CONTANGO OIL & GAS COMPANY
CO-SALE AGREEMENT
THIS CO-SALE AGREEMENT (the "Agreement") is made as of this
29th day of December, 1999, by and among Contango Oil & Gas Company, a Nevada
corporation (the "Company"), 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"), and Xxxxxxx X. Peak ("Peak").
RECITALS
WHEREAS, TCW is purchasing shares of the Company's Common
Stock, and a warrant to purchase additional shares of Common Stock (the
"Warrant" and together with the Common Stock purchased by TCW, the
"Securities"), pursuant to that certain Securities Purchase Agreement dated as
of the date hereof (the "Securities Purchase Agreement"), between TCW and the
Company;
WHEREAS, TCW was induced by the Company to purchase the
Securities in part by the Company's and Peak'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 TCW.
In consideration of the mutual covenants set forth herein, the
parties agree hereto as follows:
1. DEFINITIONS.
(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 and shares of
Common Stock issued or issuable upon exercise of the Warrant.
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 and to TCW 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) TCW shall 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 TCW wishes to sell under its right to
participate. To the extent TCW 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 TCW and give TCW the opportunity to sell additional shares.
(c) TCW 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 TCW 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 and TCW at the time of the sale or transfer. TCW shall
effect its 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 TCW elects
to sell.
(d) After TCW shall have received its portion of the sale proceeds by
reason of participation in a co-sale transaction, then TCW 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 TCW
exercising its rights of co-sale hereunder, Peak shall not sell to such
prospective purchaser or purchasers any Co-Sale Stock unless and until,
simultaneously with such sale, Peak shall purchase such shares or other
securities from TCW on the same terms and conditions specified in the Notice.
(e) The exercise or non-exercise of the rights of TCW hereunder to
participate in one or more sales of Co-Sale Stock made by Peak shall not
adversely affect its rights to participate in subsequent sales of Co-Sale Stock
subject to Section 2(a). If TCW 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 TCW 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 TCW 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
TCW of such pledge, transfer or gift prior to effecting it and (B) the pledgee,
transferee or donee shall furnish TCW 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 TCW), 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:
"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 BETWEEN TCW, 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 rights under
this Agreement shall be subject to and conditioned upon, and Peak and the
Company shall use their best efforts to assist TCW 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) 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.
(d) 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.
(e) 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.
(f) 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 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.
(g) 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.
(h) 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.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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
By: /s/ XXXXXXX X. PEAK
--------------------------------
Xxxxxxx X. Peak
President and Chief Executive
Officer
Peak: /s/ XXXXXXX X. PEAK
--------------------------------
Xxxxxxx X. Peak
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 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
By: /s/ XXXXXX X. XXXXXXX
-----------------------------------
Xxxxxx X. Xxxxxxx
Managing Director
By: /s/ XXXXXX X. XXXXXXXX
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Xxxxxx X. Xxxxxxxx
Managing Director
