1
EXHIBIT 10.3
THE SECURITIES TO WHICH THIS AGREEMENT RELATES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY
STATE SECURITIES LAWS ("STATE LAWS") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS THE OFFER AND SALE IS REGISTERED UNDER THE SECURITIES ACT OR
THE ISSUER RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER
THAT THE OFFER AND SALE IS EXEMPT FROM SECURITIES ACT REGISTRATION.
SECURITIES PURCHASE AGREEMENT
This agreement is made and entered into as of the 29th day of December,
1999, by and between Contango Oil & Gas Company (the "Issuer") and Trust Company
of the West, a California trust company, in its capacities as Investment Manager
pursuant to the Investment Management Agreement dated as of June 6, 1988 between
General Xxxxx, Inc. and the Trust Company of the West and as Custodian pursuant
to the Custody Agreement dated as of February 6, 1989 among General Xxxxx, Inc.,
the Trust Company of the West and State Street Bank and Trust Company, as
Trustee (the "Purchaser").
1. AGREEMENT TO PURCHASE SECURITIES. On the terms and subject to the
conditions set forth in this agreement, the Purchaser hereby agrees to purchase
from the Issuer 3,703,704 shares of the Issuer's common stock (the "Shares") and
warrants to purchase an additional 370,370 shares of common stock (the
"Warrant") for an aggregate purchase price of $2,500,000 (the "Purchase Price"),
payable by wire transfer to the account of the Issuer.. The shares of Issuer's
common stock that may be issued upon exercise of the Warrant are referred to
herein as the "Warrant Shares" and the Shares, the Warrant and the Warrant
Shares are collectively referred to herein as the "Securities").
2. WIRE TRANSFER OF PAYMENT FOR AND DELIVERY OF THE SECURITIES.
Promptly after the Purchaser has wired the Purchase Price for the Securities to
the Issuer's account as instructed, the Issuer shall issue and deliver a
certificate representing the Shares, and the Warrant in the form attached hereto
as Exhibit A, in the name and to the address specified by the Purchaser in the
registration and delivery instructions on the signature page of this agreement.
3. PURCHASER'S REPRESENTATIONS AND WARRANTIES. The Purchaser hereby
represents and warrants to the Issuer that:
3.1 Investment Intent. The Purchaser is acquiring the Securities
solely for the Purchaser's own account for investment purposes, and not with a
view to, or for offer or sale in connection with, any distribution of the
Securities in violation of the Securities Act.
3.2 Access to Information. The Purchaser has received a copy of the
Issuer's annual report on Form 10-KSB for the year ended June 30, 1999 (the
"Annual Report") and quarterly report on Form 10-QSB for the quarter ended
September 30, 1999 (the "Quarterly Report") and has reviewed them carefully,
including the risk factors set forth under the heading, "Management's Discussion
and Analysis or Plan of Operation -- Risk Factors." In addition, the Purchaser
has received and reviewed a copy of the Issuer's proxy statement for its annual
meeting of stockholders held on September 28, 1999 (the "Proxy Statement"). If
desired, the
2
Purchaser has also sought and obtained from management of the Issuer such
additional information concerning the business, management and financial affairs
of the Issuer as the Purchaser has deemed necessary or appropriate in evaluating
an investment in the Issuer and determining whether or not to purchase the
Securities.
3.3 Accredited Investor. By completing the Accredited Investor
Certification attached as Exhibit A, the Purchaser represents and warrants that
it is an accredited investor, as defined by Rule 501(a) of Regulation D under
the Securities Act.
3.4 Preexisting Relationship; Knowledge and Experience. The
Purchaser has a preexisting personal and/or business relationship with the
Issuer and certain of its officers, directors and/or controlling persons, is
experienced in evaluating and investing in the securities of businesses in the
development stage, and has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of an
investment in the Securities and of protecting its interests in connection with
an acquisition of the Securities.
3.5 Suitability. The Purchaser has carefully considered, and has, to
the extent the Purchaser deems it necessary, discussed with the Purchaser's own
professional legal, tax and financial advisers the suitability of an investment
in the Securities for the Purchaser's particular tax and financial situation,
and the Purchaser has determined that the Securities are a suitable investment
for the Purchaser.
3.6 Illiquidity; Ability to Bear Risk of Loss. The Purchaser has no
need for liquidity in its investment in the Securities, is financially able to
hold the Securities subject to restrictions on transfer for an indefinite period
of time, and is capable of bearing the economic risk of losing up to the entire
amount of its investment in the Securities.
3.7 Private Offering. The offer of the Securities was directly
communicated to the Purchaser by the Issuer. At no time was the Purchaser
presented with or solicited by any leaflet, newspaper or magazine article, radio
or television advertisement, or any other form of general advertising or
solicited or invited to attend a promotional meeting otherwise than in
connection and concurrently with such directly communicated offer.
3.8 Truth and Accuracy. All representations and warranties made by
the Purchaser in this agreement are true and accurate as of the date hereof and
shall be true and accurate as of the date the Issuer issues the Securities. If
at any time prior to the issuance of the Securities any representation or
warranty shall not be true and accurate in any respect, the Purchaser shall so
notify the Issuer.
3.9 Authority. The individual executing and delivering this
agreement on behalf of the Purchaser has been duly authorized to execute and
deliver this agreement on behalf of the Purchaser, the signature of such
individual is binding upon the Purchaser, the Purchaser is duly organized and
subsisting under the laws of the jurisdiction in which is was organized, and the
Purchaser was not formed for the specific purpose of acquiring the Securities.
3.10 No Violation. The execution and delivery of this agreement and
the consummation of the transactions or performance of the obligations
contemplated by this agreement do not and will not violate any term of the
Purchaser's organizational documents and will not result in a breach of any term
of, or constitute a default under, any statute, indenture,
3
mortgage, other agreement or instrument to which the Purchaser is a party or by
which it is bound, or any order, writ, judgment or decree.
3.11 Enforceability. The Purchaser has duly executed and delivered
this agreement and (subject to its execution by the Issuer) it constitutes a
valid and binding agreement of the Purchaser enforceable in accordance with its
terms against the Purchaser, except as such enforceability may be limited by
principles of public policy, and subject to laws of general application relating
to bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
3.12 Reliance on Own Advisers. In connection with the Purchaser's
investment in the Securities, the Purchaser has not relied upon the Issuer or
its advisers for legal or tax advice, and has, if desired, in all cases sought
the advice of the Purchaser's own legal counsel and tax advisers.
3.13 Scope of Business. The Purchaser has been advised and
understands that the Issuer will be exposed to numerous investment opportunities
in all areas of the oil and gas industry and may therefore pursue various types
of opportunities, even if they do not fit within the primary focus of the
Issuer's current business plan. For example, such opportunities could include
investments both onshore and offshore the United States and also international
investments. Potential opportunities could also include such things as
downstream investments in oil and gas service companies, pipelines, and gas
processing and gas storage facilities.
4. ISSUER'S REPRESENTATIONS AND WARRANTIES. The Issuer hereby
represents and warrants to the Purchaser that:
4.1 Authority. The individual executing and delivering this
agreement on behalf of the Issuer has been duly authorized to execute and
deliver this agreement on behalf of the Issuer, the signature of such individual
is binding upon the Issuer, and the Issuer is duly organized and subsisting
under the laws of the jurisdiction in which it was organized.
4.2 Enforceability. The Issuer has duly executed and delivered this
agreement and (subject to its execution by the Purchaser) it constitutes a valid
and binding agreement of the Issuer enforceable in accordance with its terms
against the Issuer, except as such enforceability may be limited by principles
of public policy, and subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
4.3 Capitalization. The Issuer has no outstanding capital stock
other than common stock as of the date of this agreement. The Issuer is
authorized to issue 50,000,000 shares of common stock, of which 12,253,625
shares are issued and outstanding, and 125,000 shares of preferred stock, none
of which are issued and outstanding. All of the outstanding shares of common
stock of the Issuer have been duly and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar rights. The Shares
have been duly authorized and when issued and delivered to the Purchaser against
payment therefor as provided by this agreement, will be validly issued, fully
paid and non-assessable, and the issuance of such Shares will not be subject to
any preemptive or similar rights. If and when issued, the Warrant Shares will
have been duly authorized and when issued and delivered to the Purchaser against
payment therefor as provided by in the Warrant, will be validly issued, fully
paid and non-assessable,
4
and the issuance of such Warrant Shares will not be subject to any preemptive or
similar rights.
4.4 No Conflicts. The issuance and sale of the Securities to the
Purchaser as contemplated hereby will not violate or conflict with the Issuer's
Articles of Incorporation or By-laws or any agreements to which the Issuer is a
party or by which it is otherwise bound or, to the Issuer's knowledge, any
statute, rule or regulation (federal, state, local or foreign) to which it is
subject.
4.5 SEC Documents. The Issuer has provided the Annual Report and the
Proxy Statement to the Purchaser. As of the date hereof, the Annual Report and
the Proxy Statement do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Issuer included
in the Annual Report have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present the
financial position of the Issuer as of the dates thereof and the results of its
operations and cash flows for the periods then ended. The Issuer has included in
the Annual Report all material agreements, contracts and other documents that it
reasonably believes are required to be filed as exhibits to the Annual Report.
5. RESTRICTIONS ON TRANSFER.
5.1 Resale Restrictions. The Purchaser understands that the offer
and sale of the Securities to the Purchaser has not been registered under the
Securities Act or under any State Laws. The Purchaser agrees not to offer, sell
or otherwise transfer the Securities, or any interest in the Securities, unless
(i) the offer and sale is registered under the Securities Act, (ii) the
Securities may be sold in accordance with the applicable requirements and
limitations of Rule 144 under the Securities Act and any applicable State Laws
and, if the Issuer so requests, the Purchaser delivers to the Issuer an opinion
of counsel to such effect, or (iii) the Purchaser delivers to the Issuer an
opinion of counsel reasonably satisfactory to the Issuer that the offer and sale
is otherwise exempt from Securities Act registration.
5.2 Restrictive Legend. The Purchaser understands and agrees that a
legend in substantially the following form will be placed on the certificates or
other documents representing the Securities:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED UNLESS (i) THE OFFER AND SALE IS REGISTERED UNDER
THE SECURITIES ACT, OR (ii) THE OFFER AND SALE IS EXEMPT FROM SECURITIES
ACT REGISTRATION AND THE TERMS OF SECTION 5.2 OF THE SUBSCRIPTION
AGREEMENT PURSUANT TO WHICH THE SECURITIES WERE ORIGINALLY PURCHASED
HAVE BEEN COMPLIED WITH. (A COPY OF THE SUBSCRIPTION AGREEMENT IS ON
FILE AT THE CORPORATE OFFICE OF THE ISSUER.)"
5
5.3 Illiquid Investment. The Purchaser acknowledges that it must
bear the economic risk of its investment in the Securities for an indefinite
period of time, until such time as the Securities are registered or as an
exemption from registration is available. The Purchaser acknowledges that the
soonest that the Rule 144 exemption from registration could become available
would be after the Purchaser has paid for and held the Securities for one year.
6. RIGHT TO PURCHASE ADDITIONAL SECURITIES
6.1 First Refusal Rights. Subject to the terms and conditions of
this Article 6, the Company hereby grants to the Purchaser a right of first
refusal to purchase its Pro Rata Share (as defined below) of any issue of New
Securities (as defined below) that the Company (or any subsidiary whose capital
stock will not be wholly owned, directly or indirectly, by the Company upon
completion of any such issuance) may from time to time after the date of this
Agreement propose to issue.
6.2 New Securities. "New Securities" shall mean any capital stock,
any rights, options or warrants to purchase or subscribe for capital stock, and
any securities or other instruments of any type whatsoever that are, or may
become, convertible into or exchangeable for capital stock, which are issued for
cash; provided, however, that "New Securities" shall not include: (i) securities
offered and sold by the Company pursuant to a Public Offering (as hereinafter
defined); (ii) shares of the Company's Common Stock (or related options or
rights) issued to the Company's employees and directors pursuant to a plan
adopted by the Board of Directors; and (iii) shares of the Company's capital
stock issued in connection with any existing warrant, option or right, stock
split or stock dividend by the Company.
6.3 Notice and Allocation Periods. If the Company or, when
applicable, its subsidiary, proposes to undertake a bona fide issuance of New
Securities, then it shall give the Purchaser written notice of its intention,
describing the type of New Securities, the price, the number of shares to be
offered, and the general terms upon which such securities are proposed to be
offered. The Purchaser shall be given at least 20 days' prior written notice
within which to agree to purchase all or any part of its Pro Rata Share (as
hereinafter defined) of such issuance of New Securities for the price and upon
the general terms specified in said notice by giving written notice to the
issuer within such period and stating therein the quantity of New Securities to
be purchased by it. "Pro Rata Share" shall mean that portion of the number of
shares of New Securities proposed to be issued that equals the proportion that
(a) the number of shares of common stock held by the Purchaser immediately prior
to the proposed issuance, plus the number of shares of common stock that would
then be issuable to the Purchaser assuming that the Warrant had been fully
exercised, bears to (b) the total number of shares of common stock issued and
outstanding immediately prior to the proposed issuance, assuming that all
securities of the Company convertible into or exchangeable for common stock had
been converted or exchanged.
6.4 Right of Company to Sell New Securities. If the Purchaser fails
to exercise in full its rights of first refusal within the applicable period set
forth above, then the Company or, when applicable, its subsidiary shall have 120
days thereafter to sell the New Securities respecting that the rights set forth
herein were not exercised at a price and upon general terms no more favorable to
the purchaser thereof than specified in the notice to the Purchaser. If such New
Securities have not been sold within such 120-day period, then the
6
Company or, when applicable, its subsidiary shall not thereafter issue or sell
any New Securities without first offering them to the Purchaser in the manner
provided above.
6.5 Public Offering. Reference to the term "Public Offering" in this
Agreement shall mean a bona fide firm commitment underwritten public offering of
shares of the Company's Common Stock made through a nationally recognized
underwriting firm pursuant to an effective registration statement under the
Securities Act, which results in gross proceeds to the Company of not less than
$15,000,000.
6.6 Termination. This Article 6 shall continue in effect from the
date of this Agreement until the Company has completed a Public Offering.
7. REGISTRATION PROCEDURES.
7.1 Within 90 days after the issuance of the Shares, the Issuer
shall prepare and file or cause to be filed with the SEC a registration
statement (the "Registration Statement") with respect to the Shares. The Issuer
shall thereafter use diligence in attempting to cause the Registration Statement
to be declared effective by the SEC and shall thereafter use diligence to
maintain the effectiveness of the Registration Statement until the earlier to
occur of (i) the date which is one year from the effective date of the
Registration Statement, (ii) the date on which all of the Shares have been sold
by the Purchaser or (iii) the date on which the Shares can be resold pursuant to
SEC Rule 144.
7.2 Following effectiveness of the Registration Statement, the
Issuer shall furnish to the Purchaser a prospectus as well as such other
documents as the Purchaser may reasonably request.
7.3 The Issuer shall use diligent efforts to (i) register or
otherwise qualify the common stock covered by the Registration Statement for
sale under the securities laws of such jurisdictions as the Purchaser may
reasonably request, (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements as may be required, (iii)
take such other actions as may be necessary to maintain such registrations
and/or qualifications in effect at all times while the Registration Statement is
likewise maintained effective and (iv) take all other actions reasonably
necessary or advisable to qualify the Shares for sale in such jurisdictions;
provided, however, that the Issuer shall not be required in connection therewith
or as a condition thereto to (I) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 7.3,
(II) subject itself to general taxation in any such jurisdiction, (III) file a
general consent to service of process in any such jurisdiction, (IV) provide any
undertakings that cause more than nominal expense or burden to the Issuer or (V)
make any change in its certificate of incorporation or bylaws, which in each
case the Board determines to be contrary to the best interests of the Issuer and
its stockholders.
7.4 The Issuer shall, following effectiveness of the Registration
Statement, as promptly as practicable after becoming aware of any such event,
notify the Purchaser of the happening of any event of which the Issuer has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the
7
Registration Statement to correct such untrue statement or omission, and deliver
a number of copies of such supplement or amendment to the Purchaser or as the
Purchaser may reasonably request. The Issuer may voluntarily suspend the
effectiveness of such Registration Statement for a limited time, which in no
event shall be longer than 90 days, if the Issuer has been advised by legal
counsel that the offering of common stock pursuant to the Registration Statement
would adversely affect, or would be improper in view of (or improper without
disclosure in a prospectus), a proposed financing, a reorganization,
recapitalization, merger, consolidation, or similar transaction involving the
Issuer or its subsidiaries, in which event the one year period referred to in
clause (i) of Section 7.1 shall be extended for an additional period of time
beyond such one year period equal to the number of days the effectiveness
thereof has been suspended pursuant to this sentence.
7.5 Following effectiveness of the Registration Statement, the
Issuer, as promptly as practicable after becoming aware of any such event, will
notify the Purchaser of the issuance by the SEC of any stop order or other
suspension of effectiveness of the Registration Statement at the earliest
possible time.
7.6 Following effectiveness of the Registration Statement, the
Issuer will use diligence either to (i) cause all the common stock covered by
the Registration Statement to be listed on each national securities exchange on
which similar securities issued by the Issuer are then listed, if any, if the
listing of such common stock is then permitted under the rules of such exchange,
or (ii) secure the quotation of all the common stock covered by the Registration
Statement on The Nasdaq SmallCap Market, if the listing of such common stock is
then permitted under the rules of such The Nasdaq SmallCap Market, or (iii) if,
despite the Issuer's best efforts to satisfy the preceding clause (i) or (ii),
the Issuer is unsuccessful in satisfying the preceding clause (i) or (ii) and
without limiting the generality of the foregoing, to use its best efforts to
arrange for at least two market makers to register with the National Association
of Securities Dealers, Inc. as such with respect to such common stock.
7.7 Provide a transfer agent and registrar, which may be a single
entity, for the common stock not later than the effective date of the
Registration Statement.
7.8 It shall be a condition precedent to the obligations of the
Issuer to take any action pursuant to this Section 7 that the Purchaser shall
furnish to the Issuer such information regarding itself as the Issuer may
reasonably request to effect the registration of the common stock and shall
execute such documents in connection with such registration as the Issuer may
reasonably request.
7.9 The Purchaser agrees to cooperate with the Issuer in any manner
reasonably requested by the Issuer in connection with the preparation and filing
of the Registration Statement hereunder.
7.10 The Purchaser agrees that, upon receipt of any notice from the
Issuer of the happening of any event of the kind described in Section 7.4 or
7.5, the Purchaser will immediately discontinue disposition of Shares pursuant
to the Registration Statement until the Purchaser's receipt of notice from the
Issuer that sales may resume and copies of the supplemented or amended
prospectus and, if so directed by the Issuer, shall deliver to the Issuer (at
the expense of the Issuer) or destroy (and deliver to the Issuer a certificate
of destruction) all copies in the Purchaser's possession of the prospectus
covering such Common Stock current at the time of receipt of such notice.
8
7.11 All expenses, other than (i) underwriting discounts and
commissions, (ii) other fees and expenses of investment bankers and (iii)
brokerage commissions, incurred in connection with registrations, filings or
qualifications pursuant to this Section 7, including, without limitation, all
registration, listing and qualification fees, printers and accounting fees and
the fees and disbursements of counsel to the Issuer, shall be borne by the
Issuer.
7.12 To the extent permitted by law, the Issuer will indemnify and
hold harmless the Purchaser, the directors, if any, of the Purchaser, the
officers, if any, of the Purchaser, each person, if any, who controls the
Purchaser within the meaning of the Securities Act or the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), any underwriter (as defined in the
Securities Act) for the Purchaser, the directors, if any, of such underwriter
and the officers, if any, of such underwriter, and each person, if any, who
controls any such underwriter within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, expenses or liabilities (joint or several) (collectively, "Claims") to
which any of them may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations in the Registration
Statement, or any post effective amendment thereof, or any prospectus included
therein: (i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any post effective amendment thereof
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus if used prior to the effective date of
such Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Issuer files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Issuer of the Securities Act,
any state securities law or any rule or regulation under the Securities Act, the
Exchange Act or any state securities law (the matters in the foregoing clauses
(i) through (iii) are hereinafter collectively referred to as the "Violations").
Subject to the restrictions set forth in Section 7.14 with respect to the number
of legal counsel, the Issuer shall reimburse the Purchaser and each such
underwriter or controlling person, promptly as such expenses are incurred and
are due and payable, for any reasonable legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnity
contained in this Section 7.12 shall not apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Issuer by any Indemnified Person or
underwriter for such Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto; (II) with respect to any preliminary prospectus shall not
inure to the benefit of any person from whom the person asserting any Claim
purchased the Shares that are the subject thereof (or to the benefit of any
person controlling such person) if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected in the prospectus, as
then amended or supplemented, if such final prospectus was timely made available
by the Issuer; and (III) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Issuer, which consent shall not be unreasonably withheld. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person and shall survive the transfer of the Shares by
the Purchaser.
9
7.13 The Purchaser agrees to indemnify and hold harmless, to the
same extent and in the same manner set forth in Section 7.12, the Issuer, each
of its directors, each of its officers who signs the Registration Statement,
each person, if any, who controls the Issuer within the meaning of the
Securities Act or the Exchange Act, any underwriter and any other stockholder
selling securities pursuant to the Registration Statement or any of its
directors or officers or any person who controls such stockholder or underwriter
within the meaning of the Securities Act or the Exchange Act (each such person
and each Indemnified Person, an "Indemnified Party"), against any Claim to which
any of them may become subject, under the Securities Act, the Exchange Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation by
the Purchaser, in each case to the extent (and only to the extent) that (I) such
Violation occurs in reliance upon and in conformity with written information
furnished to the Issuer by the Purchaser expressly for use in connection with
such Registration Statement or such prospectus or (II) is a result of the breach
of federal or state securities laws pertaining to the transfer by the Purchaser
of the Shares or the securities underlying the Shares; and the Purchaser will
reimburse any reasonable legal or other expenses reasonably incurred by any
Indemnified Party in connection with investigating or defending any such Claim;
provided, however, that the indemnity contained in this Section 7.13 shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Purchaser, which consent shall not be
unreasonably withheld; provided, further, that the Purchaser shall be liable
under this Section 7.13 for only that amount of a Claim as does not exceed the
net proceeds to the Purchaser as a result of the sale of Shares pursuant to such
Registration Statement or such prospectus. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Shares (or underlying
securities) by the Purchaser. Notwithstanding anything to the contrary contained
herein the indemnity contained in this Section 7.13 with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.
7.14 Promptly after receipt by an Indemnified Person or Indemnified
Party under Section 7.12 or 7.13 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is made against any indemnifying
party under this Section 7, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying parties;
provided, however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel, with the fees and expenses to be paid by
the indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person
or Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. Except as provided in the preceding sentence, the Issuer shall pay
for only one separate legal counsel for the Indemnified Persons. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 7,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnity required by this Section 7 shall be
10
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
8. TRANSFER AGENT INSTRUCTIONS. Promptly following the delivery by the
Purchaser of the Purchase Price, the Issuer's transfer agent will be instructed
by the Issuer to issue one or more certificates representing the Shares
purchased, bearing the restrictive legend specified in Section 5.2 of this
Agreement, registered in the name of the Purchaser or its nominee and in such
denominations as shall be specified by the Purchaser. The Issuer warrants that
no instruction other than such instructions referred to in this Section 8 and
stop transfer instructions to give effect to Section 5.1 and 5.2 hereof will be
given by the Issuer to the transfer agent and that the Shares shall otherwise be
freely transferable on the books and records of the Issuer as and to the extent
provided in this Agreement. Nothing in this Section shall affect in any way the
Purchaser's obligations and agreement to comply with all applicable federal and
state securities laws upon resale of the Shares. If the Purchaser provides the
Issuer with an opinion of counsel reasonably satisfactory in form, scope and
substance to the Issuer that registration of a resale by the Purchaser of any of
the Shares in accordance with Section 5.1 is not required under the Securities
Act or applicable state securities laws, the Issuer shall permit the transfer
agent to issue one or more share certificates in such name and in such
denominations as specified by the Purchaser.
9. BOARD OF DIRECTORS. If, at any time it could elect a director based
on the number of shares of common stock it holds, Purchaser chooses not to
designate a candidate for election to the Board, Purchaser shall still be
entitled, at its option, to designate a person (the "Observer") who shall attend
any meeting of the Board for the sole purpose of observing such meeting for and
on behalf of the Purchaser. The Observer shall have no right or obligation to
vote or otherwise to participate in the discussion or consideration of any
matter addressed at any such meeting; provided, however, that notwithstanding
anything else in this Section 9, Purchaser shall have the right to designate an
Observer for as long as Purchaser holds at least 10% of the Issuer's common
stock on a fully diluted basis.
10. RELIANCE. The Purchaser understands and agrees that the Issuer and
its officers, directors, employees and agents may, and will, rely on the
accuracy of the Purchaser's representations and warranties in this agreement to
establish compliance with applicable securities laws. The Purchaser agrees to
indemnify and hold harmless all such parties against all losses, claims, costs,
expenses and damages or liabilities which they may suffer or incur caused or
arising from their reliance on such representations and warranties.
11. MISCELLANEOUS.
11.1 Survival. The representations and warranties made in this
agreement shall survive the closing of the transactions contemplated by this
agreement.
11.2 Assignment. This agreement is not transferable or assignable.
11.3 Execution and Delivery of Agreement. The Issuer shall be
entitled to rely on delivery by facsimile transmission of an executed copy of
this agreement, and acceptance by the Issuer of such facsimile copy shall create
a valid and binding agreement between the Purchaser and the Issuer.
11
11.4 Titles. The titles of the sections and subsections of this
agreement are for the convenience of reference only and are not to be considered
in construing this agreement.
11.5 Severability. The invalidity or unenforceability of any
particular provision of this agreement shall not affect or limit the validity or
enforceability of the remaining provisions of this agreement.
11.6 Entire Agreement. This agreement constitutes the entire
agreement and understanding between the parties with respect to the subject
matters herein and supersedes and replaces any prior agreements and
understandings, whether oral or written, between them with respect to such
matters.
11.7 Waiver and Amendment. Except as otherwise provided herein, the
provisions of this agreement may be waived, altered, amended or repealed, in
whole or in part, only upon the mutual written agreement of the Purchaser and
the Issuer.
11.8 Counterparts. This agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
11.9 Governing Law. This agreement is governed by and shall be
construed in accordance with the laws of the State of Nevada.
12
IN WITNESS WHEREOF, the parties hereto have duly executed this
agreement as of the date first above mentioned.
THE "ISSUER" THE "PURCHASER"
CONTANGO OIL & GAS COMPANY TRUST COMPANY OF THE WEST,
a California trust company, in its
capacities as Investment Manager
pursuant to the Investment
Management Agreement dated as of
June 6, 1988 between General Xxxxx,
Inc. and the Trust Company of the
West and as Custodian pursuant to
the Custody Agreement dated as of
February 6, 1989 among General
Xxxxx, Inc., the Trust Company of
the West and State Street Bank and
Trust Company, as trustee
By: /s/ XXXXXXX X. PEAK By: /s/ XXXXXX X. XXXXXXX
------------------------------- -----------------------------
Xxxxxxx X. Peak Xxxxxx X. Xxxxxxx
President and Chief Executive Managing Director
Officer
By: /s/ XXXXXX X. XXXXXXXX
----------------------------
Xxxxxx X. Xxxxxxxx
Senior Vice President
