to any other Person who is the registered holder of
any Preferred Shares, Conversion Shares or Dividend Shares, to the
address for the purpose of such holder as it appears in the stock
ledger of the Company.
6.1.2. Any notice shall be deemed to have been duly given when
delivered by hand, if personally delivered, and if sent by mail, two business
days after being deposited in the mail, postage prepaid.
6.2. Survival. All warranties, representations and covenants made by
the Company herein or in any certificate or other instrument delivered by it or
on its behalf under this Agreement shall be considered to have been relied upon
by the Holders and shall survive the issuance of the Preferred Shares regardless
of any investigation made by or on behalf of the Holders. All statements in any
such certificate or other instrument so delivered shall constitute
representations and warranties by the Company hereunder.
All representations, warranties and covenants made by the Holders
herein shall be considered to have been relied upon by the Company and shall
survive the issuance to the Holders of the Preferred Shares regardless of any
investigation made by the Company or on its behalf.
The provisions of Section 4 and Section 5.8 hereof shall survive the
issuance to the Holders of the Preferred Shares, the Conversion Shares and
Dividend Shares .
6.3. Successors and Assigns. Except as otherwise expressly provided
herein, this Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties whether so expressed or not.
6.4. Amendment and Waiver, etc. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, but only with the
written consent of the Requisite Holders. No failure or delay on the part of the
Holders in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to the
Holders at law or in equity or otherwise. No waiver of or consent to any
departure by the Company from any provision of this Agreement shall be effective
unless signed in writing by the Holders.
6.5. Duplicate Originals. Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument.
6.6. Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
6.7. Governing Law. This Agreement shall be construed in accordance
with and governed by the law of the State of California.
6.8. Specific Performance. The Company acknowledges that the Holders
have no adequate remedy at law for breaches by the Company of its obligations
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hereunder or under the Articles of Incorporation, and accordingly the Company
irrevocably agrees that the Holders shall be entitled to the remedy of specific
performance and waives any right the Company may have to object to such remedy.
6.9. Applicable IRR Calculation. Attached hereto as Exhibit C are
schedules provided by way of example in calculating the Applicable IRR Amount
(as defined in the Certificate of Designation) for purposes of Section 4.4 of
the Certificate of Designation.
6.10 Consents, Approvals and Other Actions by Purchasers or Holders.
Except where specifically provided or the context would provide otherwise, any
consent, approval or other action to be given or taken by Purchasers or Holders
under this Agreement or any other document relating to the Preferred Shares or
Conversion Shares shall be deemed to have been given or taken if given or taken
by Purchasers or Holders , as the case may be, purchasing or holding a majority
of the Preferred Shares or Conversion Shares, as applicable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Stock Purchase Agreement as of the date first above written.
Address for Notices: COMSTOCK RESOURCES, INC.,
a Nevada corporation
LBJ Freeway, Suite 1000
Dallas, TX 75244
By /s/ M. JAY ALLSION
---------------------
M. Jay Allison
President and
Chief Executive Officer
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Address for Notices: TCW DEBT AND ROYALTY FUND VI, L.P., a
California limited partnership
865 S. Figueroa Street, Suite 1800
Los Angeles, CA 90017 By: TCW Asset Management Company, a
Attn: Arthur R. Carlson California corporation, as General Partner
By: /s/ THOMAS F. MEHLBERG
--------------------------
Thomas F. Mehlberg
Managing Director
By:/s/ ALVIN R. ALBE, JR.
-------------------------
Alvin R. Albe, Jr.
Executive Vice President,
Finance & Administration
Address for Notices: TCW DEBT AND ROYALTY FUND VIB, L.P., a
California limited partnership
865 S. Figueroa Street, Suite 1800
Los Angels, CA 90017 By: TCW Asset Management Company, a
Attn: Arthur R. Carlson California corporation, as General Partner
By: /s/ THOMAS F. MEHLBERG
--------------------------
Thomas F. Mehlberg
Managing Director
By:/s/ ALVIN R. ALBE, JR.
-------------------------
Alvin R. Albe, Jr.
Executive Vice President,
Finance & Administration
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Address for Notices: TCW ASSET MANAGEMENT COMPANY, a California
corporation, as Investment Manager under
865 S. Figueroa Street, Suite 1800 the Investment Management Agreement dated as
Los Angeles, CA 90017 of July 7, 1997 between Morgan Stanley Asset
Attn: Arthur R. Carlson Management Inc. as Fiduciary Advisor on
behalf of, inter alia, Eugenia III
Investment Holdings Limited and
TCW Asset Management Company as amended by
amendment dated as of October 15, 1998
between Bessemer Trust Company, N.A.,
in the capacity discussed therein, and TCW
Asset Management Company
By: /s/ THOMAS F. MEHLBERG
--------------------------
Thomas F. Mehlberg
Managing Director
By:/s/ ALVIN R. ALBE, JR.
-------------------------
Alvin R. Albe, Jr.
Executive Vice President,
Finance & Administration
Address for Notices TCW ASSET MANAGEMENT COMPANY, a California
corporation, as Investment Manager pursuant
865 S. Figueroa Street, Suite 1800 to the Investment Management and Custody
Los Angeles, CA 90017 Agreement dated as of May 19, 1997 between
Attn: Arthur R. Carlson Allmerica Asset Management, Inc. as agent
for First Allmerica Financial Life
Insurance Company, TCW Asset Management
Company and Trust Company of the West
By: /s/ THOMAS F. MEHLBERG
--------------------------
Thomas F. Mehlberg
Managing Director
By:/s/ ALVIN R. ALBE, JR.
-------------------------
Alvin R. Albe, Jr.
Executive Vice President,
Finance & Administration
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Address for Notices: TCW ASSET MANAGEMENT COMPANY, a California
corporation, as Investment Manager pursuant
865 S. Figueroa Street, Suite 1800 to the Investment Management and Custody
Los Angeles, CA 90017 Agreement dated as of October 27, 1997
Attn: Arthur R. Carlson between University of Chicago,
TCW Asset Management Company and Trust
Company of the West
By: /s/ THOMAS F. MEHLBERG
--------------------------
Thomas F. Mehlberg
Managing Director
By:/s/ ALVIN R. ALBE, JR.
-------------------------
Alvin R. Albe, Jr.
Executive Vice President,
Finance & Administration
Address for Notices: TCW ASSET MANAGEMENT COMPANY, a Cslifornia
corporation, as Investment Manager pursuat
865 S. Figueroa Street, Suite 1800 to the Investment Management and Custody
Los Angles, CA 90017 Agreement dated as of October 27, 1997
Attn: Arthur R. Carlson between University of Notre Dame du Lac,
TCW Asset Management Company
and Trust Company of the West
By: /s/ THOMAS F. MEHLBERG
--------------------------
Thomas F. Mehlberg
Managing Director
By:/s/ ALVIN R. ALBE, JR.
-------------------------
Alvin R. Albe, Jr.
Executive Vice President,
Finance & Administration
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Address for Notices: TCW ASSET MANAGEMENT COMPANY, a California
corporation, as Investment Manager pursuant
865 S. Figueroa Street, Suite 1800 to the Investment Management and Custody
Los Angeles, CA 90017 Agreement dated as of October 24, 1997
Attn: Arthur R. Carlson between William N. Pennington Separate
Property Trust dated January 1, 1991,
TCW Asset Management Company and Trust
Company of the West
By: /s/ THOMAS F. MEHLBERG
--------------------------
Thomas F. Mehlberg
Managing Director
By:/s/ ALVIN R. ALBE, JR.
-------------------------
Alvin R. Albe, Jr.
Executive Vice President,
Finance & Administration
Address for Notices: TCW ASSET MANAGEMENT COMPANY, a California
corporation, as Investment Manager pursuant
865 S. Figueroa Street, Suite 1800 to the Investment Management Agreement
Los Angeles, CA 90017 dated as of October 27, 1997 between
Attn: Arthur R. Carlson Delta Air Lines, Inc., TCW Asset Management
Company and Trust Company of the West
By: /s/ THOMAS F. MEHLBERG
--------------------------
Thomas F. Mehlberg
Managing Director
By:/s/ ALVIN R. ALBE, JR.
-------------------------
Alvin R. Albe, Jr.
Executive Vice President,
Finance & Administration
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Address for Notices TRUST COMPANY OF THE WEST, a California
trust company, in its capacities as
865 S. Figueroa Street, Suite 1800 Investment Manager pursuant to the
Los Angeles, CA 90017 Investment Management Agreement dated as of
Attn: Arthur R. Carlson June 6, 1988 between General Mills, Inc. and
the Trust Company of the West and as
Custodian pursuant to the Custody Agreement
dated as of February 6, 1989 among
General Mills, Inc., the Trust Company
of the West and State Street Bank and
Trust Company, as trustee
By: /s/ THOMAS F. MEHLBERG
--------------------------
Thomas F. Mehlberg
Managing Director
By:/s/ ALVIN R. ALBE, JR.
-------------------------
Alvin R. Albe, Jr.
Executive Vice President,
Finance & Administration
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Address for Notices PACIFIC LIFE INSURANCE COMPANY,
a California stock insurer
700 Newport Center Drive
Newport Beach, CA 92660
Attn: W.R. Schmidt
Assistant Vice President
By: /s/ WILLIAM R. SCHMIDT
--------------------------
Assistant Vice President
By: /s/ DIANE W. DALLES
-----------------------
Assistant Secretary
Address for Notices AQUILA ENERGY CAPITAL CORPORATION,
a Delaware corporation
2 Houston Center
909 Fannin, Suite 1850
Houston, Texas 77010-1007
Attn: Kenneth F. Wyatt,
Vice President
By: /s/ KENNETH F. WYATT
------------------------
Kenneth F. Wyatt
Vice President
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SCHEDULE A
Number of Shares
Series A Series B
Holder 1999 Preferred 1999 Preferred
------- ---------------- --------------
TCW DEBT AND ROYALTY FUND VI, L.P., a
California limited partnership (95-4623776) 334,375 180,576
TCW DEBT AND ROYALTY FUND VIB, L.P., a 101,733 54,940
California limited partnership (95-4657858)
TRUST COMPANY OF THE WEST, a California trust 157,587 85,103
company, as Custodian for Eugenia III
Investment Holdings Limited
TRUST COMPANY OF THE WEST, a California trust 100,716 54,391
company, as Custodian for Allmerica Asset
Management, Inc. as agent for First Allmerica
Financial Life Insurance Company (04-1867050)
TRUST COMPANY OF THE WEST, a California trust 40,286 21,756
company, as Custodian pursuant to the Investment
Management and Custody Agreement dated as of
October 27, 1997 between University of Chicago,
TCW Asset Management Company and Trust Company
of the West (36-2177139)
TRUST COMPANY OF THE WEST, a California trust 33,086 17,868
company, as Custodian pursuant to the Investment
Management and Custody Agreement dated as of
October 27, 1997 between University of Notre Dame
du Lac, TCW Asset Management Company and Trust
Company of the West (35-0868188)
TRUST COMPANY OF THE WEST, a California trust 151,073 81,586
company, as Custodian pursuant to the Investment
Management and Custody Agreement dated as of
October 24, 1997 between William N. Pennington
Separate Property Trust dated January 1, 1991,
TCW Asset Management Company and Trust Company
of the West (###-##-####)
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Number of Shares
Series A Series B
Holder 1999 Preferred 1999 Preferred
------- ---------------- --------------
TRUST COMPANY OF THE WEST, a California trust 55,144 29,780
company, as Sub-Custodian for the Delta Master
Trust dated May 27, 1982, as amended, under the
sub-custody agreement and power of attorney
dated October 30, 1997 among Trust Company
of the West, Citibank F.S.B., as Trustee
and TCW Asset Management Company (36-6751614)
TRUST COMPANY OF THE WEST, a California trust 324,667 175,333
company, in its capacities as Investment Manager
pursuant to the Investment Management Agreement
dated as of June 6, 1988 with General Mills, Inc.
and as Custodian pursuant to the Custody Agreement
dated as of February 6, 1989 with General
Mills, Inc. and State Street Bank and
Trust Company, as trustee (41-0274440)
PACIFIC LIFE INSURANCE COMPANY 324,667 175,333
AQUILA ENERGY CAPITAL CORPORATION 324,667 175,333
------- -------
Total: 1,948,001 1,051,999
========= =========
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