1
EXHIBIT 99.3
CONTANGO OIL & GAS COMPANY
CO-SALE AGREEMENT
THIS CO-SALE AGREEMENT (the "Agreement") is effective as of the 27th
day of September, 2000, by and among Contango Oil & Gas Company, a Nevada
corporation (the "Company"), the Southern Ute Indian Tribe, a federally
recognized Indian tribe organized under the Indian Reorganization Act of 1934,
doing business as the Southern Ute Indian Tribe Growth Fund (the "SUIT"), Trust
Company of the West, a California trust company, in its capacities as Investment
Manager pursuant to the Investment Management Agreement dated as of June 6, 1988
between General Xxxxx, Inc. and the Trust Company of the West and as Custodian
pursuant to the Custody Agreement dated as of February 6, 1989 among General
Xxxxx, Inc., the Trust Company of the West and State Street Bank and Trust
Company, as Trustee ("TCW"), Aquila Energy Capital Corporation, a Delaware
corporation ("Aquila") and Xxxxxxx X. Peak ("Peak").
RECITALS
WHEREAS, Aquila is purchasing, or has purchased, shares of the
Company's Series B Senior Convertible Cumulative Preferred Stock (the "Aquila
Securities"), pursuant to that certain Securities Purchase Agreement dated as of
September 27, 2000 (the "Aquila Securities Purchase Agreement"), between Aquila
and the Company;
WHEREAS, TCW has previously purchased shares of the Company's Common
Stock, warrants to purchase additional shares of Common Stock, and shares of the
Company's Series A Senior Convertible Cumulative Preferred Stock (collectively,
the "TCW Securities") and SUIT has previously purchased shares of the Company's
Common Stock and a warrant to purchase additional shares of Common Stock
(collectively, the "SUIT Securities") and have previously entered into a Co-Sale
Agreement dated June 8, 2000 with the Company and Peak (the "Prior Co-Sale
Agreement") (which in turn superseded the Co-Sale Agreement dated December 29,
1999 among the Company, TCW and Peak);
WHEREAS, Aquila was induced by the Company to purchase the Aquila
Securities in part by the Company's, Peak's, TCW's and SUIT's agreement to enter
into this Agreement; and
WHEREAS, the parties desire to enter into this Agreement in order to
grant rights of co-sale to Aquila and replace the Prior Co-Sale Agreement.
In consideration of the mutual covenants set forth herein, the parties
agree hereto as follows:
1. DEFINITIONS.
1
2
(a) "CO-SALE STOCK" shall mean shares of the Company's Common Stock now
owned or subsequently acquired by Peak.
(b) "COMMON STOCK" shall mean the Company's Common Stock, shares of
Common Stock issued or issuable upon exercise of the warrants held by SUIT and
TCW, shares of Common Stock issued or issuable pursuant to the certificate of
designation of the Series A Preferred Stock held by TCW and shares of Common
Stock issued or issuable pursuant to the certificate of designation of the
Series B Preferred Stock held by Aquila.
2. SALES BY PEAK.
(a) If Peak proposes to sell or transfer any shares of Co-Sale Stock,
then Peak shall promptly give written notice (the "Notice") simultaneously to
the Company, to SUIT, to TCW and to Aquila at least thirty (30) days prior to
the closing of such sale or transfer. The Notice shall describe in reasonable
detail the proposed sale or transfer including, without limitation, the number
of shares of Co-Sale Stock to be sold or transferred, the nature of such sale or
transfer, the consideration to be paid, and the name and address of each
prospective purchaser or transferee.
(b) SUIT, TCW and Aquila shall each have the right, exercisable upon
written notice to Peak within fifteen (15) days after the Notice, to participate
in such sale of Co-Sale Stock on the same terms and conditions. Such notice
shall indicate the number of shares of Common Stock SUIT, TCW and/or Aquila
wishes to sell under its right to participate. To the extent SUIT, TCW or Aquila
exercises such right of participation in accordance with the terms and
conditions set forth below, the number of shares of Co-Sale Stock that Peak may
sell in the transaction shall be correspondingly reduced. If the prospective
purchaser or transferee then increases the number of shares it would like to
purchase, Peak will provide notification of such change to SUIT, TCW and Aquila,
and give SUIT, TCW and Aquila the opportunity to sell additional shares.
(c) SUIT, TCW or Aquila, respectively, may sell all or any part of that
number of shares equal to the product obtained by multiplying (i) the aggregate
number of shares of Co-Sale Stock covered by the Notice by (ii) a fraction the
numerator of which is the number of shares of Common Stock owned by SUIT, TCW or
Aquila, respectively, at the time of the sale or transfer and the denominator of
which is the total number of shares of Common Stock owned by Peak, TCW, SUIT and
Aquila at the time of the sale or transfer. SUIT, TCW or Aquila shall effect its
respective participation in the sale by promptly delivering to Peak for transfer
to the prospective purchaser one or more certificates, properly endorsed for
transfer, which represent the number of shares of Common Stock which SUIT, TCW
or Aquila elects to sell.
(d) After SUIT, TCW or Aquila shall have received its respective
portion of the sale proceeds by reason of participation in a co-sale
transaction, then SUIT, TCW or Aquila, as applicable, shall deliver to Peak
pursuant to Section 2(c) that number of shares of Common Stock that shall be
transferred to the prospective purchaser in consummation of the sale of the
Common Stock pursuant to the terms and conditions specified in the Notice. To
the extent that any prospective purchaser or purchasers prohibits such
assignment or otherwise refuses to purchase shares or other securities from
SUIT, TCW or Aquila exercising its rights of co-sale hereunder, Peak shall not
sell to such prospective purchaser or purchasers any Co-Sale Stock
2
3
unless and until, simultaneously with such sale, Peak shall purchase such shares
or other securities from SUIT, TCW or Aquila, as applicable, on the same terms
and conditions specified in the Notice.
(e) The exercise or non-exercise of the rights of SUIT, TCW or Aquila
hereunder to participate in one or more sales of Co-Sale Stock made by Peak
shall not adversely affect its respective rights to participate in subsequent
sales of Co-Sale Stock subject to Section 2(a). If SUIT, TCW or Aquila does not
elect to participate in the sale of the Co-Sale Stock subject to the Notice,
Peak may, not later than sixty (60) days following delivery to the Company of
the Notice, enter into an agreement providing for the closing of the transfer of
the Co-Sale Stock covered by the Notice within thirty (30) days of such
agreement on terms and conditions not more materially favorable to the
transferor than those described in the Notice. Any proposed transfer on terms
and conditions materially more favorable than those described in the Notice, as
well as any subsequent proposed transfer of any of the Co-Sale Stock by Peak,
shall again be subject to the co-sale rights of SUIT, TCW and Aquila and shall
require compliance by Peak with the procedures described in this Section 2.
3. EXEMPT TRANSFERS.
(a) Notwithstanding the foregoing, the co-sale rights of SUIT, TCW and
Aquila shall not apply to (i) any pledge of Co-Sale Stock made pursuant to a
bona fide loan transaction with a financial institution that creates a mere
security interest, (ii) any transfer to the ancestors, descendants or spouse of
Peak or to trusts for the benefit of such persons, (iii) any transfer or
transfers by Peak to Xxxx Xxxxxxx so long as such transfer is made in connection
with Jurrius' appointment to the Company's Board of Directors, not to exceed
1,000,000 shares, or (iv) any bona fide gift of not more than Peak's holdings of
the Company's securities on the date hereof; provided that in the event of any
transfer made pursuant to one of the exemptions provided by clauses (i), (ii)
and (iv), (A) Peak shall inform SUIT, TCW and Aquila of such pledge, transfer or
gift prior to effecting it and (B) the pledgee, transferee or donee shall
furnish SUIT, TCW and Aquila with a written agreement to be bound by and comply
with all provisions of Section 2. Except with respect to Co-Sale Stock
transferred under clause (iii) above (which Co-Sale Stock shall no longer be
subject to the co-sale rights of SUIT, TCW and Aquila), such transferred Co-Sale
Stock shall remain "Co-Sale Stock" hereunder, and such pledgee, transferee or
donee shall be treated similarly with Peak for purposes of this Agreement.
(b) Notwithstanding the foregoing, the provisions of Section 2 shall
apply to the sale of any Co-Sale Stock to (i) the public pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act") or (ii) the Company.
4. LEGEND.
(a) Each certificate representing shares of Co-Sale Stock now or
hereafter owned by Peak or issued to any person in connection with a transfer
pursuant to Section 3(a) hereof shall be endorsed with the following legend:
3
4
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN CO-SALE AGREEMENT BY AND AMONG SUIT, TCW, AQUILA, THE COMPANY AND
CERTAIN HOLDERS OF STOCK OF THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY."
(b) Peak agrees that the Company may instruct its transfer agent to
impose transfer restrictions on the shares represented by certificates bearing
the legend referred to in Section 4(a) above to enforce the provisions of this
Agreement and the Company agrees to promptly do so. The legend shall be removed
upon termination of this Agreement.
5. MISCELLANEOUS.
(a) CONDITIONS TO EXERCISE OF RIGHTS. Exercise of TCW's, SUIT's and
Aquila's rights under this Agreement shall be subject to and conditioned upon,
and Peak and the Company shall use their best efforts to assist TCW, SUIT and
Aquila in, compliance with applicable laws.
(b) GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Nevada.
(c) PRIOR CO-SALE AGREEMENT. This Agreement shall replace the Prior
Co-Sale Agreement in its entirety, and the Prior Co-Sale Agreement is hereby
cancelled and shall have no further force or effect.
(d) AMENDMENT. Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only by the written consent of each
of the parties hereto.
(e) NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
party to be notified at the address as set forth on the signature page hereof or
at such other address as such party may designate by ten (10) days advance
written notice to the other parties hereto.
(f) SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
(g) ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under
4
5
or with respect to this Agreement, including without limitation, such reasonable
fees and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
(h) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties relative to the specific subject matter hereof. Any previous
agreement among the parties relative to the specific subject matter hereof is
superseded by this Agreement. This Agreement and the rights and obligations of
the parties hereunder shall inure to the benefit of, and be binding upon, their
respective successors, assigns and legal representatives.
(i) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
* * *
5
6
IN WITNESS WHEREOF, the undersigned have executed this Co-Sale
Agreement as of the date set forth above.
COMPANY: CONTANGO OIL & GAS COMPANY
a Nevada corporation
Address: 3700 Buffalo Speedway By: /s/ Xxxxxxx X. Peak
Suite 960 --------------------------------
Xxxxxxx, XX 00000 Xxxxxxx X. Peak
President and Chief Executive
Officer
PEAK: /s/ Xxxxxxx X. Peak
------------------------------------
Xxxxxxx X. Peak, an individual
Address: 0000 Xxxxxxx Xxxxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
TCW: TRUST COMPANY OF THE WEST, a
California trust company, in its
capacities as Investment Manager
pursuant to the Investment
Management Agreement dated as of
June 6, 1988 between General Xxxxx,
Inc. and the Trust Company of the
West as Custodian pursuant to the
Custody Agreement dated as of
February 6, 1989 among General
Xxxxx, Inc., the Trust Company of
the West and State Street Bank and
Trust Company, as trustee
Address: 000 X. Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000 By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxx
Managing Director
SUIT: SOUTHERN UTE INDIAN TRIBE, a
federally recognized Indian tribe
organized under the Indian
Reorganization Act of 1934, doing
business as the Southern Ute Indian
Tribe Growth Fund
Address: 000 Xxxx 0xx Xxxxxx
Xxxxx X
Xxxxxxx, XX 00000 By: /s/ Xxxxxx [Illegible]
6
7
AQUILA: AQUILA ENERGY CAPITAL CORPORATION, a
Delaware corporation
Address: 2 Houston Center
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000 By: /s/ Xxxxxxx X. Xxxxx
7
