Exhibit 10.7
STOCK PURCHASE AGREEMENT
BETWEEN
MATADOR PETROLEUM CORPORATION
AND
UNION OIL COMPANY OF CALIFORNIA
JANUARY 20, 1998
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is entered into this
12th day of January, 1998, between MATADOR PETROLEUM CORPORATION (formerly
named Matador Hold Co.), a Texas corporation ("MATADOR"), and UNION OIL
COMPANY OF CALIFORNIA, a California corporation ("UNOCAL").
1. PURCHASE AND SALE OF STOCK.
1.1 PURCHASE AND SALE. Matador hereby sells to Unocal all right, title
and interest in and to 670,000 newly issued shares (the "NEW SHARES") of the
Common Stock, par value $0.10 per share, of Matador (the "COMMON STOCK").
Unocal hereby purchases from Matador the New Shares in consideration for the
transfer to Matador of the properties (the "SENM Properties") described in
the Contribution Agreement between Matador and Unocal dated the date of this
Agreement (the "Contribution Agreement").
1.2 CLOSING; CLOSING DATE. Subject to the terms and conditions herein
contained, the consummation of the transactions referred to above shall take
place (the "CLOSING") contemporaneous with the execution of this Agreement
(the "CLOSING DATE").
1.3 DELIVERY OF CERTIFICATES. Unocal hereby acknowledges receipt
from Matador of Certificate No. 819 representing the New Shares.
2. REPRESENTATIONS AND WARRANTIES OF UNOCAL. Unocal hereby represents and
warrants to Matador as follows:
2.1 ORGANIZATION, GOOD STANDING, ETC. Unocal is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Unocal has the corporate power to own the SENM Properties and to
operate the SENM Properties as they are now being operated. Unocal has the
corporate power and authority to execute and deliver this Agreement, the
Contribution Agreement and the Shareholders Agreement among Matador, Unocal
and others of even date herewith (the "Shareholders Agreement," and together
with this Agreement and the Contribution Agreement, the "Transaction
Documents") and to consummate the transactions contemplated by the
Transaction Documents.
2.2 NO BREACH OF STATUTE OR CONTRACT; GOVERNMENTAL AUTHORIZATIONS.
Neither the execution and delivery of the Transaction Documents by Unocal nor
compliance with the terms and provisions of the Transaction Documents by
Unocal will violate any law, statute, rule or regulation of any governmental
authority to which Unocal or the SENM Properties is subject, or conflict with
or result in a breach of any of the terms, conditions or provisions of any
judgment, order, injunction, decree or ruling of any court or governmental
agency or authority, to which Unocal or its subsidiaries are subject or any
agreement or instrument to which Unocal or its subsidiaries are a party or by
which any of them is bound, or constitute a material default thereunder,
except where the violation, conflict, breach or default would not have a
material adverse effect on the SENM Properties or the ability of the parties
to
consummate the transactions contemplated by this Agreement. Neither the
execution and delivery of the Transaction Documents by Unocal nor compliance
with the terms and provisions of the Transaction Documents by Unocal will
result in the creation of any material lien, charge or encumbrance upon any
of the SENM Properties or give to others any material interest or rights,
including rights of termination or cancellation, in or with respect to any of
the SENM Properties.
2.3 AUTHORIZATION. The execution, delivery and performance of the
Transaction Documents and of all other agreements and transactions
contemplated hereby and thereby by Unocal have been duly and validly
authorized and approved by all requisite corporate action on the part of
Unocal. The Transaction Documents have been, and the other agreements and
instruments contemplated thereby, when executed and delivered, will be, duly
executed and delivered by Unocal as required and, assuming the due
authorization, execution and delivery hereof and thereof by the other parties
hereto or thereto, each Transaction Document constitutes and, when executed,
each of the other agreements contemplated hereby and thereby will constitute,
a valid and binding obligation of Unocal, enforceable against Unocal in
accordance with its terms, subject to applicable bankruptcy, reorganization,
insolvency, moratorium, and similar laws affecting creditors' rights
generally from time to time and to general principles of equity and
considerations of public policy.
2.4 FINANCIAL STATEMENTS. Unocal has furnished Matador with audited
balance sheets and income statements for the SENM Properties, treated as a
stand alone business, at and for the years ended December 31, 1994, 1995 and
1996, and an unaudited balance sheet and income statement at and for the nine
months ended September 30, 1997, all in a form that comply with the financial
statement reporting requirements of the Securities Act of 1933, as amended
(the "Securities Act"), and the rules and regulations promulgated thereunder.
Unocal will reasonably cooperate with Matador after the Closing to provide
and produce any other financial information or statements reasonably required
by Matador in connection with any public offering of securities of Matador.
2.5 INVESTMENT INTENT. Unocal has no present intention to sell or
otherwise dispose of any of the New Shares. Unocal is acquiring the New
Shares for investment purposes and not with a view to or in connection with a
distribution within the meaning of the Securities Act. Unocal understands and
agrees that the New Shares being acquired by it have not been registered
under any federal or state securities laws, and that the certificates
representing the New Shares will have a legend imprinted thereon to such
effect. Unocal is an accredited investor as defined under Regulation D
promulgated under the Securities Act. Unocal is fully aware (i) of the
circumstances under which Unocal is required to hold the New Shares, (ii) of
the limitations on the transfer or disposition of the New Shares, (iii) that
the New Shares must be held indefinitely unless the transfer thereof is
registered under the securities laws or an exemption from registration is
available and (iv) that no exemption from registration is likely to become
available for at least one year from the date of acquisition of the New
Shares. Unocal is aware of the provisions of Rules 144 and 145 promulgated
under the Securities Act and has been advised of the applicable limitations
thereof. Unocal acknowledges that Matador is relying upon the truth and
accuracy of the representations and warranties in this Section 2.5 by Unocal
in consummating the transactions contemplated by this Agreement without
registering the New Shares under the securities laws. Unocal understands and
agrees that appropriate stop transfer notations will be placed in the records
of Matador and with its transfer agents in respect of the New Shares. The
provisions of this Section 2.5 shall survive
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Closing. Unocal agrees that the certificates representing the New Shares will
be imprinted with the following legend, the terms of which are specifically
agreed to:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
OR THE SECURITIES LAWS OF ANY STATE, IN RELIANCE UPON EXEMPTIONS FROM
REGISTRATION REQUIREMENTS. WITHOUT SUCH REGISTRATION, SUCH SHARES MAY NOT
BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, EXCEPT UPON
DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR SUCH SALE, PLEDGE,
HYPOTHECATION OR TRANSFER OR THE SUBMISSION TO THE COMPANY OF SUCH OTHER
EVIDENCE AS MAY BE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH
SALE, PLEDGE, HYPOTHECATION OR TRANSFER SHALL NOT BE IN VIOLATION OF THE
SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR
REGULATION PROMULGATED THEREUNDER.
2.6 NO MATERIAL ADVERSE CHANGE. There has been no material adverse
change in the financial condition, properties, assets, business or results of
operations of the SENM Properties subsequent to September 30, 1997.
2.7 LITIGATION, PROCEEDINGS, ETC. There is no action, suit, notice of
violation, proceeding or investigation pending or, to the best knowledge of
Unocal, threatened against or affecting Unocal or any of its subsidiaries or
any of their respective properties before or by any court, governmental or
administrative agency or regulatory authority (Federal, state, county or
local) that relates to or challenges the legality, validity or enforceability
of the Transaction Documents or that (A) would (individually or in the
aggregate) have a material adverse effect on the financial condition,
properties, assets, business, prospects or results of operations of the SENM
Properties, or (B) would (individually or in the aggregate) impair the
ability of Unocal to perform fully on a timely basis any obligations that it
has under the Transaction Documents.
2.8 NO DEFAULT OR VIOLATION. Neither Unocal nor any of its
subsidiaries (i) is in default under or in violation of any indenture, loan
or credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound, except such
violations or defaults as would not reasonably be expected to have a material
adverse effect on the financial condition, properties, assets, business,
results of operations or prospects of the SENM Properties, (ii) is in
violation of any order of any court, arbitrator or governmental body that
would (x) adversely affect the legality, validity or enforceability of the
Transaction Documents or (y) have a material adverse effect on the financial
condition, properties, assets, business, prospects or results of operations
of the SENM Properties, or (iii) is in violation of any statute, rule or
regulation of any governmental authority that would (individually or in the
aggregate) (x) adversely affect the legality, validity or enforceability of
the Transaction Documents or (y) have a material adverse effect on the
financial condition, properties, assets, business, prospects or results of
operations of the SENM Properties.
2.9 GOVERNMENTAL CONSENTS, ETC. No authorization, consent, approval,
waiver, license, qualification or formal exemption from, nor any filing,
declaration, qualification or
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registration with, any court, governmental agency or regulatory authority or
any securities exchange is required in connection with the execution,
delivery or performance by Unocal of the Transaction Documents.
2.10 CERTAIN FEES. No fees or commissions will be payable by Unocal to
any broker, finder or investment banker with respect to the issuance and sale
of any of the New Shares pursuant to the terms of this Agreement. Unocal will
indemnify and hold harmless Matador from and against any claims for such fees
or commissions arising out of actions taken by Unocal or its affiliates.
2.11 TITLE TO PROPERTIES. Unocal has good and marketable title to all
properties (real, personal and mixed, tangible and intangible) included in
the SENM Properties, free and clear of all encumbrances, except (i) as
disclosed in records made available by Unocal to Matador prior to the date
hereof, (ii) liens for taxes not yet due and payable, (iii) statutory liens
(including materialmen's, mechanic's, repairmen's, landlord's and other
similar liens) arising in connection with the ordinary course of business
securing payments not yet due and payable, and (iv) such imperfections or
irregularities of title, if any, as (A) are not substantial in character,
amount or extent and do not materially detract from the value of the property
subject thereto, (B) do not materially interfere with either the present or
intended use of such property, and (C) do not, individually or in the
aggregate, materially interfere with the conduct of normal operations of the
SENM Properties.
2.12 ENVIRONMENTAL MATTERS. Except as would not, individually or in the
aggregate, have a material adverse effect on the financial condition,
properties, assets, business, prospects or results of operations of the SENM
Properties:
(a) Neither Unocal, any of its subsidiaries nor any of the SENM
Properties is in violation of, or subject to any pending or, to the best
knowledge of Unocal, threatened proceeding under, or subject to any
remedial obligations under, any applicable laws, statutes, rules or
regulations pertaining to health, safety, the environment, Hazardous
Substances or Solid Wastes (such applicable laws, statutes, rules or
regulations as they now exist or are hereafter enacted and/or amended are
collectively, for purposes of this Section 2.12, called "APPLICABLE
ENVIRONMENTAL LAWS"), including without limitation the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986 (as
amended "CERCLA"), the Resource Conservation and Recovery Act of 1976, as
amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal
Act Amendments of 1980, and the Hazardous and Solid Waste Amendments of
1984 (as amended "RCRA"), the Outer Continental Shelf Lands Act of 1978,
the Oil Pollution Act of 1990, the Texas Water Code and the Texas Solid
Waste Disposal Act. No asbestos, material containing asbestos that is or
may become friable, or material containing asbestos deemed hazardous by
Applicable Environmental Laws, has been installed in any SENM Property.
The representations and warranties set forth in the preceding sentences
of this Section would continue to be true and correct following disclosure
to the applicable governmental authorities of all relevant facts,
conditions, and circumstances, if any, pertaining to the SENM Properties;
(b) Unocal and its subsidiaries have obtained all necessary
licenses, authorizations, consents, approvals, qualifications and permits
to construct, occupy,
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operate and use all buildings, improvements, fixtures, equipment or other
tangible property forming a part of the SENM Properties by reason of any
Applicable Environmental Laws. Unocal and its subsidiaries undertook, at
the time of acquisition of the SENM Properties, all appropriate inquiry
into the previous ownership and uses of the SENM Properties consistent
with good commercial or customary practice. Unocal and its subsidiaries
have taken all steps necessary to determine and have determined that no
Hazardous Substances or Solid Wastes (as defined herein) have been
Disposed (as defined herein) of or otherwise Released (as defined herein)
on or to the SENM Properties.
For purposes of this Agreement, the terms "HAZARDOUS SUBSTANCE" and
"RELEASE" shall have the meanings specified in CERCLA, and the terms "SOLID
WASTE" and "DISPOSAL" (or "DISPOSED") shall have the meanings specified in
RCRA; provided that in the event either CERCLA or RCRA is amended so as to
broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment; and provided
further, that to the extent the laws of the jurisdiction in which the
Property (as defined in Section 3.14) or the SENM Properties are located
establish a meaning for "Hazardous Substance," "Release," "Solid Waste" or
"Disposal" (or "Disposed") which is broader than that specified in either
CERCLA or RCRA, such broader meaning shall apply to the Property or SENM
Properties subject to such jurisdictions' laws.
3. REPRESENTATIONS AND WARRANTIES OF MATADOR. Matador represents and warrants
to Unocal as follows:
3.1 ORGANIZATION, GOOD STANDING, ETC. Matador is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Texas. Matador has the corporate power to own its property and to carry on
its business as now being conducted and is duly qualified to do business and
is in good standing in each jurisdiction where such qualification is
necessary and appropriate. Matador has the corporate power to execute and
deliver the Transaction Documents and to consummate the transactions
contemplated thereby.
3.2 NO BREACH OF STATUTE OR CONTRACT; GOVERNMENTAL AUTHORIZATIONS.
Neither the execution and delivery of the Transaction Documents by Matador
nor compliance with the terms and provisions of the Transaction Documents by
Matador will violate any law, statute, rule or regulation of any governmental
authority, or conflict with or result in a breach of any of the terms,
conditions or provisions of any judgment, order, injunction, decree or ruling
of any court or governmental agency or authority, to which Matador or its
subsidiaries are subject or of any agreement or instrument to which Matador
or its subsidiaries are parties or by which any of them is bound, or
constitute a material default thereunder, except where the violation,
conflict, breach or default would not have a material adverse effect on
Matador and its subsidiaries taken as a whole. Neither the execution and
delivery of the Transaction Documents by Matador nor compliance with the
terms and provisions of the Transaction Documents by Matador will result in
the creation of any material lien, charge or encumbrance upon any assets of
Matador or its subsidiaries, or give to others any material interest or
rights, including rights of termination or cancellation, in or with respect
to any of the assets or agreements of Matador or its subsidiaries.
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3.3 AUTHORIZATION. The execution, delivery and performance of the
Transaction Documents and of all other agreements and transactions
contemplated hereby and thereby by Matador have been duly and validly
authorized and approved by all requisite corporate action on the part of
Matador. The Transaction Documents have been, and the other agreements and
instruments contemplated thereby, when executed and delivered, will be, duly
executed and delivered by Matador as required and, assuming the due
authorization, execution and delivery hereof and thereof by the other parties
hereto or thereto, each Transaction Document constitutes and, when executed,
each of the other agreements contemplated hereby and thereby will constitute,
a valid and binding obligation of Matador, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
insolvency, moratorium, and similar laws affecting creditors' rights
generally from time to time and to general principles of equity and
considerations of public policy.
3.4 FINANCIAL STATEMENTS. Matador has furnished Unocal with audited
consolidated balance sheets for Matador E & P Company (formerly named Matador
Petroleum Corporation), its principal operating subsidiary ("Operating
Subsidiary"), at and for the years ended December 31, 1994, 1995 and 1996,
and an unaudited balance sheet and income statement for Operating Subsidiary
at and for the nine months ended September 30, 1997, all in accordance with
generally accepted accounting principles, except that the interim statements
do not include footnotes and are subject to year-end adjustments.
3.5 CAPITAL STOCK OF MATADOR AND SUBSIDIARIES. The authorized capital
stock of Matador consists of 10,000,000 shares of Common Stock and 2,000,000
shares of Preferred Stock, par value $0.10 per share (the "Preferred Stock").
There are 833,894 shares of Common Stock issued and outstanding. There are
388,890 shares of Preferred Stock issued and outstanding, all of which are
designated as Series A Convertible Preferred Stock. There are no shares held
in the treasury of Matador. There are no outstanding options, warrants or
other rights to subscribe for or purchase from Matador or any of its
subsidiaries any capital stock of Matador, or securities convertible into
capital stock of Matador except for (i) employee stock options covering
28,350 shares of Common Stock granted pursuant to a qualified incentive stock
option plan, which authorizes the issuance of up to 200,000 shares of Common
Stock and that includes certain stock appreciation rights, (ii) director
stock options covering 3,000 shares of Common Stock granted pursuant to a
non-qualified director stock option plan that authorizes the issuance of
30,000 shares of Common Stock, and (iii) 388,890 shares of Common Stock
reserved for issuance or issuable upon the conversion of the currently
outstanding shares of Preferred Stock. Matador owns all of the issued and
outstanding capital stock of Operating Subsidiary, which is Matador's
principal operating subsidiary. All of the capital stock of Matador's
subsidiaries has been validly authorized and issued, is fully paid and
nonassessable and is owned directly or indirectly by Matador free and clear
of any lien, charge or encumbrance. Each Matador subsidiary is duly
organized, validly existing and in good standing under the laws of its state
of organization, with the corporate or organizational power to own its
property and carry on its business as it is now being conducted, and is duly
qualified to do business and is in good standing in each jurisdiction where
such qualification is necessary and appropriate.
3.6 NO MATERIAL ADVERSE CHANGE. There has been no material adverse change
in the financial condition, properties, assets, business or results of
operations of Matador and its subsidiaries (taken as a whole) subsequent to
September 30, 1997.
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3.7 LITIGATION, PROCEEDINGS, ETC. There is no action, suit, notice of
violation, proceeding or investigation pending or, to the best knowledge of
Matador, threatened against or affecting Matador or any of its subsidiaries
or any of their respective properties before or by any court, governmental or
administrative agency or regulatory authority (Federal, state, county or
local) that relates to or challenges the legality, validity or enforceability
of the Transaction Documents or that (i) would (individually or in the
aggregate) have a material adverse effect on the financial condition,
properties, assets, business, prospects or results of operations of Matador
and its subsidiaries (taken as a whole), or (ii) would (individually or in
the aggregate) impair the ability of Matador to perform fully on a timely
basis any obligations that it has under the Transaction Documents.
3.8 NO DEFAULT OR VIOLATION. Neither Matador nor any of its
subsidiaries (i) is in default under or in violation of any indenture, loan
or credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound, except such
violations or defaults as would not reasonably be expected to have a material
adverse effect on the financial condition, properties, assets, business,
results of operations or prospects of Matador and its subsidiaries (taken as
a whole), (ii) is in violation of any order of any court, arbitrator or
governmental body that would (x) adversely affect the legality, validity or
enforceability of the Transaction Documents or (y) have a material adverse
effect on the financial condition, properties, assets, business, prospects or
results of operations of Matador and its subsidiaries (taken as a whole), or
(iii) is in violation of any statute, rule or regulation or any governmental
authority that would (individually or in the aggregate) (x) adversely affect
the legality, validity or enforceability of the Transaction Documents or (y)
have a material adverse effect on the financial condition, properties,
assets, business, prospects or results of operations of Matador and its
subsidiaries (taken as a whole).
3.9 STATUS OF NEW SHARES. The New Shares have been duly authorized
and, when issued, will be validly issued, fully paid and nonassessable, and
will not be subject to preemptive rights of any person or other claim of any
third party.
3.10 GOVERNMENTAL CONSENTS, ETC. Subject to the accuracy of Unocal's
representations hereunder, no authorization, consent, approval, waiver,
license, qualification or formal exemption from, nor any filing, declaration,
qualification or registration with, any court, governmental agency or
regulatory authority or any securities exchange is required in connection
with the execution, delivery or performance by Matador of the Transaction
Documents, and the issuance, sale or delivery of the New Shares.
3.11 CERTAIN FEES. No fees or commissions will be payable by Matador
to any broker, finder or investment banker with respect to the issuance and
sale of any of the New Shares pursuant to the terms of this Agreement.
Matador will indemnify and hold harmless Unocal from and against any claims
for such fees or commissions arising out of actions taken by Matador or its
affiliates.
3.12 TAXES. All tax returns required to be filed by Matador and its
material subsidiaries in any jurisdiction (including foreign jurisdictions)
have been or will be filed, and all taxes, assessments, fees and other
charges shown thereon to be due and payable have been or will be paid, other
than those being contested in good faith (for which reserves have been
established) or those currently payable without penalty or interest. Matador
does not know of any actual or proposed material additional tax assessments
for any fiscal period against it
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or any of its subsidiaries. None of Matador's nor its subsidiaries' tax
returns are under audit, and no waivers of the statutes of limitations or
extensions of time with respect to any tax returns have been granted to
Matador or any of its subsidiaries, except as would not, individually or in
the aggregate, have a material adverse effect on the financial condition,
properties, assets, business prospects or results of operations of Matador
and its subsidiaries (taken as a whole).
3.13 TITLE TO PROPERTIES. Each of Matador and its subsidiaries has
good and marketable title to all properties (real, personal and mixed,
tangible and intangible) it owns or purports to own, including without
limitation the properties reflected in its books and records and in the
latest balance sheet of Matador, other than those disposed of after the date
of such balance sheet in the ordinary course of business consistent with past
practice, free and clear of all encumbrances, except (i) as disclosed in
records made available by Matador to Unocal prior to the date hereof, (ii)
liens for taxes not yet due and payable, (iii) statutory liens (including
materialmen's, mechanic's, repairmen's, landlord's and other similar liens)
arising in connection with the ordinary course of business securing payments
not yet due and payable, and (iv) such imperfections or irregularities of
title, if any, as (A) are not substantial in character, amount or extent and
do not materially detract from the value of the property subject thereto, (B)
do not materially interfere with either the present or intended use of such
property, and (C) do not, individually or in the aggregate, materially
interfere with the conduct of Matador's or any of its subsidiary's normal
operations.
3.14 ENVIRONMENTAL MATTERS. Except as would not, individually or in
the aggregate, have a material adverse effect on the financial condition,
properties, assets, business, prospects or results of operations of Matador
and its subsidiaries (taken as a whole):
(a) Neither Matador, any of its subsidiaries nor any property owned
or leased by Matador or any subsidiary (for purposes of this Section 3.14
and Section 2.12, the "Property") is in violation of, or subject to any
pending or, to the best knowledge of Matador, threatened proceeding under,
or subject to any remedial obligations under, any applicable laws,
statutes, rules or regulations pertaining to health, safety, the
environment, Hazardous Substances or Solid Wastes (such applicable laws,
statutes, rules or regulations as they now exist or are hereafter enacted
and/or amended are collectively, for purposes of this Section 3.14,
called "APPLICABLE ENVIRONMENTAL LAWS"), including without limitation
CERCLA, RCRA, the Outer Continental Shelf Lands Act of 1978, the Oil
Pollution Act of 1990, the Texas Water Code and the Texas Solid Waste
Disposal Act. No asbestos, material containing asbestos that is or may
become friable, or material containing asbestos deemed hazardous by
Applicable Environmental Laws, has been installed in any Property. The
representations and warranties set forth in the preceding sentences of
this Section would continue to be true and correct following disclosure to
the applicable governmental authorities of all relevant facts, conditions,
and circumstances, if any, pertaining to the Property;
(b) Matador and its subsidiaries have obtained all necessary
licenses, authorizations, consents, approvals, qualifications and permits
to construct, occupy, operate and use all buildings, improvements,
fixtures, equipment or other tangible property forming a part of the
Property by reason of any Applicable Environmental Laws. Matador and its
subsidiaries undertook, at the time of acquisition of the Property, all
appropriate inquiry into the previous ownership and uses of the Property
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consistent with good commercial or customary practice. Matador and its
subsidiaries have taken all steps necessary to determine and have
determined that no Hazardous Substances or Solid Wastes have been Disposed
of or otherwise Released on or to the Property.
4. CERTAIN COVENANTS OF MATADOR. Matador agrees and covenants that:
(a) Matador will contribute the SENM Properties to Operating
Subsidiary and will not sell any of its Operating Subsidiary common stock
prior to two years after the Closing Date;
(b) Until two years after the Closing Date, Matador will limit
the number of shares of capital stock issued and outstanding, together with
all options, warrants and other rights of any person to subscribe for or
purchase from Matador shares of its capital stock, to a number such that
Unocal's Proportionate Share (as defined below) of Matador capital stock
shall not be less than (i) 22% on a fully diluted basis as a result of the
IPO (as defined below) or following the IPO and (ii) 31% on a fully diluted
basis if prior to the IPO;
(c) Until two years after the Closing Date, with respect to any
proposed issuance of capital stock by Matador that would dilute Unocal's
Proportionate Share below the percentages contained in Section 4(b), Unocal
shall have the option (but not the obligation) to purchase for cash at the
issue price (and if the consideration is not in cash, at the dollar value of
the consideration paid) for such capital stock (the "ISSUE PRICE") such
number of shares of Matador capital stock as is necessary to retain Unocal's
Proportionate Share at not less than such percentages. Until two years after
the Closing Date, Unocal may elect, in lieu of cash payment for the Issue
Price of such shares pursuant this Section 4(c), to convey and deliver
Unocal's interest in certain Texas, New Mexico, Oklahoma and Louisiana oil
and gas properties to Matador. If Unocal proposes such a contribution,
XxXxxxxx & XxXxxxxxxx will appraise the properties and deliver a copy of
their report to both Unocal and the directors not affiliated with Unocal (the
"NON-UNOCAL DIRECTORS") for their review and consideration. The parties then
agree to negotiate in good faith to determine the fair market value of the
properties for purposes of this exchange. If Unocal and a majority of the
Non-Unocal Directors agree on a fair market value, then Unocal will receive
an amount of shares of capital stock with an Issue Price equal to the agreed
fair market value of such properties. If Unocal and the Non-Unocal Directors
do not agree on the fair market value of such properties, then Unocal may
elect not to convey properties in lieu of cash for the purchase of such
shares of Matador capital stock. If such proposed issuance is prior to two
years after the Closing Date and Unocal and a majority of the Non-Unocal
Directors are unable to agree on the fair market value of the properties,
then Matador may not issue capital stock that would reduce Unocal's
Proportionate Share below the percentages stated above without the written
approval of Unocal.
(d) For a period of not less than two years following completion of
the IPO, Matador will prepare and file, on a timely basis, all periodic reports
and other information required to meet the current public information
requirements of Rule 144 promulgated by the Securities and Exchange Commission
(the "COMMISSION") pursuant to the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT").
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(e) If an IPO has not been completed on or before January 2,
1999, and if Unocal delivers to Matador on or before January 2, 1999, a
written exercise notice citing this paragraph, then Unocal shall receive on
July 2, 1999, a cash payment in the amount of $22,000,000 (the "PAYMENT") in
exchange for the transfer to Matador on such date of all of the New Shares,
free and clear of liens or encumbrances. If an IPO has not been completed on
or before January 2, 1999, and Unocal does not deliver to Matador on or
before January 2, 1999, a written exercise notice, then if an IPO has not
been completed on or before January 2, 2000, and if Unocal delivers to
Matador on or before January 2, 2000, a written exercise notice citing this
paragraph, Unocal shall receive, on March 2, 2000, the Payment in exchange
for the transfer to Matador on such date of all of the New Shares, free and
clear of liens or encumbrances. This Section 4(e) shall automatically expire
upon the sooner of: (i) the completion of an IPO; or (ii) January 2, 2000, if
Unocal has not delivered a written exercise notice for the Payment on or
prior to such date. Matador will reasonably and in good faith cooperate with
Unocal's reasonable efforts to obtain third-party guarantees of or insurance
or letters of credit covering Matador's obligations under this Section 4(e),
provided that (A) Unocal shall pay in full all reasonable expenses of Matador
in connection with such cooperation or the guarantee, insurance or letter of
credit, and (B) Matador shall not be required to place any restrictions or
encumbrances on its properties or take or omit to take any action if such
action or omission or restriction or encumbrance would be detrimental to
Matador beyond a DE MINIMIS impact, provided that nothing in this sentence
shall in any way limit or restrict Matador's obligations set forth in the
preceding portions of this Section 4(e).
(f) "Unocal's Proportionate Share" of Matador capital stock shall
be equal to the fraction, expressed as a percentage, represented by a
numerator equal to the total of all New Shares plus any additional shares of
capital stock of Matador beneficially owned or held by Unocal or any of its
affiliates (including for this purpose any shares of capital stock or other
equity securities which could be acquired upon conversion of any securities
convertible into capital stock or other equity securities or exercise of any
rights to acquire capital stock or other equity securities) over a
denominator equal to the total number of outstanding shares of Matador
capital stock (including, common stock, preferred stock and all other classes
of Matador capital stock outstanding and assuming exercise of all conversion
rights and options, warrants and similar rights with respect to Matador
capital stock).
(g) For purposes of this Agreement, "IPO" means the first to occur
of (i) an underwritten public offering of common stock of Matador pursuant to a
registration statement filed under the Securities Act in which the aggregate net
cash proceeds received by Matador are equal to or in excess of the amount equal
to $15,000,000; (ii) the listing of the Common Stock on a national exchange or
the Nasdaq National Market; or (iii) a merger of Matador into a publicly-traded
company wherein Matador is the surviving entity; provided, however, that the
term "IPO" shall not include an offering pursuant to any registration statement
(1) relating to any capital stock of Matador or options, warrants or other
rights to acquire any such capital stock issued or to be issued as compensation
primarily to directors, officers or employees of Matador, (2) relating to any
employee benefit plan or interests therein, or (3) relating principally to any
preferred stock or debt securities of Matador.
(h) Until the earlier of (i) completion of the IPO, (ii) such time
as Matador delivers payment to Unocal of the Payment in exchange for the
transfer to Matador of all of the New Shares as described in Section 4(e) above
or (iii) two years after the Closing Date, without the prior consent of Unocal,
Matador shall not (A) enter into any transaction the
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result of which is that the shareholders of Matador immediately prior to the
transaction cease to hold sufficient voting stock of Matador to elect a
majority of the Board of Directors of Matador or any successor thereto, (B)
sell, or permit any subsidiary to sell, assets that constitute more than 80%
of the assets of Matador and its subsidiaries taken as a whole, provided that
any assets that are exchanged for oil and gas properties shall not be treated
as having been sold and any assets the sale proceeds of which are reinvested
in oil and gas properties within 180 days shall not be treated as having been
sold.
(i) Until such time as Matador is required to file reports pursuant
to Sections 13 or 15(d) of the Exchange Act and for so long as Unocal is a
holder of shares of Common Stock, Matador shall deliver to Unocal the following:
(A) ANNUAL FINANCIALS. As soon as practicable after the end of each
fiscal year, and in any event within 90 days thereafter, consolidated
balance sheets of Matador and its subsidiaries, if any, as of the end of
such fiscal year, consolidated statements of income, consolidated
statements of cash flows and consolidated statements of changes in
stockholders' equity of Matador and its subsidiaries, if any, for such
year, prepared in accordance with generally accepted accounting principles
and setting forth in each case in comparative form the figures for the
previous fiscal year (or, at the election of Matador, setting forth in
comparative form the budgeted figures for the fiscal year then reported),
all in reasonable detail and audited by independent public accountants of
national standing selected by Matador, together with a certificate of
Matador executed by Matador's chief executive officer or principal
financial or accounting officer certifying that all covenants with which
Matador must comply hereunder have been complied with or setting forth in
reasonable detail any covenants with which Matador has not complied.
(B) QUARTERLY FINANCIALS. As soon as practicable after the end of
the first, second and third quarterly accounting periods in each fiscal
year of Matador, and in any event within 45 days thereafter, a
consolidated balance sheet of Matador and its subsidiaries, if any, as of
the end of each such quarterly period, consolidated statements of income,
consolidated statements of cash flows and consolidated statements of
changes in stockholders' equity of Matador and its subsidiaries for such
period and for the current fiscal year to date, prepared in accordance
with generally accepted accounting principles (other than for accompanying
notes), subject to changes resulting from year-end audit adjustments, all
in reasonable detail and signed by Matador's principal financial or
accounting officer.
(C) OTHER INFORMATION. With reasonable promptness, such other
information and data, including access to books, records, officers and
accountants, with respect to Matador and its subsidiaries, if any, as
Unocal may from time to time reasonably request.
(j) The parties to this Agreement acknowledge that from time to time
Matador and its subsidiaries (the "MATADOR GROUP") allow Matador's shareholders
and directors to participate in proposed transactions to which the Matador Group
is a party and for which the Matador Group needs participants (a "PARTICIPATORY
TRANSACTION"). For a period ending two years after the Closing Date or until an
IPO, whichever is sooner, the Matador Group will enter into agreements allowing
directors of a member of the Matador Group to
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participate in a Participatory Transactions "PARTICIPATION AGREEMENTS" only
on the following terms:
(A) The Chief Executive Officer and all other officers of a member
of the Matador Group may not participate in a Participatory Transaction.
(B) A director of a member of the Matador Group may participate in a
Participatory Transaction only if the Matador Group intends to offer
persons not related to the Matador Group the opportunity to participate in
this Participatory Transaction.
(C) If a director of a member of the Matador Group is to participate
in a Participatory Transaction, Matador must prepare a summary in writing
of the proposed Participation Agreement with the director that includes an
explanation of (i) the details of the Participation Agreement and (ii) why
the Participation Agreement is in the Matador Group's best interests.
(D) Before or contemporaneously with the approval (if necessary) or
consummation of a Participatory Transaction, Participation Agreements must
be approved by a committee or sub-committee of the Board of Directors of
Matador composed entirely of disinterested (as defined in
Section 1.02A(12) of the Texas Business Corporation Act) directors of
Matador.
(E) At the first meeting of the Board of Directors of Matador
following this approval, a majority of the disinterested (as defined in
Section 1.02A(12) of the Texas Business Corporation Act) directors of
Matador must ratify the Participation Agreement. A director of a member of
the Matador Group who is party to a Participation Agreement to be ratified
at that meeting must excuse himself or herself from discussion of the
Participation Agreement to which he or she is a party and discussion of
all other Participation Agreements related to the Participatory
Transaction to which such director's Participation Agreement relates.
(F) Participation Agreements will be allowed on such terms as the
Board of Directors of Matador or a committee or sub-committee approve as
(i) in the Matador Group's best interest and (ii) on fair and reasonable
terms no less favorable than the Matador Group would obtain in a
comparable's arm's-length transaction with a person or entity other than
an affiliate of the Matador Group. Participation Agreements on the same
basis as agreements with third-party participants who are unrelated to the
Matador Group are presumptively permissible.
5. RESTRICTIONS ON TRANSFERABILITY OF SHARES; COMPLIANCE WITH SECURITIES ACT.
5.1 RESTRICTIONS ON TRANSFERABILITY; DEFINITIONS. Registrable Shares
(as defined below) 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 Registrable Shares. For purposes of
this Agreement:
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(i) "REGISTRABLE SHARES" means all New Shares other than New Shares
that have been sold in a registered public offering.
(ii) "FIRST PUBLIC SALE" means the first issuance of shares of
Common Stock by Matador pursuant to a public distribution in which the Common
Stock shall be listed and traded on a national or regional exchange or on the
Nasdaq National Market.
(iii) "QUALIFIED FIRST PUBLIC SALE" means a First Public Sale (a)
the proceeds of which realized by Matador, taken on a net basis after
deducting all fees and expenses relating thereto, including, without
limitation, all underwriting, legal, accounting, filing and other fees and
expenses, shall be in an amount of not less than $15,000,000 and (b) which
increases by not less than 300 the number of holders of Common Stock;
PROVIDED, HOWEVER, that a Qualified First Public Sale shall be deemed to have
occurred for all purposes of this Agreement in the event that Matador shall
consolidate or merge with or into any other corporation, or shall sell or
otherwise convey to another corporation all or substantially all of the
assets of Matador, and the survivor of such consolidation or merger, or such
other corporation, as the case may be, shall (i) have its common stock listed
and traded on a national or regional exchange or on the Nasdaq National
Market and (ii) have a pro forma market value of not less than $75,000,000.
5.2 NOTICE OF PROPOSED TRANSFER; REGISTRATION NOT REQUIRED. Holders
of Registrable Shares, by acceptance thereof, agree to give prior written
notice to Matador of such holder's intention to transfer any Registrable
Shares 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 5.3 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 5.9 hereof if such legend is still required on
any such certificates of Common Stock).
5.3 (a) REQUIRED REGISTRATION. The holders of at least 33 1/3% of the
aggregate number of Registrable Shares may request Matador to effect the
registration (the "DEMAND REGISTRATION") or qualification or filing for
exemption under applicable federal and state securities laws of such
Registrable Shares. Matador shall promptly give written notice to all holders
of Registrable Shares of a proposed registration or qualification or filing
for exemption, and shall, subject to the conditions of this Section 5.3 and
Section 5.4, as expeditiously as possible, effect any such registration or
qualification or filing for exemption of
(i) such Registrable Shares;
(ii) all Registrable Shares of holders of Registrable Shares
which shall have advised Matador in writing within 30 days after the
giving of such written notice by Matador of their desire to have their
Registrable 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 Registrable Shares which the holders thereof
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propose to make, and Matador 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 Matador's
obligations with respect to the Demand Registration pursuant to Section
5.3(a) hereof, Matador shall use commercially reasonable efforts to effect or
cause the registration of the Registrable Shares under the Securities Act to
permit the sale of such Registrable Shares by the holders thereof in
accordance with the intended method of distribution thereof, and pursuant
thereto, Matador 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 Matador and which shall
permit the disposition of the Registrable 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 5.3(a) hereof, and comply with the provisions of the
Securities Act with respect to the disposition of all of the Registrable
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 Registrable Shares to be
included in a registration statement hereunder and the underwriters (which
term, for 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 Matador) 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 Matador, and cause the
officers, directors and employees of Matador, and counsel and independent
certified public accountants for Matador, 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 Registrable 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
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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 Matador contemplated by paragraph (xi)
below cease to be true and correct in all material respects, (5) of the
receipt by Matador of any notification with respect to the suspension of
the qualification of the Registrable 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 Registrable 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 Registrable Shares being sold specify should be included
therein relating to the sale of the Registrable Shares, including, without
limitation, information with respect to the principal amount of
Registrable 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
Registrable Shares to be sold in such offering, except to the extent that
Matador 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 Registrable 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
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order to facilitate the disposition of the Registrable Shares owned by
such holder; Matador consents to the use of the prospectus or any
amendment or supplement thereto by each of the selling holders of
Registrable Shares and the underwriters in connection with the offering
and sale of the Registrable Shares covered by the prospectus or any
supplement or amendment thereto;
(viii) use commercially reasonable efforts to (1) register or
qualify the Registrable 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 Registrable 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 Registrable Shares owned by such holder; PROVIDED,
HOWEVER, that Matador 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
Registrable 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 Matador to enable the holder or holders thereof to
consummate the disposition of such Registrable Shares;
(x) cooperate with the holders of the Registrable Shares to be
included in a registration statement hereunder and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Shares to be sold and not bearing
any restrictive legends; and, in the case of an underwritten offering,
enable such Registrable 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 Registrable 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 Registrable Shares to be included in a registration
statement hereunder shall reasonably request in order to expedite or
facilitate the disposition of such Registrable 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 Registrable 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 Matador in customary form and covering such matters of the type
customarily covered by such opinion, addressed to each selling holder and
the
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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 Matador
addressed to the selling holders of Registrable 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 Registrable 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 Matador;
(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
Registrable Shares listed, subject to notice, on the Nasdaq National
Market or other applicable exchange.
Upon the occurrence of any event contemplated by paragraph (iv) above,
Matador 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
Registrable 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 Registrable Shares agrees
that upon receipt of any notice from Matador 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 Registrable Shares
pursuant to the registration statement applicable to such Registrable Shares
until such holder receives copies of such amended or supplemented
registration statement or prospectus, and if so directed by Matador, such
holder shall deliver to Matador (at Matador's expense) all copies, other than
permanent file copies, then in such holders' possession of the prospectus
covering such Registrable Shares at the time of receipt of such notice.
Matador may require each holder of Registrable Shares as to which any
registration is being effected under this Section 5.3 or under Section 5.5 to
furnish to Matador such information regarding such holder and the distribution
of such Registrable Shares as Matador
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may from time to time reasonably request in writing in order to comply with
the Securities Act. Each holder of Registrable Shares as to which any
registration is being effected agrees to notify Matador as promptly as
practicable of any inaccuracy or change in information previously furnished
by such holder to Matador 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 Registrable Shares or omits to state any material fact regarding such
holder or the distribution of such Registrable 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 Matador 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 Registrable 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.
5.4 CONDITIONS TO REQUIRED REGISTRATION. Matador shall not be
required to register or effect any registration of Registrable Shares under
the Securities Act pursuant to Section 5.3:
(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 Registrable Shares
could participate pursuant to Section 5.5;
(c) unless the request therefor is to register not less than 33%
of the aggregate number of Registrable Shares not theretofore registered
pursuant to Section 5.3 or Section 5.5;
(d) so long as Matador 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 First Public Sale of Matador unless,
prior to the First Public Sale, Matador has agreed, for the benefit of any
other holder of securities of Matador, to register for public distribution
any security of Matador;
(f) at any time more than five years subsequent to the
Qualified First Public Sale; and
(g) unless Matador 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 Registrable 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 First Public Sale, each holder of Registrable Shares
shall enter into a reasonably customary form
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of lock-up agreement with respect to the public distribution of its
Registrable 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 Preferred Stock currently outstanding) in connection with
the First Public Sale and such lock-up agreement shall in no event restrict
the public distribution of the Registrable Shares of such holder for a period
in excess of 180 days after the First Public Sale.
5.5 INCIDENTAL REGISTRATIONS. Matador agrees that at any time after a
First Public Sale (and, in the event Matador has granted any so-called
piggy-back rights with respect to the First Public Sale, in connection with
the First Public Sale) and before the tenth (10th) anniversary of the
Qualified First Public Sale, it proposes to register any of its securities in
a primary offering of such securities under the Securities Act (otherwise
than pursuant to Section 5.3) 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 Matador, it will give
timely written notice to all holders of outstanding Registrable Shares of its
intention so to do and upon the written request of the holder of any such
Registrable Shares, given within 30 days after receipt of any such notice
from Matador, Matador will in each instance, subject to the next paragraph of
this Section 5.5, use commercially reasonable efforts to cause all such
Registrable Shares held by any such requesting holder of Registrable 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 Registrable Shares shall in its request describe briefly
the manner of any proposed transfer of its Registrable Shares which proposed
transfer shall, in any event, be in accordance with the manner of
distribution provided for in such registration. Matador shall provide to each
holder of Registrable Shares that has requested inclusion of shares in the
registration written notice of the date (the "FINAL DECISION DATE") that is
three business days prior to Matador'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 15 days of Matador's estimated date for sending the
preliminary prospectus. The notice shall be made to each holder of
Registrable Shares in writing by overnight air courier or facsimile
communication in accordance with the provisions of Section 7.7 at least two
business days prior to the Final Decision Date. Each holder of Registrable
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 Matador a written notice of withdrawal of its request to include
shares in the proposed offering. Any holder of Registrable 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 5.5) upon substantially the same terms and at
the same price per share as shares are sold by Matador in the proposed
offering, and (ii) enter into such customary agreements (including an
underwriting agreement and any lock-up agreement requested by the Managing
Underwriter and agreed to by Matador) and take such other actions in
connection therewith as Matador 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
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Matador and the underwriters, in form, substance and scope as are customarily
made in an underwritten offering; (2) comply with information requests by
Matador in accordance with the last paragraph of Section 5.3; and (3) deliver
such documents and certificates as may be reasonably requested by Matador 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 5.5 shall
be deemed to require Matador to proceed with any registration of its
securities after giving the notice herein provided. Registration pursuant to
this Section 5.5 shall be in accordance with, and subject to the provisions
of, the "Registration Procedures" set forth in Section 5.3(b) (other than
clauses (i), (ii) and (v) thereof).
If the managing underwriter engaged by Matador 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 Registrable Shares would have an adverse
effect on the marketability or the price of such offering, Matador 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 Matador,
upon written notice to the holders of such Registrable Shares, shall have the
right to limit such Registrable 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 Matador held by any person (other
than Matador) are to be included in such underwritten public offering, such
reduction in the number of Registrable 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.
5.6 EXPENSES; RELIANCE. Matador 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 Registrable Shares whose Registrable 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 Registrable
Shares pursuant to Section 5.3 or Section 5.5. Notwithstanding the foregoing,
Matador shall not be required to bear any such expenses in connection with
any registration of Registrable Shares under the Securities Act pursuant to
Section 5.3 more than twice, PROVIDED, that:
(i) no registration shall be included as a required
registration pursuant to Section 5.3 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 Registrable Shares
demanded to be included in such registration request that Matador 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
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(ii) no registration which has been declared effective shall
be included as a required registration pursuant to Section 5.3 if the
holders of Registrable Shares are unable to register and sell at least 80%
of any Registrable Shares demanded to be included in such registration for
reasons (excluding, in any event, changes in market price) which are not
reasonably within the control of such holders.
5.7 INDEMNIFICATION AND CONTRIBUTION. (a) In connection with any
registration, qualification, notification, or exemption of securities under
Section 5.3 or Section 5.5, Matador hereby indemnifies each holder of the
Registrable 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 Matador, any agent or employee of Matador or any underwriter (and
as amended or supplemented if Matador 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
Matador by such holder or any such underwriter expressly for use therein, and
Matador and each officer, director and controlling person of Matador shall be
indemnified by each holder of the Registrable 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 Matador 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 Matador shall not inure to the benefit of any underwriter
from whom the person asserting any loss, claim or damage purchased the
Registrable 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 5.7, 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 5.7(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 5.7(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
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fees and expenses of such counsel shall 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 5.7 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 6.7(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 Registrable Shares.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5.7(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 5.7(c) shall
survive, with respect to a holder of Registrable Shares, the transfer of
Registrable Shares by such holder and with respect to a holder of Registrable
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 5.3
or Section 5.5, inclusive, Matador agrees, and each holder of Registrable
Shares by acceptance of such Registrable Shares agrees, that it will enter
into an agreement containing the indemnification provisions of this Section
5.7, and Matador shall not be required to register any shares held by any
holder that does not enter into such an agreement.
5.8 ADDITIONAL REGISTRATION RIGHTS. Without the written consent of
the holders of 66-2/3% of Registrable Shares which have not previously been
registered, Matador will not grant to any person at any time on or after the
Closing Date the right to request Matador to effect the registration or
qualification or filing for exemption under applicable federal or state
securities laws of any securities of Matador, whether pursuant to any
subsequent agreement
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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 Registrable Shares hereunder, including, without limitation,
the rights granted to such holders pursuant to Sections 5.3 and 5.5. It is
agreed that the granting by Matador to other persons of Registration Rights
that are substantially identical to, or less favorable than, the registration
rights granted to the holders of the Registrable Shares under this Agreement
shall not be deemed to be in conflict with the rights of the holders of the
Registrable Shares hereunder.
5.9 RESTRICTIVE LEGENDS. (a) Each certificate representing
Registrable Shares and each certificate for shares of Common Stock issued to
a subsequent transferee of such certificate shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"The shares evidenced by this certificate have not 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 Matador
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."
In the event that Registrable Shares are sold pursuant to a
registration statement covering Registrable Shares that has become effective
under the Securities Act and under any applicable state securities laws or in
the event that Matador 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 Registrable 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),
Matador shall, or shall instruct its transfer agents and registrars to,
remove such legend from the certificates evidencing Registrable Shares or
issue new certificates without such legend in lieu thereof. Upon the written
request of the holder or holders of any Registrable Shares or any Registrable
Shares, Matador covenants and agrees forthwith to request its counsel to
render an opinion with respect to the matters covered by this Section 5.9 and
to bear all expenses in connection with the same.
5.10 MISCELLANEOUS. Matador shall use commercially reasonable efforts
to comply with all reporting requirements set forth or referred to in Rule
144A and, subsequent to the First Public Sale, Rule 144, each as promulgated
under the Securities Act.
6. SOLICITATION OF EMPLOYEES.
Until the date on which there is no director of Matador
affiliated with Unocal, without the prior written consent of Unocal or
Matador, as applicable, neither Matador nor Unocal will solicit for
employment or otherwise interfere, directly or indirectly, with the
employment relationship of any person who is now employed by Matador or
Unocal, as applicable.
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7. GENERAL PROVISIONS.
7.1 AMENDMENTS. This Agreement and the form of any exhibit attached
hereto may be amended only upon the written agreement of the parties hereto.
7.2 SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES. The
respective representations and warranties of the parties contained in this
Agreement shall survive the Closing Date, regardless of any investigation
made by or on behalf of any party, and shall expire and terminate on the
third anniversary of the Closing Date; provided that the representations and
warranties contained in Section 3.13 hereof shall not terminate until the
expiration of the applicable statute of limitations (including any extension
thereof) for any claim by a taxing authority for any taxes, penalties or
interest. All agreements and undertakings to be or capable of being performed
after the Closing Date shall survive the Closing.
7.3 INDEMNIFICATION BY MATADOR. Matador hereby agrees to indemnify
and hold harmless Unocal in respect of any losses claims, damages,
liabilities or related expenses (including, but not limited to, all
litigation costs) which Unocal incurs in excess of $10,000 in the aggregate
as a result of the breach of any of the representations, warranties and
covenants made by Matador in or pursuant to this Agreement. The
indemnification obligations of Matador under this Section 7.3 shall survive
the Closing Date and will terminate at the time specified in Section 7.2,
except with respect to any indemnity claim or claims pending on the date of
such termination.
7.4 INDEMNIFICATION BY UNOCAL. Unocal hereby agrees to indemnify and
hold harmless Matador in respect of any losses claims, damages, liabilities
or related expenses (including, but not limited to, all litigation costs)
which Matador incurs in excess of $10,000 in the aggregate as a result of the
breach of any of the representations, warranties and covenants made by Unocal
in or pursuant to this Agreement. The indemnification obligations of Unocal
under this Section 7.4 shall survive the Closing Date and will terminate at
the time specified in Section 7.2, except with respect to any indemnity claim
or claims pending on the date of such termination.
7.5 INDEMNIFICATION PROCEDURE. Promptly after any party hereto (the
"INDEMNIFIED PARTY") has received notice or has knowledge of the occurrence
of any event which the Indemnified Party asserts is an indemnifiable event or
after the commencement of any action, claim or proceeding commenced against
the Indemnified Party by a third party that might result in any claim for
indemnity pursuant to this Agreement (a "THIRD PARTY CLAIM"), the Indemnified
Party shall notify the party obligated to provide indemnification hereunder
(the "INDEMNIFYING PARTY") written notice of such claim or the commencement
of such action or proceeding. Promptly after receipt by an Indemnifying Party
of any such notice, the Indemnifying Party shall, within twenty days of
receipt of such notice, either: (i) acknowledge the debt, liability or
obligation for which indemnity is sought as a valid claim and forthwith pay
the Indemnified Party an amount sufficient to discharge such debt, liability
or obligation; (ii) in the event of a Third Party Claim which is not
acknowledged by the Indemnifying Party to be owing, notify the Indemnified
Party of the defense thereto and thereupon promptly assume and diligently
contest such Third Party Claim with counsel satisfactory to the Indemnified
Party; or (iii) with respect to a claim other than a Third Party Claim, in
the event
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of a claim by the Indemnified Party for indemnity hereunder which is
challenged by the Indemnifying Party, notify the Indemnified Party of such
challenge.
7.6 GOVERNING LAW. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of Texas.
7.7 NOTICES. All notices, requests, demands or other communications
required or permitted by this Agreement shall be in writing and effective
when received, and delivery shall be made personally or by registered or
certified mail, return receipt requested, postage prepaid, or overnight
courier or confirmed facsimile transmission, addressed as follows (or to such
other address as a party may designate by notice to the other party):
(a) If to Matador:
Matador Petroleum Corporation
Suite 158, Pecan Creek
0000 Xxxxxx Xxxx
Xxxxxx, Xxxxx 00000-0000
Attention: Xxxxxx Xx. Xxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Fulbright & Xxxxxxxx L.L.P.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
(b) If to Unocal:
Union Oil Company of California
00000 Xxxxxxxxx Xxxxxxx
Xxxxx Xxxx, Xxxxx 00000
Attention: Xxxx Xxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Union Oil Company of California
00000 Xxxxxxxxx Xxxxxxx
Xxxxx Xxxx, Xxxxx 00000
Attenytion: Xxxxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
7.8 NO ASSIGNMENT. This Agreement may not be assigned by any party
hereto without the prior written consent of the other party hereto, provided
that the rights under this Agreement may be assigned by a party to an
Affiliate of such party (as such term is defined
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for purposes of the Securities Act and the rules and regulations promulgated
thereunder) without the requirement of consent by any party.
7.9 FEES AND EXPENSES. All fees and expenses, including attorneys'
fees, incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by the respective party who has incurred
such fee or expense.
7.10 HEADINGS. The descriptive headings of the Sections and paragraphs
of this Agreement are inserted for convenience only and do not constitute a
part of this Agreement.
7.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered as one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties hereto and delivered to each of the other parties hereto.
7.12 ENTIRE AGREEMENT. The Transaction Documents and the other
agreements contemplated thereby constitute the entire agreement between
Matador and Unocal with respect to the subject matter hereof and thereof, and
supersede all other agreements and understandings between the parties with
respect to the subject matter hereof and thereof.
7.13 PUBLICITY. The initial press release relating to this Agreement
shall be a joint press release and thereafter Unocal and Matador shall,
subject to their respective legal obligations (including requirements of the
stock exchange and other similar regulatory bodies), consult with each other,
and use reasonable efforts to agree upon the text, regarding any press
release before issuing any such press release or otherwise making public
statements with respect to the transactions contemplated hereby.
7.14 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any person other than the parties to it, nor is
anything in this Agreement intended to relieve or discharge the obligation or
liability of any third persons to any party to this Agreement, nor shall any
provision give any third persons any rights of subrogation or action over or
against any party to this Agreement.
7.15 SPECIFIC PERFORMANCE. Matador and Unocal each acknowledge that
neither Matador nor Unocal would have an adequate remedy at law for money
damages in the event that this Agreement were not performed in accordance
with its terms, and therefore, agree that Matador and Unocal each shall be
entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
7.16 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
extent possible.
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EXECUTED and delivered the day and year first above written.
MATADOR PETROLEUM CORPORATION
By:
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Name:
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Title:
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UNION OIL COMPANY OF CALIFORNIA
By:
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Name:
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Title:
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