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EXHIBIT 10.5
CONTANGO OIL & GAS COMPANY
CO-SALE AGREEMENT
THIS CO-SALE AGREEMENT (the "Agreement") is made as of this 29th day of
December, 1999, by and among Contango Oil & Gas Company, a Nevada corporation
(the "Company"), Trust Company of the West, a California trust company, in its
capacities as Investment Manager pursuant to the Investment Management Agreement
dated as of June 6, 1988 between General Xxxxx, Inc. and the Trust Company of
the West and as Custodian pursuant to the Custody Agreement dated as of February
6, 1989 among General Xxxxx, Inc., the Trust Company of the West and State
Street Bank and Trust Company, as Trustee ("TCW"), and Xxxxxxx X. Peak ("Peak").
RECITALS
WHEREAS, TCW is purchasing shares of the Company's Common Stock, and a
warrant to purchase additional shares of Common Stock (the "Warrant" and
together with the Common Stock purchased by TCW, the "Securities"), pursuant to
that certain Securities Purchase Agreement dated as of the date hereof (the
"Securities Purchase Agreement"), between TCW and the Company;
WHEREAS, TCW was induced by the Company to purchase the Securities in
part by the Company's and Peak's agreement to enter into this Agreement; and
WHEREAS, the parties desire to enter into this Agreement in order to
grant rights of co-sale to TCW.
In consideration of the mutual covenants set forth herein, the parties
agree hereto as follows:
1. DEFINITIONS.
(a) "CO-SALE STOCK" shall mean shares of the Company's Common Stock now
owned or subsequently acquired by Peak.
(b) "COMMON STOCK" shall mean the Company's Common Stock and shares of
Common Stock issued or issuable upon exercise of the Warrant.
2. SALES BY PEAK.
(a) If Peak proposes to sell or transfer any shares of Co-Sale Stock,
then Peak shall promptly give written notice (the "Notice") simultaneously to
the Company and to TCW at least thirty (30) days prior to the closing of such
sale or transfer. The Notice shall describe in reasonable detail the proposed
sale or transfer including, without limitation, the number of shares of Co-Sale
Stock to be sold or transferred, the nature of such sale or transfer, the
consideration to be paid, and the name and address of each prospective purchaser
or transferee.
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(b) TCW shall have the right, exercisable upon written notice to Peak
within fifteen (15) days after the Notice, to participate in such sale of
Co-Sale Stock on the same terms and conditions. Such notice shall indicate the
number of shares of Common Stock TCW wishes to sell under its right to
participate. To the extent TCW exercises such right of participation in
accordance with the terms and conditions set forth below, the number of shares
of Co-Sale Stock that Peak may sell in the transaction shall be correspondingly
reduced.
(c) TCW may sell all or any part of that number of shares equal to the
product obtained by multiplying (i) the aggregate number of shares of Co-Sale
Stock covered by the Notice by (ii) a fraction the numerator of which is the
number of shares of Common Stock owned by TCW at the time of the sale or
transfer and the denominator of which is the total number of shares of Common
Stock owned by Peak and TCW at the time of the sale or transfer. TCW shall
effect its participation in the sale by promptly delivering to Peak for transfer
to the prospective purchaser one or more certificates, properly endorsed for
transfer, which represent the number of shares of Common Stock which TCW elects
to sell.
(d) The stock certificate or certificates that TCW delivers to Peak
pursuant to Section 2(c) shall be transferred to the prospective purchaser in
consummation of the sale of the Common Stock pursuant to the terms and
conditions specified in the Notice, and Peak shall concurrently therewith remit
to TCW that portion of the sale proceeds to which TCW is entitled by reason of
its participation in such sale. To the extent that any prospective purchaser or
purchasers prohibits such assignment or otherwise refuses to purchase shares or
other securities from TCW exercising its rights of co-sale hereunder, Peak shall
not sell to such prospective purchaser or purchasers any Co-Sale Stock unless
and until, simultaneously with such sale, Peak shall purchase such shares or
other securities from TCW on the same terms and conditions specified in the
Notice.
(e) The exercise or non-exercise of the rights of TCW hereunder to
participate in one or more sales of Co-Sale Stock made by Peak shall not
adversely affect its rights to participate in subsequent sales of Co-Sale Stock
subject to Section 2(a).
(i) If TCW does not elect to participate in the sale of the Co-Sale
Stock subject to the Notice, Peak may, not later than sixty (60) days following
delivery to the Company of the Notice, enter into an agreement providing for the
closing of the transfer of the Co-Sale Stock covered by the Notice within thirty
(30) days of such agreement on terms and conditions not more materially
favorable to the transferor than those described in the Notice. Any proposed
transfer on terms and conditions materially more favorable than those described
in the Notice, as well as any subsequent proposed transfer of any of the Co-Sale
Stock by Peak, shall again be subject to the co-sale rights of TCW and shall
require compliance by Peak with the procedures described in this Section 2.
3. EXEMPT TRANSFERS.
(a) Notwithstanding the foregoing, the co-sale rights of TCW shall not
apply to (i) any pledge of Co-Sale Stock made pursuant to a bona fide loan
transaction with a financial institution that creates a mere security interest,
(ii) any transfer to the ancestors, descendants or spouse of Peak or to trusts
for the benefit of such persons, (iii) any transfer or transfers by Peak to Xxxx
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Jurrius so long as such transfer is made in connection with Jurrius' appointment
to the Company's Board of Directors, or (iv) any bona fide gift; provided that
in the event of any transfer made pursuant to one of the exemptions provided by
clauses (i), (ii) and (iv), (A) Peak shall inform TCW of such pledge, transfer
or gift prior to effecting it and (B) the pledgee, transferee or donee shall
furnish TCW with a written agreement to be bound by and comply with all
provisions of Section 2. Except with respect to Co-Sale Stock transferred under
clause (iii) above (which Co-Sale Stock shall no longer be subject to the
co-sale rights of TCW), such transferred Co-Sale Stock shall remain "Co-Sale
Stock" hereunder, and such pledgee, transferee or donee shall be treated
similarly with Peak for purposes of this Agreement.
(b) Notwithstanding the foregoing, the provisions of Section 2 shall
not apply to the sale of any Co-Sale Stock to (i) the public pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act") or (ii) to the Company.
4. LEGEND.
(a) Each certificate representing shares of Co-Sale Stock now or
hereafter owned by Peak or issued to any person in connection with a transfer
pursuant to Section 3(a) hereof shall be endorsed with the following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN CO-SALE AGREEMENT BY AND BETWEEN TCW, THE COMPANY AND CERTAIN HOLDERS OF
STOCK OF THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN
REQUEST TO THE SECRETARY OF THE COMPANY."
(b) Peak agrees that the Company may instruct its transfer agent to
impose transfer restrictions on the shares represented by certificates bearing
the legend referred to in Section 4(a) above to enforce the provisions of this
Agreement and the Company agrees to promptly do so. The legend shall be removed
upon termination of this Agreement.
5. MISCELLANEOUS.
(a) CONDITIONS TO EXERCISE OF RIGHTS. Exercise of TCW's rights under
this Agreement shall be subject to and conditioned upon, and Peak and the
Company shall use their best efforts to assist TCW in, compliance with
applicable laws.
(b) GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Nevada.
(c) AMENDMENT. Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only by the written consent of (i)
as to the Company, only by the Company, (ii) as to TCW, only by TCW and (iii) as
to Peak, only by Xxxx.
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(x) XXXX. This Agreement shall terminate upon the closing of a firm
commitment underwritten public offering of the Company's Common Stock pursuant
to an effective registration statement under the Securities Act.
(e) NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
party to be notified at the address as set forth on the signature page hereof or
at such other address as such party may designate by ten (10) days advance
written notice to the other parties hereto.
(f) SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
(f) ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
(h) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties relative to the specific subject matter hereof. Any previous
agreement among the parties relative to the specific subject matter hereof is
superseded by this Agreement. This Agreement and the rights and obligations of
the parties hereunder shall inure to the benefit of, and be binding upon, their
respective successors, assigns and legal representatives.
(i) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned have executed this CO-SALE
AGREEMENT as of the date set forth above.
Company: CONTANGO OIL & GAS COMPANY
a Nevada corporation
By: /s/ XXXXXXX X. PEAK
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Xxxxxxx X. Peak
President and Chief Executive
Officer
Peak: /s/ XXXXXXX X. PEAK
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Xxxxxxx X. Peak
TCW: TRUST COMPANY OF THE WEST,
a California trust company, in its
capacities as Investment Manager
pursuant to the Investment Management
Agreement dated as of June 6, 1988
between General Xxxxx, Inc. and the
Trust Company of the West and as
Custodian pursuant to the Custody
Agreement dated as of February 6, 1989
among General Xxxxx, Inc., the Trust
Company of the West and State Street
Bank and Trust Company, as trustee
By: /s/ XXXXXX X. XXXXXXX
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Xxxxxx X. Xxxxxxx
Managing Director
By: /s/ XXXXXX X. XXXXXXXX
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Xxxxxx X. Xxxxxxxx
Senior Vice President
