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EXHIBIT 10.1
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1. AGREEMENT TO PURCHASE SECURITIES...............................................................1
2. WIRE TRANSFER OF PAYMENT FOR AND DELIVERY OF THE SECURITIES....................................1
3. PURCHASER'S REPRESENTATIONS AND WARRANTIES.....................................................2
3.1 Investment Intent.....................................................................2
3.2 Access to Information.................................................................2
3.3 Accredited Investor...................................................................2
3.4 Preexisting Relationship; Knowledge and Experience....................................2
3.5 Suitability...........................................................................2
3.6 Ability to Bear Risk of Loss..........................................................2
3.7 Private Offering......................................................................3
3.8 Truth and Accuracy....................................................................3
3.9 Authority.............................................................................3
3.10 No Violation..........................................................................3
3.11 Enforceability........................................................................3
3.12 Reliance on Own Advisers..............................................................3
3.13 Scope of Business.....................................................................3
4. ISSUER'S REPRESENTATIONS AND WARRANTIES........................................................4
4.1 Corporate Existence; Authority........................................................4
4.2 Enforceability........................................................................4
4.3 Capitalization........................................................................4
4.4 No Conflicts..........................................................................5
4.5 SEC Documents.........................................................................5
4.6 Litigation............................................................................5
4.7 No Material Adverse Change............................................................5
4.8 Environmental Matters.................................................................5
4.9 Equity Sales Since November 5, 1999...................................................6
4.10 Material Agreements...................................................................6
4.11 Truth and Accuracy....................................................................6
4.12 Compliance with Laws, Other Instruments...............................................7
4.13 Observance of Agreements, Statutes and Orders.........................................7
5. RESTRICTIONS ON TRANSFER.......................................................................7
5.1 Resale Restrictions...................................................................7
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5.2 Restrictive Legend....................................................................7
5.3 Illiquid Investment...................................................................8
6. REGISTRATION PROCEDURES........................................................................8
6.1 Demand Registration Rights............................................................8
6.2 Piggy-Back Registration Rights........................................................9
6.3 Delivery of Prospectus...............................................................11
6.4 Third Party Registration Rights......................................................11
6.5 Registration in Other Jurisdictions..................................................11
6.6 Notice of Material Events............................................................11
6.7 Notice of Suspension of Effectiveness................................................12
6.8 Listing of Common Stock on Securities Exchanges......................................12
6.9 Further Assurances...................................................................12
6.10 Cooperation..........................................................................12
6.11 Discontinuation of Disposition of Shares.............................................12
6.12 Expenses.............................................................................13
6.13 Indemnification of Purchaser.........................................................13
6.14 Indemnification of Issuer............................................................14
6.15 Participation in Indemnified Claims..................................................14
7. TRANSFER AGENT INSTRUCTIONS...................................................................15
8. RELIANCE......................................................................................15
9. COVENANT REGARDING PRIORITY OF PREFERRED SHARES...............................................15
10. AMENDMENT TO 1999 SECURITIES PURCHASE AGREEMENT...............................................16
11. MISCELLANEOUS.................................................................................17
11.1 Survival.............................................................................17
11.2 Assignment...........................................................................17
11.3 Execution and Delivery of Agreement..................................................17
11.4 Titles...............................................................................17
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11.5 Severability.........................................................................18
11.6 Entire Agreement.....................................................................18
11.7 Waiver and Amendment.................................................................18
11.8 Counterparts.........................................................................18
11.9 Governing Law........................................................................18
11.10 Fees.................................................................................18
11.11 Attorney's Fees......................................................................18
EXHIBIT A FORM OF WARRANT...............................................................................1
Section 1. Certain Definitions..........................................................1
Section 2. Exercise of Warrant..........................................................4
Section 3. Transfer, Division and Combination...........................................6
Section 4. Adjustment of Stock Unit ....................................................6
(A) Stock Dividends, Subdivisions and Combinations...............................7
(B) Certain Other Dividends and Distributions....................................7
(C) Issuance of Additional Shares of Common Stock................................8
(D) Issuance of Warrants, Options or Other Rights................................9
(E) Issuance of Convertible Securities..........................................10
(F) Superseding Adjustment of Stock Unit........................................10
(G) Other Provisions Applicable to Adjustments Under this Section...............11
(H) Merger, Consolidation or Disposition of Assets..............................13
(I) Other Action Affecting Common Stock.........................................14
(J) No Adjustments for Certain Transactions.....................................14
Section 5. Notice to Warrant Holders...................................................14
(A) Notice of Adjustment of Stock Unit or Purchase Price........................14
(B) Notice of Certain Corporate Action..........................................14
Section 6. Reservation and Authorization of Common Stock;
Registration with or Approval of any Governmental
Authority...................................................................15
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Section 7. Taking of Record; Stock and Warrant Transfer Books..........................16
Section 8. Transfer Taxes..............................................................16
Section 9. No Voting Rights............................................................16
Section 10. Restrictions on Transferability.............................................16
Section 11. Limitation of Liability.....................................................16
Section 12. Registration Rights.........................................................16
Section 13. Loss, Destruction of Warrant Certificates...................................16
Section 14. Furnish Information.........................................................17
Section 15. Amendments..................................................................17
Section 16. Office of the Company.......................................................17
Section 17. Notices Generally...........................................................17
Section 18. Governing Law...............................................................18
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Schedules
4.3(b) Outstanding Subscriptions, Options, Warrants, Convertible
Securities, etc.
4.3(c) Third Party Registration Rights
4.9 Purchasers of Common Stock since November 5, 1999
Exhibits
A Form of Warrant
B Accredited Investor Certificate
C Certificate of Designation of Series A Senior Convertible
Cumulative Preferred Stock
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EXHIBIT 10.1
THE SECURITIES TO WHICH THIS AGREEMENT RELATES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY
STATE SECURITIES LAWS ("STATE LAWS") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS THE OFFER AND SALE IS REGISTERED UNDER THE SECURITIES ACT OR
THE ISSUER RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER
THAT THE OFFER AND SALE IS EXEMPT FROM SECURITIES ACT REGISTRATION.
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement ("Agreement") is made and entered
into as of the 24th day of August, 2000, by and between Contango Oil & Gas
Company (the "Issuer") and Trust Company of the West, a California trust
company, in its capacities as Investment Manager pursuant to the Investment
Management Agreement dated as of June 6, 1988 between General Mills, Inc. and
the Trust Company of the West and as Custodian pursuant to the Custody Agreement
dated as of February 6, 1989 among General Mills, Inc., the Trust Company of the
West and State Street Bank and Trust Company, as Trustee (the "Purchaser").
1. AGREEMENT TO PURCHASE SECURITIES. On the terms and subject to the
conditions set forth in this Agreement, the Purchaser hereby agrees to purchase
from the Issuer 2,500 shares of the Issuer's Series A Convertible Preferred
Stock, $.04 per share par value (the "Preferred Shares") and warrants to
purchase 500,000 shares of the Issuer's common stock in the form attached hereto
as Exhibit A (the "Warrant") for an aggregate purchase price of $2,500,000 (the
"Purchase Price"), payable by wire transfer to the account of the Issuer. The
shares of Issuer's common stock that may be issued upon conversion of the
Preferred Shares as contemplated by the Designation Certificate (as defined
below) are referred to herein as the "Converted Shares", the shares of Issuer's
common stock that may be issued upon exercise of the Warrant are referred to
herein as the "Warrant Shares" and the Preferred Shares, the Warrant, the
Converted Shares and the Warrant Shares are collectively referred to herein as
the "Securities"). The foregoing purchase and payment of the Purchase Price
shall occur concurrently with (i) the issuance of Issuer's common stock upon the
exercise of options to purchase up to 2,500,000 shares of Issuer's common stock
issued to the Southern Ute Indian Tribe, (ii) the issuance of warrants to
purchase 250,000 shares of Issuer's common stock issued to the Southern Ute
Indian Tribe, (iii) the issuance of warrants to purchase 125,000 shares of
Issuer's common stock issued to Juneau Exploration Company, LLC, (iv) the
issuance of warrants to purchase 125,000 shares of Issuer's common stock issued
to Fairfield Industries Incorporated, and (v) the execution and delivery of the
limited liability company organization documents for Republic Exploration LLC on
terms approved by the Purchaser.
2. WIRE TRANSFER OF PAYMENT FOR AND DELIVERY OF THE SECURITIES.
Immediately after the Purchaser has wired the Purchase Price for the Preferred
Shares
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and the Warrant as instructed by Issuer, the Issuer shall issue and deliver a
certificate representing the Preferred Shares and the Warrant, in the name and
to the address specified by the Purchaser in the registration and delivery
instructions on the signature page of this Agreement.
3. PURCHASER'S REPRESENTATIONS AND WARRANTIES. The Purchaser hereby
represents and warrants to the Issuer that:
3.1 Investment Intent. The Purchaser is acquiring the
Securities solely for the Purchaser's own account for investment purposes, and
not with a view to, or for offer or sale in connection with, any distribution of
the Securities in violation of the Securities Act.
3.2 Access to Information. The Purchaser has received a copy
of the Issuer's annual report on Form 10-KSB for the year ended June 30, 1999
(the "Annual Report") and quarterly report on Form 10-QSB for the quarter ended
March 31, 2000 (the "Quarterly Report") and has reviewed them carefully,
including the risk factors set forth under the heading, "Management's Discussion
and Analysis of Plan of Operation -- Risk Factors." In addition, the Purchaser
has received and reviewed a copy of the Issuer's proxy statement for its annual
meeting of stockholders held on September 28, 1999 (the "Proxy Statement"). If
desired, the Purchaser has also sought and obtained from management of the
Issuer such additional information concerning the business, management and
financial affairs of the Issuer as the Purchaser has deemed necessary or
appropriate in evaluating an investment in the Issuer and determining whether or
not to purchase the Securities.
3.3 Accredited Investor. By completing the Accredited Investor
Certification attached as Exhibit B, the Purchaser represents and warrants that
it is an accredited investor, as defined by Rule 501(a) of Regulation D under
the Securities Act.
3.4 Preexisting Relationship; Knowledge and Experience. The
Purchaser has a preexisting business relationship with certain of the Issuer's
officers, directors and/or controlling persons, is experienced in evaluating and
investing in the securities of businesses in the development stage, and has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of an investment in the Securities and of
protecting its interests in connection with an acquisition of the Securities.
3.5 Suitability. The Purchaser has carefully considered, and
has, to the extent the Purchaser deems it necessary, discussed with the
Purchaser's own professional legal, tax and financial advisers the suitability
of an investment in the Securities for the Purchaser's particular tax and
financial situation, and the Purchaser has determined that the Securities are a
suitable investment for the Purchaser.
3.6 Ability to Bear Risk of Loss. The Purchaser is financially
able to hold the Securities subject to restrictions on transfer for an
indefinite period of time, and is capable of bearing the economic risk of losing
up to the entire amount of its investment in the Securities.
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3.7 Private Offering. The offer of the Securities was directly
communicated to the Purchaser by the Issuer. At no time was the Purchaser
presented with or solicited by any leaflet, newspaper or magazine article, radio
or television advertisement, or any other form of general advertising or
solicited or invited to attend a promotional meeting otherwise than in
connection and concurrently with such directly communicated offer.
3.8 Truth and Accuracy. All representations and warranties
made by the Purchaser in this Agreement are true and accurate as of the date
hereof and shall be true and accurate as of the date the Issuer issues the
Securities. If at any time prior to the issuance of the Securities any
representation or warranty shall not be true and accurate in any respect, the
Purchaser shall so notify the Issuer.
3.9 Authority. The individuals executing and delivering this
Agreement on behalf of the Purchaser have been duly authorized to execute and
deliver this Agreement on behalf of the Purchaser, the signature of both such
individuals is binding upon the Purchaser, the Purchaser is duly organized and
subsisting under the laws of the jurisdiction in which it was organized, and the
Purchaser was not formed for the specific purpose of acquiring the Securities.
3.10 No Violation. The execution and delivery of this
Agreement and the consummation of the transactions or performance of the
obligations contemplated by this Agreement do not and will not violate any term
of the Purchaser's organizational documents.
3.11 Enforceability. The Purchaser has duly executed and
delivered this Agreement and (subject to its execution by the Issuer) it
constitutes a valid and binding agreement of the Purchaser enforceable in
accordance with its terms against the Purchaser, except as such enforceability
may be limited by principles of public policy, and subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies.
3.12 Reliance on Own Advisers. In connection with the
Purchaser's investment in the Securities, the Purchaser has not relied upon the
Issuer or its advisers for legal or tax advice, and has, if desired, in all
cases sought the advice of the Purchaser's own legal counsel and tax advisers.
3.13 Scope of Business. The Purchaser has been advised and
understands that the Issuer will be exposed to numerous investment opportunities
in all areas of the oil and gas industry and may therefore pursue various types
of opportunities, even if they do not fit within the primary focus of the
Issuer's current business plan. For example, such opportunities could include
both onshore and offshore United States investments and also international
investments. Potential opportunities could also include such things as
downstream investments in oil and gas service companies, pipelines, and gas
processing and gas storage facilities.
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4. ISSUER'S REPRESENTATIONS AND WARRANTIES. The Issuer hereby
represents and warrants to the Purchaser that:
4.1 Corporate Existence; Authority. The Issuer is a
corporation duly organized, validly existing and in good standing under the laws
of Nevada, and it has all requisite power and authority to carry on its business
as it is being conducted. The individual executing and delivering this Agreement
on behalf of the Issuer has been duly authorized to execute and deliver this
Agreement on behalf of the Issuer, and the signature of such individual is
binding upon the Issuer.
4.2 Enforceability. The Issuer has duly executed and delivered
this Agreement and (subject to its execution by the Purchaser) it constitutes a
valid and binding agreement of the Issuer enforceable in accordance with its
terms against the Issuer, except as such enforceability may be limited by
principles of public policy, and subject to laws of general application relating
to bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
4.3 Capitalization.
(a) The Issuer has no outstanding capital stock other
than common stock as of the date of this Agreement. The Issuer is authorized to
issue 50,000,000 shares of common stock, of which (prior to giving effect to the
transactions set forth herein and after giving effect to the exercise by the
Southern Ute Indian Tribe of options to purchase 2,500,000 shares of common
stock concurrently with the initial issuance of the Preferred Shares) 22,920,412
shares are issued and outstanding, and 125,000 shares of preferred stock, none
of which (prior to giving effect to the transactions set forth herein) are
issued and outstanding. All of the outstanding shares of common stock of the
Issuer have been duly and validly issued and are fully paid, non-assessable and
not subject to any preemptive or similar rights. The Preferred Shares have been
duly authorized and when issued and delivered to the Purchaser against payment
therefor as provided by this Agreement, will be validly issued, fully paid and
non-assessable, shall have the rights and preferences set forth in the Preferred
Stock Series Designation Certificate attached hereto as Exhibit C (the
"Designation Certificate") and the issuance of such Preferred Shares will not be
subject to any preemptive or similar rights. If and when issued, the Converted
Shares and/or Warrant Shares will have been duly authorized and when issued and
delivered to the Purchaser against payment therefor as provided by in herein and
in the Warrant, will be validly issued, fully paid and non-assessable, and the
issuance of such Converted Shares and/or Warrant Shares will not be subject to
any preemptive or similar rights.
(b) Prior to giving effect to the transactions set
forth herein, there are no outstanding subscriptions, options, warrants,
convertible securities, calls, commitments, agreements or rights to purchase or
otherwise acquire from the Issuer any shares of, or any securities convertible
into, the capital stock of the Issuer except as set forth on Schedule 4.3(b),
including (i) outstanding options to purchase 734,167 shares of the Issuer's
common stock under the Issuer's 1999 Stock Incentive Plan, under which 5,000,000
shares of common stock are reserved for issuance, (ii) warrants exercisable for
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2,840,370 shares of the Issuer's common stock at the exercise price of $1.00 per
share, and (iii) after giving effect to the exercise by the Southern Ute Indian
Tribe of options to purchase 2,500,000 shares of common stock concurrently with
the initial issuance of the Preferred Shares, outstanding options to purchase an
aggregate of 280,000 shares of the Issuer's common stock pursuant to certain
agreements between the Issuer and various third parties.
(c) Except as set forth on Schedule 4.3(c), no
shareholders of the Issuer have any right to require the registration of any
securities of the Issuer or to participate in any such registration.
4.4 No Conflicts. The issuance and sale of the Securities to
the Purchaser as contemplated hereby and the performance of this Agreement and
the Warrant will not violate or conflict with the Issuer's Articles of
Incorporation or By-laws or any agreements to which the Issuer is a party or by
which it is otherwise bound or, to the Issuer's knowledge, any statute, rule or
regulation (federal, state, local or foreign) to which it is subject.
4.5 SEC Documents. The Issuer has provided the Annual Report,
the Quarterly Report and the Proxy Statement to the Purchaser. As of the date
hereof, the Annual Report, the Quarterly Report and the Proxy Statement do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Issuer included in the Annual Report
and the financial statements dated as of March 31, 2000 heretofore delivered to
the Purchaser, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present the
financial position of the Issuer as of the dates thereof and the results of its
operations and cash flows for the periods then ended. The Issuer has included in
the Annual Report all material agreements, contracts and other documents that it
reasonably believes are required to be filed as exhibits to the Annual Report.
4.6 Litigation. There is no litigation or other legal,
administrative or governmental proceeding pending or, to the knowledge of the
Issuer, threatened against or relating to the Issuer or its properties or
business, that if determined adversely to the Issuer may reasonably be expected
to have a material adverse effect on the present or future operations or
financial condition of the Issuer.
4.7 No Material Adverse Change. Since the date of the
Quarterly Report, there has not been any material adverse change in the
business, operations, properties, prospects, assets, or condition of the Issuer,
and no event has occurred or circumstance exits that may result in such a
material adverse change.
4.8 Environmental Matters.
(a) Except as would not be reasonably likely to have
a material adverse effect change in the business, operations, properties,
prospects, assets, or
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condition of the Issuer: (i) to Issuer's knowledge, Issuer has complied with all
applicable Environmental Laws (as defined in Section 4.8(b)); (ii) to Issuer's
knowledge, Issuer is not subject to liability for any Hazardous Substance
disposal or contamination on any third party property; (iii) to Issuer's
knowledge, Issuer has not been associated with any release or threat of release
of any Hazardous Substance; (v) Issuer has not received any notice, demand,
letter, claim or request for information alleging that Issuer may be in
violation of or liable under any Environmental Law; (vi) Issuer is not subject
to any orders, decrees, injunctions or other arrangements with any Governmental
Entity or is subject to any indemnity or other agreement with any third party
relating to liability under any Environmental Law or relating to Hazardous
Substances; and (vii) there are no circumstances or conditions involving Issuer
that could reasonably be expected to result in any claims, liability,
investigations, costs or restrictions on the ownership, use or transfer of any
property of Issuer pursuant to any Environmental Law.
(b) For purposes of this Agreement, the term
"Environmental Law" means any federal, state, local or foreign law, regulation,
order, decree, permit, authorization, opinion, common law or agency requirement
relating to: (A) the protection, investigation or restoration of the
environment, health and safety, or natural resources, (B) the handling, use,
presence, disposal, release or threatened release of any Hazardous Substance or
(C) noise, odor, wetlands, pollution, contamination or any injury or threat of
injury to persons or property.
(c) For purposes of this Agreement, the term
"Hazardous Substance" means any substance that is: (A) listed, classified or
regulated pursuant to any Environmental Law; (B) any petroleum product or
by-product, asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials or radon; or (C) any other
substance which is the subject of regulatory action by any governmental entity
pursuant to any Environmental Law.
4.9 Equity Sales Since November 5, 1999. All shares of common
stock sold by Issuer since November 5, 1999, the purchasers thereof, the number
of shares purchased and the dollar amount paid by each purchaser are set forth
on Schedule 4.9.
4.10 Material Agreements. The Issuer has delivered to the
Purchaser true and correct copies of (i) the Agreement dated September 1, 1999,
as amended, between the Issuer and Juneau Exploration Company, LLC (the "Juneau
Agreement"), (ii) the Participation Agreement dated June 8, 2000 between the
Issuer and the Southern Ute Indian Tribe (doing business as Red Willow
Production Company) (the "SUIT Participation Agreement"), and (iii) the Limited
Liability Company Agreement dated August 24, 2000 of Republic Exploration LLC
(the "REX Agreement"), and since the date received by Purchaser, the Juneau
Agreement, the SUIT Participation Agreement and the REX Agreement have not been
amended or modified in any respect, orally or in writing, are in full force and
effect and have not been terminated.
4.11 Truth and Accuracy. All representations and warranties
made by the Issuer in this Agreement are true and accurate as of the date hereof
and shall be true and accurate as of the date the Issuer issues the Securities.
If at any time prior to the
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issuance of any of the Securities any representation or warranty shall not be
true and accurate in any respect, the Issuer shall so notify the Purchaser.
4.12 Compliance with Laws, Other Instruments. The execution,
delivery and performance by the Issuer of this agreement will not (a)
contravene, result in any breach of, or constitute a default under or result in
the creation of any lien in respect of any property of the Issuer under, any
indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease,
corporate charter or bylaws, or any other material agreement or instrument to
which the Issuer is bound or by which the Issuer or any of its respective
properties may be bound or affected, (b) conflict with or result in a breach of
any of the terms, conditions or provisions of any order, judgment, decree, or
ruling of any court, arbitrator or governmental authority applicable to the
Issuer or (c) violate any provision of any statute or other rule or regulation
of any governmental authority applicable to the Issuer.
4.13 Observance of Agreements, Statutes and Orders. The Issuer
is not in default under any term of any agreement or instrument to which it is a
party or by which it is bound, or any order, judgment, decree or ruling of any
court, arbitrator or governmental authority or is in violation of any applicable
law, ordinance, rule or regulation (including without limitation environmental
laws) of any governmental authority which default or violation could have a
material adverse effect upon the business or operations of the Issuer.
5. RESTRICTIONS ON TRANSFER
5.1 Resale Restrictions. The Purchaser understands that the
offer and sale of the Securities to the Purchaser has not been registered under
the Securities Act or under any State Laws. The Purchaser agrees not to offer,
sell or otherwise transfer the Securities, or any interest in the Securities,
unless (i) the offer and sale is registered under the Securities Act, (ii) the
Securities may be sold in accordance with the applicable requirements and
limitations of Rule 144 under the Securities Act and any applicable State Laws
and, if the Issuer reasonably requests, the Purchaser delivers to the Issuer an
opinion of counsel to such effect, or (iii) the Purchaser delivers to the Issuer
an opinion of counsel reasonably satisfactory to the Issuer that the offer and
sale is otherwise exempt from Securities Act registration. Notwithstanding the
foregoing subsections (ii) and (iii), no opinion shall be required for transfers
by Purchaser to Purchaser's affiliates.
5.2 Restrictive Legend. The Purchaser understands and agrees
that a legend in substantially the following form will be placed on the
certificates or other documents representing the Securities:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE
SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS (i)
THE OFFER AND SALE IS REGISTERED UNDER THE SECURITIES ACT, OR (ii) THE OFFER AND
SALE IS EXEMPT FROM SECURITIES ACT REGISTRATION AND THE TERMS OF SECTION 5.1 OF
THE SECURITIES PURCHASE AGREEMENT
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PURSUANT TO WHICH THE SECURITIES WERE ORIGINALLY PURCHASED HAVE BEEN COMPLIED
WITH. (A COPY OF THE SECURITIES PURCHASE AGREEMENT IS ON FILE AT THE CORPORATE
OFFICE OF THE ISSUER.)"
5.3 Illiquid Investment. The Purchaser acknowledges that it
must bear the economic risk of its investment in the Securities for an
indefinite period of time, until such time as the Securities are registered or
as an exemption from registration is available. The Purchaser acknowledges that
the soonest that the Rule 144 exemption from registration could become available
would be after the Purchaser has paid for and held the Securities for one year.
6. REGISTRATION PROCEDURES.
6.1 Demand Registration Rights.
(a) Purchaser shall be entitled to make a request for
registration under the Securities Act of the Converted Shares or Warrant Shares
(together, "Registerable Securities") in an aggregate amount of at least equal
to the lesser of (i) 1,000,000 shares and (ii) number of non-registered
Converted Shares and Warrant Shares then issued to Purchaser (a "Demand
Registration"). Within 90 days of the receipt of a written request for a Demand
Registration, the Issuer shall file with the SEC and use its best efforts to
cause to become effective under the Securities Act a registration statement with
respect to such Registerable Securities (a "Demand Registration Statement"). Any
such request will specify the number of Registerable Securities proposed to be
sold and will also specify the intended method of disposition thereof. The
Issuer shall be required to register Registerable Securities pursuant to this
Section 6.1 on a maximum of three separate occasions; provided, the Issuer shall
not be required to register Registerable Securities pursuant to this Section 6.1
more than once in any twelve month period. The Issuer shall thereafter use
diligence in attempting to cause each Demand Registration Statement to be
declared effective by the SEC and shall thereafter use diligence to maintain the
effectiveness of such Demand Registration Statement until the earlier to occur
of (i) the date which is one year from the effective date of such Demand
Registration Statement, (ii) the date on which all of the Converted Shares and
Warrant Shares have been sold by the Purchaser or (iii) the date on which the
Converted Shares and Warrant Shares can be resold in full over a three-month
period pursuant to SEC Rule 144.
Subject to Section 6.1(b) hereof, no other securities of the
Issuer except securities held by Purchaser, any persons with "demand"
registration rights pursuant to a contractual commitment of the Issuer ("Demand
Right Holder"), and any Person entitled to exercise "piggy back" registration
rights pursuant to contractual commitments of the Issuer shall be included in a
Demand Registration.
(b) In a registration pursuant to Section 6.1(a)
hereof involving an underwritten offering, if the managing underwriter or
underwriters of such underwritten offering have informed, in writing, the Issuer
and the Purchaser that in such underwriter's or underwriters' opinion the total
number of securities which the Purchaser and any other person desiring to
participate in such registration intend to include in such
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offering is such as to adversely affect the success of such offering, including
the price at which such securities can be sold, then the Issuer will be required
to include in such registration only the amount of securities which it is so
advised should be included in such registration. In such event, securities shall
be registered in such registration in the following order of priority: (i)
first, the Registerable Securities which have been requested to be included in
such registration by the Purchaser and person(s) exercising demand registration
rights (whether pursuant to this Agreement or otherwise) (pro rata based on the
amount of securities sought to be registered by such Persons), (ii) second,
provided that no securities sought to be included by the Purchasers and the
Demand Right Holders have been excluded from such registration, the securities
of other persons entitled to exercise "piggy-back" registration rights pursuant
to contractual commitments of the Issuer (pro rata based on the amount of
securities sought to be registered by such Persons) and (iii) third, securities
the Issuer proposes to register.
(c) A Demand Registration Statement will not be
deemed to have been effected as a Demand Registration unless it has been
declared effective by the SEC and the Issuer has complied in a timely manner and
in all material respects with all of its obligations under this Agreement with
respect thereto; provided, however, that if, after such Demand Registration
Statement has become effective, the offering of Registerable Securities pursuant
to such Registration Statement is or becomes the subject of any stop order,
injunction or other order or requirement of the SEC or any other governmental or
administrative agency or court that prevents, restrains or otherwise limits the
sale of Registerable Securities pursuant to such Demand Registration Statement
for any reason not attributable to Purchaser and such Demand Registration
Statement has not become effective within a reasonable time period thereafter
(not to exceed 60 days), such Demand Registration Statement will be deemed not
to have been effected. If (i) a registration requested pursuant to this Section
6.1 is deemed not to have been effected or (ii) a Demand Registration does not
remain effective under the Securities Act until at least the earlier of (A) an
aggregate of 90 days after the effective date thereof or (B) the consummation of
the distribution by the Purchaser of 80% of Purchaser's Registerable Securities
covered thereby, then the Issuer shall continue to be obligated to effect a
Demand Registration pursuant to this Section 6.1. For purposes of calculating
the 90-day period referred to in the preceding sentence, any period of time
during which such Demand Registration Statement was not in effect shall be
excluded.
6.2 Piggy-Back Registration Rights
(a) If at any time a Demand Registration Statement is
not in effect with respect to all Registerable Securities and the Issuer
proposes to file a registration statement under the Securities Act with respect
to an offering by the Issuer for its own account or for the account of any of
its security holders of any class of its Common Stock in a firmly underwritten
public equity offering (other than (i) a registration statement on Form S-4 or
S-8 (or any substitute form that may be adopted by the SEC) or (ii) a
registration statement filed in connection with an exchange offer or offering of
securities solely to the Issuer's existing security holders), then the Issuer
shall give written notice of such proposed filing to the Purchaser as soon as
practicable (but in no event fewer than 30 days before the anticipated filing
date), and such notice shall offer Purchaser the opportunity to register such
number of Registerable Securities as Purchaser
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<PAGE> 15
may request in writing within 15 days after receipt of such written notice from
the Issuer (which request shall specify the shares intended to be disposed of by
Purchaser) (a "Piggy-Back Registration"). The Issuer shall use its best efforts
to keep such Piggy-Back Registration continuously effective under the Securities
Act until at least the earlier of (A) the 90th day after the effective date
thereof or (B) the consummation of the distribution by the holders of all of the
securities covered thereby. The Issuer shall use its best efforts to cause the
managing underwriter or underwriters, if any, of such proposed offering to
permit the Registerable Securities requested by Purchaser to be included in a
Piggy-Back Registration to be included on the same terms and conditions as any
similar securities of the Issuer or any other security holder included therein
and to permit the sale or other disposition of such Registerable Securities in
accordance with the intended method of distribution thereof. Purchaser shall
have the right to withdraw its request for inclusion of its Registerable
Securities in any Registration Statement pursuant to this Section 6.2 by giving
written notice to the Issuer of its request to withdraw. The Issuer may withdraw
the proposed offering and/or a Piggy-Back Registration (subject to the Issuer's
obligation to use its best efforts to permit such Piggy-Back Registration set
forth in the second immediately preceding sentence) at any time prior to the
time it becomes effective or the Issuer may elect to delay the registration;
provided, however, that the Issuer shall give prompt written notice thereof to
Purchaser.
No registration effected under this Section 6.2, and no
failure to effect a registration under this Section 6.2, shall relieve the
Issuer of its obligation to effect a registration upon the request of Purchaser
pursuant to Section 6.1 hereof, and no failure to effect a registration under
this Section 6.2 and to complete the sale of securities registered thereunder in
connection therewith shall relieve the Issuer of any other obligation under this
Agreement.
(b) In a registration pursuant to Section 6.2 hereof
involving an underwritten offering, if the managing underwriter or underwriters
of such underwritten offering have informed, in writing, the Issuer and the
security holders requesting inclusion in such offering that in such
underwriter's or underwriters' opinion the total number of securities which the
Issuer, the Purchaser and any other persons desiring to participate in such
registration intend to include in such offering is such as to adversely affect
the success of such offering, including the price at which such securities can
be sold, then the Issuer will be required to include in such registration only
the amount of securities which it is so advised should be included in such
registration. In such event: (x) in cases initially involving the registration
for sale of securities for the Issuer's own account, securities shall be
registered in such offering in the following order of priority: (i) first, the
securities which the Issuer proposes to register and (ii) second, the securities
which have been requested to be included in such registration by persons
entitled to exercise "piggy-back" registration rights pursuant to contractual
commitments of the Issuer (pro rata based on the amount of securities sought to
be registered by such persons); and (y) in cases not initially involving the
registration for sale of securities for the Issuer's own account, securities
shall be registered in such offering in the following order of priority: (i)
first, the securities of any Demand Right Holder whose exercise of a demand
registration right is the basis for the registration, (ii) second, securities of
other persons entitled to exercise "piggy-back" registration rights pursuant to
contractual
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<PAGE> 16
commitments (pro rata based on the amount of securities sought to be registered
by such Persons) and (iii) third, the securities which the Issuer proposes to
register.
6.3 Delivery of Prospectus. Following effectiveness of any
registration statement filed by Issuer pursuant to Sections 6.1 or 6.2 of this
Agreement ("a Registration Statement"), the Issuer shall furnish to the
Purchaser a prospectus as well as such other documents as the Purchaser may
reasonably request.
6.4 Third Party Registration Rights. Without the written
consent of the Purchaser, the Issuer shall not grant to any person the right to
request the Issuer to register any securities of the Issuer under the Securities
Act unless the rights so granted are subject to the prior rights of the
Purchaser set forth herein, and are not otherwise in conflict or inconsistent
with the provisions of this Agreement; provided, that Issuer has granted the
registration rights set forth on Schedule 4.3(c) hereto and may grant rights
that are pari passu with the rights of the Purchaser set forth herein in
connection with the issuance of common stock upon conversion of the Issuer's
Series B Preferred (as defined in Section 9 below).
6.5 Registration in Other Jurisdictions. The Issuer shall use
diligent efforts to (i) register or otherwise qualify the common stock covered
by the Registration Statement for sale under the securities laws of such
jurisdictions as the Purchaser may reasonably request, (ii) prepare and file in
those jurisdictions such amendments (including post-effective amendments) and
supplements as may be required, (iii) take such other actions as may be
necessary to maintain such registrations and/or qualifications in effect at all
times while the Registration Statement is likewise maintained effective and (iv)
take all other actions reasonably necessary or advisable to qualify the
Converted Shares and the Warrant Shares for sale in such jurisdictions;
provided, however, that the Issuer shall not be required in connection therewith
or as a condition thereto to (I) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 6.5,
(II) subject itself to general taxation in any such jurisdiction, (III) file a
general consent to service of process in any such jurisdiction, (IV) provide any
undertakings that cause more than nominal expense or burden to the Issuer or (V)
make any change in its certificate of incorporation or bylaws, which in each
case the Board determines to be contrary to the best interests of the Issuer and
its stockholders.
6.6 Notice of Material Events. The Issuer shall, following
effectiveness of the Registration Statement, as promptly as practicable after
becoming aware of any such event, notify the Purchaser of the happening of any
event of which the Issuer has knowledge, as a result of which the prospectus
included in the Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver a number of
copies of such supplement or amendment to the Purchaser or as the Purchaser may
reasonably request. The Issuer may voluntarily suspend once the effectiveness of
a Registration Statement for a limited time, which in no event shall be longer
than 90 days, if the Issuer
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<PAGE> 17
has been advised by legal counsel that the offering of common stock pursuant to
the Registration Statement would adversely affect, or would be improper in view
of (or improper without disclosure in a prospectus), a proposed financing, a
reorganization, recapitalization, merger, consolidation, or similar transaction
involving the Issuer or its subsidiaries, in which event the one year period
referred to in clause (i) of Section 6.1(a) shall be extended for an additional
period of time beyond such one year period equal to the number of days the
effectiveness thereof has been suspended pursuant to this sentence.
6.7 Notice of Suspension of Effectiveness. Following
effectiveness of a Registration Statement, the Issuer, as promptly as
practicable after becoming aware of any such event, will notify the Purchaser of
the issuance by the SEC of any stop order or other suspension of effectiveness
of the Registration Statement at the earliest possible time.
6.8 Listing of Common Stock on Securities Exchanges. Following
effectiveness of a Registration Statement, the Issuer will use diligence either
to (i) cause all the common stock covered by the Registration Statement to be
listed on each national securities exchange on which similar securities issued
by the Issuer are then listed, if any, if the listing of such common stock is
then permitted under the rules of such exchange, or (ii) secure the quotation of
all the common stock covered by the Registration Statement on The Nasdaq
SmallCap Market, if the listing of such common stock is then permitted under the
rules of such The Nasdaq SmallCap Market, or (iii) if, despite the Issuer's best
efforts to satisfy the preceding clause (i) or (ii), the Issuer is unsuccessful
in satisfying the preceding clause (i) or (ii) and without limiting the
generality of the foregoing, to use its best efforts to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. as such with respect to such common stock.
6.9 Further Assurances. It shall be a condition precedent to
the obligations of the Issuer to take any action pursuant to this Article 6 that
the Purchaser shall furnish to the Issuer such information regarding itself as
the Issuer may reasonably request to effect the registration of the common stock
and shall execute such documents in connection with such registration as the
Issuer may reasonably request.
6.10 Cooperation. The Purchaser agrees to cooperate with the
Issuer in any manner reasonably requested by the Issuer in connection with the
preparation and filing of a Registration Statement hereunder.
6.11 Discontinuation of Disposition of Shares. The Purchaser
agrees that, upon receipt of any notice from the Issuer of the happening of any
event of the kind described in Section 6.6 or 6.7, the Purchaser will
immediately discontinue disposition of the Converted Shares and/or Warrant
Shares pursuant to an effective Registration Statement until the Purchaser's
receipt of notice from the Issuer that sales may resume and copies of the
supplemented or amended prospectus and, if so directed by the Issuer, shall
deliver to the Issuer (at the expense of the Issuer) or destroy (and deliver to
the Issuer a certificate of destruction) all copies in the Purchaser's
possession of the prospectus covering such Common Stock current at the time of
receipt of such notice.
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<PAGE> 18
6.12 Expenses. All expenses, other than (i) underwriting
discounts and commissions, (ii) other fees and expenses of investment bankers
and (iii) brokerage commissions, in each case incurred in connection with
registrations, filings or qualifications pursuant to this Article 6, including,
without limitation, all registration, listing and qualification fees, printing
and accounting fees and the fees and disbursements of counsel to the Issuer,
shall be borne by the Issuer.
6.13 Indemnification of Purchaser. To the extent permitted by
law, the Issuer will indemnify and hold harmless the Purchaser, its directors
and officers, each person, if any, who is under common control with the
Purchaser within the meaning of the Securities Act or the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), any underwriter (as defined in the
Securities Act) for the Purchaser, the officers and directors of such
underwriter and each person, if any, who controls any such underwriter within
the meaning of the Securities Act or the Exchange Act (each, an "Indemnified
Person"), against any losses, claims, damages, expenses or liabilities (joint or
several) (collectively, "Claims") to which any of them may become subject under
the Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in a Registration Statement, or any post effective amendment thereof,
or any prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement or any post
effective amendment thereof or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of a Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Issuer files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading or (iii) any violation or alleged violation by the Issuer
of the Securities Act, any state securities law or any rule or regulation under
the Securities Act, the Exchange Act or any state securities law (the matters in
the foregoing clauses (i) through (iii) are hereinafter collectively referred to
as the "Violations"). Subject to the restrictions set forth in Section 6.15 with
respect to the number of legal counsel, the Issuer shall reimburse the Purchaser
and each such underwriter or controlling person, promptly as such expenses are
incurred and are due and payable, for any reasonable legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnity contained in this Section 6.13 (I) shall not apply to a
Claim arising out of or based upon a Violation which occurs in reliance upon and
in conformity with information furnished in writing to the Issuer by any
Indemnified Person or underwriter for such Indemnified Person expressly for use
in connection with the preparation of a Registration Statement or any such
amendment thereof or supplement thereto; (II) with respect to any preliminary
prospectus shall not inure to the benefit of any person from whom the person
asserting any Claim purchased the Converted Shares and/or Warrant Shares that
are the subject thereof (or to the benefit of any person controlling such
person) if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the prospectus, as then amended or
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<PAGE> 19
supplemented, if such final prospectus was timely made available by the Issuer;
and (III) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Issuer, which
consent shall not be unreasonably withheld. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Converted Shares and/or
Warrant Shares by the Purchaser.
6.14 Indemnification of Issuer. The Purchaser agrees to
indemnify and hold harmless, to the same extent and in the same manner set forth
in Section 6.13, the Issuer, each of its directors, each of its officers who
signs a Registration Statement, each person, if any, who controls the Issuer
within the meaning of the Securities Act or the Exchange Act, any underwriter
and any other stockholder selling securities pursuant to a Registration
Statement or any of its directors or officers or any person who controls such
stockholder or underwriter within the meaning of the Securities Act or the
Exchange Act (each such person and each Indemnified Person, an "Indemnified
Party"), against any Claim to which any of them may become subject, under the
Securities Act, the Exchange Act or otherwise, insofar as such Claim arises out
of or is based upon any Violation by the Purchaser, in each case to the extent
(and only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished to the Issuer by the Purchaser
expressly for use in connection with such Registration Statement or such
prospectus; and the Purchaser will reimburse any reasonable legal or other
expenses reasonably incurred by any Indemnified Party in connection with
investigating or defending any such Claim; provided, however, that the indemnity
contained in this Section 6.14 shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior written consent of
the Purchaser, which consent shall not be unreasonably withheld; provided,
further, that the Purchaser shall be liable under this Section 6.14 for only
that amount of a Claim as does not exceed the net proceeds to the Purchaser as a
result of the sale of the Converted Shares and/or Warrant Shares pursuant to any
such Registration Statement or such prospectus. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such Indemnified Party and shall survive the transfer of the Converted Shares
and/or Warrant Shares (or underlying securities) by the Purchaser.
Notwithstanding anything to the contrary contained herein the indemnity
contained in this Section 6.14 with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
6.15 Participation in Indemnified Claims. Promptly after
receipt by an Indemnified Person or Indemnified Party under Section 6.13 or 6.14
of notice of the commencement of any action (including any governmental action),
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is made against any indemnifying party under this Article 6, deliver to
the indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, assume control of the defense thereof with counsel mutually
satisfactory to the indemnifying parties; provided, however, that an Indemnified
Person or Indemnified Party shall have the right to retain its own counsel, with
the fees and expenses to be paid by the indemnifying party, if, in the
reasonable opinion of
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<PAGE> 20
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person or Indemnified Party and the indemnifying party would
be inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. Except as provided in the preceding sentence, the
Issuer shall pay for only one separate legal counsel for the Indemnified
Persons. The failure to deliver written notice to the indemnifying party within
a reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Article 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action. The indemnity required by this
Article 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable.
7. TRANSFER AGENT INSTRUCTIONS. The Issuer will instruct its transfer
agent to, concurrently with the delivery by the Purchaser of the Purchase Price,
issue one or more certificates representing the Preferred Shares purchased,
bearing the restrictive legend specified in Section 5.2 of this Agreement,
registered in the name of the Purchaser or its nominee and in such denominations
as shall be specified by the Purchaser. The Issuer warrants that no instruction
other than to issue the shares and stop transfer instructions to give effect to
Section 5.1 and 5.2 hereof will be given by the Issuer to the transfer agent and
that the Preferred Shares shall otherwise be freely transferable on the books
and records of the Issuer as and to the extent provided in this Agreement.
Nothing in this Section shall affect in any way the Purchaser's obligations and
agreement to comply with all applicable federal and state securities laws upon
resale of the Preferred Shares. If the Purchaser provides the Issuer with an
opinion of counsel reasonably satisfactory in form, scope and substance to the
Issuer that registration of a resale by the Purchaser of any of the Preferred
Shares in accordance with Section 5.1 is not required under the Securities Act
or applicable state securities laws, the Issuer shall permit the transfer agent
to issue one or more share certificates in such name and in such denominations
as specified by the Purchaser.
8. RELIANCE. Each of the Purchaser and the Issuer understand and agree
that the other party and its respective officers, directors, employees and
agents may, and will, rely on the accuracy of the other party's respective
representations and warranties in this Agreement to establish compliance with
applicable securities laws. Each of the Purchaser and the Issuer agree to
indemnify and hold harmless all such parties against all losses, claims, costs,
expenses and damages or liabilities which they may suffer or incur caused or
arising from their reliance on such representations and warranties.
9. COVENANT REGARDING PRIORITY OF PREFERRED SHARES. The Issuer shall
not issue preferred stock that ranks senior to or pari passu with the Preferred
Shares as to dividend distributions or distributions upon the liquidation,
winding-up or dissolution of the Issuer; provided, that nothing in this Section
9 shall prohibit the Issuer from issuing its Series B preferred stock (the
"Series B Preferred") ranking pari passu with the Preferred Shares as to
dividend distributions or distributions upon the liquidation, winding-up or
dissolution of the Issuer on material terms and conditions no more favorable to
the holder thereof than the Preferred Shares or otherwise as approved in
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<PAGE> 21
writing by the Purchaser (which approval shall not be unreasonably withheld),
which Series B Preferred shall have a conversion price per share of not less
than $2.00 and shall be designated, issued and sold prior to June 30, 2001, for
an aggregate purchase price of up to $7,500,000.
10. AMENDMENT TO 1999 SECURITIES PURCHASE AGREEMENT.
10.1 Issuer and Purchaser hereby agree that Section 6.3 of
that certain Securities Purchase Agreement dated as of December 29, 1999 between
Issuer and Purchaser (the "1999 Securities Purchase Agreement") is hereby
amended by replacing the last sentence thereof with the following: "Pro Rata
Share" shall mean that portion of the number of shares of New Securities
proposed to be issued that equals the proportion that (a) the number of shares
of common stock held by the Purchaser immediately prior to the proposed
issuance, plus the number of shares of common stock that would then be issuable
to the Purchaser assuming that any securities owned by Purchaser convertible
into or exchangeable for common stock have been fully converted or exchanged and
that the Warrant and any other warrants or options to purchase common stock held
by the Purchaser had been fully exercised, bears to (b) the total number of
shares of common stock issued and outstanding immediately prior to the proposed
issuance.
10.2 The Issuer and Purchaser further agree that Section 9 of
the 1999 Securities Purchase Agreement is hereby amended in its entirety to read
as follows:
"The Issuer's Board of Directors shall consist of (a) prior to
the issuance of Issuer's Series B Preferred, not more than
eight (8) members, or ten (10) members if a dividend default
shall have occurred entitling the holders of the Preferred
Shares to appoint two additional directors (a "Series A
Dividend Default"), and (b) after the issuance of Issuer's
Series B Preferred, not more than nine (9) members, or eleven
(11) members if a dividend default shall occurred entitling
the holders of the Series B Preferred to appoint two
additional directors (a "Series B Dividend Default"), or
thirteen (13) members if a Series A Dividend Default and a
Series B Dividend Default shall have occurred. If at any time
the Purchaser has not appointed or nominated for election at
least one of the members of the Issuer's Board and the
Purchaser then holds at least five percent (5%) of the
Issuer's outstanding common stock, then the Purchaser shall be
entitled to appoint one observer to the Issuer's Board (the
"Observer"). Such Observer shall have the right to attend, and
receive all materials distributed for or at, all meetings
(telephonic and otherwise) of the Board (including committees
thereof) and shall be entitled to the same rights and
privileges as directors of the Issuer, except that such
Observer shall not be entitled to vote on matters presented to
or discussed by the Board. The Observer will receive
compensation from the Issuer for his services as observer on
an equal basis with the directors of the Issuer and shall be
entitled to be reimbursed by the Issuer for all reasonable
costs and expenses incurred in connection with his
participation in meetings or other activities of the Board of
Directors. The Purchaser will use commercially reasonable
efforts to cause the Observer
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to keep all information provided to the Observer in connection
with all meetings of the Board confidential prior to its
becoming public, except that the Observer shall be permitted
to disclose such information (i) to officers, directors,
employees, representatives, agents, auditors, accountants,
consultants, advisors, lawyers and affiliates of the Purchaser
in the ordinary course of business who have been made aware of
the confidential nature of the information; (ii) to
prospective assignees and their respective directors,
employees, agents and representatives who have agreed in
writing to become subject to this confidentiality provision,
(iii) as required by applicable law, or pursuant to subpoenas
or other legal process, or as requested by governmental
agencies and examiners; (iv) to the extent such information
(A) becomes available to the Observer other than as a result
of a breach of this provision or (B) becomes available to the
Observer on a non-confidential basis, or (v) to the extent the
Corporation shall have consented to such disclosure in
writing."
10.3 The Issuer and Purchaser further agree that the 1999
Securities Purchase Agreement is hereby further amended by adding the following
provision as Section 12.11 thereof:
"12.11. Attorney's Fees. In any action or proceeding brought
to enforce any provision of this Agreement, or where any
provision hereof is validly asserted as a defense, the
successful party shall be entitled to recover reasonable
attorney's fees (including any fees incurred in any appeal) in
addition to its costs and expenses and any other available
remedy."
11. MISCELLANEOUS.
11.1 Survival. The representations and warranties made in this
Agreement shall survive the closing of the transactions contemplated by this
Agreement.
11.2 Assignment. This Agreement is not transferable or
assignable, except that the rights of Purchaser set forth in Sections 5 and 6
hereof shall be transferable to an affiliate of Purchaser (including, without
limitation, any affiliate of, or investment fund or account managed by any
affiliated of, The TCW Group, Inc. and any beneficiary or beneficial interest
holder of any such fund or account) and any transferee of Purchaser's
Securities.
11.3 Execution and Delivery of Agreement. The Issuer shall be
entitled to rely on delivery by facsimile transmission of an executed copy of
this Agreement, and acceptance by the Issuer of such facsimile copy shall create
a valid and binding agreement between the Purchaser and the Issuer.
11.4 Titles. The titles of the sections and subsections of
this Agreement are for the convenience of reference only and are not to be
considered in construing this Agreement.
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11.5 Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect or limit the validity or
enforceability of the remaining provisions of this Agreement.
11.6 Entire Agreement. This Agreement constitutes the entire
agreement and understanding between the parties with respect to the subject
matters herein and supersedes and replaces any prior agreements and
understandings, whether oral or written, between them with respect to such
matters.
11.7 Waiver and Amendment. Except as otherwise provided
herein, the provisions of this Agreement may be waived, altered, amended or
repealed, in whole or in part, only upon the mutual written agreement of the
Purchaser and the Issuer.
11.8 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one and the same instrument.
11.9 Governing Law. This Agreement is governed by and shall be
construed in accordance with the laws of the State of Nevada.
11.10 Fees. The Issuer agrees to pay or reimburse the
Purchaser for the reasonable fees and expenses of counsel to the Purchaser in
connection with the investigation, review, negotiation, execution and delivery
of this Agreement, the Designation Certificate, the Warrant and other documents
delivered by Issuer to the Purchaser prior to or concurrently with the initial
issuance of the Preferred Shares.
11.11 Attorney's Fees. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the successful party shall be entitled to recover
reasonable attorney's fees (including any fees incurred in any appeal) in
addition to its costs and expenses and any other available remedy.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above mentioned.
<TABLE>
<CAPTION>
THE "ISSUER" THE "PURCHASER"
<S> <C>
CONTANGO OIL & GAS COMPANY TRUST COMPANY OF THE WEST, a California trust
company, in its capacities as Investment
Manager pursuant to the Investment Management
Agreement dated as of June 6, 1988 between
General Mills, Inc. and the Trust Company of
the West and as Custodian pursuant to the
Custody Agreement dated as of February 6,
1989 among General Mills, Inc., the Trust
Company of the West and State Street Bank and
Trust Company, as trustee
</TABLE>
By: /s/ KENNETH R. PEAK By: /s/ ARTHUR R. CARLSON
----------------------------- ------------------------------------------
Kenneth R. Peak Arthur R. Carlson
President and Chief Managing Director
Executive Officer
By: /s/ THOMAS F. MEHLBERG
------------------------------------------
Thomas F. Mehlberg
Managing Director
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'
EXHIBIT A
FORM OF WARRANT
WARRANT
TO PURCHASE COMMON STOCK OF
CONTANGO OIL & GAS COMPANY
A NEVADA CORPORATION
(THE "COMPANY")
EXPIRING AUGUST 24, 2005
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, OR
OTHERWISE TRANSFERRED, UNLESS (i) THE OFFER AND SALE IS REGISTERED
UNDER THE SECURITIES ACT, OR (ii) THE OFFER AND SALE IS EXEMPT FROM
SECURITIES ACT REGISTRATION AND THE TERMS OF SECTION 5.1 OF THE
SECURITIES PURCHASE AGREEMENT PURSUANT TO WHICH THE SECURITIES WERE
ORIGINALLY PURCHASED HAVE BEEN COMPLIED WITH. (A COPY OF THE SECURITIES
PURCHASE AGREEMENT IS ON FILE AT THE CORPORATE OFFICE OF THE COMPANY.)
THIS IS TO CERTIFY THAT:
Trust Company of the West, a California trust company, in its
capacities as Investment Manager pursuant to the Investment Management Agreement
dated as of June 6, 1988 between General Mills, Inc. and the Trust Company of
the West and as Custodian pursuant to the Custody Agreement dated as of February
6, 1989 among General Mills, Inc., the Trust Company of the West and State
Street Bank and Trust Company, as Trustee ("HOLDER"), or registered assigns, is
entitled to purchase from the Company at any time and from time to time on and
after the date hereof but not later than 5 p.m., Central Standard Time, on
August 24, 2005 (the "EXPIRATION DATE"), Five Hundred Thousand (500,000) Stock
Units, in whole or in part, at a per Stock Unit purchase price at any date equal
to the Purchase Price (as defined below), all on the terms and conditions
hereinbelow provided.
Section 1. Certain Definitions. Initially capitalized terms not
otherwise defined herein shall have the meanings ascribed to such terms in the
Securities Purchase Agreement. As used in this Warrant:
"5-DAY AVERAGE PRICE" per share of Common Stock, for purposes
of any provision herein at the date specified in such provision, shall mean the
average closing
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price of the Common Stock on the securities exchange or other national market
system on which the Common Stock is then traded over the 5-trading day period
immediately prior to such date or, if the Common Stock is not then traded on a
securities exchange or national market system, the average of the bid and asked
prices on the over-the-counter market on which the Common Stock is then traded
as of the close of such market over the 5-trading day period immediately prior
to such date.
"30-DAY AVERAGE PRICE" per share of Common Stock, for purposes
of any provision herein at the date specified in such provision, shall mean the
average closing price of the Common Stock on the securities exchange or other
national market system on which the Common Stock is then listed over the
30-trading day period immediately prior to such date or, if the Common Stock is
not then traded on a securities exchange or national market system, the average
of the bid and asked prices on the over-the-counter market on which the Common
Stock is then traded as of the close of such market over the 30-trading day
period immediately prior to such date.
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of
Common Stock issued by the Company after the Closing Date other than (i) any
shares of Common Stock issued pursuant to the outstanding warrants and options
listed on Attachment 1, (ii) shares of Common Stock issued pursuant to options
to purchase Common Stock issued pursuant to the Company's 1999 Stock Incentive
Plan, including those options issued to date under such plan and listed on
Attachment 1, in an aggregate amount not to exceed 5,000,000 shares, (iii) any
shares of Common Stock issued upon the exercise of options granted to Juneau
Exploration Company, LLC ("JEX") pursuant to the Company's exploration agreement
with JEX dated September 1, 1999, as amended, (iv) any shares of Common Stock
issued to Glen Dillon in a number not to exceed 1,250 per month, (v) any shares
of Common Stock issued upon conversion of Series A Preferred Stock issued to the
Trust Company of the West, in its capacities as Investment Manager and Custodian
("TCW"), (vi) any shares of Common Stock issued to William Gibbons, the
Company's treasurer and assistant secretary, in a number not to exceed 2,000
shares per month through December 31, 2000, (vii) any shares of Common Stock
issued pursuant to warrants to purchase up to 125,000 shares of Common Stock
issued to Fairfield Industries Incorporated on or prior to the Closing Date,
(viii) any shares of Common Stock issued pursuant to warrants to purchase up to
125,000 shares of Common Stock issued to JEX on or prior to the Closing Date,
(ix) any shares of Common Stock issued pursuant to warrants to purchase up to
250,000 shares of Common Stock issued to the Southern Ute Indian Tribe doing
business as the Southern Ute Indian Tribe Growth Fund ("SUIT") on or prior to
the Closing Date, (x) any shares of Common Stock issued pursuant to warrants to
purchase up to 500,000 shares of Common Stock issued to TCW on or prior to the
Closing Date, (xi) any shares of Common Stock issued pursuant to options granted
to SUIT on a quarterly basis to the same extent such options are granted to the
Company's outside directors under the 1999 Stock Incentive Plan, (xii) any
shares of Common Stock issued pursuant to options granted to TCW on a quarterly
basis to the same extent such options are granted to the Company's outside
directors under the 1999 Stock Incentive Plan, (xiii) any shares of Common Stock
issued upon conversion of the Company's Series B Preferred Stock at a conversion
price per share of not less than $2.00 which stock shall be designated, issued
and sold prior to June 30, 2001 for an aggregate purchase price not to exceed
$7,500,000, and (xiv) any shares of Common Stock issued
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pursuant to a 401(k) or other qualified retirement plan for officers, directors
or employees of the Company and its affiliates in an aggregate amount not to
exceed 100,000 shares.
"AGGREGATE PURCHASE PRICE" shall have the meaning given in
Section 2 below.
"APPRAISED VALUE" shall mean the fair market value of all
outstanding Common Stock, as determined by a written appraisal (the "APPRAISAL")
prepared by a national or major regional investment bank acceptable to the Board
of Directors of the Company and the Holder. "Fair market value" is defined for
this purpose as the price in a single transaction determined on a going-concern
basis that would be agreed upon by the most likely hypothetical buyer for 100%
of the equity capital of the Company. In the event that the Company and Holder
cannot, in good faith, agree upon an investment bank, then the Company, on the
one hand, and Holder, on the other hand, shall each select an investment bank,
the two investment banks so selected shall select a third investment bank who
shall be directed to prepare the Appraisal and the term Appraised Value shall
mean the appraised value set forth in the Appraisal prepared in accordance with
this definition. The Company shall pay for the cost of any such Appraisal.
"BOARD OF DIRECTORS" shall mean the duly appointed board of
directors of the Company.
"BUSINESS DAY" shall mean a day, other than a Saturday, Sunday
or legal holiday on which commercial banks are authorized or obligated by law or
executive order to close in the States of Texas or California.
"CLOSING DATE" shall mean August __, 2000.
"COMMISSION" shall mean the Securities and Exchange
Commission.
"COMMON STOCK" shall mean the Company's authorized common
stock, $.04 par value per share, irrespective of class unless otherwise
specified, as constituted on the date of original issuance of this Warrant, and
any stock into which such common stock may thereafter be changed, and shall also
include stock of the Company of any other class which is not preferred as to
dividends or assets over any other class of stock of the Company and which is
not subject to redemption, issued to the holders of shares of Common Stock upon
any reclassification thereof.
"CONVERTIBLE SECURITIES" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable
for Additional Shares of Common Stock, either immediately or upon the arrival of
a specified date or the happening of a specified event.
"CURRENT MARKET PRICE" per share of Common Stock for the
purposes of any provision of this Warrant at a date herein specified, shall mean
the greater of (i) the 30-Day Average Price of the Common Stock or (ii) the
5-Day Average Price of the Common Stock; provided, that if the Current Market
Price per share of Common Stock cannot be ascertained by such methods, then the
Current Market Price per share of Common Stock shall be deemed to be the greater
of (i) the net book value per share of
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Common Stock, determined in accordance with generally accepted accounting
principles, or (ii) the fair value per share of Common Stock determined pursuant
to the Appraised Value.
"CURRENT WARRANT PRICE" per share of Common Stock, for the
purpose of any provision of this Warrant at the date herein specified, shall
mean the amount equal to the quotient resulting from dividing the Purchase Price
per Stock Unit in effect on such date by the number of shares (including any
fractional share) of Common Stock comprising a Stock Unit on such date.
"PERSON" shall mean any individual, corporation, partnership,
association, joint stock company, trust or trustee thereof, estate or executor
thereof, unincorporated organization or joint venture, court or governmental
unit or any agency or subdivision thereof, or any other legally recognizable
entity.
"PURCHASE PRICE" shall mean $1.00 per Stock Unit.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"STOCK UNIT" shall mean one share of Common Stock, as such
Common Stock was constituted on the date of original issue of this Warrant and
thereafter shall mean such number of shares (including any fractional shares) of
Common Stock as shall result from the adjustments specified in Section 4 of this
Warrant.
"WARRANT" shall mean this Warrant, evidencing rights to
purchase shares of Common Stock, and all Warrants issued upon transfer, division
or combination of, or in substitution for, this Warrant. All Warrants shall at
all times be identical as to terms and conditions and date, except as to the
Common Stock for which they may be exercised.
"WARRANT STOCK" shall mean the shares of Common Stock
purchasable by the Holder upon the exercise hereof.
Section 2. Exercise of Warrant. The holder of this Warrant may, at any
time on or after the date hereof but not later than the Expiration Date,
exercise this Warrant in whole or in part for the number of Stock Units which
such holder is then entitled to purchase hereunder (the "Eligible Stock Units").
In order to exercise this Warrant, in whole or in part, the holder hereof shall
deliver to the Company at its office maintained for such purpose pursuant to
Section 16: (i) a written notice of such holder's election to exercise this
Warrant, (ii) this Warrant, and (iii) the total purchase price for the shares
being purchased upon such exercise by (a) delivery in cash, by wire transfer or
certified or official bank check of immediately available funds in an amount
equal to the product of the Purchase Price multiplied by the number of Stock
Units being purchased upon such exercise (the "AGGREGATE PURCHASE PRICE"), (b)
by delivery of shares of Common Stock held by the Holder having a Current Market
Price equal to the Aggregate Purchase Price or (c) to the extent permitted by
applicable law, the delivery of a notice to the Company that the Holder is
exercising the Warrant without payment of the Purchase Price by
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authorizing the Company to deliver the number of shares of Warrant Stock
issuable upon exercise of the Warrant to be determined based upon the following
formula:
((MP - WP) x WS)/MP = the number of shares of Warrant Stock issuable
upon exercise of this Warrant without payment of
the Purchase Price
WHERE:
MP = Current Market Price
WP = Current Warrant Price
WS = The number of shares of Warrant Stock issuable upon exercise
of this Warrant (in whole or in part).
Such notice may be in the form of the Subscription set out at the end of this
Warrant. Upon receipt thereof, the Company shall, as promptly as practicable and
in any event within ten (10) Business Days thereafter, cause to be executed and
delivered to such holder a certificate or certificates representing the
aggregate number of fully paid and nonassessable shares of Warrant Stock
issuable upon such exercise. In the event the holder of this Warrant elects to
exercise this Warrant with respect to less than all of the then Eligible Stock
Units, the Company shall also return to the holder, this Warrant marked to show
the remaining Stock Units eligible to be exercised.
The stock certificate or certificates for Warrant Stock so delivered shall be
endorsed with a legend in the form contained in Section 5 of the Securities
Purchase Agreement and shall be in such denominations as may be specified in
said notice and shall be registered in the name of such holder or such other
name or names as shall be designated in said notice. Such certificate or
certificates shall be deemed to have been issued and such holder or any other
Person so designated to be named therein shall be deemed to have become a holder
of record of such shares, including to the extent permitted by law the right to
vote such shares or to consent or to receive notice as a stockholder, as of the
time said notice is received by the Company as aforesaid.
Except as otherwise provided in Section 8 hereof, the Company shall pay all
expenses, transfer taxes and other charges payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2,
except that, in case such stock certificates shall be registered in a name or
names other than the name of the holder of this Warrant, funds sufficient to pay
all stock transfer taxes which shall be payable upon the issuance of such stock
certificate or certificates shall be paid by the holder hereof at the time of
delivering the notice of exercise mentioned above.
All shares of Warrant Stock issuable upon the exercise of this Warrant shall be
validly issued, fully paid and nonassessable, and free from all liens and other
encumbrances thereon.
The Company will not close its books against the transfer of this Warrant or of
any share of Warrant Stock in any manner which interferes with the timely
exercise of this Warrant.
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With the consent of the holder of this Warrant, the Company will from time to
time take all such action as may be necessary to assure that the par value per
share of the unissued Common Stock acquirable upon exercise of this Warrant is
at all times equal to or less than the Current Warrant Price per share of Common
Stock then in effect.
No fractional shares or scrip representing fractional shares shall be issued
upon the exercise of this Warrant. If the exercise of this Warrant results in a
required issuance of a fraction of a share, an amount equal to such fraction
multiplied by the Current Market Price per share of Common Stock on the day of
delivery of notice of exercise to the Company shall be paid to the holder of
this Warrant in cash by the Company.
Section 3. Transfer, Division and Combination. Subject to Section 10,
this Warrant and all rights hereunder are transferable, in whole or in part, on
the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the office of the Company maintained for such purpose pursuant
to Section 16, together with a written assignment of this Warrant duly executed
by the holder hereof or its agent or attorney and payment of funds sufficient to
pay any stock transfer taxes payable upon the making of such transfer. Upon such
surrender and payment the Company shall, subject to Section 10, execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees and
in the denominations specified in such instrument of assignment, and this
Warrant shall promptly be cancelled. If and when this Warrant is assigned in
blank (in case the restrictions on transferability in Section 10 shall have been
terminated), the Company may (but shall not be obliged to) treat the bearer
hereof as the absolute owner of this Warrant for all purposes and the Company
shall not be affected by any notice to the contrary. This Warrant, if properly
assigned in compliance with this Section 3 and Section 10, may be exercised by
an assignee for the purchase of shares of Common Stock without having a new
Warrant issued.
This Warrant may, subject to Section 10, be divided or combined with other
Warrants upon presentation at the aforesaid office of the Company, together with
a written notice specifying the names and denominations in which new Warrants
are to be issued, signed by the holder hereof or its agent or attorney. Subject
to compliance with the preceding paragraph and with Section 10, as to any
transfer which may be involved in such division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
The Company shall pay all expenses, taxes (other than income taxes, if any, of
the transferee) and other charges incurred by the Company in the performance of
its obligations in connection with the preparation, issue and delivery of
Warrants under this Section 3.
The Company agrees to maintain at its aforesaid office books for the
registration and transfer of the Warrants.
Section 4. Adjustment of Stock Unit. The number of shares of Common
Stock comprising a Stock Unit shall be subject to adjustment from time to time
as set forth in this Section 4 with respect to any fact or event described
herein occurring after the date
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hereof. The Company will not create any class of Common Stock which carries any
rights to dividends or assets differing in any respect from the rights of the
Common Stock on the date hereof. Anything contained in this Section 4
notwithstanding, any adjustment made pursuant to any provision of this Section 4
shall be made without duplication of an adjustment otherwise required by and
made pursuant to another provision of this Section 4 on account of the same
facts or events.
(A) Stock Dividends, Subdivisions and Combinations. In case at
any time or from time to time the Company shall:
(1) take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend
payable in, or other distribution of, Common Stock, or
(2) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock, or
(3) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock,
then the number of shares of Common Stock comprising a Stock Unit immediately
after the happening of any event described in clauses (1) through (3) above
shall be adjusted so as to consist of the number of shares of Common Stock which
a record holder of the number of shares of Common Stock constituting a Stock
Unit immediately prior to the happening of such event would own or be entitled
to receive after the happening of event described in clauses (1) through (3)
above.
(B) Certain Other Dividends and Distributions. In case at any
time or from time to time the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive any dividend or other
distribution of:
(1) cash (other than a cash distribution made as a
dividend and payable out of earnings or earned surplus legally
available for the payment of dividends under the laws of the
jurisdiction of incorporation of the Company, to the extent,
but only to the extent, that the aggregate of all such
dividends paid or declared after the date hereof, does not
exceed the consolidated net income of the Company and its
consolidated subsidiaries earned subsequent to the date hereof
determined in accordance with generally accepted accounting
principles), or
(2) any evidence of its indebtedness (other than
Convertible Securities), any shares of its stock (other than
Additional Shares of Common Stock) or any other securities or
property of any nature whatsoever (other than cash and other
than Convertible Securities or Additional Shares of Common
Stock), or
(3) any warrants, options or other rights to
subscribe for or purchase (i) any evidences of its
indebtedness (other than Convertible Securities), (ii) any
shares of its stock (other than Additional Shares of
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Common Stock) or (iii) any other securities or property of any
nature whatsoever (other than cash and other than Convertible
Securities or Additional Shares of Common Stock),
then the number of shares of Common Stock thereafter comprising a Stock Unit
shall be adjusted to that number determined by multiplying the number of shares
of Common Stock comprising a Stock Unit immediately prior to such adjustment by
a fraction (i) the numerator of which shall be the Current Market Price per
share of Common Stock at the date of taking such record, and (ii) the
denominator of which shall be such Current Market Price per share of Common
Stock minus the portion applicable to one share of Common Stock of any such cash
so distributable (if any) and of the fair value of any and all such evidences of
indebtedness, shares of stock, other securities or property, or warrants,
options or other subscription or purchase rights, so distributable (if any).
Such fair value shall be determined in good faith by the Board of Directors of
the Company, provided that if such determination is objected to by the Holder,
such determination shall be made by an independent appraiser selected by such
Board of Directors and not objected to by the Holder. The fees and expenses of
such appraiser shall be paid by the Company. A reclassification (other than a
change in par value) of the Common Stock into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by the Company to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Subsection and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, shall be deemed a subdivision or combination, as
the case may be, of the outstanding shares of Common Stock within the meaning of
Subsection A of this Section 4.
(C) Issuance of Additional Shares of Common Stock. In case at
any time or from time to time the Company shall (except as hereinafter provided)
issue, whether in connection with the merger of a corporation into the Company
or otherwise, any Additional Shares of Common Stock for a consideration per
share less than the greater of (i) the Current Market Price per share of Common
Stock or (ii) the Current Warrant Price per share of Common Stock, then the
number of shares of Common Stock thereafter comprising a Stock Unit shall be
adjusted to be the greater of (A) that number determined by multiplying the
number of shares of Common Stock comprising a Stock Unit immediately prior to
such adjustment by a fraction (i) the numerator of which shall be the Current
Warrant Price per share of Common Stock, and (ii) the denominator of which shall
be the consideration per share received by the Company for such Additional
Shares of Common Stock or (B) that number determined by multiplying the number
of shares of Common Stock comprising a Stock Unit immediately prior to such
adjustment by a fraction (i) the numerator of which shall be the number of
shares of Common Stock outstanding, plus the number of such Additional Shares of
Common Stock so issued, and (ii) the denominator of which shall be the number of
shares of Common Stock outstanding, plus the number of shares of Common Stock
which the aggregate consideration for the total number of such Additional Shares
of Common Stock would purchase at the greater of the Current Warrant Price or
the Current Market Price per share of Common Stock. For purposes of this
Subsection, the date as of which the Current Market Price and the Current
Warrant Price per share of Common Stock shall be computed shall be the earlier
of (i) the date on which the Company shall enter into a firm
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contract for the issuance of such Additional Shares of Common Stock, or (ii) the
date of actual issuance of such Additional Shares of Common Stock. The
provisions of this Subsection shall not apply to any issuance of Additional
Shares of Common Stock for which an adjustment is provided under Subsection A of
this Section 4. No adjustment of the number of shares of Common Stock comprising
a Stock Unit shall be made under this Subsection upon the issuance of any
Additional Shares of Common Stock which are issued pursuant to the exercise of
any warrants, options or other subscription or purchase rights or pursuant to
the exercise of any conversion or exchange rights in any Convertible Securities,
if any such adjustment shall previously have been made upon the issuance of such
warrants, options or other rights or upon the issuance of such Convertible
Securities (or upon the issuance of any warrants, options or other rights
therefor) pursuant to Subsection D or E of this Section 4.
(D) Issuance of Warrants, Options or Other Rights. In case at
any time or from time to time the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them to receive a distribution of,
or shall otherwise issue, any warrants, options or other rights to subscribe for
or purchase any Additional Shares of Common Stock or any Convertible Securities
and the consideration per share for which Additional Shares of Common Stock may
at any time thereafter be issuable pursuant to such warrants, options or other
rights or pursuant to the terms of such Convertible Securities shall be less
than the greater of (i) the Current Market Price per share of Common Stock or
(ii) the Current Warrant Price per share of Common Stock, then the number of
shares of Common Stock thereafter comprising a Stock Unit shall be adjusted to
be the greater of those numbers determined pursuant to clauses (A) and (B) in
the first sentence of Subsection C of this Section 4. All adjustments made
pursuant to this Subsection D shall be made on the basis that (i) the maximum
number of Additional Shares of Common Stock issuable pursuant to all such
warrants, options or other rights or necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
as of the date specified in the last sentence of this Subsection, (ii) the
aggregate consideration for such maximum number of Additional Shares of Common
Stock shall be deemed to be the minimum consideration received and receivable by
the Company for the issuance of such Additional Shares of Common Stock pursuant
to such warrants, options or other rights or pursuant to the terms of such
Convertible Securities and (iii) the consideration per share received by the
Company for such Additional Shares of Common Stock shall be that number
determined by dividing (x) the aggregate consideration for such maximum number
of Additional Shares of Common Stock (determined as set forth in clause (ii) of
this sentence) by (y) the maximum number of Additional Shares of Common Stock
issuable pursuant to all such warrants, options or other rights or necessary to
effect the conversion or exchange of all such Convertible Securities (determined
as set forth in clause (i) of this sentence). For purposes of this Subsection,
the computation date for subclause (i) above and as of which the Current Market
Price and the Current Warrant Price per share of Common Stock shall be computed
shall be the earliest of (a) the date on which the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to receive
any such warrants, options or other rights, (b) the date on which the Company
shall enter into a firm contract for the issuance of such warrants, options or
other rights, and (c) the date of actual issuance of such warrants, options or
other rights.
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(E) Issuance of Convertible Securities. In case at any time or
from time to time the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a distribution of, or shall
otherwise issue, any Convertible Securities and the consideration per share for
which Additional Shares of Common Stock may at any time thereafter be issuable
pursuant to the terms of such Convertible Securities shall be less than the
greater of (i) the Current Market Price per share of Common Stock or (ii) the
Current Warrant Price per share of Common Stock, then the number of shares of
Common Stock thereafter comprising a Stock Unit shall be adjusted to be the
greater of those numbers determined pursuant to clauses (A) and(B) in the first
sentence of Subsection C of this Section 4. All adjustments made pursuant to
this Subsection E shall be made on the basis that (i) the maximum number of
Additional Shares of Common Stock necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued as of the
computation date specified in the penultimate sentence of this Subsection, (ii)
the aggregate consideration for such maximum number of Additional Shares of
Common Stock shall be deemed to be the minimum consideration received and
receivable by the Company for the issuance of such Additional Shares of Common
Stock pursuant to the terms of such Convertible Securities and (iii) the
consideration per share received by the Company for such Additional Shares of
Common Stock shall be that number determined by dividing (x) the aggregate
consideration for such maximum number of Additional Shares of Common Stock
(determined as set forth in clause (ii) of this sentence) by (y) the maximum
number of Additional Shares of Common Stock necessary to effect the conversion
or exchange of all such Convertible Securities (determined as set forth in
clause (i) of this sentence). For purposes of this Subsection, the computation
date for clause (i) above and as of which the Current Market Price and the
Current Warrant Price per share of Common Stock shall be computed shall be the
earliest of (a) the date on which the Company shall take a record of the holders
of its Common Stock for the purpose of entitling them to receive any such
Convertible Securities, (b) the date on which the Company shall enter into a
firm contract for the issuance of such Convertible Securities, and (c) the date
of actual issuance of such Convertible Securities. No adjustment of the number
of shares of Common Stock comprising a Stock Unit shall be made under this
Subsection upon the issuance of any Convertible Securities which are issued
pursuant to the exercise of any warrants, options or other subscription or
purchase rights therefor, if any such adjustment shall previously have been made
upon the issuance of such warrants, options or other rights pursuant to
Subsection D of this Section 4.
(F) Superseding Adjustment of Stock Unit. If, at any time
after any adjustment of the number of shares of Common Stock comprising a Stock
Unit shall have been made pursuant to the foregoing Subsection D or E of this
Section 4 on the basis of the issuance of warrants, options or other rights or
the issuance of other Convertible Securities, or after any new adjustment of the
number of shares of Common Stock comprising a Stock Unit shall have been made
pursuant to this Subsection,
(1) such warrants, options or rights or the right of
conversion or exchange in such other Convertible Securities
shall expire, and a portion or all of such warrants, options
or rights, or the right of conversion or exchange in respect
of a portion of such other Convertible Securities, as the case
may be, shall not have been exercised, or
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(2) the consideration per share for which Additional
Shares of Common Stock are issuable pursuant to such warrants,
options or rights or the terms of such other Convertible
Securities, shall be increased solely by virtue of provisions
therein contained for an automatic increase in such
consideration per share upon the arrival of a specified date
or the happening of a specified event,
such previous adjustment shall be rescinded and annulled and the Additional
Shares of Common Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a recomputation shall be made of the effect of such warrants, options
or rights or other Convertible Securities on the basis of:
(3) treating the number of Additional Shares of
Common Stock, if any, theretofore actually issued or issuable
pursuant to the previous exercise of such warrants, options or
rights or such right of conversion or exchange, as having been
issued on the date or dates of such issuance as determined for
purposes of such previous adjustment and for the consideration
actually received and receivable therefor, and
(4) treating any such warrants, options or rights or
any such other Convertible Securities which then remain
outstanding as having been granted or issued immediately after
the time of such expiration or of such increase of the
consideration per share for which such Additional Shares of
Common Stock are issuable under such warrants, options or
rights or other Convertible Securities,
and, if and to the extent called for by the foregoing provisions of this Section
4 on the basis aforesaid, a new adjustment of the number of shares of Common
Stock comprising a Stock Unit shall be made, which new adjustment shall
supersede the previous adjustment so rescinded and annulled.
(G) Other Provisions Applicable to Adjustments Under this
Section. The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock comprising a Stock Unit
hereinbefore provided for in this Section 4:
(1) Treasury Stock. The sale or other disposition of
any issued shares of Common Stock owned or held by or for the
account of the Company shall be deemed an issuance thereof for
purposes of this Section 4.
(2) Computation of Consideration. To the extent that
any Additional Shares of Common Stock or any Convertible
Securities or any warrants, options or other rights to
subscribe for or purchase any Additional Shares of Common
Stock or any Convertible Securities shall be issued solely for
cash consideration, the consideration received by the
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<PAGE> 36
Company therefor shall be deemed to be the amount of cash
received by the Company therefor, or, if such Additional
Shares of Common Stock or Convertible Securities are offered
by the Company for subscription, the subscription price, or,
if such Additional Shares of Common Stock or Convertible
Securities are sold to underwriters or dealers for public
offering without a subscription offering, the initial public
offering price, in any such case excluding any amounts paid or
receivable for accrued interest or accrued dividends and
without deduction of any compensation, discounts or expenses
paid or incurred by the Company for and in the underwriting
of, or otherwise in connection with, the issue thereof. To the
extent that such issuance shall be for a consideration other
than solely for cash, then, except as herein otherwise
expressly provided, the amount of such consideration shall be
deemed to be the fair value of such consideration at the time
of such issuance as determined in good faith by the Board of
Directors of the Company, provided that if such determination
is objected to by the Holder, such determination shall be made
by an independent appraiser selected by such Board of
Directors and not objected to by the Holder. The fees and
expenses of such appraiser shall be paid by the Company. The
consideration for any Additional Shares of Common Stock
issuable pursuant to any warrants, options or other rights to
subscribe for or purchase the same shall be the consideration
received or receivable by the Company for issuing such
warrant, options or other rights, plus the additional
consideration payable to the Company upon the exercise of such
warrants, options or other rights. The consideration for any
Additional Shares of Common Stock issuable pursuant to the
terms of any Convertible Securities shall be the consideration
received or receivable by the Company for issuing any
warrants, options or other rights to subscribe for or purchase
such Convertible Securities (if any), plus the consideration
paid or payable to the Company in respect of the subscription
for or purchase of such Convertible Securities, plus the
additional consideration, if any, payable to the Company upon
the exercise of the right of conversion or exchange in such
Convertible Securities.
(3) When Adjustments To Be Made. The adjustments
required by the preceding Subsections of this Section 4 shall
be made whenever and as often as any specified event requiring
an adjustment shall occur. For the purpose of any adjustment,
any specified event shall be deemed to have occurred at the
close of business on the date of its occurrence.
(4) Fractional Interests. In computing adjustments
under this Section, fractional interests in Common Stock shall
be taken into account to the nearest 1/100th of a share.
(5) When Adjustment Not Required. If the Company
shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend or
distribution or subscription or purchase rights and shall,
thereafter and before the distribution thereof to
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<PAGE> 37
shareholders, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the
taking of such record and any such adjustment previously made
in respect thereof shall be rescinded and annulled.
(H) Merger, Consolidation or Disposition of Assets. In case
the Company shall merge or consolidate into another corporation, or shall sell,
transfer or otherwise dispose of all or substantially all of its property,
assets or business to another corporation and pursuant to the terms of such
merger, consolidation or disposition, shares of common stock of the successor or
acquiring corporation are to be received by or distributed to the holders of
Common Stock of the Company, then the Holder shall have the right thereafter to
receive, upon exercise of this Warrant, Stock Units each comprising the number
of shares of common stock of the successor or acquiring corporation receivable
upon or as a result of such merger, consolidation or disposition of assets by a
holder of the number of shares of Common Stock comprising a Stock Unit
immediately prior to such event. If, pursuant to the terms of such merger,
consolidation or disposition of assets, any cash, shares of stock or other
securities or property of any nature whatsoever (including warrants, options or
other subscription or purchase rights) are to be received by or distributed to
the holders of Common Stock of the Company in addition to common stock of the
successor or acquiring corporation, there shall be either, at the Holder's
option, (i) an adjustment in the number of shares of Common Stock thereafter
comprising a Stock Unit to that number determined by multiplying the number of
shares of Common Stock comprising a Stock Unit immediately prior to such
adjustment by a fraction (x) the numerator of which shall be the Current Market
Price per share of Common Stock at the date of such merger, consolidation or
disposition, and (y) the denominator of which shall be such Current Market Price
per share minus the portion applicable to one share of Common Stock of any cash
so distributed and of the fair value of any and all such shares of stock,
securities or other property or (ii) the Holder shall have the right to receive
such cash, shares of stock or other securities or property of any nature as a
holder of the number of shares of Common Stock underlying a Stock Unit would
have been entitled to receive upon the occurrence of such event, for each Stock
Unit into which the Holder's Warrants are exercisable. Such fair value shall be
determined in good faith by the Board of Directors of the Company, provided that
if such determination is objected to by the Holder, such determination shall be
made by an independent appraiser selected by such Board of Directors and not
objected to by the Holder. The fees and expenses of such appraiser shall be paid
by the Company. In case of any such merger, consolidation or disposition of
assets, the successor or acquiring corporation shall expressly assume the due
and punctual observance and performance of each and every covenant and condition
of this Warrant and the Securities Purchase Agreement to be performed and
observed by the Company and all of the obligations and liabilities hereunder and
thereunder, subject to such modification as shall be necessary to provide for
adjustments of Stock Units which shall be as nearly equivalent as practicable to
the adjustments provided for in this Section 4. For the purposes of this Section
4 "common stock of the successor or acquiring corporation" shall include stock
of such corporation of any class which is not preferred as to dividends or
assets over any other class of stock of such corporation and which is not
subject to redemption. The foregoing provisions of this Subsection shall
similarly apply to successive mergers, consolidations or dispositions of assets.
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<PAGE> 38
(I) Other Action Affecting Common Stock. In case at any time
or from time to time the Company shall take any action affecting its Common
Stock, other than an action described in any of the foregoing Subsections A to
H, inclusive, of this Section 4 and the actions described in clauses (i) through
(xiv) of the definition of Additional Shares of Common Stock, then, unless in
the reasonable opinion of the Board of Directors of the Company such action will
not have a materially adverse effect upon the rights of the Holder, the number
of shares of Common Stock or other stock comprising a Stock Unit, or the
purchase price thereof, shall be adjusted in such manner and at such time as the
Board of Directors of the Company may in good faith determine to be equitable in
the circumstances.
(J) No Adjustments for Certain Transactions. Anything
contained in this Warrant notwithstanding, the number of shares of Common Stock
comprising a Stock Unit and the Purchase Price per Stock Unit shall not be
adjusted, nor be subject to adjustment, on account of the granting of any rights
under a phantom stock plan, stock appreciation rights plan or other deferred
compensation plan to officers, directors or employees of the Company or its
affiliates, if (i) no shares of Common Stock are issued or required to be issued
under any such plan and (ii) the only consideration paid or payable to any
participant in such plan is cash.
Section 5. Notice to Warrant Holders.
(A) Notice of Adjustment of Stock Unit or Purchase Price.
Whenever the number of shares of Warrant Stock comprising a Stock Unit or the
Purchase Price per Stock Unit shall be adjusted pursuant to Section 4, the
Company shall forthwith obtain a certificate signed by the president of the
Company and the principal financial officer of the Company, setting forth, in
reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated (including a statement of the fair value, as
determined by the Board of Directors of the Company, of any evidences of
indebtedness, shares of stock, other securities or property or warrants, options
or other subscription or purchase rights referred to in Section 4.B, Section
4.G(2) or Section 4.H) and specifying the number of shares of Common Stock
comprising a Stock Unit and (if such adjustment was made pursuant to Section 4.H
or Section 4.I) describing the number and kind of any other shares of stock
comprising a Stock Unit, and any change in the Purchase Price thereof after
giving effect to such adjustment or change. The Company shall promptly, and in
any case within 10 days after the making of such adjustment, cause a signed copy
of such certificate to be delivered to the Holder. The Company shall keep at its
office or agency, maintained for the purpose pursuant to Section 16, copies of
all such certificates and cause the same to be available for inspection at said
office during normal business hours by the Holder or any prospective purchaser
of the Warrant designated by the Holder.
(B) Notice of Certain Corporate Action. In case the Company
shall propose (a) to pay any dividend payable in cash or in stock of any class
to the holders of its Common Stock or to make any other distribution to the
holders of its Common Stock, or (b) to offer to the holders of its Common Stock
rights to subscribe for or to purchase any Additional Shares of Common Stock or
shares of stock of any class or any other securities, rights or options, or (c)
to effect any reclassification of its Common Stock
14
<PAGE> 39
(other than a reclassification involving only the subdivision or combination of
outstanding shares of Common Stock), or (d) to effect any capital
reorganization, or (e) to effect any consolidation, merger or sale, change to
the Company's charter or bylaws, transfer or other disposition of all or
substantially all of its property, assets or business, or (f) to effect the
liquidation, dissolution or winding up of the Company, then in each such case,
the Company shall give to each holder of a Warrant, in accordance with Section
17, a notice, certified by the president of the Company and the principal
financial officer of the Company, of such proposed action, which shall specify
the date on which a record is to be taken for the purposes of such stock
dividend, distribution or rights, or the date on which such reclassification,
reorganization, consolidation, merger, sale, change to the Company's charter or
bylaws, transfer, disposition, liquidation, dissolution, or winding up is to
take place and the date of participation therein by the holders of Common Stock,
if any such date is to be fixed, and shall also set forth such facts with
respect thereto as shall be reasonably necessary to indicate the effect of such
action on the Common Stock and the number and kind of any other shares of stock
which will comprise a Stock Unit, and the purchase price or prices thereof,
after giving effect to any adjustment which will be required as a result of such
action. Such notice shall be so given in the case of any action covered by
clause (a) or (b) above at least twenty days prior to the record date for
determining holders of the Common Stock for purposes of such action, and in the
case of any other such action, at least thirty days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of Common Stock, whichever shall be the earlier.
Section 6. Reservation and Authorization of Common Stock; Registration
with or Approval of any Governmental Authority. The Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued shares of Common Stock as will be sufficient to
permit the exercise in full of all outstanding Warrants. Without the prior
written consent of the Holder, the Company will not amend its Certificate of
Incorporation in any respect relating to the Common Stock other than to increase
or decrease the number of shares of authorized capital stock (subject to the
provisions of the preceding sentence) or to decrease the par value of Common
Stock.
Before taking any action which would cause an adjustment reducing the Current
Warrant Price per share of Common Stock below the then par value, if any, of the
shares of Common Stock issuable upon exercise of the Warrants, the Company shall
take any corporate action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue fully-paid and
nonassessable shares of Common Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the number of
shares of Common Stock comprising a Stock Unit or in the Current Warrant Price
per share of Common Stock, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof (except that nothing
contained in this Warrant certificate shall require the Company to register the
Warrants under the Securities Act or any similar federal or state equivalent).
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<PAGE> 40
Section 7. Taking of Record; Stock and Warrant Transfer Books. In the
case of all dividends or other distributions by the Company to the holders of
its Common Stock with respect to which any provision of Section 4 refers to the
taking of a record of such holders, the Company will in each such case take such
a record and will take such record as of the close of business on a Business
Day. The Company will not at any time, except (i) upon dissolution, liquidation
or winding up, or (ii) for purposes of declaring and paying a dividend or
matters related to voting by shareholders of the Company, close its stock
transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
Section 8. Transfer Taxes. The Company will pay any and all transfer
taxes that may be payable in respect of the issuance or delivery of shares of
Common Stock on exercise of this Warrant. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery of shares of Common Stock in a name other than that in
which this Warrant is registered, and no such issue or delivery shall be made
unless and until the person requesting such issue has paid to the Company the
amount of any such tax, or has established, to the satisfaction of the Company,
that such tax has been paid.
Section 9. No Voting Rights. This Warrant shall not entitle the holder
hereof to any voting rights, or to any rights as a stockholder of the Company.
Section 10. Restrictions on Transferability. The Warrants and the
Warrant Stock shall be transferable only (i) in accordance with the provisions
of Section 5 of the Securities Purchase Agreement and (ii) upon compliance with
the conditions specified in this Warrant and in compliance with the provisions
of the Securities Act and applicable state securities laws in respect of the
transfer of any Warrant or any Warrant Stock, and any holder of this Warrant
shall be bound by the provisions of (and entitled to the benefits of) Section 3
hereof.
Section 11. Limitation of Liability. No provision hereof, in the
absence of affirmative action by the holder hereof to purchase shares of Common
Stock, and no mere enumeration herein of the rights or privileges of the holder
hereof, shall give rise to any liability of such holder for the purchase price
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
Section 12. Registration Rights. The Holder shall have registration
rights and benefits with respect to any Warrant Stock issuable upon the exercise
hereof identical to the rights and benefits (and subject to the same terms and
conditions) as those set forth in Section 6 of the Securities Purchase Agreement
as if such provisions were set forth herein in their entirety. Nothing in this
Section 12 shall limit or reduce the rights and benefits of the Purchaser under
the Securities Purchase Agreement.
Section 13. Loss, Destruction of Warrant Certificates. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Company
(the original Holder's or any other institutional holder's indemnity being
satisfactory indemnity in the event of loss, theft or destruction
16
<PAGE> 41
of any Warrant owned by such institutional holder), or, in the case of any such
mutilation, upon surrender and cancellation of such Warrant, the Company will
make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant,
a new Warrant of like tenor and representing the right to purchase the same
aggregate number of shares of Common Stock.
Section 14. Furnish Information. The Company agrees that it shall
deliver to the holder of record hereof promptly after their becoming available
copies of all financial statements, reports and proxy statements which the
Company shall have sent to its stockholders generally.
Section 15. Amendments. The terms of this Warrant may be amended, and
the observance of any term therein may be waived, only with the written consent
of the Holder.
Section 16. Office of the Company. So long as any of the Warrants
remains outstanding, the Company shall maintain an office in Houston, Texas
where the Warrants may be presented for exercise, transfer, division or
combination as in this Warrant provided. Such office shall be at 3700 Buffalo
Speedway, Suite 960 unless and until the Company shall designate and maintain
some other office for such purposes and give written notice thereof to the
Holder.
Section 17. Notices Generally. All notices, requests and other
communications hereunder must be in writing and will be deemed to have been duly
given only if delivered personally or by facsimile transmission or mailed (first
class postage prepaid) to the parties at the following addresses or facsimile
numbers:
If to Company, to:
Contango Oil and Gas Company
3700 Buffalo Speedway, Suite 960
Houston, Texas 77098
Attention: Kenneth R. Peak, President and Chief Executive Officer
Phone: (713) 960-1901
Fax: (713) 960-1065
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with a copy to:
Morgan, Lewis & Bockius LLP
300 South Grand Avenue, 22nd Floor
Los Angeles, California 90071
Attention: Richard A. Shortz, Esq.
Phone: (213) 612-2500
Fax: (213) 612-2554
If to Holder, to:
Trust Company of the West
865 S. Figueroa Street
Los Angeles, California 90017
Attention: Arthur R. Carlson
Phone: (213) 244-0053
Fax: (213) 244-0604
with a copy to:
Milbank, Tweed, Hadley & McCloy LLP
601 S. Figueroa Street, 30th Floor
Los Angeles, CA 90017
Attention: David A. Lamb, Esq.
Phone: (213) 892-4000
Fax: (213) 629-5063
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice is to be delivered pursuant to this Section). Any party from
time to time may change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying such change to
the other party hereto.
Section 18. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEVADA.
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<PAGE> 43
IN WITNESS WHEREOF, the Company has caused this Certificate to be signed in its
name by its President and Chief Executive Officer.
Dated:
----------------------
CONTANGO OIL & GAS COMPANY, a
Nevada corporation
By:
--------------------------------------
Kenneth R. Peak
President and Chief Executive Officer
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<PAGE> 44
SUBSCRIPTION FORM
(to be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably exercises this
Warrant for and purchases ___________ Stock Units of ___________________, a
__________ corporation, purchasable with this Warrant, herewith makes payment
therefor on the terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any securities
or other property issuable upon such exercise) be issued in the name of and
delivered to ___________ whose address is ___________ .
Dated:
--------------------------------------
(Signature of Registered Owner)
--------------------------------------
(Street Address)
--------------------------------------
(City) (State) (Zip Code)
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<PAGE> 45
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of Stock Units
set forth below:
<TABLE>
<CAPTION>
No. of Stock
Name and Address of Assignee Units
---------------------------- ------------
<S> <C>
</TABLE>
and does hereby irrevocably constitute and appoint _____________________
attorney to make sure transfer on the books of ________________, a ___________
corporation, maintained for the purpose, with full power of substitution in the
premises.
Dated:
-----------------------------------
Signature
-----------------------------------
Witness
NOTICE: The signature to the assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatever.
[The signature to this assignment must be guaranteed by an Eligible
Guarantor Institution as defined in Rule 17Ad-15 promulgated under the
Securities Exchange Act of 1934, as amended, or any successor thereto.]
21
<PAGE> 46
EXHIBIT B
ACCREDITED INVESTOR CERTIFICATE
In connection with the issuance of certain Warrants (the "Warrants") to
purchase the Common Stock (the "Common Stock") of Contango Oil & Gas Company, a
Nevada corporation (the "Company"), the undersigned (an "Investor") hereby
furnishes the following information and makes the following acknowledgments and
representations and warranties:
I. Legal Status of Investor.
Each Investor must check the applicable statement below.
The Investor is (check the appropriate category(ies)):
___ A natural person whose net worth (or joint net worth with his
or her spouse) is in excess of $1,000,000 as of the date
hereof;
___ A natural person whose income in 1997 and 1998 was, and whose
income in 1999 is expected to be, in excess of $200,000, or
whose income with his or her spouse in 1997 and 1998 was, and
whose income with his or her spouse in 1999 is expected to be,
in excess of $300,000;
___ A broker dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934, as amended;
___ An organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business
trust or partnership, not formed for the specific purpose of
acquiring the Securities, with total assets in excess of
$5,000,000;
___ A trust with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the Securities, whose
purchase is directed by a sophisticated person as described in
Rule 506(b)(2)(ii) under the Securities Act;
___ An entity in which all of the equity owners are "accredited
investors" as defined in Rule 501 under the Securities Act; or
___ A director or executive officer of the Company.
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<PAGE> 47
II. Identity of Investor.
Name: _____________________________________________________
Address: _____________________________________________________
Telephone: _____________________________________________________
Tax ID No.: _____________________________________________________
III. Acknowledgment.
Investor understands, acknowledges and agrees that:
(a) The Warrants have not been registered under the Securities
Act or any other applicable federal or state securities laws;
(b) Investor is acquiring the Warrants for his, her or its own
account for investment purposes and not with a view to, or for offer or
sale in connection with, any distribution of the Warrants in violation
of the Securities Act; and
(c) Investor has a preexisting personal and business
relationship with the Company and certain of its officers, directors
and controlling persons, and, by reason of Investor's business and
financial experience, has the capacity to protect his, her or its
interests in connection with the acquisition of the Warrants.
This completed questionnaire must be returned as soon as possible after
receipt hereof and prior to acquiring the Warrants.
--------------------------------
Print or type name of Investor
By:
-----------------------------
Name:
Title:
Date: , 2000
------------------
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<PAGE> 48
EXHIBIT C
CERTIFICATE OF DESIGNATION, PREFERENCES,
AND RELATIVE RIGHTS AND LIMITATIONS
OF THE
SERIES A SENIOR CONVERTIBLE CUMULATIVE PREFERRED STOCK
1
