-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SofIbi8KccyWZVd13QavhCBXn0H0m8I3qUgucBHLpRPfjjKWNh2BM3Fdefj2MNXP C7zXj59BVvXV3mVluSjdCQ== /in/edgar/work/0000950129-00-004918/0000950129-00-004918.txt : 20001011 0000950129-00-004918.hdr.sgml : 20001011 ACCESSION NUMBER: 0000950129-00-004918 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20001010 GROUP MEMBERS: AQUILA ENERGY CAPITAL CORP GROUP MEMBERS: AQUILA ENERGY CAPITAL CORPORATION GROUP MEMBERS: AQUILA ENERGY CORPORATION GROUP MEMBERS: UTILICORP UNITED INC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CONTANGO OIL & GAS CO CENTRAL INDEX KEY: 0001071993 STANDARD INDUSTRIAL CLASSIFICATION: [6770 ] IRS NUMBER: 954067606 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-56993 FILM NUMBER: 737012 BUSINESS ADDRESS: STREET 1: 3700 BUFFALO SPEEDWAY SUITE 960 CITY: HOUSTON STATE: TX ZIP: 77098 BUSINESS PHONE: 7139601901 MAIL ADDRESS: STREET 1: 3700 BUFFALO SPEEDWAY SUITE 960 CITY: HOUSTON STATE: TX ZIP: 77098 FORMER COMPANY: FORMER CONFORMED NAME: MGPX VENTURES INC DATE OF NAME CHANGE: 19981013 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: AQUILA ENERGY CAPITAL CORP CENTRAL INDEX KEY: 0001095182 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 431825091 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 909 FANNIN SUITE 1850 STREET 2: TWO HOUSTON CENTER CITY: HOUSTON STATE: TX ZIP: 77010-1007 BUSINESS PHONE: 7133367441 MAIL ADDRESS: STREET 1: 909 FANNIN SUITE 1850 STREET 2: TWO HOUSTON CENTER CITY: HOUSTON STATE: TX ZIP: 77010-1007 SC 13D 1 h80802sc13d.txt AQUILA ENERGY CAPITAL CORP FOR CONTANGO OIL & GAS 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D (Amendment No. ______)* UNDER THE SECURITIES EXCHANGE ACT OF 1934 CONTANGO OIL & GAS COMPANY (Name of Issuer) Common Stock, par value $0.04 per share (Title of Class of Securities) 2107-5N-105 (CUSIP Number) Jeffrey D. Ayers Senior Vice President Legal and Regulatory Affairs Aquila Energy Corporation 1100 Walnut Street, Suite 3300 P.O. Box 13207 Kansas City, Missouri 64199-3207 (816) 527-4170 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) September 27, 2000 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]. NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on a remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act shall be subject to all other provisions of the Act (however, see the Notes). Page 1 of 20 2 CUSIP NO. 2107-5N-105 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON UtiliCorp United Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS Not applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- NUMBER OF ----------------------------------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY OWNED BY 2,272,727 EACH ----------------------------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH -0- ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,272,727 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,272,727 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.0% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON HC, CO - -------------------------------------------------------------------------------- Page 2 of 20 3 CUSIP NO. 2107-5N-105 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Aquila Energy Corporation - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS Not applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- NUMBER OF ----------------------------------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY OWNED BY 2,272,727 EACH ----------------------------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH -0- ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,272,727 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,272,727 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.0% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- Page 3 of 20 4 CUSIP NO. 2107-5N-105 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Aquila Energy Capital Corporation - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF; WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- NUMBER OF ----------------------------------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY OWNED BY 2,272,727 EACH ----------------------------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH -0- ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,272,727 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,272,727 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.0% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- Page 4 of 20 5 CUSIP NO. 2107-5N-105 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Jay D. Brehmer - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS Not applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States of America - -------------------------------------------------------------------------------- NUMBER OF SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED BY EACH -0- REPORTING PERSON ------------------------------------------------------ WITH 8 SHARED VOTING POWER 2,272,727 ------------------------------------------------------ 9 SOLE DISPOSITIVE POWER -0- ------------------------------------------------------ 10 SHARED DISPOSITIVE POWER 2,272,727 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,272,727 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.0% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------- Page 5 of 20 6 ITEM 1. SECURITY AND ISSUER. This Schedule 13D relates to the common stock, par value $0.04 per share (the "Common Stock"), of Contango Oil & Gas Company, a Nevada corporation ("Contango"). The principal executive office of Contango is 3700 Buffalo Speedway, Suite 960, Houston, Texas 77098. ITEM 2. IDENTITY AND BACKGROUND. ITEMS 2(a) AND (b) This Schedule 13D is being filed on behalf of: (1) UtiliCorp United Inc. ("UtiliCorp"); (2) UtiliCorp's wholly-owned subsidiary Aquila Energy Corporation ("Aquila"); (3) Aquila's wholly-owned subsidiary Aquila Energy Capital Corporation ("AECC"); and (4) Jay D. Brehmer, an individual. UtiliCorp, Aquila, AECC and Jay D. Brehmer are hereinafter referred to singly as an "Aquila Related Entity," and collectively as the "Aquila Related Entities." Mr. Brehmer is employed as the Director of Capital and Finance for AECC. Mr. Brehmer disclaims beneficial ownership of any securities owned by any other Aquila Related Entity. Schedule I attached hereto and incorporated herein sets forth with respect to each director and/or executive officer of UtiliCorp his/her name, residence, citizenship, present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted. The principal business address for each executive officer is 20 West Ninth Street, Kansas City, Missouri 64105. Schedule II attached hereto and incorporated herein sets forth with respect to each director and/or executive officer of Aquila, his/her name, residence, citizenship, present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted. The principal business address for each executive officer is 1100 Walnut Street, Kansas City, Missouri 64106. Schedule III attached hereto and incorporated herein sets forth with respect to each director and/or executive officer of AECC, his/her name, residence, citizenship, present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted. The principal business address for each executive officer Page 6 of 20 7 is 1100 Walnut Street, Kansas City, Missouri 64106. AECC also maintains the following business address: Two Houston Center, 909 Fannin, Suite 1850, Houston, Texas 77010- 1007. ITEMS 2(c) AND (f) UtiliCorp, a Delaware corporation, is primarily engaged in providing energy and energy related products and services to customers throughout North America and around the world. Aquila, a Delaware corporation, is primarily engaged in the gathering, transportation, marketing and wholesaling of natural gas, condensate, power and other related commodities. AECC, a Delaware corporation, is primarily engaged in providing financial structuring services to companies involved in the acquisition and exploration of oil and gas properties. Mr. Brehmer is an employee of AECC holding the position of Director of Capital and Finance for AECC and is a citizen of the United States of America. ITEMS 2(d) AND (e) During the last five years, neither UtiliCorp, Aquila, AECC, Mr. Brehmer nor, to the best of their knowledge, any of their respective executive officers or directors: (1) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors); or (2) has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Page 7 of 20 8 ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. On September 27, 2000, AECC purchased from Contango 5,000 shares of Contango's newly-created Series B Senior Convertible Cumulative Preferred Stock, par value $0.04 per share (the "Preferred Stock"), for the cash purchase price of $5,000,000. AECC funded the purchase price for the Preferred Stock from its own working capital that was contributed to AECC by its ultimate parent, UtiliCorp, through AECC's immediate parent corporation, Aquila. The Preferred Stock is presently convertible into shares of Contango's Common Stock, initially for a conversion price of $2.20 per share or an aggregate of 2,272,727 shares of Common Stock. Accordingly, the Aquila Related Entities may be deemed to beneficially own the number of shares of Common Stock into which the Preferred Stock is convertible. ITEM 4. PURPOSE OF THE TRANSACTION. The Preferred Stock was acquired for investment purposes and for the other purposes described in this Schedule 13D. The Aquila Related Entities expect to seek to influence management of Contango from time to time, principally through membership on Contango's board of directors of an individual designated by AECC and through the exercise of voting rights attributable to the Preferred Stock. On October 2, 2000, Jay D. Brehmer, an officer of AECC, was elected to the board of directors of Contango in accordance with the terms of the Securities Purchase Agreement pursuant to which AECC purchased the Preferred Stock. Based on their continuing evaluation of Contango's business, business prospects and financial condition, alternative investment opportunities and other factors that may be considered relevant by the Aquila Related Entities, the Aquila Entities may choose from time to time to convert some or all of the Preferred Stock into Common Stock, dispose of some or all of the Preferred Stock or Common Stock into which Preferred Stock has been converted, or acquire and dispose of other Contango securities (including Common Stock) by means of open market transactions or in privately-negotiated transactions. Except as described elsewhere in this Schedule 13D, the Aquila Related Entities have no plans or proposals which relate to, or would result in, any of the transactions described in Items 4(a)-(j) of Schedule 13D. The Aquila Related Entities may in the future, however, consider such matters based on their ongoing evaluation of Contango's business and finances. Accordingly, the Aquila Related Entities may, subject to applicable laws, develop such plans or proposals and hold formal or informal discussions with, and make such proposals to, Contango's board of directors, officers or stockholders or with third parties with respect to any such plans or proposals. Page 8 of 20 9 ITEM 5. INTEREST IN SECURITIES OF CONTANGO. (a) As of the date of this Schedule 13D, AECC owns 5,000 shares of Preferred Stock, which constitutes all of the issued and outstanding shares of Preferred Stock. AECC's Preferred Stock is presently convertible into approximately 2,272,727 shares of Contango Common Stock, or approximately 9.0% of Contango's outstanding Common Stock, after giving effect to the conversion of all Preferred Stock owned by AECC. The rights afforded AECC with respect to the Preferred Stock are set forth in the Securities Purchase Agreement dated September 27, 2000, by and between Contango and AECC pursuant to which AECC purchased the Preferred Stock (the "Purchase Agreement") and the Statement of Designations, Preferences, and Relative Rights and Limitations of the Preferred Stock filed by Contango with the Nevada Secretary of State to create the Preferred Stock (the "Statement of Designations"). Both the Purchase Agreement and the Statement of Designations are included as Exhibits to this Schedule 13D. The Statement of Designations provides that the Preferred Stock is entitled to vote, together with the holders of Common Stock and any other voting capital stock of Contango, as one class on all matters submitted to a vote of the stockholders of Contango. In any such vote, each share of Preferred Stock entitles the holder to one vote per each share of Common Stock into which the share of Preferred Stock is then convertible. Additionally, under the terms of the Statement of Designations, Contango cannot take certain important corporate actions unless approved by the holders of a majority of the Preferred Stock, voting as a single class. The particular voting and consent rights of the Preferred Stock are set forth in Section 6 of the Statement of Designations. Aquila, as the parent corporation of AECC and UtiliCorp, as the ultimate parent corporation of AECC each may be deemed to beneficially own shares of the Preferred Stock and Common Stock deemed to be owned by the other Aquila Related Entities, which is currently 5,000 shares of Preferred Stock and approximately 2,272,727 shares of Common Stock into which the Preferred Stock is presently convertible. Aquila and UtiliCorp each disclaim beneficial ownership of the shares of Contango's Preferred Stock and Common Stock reported herein and the filing of this Schedule 13D shall not be construed as an admission that any such entity is the beneficial owner of any securities covered by this Schedule 13D. Mr. Brehmer may be deemed to beneficially own shares of Contango's Preferred Stock and Common Stock deemed to be owned by the other Aquila Related Entities, which is currently 5,000 shares of Preferred Stock and approximately 2,272,727 shares of Common Stock into which the Preferred Stock is presently convertible. Mr. Brehmer disclaims beneficial ownership of the shares of Contango's Preferred Stock and Common Stock reported herein and the filing of this Schedule 13D shall not be construed as an admission that Mr. Brehmer is the beneficial owner of any securities covered by this Schedule 13D. Page 9 of 20 10 (b) Aquila, as the parent corporation of AECC, and UtiliCorp, as the ultimate parent corporation of AECC, each may be deemed to have the power to vote and dispose of the shares of Contango's Preferred Stock and Common Stock that AECC has the power to vote and dispose of, which is currently 5,000 shares of Preferred Stock and approximately 2,272,727 shares of Common Stock into which the Preferred Stock is presently convertible. (c) Except for the purchase by AECC described herein, none of the Aquila Related Entities, and to the best of their knowledge, none of their respective executive officers, or directors has effected transactions involving Contango's Common Stock during the last sixty (60) days. The Aquila Related Entities (other than AECC) and each of the individuals listed in Item 2 disclaims beneficial ownership of the shares of Contango's Preferred Stock and Common Stock reported herein (except for the shares owned directly by such individuals, if any) and the filing of this Schedule 13D shall not be construed as an admission that any such person is the beneficial owner of any securities covered by this Schedule 13D. (d) No other persons other than those described in Item 5 have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Preferred Stock or the Common Stock. (e) Inapplicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF CONTANGO. The purchase and sale of the Preferred Stock was accomplished pursuant to the Securities Purchase Agreement which is an Exhibit to this Schedule 13D. The Purchase Agreement contains a number of agreements between Contango and AECC pertaining to the Preferred Stock and the Common Stock, including the following: (1) Contango and AECC made certain customary representations and warranties to each other in Articles 3 and 4 of the Purchase Agreement. Articles 3 and 4 of the Purchase Agreement are hereby incorporated herein by this reference. (2) The Preferred Stock and the Common Stock certificates are required to bear a legend restricting transfer of the securities represented thereby, except in compliance with the Securities Act and any applicable state securities laws. Article 5 of the Purchase Agreement is hereby incorporated herein by this reference. (3) AECC is granted demand and "piggy-back" registration rights with respect to securities into which the Preferred Stock is converted (generally Common Stock) in Article 6 of the Purchase Agreement. Article 6 of the Purchase Agreement is hereby incorporated herein by this reference. Page 10 of 20 11 (4) Contango has agreed in Article 9 of the Purchase Agreement not to issue securities ranking senior to the Preferred Stock unless approved by the holders of Preferred Stock. Article 9 of the Purchase Agreement is hereby incorporated herein by this reference. (5) Contango has agreed in Article 10 of the Purchase Agreement and in Section 6(d) of the Statement of Designations that for so long as AECC holds at least five percent of Contango's Common Stock or a sufficient number of shares of Preferred Stock which, if converted to Common Stock would constitute at least five percent of Contango's Common Stock, or a combination of these forms of ownership, then Contango will use its best efforts to cause one of the members of Contango's board of directors to be an individual selected by AECC. Contango has also agreed to compensate such director on the same basis as other outside directors of Contango. Article 10 of the Purchase Agreement and Section 6(d) of the Statement of Designations are hereby incorporated herein by this reference. (6) Contango has also agreed in Article 10 of the Purchase Agreement and in Section 6(d) of the Statement of Designations that if AECC has not appointed or nominated for election at least one member of Contango's board of directors pursuant to its rights described therein, then AECC is granted the right to have an observer attend board meetings and to have the observer compensated to the same extent as are the directors of Contango. Article 10 of the Purchase Agreement and Section 6(d) of the Statement of Designations are hereby incorporated herein by this reference. The Statement of Designation grants a number of other rights to the holders of Preferred Stock, including the following: (1) The Preferred Stock dividend rate is 8% per annum if paid in cash and 10% per annum if Contango chooses to pay dividends in additional shares of Preferred Stock. Accordingly, AECC may acquire additional shares of Preferred Stock (and thus additional shares of underlying Common Stock) if Contango chooses to pay dividends by issuing more shares of Preferred Stock. (2) The Preferred Stock generally ranks on a parity with Contango's existing Series A Senior Preferred Convertible Cumulative Preferred Stock. The terms of the two series of preferred stock are substantially identical in most respects. (3) The voting and consent rights of the Preferred Stock are summarized in Item 5 above and are set forth in Section 6 of the Statement of Designation. (4) Section 6(d) of the Statement of Designations sets forth certain rights of AECC to nominate one director to Contango's board of directors and grants certain observer rights substantially identical to those included in the Purchase Agreement. Additionally, Section 6(c) provides that if Contango defaults in the payment of dividends (either cash or in-kind) on two consecutive dividend payment dates, then Contango's board of directors will Page 11 of 20 12 be increased by two directors and those directorships will be elected by the holders of the Preferred Stock. (5) Certain mandatory and voluntary conversion rights with respect to the Preferred Stock are set forth in Section 7 of the Statement of Designations. The Preferred Stock is initially convertible into Common Stock at a conversion price of $2.20 per share. In the event the mean average trading price of the Common Stock is equal to or greater than $2.50 per share for 20 consecutive trading days, Contango can itself convert the Preferred Stock into Common Stock at the then applicable conversion price (initially $2.20 per share). (6) Section 8 of the Statement of Designation grants certain antidilution rights to the holders of Preferred Stock, including in the event that Contango issues Common Stock at a price below the greater of the then current conversion price for the Preferred Stock or the then current market price for the Preferred Stock. (7) Sections 9 and 10 of the Statement of Designations set forth certain rights of the holders of Preferred Stock to receive notice of certain corporate actions and additional protection against impairment of the conversion rights of the Preferred Stock. The particular sections of the Statement of Designations referred to above and all other provisions of the Statement of Designations are set forth in an Exhibit to this Schedule 13D and are hereby incorporated in this Schedule 13D in their entirety. In connection with the sale of the Preferred Stock, a "Co-Sale Agreement" was executed as of September 27, 2000, by and among Contango. AECC, certain other stockholders of Contango and Kenneth R. Peak. Mr. Peak is the President, Chief Executive Officer and a stockholder of Contango. The Co-Sale Agreement generally grants the stockholders who are parties to it (other than Mr. Peak) the right to participate proportionately with Mr. Peak in any sales by him of Common Stock then owned or later acquired by Mr. Peak. The Co-Sale Agreement is included in this Schedule 13D as an Exhibit and is hereby incorporated herein by this reference. In connection with the sale of the Preferred Stock, a "Marketing Agreement" was executed as of September 27, 2000, between Contango and AECC, The Marketing Agreement generally provides that AECC has the right to purchase natural gas produced from oil and gas properties then owned or later acquired by Contango provided that the price offered by AECC is better than competing bids and that AECC's terms of purchase are comparable to, or more favorable than, Contango's competing bids. Contango is not required to offer natural gas sales to AECC under the Marketing Agreement if the sale to AECC would conflict with certain types of contractual arrangements pertaining to the properties from which the natural gas is produced by Contango. The Marketing Agreement is included in this Schedule 13D as an Exhibit and is hereby incorporated herein by this reference. Page 12 of 20 13 ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. EXHIBIT NO. DESCRIPTION OF EXHIBIT ----------- ---------------------- 99.1 Securities Purchase Agreement 99.2 Statement of Designation for Preferred Stock 99.3 Co-Sale Agreement 99.4 Marketing Agreement [SIGNATURE PAGE FOLLOWS] Page 13 of 20 14 SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: October 6, 2000 UtiliCorp United Inc. By: /s/ PETER S. LOWE -------------------------------------- Name: Peter S. Lowe -------------------------------------- Title: Chief Financial Officer -------------------------------------- Aquila Energy Corporation By: /s/ DANIEL J. STREEK -------------------------------------- Name: Daniel J. Streek -------------------------------------- Title: Senior Vice President -------------------------------------- Aquila Energy Capital Corporation By: /s/ BRUCE A. REED -------------------------------------- Name: Bruce A. Reed -------------------------------------- Title: Senior Vice President -------------------------------------- Page 14 of 20 15 SCHEDULE I TO SCHEDULE 13D OF AQUILA RELATED ENTITIES DIRECTORS AND OFFICERS OF UTILICORP Each executive officer is a citizen of the United States of America unless otherwise noted. Richard C. Green, Jr. Chairman of the Board of Directors and Chief Executive Officer 1215 W. 57th Street Kansas City, MO 64113 Robert K. Green President and Chief Operating Officer; Director 2318 West 59th Street Shawnee Mission, KS 66208 Peter S. Lowe Senior Vice President and Chief Financial Officer 5505 West 86th Street Overland Park, KS 66207 Leslie J. Parette, Jr. Senior Vice President and General Counsel 6612 West 121st Street Overland Park, KS 66209 James G. Miller Senior Vice President 5828 Hickory Place Parkhill, MO 64152 Keith G. Stamm Senior Vice President 13109 Beverly Street Overland Park, KS 66209 Dale J. Wolf Vice President, Secretary and Treasurer 3305 W. 132nd Street Leawood, KS 66209 Page 15 of 20 16 Nancy J. Browning Assistant Secretary 4952 Belinder Westwood, KS 66205 Douglas P. Evanson Assistant Secretary and Assistant Treasurer 15409 Horton Overland Park, KS 66223 Michael Cole Assistant Treasurer 12521 Searcy Carney, MO 64060 Shirley Ann Jackson Director President, Rensselaer Polytechnic Institute 110 8th Street Troy, NY 12180-3590 John R. Baker Director 205 Oxford Lane Lee's Summit, MD 64063 Robert F. Jackson, Jr. Director 1005 W. 125th Terrace Kansas City, MO 64145 L. Patton Kline Director Mountain Lake Lake Wales, FL 33359-0832 Herman Cain Chairman of the Board, Godfather's Pizza, Inc. 9140 West Dodge Road Omaha, NE 68114 Page 16 of 20 17 Stanley O. Ikenberry Director University of Illinois President, American Council of Education 1007 W. Nevada Urbana, IL 61801 Irvine O. Hockaday, Jr. Director President and Chief Executive Officer of Hallmark Cards, Inc. Page 17 of 20 18 SCHEDULE II DIRECTORS AND OFFICERS OF AQUILA Each executive officer is a citizen of the United States of America unless otherwise noted. Robert K. Green Chairman of the Board of Directors 2318 West 59th Street Shawnee Mission, KS 66208 Keith G. Stamm Chief Executive Officer; Director 13109 Beverly Street Overland Park, KS 66209 Edward K. Mills President and Chief Operating Officer; Director 4344 Terrace Kansas City, MO 64111 Daniel J. Streek Senior Vice President 11011 N. Main Kansas City, MO 64155 Nancy J. Browning Secretary 4952 Belinder Westwood, KS 66205 Dale J. Wolf Treasurer 3305 W. 132nd Street Leawood, KS 66209 Page 18 of 20 19 SCHEDULE III DIRECTORS AND OFFICERS OF AECC Each executive officer is a citizen of the United States of America unless otherwise noted. Robert K. Green Chairman of the Board of Directors 2318 West 59th Street Shawnee Mission, KS 66208 Edward K. Mills President; Director 4344 Terrace Kansas City, MO 64111 Daniel J. Streek Senior Vice President 11011 N. Main Kansas City, MO 64155 Bruce A. Reed Senior Vice President 5628 Suwance Drive Fairway, KS 66205 Nancy J. Browning Secretary 4952 Belinder Westwood, KS 66205 Dale J. Wolf Treasurer 3305 W. 132nd Street Leawood, KS 66209 Keith G. Stamm Director 13109 Beverly Street Overland, KS 66209 Page 19 of 20 20 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT ----------- ---------------------- 99.1 Securities Purchase Agreement 99.2 Statement of Designation for Preferred Stock 99.3 Co-Sale Agreement 99.4 Marketing Agreement
Page 20 of 20 EX-99.7.1 2 h80802ex99-7_1.txt SECURITIES PURCHASE AGREEMENT 1 EXHIBIT 99.1 SECURITIES PURCHASE AGREEMENT dated as of September 27, 2000 between CONTANGO OIL & GAS COMPANY and AQUILA ENERGY CAPITAL CORPORATION 5,000 shares of Series B Senior Convertible Cumulative Preferred Stock 354201MSW 2 TABLE OF CONTENTS 1. AGREEMENT TO PURCHASE SECURITIES...............................................................1 2. WIRE TRANSFER OF PAYMENT FOR AND DELIVERY OF THE SECURITIES....................................1 3. PURCHASER'S REPRESENTATIONS AND WARRANTIES.....................................................1 3.1 Investment Intent.....................................................................1 3.2 Access to Information.................................................................1 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.............................................................................2 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..........................................................................5 4.5 SEC Documents.........................................................................5 4.6 Litigation............................................................................5 4.7 No Material Adverse Change............................................................6 4.8 Environmental Matters.................................................................6 4.9 Equity Sales Since November 5, 1999...................................................6 4.10 Material Agreements...................................................................6 4.11 Truth and Accuracy....................................................................7 4.12 Compliance with Laws, Other Instruments...............................................7 4.13 Observance of Agreements, Statutes and Orders.........................................7
i 3 5. RESTRICTIONS ON TRANSFER.......................................................................7 5.1 Resale Restrictions...................................................................7 5.2 Restrictive Legend....................................................................8 5.3 Illiquid Investment...................................................................8 6. Registration Procedures........................................................................8 6.1 Demand Registration Rights............................................................8 6.2 Piggy-Back Registration Rights.......................................................10 6.3 Delivery of Prospectus...............................................................11 6.4 Third Party Registration Rights......................................................11 6.5 Registration in Other Jurisdictions..................................................11 6.6 Notice of Material Events............................................................11 6.7 Notice of Suspension of Effectiveness................................................12 6.8 Listing of Common Stock on Securities Exchanges......................................12 6.9 Further Assurances...................................................................12 6.10 Cooperation..........................................................................12 6.11 Discontinuation of Disposition of Shares.............................................12 6.12 Expenses.............................................................................13 6.13 Indemnification of Purchaser.........................................................13 6.14 Indemnification of Issuer............................................................14 6.15 Participation in Indemnified Claims..................................................14 7. TRANSFER AGENT INSTRUCTIONS...................................................................15 8. RELIANCE......................................................................................15 9. COVENANT REGARDING PRIORITY OF PREFERRED SHARES...............................................15 10. BOARD OF DIRECTORS............................................................................16 11. MISCELLANEOUS.................................................................................16 11.1 Survival.............................................................................16 11.2 Assignment...........................................................................16 11.3 Execution and Delivery of Agreement..................................................17 11.4 Titles...............................................................................17 11.5 Severability.........................................................................17 11.6 Entire Agreement.....................................................................17 11.7 Waiver and Amendment.................................................................17 11.8 Counterparts.........................................................................17
ii 4 11.9 Governing Law........................................................................17
iii 5 Schedules 4.3(b) Outstanding Subscriptions, Options, Warrants, Convertible Securities, etc. 4.3(c) Third Party Registration Rights 4.9 Purchasers of Common Stock since November 5, 1999 Exhibits A Accredited Investor Certificate B Certificate of Designation of Series B Senior Convertible Cumulative Preferred Stock 1 6 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 27th day of September, 2000, by and between Contango Oil & Gas Company (the "Issuer") and Aquila Energy Capital Corporation (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 5,000 shares of the Issuer's Series B Senior Convertible Cumulative Preferred Stock, $.04 per share par value (the "Preferred Shares") for a purchase price of $5,000,000 (the "Purchase Price"), payable by wire transfer to the account of the Issuer. The shares of Issuer's common stock that may be issued upon conversion of the Preferred Shares as contemplated by the Designation Certificate (as defined below) are referred to herein as the "Converted Shares", and the Preferred Shares and the Converted Shares are collectively referred to herein as the "Securities"). 2. WIRE TRANSFER OF PAYMENT FOR AND DELIVERY OF THE SECURITIES. Immediately after the Purchaser has wired the Purchase Price for the Preferred Shares as instructed by Issuer, the Issuer shall issue and deliver a certificate representing the Preferred Shares, in the name and to the address specified by the Purchaser in the registration and delivery instructions on the signature page of this Agreement. 3. PURCHASER'S REPRESENTATIONS AND WARRANTIES. The Purchaser hereby represents and warrants to the Issuer that: 3.1 Investment Intent. The Purchaser is acquiring the Securities solely for the Purchaser's own account for investment purposes, and not with a view to, or for offer or sale in connection with, any distribution of the Securities in violation of the Securities Act. 3.2 Access to Information. The Purchaser has received a copy of the Issuer's annual report on Form 10-KSB for the year ended June 30, 1999 (the "Annual Report") and quarterly report on Form 10-QSB for the quarter ended March 31, 2000 (the "Quarterly Report") and has reviewed them carefully, including the risk factors set forth 1 7 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 is experienced in evaluating and investing in the securities of businesses in the development stage, and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the Securities and of protecting its interests in connection with an acquisition of the Securities. 3.5 Suitability. The Purchaser has carefully considered, and has, to the extent the Purchaser deems it necessary, discussed with the Purchaser's own professional legal, tax and financial advisers the suitability of an investment in the Securities for the Purchaser's particular tax and financial situation, and the Purchaser has determined that the Securities are a suitable investment for the Purchaser. 3.6 Ability to Bear Risk of Loss. The Purchaser is financially able to hold the Securities subject to restrictions on transfer for an indefinite period of time, and is capable of bearing the economic risk of losing up to the entire amount of its investment in the Securities. 3.7 Private Offering. The offer of the Securities was directly communicated to the Purchaser by the Issuer. At no time was the Purchaser presented with or solicited by any leaflet, newspaper or magazine article, radio or television advertisement, or any other form of general advertising or solicited or invited to attend a promotional meeting otherwise than in connection and concurrently with such directly communicated offer. 3.8 Truth and Accuracy. All representations and warranties made by the Purchaser in this Agreement are true and accurate as of the date hereof and shall be true and accurate as of the date the Issuer issues the Securities. If at any time prior to the issuance of the Securities any representation or warranty shall not be true and accurate in any respect, the Purchaser shall so notify the Issuer. 3.9 Authority. The individuals executing and delivering this Agreement on behalf of the Purchaser have been duly authorized to execute and deliver this Agreement on behalf of the Purchaser, the signature of both such individuals is binding upon the Purchaser, the Purchaser is duly organized and subsisting under the 2 8 laws of the jurisdiction in which it was organized, and the Purchaser was not formed for the specific purpose of acquiring the Securities. 3.10 No Violation. The execution and delivery of this Agreement and the consummation of the transactions or performance of the obligations contemplated by this Agreement do not and will not violate any term of the Purchaser's organizational documents. 3.11 Enforceability. The Purchaser has duly executed and delivered this Agreement and (subject to its execution by the Issuer) it constitutes a valid and binding agreement of the Purchaser enforceable in accordance with its terms against the Purchaser, except as such enforceability may be limited by principles of public policy, and subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies. 3.12 Reliance on Own Advisers. In connection with the Purchaser's investment in the Securities, the Purchaser has not relied upon the Issuer or its advisers for legal or tax advice, and has, if desired, in all cases sought the advice of the Purchaser's own legal counsel and tax advisers. 3.13 Scope of Business. The Purchaser has been advised and understands that the Issuer will be exposed to numerous investment opportunities in all areas of the oil and gas industry and may therefore pursue various types of opportunities, even if they do not fit within the primary focus of the Issuer's current business plan. For example, such opportunities could include both onshore and offshore United States investments and also international investments. Potential opportunities could also include such things as downstream investments in oil and gas service companies, pipelines, and gas processing and gas storage facilities. 4. ISSUER'S REPRESENTATIONS AND WARRANTIES. The Issuer hereby represents and warrants to the Purchaser that: 4.1 Corporate Existence; Authority. The Issuer is a corporation duly organized, validly existing and in good standing under the laws of Nevada, and it has all requisite power and authority to carry on its business as it is being conducted. The individual executing and delivering this Agreement on behalf of the Issuer has been duly authorized to execute and deliver this Agreement on behalf of the Issuer, and the signature of such individual is binding upon the Issuer. 4.2 Enforceability. The Issuer has duly executed and delivered this Agreement and (subject to its execution by the Purchaser) it constitutes a valid and binding agreement of the Issuer enforceable in accordance with its terms against the Issuer, except as such enforceability may be limited by principles of public policy, and subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies. 3 9 4.3 Capitalization. (a) The Issuer is authorized to issue 50,000,000 shares of common stock, of which 22,920,412 shares are issued and outstanding, and, prior to giving effect to the transactions set forth herein, 125,000 shares of preferred stock, of which 5,000 shares have been designated as Series A Senior Convertible Cumulative Preferred Stock (the "Series A Preferred") and 2,500 shares of such Series A Preferred are issued and outstanding. All of the outstanding shares of common stock and Series A Preferred stock of the Issuer have been duly and validly issued and are fully paid, non-assessable and not subject to any preemptive or similar rights. The Preferred Shares have been duly authorized and when issued and delivered to the Purchaser against payment therefor as provided by this Agreement, will be validly issued, fully paid and non-assessable, shall have the rights and preferences set forth in the Preferred Stock Series Designation Certificate attached hereto as Exhibit B (the "Designation Certificate") and the issuance of such Preferred Shares will not be subject to any preemptive or similar rights. If and when issued, the Converted Shares will have been duly authorized and when issued and delivered to the Purchaser against payment therefor as provided by in herein, will be validly issued, fully paid and non-assessable, and the issuance of such Converted 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 1,034,167 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 3,830,370 shares of the Issuer's common stock at the exercise price of $1.00 per share, (iii) 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, and (iv) the Series A Preferred stock which is currently convertible into 2,000,000 shares the Issuer's common stock (excluding accrued and unpaid dividends). (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. (d) No issuance of the Preferred Shares, the Converted Shares and any other securities issued or issuable pursuant to this Agreement or the Designation Certificate will result in the right of any person to obtain any "anti-dilution adjustment", including any adjustment to the number of securities of the Issuer outstanding or hereafter issuable, or to the conversion price or exchange price of any convertible or exchangeable securities of the Issuer, or to the exercise price of any option, warrant or right currently outstanding or issuable. 4 10 4.4 No Conflicts. (a) The issuance and sale of the Securities to the Purchaser as contemplated hereby and the performance of this Agreement 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. (b) The Issuer has obtained, and has provided to the Purchaser true and correct copies of, written waivers of rights of first refusal to purchase additional securities issued by the Issuer insofar as such rights pertain to the Series A Preferred, the Preferred Shares, the Converted Shares and any other securities issued or issuable pursuant to this Agreement or the Designation Certificate. Without limited the generality of the preceding sentence, the Issuer has obtained such written waivers from all parties entitled to assert the rights set forth in (i) Section 6 (Right to Additional Securities) under that certain Securities Purchase Agreement dated December 29, 1999, by and between the Issuer and Trust Company of the West, and (ii) Section 6 (Right to Additional Securities) under that certain Securities Purchase Agreement dated June 8, 2000, by and between the Issuer and the Southern Ute Indian Tribe. (c) The Issuer has obtained, and has provided to the Purchaser, a true and correct copy of, a written consent to the issuance of the Preferred Shares, the Converted Shares and any other securities issued or issuable pursuant to this Agreement or the Designation Certificate from the holders of the Series A Preferred. 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 and in its Quarterly Reports on Form 10-QSB filed since the Annual Report, all material agreements, contracts and other documents that it reasonably believes are required to be filed as exhibits thereto. 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. 5 11 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 circumstances or conditions involving Issuer that could reasonably be expected to result in any claims, liability, investigations, costs or restrictions on the ownership, use or transfer of any property of Issuer pursuant to any Environmental Law. (b) For purposes of this Agreement, the term "Environmental Law" means any federal, state, local or foreign law, regulation, order, decree, permit, authorization, opinion, common law or agency requirement relating to: (A) the protection, investigation or restoration of the environment, health and safety, or natural resources, (B) the handling, use, presence, disposal, release or threatened release of any Hazardous Substance or (C) noise, odor, wetlands, pollution, contamination or any injury or threat of injury to persons or property. (c) For purposes of this Agreement, the term "Hazardous Substance" means any substance that is: (A) listed, classified or regulated pursuant to any Environmental Law; (B) any petroleum product or by-product, asbestos-containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive materials or radon; or (C) any other substance which is the subject of regulatory action by any governmental entity pursuant to any Environmental Law. 4.9 Equity Sales Since November 5, 1999. All shares of common stock sold by Issuer since November 5, 1999, the purchasers thereof, the number of shares purchased and the dollar amount paid by each purchaser are set forth on Schedule 4.9. 4.10 Material Agreements. The Issuer has delivered to the Purchaser true and correct copies of (i) the Agreement dated September 1, 1999, as amended, between the Issuer and Juneau Exploration Company, LLC (the "Juneau Agreement"), (ii) the Participation Agreement dated June 8, 2000 between the Issuer and the Southern Ute Indian Tribe (doing business as Red Willow Production Company) (the "SUIT 6 12 Participation Agreement"), and (iii) the Limited Liability Company Agreement dated August 24, 2000 of Republic Exploration LLC (the "REX Agreement"), and since the date received by Purchaser, the Juneau Agreement, the SUIT Participation Agreement and the REX Agreement have not been amended or modified in any respect, orally or in writing, are in full force and effect and have not been terminated. 4.11 Truth and Accuracy. All representations and warranties made by the Issuer in this Agreement are true and accurate as of the date hereof and shall be true and accurate as of the date the Issuer issues the Securities. If at any time prior to the issuance of any of the Securities any representation or warranty shall not be true and accurate in any respect, the Issuer shall so notify the Purchaser. 4.12 Compliance with Laws, Other Instruments. The execution, delivery and performance by the Issuer of this agreement will not (a) contravene, result in any breach of, or constitute a default under or result in the creation of any lien in respect of any property of the Issuer under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or bylaws, or any other material agreement or instrument to which the Issuer is bound or by which the Issuer or any of its respective properties may be bound or affected, (b) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or governmental authority applicable to the Issuer or (c) violate any provision of any statute or other rule or regulation of any governmental authority applicable to the Issuer. 4.13 Observance of Agreements, Statutes and Orders. The Issuer is not in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or governmental authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation environmental laws) of any governmental authority which default or violation could have a material adverse effect upon the business or operations of the Issuer. 5. RESTRICTIONS ON TRANSFER 5.1 Resale Restrictions. The Purchaser understands that the offer and sale of the Securities to the Purchaser has not been registered under the Securities Act or under any State Laws. The Purchaser agrees not to offer, sell or otherwise transfer the Securities, or any interest in the Securities, unless (i) the offer and sale is registered under the Securities Act, (ii) the Securities may be sold in accordance with the applicable requirements and limitations of Rule 144 under the Securities Act and any applicable State Laws and, if the Issuer reasonably requests, the Purchaser delivers to the Issuer an opinion of counsel to such effect, or (iii) the Purchaser delivers to the Issuer an opinion of counsel reasonably satisfactory to the Issuer that the offer and sale is otherwise exempt from Securities Act registration. Notwithstanding the foregoing subsections (ii) and (iii), no opinion shall be required for transfers by Purchaser to Purchaser's affiliates. 7 13 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 the Converted Shares (the "Registerable Securities") in an aggregate amount of at least equal to the lesser of (i) 1,705,000 shares and (ii) number of non-registered Converted Shares then issued to Purchaser (a "Demand Registration"). Within 90 days of the receipt of a written request for a Demand Registration, the Issuer shall file with the SEC and use its best efforts to cause to become effective under the Securities Act a registration statement with respect to such Registerable Securities (a "Demand Registration Statement"). Any such request will specify the number of Registerable Securities proposed to be sold and will also specify the intended method of disposition thereof. The Issuer shall be required to register Registerable Securities pursuant to this Section 6.1 on a maximum of three separate occasions; provided, the Issuer shall not be required to register Registerable Securities pursuant to this Section 6.1 more than once in any twelve month period. The Issuer shall thereafter use diligence in attempting to cause each Demand Registration Statement to be declared effective by the SEC and shall thereafter use diligence to maintain the effectiveness of such Demand Registration Statement until the earlier to occur of (i) the date which is one year from the effective date of such Demand Registration Statement, (ii) the date on which all of the Converted Shares have been sold by the Purchaser or (iii) the date on which the Converted Shares can be resold in full over a three-month period pursuant to SEC Rule 144. 8 14 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 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. 9 15 6.2 Piggy-Back Registration Rights (a) If at any time a Demand Registration Statement is not in effect with respect to all Registerable Securities and the Issuer proposes to file a registration statement under the Securities Act with respect to an offering by the Issuer for its own account or for the account of any of its security holders of any class of its Common Stock in a firmly underwritten public equity offering (other than (i) a registration statement on Form S-4 or S-8 (or any substitute form that may be adopted by the SEC) or (ii) a registration statement filed in connection with an exchange offer or offering of securities solely to the Issuer's existing security holders), then the Issuer shall give written notice of such proposed filing to the Purchaser as soon as practicable (but in no event fewer than 30 days before the anticipated filing date), and such notice shall offer Purchaser the opportunity to register such number of Registerable Securities as Purchaser may request in writing within 15 days after receipt of such written notice from the Issuer (which request shall specify the shares intended to be disposed of by Purchaser) (a "Piggy-Back Registration"). The Issuer shall use its best efforts to keep such Piggy-Back Registration continuously effective under the Securities Act until at least the earlier of (A) the 90th day after the effective date thereof or (B) the consummation of the distribution by the holders of all of the securities covered thereby. The Issuer shall use its best efforts to cause the managing underwriter or underwriters, if any, of such proposed offering to permit the Registerable Securities requested by Purchaser to be included in a Piggy-Back Registration to be included on the same terms and conditions as any similar securities of the Issuer or any other security holder included therein and to permit the sale or other disposition of such Registerable Securities in accordance with the intended method of distribution thereof. Purchaser shall have the right to withdraw its request for inclusion of its Registerable Securities in any Registration Statement pursuant to this Section 6.2 by giving written notice to the Issuer of its request to withdraw. The Issuer may withdraw the proposed offering and/or a Piggy-Back Registration (subject to the Issuer's obligation to use its best efforts to permit such Piggy-Back Registration set forth in the second immediately preceding sentence) at any time prior to the time it becomes effective or the Issuer may elect to delay the registration; provided, however, that the Issuer shall give prompt written notice thereof to Purchaser. No registration effected under this Section 6.2, and no failure to effect a registration under this Section 6.2, shall relieve the Issuer of its obligation to effect a registration upon the request of Purchaser pursuant to Section 6.1 hereof, and no failure to effect a registration under this Section 6.2 and to complete the sale of securities registered thereunder in connection therewith shall relieve the Issuer of any other obligation under this Agreement. (b) In a registration pursuant to Section 6.2 hereof involving an underwritten offering, if the managing underwriter or underwriters of such underwritten offering have informed, in writing, the Issuer and the security holders requesting inclusion in such offering that in such underwriter's or underwriters' opinion the total number of securities which the Issuer, the Purchaser and any other persons desiring to participate in such registration intend to include in such offering is such as to adversely affect the success of such offering, including the price at which such securities can be sold, then the Issuer will be required to include in such registration only the amount of 10 16 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 quantity of the prospectus as well as such other documents as the Purchaser may reasonably request. 6.4 Third Party Registration Rights. Without the written consent of the Purchaser, the Issuer shall not grant to any person the right to request the Issuer to register any securities of the Issuer under the Securities Act unless the rights so granted are subject to the prior rights of the Purchaser set forth herein, and are not otherwise in conflict or inconsistent with the provisions of this Agreement; provided, that Issuer has granted the registration rights set forth on Schedule 4.3(c). 6.5 Registration in Other Jurisdictions. The Issuer shall use diligent efforts to (i) register or otherwise qualify the common stock covered by the Registration Statement for sale under the securities laws of such jurisdictions as the Purchaser may reasonably request, (ii) prepare and file in those jurisdictions such amendments (including post-effective amendments) and supplements as may be required, (iii) take such other actions as may be necessary to maintain such registrations and/or qualifications in effect at all times while the Registration Statement is likewise maintained effective and (iv) take all other actions reasonably necessary or advisable to qualify the Converted Shares 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 11 17 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 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 12 18 described in Section 6.6 or 6.7, the Purchaser will immediately discontinue disposition of the Converted 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 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 13 19 and in conformity with information furnished in writing to the Issuer by any Indemnified Person or underwriter for such Indemnified Person expressly for use in connection with the preparation of a Registration Statement or any such amendment thereof or supplement thereto; (II) with respect to any preliminary prospectus shall not inure to the benefit of any person from whom the person asserting any Claim purchased the Converted Shares 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 Converted Shares by the Purchaser. 6.14 Indemnification of Issuer. The Purchaser agrees to indemnify and hold harmless, to the same extent and in the same manner set forth in Section 6.13, the Issuer, each of its directors, each of its officers who signs a Registration Statement, each person, if any, who controls the Issuer within the meaning of the Securities Act or the Exchange Act, any underwriter and any other stockholder selling securities pursuant to a Registration Statement or any of its directors or officers or any person who controls such stockholder or underwriter within the meaning of the Securities Act or the Exchange Act (each such person and each Indemnified Person, an "Indemnified Party"), against any Claim to which any of them may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is based upon any Violation by the Purchaser, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished to the Issuer by the Purchaser expressly for use in connection with such Registration Statement or such prospectus; and the Purchaser will reimburse any reasonable legal or other expenses reasonably incurred by any Indemnified Party in connection with investigating or defending any such Claim; provided, however, that the indemnity contained in this Section 6.14 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Purchaser, which consent shall not be unreasonably withheld; provided, further, that the Purchaser shall be liable under this Section 6.14 for only that amount of a Claim as does not exceed the net proceeds to the Purchaser as a result of the sale of the Converted Shares pursuant to any such Registration Statement or such prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of the Converted Shares (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 14 20 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. TRANSFER AGENT INSTRUCTIONS. The Issuer, concurrently with the delivery by the Purchaser of the Purchase Price, will issue one or more certificates representing the Preferred Shares purchased, bearing the restrictive legend specified in Section 5.2 of this Agreement, registered in the name of the Purchaser or its nominee and in such denominations as shall be specified by the Purchaser. The Issuer warrants that the Preferred Shares shall be freely transferable on the books and records of the Issuer as and to the extent provided in this Agreement. Nothing in this Section shall affect in any way the Purchaser's obligations and agreement to comply with all applicable federal and state securities laws upon resale of the Preferred Shares. If the Purchaser provides the Issuer with an opinion of counsel reasonably satisfactory in form, scope and substance to the Issuer that registration of a resale by the Purchaser of any of the Preferred Shares in accordance with Section 5.1 is not required under the Securities Act or applicable state securities laws, the Issuer shall permit the transfer agent to issue one or more share certificates in such name and in such denominations as specified by the Purchaser. 8. RELIANCE. Each of the Purchaser and the Issuer understand and agree that the other party and its respective officers, directors, employees and agents may, and will, rely on the accuracy of the other party's respective representations and warranties in this Agreement to establish compliance with applicable securities laws. Each of the Purchaser and the Issuer agree to indemnify and hold harmless all such parties against all losses, claims, costs, expenses and damages or liabilities which they may suffer or incur caused or arising from their reliance on such representations and warranties. 9. COVENANT REGARDING PRIORITY OF PREFERRED SHARES. The Issuer shall not issue preferred stock that ranks senior to the Preferred Shares as to dividend distributions 15 21 or distributions upon the liquidation, winding-up or dissolution of the Issuer except as approved by the holder(s) of the Preferred Shares pursuant to the Designation Certificate. 10. BOARD OF DIRECTORS. For so long as the Purchaser holds at least five percent (5%) of the Issuer's common stock or a sufficient number of Preferred Shares which, if converted to common stock in accordance with the Designation Certificate, would constitute at least five percent (5%) of the Issuer's common stock, or a combination of the foregoing, the Issuer shall use its best efforts to cause one of the members of the Issuer's Board of Directors to be an individual selected by the Purchaser in its discretion. Such board member, if any, shall have all the rights and privileges of each other outside board member of the Issuer, including rights to compensation as established by the Issuer. If at any time the Purchaser has not appointed or nominated for election at least one of the members of the Issuer's Board of Directors and the Purchaser then holds at least five percent (5%) of the Issuer's common stock or Preferred Shares which, if converted to common stock in accordance with the Designation Certificate, would constitute at least five percent (5%) of the Issuer's common stock, or a combination of the foregoing, then the Purchaser shall be entitled to appoint one observer to the Issuer's Board of Directors (the "Observer"). Such Observer shall have the right to attend, and receive all materials distributed for or at, all meetings (telephone and otherwise) of the Board of Directors (including committees thereof) and shall be entitled to the same rights and privileges as directors of the Issuer, except that such Observer shall not be entitled to vote on matters presented to or discussed by the Board of Directors. The Observer will receive compensation from the Issuer for his services as observer on an equal basis with the directors of the Issuer and shall be entitled to be reimbursed by the Issuer for all reasonable costs and expenses incurred in connection with his participation in meetings or other activities of the Board of Directors. The Purchaser will use commercially reasonable efforts to cause the Observer to keep all information provided to the Observer in connection with all meetings of the Board of Directors confidential prior to its becoming public, except that the Observer shall be permitted to disclose such information (i) to officers, directors, employees, representatives, agents, auditors, accountants, consultants, advisors, lawyers and affiliates of the Purchaser in the ordinary course of business who have been made aware of the confidential nature of the information; (ii) to prospective assignees and their respective directors, employees, agents and representatives who have agreed in writing to become subject to this confidentiality provision, (iii) as required by applicable law, or pursuant to subpoenas or other legal process, or as requested by governmental agencies and examiners; (iv) to the extent such information (A) becomes available to the Observer other than as a result of a breach of this provision or (B) becomes available to the Observer on a non-confidential basis, or (v) to the extent the Issuer shall have consented to such disclosure in writing. 11. MISCELLANEOUS. 11.1 Survival. The representations and warranties made in this Agreement shall survive the closing of the transactions contemplated by this Agreement. 11.2 Assignment. This Agreement is not transferable or assignable, except that the rights of Purchaser set forth in Sections 5 and 6 hereof shall be 16 22 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. 11.3 Execution and Delivery of Agreement. The Issuer shall be entitled to rely on delivery by facsimile transmission of an executed copy of this Agreement, and acceptance by the Issuer of such facsimile copy shall create a valid and binding agreement between the Purchaser and the Issuer. 11.4 Titles. The titles of the sections and subsections of this Agreement are for the convenience of reference only and are not to be considered in construing this Agreement. 11.5 Severability. The invalidity or unenforceability of any particular provision of this Agreement shall not affect or limit the validity or enforceability of the remaining provisions of this Agreement. 11.6 Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties with respect to the subject matters herein and supersedes and replaces any prior agreements and understandings, whether oral or written, between them with respect to such matters. 11.7 Waiver and Amendment. Except as otherwise provided herein, the provisions of this Agreement may be waived, altered, amended or repealed, in whole or in part, only upon the mutual written agreement of the Purchaser and the Issuer. 11.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. 11.9 Governing Law. This Agreement is governed by and shall be construed in accordance with the laws of the State of Nevada. 17 23 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 AQUILA ENERGY CAPITAL CORPORATION By: /s/ Kenneth R. Peak By: /s/ Kenneth F. Wyatt --------------------------------- Kenneth R. Peak President and Chief Executive Officer 18 24 EXHIBIT A ACCREDITED INVESTOR CERTIFICATE In connection with the issuance of shares of Series B Senior Preferred Convertible Cumulative Preferred Stock (the "Series B Preferred") 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.
1 25 II. Identity of Investor. Name: __________________________________________________ Address: __________________________________________________ Telephone: __________________________________________________ Tax ID No.: __________________________________________________ III. Acknowledgment. Investor understands, acknowledges and agrees that: (a) The shares of Series B Preferred have not been registered under the Securities Act or any other applicable federal or state securities laws; (b) Investor is acquiring the Series B Preferred 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 Series B Preferred 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 Series B Preferred. This completed questionnaire must be returned as soon as possible after receipt hereof and prior to acquiring the Series B Preferred. __________________________________ Print or type name of Investor By: ______________________________ Name: Title: Date: _____________________, 2000 2 26 EXHIBIT B CERTIFICATE OF DESIGNATION, PREFERENCES, AND RELATIVE RIGHTS AND LIMITATIONS OF THE SERIES B SENIOR CONVERTIBLE CUMULATIVE PREFERRED STOCK 1 27 ATTACHMENT 1 AND CONTANGO OIL & GAS COMPANY EXHIBIT 4.3(b) WARRANTS AND OPTIONS GRANTED AS OF SEPTEMBER 13, 2000
NUMBER OF NUMBER OF TERM OPTIONS WARRANTS STOCKHOLDER DATE (YRS) STRIKE GRANTED GRANTED - ------------------------- -------- ----- ------- --------- --------- 1999 PLAN OPTIONS: Alcorn - Texas Properties 08/31/99 5 $ 1.00 10,000 -- Billy Jack Corbell 11/04/99 5 $ 1.00 5,000 -- Billy Jack Corbell 01/06/00 5 $ 1.00 5,000 -- Blair Foster 11/04/99 5 $ 1.00 8,500 -- Brad Juneau 08/20/99 5 $ 1.00 -- 400,000 Brad Juneau 09/28/99 5 $ 1.00 5,000 -- Brad Juneau 12/31/99 5 $ 1.00 5,000 -- Brad Juneau (JEX) 01/07/00 5 $ 1.00 90,000 -- Brad Juneau (JEX) 01/31/00 5 $ 1.00 90,000 -- Brad Juneau (JEX) 03/15/00 5 $ 1.00 90,000 -- Brad Juneau 03/31/00 5 $ 1.00 5,000 -- Brad Juneau (JEX) 06/23/00 5 $ 1.00 90,000 -- Brad Juneau 06/30/00 5 $ 1.00 5,000 -- Brad Juneau (JEX) 08/24/00 5 $ 1.00 -- 125,000 Brad Juneau (JEX) 08/25/00 5 $ 1.00 90,000 -- Brad Juneau (JEX) 08/25/00 5 $ 1.00 90,000 -- Brad Juneau (JEX) 09/13/00 5 $ 1.00 90,000 -- Charlene Burrell 12/10/99 5 $ 1.00 5,000 -- Charles Reimer 08/20/99 5 $ 1.00 -- 400,000 Charles Reimer 09/28/99 5 $ 1.00 5,000 -- Charles Reimer 12/31/99 5 $ 1.00 5,000 -- Charles Reimer 03/31/00 5 $ 1.00 5,000 -- Charles Reimer 06/30/00 5 $ 1.00 5,000 -- Darrell Williams 08/20/99 5 $ 1.00 -- 160,000 Darrell Williams 09/28/99 5 $ 1.00 5,000 -- Darrell Williams 12/31/99 5 $ 1.00 5,000 -- Darrell Williams 03/31/00 5 $ 1.00 5,000 -- Darrell Williams 06/30/00 5 $ 1.00 5,000 -- 1999 PLAN OPTIONS (continued): Fairfield Industries 08/24/00 5 $ 1.00 -- 125,000 TOTAL SHARES TOTAL SHARES PERCENT -------------- STOCKHOLDER GRANTED VESTED NUMBER TOTAL COMMENT - ------------------------- ------------- ------- ------- ------- ----------------------------------------------------- 1999 PLAN OPTIONS: Alcorn - Texas Properties 10,000 100.0% 10,000 10,000 Billy Jack Corbell 5,000 100.0% 5,000 5,000 Billy Jack Corbell 5,000 100.0% 5,000 5,000 ------- 10,000 Blair Foster 8,500 100.0% 8,500 8,500 Partial commission on $0.75 offering. Brad Juneau 400,000 100.0% 400,000 400,000 In connection with Units offering ($0.10 Offering). Brad Juneau 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Brad Juneau 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Brad Juneau (JEX) 90,000 33.3% 30,000 30,000 Shelby County options Brad Juneau (JEX) 90,000 100.0% 90,000 90,000 Needville options Brad Juneau (JEX) 90,000 33.3% 30,000 30,000 BVH options Brad Juneau 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Brad Juneau (JEX) 90,000 33.3% 30,000 30,000 [ILLEGIBLE] #1 Brad Juneau 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Brad Juneau (JEX) 125,000 100.0% 125,000 125,000 In connection with formation of Republic Exploration ------- Brad Juneau (JEX) 90,000 33.3% 30,000 30,000 [ILLEGIBLE] #2 Brad Juneau (JEX) 90,000 33.3% 30,000 30,000 E128 Brad Juneau (JEX) 90,000 33.3% 30,000 30,000 Brazos 436 ------- 801,657 Charlene Burrell 5,000 100.0% 5,000 5,000 JEX employees. Charles Reimer 400,000 100.0% 400,000 400,000 In connection with Units offering ($0.10 Offering). Charles Reimer 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Charles Reimer 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Charles Reimer 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Charles Reimer 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. ------- 406,657 Darrell Williams 160,000 100.0% 160,000 160,000 In connection with Units offering ($0.10 Offering). Darrell Williams 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Darrell Williams 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Darrell Williams 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Darrell Williams 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. ------- 166,657 1999 PLAN OPTIONS (continued): Fairfield Industries 125,000 100.0% 125,000 125,000 In connection with formation of Republic Exploration
Options/Warrants - Page 1 28 EXHIBIT 4.3(b) CONTANGO OIL & GAS COMPANY WARRANTS AND OPTIONS GRANTED AS OF SEPTEMBER 13, 2000
NUMBER OF NUMBER OF TERM OPTIONS WARRANTS TOTAL SHARES PERCENT STOCKHOLDER DATE (YRS) STRIKE GRANTED GRANTED GRANTED VESTED - ----------- ---- ----- ------ ------- ------- ------- ------ Gene Graham 10/18/99 5 $ 1.00 7,500 -- 7,500 100.0% Gerhart Hunter 12/10/99 5 $ 1.00 5,000 -- 5,000 100.0% Glen Dillon 09/28/99 5 $ 1.00 10,000 -- 10,000 100.0% Glen Dillon 05/30/00 5 $ 1.00 25,000 -- 25,000 33.3% IAS 11/04/99 5 $ 1.00 55,167 -- 55,167 100.0% Joe Romano 08/20/99 5 $ 1.00 -- 100,000 100,000 100.0% Joe Romano 09/30/99 5 $ 1.00 5,000 -- 5,000 33.3% Joe Romano 12/31/99 5 $ 1.00 5,000 -- 5,000 33.3% Joe Romano 03/31/00 5 $ 1.00 5,000 -- 5,000 33.3% Joe Romano 06/30/00 5 $ 1.00 5,000 -- 5,000 33.3% John Miller 02/11/99 5 $ 1.00 5,000 -- 5,000 100.0% Kaci Brubaker 09/28/99 5 $ 1.00 10,000 -- 10,000 100.0% Kaci Brubaker 12/27/99 5 $ 1.00 10,000 -- 10,000 100.0% Kaci Brubaker 05/30/00 5 $ 1.00 25,000 -- 25,000 33.3% Ken Peak 08/20/99 5 $ 1.00 -- 1,400,000 1,400,000 100.0% Linda Ferszt 02/11/00 5 $ 1.00 5,000 -- 5,000 100.0% Linda Ferszt 01/07/00 5 $ 1.00 5,000 -- 5,000 33.3% Linda Ferszt 01/31/00 5 $ 1.00 5,000 -- 5,000 100.0% Linda Ferszt 03/15/00 5 $ 1.00 5,000 -- 5,000 33.3% Linda Ferszt 06/23/00 5 $ 1.00 5,000 -- 5,000 33.3% Linda Ferszt 08/25/00 5 $ 1.00 5,000 -- 5,000 33.3% Linda Ferszt 08/25/00 5 $ 1.00 5,000 -- 5,000 33.3% Linda Ferszt 09/13/00 5 $ 1.00 5,000 -- 5,000 33.3% Mark Stevens 12/10/99 5 $ 1.00 5,000 -- 5,000 100.0% Melanie Gooch 09/28/99 5 $ 1.00 2,500 -- 2,500 100.0% TOTAL SHARES ---------------- STOCKHOLDER NUMBER TOTAL COMMENT - ----------- ------ ----- --------------- Gene Graham 7,500 7,500 Gerhart Hunter 5,000 5,000 JEX employees. Glen Dillon 10,000 10,000 Glen Dillon 8,333 8,333 ------- 18,333 IAS 55,167 55,167 Partial commission on $0.75 offering. Joe Romano 100,000 100,000 In connection with Units offering ($0.10 Offering). Joe Romano 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Joe Romano 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Joe Romano 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Joe Romano 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. --------- 106,667 John Miller 5,000 5,000 JEX employee Kaci Brubaker 10,000 10,000 Kaci Brubaker 10,000 10,000 Kaci Brubaker 8,333 8,333 --------- 28,333 Ken Peak 1,400,000 1,400,000 In connection with Units offering ($0.10 Offering). Linda Ferszt 5,000 5,000 Linda Ferszt 1,667 1,667 Shelby County options Linda Ferszt 5,000 5,000 Needville options Linda Ferszt 1,667 1,667 BVH options Linda Ferszt 1,667 1,667 Guilita #1 Linda Ferszt 1,667 1,667 Guilita #2 Linda Ferszt 1,667 1,667 E128 Linda Ferszt 1,667 1,667 Brazos 436 --------- 20,000 Mark Stevens 5,000 5,000 JEX employees. Melanie Gooch 2,500 2,500
1999 PLAN OPTIONS (continued): OptionsWarrants - Page 2 29 CONTANGO OIL & GAS COMPANY EXHIBIT 4.3(b) WARRANTS AND OPTIONS GRANTED AS OF SEPTEMBER 13, 2000
NUMBER OF NUMBER OF TOTAL SHARES TERM OPTIONS WARRANTS TOTAL SHARES PERCENT ------------------- STOCKHOLDER DATE (YRS) STRIKE GRANTED GRANTED GRANTED VESTED NUMBER TOTAL - ----------- -------- ----- ------ ----------- ----------- ------------ ------- ------- --------- Scott Archer 09/28/99 5 $ 1.00 5,000 -- 5,000 100.0% 5,000 5,000 Scott Archer 01/07/00 5 $ 1.00 5,000 -- 5,000 33.3% 1,667 1,667 Scott Archer 01/31/00 5 $ 1.00 5,000 -- 5,000 100.0% 5,000 5,000 Scott Archer 03/15/00 5 $ 1.00 5,000 -- 5,000 33.3% 1,667 1,667 Scott Archer 06/23/00 5 $ 1.00 5,000 -- 5,000 33.3% 1,667 1,667 Scott Archer 08/25/00 5 $ 1.00 5,000 -- 5,000 33.3% 1,667 1,667 Scott Archer 08/25/00 5 $ 1.00 5,000 -- 5,000 33.3% 1,667 1,667 Scott Archer 09/13/00 5 $ 1.00 5,000 -- 5,000 33.3% 1,667 1,667 ------- 20,000 SIMCO 11/15/99 5 $ 1.00 500 -- 500 100.0% 500 500 SUIT 06/24/00 5 $ 1.00 -- 250,000 250,000 100.0% 250,000 250,000 TCW 12/28/99 5 $ 1.00 -- 370,370 370,370 100.0% 370,370 370,370 TCW 08/24/00 5 $ 1.00 -- 500,000 600,000 100.0% 500,000 500,000 ------- 870,370 William H. Gibbons 02/01/00 5 $ 1.00 25,000 -- 25,000 100.0% 25,000 25,000 William H. Gibbons 05/30/00 5 $ 1.00 25,000 -- 25,000 33.3% 8,333 8,333 ------- 33,333 --------------------------------------------------------------------------------------------------- TOTAL 1,034,167 3,830,370 4,864,537 4,361,284 --------------------------------------------------------------------------------------------------- OTHER OPTIONS: Buddy Young 06/08/99 5 $ 1.00 100,000 -- 100,000 100.0% 100,000 Mestena, Inc. 03/21/00 5 $ 1.50 175,000 -- 175,000 100.0% 175,000 SUIT Growth Fund 06/30/00 5 $ 1.00 5,000 -- 5,000 33.3% 1,667 1,667 --------------------------------------------------------------------------------------- TOTAL 280,000 276,667 --------------------------------------------------------------------------------------- STOCKHOLDER COMMENT - ----------- ------- Scott Archer Scott Archer Shelby County options Scott Archer Needville options Scott Archer BVH options Scott Archer Guilita #1 Scott Archer Guilita #2 Scott Archer E128 Scott Archer Brazos 436 SIMCO SUIT in connection with formation of Republic Exploration TCW in connection with $0.75 offering TCW in connection with formation of Republic Exploration William H. Gibbons William H. Gibbons OTHER OPTIONS: Buddy Young Granted by old MGPX BOD. Mesteria, Inc. In corporation with JEX/Ranch Agreement dtd 03/21/00. SUIT Growth Fund 1/3, 1/3 and 1/3 vesting - Directors fees.
OptionsWarrants - Page 3 30 SCHEDULE 4.3(c) CONTANGO OIL & GAS COMPANY REGISTRATION RIGHTS The following shareholders have rights to require the registration of securities of Contango Oil & Gas Company or to participate in any such registration:
HOLDER NO. SHARES ------ ---------- Juneau Exploration Company, LLC shares (09/99)............................... 400,000 Holders of common shares sold in $0.75 offering (12/99)...................... 1,539,332 TCW shares sold (12/99)...................................................... 3,703,704 Shares issued upon exercise of TCW Warrant (12/99)........................... 370,370 SUIT shares sold (06/00)..................................................... 2,500,000 Shares issued upon exercise of SUIT Option (06/00)........................... 2,500,000 Shares issuable upon conversion of Series A preferred........................ 2,000,000 Shares issued upon exercise of TCW Warrant (08/00)........................... 500,000 Shares issued upon exercise of SUIT Warrant (08/00).......................... 250,000 Shares issued upon exercise of Juneau Exploration Company LLC Warrant (08/00)......................... 125,000 Shares issued upon exercise of Fairfield Industries Warrant (08/00)................................... 125,000 Shares issuable upon conversion of Series B preferred........................ 3,409,090.90
The following shareholders have certain limited registration rights in the event any shares issued in the same offering are registered:
HOLDER NO. SHARES ------ ---------- Holders of common shares sold in $0.10 offering (8/99)....................... 6,460,000 Holders of common shares sold in $0.30 offering (9/99)....................... 3,780,000
31 SCHEDULE 4.9 CONTANGO OIL & GAS COMPANY SUMMARY OF EQUITY SALES SINCE 11/05/99(1)
OFFERING NO. SHS. PRICE PROCEEDS -------- -------- ----- -------- FOUNDER TRANSACTIONS: $0.10 Offering 6,460,000 $ 0.100 $ 646,000 $0.30 Offering 3,780,000 $ 0.300 1,134,000 $0.75 Offering 1,539,332 $ 0.750 1,154,499 TCW Common Stock 3,703,704 $ 0.675 2,500,000 Gibbons/Dillon/Corbell Shares 28,750 $ 1.000 28,750 SUIT Common Stock 2,500,000 $ 1.000 2,500,000 SUIT Common Stock 2,500,000 $ 1.000 2,500,000 --------------- ----------------- 20,511,786 $ 10,463,249 =============== =================
- -------- (1) Excludes 400,000 shares issued to Brad Juneau in connection with execution of Juneau Exploration Agreement (09/99). EX-99.7.2 3 h80802ex99-7_2.txt STATEMENT OF DESIGNATION FOR PREFERRED STOCK 1 EXHIBIT 99.2 CERTIFICATE OF DESIGNATIONS, PREFERENCES, AND RELATIVE RIGHTS AND LIMITATIONS OF THE SERIES B SENIOR CONVERTIBLE CUMULATIVE PREFERRED STOCK OF CONTANGO OIL & GAS COMPANY (the "Corporation") 1. Designation. A series of the Preferred Stock of the Corporation is hereby designated as "Series B Senior Convertible Cumulative Preferred Stock" consisting initially of 10,000 authorized shares each having a par value of $0.04 (hereinafter called the "Series B Preferred Stock"). Shares of the Series B Preferred Stock shall rank prior to the Corporation's Common Stock (and any Junior Stock (as hereinafter defined) with respect to the payment of dividends or distributions and upon liquidation, dissolution, winding-up or otherwise. (All equity securities of the Corporation to which the Series B Preferred Stock ranks prior, whether with respect to dividends or distributions or upon liquidation, dissolution, winding-up or otherwise, including the Common Stock, are collectively referred to herein as "Junior Stock"; all equity securities of the Corporation with which the Series B Preferred Stock ranks on a parity, whether with respect to dividends or distributions or upon liquidation, dissolution, winding-up or otherwise, are collectively referred to herein as "Parity Stock"; and all equity securities of the Corporation to which the Preferred Stock ranks junior, whether with respect to dividends or distributions or upon liquidation, dissolution, winding-up or otherwise, are collectively referred to herein as "Senior Stock"). Except for shares of Series B Preferred Stock issuable in accordance with Section 2 hereof, the Corporation shall not issue any shares of Series B Preferred Stock after the initial issuance of Series B Preferred Stock. 2. Dividends. (a) The holders of the shares of Series B Preferred Stock shall be entitled to receive quarterly dividends at a dividend rate equal to 8% per annum (or 2% per Quarterly Dividend Period) if paid in cash on a current quarterly basis (the "Cash Dividend Rate") or otherwise at a dividend rate equal to 10% per annum (or 2.5% per Quarterly Dividend Period) if not paid on a current quarterly basis or if paid in shares of Series B Preferred Stock (the "PIK Dividend Rate") (the applicable dividend rate being hereinafter referred to as the "Dividend Rate"), in each case computed on the basis of $1,000 per share, when and as declared by the Board of Directors of the Corporation, out of funds or shares of Series B Preferred Stock legally available for the payment of dividends. Quarterly dividend periods (each a "Quarterly Dividend Period") shall commence on January 1, April 1, July 1 and October 1 in each year, except that the first Quarterly Dividend Period shall commence on the date of issuance of the Series B Preferred Stock, and shall end on 2 and include the day immediately preceding the first day of the next Quarterly Dividend Period. Dividends on the shares of Series B Preferred Stock shall be payable on March 31, June 30, September 30 and December 31 of each year (a "Dividend Payment Date"), commencing September 30, 2000. Each such dividend shall be paid to the holders of record of the Series B Preferred Stock as they shall appear on the stock register of the Corporation on such record date, not exceeding 45 days nor less than 10 days preceding such Dividend Payment Date, as shall be fixed by the Board of Directors of the Corporation or a duly authorized committee thereof. If, on any Dividend Payment Date, the holders of the Series B Preferred Stock shall not have received the full dividends provided for in this Section 2(a) in cash or in kind, then such dividends shall cumulate, whether or not earned or declared, with additional dividends thereon, compounded quarterly, at the PIK Dividend Rate applicable to the Series B Preferred Stock as provided in this Section 2(a), for each succeeding full Quarterly Dividend Period during which such dividends shall remain unpaid. (b) The amount of any dividends accrued on any share of the Series B Preferred Stock on any Dividend Payment Date shall be deemed to be the amount of any unpaid dividends accumulated thereon to and including such Dividend Payment Date, whether or not earned or declared. The amount of dividends accrued on any share of the Series B Preferred Stock on any date other than a Dividend Payment Date shall be deemed to be the sum of (i) the amount of any unpaid dividends accumulated thereon to and including the last preceding Dividend Payment Date, whether or not earned or declared, and (ii) an amount determined by multiplying (x) the Cash Dividend Rate by (y) a fraction, the numerator of which shall be the number of days from the last preceding Dividend Payment Date to and including the date on which such calculation is made and the denominator of which shall be the full number of days in such Quarterly Dividend Period. (c) Immediately prior to authorizing or making any distribution in liquidation with respect to the Series B Preferred Stock (other than a purchase or acquisition of Series B Preferred Stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Series B Preferred Stock), the Board of Directors shall, to the extent of any funds legally available therefor, declare a dividend in cash on the Series B Preferred Stock payable on the distribution date in an amount equal to any accrued and unpaid dividends on the Series B Preferred Stock as of such date. (d) The Board of Directors may declare dividends payable in shares of Series B Preferred Stock in lieu of cash dividends on a Dividend Payment Date. In the event the Board of Directors elects to declare a dividend payable in shares of Series B Preferred Stock, each holder of shares of Series B Preferred Stock shall be entitled to receive such additional shares of Series B Preferred Stock (or cash in lieu of a fraction thereof) equal to the product of (x) the number of shares of Series B Preferred Stock held by such holder multiplied by (y) the PIK Dividend Rate. 3. Priority. (a) Parity with Series A Preferred Stock. Unless otherwise expressly provided herein, the Series B Preferred Stock shall rank on a parity with respect to the Corporation's Series A Senior Preferred Convertible Cumulative Preferred Stock (hereinafter called the "Series 2 3 A Preferred Stock") in all respects, including with respect to dividends or distributions, redemption or upon liquidation, dissolution, winding-up or otherwise. Accordingly, the Series A Preferred Stock shall be Parity Stock with respect to the Series B Preferred Stock, unless otherwise expressly provided herein. (b) Priority as to Dividends. (i) Holders of shares of the Series B Preferred Stock shall be entitled to receive the dividends provided for in Section 2 hereof in preference to and in priority over any dividends or distributions upon any Junior Stock. No dividends shall be declared or paid or set apart for payment on any Junior Stock for any period unless at the time of such declaration or payment or setting apart for payment (A) full cumulative dividends have been or contemporaneously are declared and paid in cash (or declared and a sum sufficient for the payment thereof set apart for such payment) on the Series B Preferred Stock for all Quarterly Dividend Periods terminating on or prior to the date of payment of such dividends on Junior Stock, (B) an amount equal to the dividends accrued on the Series B Preferred Stock from the last Dividend Payment Date to the date of payment of such dividends on Junior Stock has been declared and set apart in cash for payment on the Series B Preferred Stock and (C) the dividend payment for the most recent Quarterly Dividend Period on the Series B Preferred Stock has been paid entirely in cash. (ii) No dividends shall be declared or paid or set apart for payment on any Parity Stock for any period unless at the time of such declaration or payment or setting aside for payment dividends have been or contemporaneously are declared and paid in accordance with Section 2 hereof on the Series B Preferred Stock for all Quarterly Dividend Periods terminating on or prior to the date of payment of such dividends on Parity Stock. All dividends paid upon shares of the Series B Preferred Stock and any Parity Stock shall be paid pro rata so that the amount of dividends paid per share of the Series B Preferred Stock and such Parity Stock shall in all cases bear to each other the same ratio that accrued and unpaid dividends per share on the Series B Preferred Stock and such Parity Stock bear to each other. (c) Priority on Redemption. The Corporation shall not, directly or indirectly, redeem or purchase or otherwise acquire for value any Junior Stock or Parity Stock unless, at the time of making such redemption, purchase or other acquisition, full cumulative dividends have been or contemporaneously are declared and paid in accordance with Section 2 hereof (or declared and a sum (or shares of Series B Preferred Stock) sufficient for payment thereof set apart for such payment) on the Series B Preferred Stock for all Quarterly Dividend Periods terminating on or prior to the date of redemption of Junior Stock and/or Parity Stock. 4. Redemption. Upon the sale, conveyance or disposition of all or substantially all of the assets of the Corporation or a sale, conveyance or disposition of a majority of the outstanding shares of common stock in a transaction or series of related transactions (except for a merger or consolidation after the consummation of which the stockholders of the Corporation prior to such merger or consolidation own a majority of the voting securities of the surviving corporation or its parent corporation), each holder of Series B Preferred Stock shall have the right to require that the Corporation redeem all or any part of such holder's Series B Preferred Stock for cash out of legally available funds at a price per share equal to the Liquidation Preference (as defined in 3 4 Section 7(d) but with the accrued and unpaid dividends being paid through the date of redemption rather than the Conversion Date). If on the date of such sale, conveyance or disposition funds legally available for such redemption shall be insufficient to redeem all of the outstanding shares of Series B Preferred Stock held by holders who have elected to have their shares redeemed, funds to the extent legally available shall be used for such purpose and the Corporation shall effect such redemption pro rata according to the number of shares of Series B Preferred Stock held by each holder thereof. The redemption requirements provided hereby shall be continuous, so that if on the date of such sale, conveyance or disposition such requirements cannot be fully discharged, without further action by any holder of the Series B Preferred Stock funds legally available shall be applied therefor until such requirements are fulfilled. Upon payment in full of the amounts owing under this Section 4 to any holder of Series B Preferred Stock who has elected to have its shares redeemed, then notwithstanding that the certificate or certificates evidencing such shares shall not have been surrendered, the dividends with respect to such shares shall cease to accrue after the date of such payment in full and all rights with respect to such shares shall forthwith terminate. 5. Liquidation Preference. (a) In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of shares of the Series B Preferred Stock shall be entitled to receive, out of the assets of the Corporation, whether such assets are capital or surplus and whether or not any dividends as such are declared, $1,000 per share plus an amount equal to all accrued and unpaid dividends thereon to the date fixed for distribution, and no more, before any distribution shall be made to the holders of Junior Stock with respect to the distribution of assets. If the assets of the Corporation are not sufficient to pay in full the liquidation payments payable to the holders of outstanding shares of the Series B Preferred Stock and any other Parity Stock, then the holders of all such shares shall share ratably in such distribution of assets in accordance with the amount which would be otherwise payable on such distribution to the holders of Series B Preferred Stock and the holders of such Parity Stock were such liquidation payments paid in full. Except as provided, in this Section 5(a), in the event of any liquidation, dissolution or winding up of the affairs of the Corporation, the holders of shares of Series B Preferred Stock shall not be entitled to any additional payments. (b) Written notice of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, stating a payment date and the place where the distributive amounts shall be payable, shall be given by mail, postage prepaid, not less than 30 days prior to the payment date stated therein, to the holders of record of the Series B Preferred Stock at their respective addresses as the same shall appear on the books of the Corporation. 6. Voting Rights. (a) General. In addition to the rights otherwise provided for herein or by law, holders of Series B Preferred Stock shall be entitled to vote, together with the holders of Common Stock and any other voting Junior Stock or Parity Stock, as one class on all matters submitted to a vote of stockholders of the Corporation, in the same manner and with the same effect as the holders of Common Stock. In any such vote, each share of Series B Preferred Stock shall entitle the holder 4 5 thereof to one vote per share for each share of Common Stock (including fractional shares) into which each share of Series B Preferred Stock is then convertible, rounded to the nearest one-tenth of a share. (b) Protective Provisions. So long as any Series B Preferred Stock is outstanding, the holders of the Series B Preferred Stock shall have the voting power provided for by law and the Corporation covenants and agrees that it shall not, without the written consent in lieu of a meeting, or the affirmative vote at a meeting called for such purpose, of holders of Series B Preferred Stock of record that hold at least a majority of the outstanding Series B Preferred Stock, voting as a separate class: (i) amend, alter or repeal, in any manner whatsoever, the designations, powers, preferences, relative, participating, optional or other special rights, qualifications, limitations and restrictions of the Series B Preferred Stock; (ii) authorize, issue, or agree to authorize or issue, whether by reclassification or otherwise, any Senior Stock; (iii) authorize, issue, or agree to authorize or issue, whether by reclassification or otherwise, any new class or series of stock or any other securities convertible into equity securities of the Corporation ranking on a parity with the holders of Series B Preferred Stock with respect to the rights of redemption, liquidation, preference, voting or dividends, or any increase in the authorized or designated number of any such new class or series, other than the Series A Preferred Stock; (iv) amend, alter or repeal any provision of the articles of incorporation of the Corporation, including the certificate of designation of any class or series of stock; (v) directly or indirectly, redeem, purchase or otherwise acquire for value (including through an exchange), or set apart money or other property for any mandatory purchase or other analogous fund for the redemption, purchase or acquisition of, any shares of Common Stock or other Junior Stock; (vi) consolidate or merge with or into any other corporation where (1) the Corporation is not the surviving corporation or (2) the Corporation shall issue to any person as consideration in respect of such consolidation or merger any capital stock of the Corporation representing 20% or more of the Corporation's outstanding capital stock prior to such consolidation or merger; (vii) sell or convey all or substantially all of the assets of the Corporation, or dissolve or liquidate the Corporation; or (viii) incur any indebtedness, liabilities or obligations constituting Restricted Debt (as defined below), which in the aggregate with all other Restricted Debt of the Corporation (on a consolidated basis) is in excess of 50% of the NPV10 (as defined below) of the Proved Reserves (as defined below) attributable to the properties of the Corporation at the time of incurrence. 5 6 For purposes of this Section 6(b), the following terms shall have the meanings set forth below: "NPV10" means with respect to any Proved Reserves as expected to be produced from the properties of the Corporation, the net present value of the future net revenues expected to accrue to the Corporation's interests in such Reserves during the remaining expected economic lives of such Reserves, discounted at 10% per annum. Each calculation of such expected future net revenues shall be made at the time of incurrence in accordance with the then existing standards of the Society of Petroleum Engineers and Society of Petroleum Evaluation Engineers, provided that in any event: (i) appropriate deductions shall be made for (A) direct taxes and existing burdens, (B) lease operating expenses, (C) transportation, gathering and marketing burdens, (D) capital expenditures (including plugging and abandonment costs), and (E) general and administrative or overhead costs pursuant to the relevant operating agreements (COPAS); and (ii) the pricing assumptions and escalations used in determining NPV10 for any particular Proved Reserves shall be: (A) the contract price, if any, during the term of any written oil and gas sales contract between Corporation and unrelated persons; or (B) if no sales contract exits: (I) for volumes of oil and gas swapped or hedged with investment grade counter parties, the hedged price net of any costs, expenses or deductions relating thereto; and (II) for "naked" or long unhedged volumes, the oil and gas prices reflected in the NYMEX oil and gas strips going forward one year with adjustment for basis (quality and geographical) differentials. "Proved Reserves" means those reserves which are "proved oil and gas reserves" within the meaning of Rule 4-10 of Regulation S-X, 17 C.F.R. Section 210.4-10 of the Securities Exchange Commission. In addition, Proved Reserves must have facilities to process and transport those reserves to market which are operational at the time of the estimate, or there is a commitment or reasonable expectation to install such facilities in the future. "Restricted Debt" of any Person means debt in any of the following categories: (i) debt for borrowed money; (ii) debt constituting an obligation to pay the deferred purchase price of property or services; (iii) debt evidenced by a bond, debenture, note or similar instrument; (iv) debt which (A) would under GAAP be shown on the Corporation's balance sheet as a liability and (B) is payable more than one year from the date of creation thereof (other than reserves for taxes and contingent obligations); (v) debt constituting principal under leases capitalized in accordance with GAAP; (vi) debt arising under conditional sales or other title retention agreements; (vii) debt owing under direct or indirect guaranties of debt of any other 6 7 person or constituting obligations to purchase or acquire or to otherwise protect or insure a creditor against loss in respect of debt of any other person (such as obligations under working capital maintenance agreements, agreements to keep-well, or agreements to purchase debt, assets, goods, securities or services), but excluding endorsements in the ordinary course of business of negotiable instruments in the course of collection; (viii) debt with respect to letters of credit or applications or reimbursement agreements therefor; provided, however, that the term "Restricted Debt" shall not include debt which is 60 days or less past due that was incurred on ordinary trade terms and is owed by the Corporation incurring the same to vendors, suppliers, or other persons providing goods and services for use by the Corporation in the ordinary course of its business. (c) Dividend Default. In the event of a Dividend Default (as hereinafter defined), the number of directors on the Board of Directors of the Corporation shall be increased by two directors, both of whom shall be nominated and elected as soon as practicable pursuant to the Bylaws of the Corporation by the holders of the Series B Preferred Stock, to serve until the later of (i) the date of the next annual meeting of stockholders and until such directors' successors are elected and qualify and (ii) the date on which the Dividend Default is cured; provided, however, that if permitted under applicable law, the holders of the Series B Preferred Stock shall have the right to elect the same individual to serve as both directors and, if so elected, such individual shall be treated as constituting two directors for all purposes including without limitation voting and quorum. A "Dividend Default" shall occur if, at any time, dividends are not paid in full (either in cash or in kind as provided for herein) with respect to all shares of Series B Preferred Stock on any two consecutive Dividend Payment Dates. (d) Board of Directors. If at any time a majority of the holders of the Series B Preferred Stock has not appointed or nominated for election at least one of the members of the Corporation's Board of Directors and shares of Series B Preferred Stock remain outstanding, then the holders of the Series B Preferred Stock shall be entitled to appoint one observer to the Corporation's Board of Directors (the "Observer"). Such Observer shall have the right to attend, and receive all materials distributed for or at, all meetings (telephone and otherwise) of the Board of Directors (including committees thereof) and shall be entitled to the same rights and privileges as directors of the Corporation, except that such Observer shall not be entitled to vote on matters presented to or discussed by the Board of Directors. The Observer will receive compensation from the Corporation for his services as observer on an equal basis with the directors of the Corporation and shall be entitled to be reimbursed by the Corporation for all reasonable costs and expenses incurred in connection with his participation in meetings or other activities of the Board of Directors. The holders of the Series B Preferred Stock will use commercially reasonable efforts to cause the Observer to keep all information provided to the Observer in connection with all meetings of the Board of Directors confidential prior to its becoming public, except that the Observer shall be permitted to disclose such information (i) to officers, directors, employees, representatives, agents, auditors, accountants, consultants, advisors, lawyers and affiliates of the holders of the Series B Preferred Stock in the ordinary course of business who have been made aware of the confidential nature of the information; (ii) to prospective assignees and their respective directors, employees, agents and representatives who have agreed in writing to become subject to this confidentiality provision, (iii) as required by applicable law, or pursuant to subpoenas or other legal process, or as requested by governmental agencies and examiners; (iv) to the extent such information (A) becomes available to the Observer other than 7 8 as a result of a breach of this provision or (B) becomes available to the Observer on a non-confidential basis, or (v) to the extent the Corporation shall have consented to such disclosure in writing. 7. Conversion Rights. (a) Voluntary Conversion. At a holder's election, the Series B Preferred Stock may be converted, in whole or in part, to fully paid and nonassessable shares of Common Stock at a conversion price of $2.20 per share, as adjusted in accordance with Section 8 hereof (the "Conversion Price"). The number of shares of the Common Stock into which a share of Series B Preferred Stock is convertible shall be equal to the Liquidation Preference (as defined in Section 7(d)) of such share of Series B Preferred Stock divided by the Conversion Price in effect on the Voluntary Conversion Date (as hereinafter defined). (b) Exercise of Voluntary Conversion Privilege. In order to exercise the voluntary conversion privilege, the registered holder of any share of Series B Preferred Stock to be converted shall surrender the certificate representing such share at the office of the Corporation and shall give written notice (the "Conversion Notice") to the Corporation at said office that the holder elects to convert such shares of Series B Preferred Stock or a specified portion thereof into shares of Common Stock. As promptly as practicable after the receipt of the Conversion Notice (such date of receipt, the "Voluntary Conversion Date") and the surrender of such shares of Series B Preferred Stock, the Corporation shall issue and deliver to the registered holder of such shares of Series B Preferred Stock, at the address set forth on the Conversion Notice, a certificate or certificates for the number of full shares of Common Stock, as applicable, issuable upon the conversion of such shares of Series B Preferred Stock (or a specified portion thereof) and cash in respect of any fraction of a share issuable upon such conversion. Such conversion shall be deemed to have been effected at the close of business on the Voluntary Conversion Date, and the holder of such shares of Series B Preferred Stock shall be deemed to have become the holder of record of the shares of Common Stock represented thereby as of the Voluntary Conversion Date. (c) Mandatory Conversion. In the event the mean average traded price of the Corporation's Common Stock on each of the immediately preceding 20 consecutive Trading Days (as hereinafter defined) is equal to or greater than $2.50 per share (as adjusted for any subdivision or combination of outstanding Common Stock) (a "Mandatory Conversion Event"), the Corporation may elect to convert all, but not less than all, of the outstanding shares of Series B Preferred Stock to fully paid and nonassessable shares of Common Stock at the Conversion Price (as defined in Section 7(a)). In order to effect the mandatory conversion of the Series B Preferred Stock, the Corporation shall mail notice (the "Mandatory Conversion Notice") to all holders of outstanding shares of Series B Preferred Stock within 10 days after the occurrence of a Mandatory Conversion Event, specifying a date (which must be at least 10 but not more than 30 days after the date of such notice (the "Mandatory Conversion Date"). The number of shares of the Common Stock into which a share of Series B Preferred Stock is convertible shall be equal to the quotient of the Liquidation Preference (as defined in Section 7(d)) of such share of Series B Preferred Stock divided by the Conversion Price. On or before the Mandatory Conversion Date, each holder of Series B Preferred 8 9 Stock shall surrender the certificate(s) representing the Series B Preferred Stock to the Corporation at said office, accompanied by a written statement setting forth the name or names (with address) in which the certificate or certificates for shares of Common Stock shall be issued. As promptly as practicable thereafter, the Corporation shall issue and deliver to the registered holder of such shares of Series B Preferred Stock, at the address specified by the holder, a certificate or certificates for the full shares of Common Stock issuable upon mandatory conversion pursuant to this Section 7(c). For purposes of this Section 7(c), "Trading Day" shall mean (1) (x) if the Common Stock is listed on at least one stock exchange, a day on which there is trading on the principal stock exchange on which the Common Stock is listed, (y) if the Common Stock is not listed on a stock exchange, but sale prices of the Common Stock are reported on an automated quotation system, a day on which trading is reported on the principal automated quotation system on which sales of the Common Stock are reported, or (z) if the Common Stock is not listed on a stock exchange and sale prices of the Common Stock are not reported on an automated quotation system, a day on which quotations are reported by National Quotation Bureau Incorporated, and (2) the volume of shares of Common Stock sold on such day is 50,000 shares (as adjusted in the same manner and proportion as the adjustment of a Stock Unit in accordance with Section 8(a) hereof) or more. For purposes of this Section 7(c), Trading Days shall not be deemed to be "consecutive" if there shall occur any day which meets the criteria set forth in clause (1) of the preceding sentence but does not meet the criteria set forth in clause (2) thereof between one Trading Day and the next Trading Day. (d) As used in this Section 7, the term "Liquidation Preference" shall mean the sum of (i) $1,000 per share of Series B Preferred Stock and (ii) accrued and unpaid dividends on the applicable Conversion Date calculated in accordance with Sections 2(a) and (b) hereof. (e) Fractional Shares. The Corporation shall not be required to issue fractional shares of Common Stock upon the conversion of shares of the Series B Preferred Stock. If shares of the Series B Preferred Stock (or specified portions thereof, if applicable) shall be presented for conversion which would result in the issuance of any fraction of a share of Common Stock, the Corporation may instead pay an amount in cash equal to the Conversion Price on the day immediately preceding the Voluntary Conversion Date or the Mandatory Conversion Date, as the case may be, multiplied by such fraction. (f) Reservation of Shares. The Corporation shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of enabling it to set aside shares to satisfy any obligation to issue shares of Common Stock upon conversion of Series B Preferred Stock, such number of shares of Common Stock as shall then be issuable upon the conversion of all outstanding shares of Series B Preferred Stock. The shares of Common Stock issuable upon conversion of shares of Series B Preferred Stock shall, upon issuance, be duly authorized, validly issued, fully paid, nonassessable, free of preemptive rights and free and clear of all liens, charges, security interests and other encumbrances whatsoever. 8. Adjustment of Number of Shares Issuable Upon Conversion and the Conversion Price. The number of shares issuable upon conversion and the Conversion Price (and each component 9 10 thereof) are subject to adjustment from time to time as set forth in this Section 8 with respect to any fact or event described herein occurring after the date hereof. Anything contained in this Section 8 notwithstanding, any adjustment made pursuant to any provision of this Section 8 shall be made without duplication of an adjustment otherwise required by and made pursuant to another provision of this Section 8 on account of the same facts or events. (a) Definitions. For purposes of this Section 8, the following terms shall have the meanings ascribed to such terms below: "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 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 Corporation after the Closing Date other than (i) any shares of Common Stock issued pursuant to the outstanding warrants, options and convertible stock listed on Attachment 1, (ii) shares of Common Stock issued pursuant to options to purchase Common Stock issued pursuant to the Corporation'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 Corporation'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 Corporation'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 10 11 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 Corporation'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 Corporation's outside directors under the 1999 Stock Incentive Plan, (xiii) any shares of Common Stock issued upon conversion of the Corporation's Series B Preferred, and (xiv) any shares of Common Stock issued pursuant to a 401(k) or other qualified retirement plan for officers, directors or employees of the Corporation and its affiliates in an aggregate amount not to exceed 100,000 shares. "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 Corporation and the holders of the Series B Preferred Stock. "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 Corporation. In the event that the Corporation and the holders of the Series B Preferred Stock cannot, in good faith, agree upon an investment bank, then the Corporation, on the one hand, and the holders of the Series B Preferred Stock, 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 Corporation shall pay for the cost of any such Appraisal. "CLOSING DATE" shall mean September 27, 2000. "CONVERTIBLE SECURITIES" shall mean evidences of indebtedness, shares of stock or other securities which are convertible 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 CONVERSION PRICE" per share of Common Stock, for the purpose of any provision herein at the date herein specified, shall mean the amount equal to the quotient resulting from dividing the Conversion 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. 11 12 "CURRENT MARKET PRICE" per share of Common Stock for the purposes of any provision herein 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, or (ii) the fair value per share of Common Stock determined pursuant to the Appraised Value. "STOCK UNIT" shall mean one share of Common Stock, as such Common Stock was constituted on the date of original issue of the Series B Preferred Stock and thereafter shall mean such number of shares (including any fractional shares) of Common Stock as shall result from the adjustments specified in this Section 8. (b) Stock Dividends, Subdivisions and Combinations. In case at any time or from time to time the Corporation shall: (i) 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 (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or (iii) 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 (i) through (iii) 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 (i) through (iii) above. (c) Certain Other Dividends and Distributions. In case at any time or from time to time the Corporation 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: (i) 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 Corporation, 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 Corporation and its consolidated subsidiaries earned subsequent to the date hereof determined in accordance with generally accepted accounting principles), or (ii) 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 12 13 property of any nature whatsoever (other than cash and other than Convertible Securities or Additional Shares of Common Stock), or (iii) any warrants, options or other rights to subscribe for or purchase (x) any evidences of its indebtedness (other than Convertible Securities), (y) any shares of its stock (other than Additional Shares of Common Stock) or (z) 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 (A) the numerator of which shall be the Current Market Price per share of Common Stock at the date of taking such record, and (B) 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 pursuant to the Valuation Procedure. The "Valuation Procedure" is a determination of fair value of any property made in good faith by the Board of Directors of the Corporation; provided, that if the holders of a majority of the Series B Preferred Stock object to such determination within ten days of receipt of written notification thereof, then the fair value of such property shall be determined in good faith by a recognized national or major regional investment bank selected by the Board of Directors, which investment bank is not reasonably objected to by the holders of a majority of the Series B Preferred Stock. The fees and expenses of such investment bank shall be paid by the Corporation. 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 Corporation to the holders of its Common Stock of such shares of such other class of stock within the meaning of this Section 8(c) 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 Section 8(b). (d) Issuance of Additional Shares of Common Stock. In case at any time or from time to time the Corporation shall (except as hereinafter provided) issue, whether in connection with the merger of a corporation into the Corporation or otherwise, any Additional Shares of Common Stock for a consideration per share less than the greater of (i) the Current Conversion Price or (ii) the Current Market 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 Conversion Price per share of Common Stock, and (ii) the denominator of which shall be the consideration per share received by the Corporation 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 (x) 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 (y) the denominator of which shall be the 13 14 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 Conversion Price and the Current Market Price per share of Common Stock. For purposes of this Section 8(d), the date as of which the Current Market Price per share of Common Stock shall be computed shall be the earlier of (i) the date on which the Corporation 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 Section 8(d) shall not apply to any issuance of Additional Shares of Common Stock for which an adjustment is provided under Section 8(b). No adjustment of the number of shares of Common Stock comprising a Stock Unit shall be made under this Section 8(d) 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 Section 8(e) or Section 8(f). (e) Issuance of Warrants, Options or Other Rights. In case at any time or from time to time the Corporation 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 (A) the Current Conversion Price per share of Common Stock or (B) the Current Market 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 the first sentence of Section 8(d). All adjustments made pursuant to this Section 8(e) 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 Section 8(e), (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 Corporation 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 Corporation 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 Section 8(e), the computation date for subclause (i) above and as of which the Current Market Price and the Current Conversion Price per share of Common Stock shall be computed shall be the earliest of (A) the date on which the Corporation shall take a record of the holders of its Common Stock for the purpose of entitling them to receive any such warrants, options or other rights, (B) the date on which the Corporation shall 14 15 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. (f) Issuance of Convertible Securities. In case at any time or from time to time the Corporation 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 (A) the Current Conversion Price per share of Common Stock or (B) the Current Market 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 the first sentence of Section 8(d). All adjustments made pursuant to this Section 8(f) 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 Section 8(f), (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 Corporation 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 Corporation 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 Section 8(f), the computation date for clause (i) above and as of which the Current Market Price and the Current Conversion Price per share of Common Stock shall be computed shall be the earliest of (A) the date on which the Corporation 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 Corporation 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 Section 8(f) 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 Section 8(e). (g) 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 Section 8(e) or Section (f) 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 Section 8(g), (i) 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 15 16 (ii) 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: (iii) 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 (iv) 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 8 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. (h) Other Provisions Applicable to Adjustments Under this Section 8. 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 8: (i) Treasury Stock. The sale or other disposition of any issued shares of Common Stock owned or held by or for the account of the Corporation shall be deemed an issuance thereof for purposes of this Section 8. (ii) Computation of Consideration. To the extent that any Additional Shares of Common Stock or any Convertible Securities or any warrants, options or other rights to subscribe for or purchase any Additional Shares of Common Stock or any Convertible Securities shall be issued solely for cash consideration, the consideration received by the Corporation therefor shall be deemed to be the amount of cash received by the Corporation therefor, or, if such Additional Shares of Common Stock or Convertible Securities are offered by the Corporation 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 16 17 compensation, discounts or expenses paid or incurred by the Corporation 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 pursuant to the Valuation Procedure. 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 Corporation for issuing such warrant, options or other rights, plus the additional consideration payable to the Corporation 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 Corporation 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 Corporation in respect of the subscription for or purchase of such Convertible Securities, plus the additional consideration, if any, payable to the Corporation upon the exercise of the right of conversion or exchange in such Convertible Securities. (iii) When Adjustments To Be Made. The adjustments required by the preceding Sections 8(b) through (h) inclusive 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. (iv) Fractional Interests. In computing adjustments under this Section 8, fractional interests in Common Stock shall be taken into account to the nearest 1/100th of a share. (v) When Adjustment Not Required. If the Corporation 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 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. (i) Merger, Consolidation or Disposition of Assets. In case the Corporation 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 Corporation, then each holder of Series B Preferred Stock shall have the right thereafter to receive 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 17 18 received by or distributed to the holders of Common Stock of the Corporation in addition to common stock of the successor or acquiring corporation, there shall be 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. Such fair value shall be determined pursuant to the Valuation Procedure. 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 contained herein to be performed and observed by the Corporation 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 8. For the purposes of this Section 8 "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 Section 8(i) shall similarly apply to successive mergers, consolidations or dispositions of assets. (j) Other Action Affecting Common Stock. In case at any time or from time to time the Corporation shall take any action affecting its Common Stock, other than an action described in any of the foregoing Sections 8(b) to Section 8(i), inclusive, of this Section 8 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 Corporation such action will not have a materially adverse effect upon the rights of the holders of the Series B Preferred Stock, the number of shares of Common Stock or other stock comprising a Stock Unit, or the Conversion Price thereof, shall be adjusted in such manner and at such time as the Board of Directors of the Corporation may in good faith determine to be equitable in the circumstances. (k) No Adjustments for Certain Transactions. Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock comprising a Stock Unit and the Current Conversion 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 Corporation 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. 9. Notice to Holders of Series B Preferred Stock. (a) Notice of Adjustment of Stock Unit or Current Conversion Price. Whenever the number of shares of Common Stock comprising a Stock Unit or the Current Conversion Price per Stock Unit shall be adjusted pursuant to Section 8, the Corporation shall forthwith obtain a certificate signed by the president of the Corporation and the principal financial officer of the Corporation, 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 18 19 determined by the Board of Directors of the Corporation, 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 8(c), Section 8(h)(ii) or Section 8(i)) and specifying the number of shares of Common Stock comprising a Stock Unit and (if such adjustment was made pursuant to Section 8(i) or Section 8(j)) describing the number and kind of any other shares of stock comprising a Stock Unit, and any change in the Current Conversion Price thereof after giving effect to such adjustment or change. The Corporation 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 each holder of Series B Preferred Stock. The Corporation shall keep at its office or agency copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any holder of Series B Preferred Stock or any prospective purchaser of Series B Preferred Stock designated by a holder. (b) Notice of Certain Corporate Action. In case the Corporation shall propose (i) 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 (ii) to offer to the holders of its Common Stock rights to subscribe for or to purchase any Additional Shares of Common Stock or shares of stock of any class or any other securities, rights or options, or (iii) 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 (iv) to effect any capital reorganization, or (v) to effect any consolidation, merger or sale, change to the Corporation's charter or bylaws, transfer or other disposition of all or substantially all of its property, assets or business, or (vi) to effect the liquidation, dissolution or winding up of the Corporation, then in each such case, the Corporation shall give to each holder of Series B Preferred Stock, a notice, certified by the president of the Corporation and the principal financial officer of the Corporation, 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 Corporation'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 Current Conversion Price 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 (i) or (ii) 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. 10. No Impairment. Other than in connection with the amendment of its Articles of Incorporation approved by the requisite number of stockholders, the Corporation will not, through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation but will at all times in good faith assist in the carrying out of all the provisions of this Certificate and in the taking of all action as may be necessary or appropriate in order to protect the conversion rights of the holders of the 19 20 Series B Preferred Stock against impairment. Without limiting the generality of the foregoing, the Corporation (i) will not permit the par value of any shares of stock at the time receivable upon the conversion of the Series B Preferred Stock to exceed the Current Conversion Price then in effect, (ii) will take all such action as may be necessary or appropriate in order that the corporation may validly and legally issue fully paid non-assessable shares of stock on the conversion of the Series B Preferred Stock, and (iii) will not issue any Additional Shares of Common Stock or Convertible Securities or take any action which results in any adjustment of the Current Conversion Price or the number of shares comprising a Stock Unit if the total number of shares of Common Stock issuable after such issuance or action upon the conversion or payment of all outstanding dividends on, all of the then outstanding shares of Series B Preferred Stock will exceed the total number of shares of Common Stock then authorized by the Corporation's Articles of Incorporation and available for the purpose of issue upon such conversion or payment of such dividend. 20 21 ATTACHMENT 1 AND CONTANGO OIL & GAS COMPANY EXHIBIT 4.3(b) WARRANTS AND OPTIONS GRANTED AS OF SEPTEMBER 13, 2000
NUMBER OF NUMBER OF TERM OPTIONS WARRANTS STOCKHOLDER DATE (YRS) STRIKE GRANTED GRANTED - ------------------------- -------- ----- ------- --------- --------- 1999 PLAN OPTIONS: Alcorn - Texas Properties 08/31/99 5 $ 1.00 10,000 -- Billy Jack Corbell 11/04/99 5 $ 1.00 5,000 -- Billy Jack Corbell 01/06/00 5 $ 1.00 5,000 -- Blair Foster 11/04/99 5 $ 1.00 8,500 -- Brad Juneau 08/20/99 5 $ 1.00 -- 400,000 Brad Juneau 09/28/99 5 $ 1.00 5,000 -- Brad Juneau 12/31/99 5 $ 1.00 5,000 -- Brad Juneau (JEX) 01/07/00 5 $ 1.00 90,000 -- Brad Juneau (JEX) 01/31/00 5 $ 1.00 90,000 -- Brad Juneau (JEX) 03/15/00 5 $ 1.00 90,000 -- Brad Juneau 03/31/00 5 $ 1.00 5,000 -- Brad Juneau (JEX) 06/23/00 5 $ 1.00 90,000 -- Brad Juneau 06/30/00 5 $ 1.00 5,000 -- Brad Juneau (JEX) 08/24/00 5 $ 1.00 -- 125,000 Brad Juneau (JEX) 08/25/00 5 $ 1.00 90,000 -- Brad Juneau (JEX) 08/25/00 5 $ 1.00 90,000 -- Brad Juneau (JEX) 09/13/00 5 $ 1.00 90,000 -- Charlene Burrell 12/10/99 5 $ 1.00 5,000 -- Charles Reimer 08/20/99 5 $ 1.00 -- 400,000 Charles Reimer 09/28/99 5 $ 1.00 5,000 -- Charles Reimer 12/31/99 5 $ 1.00 5,000 -- Charles Reimer 03/31/00 5 $ 1.00 5,000 -- Charles Reimer 06/30/00 5 $ 1.00 5,000 -- Darrell Williams 08/20/99 5 $ 1.00 -- 160,000 Darrell Williams 09/28/99 5 $ 1.00 5,000 -- Darrell Williams 12/31/99 5 $ 1.00 5,000 -- Darrell Williams 03/31/00 5 $ 1.00 5,000 -- Darrell Williams 06/30/00 5 $ 1.00 5,000 -- 1999 PLAN OPTIONS (continued): Fairfield Industries 08/24/00 5 $ 1.00 -- 125,000 TOTAL SHARES TOTAL SHARES PERCENT -------------- STOCKHOLDER GRANTED VESTED NUMBER TOTAL COMMENT - ------------------------- ------------- ------- ------- ------- ----------------------------------------------------- 1999 PLAN OPTIONS: Alcorn - Texas Properties 10,000 100.0% 10,000 10,000 Billy Jack Corbell 5,000 100.0% 5,000 5,000 Billy Jack Corbell 5,000 100.0% 5,000 5,000 ------- 10,000 Blair Foster 8,500 100.0% 8,500 8,500 Partial commission on $0.75 offering. Brad Juneau 400,000 100.0% 400,000 400,000 In connection with Units offering ($0.10 Offering). Brad Juneau 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Brad Juneau 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Brad Juneau (JEX) 90,000 33.3% 30,000 30,000 Shelby County options Brad Juneau (JEX) 90,000 100.0% 90,000 90,000 Needville options Brad Juneau (JEX) 90,000 33.3% 30,000 30,000 BVH options Brad Juneau 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Brad Juneau (JEX) 90,000 33.3% 30,000 30,000 [ILLEGIBLE] #1 Brad Juneau 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Brad Juneau (JEX) 125,000 100.0% 125,000 125,000 In connection with formation of Republic Exploration ------- Brad Juneau (JEX) 90,000 33.3% 30,000 30,000 [ILLEGIBLE] #2 Brad Juneau (JEX) 90,000 33.3% 30,000 30,000 E128 Brad Juneau (JEX) 90,000 33.3% 30,000 30,000 Brazos 436 ------- 801,657 Charlene Burrell 5,000 100.0% 5,000 5,000 JEX employees. Charles Reimer 400,000 100.0% 400,000 400,000 In connection with Units offering ($0.10 Offering). Charles Reimer 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Charles Reimer 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Charles Reimer 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Charles Reimer 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. ------- 406,657 Darrell Williams 160,000 100.0% 160,000 160,000 In connection with Units offering ($0.10 Offering). Darrell Williams 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Darrell Williams 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Darrell Williams 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Darrell Williams 5,000 33.3% 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. ------- 166,657 1999 PLAN OPTIONS (continued): Fairfield Industries 125,000 100.0% 125,000 125,000 In connection with formation of Republic Exploration
Options/Warrants - Page 1 22 EXHIBIT 4.3(b) CONTANGO OIL & GAS COMPANY WARRANTS AND OPTIONS GRANTED AS OF SEPTEMBER 13, 2000
NUMBER OF NUMBER OF TERM OPTIONS WARRANTS TOTAL SHARES PERCENT STOCKHOLDER DATE (YRS) STRIKE GRANTED GRANTED GRANTED VESTED - ----------- ---- ----- ------ ------- ------- ------- ------ Gene Graham 10/18/99 5 $ 1.00 7,500 -- 7,500 100.0% Gerhart Hunter 12/10/99 5 $ 1.00 5,000 -- 5,000 100.0% Glen Dillon 09/28/99 5 $ 1.00 10,000 -- 10,000 100.0% Glen Dillon 05/30/00 5 $ 1.00 25,000 -- 25,000 33.3% IAS 11/04/99 5 $ 1.00 55,167 -- 55,167 100.0% Joe Romano 08/20/99 5 $ 1.00 -- 100,000 100,000 100.0% Joe Romano 09/30/99 5 $ 1.00 5,000 -- 5,000 33.3% Joe Romano 12/31/99 5 $ 1.00 5,000 -- 5,000 33.3% Joe Romano 03/31/00 5 $ 1.00 5,000 -- 5,000 33.3% Joe Romano 06/30/00 5 $ 1.00 5,000 -- 5,000 33.3% John Miller 02/11/99 5 $ 1.00 5,000 -- 5,000 100.0% Kaci Brubaker 09/28/99 5 $ 1.00 10,000 -- 10,000 100.0% Kaci Brubaker 12/27/99 5 $ 1.00 10,000 -- 10,000 100.0% Kaci Brubaker 05/30/00 5 $ 1.00 25,000 -- 25,000 33.3% Ken Peak 08/20/99 5 $ 1.00 -- 1,400,000 1,400,000 100.0% Linda Ferszt 02/11/00 5 $ 1.00 5,000 -- 5,000 100.0% Linda Ferszt 01/07/00 5 $ 1.00 5,000 -- 5,000 33.3% Linda Ferszt 01/31/00 5 $ 1.00 5,000 -- 5,000 100.0% Linda Ferszt 03/15/00 5 $ 1.00 5,000 -- 5,000 33.3% Linda Ferszt 06/23/00 5 $ 1.00 5,000 -- 5,000 33.3% Linda Ferszt 08/25/00 5 $ 1.00 5,000 -- 5,000 33.3% Linda Ferszt 08/25/00 5 $ 1.00 5,000 -- 5,000 33.3% Linda Ferszt 09/13/00 5 $ 1.00 5,000 -- 5,000 33.3% Mark Stevens 12/10/99 5 $ 1.00 5,000 -- 5,000 100.0% Melanie Gooch 09/28/99 5 $ 1.00 2,500 -- 2,500 100.0% TOTAL SHARES ---------------- STOCKHOLDER NUMBER TOTAL COMMENT - ----------- ------ ----- --------------- Gene Graham 7,500 7,500 Gerhart Hunter 5,000 5,000 JEX employees. Glen Dillon 10,000 10,000 Glen Dillon 8,333 8,333 ------- 18,333 IAS 55,167 55,167 Partial commission on $0.75 offering. Joe Romano 100,000 100,000 In connection with Units offering ($0.10 Offering). Joe Romano 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Joe Romano 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Joe Romano 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. Joe Romano 1,667 1,667 1/3, 1/3 and 1/3 vesting - Directors fees. --------- 106,667 John Miller 5,000 5,000 JEX employee Kaci Brubaker 10,000 10,000 Kaci Brubaker 10,000 10,000 Kaci Brubaker 8,333 8,333 --------- 28,333 Ken Peak 1,400,000 1,400,000 In connection with Units offering ($0.10 Offering). Linda Ferszt 5,000 5,000 Linda Ferszt 1,667 1,667 Shelby County options Linda Ferszt 5,000 5,000 Needville options Linda Ferszt 1,667 1,667 BVH options Linda Ferszt 1,667 1,667 Guilita #1 Linda Ferszt 1,667 1,667 Guilita #2 Linda Ferszt 1,667 1,667 E128 Linda Ferszt 1,667 1,667 Brazos 436 --------- 20,000 Mark Stevens 5,000 5,000 JEX employees. Melanie Gooch 2,500 2,500
1999 PLAN OPTIONS (continued): OptionsWarrants - Page 2 23 CONTANGO OIL & GAS COMPANY EXHIBIT 4.3(b) WARRANTS AND OPTIONS GRANTED AS OF SEPTEMBER 13, 2000
NUMBER OF NUMBER OF TOTAL SHARES TERM OPTIONS WARRANTS TOTAL SHARES PERCENT ------------------- STOCKHOLDER DATE (YRS) STRIKE GRANTED GRANTED GRANTED VESTED NUMBER TOTAL - ----------- -------- ----- ------ ----------- ----------- ------------ ------- ------- --------- Scott Archer 09/28/99 5 $ 1.00 5,000 -- 5,000 100.0% 5,000 5,000 Scott Archer 01/07/00 5 $ 1.00 5,000 -- 5,000 33.3% 1,667 1,667 Scott Archer 01/31/00 5 $ 1.00 5,000 -- 5,000 100.0% 5,000 5,000 Scott Archer 03/15/00 5 $ 1.00 5,000 -- 5,000 33.3% 1,667 1,667 Scott Archer 06/23/00 5 $ 1.00 5,000 -- 5,000 33.3% 1,667 1,667 Scott Archer 08/25/00 5 $ 1.00 5,000 -- 5,000 33.3% 1,667 1,667 Scott Archer 08/25/00 5 $ 1.00 5,000 -- 5,000 33.3% 1,667 1,667 Scott Archer 09/13/00 5 $ 1.00 5,000 -- 5,000 33.3% 1,667 1,667 ------- 20,000 SIMCO 11/15/99 5 $ 1.00 500 -- 500 100.0% 500 500 SUIT 06/24/00 5 $ 1.00 -- 250,000 250,000 100.0% 250,000 250,000 TCW 12/28/99 5 $ 1.00 -- 370,370 370,370 100.0% 370,370 370,370 TCW 08/24/00 5 $ 1.00 -- 500,000 600,000 100.0% 500,000 500,000 ------- 870,370 William H. Gibbons 02/01/00 5 $ 1.00 25,000 -- 25,000 100.0% 25,000 25,000 William H. Gibbons 05/30/00 5 $ 1.00 25,000 -- 25,000 33.3% 8,333 8,333 ------- 33,333 --------------------------------------------------------------------------------------------------- TOTAL 1,034,167 3,830,370 4,864,537 4,361,284 --------------------------------------------------------------------------------------------------- OTHER OPTIONS: Buddy Young 06/08/99 5 $ 1.00 100,000 -- 100,000 100.0% 100,000 Mestena, Inc. 03/21/00 5 $ 1.50 175,000 -- 175,000 100.0% 175,000 SUIT Growth Fund 06/30/00 5 $ 1.00 5,000 -- 5,000 33.3% 1,667 1,667 --------------------------------------------------------------------------------------- TOTAL 280,000 276,667 --------------------------------------------------------------------------------------- STOCKHOLDER COMMENT - ----------- ------- Scott Archer Scott Archer Shelby County options Scott Archer Needville options Scott Archer BVH options Scott Archer Guilita #1 Scott Archer Guilita #2 Scott Archer E128 Scott Archer Brazos 436 SIMCO SUIT in connection with formation of Republic Exploration TCW in connection with $0.75 offering TCW in connection with formation of Republic Exploration William H. Gibbons William H. Gibbons OTHER OPTIONS: Buddy Young Granted by old MGPX BOD. Mesteria, Inc. In corporation with JEX/Ranch Agreement dtd 03/21/00. SUIT Growth Fund 1/3, 1/3 and 1/3 vesting - Directors fees.
OptionsWarrants - Page 3 EX-99.7.3 4 h80802ex99-7_3.txt CO-SALE AGREEMENT 1 EXHIBIT 99.3 CONTANGO OIL & GAS COMPANY CO-SALE AGREEMENT THIS CO-SALE AGREEMENT (the "Agreement") is effective as of the 27th day of September, 2000, by and among Contango Oil & Gas Company, a Nevada corporation (the "Company"), 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 "SUIT"), Trust Company of the West, a California trust company, in its capacities as Investment Manager pursuant to the Investment Management Agreement dated as of June 6, 1988 between General Mills, Inc. and the Trust Company of the West and as Custodian pursuant to the Custody Agreement dated as of February 6, 1989 among General Mills, Inc., the Trust Company of the West and State Street Bank and Trust Company, as Trustee ("TCW"), Aquila Energy Capital Corporation, a Delaware corporation ("Aquila") and Kenneth R. Peak ("Peak"). RECITALS WHEREAS, Aquila is purchasing, or has purchased, shares of the Company's Series B Senior Convertible Cumulative Preferred Stock (the "Aquila Securities"), pursuant to that certain Securities Purchase Agreement dated as of September 27, 2000 (the "Aquila Securities Purchase Agreement"), between Aquila and the Company; WHEREAS, TCW has previously purchased shares of the Company's Common Stock, warrants to purchase additional shares of Common Stock, and shares of the Company's Series A Senior Convertible Cumulative Preferred Stock (collectively, the "TCW Securities") and SUIT has previously purchased shares of the Company's Common Stock and a warrant to purchase additional shares of Common Stock (collectively, the "SUIT Securities") and have previously entered into a Co-Sale Agreement dated June 8, 2000 with the Company and Peak (the "Prior Co-Sale Agreement") (which in turn superseded the Co-Sale Agreement dated December 29, 1999 among the Company, TCW and Peak); WHEREAS, Aquila was induced by the Company to purchase the Aquila Securities in part by the Company's, Peak's, TCW's and SUIT's agreement to enter into this Agreement; and WHEREAS, the parties desire to enter into this Agreement in order to grant rights of co-sale to Aquila and replace the Prior Co-Sale Agreement. In consideration of the mutual covenants set forth herein, the parties agree hereto as follows: 1. DEFINITIONS. 1 2 (a) "CO-SALE STOCK" shall mean shares of the Company's Common Stock now owned or subsequently acquired by Peak. (b) "COMMON STOCK" shall mean the Company's Common Stock, shares of Common Stock issued or issuable upon exercise of the warrants held by SUIT and TCW, shares of Common Stock issued or issuable pursuant to the certificate of designation of the Series A Preferred Stock held by TCW and shares of Common Stock issued or issuable pursuant to the certificate of designation of the Series B Preferred Stock held by Aquila. 2. SALES BY PEAK. (a) If Peak proposes to sell or transfer any shares of Co-Sale Stock, then Peak shall promptly give written notice (the "Notice") simultaneously to the Company, to SUIT, to TCW and to Aquila at least thirty (30) days prior to the closing of such sale or transfer. The Notice shall describe in reasonable detail the proposed sale or transfer including, without limitation, the number of shares of Co-Sale Stock to be sold or transferred, the nature of such sale or transfer, the consideration to be paid, and the name and address of each prospective purchaser or transferee. (b) SUIT, TCW and Aquila shall each have the right, exercisable upon written notice to Peak within fifteen (15) days after the Notice, to participate in such sale of Co-Sale Stock on the same terms and conditions. Such notice shall indicate the number of shares of Common Stock SUIT, TCW and/or Aquila wishes to sell under its right to participate. To the extent SUIT, TCW or Aquila exercises such right of participation in accordance with the terms and conditions set forth below, the number of shares of Co-Sale Stock that Peak may sell in the transaction shall be correspondingly reduced. If the prospective purchaser or transferee then increases the number of shares it would like to purchase, Peak will provide notification of such change to SUIT, TCW and Aquila, and give SUIT, TCW and Aquila the opportunity to sell additional shares. (c) SUIT, TCW or Aquila, respectively, may sell all or any part of that number of shares equal to the product obtained by multiplying (i) the aggregate number of shares of Co-Sale Stock covered by the Notice by (ii) a fraction the numerator of which is the number of shares of Common Stock owned by SUIT, TCW or Aquila, respectively, at the time of the sale or transfer and the denominator of which is the total number of shares of Common Stock owned by Peak, TCW, SUIT and Aquila at the time of the sale or transfer. SUIT, TCW or Aquila shall effect its respective participation in the sale by promptly delivering to Peak for transfer to the prospective purchaser one or more certificates, properly endorsed for transfer, which represent the number of shares of Common Stock which SUIT, TCW or Aquila elects to sell. (d) After SUIT, TCW or Aquila shall have received its respective portion of the sale proceeds by reason of participation in a co-sale transaction, then SUIT, TCW or Aquila, as applicable, shall deliver to Peak pursuant to Section 2(c) that number of shares of Common Stock that shall be transferred to the prospective purchaser in consummation of the sale of the Common Stock pursuant to the terms and conditions specified in the Notice. To the extent that any prospective purchaser or purchasers prohibits such assignment or otherwise refuses to purchase shares or other securities from SUIT, TCW or Aquila exercising its rights of co-sale hereunder, Peak shall not sell to such prospective purchaser or purchasers any Co-Sale Stock 2 3 unless and until, simultaneously with such sale, Peak shall purchase such shares or other securities from SUIT, TCW or Aquila, as applicable, on the same terms and conditions specified in the Notice. (e) The exercise or non-exercise of the rights of SUIT, TCW or Aquila hereunder to participate in one or more sales of Co-Sale Stock made by Peak shall not adversely affect its respective rights to participate in subsequent sales of Co-Sale Stock subject to Section 2(a). If SUIT, TCW or Aquila does not elect to participate in the sale of the Co-Sale Stock subject to the Notice, Peak may, not later than sixty (60) days following delivery to the Company of the Notice, enter into an agreement providing for the closing of the transfer of the Co-Sale Stock covered by the Notice within thirty (30) days of such agreement on terms and conditions not more materially favorable to the transferor than those described in the Notice. Any proposed transfer on terms and conditions materially more favorable than those described in the Notice, as well as any subsequent proposed transfer of any of the Co-Sale Stock by Peak, shall again be subject to the co-sale rights of SUIT, TCW and Aquila and shall require compliance by Peak with the procedures described in this Section 2. 3. EXEMPT TRANSFERS. (a) Notwithstanding the foregoing, the co-sale rights of SUIT, TCW and Aquila shall not apply to (i) any pledge of Co-Sale Stock made pursuant to a bona fide loan transaction with a financial institution that creates a mere security interest, (ii) any transfer to the ancestors, descendants or spouse of Peak or to trusts for the benefit of such persons, (iii) any transfer or transfers by Peak to John Jurrius so long as such transfer is made in connection with Jurrius' appointment to the Company's Board of Directors, not to exceed 1,000,000 shares, or (iv) any bona fide gift of not more than Peak's holdings of the Company's securities on the date hereof; provided that in the event of any transfer made pursuant to one of the exemptions provided by clauses (i), (ii) and (iv), (A) Peak shall inform SUIT, TCW and Aquila of such pledge, transfer or gift prior to effecting it and (B) the pledgee, transferee or donee shall furnish SUIT, TCW and Aquila with a written agreement to be bound by and comply with all provisions of Section 2. Except with respect to Co-Sale Stock transferred under clause (iii) above (which Co-Sale Stock shall no longer be subject to the co-sale rights of SUIT, TCW and Aquila), such transferred Co-Sale Stock shall remain "Co-Sale Stock" hereunder, and such pledgee, transferee or donee shall be treated similarly with Peak for purposes of this Agreement. (b) Notwithstanding the foregoing, the provisions of Section 2 shall apply to the sale of any Co-Sale Stock to (i) the public pursuant to a registration statement filed with, and declared effective by, the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Securities Act") or (ii) the Company. 4. LEGEND. (a) Each certificate representing shares of Co-Sale Stock now or hereafter owned by Peak or issued to any person in connection with a transfer pursuant to Section 3(a) hereof shall be endorsed with the following legend: 3 4 "THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN CO-SALE AGREEMENT BY AND AMONG SUIT, TCW, AQUILA, THE COMPANY AND CERTAIN HOLDERS OF STOCK OF THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY." (b) Peak agrees that the Company may instruct its transfer agent to impose transfer restrictions on the shares represented by certificates bearing the legend referred to in Section 4(a) above to enforce the provisions of this Agreement and the Company agrees to promptly do so. The legend shall be removed upon termination of this Agreement. 5. MISCELLANEOUS. (a) CONDITIONS TO EXERCISE OF RIGHTS. Exercise of TCW's, SUIT's and Aquila's rights under this Agreement shall be subject to and conditioned upon, and Peak and the Company shall use their best efforts to assist TCW, SUIT and Aquila in, compliance with applicable laws. (b) GOVERNING LAW. This Agreement shall be governed by and construed under the laws of the State of Nevada. (c) PRIOR CO-SALE AGREEMENT. This Agreement shall replace the Prior Co-Sale Agreement in its entirety, and the Prior Co-Sale Agreement is hereby cancelled and shall have no further force or effect. (d) AMENDMENT. Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only by the written consent of each of the parties hereto. (e) NOTICES. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the party to be notified at the address as set forth on the signature page hereof or at such other address as such party may designate by ten (10) days advance written notice to the other parties hereto. (f) SEVERABILITY. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. (g) ATTORNEYS' FEES. In the event that any dispute among the parties to this Agreement should result in litigation, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under 4 5 or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals. (h) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties relative to the specific subject matter hereof. Any previous agreement among the parties relative to the specific subject matter hereof is superseded by this Agreement. This Agreement and the rights and obligations of the parties hereunder shall inure to the benefit of, and be binding upon, their respective successors, assigns and legal representatives. (i) COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. * * * 5 6 IN WITNESS WHEREOF, the undersigned have executed this Co-Sale Agreement as of the date set forth above. COMPANY: CONTANGO OIL & GAS COMPANY a Nevada corporation Address: 3700 Buffalo Speedway By: /s/ Kenneth R. Peak Suite 960 -------------------------------- Houston, TX 77098 Kenneth R. Peak President and Chief Executive Officer PEAK: /s/ Kenneth R. Peak ------------------------------------ Kenneth R. Peak, an individual Address: 3700 Buffalo Speedway Suite 960 Houston, TX 77098 TCW: TRUST COMPANY OF THE WEST, a California trust company, in its capacities as Investment Manager pursuant to the Investment Management Agreement dated as of June 6, 1988 between General Mills, Inc. and the Trust Company of the West as Custodian pursuant to the Custody Agreement dated as of February 6, 1989 among General Mills, Inc., the Trust Company of the West and State Street Bank and Trust Company, as trustee Address: 865 S. Figueroa Street Suite 1800 Los Angeles, CA 90017 By: /s/ Arthur R. Carlson -------------------------------- Arthur R. Carlson Managing Director SUIT: 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 Address: 135 East 9th Street Suite H Durango, CO 81301 By: /s/ Robert [Illegible] 6 7 AQUILA: AQUILA ENERGY CAPITAL CORPORATION, a Delaware corporation Address: 2 Houston Center 909 Fannin, Suite 1850 Houston, Texas 77010 By: /s/ Kenneth F. Wyatt 7 EX-99.7.4 5 h80802ex99-7_4.txt MARKETING AGREEMENT 1 EXHIBIT 99.4 CONTANGO OIL & GAS COMPANY MARKETING AGREEMENT This Marketing Agreement ("Agreement"), dated as of September 27, 2000, is between Contango Oil & Gas Company, a Nevada corporation ("Contango), and Aquila Energy Capital Corporation, a Delaware corporation ("Aquila"). RECITALS: WHEREAS, Contango is in the business of exploring, acquiring and selling oil and natural gas. WHEREAS, concurrently herewith, Contango and Aquila are entering into a Securities Purchase Agreement (the "Securities Purchase Agreement"), pursuant to which Aquila shall purchase 5,000 shares of the Contango's Series B Senior Convertible Cumulative Preferred Stock (the "Series B Preferred"). WHEREAS, in order to induce Aquila to enter into the Securities Purchase Agreement, Contango has agreed to grant Aquila certain marketing rights with respect to the sale of Contango's oil and natural gas. In consideration of the mutual covenants set forth herein, the parties agree as follows 1. DEFINITIONS. (a) "Contango Prospects" shall mean oil and gas exploration and development prospects in which Contango now holds, or may hereafter acquire, a participation right. (b) "Operating Agreement" shall mean the agreement for the operation of leases and wells that govern the Contango Prospects. (c) "Participation Agreements" shall mean, collectively, any participation agreements entered into by Contango and a third party, including without limitation Juneau Exploration Company, LLC and the Southern Ute Indian Tribe doing business as Red Willow Production Company, whereby Contango has granted such third parties participation rights with respect to the Product generated from Contango Prospects. (d) "Product" shall mean natural gas produced from all Contango Prospects. 1 2 2. SALES OF PRODUCT (a) Subject to those agreements for the sale of Product which are in effect as of the date hereof (none of which extend beyond the production month of December 2000), Contango shall request bids from prospective purchasers for the purchase of Product. Prior to any sale of Product in excess of 1 mmcfd from any single well, Contango shall give written notice (the "Notice") to Aquila at least ten (10) days prior to the proposed closing of the sale. The Notice shall describe in reasonable detail the terms and conditions of the bid which Contango proposes to accept (the "Competing Bid"), including, without limitation, the location and amount of Product proposed to be purchased, the consideration to be paid, the name and address of the prospective purchaser and the material terms and conditions of the Competing Bid. (b) Aquila shall have the opportunity to submit a matching bid (the "Aquila Bid") to purchase such Product upon written notice to Contango within five (5) days after receipt of the Notice. The Aquila Bid shall indicate the amount of Product proposed to be purchased, the consideration to be paid, and all terms and conditions thereof, including any pipeline arrangements. Failure of Aquila to respond to the Notice within such time period shall constitute a waiver of its rights to submit a matching bid for such proposed sale of Product. (c) Provided that (i) the consideration offered under the Aquila Bid exceeds that of the Competing Bid, and (ii) the terms and conditions of the Aquila Bid are comparable or more favorable to Contango in its reasonable discretion (including, without limitation, volume considerations and gas pipeline arrangements of the Competing Bid), Contango shall accept the Aquila Bid and shall sell such Product to Aquila on the terms and conditions set forth in the Aquila Bid; provided, that Contango shall not be obligated to accept the Aquila Bid if such acceptance would conflict with the terms of any Participation Agreement or Operating Agreement. 3. TERM OF AGREEMENT. This Agreement shall terminate upon the later to occur of (i) September 27, 2001, and (ii) the date upon which all shares of the Series B Preferred have been converted to shares of Contango's common stock in accordance with the Certificate of Designation of the Series B Preferred. 4. MISCELLANEOUS. (a) GOVERNING LAW. This Agreement shall be governed by and construed under the laws of the State of Nevada. (b) AMENDMENT. Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only by the written consent of each of the parties hereto. 2 3 (c) NOTICES. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the party to be notified at the address as set forth on the signature page hereof or at such other address as such party may designate by ten (10) days advance written notice to the other party hereto. (d) SEVERABILITY. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. (e) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties relative to the specific subject matter hereof. Any previous agreement among the parties relative to the specific subject matter hereof is superseded by this Agreement. This Agreement and the rights and obligations of the parties hereunder shall inure to the benefit of, and be binding upon, their respective successors, assigns and legal representatives. (f) COUNTERPARTS. This Agreement may be executed in counterparts or by facsimile, all of said counterparts taken together shall be deemed to be one and the same instrument. * * * 3 4 IN WITNESS WHEREOF, the undersigned have executed this Marketing Agreement as of the date set forth above. CONTANGO: CONTANGO OIL & GAS COMPANY a Nevada corporation Address: 3700 Buffalo Speedway Suite 960 By: /s/ Kenneth R. Peak Houston, TX 77098 ----------------------------- Kenneth R. Peak President and Chief Executive Officer AQUILA: AQUILA ENERGY CAPITAL CORPORATION, a Delaware corporation Address: 2 Houston Center 909 Fannin, Suite 1850 Houston, Texas 77010 By: /s/ Kenneth F. Wyatt ------------------------------- 4 -----END PRIVACY-ENHANCED MESSAGE-----