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EXHIBIT 5
SECURITIES PURCHASE AGREEMENT
dated as of August 24, 2000
between
CONTANGO OIL & GAS COMPANY
and
SOUTHERN UTE INDIAN TRIBE
doing business as Southern Ute Indian Tribe Growth Fund
Warrant to purchase 250,000 shares of Common Stock
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TABLE OF CONTENTS
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<S> <C> <C>
1. Agreement to Purchase Securities........................................................................1
2. Delivery of the Securities; Issuance of Additional Warrants.............................................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 Knowledge and Experience.......................................................................2
3.5 Suitability....................................................................................2
3.6 Ability to Bear Risk of Loss...................................................................2
3.7 Private Offering...............................................................................2
3.8 Truth and Accuracy.............................................................................2
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.................................................................3
4.1 Corporate Existence; Authority.................................................................3
4.2 Enforceability.................................................................................3
4.3 Capitalization.................................................................................4
4.4 No Conflicts...................................................................................4
4.5 SEC Documents..................................................................................4
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 Truth and Accuracy.............................................................................6
4.11 Compliance with Laws, Other Instruments........................................................6
4.12 Observance of Agreements, Statutes and Orders..................................................6
5. Restrictions on Transfer................................................................................6
5.1 Resale Restrictions............................................................................6
</TABLE>
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<TABLE>
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5.2 Restrictive Legend.............................................................................7
5.3 Illiquid Investment............................................................................7
6. Registration Procedures.................................................................................7
6.1 Demand Registration Rights.....................................................................7
6.2 Piggy-Back Registration Rights.................................................................8
6.3 Delivery of Prospectus........................................................................10
6.4 Third Party Registration Rights...............................................................10
6.5 Registration in Other Jurisdictions...........................................................10
6.6 Notice of Material Events.....................................................................10
6.7 Notice of Suspension of Effectiveness.........................................................11
6.8 Listing of Common Stock on Securities Exchanges...............................................11
6.9 Further Assurances............................................................................11
6.10 Cooperation...................................................................................11
6.11 Discontinuation of Disposition of Shares......................................................11
6.12 Expenses......................................................................................11
6.13 Indemnification of Purchaser..................................................................12
6.14 Indemnification of Issuer.....................................................................13
6.15 Participation in Indemnified Claims...........................................................13
7. Reliance...............................................................................................14
8. Amendment to Existing Securities Purchase Agreement....................................................14
9. Miscellaneous..........................................................................................14
9.1 Survival......................................................................................14
9.2 Binding Effect; Assignment....................................................................14
9.3 Execution and Delivery of Agreement...........................................................15
9.4 Titles........................................................................................15
9.5 Severability..................................................................................15
9.6 Entire Agreement..............................................................................15
9.7 Waiver and Amendment..........................................................................15
9.8 Counterparts..................................................................................15
9.9 Governing Law.................................................................................15
9.10 Attorney's Fees...............................................................................15
</TABLE>
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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 the Southern Ute Indian Tribe, a federally recognized
Indian tribe organized under the Indian Reorganization Act of 1934, doing
business as the Southern Ute Indian Tribe Growth Fund (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 a warrant to purchase 250,000 shares of the Issuer's common
stock in the form attached hereto as Exhibit A (the "Warrant") for an aggregate
purchase price of $10.00 and other good and valuable consideration, receipt of
which is hereby acknowledged by the Issuer. The shares of Issuer's common stock
that may be issued upon exercise of the Warrant are referred to herein as the
"Warrant Shares" and the Warrant 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 Purchaser, (ii) the issuance of Issuer's
Series A Preferred Stock and warrants to purchase 500,000 shares of Issuer's
common stock issued to Trust Company of the West, in its capacity as Investment
Manager and Custodian, (iii) the issuance of warrants to purchase 125,000 shares
of Issuer's common stock issued to Fairfield Industries Incorporated, (iv) the
issuance of warrants to purchase 125,000 shares of Issuer's common stock issued
to Juneau Exploration Company, LLC and (v) the execution and delivery of the
limited liability company organization documents for Republic Exploration LLC on
terms approved by the Purchaser.
2. DELIVERY OF THE SECURITIES; ISSUANCE OF ADDITIONAL WARRANTS.
Concurrently with the execution of this Agreement, the Issuer shall issue and
deliver 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.
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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 carefully reviewed them, 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 Knowledge and Experience. The Purchaser 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.
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.
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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 a federally
organized Indian tribe organized under the Indian Reorganization Act of 1934 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.
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
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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 the Warrant and (subject to the execution of this Agreement by the
Purchaser) they constitute valid and binding agreements of the Issuer
enforceable in accordance with their respective 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 its Series A Preferred Stock)
22,920,412 shares are issued and outstanding, and 125,000 shares of preferred
stock, none of which are issued and outstanding. Concurrently herewith, the
Issuer is entering into a transaction whereby it will issue 2,500 shares of its
Series A Preferred Stock. 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. If and when issued, the Warrant
Shares will have been duly authorized and when issued and delivered to the
Purchaser against payment therefor as provided in the Warrant, will be validly
issued, fully paid and non-assessable, and the issuance of such 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 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 its Series A Preferred Stock, 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.
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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 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
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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 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 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.
4.11 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.
4.12 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
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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 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 Warrant Shares (the "Registerable
Securities") in an aggregate amount equal to the number of Warrant Shares then
issued to Purchaser (a "Demand Registration"). Within 90 days of the receipt of
a written request for a Demand
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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 only once. The Issuer shall use diligence to maintain the
effectiveness of the Demand Registration Statement until the earlier to occur of
(i) the date which is one year from the effective date of the Demand
Registration Statement, (ii) the date on which all of the Warrant Shares have
been sold by the Purchaser or (iii) the date on which the 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 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
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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) 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 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 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;
provided, further, that the Issuer shall not withdraw a Piggy-Back Registration
request from the Purchaser unless any and all piggy-back registration requests
of other security holders are also withdrawn.
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
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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 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 the 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 holders of the Issuer's Series A preferred stock in
connection with the issuance of common stock upon conversion of the Issuer's
Series B preferred stock.
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
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(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 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 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
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<PAGE> 15
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 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.
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
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<PAGE> 16
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 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 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 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
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<PAGE> 17
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 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 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 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. 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.
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8. AMENDMENT TO EXISTING SECURITIES PURCHASE AGREEMENT.
8.1 The Issuer and Purchaser further agree that the first sentence
of Section 9 of the that certain Securities Purchase Agreement dated as of June
8, 2000 between the Issuer and the Purchaser (the "Existing 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."
8.2 The Issuer and Purchaser further agree that the Existing
Securities Purchase Agreement is hereby further amended by adding the following
provision as Section 11.13 thereof:
"11.13 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."
9. MISCELLANEOUS.
9.1 Survival. The representations and warranties made in this
Agreement shall survive the closing of the transactions contemplated by this
Agreement.
9.2 Binding Effect; Assignment. This Agreement is not transferable
or assignable, except that the rights of Purchaser set forth in Section 6 hereof
shall be transferable to an affiliate of Purchaser and any transferee of
Purchaser's Securities who receives at least 30% of the Securities to be issued
hereby.
9.3 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.
9.4 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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9.5 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.
9.6 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.
9.7 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.
9.8 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.
9.9 Governing Law. This Agreement is governed by and shall be
construed in accordance with the laws of the State of Nevada.
9.10 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.
THE "ISSUER" THE "PURCHASER"
CONTANGO OIL & GAS COMPANY SOUTHERN UTE INDIAN TRIBE,
doing business as the SOUTHERN UTE
INDIAN TRIBE GROWTH FUND
By: /s/ Kenneth R. Peak By: John E. Baker, Jr.
------------------------- ------------------------------------
Kenneth R. Peak John E. Baker, Jr.
President and Chief Executive Chairman
Officer
Address: 3700 Buffalo Speedway Address: 135 East 9th Street, Suite H
Suite 960 Durango, Colorado 81301
Houston, Texas 77098
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<PAGE> 21
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:
The Southern Ute Indian Tribe, a federally recognized Indian tribe
organized under the Indian Reorganization Act of 1934, doing business as the
Southern Ute Indian Tribe Growth Fund ("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"), Two Hundred Fifty Thousand (250,000)
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 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
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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 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 Series B Preferred 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
pursuant to a 401(k) or other qualified retirement plan for the officers,
directors or employees of the Company and its affiliates in an aggregate amount
not to exceed 100,000 shares.
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<PAGE> 23
"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 State of Texas.
"CLOSING DATE" shall mean August 24, 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 Common Stock, determined in accordance
with generally accepted accounting principles,
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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.
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
4
<PAGE> 25
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.
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<PAGE> 26
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. 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.
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.
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<PAGE> 27
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 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
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<PAGE> 28
(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 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
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<PAGE> 29
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 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
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<PAGE> 30
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.
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,
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<PAGE> 31
(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
(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
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<PAGE> 32
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 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 shareholders, legally abandon its
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<PAGE> 33
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> 34
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.
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
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<PAGE> 35
securities, rights or options, or (c) to effect any reclassification of its
Common Stock (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.
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
15
<PAGE> 36
require the Company to register the Warrants under the Securities Act or any
similar federal or state equivalent).
Section 2. 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.
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.
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.
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.
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.
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.
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<PAGE> 37
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 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.
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.
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.
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.
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
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
17
<PAGE> 38
If to Holder, to:
Southern Ute Indian Tribe,
doing business as the Southern Ute
Indian Tribe Growth Fund
135 East 9th Street, Suite H
Durango, Colorado 81301
Attention: John Jurrius
Phone: (970) 375-2199
Fax: (970) 375-2216
with a copy to:
Jones & Keller
World Trade Center, 16th Floor
1625 Broadway
Denver, Colorado 80202
Attention: Reid Godbolt, Esq.
Phone: (303) 573-1600
Fax: (303) 573-0769
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.
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> 39
IN WITNESS WHEREOF, the Company has caused this Certificate to be signed in its
name by its President and Chief Executive Officer.
Dated: August 24, 2000
CONTANGO OIL & GAS COMPANY,
a Nevada corporation
By: /s/ Kenneth R. Peak
-------------------------------------
Kenneth R. Peak
President and Chief Executive Officer
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<PAGE> 40
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> 41
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.]
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<PAGE> 42
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> 43
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> 44
Schedules
4.3(b) Outstanding Subscriptions, Options, Warrants, Convertible Securities,
etc.
4.3(c) Third Party Registration Rights
4.9(a) Purchasers of Common Stock since November 5, 1999
Exhibits
A Form of Warrant
B Accredited Investor Certificate
