EXHIBIT 99.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into effective as of the 18th day of May, 2001, by and among SOUTH TEXAS
DRILLING & EXPLORATION, INC., a Texas corporation (the "Company"), and WEDGE
ENERGY SERVICES, L.L.C., a Delaware limited liability company and its Affiliates
(such entity being referred to herein as the "Investor").
WITNESSETH:
WHEREAS, Investor is acquiring 2,400,000 shares of the $0.10 par value
common stock of the Company (the "Common Stock") in accordance with the Common
Stock Purchase Agreement dated May 16th, 2001 (the "2001 Stock Purchase
Agreement") and has previously acquired 3,678,161 shares of Common Stock in
accordance with a Common Stock Purchase Agreement dated May 10, 2000 (the "2000
Stock Purchase Agreement") and 1,153,846 shares of Common Stock in accordance
with a Subscription Agreement dated February 28, 2000 (the "2000 Subscription
Agreement"); and
WHEREAS, the Company has agreed to provide the Investor with certain
registration rights with respect to the Registrable Securities (as defined
herein).
WHEREAS, the parties desire that this Agreement supercede in every way
that certain Registration Rights Agreement dated March 30, 2001 between them
entered into incident to the purchase by WEDGE of the 4.86% Convertible
Subordinated Debenture, Series A issued by the Company, which Registration
Rights Agreement is hereby canceled and rendered a nullity by agreement of the
parties.
WHEREAS, the parties also desire that this Agreement supercede in every
way that certain Registration Rights Agreement between them entered into
incident to the 2000 Subscription Agreement, which Registration Rights Agreement
is hereby canceled and rendered a nullity by agreement of the parties.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the parties hereto
hereby agree as follows:
Section 1. Certain Definitions. As used in this Agreement, the
following definitions shall apply:
"Affiliate" means a Person who directly or indirectly
controls, is controlled by, or is under common control with, the Person referred
to. For this purpose, "control" means the ability to direct or cause the
direction of the management or affairs of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Commission" means the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute, and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
"Holder" means any holder of outstanding Registrable
Securities.
"Person" means any natural Person, any unincorporated
organization or association, and any partnership, limited liability company,
corporation, estate, trust, nominee, custodian or other individual or entity.
The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act (and any post-effective amendments thereto
filed or required to be filed), and the declaration or ordering of the
effectiveness of such registration statement.
"Registrable Securities" means: (i) the Common Stock held by
the Investor or assigns issued pursuant to the 2001 Stock Purchase Agreement
(ii) any other Common Stock heretofore or hereafter acquired by the Investor,
and (iii) any securities of the Company held by the Investor that are or were
issued or issuable, directly or indirectly, in respect of or by way of exchange
for such Common Stock or any capital stock into which such Common Stock may be
converted, together with any other securities which are issued with respect
thereto by way of any stock split, stock dividend, recapitalization,
reorganization, or similar event; provided, however, that Registrable Securities
shall not include any Registrable Securities which have previously been
registered or sold to the public.
"Registration Expenses" means all expenses incurred by the
Company in complying with registration obligations hereunder, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company and the
reasonable fees and disbursements of not more than one counsel chosen by the
Holders who are the holders of a majority of Registrable Securities being
registered, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company). Registration Expenses shall not include fees of counsel for the
Holders other than of one counsel as set forth above or Selling Expenses as
defined below.
"Requisite Holders" means Holders of not less than 50% of the
Registrable Securities who are also holders of at least 2% of the then
outstanding equity securities of the Company.
"Requisite Securities" means in connection with Registrable
Securities with an aggregate value of at least $10,000,000 in the event of a
registration demand which requires a registration using Form S-1 or its
substantial equivalent or at least $7,500,000 which requires a registration
using Form S-3 or its substantial equivalent. The aggregate value of Registrable
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Securities shall be based upon the average closing price (the last price at
which a share of Common Stock is sold) of common Stock for the 30 trading days
next preceding any date on which "Requisite Securities" is to be determined.
"Restricted Securities" means the securities of the Company
required to bear the legend set forth in Section 2 hereof.
"Rule 144" means Rule 144 promulgated under the Securities
Act, or any similar successor rule, as the same shall be in effect from time to
time.
"Rule 145" means Rule 145 promulgated under the Securities
Act, or any similar successor rule, as the same shall be in effect from time to
time.
"Rule 415" means Rule 415 promulgated under the Securities
Act, or any similar successor rule, as the same shall be in effect from time to
time.
"Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the sale of
Registrable Securities.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, as shall be in effect at the time.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules, regulations and interpretations promulgated
thereunder.
Section 2. Demand Registrations.
(a) Request for Registration. If, at any time after the date
hereof, the Company shall receive from the Requisite Holders a written request
that the Company effect the registration under the Securities Act of the resale
of Registrable Securities held by such Requisite Holders (a "Demand
Registration"), then the Company shall:
(i) promptly give written notice of the proposed
registration to all other Holders;
(ii) use its best efforts to effect, as soon as
practicable, the registration under the Securities Act of the Registrable
Securities which the Company has been so requested to register, together with
all or such portion of the Registrable Securities of any Holders joining in such
request as are specified in a written request received by the Company within 20
days after the Company mails such written notice in accordance with the
registration procedures set forth in Section 6 hereof and to keep effective for
120 days after the effective date;
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provided, however, that the Company shall not be obligated to take any action to
effect any such registration under the Securities Act:
(A) after the Company has effected four such
registrations pursuant to this Section 2 which has been declared or ordered
effective and pursuant to which securities have been sold; or
(B) If less than the Requisite Securities
are requested to be included in the registration.
(iii) the Holder shall be entitled to make a request
for a shelf registration pursuant to Rule 415 of the Securities Act, which
request may be for a shelf registration of not more than 12 month duration. This
shall count as one demand right under Section 2(a)(ii)(A).
Subject to the foregoing clauses 2(a)(ii)(A), 2(a)(ii)(B) and 2(a)(iii) the
Company shall file a registration statement covering the Registrable Securities
so requested to be registered as soon as practicable, and in any event within 90
days, after receipt of the request or requests of the Requisite Holders;
provided, however, that if the Company shall within five days of such demand
furnish to such Holder a certificate signed by the president of the Company
stating that in the good faith judgment of the board of directors of the
Company, it would be detrimental to the Company or its shareholders for such
registration statement to be filed on or before the date filing would be
required and it is therefore essential to defer the filing of such registration
statement, the Company shall have the right to defer such filing for a
reasonable period not to exceed 90 days from receipt of such Holder's request.
The Company's right to delay such registration as set forth in the previous
sentence may only be exercised one time during any twelve month period.
(b) Underwritten Demand Registrations. The offering of the
Registrable Securities pursuant to such Demand Registration shall be in the form
of an underwritten offering except for one such Demand Registration which may be
for a shelf registration in compliance with the provisions of this Section 2. In
the event the managing underwriter or underwriters of the Demand Registration
advise the Company and the Requisite Holders in writing that the total amount of
Registrable Securities requested to be included in such offering would exceed
the maximum amount of securities which can be marketed at a price reasonably
related to the current fair market value of such securities without adversely
affecting such offering (the "Underwriters Maximum Number"), the Company will be
required to include in such registration to the extent of the Underwriters
Maximum Number: first, all of the Registrable Securities requested to be
included in such registration by the Holders thereof, allocated pro rata among
such Holders on the basis of the number of Registrable Securities requested to
be included therein by each such Holder; and second, any equity securities
requested to be included in such registration by the Company and any other
holders of such securities, allocated as determined by the Company subject to
any agreements between the Company and any such holders.
(c) Selection of Underwriters. The managing underwriter or
underwriters to
PAGE -4-
be used in connection with such registration shall be selected by the Requisite
Holders holding a majority of the Registrable Securities being registered. The
Company shall have the right to approve the selection of any such underwriters,
which approval shall not be unreasonably withheld.
(d) Underwriting Agreements. The Company shall (together with
all Holders selling Registrable Securities) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by a majority in interest of the Requisite Holders, and each Holder selling
Registrable Securities shall participate in such underwriting.
(e) Withdrawal from Underwriting. If any Holder of Registrable
Securities disapproves of the terms of the underwriting, such person may elect
to withdraw therefrom by written notice to the Company, the managing underwriter
and the Requisite Holders. The Registrable Securities and/or other securities so
withdrawn shall also be withdrawn from registration, and such Registrable
Securities shall not be transferred in a public distribution prior to 60 days
after the effective date of such registration, or such other shorter period of
time as the underwriters may require. If by the withdrawal of such Registrable
Securities a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the maximum of any limitation imposed by
the underwriters), then the Company shall offer to all Holders who have included
Registrable Securities in the registration the right to include additional
Registrable Securities in the same proportion and manner used in determining the
underwriter limitation in this Section 2.
(f) Inclusion as a Demand Registration. For purposes of this
Section 2, a registration will not count as a Demand Registration until it has
become effective; provided, however, if the Requisite Holders withdraw their
Registrable Securities (whether before or after the effectiveness of such
registration) and not as a result of any wrong doing by the Company, or if as a
result of any action by the managing underwriters or underwriters, such demand
will count as a Demand Registration for purposes of this Section 2 unless the
Requisite Holders pay all of the Registration Expenses associated with such
attempted registration.
Section 3. Piggyback Registration.
(a) Right to Include Registrable Securities. Whenever the
Company proposes to register the sale of any of its equity securities under the
Securities Act other than on Form S-4 or Form S-8 promulgated under the
Securities Act or any similar form then in effect, the Company shall give
written notice thereof to each Holder as soon as practicable (but in any event
at least 30 days before such filing), offering such Holder the opportunity to
register on such registration statement such number of Registrable Securities as
such Holder may request in writing, subject to the provisions of section 3(b),
not later than 20 days after the date of the giving of such notice (a "Piggyback
Registration"). Upon receipt by the Company of any such request, the Company
shall use reasonable efforts to, or in the case of an underwritten offering, to
cause the managing underwriter or underwriters to, include such Registrable
Securities in such registration statement (or in a separate registration
statement concurrently filed) and to cause such registration statement to
PAGE -5-
become effective with respect to such Registrable Securities in accordance with
the registration procedures set forth in Section 6 hereof. If the Company's
registration is to be effected pursuant to an underwritten offering, Registrable
Securities registered pursuant to this Section 3 shall be distributed in
accordance with such offering. Notwithstanding the foregoing, if at any time
after giving written notice of its intention to register its equity securities
and before the effectiveness of the registration statement filed in connection
with such registration, the Company determines for any reason either not to
effect such registration or to delay such registration, the Company may, at its
election, by delivery of written notice to each Holder (A) in the case of a
determination not to effect registration, relieve itself of its obligation to
register the Registrable Securities in connection with such registration or (B)
in the case of a determination to delay registration, delay the registration of
such Registrable Securities for the same period as the delay in the registration
of such other equity securities. Each Holder requesting inclusion in a
registration pursuant to this Section 3 may, at any time before the effective
date of the registration statement relating to such registration, revoke such
request by delivering written notice of such revocation to the Company (which
notice shall be effective only upon receipt by the Company); provided, however,
that if the Company, in consultation with its financial and legal advisors,
determines that such revocation would materially delay the registration or
otherwise require a recirculation of the prospectus contained in the
registration statement, then such holder shall have no right to so revoke its
request.
(b) Priority in Piggyback Registration. Notwithstanding the
foregoing, with respect to a Piggyback Registration that is underwritten and
with respect to which the managing underwriter or underwriters advise the
Company of an Underwriters Maximum Number, then the Company will so notify all
Holders requesting inclusion in such registration and will be required to
include in such registration, to the extent of the Underwriters Maximum Number:
first, any equity securities that the Company proposes to sell for its own
account; second, the Registrable Securities requested by Holders to be included
in such registration prior to any other holders of equity securities having
piggyback registration rights; provided, however, in no event will the number of
shares to be included by the Holder be reduced to less than 25% of the total
Registrable Securities; and third, to the extent that the Underwriters Maximum
Number has not been filled by the application of the preceding clauses, any
further equity securities that the Company proposes to sell for its own account
and/or any equity securities requested to be included in such registration by
other holders of such securities, allocated as determined by the Company subject
to agreements between the Company and any such holders.
(c) Selection of Underwriters. If any Piggyback Registration
is in the form of an underwritten offering, the managing underwriter or
underwriters and any additional investment bankers and managers to be used in
connection with such registration shall be selected by the Company (subject to
any separate agreement with the holders on behalf of which a secondary
underwritten offering is being made).
(d) Underwriting Agreements. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in
PAGE -6-
customary form with the managing underwriter selected for such underwriting by
the Company, and each Holder selling Registrable Securities shall participate in
such underwriting.
(e) Withdrawal from Underwriting. If any Holder or other
holder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the managing
underwriter. Any securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration, and shall not be transferred in a public
distribution prior to 180 days after the effective date of the registration
statement relating thereto, or such other shorter period of time as the
underwriters may require. Sales under Rule 144 shall not be considered a public
distribution for purposes of this paragraph.
(f) Right to Terminate Registration. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
Section 4. Market Standoff. If the Company at any time shall register
the offer and sale of shares of Common Stock to the public under the Securities
Act (including any registration pursuant to Sections 2 or 3), the Holders shall
not sell publicly, make any short sale of, grant any option for the purchase of,
or otherwise dispose publicly of, any Registrable Securities (other than those
shares of Common Stock included in such registration pursuant to Sections 2 or
3) without the prior written consent of the Company for a period designated by
the Company in writing to the Holders, which period shall begin not more than 10
days prior to the effectiveness of the registration statement pursuant to which
such public offering shall be made and shall not last more than 120 days after
the effective date of such registration statement. The Company shall obtain the
agreement of any person permitted to sell shares of stock in a registration to
be bound by and to comply with this Section 4 as if such person was a Holder
hereunder.
Section 5. Expenses of Registration. All Registration Expenses incurred
in connection with the one Demand Registration and the Piggyback Registrations
shall be borne by the Company. All Selling Expenses relating to securities so
registered as well as all Registration Expenses relating to Demand Registrations
and Piggyback Registrations not required to be borne by the Company shall be
borne by the holders of such securities pro rata on the basis of the number of
shares of securities so registered on their behalf.
Section 6. Registration Procedures. If and whenever the Company is
required by the provisions of Section 2 or 3 hereof to use its best efforts to
effect promptly the registration of Registrable Securities, the Company shall:
(a) Prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become and remain effective as provided
herein;
(b) Prepare and file with the Commission such amendments and
supplements to
PAGE -7-
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and current and
to comply with the provisions of the Securities Act with respect to the sale of
or other disposition of all Registrable Securities covered by such registration
statement, including such amendments and supplements as may be necessary to
reflect the intended method of disposition of the prospective seller or sellers
of such Registrable Securities, but for no longer than one hundred twenty (120)
days subsequent to the effective date of such registration; provided, however,
that (i) such period shall be extended for a period of time equal to the period
the Holder refrains from selling any securities included in such registration at
the request of an underwriter of Common Stock (or other securities) of the
Company; and (ii) in the case of any registration of Registrable Securities on
Form S-3 which are intended to be offered on a continuous or delayed basis, such
period shall be extended, if necessary, to keep the registration statement
effective until all such Registrable Securities are sold, provided that Rule 415
permits an offering on a continuous or delayed basis, and provided further that
applicable rules under the Securities Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective amendment
that (I) includes any prospectus required by Section 10(a)(3) of the Securities
Act or (II) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement. the
incorporation by reference of information required to be included in (I) and
(II) above to be contained in periodic reports filed pursuant to Section 13 or 1
5(d) of the Exchange Act in the registration statement;
(c) Furnish to each prospective seller of Registrable
Securities such number of copies of a 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 Registrable Securities of such
seller;
(d) Notify each seller of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such seller, prepare and
furnish to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing;
(e) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange or approved for quotation on
any inter-dealer quotation system on which similar securities issued by the
Company are then listed or quoted;
(f) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP number
of all such Registrable Securities, in each case not later than the effective
date of such registration;
PAGE -8-
(g) Use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any Holder may reasonably request and do any and all other acts
and things which may be reasonably necessary or advisable to enable any Holder
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such Holder; provided, however, that the Company will not be
required to qualify generally to do business, subject itself to general taxation
or consent to general service of process in any jurisdiction where it would not
otherwise be required to do so but for this paragraph (g);
(h) Use its best efforts to cause such Registrable Securities
to be registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and operations of the
Company to enable each Holder holding such Registrable Securities to consummate
the disposition of such Registrable Securities;
(i) Subject to the execution of confidentiality agreements in
form and substance satisfactory to the Company, make available upon reasonable
notice and during normal business hours, for inspection by each Holder holding
such Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or other
agent retained by any Holder or underwriter (collectively, the "Inspectors"),
all pertinent financial and other records, pertinent corporate documents and
properties of the Company as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such Inspector in connection with such registration statement;
(j) Use its best efforts to obtain from its independent
certified public accountants "cold comfort" letters in customary form and at
customary times and covering matters of the type customarily covered by cold
comfort letters;
(k) Use its best efforts to obtain from its counsel an opinion
or opinions in customary form;
(1) Issue to any underwriter to which any Holder holding such
Registrable Securities may sell shares in such offering certificates evidencing
such Registrable Securities;
(m) 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 first month after the effective date of the
Registration Statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act;
(n) In connection with any offering pursuant to a registration
statement filed
PAGE -9-
pursuant to Section 2 hereof, enter into an underwriting agreement reasonably
necessary to effect the sale of the Common Stock, provided such underwriting
agreement contains customary underwriting provisions; and provided further that
if the underwriter so requests, the underwriting agreement will contain a
customary contribution provision; and
(o) Use its best efforts to take all other steps necessary to
effect the registration of such Registrable Securities contemplated hereby.
Section 7. Indemnification. In the event any of the Registrable
Securities are included in a registration statement under this Section:
(a) The Company will indemnify each Holder, each of such
Holder's officers and directors and partners (and each partner's officers,
directors and partners) and such Holder's separate legal counsel and independent
accountants, and each person controlling such Holder within the meaning of
Section 15 of the Securities Act, and each underwriter, if any, and each person
who controls any underwriter within the meaning of Section 15 of the Securities
Act, against all expenses, claims, losses, damages or liabilities (or actions in
respect thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained, on the
effective date thereof; in any registration statement, any prospectus contained
therein, or any amendment or supplement thereto. or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein (in the case of a prospectus, in the
light of the circumstances under which they were made) not misleading, or any
violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company in connection with any such
registration, qualification or compliance, and the Company will reimburse each
such Holder, each of its officers, directors and partners (and each partner's
officers, directors and partners) and such Holders' separate legal counsel and
independent accountants and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder or underwriter and stated
to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers and its legal counsel and independent accountants,
each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such underwriter
within the meaning of Section 15 of the Securities Act, and each other such
Holder, each of its officers and directors and each person controlling such
Holder within the meaning of Section 15 of the Securities Act, against all
PAGE -10-
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained, on the effective date thereof, in any such registration
statement, any prospectus contained therein, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of a prospectus, in the
light of the circumstances under which they were made) not misleading, and will
reimburse the Company, such Holders, such directors, officers, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement or prospectus in reliance upon
and in conformity with written information furnished to the Company by an
instrument duly executed by such Holder and stated to be specifically for use
therein; provided, however, that the obligations of any such Holder hereunder
shall be limited to an amount equal to the proceeds to each such Holder of
Registrable Securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 7 to the extent such failure is not
prejudicial. No Indemnifying Party, in the defense of any such claim or
litigation, shall. except with the consent of each 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) If the indemnification provided for in this Section 7 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage or expense referred to
herein, then the Indemnifying Party, in lieu of indemnifying the Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
with respect to such loss, liability, claim, damage or expense in the proportion
that is appropriate to reflect the relative fault of the Indemnifying Party and
the Indemnified Party in connection with the statements or omissions that
resulted in such loss, liability, claim, damage or expense, as well as any other
relevant equitable considerations. The relative fault of the Indemnifying Party
and the Indemnified Party shall he determined by reference to, among other
things, whether the untrue or alleged untrue statement of material fact or the
omission (or alleged omission) to state a material fact relates to information
supplied by the Indemnifying Party or by the Indemnified Party, and the parties,
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
PAGE -11-
Section 8. Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Section.
Section 9. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company shall use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, beginning 90
days after (i) the Registration Date, or (ii) the Company issues an offering
circular meeting the requirements of Regulation A under the Securities Act;
(b) File with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Securities Exchange Act (at any time after it has become subject to such
reporting requirements); and
(c) Furnish to any Holder promptly upon request a written
statement as to its compliance with the reporting requirements of Rule 144 and
the Securities Act and the Securities Exchange Act, a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
of the Company and other information in the possession of or reasonably
obtainable by the Company as a Holder may reasonably request in availing itself
of any rule or regulation of the Commission allowing a Holder to sell any such
securities without registration.
Section 10. Assignment of Registration Rights. The rights to cause the
Company to register securities granted under this Agreement may be assigned to a
transferee or assignee in connection with the transfer assignment of shares of
Registrable Securities (i) to a Family Affiliate of the Holder, (ii) to
Affiliates of the Holder, (iii) to the Company, (iv) to Persons to whom the
Registrable Securities are transferred by reason of the Holder's death or
involuntarily by operation of law, (v) pursuant to a transfer approved by the
Company in its sole and absolute discretion, or (vi) to Persons to whom the
Registrable Securities are transferred in accordance with the transfer
restriction provisions, if any, in the Subscription Agreement, articles of
incorporation, bylaws, any Shareholder's Agreement among the Holders, the
Company and other holders of capital stock of the Company or other documents or
agreements of Holder; provided, however, that the Company is given written
notice thereof.
Section 11. Subsequent Purchasers. Without the affirmative vote of the
Holders of at least 66-2/3% of the Registrable Securities, the Company shall not
grant to any purchaser of the Company's securities any demand registration
rights, or any piggyback registration rights that, with respect to underwriters
cutbacks, would be inconsistent or in conflict with the provisions hereof.
PAGE -12-
Moreover, for so long as the holders of the Registrable Securities are entitled
to exercise the registration rights described herein, they shall receive the
benefit of any and all registration rights granted by the Company to any other
person who is as of the date of this Agreement securities holder in the Company
(or any affiliate of such existing securities holder) which are more favorable
than the registration rights granted to the Investor herein.
Section 12. Term. This Agreement and all rights granted to the Investor
hereunder shall expire on the tenth anniversary of the date on which the first
registration statement by the Company for an offering of its securities to the
general public is declared effective by the Commission.
Section 13. Miscellaneous.
(a) Notices. Any notice or other communications required or
permitted hereunder shall be deemed to be sufficient if contained in a written
instrument delivered in person or by nationally-recognized overnight courier or
duly sent by First Class certified mail, postage prepaid, or by telecopy
addressed to such party at the address or telecopy number set forth below or
such other address or telecopy number as may hereafter be designated in writing
by the addressee to the address or listing all parties:
If to the Company: South Texas Drilling & Exploration, Inc.
9310 Broadway, Bldg. 1
San Antonio, Texas 78217
ATTN: Wm. Stacy Locke
If to the Investor: WEDGE Energy Services, L.L.C.
1415 Louisiana Street, Suite 3000
Houston, Texas 77002
ATTN: William H. White
(b) Entire Agreement: Amendments. This Agreement represents
the entire agreement of the parties hereto, and supersedes any other agreements
among the parties with respect to the subject matter hereof. The terms and
provisions of this Agreement may not be modified or amended, or any of the
provisions hereof waived, except pursuant to the written consent of the Company
and holders of a majority of the Registrable Securities.
(c) Assignment. This Agreement may not be assigned by any
party without the prior written consent of the other parties, except by a Holder
in accordance with Section 10 above. Any assignment which contravenes this
Section shall be void ab initio.
(d) Counterparts. This Agreement may be executed in any number
of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
PAGE -13-
(e) Headings: Interpretations. The headings of the various
sections of this Agreement have been inserted for convenience of reference only
and shall not be deemed to be a part of this Agreement. Whenever the context
requires, references in this Agreement to the singular number shall include the
plural and, likewise, the plural number shall include the singular, and words
denoting gender shall include the masculine, feminine and neuter.
(f) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without regard to
the principles of conflicts of law thereof.
(g) Separability. In case any one or more of the provisions
contained in this Agreement or any application thereof shall be invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein and other applications thereof shall
not in any way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be executed the day and date above written.
SOUTH TEXAS DRILLING & EXPLORATION, INC.
By: /s/ WM. STACY LOCKE
--------------------------------------
Name: Wm. Stacy Locke
------------------------------------
Title: President
------------------------------------
WEDGE ENERGY SERVICES, L.L.C.
By: /s/ WILLIAM H. WHITE
--------------------------------------
Name:: William H. White
------------------------------------
Title: President
------------------------------------
PAGE -14-