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MATADOR PETROLEUM CORPORATION
MATADOR HOLD CO.
PREFERRED STOCK CONVERSION AGREEMENT
Dated as of January 19, 1998
Series A Convertible Preferred Stock
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TABLE OF CONTENTS
SECTION HEADING PAGE
SECTION 1. SERIES A PREFERRED STOCK; CLOSING DATE, CONSENTS...................... 2
Section 1.01. Creation and Description of Series A
Preferred Stock.................................................... 2
Section 1.02. Conversion of Old Preferred Stock, Execution
of Shareholders Agreement, Certain Consents........................ 2
Section 1.03. Stock Certificates................................................. 3
Section 1.04. Several Obligations of Preferred Shareholders...................... 3
SECTION 2. REPRESENTATIONS....................................................... 3
Section 2.01. Representations of Each Preferred Shareholder...................... 3
Section 2.02. Representations of the Company and Old Matador..................... 3
SECTION 3. CLOSING CONDITIONS.................................................... 4
Section 3.01. Preferred Shareholders' Closing Conditions......................... 4
SECTION 4. COVENANTS OF OLD MATADOR AND THE COMPANY.............................. 5
Section 4.01. (a) Reports and Rights of Inspection............................... 5
Section 4.02. Purchase of Shares................................................. 9
Section 4.03. Transactions with Affiliates.......................................10
Section 4.04. Nature of Business.................................................10
Section 4.05. Corporate Existence; Licenses and Permits;
Maintenance of Properties..........................................10
Section 4.06. Taxes..............................................................10
Section 4.07. Insurance..........................................................10
Section 4.08. Expenses of Directors..............................................11
Section 4.09. Remedies and Default...............................................11
Section 4.10. Maintenance of Old Matador as a Wholly-Owned Subsidiary............11
Section 4.11. Appointment of Directors of Old Matador............................11
Section 4.12. Appointment of Observers of Old Matador............................12
Section 4.13. Joint and Several Obligations......................................12
Section 4.14. Preferred Stock Purchase Agreements................................12
SECTION 5. PREFERRED SHAREHOLDERS' SPECIAL RIGHTS................................12
Section 5.01. Direct Payment.....................................................12
Section 5.02. Delivery Expense...................................................12
Section 5.03. Taxes..............................................................13
Section 5.04. Replacement of Certificates for Shares.............................13
Section 5.05. Registration of Preferred Stock....................................13
Section 5.06. Exchange of Certificates for Shares................................13
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Section 5.07. Special Voting, Approval and Consent Rights of Series A
Preferred Stock with Respect to Old Matador........................14
SECTION 6. AMENDMENTS, MODIFICATIONS AND WAIVERS.................................14
Section 6.01. ...................................................................14
Section 6.02. ...................................................................14
Section 6.03. ...................................................................15
SECTION 7. CERTAIN DEFINITIONS...................................................15
SECTION 8. RESTRICTIONS ON TRANSFERABILITY OF SHARES;
COMPLIANCE WITH SECURITIES ACT........................................19
Section 8.01. Restrictions on Transferability....................................19
Section 8.02. Notice of Proposed Transfer; Registration not Required.............19
Section 8.03. (a) Required Registration..........................................19
Section 8.04. Conditions to Required Registration................................24
Section 8.05. Incidental Registrations...........................................25
Section 8.06. Expenses; Reliance.................................................27
Section 8.07. Indemnification and Contribution...................................28
Section 8.08. Additional Registration Rights.....................................29
Section 8.09. Restrictive Legends................................................30
Section 8.10. Miscellaneous......................................................31
SECTION 9. STOCK PURCHASE RIGHTS.................................................31
SECTION 10. MISCELLANEOUS.........................................................32
Section 10.01. Expenses...........................................................32
Section 10.02. Powers and Rights Not Waived; Remedies Cumulative..................32
Section 10.03. Notices............................................................33
Section 10.04. Successors and Assigns.............................................33
Section 10.05. Survival of Covenants and Representations..........................33
Section 10.06. Severability.......................................................33
Section 10.07. Governing Law......................................................34
Section 10.08. Captions...........................................................34
Section 10.09. Counterparts.......................................................34
Signature Page............................................................................35
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EXHIBITS TO PREFERRED STOCK CONVERSION AGREEMENT:
EXHIBIT A -- Names and Addresses of Preferred Shareholders and Amounts
of Shares
EXHIBIT B -- Plan of Merger
EXHIBIT C -- Form of Certificate of Designation
EXHIBIT D -- Form of Closing Certificate
EXHIBIT E -- Description of Closing Opinion of General Counsel to the
Company
EXHIBIT F -- Description of Closing Opinion of Special Counsel to the
Company
EXHIBIT G -- Estimate of Fair Market Value
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PREFERRED STOCK CONVERSION AGREEMENT
THIS PREFERRED STOCK CONVERSION AGREEMENT dated as of January 19, 1998,
made and entered into by and among THE TRAVELERS INSURANCE COMPANY, THE
TRAVELERS INDEMNITY COMPANY, THE PHOENIX INSURANCE COMPANY, THE TRAVELERS LIFE
AND ANNUITY COMPANY, and THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
(collectively, the "PREFERRED SHAREHOLDERS"), MATADOR PETROLEUM CORPORATION, a
Texas corporation ("OLD MATADOR") and MATADOR HOLD CO., a Texas corporation (the
"COMPANY").
WITNESSETH:
WHEREAS, the Preferred Shareholders are the owners of all of the shares of
Series A Convertible Preferred Stock of Old Matador (the "OLD PREFERRED STOCK")
identified in Exhibit A attached hereto and hereby made a part hereof;
WHEREAS, the Company and Old Matador have proposed an Agreement and Plan
of Merger (the "PLAN OF MERGER") dated as of January 20, 1998, by and among Old
Matador, the Company and Matador Merge Co., a Texas corporation ("MERGE CO.") a
copy of which is attached hereto as Exhibit B and hereby made a part hereof,
pursuant to which Merge Co. will merge into Old Matador which will thereupon
become a wholly-owned subsidiary of the Company and all outstanding shares of
capital stock of Old Matador will be converted into the same number of shares of
the Company with the same designations, rights, preferences, qualifications,
limitations and restrictions as the shares of Old Matador (the "MERGER");
WHEREAS, pursuant to the Plan of Merger the shares of the Old Preferred
Stock will be converted into newly issued shares of Preferred Stock $.10 par
value of the Company, designated "Series A Convertible Preferred Stock" (the
"SERIES A PREFERRED STOCK");
WHEREAS, following the consummation of the Merger, the Company will enter
into a Stock Purchase Agreement (the "STOCK PURCHASE AGREEMENT") dated as of
January 20, 1998, with Union Oil Company of California, a California corporation
("UNOCAL") pursuant to which the Company will issue and sell to Unocal 670,000
newly issued shares (the "NEW SHARES") of the Common Stock, par value $.10 per
share of the Company (the "COMMON STOCK") in exchange for certain assets of
Unocal to be contributed to the Company pursuant to the Stock Purchase Agreement
and that certain Contribution Agreement (the "CONTRIBUTION AGREEMENT") dated as
of January 20, 1998, between Unocal and the Company;
WHEREAS, Old Matador and the Company have requested the Preferred
Shareholders to (i) consent to the consummation of the Merger pursuant to the
Plan of Merger, the Stock Purchase Agreement and the transactions contemplated
thereby and the Contribution Agreement and the transactions contemplated
thereby, subject to the limitations contained herein, and (ii) enter into a
Shareholders Agreement (the "SHAREHOLDERS AGREEMENT") dated as of January 20,
1998, by and among the Company, Unocal, the Preferred Shareholders and certain
holders of Common Stock of the Company;
WHEREAS, the Preferred Shareholders are willing to (i) consent to the
Merger, the Stock Purchase Agreement and the transactions contemplated thereby
and the Contribution Agreement and the transactions contemplated thereby,
subject to the limitations contained herein, and (ii) enter into the
Shareholders Agreement, upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants herein contained, the Preferred Shareholders hereby severally
agree and Old Matador and the Company hereby jointly and severally agree as
follows:
SECTION 1. SERIES A PREFERRED STOCK; CLOSING DATE, CONSENTS.
SECTION 1.01. CREATION AND DESCRIPTION OF SERIES A PREFERRED STOCK. The
Company has created Series A Preferred Stock consisting of 388,890 shares PLUS
shares of Series A Preferred Stock to be issued in accordance with Section 2(c)
of the Certificate of Designation herein after described. The Series A Preferred
Stock has the designations, preferences, limitations and relative rights set
forth in the form of Certificate of Designation (the "CERTIFICATE OF
DESIGNATION") attached hereto as Exhibit C setting forth the Resolution (the
"RESOLUTION") adopted by the Board of Directors of the Company designating the
Series A Preferred Stock, which Resolution has been duly adopted by the Board of
Directors of the Company in accordance with the provisions of Article Four of
the Articles of Incorporation, as amended (the "ARTICLES OF INCORPORATION"), of
the Company, and filed by the Company with the Secretary of State of the State
of Texas pursuant to the Texas Business Corporation Act (the "TBCA"). A true and
correct copy of the Articles of Incorporation of the Company as currently in
effect including the Certificate of Amendment and the Certificate of Designation
has heretofore been furnished to the Preferred Shareholders by the Company. The
Series A Preferred Stock will rank, as to preferences on payment of dividends or
distribution of assets upon liquidation, prior to any and all other shares of
Junior Stock (as defined in the Certificate of Designation), now or hereafter
issued by the Company. The terms which are capitalized herein shall have the
meanings set forth in Section 7 unless the context shall otherwise require.
SECTION 1.02. CONVERSION OF OLD PREFERRED STOCK, EXECUTION OF SHAREHOLDERS
AGREEMENT, CERTAIN CONSENTS. At the Effective Time, as defined in the Plan of
Merger, pursuant to the Plan of Merger, each share of Old Preferred Stock shall
be converted into a share of Series A Preferred Stock held by each of the
Preferred Shareholders as set forth opposite its name on Exhibit A hereto (the
day on which the Effective Time occurs is herein called the "CLOSING DATE").
Each Preferred Shareholder agrees to execute the Shareholders Agreement at the
Closing of the transactions contemplated by the Stock Purchase Agreement in the
form heretofore delivered to the Preferred Shareholders. Each Preferred
Shareholder hereby severally consents to the Merger, the Stock Purchase
Agreement and the transactions contemplated thereby and the Contribution
Agreement and the transactions contemplated thereby; PROVIDED, HOWEVER, that
notwithstanding the foregoing consents, the Preferred Shareholders reserve all
rights under this Agreement and the Certificate of Designation, as hereinafter
defined, with respect to the following:
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(a) The stock purchase rights and options under Article 9 of this
Agreement, except with respect to the issuance of the New Shares pursuant
to the Stock Purchase Agreement which is hereby approved;
(b) The right to consent to the purchase, redemption or other
acquistion of shares of Junior Stock as provided in Section 5(d)(iii) of
the Certificate of Designation, except for the Company's repurchase of the
New Shares pursuant to Section 4(e) of the Stock Purchase Agreement which
is hereby approved; and
(c) The right to consent to the creation, authorization or issuance
of any shares of any class of Prior Stock and certain classes of Parity
Stock as provided under Sections 5(d)(iv) and (v) of the Certificate of
Designation.
SECTION 1.03. STOCK CERTIFICATES. As of the Closing Date, in
accordance with the Plan of Merger, the certificates representing the Old
Preferred Stock will be thereafter evidence of a like number of shares of
Series A Preferred Stock.
The certificates evidencing the shares of Series A Preferred Stock shall
bear the legend provided for in Section 8.09.
SECTION 1.04. SEVERAL OBLIGATIONS OF PREFERRED SHAREHOLDERS. The
obligations of each Preferred Shareholder under this Agreement shall be
several and not joint and no Preferred Shareholder shall be liable or
responsible for the acts of any other Preferred Shareholder.
SECTION 2. REPRESENTATIONS.
SECTION 2.01. REPRESENTATIONS OF EACH PREFERRED SHAREHOLDER. (a) Each
Preferred Shareholder severally represents, and in entering into this Agreement
the Company understands, that it is an "Accredited Investor" as defined in
Regulation D of the Securities Act and is acquiring the Series A Preferred Stock
for the purpose of investment and not with a view to the distribution thereof,
and that it has no present intention of selling, negotiating or otherwise
disposing of the Series A Preferred Stock; it being understood, however, that
the disposition of a Preferred Shareholder's property shall at all times be and
remain within its control, subject to the terms of the restrictive legend
described in Section 8.09. Each Preferred Shareholder understands that the
Series A Preferred Stock has not been registered under the Securities Act or any
state securities laws and may be resold only if registered pursuant to the
provisions of the Securities Act and such state securities laws that are
applicable to a sale of the Series A Preferred Stock or if any exemption from
registration is available.
(b) Each Preferred Shareholder severally represents as to itself that the
conversion of its Old Preferred Stock into shares of Series A Preferred Stock on
the Closing Date will not require the payment of stamp, documentary or any
similar taxes imposed by its jurisdiction of domicile.
SECTION 2.02. REPRESENTATIONS OF THE COMPANY AND OLD MATADOR. The Company
and Old Matador represent and warrant that all representations and warranties
set forth in the
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Closing Certificate attached hereto as Exhibit D are true and correct as of
the date of the execution and delivery of this Agreement by the Company.
SECTION 3. CLOSING CONDITIONS.
SECTION 3.01. PREFERRED SHAREHOLDERS' CLOSING CONDITIONS. The Preferred
Shareholders' obligations hereunder shall be subject to the performance by
the Company and Old Matador of their agreements hereunder which by the terms
hereof are to be performed at or prior to the Closing Date and to the
following further conditions precedent:
(a) CLOSING CERTIFICATE. The Preferred Shareholders shall receive from the
Company and Old Matador a Closing Certificate dated the Closing Date and
executed by the President or a Vice President of the Company, and Old Matador
respectively, the truth and accuracy of which shall be a condition to the
Preferred Shareholders' obligation to consent to the Merger and conversion of
the Old Preferred Stock for the shares of Series A Preferred Stock pursuant to
the Merger.
(b) CERTIFICATE OF DESIGNATION, MERGER. The Board of Directors of the
Company shall have duly adopted the Resolution set forth in the Certificate of
Designation, and the Certificate of Designation shall have been duly filed with
the Secretary of State of the State of Texas, and all proper actions have been
duly taken so that the Merger will be duly effected all in compliance with the
applicable provisions of the TBCA, including, without limitation, the provisions
of Articles 5.01 and 5.03H of the TBCA upon the filing of the Articles of Merger
with the Secretary of State of the State of Texas on the Closing Date.
(c) LEGAL OPINIONS. The Preferred Shareholders shall receive from
Xxxxx Xxxxxxx, Esq. general counsel for the Company, and from Fulbright &
Xxxxxxxx L.L.P., special counsel for the Company in this transaction, their
respective opinions, dated the Closing Date, in form and substance
satisfactory to the Preferred Shareholders and covering substantially the
respective matters set forth in Exhibits E and F, respectively, hereto.
(d) CORPORATE EXISTENCE AND AUTHORITY. On or prior to the Closing Date,
the Preferred Shareholders shall have received, in form and substance
satisfactory to them and their special counsel, such documents and evidence with
respect to the Company and Old Matador as they may reasonably request in order
to establish the existence and good standing of the Company and the
authorization of the transactions contemplated by this Agreement, the Series A
Preferred Stock, the Plan of Merger, the Stock Purchase Agreement, the
Contribution Agreement and the Shareholders Agreement.
(e) CHARTER AND BY-LAWS. The Articles of Incorporation and By-laws of the
Company shall be in the form heretofore delivered to the Preferred Shareholders
and shall satisfy the requirements of Article 5.03H of the TBCA.
(f) CONSENT OF HOLDERS OF OTHER SECURITIES. Any consents or approvals
required to be obtained from any holder or holders of any outstanding Security
of the Company or Old Matador and any amendments of agreements pursuant to which
any Security may have been
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issued which shall be necessary to permit the consummation of the
transactions contemplated hereby shall have been obtained and all such
consents or amendments shall be, satisfactory in form and substance to the
Preferred Shareholders and their special counsel.
(g) CO-SALE AGREEMENT. The Co-Sale Agreement dated the date hereof between
the Principals (as defined therein), the Company, Old Matador and the
Shareholders (as defined therein) shall have been executed and delivered in form
and substance satisfactory to the Preferred Shareholders.
(h) SPECIAL COUNSEL FEES. On or prior to the Closing Date, the
reasonable charges and disbursements of Xxxxxxx and Xxxxxx, special counsel
to the Preferred Shareholders, shall have been paid by the Company.
(i) PROCEEDINGS AND DOCUMENTS. All proceedings taken in connection with
the transactions contemplated by this Agreement, and all documents necessary to
the consummation thereof, shall be reasonably satisfactory in form and substance
to the Preferred Shareholders and their special counsel, and the Preferred
Shareholders and their special counsel shall have received copies (executed or
certified as may be appropriate) of all legal documents or proceedings which the
Preferred Shareholders and their special counsel may reasonably request in
connection with the consummation of said transactions, including, without
limitation of true and accurate copy of the Stock Purchase Agreement, the
Contribution Agreement and the Shareholders Agreement to be entered into by the
parties thereto following the consummation of the Merger.
SECTION 4. COVENANTS OF OLD MATADOR AND THE COMPANY.
Old Matador and the Company, jointly and severally covenant and agree with
each Preferred Shareholder that from and after the Closing Date and continuing
so long as any shares of Series A Preferred Stock remain outstanding:
SECTION 4.01. (a) REPORTS AND RIGHTS OF INSPECTION. The Company will keep,
and will cause each Subsidiary to keep, proper books of record and account in
which full and correct entries will be made in all material respects of all
dealings or transactions of, or in relation to, the business and affairs of the
Company or such Subsidiary, in accordance with GAAP consistently applied (except
for changes disclosed in the financial statements furnished to the Preferred
Shareholders pursuant to this Section 4.01(a) and concurred in by the
independent public accountants referred to in Section 4.01(a)(ii)), and will
furnish to each Preferred Shareholder so long as it is the holder of any share
of Series A Preferred Stock and to each other Institutional Holder of the shares
of Series A Preferred Stock (in duplicate if so specified below or otherwise
requested):
(i) QUARTERLY STATEMENTS. As soon as available and in any
event within 45 days after the end of each quarterly fiscal period
(except the last) of each fiscal year, copies of:
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(1) a consolidated balance sheet of the Company and its
Subsidiaries as of the close of such quarterly fiscal period,
setting forth in comparative form the consolidated figures for the
fiscal year then most recently ended,
(2) a consolidated statement of income of the Company and its
Subsidiaries for such quarterly fiscal period and for the portion of
the fiscal year ending with such quarterly fiscal period, in each
case setting forth in comparative form the consolidated figures for
the corresponding periods of the preceding fiscal year, and
(3) a consolidated statement of cash flows of the Company and
its Subsidiaries for the portion of the fiscal year ending with such
quarterly fiscal period, setting forth in comparative form the
consolidated figures for the corresponding period of the preceding
fiscal year,
all in reasonable detail and accompanied by a certificate of an authorized
financial officer of the Company, which certificate shall state that such
consolidated financial statements present fairly, in all material respects,
the consolidated financial position of the Company and its Subsidiaries as of
the end of the fiscal quarter set forth therein and the consolidated results
of operations and cash flows for such fiscal quarter, subject to normal
year-end audit adjustments and to the fact that such financial statements
shall not include footnote disclosures;
(ii) ANNUAL STATEMENTS. As soon as available and in any event
within 90 days after the close of each fiscal year of the Company, copies of:
(1) consolidated and consolidating balance sheets of the
Company and its Subsidiaries as of the close of such fiscal year,
and
(2) consolidated and consolidating statements of income,
retained earnings and cash flows of the Company and its Subsidiaries
for such fiscal year,
in each case setting forth in comparative form the consolidated figures for
the preceding fiscal year, all in reasonable detail and accompanied by a
report thereon of a firm of independent public accountants of recognized
national standing selected by the Company to the effect that the consolidated
financial statements present fairly, in all material respects, the
consolidated financial position of the Company and its Subsidiaries as of the
end of the fiscal year being reported on and the consolidated results of the
operations and cash flows for said year in conformity with GAAP and that the
examination of such accountants in connection with such financial statements
has been conducted in accordance with generally accepted auditing standards
and included such tests of the accounting records and such other auditing
procedures as said accountants deemed necessary in the circumstances;
PROVIDED, HOWEVER, that the Company shall not be required to furnish the
foregoing consolidating financial statements for any year unless requested to
do so in writing by a Preferred Shareholder;
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(iii) AUDIT REPORTS. Promptly upon receipt thereof, one copy of
each interim or special audit made by independent accountants of the
Company or any Subsidiary and any management letter received from such
accountants;
(iv) SEC AND OTHER REPORTS. Promptly upon their becoming available,
one copy of each financial statement, report, notice or proxy statement
sent by (1) the Company or any Subsidiary to public Securities holders
generally and of each regular or periodic report, and any registration
statement or prospectus filed by the Company or any Subsidiary with any
securities exchange or the Commission or any successor agency, and (2)
copies of any material orders in any proceedings to which the Company or
any of its Subsidiaries is a party, issued by any governmental agency,
federal or state, having jurisdiction over the Company or any of its
Subsidiaries;
(v) ERISA REPORTS. Promptly upon the occurrence thereof, written
notice of (1) a Reportable Event with respect to any Plan; (2) the
institution of any steps by the Company, any Subsidiary or any ERISA
Affiliate, the PBGC or any other Person to terminate any Plan; (3) the
institution of any steps by the Company or any Subsidiary or any ERISA
Affiliate to withdraw from any Plan; (4) a non-exempt "prohibited
transaction" within the meaning of Section 406 of ERISA in connection with
any Plan; (5) any material increase in the contingent liability of the
Company or any Subsidiary with respect to any post-retirement welfare
liability; or (6) the taking of any action by, or the threatening of the
taking of any action by, the Internal Revenue Service, the Department of
Labor or the PBGC with respect to any of the foregoing;
(vi) OFFICER'S CERTIFICATES. Within the periods provided in
paragraphs (i) and (ii) above, a certificate of a Responsible Officer of
the Company stating that such officer has reviewed the provisions of this
Agreement and setting forth: whether there existed as of the date of such
financial statements and whether, to the best of such officer's knowledge,
there exists on the date of the certificate or existed at any time during
the period covered by such financial statements any Event of Default or
event which with the lapse of time or giving of notice, or both would
constitute an Event of Default and, if any such condition or event exists
on the date of the certificate, specifying the nature and period of
existence thereof and the action the Company is taking and proposes to
take with respect thereto;
(vii) OIL & GAS AUDIT REPORTS. Promptly upon receipt thereof, one copy
of each annual audit of the oil and gas reserves of the Company and its
Subsidiaries made by DeGoyler & XxxXxxxxxxx or another reputable
independent petroleum engineering firm reasonably satisfactory to the
Company and the holders of 66-2/3% in aggregate principal amount if the
Series A Preferred Stock;
(viii) OPERATING PLAN. As soon as practicable and in any event within
60 days of the close of each fiscal year, an operating plan of the Company
and its Subsidiaries for the following fiscal year prepared for each
month, including projected income statements, balance sheets, cash flow
budgets, and capital expenditure budget for each
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month supported by a narrative describing the primary assumptions upon
which the plan is based;
(ix) COMPARISON OF ACTUAL AND PROJECTED RESULTS. As soon as
practicable and in any event within 60 days after the close of each
quarterly fiscal period commencing with the quarterly fiscal period ending
on March 31, 1998, a comparison of actual results to the most recently
delivered operating plan delivered pursuant to SECTION 4.01(viii) for the
quarterly fiscal period then ended and for the year to date along with (i)
management's discussion of significant occurrences during such quarterly
fiscal period, (ii) management's analysis of the performance of the
Company and its Subsidiaries during such quarterly fiscal period, (iii)
management's explanation of any deviations of actual results from
projected performance, and (iv) management's plan to correct any such
deviations;
(xi) COMMON STOCK VALUATION. Within the periods provided in
paragraphs (i) and (ii) above, a report of a Responsible Officer of the
Company providing an estimate of the then current fair market value of the
Company's Common Stock using both the cash flow multiple and asset value
methods in the form of Exhibit G hereto or such other form as shall be
reasonably requested by the holders of 66-2/3% of the Series A Preferred
Stock. Such report shall include all supporting calculations necessary to
determine such fair market value;
(xii) NOTICE OF CLAIMED DEFAULT. Immediately upon becoming aware that
the holder of any evidence of indebtedness or Preferred Stock of the
Company or any Subsidiary has given notice pursuant to the evidence of
indebtedness or taken any other action with respect to a claimed default
or event of default with respect to any such evidence of indebtedness or
Preferred Stock, a written notice specifying the notice given or action
taken by such holder and the nature of the claimed default or event of
default and what action the Company is taking or proposes to take with
respect thereto; and
(xiii) REQUESTED INFORMATION. With reasonable promptness in the
ordinary course of business, such other data and information relating to
the business, operations, affairs, financial conditions, assets or
properties of the Company or any of its Subsidiaries or relating to the
ability of the Company to perform its obligations under or in respect of
this Agreement, the Series A Preferred Stock or the Certificate of
Designation as any Preferred Shareholder or any such Institutional Holder
may reasonably request.
Without limiting the foregoing, the Company will permit each Preferred
Shareholder, so long as it is the holder of any Series A Preferred Stock, and
each other Institutional Holder of shares of Series A Preferred Stock, which
by virtue of holding such shares shall be bound by this Agreement (or such
Persons as either you or such Institutional Holder may designate, PROVIDED
that such Persons have agreed in writing to be bound by the provisions of
Section 4.01(b) hereof), to visit and inspect, under the Company's guidance,
any of the properties of the Company or any Subsidiary, to examine all of
their books of account, records, reports and other papers, to make copies and
extracts therefrom and to discuss their respective affairs, finances and
accounts with their respective officers and independent public accountants and
8
independent engineers (and by this provision the Company and Old Matador
authorize said accountants and independent engineers to discuss with any
Preferred Shareholder the finances and affairs of the Company and its
Subsidiaries), all at such reasonable times and as often as may be reasonably
requested in good faith. Any visitation or inspection shall be at the sole
expense of the Preferred Shareholder or such Institutional Holder, unless the
Company or Old Matador has defaulted in the performance any of their
obligations hereunder (and has knowledge of such default or has received
written notice thereof) or the holder of any evidence of Indebtedness of the
Company or any Subsidiary gives any written notice or takes any other action
with respect to a claimed default, in which case, any such visitation or
inspection shall be at the sole reasonable expense of the Company.
(b) CONFIDENTIAL INFORMATION. Each Preferred Shareholder agrees that it
will keep confidential in accordance with its internal policies and procedures
in effect from time to time, and will use only for the purpose of evaluating
its investment in the Series A Preferred Stock or protecting, administering or
enforcing its rights regarding such investment, any written information with
respect to the Company or its Subsidiaries which is furnished or obtained
pursuant to this Agreement and which is designated by the Company or its
Subsidiaries to the Preferred Shareholders in writing as confidential,
PROVIDED that a Preferred Shareholder may disclose any such information (i) as
has become generally available to the public (other than as a consequence of a
Preferred Shareholder's actions) or to a Preferred Shareholder on a
non-confidential basis from a source other than the Company or its
Subsidiaries or as was known to a Preferred Shareholder on a non-confidential
basis prior to its disclosure by the Company or its Subsidiaries, (ii) as may
be required or appropriate in any report, statement or testimony submitted to
any municipal, state or federal regulatory body having or claiming to have
jurisdiction over you or to the National Association of Insurance
Commissioners or similar organizations or their successors, (iii) as may be
required or appropriate in response to any summons or subpoena or in
connection with any litigation, (iv) to the extent that a Preferred
Shareholder reasonably believes it appropriate in order to protect its
investment in the Series A Preferred Stock or in order to comply with any law,
order, regulation or ruling applicable to it, (v) to a Preferred Shareholder's
officers, trustees, employees, auditors or counsel or to rating agencies or
another holder of the Series A Preferred Stock, (vi) to Persons who are
parties to substantially identical confidentiality agreements, or (vii) to a
prospective transferee in connection with any contemplated transfer of any of
the Series A Preferred Stock by a Preferred Shareholder PROVIDED that such
prospective transferee agrees to be bound by confidentiality provisions
substantially identical to the foregoing provisions for the benefit of the
Company. By its acceptance of Series A Preferred Stock, any transferee shall
be bound by the terms of this Section 4.01(b).
SECTION 4.02. PURCHASE OF SHARES. The Company will not, directly or
indirectly, through any Subsidiary or otherwise, purchase, redeem or retire,
or make any offer to purchase, redeem or retire, any shares of Series A
Preferred Stock other than pursuant to and in accordance with the applicable
provisions of the Certificate of Designation other than written offers to
repurchase the Series A Preferred Stock, pro rata, from all holders thereof at
the same time and upon the same terms.
9
SECTION 4.03. TRANSACTIONS WITH AFFILIATES. The Company will not, and will
not permit any Subsidiary to, enter into or be a party to any transaction or
arrangement with any Affiliate (including, without limitation, the purchase
from, sale to or exchange of property with, or the rendering of any service by
or for, any Affiliate), except in the ordinary course of and pursuant to the
reasonable requirements of the Company's or such Subsidiary's business and
upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than that Affiliate would obtain in a comparable arm's-length
transaction with a Person other than an Affiliate; PROVIDED, HOWEVER, that for
the purporse of this Section 4.03 the Preferred Shareholders have approved the
terms of the Company's obligations arising under the transactions contemplated
under the Stock Purchase Agreement and the Contribution Agreement.
SECTION 4.04. NATURE OF BUSINESS. Neither the Company nor any Subsidiary
will engage in any business if, as a result, the general nature of the
business, taken on a consolidated basis, which would then be engaged in by the
Company and its Subsidiaries would be substantially changed from the general
nature of the business engaged in by the Company and its Subsidiaries as of
the date of this Agreement.
SECTION 4.05. CORPORATE EXISTENCE; LICENSES AND PERMITS; MAINTENANCE OF
PROPERTIES'. The Company will at all times cause to be done all things
necessary to maintain, preserve and renew the existence of each of the Company
and Old Matador as a corporation organized under the laws of a state of the
United States of America (except in connection with a merger or consolidation
in which the Company or Old Matador is not the surviving corporation) and will
do all things reasonably necessary to preserve and keep in force and effect,
and cause each of the Company's Subsidiaries to preserve and keep in force and
effect, all patents, trademarks, service marks, trade names, copyrights,
licenses and permits necessary and material to the conduct of its and their
respective businesses, and will maintain and keep, and cause each of the
Company's Subsidiaries to maintain and keep, its and their properties in
working order and condition (except for normal wear and tear), and from time
to time make all repairs, renewals and replacements in accordance with
standards of a reasonable and prudent operator of oil and gas properties.
SECTION 4.06. TAXES. The Company will duly pay and discharge, and will
cause each of its Subsidiaries to duly pay and discharge, all taxes,
assessments and governmental charges upon or against the Company, its
Subsidiaries or their respective properties, in each case before the same
become delinquent and before penalties accrue thereon, unless and to the
extent that the same are being contested in good faith by appropriate
proceedings and the Company and its Subsidiaries shall have set aside on their
respective books adequate reserves with respect thereto.
SECTION 4.07. INSURANCE. The Company will and will cause each of its
Subsidiaries to maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and business against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated.
10
SECTION 4.08. EXPENSES OF DIRECTORS. The Company shall promptly reimburse
in full each director of the Company and Old Matador who is not an employee of
the Company and who is elected or designated as a director solely by the
holders of the Series A Preferred Stock for all of each such director's
reasonable out-of-pocket expenses incurred in attending each meeting of the
Board of Directors of the Company and Old Matador or any committee thereof.
SECTION 4.09. REMEDIES AND DEFAULT.
(a) NOTICE OF DEFAULT. If the Company shall default in performing and
complying with its covenants contained in this Section 4, it shall, promptly
after any Responsible Officer of the Company obtains knowledge of such
default, give notice thereof to all holders of outstanding shares of Series A
Preferred Stock, such notice to be in writing and sent in the manner provided
in Section 10.03.
(b) REMEDIES. (i) If the Company shall default in the performance and
observance of any of its covenants contained in this Section 4 and such
default is not remedied within 30 days after the earlier of (1) the day on
which a Responsible Officer of the Company first obtains knowledge of such
default or (2) the day on which a written notice thereof is given to the
Company by the holder of any share of the Series A Preferred Stock, the
holders of at least a majority of the shares of the Series A Preferred Stock
outstanding at the time may proceed to protect and enforce any or all of the
rights of the holders of Series A Preferred Stock and remedies resulting from
such failure, by suit in equity or action at law or by other appropriate
proceeding.
(ii) The Company further agrees, to the extent not prohibited by law, to
pay to the holder or holders of the Series A Preferred Stock all reasonable
costs and expenses incurred by them in enforcing the observance by the Company
of its covenants contained in this Section 4, including reasonable
compensation to such holder's or holders' attorneys for all services rendered
in connection therewith.
SECTION 4.10. MAINTENANCE OF OLD MATADOR AS A WHOLLY-OWNED SUBSIDIARY. The
Company agrees that so long as any shares of Series A Preferred Stock are
outstanding, it will maintain Old Matador as a 100% wholly-owned direct
Subsidiary of the Company and Old Matador shall not issue any capital stock or
any rights, options, agreements or other instruments evidencing the right to
acquire any capital stock of Old Matador, except for such issuance solely to
the Company, and the Company shall not transfer, exchange or convert or enter
into any agreement providing for any transfer, exchange or conversion of any
capital stock of Old Matador owned by the Company.
SECTION 4.11. APPOINTMENT OF DIRECTORS OF OLD MATADOR. The Company agrees
that if at any time the Company has directors elected by the Preferred
Shareholders in accordance with Section 5 of the Certificate of Designation,
it will cause such directors to also be appointed as directors of Old Matador
with the same rights and privileges with respect to Old Matador as they have
with respect to the Company.
11
SECTION 4.12. APPOINTMENT OF OBSERVERS OF OLD MATADOR. The Company agrees
that if at any time the Company has observers appointed by the Preferred
Shareholders in accordance with Section 5 of the Certificate of Designation,
it will cause such persons to be appointed as observers of Old Matador with
the same rights and privileges with respect to Old Matador as they have with
respect to the Company.
SECTION 4.13. JOINT AND SEVERAL OBLIGATIONS. Every covenant,
representation, warranty or agreement of Old Matador or the Company contained
in this Agreement, the Certificate of Designation, the Closing Certificate or
any other certificate, agreement or instrument contemplated under this
Agreement shall be the joint and several obligation of each of Old Matador and
the Company.
SECTION 4.14. PREFERRED STOCK PURCHASE AGREEMENTS. Old Matador and the
Company shall be jointly and severally liable for full performance of all
covenants, representations, warranties and obligations of Old Matador under
those certain Preferred Stock Purchase Agreements (the "PREFERRED STOCK
PURCHASE AGREEMENTS") dated as of May 30, 1996 between Old Matador and each of
the Preferred Shareholders with respect to all matters relating to the period
prior to the Effective Time of the Merger. All agreements and covenants of Old
Matador under the Preferred Stock Purchase Agreements with respect to matters
relating to the period after the Effective Time of the Merger shall terminate
at the Effective Time of the Merger and be superseded by the agreements and
covenants in the Agreement.
SECTION 5. PREFERRED SHAREHOLDERS' SPECIAL RIGHTS.
SECTION 5.01. DIRECT PAYMENT. The Company will pay punctually all amounts
with respect to any shares of Series A Preferred Stock (whether as dividends,
upon redemption of shares or otherwise) payable in accordance with the terms
hereof to each Preferred Shareholder or its nominee or any other Institutional
Holder of the shares of Series A Preferred Stock, without any presentment or
surrender of any certificate for any such shares on partial redemption of any
of the shares evidenced by such certificate: (a) to the Preferred
Shareholder's addresses for payments set forth in Exhibit A hereto, (b) by
wire transfer in immediately available funds to such bank account at a
commercial bank in the United States of America as may be designated under the
Preferred Shareholder's name in Exhibit A or as may hereafter be designated or
redesignated by written notice to the Company from the Preferred Shareholder
or such Institutional Holder of the shares of Series A Preferred Stock, and
(c) if payment in the manner provided by the foregoing clause (b) has not been
specified, by check duly mailed and addressed to such address as may be
specified in a written notice to the Company by the Preferred Shareholder or
such Institutional Holder of the shares of Series A Preferred Stock.
SECTION 5.02. DELIVERY EXPENSE. If a Preferred Shareholder surrenders any
certificate for shares of Series A Preferred Stock to the Company or a
transfer agent of the Company for exchange for certificates of other
denominations or for registration in another name or names, the Company will
pay the cost of insurance and delivery to such place as a Preferred
Shareholder may designate from the Company or its transfer agent of the
certificates issued in substitution or replacement for the surrendered
certificate.
12
SECTION 5.03. TAXES. The Company will, within 5 business days, pay all
stamp and other taxes (other than (a) income or similar taxes, (b) taxes which
are the result of the ownership of the Series A Preferred Stock including,
without limitation, taxes which are imposed on a Preferred Shareholder (or its
transferee) by the State of a Preferred Shareholder's domicile (or any other
State which may impose taxes on a Preferred Shareholder (or its transferee) by
virtue of its assets or operations)) which may be payable in connection with
the execution and delivery of this Agreement or the conversion, and the
authorization thereof, of the Old Preferred Stock to the Series A Preferred
Stock pursuant to the Plan of Merger or in connection with any modification of
the Series A Preferred Stock, this Agreement, the Articles of Incorporation or
the By-laws of the Company or the Resolution, and will indemnify and save each
Preferred Shareholder harmless, without limitation as to time, from and
against any and all liabilities with respect to all such taxes and the Company
agrees to pay to each Preferred Shareholder such additional amounts as may be
necessary in respect of such taxes in order that it shall incur no greater
cost or expenses than the Preferred Shareholder would have incurred had there
been no such taxes payable in connection with such execution and delivery,
such conversion and authorization and such modification. The obligations of
the Company under this Section 5.03 shall survive the termination of this
Agreement and any redemption or repurchase of the Series A Preferred Stock by
the Company.
SECTION 5.04. REPLACEMENT OF CERTIFICATES FOR SHARES. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of any certificate evidencing any shares of Series A
Preferred Stock and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (PROVIDED, if the owner of such shares is a
Preferred Shareholder who has executed this Agreement or an Institutional
Holder, its own agreement to indemnify shall be deemed to be
satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company, at its expense, will execute and deliver, in lieu thereof, a new
certificate for an equal number of shares of Series A Preferred Stock.
SECTION 5.05. REGISTRATION OF PREFERRED STOCK. All shares of Class A
Preferred Stock issued pursuant to this Agreement shall be registered by the
Company in a Preferred Shareholder's name, or the name of its nominee, as a
Preferred Shareholder may request and thereafter, upon surrender of any
certificate therefor as provided herein, in such name or names as a Preferred
Shareholder or its duly registered successors and assigns may request.
SECTION 5.06. EXCHANGE OF CERTIFICATES FOR SHARES. (a) Upon surrender at
the office of the Company of any certificate for shares of Series A Preferred
Stock and at the request of the holder of such shares, the Company will,
promptly, and in any event, within 10 business days, subject to clause (b) of
this Section 5.06, execute and deliver, at the Company's expense (except as
provided below), new certificates for shares of Series A Preferred Stock in
exchange for such surrendered certificates, which new certificates shall be in
denominations of
13
100 shares or any multiple thereof (except as may be necessary to reflect any
number of shares not evenly divisible by 100) as requested by such holder, in
an aggregate number of shares equal to the number of shares represented by
such surrendered certificates. In the event a certificate being surrendered is
for less than 100 shares, a new certificate will be issued for not less than
the number of shares represented by the certificate being surrendered. Such
new certificates shall be registered in the name of such Person as such holder
may request. The Company may require payment of a sum sufficient to cover any
stamp tax or governmental charge imposed in respect of any transfer. Any
issuance of new certificates shall be subject to compliance with the
provisions of the legend described in Section 8.09.
(b) Any transferee of any share of Series A Preferred Stock, by its
acceptance of such share registered in its name (or in the name of its
nominee), shall be deemed to have made the representations set forth in
Section 2.01 hereof.
SECTION 5.07. SPECIAL VOTING, APPROVAL AND CONSENT RIGHTS OF SERIES A
PREFERRED STOCK WITH RESPECT TO OLD MATADOR. Any act or transaction by or
involving Old Matador, which, if taken by or involving the Company, would
require the vote, approval or consent of the holders of Series A Preferred
Stock under this Agreement, the Certificate of Designation, the TCBA or other
applicable law, shall require the same vote, approval or consent of the
holders of Series A Preferred Stock, as if such act or transaction taken by or
involving Old Matador were taken by or involving the Company.
SECTION 6. AMENDMENTS, MODIFICATIONS AND WAIVERS.
SECTION 6.01. Any covenant, agreement, provision or condition of or with
respect to the Series A Preferred Stock as set forth in the Certificate of
Designation or this Agreement, may, with the written consent of the Company,
be amended or modified, or compliance therewith may be waived (either
generally or in any particular instance and either retroactively or
prospectively), by and only by one or more written instruments signed by the
holders of not less than two thirds (2/3) of the aggregate number of shares of
Series A Preferred Stock then outstanding; PROVIDED, HOWEVER, that no such
amendment, modification or waiver of the provisions of Sections 1 and 3 shall
be effective as to a Preferred Shareholder unless consented to by the
Preferred Shareholder in writing; and PROVIDED, FURTHER that no amendment,
modification or waiver shall, without the consent in writing of the holders of
all of the shares of Series A Preferred Stock then outstanding, amend any
provision of this Section 6 or any provision of Article 5 of the Certificate
of Designation. Except to the extent not effective as to a Preferred
Shareholder because not consented to by the Preferred Shareholder pursuant to
the terms hereof, any amendment, modification or waiver pursuant to this
Section 6 shall apply equally to all holders of shares of Series A Preferred
Stock and shall be binding on them, on each future holder of any such shares
(or successor or assignee of such holder) and on the Company.
SECTION 6.02. So long as any shares of Series A Preferred Stock are
outstanding, the Company will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment (it being understood and agreed
that preliminary discussions with respect to any such proposed waiver or
amendment shall not constitute such solicitation, request or
14
negotiation) of any of the provisions of the Series A Preferred Stock as set
forth in the Certificate of Designation or this Agreement, unless each holder
of shares of Series A Preferred Stock (irrespective of the number of shares
then owned by it) shall be informed thereof by the Company and shall be
afforded the opportunity of considering the same and shall be supplied by the
Company with information reasonably sufficient to enable it to make an
informed decision with respect thereto. The Company will not, directly or
indirectly, pay or cause to be paid any remuneration, whether by way of fee or
otherwise, to any holder of shares of Series A Preferred Stock as
consideration for or as an inducement to the entering into by such holder of
any waiver or amendment of any of the terms and provisions of this Agreement,
unless such remuneration is concurrently offered to be paid, on the same
terms, ratably to the holders of all of the shares of Series A Preferred Stock
then outstanding.
SECTION 6.03. The Company will give prompt notice to all holders of the
Series A Preferred Stock of the effectiveness of any amendment, modification
or waiver entered into in accordance with the provisions of this Section 6.
Such notice shall state the terms of any such amendment, modification or
waiver and shall be accompanied by at least two conformed copies (which may be
composite conformed copies) of each written instrument which embodies such
amendment, modification or waiver.
SECTION 7. CERTAIN DEFINITIONS.
The terms hereinafter set forth when used herein shall have the
following meanings:
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of Common
Stock issued by the Company after the effective time of the Merger, other than:
(a) Common Stock issued upon conversion of the Series A Preferred
Stock;
(b) Common Stock issued upon the exercise of warrants, options or
other rights in existence on May 30, 1996 to subscribe for or purchase
Common Stock of Old Matador to the extent such warrants, options or other
rights arise under a bona fide incentive plan for employees or directors
of the Old Matador (described on Exhibit B to the Certificate of
Designation attached hereto as Exhibit C) which warrants, options or other
rights are assumed or otherwise converted into identical warrants, options
or rights to acquire Common Stock of the Company in connection with the
Merger;
(c) Common Stock issued upon the grant of Common Stock after May 30,
1996, or upon the exercise of warrants, options or other rights granted
after May 30, 1996, to subscribe for or purchase Common Stock or Common
Stock of Old Matador (but only to the extent that such warrants, options
or other rights with respect to Common Stock of Old Matador are assumed or
otherwise converted into identical warrants, options or other rights to
acquire Common Stock of the Company) to the extent that such grants,
warrants, options or other rights arise under a bona fide incentive plan
for employees or directors of the Company or its subsidiaries and the
aggregate number of shares so issued shall not exceed 5% of the aggregate
number of shares of Common Stock at any time outstanding, determined on a
fully-diluted basis
15
giving effect to the issuance of the Common Stock described in this
clause (c) and the conversion of the Series A Preferred Stock but not
giving effect to the issuance of any Common Stock described in clause (b);
and
(d) 670,000 shares of Common Stock to be issued to Unocal pursuant
to the Stock Purchase Agreement.
"AFFILIATE" shall mean any Person (other than a Subsidiary) (a) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, (b) which
beneficially owns or holds 5% or more of any class of the Voting Stock of the
Company or (c) 5% or more of the Voting Stock (or in the case of a Person
which is not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by the Company or a Subsidiary. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of Voting Stock, by contract or otherwise.
"COMMISSION" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"COMMON STOCK" shall mean and include any share of any class or series
of capital stock of a corporation, the right of which to share in
distributions of either earnings or assets of such corporation is without
limit as to any amount or percentage and has no preference over any other
capital stock of such Corporation upon dissolution, liquidation or winding-up
of such corporation and in any event shall in the case of the Company include
the shares of Common Stock identified in paragraph 4 of the Closing
Certificate of the Company attached hereto as Exhibit D.
"CONVERSION AGREEMENT" shall mean this Agreement.
"CONVERSION SHARES" shall mean the shares of Common Stock of the Company
issued upon the conversion of any of the shares of Series A Preferred Stock,
PROVIDED, that any such shares that are sold in a registered public offering
shall thereafter cease to be Conversion Shares.
"ENVIRONMENTAL LAW" shall mean any federal, state or local statute, law,
regulation, order, consent decree, judgment, permit, license, code, covenant,
deed restriction, common law, treaty, convention, ordinance or other
requirement relating to public health, safety or the environment, including,
without limitation, those relating to releases, discharges or emissions to
air, water, land or groundwater, to the withdrawal or use of groundwater, to
the use and handling of polychlorinated biphenyls or asbestos, to the
disposal, treatment, storage or management of hazardous or solid waste, or
Hazardous Substances or crude oil, or any fraction thereof, or to exposure to
toxic or hazardous materials, to the handling, transportation, discharge or
release of gaseous or liquid Hazardous Substances and any regulation, order,
notice or demand issued pursuant to such law, statute or ordinance, in each
case applicable to the property of the Company and its Subsidiaries or the
operation, construction or modification of any thereof, including without
limitation, the following: the Comprehensive Environmental
16
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act of 1976 and the
Hazardous and Solid Waste Amendments of 1984, the Hazardous Materials
Transportation Act, as amended, the Federal Water Pollution Control Act, as
amended by the Clean Water Act of 1976, the Safe Drinking Water Control Act,
the Clean Air Act of 1966, as amended, the Toxic Substances Control Act of
1976, the Emergency Planning and Community Right-to-Know Act of 1986, the
National Environmental Policy Act of 1975, the Oil Pollution Act of 1990 and
any similar or implementing state law, and any state statute and any further
amendments to these laws providing for financial responsibility for cleanup or
other actions with respect to the release or threatened release of Hazardous
Substances or crude oil, or any fraction thereof, and all rules, regulations,
guidance documents and publications promulgated thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA shall be construed to also refer to any
successor sections.
"ERISA AFFILIATE" shall mean any corporation, trade or business that is,
along with the Company, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in section 414(b) and
414(c), respectively, of the Code or Section 4001 of ERISA.
"GAAP" shall mean United States generally accepted accounting principles
at the time.
"HAZARDOUS SUBSTANCE" shall mean any hazardous or toxic material,
substance or waste, pollutant or contaminant which is regulated under any
statute, law, ordinance, rule or regulation of any local, state, regional or
federal authority having jurisdiction over the property of the Company and its
Subsidiaries or its use, including but not limited to any material, substance
or waste which is: (a) defined as a hazardous substance under Section 311 of
the Federal Water Pollution Control Act (33 U.S.C. Section 1317), as amended;
(b) regulated as a hazardous waste under Section 1004 or Section 3001 of the
Federal Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 ET SEQ.), as amended; (c) defined as a
hazardous substance under Section 101 of the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Section 9601 ET SEQ.), as
amended; or (d) defined or regulated as a hazardous substance or hazardous
waste under any rules or regulations promulgated under any of the foregoing
statutes.
"INITIAL PUBLIC OFFERING" shall have the meaning ascribed to such term
in the Certificate of Designation, in the form attached hereto as Exhibit C.
"INSTITUTIONAL HOLDER" shall mean any of the following Persons: (a) any
bank, savings and loan association, savings institution, trust company or
national banking association, acting for its own account or in a fiduciary
capacity, (b) any charitable foundation, (c) any insurance company, (d) any
fraternal benefit society, (e) any pension, retirement or profit-sharing trust
or fund within the meaning of Title I of ERISA or for which any bank, trust
company, national
17
banking association or investment adviser registered under the Investment
Advisers Act of 1940, as amended, is acting as trustee or agent, (f) any
investment company or business development company, as defined in the
Investment Company Act of 1940, as amended, (g) any small business investment
company licensed under the Small Business Investment Act of 1958, as amended,
(h) any broker or dealer registered under the Securities Exchange Act of
1934, as amended, or any investment adviser registered under the Investment
Advisers Act of 1940, as amended, (i) any government, any public employees'
pension or retirement system, or any other government agency supervising the
investment of public funds, (j) any other entity all of the equity owners of
which are Institutional Holders or (k) any other Person which is within the
definition of "qualified institutional buyer" as such term is used in Rule
144A, as from time to time in effect, promulgated under the Securities Act of
1933, as amended.
"JUNIOR STOCK" shall have the meaning ascribed to such term in the
Certificate of Designation.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries taken as a whole or (b) the ability of the Company
to perform its obligations under or in respect of this Agreement, the Series A
Preferred Stock or the Certificate of Designation, or (c) the validity or
enforceability of this Agreement, the Series A Preferred Stock or the
Certificate of Designation.
"MULTIEMPLOYER PLAN" shall have the same meaning as in ERISA.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"PERSON" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, entity, limited liability company or government (whether national,
federal state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or department thereof).
"PLAN" shall mean a "pension plan," as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to which
the Company or any ERISA Affiliate contributed or is a member or otherwise may
have any liability.
"PREFERRED STOCK" shall mean any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation and in any event shall in the case of the
Company include the shares of Series A Preferred Stock.
"QUALIFIED INITIAL PUBLIC OFFERING" shall have the meaning ascribed to
such term in the Certificate of Designation.
"REPORTABLE EVENT" shall have the same meaning as in ERISA.
18
"RESPONSIBLE OFFICER" shall mean the President, any Executive Vice
President or any Vice President of the Company.
"SECURITY" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"SECURITIES ACT" shall mean the Securities Act of 1933 as amended.
"SUBSIDIARY" shall mean any corporation more than 50% of the shares of
capital stock of which having ordinary voting power for the election of
directors is owned, directly or indirectly, by the Company and/or any other
Subsidiary.
"UNDERLYING SHARES" shall mean the shares of Common Stock of the Company
issuable upon conversion of any of the shares of Series A Preferred Stock.
"VOTING STOCK" shall mean Securities of any class or classes, the holders
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions).
SECTION 8. RESTRICTIONS ON TRANSFERABILITY OF SHARES; COMPLIANCE WITH
SECURITIES ACT.
SECTION 8.01. RESTRICTIONS ON TRANSFERABILITY. The Series A Preferred Stock
and the Company's Common Stock issued upon the conversion of any of the Series A
Preferred Stock pursuant to the Articles of Incorporation shall not be
transferable except upon the conditions hereinafter specified, which conditions
are intended to insure compliance with the provisions of the Securities Act and
any applicable state Securities laws, in respect of the transfer of any Series A
Preferred Stock or any such Common Stock.
SECTION 8.02. NOTICE OF PROPOSED TRANSFER; REGISTRATION NOT REQUIRED. The
holder of each share of Series A Preferred Stock or any Conversion Shares, by
acceptance thereof, agrees to give prior written notice to the Company of such
holder's intention to transfer such Series A Preferred Stock or the Underlying
Shares relating thereto or such Conversion Shares (or any portion thereof),
describing briefly the manner and circumstances of the proposed transfer;
PROVIDED, HOWEVER, that no such notice shall be required for a transfer under a
registration, qualification or filing for exemption requested in accordance
with the provisions of Section 8.03 or in connection with A transfer made in
accordance with the exemptions afforded by Rule 144 or Rule 144A of the General
Rules and Regulations of the Commission (or any other available exemption from
the registration requirements of the Securities Act so long as such holder
complies with the provisions of the legend described in Section 8.09 hereof if
such legend is still required on any such certificates of Series A Preferred
Stock or Conversion Shares).
SECTION 8.03. (a) REQUIRED REGISTRATION. The holders of at least 33-1/3% of
the aggregate number of Underlying Shares and Conversion Shares may request the
Company to effect the registration (the "DEMAND Registration") or qualification
or filing for exemption
19
under applicable federal and state securities laws of such Underlying Shares or
Conversion Shares. The Company shall promptly give written notice to all
holders of Underlying Shares and Conversion Shares of a proposed registration
or qualification or filing for exemption, and shall, subject to the conditions
of this Section 8.03 and Section 8.04, as expeditiously as possible, effect any
sUch registration or qualification or filing for exemption of:
(i) such Underlying Shares, or such Conversion Shares, or both;
(ii) all Underlying Shares and Conversion Shares of holders of Series
A Preferred Stock or Conversion Shares which shall have advised the
Company in writing within 30 days after the giving of such written notice
by the Company of their desire to have their Underlying Shares or
Conversion Shares registered or qualified or exempted,
with, or notification to or approval of, any governmental authority under any
federal or state securities laws, or listing with any securities exchange, which
may be required reasonably to permit the sale or other disposition of any such
Underlying Shares or Conversion Shares which the holders thereof propose to
make, and the Company will keep effective such registration, qualification,
exemption, notification or approval for a period of 180 days after the
effectiveness thereof as may be necessary to effect such sales or dispositions.
(b) REGISTRATION PROCEDURES. In connection with the Company's obligations
with respect to the Demand Registration pursuant to Section 8.03(a) hereof,
the Company shall use commercially reasonable efforts to effect or cause the
registration of the Underlying Shares or Conversion Shares under the Securities
Act to permit the sale of such Underlying Shares or Conversion Shares by the
holders thereof in accordance with the intended method of distribution thereof,
and pursuant thereto, the Company shall:
(i) prepare and file with the Commission a registration statement or
registration statements with respect to the Demand Registration on any
form which may be utilized by the Company and which shall permit the
disposition of the Underlying Shares or Conversion Shares in accordance
with the intended method or methods thereof, and use commercially
reasonable efforts to cause such registration statement or registration
statements to become effective on or prior to 45 days from the date of any
such request;
(ii) prepare and file with the Commission such amendments and
supplements to a registration statement or statements hereunder and the
prospectus used in connection therewith as may be necessary to maintain
the effectiveness of such registration statement for the applicable period
specified in Section 8.03(a) hereof, and comply with the provisions of the
Securities Act with respect to the disposition of all of the Underlying
Shares or Conversion Shares to be included in such registration statement
during such applicable period in accordance with the intended methods of
disposition by the holders thereof set forth in the registration
statement;
(iii) provide the holders of the Underlying Shares or Conversion
Shares to be included in a registration statement hereunder and the
underwriters (which term, for
20
purposes of this Agreement, shall include a person deemed to be an
underwriter within the meaning of Section 2(11) of the Securities Act),
if any, of the Securities being sold and counsel for such underwriters
and not more than one counsel for such holders (which counsel shall be
subject to reasonable approval by the Company) the opportunity to
participate in the preparation of such registration statement, each
prospectus included therein or filed with the Commission, and each
amendment or supplement thereto; and make available for inspection by
such persons such financial and other information, books and records of
the Company, and cause the officers, directors and employees of the
Company, and counsel and independent certified public accountants for the
Company, to respond to such inquiries, as shall be reasonably necessary,
in the opinion of the respective counsel to such holders and such
underwriters, to conduct a reasonable investigation within the meaning of
the Securities Act;
(iv) promptly notify the selling holders of Underlying Shares or
Conversion Shares to be included in a registration statement hereunder and
the managing underwriters, if any, of the Securities being sold and (if
requested by any such person) confirm such advice in writing, (1) when
such registration statement, the prospectus or any prospectus supplement
or post-effective amendment has been filed, and, with respect to such
registration statement or any post-effective amendment, when the same has
become effective, (2) of any request by the Commission for amendments or
supplements to such registration statement or the prospectus or for
additional or supplemental information, (3) of the issuance by the
Commission of any stop order suspending the effectiveness of such
registration statement or the initiation of any proceedings for that
purpose, (4) if at any time the representations and warranties of the
Company contemplated by paragraph (xi) below cease to be true and correct
in all material respects, (5) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Underlying Shares or Conversion Shares for sale in any jurisdiction or the
initiation or threat of any proceeding for such purpose, or (6) at any
time when a prospectus is required to be delivered under the Securities
Act, of the happening of any event as a result of which such registration
statement, prospectus, any prospectus supplement, or any document
incorporated by reference in any of the foregoing contains an untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing;
(v) make reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of a registration statement hereunder or any
post-effective amendment thereto at the earliest practicable date;
(vi) if reasonably requested by the managing underwriter or
underwriters or the holders of at least a majority in aggregate principal
amount of the Underlying Shares or Conversion Shares being sold in
connection with an underwritten offering, promptly incorporate in a
prospectus supplement or post-effective amendment such information as
such managing underwriter or underwriters or such holders of at least a
majority in aggregate principal amount of the Underlying Shares or
Conversion Shares being sold specify should be included therein relating
to the sale of the Underlying Shares or
21
Conversion Shares, including, without limitation, information with
respect to the principal amount of Underlying Shares or Conversion Shares
being sold to such underwriters, the purchase price being paid therefor
by such underwriters and with respect to any other terms of the
underwritten (or best efforts underwritten) offering of the Underlying
Shares or Conversion Shares to be sold in such offering, except to the
extent that the Company is advised in a written opinion of outside
counsel that the inclusion of such information is reasonably likely to
violate the federal securities laws; and make all required filings of
such prospectus supplement or post-effective amendment promptly after
notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment;
(vii) furnish to each holder of Underlying Shares or Conversion Shares
to be included in a registration statement hereunder and each underwriter,
if any, of the Securities being sold such number of copies of such
registration statement, each such amendment and supplement thereto (in
each case including all exhibits thereto), the prospectus included in such
registration statement and such other documents as such holder and
underwriter, if any, may reasonably request in order to facilitate the
disposition of the Underlying Shares or Conversion Shares owned by such
holder; the Company consents to the use of the prospectus or any amendment
or supplement thereto by each of the selling holders of Underlying Shares
or Conversion Shares and the underwriters in connection with the offering
and sale of the Underlying Shares or Conversion Shares covered by the
prospectus or any supplement or amendment thereto;
(viii) use commercially reasonable efforts to (1) register or qualify
the Underlying Shares or Conversion Shares to be included in a
registration statement hereunder under such other securities laws or Blue
Sky laws of such jurisdictions as any holder of such Underlying Shares or
Conversion Shares and each underwriter, if any, of the Securities being
sold shall reasonably request, (2) keep such registrations or
qualifications in effect for so long as the registration statement remains
in effect and (3) take any and all such actions as may be reasonably
necessary or advisable to enable such holder and underwriter, if any, to
consummate the disposition in such jurisdictions of such Underlying Shares
or Conversion Shares owned by such holder; PROVIDED, HOWEVER, that the
Company shall not be required for any such purpose to (A) qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it would not otherwise be required to qualify but for the
requirements of this paragraph (viii) or (B) consent to general service of
process in any such jurisdiction;
(ix) use commercially reasonable efforts to cause all of the
Underlying Shares or Conversion Shares that are to be included in a
registration statement hereunder 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 the holder or
holders thereof to consummate the disposition of such Underlying Shares or
Conversion Shares;
(x) cooperate with the holders of the Underlying Shares or
Conversion Shares to be included in a registration statement hereunder and
the managing underwriters, if
22
any, to facilitate the timely preparation and delivery of certificates
representing Underlying Shares or Conversion Shares to be sold and not
bearing any restrictive legends; and, in the case of an underwritten
offering, enable such Underlying Shares or Conversion Shares to be in
such denominations and registered in such names as the managing
underwriters may request at least two business days prior to any sale of
the Underlying Shares or Conversion Shares;
(xi) enter into such customary agreements (including an underwriting
agreement) and take such other actions in connection therewith as the
holders of at least a majority in aggregate principal amount of the
Underlying Shares or Conversion Shares to be included in a registration
statement hereunder shall reasonably request in order to expedite or
facilitate the disposition of such Underlying Shares or Conversion Shares
and in such connection, whether or not an underwriting agreement is
entered into and whether or not the disposition is an underwritten
offering, (1) make such representations and warranties to the holders of
such Underlying Shares or Conversion Shares and the underwriters, if any,
in form, substance and scope as are customarily made in an underwritten
offering; (2) obtain an opinion of counsel to the Company in customary
form and covering such matters of the type customarily covered by such
opinion, addressed to each selling holder and the underwriters, if any,
and dated the effective date of such registration statement and dated the
effective date of a post-effective amendment to the registration
statement, if such is filed (or, if such registration statement covers an
underwritten offering, dated the date of the closing as specified in the
underwriting agreement); (3) obtain a "cold comfort" letter from the
independent certified public accountants of the Company addressed to the
selling holders of Underlying Shares or Conversion Shares and to the
underwriters, if any, dated the effective date of such registration
statement and dated the effective date of a post-effective amendment to
the registration statement, if such is filed (and, if such registration
statement covers an underwritten offering, dated the date of the closing
as specified in the underwriting agreement), such letter to be in
customary form and covering such matters of the type customarily covered
by such letter; and (4) deliver such documents and certificates as may be
reasonably requested by the holders of at least a majority in aggregate
principal amount of the Underlying Shares or Conversion Shares being sold
and the managing underwriters, if any, to evidence compliance with clause
(1) above and with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company;
(xii) otherwise use commercially reasonable 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 a period of at least twelve months which shall satisfy
the provisions of Section 11(a) of the Securities Act and Rule 158 of the
Commission thereunder; and
(xiii) use commercially reasonable efforts to have the Underlying
Shares or Conversion Shares listed, subject to notice, on the Nasdaq
National Market or other applicable exchange.
23
Upon the occurrence of any event contemplated by paragraph (iv) above, the
Company shall, as soon as reasonably practicable, prepare and furnish to each
holder included in such registration statement and underwriter, if any, a
reasonable number of copies of a prospectus (supplemented or amended if
necessary) so that, as thereafter delivered to the purchasers of the Underlying
Shares or Conversion Shares, such prospectus shall not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing. Each holder of Underlying Shares or
Conversion Shares agrees that upon receipt of any notice from the Company of the
happening of any event of the kind described in clauses (2) through (6) of
paragraph (iv) hereof, such holder shall forthwith discontinue the disposition
of Underlying Shares or Conversion Shares pursuant to the registration statement
applicable to such Underlying Shares or Conversion Shares until such holder
receives copies of such amended or supplemented registration statement or
prospectus, and if so directed by the Company, such holder shall deliver to the
Company (at the Company's expense) all copies, other than permanent file copies,
then in such holders' possession of the prospectus covering such Underlying
Shares or Conversion Shares at the time of receipt of such notice.
The Company may require each holder of Underlying Shares or Conversion
Shares as to which any registration is being effected under this Section 8.03
or under Section 8.05 to furnish to the Company such information regarding such
holdeR and the distribution of such Underlying Shares or Conversion Shares as
the Company may from time to time reasonably request in writing in order to
comply with the Securities Act. Each holder of Underlying Shares or Conversion
Shares as to which any registration is being effected agrees to notify the
Company as promptly as practicable of any inaccuracy or change in information
previously furnished by such holder to the Company or of the happening of any
event in either case as a result of which any prospectus relating to such
registration contains an untrue statement of a material fact regarding such
holder or the distribution of such Underlying Shares or Conversion Shares or
omits to state any material fact regarding such holder or the distribution of
such Underlying Shares or Conversion Shares required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and to furnish promptly to the Company any
additional information required to correct and update any previously furnished
information or required so that such prospectus shall not contain, with respect
to such holder or the distribution of such Underlying Shares or Conversion
Shares, an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing.
SECTION 8.04. CONDITIONS TO REQUIRED REGISTRATION. The Company shall
not be required to register or effect any registration of Underlying Shares
or Conversion Shares under the Securities Act pursuant to Section 8.03:
(a) [Intentionally Left Blank];
(b) unless at least 120 days shall have elapsed after a registration
of other shares in which the holders of the Series A Preferred Stock or
Underlying Shares or Conversion Shares could participate pursuant to
Section 8.05;
24
(c) unless the request therefor is to register not less than 33% of
the aggregate number of Underlying Shares and Conversion Shares not
theretofore registered pursuant to Section 8.03 or Section 8.05;
(d) so long as the Company has not afforded the right to any other
security holders to require registration (other than pursuant to Form S-3
promulgated under the Securities Act, or any successor form that is
intended for implementation of the so-called "short form" registration
process under the Securities Act (collectively, "FORM S-3") or Form S-4 or
Form S-8, in each case promulgated under the Securities Act, or any
respective successor form), unless the registration can be effected on
Form S-3;
(e) at any time prior to the Initial Public Offering of the Company
unless, prior to the Initial Public Offering, the Company has agreed, for
the benefit of any other holder of Securities of the Company, to register
for public distribution any Security of the Company;
(f) at any time more than five (5) years subsequent to the Qualified
Initial Public Offering; and
(g) unless the Company shall have been consulted in good faith
regarding who the managing underwriter shall be for any underwritten
public offering, PROVIDED, in any event, that the holders of the Series A
Preferred Stock and Conversion Shares requesting registration shall have
the right, in their sole discretion, to choose the managing underwriter.
In addition to and not in limitation of the foregoing restrictions, in
connection with the Initial Public Offering, each holder of Underlying Shares or
Conversion Shares shall enter into a reasonably customary form of lock-up
agreement with respect to the public distribution of its Underlying Shares or
Conversion Shares, PROVIDED, that such lock-up agreement shall be no more
restrictive than any lock-up agreement entered into by Xxxxxx Xxxxx or any
member of the Board of Directors of Matador (other than directors elected by the
holders of the Series A Preferred Stock) in connection with the Initial Public
Offering and such lock-up agreement shall in no event restrict the public
distribution of the Underlying Shares or Conversion Shares of such holder for a
period in excess of 180 days after the Initial Public Offering.
SECTION 8.05. INCIDENTAL REGISTRATIONS. The Company agrees that at any time
after an Initial Public Offering (and, in the event the Company has granted any
so-called piggy-back rights with respect to the Initial Public Offering, in
connection with the Initial Public Offering) and before the tenth (10th)
anniversary of the Qualified Initial Public Offering, it proposes to register
any of its Securities in a primary offering of such Securities under the
Securities Act (otherwise than pursuant to Section 8.03) on Form S-1 or any
other form of registration statement (other than Form S-4 or Form S-8) then
available for the registration under the Securities Act of Securities of the
Company, it will give timely written notice to all holders of outstanding
Series A Preferred Stock and Conversion Shares of its intention so to do and
upon the written request of the holder of any such Series A Preferred Stock or
Conversion Shares, given within thirty days after receipt of any such notice
from the Company, the Company will in each
25
instance, subject to the next paragraph of this Section 8.05, use commercially
reasonable efforts to cause all such Underlying Shares or Conversion Shares
held by any such requesting holder of Series A Preferred Stock or Conversion
Shares to be registered under the Securities Act and registered or qualified
under any state securities laws, all to the extent necessary to permit the sale
or other disposition thereof in the manner stated in such request by the
prospective seller of the securities so registered. Any holder requesting
registration of its Underlying Shares or Conversion Shares shall in its request
describe briefly the manner of any proposed transfer of its Underlying Shares
or Conversion Shares which proposed transfer shall, in any event, be in
accordance with the manner of distribution provided for in such registration.
The Company shall provide to each holder of Series A Preferred Stock or
Conversion Shares that has requested inclusion of shares in the registration
written notice of the date (the "FINAL DECISION DATE") that is three (3)
business days prior to the Company's estimate of the date it will first send to
either underwriters or potential investors a preliminary prospectus covering
the proposed offering. The Final Decision Date will not change so long as a
preliminary prospectus is sent to either underwriters or potential investors
within fifteen (15) days of the Company's estimated date for sending the
preliminary prospectus. The notice shall be made to each holder of Series A
Preferred Stock or Conversion Shares in writing by overnight air courier or
facsimile communication in accordance with the provisions of Section 10.03 at
least two (2) business days prior to the Final Decision Date. Each holder of
Series A Preferred Stock or Conversion Shares that has previously requested
inclusion of shares in the registration shall have until 5:00 p.m. Dallas,
Texas time on the Final Decision Date to deliver to the Company a written
notice of withdrawal of its request to include shares in the proposed offering.
Any holder of Series A Preferred Stock or Conversion Shares that has previously
requested inclusion of shares in the registration that does not withdraw such
request in accordance with the preceding sentence shall thereafter be bound to
(i) sell in the proposed offering covered by the registration the number of
shares previously requested by the holder to be included in the registration
(subject to reduction in accordance with the next paragraph of this Section
8.05) upon substantially the same terms and at the same price per share as
shares are sold by the Company in the proposed offering, (ii) voluntarily
convert into Conversion Shares such number of shares of Series A Preferred
Stock as are necessary to permit such holder to deliver and sell the required
number of shares in the proposed offering, and (iii) enter into such customary
agreements (including an underwriting agreement and any lock-up agreement
requested by the Managing Underwriter and agreed to by the Company) and take
such other actions in connection therewith as the Company shall reasonably
request in order to expedite or facilitate the registration or the proposed
offering, and in such connection (1) make such representations and warranties
as are relevant to such holder to the Company and the underwriters, in form,
substance and scope as are customarily made in an underwritten offering; (2)
comply with information requests by the Company in accordance with the last
paragraph of Section 8.03; and (3) deliver such documents and certificates aS
may be reasonably requested by the Company and the managing underwriters to
evidence compliance with clause (1) above and with any customary conditions
contained in the underwriting agreement or other agreement entered into by the
selling holder which in no event shall require indemnification of any party by
such selling holder except with regards to written material misstatements or
material omissions in written material provided by such selling holder. Nothing
in this Section 8.05 shall be deemed to require the Company to proceed with any
registration of its Securities after giving the notice herein provided.
Registration pursuant to this Section 8.05
26
shall be in accordance with, and subject to the provisions of, the "Registration
Procedures" set forth in Section 8.03(b) (other than clauses (i), (ii) and (v)
thereof).
If the managing underwriter engaged by the Company in connection with an
underwritten public offering of such Securities proposed for registration under
the Securities Act determines in good faith and for valid business reasons that
registration of such Underlying Shares or Conversion Shares would have an
adverse effect on the marketability or the price of such offering, the Company
shall cause such managing underwriter to give prompt written notice of such
determination to such requesting holder or holders, setting forth in reasonable
detail the reasons for such determination. In such event the Company, upon
written notice to the holders of such Underlying Shares or Conversion Shares,
shall have the right to limit such Underlying Shares or such Conversion Shares
to be registered, if any, to the largest number which would not result in such
adverse effect on marketability or the price of such offering (such limitation
being applied to each such requesting holder pro rata in respect of the number
of shares subject to such request); PROVIDED that if Securities of the Company
held by any Person (other than the Company) are to be included in such
underwritten public offering, such reduction in the number of Underlying Shares
or Conversion Shares (treating all such Shares as one class of Securities for
this purpose) shall be not more than proportionate to the reduction in the
number of such other Securities which are to be included in such registration.
SECTION 8.06. EXPENSES; RELIANCE. The Company will pay all reasonable
expenses, including, without limitation, registration fees, qualification fees,
legal expenses, including the reasonable fees and expenses of one counsel to
the holders of Series A Preferred Stock or Conversion Shares whose Underlying
Shares or Conversion Shares are being registered, printing expenses and the
costs of special audits, if any and "COLD COMFORT" letters, expenses of
underwriters (excluding reasonable discounts and commissions, but including the
reasonable fees and expenses of any necessary special experts) in connection
with the registration, qualification, notification or exemption requested by
any holder or holders of Series A Preferred Stock or Conversion Shares pursuant
to Section 8.03 OR Section 8.05. Notwithstanding the foregoing, The Company
shall not be required to bear any such expenses in connection with any
registration of Underlying Shares or Conversion Shares under the Securities Act
pursuant to Section 8.03 more than twice, PROVIDED, that:
(i) no registration shall be included as a required registration
pursuant to Section 8.03 until such time, if any, as the registration
statement filed in connection therewith shall be declared effective,
except in the event that the holders of the Underlying Shares or
Conversion Shares demanded to be included in such registration request
that the Company withdraw such registration statement prior to the
effectiveness thereof for reasons which are reasonably within the control
of such Holders or because of the available sales price of such shares;
and
(ii) no registration which has been declared effective shall be
included as a required registration pursuant to Section 8.03 if the
holders of Underlying Shares or Conversion Shares are unable to register
and sell at least 80% of any Underlying Shares or Conversion Shares
demanded to be included in such registration for reasons
27
(excluding, in any event, changes in market price) which are not
reasonably within the control of such holders.
SECTION 8.07. INDEMNIFICATION AND CONTRIBUTION. (a) In connection with any
registration, qualification, notification, or exemption of Securities under
Section 8.03 or Section 8.05, the Company hereby indemnifies each holder of The
Underlying Shares and/or Conversion Shares, and each underwriter thereof,
including each Person, if any, who controls each such holder within the meaning
of Section 15 of the Securities Act, against all losses, claims, damages and
liabilities caused by any untrue, or alleged untrue, statement of a material
fact contained in any registration statement or prospectus or notification or
offering circular prepared by the Company, any agent or employee of the Company
or any underwriter (and as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary prospectus
or caused by any omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
untrue statement or alleged untrue statement or omission based upon information
furnished in writing to the Company by such holder or any such underwriter
expressly for use therein, and the Company and each officer, director and
controlling Person of the Company shall be indemnified by each holder of the
Underlying Shares and/or Conversion Shares or by the underwriters, as the case
may be, for all such losses, claims, damages and liabilities caused by any
untrue, or alleged untrue, statement or omission, or alleged omission, based
upon information furnished in writing to the Company by each such holder
thereof or the underwriters, as the case may be, expressly for any such use.
The foregoing is subject to the condition that, insofar as it relates to any
untrue statement, alleged untrue statement or omission or alleged omission made
in any preliminary prospectus but eliminated or remedied in the final
prospectus (or in any amendment or supplement thereto), the indemnity of the
Company shall not inure to the benefit of any underwriter from whom the Person
asserting any loss, claim or damage purchased the Conversion Shares which were
the subject thereof (or to the benefit of any Person who controls such
underwriter), if a copy of the final prospectus (or such amendment or
supplement thereto) was not sent or given to such Person at or prior to the
time such action is required by the Securities Act.
(b) Promptly upon receipt by a party indemnified under this Section of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 8.07, such indemnified party shall notify
thE indemnifying party in writing of the commencement of such action, and the
failure so to notify the indemnifying party shall relieve it of any liability
which it may have to any indemnified party under Section 8.07(a), but not
otherwise, PROVIDED that the failure to give such notice shall have materially
impaired the ability of the indemnifying party to avail itself of the rights
described hereinbelow in this Section 8.03(b). In case notice of commencement
of any sucH action shall be given to the indemnifying party as above provided,
the indemnifying party shall be entitled to participate in and, to the extent
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense of such action at its own expense, with counsel chosen by it
and reasonably satisfactory to such indemnified party. The indemnified party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, and the fees and expenses of such counsel
shall
28
be paid by the indemnified party unless the indemnifying party either agrees
to pay the same or fails to assume the defense of such action with counsel
reasonably satisfactory to the indemnified party. No indemnifying party shall
be liable for any settlement entered into without its consent, which consent
will not be unreasonably withheld or delayed.
(c) If the indemnification provided for in this SECTION 8.07 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses to which such
indemnified party would be otherwise entitled under SECTIONS 8.07(a) and (b),
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact, has been made by, or relates to information supplied by, such
indemnifying party or indemnified parties, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such party
in connection with any investigation or proceeding. In no event shall any
Person be required to contribute an amount greater than the dollar amount of
the proceeds received by such Person with respect to the sale of any
Underlying Shares.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this SECTION 8.07(c) were determined by PRO RATA
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. The contribution provided for in this SECTION 8.07(c) shall
survive, with respect to A holder of Conversion Shares, the transfer of
Conversion Shares by such holder and with respect to a holder of Conversion
Shares, shall remain in full force and effect regardless of any investigation
made by or on behalf of any indemnified party.
(d) In connection with any registration pursuant to SECTION 8.03 or
SECTION 8.05, inclusive, the Company agrees, and each holder of Series A
Preferred Stock or Conversion Shares by acceptance of such Series A Preferred
Stock or Conversion Shares agrees, that it will enter into an agreement
containing the indemnification provisions of this SECTION 8.07, and the
Company shall not be required to register any shares held by any holder that
does not enter into such an agreement.
SECTION 8.08. ADDITIONAL REGISTRATION RIGHTS. Without the written consent
of the holders of 66-2/3% of Underlying Shares and Conversion Shares which
have not previously been registered, the Company will not grant to any Person
at any time on or after the Closing
29
Date the right to request the Company to effect the registration or
qualification or filing for exemption under applicable federal or state
Securities laws of any Securities of the Company, whether pursuant to any
subsequent agreement or understanding reached on or after the Closing Date or
pursuant to any amendment or supplement to any agreement existing on or prior
to the Closing Date or otherwise, which right would in any way conflict with
the rights of the holders of Series A Preferred Stock hereunder, including,
without limitation, the rights granted to such holders pursuant to SECTIONS
8.03 and 8.05. It is agreed that the granting by the Company to other Persons
of Registration Rights that are substantially identical to, or less favorable
than, the registration rights granted to the holders of the Series A Preferred
Stock under this Agreement shall not be deemed to be in conflict with the
rights of the holders of the Series A Preferred Stock hereunder.
SECTION 8.09. RESTRICTIVE LEGENDS. (a) Each certificate representing
shares of the Series A Preferred Stock and each certificate for shares of
Common Stock of the Company initially issued upon the conversion of any Series
A Preferred Stock and each certificate for shares of Common Stock of the
Company issued to a subsequent transferee of such certificate shall be stamped
or otherwise imprinted with legends in substantially the following forms:
"Neither the shares evidenced by this certificate nor the shares of
Common Stock issuable upon conversion hereof have been registered or
qualified under the Securities Act of 1933, as amended, or any state
securities laws and may be reoffered and sold only if registered or
qualified pursuant to the provisions of said Securities Act and
applicable state laws or if an exemption from registration is
available and the Company shall have received an opinion of counsel
(which shall include staff counsel to any holder of this
certificate) to the effect that such an exemption is available."
"The transfer of the shares represented by this certificate is
subject to the conditions specified in the Preferred Stock
Conversion Agreement dated as of January 19, 1998 between the
Company and the shareholders named therein, and no transfer of
such shares shall be valid or effective until such conditions shall
have been fulfilled."
In the event that Conversion Shares are sold pursuant to a registration
statement covering Underlying Shares or Conversion Shares that has become
effective under the Securities Act and under any applicable state securities
laws or in the event that the Company shall receive an opinion of its counsel
that, in the opinion of such counsel, any such legend is not, or is no longer,
necessary or required with respect to any Conversion Shares (including,
without limitation, because of the availability of the exemptions afforded by
Rule 144 or Rule 144A of the General Rules and Regulations of the Commission),
the Company shall, or shall instruct its transfer agents and registrars to,
remove such legend from the certificates evidencing Conversion Shares or issue
new certificates without such legend in lieu thereof. Upon the written request
of the holder or holders of any Series A Preferred Stock or any Conversion
Shares, the Company covenants and agrees forthwith to request its counsel to
30
render an opinion with respect to the matters covered by this SECTION 8.09 and
to bear all expenses in connection with the same.
SECTION 8.10. MISCELLANEOUS. The Company shall use commercially reasonable
efforts to comply with all reporting requirements set forth or referred to in
Rule 144A and, subsequent to the Initial Public Offering, Rule 144, each as
promulgated under the Securities Act.
SECTION 9. STOCK PURCHASE RIGHTS.
(a) The Company shall not issue, sell or exchange, or agree to issue,
sell or exchange, in any case whether from treasury shares, from the issuance
of authorized but unissued shares or otherwise, any (i) Additional Shares of
Common Stock, (ii) any debt or equity security which by its terms is
convertible into or exchangeable for Additional Shares of Common Stock or
(iii) any option, warrant or other right to subscribe for, purchase or
otherwise acquire any Additional Shares of Common Stock or any debt or equity
security of the Company described in (ii) above (the securities listed in (i),
(ii) and (iii) above, the "OFFERED SECURITIES"), unless the Company shall, in
accordance with the provisions of this Section 9, give each holder of shares
of Series A Preferred Stock of the Company (each, an "OFFEREE" and
collectively, the "OFFEREES") the first right and option (the "PURCHASE
RIGHT") to purchase up to a number of the Offered Securities equal to the
Offeree's Proportionate Percentage (as defined below) of such Offered
Securities, on terms and conditions (subject to the provisions of this Section
9), including a purchase price equal to the dollar value of the consideration,
set forth in a notice (the "NOTICE") given by the Company to each of the
Offerees (which notice shall state that the failure of any Offeree to deliver
to the Company a written exercise of its Purchase Right within 30 days from
the date of such Notice shall be deemed to constitute a notification to the
Company of such Offeree's decision not to exercise its Purchase Right under
this Section 9(a)) at the address of such Offeree appearing in the books and
records of the Company (in the event such consideration includes non-cash
consideration, the dollar value of such non-cash consideration shall be
determined by the Company's Board of Directors, whose good faith determination
shall be conclusive).
(b) The Purchase Right shall be exercisable, if at all, by the Offerees
for a period of thirty (30) days from the date of the Notice. Failure of any
Offeree to deliver to the Company a written exercise of its Purchase Right
within the 30-day period shall be deemed to constitute a notification to the
Company of such Offeree's decision not to exercise its Purchase Right under
Section 9(a).
(c) The Offerees may exercise the Purchase Right by giving written
notice to the Company not later than the close of business on the date of
expiration of such right and option (or if such date is not a business day,
then on or before the close of business on the next succeeding business day),
advising of the election to exercise the same on the terms and conditions set
forth in the Notice.
(d) In the event that any or all of the Offered Securities are not
purchased by the Offerees, the Company may, during the one hundred twenty
(120) day period commencing on the expiration of the time periods provided for
in subparagraphs (b) and (c) above, as
31
applicable, issue, sell or exchange all or the remaining Offered Securities,
as the case may be, for the consideration per Offered Security, the dollar
value of which is equal to or greater than the dollar value of the
consideration per Offered Security specified in the Notice.
(e) As used in this Section 9, the term "PROPORTIONATE PERCENTAGE" shall
mean a fraction, the numerator of which is the number of shares of Common
Stock owned by the applicable Offeree (assuming the issuance of all Common
Stock then issuable pursuant to then outstanding shares of Series A Preferred
Stock) and the denominator of which is the total number of shares of Common
Stock owned by all holders of Common Stock (assuming the issuance of all
Common Stock then issuable pursuant to then outstanding shares of Series A
Preferred Stock).
SECTION 10. MISCELLANEOUS.
SECTION 10.01. EXPENSES. Whether or not the transactions herein
contemplated shall be consummated, the Company agrees to pay directly all
reasonable out-of-pocket expenses of the Preferred Shareholders in connection
with the preparation, execution and delivery of this Agreement, the
Shareholders Agreement and the Series A Preferred Stock and the transactions
contemplated thereby and hereby, including but not limited to the reasonable
charges and disbursements of Xxxxxxx and Xxxxxx, special counsel to the
Preferred Shareholders, duplicating and printing costs and charges for mailing
the Series A Preferred Stock, adequately insured to their home office or at
such other place as a Preferred Shareholder may designate, and all reasonable
expenses (including, without limitation, the reasonable cost of any financial
advisor hired by a Preferred Shareholder) relating to any proposed or actual
amendments, waivers or consents pursuant to the provisions of the Series A
Preferred Stock, this Agreement, the Shareholders Agreement or the Certificate
of Designation (whether or not the same are actually executed and delivered),
including, without limitation, any such proposed or actual amendments,
waivers, or consents resulting from any work-out, renegotiation or
restructuring relating to the performance by the Company of its obligations
under the Series A Preferred Stock, this Agreement, the Shareholders Agreement
or the Certificate of Designation. In connection with the issuance and sale of
the Series A Preferred Stock on the Closing Date, the Company also agrees to
pay, within five business days of receipt thereof, supplemental statements of
Xxxxxxx and Xxxxxx for reasonable disbursements unposted or not incurred as of
the Closing Date. The Company agrees to protect and indemnify each Preferred
Shareholder against any liability for any and all brokerage fees and
commissions payable or claimed to be payable to any Person in connection with
the transactions contemplated by this Agreement, except to the extent that
such brokerage fees or commissions are payable or claimed to be payable as a
result of agreements by one or more of the Preferred Shareholders. Without
limiting the foregoing, the Company agrees to pay the cost of obtaining the
private placement number for the Series A Preferred Stock and authorizes the
submission of such information as may be required by Standard & Poor's CUSIP
Service Bureau for the purpose of obtaining such number.
SECTION 10.02. POWERS AND RIGHTS NOT WAIVED; REMEDIES CUMULATIVE. No delay
or failure on the part of the holder of any share of Series A Preferred Stock
or any share of Common Stock issuable upon conversion of any of the Series A
Preferred Stock in the
32
exercise of any power or right shall operate as a waiver thereof; nor shall
any single or partial exercise of the same preclude any other or further
exercise thereof, or the exercise of any other power or right, and the rights
and remedies of the holder of any share of Series A Preferred Stock, or any
share of Common Stock issuable upon conversion of any of the Series A
Preferred Stock are cumulative to, and are not exclusive of, any rights or
remedies any such holder would otherwise have.
SECTION 10.03. NOTICES. All communications provided for hereunder shall be
in writing and, if to a Preferred Shareholder, delivered or mailed prepaid by
registered or certified mail or overnight air courier, or by facsimile
communication, in each case addressed to the Preferred Shareholder at the
address of the Preferred Shareholder appearing on Exhibit A to this Agreement
or such other address as a Preferred Shareholder or the subsequent holder of
any share of Series A Preferred Stock may designate to the Company in writing,
and if to the Company, delivered or mailed by registered or certified mail or
overnight air courier, or by facsimile communication, to the Company at Suite
158, Pecan Creek, 0000 Xxxxxx Xxxx, Xxxxxx, Xxxxx 00000, Attention: President,
with a copy to Fulbright and Xxxxxxxx L.L.P., 0000 Xxxx Xxxxxx, Xxxxx 0000,
Xxxxxx, Xxxxx 00000, Attention: Xxxxxxx X. Xxxxxxx, Esq., or to such other
address as the Company may in writing designate to the Preferred Shareholders
or to a subsequent holder of the shares of Series A Preferred Stock or
Conversion Shares; PROVIDED, HOWEVER, that a notice to a Preferred Shareholder
by overnight air courier shall only be effective if delivered to a Preferred
Shareholder at a street address designated for such purpose in Exhibit A, and
a notice to a Preferred Shareholder by facsimile communication shall only be
effective if confirmed by transmission of a copy thereof by prepaid overnight
air courier, or, in either case, as the Preferred Shareholders or a subsequent
holder of any share of Series A Preferred Stock, Conversion Shares, or any
share of Common Stock issuable upon conversion of any of the Series A
Preferred Stock initially issued to you may designate to the Company in
writing.
SECTION 10.04. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the Company and its successors and assigns and each of the holders of shares
of Series A Preferred Stock and each of their respective successors and
assigns and shall inure to the benefit of the Company and to the benefit of
each Preferred Shareholder and to the benefit of each Preferred Shareholder's
successors and permitted assigns, including each permitted successive holder
or holders of shares of Series A Preferred Stock.
SECTION 10.05. SURVIVAL OF COVENANTS AND REPRESENTATIONS. All covenants,
representations and warranties made herein and in any certificates delivered
pursuant hereto, whether or not in connection with the Closing Date, shall
survive the Closing, the Merger and the delivery of the Series A Preferred
Stock and this Agreement.
SECTION 10.06. SEVERABILITY. Should any part of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect
the validity or enforceability of any remaining portion, which remaining
portion shall remain in force and effect as if this Agreement had been
executed with the invalid or unenforceable portion thereof eliminated and it
is hereby declared the intention of the parties hereto that they would have
executed the
33
remaining portion of this Agreement without including therein any such part,
parts or portion which may, for any reason, be hereafter declared invalid or
unenforceable.
SECTION 10.07. GOVERNING LAW. This Agreement and the Series A Preferred
Stock issued and sold hereunder shall be governed by and construed in
accordance with Texas law (without regards to conflicts of law principles),
including all matters of construction, validity and performance.
SECTION 10.08. CAPTIONS. The descriptive headings of the various
Sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof.
SECTION 10.09. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each counterpart shall be deemed to be an original; and
all such counterparts shall constitute one and the same instrument.
34
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
19th day of January, 1998.
MATADOR PETROLEUM CORPORATION
By /s/ Xxxxxx Xx. Xxxxx
Its President, Chief Executive
Officer and Chairman of
the Board
MATADOR HOLD CO.
By /s/ Xxxxxx Xx. Xxxxx
Its President, Chief Executive
Officer and Chairman of
the Board
35
THE TRAVELERS INSURANCE COMPANY
By /s/ Xxxx X. Xxxxxxxx
Its Second Vice President
-----------------------------
36
THE TRAVELERS INDEMNITY COMPANY
By /s/ Xxxx X. Xxxxxxxx
Its Second Vice President
-----------------------------
37
THE PHOENIX INSURANCE COMPANY
By /s/ Xxxx X. Xxxxxxxx
Its Second Vice President
-----------------------------
38
THE TRAVELERS LIFE AND ANNUITY
COMPANY
By /s/ Xxxx X. Xxxxxxxx
Its Second Vice President
-----------------------------
39
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By: Lincoln Investment Management,
Inc., its Attorney-in-Fact
By /s/ Xxxx X. Xxxxxxxx
--------------------------------
Its: Second Vice President
----------------------------
40
EXHIBIT A
(to Conversion Agreement)
SHARES OF SERIES A
NAME AND ADDRESS OF SHARES OF OLD PREFERRED STOCK
PREFERRED SHAREHOLDER PREFERRED STOCK TO BE RECEIVED
THE TRAVELERS INSURANCE COMPANY 75,000 75,000
Xxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000-0000
Attention: Securities Department--
Private Placements--9PB
Payments
All payments on or in respect of the Series A Convertible Preferred Stock to
be by bank wire transfer of Federal or other immediately available funds
(identifying each payment as "Matador Petroleum Corporation, Series A
Convertible Preferred Stock, PPN 57648* 11 6") to:
The Chase Manhattan Bank, N.A. (ABA #000000000)
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
for credit to: The Travelers Insurance Company--
Consolidated Private Placement Account Number 000-0-000000
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payment and written confirmation of each such payment,
to be addressed Attention: Securities Department--Cashier--10PB.
Name of Nominee in which Series A Convertible Preferred Stock certificates are
to be issued: Tral & Co
Taxpayer I.D. Number: 00-0000000
SHARES OF SERIES A
NAME AND ADDRESS OF SHARES OF OLD PREFERRED STOCK
PREFERRED SHAREHOLDER PREFERRED STOCK TO BE RECEIVED
THE TRAVELERS INDEMNITY COMPANY 73,334 73,334
Xxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000-0000
Attention: Securities Department--
Private Placements--9PB
Telecopier Number: (000) 000-0000
Payments
All payments on or in respect of the Series A Convertible Preferred Stock to
be by bank wire transfer of Federal or other immediately available funds
(identifying each payment as "Matador Petroleum Corporation, Series A
Convertible Preferred Stock, PPN 57648* 11 6") to:
The Chase Manhattan Bank, N.A. (ABA #000000000)
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
for credit to: The Travelers Insurance Company--
Consolidated Private Placement Account Number 000-0-000000
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments and written confirmation of each such payment
to be addressed Attention: Securities Department--Cashier--10PB.
Name of Nominee in which Series A Convertible Preferred Stock Certificates are
to be issued: TRAL & CO
Taxpayer I.D. Number: 00-0000000
SHARES OF SERIES A
NAME AND ADDRESS OF SHARES OF OLD PREFERRED STOCK
PREFERRED SHAREHOLDER PREFERRED STOCK TO BE RECEIVED
THE PHOENIX INSURANCE COMPANY 10,000 10,000
Xxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000-0000
Attention: Securities Department--
Private Placements--9PB
Payments
All payments on or in respect of the Series A Convertible Preferred Stock to
be by bank wire transfer of Federal or other immediately available funds
(identifying each payment as "Matador Petroleum Corporation, Series A
Convertible Preferred Stock, PPN 57648* 11 6") to:
Chase Manhattan Bank, N.A. (ABA #000000000)
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
for credit to: The Travelers Insurance Company
Consolidated Private Placement Account Number 000-0-000000
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payment and written confirmation of each such payment,
to be addressed Attention: Securities Department--Cashier--10 PB.
Name of Nominee in which Series A Convertible Preferred Stock certificates are
to be issued: TRAL & CO
Taxpayer I.D. Number: 00-0000000
SHARES OF SERIES A
NAME AND ADDRESS OF SHARES OF OLD PREFERRED STOCK
PREFERRED SHAREHOLDER PREFERRED STOCK TO BE RECEIVED
THE TRAVELERS LIFE AND ANNUITY 8,333 8,333
COMPANY
Xxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000-0000
Attention: Securities Department--
Private Placements--9PB
Payments
All payments on or in respect of the Series A Convertible Preferred Stock to
be by bank wire transfer of Federal or other immediately available funds
(identifying each payment as "Matador Petroleum Corporation, Series A
Convertible Preferred Stock, PPN 57648* 11 6") to:
Chase Manhattan Bank, N.A. (ABA #000000000)
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
for credit to: The Travelers Insurance Company
Consolidated Private Placement Account Number 000-0-000000
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payment and written confirmation of each such payment,
to be addressed Attention: Securities Department--Cashier--10PB.
Name of Nominee in which Series A Convertible Preferred Stock certificates are
to be issued: TRAL & Co
Taxpayer I.D. Number: 00-0000000
SHARES OF SERIES A
NAME AND ADDRESS OF SHARES OF OLD PREFERRED STOCK
PREFERRED SHAREHOLDER PREFERRED STOCK TO BE RECEIVED
THE LINCOLN NATIONAL LIFE 222,223 222,223
INSURANCE COMPANY
c/o Lincoln Investment Management, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Investments/Private Placements
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Matador Petroleum Corporation, Series A Convertible Preferred Stock, PPN
57648* 11 6") to:
Bankers Trust Company (ABA #000000000)
Private Placement Processing
New York, New York
Account Number 00-000-000
for the account of: The Lincoln National Life Insurance Company (EGP)
Custodial Account Number 98336
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above with duplicate notices with respect to payments to:
Bankers Trust Company
X.X. Xxx 000
Xxxxxxx Xxxxx Xxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Private Placement Unit
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 00-0000000
Securities are to be delivered to:
Bankers Trust Company
00 Xxxx Xxxxxx, 0xx Xxxxx, Window #44
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxx, Mail Stop 4049
Ref: The Lincoln National Life Insurance Company (EGP)
Custodial Account No. 98336
B-10
EXHIBIT B
(to Conversion Agreement)
PLAN OF MERGER
ATTACHED HERETO
C-10
EXHIBIT C
(to Conversion Agreement)
CERTIFICATE OF DESIGNATION
ATTACHED HERETO
D-5
EXHIBIT D
(to Conversion Agreement)
MATADOR PETROLEUM CORPORATION
MATADOR HOLD CO.
CLOSING CERTIFICATE
To the Preferred Shareholders Listed
in Exhibit A to the Preferred Stock
Conversion Agreement
Gentlemen:
Matador Petroleum Corporation, a Texas corporation ("OLD MATADOR") and
Matador Hold Co., a Texas corporation (the "COMPANY"), as an inducement to and
as part of the consideration for your acquisition on this date of an aggregate
of 388,890 shares of the Series A Convertible Preferred Stock (the "SERIES A
PREFERRED STOCK") of the Company pursuant to that certain Preferred Stock
Conversion Agreement dated as of January 19, 1998 (the "CONVERSION AGREEMENT",
and the Merger described therein, words and phrases not otherwise defined
herein having the meanings assigned thereto in the Conversion Agreement) among
you, the Company and Old Matador, and in compliance with the Conversion
Agreement, hereby, jointly and severally, represent and warrant to you as of
the date hereof as follows:
1. CORPORATE ORGANIZATION AND AUTHORITY. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas, and has all requisite corporate and regulatory power and
authority (i) to own and operate its properties and to conduct the business
now being conducted by it, (ii) to enter into the Conversion Agreement and to
create and issue the Series A Preferred Stock as contemplated in the
Conversion Agreement and (iii) to consummate the Merger in accordance with the
applicable provisions of the TBCA set forth in the Plan of Merger.
2. QUALIFICATION TO DO BUSINESS. The Company is duly qualified and in
good standing as a foreign corporation authorized to do business in each
jurisdiction wherein the nature of properties owned or leased or activities
conducted by it makes such licensing or qualification necessary, except in
jurisdictions where the failure to be so qualified could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
3. SOLVENCY AND CONSIDERATION. (a) On the Closing Date, the Company is
solvent, has capital not unreasonably small in relation to its business or any
contemplated or undertaken transaction and has assets having a value both at
fair valuation and a present fair salable value greater than the amount
required to pay its debts as they become due and greater than the amount that
will be required to pay its probable liability on its existing debts as they
become due and matured. The Company does not intend to incur, nor does it
believe, nor should it have believed that it will incur, debts beyond its
ability to pay such debts as they become due and, so far as the Company can
foresee, after the Closing Date, neither the
Company nor any of its Subsidiaries will be rendered insolvent by the
execution, delivery and performance of its respective obligations under or in
respect of the Series A Preferred Stock and the Conversion Agreement. Neither
the Company nor any of its Subsidiaries intends to hinder, delay or defraud
its creditors by or through the execution, delivery or performance of its
respective obligations under or in respect of the Series A Preferred Stock and
the Conversion Agreement.
(b) There will be provided to the Company a substantial economic benefit
and adequate consideration for the execution and delivery of the Series A
Preferred Stock and Conversion Agreement by the Company.
4. CAPITAL STOCK. The authorized and outstanding capital stock of the
Company immediately after the effective time of the Merger will be set forth
in Annex I attached hereto. All of the outstanding capital stock of the
Company has been, and will be upon the consummation of the Merger, validly
issued and is, and will be upon the consummation of the Merger, fully paid and
non-assessable. The shareholders of the Company (other than the holders of
Series A Preferred Stock) are not entitled to any preemptive rights with
respect to the Common Stock of the Company. Except as set forth on Exhibit I
hereto, neither the Company nor any of its Subsidiaries has, or will have upon
consummation of the Merger, outstanding any warrants, options, convertible
Securities or preemptive or other rights for the purchase, or is a party or is
bound by any agreement or other instrument restricting or affecting the
issuance, of capital stock of the Company or any of its Subsidiaries, other
than the Series A Preferred Stock. The shares of Series A Preferred Stock
which are to be issued to you on the Closing Date will, upon the issuance to
you, have the designations, preferences, qualifications, limitations,
restrictions and such special and relevant rights as are set forth in the
Articles of Incorporation, the Certificate of Designation and the laws of the
State of Texas. The shares of Series A Preferred Stock when issued on the
Closing Date, and the shares of Common Stock issuable upon conversion of the
Series A Preferred Stock, if and when converted in compliance with the terms
and provisions of the Series A Preferred Stock, will be validly issued, fully
paid and nonassessable shares.
5. FULL DISCLOSURE. The Conversion Agreement, and any other written
statement furnished by the Company or Old Matador to you in connection with
the Series A Preferred Stock, taken as a whole, do not contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein or herein not misleading in light of the
circumstances under which they were made. There is no fact peculiar to the
Company Old Matador or the Company's Subsidiaries which the Company has not
disclosed to you in writing which has, nor, so far as the Company can now
foresee, could reasonably be expected to have a Material Adverse Effect.
6. SALE IS LEGAL AND AUTHORIZED. The authorization, creation and
issuance of the Series A Preferred Stock and compliance by the Company with
all of the provisions of the Series A Preferred Stock and the Conversion
Agreement and the issuance of Common Stock upon conversion of the Series A
Preferred Stock in accordance with the terms and provisions thereof (a) are
within the corporate powers of the Company, (b) have been duly authorized by
all necessary corporate action on the part of the Company, and (c) are legal
and will not
conflict with nor result in any breach of any of the provisions of, or
constitute a default under, or result in the creation of any lien or
encumbrance upon any property of the Company or Old Matador under the
provisions of, any loan agreement, charter instrument, By-law or other
agreement or instrument to which the Company or Old Matador is a party or by
which the Company or Old Matador may be bound or to which any of the
properties of the Company or Old Matador may be subject. The shares of the
Series A Preferred Stock have been duly executed and delivered and the
Conversion Agreement has been duly executed and delivered by the Company.
7. PRIVATE OFFERING. Neither the Company nor any agent, broker or
dealer of the Company has offered any of the shares of Series A Preferred
Stock or any similar Security 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 purchaser, other than the Preferred
Shareholders. The Company agrees that neither the Company nor anyone acting on
its behalf will offer the Series A Preferred Stock or any part of either
thereof or any similar Securities for issue or sale to, or solicit any offer
to acquire any of the same from, anyone so as to bring the issuance and sale
of the Series A Preferred Stock within the provisions of Section 5 of the
Securities Act of 1933, as amended (the "SECURITIES ACT").
8. RESTRICTIONS ON DISTRIBUTIONS. Neither the Company nor Old Matador
is a party to or bound by any contract, indenture, agreement, instrument,
order of any court, or governmental agency, (except the Texas Business
Corporation Act) rule or regulation, or any note, debenture, bond, or other
Security, which contains provisions expressly limiting or restricting payments
by the Company or Old Matador on or in respect of shares of its capital stock
of any class, including, without limitation, the Company's right and
obligation to declare and pay the regular dividends on the Series A Preferred
Stock and to make redemptions of shares of the Series A Preferred Stock
pursuant to the provisions of the Certificate of Designation.
9. ERISA. The consummation of the transactions provided for in the
Series A Preferred Stock and the Conversion Agreement and compliance by the
Company with the provisions thereof will not involve any prohibited
transaction within the meaning of ERISA or Section 4975 of the Internal
Revenue Code of 1986, as amended.
10. INVESTMENT COMPANY ACT. None of the Company, Old Matador or any
Subsidiary is, and none of them is directly or indirectly controlled by, or
acting on behalf of any Person which is, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
11. ABSENCE OF FOREIGN OR ENEMY STATUS. None of the Company, Old Matador
or any of Subsidiary or any Affiliate of the Company or Old Matador, is, by
reason of being a "national" of a "designated foreign country" or a "specially
designated national" within the meaning of the Regulations of the Office of
Foreign Assets Control, United States Treasury Department (31 C.F.R., Subtitle
B, Chapter V), or for any other reason, subject to any restriction or
prohibition under, or is in violation of, any federal statute or Presidential
Executive Order, or any rules or regulations of any department, agency or
administrative body
promulgated under any such statute or Order, concerning trade or other
relations with any foreign country or any citizen or national thereof or the
ownership or operation of any property.
12. NO CHANGE IN APPLICABLE CONVERSION FACTOR, COMPLIANCE WITH PREFERRED
STOCK PURCHASE AGREEMENTS. Since the issuance of the Old Preferred Stock by
Old Matador through the Closing Date, there has been no event or occurrence
requiring any adjustment to the Applicable Conversion Factor as defined in the
Certificate of Designation with respect to the Old Preferred Stock and the
Applicable Conversion Factor with respect to the Old Preferred Stock is, and
immediately prior to the effective time of the Merger will be, equal to 1.00.
Old Matador is, and at the effective time of the Merger will be, in compliance
with all the terms and conditions of the Preferred Stock Purchase Agreements.
13. TAX-FREE TRANSACTIONS. No gain or loss will be recognized by the
Company, Merge Co. or Old Matador for federal income tax purposes by reason of
the Merger. No gain or loss will be recognized by the holders of Old Preferred
Stock (i) upon the receipt of shares of Series A Preferred Stock pursuant to
the Merger, or (ii) as a result of the transfer of assets by Unocal solely in
exchange for the New Shares pursuant to the Stock Purchase Agreement. The
basis of the shares of Series A Preferred Stock treated as received by a
holder of Old Preferred Stock will be the same as the basis of the shares of
Old Preferred Stock treated as exchanged therefor. The holding period of the
shares of Series A Preferred treated as received by a holder of Old Preferred
Stock pursuant to the Merger would include the holding period of the shares of
Old Preferred Stock treated as exchanged therefor, provided such Old Preferred
Stock is held as a capital asset at the time of the Merger.
14. SECURITIES ACT. The issuance of the Series A Preferred Stock and
the Common Stock of the Company pursuant to the Merger does not require the
registration of such securities under the Securities Act.
IN WITNESS WHEREOF, this Certificate is executed and delivered this ______
day of January, 1998.
MATADOR PETROLEUM CORPORATION
By
Its
-----------------------------
MATADOR HOLD CO.
By
Its
-----------------------------
ANNEX I
TO CLOSING CERTIFICATE
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
AUTHORIZED ISSUED
AFTER THE MERGER AFTER
MERGER
Class Common Stock, 10,000,000 833,894
$.10 par value
Preferred Stock, 2,000,000 388,890
$.10 par value
EXHIBIT I
TO CLOSING CERTIFICATE
EMPLOYEE AND DIRECTOR STOCK OPTIONS
Employee and Director Stock Options Covering 31,350 Shares of Common Stock
pursuant to:
A qualified Incentive Stock Option Plan was adopted on November 14, 1987,
authorizing the issuance of up to a collective total of 200,000 shares to
current and future employees, along with certain stock appreciation rights
to accompany stock covered by any option, for services rendered to the
Company. Such options are granted at the discretion of the Board of
Directors at an option price to be established by the Board, not to be
less than 110% of the fair market value of such shares on the date that
the option is granted, such options being exercisable at a rate of between
20% and 100% per year, cumulatively for a period between five and ten
years. There are currently 28,350 employee options outstanding.
A non-qualified Director Stock Option Plan was adopted on October 15,
1992, authorizing the issuance of up to a collective total of 30,000
shares to current and future directors of the Company for services
rendered to the Company. Each director is eligible for up to 200 shares
per year at an option price to be established by the Board of Directors,
not to be less than 100% of the fair market value of such shares on the
date that the option is granted, such options being exercisable for up to
five years. There are currently 3000 director options outstanding.
EXHIBIT E
(to Conversion Agreement)
DESCRIPTION OF CLOSING OPINION OF COUNSEL TO THE COMPANY
The closing opinion of Xxxxx Xxxxxxx, Esq., counsel for the Company, which
is called for by Section 3.04 of the Conversion Agreement, shall be dated the
Closing Date and addressed to the Preferred Shareholders, shall be satisfactory
in scope and form to the Preferred Shareholders and shall be to the effect that:
1. The Company is a corporation, duly incorporated, validly
existing and in good standing under the laws of the State of Texas, has
the corporate power and the corporate authority to execute and perform the
Conversion Agreement and the Plan of Merger and to issue the Series A
Preferred Stock and has the full corporate power and the corporate
authority to conduct the activities in which it is now engaged and is duly
licensed or qualified and is in good standing as a foreign corporation in
each jurisdiction in which the character of the properties owned or leased
by it or the nature of the business transacted by it makes such licensing
or qualification necessary.
2. The Conversion Agreement and the Plan of Merger have been duly
authorized by all necessary corporate action on the part of the Company
and Old Matador, and have been duly executed and delivered by the Company
and Old Matador.
3. The creation of the Series A Preferred Stock has been duly and
validly effected, in accordance with provisions of the Conversion
Agreement, the Plan of Merger and the Texas General Corporation Law, by
all necessary action on the part of the Company and on the part of the
Secretary of State of the State of Texas.
4. The authorized capital stock of the Company consists of
10,000,000 shares of Common Stock par value $.10 and 2,000,000 Preferred
Shares having a par value of $.10 per share of which after giving effect
to the Merger and the issue and of the Preferred Shares, _________ shares
of Common Stock and 388,390 Preferred Shares will be outstanding on the
date hereof and will be fully paid and nonassessable and 388,390 shares of
Common Stock are reserved to satisfy the conversion rights applicable to
the Preferred Shares;
5. The issuance and delivery of the Series A Preferred Stock as
contemplated in the Conversion Agreement have been duly authorized by all
necessary corporate action on the part of the Company and Old Matador; the
certificates for the shares of Series A Preferred Stock have been duly
executed.
6. The issuance and delivery of the Series A Preferred Stock and
the execution, delivery and performance by the Company and Old Matador of
the Conversion Agreement and the Plan of Merger do not conflict with or
result in any breach of any of the provisions of or constitute a default
under or result in the creation or imposition of any lien upon any of the
property of the Company or Old Matador pursuant to the provisions of the
Articles of Incorporation or By-laws of the Company
or Old Matador or any agreement or other instrument to which the Company
or Old Matador is a party or by which the Company or Old Matador may be
bound.
7. Neither the Company nor Old Matador is not a party under or
bound by any contract, indenture, agreement, instrument, order of any
court, or governmental agency rule or regulation or any note, debenture,
bond, or other security under the terms of or pursuant to which, the
Company's right and obligation to declare and pay the regular dividends on
the Series A Preferred Stock or to otherwise make distributions in respect
of the Series A Preferred Stock or to redeem shares of the Series A
Preferred Stock pursuant to the provisions of the Resolution is
restricted.
8. The issuance and delivery of the Series A Preferred Stock and
the issuance of any shares of Common Stock upon the conversion of the
Series A Preferred Stock, will not violate preemptive rights of other
holders of capital stock of the Company or Old Matador existing under the
Articles of Incorporation or By-laws of the Company or Old Matador or
under the Texas Business Corporation Act or any other agreement or other
instrument or trigger any anti-takeover rights of other holders of capital
stock of the Company or Old Matador or conflict with, or result in any
breach of any of, or constitute a default under or result in the creation
or imposition of any lien or encumbrance upon any of the property of the
Company or Old Matador pursuant to, the provisions of the Articles of
Incorporation or By-laws of the Company or Old Matador or any agreement or
other instrument to which the Company or Old Matador is a party or by
which the Company or Old Matador may be bound.
9. The Certificate of Designation has been duly approved by the
Board of Directors of the Company at a meeting duly called and held on
January __, 1998 and said Certificate of Designation has been duly filed
for the record in the manner and place required by law to effect an
amendment to the Company's Articles of Incorporation.
11. There is no litigation pending or, to the best knowledge of such
counsel, threatened which in such counsel's opinion would impair the
ability of the Company to issue and deliver the Series A Preferred Stock
or impair the ability of the Company or Old Matador to comply with the
provisions of the Conversion Agreement or the Plan of Merger.
The opinion of Xxxxx Xxxxxxx, Esq. shall cover such other matters
relating to the conversion of the Series A Preferred Stock as the Preferred
Shareholders may reasonably request. With respect to matters of fact on which
such opinion is based, such counsel shall be entitled to rely on appropriate
certificates of public officials and officers of the Company.
EXHIBIT F
(to Conversion Agreement)
DESCRIPTION OF CLOSING OPINION OF SPECIAL COUNSEL TO THE COMPANY
The closing opinion of Fulbright & Xxxxxxxx L.L.P., special counsel for
the Company, which is called for by Section 3.04 of the Conversion Agreement,
shall be dated the Closing Date and addressed to the Preferred Shareholders,
shall be satisfactory in scope and form to the Preferred Shareholders and shall
be to the effect that:
1. The Conversion Agreement (including, without limitation, Section
9 thereof) constitutes the legal, valid and binding contract of the
Company and Old Matador, enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent conveyance and similar laws
affecting creditors' rights generally, and general principles of equity
(regardless of whether the application of such principles is considered in
a proceeding in equity or at law) except that no opinion is expressed as
to whether the enforcement of the indemnity provisions contained in
SECTION 8.07 of the Conversion Agreement may be limited under certain
circumstances by public policy considerations.
2. The Series A Preferred Stock has the designations, preferences,
limitations and relative rights set forth in the Certificate of
Designation, the applicable provisions of Article Four of the Articles of
Incorporation of the Company and the Texas General Corporation Law.
3. The shares represented by the certificates for the shares of
Series A Preferred Stock are validly issued, fully paid and
non-assessable.
4. No consent, approval or authorization of any federal, state or
local governmental authority is required on the part of the Company or Old
Matador for the execution and delivery of the Conversion Agreement or the
Plan of Merger or the offer, issue, or delivery thereunder of the Series A
Preferred Stock; and no compliance by the Company with any applicable
provision of law requiring any designation, declaration, filing,
registration and/or qualification with any governmental authority is
required for such offer, issue, or delivery.
5. The shares of Series A Preferred Stock are not equity securities
of a class which is, or is required to be, registered pursuant to Section
12 of the Securities and Exchange Act of 1934, as amended.
6. The offering, issuance and delivery of the Series A Preferred
Stock under the circumstances contemplated by the Conversion Agreement and
the Plan of Merger do not, under existing law, require the registration of
the Series A Preferred Stock under the Securities Act of 1933, as amended,
or the registration at this time of the Common Stock of the Company
issuable upon conversion of the Series A Preferred Stock.
7. Assuming compliance by the Company with the terms and provisions
of the Series A Preferred Stock, if and when issued upon conversion of the
Series A Preferred Stock, in accordance with the provisions thereof, the
shares of Common Stock
issuable upon such conversion will be validly issued, fully paid and
nonassessable shares;
8. The issuance and delivery of Common Stock of the Company under
circumstances contemplated by the Plan of Merger do not under existing
law, require the registration of the Common Stock under the Securities Act
of 1933, as amended.
9. The Plan of Merger and the Merger comply in all respect with the
applicable provisions of the Texas Business Corporation Act, including
without limitation, the provisions of Article 5.03H thereof, and the
Merger will become effective in compliance with all applicable law upon
the filing of the Articles of Merger with the Secretary of Texas on the
Closing Date.
The opinion of Fulbright & Xxxxxxxx L.L.P., shall cover such other
matters relating to the sale of the Series A Preferred Stock as the Preferred
Shareholders may reasonably request. The opinion of Fulbright & Xxxxxxxx shall
also state that the opinion of Xxxxx Xxxxxxx, Esq. is satisfactory in scope
and form to Fulbright & Xxxxxxxx L.L.P. and that, in their opinion, the
Preferred Shareholders are justified in relying thereon. With respect to
matters of fact on which such opinion is based, such counsel shall be entitled
to rely on appropriate certificates of public officials and officers of the
Company. Fulbright & Xxxxxxxx, LLP shall also deliver their opinion as to
certain tax matters in the form attached to this Exhibit F as Annex 1.
ANNEX I
TO
EXHIBIT F
(to Conversion Agreement)
TAX OPINION ATTACHED HERETO
EXHIBIT G
(to Conversion Agreement)
ESTIMATE OF FAIR MARKET VALUE
I. ASSET VALUATION METHOD
ASSETS
Current Assets XXX
Property & Equipment, at cost:
Producing Oil/Gas Properties
o Real Estate XXX
o D&M Proved; 10% Flat XXX
o Company Proved; 10% Flat XXX
o 1996 Xxxxx & Acquisitions XXX
o 1996 Without Recomp XXX
o 1996 PUDs XXX
o 1996 Prospect Commitments at cost XXX
---
Property and Equipment, net XXX
Other Non-Current Assets XXX
---
Total Assets XXX
Less:
Total Debt XXX
Other Liabilities XXX
---
Total Liabilities XXX
Net Enterprise Value Estimate XXX
Fully Diluted Common/Preferred Shares Percent XXX
Net Value/Share XXX
Number of Lincoln Shares XXX
Estimate of Value of Lincoln Shares XXX
Value
-----
Probable Reserves
Property A XXX
Property B XXX
Property C XXX
---
Total Possible Reserves XXX
Value/Share XXX
Possible Reserves
Property X XXX
Property Y XXX
Property Z XXX
---
Total Possible Reserves XXX
Value/Share XXX
II. CASHFLOW MULTIPLE METHOD
Trailing twelve month EBITDA XXX
Times multiple X
---
Less: O/S Debt XXX
Plus: Cash XXX
---
Net Enterprise Value Estimate XXX
Fully diluted common/preferred shares 0/S XXX
Net Value/Share XXX
Number of Lincoln Shares XXX
Estimate of value of Lincoln Shares XXX
