8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 8–K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported): September 12, 2019

 

 

CONTANGO OIL & GAS COMPANY

(Exact Name of Registrant as Specified in Charter)

 

 

 

Texas

  001-16317   95-4079863
(State or Other Jurisdiction of Incorporation)   (Commission File Number)   (IRS Employer Identification No.)

717 Texas Ave., Suite 2900, Houston Texas 77002

(Address of Principal Executive Offices)

(713) 236-7400

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

  

Trading Symbol(s)

  

Name of each exchange on which registered

Common Stock, Par Value $0.04 per share    MCF    NYSE American

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company    ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

 

 

 


Item 1.01

Entry into Material Definitive Agreement.

Underwriting Agreement

On September 12, 2019, Contango Oil & Gas Company (the “Company”) entered into an underwriting agreement (the “Underwriting Agreement”) with Cowen and Company, LLC and Intrepid Partners, LLC (the “Underwriters”), in connection with an underwritten public offering (the “Public Offering”) of 44,736,842 shares of common stock, par value $0.04 per share (the “Common Shares”). The Company granted the Underwriters a 30-day option to purchase up to an additional 6,710,526 Common Shares. On September 13, 2019, the Underwriters exercised the option to purchase an additional 6,710,526 Common Shares. The estimated net proceeds from the offering were $46.13 million, after deducting the underwriting discount and estimated fees and expenses. Net proceeds from the Public Offering and the Private Placement (defined below) are expected to be used to fund the cash portion of the purchase price for the Pending Acquisition (defined below) that is due at closing, and for related transaction expenses. Pending the application of the proceeds in this manner, the Company intends to use the balance of the proceeds from the offering to reduce borrowings under its revolving credit facility or invest in short-term securities. If the Pending Acquisition is not consummated, the Company intends to use the proceeds from the offering for general corporate purposes, including funding future potential acquisitions or a portion of its 2019 capital program. The issuance and sale of the Common Shares has been registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to an effective Registration Statement on Form S-3 (Registration No. 333-215784), filed with the Securities and Exchange Commission (the “Commission”) on January 27, 2017, as amended by Post-Effective Amendment No. 1, filed with the Commission on June 24, 2019. A legal opinion relating to the validity of the Common Shares is filed herewith as Exhibit 5.1.

The Underwriting Agreement contains customary representations, warranties and agreements by the Company and customary conditions to closing, obligations of the parties and termination provisions. Additionally, the Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the Underwriters may be required to make because of any of those liabilities. Furthermore, the Company has agreed with the Underwriters not to offer or sell any shares of its common stock (or securities convertible into or exchangeable for common stock), subject to limited exceptions, for a period of 90 days after the date of the Underwriting Agreement without the prior written consent of the Underwriters.

Certain of the Underwriters and their affiliates have provided, and may in the future provide, various investment banking, commercial banking and other financial services for the Company and its affiliates for which they have received, and may in the future receive, customary fees. The Underwriters have agreed to reimburse the Company for certain expenses relating to the Public Offering.

The foregoing description of the Underwriting Agreement is qualified in its entirety by reference to such Underwriting Agreement, a copy of which is filed herewith as Exhibit 1.1 and is incorporated herein by reference.

Purchase Agreement

On September 12, 2019, the Company entered into a Purchase Agreement (the “Purchase Agreement”) with each of the purchasers set forth in Schedule A thereto (the “Purchasers”) to issue and sell in a private placement exempt from registration pursuant to Section 4(a)(2) of the Securities Act (the “Private Placement”) 789,474 shares of Series A Contingent Convertible Preferred Stock, par value $0.04 per share (the “Preferred Shares”), at a price of $9.50 per Preferred Share (the “Original Issue Price”), resulting in gross proceeds of $7.5 million. A description of the Series A Contingent Convertible Preferred Stock is provided below under the section entitled “Statement of Resolution.” The Purchase Agreement contains customary representations, warranties and agreements of the Company and the Purchasers. The Purchasers are entities affiliated with John C. Goff, a member of the Company’s board of directors (the “Board”). Mr. Goff, together with his affiliated entities, held in the aggregate, prior to the


closing of the Public Offering and Private Placement, approximately 20.00% of the outstanding common stock of the Company and is party to a Cooperation Agreement with the Company, which was previously filed as an exhibit to a Current Report on Form 8-K on August 15, 2018. The Purchase Agreement contains customary representations, warranties and agreements by the Company and customary conditions to closing, obligations of the parties and termination provisions. Additionally, the Company has agreed to indemnify the Purchasers against certain liabilities or to contribute to payments the Purchasers may be required to make because of any of those liabilities.

The foregoing description of the Purchase Agreement is qualified in its entirety by reference to such Purchase Agreement, a copy of which is filed herewith as Exhibit 10.1 and is incorporated herein by reference.

Statement of Resolution

At the closing of the Private Placement, the Company adopted and filed with the Secretary of State of the State of Texas the “Statement of Resolution Establishing Series of Shares Designated Series A Contingent Convertible Preferred Stock of Contango Oil & Gas Company” (the “Statement of Resolution”) as an amendment to the Amended and Restated Certificate of Formation of the Company (the “Certificate of Formation”) to authorize and establish the rights, preferences and privileges of the Preferred Shares. The Preferred Shares are a new class of equity interests that rank equal to the Common Shares with respect to dividend rights and rights upon liquidation. The Preferred Shares will be entitled to vote on an as-converted basis on all matters submitted to a vote of our stockholders, with voting rights of the Preferred Shares equal to 19.99% of the Common Shares outstanding prior to the closing of the Public Offering.

No dividends shall accrue or be payable on the Preferred Shares until the first anniversary of the closing of the Private Placement. Holders of the Preferred Shares are entitled to receive, when and as declared by the Board and declared by the Company, cash dividends of ten percent (10%) of the Original Issue Price per annum on each outstanding Preferred Share. Such dividends shall accrue from the first anniversary of the closing of the Private Placement and shall cease to accrue on the date immediately preceding the date of Conversion (as defined below). Following such date, subject to compliance with the Credit Agreement (as defined below), dividends shall be payable quarterly in cash on March 31, June 30, September 30 and December 31 of each year, beginning September 30, 2020, when, as and if declared by the Board, until the time of the Conversion; provided, however, when there are no Preferred Shares outstanding, no dividends, including any dividends which have accrued, shall be payable to the holders of the Preferred Shares or the holders of the Common Shares into which the Preferred Shares convert.

Each of the Purchasers have agreed to restrictions on its ability to dispose of shares of Preferred Shares without the prior written consent of the Company until six months from the closing of the Private Placement. Upon effectiveness of an amendment of the Certificate of Formation to increase the number of authorized Common Shares and shareholder approval of the issuance of the Common Shares underlying the Preferred Shares in accordance with applicable law and stock exchange rules, each Preferred Share will automatically convert into the number of Common Shares the Purchaser would have received if the Purchaser had purchased shares of Common Shares in the Public Offering for the same gross proceeds (the “Conversion”) and, upon the Conversion, the outstanding Preferred Shares will be cancelled. The Company intends to seek such approval by written consent, and the Purchasers delivered a written consent immediately following the closing of the Private Placement with respect to all of the Common Shares held by the Purchasers entitled to vote on the matter.

The foregoing description of the Statement of Resolution is qualified in its entirety by reference to such Statement of Resolution, a copy of which is filed herewith as Exhibit 3.1 and is incorporated herein by reference.

Registration Rights Agreement

On September 17, 2019, in connection with the closing of the Private Placement and pursuant to the Purchase Agreement, the Company entered into a Registration Rights Agreement (the “Registration Rights


Agreement”) with the Purchasers relating to the registration of the resale of the Common Shares issuable upon the Conversion. Pursuant to the Registration Rights Agreement, the Company is required to use its commercially reasonable efforts to prepare and file an initial registration statement under the Securities Act to permit the public resale of such Common Shares within 30 days of the Conversion.

The foregoing description of the Registration Rights Agreement is qualified in its entirety by reference to such Registration Rights Agreement, a copy of which is filed herewith as Exhibit 10.2 and is incorporated herein by reference.

Credit Agreement

On September 17, 2019, the Company entered into a Credit Agreement by and among the Company, JPMorgan Chase Bank, N.A., as Administrative Agent (the “Administrative Agent”), and each of JPMorgan Chase Bank, N.A., Royal Bank of Canada and Cadence Bank, N.A., as joint bookrunners and the lenders from time to time party thereto (the “Credit Agreement”), pursuant to which the Company obtained a revolving credit facility with a borrowing base of $65 million. The revolving credit facility matures on September 17, 2024.

The borrowing base is subject to semi-annual redeterminations. The borrowing base may also be adjusted by certain events, including the incurrence of any senior unsecured debt, material asset dispositions or liquidation of hedges in excess of certain thresholds.

The Credit Agreement is secured by liens on substantially all of the Company’s and its wholly owned and/or controlled subsidiaries’ oil and gas properties and other assets and contains customary representations and warranties, affirmative and negative covenants (including financial covenants), and events of default typical for a financing of this type. The Company’s wholly owned and/or controlled subsidiaries are required to join as guarantors and grant a security interest in each of their respective assets.

Under the terms of Credit Agreement, the Company and its subsidiaries have a continuing obligation to execute security instruments (including security agreements and mortgages) such that, after giving effect thereto, the Administrative Agent will have, at all times, a first-priority lien on a material portion of the Company’s and its subsidiaries’ properties now owned, or hereafter acquired, including substantially all of their real and personal property and at least 85% of their oil and gas properties classified as proven reserves.

The Credit Agreement contains various affirmative and negative covenants. These negative covenants may limit the Company’s ability to, among other things: incur additional indebtedness; make loans to others; make investments; enter into mergers; make or declare dividends or distributions; enter into commodity hedges exceeding a specified percentage of the Company’s expected production; enter into interest rate hedges exceeding a specified percentage of the Company’s outstanding indebtedness; incur liens; sell assets including any of the Company’s oil and gas properties unless the Company complies with certain conditions; and engage in certain other transactions without the prior consent of the lenders.

The foregoing description of the Credit Agreement is qualified in its entirety by reference to such Credit Agreement, a copy of which is filed herewith as Exhibit 10.3 and is incorporated herein by reference.


Item 2.03

Creation of Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information regarding the Credit Agreement set forth in Item 1.01 of this Current Report on Form 8-K (this “Current Report”) is incorporated by reference into this Item 2.03.

 

Item 3.02

Unregistered Sales of Equity Securities.

The information regarding the Private Placement set forth in Item 1.01 and Item 5.03 of this Current Report is incorporated by reference into this Item 3.02. The Private Placement was undertaken in reliance upon an exemption from the registration requirements of the Securities Act, pursuant to Section 4(a)(2) thereof.

 

Item 3.03

Material Modifications to Rights of Security Holders.

The information set forth in Item 5.03 is incorporated by reference into this Item 3.03.

 

Item 5.03

Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

A summary of the rights, preferences and privileges of the Preferred Shares and other material terms and conditions of the Statement of Resolution is set forth in Item 1.01 of this Current Report and is incorporated by reference into this Item 5.03.

 

Item 8.01

Other Events.

On September 12, 2019, the Company issued a press release announcing the entry into a commitment for a new five-year credit facility (the “Credit Commitment”), an agreement with a private oil and gas company to acquire approximately 159,872 net acres located in North Louisiana and the Western Anadarko Basin in Western Oklahoma and the Texas Panhandle (the “Pending Acquisition”) and the Private Placement. A copy of the press release announcing the Credit Commitment, the Pending Acquisition and the Private Placement is filed herewith as Exhibit 99.1 and is incorporated herein by reference.

 

Item 9.01

Financial Statements and Exhibits.

 

(d)

Exhibits

 

Exhibit
Number

  

Description

1.1    Underwriting Agreement, dated September 12, 2019, by and among Contango Oil & Gas Company, Cowen and Company, LLC and Intrepid Partners, LLC.
3.1    Statement of Resolution Establishing Series of Shares Designated Series A Contingent Convertible Preferred Stock of Contango Oil & Gas Company, dated September 17, 2019.
5.1    Opinion of Gibson, Dunn & Crutcher LLP.
10.1    Purchase Agreement, dated September 12, 2019, by and among Contango Oil & Gas Company and each of the purchasers set forth in Schedule A thereto.
10.2    Registration Rights Agreement, dated September 17, 2019, by and among Contango Oil & Gas Company and each of the parties set forth in Schedule A thereto.
10.3    Credit Agreement, dated September 17, 2019, by and among Contango Oil  & Gas Company, JPMorgan Chase Bank, N.A., as Administrative Agent, and each of JPMorgan Chase Bank, N.A., Royal Bank of Canada and Cadence Bank, N.A., as joint bookrunners and the lenders from time to time party thereto.
99.1    Press Release, dated September 12, 2019.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Current Report to be signed on its behalf by the undersigned hereunto duly authorized.

 

      CONTANGO OIL & GAS COMPANY
Date: September 18, 2019            /s/ E. Joseph Grady
      E. Joseph Grady
      Senior Vice President and Chief Financial and Accounting Officer
EX-1.1

Exhibit 1.1

Execution Version

44,736,842 SHARES

CONTANGO OIL & GAS COMPANY

COMMON STOCK

UNDERWRITING AGREEMENT

September 12, 2019

Cowen and Company, LLC

Intrepid Partners, LLC

as representatives of the several Underwriters

named on Schedule A hereto

c/o Cowen and Company, LLC

599 Lexington Avenue

New York, New York 10022

Ladies and Gentlemen:

Contango Oil & Gas Company, a Texas corporation (the “Company”), proposes to issue and sell to the several underwriters named in Schedule A annexed hereto (collectively, the “Underwriters”), for whom you are acting as representatives (the “Representatives”), an aggregate of 44,736,842 shares (the “Firm Shares”) of common stock, $0.04 par value per share (the “Common Stock”), of the Company. In addition, the Company proposes to grant the Underwriters the option to purchase up to an additional 6,710,526 shares of Common Stock (the “Additional Shares”) on the terms set forth in Section 1(b) hereof. The Firm Shares and the Additional Shares are collectively referred to herein as the “Shares.”

To the extent there are no additional Underwriters listed on Schedule A other than you, the terms “Representatives” and “Underwriters” as used herein shall mean Cowen and Company, LLC and Intrepid Partners, LLC, as Underwriters.

The Company has prepared and filed, in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations thereunder (collectively, the “Act”), with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-3 (File No. 333-215784) including a prospectus, which registration statement incorporates by reference documents which the Company has filed, or will file, in accordance with the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (collectively, the “Exchange Act”). Such registration statement has become effective under the Act. The term “Registration Statement,” as of any time, means such registration statement as amended by any post-effective amendments thereto at such time, including the exhibits and any schedules thereto at such time, the documents incorporated or deemed to be incorporated by reference therein at such time pursuant to Item 12 of Form S-3 under the Act and the documents otherwise deemed to be a part thereof as of such time pursuant to Rule 430B under the Act (“Rule 430B”); provided, however, that the “Registration Statement” without reference to a time means such registration statement as amended by any post-effective amendments thereto as of the time of the first contract of sale for the Shares, which time shall be considered the “new effective date” of the Registration Statement with respect to the Shares within the meaning of paragraph (f)(2) of Rule 430B under the Act, including the exhibits and schedules thereto at such time, the documents incorporated or deemed to be incorporated by reference therein at such time pursuant to Item 12 of Form S-3 under the Act and the documents otherwise deemed to be a part thereof as of such time pursuant to Rule 430B. The base


prospectus filed as part of such registration statement, as amended in the form in which it has been filed most recently with the Commission prior to the execution and delivery of this Agreement in accordance with Section 3(b) or 3(c) hereof, including the prospectus supplement thereto filed by the Company pursuant to Rule 424(c) under the Act, is referred to herein as the “Base Prospectus.” The Company has prepared and filed a preliminary prospectus supplement relating to the Shares in accordance with Rule 424(b) under the Act (“Rule 424(b)”) (including the Incorporated Documents (as defined below), the “Preliminary Prospectus Supplement”) and delivered the Base Prospectus and such preliminary prospectus supplement to the Underwriters. The Base Prospectus and the Preliminary Prospectus Supplement are collectively referred to herein as the “Preliminary Prospectus.” Promptly after execution and delivery of this Agreement, the Company will prepare and file a final prospectus supplement relating to the Shares in accordance with the provisions of Rule 424(b) (including the Incorporated Documents, the “Prospectus Supplement”). The Base Prospectus and the Prospectus Supplement, in the form the Base Prospectus and the Prospectus Supplement are first furnished to the Underwriters for use in connection with the offer and sale of Shares, are collectively referred to herein as the “Prospectus.” For purposes of this Agreement, all references to the Registration Statement, the Preliminary Prospectus or the Prospectus or any amendment or supplement thereto shall be deemed to refer to the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system (or any successor system) (“EDGAR”).

As used in this Agreement:

Applicable Time” means 7:40 P.M., New York City time, on the date hereof.

Disclosure Package” means each Issuer General Use Free Writing Prospectus, if any, issued and delivered by the Company to the Underwriters for general distribution to investors prior to the Applicable Time, the Preliminary Prospectus and the number of Shares to be sold by the Company and the initial offering price per Share, all considered together.

Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 under the Act (“Rule 433”), including, without limitation, any “free writing prospectus” (as defined in Rule 405) relating to the Shares that is (i) required to be filed with the Commission by the Company, (ii) a “road show that is a written communication” within the meaning of Rule 433(d)(8)(i) under the Act, whether or not required to be filed with the Commission, or (iii) exempt from filing with the Commission pursuant to Rule 433(d)(5)(i) under the Act because it contains a description of the Shares or of the offering thereof that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g) under the Act.

Issuer General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is furnished to the Underwriters for general distribution to investors, as evidenced by such Issuer Free Writing Prospectus being specified in Schedule B hereto.

Issuer Limited Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus.

Any reference herein to the Registration Statement, the Disclosure Package, the Preliminary Prospectus or the Prospectus shall be deemed to include the documents incorporated by reference, or deemed to be incorporated by reference, therein pursuant to Item 12 of Form S-3 under the Act prior to the execution and delivery of this Agreement (the “Incorporated Documents”). Any reference herein to the terms “amend,” “amendment” or “supplement” with respect to the Registration Statement, the Disclosure Package, the Preliminary Prospectus or the Prospectus shall be deemed to include the filing of any document incorporated by reference, or deemed to be incorporated by reference, therein at or after the execution and delivery of this Agreement.

 

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As used in this Agreement, “business day” shall mean a day on which the New York Stock Exchange (the “NYSE”) is open for trading. The terms “herein,” “hereof,” “hereto,” “hereinafter” and similar terms, as used in this Agreement, shall in each case refer to this Agreement as a whole and not to any particular section, paragraph, sentence or other subdivision of this Agreement. The term “or,” as used herein, is not exclusive.

1. Sale and Delivery of Shares.

(a) Upon the basis of the representations and warranties and subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the respective Underwriters, and each of the Underwriters, severally and not jointly, agrees to purchase from the Company the number of Firm Shares set forth opposite the name of such Underwriter in Schedule A attached hereto, subject to adjustment in accordance with Section 7 hereof at a purchase price of $0.9025 per Share, less an amount per Share equal to any dividends or other distributions declared by the Company and payable on the Firm Shares but not payable on the Additional Shares. The Company is advised by the Representatives that the Underwriters will (i) make a public offering of their respective portions of the Firm Shares as soon after the effectiveness of this Agreement as in the Representatives’ judgment is advisable and (ii) initially offer the Firm Shares upon the terms and conditions set forth in the Prospectus. The Representatives may from time to time increase or decrease the public offering price of the Shares after the initial public offering to such extent as the Representatives may determine.

(b) In addition, the Company grants to the several Underwriters the option (the “Additional Shares Option”) to purchase, and upon the basis of the representations and warranties and subject to the terms and conditions herein set forth, the Underwriters shall have the right to purchase, severally and not jointly, from the Company ratably in accordance with the number of Firm Shares to be purchased by each of them, all or a portion of the Additional Shares at the same purchase price per share to be paid by the Underwriters to the Company for the Firm Shares. The Additional Shares Option may be exercised by the Representatives on behalf of the several Underwriters at any time and from time to time on or before the thirtieth day following the date of this Agreement by written notice to the Company. Such notice shall set forth the aggregate number of Additional Shares as to which the Additional Shares Option is being exercised and the date and time when the Additional Shares are to be delivered (any such date and time being herein referred to as an “Additional Time of Purchase”); provided, however, that no Additional Time of Purchase shall be earlier than the Time of Purchase (as defined below) or later than the tenth business day after the date on which the Additional Shares Option shall have been exercised. The number of Additional Shares to be sold to each Underwriter shall be the number which bears the same proportion to the aggregate number of Additional Shares being purchased as the number of Firm Shares set forth opposite the name of such Underwriter on Schedule A hereto bears to the total number of Firm Shares (subject, in each case, to such adjustment as the Representatives may determine to eliminate fractional shares and to adjustment in accordance with Section 7 hereof).

(c) Payment of the purchase price for the Firm Shares shall be made to the Company by Federal Funds wire transfer against delivery of the certificates or security entitlements in respect of the Firm Shares to the Representatives through the facilities of The Depository Trust Company for the respective accounts of the Underwriters. Such payment and delivery shall be made at 10:00 A.M., New York City time, on September 17, 2019 (unless another time shall be agreed to by the Representatives and the Company, unless postponed in accordance with the provisions of Section 7 hereof). The time at which such payment and delivery are to be made is herein referred to as the “Time of Purchase.” Electronic transfer of the Firm Shares shall be made to the Representatives at the Time of Purchase in such names and in such denominations as the Representatives shall specify.

 

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(d) Payment of the purchase price for the Additional Shares shall be made at the Additional Time of Purchase in the same manner and at the same office and time of day as the payment for the Firm Shares. Electronic transfer of the Additional Shares shall be made to the Representatives at the Additional Time of Purchase in such names and in such denominations as the Representatives shall specify.

(e) Each of the Representatives individually and not as representatives of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Firm Shares or the Additional Shares, if any, to be purchased by any Underwriter whose funds have not been received by the Time of Purchase or any applicable Additional Time of Purchase, as the case may be, but such payment shall not relieve such Underwriter from its obligations hereunder.

(f) Deliveries of the documents described in Section 5 hereof with respect to the purchase of the Shares shall be made at the offices of Gibson, Dunn & Crutcher LLP at 811 Main Street, Suite 3000, Houston, Texas 77002, at 10:00 A.M., New York City time, at the Time of Purchase and, if applicable, any Additional Time of Purchase, as the case may be.

2. Representations and Warranties. (a) The Company represents and warrants to the Underwriters on the date of this Agreement, the Applicable Time, the Time of Purchase and each Additional Time of Purchase, if any, and agrees with the Underwriters, as follows:

(i) The Company meets the requirements for use of Form S-3 under the Act. The Shares have been and remain eligible for registration by the Company on the Registration Statement, and the Registration Statement and any post-effective amendment thereto have become effective under the Act. No stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the Act, no notice of objection of the Commission to the use of the Registration Statement or any post-effective amendment thereto has been received by the Company, no order preventing or suspending the use of the Preliminary Prospectus or the Prospectus or any amendment or supplement thereto has been issued and no proceedings for any of those purposes have been instituted or are pending or, to the Company’s knowledge, threatened. The Company has complied with each request (if any) from the Commission related to the Registration Statement, Preliminary Prospectus or Prospectus for additional information.

Each of the Registration Statement and any post-effective amendment thereto, at the time of its initial effectiveness and as of each deemed effective date with respect to the Underwriters pursuant to Rule 430B(f)(2), complied in all material respects with the requirements of the Act. Each of the Preliminary Prospectus and the Prospectus and any amendment or supplement thereto, at the time it was filed with the Commission, complied in all material respects with the requirements of the Act and is identical to the electronically transmitted copy thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. The Incorporated Documents, when they became effective or at the time they were or hereafter are filed with the Commission, as the case may be, complied and will comply in all material respects with the requirements of the Exchange Act.

(ii) Neither the Registration Statement nor any amendment thereto, at its initial effectiveness or subsequent deemed effective date, the Time of Purchase or any Additional Time of Purchase, contained, contains or will contain an untrue statement of a material fact or omitted, omits or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. At the Applicable Time, neither (A) the Disclosure Package nor (B) any individual Issuer Limited Use Free Writing Prospectus, when considered together with the Disclosure Package, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein,

 

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in the light of the circumstances under which they were made, not misleading. Neither the Prospectus nor any amendment or supplement thereto (including any prospectus wrapper), as of its issue date or at the time of any filing with the Commission pursuant to Rule 424(b), the Time of Purchase or any Additional Time of Purchase, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Incorporated Documents, when they became effective or at the time they were or hereafter are filed with the Commission, as the case may be, when read together with the other information in the Registration Statement, the Disclosure Package or the Prospectus, as the case may be, did not, do not and will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(iii) Each Issuer Free Writing Prospectus, as of its issue date and at all subsequent times through the completion of the public offer and sale of the Shares, did not, does not and will not include any information that conflicted, conflicts or will conflict with the information then contained in the Registration Statement, the Preliminary Prospectus or the Prospectus or any amendment or supplement thereto, including any Incorporated Document, that has not been superseded or modified.

(iv) (A) At the time of filing the Registration Statement and any post-effective amendment thereto, (B) at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) under the Act) of the Shares, (C) at the date of this Agreement and (D) at the Applicable Time, the Company was not and is not an “ineligible issuer,” as defined in Rule 405, without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an ineligible issuer.

(v) The Company has an authorized, issued and outstanding capitalization as set forth in the section of the Registration Statement, the Preliminary Prospectus component of the Disclosure Package and the Prospectus entitled “Capitalization” under the column entitled “Actual” (except for subsequent issuances, if any, pursuant to this Agreement, pursuant to reservations, agreements or employee benefit plans referred to in the Registration Statement, the Disclosure Package and the Prospectus, pursuant to the exercise of convertible securities or options referred to in the Registration Statement, the Disclosure Package and the Prospectus or pursuant to the issuance of preferred stock of the Company in a private placement concurrent with the issuance of the Firm Shares referred to in the Registration Statement, the Disclosure Package and the Prospectus and the issuance of Common Stock upon conversion of such preferred stock). All of the issued and outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable, have been issued in compliance with all applicable securities laws and were not issued in violation of any preemptive right, resale right, right of first refusal or similar right.

(vi) The Common Stock is duly listed, and admitted and authorized for trading, on the NYSE American LLC (the “NYSE American”). The Shares are duly listed, and admitted and authorized for trading, subject (except in the case of any Additional Time of Purchase) to official notice of issuance, on the NYSE American. The Company has not received any notice from the NYSE American regarding the delisting or potential delisting of the Common Stock, including the Shares, from the NYSE American. The certificates for the Shares are in due and proper form.

 

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(vii) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Texas, with full corporate power and authority to own, lease and operate its properties and assets and conduct its business as described in the Registration Statement, the Disclosure Package and the Prospectus, to execute and deliver this Agreement and to issue, sell and deliver the Shares as contemplated herein.

(viii) The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the ownership or leasing of its properties and assets or the conduct of its business requires such qualification, except where the failure to be so qualified and in good standing would not, individually or in the aggregate, reasonably be expected to either (i) have a material adverse effect on the business, properties, condition (financial or otherwise), liquidity, results of operations or prospects of the Company and the Subsidiaries (as defined below) taken as a whole or (ii) prevent or materially interfere with consummation of the transactions contemplated hereby (the occurrence of any such effect or any such prevention or interference described in the foregoing clauses (i) and (ii) being herein referred to as a “Material Adverse Effect”).

(ix) The Company owns, directly or indirectly, the issued and outstanding capital stock, membership interests, partnership interests or other ownership interests (as applicable) of each of the entities listed on Schedule C hereto in the percentages set forth on Schedule C hereto, which constitute all direct or indirect subsidiaries of the Company. References herein to “Subsidiaries” refer to the entities listed on Schedule C hereto. Each Subsidiary has been duly organized and is validly existing and in good standing under the laws of the jurisdiction of its organization, with full power and authority to own, lease and operate its properties and assets and to conduct its business as described in the Registration Statement, the Disclosure Package and the Prospectus, except where the failure to be in good standing would not have a Material Adverse Effect. Each Subsidiary is duly qualified to do business and is in good standing in each jurisdiction where the ownership or leasing of its properties and assets or the conduct of its business requires such qualification, except where the failure to be so qualified and in good standing would not, individually or in the aggregate, have a Material Adverse Effect. Except as disclosed in the Registration Statement, the Disclosure Package and the Prospectus, all of the outstanding shares of capital stock of, or other equity interests in, each of the Subsidiaries have been duly authorized and validly issued, are fully paid and non-assessable, have been issued in compliance with all applicable securities laws, were not issued in violation of any preemptive right, resale right, right of first refusal or similar right and are owned by the Company or applicable Subsidiary subject to no security interest, other encumbrance or adverse claims, except for such liens, encumbrances, equities or claims granted in connection with that certain Credit Agreement, dated as of October 1, 2013, among the Company, as borrower, Royal Bank of Canada, as administrative agent, and each lender from time to time party thereto, as amended by the First Amendment to Credit Agreement, dated as of April 11, 2014, the Second Amendment to Credit Agreement, dated as of October 28, 2014, the Third Amendment to Credit Agreement, dated as of May 6, 2016, the Fourth Amendment and Waiver to Credit Agreement, dated as of March 7, 2018, the Fifth Amendment to Credit Agreement, dated as of May 18, 2018, the Sixth Amendment to Credit Agreement, dated as of November 2, 2018, the Seventh Amendment to Credit Agreement, dated as of June 17, 2019, and as further amended, restated or modified from time to time, and related security documents (collectively, the “Credit Agreement”), or as could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. No options, warrants or other rights to purchase, agreements or other obligations to issue or other rights to convert any obligation into shares of capital stock of, or equity interests in, the Subsidiaries are outstanding. The Company owns, directly or indirectly, 37% of the outstanding limited liability company interests in Exaro Energy III LLC, a Delaware limited liability company (“Exaro”), and such limited liability company interests are owned by the Company subject to no security interest, other encumbrance or adverse claims, except for such liens, encumbrances, equities or claims granted in connection with the Credit Agreement or as could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

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(x) The Shares have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued, fully paid and non-assessable and free of statutory and contractual preemptive rights, resale rights, rights of first refusal and similar rights and any restriction upon the voting or transfer thereof pursuant to the Texas Business Organizations Code or the Company’s charter or bylaws or any agreement or other instrument to which the Company is a party. No holder of Shares will be subject to personal liability by reason of being such a holder.

(xi) The capital stock of the Company, including the Common Stock, conforms in all material respects to each description thereof contained or incorporated by reference in the Registration Statement, the Disclosure Package and the Prospectus.

(xii) This Agreement has been duly authorized, executed and delivered by the Company.

(xiii) Neither the Company nor any of the Subsidiaries is in breach or violation of or in default under (nor has any event occurred which, with notice, lapse of time or both, would result in any breach or violation of, constitute a default under or give the holder of any indebtedness (or a person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a part of such indebtedness under) (A) its charter or bylaws or similar organizational documents, or (B) any indenture, mortgage, deed of trust, bank loan or credit agreement or other evidence of indebtedness, or any license, lease, contract or other agreement or instrument to which it is a party or by which it or any of its properties or assets may be bound or affected, or (C) any U.S. federal, state, local or foreign law, or (D) any rule or regulation of any U.S. federal, state, local or foreign governmental or regulatory commission, board, body, authority or agency or any self-regulatory organization or other non-governmental regulatory authority (including, without limitation, the NYSE American) (collectively, a “Regulatory Authority”), or (E) any decree, judgment or order applicable to it or any of its properties, except, in the case of clauses (B), (C), (D) and (E), to the extent that any such conflict, breach, violation or default would not reasonably be expected to have a Material Adverse Effect.

(xiv) The execution, delivery and performance of this Agreement, the issuance and sale of the Shares, the consummation of the transactions contemplated hereby and the application of the proceeds from the sale of the Shares as described under “Use of Proceeds” in the most recent Preliminary Prospectus do not and will not conflict with, result in any breach or violation of or constitute a default under (nor constitute any event which, with notice, lapse of time or both, would result in any breach or violation of, constitute a default under or give the holder of any indebtedness (or a person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a part of such indebtedness under) (or result in the creation or imposition of a lien, charge or encumbrance on any property or asset of the Company or any Subsidiary pursuant to) (A) the charter or bylaws or similar organizational document of the Company or any of the Subsidiaries, or (B) any indenture, mortgage, deed of trust, bank loan or credit agreement or other evidence of indebtedness, or any license, lease, contract or other agreement or instrument to which the Company or any of the Subsidiaries is a party or by which any of them or any of their respective properties or assets may be bound or affected, or (C) any U.S. federal, state, local or foreign law, or (D) any rule or regulation of any Regulatory Authority (including, without limitation, the rules and regulations of the NYSE American), or (E) any decree, judgment or order applicable to the Company or any of the Subsidiaries or any of their respective properties or assets.

 

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(xv) No approval, authorization, license, registration, qualification, decree, consent or order of or filing with any Regulatory Authority or approval of the stockholders of the Company is necessary or required in connection with the issuance and sale of the Shares or the consummation by the Company of the transactions contemplated hereby, other than (i) registration of the offer and sale of the Shares under the Act, which has been effected, (ii) any necessary qualification under the state or non-U.S. securities or blue sky laws of the various jurisdictions in which the Shares are being offered by the Underwriters or (iii) under the Rules of the Financial Industry Regulatory Authority, Inc. (“FINRA”).

(xvi) Except as disclosed in the Registration Statement, the Disclosure Package and the Prospectus, (i) no person has the right, contractual or otherwise, to cause the Company to issue or sell to it any shares of Common Stock or shares of any other capital stock of the Company, (ii) no person has any preemptive rights, resale rights, rights of first refusal or other rights to purchase any shares of Common Stock or shares of any other capital stock of the Company and (iii) no person has the right to act as an underwriter or as a financial advisor to the Company in connection with the offer and sale of the Shares. Except as disclosed in the Registration Statement, the Disclosure Package and the Prospectus and duly waived, no person has the right, contractual or otherwise, to cause the Company to register under the Act the offer or sale of any shares of Common Stock, or to include any such shares, in the Registration Statement or the offering of Shares contemplated thereby.

(xvii) Each of the Company and the Subsidiaries has all necessary permits, licenses, authorizations, consents and approvals issued by the appropriate Regulatory Authorities and has made all necessary filings required under any applicable law, regulation or rule, and has obtained all necessary permits, licenses, authorizations, consents and approvals from other persons, in order to conduct their respective businesses as described in the Registration Statement, the Disclosure Package and the Prospectus. Neither the Company nor any of the Subsidiaries is in violation of, or in default under, or has received notice of any proceedings relating to revocation or modification of, any such permit, license, authorization, consent or approval or any U.S. federal, state, local or foreign law, regulation or rule or any decree, judgment or order applicable to the Company or any of the Subsidiaries, except where such violation, default, revocation or modification would not, individually or in the aggregate, have a Material Adverse Effect.

(xviii) Except as disclosed in the Registration Statement, the Disclosure Package and the Prospectus, there are no actions, suits, proceedings, claims, investigations or inquiries pending or, to the Company’s knowledge, threatened to which the Company or any of the Subsidiaries or any of their respective directors or officers is or would be a party or of which any of their respective properties or assets is or would be subject at law or in equity, before or by any Regulatory Authority, except any such action, suit, proceeding, claim, investigation or inquiry which, if resolved adversely to the Company or any Subsidiary, would not, individually or in the aggregate, have a Material Adverse Effect.

(xix) Grant Thornton LLP (“GT”), whose report on the consolidated financial statements of the Company and the Subsidiaries is included or incorporated by reference in the Registration Statement, the Disclosure Package and the Prospectus, is an independent registered public accounting firm as required by the Act and by the rules of the Public Company Accounting Oversight Board.

 

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(xx) The financial statements included or incorporated by reference in the Registration Statement, the Disclosure Package and the Prospectus, together with the related notes and schedules, present fairly the consolidated financial position of the Company and the Subsidiaries as of the dates indicated and the consolidated results of operations, cash flows and changes in stockholders’ equity of the Company and the Subsidiaries for the periods specified and have been prepared in compliance with the requirements of the Act and the Exchange Act and in conformity with U.S. generally accepted accounting principles (“GAAP”) applied on a consistent basis during the periods involved. The supporting schedules included or incorporated by reference in the Registration Statement, the Disclosure Package and the Prospectus, if any, present fairly in all material respects the information set forth therein. The other financial and statistical data included or incorporated by reference in the Registration Statement, the Disclosure Package and the Prospectus are accurately and fairly presented in all material respects and are prepared on a basis consistent with the financial statements and books and records of the Company. There are no financial statements (historical or pro forma) that are required by the Act or the Exchange Act to be included or incorporated by reference in the Registration Statement, the Disclosure Package or the Prospectus that are not included or incorporated by reference as required. The Company and the Subsidiaries do not have any material liabilities or obligations, direct or contingent (including any off-balance sheet obligations), not described or incorporated by reference in the Registration Statement, the Disclosure Package and the Prospectus. All disclosures included or incorporated by reference in the Registration Statement, the Disclosure Package and the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission) comply with Regulation G under the Exchange Act and Item 10 of Regulation S-K under the Act, to the extent applicable. The interactive data in eXtensible Business Reporting Language included or incorporated by reference in the Registration Statement, the Disclosure Package and the Prospectus fairly presents the information called for in all material respects and has been prepared in accordance with the Commission’s rules and guidelines applicable thereto.

(xxi) Netherland, Sewell & Associates, Inc. (“NSAI”), a reserve engineer that prepared reserve reports of the estimated net proved oil and natural gas reserves held by the Company and the Subsidiaries as of December 31, 2018 with respect to certain oil and gas properties located in Colorado, Louisiana, Mississippi, Texas and Wyoming (the “NSAI Properties”), was, as of the date of preparation of such reserve reports, and is, as of the date hereof, an independent petroleum engineer with respect to the Company.

(xxii) The information contained or incorporated by reference in the most recent Preliminary Prospectus regarding estimated proved reserves of the Company and the Subsidiaries as of December 31, 2018 with respect to the NSAI Properties is based upon the reserve reports prepared by NSAI. The information provided to NSAI by the Company and the Subsidiaries, including, without limitation, information as to: production, costs of operation and development, current prices for production, agreements relating to current and future operations and sales of production, was true and correct in all material respects on the dates the reports were made. Such information was provided to NSAI in accordance with all customary industry practices.

(xxiii) William M. Cobb & Associates (“WMC”), a reserve engineer that prepared reserve reports of the estimated net proved oil and natural gas reserves held by the Company and the Subsidiaries as of January 1, 2019 with respect to certain oil and gas properties located in West Texas, state and federal waters of the Gulf of Mexico and onshore Mississippi (the “WMC Properties”), was, as of the date of preparation of such reserve reports, and is, as of the date hereof, an independent petroleum engineer with respect to the Company.

 

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(xxiv) The information contained or incorporated by reference in the most recent Preliminary Prospectus regarding estimated proved reserves of the Company and the Subsidiaries as of January 1, 2019 with respect to the WMC Properties is based upon the reserve reports prepared by WMC. The information provided to WMC by the Company and the Subsidiaries, including, without limitation, information as to: production, costs of operation and development, current prices for production, agreements relating to current and future operations and sales of production, was true and correct in all material respects on the dates the reports were made. Such information was provided to WMC in accordance with all customary industry practices.

(xxv) W.D. Von Gonten & Co. (“WDVG”), a reserve engineer that prepared reserve reports of the estimated net proved oil and natural gas reserves held by Exaro as of January 1, 2019 with respect to certain oil and gas properties located in Wyoming (the “WDVG Properties”), was, as of the date of preparation of such reserve reports, and is, as of the date hereof, an independent petroleum engineer with respect to the Company.

(xxvi) The information contained or incorporated by reference in the most recent Preliminary Prospectus regarding estimated proved reserves of Exaro as of January 1, 2019 with respect to the WDVG Properties is based upon the reserve reports prepared by WDVG. To the knowledge of the Company, the information provided to WDVG by Exaro, including, without limitation, information as to: production, costs of operation and development, current prices for production, agreements relating to current and future operations and sales of production, was true and correct in all material respects on the dates the reports were made. Such information was provided to WDVG in accordance with all customary industry practices.

(xxvii) The factual information underlying the estimates of reserves of the Company and the Subsidiaries included or incorporated by reference in the Registration Statement, the Disclosure Package and the Prospectus, including, without limitation, production, costs of operation and development, current prices for production, agreements relating to current and future operations and sales of production, was true and correct in all material respects on the dates such estimates were made and such information was supplied and was prepared in accordance with customary industry practices. Other than normal production of reserves, intervening market commodity price fluctuations, fluctuations in demand for such products, adverse weather conditions, unavailability or increased costs of rigs, equipment, supplies or personnel, the timing of third party operations and other factors, changes in applicable regulations or regulatory guidance regarding the rules for estimating reserves, in each case in the ordinary course of business, and except as described in the Registration Statement, the Disclosure Package and the Prospectus, neither of the Company nor any of the Subsidiaries is aware of any facts or circumstances that would result in a material adverse change in the aggregate net reserves, or the aggregate present value of future net cash flows therefrom, as described in the Registration Statement, the Disclosure Package and the Prospectus.

(xxviii) Except as disclosed in the Registration Statement, the Disclosure Package and the Prospectus, each stock option granted under any stock option plan of the Company or any Subsidiary (each, a “Stock Plan”) was granted with a per share exercise price no less than the fair market value per share of Common Stock on the grant date of such option, and no such grant involved any “back-dating,” “forward-dating” or similar practice with respect to the effective date of such grant. Each such stock option (i) was granted in compliance with applicable law and with the applicable Stock Plan(s), (ii) was duly approved by the Board of Directors (or a duly authorized committee thereof) of the Company or such Subsidiary, as applicable, and (iii) has been properly accounted for in the Company’s consolidated financial statements in accordance with GAAP and disclosed in the Registration Statement, the Disclosure Package and the Prospectus.

 

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(xxix) Except as disclosed in the Registration Statement, the Disclosure Package and the Prospectus, subsequent to the respective dates as of which information is given in the Registration Statement, the Disclosure Package and the Prospectus, there has not been, whether or not arising in the ordinary course of business, (i) any material adverse change, or any development involving a prospective material adverse change, in the business, properties, management, condition (financial or otherwise), liquidity, or results of operations of the Company and the Subsidiaries taken as a whole (a “Material Adverse Change”), (ii) any transaction which is material to the Company and the Subsidiaries taken as a whole, (iii) any obligation or liability, direct or contingent (including any off-balance sheet obligations) incurred by the Company or any Subsidiary that is material to the Company and the Subsidiaries taken as a whole, (iv) any change in the capital stock of, or other equity interests in, or outstanding indebtedness of, the Company or any Subsidiaries or (v) any dividend or distribution of any kind declared, paid or made on the capital stock of, or other equity interests in, the Company or any Subsidiary.

(xxx) Neither the Company nor any Subsidiary is, or at any time when a prospectus is required by the Act to be delivered (whether physically or through compliance with Rule 172 under the Act or any similar rule) in connection with any sale of Shares or at the Time of Purchase or any Additional Time of Purchase will any of them be, and, after giving effect to the offer and sale of the Shares and the application of the proceeds thereof, neither of them will be, an “investment company,” as defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”).

(xxxi) The Company and the Subsidiaries have good and marketable title to all of their interests in oil and gas properties and all other real property owned by the Company and the Subsidiaries and good title to all other properties owned by them, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind except such as (i) are disclosed in the Registration Statement, the Disclosure Package and the Prospectus, (ii) arise under the Credit Agreement, (iii) liens and encumbrances under operating agreements, unitization and pooling agreements, production sales contracts, farm-out agreements and other oil and gas exploration participation and production agreements, in each case that secure payment of amounts not yet due and payable for the performance of other unmatured obligations and are of a scope and nature customary in the oil and gas industry or arise in connection with drilling and production operations, or (iv) would not, in the aggregate, have a Material Adverse Effect. Except as would not, in the aggregate, reasonably be expected to have a Material Adverse Effect or as described in the Registration Statement, the Disclosure Package and the Prospectus, all of the oil and gas leases of the Company or any of the Subsidiaries and under which the Company or any of the Subsidiaries holds properties described in the Prospectus, are in full force and effect, and neither the Company nor any of the Subsidiaries has received written notice of any claim of any sort that has been asserted by anyone adverse to the rights of the Company or any of the Subsidiaries under any of such leases, or affecting or questioning the rights of the Company or such Subsidiary to the continued possession of the leased or subleased premises under any such lease, except for such claims that would not have a Material Adverse Effect.

(xxxii) The Company and the Subsidiaries have such consents, easements, rights-of-way or licenses from any person (collectively, “rights-of-way”) as are necessary to enable the Company to conduct its business in the manner described in the Registration Statement, the Disclosure Package and the Prospectus, subject to qualifications as may be set forth in the Disclosure Package and the Prospectus, except where failure to have such rights-of-way would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

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(xxxiii) As of the date hereof, (i) all royalties, rentals, deposits and other amounts owed under the oil and gas leases constituting the oil and gas properties of the Company and the Subsidiaries have been properly and timely paid (other than amounts held in suspense accounts pending routine payments or related to disputes about the proper identification of royalty owners and except where the failure to timely pay or pay such amounts would not reasonably be expected to have a Material Adverse Effect); and no material amount of proceeds from the sale or production attributable to the oil and gas properties of the Company and the Subsidiaries are currently being held in suspense by any purchaser thereof, except where such amounts due would not reasonably be expected to have a Material Adverse Effect, and (ii) there are no claims under take-or-pay contracts pursuant to which natural gas purchasers have any makeup rights affecting the interests of the Company or the Subsidiaries in their respective oil and gas properties, except where such claims would not reasonably be expected to have a Material Adverse Effect.

(xxxiv) Each of the Company and the Subsidiaries owns, licenses or otherwise has the right to use all inventions, patent applications, patents, trademarks (both registered and unregistered), trade names, service names, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), copyrights, service marks and other intellectual property as described in the Registration Statement, the Disclosure Package and the Prospectus and which is necessary for the conduct of, or material to, its business (collectively, the “Intellectual Property”), and the Company is unaware of any claim to the contrary or any challenge by any other person to the rights of the Company or any of the Subsidiaries with respect to the Intellectual Property. Neither the Company nor any of the Subsidiaries has infringed or is infringing the intellectual property of a third party, and neither the Company nor any Subsidiary is subject to any pending claim, or aware of any threatened claim, by a third party to the contrary.

(xxxv) Except for matters which would not, individually or in the aggregate, have a Material Adverse Effect, (i) there is (A) no unfair labor practice complaint pending or, to the Company’s knowledge, threatened against the Company or any of the Subsidiaries before the National Labor Relations Board, and no grievance or arbitration proceeding arising out of or under collective bargaining agreements is pending or, to the Company’s knowledge, threatened, (B) no strike, labor dispute, slowdown or stoppage pending or, to the Company’s knowledge, threatened against the Company or any of the Subsidiaries and (C) no union representation dispute currently existing concerning the employees of the Company or any of the Subsidiaries, (ii) to the Company’s knowledge, no union organizing activities are currently taking place concerning the employees of the Company or any of the Subsidiaries and (iii) to the Company’s knowledge, there has been no violation of any federal, state, local or foreign law relating to discrimination in the hiring, promotion or pay of employees, any applicable wage or hour laws or any provision of the Employee Retirement Income Security Act of 1974, as amended, or the rules and regulations promulgated thereunder concerning the employees of the Company or any of the Subsidiaries.

(xxxvi) The Company and the Subsidiaries and their respective properties, assets and operations are in compliance with, and the Company and each of the Subsidiaries hold all permits, authorizations and approvals required under, Environmental Laws (as defined below), except to the extent that failure to so comply or to hold such permits, authorizations or approvals would not, individually or in the aggregate, have a Material Adverse Effect. There are no past or present conditions, circumstances, activities, practices, actions, omissions or plans that could reasonably be expected to give rise to any material costs or liabilities to the Company or any Subsidiary under, or to interfere with or prevent compliance by the Company or any Subsidiary with, Environmental Laws. Except as would not, individually or in the aggregate, have a Material Adverse Effect, neither the Company nor any of the Subsidiaries (i) is the subject of any investigation, (ii) has received any notice or claim, (iii) is a party to or affected by any pending or, to the Company’s knowledge, threatened action, suit or proceeding, (iv) is bound by any decree, judgment or order or (v) has entered into any agreement, in each case relating to any actual or

 

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alleged violation of any Environmental Law or any actual or alleged release or threatened release or cleanup at any location of any Hazardous Materials (as defined below) (as used herein, “Environmental Law” means any U.S. federal, state, local or foreign law, statute, ordinance, rule, regulation, order, decree, judgment, injunction, permit, license, authorization or other binding requirement, or common law, relating to the protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, those relating to the distribution, processing, generation, treatment, storage, disposal, transportation, other handling or release or threatened release of Hazardous Materials, and “Hazardous Materials” means any material (including, without limitation, any flammable explosives, radioactive materials, toxic chemicals, pollutants, contaminants, hazardous or toxic substances or wastes, petroleum or petroleum products, asbestos-containing materials or mold) or any other hazardous materials as defined or regulated by or which may give rise to liability under any Environmental Law). In the ordinary course of their business, the Company and each of the Subsidiaries conduct periodic reviews of the effect of the Environmental Laws on their respective properties, assets and operations, in the course of which they identify and evaluate associated costs and liabilities (including, without limitation, any capital or operating expenditures required for cleanup, closure of properties or compliance with the Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties).

(xxxvii) All tax returns required to be filed by the Company or any of the Subsidiaries have been timely filed, and all taxes and other assessments of a similar nature (whether imposed directly or through withholding), including any interest, additions to tax or penalties applicable thereto due or claimed to be due from such entities, have been timely paid, other than those being contested in good faith and for which adequate reserves have been provided or those that would not, individually or in the aggregate, have a Material Adverse Effect.

(xxxviii) The Company and each of the Subsidiaries maintain insurance covering their respective properties, assets, operations, personnel and businesses as the Company reasonably deems adequate. Such insurance insures against such losses and risks to an extent which is adequate in accordance with customary industry practice for similar companies to protect the Company and the Subsidiaries and their respective properties, assets, operations, personnel and businesses in all material respects. All such insurance is fully in force. Neither the Company nor any Subsidiary has reason to believe that it will not be able to renew any such insurance as and when such insurance expires.

(xxxix) Neither the Company nor any Subsidiary has sent or received any communication regarding termination of, or intent not to renew, any of the contracts or other documents referred to or described in the Registration Statement, the Disclosure Package or the Prospectus, or referred to or described in, or filed as an exhibit to, the Registration Statement or any Incorporated Document, and no such termination or non-renewal has been threatened by the Company or any Subsidiary or, to the Company’s knowledge, any other party to any such contract or other document, except for such terminations or non-renewals as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(xl) The Company and each of the Subsidiaries maintain effective internal control over financial reporting (as defined in Rules 13a-15 and 15d-15 under the Exchange Act) and a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; (iv) the recorded accountability

 

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for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences; and (v) the interactive data in eXtensible Business Reporting Language included or incorporated by reference in the Registration Statement, the Disclosure Package and the Prospectus fairly presents the information called for in all material respects and is prepared in accordance with the Commission’s rules and guidelines applicable thereto. The Company’s independent registered public accountants and the Audit Committee of the Board of Directors of the Company have been advised of (i) all significant deficiencies and material weaknesses, if any, in the design or operation of the Company’s internal control over financial reporting (whether or not remediated) and (ii) all fraud, if any, whether or not material, that involves management or other employees who have a role in the Company’s internal control over financial reporting. All significant deficiencies and material weaknesses, if any, in the Company’s internal control over financial reporting are disclosed in the Registration Statement, the Disclosure Package and the Prospectus. Since the end of the Company’s most recent audited fiscal year, except as disclosed in the Registration Statement, the Disclosure Package and the Prospectus, there have not been any changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

(xli) The Company and each of the Subsidiaries maintain effective disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 under the Exchange Act) designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the Commission’s rules and forms, and is accumulated and communicated to management of the Company, including its principal executive officer and its principal financial officer, as appropriate, to allow timely decisions regarding disclosure.

(xlii) The principal executive officers (or their equivalents) and principal financial officers (or their equivalents) of the Company have made all certifications required by the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and any related rules and regulations promulgated by the Commission, and the statements contained in each such certification are complete and correct in all material respects. The Company, the Subsidiaries and the Company’s directors and executive officers are each in compliance in all material respects with all applicable effective provisions of the Sarbanes-Oxley Act and the rules and regulations of the Commission and the NYSE American promulgated thereunder.

(xliii) Each “forward-looking statement” (within the meaning of Section 27A of the Act or Section 21E of the Exchange Act) contained or incorporated by reference in the Registration Statement, the Disclosure Package or the Prospectus was made by the Company with a reasonable basis and in good faith.

(xliv) All statistical or market-related data included or incorporated by reference in the Registration Statement, the Disclosure Package and the Prospectus are based on or derived from sources that the Company reasonably believes to be reliable and accurate.

(xlv) Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its Subsidiaries is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is

 

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defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA; and the Company, its Subsidiaries and, to the knowledge of the Company, its affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith.

(xlvi) The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with all applicable financial recordkeeping and reporting requirements and the money laundering statutes and the rules and regulations thereunder, including but not limited to the Currency and Foreign Transactions Reporting Act of 1970, as amended, the United States Bank Secrecy Act, as amended by the USA PATRIOT Act of 2001, the United States Money Laundering Control Act of 1986, as amended, and the applicable anti-money laundering statutes of jurisdictions where the Company and its Subsidiaries conduct business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its Subsidiaries with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.

(xlvii) None of the Company, any of its Subsidiaries or, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its Subsidiaries is currently the subject or the target of any applicable sanctions administered or enforced by the U.S. Government (including, without limitation, the Office of Foreign Assets Control of the U.S. Department of the Treasury), the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority (collectively, “Sanctions”), nor is the Company or any of its Subsidiaries located, organized, or resident in a country or territory that is the subject or target of Sanctions; and the Company will not directly or indirectly use the proceeds of the offering hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity (i) to fund any activities of or business with any person, or in any country or territory, that, at the time of such funding, is the subject of Sanctions or (ii) in any other manner that will result in a violation by any person (including any person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions. Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its Subsidiaries, is a person that is, or is 50% or more owned or otherwise controlled by a person that is: (i) the subject of any Sanctions (a “Sanctioned Person”); or (ii) located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions that broadly prohibit dealings with that country or territory (currently, Cuba, Iran, North Korea, Sudan, Venezuela, Syria and the Crimea region of Ukraine claimed by Russia) (collectively, “Sanctioned Countries” and each, a “Sanctioned Country”). Except as has been disclosed to the Underwriters or is not material to the analysis under any Sanctions, neither the Company nor any of its Subsidiaries has engaged in any dealings or transactions with or for the benefit of a Sanctioned Person, or with or in a Sanctioned Country, in the preceding five (5) years, nor does the Company or any of its Subsidiaries have any plans to increase its dealings or transactions with Sanctioned Persons, or with or in Sanctioned Countries.

(xlviii) No Subsidiary is currently prohibited, directly or indirectly, from paying any dividends or making other distributions to the Company, from repaying to the Company any loans or advances to such Subsidiary from the Company or from transferring any of such Subsidiary’s properties or assets to the Company or any other Subsidiary of the Company, except, in each case, as described in the Registration Statement, the Disclosure Package and the Prospectus.

 

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(xlix) The issuance and sale of the Shares will not cause any holder of any shares of capital stock, securities convertible into or exchangeable or exercisable for capital stock or options, warrants or other rights to purchase capital stock or any other securities of the Company to have any right to acquire any shares of capital stock of the Company.

(l) Neither the Company nor any of the Subsidiaries is a party to any contract, agreement or understanding with any person (other than as contemplated by this Agreement) that would give rise to a valid claim against the Company or any of the Subsidiaries or the Underwriters for a brokerage commission, finder’s fee or like payment in connection with the offer and sale of any Shares.

(li) Neither the Company nor any of the Subsidiaries nor any of their respective directors, officers, affiliates or controlling persons has taken, directly or indirectly, any action that is designed, or might reasonably be expected, to cause or result in, or any action that constitutes, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares or a violation of Regulation M under the Exchange Act.

(lii) Except as disclosed in the Registration Statement, the Disclosure Package and the Prospectus, the Company (A) does not have any material lending or other relationship with any Underwriter or any bank, lending or other affiliate of any Underwriter and (B) does not intend to use any of the proceeds from its sale of Shares contemplated hereby to repay any outstanding debt owed to any Underwriter or any affiliate of any Underwriter.

(liii) No relationship, direct or indirect, exists between or among the Company or any of the Subsidiaries on the one hand, and the directors, officers, stockholders (or analogous interest holders), customers or suppliers of the Company or any of its affiliates on the other hand, which is required to be described in the Disclosure Package and the Prospectus or a document incorporated by reference therein and which is not so described.

(liv) Except as described in the Registration Statement or the Disclosure Package, no person or entity has the right to require registration of shares of Common Stock or other securities of the Company or any of its Subsidiaries because of the filing or effectiveness of the Registration Statement or otherwise, except for persons and entities who have expressly waived such right in writing or who have been given timely and proper written notice and have failed to exercise such right within the time or times required under the terms and conditions of such right. Except as described in the Disclosure Package, there are no persons with registration rights or similar rights to have any securities registered by the Company or any of its Subsidiaries under the Act, except the Common Stock issuable upon conversion of preferred stock issued in a private placement concurrent with the issuance of the Firm Shares referred to in the Registration Statement, the Disclosure Package and the Prospectus.

(lv) The Company and its Subsidiaries are presently in material compliance with all applicable laws or statutes and all judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority, internal policies and contractual obligations relating to the privacy and security of IT Systems and personal data and to the protection of such IT Systems and personal data from unauthorized use, access, misappropriation or modification, except to the extent that failure to so comply would not, individually or in the aggregate, have a Material Adverse Effect. To the knowledge of the Company, there has been no security breach or attack or other compromise of or relating to any of the Company’s and its Subsidiaries’ IT Systems, except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

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(b) Any certificate signed by any officer or other representative of the Company or any of the Subsidiaries and delivered to the Representatives or to counsel for the Underwriters in connection with the offering of the Shares shall be deemed to be a representation and warranty by the Company, as to matters covered thereby, to the Underwriters.

3. Certain Covenants of the Company. The Company agrees:

(a) The Company, subject to Sections 3(b) and 3(c) hereof, will comply with the requirements of Rule 430B, and will notify the Representatives immediately, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement or any new registration statement relating to the Shares shall become effective or any amendment or supplement to the Prospectus shall have been filed, (ii) of the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus, including any Incorporated Documents, or for additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto or any notice of objection to the use of the Registration Statement or any post-effective amendment thereto or of the issuance of any order preventing or suspending the use of the Preliminary Prospectus or the Prospectus or any amendment or supplement thereto, or of the suspension of the qualification of any Shares for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes or of any examination pursuant to Section 8(d) or 8(e) of the Act concerning the Registration Statement and (v) if the Company becomes the subject of a proceeding under Section 8A of the Act in connection with any offer or sale of Shares. The Company will effect all filings required under Rule 424(b) and Rule 430B in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), and will take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company will make every reasonable effort to prevent the issuance of any stop, prevention or suspension order and, if any such order is issued, to obtain the lifting thereof at the earliest possible moment.

(b) The Company will comply with the Act and the Exchange Act so as to permit the completion of sales of Shares as contemplated in this Agreement and in the Registration Statement, the Disclosure Package and the Prospectus. If any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or counsel to the Company, to (i) amend the Registration Statement in order that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) amend or supplement the Disclosure Package or the Prospectus in order that the Disclosure Package or the Prospectus, as the case may be, will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser or (iii) amend the Registration Statement or amend or supplement the Disclosure Package or the Prospectus, as the case may be, including, without limitation, the filing of any Incorporated Documents, in order to comply with the requirements of the Act or the Exchange Act, the Company will promptly (A) give the Underwriters written notice of such event or condition, (B) prepare any amendment or supplement as may be necessary to correct such statement or omission or to comply with such requirements and, a reasonable amount of time prior to any proposed filing or use, furnish the Underwriters with copies of any such amendment or supplement and (C) file with the Commission any such amendment or supplement and use its commercially reasonable efforts to have any amendment to the Registration Statement declared effective by the Commission as soon as possible; provided, however, that the Company shall not file or use any such amendment or supplement to which the Representatives shall object, which, in the case of any Incorporated Document, shall not be unreasonably withheld.

 

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(c) The Company will give the Representatives written notice of its intention to file or use any amendment to the Registration Statement or any amendment or supplement to the Disclosure Package or the Prospectus, whether pursuant to the Act, the Exchange Act or otherwise, will furnish the Underwriters with copies of any such document a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file or use any such document to which the Representatives or counsel for the Underwriters shall object, which, in the case of any Incorporated Documents shall not be unreasonably withheld.

(d) Upon request, the Company will deliver to the Representatives and counsel for the Underwriters, without charge, signed copies of the Registration Statement as originally filed and each amendment thereto (including exhibits filed therewith or incorporated by reference therein and Incorporated Documents) and signed copies of all consents and certificates of experts. The signed copies of the Registration Statement and each amendment thereto furnished to the Representatives and counsel for the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.

(e) The Company will furnish to each Underwriter, without charge, during the period in which a prospectus is (or, but for the exception afforded by Rule 172 of the Act (“Rule 172”), would be) required by the Act to be delivered in connection with any offer or sale of Shares, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished in accordance with this Section will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.

(f) The Company, during the period in which a prospectus is (or, but for the exception afforded by Rule 172, would be) required by the Act to be delivered in connection with any offer or sale of Shares, will file all documents required to be filed with the Commission pursuant to the Exchange Act within the time periods prescribed by, and meeting the requirements of, the Exchange Act. Additionally, the Company shall report the use of the net proceeds from the sale of any Shares as may be required under the Act, including, if applicable, Rule 463 of the Act.

(g) The Company will use its commercially reasonable efforts, in cooperation with the Underwriters, to qualify the Shares for offering and sale under the applicable securities laws of such states and non-U.S. jurisdictions as the Representatives may, from time to time, designate and to maintain such qualifications in effect so long as required to complete the sale of the Shares contemplated by this Agreement; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.

(h) The Company will timely file such reports pursuant to the Exchange Act as are necessary in order to make generally available to its security holders as soon as practicable an earnings statement for the purposes of, and to provide to the Underwriters the benefits contemplated by, the last paragraph of Section 11(a) of the Act.

(i) The Company will use the net proceeds received by it from the sale of the Shares pursuant to this Agreement in the manner specified in the Registration Statement, the Disclosure Package and the Prospectus under “Use of Proceeds.”

(j) The Company will use its commercially reasonable efforts to effect and maintain the listing of the Shares on, and satisfy the requirements of, the NYSE American.

 

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(k) The Company will not, without the prior written consent of the Representatives, within 90 days after the date of this Agreement, (i) issue, sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act and the rules and regulations of the Commission promulgated thereunder, with respect to, any Common Stock or any other securities of the Company that are substantially similar to Common Stock, or any securities convertible into or exchangeable or exercisable for, or any warrants or other rights to purchase, the foregoing, (ii) file or cause to become effective a registration statement under the Act relating to the offer and sale of any Common Stock or any other securities of the Company that are substantially similar to Common Stock, or any securities convertible into or exchangeable or exercisable for, or any warrants or other rights to purchase, the foregoing, (iii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Common Stock or any other securities of the Company that are substantially similar to Common Stock, or any securities convertible into or exchangeable or exercisable for, or any warrants or other rights to purchase, the foregoing, whether any such transaction is to be settled by delivery of Common Stock or such other securities, in cash or otherwise or (iv) publicly announce an intention to effect any transaction specified in clause (i), (ii) or (iii). The foregoing sentence shall not apply to (A) the Shares to be sold hereunder, (B) any shares of Common Stock issued by the Company upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof and referred to in the Registration Statement, the Disclosure Package and the Prospectus, (C) any shares of Common Stock issued or options to purchase Common Stock granted pursuant to employee benefit plans of the Company (as they exist on the date hereof) referred to in the Registration Statement, the Disclosure Package and the Prospectus, (D) any shares of Common Stock issued pursuant to non-employee director stock plans or dividend reinvestment plans (as they exist on the date hereof) referred to in the Registration Statement, the Disclosure Package and the Prospectus, provided that the Company shall cause each recipient of such shares pursuant to clause (A), (B), (C) or (D) to execute and deliver to you, on or prior to such issuance, a “lock-up” agreement, substantially in the form of Exhibit B hereto, (E) the issuance of shares of preferred stock of the Company in a private placement concurrent with the issuance of the Firm Shares and the issuance of Common Stock upon conversion of such preferred stock, and (F) the issuance or sale of shares of Common Stock or the execution of any agreement to issue shares of Common Stock directly to the seller as part of the purchase price in connection with the acquisition of stock or assets of another business, by merger or otherwise, provided that the aggregate number of shares of Common Stock that the Company may issue or sell pursuant to this clause (F) shall not exceed 10% of the total number of shares of Common Stock issued and outstanding immediately following the completion of the transactions contemplated by this Agreement.

(l) The Company agrees that, unless it obtains the prior written consent of the Representatives, it will not make any offer relating to the Shares that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus,” or a portion thereof, required to be filed by the Company with the Commission or retained by the Company under Rule 433. The Company represents that it has treated or agrees that it will treat each such free writing prospectus consented to by the Representatives as an “issuer free writing prospectus,” as defined in Rule 433, and that it will comply with the applicable requirements of Rule 433 with respect thereto, including timely filing with the Commission where required, legending and record keeping. If at any time following issuance of an Issuer Free Writing Prospectus any event shall occur or condition shall exist as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement, the Preliminary Prospectus or the Prospectus or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representatives and will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.

 

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(m) The Company agrees that it will not, directly or indirectly, any action that is designed, or might reasonably be expected, to cause or result in, or any action that constitutes, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any Shares or a violation of Regulation M under the Exchange Act.

(n) If, immediately prior to the third anniversary of the initial effective date of the Registration Statement (the “Renewal Deadline”), this Agreement is still in effect or any Shares purchased by any Underwriter remain unsold, the Company will, prior to the Renewal Deadline, (i) promptly notify the Underwriters and (ii) promptly file, if it is eligible to do so, a new automatic shelf registration statement relating to the Shares, in form and substance reasonably satisfactory to the Underwriters. If, at the time the Company intends to file such a new automatic shelf registration statement, it is not eligible to do so, the Company will, prior to the Renewal Deadline, (i) promptly notify the Underwriters, (ii) promptly file a new shelf registration statement on the proper form relating to the Shares, in form and substance reasonably satisfactory to the Underwriters, (iii) use its commercially reasonable efforts to cause such new shelf registration statement to be declared effective within 60 days after the Renewal Deadline and (iv) promptly notify the Underwriters of such effectiveness. The Company will take all other action necessary or appropriate to permit the offer and sale of the Shares to continue as contemplated in the expired Registration Statement. References herein to the “Registration Statement” shall include such new automatic shelf registration statement or such new shelf registration statement, as the case may be.

4. Covenant to Pay Costs. (a) The Company agrees to pay, or cause to be paid, all costs, expenses, fees and taxes in connection with (i) the preparation and filing of the Registration Statement, the Preliminary Prospectus, any Issuer Free Writing Prospectus and the Prospectus and any amendments or supplements thereto, and the printing and furnishing of copies of each thereof to the Underwriters (including costs of mailing and shipment), (ii) the printing, registration, issue, sale and delivery of the Shares, including any stock or transfer taxes and stamp or similar duties payable upon the registration, sale, issuance or delivery of the Shares to the Underwriters, (iii) the producing, word processing and/or printing of this Agreement, any Agreement Among Underwriters, any dealer agreements, any closing documents (including compilations thereof) and such other documents as may be required in connection with the offering, purchase, sale, issuance or delivery of the Shares, and the reproduction and/or printing and furnishing of copies of each thereof to the Underwriters (including costs of mailing and shipment), (iv) the qualification of the Shares for offer and sale under state or non-U.S. laws and the determination of their eligibility for investment under state or non-U.S. law (including the legal fees and filing fees and other disbursements of counsel for the Underwriters) and the printing and furnishing of copies of any blue sky surveys or legal investment surveys to the Underwriters, (v) the fees and expenses incurred in connection with the listing of the Shares on the NYSE American and any registration thereof under the Exchange Act, (vi) any filing for review of the public offering of the Shares by FINRA up to $30,000, including the legal fees and filing fees and other disbursements of counsel to the Underwriters relating to FINRA matters, (vii) the fees and disbursements of the transfer agent and registrar for the Shares, (viii) the costs and expenses of the Company relating to presentations or meetings undertaken in connection with the marketing of the offering of the Shares to prospective investors and the Underwriters’ respective sales forces, including, without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations, travel, lodging and other expenses incurred by the officers and other representatives of the Company and any such consultants, and the cost of any aircraft chartered in connection with the road show and (ix) the performance of the Company’s other obligations hereunder.

(b) If this Agreement is terminated by the Representatives in accordance with the provisions of Sections 5, 6(b)(1) or 6(b)(2)(B), 6(b)(3) or 7 hereof, the Company shall reimburse the Underwriters for all of their out-of-pocket expenses, including the fees and disbursements of counsel to the Underwriters.

 

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5. Conditions of the Underwriters’ Obligations. The obligations of the Underwriters hereunder are subject to the accuracy of the representations and warranties on the part of the Company contained herein or in certificates of any officer of the Company or any of the Subsidiaries and delivered pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions precedent:

(a) The Company shall have filed the Registration Statement with the Commission not earlier than three years prior to the date hereof and the Registration Statement shall have become effective. The Company shall have filed with the Commission the Preliminary Prospectus and the Prospectus in the manner and within the time period required by Rule 424(b) and Rule 430B, and each Issuer Free Writing Prospectus, if any, in the manner and within the time period required by Rule 433. No stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the Act, no notice of objection of the Commission to the use of the Registration Statement or any post-effective amendment thereto has been received by the Company, no order preventing or suspending the use of the Preliminary Prospectus or the Prospectus or any amendment or supplement thereto has been issued and no proceedings for any of those purposes have been instituted or are pending or, to the Company’s knowledge, threatened. The Company shall have complied with any and all requests for additional information on the part of the Commission to the reasonable satisfaction of the Underwriters.

(b) At the Time of Purchase, the Underwriters shall have received the favorable written opinion or opinions of Gibson, Dunn & Crutcher LLP (“GDC”), counsel to the Company, dated such date, in form and substance satisfactory to the Underwriters.

(c) At the Time of Purchase, the Underwriters shall have received the favorable written opinion or opinions of White & Case LLP (“W&C”), counsel to the Underwriters, dated such date, with respect to such matters as the Underwriters may reasonably request. In giving such opinion or opinions, such counsel may rely, as to all matters governed by the laws of jurisdictions other than the laws of the State of New York, the Delaware General Corporation Law and the federal securities laws of the United States, upon the opinions of counsel satisfactory to the Underwriters. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers and other representatives of the Company, the Subsidiaries and certificates of public officials.

(d) On the date of this Agreement, the Underwriters shall have received a letter from GT, dated such date, in form and substance satisfactory to the Underwriters, containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and other financial information included or incorporated by reference in the Registration Statement, the Disclosure Package and the Prospectus or any amendment or supplement thereto.

(e) At the Time of Purchase, the Underwriters shall have received from GT a letter, dated such date, to the effect that they reaffirm the statements made in the letter furnished pursuant to Section 5(d) hereof, except that the specified date referred to shall be a date not more than three business days prior to the Time of Purchase.

(f) On the date of this Agreement, the Underwriters shall have received from NSAI an initial letter, in form and substance satisfactory to the Underwriters, addressed to the Underwriters stating the conclusions and findings of such firm with respect to the reserve and other operational information and other matters as is customary to underwriters in connection with registered public offerings.

(g) At the Time of Purchase, the Underwriters shall have received from NSAI a letter, dated such date, to the effect that they reaffirm the statements made in the letter furnished pursuant to Section 5(f) hereof, except that the specified date referred to shall be a date not more than three business days prior to the Time of Purchase.

 

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(h) On the date of this Agreement, the Underwriters shall have received from WMC an initial letter, in form and substance satisfactory to the Underwriters, addressed to the Underwriters stating the conclusions and findings of such firm with respect to the reserve and other operational information and other matters as is customary to underwriters in connection with registered public offerings.

(i) At the Time of Purchase, the Underwriters shall have received from WMC a letter, dated such date, to the effect that they reaffirm the statements made in the letter furnished pursuant to Section 5(h) hereof, except that the specified date referred to shall be a date not more than three business days prior to the Time of Purchase.

(j) On the date of this Agreement, the Underwriters shall have received from WDVG an initial letter, in form and substance satisfactory to the Underwriters, addressed to the Underwriters stating the conclusions and findings of such firm with respect to the reserve and other operational information and other matters as is customary to underwriters in connection with registered public offerings.

(k) At the Time of Purchase, the Underwriters shall have received from WDVG a letter, dated such date, to the effect that they reaffirm the statements made in the letter furnished pursuant to Section 5(j) hereof, except that the specified date referred to shall be a date not more than three business days prior to the Time of Purchase.

(l) At the Time of Purchase, there shall not have been, since the date of the latest audited financial statements included or incorporated by reference in the Registration Statement, the Disclosure Package and the Prospectus or since the respective dates as of which information is given in the Registration Statement, the Disclosure Package and the Prospectus, any Material Adverse Change, and the Underwriters shall have received a certificate of the Chief Executive Officer or President of the Company and of the Chief Financial Officer or Chief Accounting Officer of the Company, dated such date, to the effect set forth in Exhibit A hereto.

(m) On the date of this Agreement, the Underwriters shall have received a lock-up agreement substantially in the form of Exhibit B hereto signed by each person listed on Schedule D hereto and each such agreement shall be in full force and effect at the Time of Purchase and each Additional Time of Purchase, if any.

(n) On the date of this Agreement and at the Time of Purchase and each Additional Time of Purchase, if any, the Shares shall have been duly listed, and admitted and authorized for trading, on the NYSE American, subject (except in the case of any Additional Time of Purchase) to official notice of issuance.

(o) If required by FINRA, FINRA shall not have raised any objection with respect to the fairness or reasonableness of the underwriting, or other arrangements of the transactions contemplated hereby.

(p) On the date of this Agreement and at the Time of Purchase and each Additional Time of Purchase, if any, that certain commitment letter entered into by and among the Company, JPMorgan Chase Bank, N.A., the Royal Bank of Canada and Cadence Bank, N.A., dated as of September 6, 2019 (the “Credit Commitment”), in connection with the Company’s senior secured reserve-based revolving credit facility, shall not have been terminated, unless the closing of such facility has been consummated on or before such date.

 

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(q) After giving effect to this offering of the Shares and any other sale by the Company of equity securities at or before the Time of Purchase, the Company shall have received proceeds from new equity issuances sufficient to satisfy any related condition in the Credit Commitment.

(r) In the event that the Underwriters exercise their option provided in Section 1(b) hereof to purchase all or any portion of the Additional Shares, the representations and warranties of the Company contained herein and the statements in any certificates furnished by the Company or any of the Subsidiaries pursuant to the provisions hereof shall be true and correct as of each Additional Time of Purchase and, at the relevant Additional Time of Purchase, the Representatives shall have received:

(i) A certificate, dated such Additional Time of Purchase, of the Chief Executive Officer or President of the Company and of the Chief Financial Officer or Chief Accounting Officer of the Company confirming that the certificate delivered at the Time of Purchase pursuant to Section 5(l) hereof remains true and correct as of such Additional Time of Purchase.

(ii) The favorable written opinion or opinions of GDC, dated such Additional Time of Purchase, relating to the Additional Shares to be purchased on such Additional Time of Purchase and otherwise to the same effect as the opinion required by Section 5(b) hereof.

(iii) The favorable written opinion or opinions of W&C, dated such Additional Time of Purchase, relating to the Additional Shares to be purchased on such Additional Time of Purchase and otherwise to the same effect as the opinion required by Section 5(c) hereof.

(iv) A letter from GT, in form and substance satisfactory to the Underwriters and dated such Additional Time of Purchase, substantially in the same form and substance as the letter furnished to the Underwriters pursuant to Section 5(e) hereof, except that the “specified date” in the letter furnished pursuant to this paragraph shall be a date not more than three business days prior to such Additional Time of Purchase.

(v) A letter from NSAI, in form and substance satisfactory to the Underwriters and dated such Additional Time of Purchase, substantially in the same form and substance as the letter furnished to the Underwriters pursuant to Section 5(g) hereof, except that the “specified date” in the letter furnished pursuant to this paragraph shall be a date not more than three business days prior to such Additional Time of Purchase.

(vi) A letter from WMC, in form and substance satisfactory to the Underwriters and dated such Additional Time of Purchase, substantially in the same form and substance as the letter furnished to the Underwriters pursuant to Section 5(i) hereof, except that the “specified date” in the letter furnished pursuant to this paragraph shall be a date not more than three business days prior to such Additional Time of Purchase.

(vii) A letter from WDVG, in form and substance satisfactory to the Underwriters and dated such Additional Time of Purchase, substantially in the same form and substance as the letter furnished to the Underwriters pursuant to Section 5(k) hereof, except that the “specified date” in the letter furnished pursuant to this paragraph shall be a date not more than three business days prior to such Additional Time of Purchase.

(s) At the Time of Purchase and each Additional Time of Purchase, if any, counsel for the Underwriters shall have been furnished with such documents and opinions as they may require for the purpose of enabling them to render the opinions or make the statements requested by the Underwriters, or

 

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in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the covenants, obligations or conditions, contained herein; and all proceedings taken by the Company in connection with the offer and sale of the Shares as contemplated herein shall be satisfactory in form and substance to the Representatives and counsel to the Underwriters.

(t) If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement or, in the case of any condition to the purchase of Additional Shares on an Additional Time of Purchase subsequent to the Time of Purchase, the obligations of the several Underwriters to purchase such Additional Shares, may be terminated by the Representatives by notice to the Company at any time at or prior to the Time of Purchase or such Additional Time of Purchase, as the case may be, and any such termination shall be without liability of any party to any other party except the provisions of Sections 2, 4, 8, 11, 12 and 13 hereof shall remain in full force and effect notwithstanding such termination.

6. Effective Date of Agreement; Termination. (a) This Agreement shall become effective when the parties hereto have executed and delivered this Agreement.

(b) The Representatives may terminate this Agreement at any time at or prior to the Time of Purchase, by notice to the Company, if (1) since the time of execution of this Agreement or the earlier respective dates as of which information is given in the Registration Statement, the Disclosure Package and the Prospectus, there shall have been any material adverse change in the business, properties, condition (financial or otherwise), liquidity, results of operations or prospects of the Company and the Subsidiaries taken as a whole the effect of which change or development is, in the sole judgment of the Representatives, so material and adverse as to make it impractical or inadvisable to proceed with the completion of the offering of Shares contemplated by this Agreement or to enforce contracts for the sale of such Shares, or (2) since the time of execution of this Agreement, there shall have occurred: (A) a suspension or material limitation in trading in securities generally on the NYSE, the NYSE American or Nasdaq, (B) a suspension or material limitation in trading in the Company’s securities on the NYSE American, (C) a general moratorium on commercial banking activities declared by either federal or New York State authorities or a material disruption in commercial banking or securities settlement or clearance services in the United States, or (D) an outbreak or escalation of hostilities or acts of terrorism involving the United States or a declaration by the United States of a national emergency or war or any other calamity or crisis or any change in financial, political or economic conditions in the United States or elsewhere if the effect of any such event specified in this clause (D), in the sole judgment of the Representatives, makes it impractical or inadvisable to proceed with the completion of the offering of Shares contemplated by this Agreement or to enforce contracts for the sale of such Shares, or (3) since the time of execution of this Agreement, there shall have occurred any downgrading in or withdrawal of, or any notice or announcement shall have been given or made of any intended or potential downgrading in or withdrawal of, or any watch, review or possible change that does not indicate an affirmation of, or improvement in, any rating accorded any securities of or guaranteed by the Company or any Subsidiary by any “nationally recognized statistical rating organization,” as that term is defined in Section 3(a)(62) of the Exchange Act.

(c) In the event of any termination under Section 6(b) hereof, neither party will have any liability to the other party hereto, except as set forth in Section 4 hereof, and provided further that the provisions of Sections 2, 8, 11, 12 and 13 hereof shall remain in effect.

 

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7. Default. If one or more Underwriters shall fail at the Time of Purchase or any Additional Time of Purchase to purchase the Shares which it or they are obligated to purchase under this Agreement (the “Defaulted Shares”), then the Representatives shall have the right, within 24 hours thereafter, to make arrangements for one of or more of the Underwriters or any other underwriters to purchase all, but not less than all, of the Defaulted Shares in such amounts as may be agreed upon and upon the terms herein set forth; provided, however, that if such arrangements shall not have been completed within such 24-hour period, then:

(i) if the number of Defaulted Shares does not exceed 10% of the number of Shares to be so purchased by all of the Underwriters on such date, the non-defaulting Underwriters shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective initial purchase obligation bears to the purchase obligations of all non-defaulting Underwriters; or

(ii) if the number of Defaulted Shares exceeds 10% of the number of Shares to be so purchased by all of the Underwriters on such date, this Agreement or, with respect to any Additional Time of Purchase subsequent to the Time of Purchase, the obligation of the several Underwriters to purchase, and the Company to sell, such Additional Shares shall terminate without liability on the part of any non-defaulting Underwriter.

No action taken pursuant to this Section 7 shall relieve any defaulting Underwriter from liability in respect of its default. In the event of any such default which does not result in a termination of this Agreement or, with respect to Additional Shares, the obligation of the several Underwriters to purchase, and the Company to sell, such Additional Shares, either the Representatives or the Company shall have the right to postpone the Time of Purchase or applicable Additional Time of Purchase, as the case may be, for a period not exceeding seven days in order to effect any required changes in the Registration Statement, the Disclosure Package or the Prospectus or in any other documents or arrangements. As used herein, the term “Underwriter” includes any person substituted for an Underwriter under this Section 7.

8. Indemnity and Contribution.

(a) The Company agrees to indemnify, defend and hold harmless each Underwriter, its partners, directors, officers and members, any person who controls any Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, and any “affiliate” (within the meaning of Rule 405 under the Act) of any Underwriter, and the successors and assigns of all of the foregoing persons, from and against any and all loss, damage, expense, liability or claim (including the reasonable cost of investigation) whatsoever, as incurred, which, jointly or severally, any Underwriter or any such person may incur insofar as such loss, damage, expense, liability or claim arises out of, relates to or is based on (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including any information deemed to be a part thereof pursuant to Rule 430B, or arises out of, relates to or is based on any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as any such loss, damage, expense, liability or claim primarily and directly arises out of, relates to or is based on any untrue statement or alleged untrue statement of a material fact contained in, and in conformity with information concerning the Underwriters furnished in writing by the Representatives to the Company expressly for use in, the Registration Statement (or any amendment thereto) or primarily and directly arises out of, relates to or is based on any omission or alleged omission to state a material fact in the Registration Statement (or any amendment thereto) in connection with such information, which material fact was not contained in such information and which material fact was required to be stated in the Registration Statement or was necessary to make such information not misleading or (ii) any untrue statement or alleged untrue statement of a material fact included in the Preliminary Prospectus, any Issuer Free Writing

 

25


Prospectus, the Disclosure Package or the Prospectus (or any amendment or supplement thereto) or in any information provided to investors by, or with the approval of, the Company (the “Marketing Information”), including, without limitation, any investor presentations, or arises out of, relates to or is based on any omission or alleged omission to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except, with respect to the Preliminary Prospectus, the Disclosure Package or the Prospectus (or any amendment or supplement thereto), insofar as any such loss, damage, expense, liability or claim primarily and directly arises out of, relates to or is based on any untrue statement or alleged untrue statement of a material fact contained in, and in conformity with information concerning the Underwriters furnished in writing by or on behalf of the Representatives to the Company expressly for use in, the Preliminary Prospectus, the Disclosure Package or the Prospectus (or any amendment or supplement thereto) or primarily and directly arises out of, relates to or is based on any omission or alleged omission to state a material fact in the Preliminary Prospectus, the Disclosure Package or the Prospectus (or any amendment or supplement thereto) in connection with such information, which material fact was not contained in such information and which material fact was necessary in order to make the statements in such information, in the light of the circumstances under which they were made, not misleading.

(b) Each Underwriter, severally and not jointly, agrees to indemnify, defend and hold harmless the Company, its directors and officers, and any person who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, and the successors and assigns of all of the foregoing persons, from and against any and all loss, damage, expense, liability or claim (including the reasonable cost of investigation) whatsoever, as incurred, which, jointly or severally, the Company or any such person may incur insofar as such loss, damage, expense, liability or claim primarily and directly arises out of, relates to or is based on (i) any untrue statement or alleged untrue statement of a material fact contained in, and in conformity with information concerning such Underwriter furnished in writing by or on behalf of such Underwriter to the Representatives for delivery to the Company expressly for use in, the Registration Statement (or any amendment thereto), or primarily and directly arises out of, relates to or is based on any omission or alleged omission to state a material fact in the Registration Statement (or any amendment thereto), in connection with such information, which material fact was not contained in such information and which material fact was required to be stated in the Registration Statement (or any amendment thereto) or was necessary to make such information not misleading or (ii) any untrue statement or alleged untrue statement of a material fact contained in, and in conformity with information concerning such Underwriter furnished in writing by or on behalf of such Underwriter to the Representatives for delivery to the Company expressly for use in the Preliminary Prospectus, the Disclosure Package or the Prospectus (or any amendment or supplement thereto), or primarily and directly arises out of, relates to or is based on any omission or alleged omission to state a material fact in the Preliminary Prospectus, the Disclosure Package or the Prospectus (or any amendment or supplement thereto) in connection with such information, which material fact was not contained in such information and which material fact was necessary in order to make the statements in such information, in the light of the circumstances under which they were made, not misleading.

(c) If any action, suit or proceeding (each, a “Proceeding”) is brought against a person (an “indemnified party”) in respect of which indemnity may be sought against any party required to provide indemnification under this Agreement (as applicable, the “indemnifying party”), such indemnified party shall promptly notify such indemnifying party in writing of the institution of such Proceeding and such indemnifying party shall be permitted to assume the defense of such Proceeding, including the employment of counsel reasonably satisfactory to such indemnified party and payment of all fees and expenses; provided, however, that the omission or failure to so notify such indemnifying party shall not relieve such indemnifying party from any liability which such indemnifying party may have to any indemnified party otherwise than under this Section 8. The indemnified party or parties shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of

 

26


such indemnified party or parties unless the employment of such counsel shall have been authorized in writing by the indemnifying party in connection with the defense of such Proceeding or the indemnifying party shall not have, within a reasonable period of time in light of the circumstances, employed counsel to defend such Proceeding or such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from, additional to or in conflict with those available to such indemnifying party (in which case such indemnifying party shall not have the right to assume the defense of such Proceeding on behalf of the indemnified party or parties), in any of which events such fees and expenses shall be borne by such indemnifying party and paid as incurred. In no event shall any indemnifying party be liable for the expenses of more than one separate counsel (in addition to any local counsel) in any one Proceeding or series of related Proceedings in the same jurisdiction representing the indemnified parties who are parties to such Proceeding or Proceedings. The indemnifying party shall not be liable for any settlement of any Proceeding effected without its written consent but, if settled with its written consent, such indemnifying party agrees to indemnify and hold harmless the indemnified party or parties from and against any and all loss, damage, expense, liability or claim by reason of such settlement. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second sentence of this Section 8(c), then the indemnifying party agrees that it shall be liable for any settlement of any Proceeding effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall not have fully reimbursed the indemnified party in accordance with such request prior to the date of such settlement and (iii) such indemnified party shall have given the indemnifying party at least 30 days’ prior notice of its intention to settle. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened Proceeding in respect of which such indemnified party is a party and indemnity has been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such Proceeding and does not include an admission of fault or culpability or a failure to act by or on behalf of such indemnified party.

(d) If the indemnification provided for in this Section 8 is unavailable to an indemnified party under the applicable subsections above or insufficient to hold an indemnified party harmless in respect of any and all losses, damages, expenses, liabilities or claims referred to therein, then each applicable indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, damages, expenses, liabilities or claims (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Underwriters on the other hand in connection with the statements or omissions which resulted in such losses, damages, expenses, liabilities or claims, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other hand shall be deemed to be in the same respective proportions as the total proceeds from the offering of the Shares (net of related total underwriting discounts but before deducting expenses) received by the Company and the related total underwriting discounts received by the Underwriters bear to the aggregate initial public offering price of the Shares. The relative fault of the Company on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue statement or alleged untrue statement of a material fact or omission or alleged omission relates to information supplied by the Company or by the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, damages, expenses, liabilities and claims referred to in this subsection shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with investigating, preparing to defend or defending any Proceeding.

 

27


For purposes of this Section 8, each person, if any, who controls an Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act and each Underwriter’s partners, directors, officers, members and affiliates shall have the same rights to contribution as such Underwriter; each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company.

(e) Each of the Company and the Underwriters agrees that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 8(d) hereof. Notwithstanding the provisions of this Section 8, no Underwriter shall be required to contribute any amount in excess of the total underwriting discounts received by such Underwriter in connection with Shares underwritten by it for sale to the public. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters’ obligations to contribute pursuant to this Section 8 are several in proportion to their respective underwriting commitments and not joint.

(f) The provisions contained in this Section 8, as well as the representations, warranties and covenants of the Company contained in this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of any Underwriter, its partners, directors, officers, members or affiliates or any person who controls any Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, or by or on behalf of the Company, the Company’s directors or officers or any person who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, and shall survive any termination of this Agreement or the sale and delivery of the Shares. The Company agrees promptly to notify the Underwriters of the commencement of any Proceeding against it and, in the case of the Company, against any of the Company’s directors or officers, in connection with the sale and delivery of the Shares or with the Registration Statement, the Disclosure Package or the Prospectus.

 

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9. Information Furnished by the Underwriters. The statements set forth in the third paragraph under the heading “Discounts and Commissions” and the paragraphs under the heading “Stabilization” under the caption “Underwriting” in the Prospectus, only insofar as such statements relate to the amount of selling concession and reallowance or to the stabilization activities that may be undertaken by the Underwriters, constitute the only information furnished by or on behalf of one or more of the Underwriters as such information is referred to in Sections 2 and 8 hereof.

10. Notices. Except as otherwise herein provided, all statements, requests, notices and agreements shall be in writing or by telegram or facsimile and, if to the Underwriters, shall be sufficient in all respects if delivered or sent to Cowen and Company, LLC, 599 Lexington Avenue, New York, New York 10022, Attn: Head of Equity Capital Markets, Fax: 646-562-1249 with a copy to the General Counsel, Fax: 646-562-1124, and Intrepid Partners, LLC, 1201 Louisiana Street, Suite 600, Houston, Texas 77002, Attn: Christopher Winchenbaugh, Fax: (281) 582-7298, with a copy to White & Case LLP, 1221 Avenue of the Americas, New York, New York 10020, Attn: Stuart Bressman; and if to the Company, shall be sufficient in all respects if delivered or sent to the Company at the offices of the Company at 717 Texas Avenue, Suite 2900, Houston, Texas 77002 (facsimile: 713-758-2222), Attn: Wilkie S. Colyer, Jr., President and CEO.

11. Governing Law; Construction. This Agreement and any claim, counterclaim or dispute of any kind or nature whatsoever arising out of or in any way relating to this Agreement (“Claim”), directly or indirectly, shall be governed by, and construed in accordance with, the laws of the State of New York. The section headings in this Agreement have been inserted as a matter of convenience of reference and are not a part of this Agreement.

12. Submission to Jurisdiction. Except as set forth below, no Claim may be commenced, prosecuted or continued in any court other than the courts of the State of New York located in the City and County of New York or in the United States District Court for the Southern District of New York, which courts shall have exclusive jurisdiction over the adjudication of such matters, and the Company consents to the jurisdiction of such courts and personal service with respect thereto. Each party consents to personal jurisdiction, service and venue in any court in which any Claim arising out of or in any way relating to this Agreement is brought by any third party against any Underwriter or any indemnified party. Each of the Underwriters and the Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) waives all right to trial by jury in any action, proceeding or counterclaim (whether based upon contract, tort or otherwise) in any way arising out of or relating to this Agreement. The Company agrees that a final judgment in any such action, proceeding or counterclaim brought in any such court shall be conclusive and binding upon the Company and may be enforced in any other courts to the jurisdiction of which the Company is or may be subject, by suit upon such judgment.

13. Parties at Interest. This Agreement has been and is made solely for the benefit of the Underwriters and the Company and, to the extent provided in Section 8 hereof, the controlling persons, partners, directors, officers, members and affiliates referred to in such Section, and their respective successors, assigns, heirs, personal representatives and executors and administrators. No other person, partnership, association or corporation (including a purchaser of Shares, as such purchaser, from any of the Underwriters) shall acquire or have any right under or by virtue of this Agreement.

 

29


14. No Fiduciary Relationship. The Company acknowledges and agrees that the Underwriters are acting solely as underwriters in connection with the purchase and sale of the Shares. The Company further acknowledges and agrees that the Underwriters are acting pursuant to a contractual relationship created solely by this Agreement entered into on an arm’s length basis, and in no event do the parties intend that the Underwriters act or be responsible as a fiduciary to the Company, its management, stockholders or other equity owners or creditors or any other person in connection with any activity that the Underwriters may undertake or have undertaken in furtherance of the purchase and sale of the Shares, either before or after the date hereof. The Underwriters hereby expressly disclaim any fiduciary or similar obligations to the Company, either in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions, and the Company confirms its understanding and agreement to that effect. The Company agrees that it is responsible for making its own independent judgments with respect to any such transactions and that any opinions or views expressed by any Underwriter to the Company regarding such transactions, including, but not limited to, any opinions or views with respect to the price or market for the Shares, do not constitute advice or recommendations to the Company. The Company agrees that Underwriters are not acting as fiduciary of the Company and no Underwriter has assumed or will assume any advisory responsibility in favor of the Company with respect to the transactions contemplated hereby or the process leading thereto (irrespective of whether any Underwriter has advised or is currently advising the Company on other matters). The Company waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the Underwriters with respect to any breach or alleged breach of any fiduciary, advisory or similar duty to the Company in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions.

15. Counterparts. This Agreement may be signed by the parties in one or more counterparts which together shall constitute one and the same agreement among the parties.

16. Successors and Assigns. This Agreement shall be binding upon the Underwriters and the Company and their respective successors and assigns and any successor or assign of any substantial portion of the respective businesses and/or assets of the Underwriters and the Company, as the case may be.

[The Remainder of This Page Intentionally Left Blank; Signature Page Follows]

 

30


If the foregoing correctly sets forth the understanding between the Company and the several Underwriters, please so indicate in the space provided below for that purpose, whereupon this Agreement and your acceptance shall constitute a valid and legally binding agreement between the Company and the several Underwriters.

 

Very truly yours,
CONTANGO OIL & GAS COMPANY
By:  

/s/ E. Joseph Grady

  Name:   E. Joseph Grady
  Title:   Senior Vice President and Chief
    Financial Officer

[Signature Page to Underwriting Agreement]


Accepted and agreed to as of the date first above written
COWEN AND COMPANY, LLC
INTREPID PARTNERS, LLC
By:   COWEN AND COMPANY, LLC
By:  

/s/ Matthew Rovelli

  Name: Matthew Rovelli
  Title: Managing Director
On behalf of themselves and as representatives of the several Underwriters.

[Signature Page to Underwriting Agreement]


Accepted and agreed to as of the date first above written
COWEN AND COMPANY, LLC
INTREPID PARTNERS, LLC
By:   INTREPID PARTNERS, LLC
By:  

/s/ Christopher F. Winchenbaugh

  Name: Christopher F. Winchenbaugh
  Title: President, COO, CCO
On behalf of themselves and as representatives of the several Underwriters.

[Signature Page to Underwriting Agreement]


SCHEDULE A

 

Underwriters

   Number of
Firm Shares
     Number of
Additional Shares
 

Cowen and Company, LLC

     22,368,421        3,355,263  

Intrepid Partners, LLC

     22,368,421        3,355,263  
  

 

 

    

 

 

 

Total

     44,736,842        6,710,526  
  

 

 

    

 

 

 

 

Schedule A-1


SCHEDULE B

ISSUER GENERAL USE FREE WRITING PROSPECTUS

None.

 

Schedule B-1


SCHEDULE C

SUBSIDIARIES

 

Subsidiary

   Ownership
Percentage
 

Crimson Exploration Inc.

     100

Crimson Exploration Operating, Inc.

     100

Contango Energy Company

     100

Contango Rocky Mountain Inc.

     100

Contango Operators, Inc.

     100

Contango Mining Company

     100

Conterra Company

     100

Contaro Company

     100

Contango Alta Investments, Inc.

     100

Contango Venture Capital Corporation

     100

LTW Pipeline Co.

     100

 

Schedule C-1


SCHEDULE D

PERSONS DELIVERING LOCK-UP AGREEMENTS

Directors & Executive Officers

 

1.

Wilkie S. Colyer

 

2.

E. Joseph Grady

 

3.

Michael J. Autin

 

4.

Joseph J. Romano

 

5.

B.A. Berilgen

 

6.

B. James Ford

 

7.

Lon McCain

 

8.

John C. Goff

 

Schedule D-1


EXHIBIT A

FORM OF OFFICERS’ CERTIFICATE

Pursuant to Section 5(l) of the Underwriting Agreement, dated September 12, 2019 (the “Underwriting Agreement”), between Contango Oil & Gas Company, a Texas corporation (the “Company”), and Cowen and Company, LLC and Intrepid Partners, LLC, as the representatives of the several underwriters named in Schedule A thereto, each of Wilkie S. Colyer, Jr. in his capacity as Chief Executive Officer and President of the Company, and E. Joseph Grady, in his capacity as Senior Vice President and Chief Financial Officer of the Company, does hereby certify, on behalf of the Company, that, to the best of his knowledge, after reasonable investigation:

At the Time of Purchase, there has not been, since the date of the latest audited financial statements included or incorporated by reference in the Registration Statement, the Disclosure Package and the Prospectus or since the respective dates as of which information is given in the Registration Statement, the Disclosure Package and the Prospectus, any Material Adverse Change.

Each of Gibson, Dunn & Crutcher LLP and White & Case LLP is entitled to rely on this certificate in connection with the opinion that such firm is rendering pursuant to Section 5 of the Underwriting Agreement.

Capitalized terms used herein and not defined herein shall have the meanings set forth in the Underwriting Agreement.

 

Exhibit A-1


EXHIBIT B

LOCK-UP LETTER AGREEMENT

September 12, 2019

Cowen and Company, LLC

Intrepid Partners, LLC

as representatives of the several Underwriters

named on Schedule A to the Underwriting Agreement referred to herein

c/o Cowen and Company, LLC

599 Lexington Avenue

New York, New York 10022

Ladies and Gentlemen:

This Lock-Up Agreement is being delivered to you in connection with the proposed Underwriting Agreement (the “Underwriting Agreement”) to be entered into by Contango Oil & Gas Company, a Texas corporation (the “Company”), and you and the other Underwriters to be named in Schedule A to the Underwriting Agreement, with respect to the public offering (the “Offering”) of shares of Common Stock, par value $0.04 per share, of the Company (the “Common Stock”). Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Underwriting Agreement.

In order to induce you to enter into the Underwriting Agreement, the undersigned agrees that, for a period (the “Lock-Up Period”) beginning on the date hereof and ending on, and including, the date that is 90 days after the date of the Prospectus relating to the Offering, the undersigned will not, without the prior written consent of Cowen and Company, LLC and Intrepid Partners, LLC (the “Representatives”), (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or file (or otherwise participate in the filing of) a registration statement (including any amendment thereto) with the Securities and Exchange Commission (the “Commission”) in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder (the “Exchange Act”) with respect to, any Common Stock or any other securities of the Company that are substantially similar to Common Stock, or any securities convertible into or exchangeable or exercisable for, or any warrants or other rights to purchase, the foregoing, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Common Stock or any other securities of the Company that are substantially similar to Common Stock, or any securities convertible into or exchangeable or exercisable for, or any warrants or other rights to purchase, the foregoing, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise or (iii) publicly announce an intention to effect any transaction specified in clause (i) or (ii). The foregoing sentence shall not apply to:

(a) bona fide gifts;

(b) dispositions to any trust for the direct or indirect benefit of the undersigned and/or the immediate family of the undersigned (for purposes of this Lock-Up Agreement, “immediate family” shall mean the undersigned and the spouse, any lineal descendent, father, mother, brother or sister of the undersigned);

 

Exhibit B-1


(c) transfers of shares of Common Stock or any security, directly or indirectly, convertible into Common Stock in connection with estate planning or by intestacy or distributions of shares of Common Stock or any security, directly or indirectly, convertible into Common Stock to limited partners, members, stockholders or affiliates of the undersigned; and

(d) withholding of shares of Common Stock by the Company for purposes of covering tax liabilities arising from or related to the vesting during the Lock-Up Period of restricted stock and performance shares awarded pursuant to the Company’s existing equity compensation plans;

provided that it shall be a condition to any transfer pursuant to clause (a), (b) or (c) that (1) each donee, distributee or transferee shall sign and deliver a lock up letter substantially in the form of this Lock-Up Agreement, (2) no public announcement and no filing by any party (donor, donee, transferor or transferee) under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made during the Lock-Up Period in connection with such transfer or disposition and (3) the undersigned notifies the Representatives at least two business days prior to the proposed transfer or disposition.

The undersigned further agrees that, for the Lock-Up Period, the undersigned will not, without the prior written consent of the Representatives, make any demand for, or exercise any right with respect to, the registration of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, or warrants or other rights to purchase Common Stock or any such securities.

The undersigned hereby confirms that the undersigned has not, directly or indirectly, taken, and hereby covenants that the undersigned will not, directly or indirectly, take, any action designed, or which has constituted or will constitute or might reasonably be expected to cause or result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Common Stock.

The undersigned hereby authorizes the Company and its transfer agent, during the Lock-Up Period, to decline the transfer of or to note stop transfer restrictions on the stock register and other records relating to shares of Common Stock or other securities subject to this Lock-Up Agreement of which the undersigned is the record holder, and, with respect to shares of Common Stock or other securities subject to this Lock-Up Agreement of which the undersigned is the beneficial owner but not the record holder, the undersigned hereby agrees to cause such record holder to authorize the Company and its transfer agent, during the Lock-Up Period, to decline the transfer of or to note stop transfer restrictions on the stock register and other records relating to such shares or other securities.

If (i) the Company notifies you in writing that it does not intend to proceed with the Offering, or (ii) for any reason the Underwriting Agreement shall be terminated prior to the Time of Purchase, this Lock-Up Agreement shall be terminated and the undersigned shall be released from its obligations hereunder.

The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Lock-Up Agreement. All authority herein conferred or agreed to be conferred and any obligations of the undersigned shall be binding upon the successors, assigns, heirs or personal representatives of the undersigned.

The undersigned understands that the Company and the Underwriters will proceed with the Offering in reliance on this Lock-Up Agreement.

Whether or not the Offering actually occurs depends on a number of factors, including market conditions. Any Offering will only be made pursuant to the Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriters.

 

Exhibit B-2


This Lock-Up Agreement and any claim, controversy or dispute arising under or related to this Lock-Up Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of laws principles thereof.

(Signature Page Follows)

 

Yours very truly,
By:  

 

  Name:
  Title:

 

Exhibit B-3

EX-3.1

Exhibit 3.1

STATEMENT OF RESOLUTION

ESTABLISHING SERIES OF SHARES

DESIGNATED

SERIES A CONTINGENT CONVERTIBLE PREFERRED STOCK

OF CONTANGO OIL & GAS COMPANY

Pursuant to Section 21.155 and Section 21.156 of the Texas Business Organizations Code (the “Code”):

CONTANGO OIL & GAS COMPANY, a Texas corporation (the “Corporation”), certifies that pursuant to the authority contained in Article IV of its Amended and Restated Certificate of Formation (the “Certificate of Formation”), and in accordance with the provisions of Section 21.155 and Section 21.156 of the Code, the Board of Directors of the Corporation (the “Board”) duly approved and adopted on September 9, 2019, and a duly authorized Pricing Committee of the Board has duly approved and adopted on September 12, 2019, the following resolution creating and providing for the establishment and issuance of a series of shares of Series A Preferred Stock (defined below) as hereinafter described, providing for the designations, preferences, limitations and relative rights, voting, redemption and other rights thereof and the qualifications, limitations or restrictions thereof, in addition to those set forth in the Certificate of Formation, all in accordance with the provisions of Section 21.155 and Section 21.156 of the Code, which resolution remains in full force and effect on the date hereof:

RESOLVED, that the rights, powers and preferences, and the qualifications, limitations and restrictions, of the Series A Contingent Convertible Preferred Stock as set forth in the Statement of Resolution are hereby approved and adopted by the Board and the Series A Contingent Convertible Preferred Stock is hereby authorized out of the Corporation’s authorized preferred stock, par value $0.04 per share; and the form, terms and provisions of the Statement of Resolution are hereby approved, adopted, ratified and confirmed in all respects as follows:

Section 1. Designation and Amount; Ranking.

(a) The shares of such series shall be designated the “Series A Contingent Convertible Preferred Stock” (the “Series A Preferred Stock”).

(b) Each share of Series A Preferred Stock shall be identical in all respects with the other shares of Series A Preferred Stock.

(c) The authorized number of shares of Series A Preferred Stock shall initially be 789,474, which number may from time to time be increased or decreased by resolution of the Board as permitted by the Code.

(d) For purposes of this Statement of Resolution, “Capital Stock” of any person means any and all shares, interests, participations or other equivalents however designated of corporate stock or other equity participations, including partnership interests, whether general or limited, of such person and any rights (other than debt securities convertible or exchangeable into an equity interest), warrants or options to acquire an equity interest in such person. The Series A Preferred Stock shall, with respect to dividend rights and rights upon a liquidation, winding-up or dissolution of the Corporation, rank:


(i) senior to any class or series of Capital Stock of the Corporation, the terms of which do not expressly provide that such class or series ranks senior to or on a parity with the Series A Preferred Stock with respect to dividend rights or rights upon a liquidation, winding-up or dissolution of the Corporation (collectively, together with any warrants, rights, calls or options exercisable for or convertible into such Capital Stock, the “Junior Stock”);

(ii) on parity with the Common Stock, par value $0.04 per share, of the Corporation (“Common Stock”) and any class or series of Capital Stock of the Corporation, the terms of which provide that such class or series ranks on a parity with the Series A Preferred Stock with respect to dividend rights or rights upon a liquidation, winding-up or dissolution of the Corporation (collectively, together with any warrants, rights, calls or options exercisable for or convertible into such Capital Stock, the “Parity Stock”); and

(iii) junior to any class or series of Capital Stock of the Corporation (other than Common Stock), the terms of which expressly provide that such class or series ranks senior to the Series A Preferred Stock with respect to dividend rights or rights upon a liquidation, winding-up or dissolution of the Corporation (collectively, together with any warrants, rights, calls or options exercisable for or convertible into such Capital Stock, the “Senior Stock”).

Section 2. Definitions.

For purposes of this Statement of Resolution, the following terms have meanings set forth in the Section indicated:

 

Term

  

Section

Board    Preamble
Business Day    Section 11(c)
Capital Stock    Section 1(d)
Certificate of Formation    Preamble
Common Stock    Section 1(d)(ii)
Code    Preamble
Conversion Ratio    Section 8(a)
Conversion Requirements    Section 8(a)
Corporation    Preamble
Junior Stock    Section 1(d)(i)
Liquidation    Section 4(a)
Liquidation Distribution    Section 4(a)
National Securities Exchange    Section 8(a)
Original Issue Date    Section 3(a)
Original Issue Price    Section 3(a)
Parity Stock    Section 1(d)(ii)
Transfer Agent    Section 7(b)
Senior Stock    Section 1(d)(iii)
Series A Preferred Stock    Section 1(a)

 

2


Section 3. Dividends.

(a) Holders of shares of Series A Preferred Stock shall be entitled to receive, when and as declared by the Board and declared by the Corporation, out of funds that are legally available therefor, cash dividends of ten percent (10%) of the Original Issue Price per annum on each outstanding share of Series A Preferred Stock. Such dividends shall accrue from the first anniversary of the Original Issue Date of the Series A Preferred Stock and shall cease to accrue on the date immediately preceding the date on which the Conversion Requirements described in Section 8 are satisfied. The “Original Issue Price” means $9.50 per share (as adjusted for any stock split, combination or similar event or transaction directly affecting the Series A Preferred Stock but not by any accrued dividends). The “Original Issue Date” means September 17, 2019.

(b) Following the first anniversary of the Original Issue Date, dividends pursuant to this Section 3 shall be payable quarterly in cash, on March 31, June 30, September 30 and December 31 of each year, beginning September 30, 2020, when, as and if declared by the Board, until the time at which the Conversion Requirements are satisfied; provided, however, that when the Preferred Stock is no longer outstanding, no dividends shall be payable to the holders of the Series A Preferred Stock or the holders of the Common Stock into which the Series A Preferred Stock converts. Payments of any dividends pursuant to this Section 3 shall be payable only if the Corporation has surplus income and such payment is permissible under the Corporation’s debt instruments then in effect.

(c) No dividends or distributions shall be paid with respect to the Common Stock (i) prior to the holders of the Series A Preferred Stock having received all accrued but unpaid dividends on the Series A Preferred Stock or (ii) unless and until all shares of Series A Preferred Stock have been converted to shares of Common Stock.

(d) Holders of Series A Preferred Stock shall fully participate, on an as-converted basis, in any dividends declared and paid or distributions on Common Stock as if the Series A Preferred Stock were converted into shares of Common Stock as of the record date for such dividend or distribution at the Conversion Ratio.

Section 4. Liquidation.

(a) Prior to conversion pursuant to Section 8, in the event of a liquidation (complete or partial), dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary (a “Liquidation”), after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of Series A Preferred Stock shall be entitled to receive, in respect of any shares of Series A Preferred Stock held by them, out of assets of the Corporation available for distribution to shareholders of the Corporation or their assignees, and subject to the rights of any outstanding shares of Senior Stock and before any amount shall be distributed to the holders of Junior Stock, a liquidating distribution (the “Liquidation Distribution”) in an amount equal to the amount such holder of Series A Preferred Stock would have been entitled to receive had such holder converted its shares of Series A Preferred Stock into shares of Common Stock at the Conversion Ratio immediately prior to such Liquidation.

 

3


(b) If, upon any Liquidation, the amount payable with respect to the Liquidation Distribution is not paid in full, the holders of the Series A Preferred Stock and any Parity Stock shall share equally and ratably in any distribution of the Corporation’s assets in proportion to the respective liquidation distributions to which they are entitled.

(c) After the payment in cash or proceeds to the holders of shares of the Series A Preferred Stock of the full amount of the Liquidation Distribution with respect to outstanding shares of Series A Preferred Stock, the holders of outstanding shares of Series A Preferred Stock shall have no right or claim, based on their ownership of shares of Series A Preferred Stock, to the remaining assets of the Corporation, if any. Whenever any such distribution shall be paid in property other than cash, the value of such distribution shall be the fair market value of such property as determined in the good faith reasonable discretion of the Board or liquidating trustee, as the case may be.

Section 5. Voting.

The holders of outstanding shares of Series A Preferred Stock shall have the following voting rights:

(a) Each share of Series A Preferred Stock shall entitle the holder thereof to voting power equal to 8.71 shares of Common Stock on all matters submitted to a vote of the shareholders of the Corporation; provided that, to eliminate fractional votes, the votes cast by the shares of Series A Preferred Stock in the aggregate “for” or “against” a matter will be rounded down to the nearest whole vote.

(b) In the event the Corporation shall at any time after declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(c) Except as otherwise provided herein or by the Code or other applicable law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of the shareholders of the Corporation.

(d) Except as set forth herein or as otherwise required by the Code or other applicable law, the holders of shares of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with the holders of shares of Common Stock as set forth herein) for taking any corporate action.

 

4


Section 6. Reservation of Common Stock.

(a) Subject to the Conversion Requirements set forth in Section 8, at any time that any Series A Preferred Stock is outstanding, the Corporation shall from time to time take all lawful action within its control to cause the authorized capital stock of the Corporation to include a number of authorized but unissued shares of Common Stock equal to 7,894,740 shares (for the avoidance of doubt, taking into account any other obligations of the Corporation to reserve Common Stock upon the conversion, exchange or exercise of other securities of the Corporation such that any other reservation may not be counted toward the reservation of Common Stock hereunder) (such authorized but unissued shares, the “Reserved Shares”). If, at any time, the Corporation lacks a sufficient number of Reserved Shares, the Corporation shall use its reasonable best efforts to take all lawful action within its control to effect an amendment to the Certificate of Formation to increase the authorized but unissued shares of Common Stock of the Corporation to provide for a sufficient number of Reserved Shares.

(b) If any shares of Common Stock to be reserved for the purpose of conversion of the Series A Preferred Stock require registration or listing with or approval of any governmental authority, stock exchange or other regulatory body under any federal or state law or regulation or otherwise before such shares may be validly issued or delivered upon conversion, the Corporation shall, at its sole cost and expense, in good faith and as expeditiously as possible following satisfaction of the Conversion Requirements set forth in Section 8, endeavor to secure such registration, listing or approval, as the case may be.

Section 7. Form.

(a) Notwithstanding anything to the contrary herein, the shares of Series A Preferred Stock and any shares of Common Stock issued upon conversion thereof shall be in uncertificated, book-entry form as permitted by the Bylaws of the Corporation and the Code, and shall bear a legend in substantially the following form:

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.”

(b) The duly appointed transfer agent for the Series A Preferred Stock shall be Continental Stock Transfer & Trust Company (the “Transfer Agent”). The Corporation may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Corporation and the Transfer Agent; provided that if the Corporation removes Continental Stock Transfer & Trust Company, the Corporation shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal.

(c) Transfers of Series A Preferred Stock or any shares of Common Stock issued upon conversion thereof held in uncertificated, book-entry form shall be made only upon the transfer books of the Corporation kept at an office of the Transfer Agent upon receipt of proper transfer instructions from the registered owner of such uncertificated shares, or from a duly authorized attorney or from an individual presenting proper evidence of succession, assignment or authority to transfer the stock. The Corporation may refuse any requested transfer until furnished evidence satisfactory to it that such transfer is proper.

 

5


Section 8. Conversion.

(a) Following (i) effectiveness of an amendment to the Certificate of Formation to increase the number of authorized shares of Common Stock by at least 50,000,000 shares and (ii) approval by the shareholders of the Corporation, in accordance with applicable law and the applicable rules and regulations of the principal national securities exchange on which the Common Stock is then listed for trading (the “National Securities Exchange”), of the issuance of the shares of Common Stock to be issued upon conversion of the Preferred Stock pursuant to this Section 8 (the “Conversion Requirements”), each share of Series A Preferred Stock shall automatically convert into 10 shares of Common Stock (the “Conversion Ratio”).

(b) Any Common Stock delivered as a result of conversion pursuant to this Section 8 following satisfaction of the Conversion Requirements shall be validly issued, fully paid and non- assessable, free and clear of any preemptive right, liens, claims, rights or encumbrances other than those arising under the Code or the Bylaws of the Corporation. Immediately following the settlement of conversion, the rights of the holders of converted Series A Preferred Stock shall cease and the persons entitled to receive shares of Common Stock upon the conversion of shares of Series A Preferred Stock shall be treated for all purposes as having become the owners of such shares of Common Stock. Concurrently with such conversion, the converted shares of Series A Preferred Stock shall cease to be outstanding, shall be canceled and the shares of Series A Preferred Stock formerly designated pursuant to this Statement of Resolution shall be restored to authorized but unissued shares of Preferred Stock.

(c) If, after the Original Issue Date, the Corporation (i) makes a distribution on its Common Stock in cash, securities (including Common Stock) or other property or assets, (ii) subdivides or splits its outstanding Common Stock into a greater number of Common Stock, (iii) combines or reclassifies its Common Stock into a smaller number of Common Stock or (iv) issues by reclassification of its Common Stock any securities (including any reclassification in connection with a merger, consolidation or business combination in which the Corporation is the surviving person), then the Conversion Ratio in effect at the time of the record date for such distribution or of the effective date of such subdivision, split, combination, or reclassification shall be proportionately adjusted so that the conversion of the Series A Preferred Stock after such time shall entitle the holder to receive the aggregate number of Common Stock (or shares of any securities into which such shares of Common Stock would have been combined, consolidated, merged or reclassified pursuant to clauses (iii) and (iv) above) that such holder would have been entitled to receive if the Series A Preferred Stock had been converted into Common Stock immediately prior to such record date or effective date, as the case may be, and in the case of a merger, consolidation or business combination in which the Corporation is the surviving person, the Corporation shall provide effective provisions to ensure that the provisions in this Statement of Resolution relating to the Series A Preferred Stock shall not be abridged or amended and that the Series A Preferred Stock shall thereafter retain the same powers, preferences and relative participating, optional and other special rights, and the qualifications, limitations and restrictions thereon, that the Series A Preferred Stock had immediately prior to such transaction or event. An adjustment made pursuant to this Section 8(c) shall become effective immediately after the record date in the case of a distribution and shall become effective immediately after the effective date in the case of a subdivision, combination, reclassification (including any reclassification in connection with a merger, consolidation or business combination in which the Corporation is the surviving person) or split. Such adjustment shall be made successively whenever any event described above shall occur.

 

6


(d) Notwithstanding any of the other provisions of this Section 8, no adjustment shall be made to the Conversion Ratio pursuant to Section 8(c) as a result of any of the following:

(i) the grant of Common Stock or options, warrants or rights to purchase Common Stock to employees, officers or directors of the Corporation or its subsidiaries, under compensation plans and agreements approved in good faith by the Board; provided, that in the case of options, warrants or rights to purchase Common Stock, the exercise price per Common Stock shall not be less than the closing price of the Common Stock (as reported by the National Securities Exchange) on the date such option, warrant or other right is issued;

(ii) the issuance of any Common Stock as all or part of the consideration to effect (A) the closing of any acquisition by the Corporation of assets of a third party or (B) the consummation of a merger, consolidation or other business combination of the Corporation with another entity in which the Corporation survives and the Common Stock remain outstanding to the extent such transaction(s) is or are validly approved by the vote or consent of the Board;

(iii) without duplication of Section 8(d)(i) above, the issuance of options, warrants or other rights to purchase Common Stock, or securities exercisable or convertible into or exchangeable for Common Stock (or options, warrants or other rights to purchase any such securities that are exercisable or convertible into or exchangeable for Common Stock, in each case, that are outstanding on the date of first issuance of shares of Series A Preferred Stock); and

(iv) the issuance of securities for which an adjustment is made under another provision of this Section 8.

(e) The Corporation shall pay any and all issue, documentary, stamp and other taxes, excluding any income, franchise, property or similar taxes, that may be payable in respect of any issue or delivery of Common Stock on conversion of Series A Preferred Stock pursuant hereto. However, the holder of any Series A Preferred Stock shall pay any tax that is due because Common Stock issuable upon conversion thereof are issued in a name other than such holder’s name.

(f) No fractional Common Stock shall be issued upon the conversion of any Series A Preferred Stock. All Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series A Preferred Stock by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional stock. If, after the aforementioned aggregation, the conversion would result in the issuance of a fraction of a Common Stock, the Corporation shall not issue a fractional Common Stock but shall round the fractional Common Stock to the nearest whole Common Stock (and a 0.5 of a share of Common Stock shall be rounded up to the next higher share of Common Stock).

 

7


Section 9. Additional Procedures.

(a) In connection with any conversion pursuant to Section 8, the holder of Series A Preferred Stock must deliver transfer instruments reasonably satisfactory to the Corporation, at the principal office of the Corporation (or such other place mutually acceptable to the holder of Series A Preferred Stock and the Corporation), in accordance with Section 7(c).

(b) On the date of conversion pursuant to Section 8, the number of shares of Common Stock into which the applicable shares of Series A Preferred Stock are converted shall be promptly issued in uncertificated, book-entry form and evidence thereof shall be delivered to the holder of Series A Preferred Stock thereof or such holder’s designee upon the furnishing of appropriate endorsements and transfer documents and the payment of all transfer and similar taxes, if any, allocable to such holder.

Section 10. No Other Rights.

The shares of Series A Preferred Stock shall not have any powers, designations, preferences or relative, participating, optional, or other special rights, nor shall there be any qualifications, limitations or restrictions or any powers, designations, preferences or rights of such shares, other than as set forth herein or in the Certificate of Formation, or as may be provided by law.

Section 11. Other Provisions.

(a) The shares of Series A Preferred Stock shall not be subject to the operation of any retirement or sinking fund.

(b) In case any one or more of the provisions contained in this Statement of Resolution shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. Furthermore, in lieu of any such invalid, illegal or unenforceable provision, there shall be added automatically as a part of this Statement of Resolution a provision as similar in terms to such invalid, illegal or unenforceable provision as may be possible and be legal, valid and enforceable, unless the requisite parties separately agree to a replacement provision that is valid, legal and enforceable.

(c) Any amendment, modification, waiver or alteration of, or supplement to, this Statement of Resolution shall require approval of a majority of the members of the Board not affiliated with John C. Goff.

(d) Any payments, issuances or distributions required to be made hereunder on any day that is not a Business Day shall be made on the next succeeding Business Day without interest or additional payment for such delay. For the purposes of this Statement of Resolution, “Business Day” shall mean each day that is not a Saturday, Sunday or other day on which banking institutions in Houston, Texas are authorized or required by law to close. All payments required hereunder shall be made by wire transfer of immediately available funds in United States Dollars to the holders in accordance with the payment instructions as such holders may deliver by written notice to the Corporation from time to time.

 

8


Section 12. Effective Date.

This Statement of Resolution shall become effective on September 17, 2019.

[The Remainder of this Page Intentionally Left Blank]

 

9


IN WITNESS WHEREOF, Contango Oil & Gas Company has caused this Statement of Resolution to be duly executed on the date first written above.

 

CONTANGO OIL & GAS COMPANY
By:   /s/ E. Joseph Grady
Name: E. Joseph Grady
Title: Senior Vice President and Chief Financial Officer

[Signature Page to Statement of Resolution]

EX-5.1

Exhibit 5.1

 

LOGO    LOGO

September 17, 2019

Contango Oil & Gas Company

717 Texas Ave., Suite 2900

Houston, TX 77001

 

Re:

Contango Oil & Gas Company Registration Statement on Form S-3 (File No. 333-215784), as amended by Post-Effective Amendment No. 1 to Registration Statement Form S-3 (File No. 333-215784)

Ladies and Gentlemen:

We have examined the Registration Statement on Form S-3 (File No. 333-215784), as amended by Post-Effective Amendment No. 1 to Registration Statement on Form S-3 (File No. 333-215784) (the “Registration Statement”), of Contango Oil & Gas Company, a Texas corporation (the “Company”), filed with the Securities and Exchange Commission (the “Commission”) pursuant to the Securities Act of 1933, as amended (the “Securities Act”), together with the preliminary prospectus thereto filed by the Company pursuant to Rule 424(c) under the Securities Act, in connection with the offering by the Company of up to 51,447,368 shares of the Company’s common stock, par value $0.04 per share (the “Shares”). In arriving at the opinion expressed below, we have examined originals, or copies certified or otherwise identified to our satisfaction as being true and complete copies of the originals, of such documents, corporate records, certificates of officers of the Company and of public officials and other instruments as we have deemed necessary or advisable to enable us to render the opinions set forth below. In our examination, we have assumed without independent investigation the genuineness of all signatures, the legal capacity and competency of all natural persons, the authenticity of all documents submitted to us as originals and the conformity to original documents of all documents submitted to us as copies. Based upon the foregoing, and subject to the assumptions, exceptions, qualifications and limitations set forth herein, we are of the opinion that the Shares, when issued against payment therefor as set forth in the Registration Statement, will be validly issued, fully paid and non-assessable.

 

LOGO


LOGO

September 17, 2019

Page 2

We consent to the filing of this opinion as an exhibit to the Registration Statement, and we further consent to the use of our name under the caption “Legal Matters” in the Registration Statement and the prospectus that forms a part thereof. In giving these consents, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the Rules and Regulations of the Commission.

 

Very truly yours,

/s/ Gibson, Dunn & Crutcher LLP

EX-10.1

Exhibit 10.1

Execution Version

PURCHASE AGREEMENT

among

CONTANGO OIL & GAS COMPANY

and

THE PURCHASERS PARTY HERETO


TABLE OF CONTENTS

 

         Page  

ARTICLE I DEFINITIONS

     1  

Section 1.01

  Definitions      1  

ARTICLE II AGREEMENT TO SELL AND PURCHASE

     4  

Section 2.01

  Authorization of Sale of the Purchased Securities      4  

Section 2.02

  Sale and Purchase      4  

Section 2.03

  Closing      4  

Section 2.04

  Conditions to Closing      4  

Section 2.05

  Contango Deliveries      5  

Section 2.06

  Purchasers’ Deliveries      6  

Section 2.07

  Independent Nature of the Purchasers’ Obligations and Rights      6  

Section 2.08

  Further Assurances      6  

ARTICLE III REPRESENTATIONS AND WARRANTIES AND COVENANTS RELATED TO CONTANGO

     7  

Section 3.01

  Corporate Existence      7  

Section 3.02

  Valid Issuance of Purchased Securities      7  

Section 3.03

  Authorization, Enforceability      7  

Section 3.04

  No Breach      7  

Section 3.05

  Investment Company Status      7  

Section 3.06

  Certain Fees      8  

ARTICLE IV REPRESENTATIONS AND WARRANTIES AND COVENANTS OF THE PURCHASERS

     8  

Section 4.01

  Existence      8  

Section 4.02

  Authorization, Enforceability      8  

Section 4.03

  No Breach      8  

Section 4.04

  Certain Fees      9  

Section 4.05

  Unregistered Securities.      9  

Section 4.06

  Short Selling      10  

Section 4.07

  Lock-Up Agreement      10  

ARTICLE V INDEMNIFICATION, COSTS AND EXPENSES

     11  

Section 5.01

  Indemnification by Contango      11  

Section 5.02

  Indemnification by the Purchasers      11  

Section 5.03

  Indemnification Procedure      11  

Section 5.04

  Tax Treatment of Indemnification Payments      12  

ARTICLE VI TERMINATION

     12  

Section 6.01

  Termination      12  

Section 6.02

  Certain Effects of Termination      13  

 

i


ARTICLE VII MISCELLANEOUS

     13  

Section 7.01

  Expenses      13  

Section 7.02

  Interpretation      13  

Section 7.03

  Survival of Provisions      14  

Section 7.04

  No Waiver; Modifications in Writing.      14  

Section 7.05

  Binding Effect; Assignment      15  

Section 7.06

  Communications      15  

Section 7.07

  Entire Agreement      16  

Section 7.08

  Governing Law; Submission to Jurisdiction      16  

Section 7.09

  Waiver of Jury Trial      16  

Section 7.10

  Execution in Counterparts      16  

Section 7.11

  Recapitalizations, Exchanges, Etc. Affecting the Purchased Securities      17  

Section 7.12

  Certain Tax Matters      17  

 

SCHEDULE A – Schedule of Purchasers

EXHIBIT A – Form of Statement of Resolution for the Preferred Stock

EXHIBIT B – Form of Registration Rights Agreement

EXHIBIT C – Form of Voting and Support Agreement

 

 

ii


PURCHASE AGREEMENT

This PURCHASE AGREEMENT, dated as of September 12, 2019 (this “Agreement”), is entered into by and among Contango Oil & Gas Company, a Texas corporation (“Contango”), and each of the purchasers set forth in Schedule A hereto (the “Purchasers”).

RECITALS:

WHEREAS, Contango desires to sell the Purchased Securities (as defined below) and the Purchasers desire to purchase from Contango the Purchased Securities, in accordance with the provisions of this Agreement; and

WHEREAS, Contango has agreed to provide the Purchasers with certain registration rights with respect to the shares of Common Stock underlying the Purchased Securities acquired pursuant hereto.

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Contango and each of the Purchasers, severally and not jointly, hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01 Definitions. As used in this Agreement, the following terms have the meanings indicated:

Affiliate” means, with respect to a specified Person, any other Person, directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control” (including, with correlative meanings, “controlling,” “controlled by” and “under common control with”) means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; provided however, that Contango and the Purchasers shall not be considered Affiliates for purposes of this Agreement.

Agreement” has the meaning set forth in the introductory paragraph of this Agreement.

Allocated Purchase Price” means with respect to each Purchaser, the dollar amount set forth opposite such Purchaser’s name under the heading “Allocated Purchase Price” on Schedule A hereto.

Basic Documents” means, collectively, this Agreement, the Statement of Resolution and the Registration Rights Agreement.

Business Day” means any day other than a Saturday, Sunday, any federal legal holiday or day on which banking institutions in the State of Texas are authorized or required by Law or other governmental action to close.

 


Common Stock” means the Common Stock, par value $0.04 per share, of Contango.

Contango” has the meaning set forth in the introductory paragraph of this Agreement.

Contango Bylaws” shall have the meaning specified in Section 2.05(e).

Contango Related Parties” shall have the meaning specified in Section 5.02.

Closing” shall have the meaning specified in Section 2.03(b).

Closing Date” shall have the meaning specified in Section 2.03(c).

Code” means the Internal Revenue Code of 1986, as amended.

Conversion Shares” means the Common Stock issuable upon conversion of the Preferred Stock.

Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the SEC promulgated thereunder.

Governmental Authority” means, with respect to a particular Person, any country, state, county, city and political subdivision in which such Person or such Person’s Property is located or which exercises valid jurisdiction over any such Person or such Person’s Property, and any court, agency, department, commission, board, bureau or instrumentality of any of them and any monetary authority which exercises valid jurisdiction over any such Person or such Person’s Property. Unless otherwise specified, all references to Governmental Authority herein with respect to Contango means a Governmental Authority having jurisdiction over Contango, its Subsidiaries or any of their respective Properties.

Indemnified Party” shall have the meaning specified in Section 5.03.

Indemnifying Party” shall have the meaning specified in Section 5.03.

Law” means any federal, state, local or foreign order, writ, injunction, judgment, settlement, award, decree, statute, law (including common law), rule or regulation.

Lien” means any mortgage, claim, encumbrance, pledge, lien (statutory or otherwise), security agreement, conditional sale or trust receipt or a lease, consignment or bailment, preference or priority, assessment, deed of trust, charge, easement, servitude or other encumbrance upon or with respect to any property of any kind.

NYSE” means the NYSE American.

Person” means any individual, corporation, company, voluntary association, partnership, joint venture, trust, limited liability company, unincorporated organization, government or any agency, instrumentality or political subdivision thereof or any other form of entity.

 

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Preferred Stock” means the Series A Contingent Convertible Preferred Stock having the terms set forth in the Statement of Resolution.

Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

Purchased Securities” means, with respect to each Purchaser, the number of shares of Preferred Stock as set forth opposite such Purchaser’s name on Schedule A hereto.

Purchaser Related Parties” shall have the meaning specified in Section 5.01.

Purchasers” has the meaning set forth in the introductory paragraph of this Agreement.

Registration Rights Agreement” means the Registration Rights Agreement, to be entered into on the date hereof, between Contango and the Purchasers in substantially the form attached hereto as Exhibit B.

Representatives” means, with respect to a specified Person, the officers, directors, managers, employees, agents, counsel, accountants, investment bankers and other representatives of such Person.

SEC” means the United States Securities and Exchange Commission.

Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and regulations of the SEC promulgated thereunder.

Short Sales” means, without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act, whether or not against the box, and forward sale contracts, options, puts, calls, short sales, “put equivalent positions” (as defined in Rule 16a-1(h) under the Exchange Act) and similar arrangements, and sales and other transactions through non-U.S. broker dealers or foreign regulated brokers.

Statement of Resolution” shall have the meaning specified in Section 2.04(b)(iv).

Subsidiary” means, as to any Person, any corporation or other entity of which: (i) such Person or a Subsidiary of such Person is a general partner or manager; (ii) at least a majority of the outstanding equity interest having by the terms thereof ordinary voting power to elect a majority of the board of directors or similar governing body of such corporation or other entity (irrespective of whether or not at the time any equity interest of any other class or classes of such corporation or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more of its Subsidiaries; or (iii) any corporation or other entity as to which such Person consolidates for accounting purposes.

TBOC” means the Texas Business Organizations Code.

Transfer” shall have the meaning specified in Section 4.07.

 

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ARTICLE II

AGREEMENT TO SELL AND PURCHASE

Section 2.01 Authorization of Sale of the Purchased Securities. Contango has authorized the issuance and sale to the Purchasers of the Purchased Securities on the terms and subject to the conditions set forth in this Agreement.

Section 2.02 Sale and Purchase. Subject to the terms and conditions hereof, Contango hereby agrees to issue and sell to each Purchaser, free and clear of any and all Liens (other than the transfer restrictions under applicable federal and state securities laws and other than those arising under the Certificates of Designations or the TBOC), and each Purchaser, severally and not jointly, hereby agrees to purchase from Contango, such number of Purchased Securities on the Closing Date as set forth on Schedule A, and each Purchaser agrees to pay Contango its Allocated Purchase Price with respect to such Purchased Securities.

Section 2.03 Closing. Subject to the terms and conditions hereof, the consummation of the purchase and sale of the Purchased Securities hereunder (the “Closing”) shall take place at 9:00 a.m. Central Time on September 17, 2019 at the offices of Gibson, Dunn & Crutcher LLP, 811 Main Street, Suite 3000, Houston, Texas, or such other date, time or location as agreed by the parties. The date of the Closing shall be the “Closing Date.” The parties agree that the Closing may occur via delivery of facsimiles or portable document format (PDF) documents.

Section 2.04 Conditions to Closing.

(a) Mutual Conditions. The respective obligations of each party to consummate the purchase and issuance and sale of the Purchased Securities to be purchased and issued at the Closing shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions (any or all of which may be waived by a particular party on behalf of itself in writing, in whole or in part, to the extent permitted by applicable Law):

(i) no statute, rule, order, decree or regulation shall have been enacted or promulgated, and no action shall have been taken, by any Governmental Authority which temporarily, preliminarily or permanently restrains, precludes, enjoins or otherwise prohibits the consummation of the transactions contemplated hereby or makes the transactions contemplated hereby illegal;

(ii) there shall not be pending any suit, action or proceeding by any Governmental Authority seeking to restrain, preclude, enjoin or prohibit the transactions contemplated by this Agreement; and

(iii) the concurrent public offering of Common Stock pursuant to an underwriting agreement between the Company and the underwriters named therein shall be consummated.

 

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(b) Conditions of the Purchasers’ Obligations at the Closing. The respective obligations of each Purchaser to consummate the purchase of the Purchased Securities to be purchased by such Purchaser at the Closing shall be subject to the satisfaction (or waiver by such Purchaser) on or prior to the Closing Date of each of the following conditions:

(i) the representations and warranties of Contango contained in this Agreement that are qualified by materiality shall be true and correct as of the Closing Date as if made on and as of the Closing Date and all other representations and warranties shall be true and correct in all material respects as of the Closing Date as if made on and as of the Closing Date (except that representations and warranties made as of a specific date shall be required to be true and correct in all material respects as of such date only);

(ii) Contango and its Subsidiaries shall have performed and complied, in all material respects, with all of the covenants and agreements required to be performed and complied with by it hereunder on or prior to the Closing Date;

(iii) Contango shall have adopted and filed with the Secretary of State of the State of Texas the Statement of Resolution in the form attached hereto as Exhibit A (the “Statement of Resolution”), and the Statement of Resolution shall have become effective as an amendment to Contango’s Amended and Restated Certificate of Formation (the “Contango Charter”); and

(iv) Contango shall have delivered, or caused to be delivered, to the Purchasers, Contango’s closing deliveries described in Section 2.05.

(c) Conditions of Contango’s Obligations at the Closing. The obligation of Contango to consummate the sale of the Purchased Securities to be sold at the Closing shall be subject to the satisfaction (or waiver by Contango) on or prior to the Closing Date of each of the following conditions:

(i) the representations and warranties of each Purchaser contained in this Agreement that are qualified by materiality shall be true and correct as of the Closing Date as if made on and as of the Closing Date and all other representations and warranties shall be true and correct in all material respects as of the Closing Date as if made on and as of the Closing Date (except that representations and warranties made as of a specific date shall be required to be true and correct in all material respects as of such date only);

(ii) each Purchaser shall have performed and complied, in all material respects, with all of the covenants and agreements required to be performed and complied with by such Purchaser on or prior to the Closing Date;

(iii) each Purchaser shall have delivered, or caused to be delivered, to Contango such Purchaser’s closing deliveries as described in Section 2.06 of this Agreement.

Section 2.05 Contango Deliveries. At the Closing, Contango shall deliver or cause to be delivered:

(a) evidence of the Purchased Securities credited to book-entry accounts maintained by the transfer agent of the Company and issued by the Company free and clear of any Liens, other than the transfer restrictions under applicable federal and state securities laws and other than those arising under the Statement of Resolution or the TBOC, registered in such names as each Purchaser shall have designated; and

 

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(b) the Registration Rights Agreement in substantially the form attached hereto as Exhibit B, which shall have been duly executed by Contango.

Section 2.06 Purchasers Deliveries. At the Closing, each Purchaser shall deliver or cause to be delivered:

(a) its Allocated Purchase Price as of the Closing Date, such payments to be made by wire transfers of immediately available funds on the Closing Date to an account designated by Contango at least two (2) Business Days (or such shorter period of time as shall be agreeable by all parties hereto) prior to the Closing Date;

(b) the Registration Rights Agreement in substantially the form attached hereto as Exhibit B, which shall have been duly executed by each Purchaser party thereto; and

(c) the Voting and Support Agreement in substantially the form attached hereto as Exhibit C, which shall have been duly executed by each Purchaser party thereto.

Section 2.07 Independent Nature of the Purchasers Obligations and Rights. The obligations of each Purchaser under any Basic Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under any Basic Document. The failure or waiver of performance under any Basic Document of any Purchaser by Contango does not excuse performance by any other Purchaser and the waiver of performance of Contango by any Purchaser does not excuse performance by Contango with respect to each other Purchaser. Nothing contained herein or in any other Basic Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Basic Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of this Agreement or out of the other Basic Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.

Section 2.08 Further Assurances. From time to time after the date hereof, without further consideration, Contango and the Purchasers shall use their commercially reasonable efforts to take, or cause to be taken, all actions necessary or appropriate to consummate the transactions contemplated by this Agreement.

 

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ARTICLE III

REPRESENTATIONS AND WARRANTIES AND

COVENANTS RELATED TO CONTANGO

Contango represents and warrants to and covenants with each Purchaser as follows:

Section 3.01 Corporate Existence. Contango is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Texas, with all necessary power and authority to own properties and to conduct its business as currently conducted.

Section 3.02 Valid Issuance of Purchased Securities. The Purchased Securities being purchased by each of the Purchasers hereunder will be duly authorized by Contango pursuant to the Contango Charter and the Statement of Resolution prior to the Closing and, when issued and delivered by Contango to such Purchaser against payment therefor in accordance with the terms of this Agreement and the terms of the Purchased Securities, will be validly issued, fully paid and non-assessable and will be free of preemptive rights or any Liens and restrictions on transfer, other than (i) restrictions on transfer under the Statement of Resolution or this Agreement and under applicable state and federal securities laws and (ii) such Liens as are created by such Purchaser or its Affiliates.

Section 3.03 Authorization, Enforceability. Contango has all necessary corporate power and authority to execute, deliver and perform its obligations under the Basic Documents, and the execution, delivery and performance by Contango of the Basic Documents and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary legal action on the part of Contango; and no further consent or authorization of Contango is required. All corporate action required to be taken by the Contango for the authorization, issuance, sale and delivery of the Purchased Securities shall have been validly taken. The Agreement has been duly and validly authorized, executed and delivered by Contango and constitutes the legal, valid and binding obligation of Contango and, when executed and delivered by Contango, the other Basic Documents will be duly and validly authorized, executed and delivered by Contango and will constitute the legal, valid and binding obligations of Contango, in each case enforceable in accordance with their terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent transfer and similar laws affecting creditors’ rights generally or by general principles of equity and except as the rights to indemnification may be limited by applicable law.

Section 3.04 No Breach. The execution, delivery and performance by Contango of the Basic Documents and the consummation by Contango of the transactions contemplated hereby or thereby does not and will not (a) assuming the accuracy of the representations and warranties of the Purchasers contained herein and their compliance with the covenants contained herein, violate any provision of any Law or permit having applicability to Contango or the property or assets of Contango or any of its Subsidiaries, (b) conflict with or result in a violation or breach of any provision of the organizational documents of Contango, or (c) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any material agreement to which Contango is a party or by which Contango is bound or to which any of the property or assets of Contango or any of its Subsidiaries is subject, except in the case of clauses (a) and (c), for such conflicts, breaches, violations or defaults as would not have a material adverse effect on the ability to consummate the transactions contemplated by the Basic Documents.

Section 3.05 Investment Company Status. Contango is not and, immediately after the sale of the Purchased Securities and the application of the net proceeds from such sale will not be, required to register as an “investment company” or a company controlled by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

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Section 3.06 Certain Fees. Except for fees paid to Cowen and Company, LLC and Intrepid Partners, LLC in connection with the sale of the Purchased Securities, no fees or commissions are or will be payable by Contango to brokers, finders or investment bankers with respect to the sale of any of the Purchased Securities or the consummation of the transactions contemplated by this Agreement. Contango agrees that it will indemnify and hold harmless each Purchaser from and against any and all claims, demands, or liabilities for broker’s, finder’s, placement, or other similar fees or commissions incurred by Contango or alleged to have been incurred by Contango in connection with the sale of the Purchased Securities or the consummation of the transactions contemplated by this Agreement.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES AND

COVENANTS OF THE PURCHASERS

Each Purchaser, severally and not jointly, hereby represents and warrants and covenants to Contango as follows:

Section 4.01 Existence. Such Purchaser is duly organized and validly existing and in good standing under the laws of its state of formation, with all necessary power and authority to own properties and to conduct its business as currently conducted.

Section 4.02 Authorization, Enforceability. Such Purchaser has all necessary legal power and authority to execute, deliver and perform its obligations under the Basic Documents to which such Purchaser is or will be a party. The execution, delivery and performance by such Purchaser of the Basic Documents to which such Purchaser is or will be a party and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary legal action, and no further consent or authorization of such Purchaser is required. This Agreement to which such Purchaser is a party has been duly and validly authorized, executed and delivered by such Purchaser and constitutes the legal, valid and binding obligation of such Purchaser and, when executed by such Purchaser, the other Basic Documents to which such Purchaser is a party will be duly and validly authorized, executed and delivered by such Purchaser and will constitute the legal, valid and binding obligations of such Purchaser, in each case enforceable in accordance with their terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent transfer and similar laws affecting creditors’ rights generally or by general principles of equity and except as the rights to indemnification may be limited by applicable law.

Section 4.03 No Breach. The execution, delivery and performance by such Purchaser of the Basic Documents and the consummation by such Purchaser of the transactions contemplated hereby or thereby does not and will not (a) assuming the accuracy of the representations and warranties of Contango contained herein and its compliance with the covenants contained herein, violate any provision of any Law or permit having applicability to such Purchaser or the property or assets of such Purchaser, (b) conflict with or result in a violation or breach of any provision of

 

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the organizational documents of such Purchaser, or (c) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any material agreement to which such Purchaser is a party or by which such Purchaser is bound or to which any of the property or assets of such Purchaser is subject, except in the case of clauses (a) and (c), for such conflicts, breaches, violations or defaults as would not have a material adverse effect on the ability to consummate the transactions contemplated by the Basic Documents.

Section 4.04 Certain Fees. No fees or commissions are or will be payable by such Purchaser to brokers, finders or investment bankers with respect to the purchase of any of the Purchased Securities or the consummation of the transactions contemplated by this Agreement. Such Purchaser agrees, severally and not jointly with any other Purchaser, that it will indemnify and hold harmless Contango from and against any and all claims, demands or liabilities for broker’s, finder’s, placement, or other similar fees or commissions incurred by such Purchaser or alleged to have been incurred by such Purchaser in connection with the purchase of the Purchased Securities or the consummation of the transactions contemplated by this Agreement.

Section 4.05 Unregistered Securities.

(a) Accredited Investor Status; Sophisticated Purchasers. Such Purchaser is an “accredited investor” within the meaning of Rule 501 under the Securities Act and is able to bear the risk of its investment in Purchased Securities and the Conversion Shares. Such Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of the Purchased Securities and the Conversion Shares.

(b) Information. Such Purchaser and its Representatives have been furnished with all materials relating to the business, finances and operations of Contango that have been requested and materials relating to the offer and sale of the Purchased Securities that have been requested by such Purchaser and its Representatives. Such Purchaser and its Representatives have been afforded the opportunity to ask questions of Contango. Neither such inquiries nor any other due diligence investigations conducted at any time by any Purchaser and Representatives shall modify, amend or affect such Purchaser’s right (i) to rely on Contango’s representations and warranties contained in Article III above or (ii) to indemnification or any other remedy based on, or with respect to the accuracy or inaccuracy of, or compliance with, the representations, warranties, covenants and agreements in this Agreement, or any other Basic Document. Such Purchaser understands that the purchase of the Purchased Securities involves a high degree of risk. Such Purchaser has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Purchased Securities.

(c) Cooperation. Such Purchaser shall cooperate reasonably with Contango to provide any information necessary for any applicable securities filings required to be made by Contango.

(d) Legends. Such Purchaser understands that the Purchased Securities will bear a restrictive legend substantially in the form as set forth in the Statement of Resolution.

 

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(e) Purchase Representation. Such Purchaser is purchasing the Purchased Securities for its own account and not with a view to distribution in violation of any securities laws. Such Purchaser has been advised and understands that none of the Purchased Securities or the Conversion Shares have been registered under the Securities Act or under the “blue sky” laws of any jurisdiction and may be resold only if registered pursuant to the provisions of the Securities Act (or if eligible, pursuant to the provisions of Rule 144 promulgated under the Securities Act or pursuant to another available exemption from the registration requirements of the Securities Act). Such Purchaser has been advised and understands that Contango, in issuing the Purchased Securities, is relying upon, among other things, the representations and warranties of such Purchaser contained in this Article IV in concluding that such issuance is a “private offering” and is exempt from the registration provisions of the Securities Act.

(f) Rule 144. Such Purchaser understands that there is no public trading market for the Purchased Securities, that none is expected to develop and that the Purchased Securities must be held indefinitely unless and until the Purchased Securities or the Conversion Shares, as applicable, are registered under the Securities Act or an exemption from registration is available. Such Purchaser has been advised of and is aware of the provisions of Rule 144 promulgated under the Securities Act.

(g) Reliance by Contango. Such Purchaser understands that the Purchased Securities are being offered and sold in reliance on a transactional exemption from the registration requirements of federal and state securities laws and that Contango is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of such Purchaser set forth herein in order to determine the applicability of such exemptions and the suitability of such Purchaser to acquire the Purchased Securities and the Conversion Shares.

Section 4.06 Short Selling. Such Purchaser has not engaged in any Short Sales involving Common Stock owned by it between the time it first began discussions with Contango about the transaction contemplated by this Agreement and the date of execution of this Agreement.

Section 4.07 Lock-Up Agreement. Without the prior written consent of Contango, except as otherwise specifically provided in this Agreement, each Purchaser will not, during the period commencing on the date hereof and ending the date that is six months after the date hereof, (1) offer, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any of its Purchased Securities or (2) enter into any swap or other transaction or arrangement that transfers or that is designed to, or that might reasonably be expected to, result in the transfer to another, in whole or in part, any of the economic consequences of ownership of its Purchased Securities, whether any such transaction described in clause (1) or (2) above (any such transaction described in clauses (1) and (2), a “Transfer”) is to be settled by delivery of Purchased Securities, Common Stock or such other securities, in cash or otherwise.

 

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ARTICLE V

INDEMNIFICATION, COSTS AND EXPENSES

Section 5.01 Indemnification by Contango. Contango agrees to indemnify each Purchaser and its Representatives (collectively, “Purchaser Related Parties”) from, and hold each of them harmless against, any and all losses, actions, suits, proceedings (including any investigations, litigation or inquiries), demands and causes of action, and, in connection therewith, and promptly upon demand, pay or reimburse each of them for all reasonable costs, losses, liabilities, damages or expenses of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel and all other reasonable expenses incurred in connection with investigating, defending or preparing to defend any such matter that may be incurred by them or asserted against or involve any of them), involving a third party claim, as a result of, arising out of, or in any way related to (i) the failure of any of the representations or warranties made by Contango contained herein to be true and correct in all material respects as of the date hereof (except with respect to any provisions including the word “material” or words of similar import, with respect to which such representations and warranties must have been true and correct) or (ii) the material breach of any covenants of Contango contained herein, provided that, in the case of the immediately preceding clause (i), such claim for indemnification is made prior to the expiration of such representation or warranty; provided, however, that for purposes of determining when an indemnification claim has been made, the date upon which a Purchaser Related Party shall have given notice (stating in reasonable detail the basis of the claim for indemnification) to Contango shall constitute the date upon which such claim has been made.

Section 5.02 Indemnification by the Purchasers. Each Purchaser agrees, severally and not jointly, to indemnify Contango and its respective Representatives (collectively, “Contango Related Parties”) from, and hold each of them harmless against, any and all losses, actions, suits, proceedings (including any investigations, litigation or inquiries), demands and causes of action, and, in connection therewith, and promptly upon demand, pay or reimburse each of them for all reasonable costs, losses, liabilities, damages or expenses of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel and all other reasonable expenses incurred in connection with investigating, defending or preparing to defend any such matter that may be incurred by them or asserted against or involve any of them), involving a third party claim, as a result of, arising out of, or in any way related to (i) the failure of any of the representations or warranties made by such Purchaser contained herein to be true and correct in all material respects as of the date hereof or (ii) the material breach of any of the covenants of such Purchaser contained herein, provided that, in the case of the immediately preceding clause (i), such claim for indemnification relating to a breach of any representation or warranty is made prior to the expiration of such representation or warranty; provided, however, that for purposes of determining when an indemnification claim has been made, the date upon which a Contango Related Party shall have given notice (stating in reasonable detail the basis of the claim for indemnification) to such Purchaser shall constitute the date upon which such claim has been made; provided, further, that the liability of such Purchaser shall not be greater in amount than such Purchaser’s Allocated Purchase Price.

Section 5.03 Indemnification Procedure. A claim for indemnification for any matter not involving a third party claim may be asserted by notice to the party from whom indemnification is sought; provided, however, that failure to so notify the indemnifying party shall not preclude the indemnified party from any indemnification which it may claim in accordance with this Article V, except as otherwise provided in Sections 5.01 and 5.02. Promptly after any Contango Related Party or Purchaser Related Party (hereinafter, the “Indemnified Party”) has received notice of any indemnifiable claim hereunder, or the commencement of any action, suit or proceeding by a third person, which the Indemnified Party believes in good faith is an indemnifiable claim under this

 

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Agreement, the Indemnified Party shall give the indemnitor hereunder (the “Indemnifying Party”) written notice of such claim or the commencement of such action, suit or proceeding, but failure to so notify the Indemnifying Party will not relieve the Indemnifying Party from any liability it may have to such Indemnified Party hereunder except to the extent that the Indemnifying Party is materially prejudiced by such failure. Such notice shall state the nature and the basis of such claim to the extent then known. The Indemnifying Party shall have the right to defend and settle, at its own expense and by its own counsel, any such matter as long as the Indemnifying Party pursues the same diligently and in good faith. If the Indemnifying Party undertakes to defend or settle such claim, it shall promptly after such determination, and in no event later than five (5) days, notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in all commercially reasonable respects in the defense thereof and/or the settlement thereof. Such cooperation shall include, but shall not be limited to, furnishing the Indemnifying Party with any books, records and other information reasonably requested by the Indemnifying Party and in the Indemnified Party’s possession or control relevant to the claim. Such cooperation of the Indemnified Party shall be at the cost of the Indemnifying Party. After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability; provided, however, that the Indemnified Party shall be entitled (i) at its expense, to participate in the defense of such asserted liability and the negotiations of the settlement thereof and (ii) if (A) the Indemnifying Party has, within ten (10) Business Days of when the Indemnified Party provides written notice of a claim, failed (y) to assume the defense or settlement of such claim and employ counsel or (z) to notify the Indemnified Party of such assumption, or (B) if the defendants in any such action include both the Indemnified Party and the Indemnifying Party and counsel to the Indemnified Party shall have concluded that there may be reasonable defenses available to the Indemnified Party that are different from or in addition to those available to the Indemnifying Party or if the interests of the Indemnified Party reasonably may be deemed to conflict with the interests of the Indemnifying Party, then the Indemnified Party shall have the right to select a separate counsel and to assume such legal defense and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the Indemnifying Party as incurred. Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not settle any indemnified claim without the consent of the Indemnified Party, unless the settlement thereof imposes no liability or obligation on, and includes a complete release from liability of, and does not contain any admission of wrong doing by, the Indemnified Party.

Section 5.04 Tax Treatment of Indemnification Payments. Any indemnification payments made under this Article V shall be treated for all tax purposes as an adjustment to the relevant Purchaser’s Allocated Purchase Price except as otherwise required by applicable Law.

ARTICLE VI

TERMINATION

Section 6.01 Termination. This Agreement may be terminated at any time:

(a) by mutual written consent of Contango and the Purchasers; and

 

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(b) by either Contango or the Purchasers if any court of competent jurisdiction in the United States or other United States Governmental Authority shall have issued a final order, decree or ruling or taken any other final action restraining, enjoining or otherwise prohibiting the transactions contemplated hereby and such order, decree, ruling or other action is or shall have become final and nonappealable.

Section 6.02 Certain Effects of Termination. If this Agreement is terminated as provided in Section 6.01, except as set forth in Section 7.03, this Agreement shall become null and void and have no further force or effect, but the parties shall not be released from any liability arising from or in connection with any breach hereof occurring prior to such termination.

ARTICLE VII

MISCELLANEOUS

Section 7.01 Expenses. All other costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred.

Section 7.02 Interpretation. Article, Section, Schedule and Exhibit references in this Agreement are references to the corresponding Article, Section, Schedule or Exhibit to this Agreement, unless otherwise specified. All Exhibits and Schedules to this Agreement are hereby incorporated and made a part hereof as if set forth in full herein and are an integral part of this Agreement. All references to instruments, documents, contracts and agreements are references to such instruments, documents, contracts and agreements as the same may be amended, supplemented and otherwise modified from time to time, unless otherwise specified. The word “including” shall mean “including but not limited to” and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it. Whenever Contango has an obligation under the Basic Documents, the expense of complying with that obligation shall be an expense of Contango unless otherwise specified. Any reference in this Agreement to $ shall mean U.S. dollars. Whenever any determination, consent or approval is to be made or given by any Purchaser, such action shall be in such Purchaser’s sole discretion, unless otherwise specified in this Agreement. If any provision in the Basic Documents is held to be illegal, invalid, not binding or unenforceable, (i) such provision shall be fully severable and the Basic Documents shall be construed and enforced as if such illegal, invalid, not binding or unenforceable provision had never comprised a part of the Basic Documents, and the remaining provisions shall remain in full force and effect and (ii) the parties hereto shall negotiate in good faith to modify the Basic Documents so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to the Basic Documents, the date that is the reference date in calculating such period shall be excluded. If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day. Any words imparting the singular number only shall include

 

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the plural and vice versa. The words such as “herein,” “hereinafter,” “hereof” and “hereunder” refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires. The provision of a Table of Contents, the division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement.

Section 7.03 Survival of Provisions. The representations and warranties set forth in Sections 3.02, 3.03, 3.06, 4.02, 4.04 and 4.05 hereunder shall survive the execution and delivery of this Agreement indefinitely, and the other representations and warranties set forth herein shall survive for a period of six (6) months following the final Closing Date regardless of any investigation made by or on behalf of Contango or the Purchasers. The covenants made in this Agreement or any other Basic Document shall survive the final Closing and remain operative and in full force and effect regardless of acceptance of any of the Purchased Securities and payment therefor and repayment, conversion or repurchase thereof. Regardless of any purported general termination of this Agreement, the provisions of Article V and all indemnification rights and obligations of Contango and the Purchasers thereunder, Section 6.02 and this Article VII shall remain operative and in full force and effect as between Contango and the Purchasers, unless Contango and the Purchasers execute a writing that expressly (with specific references to the applicable Section or subsection of this Agreement) terminates such rights and obligations as between Contango and the Purchasers.

Section 7.04 No Waiver; Modifications in Writing.

(a) Delay. No failure or delay on the part of any party in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to a party at law or in equity or otherwise.

(b) Specific Waiver. Except as otherwise provided herein, no amendment, waiver, consent, modification or termination of any provision of this Agreement or any other Basic Document shall be effective unless signed by each of the parties hereto or thereto affected by such amendment, waiver, consent, modification or termination. Any amendment, supplement or modification of or to any provision of this Agreement or any other Basic Document, any waiver of any provision of this Agreement or any other Basic Document and any consent to any departure by Contango from the terms of any provision of this Agreement or any other Basic Document shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Agreement, no notice to or demand on Contango in any case shall entitle Contango to any other or further notice or demand in similar or other circumstances. Any investigation by or on behalf of any party shall not be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. Notwithstanding any of the foregoing, any amendment, waiver, consent or modification of, or supplement to, this Agreement or any other Basic Document shall require approval of a majority of the members of the board of directors of Contango not affiliated with John C. Goff.

 

14


Section 7.05 Binding Effect; Assignment.

(a) Binding Effect. This Agreement shall be binding upon Contango, each Purchaser and their respective successors and permitted assigns. Except as expressly provided in this Agreement, this Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and permitted assigns.

(b) Assignment of Rights. Without the written consent of Contango, no portion of the rights and obligations of any Purchaser under this Agreement may be assigned or transferred by such Purchaser. No portion of the rights and obligations of Contango under this Agreement may be transferred or assigned without the prior written consent of the Purchasers.

Section 7.06 Communications. All notices and demands provided for hereunder shall be (i) in writing and shall be given by registered or certified mail, return receipt requested, air courier guaranteeing overnight delivery or personal delivery, and (ii) via e-mail, to the following addresses:

(a) If to the Purchasers:

At such address indicated on Schedule A attached hereto.

(b) If to Contango:

Contango Oil & Gas Company

717 Texas Avenue, Suite 2900

Houston, Texas 77002

Attention: Wilkie S. Colyer, Jr.

E-mail: WColyer@contango.com

with a copy (which shall not constitute notice) to:

Gibson, Dunn & Crutcher LLP

811 Main Street, Suite 3000

Houston, Texas 77002

Attention: Hillary H. Holmes

E-mail: HHolmes@gibsondunn.com

or to such other address as Contango or such Purchaser may designate in writing. All notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; upon actual receipt if sent by certified or registered mail, return receipt requested, or regular mail, if mailed; upon actual receipt if sent by overnight courier copy; when receipt is acknowledged, if sent via e-mail; and upon actual receipt when delivered to an air courier guaranteeing overnight delivery.

 

15


Section 7.07 Entire Agreement. This Agreement, the other Basic Documents and the other agreements and documents referred to herein are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein or the other Basic Documents with respect to the rights granted by Contango or any of its Affiliates or the Purchasers or any of their Affiliates set forth herein or therein. This Agreement, the other Basic Documents and the other agreements and documents referred to herein or therein supersede all prior agreements and understandings between the parties with respect to such subject matter.

Section 7.08 Governing Law; Submission to Jurisdiction. This Agreement, and all claims or causes of action (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or related to any representation or warranty made in or in connection with this Agreement), will be construed in accordance with and governed by the laws of the State of Texas without regard to principles of conflicts of laws. Any action against any party relating to the foregoing shall be brought in any federal or state court of competent jurisdiction located within the State of Texas, and the parties hereto hereby irrevocably submit to the non-exclusive jurisdiction of any federal or state court located within the State of Texas over any such action. The parties hereby irrevocably waive, to the fullest extent permitted by applicable Law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.

Section 7.09 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT EACH HEREBY WAIVES, AND AGREES TO CAUSE ITS AFFILIATES TO WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

Section 7.10 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement. A signed copy of this Agreement delivered by facsimile, portable document format (PDF) or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement; provided, however, that each party hereto shall deliver an original signed copy of this Agreement executed by such party to any other party hereto promptly upon the request of any such other party.

 

16


Section 7.11 Recapitalizations, Exchanges, Etc. Affecting the Purchased Securities. The provisions of this Agreement shall apply to the full extent set forth herein with respect to any and all equity interests of Contango or any successor or assign of Contango (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for or in substitution of, the Purchased Securities.

Section 7.12 Certain Tax Matters. Contango agrees that, provided that each Purchaser delivers to Contango a properly executed IRS Form W-9, or similar form sufficient to cause under current Law Contango (including any paying agent of Contango) to avoid a requirement to withhold on any payments or deemed payments to any such Purchaser, Contango (including any paying agent of Contango) will not withhold on any payments or deemed payments to any such Purchaser.

[Remainder of Page Left Intentionally Blank]

 

17


IN WITNESS WHEREOF, the parties hereto execute this Agreement, effective as of the date first above written.

 

CONTANGO OIL & GAS COMPANY
By:   /s/ E. Joseph Grady
Name:   E. Joseph Grady
Title:   Senior Vice President and Chief Financial Officer

[Signatures continued on following page.]

 

[Signature Page to Purchase Agreement]


GOFF MCF PARTNERS, LP
By:   /s/ John C. Goff
Name:   John C. Goff
Title:   Chief Executive Officer
JOHN C. GOFF SEP IRA
By:   /s/ John C. Goff
  John C. Goff

[Signature Page to Purchase Agreement]


SCHEDULE A

 

Purchaser

   Number of Shares
of Preferred Stock
     Allocated Purchase Price  

Goff MCF Partners, LP

     694,737      $ 6,600,001.50  

John C. Goff SEP IRA

     94,737      $ 900,001.50  
  

 

 

    

 

 

 

Total

     789,474      $ 7,500,003.00  
  

 

 

    

 

 

 

Notice Address:

500 Commerce St., Suite 700,

Fort Worth, Texas 76102

Attention Jennifer Terrell

jterrell@Goffcp.com

With a copy to

Pillsbury Winthrop Shaw Pittman LLP

1200 Seventeenth Street NW

Washington, DC 20036-3006

Attention Robert Robbins

robert.robbins@pillsburylaw.com


EXHIBIT A

STATEMENT OF RESOLUTION

ESTABLISHING SERIES OF SHARES

DESIGNATED

SERIES A CONTINGENT CONVERTIBLE PREFERRED STOCK

OF CONTANGO OIL & GAS COMPANY

Pursuant to Section 21.155 and Section 21.156 of the Texas Business Organizations Code (the “Code”):

CONTANGO OIL & GAS COMPANY, a Texas corporation (the “Corporation”), certifies that pursuant to the authority contained in Article IV of its Amended and Restated Certificate of Formation (the “Certificate of Formation”), and in accordance with the provisions of Section 21.155 and Section 21.156 of the Code, the Board of Directors of the Corporation (the “Board”) duly approved and adopted on September 9, 2019, and a duly authorized Pricing Committee of the Board has duly approved and adopted on September 12, 2019, the following resolution creating and providing for the establishment and issuance of a series of shares of Series A Preferred Stock (defined below) as hereinafter described, providing for the designations, preferences, limitations and relative rights, voting, redemption and other rights thereof and the qualifications, limitations or restrictions thereof, in addition to those set forth in the Certificate of Formation, all in accordance with the provisions of Section 21.155 and Section 21.156 of the Code, which resolution remains in full force and effect on the date hereof:

RESOLVED, that the rights, powers and preferences, and the qualifications, limitations and restrictions, of the Series A Contingent Convertible Preferred Stock as set forth in the Statement of Resolution are hereby approved and adopted by the Board and the Series A Contingent Convertible Preferred Stock is hereby authorized out of the Corporation’s authorized preferred stock, par value $0.04 per share; and the form, terms and provisions of the Statement of Resolution are hereby approved, adopted, ratified and confirmed in all respects as follows:

Section 1. Designation and Amount; Ranking.

(a) The shares of such series shall be designated the “Series A Contingent Convertible Preferred Stock” (the “Series A Preferred Stock”).

(b) Each share of Series A Preferred Stock shall be identical in all respects with the other shares of Series A Preferred Stock.

(c) The authorized number of shares of Series A Preferred Stock shall initially be 789,474, which number may from time to time be increased or decreased by resolution of the Board as permitted by the Code.

(d) For purposes of this Statement of Resolution, “Capital Stock” of any person means any and all shares, interests, participations or other equivalents however designated of corporate stock or other equity participations, including partnership interests, whether general or limited, of such person and any rights (other than debt securities convertible or exchangeable into an equity interest), warrants or options to acquire an equity interest in such person. The Series A Preferred Stock shall, with respect to dividend rights and rights upon a liquidation, winding-up or dissolution of the Corporation, rank:


(i) senior to any class or series of Capital Stock of the Corporation, the terms of which do not expressly provide that such class or series ranks senior to or on a parity with the Series A Preferred Stock with respect to dividend rights or rights upon a liquidation, winding-up or dissolution of the Corporation (collectively, together with any warrants, rights, calls or options exercisable for or convertible into such Capital Stock, the “Junior Stock”);

(ii) on parity with the Common Stock, par value $0.04 per share, of the Corporation (“Common Stock”) and any class or series of Capital Stock of the Corporation, the terms of which provide that such class or series ranks on a parity with the Series A Preferred Stock with respect to dividend rights or rights upon a liquidation, winding-up or dissolution of the Corporation (collectively, together with any warrants, rights, calls or options exercisable for or convertible into such Capital Stock, the “Parity Stock”); and

(iii) junior to any class or series of Capital Stock of the Corporation (other than Common Stock), the terms of which expressly provide that such class or series ranks senior to the Series A Preferred Stock with respect to dividend rights or rights upon a liquidation, winding-up or dissolution of the Corporation (collectively, together with any warrants, rights, calls or options exercisable for or convertible into such Capital Stock, the “Senior Stock”).

Section 2. Definitions.

For purposes of this Statement of Resolution, the following terms have meanings set forth in the Section indicated:

 

Term

  

Section

Board    Preamble
Business Day    Section 11(c)
Capital Stock    Section 1(d)
Certificate of Formation    Preamble
Common Stock    Section 1(d)(ii)
Code    Preamble
Conversion Ratio    Section 8(a)
Conversion Requirements    Section 8(a)
Corporation    Preamble
Junior Stock    Section 1(d)(i)
Liquidation    Section 4(a)
Liquidation Distribution    Section 4(a)
National Securities Exchange    Section 8(a)
Original Issue Date    Section 3(a)
Original Issue Price    Section 3(a)
Parity Stock    Section 1(d)(ii)
Transfer Agent    Section 7(b)
Senior Stock    Section 1(d)(iii)
Series A Preferred Stock    Section 1(a)

 

2


Section 3. Dividends.

(a) Holders of shares of Series A Preferred Stock shall be entitled to receive, when and as declared by the Board and declared by the Corporation, out of funds that are legally available therefor, cash dividends of ten percent (10%) of the Original Issue Price per annum on each outstanding share of Series A Preferred Stock. Such dividends shall accrue from the first anniversary of the Original Issue Date of the Series A Preferred Stock and shall cease to accrue on the date immediately preceding the date on which the Conversion Requirements described in Section 8 are satisfied. The “Original Issue Price” means $9.50 per share (as adjusted for any stock split, combination or similar event or transaction directly affecting the Series A Preferred Stock but not by any accrued dividends). The “Original Issue Date” means September 17, 2019.

(b) Following the first anniversary of the Original Issue Date, dividends pursuant to this Section 3 shall be payable quarterly in cash, on March 31, June 30, September 30 and December 31 of each year, beginning September 30, 2020, when, as and if declared by the Board, until the time at which the Conversion Requirements are satisfied; provided, however, that when the Preferred Stock is no longer outstanding, no dividends shall be payable to the holders of the Series A Preferred Stock or the holders of the Common Stock into which the Series A Preferred Stock converts. Payments of any dividends pursuant to this Section 3 shall be payable only if the Corporation has surplus income and such payment is permissible under the Corporation’s debt instruments then in effect.

(c) No dividends or distributions shall be paid with respect to the Common Stock (i) prior to the holders of the Series A Preferred Stock having received all accrued but unpaid dividends on the Series A Preferred Stock or (ii) unless and until all shares of Series A Preferred Stock have been converted to shares of Common Stock.

(d) Holders of Series A Preferred Stock shall fully participate, on an as-converted basis, in any dividends declared and paid or distributions on Common Stock as if the Series A Preferred Stock were converted into shares of Common Stock as of the record date for such dividend or distribution at the Conversion Ratio.

Section 4. Liquidation.

(a) Prior to conversion pursuant to Section 8, in the event of a liquidation (complete or partial), dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary (a “Liquidation”), after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of Series A Preferred Stock shall be entitled to receive, in respect of any shares of Series A Preferred Stock held by them, out of assets of the Corporation available for distribution to shareholders of the Corporation or their assignees, and subject to the rights of any outstanding shares of Senior Stock and before any amount shall be distributed to the holders of Junior Stock, a liquidating distribution (the “Liquidation Distribution”) in an amount equal to the amount such holder of Series A Preferred Stock would have been entitled to receive had such holder converted its shares of Series A Preferred Stock into shares of Common Stock at the Conversion Ratio immediately prior to such Liquidation.

 

3


(b) If, upon any Liquidation, the amount payable with respect to the Liquidation Distribution is not paid in full, the holders of the Series A Preferred Stock and any Parity Stock shall share equally and ratably in any distribution of the Corporation’s assets in proportion to the respective liquidation distributions to which they are entitled.

(c) After the payment in cash or proceeds to the holders of shares of the Series A Preferred Stock of the full amount of the Liquidation Distribution with respect to outstanding shares of Series A Preferred Stock, the holders of outstanding shares of Series A Preferred Stock shall have no right or claim, based on their ownership of shares of Series A Preferred Stock, to the remaining assets of the Corporation, if any. Whenever any such distribution shall be paid in property other than cash, the value of such distribution shall be the fair market value of such property as determined in the good faith reasonable discretion of the Board or liquidating trustee, as the case may be.

Section 5. Voting.

The holders of outstanding shares of Series A Preferred Stock shall have the following voting rights:

(a) Each share of Series A Preferred Stock shall entitle the holder thereof to voting power equal to 8.71 shares of Common Stock on all matters submitted to a vote of the shareholders of the Corporation; provided that, to eliminate fractional votes, the votes cast by the shares of Series A Preferred Stock in the aggregate “for” or “against” a matter will be rounded down to the nearest whole vote.

(b) In the event the Corporation shall at any time after declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(c) Except as otherwise provided herein or by the Code or other applicable law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of the shareholders of the Corporation.

(d) Except as set forth herein or as otherwise required by the Code or other applicable law, the holders of shares of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with the holders of shares of Common Stock as set forth herein) for taking any corporate action.

 

4


Section 6. Reservation of Common Stock.

(a) Subject to the Conversion Requirements set forth in Section 8, at any time that any Series A Preferred Stock is outstanding, the Corporation shall from time to time take all lawful action within its control to cause the authorized capital stock of the Corporation to include a number of authorized but unissued shares of Common Stock equal to 7,894,740 shares (for the avoidance of doubt, taking into account any other obligations of the Corporation to reserve Common Stock upon the conversion, exchange or exercise of other securities of the Corporation such that any other reservation may not be counted toward the reservation of Common Stock hereunder) (such authorized but unissued shares, the “Reserved Shares”). If, at any time, the Corporation lacks a sufficient number of Reserved Shares, the Corporation shall use its reasonable best efforts to take all lawful action within its control to effect an amendment to the Certificate of Formation to increase the authorized but unissued shares of Common Stock of the Corporation to provide for a sufficient number of Reserved Shares.

(b) If any shares of Common Stock to be reserved for the purpose of conversion of the Series A Preferred Stock require registration or listing with or approval of any governmental authority, stock exchange or other regulatory body under any federal or state law or regulation or otherwise before such shares may be validly issued or delivered upon conversion, the Corporation shall, at its sole cost and expense, in good faith and as expeditiously as possible following satisfaction of the Conversion Requirements set forth in Section 8, endeavor to secure such registration, listing or approval, as the case may be.

Section 7. Form.

(a) Notwithstanding anything to the contrary herein, the shares of Series A Preferred Stock and any shares of Common Stock issued upon conversion thereof shall be in uncertificated, book-entry form as permitted by the Bylaws of the Corporation and the Code, and shall bear a legend in substantially the following form:

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.”

(b) The duly appointed transfer agent for the Series A Preferred Stock shall be Continental Stock Transfer & Trust Company (the “Transfer Agent”). The Corporation may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Corporation and the Transfer Agent; provided that if the Corporation removes Continental Stock Transfer & Trust Company, the Corporation shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal.

(c) Transfers of Series A Preferred Stock or any shares of Common Stock issued upon conversion thereof held in uncertificated, book-entry form shall be made only upon the transfer books of the Corporation kept at an office of the Transfer Agent upon receipt of proper transfer instructions from the registered owner of such uncertificated shares, or from a duly authorized attorney or from an individual presenting proper evidence of succession, assignment or authority to transfer the stock. The Corporation may refuse any requested transfer until furnished evidence satisfactory to it that such transfer is proper.

 

5


Section 8. Conversion.

(a) Following (i) effectiveness of an amendment to the Certificate of Formation to increase the number of authorized shares of Common Stock by at least 50,000,000 shares and (ii) approval by the shareholders of the Corporation, in accordance with applicable law and the applicable rules and regulations of the principal national securities exchange on which the Common Stock is then listed for trading (the “National Securities Exchange”), of the issuance of the shares of Common Stock to be issued upon conversion of the Preferred Stock pursuant to this Section 8 (the “Conversion Requirements”), each share of Series A Preferred Stock shall automatically convert into 10 shares of Common Stock (the “Conversion Ratio”).

(b) Any Common Stock delivered as a result of conversion pursuant to this Section 8 following satisfaction of the Conversion Requirements shall be validly issued, fully paid and non- assessable, free and clear of any preemptive right, liens, claims, rights or encumbrances other than those arising under the Code or the Bylaws of the Corporation. Immediately following the settlement of conversion, the rights of the holders of converted Series A Preferred Stock shall cease and the persons entitled to receive shares of Common Stock upon the conversion of shares of Series A Preferred Stock shall be treated for all purposes as having become the owners of such shares of Common Stock. Concurrently with such conversion, the converted shares of Series A Preferred Stock shall cease to be outstanding, shall be canceled and the shares of Series A Preferred Stock formerly designated pursuant to this Statement of Resolution shall be restored to authorized but unissued shares of Preferred Stock.

(c) If, after the Original Issue Date, the Corporation (i) makes a distribution on its Common Stock in cash, securities (including Common Stock) or other property or assets, (ii) subdivides or splits its outstanding Common Stock into a greater number of Common Stock, (iii) combines or reclassifies its Common Stock into a smaller number of Common Stock or (iv) issues by reclassification of its Common Stock any securities (including any reclassification in connection with a merger, consolidation or business combination in which the Corporation is the surviving person), then the Conversion Ratio in effect at the time of the record date for such distribution or of the effective date of such subdivision, split, combination, or reclassification shall be proportionately adjusted so that the conversion of the Series A Preferred Stock after such time shall entitle the holder to receive the aggregate number of Common Stock (or shares of any securities into which such shares of Common Stock would have been combined, consolidated, merged or reclassified pursuant to clauses (iii) and (iv) above) that such holder would have been entitled to receive if the Series A Preferred Stock had been converted into Common Stock immediately prior to such record date or effective date, as the case may be, and in the case of a merger, consolidation or business combination in which the Corporation is the surviving person, the Corporation shall provide effective provisions to ensure that the provisions in this Statement of Resolution relating to the Series A Preferred Stock shall not be abridged or amended and that the Series A Preferred Stock shall thereafter retain the same powers, preferences and relative participating, optional and other special rights, and the qualifications, limitations and restrictions thereon, that the Series A Preferred Stock had immediately prior to such transaction or event. An adjustment made pursuant to this Section 8(c) shall become effective immediately after the record date in the case of a distribution and shall become effective immediately after the effective date in the case of a subdivision, combination, reclassification (including any reclassification in connection with a merger, consolidation or business combination in which the Corporation is the surviving person) or split. Such adjustment shall be made successively whenever any event described above shall occur.

 

6


(d) Notwithstanding any of the other provisions of this Section 8, no adjustment shall be made to the Conversion Ratio pursuant to Section 8(c) as a result of any of the following:

(i) the grant of Common Stock or options, warrants or rights to purchase Common Stock to employees, officers or directors of the Corporation or its subsidiaries, under compensation plans and agreements approved in good faith by the Board; provided, that in the case of options, warrants or rights to purchase Common Stock, the exercise price per Common Stock shall not be less than the closing price of the Common Stock (as reported by the National Securities Exchange) on the date such option, warrant or other right is issued;

(ii) the issuance of any Common Stock as all or part of the consideration to effect (A) the closing of any acquisition by the Corporation of assets of a third party or (B) the consummation of a merger, consolidation or other business combination of the Corporation with another entity in which the Corporation survives and the Common Stock remain outstanding to the extent such transaction(s) is or are validly approved by the vote or consent of the Board;

(iii) without duplication of Section 8(d)(i) above, the issuance of options, warrants or other rights to purchase Common Stock, or securities exercisable or convertible into or exchangeable for Common Stock (or options, warrants or other rights to purchase any such securities that are exercisable or convertible into or exchangeable for Common Stock, in each case, that are outstanding on the date of first issuance of shares of Series A Preferred Stock); and

(iv) the issuance of securities for which an adjustment is made under another provision of this Section 8.

(e) The Corporation shall pay any and all issue, documentary, stamp and other taxes, excluding any income, franchise, property or similar taxes, that may be payable in respect of any issue or delivery of Common Stock on conversion of Series A Preferred Stock pursuant hereto. However, the holder of any Series A Preferred Stock shall pay any tax that is due because Common Stock issuable upon conversion thereof are issued in a name other than such holder’s name.

(f) No fractional Common Stock shall be issued upon the conversion of any Series A Preferred Stock. All Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series A Preferred Stock by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional stock. If, after the aforementioned aggregation, the conversion would result in the issuance of a fraction of a Common Stock, the Corporation shall not issue a fractional Common Stock but shall round the fractional Common Stock to the nearest whole Common Stock (and a 0.5 of a share of Common Stock shall be rounded up to the next higher share of Common Stock).

 

7


Section 9. Additional Procedures.

(a) In connection with any conversion pursuant to Section 8, the holder of Series A Preferred Stock must deliver transfer instruments reasonably satisfactory to the Corporation, at the principal office of the Corporation (or such other place mutually acceptable to the holder of Series A Preferred Stock and the Corporation), in accordance with Section 7(c).

(b) On the date of conversion pursuant to Section 8, the number of shares of Common Stock into which the applicable shares of Series A Preferred Stock are converted shall be promptly issued in uncertificated, book-entry form and evidence thereof shall be delivered to the holder of Series A Preferred Stock thereof or such holder’s designee upon the furnishing of appropriate endorsements and transfer documents and the payment of all transfer and similar taxes, if any, allocable to such holder.

Section 10. No Other Rights.

The shares of Series A Preferred Stock shall not have any powers, designations, preferences or relative, participating, optional, or other special rights, nor shall there be any qualifications, limitations or restrictions or any powers, designations, preferences or rights of such shares, other than as set forth herein or in the Certificate of Formation, or as may be provided by law.

Section 11. Other Provisions.

(a) The shares of Series A Preferred Stock shall not be subject to the operation of any retirement or sinking fund.

(b) In case any one or more of the provisions contained in this Statement of Resolution shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. Furthermore, in lieu of any such invalid, illegal or unenforceable provision, there shall be added automatically as a part of this Statement of Resolution a provision as similar in terms to such invalid, illegal or unenforceable provision as may be possible and be legal, valid and enforceable, unless the requisite parties separately agree to a replacement provision that is valid, legal and enforceable.

(c) Any amendment, modification, waiver or alteration of, or supplement to, this Statement of Resolution shall require approval of a majority of the members of the Board not affiliated with John C. Goff.

(d) Any payments, issuances or distributions required to be made hereunder on any day that is not a Business Day shall be made on the next succeeding Business Day without interest or additional payment for such delay. For the purposes of this Statement of Resolution, “Business Day” shall mean each day that is not a Saturday, Sunday or other day on which banking institutions in Houston, Texas are authorized or required by law to close. All payments required hereunder shall be made by wire transfer of immediately available funds in United States Dollars to the holders in accordance with the payment instructions as such holders may deliver by written notice to the Corporation from time to time.

 

8


Section 12. Effective Date.

This Statement of Resolution shall become effective on September 17, 2019.

[The Remainder of this Page Intentionally Left Blank]

 

9


IN WITNESS WHEREOF, Contango Oil & Gas Company has caused this Statement of Resolution to be duly executed on the date first written above.

 

CONTANGO OIL & GAS COMPANY
By:  

    

Name: E. Joseph Grady
Title: Senior Vice President and Chief Financial Officer

[Signature Page to Statement of Resolution]


EXHIBIT B

REGISTRATION RIGHTS AGREEMENT

by and among

CONTANGO OIL & GAS COMPANY

and

THE PURCHASERS PARTY HERETO


Table of Contents

 

ARTICLE I DEFINITIONS

     1  

Section 1.1

  Definitions      1  

Section 1.2

  Registrable Securities      3  

ARTICLE II REGISTRATION RIGHTS

     3  

Section 2.1

  Shelf Registration      3  

Section 2.2

  Sale Procedures      4  

Section 2.3

  Cooperation by Holders      6  

Section 2.4

  Expenses      7  

Section 2.5

  Indemnification      7  

Section 2.6

  Transfer or Assignment of Registration Rights      9  

Section 2.7

  Aggregation of Registrable Securities      9  

ARTICLE III MISCELLANEOUS

     10  

Section 3.1

  Communications      10  

Section 3.2

  Successors and Assigns      10  

Section 3.3

  Assignment of Rights      10  

Section 3.4

  Recapitalization (Exchanges, etc. Affecting the Registrable Securities)      10  

Section 3.5

  Specific Performance      11  

Section 3.6

  Counterparts      11  

Section 3.7

  Headings      11  

Section 3.8

  Governing Law, Submission to Jurisdiction      11  

Section 3.9

  Waiver of Jury Trial      11  

Section 3.10

  Severability of Provisions      12  

Section 3.11

  Entire Agreement      12  

Section 3.12

  Term; Amendment      12  

Section 3.13

  No Presumption      12  

Section 3.14

  Obligations Limited to Parties to Agreement      12  

Section 3.15

  Interpretation      13  

Section 3.16

  No Inconsistent Agreements; Additional Rights      13  

 

i


REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of September 17, 2019 by and between Contango Oil & Gas Company, a Texas corporation (“Contango”), and the parties set forth on Schedule A hereto (each, a “Purchaser” and collectively, the “Purchasers”).

WHEREAS, this Agreement is made in connection with the closing of the issuance and sale of the Purchased Securities pursuant to the Purchase Agreement, dated as of September 12, 2019, by and between Contango and the Purchasers (the “Purchase Agreement”);

WHEREAS, Contango has agreed to provide the registration and other rights set forth in this Agreement for the benefit of the Purchasers pursuant to the Purchase Agreement; and

WHEREAS, it is a condition to the obligations of the Purchasers and Contango under the Purchase Agreement that this Agreement be executed and delivered.

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each party hereto, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions. The terms set forth below are used herein as so defined:

Affiliate” means, with respect to a specified Person, any other Person, directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control” (including, with correlative meanings, “controlling,” “controlled by,” and “under common control with”) means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

Agreement” has the meaning specified therefor in the introductory paragraph.

Business Day” means any day other than a Saturday, Sunday, any federal legal holiday or day on which banking institutions in the State of Texas are authorized or required by law or other governmental action to close.

Statement of Resolution” means the statement of resolution setting forth the terms of the Preferred Stock.

Commission” means the United States Securities and Exchange Commission.

Common Stock” means the common stock, par value $0.04 per share, of Contango.


Contango” has the meaning specified therefor in the introductory paragraph of this Agreement.

Effective Date” means the initial date of effectiveness of the Shelf Registration Statement.

Effectiveness Period” has the meaning specified therefor in Section 2.1(a) of this Agreement.

Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.

Holder” means the record holder of any Registrable Securities.

Law” shall have the meaning set forth in the Purchase Agreement.

Losses” has the meaning specified therefor in Section 2.5(a) of this Agreement.

Person” means any individual, corporation, company, voluntary association, partnership, joint venture, trust, limited liability company, unincorporated organization, government or any agency, instrumentality or political subdivision thereof, or any other form of entity.

Preferred Stock” means the Series A Contingent Convertible Preferred Stock of Contango and having the rights and obligations specified in the Statement of Resolution.

Purchase Agreement” has the meaning specified therefor in the Recitals of this Agreement.

Purchased Securities” means the Preferred Stock to be issued and sold to the Purchasers pursuant to the Purchase Agreement.

Purchaser” or “Purchasers” has the meaning set forth in the introductory paragraph of this Agreement.

Registration” means any registration pursuant to this Agreement, including pursuant to the Shelf Registration Statement.

Registrable Securities” means, subject to Section 1.2 of this Agreement, the shares of Common Stock issued upon conversion of the Purchased Securities in accordance with the terms of the Statement of Resolution.

Registration Expenses” has the meaning specified therefor in Section 2.4(a) of this Agreement.

Resale Opt-Out Notice” has the meaning specified therefor in Section 2.1(b) of this Agreement.

Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.

 

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Selling Expenses” has the meaning specified therefor in Section 2.4(a) of this Agreement.

Selling Holder” means a Holder who is selling Registrable Securities pursuant to a Registration.

Shelf Registration Statement” means a registration statement under the Securities Act to permit the public resale of the Registrable Securities from time to time as permitted by Rule 415 of the Securities Act (or any similar provision then in force under the Securities Act).

Section 1.2 Registrable Securities. Any Registrable Security will cease to be a Registrable Security at the earliest of the following: (a) when a registration statement covering such Registrable Security has been declared effective by the Commission and such Registrable Security has been sold or disposed of pursuant to such effective registration statement; (b) when such Registrable Security is held by Contango or one of its subsidiaries; (c) when such Registrable Security has been sold in a private transaction in which the transferor’s rights under this Agreement are not assigned to the transferee of such securities; and (d) the date on which such Registrable Security has been sold pursuant to any section of Rule 144 under the Securities Act (or any similar provision then in force under the Securities Act, “Rule 144”) or any other exemption from the registration requirements of the Securities Act as a result of which the legend on any certificate or book-entry notation representing such Registrable Security restricting transfer of such Registrable Security has been removed.

ARTICLE II

REGISTRATION RIGHTS

Section 2.1 Shelf Registration.

(a) Shelf Registration. Contango shall use its commercially reasonable efforts to prepare and file an initial Shelf Registration Statement under the Securities Act covering all Registrable Securities at such time of filing within 30 days of the conversion of the Preferred Stock. Contango shall use its commercially reasonable efforts to cause such initial Shelf Registration Statement to become effective no later than 120 days from its initial filing. Contango will use its commercially reasonable efforts to cause such initial Shelf Registration Statement filed pursuant to this Section 2.1(a) to be continuously effective under the Securities Act until the earliest of (i) all Registrable Securities covered by the Shelf Registration Statement have been distributed in the manner set forth and as contemplated in such Shelf Registration Statement, (ii) there are no longer any Registrable Securities outstanding and (iii) three years from the Effective Date (the “Effectiveness Period”). A Shelf Registration Statement filed pursuant to this Section 2.l(a) shall be on such appropriate registration form of the Commission as shall be selected by Contango. A Shelf Registration Statement when declared effective (including the documents incorporated therein by reference) will comply as to form in all material respects with all applicable requirements of the Securities Act and the Exchange Act and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any prospectus contained in such Shelf Registration Statement, in the light of the circumstances under which a statement is made). As soon as practicable following the date that a Shelf Registration Statement becomes effective, but in any event within five Business Days of such date, Contango shall provide the Holders with written notice of the effectiveness of a Shelf Registration Statement.

 

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(b) Resale Registration Opt-Out. At least three Business Days before the initial filing of the Shelf Registration Statement required by Section 2.1(a), Contango shall provide advance written notice to each Holder that it plans to file a Shelf Registration Statement. Any Holder may deliver advance written notice (a “Resale Opt-Out Notice”) to Contango requesting that such Holder not be included in a Shelf Registration Statement prior to its initial filing. Following receipt of a Resale Opt-Out Notice from a Holder, Contango shall not be required to include the Registrable Securities of such Holder in such Shelf Registration Statement.

(c) Delay Rights. Notwithstanding anything to the contrary contained herein, Contango may, upon written notice to any Selling Holder whose Registrable Securities are included in the Shelf Registration Statement, suspend such Selling Holder’s use of any prospectus which is a part of the Shelf Registration Statement (in which event the Selling Holder shall discontinue sales of the Registrable Securities pursuant to the Shelf Registration Statement) if (i) Contango is pursuing an acquisition, merger, reorganization, disposition or other similar transaction and Contango determines in good faith that Contango’s ability to pursue or consummate such a transaction would be materially and adversely affected by any required disclosure of such transaction in the Shelf Registration Statement or (ii) Contango has experienced some other material non-public event the disclosure of which at such time, in the good faith judgment of Contango, would materially and adversely affect Contango; provided, however, that in no event shall the Selling Holders be suspended from selling Registrable Securities pursuant to the Shelf Registration Statement for a period of 60 consecutive days or an aggregate of 180 days in any 365-day period. Upon disclosure of such information or the termination of the condition described above, Contango shall provide prompt notice to the Selling Holders whose Registrable Securities are included in the Shelf Registration Statement, and shall promptly terminate any suspension of sales it has put into effect and shall take such other actions necessary or appropriate to permit registered sales of Registrable Securities as contemplated in this Agreement.

Section 2.2 Sale Procedures.

(a) In connection with its obligations under this Article II, Contango will, as expeditiously as possible:

(i) prepare and file with the Commission such amendments and supplements to the Shelf Registration Statement and the prospectus used in connection therewith as may be necessary to keep a Shelf Registration Statement effective for the Effectiveness Period and as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by a Shelf Registration Statement;

(ii) furnish to each Selling Holder (A) as far in advance as reasonably practicable before filing a Shelf Registration Statement or any other registration statement contemplated by this Agreement or any supplement or amendment thereto, upon request, copies of reasonably complete drafts of all such documents proposed to be filed (including exhibits and each document incorporated by reference therein to the extent then required

 

4


by the rules and regulations of the Commission), and provide each such Selling Holder the opportunity to object to any information pertaining to such Selling Holder and its plan of distribution that is contained therein and make the corrections reasonably requested by such Selling Holder with respect to such information prior to filing such Shelf Registration Statement or such other registration statement and the prospectus included therein or any supplement or amendment thereto, and (B) such number of copies of such Shelf Registration Statement or such other registration statement and the prospectus included therein and any supplements and amendments thereto as such Persons may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities covered by such Shelf Registration Statement or other registration statement;

(iii) if applicable, use its commercially reasonable efforts to register or qualify the Registrable Securities covered by a Shelf Registration Statement or any other registration statement contemplated by this Agreement under the securities or blue sky laws of such jurisdictions as the Selling Holders shall reasonably request, provided that Contango will not be required to qualify generally to transact business in any jurisdiction where it is not then required to so qualify or to take any action which would subject it to general service of process in any such jurisdiction where it is not then so subject;

(iv) promptly notify each Selling Holder, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of (A) the filing of a Shelf Registration Statement or any other registration statement contemplated by this Agreement or any prospectus included therein or any amendment or supplement thereto (other than any amendment or supplement resulting from the filing of a document incorporated by reference therein), and, with respect to such Shelf Registration Statement or any other registration statement or any post-effective amendment thereto, when the same has become effective; and (B) the receipt of any written comments from the Commission with respect to any filing referred to in clause (A) and any written request by the Commission for amendments or supplements to such Shelf Registration Statement or any other registration statement or any prospectus or prospectus supplement thereto;

(v) immediately notify each Selling Holder, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of (A) the happening of any event as a result of which the prospectus contained in a Shelf Registration Statement or any other registration statement contemplated by this Agreement or any supplemental amendment thereto, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (B) the issuance or threat of issuance by the Commission of any stop order suspending the effectiveness of such Shelf Registration Statement or any other registration statement contemplated by this Agreement, or the initiation of any proceedings for that purpose; or (C) the receipt by Contango of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction. Following the provision of such notice, Contango agrees to as promptly as practicable amend or supplement the prospectus or prospectus supplement or take other appropriate action so that the prospectus or prospectus supplement does not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and to take such other action as is necessary to remove a stop order, suspension, threat thereof or proceedings related thereto;

 

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(vi) otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least 12 months, but not more than 18 months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder;

(vii) cause all such Registrable Securities registered pursuant to this Agreement to be listed or quoted on each securities exchange or nationally recognized quotation system on which similar securities issued by Contango are then listed or quoted, and cause to be satisfied all requirements and conditions of such securities exchange or nationally recognized quotation system to the listing or quoting of such Registrable Securities that are reasonably within the control of Contango, including, without limitation, registering the Registrable Securities under the Exchange Act, if appropriate, and using commercially reasonable efforts to cause such registration to become effective pursuant to the rule of the Commission;

(viii) use its commercially reasonable efforts to cause the Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of Contango to enable the Selling Holders to consummate the disposition of such Registrable Securities;

(ix) provide a transfer agent and registrar for all Registrable Securities covered by such registration statement; and

(x) enter into customary agreements and take such other actions as are reasonably requested by the Selling Holders in order to expedite or facilitate the disposition of such Registrable Securities.

(b) Each Selling Holder, upon receipt of notice from Contango of the happening of any event of the kind described in Section 2.2(b)(v), shall forthwith discontinue disposition of the Registrable Securities until such Selling Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 2.2(b)(v) or until it is advised in writing by Contango that the use of the prospectus may be resumed, and has received copies of any additional or supplemental filings incorporated by reference in the prospectus, and, if so directed by Contango, such Selling Holder will deliver to Contango (at Contango’s expense) all copies in their possession or control, other than permanent file copies then in such Selling Holder’s possession, of the prospectus and any prospectus supplement covering such Registrable Securities current at the time of receipt of such notice.

Section 2.3 Cooperation by Holders. Contango shall have no obligation to include Registrable Securities of a Holder in the Shelf Registration Statement if such Selling Holder has failed to timely furnish such information which, in the opinion of counsel to Contango, is reasonably required in order for the registration statement or prospectus supplement, as applicable, to comply with the Securities Act.

 

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Section 2.4 Expenses.

(a) Certain Definitions. “Registration Expenses” means all expenses incident to Contango’s performance under or compliance with this Agreement to effect the registration of Registrable Securities in a Shelf Registration Statement pursuant to Section 2.1 and the disposition of such securities, including, without limitation, all registration, filing, securities exchange listing and fees, all registration, filing, qualification and other fees and expenses of complying with securities or blue sky laws, fees of the Financial Industry Regulatory Authority, transfer taxes and fees of transfer agents and registrars, all word processing, duplicating and printing expenses, and the fees and disbursements of Contango’s independent public accountants and counsel for Contango. Except as otherwise provided in Section 2.5 hereof, Contango shall not be responsible for legal fees incurred by Holders in connection with the exercise of such Holders’ rights hereunder. In addition, Contango shall not be responsible for any “Selling Expenses,” which means all underwriting fees, discounts and selling commissions, transfer taxes and fees of counsel allocable to the sale of the Registrable Securities.

(b) Expenses. Contango will pay all reasonable Registration Expenses in connection with a Shelf Registration Statement, whether or not any sale is made pursuant to such Shelf Registration Statement.

Section 2.5 Indemnification.

(a) By Contango. In the event of a registration of any Registrable Securities under the Securities Act pursuant to this Agreement, to the extent permitted by applicable law, Contango will indemnify and hold harmless each Selling Holder thereunder, its directors, officers, employees, agents, representatives and managers, and each Person, if any, who controls such Selling Holder within the meaning of the Securities Act and the Exchange Act, and its directors, officers, employees, agents, representatives and managers, against any losses, claims, damages, expenses or liabilities (including reasonable attorneys’ fees and expenses), including any of the foregoing incurred in settlement of any litigation commenced or threatened by any party other than a Selling Holder (collectively, “Losses”), joint or several, to which such Selling Holder or controlling Person or directors, officers, employees, agents, representatives or managers may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact (in the case of any prospectus, in light of the circumstances under which such statement is made) contained in the Shelf Registration Statement or any other registration statement contemplated by this Agreement, any preliminary prospectus or final prospectus contained therein, or any free writing prospectus related thereto, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in light of the circumstances under which they were made) not misleading, and will reimburse each such Selling Holder, its directors and officers, and each such controlling Person and each such director, officer, employee, agent, representatives or manager for any legal or other expenses reasonably incurred

 

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by them in connection with investigating or defending any such Loss or actions or proceedings; provided, however, that Contango will not be liable in any such case if and to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Selling Holder or such controlling Person in writing specifically for use in the Shelf Registration Statement or such other registration statement, or prospectus supplement, as applicable. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Selling Holder or any such director, officer, employee, agent, representatives, manager or controlling Person, and shall survive the transfer of such securities by such Selling Holder.

(b) By Each Selling Holder. Each Selling Holder agrees severally and not jointly to indemnify and hold harmless Contango, its directors, officers, employees, representatives and agents and each Person, if any, who controls Contango within the meaning of the Securities Act or of the Exchange Act to the same extent as the foregoing indemnity from Contango to the Selling Holders, but only with respect to information regarding such Selling Holder furnished in writing by or on behalf of such Selling Holder expressly for inclusion in the Shelf Registration Statement or prospectus supplement relating to the Registrable Securities, or any amendment or supplement thereto.

(c) Notice. Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party other than under this Section 2.5(c) except to the extent that the indemnifying party is materially prejudiced by such failure. In any action brought against any indemnified party, it shall notify the indemnifying party of the commencement thereof. The indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 2.5 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided, however, that, (i) if the indemnifying party has failed to assume the defense and employ counsel reasonably satisfactory to the indemnified party or (ii) if the defendants in any such action include both the indemnified party and the indemnifying party and counsel to the indemnified party shall have concluded that there may be reasonable defenses available to the indemnified party that are different from or additional to those available to the indemnifying party, or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party or representation by both parties by the same counsel is otherwise inappropriate under the applicable standards of professional conduct, then the indemnified party shall have the right to select a separate counsel and to assume such legal defense and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate counsel and other reasonable expenses related to such participation to be reimbursed by the indemnifying party as incurred. Notwithstanding any other provision of this Agreement, the indemnifying party shall not settle any indemnified claim without the consent of the indemnified party, unless the settlement thereof imposes no liability or obligation on, includes a complete release from liability of, and does not contain any admission of wrong doing by, the indemnified party.

 

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(d) Contribution. If the indemnification provided for in this Section 2.5 is held by a court or government agency of competent jurisdiction to be unavailable to Contango or any Selling Holder or is insufficient to hold them harmless in respect of any Losses, then each such indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of Contango on the one hand and of such Selling Holder on the other in connection with the statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations; provided, however, that in no event shall such Selling Holder be required to contribute an aggregate amount in excess of the dollar amount of proceeds (net of Selling Expenses) received by such Selling Holder from the sale of Registrable Securities giving rise to such indemnification less the amount of any damages that such Selling Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. The relative fault of Contango on the one hand and each Selling Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact has been made by, or relates to, information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this paragraph were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the first sentence of this paragraph. The amount paid by an indemnified party as a result of the Losses referred to in the first sentence of this paragraph shall be deemed to include any legal and other expenses reasonably incurred by such indemnified party in connection with investigating or defending any Loss which is the subject of this paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who is not guilty of such fraudulent misrepresentation.

(e) Other Indemnification. The provisions of this Section 2.5 shall be in addition to any other rights to indemnification or contribution which an indemnified party may have pursuant to law, equity, contract or otherwise.

Section 2.6 Transfer or Assignment of Registration Rights. Except as otherwise specifically provided in this Agreement, without the prior written consent of Contango, the rights to cause Contango to register Registrable Securities granted to the Purchasers by Contango under this Article II may not be transferred or assigned by the Purchasers.

Section 2.7 Aggregation of Registrable Securities. All Registrable Securities held or acquired by Persons who are Affiliates of one another shall be aggregated together for the purpose of determining the availability of any rights under this Agreement. In addition, all other shares of Common Stock held by a Person and for which such Person has similar registration rights pursuant to an agreement between such Person and Contango shall be aggregated together for the purpose of determining such Person’s rights under this Agreement solely as such shares relate to minimum quantity requirements contemplated herein; provided that, for the avoidance of doubt, such Common Stock shall not otherwise be deemed Registrable Securities for any other purpose under this Agreement.

 

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ARTICLE III

MISCELLANEOUS

Section 3.1 Communications. All notices and demands provided for hereunder shall be in writing and shall be given by registered or certified mail, return receipt requested, facsimile, air courier guaranteeing overnight delivery or personal delivery to the following addresses:

 

  (a)

If to a Purchaser, to such addresses indicated on Schedule A attached hereto.

 

  (b)

If to Contango:

Contango Oil & Gas Company

717 Texas Avenue, Suite 2900

Houston, Texas 77002

Attention: Wilkie S. Colyer, Jr.

Facsimile:

E-mail: WColyer@contango.com

with a copy (which shall not constitute notice) to:

Gibson, Dunn & Crutcher LLP

811 Main Street, Suite 3000

Houston, Texas 77002

Attention: Hillary H. Holmes

Facsimile: (346) 718-6902

E-mail: HHolmes@gibsondunn.com

or, if to a transferee of a Purchaser, to the transferee at the address provided pursuant to Section 2.6 above. All notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; upon actual receipt if sent by certified or registered mail, return receipt requested, or regular mail, if mailed; upon actual receipt of the facsimile copy or e-mail, if sent via facsimile or e-mail; and upon actual receipt when delivered to an air courier guaranteeing overnight delivery.

Section 3.2 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including subsequent Holders of Registrable Securities to the extent permitted herein.

Section 3.3 Assignment of Rights. All or any portion of the rights and obligations of any Purchaser under this Agreement may be transferred or assigned by such Purchaser in accordance with Section 2.6 hereof.

Section 3.4 Recapitalization (Exchanges, etc. Affecting the Registrable Securities). The provisions of this Agreement shall apply to the full extent set forth herein with respect to any and all shares of capital stock of Contango or any successor or assign of Contango (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for or in substitution of, the Registrable Securities, and shall be appropriately adjusted for combinations, recapitalizations and the like occurring after the date of this Agreement.

 

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Section 3.5 Specific Performance. Damages in the event of breach of this Agreement by a party hereto would be difficult, if not impossible, to ascertain, and it is therefore agreed that each such Person, in addition to and without limiting any other remedy or right it may have, will have the right to an injunction or other equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof, and each of the parties hereto hereby waives (a) any and all defenses it may have on the ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief or that a remedy at law would be adequate and (b) any requirement under any law to post securities as a prerequisite to obtaining equitable relief. The existence of this right will not preclude any such Person from pursuing any other rights and remedies at law or in equity which such Person may have.

Section 3.6 Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement.

Section 3.7 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

Section 3.8 Governing Law, Submission to Jurisdiction. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS OF SUCH JURISDICTION. Each of the parties hereto irrevocably agrees that any legal action or proceeding with respect to this Agreement or the Transactions shall be brought and determined by courts of the State of Texas located in Houston, Texas and the federal courts of the United States of America located in Houston, Texas, and each of the parties hereto irrevocably submits to the exclusive jurisdiction of such courts solely in respect of any legal proceeding arising out of or related to this Agreement.

Section 3.9 Waiver of Jury Trial. THE PARTIES TO THIS AGREEMENT EACH HEREBY WAIVE, AND AGREE TO CAUSE THEIR AFFILIATES TO WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. THE PARTIES TO THIS AGREEMENT EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

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Section 3.10 Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting or impairing the validity or enforceability of such provision in any other jurisdiction.

Section 3.11 Entire Agreement. This Agreement and the Purchase Agreement are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein or therein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein or therein with respect to the rights granted by Contango set forth herein or therein. This Agreement and the Purchase Agreement supersede all prior agreements and understandings between the parties with respect to such subject matter.

Section 3.12 Term; Amendment. This Agreement shall automatically terminate and be of no further force and effect on the date on which there are no Registrable Securities. This Agreement may be amended only by means of a written amendment signed by Contango and the Holders of a majority of the then outstanding Registrable Securities; provided, however, that no such amendment shall materially and adversely affect the rights of any Holder hereunder without the consent of such Holder. Notwithstanding the foregoing, any amendment, waiver, consent or modification of, or supplement to, this Agreement shall require approval of a majority of the members of the board of directors of Contango not affiliated with John C. Goff.

Section 3.13 No Presumption. In the event any claim is made by a party relating to any conflict, omission, or ambiguity in this Agreement, no presumption or burden of proof or persuasion shall be implied by virtue of the fact that this Agreement was prepared by or at the request of a particular party or its counsel.

Section 3.14 Obligations Limited to Parties to Agreement. Each of the parties hereto covenants, agrees and acknowledges that no Person other than the Purchasers, Selling Holders, their respective permitted assignees and Contango shall have any obligation hereunder and that, notwithstanding that one or more of Contango and the Purchasers may be a corporation, partnership or limited liability company, no recourse under this Agreement or under any documents or instruments delivered in connection herewith or therewith shall be had against any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of Contango, the Purchasers, Selling Holders or their respective permitted assignees, or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the foregoing, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any applicable law, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise by incurred by any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of Contango, the Purchasers, Selling Holders or any of their respective assignees,

 

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or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the foregoing, as such, for any obligations of Contango, the Purchasers, Selling Holders or their respective permitted assignees under this Agreement or any documents or instruments delivered in connection herewith or therewith or for any claim based on, in respect of or by reason of such obligation or its creation, except in each case for any assignee of the Purchasers or a Selling Holder hereunder.

Section 3.15 Interpretation. Article and Section references in this Agreement are references to the corresponding Article and Section to this Agreement, unless otherwise specified. All references to instruments, documents, contracts and agreements are references to such instruments, documents, contracts and agreements as the same may be amended, supplemented and otherwise modified from time to time, unless otherwise specified. The word “including” shall mean “including but not limited to.” Whenever any determination, consent or approval is to be made or given by a Purchaser under this Agreement, such action shall be in such Purchaser’s sole discretion unless otherwise specified.

Section 3.16 No Inconsistent Agreements; Additional Rights. If Contango hereafter enters into a registration rights agreement with a third party with terms more favorable than those set forth herein with respect to Holders of shares of Common Stock, this Agreement shall, to the extent so requested by any such Holders, be amended so as to provide such Holders with substantially the same material terms as provided to such other third party.

[Signature Pages Follow]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

CONTANGO OIL & GAS COMPANY
By:  

     

Name: E. Joseph Grady
Title: Senior Vice President and Chief Financial Officer

[Signatures continue on following page.]

[Signature Page to Registration Rights Agreement]


Goff MCF Partners, LP
By:  

     

Name:   John C. Goff
Title:   Chief Executive Officer
John C. Goff SEP IRA
By:  

     

  John C. Goff

[Signature Page to Registration Rights Agreement]


Schedule A

Purchasers

Goff MCF Partners, LP

John C. Goff SEP IRA

Notice Address:

500 Commerce St., Suite 700,

Fort Worth, Texas 76102

Attention Jennifer Terrell

jterrell@Goffcp.com

with a copy (which shall not constitute notice) to:

Pillsbury Winthrop Shaw Pittman LLP

1200 Seventeenth Street NW

Washington, DC 20036-3006

Attention Robert Robbins

robert.robbins@pillsburylaw.com

Schedule A


EXHIBIT C

VOTING AND SUPPORT AGREEMENT

THIS VOTING AND SUPPORT AGREEMENT (this “Agreement”) is made and entered into as of September 17, 2019, by and Contango Oil & Gas Company, a Texas corporation (“Contango”), and John C. Goff (“Goff”).

WITNESSETH:

WHEREAS, Contango and Goff MCF Partners, LP and John C. Goff SEP IRA, entities affiliated with Goff (the “Affiliated Entities”), entered into a Purchase Agreement, dated as of September 12, 2019 (the “Purchase Agreement”), which provides for the purchase and sale by Contango of an aggregate $7.5 million in gross proceeds of shares of Series A Contingent Convertible Preferred Stock, par value $0.04 per share (the “Preferred Stock”), to the Affiliated Entities;

WHEREAS, the Preferred Stock to be issued to the Affiliated Entities pursuant to the Purchase Agreement will automatically convert into shares of common stock, par value $0.04 per share (“Common Stock”), of Contango upon (i) effectiveness of an amendment to the Certificate of Formation of Contango (the “Charter Amendment”) to increase the number of authorized shares of Common Stock by at least 50,000,000 shares following approval by the shareholders of Contango of such amendment (the “Amendment Proposal”) and (ii) if necessary, approval by the shareholders of Contango, in accordance with applicable law and stock exchange rules and regulations, of the issuance of the shares of Common Stock to be issued upon conversion of the Preferred Stock and the issuance of such shares of Common Stock at a discount to an insider of the Company (the “Conversion Proposal” and, together with the Amendment Proposal, the “Proposals”);

WHEREAS, as of the date hereof, Goff is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of 25,304,325 shares of Common Stock; and

WHEREAS, as a condition and inducement to the willingness of Contango to enter into the Purchase Agreement, Goff has agreed to enter into this Agreement.

NOW, THEREFORE, intending to be legally bound, the parties hereto agree as follows:

1.    Certain Definitions. All capitalized terms that are used but not defined herein shall have the respective meanings ascribed to them in the Purchase Agreement. For all purposes of and under this Agreement, the following terms shall have the following respective meanings:

(a)    “Expiration Date” shall mean the earlier of (i) the first date upon which both shareholder approval of the Proposals has been obtained and the Charter Amendment has become effective and (ii) the date that is six months after the date hereof.

(b)    “Subject Shares” shall mean, without duplication, (i) all shares of Common Stock of which Goff is the record or beneficial owner as of the date hereof, which total 25,304,325 shares of Common Stock, (ii) all shares of Common Stock issuable upon conversion, exercise or exchange of options, warrants and/or other rights to acquire shares of Common Stock of which Goff is the record or beneficial owner as of the date hereof, (iii) all additional shares of Common


Stock, and all additional shares of Common Stock issuable upon conversion, exercise or exchange of options, warrants and/or other rights to acquire shares of Common Stock, in each case of which Goff acquires record or beneficial ownership during the period from the date of this Agreement through the Expiration Date (including by way of share dividend or distribution, split-up, recapitalization, combination, exchange of shares and the like and including the shares of Common Stock acquired by Goff in an underwritten public offering concurrent with the issuance of shares of Preferred Stock pursuant to the Purchase Agreement (the “Public Offering”)), and (iv) all shares of Preferred Stock acquired by the Affiliated Entities pursuant to the Purchase Agreement to the extent such shares of Preferred Stock are entitled to vote on any of the Proposals or any of the other matters set forth in Section 3(a).

(c)    “Transfer.” A Person shall be deemed to have effected a “Transfer” of Subject Shares if such Person directly or indirectly (i) sells, pledges, assigns, grants an option with respect to, transfers, tenders or disposes (by merger, by testamentary disposition, by operation of Law or otherwise) of such Subject Shares or any interest in such Subject Shares, (ii) creates or permits to exist any Liens, other than restrictions imposed by applicable Law or pursuant to this Agreement, (iii) deposits any Subject Shares into a voting trust or enters into a voting agreement or arrangement or grants any proxy, power of attorney or other authorization with respect thereto that is inconsistent with this Agreement, or (iv) agrees or commits (whether or not in writing) to take any of the actions referred to in the foregoing clauses (i) through (iii).

2.     Transfer Restrictions. From the date hereof until the Expiration Date, Goff shall not Transfer (or cause or permit the Transfer of) any of his Subject Shares, or enter into any agreement relating thereto, except with Contango’s prior written consent and in Contango’s sole discretion.

3.    Agreement to Vote Subject Shares.

(a)    At every meeting of the shareholders of Contango, however called, and at every adjournment or postponement thereof (each, a “Meeting”), and on every action or approval by written consent of the shareholders of Contango, Goff agrees, unconditionally and irrevocably, to the extent not voted by the Person(s) named (or otherwise appointed in the manner set forth in) in any proxy statement or information statement, as applicable, or to cause the holder of record on any applicable record date to, vote (or cause to be voted) all Subject Shares that are then beneficially owned by Goff and entitled to vote or act by written consent:

(i)    in favor of the approval of the Amendment Proposal, and in favor of any other matters presented or proposed as to approval of the Amendment Proposal;

(ii)    in favor of the approval of the Conversion Proposal, and in favor of any other matters presented or proposed as to approval of the Conversion Proposal;

(iii)    in favor of the approval of any proposal to adjourn or postpone the Meeting to a later date, if there are not sufficient votes for the approval of the Proposals on the date on which such Meeting is held;

(iii)    against approval of any proposal made in opposition to, in competition with, or inconsistent with, the Proposals; and

 

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(iv)    in favor of any other matter necessary or appropriate to the consummation of the transactions contemplated by the Purchase Agreement.

Goff agrees, unconditionally and irrevocably, to deliver or cause to be delivered such written consent immediately following consummation of the Public Offering. Goff acknowledges that, pursuant to the applicable rules and regulations of the NYSE American, the shares of Preferred Stock acquired by the Affiliated Entities pursuant to the Purchase Agreement shall not be entitled to vote with respect to the Conversion Proposal.

(b)    Any vote required to be cast pursuant to this Section 3 shall be cast by Goff or at the direction of Goff, as applicable, in accordance with such procedures relating thereto so as to ensure that it is duly counted, including for purposes of determining whether a quorum is present.

(c)    Except as provided herein, Goff shall not (i) enter into any agreement or understanding with any Person to vote or give instructions in any manner inconsistent with the terms of this Section 3, (ii) grant at any time while this Agreement remains in effect, a proxy, consent or power of attorney with respect to the Subject Shares inconsistent with the terms of this Section 3 or (iii) take any action that would make any representation or warranty of Goff contained herein untrue or incorrect or have the effect of preventing or disabling Goff from performing any of his obligations under this Agreement.

(d)    The obligations of Goff specified in Section 3(a) shall apply whether or not any action described above is recommended by the Contango board of directors (or any committee thereof) (the “Board”), for so long as this Agreement is in effect.

4.    Irrevocable Proxy.

(a)    Solely in the event of a failure by Goff to act in accordance with Goff’s obligations as to voting pursuant to Section 3(a) prior to the termination of this Agreement and without in any way limiting any of Goff’s right to vote the Subject Shares in his sole discretion on any other matters that may be submitted to a shareholder vote, consent or other approval, Goff hereby grants an irrevocable proxy (the “Proxy”) appointing Contango as Goff’s attorney-in-fact and proxy, with full power of substitution, for and in Goff’s name, to vote, express consent or dissent, or otherwise to utilize such voting power in the manner contemplated by Section 3 above as Contango or its proxy or substitute shall, in Contango’s sole discretion, deem proper with respect to the Subject Shares.

(b)    Goff hereby represents that any proxies heretofore given in respect of the Subject Shares, if any, are revocable, and hereby revokes such proxies.

(c)    Goff hereby affirms that his Proxy set forth in this Section 4 is given in connection with the execution of the Purchase Agreement, and that such Proxy is given to secure the performance of the duties of Goff under this Agreement. Goff hereby further affirms that his Proxy is coupled with an interest in consideration of Contango entering into this Agreement and the Purchase Agreement and incurring certain related fees and expenses and, except as set forth in Section 4(d) or in Section 12 hereof, is intended to be irrevocable. All authority conferred hereby shall survive the death, incapacity of or the appointment of any liquidator, receiver, trustee, special

 

3


manager or any other court appointed officer for Goff and shall be binding upon the heirs, estate, administrators, receivers, liquidators, trustees, special managers, personal representatives, successors and assigns of Goff.

(d)    Contango hereby acknowledges and agrees that the Proxy set forth in this Section 4 shall not be exercised to vote, consent or act on any matter except as specifically contemplated by Section 3 above and Contango agrees not to exercise the Proxy granted herein for any purpose other than the purposes described in Section 3. The Proxy set forth in this Section 4 shall be revoked, terminated and of no further force or effect automatically without further action upon the termination of this Agreement.

5.    Update of Beneficial Ownership Information. Goff shall promptly (and in any event within two Business Days after such acquisition) notify Contango of the number of Subject Shares acquired by Goff following the date hereof and prior to the Expiration Date and the updated number of Subject Shares beneficially owned by Goff as of immediately following such acquisition.

6.    Representations and Warranties of Goff. Goff hereby represents and warrants to Contango as follows:

(a)    Power; Organization; Binding Agreement. Goff has full power and authority to execute and deliver this Agreement and his Proxy, to perform Goff’s obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by Goff, and, assuming this Agreement constitutes a valid and binding obligation of Contango, constitutes a valid and binding obligation of Goff, enforceable against Goff in accordance with its terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar Laws affecting the enforcement of creditors’ rights generally or by general principles of equity.

(b)    No Conflicts. None of the execution and delivery by Goff of this Agreement, the performance by Goff of his obligations hereunder or the consummation by Goff of the transactions contemplated hereby will (i) result in a violation or breach of any agreement to which Goff is a party or by which Goff may be bound, including any voting agreement or voting trust or (ii) violate any applicable Law.

(c)    Ownership of Subject Shares. Goff (i) is the beneficial owner of the Subject Shares, all of which are free and clear of any Liens (except any Liens arising under securities Laws or Liens that are not material to Goff’s performance of his obligations under this Agreement) and (ii) no Person (other than Goff) has a right to acquire any of the Subject Shares held by Goff.

(d)    Voting Power. Goff has sole voting power, power of disposition, power to issue instructions with respect to the matters set forth herein, and power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Subject Shares, with no limitations, qualifications or restrictions on such rights, subject to applicable federal securities laws and those arising under the terms of this Agreement.

 

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(e)    Reliance by Contango. Goff understands and acknowledges that the Contango is entering into the Purchase Agreement in reliance upon Goff’s execution and delivery of this Agreement.

(f)    Consents and Approvals. The execution and delivery of this Agreement by Goff does not, and the performance by Goff of his obligations under this Agreement and the consummation by him of the transactions contemplated hereby will not, require Goff to obtain any consent, approval, authorization or permit of, or to make any filing with or notification to, any Governmental Entity, except in each case for filings with the Securities and Exchange Commission (“SEC”) by Goff or where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings and notifications, would not, either individually or in the aggregate, prevent or delay the performance by Goff of any of his obligations hereunder.

(g)    Absence of Litigation. As of the date hereof, there is no Action pending or, to the knowledge of Goff, threatened against or affecting Goff or any of his Affiliates before or by any Governmental Entity that would reasonably be expected to impair the ability of Goff to perform his obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.

7.    Certain Restrictions. Goff agrees that Goff will not (in Goff’s capacity as a shareholder of Contango) bring, commence, institute, maintain, prosecute or voluntarily aid any legal action or proceeding, which (i) challenges the validity of or seeks to enjoin the operation of any provision of this Agreement, (ii) alleges that the execution and delivery of this Agreement by Goff or the approval of the Purchase Agreement and the transactions contemplated thereby, including the Charter Amendment, by the Board, breaches any fiduciary duty of the Board or any member thereof or (iii) would reasonably be expected to restrict or otherwise affect Goff’s legal power, authority and ability to comply with and perform the covenants and obligations of Goff under this Agreement.

8.    Shareholder Capacity. The parties hereto acknowledge that this Agreement is being entered into by Goff solely in his capacity as a beneficial owner of the Subject Shares, and nothing in this Agreement shall restrict or limit the ability of Goff, who is a director of Contango, to exercise his duties attendant to such position by taking any action whatsoever in such capacity, including with respect to the Purchase Agreement or this Agreement.

9.    Disclosure. Goff shall permit Contango to publish and disclose in all documents and schedules filed with the SEC, and any press release or other disclosure document that Contango determines to be necessary or desirable in connection with the Purchase Agreement and any transactions related thereto, Goff’s identity and ownership of Subject Shares and the nature of Goff’s commitments, arrangements and understandings under this Agreement.

10.    No Ownership Interest. Except as provided in this Agreement, nothing contained in this Agreement shall be deemed to vest in Contango any direct or indirect ownership or incidence of ownership of or with respect to any Subject Shares. Except as provided in this Agreement, all rights, ownership and economic benefits relating to the Subject Shares shall remain vested in and belong to Goff.

 

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11.    Further Assurances. Subject to the terms and conditions of this Agreement, upon request of Contango, Goff shall use commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary to fulfill Goff’s obligations under this Agreement.

12.    Termination. This Agreement and Goff’s Proxy, and all rights and obligations of the parties hereunder and thereunder, shall terminate and shall have no further force or effect as of the Expiration Date. Notwithstanding anything to the contrary in this Agreement, nothing set forth in this Section 12 or elsewhere in this Agreement shall relieve any party hereto from liability, or otherwise limit the liability of any party hereto, for any willful breach of this Agreement prior to such termination.

13.    Miscellaneous.

(a)    Amendment or Supplement; Waiver. This Agreement may not be amended, modified or supplemented in any manner, whether by course of conduct or otherwise, except by an instrument in writing specifically designated as an amendment hereto, signed on behalf of each of the parties in interest at the time of the amendment. At any time prior to the Expiration Date, any party may, to the extent permitted by and subject to applicable Law, waive compliance with any of the agreements or conditions of the other parties contained herein. Any agreement on the part of a party to any such waiver shall be valid only if set forth in a written instrument executed and delivered by a duly authorized officer on behalf of such party. No failure or delay of any party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the parties hereunder are cumulative and are not exclusive of any rights or remedies which they would otherwise have hereunder. Notwithstanding any of the foregoing, any amendment, waiver, consent or modification of, or supplement to, this Agreement shall require approval of a majority of the members of the board of directors of Contango not affiliated with Goff.

(b)    Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (i) on the date of delivery if delivered personally, or if by e-mail, upon written confirmation of receipt by e-mail or otherwise, (ii) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (iii) on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered to the addresses set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

If to Contango:

Contango Oil & Gas Company

717 Texas Avenue, Suite 2900

Houston, Texas 77002

Attention: E. Joseph Grady

E-mail: jgrady@contango.com

 

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with a copy (which shall not constitute notice) to:

Gibson, Dunn & Crutcher LLP

811 Main Street, Suite 3000

Houston, Texas 77002

Attention: Hillary Holmes

E-mail: hholmes@gibsondunn.com

If to Goff:

500 Commerce St., Suite 700,

Fort Worth, Texas 76102

Attention Jennifer Terrell

jterrell@Goffcp.com

with a copy (which shall not constitute notice) to:

Pillsbury Winthrop Shaw Pittman LLP

1200 Seventeenth Street NW

Washington, DC 20036-3006

Attention Robert Robbins

robert.robbins@pillsburylaw.com

(c)    Interpretation. When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for convenience of reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. The word “including” and words of similar import when used in this Agreement will mean “including, without limitation,” unless otherwise specified. The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to the Agreement as a whole and not to any particular provision in this Agreement. The term “or” is not exclusive. The word “will” shall be construed to have the same meaning and effect as the word “shall.” References to days mean calendar days unless otherwise specified.

(d)    Entire Agreement. This Agreement and the Proxy constitute the entire agreement, and supersede all prior written agreements, arrangements, communications and understandings and all prior and contemporaneous oral agreements, arrangements, communications and understandings, among the parties with respect to the subject matter hereof and thereof.

(e)    No Third Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to or shall confer upon any Person other than the parties and their respective successors and permitted assigns any legal or equitable right, benefit or remedy of any nature under or by reason of this Agreement.

 

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(f)    Governing Law. This Agreement and all disputes or controversies arising out of or relating to this Agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal laws of the State of Texas, without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of Texas.

(g)    Submission to Jurisdiction. Each of the parties irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement brought by any party or its Affiliates against any other party or its Affiliates shall be brought and determined in the state courts located in Harris County, Texas; provided, however, that if jurisdiction is not then available in the state courts located in Harris County, Texas, then any such legal action or proceeding may be brought in any federal court located in the State of Texas. Each of the parties hereby irrevocably submits to the jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally, with regard to any such action or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby. Each of the parties agrees not to commence any action, suit or proceeding relating thereto except in the courts described above in Texas, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in Texas as described herein. Each of the parties further agrees that notice as provided herein shall constitute sufficient service of process and the parties further waive any argument that such service is insufficient. Each of the parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (i) any claim that it is not personally subject to the jurisdiction of the courts in Texas as described herein for any reason, (ii) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (iii) that (A) the suit, action or proceeding in any such court is brought in an inconvenient forum, (B) the venue of such suit, action or proceeding is improper or (C) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.

(h)    Assignment; Successors. Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise, by Goff without the prior written consent of Contango, and any such assignment without such prior written consent shall be null and void. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.

(i)    Specific Performance. The parties agree that irreparable damage would occur in the event that the parties hereto do not perform the provisions of this Agreement in accordance with its terms or otherwise breach such provisions. Accordingly, prior to the Expiration Date, the parties acknowledge and agree that each party shall be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in the state courts located in Harris County, Texas; provided, however, that if jurisdiction is not then available in the state courts of the State of Texas, then in any federal court located in the State of Texas, this being in addition to any other remedy to which such party is entitled at law or in equity. Each of the parties hereby further waives (i) any defense in any action for specific performance that a remedy at law would be adequate and (ii) any requirement under any law to post security as a prerequisite to obtaining equitable relief.

 

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(j)    Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.

(k)    Fees and Expenses. All fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such fees or expenses.

(l)    Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

(m)    Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party.

(n)    Facsimile or .pdf Signature. This Agreement may be executed by facsimile or .pdf signature and a facsimile or .pdf signature shall constitute an original for all purposes.

(o)    No Presumption Against Drafting Party. Each party hereto acknowledges that each party to this Agreement has been represented by counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the drafting party has no application and is expressly waived.

[Remainder of Page Intentionally Left Blank; Signature Pages Follow]

 

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IN WITNESS WHEREOF, the undersigned have executed and caused to be effective this Agreement as of the date first above written.

 

 

 

Name: John C. Goff

[Signatures continued on following page.]

 

 

 

[Signature Page to Voting and Support Agreement]


CONTANGO OIL & GAS COMPANY
By:    
Name:   E. Joseph Grady
Title:   Senior Vice President and Chief Financial Officer

 

 

 

[Signature Page to Voting and Support Agreement]

EX-10.2

Exhibit 10.2

REGISTRATION RIGHTS AGREEMENT

by and among

CONTANGO OIL & GAS COMPANY

and

THE PURCHASERS PARTY HERETO


Table of Contents

 

ARTICLE I DEFINITIONS

     1  

Section 1.1

  Definitions      1  

Section 1.2

  Registrable Securities      3  

ARTICLE II REGISTRATION RIGHTS

     3  

Section 2.1

  Shelf Registration      3  

Section 2.2

  Sale Procedures      4  

Section 2.3

  Cooperation by Holders      6  

Section 2.4

  Expenses      7  

Section 2.5

  Indemnification      7  

Section 2.6

  Transfer or Assignment of Registration Rights      9  

Section 2.7

  Aggregation of Registrable Securities      9  

ARTICLE III MISCELLANEOUS

     10  

Section 3.1

  Communications      10  

Section 3.2

  Successors and Assigns      10  

Section 3.3

  Assignment of Rights      10  

Section 3.4

  Recapitalization (Exchanges, etc. Affecting the Registrable Securities)      10  

Section 3.5

  Specific Performance      11  

Section 3.6

  Counterparts      11  

Section 3.7

  Headings      11  

Section 3.8

  Governing Law, Submission to Jurisdiction      11  

Section 3.9

  Waiver of Jury Trial      11  

Section 3.10

  Severability of Provisions      12  

Section 3.11

  Entire Agreement      12  

Section 3.12

  Term; Amendment      12  

Section 3.13

  No Presumption      12  

Section 3.14

  Obligations Limited to Parties to Agreement      12  

Section 3.15

  Interpretation      13  

Section 3.16

  No Inconsistent Agreements; Additional Rights      13  

 

i


REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of September 17, 2019 by and between Contango Oil & Gas Company, a Texas corporation (“Contango”), and the parties set forth on Schedule A hereto (each, a “Purchaser” and collectively, the “Purchasers”).

WHEREAS, this Agreement is made in connection with the closing of the issuance and sale of the Purchased Securities pursuant to the Purchase Agreement, dated as of September 12, 2019, by and between Contango and the Purchasers (the “Purchase Agreement”);

WHEREAS, Contango has agreed to provide the registration and other rights set forth in this Agreement for the benefit of the Purchasers pursuant to the Purchase Agreement; and

WHEREAS, it is a condition to the obligations of the Purchasers and Contango under the Purchase Agreement that this Agreement be executed and delivered.

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each party hereto, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions. The terms set forth below are used herein as so defined:

Affiliate” means, with respect to a specified Person, any other Person, directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control” (including, with correlative meanings, “controlling,” “controlled by,” and “under common control with”) means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

Agreement” has the meaning specified therefor in the introductory paragraph.

Business Day” means any day other than a Saturday, Sunday, any federal legal holiday or day on which banking institutions in the State of Texas are authorized or required by law or other governmental action to close.

Statement of Resolution” means the statement of resolution setting forth the terms of the Preferred Stock.

Commission” means the United States Securities and Exchange Commission.

Common Stock” means the common stock, par value $0.04 per share, of Contango.

 

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Contango” has the meaning specified therefor in the introductory paragraph of this Agreement.

Effective Date” means the initial date of effectiveness of the Shelf Registration Statement.

Effectiveness Period” has the meaning specified therefor in Section 2.1(a) of this Agreement.

Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.

Holder” means the record holder of any Registrable Securities.

Law” shall have the meaning set forth in the Purchase Agreement.

Losses” has the meaning specified therefor in Section 2.5(a) of this Agreement.

Person” means any individual, corporation, company, voluntary association, partnership, joint venture, trust, limited liability company, unincorporated organization, government or any agency, instrumentality or political subdivision thereof, or any other form of entity.

Preferred Stock” means the Series A Contingent Convertible Preferred Stock of Contango and having the rights and obligations specified in the Statement of Resolution.

Purchase Agreement” has the meaning specified therefor in the Recitals of this Agreement.

Purchased Securities” means the Preferred Stock to be issued and sold to the Purchasers pursuant to the Purchase Agreement.

Purchaser” or “Purchasers” has the meaning set forth in the introductory paragraph of this Agreement.

Registration” means any registration pursuant to this Agreement, including pursuant to the Shelf Registration Statement.

Registrable Securities” means, subject to Section 1.2 of this Agreement, the shares of Common Stock issued upon conversion of the Purchased Securities in accordance with the terms of the Statement of Resolution.

Registration Expenses” has the meaning specified therefor in Section 2.4(a) of this Agreement.

Resale Opt-Out Notice” has the meaning specified therefor in Section 2.1(b) of this Agreement.

Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.

 

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Selling Expenses” has the meaning specified therefor in Section 2.4(a) of this Agreement.

Selling Holder” means a Holder who is selling Registrable Securities pursuant to a Registration.

Shelf Registration Statement” means a registration statement under the Securities Act to permit the public resale of the Registrable Securities from time to time as permitted by Rule 415 of the Securities Act (or any similar provision then in force under the Securities Act).

Section 1.2 Registrable Securities. Any Registrable Security will cease to be a Registrable Security at the earliest of the following: (a) when a registration statement covering such Registrable Security has been declared effective by the Commission and such Registrable Security has been sold or disposed of pursuant to such effective registration statement; (b) when such Registrable Security is held by Contango or one of its subsidiaries; (c) when such Registrable Security has been sold in a private transaction in which the transferor’s rights under this Agreement are not assigned to the transferee of such securities; and (d) the date on which such Registrable Security has been sold pursuant to any section of Rule 144 under the Securities Act (or any similar provision then in force under the Securities Act, “Rule 144”) or any other exemption from the registration requirements of the Securities Act as a result of which the legend on any certificate or book-entry notation representing such Registrable Security restricting transfer of such Registrable Security has been removed.

ARTICLE II

REGISTRATION RIGHTS

Section 2.1 Shelf Registration.

(a) Shelf Registration. Contango shall use its commercially reasonable efforts to prepare and file an initial Shelf Registration Statement under the Securities Act covering all Registrable Securities at such time of filing within 30 days of the conversion of the Preferred Stock. Contango shall use its commercially reasonable efforts to cause such initial Shelf Registration Statement to become effective no later than 120 days from its initial filing. Contango will use its commercially reasonable efforts to cause such initial Shelf Registration Statement filed pursuant to this Section 2.1(a) to be continuously effective under the Securities Act until the earliest of (i) all Registrable Securities covered by the Shelf Registration Statement have been distributed in the manner set forth and as contemplated in such Shelf Registration Statement, (ii) there are no longer any Registrable Securities outstanding and (iii) three years from the Effective Date (the “Effectiveness Period”). A Shelf Registration Statement filed pursuant to this Section 2.l(a) shall be on such appropriate registration form of the Commission as shall be selected by Contango. A Shelf Registration Statement when declared effective (including the documents incorporated therein by reference) will comply as to form in all material respects with all applicable requirements of the Securities Act and the Exchange Act and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any prospectus contained in such Shelf Registration Statement, in the light of the circumstances under which a statement is made). As soon as practicable following the date that a Shelf Registration Statement becomes effective, but in any event within five Business Days of such date, Contango shall provide the Holders with written notice of the effectiveness of a Shelf Registration Statement.

 

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(b) Resale Registration Opt-Out. At least three Business Days before the initial filing of the Shelf Registration Statement required by Section 2.1(a), Contango shall provide advance written notice to each Holder that it plans to file a Shelf Registration Statement. Any Holder may deliver advance written notice (a “Resale Opt-Out Notice”) to Contango requesting that such Holder not be included in a Shelf Registration Statement prior to its initial filing. Following receipt of a Resale Opt-Out Notice from a Holder, Contango shall not be required to include the Registrable Securities of such Holder in such Shelf Registration Statement.

(c) Delay Rights. Notwithstanding anything to the contrary contained herein, Contango may, upon written notice to any Selling Holder whose Registrable Securities are included in the Shelf Registration Statement, suspend such Selling Holder’s use of any prospectus which is a part of the Shelf Registration Statement (in which event the Selling Holder shall discontinue sales of the Registrable Securities pursuant to the Shelf Registration Statement) if (i) Contango is pursuing an acquisition, merger, reorganization, disposition or other similar transaction and Contango determines in good faith that Contango’s ability to pursue or consummate such a transaction would be materially and adversely affected by any required disclosure of such transaction in the Shelf Registration Statement or (ii) Contango has experienced some other material non-public event the disclosure of which at such time, in the good faith judgment of Contango, would materially and adversely affect Contango; provided, however, that in no event shall the Selling Holders be suspended from selling Registrable Securities pursuant to the Shelf Registration Statement for a period of 60 consecutive days or an aggregate of 180 days in any 365-day period. Upon disclosure of such information or the termination of the condition described above, Contango shall provide prompt notice to the Selling Holders whose Registrable Securities are included in the Shelf Registration Statement, and shall promptly terminate any suspension of sales it has put into effect and shall take such other actions necessary or appropriate to permit registered sales of Registrable Securities as contemplated in this Agreement.

Section 2.2 Sale Procedures.

(a) In connection with its obligations under this Article II, Contango will, as expeditiously as possible:

(i) prepare and file with the Commission such amendments and supplements to the Shelf Registration Statement and the prospectus used in connection therewith as may be necessary to keep a Shelf Registration Statement effective for the Effectiveness Period and as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by a Shelf Registration Statement;

(ii) furnish to each Selling Holder (A) as far in advance as reasonably practicable before filing a Shelf Registration Statement or any other registration statement contemplated by this Agreement or any supplement or amendment thereto, upon request, copies of reasonably complete drafts of all such documents proposed to be filed (including exhibits and each document incorporated by reference therein to the extent then required

 

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by the rules and regulations of the Commission), and provide each such Selling Holder the opportunity to object to any information pertaining to such Selling Holder and its plan of distribution that is contained therein and make the corrections reasonably requested by such Selling Holder with respect to such information prior to filing such Shelf Registration Statement or such other registration statement and the prospectus included therein or any supplement or amendment thereto, and (B) such number of copies of such Shelf Registration Statement or such other registration statement and the prospectus included therein and any supplements and amendments thereto as such Persons may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities covered by such Shelf Registration Statement or other registration statement;

(iii) if applicable, use its commercially reasonable efforts to register or qualify the Registrable Securities covered by a Shelf Registration Statement or any other registration statement contemplated by this Agreement under the securities or blue sky laws of such jurisdictions as the Selling Holders shall reasonably request, provided that Contango will not be required to qualify generally to transact business in any jurisdiction where it is not then required to so qualify or to take any action which would subject it to general service of process in any such jurisdiction where it is not then so subject;

(iv) promptly notify each Selling Holder, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of (A) the filing of a Shelf Registration Statement or any other registration statement contemplated by this Agreement or any prospectus included therein or any amendment or supplement thereto (other than any amendment or supplement resulting from the filing of a document incorporated by reference therein), and, with respect to such Shelf Registration Statement or any other registration statement or any post-effective amendment thereto, when the same has become effective; and (B) the receipt of any written comments from the Commission with respect to any filing referred to in clause (A) and any written request by the Commission for amendments or supplements to such Shelf Registration Statement or any other registration statement or any prospectus or prospectus supplement thereto;

(v) immediately notify each Selling Holder, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of (A) the happening of any event as a result of which the prospectus contained in a Shelf Registration Statement or any other registration statement contemplated by this Agreement or any supplemental amendment thereto, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (B) the issuance or threat of issuance by the Commission of any stop order suspending the effectiveness of such Shelf Registration Statement or any other registration statement contemplated by this Agreement, or the initiation of any proceedings for that purpose; or (C) the receipt by Contango of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction. Following the provision of such notice, Contango agrees to as promptly as practicable amend or supplement the prospectus or prospectus supplement or take other appropriate action so that the prospectus or prospectus supplement does not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and to take such other action as is necessary to remove a stop order, suspension, threat thereof or proceedings related thereto;

 

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(vi) otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least 12 months, but not more than 18 months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder;

(vii) cause all such Registrable Securities registered pursuant to this Agreement to be listed or quoted on each securities exchange or nationally recognized quotation system on which similar securities issued by Contango are then listed or quoted, and cause to be satisfied all requirements and conditions of such securities exchange or nationally recognized quotation system to the listing or quoting of such Registrable Securities that are reasonably within the control of Contango, including, without limitation, registering the Registrable Securities under the Exchange Act, if appropriate, and using commercially reasonable efforts to cause such registration to become effective pursuant to the rule of the Commission;

(viii) use its commercially reasonable efforts to cause the Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of Contango to enable the Selling Holders to consummate the disposition of such Registrable Securities;

(ix) provide a transfer agent and registrar for all Registrable Securities covered by such registration statement; and

(x) enter into customary agreements and take such other actions as are reasonably requested by the Selling Holders in order to expedite or facilitate the disposition of such Registrable Securities.

(b) Each Selling Holder, upon receipt of notice from Contango of the happening of any event of the kind described in Section 2.2(b)(v), shall forthwith discontinue disposition of the Registrable Securities until such Selling Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 2.2(b)(v) or until it is advised in writing by Contango that the use of the prospectus may be resumed, and has received copies of any additional or supplemental filings incorporated by reference in the prospectus, and, if so directed by Contango, such Selling Holder will deliver to Contango (at Contango’s expense) all copies in their possession or control, other than permanent file copies then in such Selling Holder’s possession, of the prospectus and any prospectus supplement covering such Registrable Securities current at the time of receipt of such notice.

Section 2.3 Cooperation by Holders. Contango shall have no obligation to include Registrable Securities of a Holder in the Shelf Registration Statement if such Selling Holder has failed to timely furnish such information which, in the opinion of counsel to Contango, is reasonably required in order for the registration statement or prospectus supplement, as applicable, to comply with the Securities Act.

 

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Section 2.4 Expenses.

(a) Certain Definitions. “Registration Expenses” means all expenses incident to Contango’s performance under or compliance with this Agreement to effect the registration of Registrable Securities in a Shelf Registration Statement pursuant to Section 2.1 and the disposition of such securities, including, without limitation, all registration, filing, securities exchange listing and fees, all registration, filing, qualification and other fees and expenses of complying with securities or blue sky laws, fees of the Financial Industry Regulatory Authority, transfer taxes and fees of transfer agents and registrars, all word processing, duplicating and printing expenses, and the fees and disbursements of Contango’s independent public accountants and counsel for Contango. Except as otherwise provided in Section 2.5 hereof, Contango shall not be responsible for legal fees incurred by Holders in connection with the exercise of such Holders’ rights hereunder. In addition, Contango shall not be responsible for any “Selling Expenses,” which means all underwriting fees, discounts and selling commissions, transfer taxes and fees of counsel allocable to the sale of the Registrable Securities.

(b) Expenses. Contango will pay all reasonable Registration Expenses in connection with a Shelf Registration Statement, whether or not any sale is made pursuant to such Shelf Registration Statement.

Section 2.5 Indemnification.

(a) By Contango. In the event of a registration of any Registrable Securities under the Securities Act pursuant to this Agreement, to the extent permitted by applicable law, Contango will indemnify and hold harmless each Selling Holder thereunder, its directors, officers, employees, agents, representatives and managers, and each Person, if any, who controls such Selling Holder within the meaning of the Securities Act and the Exchange Act, and its directors, officers, employees, agents, representatives and managers, against any losses, claims, damages, expenses or liabilities (including reasonable attorneys’ fees and expenses), including any of the foregoing incurred in settlement of any litigation commenced or threatened by any party other than a Selling Holder (collectively, “Losses”), joint or several, to which such Selling Holder or controlling Person or directors, officers, employees, agents, representatives or managers may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact (in the case of any prospectus, in light of the circumstances under which such statement is made) contained in the Shelf Registration Statement or any other registration statement contemplated by this Agreement, any preliminary prospectus or final prospectus contained therein, or any free writing prospectus related thereto, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in light of the circumstances under which they were made) not misleading, and will reimburse each such Selling Holder, its directors and officers, and each such controlling Person and each such director, officer, employee, agent, representatives or manager for any legal or other expenses reasonably incurred

 

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by them in connection with investigating or defending any such Loss or actions or proceedings; provided, however, that Contango will not be liable in any such case if and to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Selling Holder or such controlling Person in writing specifically for use in the Shelf Registration Statement or such other registration statement, or prospectus supplement, as applicable. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Selling Holder or any such director, officer, employee, agent, representatives, manager or controlling Person, and shall survive the transfer of such securities by such Selling Holder.

(b) By Each Selling Holder. Each Selling Holder agrees severally and not jointly to indemnify and hold harmless Contango, its directors, officers, employees, representatives and agents and each Person, if any, who controls Contango within the meaning of the Securities Act or of the Exchange Act to the same extent as the foregoing indemnity from Contango to the Selling Holders, but only with respect to information regarding such Selling Holder furnished in writing by or on behalf of such Selling Holder expressly for inclusion in the Shelf Registration Statement or prospectus supplement relating to the Registrable Securities, or any amendment or supplement thereto.

(c) Notice. Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party other than under this Section 2.5(c) except to the extent that the indemnifying party is materially prejudiced by such failure. In any action brought against any indemnified party, it shall notify the indemnifying party of the commencement thereof. The indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 2.5 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided, however, that, (i) if the indemnifying party has failed to assume the defense and employ counsel reasonably satisfactory to the indemnified party or (ii) if the defendants in any such action include both the indemnified party and the indemnifying party and counsel to the indemnified party shall have concluded that there may be reasonable defenses available to the indemnified party that are different from or additional to those available to the indemnifying party, or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party or representation by both parties by the same counsel is otherwise inappropriate under the applicable standards of professional conduct, then the indemnified party shall have the right to select a separate counsel and to assume such legal defense and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate counsel and other reasonable expenses related to such participation to be reimbursed by the indemnifying party as incurred. Notwithstanding any other provision of this Agreement, the indemnifying party shall not settle any indemnified claim without the consent of the indemnified party, unless the settlement thereof imposes no liability or obligation on, includes a complete release from liability of, and does not contain any admission of wrong doing by, the indemnified party.

 

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(d) Contribution. If the indemnification provided for in this Section 2.5 is held by a court or government agency of competent jurisdiction to be unavailable to Contango or any Selling Holder or is insufficient to hold them harmless in respect of any Losses, then each such indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of Contango on the one hand and of such Selling Holder on the other in connection with the statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations; provided, however, that in no event shall such Selling Holder be required to contribute an aggregate amount in excess of the dollar amount of proceeds (net of Selling Expenses) received by such Selling Holder from the sale of Registrable Securities giving rise to such indemnification less the amount of any damages that such Selling Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. The relative fault of Contango on the one hand and each Selling Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact has been made by, or relates to, information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this paragraph were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the first sentence of this paragraph. The amount paid by an indemnified party as a result of the Losses referred to in the first sentence of this paragraph shall be deemed to include any legal and other expenses reasonably incurred by such indemnified party in connection with investigating or defending any Loss which is the subject of this paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who is not guilty of such fraudulent misrepresentation.

(e) Other Indemnification. The provisions of this Section 2.5 shall be in addition to any other rights to indemnification or contribution which an indemnified party may have pursuant to law, equity, contract or otherwise.

Section 2.6 Transfer or Assignment of Registration Rights. Except as otherwise specifically provided in this Agreement, without the prior written consent of Contango, the rights to cause Contango to register Registrable Securities granted to the Purchasers by Contango under this Article II may not be transferred or assigned by the Purchasers.

Section 2.7 Aggregation of Registrable Securities. All Registrable Securities held or acquired by Persons who are Affiliates of one another shall be aggregated together for the purpose of determining the availability of any rights under this Agreement. In addition, all other shares of Common Stock held by a Person and for which such Person has similar registration rights pursuant to an agreement between such Person and Contango shall be aggregated together for the purpose of determining such Person’s rights under this Agreement solely as such shares relate to minimum quantity requirements contemplated herein; provided that, for the avoidance of doubt, such Common Stock shall not otherwise be deemed Registrable Securities for any other purpose under this Agreement.

 

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ARTICLE III

MISCELLANEOUS

Section 3.1 Communications. All notices and demands provided for hereunder shall be in writing and shall be given by registered or certified mail, return receipt requested, facsimile, air courier guaranteeing overnight delivery or personal delivery to the following addresses:

 

  (a)

If to a Purchaser, to such addresses indicated on Schedule A attached hereto.

 

  (b)

If to Contango:

Contango Oil & Gas Company

717 Texas Avenue, Suite 2900

Houston, Texas 77002

Attention: Wilkie S. Colyer, Jr.

Facsimile:

E-mail: WColyer@contango.com

with a copy (which shall not constitute notice) to:

Gibson, Dunn & Crutcher LLP

811 Main Street, Suite 3000

Houston, Texas 77002

Attention: Hillary H. Holmes

Facsimile: (346) 718-6902

E-mail: HHolmes@gibsondunn.com

or, if to a transferee of a Purchaser, to the transferee at the address provided pursuant to Section 2.6 above. All notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; upon actual receipt if sent by certified or registered mail, return receipt requested, or regular mail, if mailed; upon actual receipt of the facsimile copy or e-mail, if sent via facsimile or e-mail; and upon actual receipt when delivered to an air courier guaranteeing overnight delivery.

Section 3.2 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including subsequent Holders of Registrable Securities to the extent permitted herein.

Section 3.3 Assignment of Rights. All or any portion of the rights and obligations of any Purchaser under this Agreement may be transferred or assigned by such Purchaser in accordance with Section 2.6 hereof.

Section 3.4 Recapitalization (Exchanges, etc. Affecting the Registrable Securities). The provisions of this Agreement shall apply to the full extent set forth herein with respect to any and all shares of capital stock of Contango or any successor or assign of Contango (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for or in substitution of, the Registrable Securities, and shall be appropriately adjusted for combinations, recapitalizations and the like occurring after the date of this Agreement.

 

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Section 3.5 Specific Performance. Damages in the event of breach of this Agreement by a party hereto would be difficult, if not impossible, to ascertain, and it is therefore agreed that each such Person, in addition to and without limiting any other remedy or right it may have, will have the right to an injunction or other equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof, and each of the parties hereto hereby waives (a) any and all defenses it may have on the ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief or that a remedy at law would be adequate and (b) any requirement under any law to post securities as a prerequisite to obtaining equitable relief. The existence of this right will not preclude any such Person from pursuing any other rights and remedies at law or in equity which such Person may have.

Section 3.6 Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement.

Section 3.7 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

Section 3.8 Governing Law, Submission to Jurisdiction. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS OF SUCH JURISDICTION. Each of the parties hereto irrevocably agrees that any legal action or proceeding with respect to this Agreement or the Transactions shall be brought and determined by courts of the State of Texas located in Houston, Texas and the federal courts of the United States of America located in Houston, Texas, and each of the parties hereto irrevocably submits to the exclusive jurisdiction of such courts solely in respect of any legal proceeding arising out of or related to this Agreement.

Section 3.9 Waiver of Jury Trial. THE PARTIES TO THIS AGREEMENT EACH HEREBY WAIVE, AND AGREE TO CAUSE THEIR AFFILIATES TO WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. THE PARTIES TO THIS AGREEMENT EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

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Section 3.10 Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting or impairing the validity or enforceability of such provision in any other jurisdiction.

Section 3.11 Entire Agreement. This Agreement and the Purchase Agreement are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein or therein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein or therein with respect to the rights granted by Contango set forth herein or therein. This Agreement and the Purchase Agreement supersede all prior agreements and understandings between the parties with respect to such subject matter.

Section 3.12 Term; Amendment. This Agreement shall automatically terminate and be of no further force and effect on the date on which there are no Registrable Securities. This Agreement may be amended only by means of a written amendment signed by Contango and the Holders of a majority of the then outstanding Registrable Securities; provided, however, that no such amendment shall materially and adversely affect the rights of any Holder hereunder without the consent of such Holder. Notwithstanding the foregoing, any amendment, waiver, consent or modification of, or supplement to, this Agreement shall require approval of a majority of the members of the board of directors of Contango not affiliated with John C. Goff.

Section 3.13 No Presumption. In the event any claim is made by a party relating to any conflict, omission, or ambiguity in this Agreement, no presumption or burden of proof or persuasion shall be implied by virtue of the fact that this Agreement was prepared by or at the request of a particular party or its counsel.

Section 3.14 Obligations Limited to Parties to Agreement. Each of the parties hereto covenants, agrees and acknowledges that no Person other than the Purchasers, Selling Holders, their respective permitted assignees and Contango shall have any obligation hereunder and that, notwithstanding that one or more of Contango and the Purchasers may be a corporation, partnership or limited liability company, no recourse under this Agreement or under any documents or instruments delivered in connection herewith or therewith shall be had against any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of Contango, the Purchasers, Selling Holders or their respective permitted assignees, or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the foregoing, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any applicable law, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise by incurred by any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of Contango, the Purchasers, Selling Holders or any of their respective assignees,

 

12


or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the foregoing, as such, for any obligations of Contango, the Purchasers, Selling Holders or their respective permitted assignees under this Agreement or any documents or instruments delivered in connection herewith or therewith or for any claim based on, in respect of or by reason of such obligation or its creation, except in each case for any assignee of the Purchasers or a Selling Holder hereunder.

Section 3.15 Interpretation. Article and Section references in this Agreement are references to the corresponding Article and Section to this Agreement, unless otherwise specified. All references to instruments, documents, contracts and agreements are references to such instruments, documents, contracts and agreements as the same may be amended, supplemented and otherwise modified from time to time, unless otherwise specified. The word “including” shall mean “including but not limited to.” Whenever any determination, consent or approval is to be made or given by a Purchaser under this Agreement, such action shall be in such Purchaser’s sole discretion unless otherwise specified.

Section 3.16 No Inconsistent Agreements; Additional Rights. If Contango hereafter enters into a registration rights agreement with a third party with terms more favorable than those set forth herein with respect to Holders of shares of Common Stock, this Agreement shall, to the extent so requested by any such Holders, be amended so as to provide such Holders with substantially the same material terms as provided to such other third party.

[Signature Pages Follow]

 

13


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

CONTANGO OIL & GAS COMPANY
By:  

/s/ E. Joseph Grady

Name: E. Joseph Grady
Title: Senior Vice President and Chief Financial Officer

[Signatures continue on following page.]

[Signature Page to Registration Rights Agreement]


Goff MCF Partners, LP
By:  

/s/ John C. Goff

Name:   John C. Goff
Title:   Chief Executive Officer
John C. Goff SEP IRA
By:  

/s/ John C. Goff

  John C. Goff

[Signature Page to Registration Rights Agreement]


Schedule A

Purchasers

Goff MCF Partners, LP

John C. Goff SEP IRA

Notice Address:

500 Commerce St., Suite 700,

Fort Worth, Texas 76102

Attention Jennifer Terrell

jterrell@Goffcp.com

with a copy (which shall not constitute notice) to:

Pillsbury Winthrop Shaw Pittman LLP

1200 Seventeenth Street NW

Washington, DC 20036-3006

Attention Robert Robbins

robert.robbins@pillsburylaw.com

Schedule A

EX-10.3

Exhibit 10.3

Execution Version

 

 

CREDIT AGREEMENT

DATED AS OF

SEPTEMBER 17, 2019

AMONG

CONTANGO OIL & GAS COMPANY,

AS BORROWER,

JPMORGAN CHASE BANK, N.A.,

AS ADMINISTRATIVE AGENT, ISSUING BANK AND SWINGLINE LENDER

ROYAL BANK OF CANADA AND CADENCE BANK, N.A.,

AS CO-SYNDICATION AGENTS,

AND

THE LENDERS PARTY HERETO

 

 

JOINT LEAD ARRANGERS AND JOINT BOOKRUNNERS

JPMORGAN CHASE BANK, N.A.,

RBC CAPITAL MARKETS, AND

CADENCE BANK, N.A.

 

 


TABLE OF CONTENTS

 

       Page  

ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS

     1  

Section 1.01

  Terms Defined Above      1  

Section 1.02

  Certain Defined Terms      1  

Section 1.03

  Classification of Loans and Borrowings      31  

Section 1.04

  Terms Generally; Rules of Construction      31  

Section 1.05

  Accounting Terms and Determinations; GAAP      32  

Section 1.06

  Interest Rates; LIBOR Notification      33  

Section 1.07

  Letter of Credit Amounts      33  

Section 1.08

  Divisions      33  

ARTICLE II THE CREDITS

     33  

Section 2.01

  Commitments      33  

Section 2.02

  Loans and Borrowings      34  

Section 2.03

  Requests for Revolving Borrowings      35  

Section 2.04

  Interest Elections      36  

Section 2.05

  Funding of Borrowings      37  

Section 2.06

  Termination and Reduction of Aggregate Maximum Credit Amounts      38  

Section 2.07

  Borrowing Base      38  

Section 2.08

  Letters of Credit      43  

Section 2.09

  Swingline Loans      49  

ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

     51  

Section 3.01

  Repayment of Loans      51  

Section 3.02

  Interest      51  

Section 3.03

  Alternate Rate of Interest      52  

Section 3.04

  Prepayments      53  

Section 3.05

  Fees      56  

ARTICLE IV PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS

     57  

Section 4.01

  Payments Generally; Pro Rata Treatment; Sharing of Set-offs      57  

Section 4.02

  Presumption of Payment by the Borrower      58  

Section 4.03

  Defaulting Lenders      58  

Section 4.04

  Disposition of Proceeds      61  

ARTICLE V INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY

     62  

Section 5.01

  Increased Costs      62  

Section 5.02

  Break Funding Payments      63  

Section 5.03

  Taxes      63  

Section 5.04

  Mitigation Obligations; Replacement of Lenders      67  

Section 5.05

  Illegality      68  

 

i


TABLE OF CONTENTS

(continued)

Page

 

ARTICLE VI CONDITIONS PRECEDENT

     69  

Section 6.01

  Effective Date      69  

Section 6.02

  Each Credit Event      72  

ARTICLE VII REPRESENTATIONS AND WARRANTIES

     73  

Section 7.01

  Organization; Powers      73  

Section 7.02

  Authority; Enforceability      73  

Section 7.03

  Approvals; No Conflicts      73  

Section 7.04

  Financial Condition; No Material Adverse Change      74  

Section 7.05

  Litigation      74  

Section 7.06

  Environmental Matters      74  

Section 7.07

  Compliance with the Laws and Agreements; No Defaults      76  

Section 7.08

  Investment Company Act      76  

Section 7.09

  Taxes      76  

Section 7.10

  ERISA      76  

Section 7.11

  Disclosure; No Material Misstatements      77  

Section 7.12

  Insurance      77  

Section 7.13

  Restriction on Liens      78  

Section 7.14

  Subsidiaries      78  

Section 7.15

  Location of Business and Offices      78  

Section 7.16

  Properties; Titles, Etc.      78  

Section 7.17

  Maintenance of Properties      79  

Section 7.18

  Gas Imbalances, Prepayments      80  

Section 7.19

  Marketing of Production      80  

Section 7.20

  Swap Agreements and Qualified ECP Counterparty      80  

Section 7.21

  Use of Loans and Letters of Credit      80  

Section 7.22

  Solvency      80  

Section 7.23

  International Operations      81  

Section 7.24

  USA PATRIOT; AML Laws; Anti-Corruption Laws and Sanctions      81  

Section 7.25

  Accounts      81  

Section 7.26

  EEA Financial Institution      81  

ARTICLE VIII AFFIRMATIVE COVENANTS

     81  

Section 8.01

  Financial Statements; Other Information      82  

Section 8.02

  Notices of Material Events      85  

Section 8.03

  Existence; Conduct of Business      86  

Section 8.04

  Payment of Obligations      86  

Section 8.05

  [Reserved]      86  

Section 8.06

  Operation and Maintenance of Properties      86  

Section 8.07

  Insurance      87  

Section 8.08

  Books and Records; Inspection Rights      87  

Section 8.09

  Compliance with Laws      87  

Section 8.10

  Environmental Matters      88  

Section 8.11

  Further Assurances      88  

 

ii


TABLE OF CONTENTS

(continued)

Page

 

Section 8.12

  Reserve Reports      89  

Section 8.13

  Title Information      90  

Section 8.14

  Additional Collateral; Additional Guarantors      91  

Section 8.15

  ERISA Event      92  

Section 8.16

  Marketing Activities      92  

Section 8.17

  Accounts      92  

Section 8.18

  Minimum Hedging      92  

ARTICLE IX NEGATIVE COVENANTS

     93  

Section 9.01

  Financial Covenants      93  

Section 9.02

  Debt      93  

Section 9.03

  Liens      95  

Section 9.04

  Restricted Payments      95  

Section 9.05

  Investments, Loans and Advances      96  

Section 9.06

  Nature of Business; International Operations      97  

Section 9.07

  Limitation on Leases      97  

Section 9.08

  Proceeds of Loans; OFAC      98  

Section 9.09

  ERISA Compliance      98  

Section 9.10

  Sale or Discount of Receivables      98  

Section 9.11

  Mergers, Etc.      98  

Section 9.12

  Sale of Properties      99  

Section 9.13

  Environmental Matters      99  

Section 9.14

  Transactions with Affiliates      99  

Section 9.15

  Subsidiaries      100  

Section 9.16

  Negative Pledge Agreements; Dividend Restrictions      100  

Section 9.17

  Gas Imbalances, Take-or-Pay or Other Prepayments      100  

Section 9.18

  Swap Agreements      100  

Section 9.19

  Amendments to Material Agreements; Amendment to Fiscal Year      101  

Section 9.20

  New Accounts      101  

Section 9.21

  Repayment of Permitted Additional Debt; Amendment to Terms of Permitted Additional Debt      101  

ARTICLE X EVENTS OF DEFAULT; REMEDIES

     102  

Section 10.01

  Events of Default      102  

Section 10.02

  Remedies      104  

ARTICLE XI THE ADMINISTRATIVE AGENT

     106  

Section 11.01

  Appointment; Powers      106  

Section 11.02

  Duties and Obligations of Administrative Agent      106  

Section 11.03

  Action by Administrative Agent      107  

Section 11.04

  Reliance by Administrative Agent      107  

Section 11.05

  Subagents      108  

Section 11.06

  Resignation of Administrative Agent      108  

Section 11.07

  Administrative Agent Individually      109  

 

iii


TABLE OF CONTENTS

(continued)

Page

 

Section 11.08

  No Reliance      109  

Section 11.09

  Administrative Agent May File Proofs of Claim      110  

Section 11.10

  Withholding Tax      110  

Section 11.11

  Authority of Administrative Agent to Release Collateral and Liens      111  

Section 11.12

  The Arrangers      112  

Section 11.13

  Credit Bidding      112  

Section 11.14

  Certain ERISA Matters      113  

ARTICLE XII MISCELLANEOUS

     114  

Section 12.01

  Notices      114  

Section 12.02

  Waivers; Amendments      117  

Section 12.03

  Expenses, Indemnity; Damage Waiver      119  

Section 12.04

  Successors and Assigns      122  

Section 12.05

  Survival; Revival; Reinstatement      126  

Section 12.06

  Counterparts; Integration; Effectiveness      126  

Section 12.07

  Severability      127  

Section 12.08

  Right of Setoff      127  

Section 12.09

  GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS      128  

Section 12.10

  Headings      129  

Section 12.11

  Confidentiality      129  

Section 12.12

  Interest Rate Limitation      130  

Section 12.13

  EXCULPATION PROVISIONS      131  

Section 12.14

  Collateral Matters; Swap Agreements; Cash Management Agreements      131  

Section 12.15

  No Third Party Beneficiaries      132  

Section 12.16

  USA PATRIOT Act Notice      132  

Section 12.17

  No Fiduciary Duty; etc.      132  

Section 12.18

  Flood Insurance Provisions      133  

Section 12.19

  Acknowledgement and Consent to Bail-In of EEA Financial Institutions      133  

Section 12.20

  Acknowledgement Regarding Any Supported QFCs      134  

Section 12.21

  Material Non-Public Information      134  

 

iv


ANNEXES, EXHIBITS AND SCHEDULES

 

Annex I    List of Maximum Credit Amounts
Exhibit A    Form of Note
Exhibit B    Form of Borrowing Request
Exhibit C    Form of Interest Election Request
Exhibit D    Form of Compliance Certificate
Exhibit E    Security Instruments
Exhibit F    Form of Guarantee and Collateral Agreement
Exhibit G    Form of Assignment and Assumption
Exhibits H-1 – 4    Forms of Tax Certificate
Schedule 7.05    Litigation
Schedule 7.14    Subsidiaries and Partnerships
Schedule 7.18    Gas Imbalances; Take or Pay; Other Prepayments
Schedule 7.19    Marketing Agreements
Schedule 7.20    Swap Agreements
Schedule 7.25    Accounts
Schedule 9.05    Investments

 

v


THIS CREDIT AGREEMENT dated as of September 17, 2019 is among Contango Oil & Gas Company, a Texas corporation (the “Borrower”); each of the Lenders from time to time party hereto; JPMorgan Chase Bank, N.A. (in its individual capacity, “JPMorgan”), as Administrative Agent, Issuing Bank and Swingline Lender (each as defined below); and Royal Bank of Canada and Cadence Bank, N.A., as co-syndication agents for the Lenders (in such capacity, together with its successors in such capacity, the “Syndication Agents”).

R E C I T A L S

A. The Borrower has requested that the Lenders provide certain loans to and extensions of credit on behalf of the Borrower.

B. The Lenders have agreed to make such loans and extensions of credit subject to the terms and conditions of this Agreement.

C. In consideration of the mutual covenants and agreements herein contained and of the loans, extensions of credit and commitments hereinafter referred to, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING MATTERS

Section 1.01 Terms Defined Above. As used in this Agreement, each term defined above has the meaning indicated above.

Section 1.02 Certain Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, bear interest at a rate determined by reference to the Alternate Base Rate.

Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

Administrative Agent” means JPMorgan in its capacity as administrative agent hereunder, or any successor administrative agent as provided in Section 11.06.

Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

Affected Loans” has the meaning assigned to such term in Section 5.05.

Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

 

1


Agents” means, collectively, the Administrative Agent and the Syndication Agents; and “Agent” means the Administrative Agent or any Syndication Agent, as the context requires.

Aggregate Maximum Credit Amounts” at any time shall equal the sum of the Maximum Credit Amounts, as the same may be reduced or terminated pursuant to Section 2.06. The initial Aggregate Maximum Credit Amounts of the Lenders is $500,000,000.

Agreement” means this Credit Agreement, as the same may from time to time be amended, modified, supplemented or restated.

Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the NYFRB Rate in effect on such day plus 12 of 1.0% and (c) the Adjusted LIBO Rate for a one month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1.0%; provided that, for the purpose of this definition, the Adjusted LIBO Rate for any day shall be based on the LIBO Screen Rate (or if the LIBO Screen Rate is not available for such one month Interest Period, the Interpolated Rate) at approximately 11:00 a.m. London time on such day. Any change in the Alternate Base Rate due to a change in the Prime Rate, the NYFRB Rate or the Adjusted LIBO Rate shall be effective from and including the effective date of such change in the Prime Rate, the NYFRB Rate or the Adjusted LIBO Rate, respectively. If the Alternate Base Rate is being used as an alternate rate of interest pursuant to Section 3.03, then the Alternate Base Rate shall be the greater of clauses (a) and (b) above and shall be determined without reference to clause (c) above. For the avoidance of doubt, if the Alternate Base Rate as determined pursuant to the foregoing would be less than 1.00%, such rate shall be deemed to be 1.00% for purposes of this Agreement.

AML Laws” means all laws, rules, and regulations of any jurisdiction applicable to any Lender, the Borrower, the Borrower’s Subsidiaries or any Guarantor from time to time concerning or relating to anti-money laundering.

Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or any of its Affiliates from time to time concerning or relating to bribery or corruption.

Applicable Margin” means, for any day, with respect to any ABR Loan or Eurodollar Loan, or with respect to the Commitment Fee Rate, as the case may be, the applicable rate per annum set forth in the Borrowing Base Utilization Grid below based upon the Borrowing Base Utilization Percentage then in effect:

 

Borrowing Base Utilization Grid  

Borrowing Base Utilization Percentage

     <25%      

³25%, but

<50%

 

 

   

³50%, but

<75%

 

 

   

³75%, but

<90%

 

 

    ³90%  

ABR Loan Margin

     1.250     1.500     1.750     2.000     2.250

Eurodollar Loan Margin

     2.250     2.500     2.750     3.000     3.250

Commitment Fee Rate

     0.500     0.500     0.500     0.500     0.500

 

2


Each change in the Applicable Margin and the Commitment Fee Rate shall apply during the period commencing on the effective date of such change in the Borrowing Base Utilization Percentage and ending on the date immediately preceding the effective date of the next such change; provided, however, that if at any time the Borrower fails to deliver a Reserve Report pursuant to Section 8.12(a), then the “Applicable Margin” and the “Commitment Fee Rate” shall mean the rate per annum set forth on the grid when the Borrowing Base Utilization Percentage is at its highest level, beginning on the date of such failure until such Reserve Report is delivered.

Applicable Percentage” means, with respect to any Lender at any time, the percentage of the Aggregate Maximum Credit Amounts represented by such Lender’s Maximum Credit Amount; provided that if the Commitments have terminated or expired, each Lender’s Applicable Percentage shall be determined based upon the Commitments most recently in effect.

Approved Electronic Platform” means IntraLinks, DebtDomain, SyndTrak, ClearPar or any other electronic platform chosen by the Administrative Agent to be its electronic transmission system.

Approved Counterparty” means (a) any Lender or any Affiliate of a Lender and (b) any other Person whose long term senior unsecured debt rating is A/A2 by S&P or Moody’s (or their equivalent) or higher.

Approved Fund” has the meaning assigned to it in Section 12.04(b).

Approved Petroleum Engineers” means (a) Ryder Scott Company, (b) Netherland, Sewell & Associates, Inc., (c) William Cobb & Associates and (d) any other independent petroleum engineers reasonably acceptable to the Administrative Agent.

Arrangers” means the collective reference to JPMorgan, RBC Capital Markets and Cadence Bank, N.A., each in its capacity as a joint lead arranger and joint bookrunner hereunder.

Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 12.04(b)), and accepted by the Administrative Agent, in the form of Exhibit G or any other form (including electronic records generated by the use of an electronic platform) approved by the Administrative Agent.

Availability Period” means the period from and including the Effective Date to but excluding the Termination Date.

Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

 

3


Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”, as now and hereafter in effect, or any successor statute.

Bankruptcy Event” means, with respect to any Person, such Person becomes the subject of a voluntary or involuntary bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment or has had any order for relief in such proceeding entered in respect thereof; provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person by a Governmental Authority or instrumentality thereof, unless such ownership interest results in or provides such Person with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permits such Person (or such Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.

Beneficial Ownership Certification” means a certification regarding beneficial ownership or control as required by the Beneficial Ownership Regulation.

Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.

Benefit Plan” means any of (a) an “employee benefit plan” (as defined in Section 3(3) of ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in Section 4975 of the Code to which Section 4975 of the Code applies, and (c) any Person whose assets include (for purposes of the Plan Asset Regulations or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan”.

BHC Act Affiliate” of a party means an “affiliate’ (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.

Borrowing” means (a) Revolving Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect or (b) a Swingline Loan.

Borrowing Base” means at any time an amount equal to the amount determined in accordance with Section 2.07, as the same may be adjusted from time to time pursuant to Section 2.07(e), Section 2.07(f), Section 2.07(g) or Section 8.13(c).

Borrowing Base Deficiency” occurs if at any time the total Revolving Credit Exposures exceeds the Borrowing Base then in effect. The amount of the Borrowing Base Deficiency is the amount by which the total Revolving Credit Exposures exceeds the Borrowing Base then in effect.

 

4


Borrowing Base Properties” means the Oil and Gas Properties of the Borrower and its Subsidiaries included in the most recently delivered Reserve Report hereunder.

Borrowing Base Utilization Percentage” means, as of any day, the fraction expressed as a percentage, the numerator of which is the sum of the Revolving Credit Exposures of the Lenders on such day, and the denominator of which is the Borrowing Base in effect on such day.

Borrowing Request” means a request by the Borrower for a Revolving Borrowing in accordance with Section 2.03, which shall be substantially in the form of Exhibit B or any other form approved by the Administrative Agent.

Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City or Houston, Texas are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

Capital Leases” means, in respect of any Person, all leases which shall have been, or should have been, in accordance with GAAP, recorded as capital leases on the balance sheet of the Person liable (whether contingent or otherwise) for the payment of rent thereunder.

Cash Equivalents” means Investments of the type described in Sections 9.05(c) through (f).

Cash Management Agreement” means any agreement to provide cash management services, including treasury, depository, overdraft, credit or debit card, electronic funds transfer and other cash management services.

Cash Receipts” means all cash received by or on behalf of the Borrower or any of its Subsidiaries, including without limitation: (a) any amounts payable under or in connection with any Oil and Gas Properties; (b) cash representing operating revenue earned or to be earned by the Borrower or any of its Subsidiaries; (c) proceeds from Loans; and (d) any other cash received by the Borrower or any of its Subsidiaries from whatever source (including, without limitation, amounts received in respect of the Liquidation of any Swap Agreement).

Casualty Event” means any loss, casualty or other insured damage to, or any nationalization, taking under power of eminent domain or by condemnation or similar proceeding of, any Property of the Borrower or any of its Subsidiaries.

Change in Control” means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof), other than the Permitted Holders, of Equity Interests representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower; (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were not (i) directors of the Borrower on the date of this Agreement or nominated or appointed by the board of directors of the Borrower or (ii) appointed by directors so nominated or appointed; or (c) a “Change of Control” (or similar event howsoever described) occurs under any Permitted Additional Debt.

 

5


Change in Law” means the occurrence after the date of this Agreement of (a) the adoption of or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 5.01(b), by any lending office of such Lender or by such Lender’s or the Issuing Bank’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement; provided that, notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements or directives thereunder or issued in connection therewith (whether or not having the force of law) or in implementation thereof and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall, in each case, be deemed to be a “Change in Law,” regardless of the date enacted, adopted, promulgated, issued or implemented.

Class” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans or Swingline Loans.

Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute.

Collateral” means all Property now owned or hereafter acquired which is subject to a Lien created or purported to be created under one or more Security Instruments.

Commitment” means, with respect to each Lender, the commitment of such Lender to make Loans and to acquire participations in Letters of Credit and Swingline Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender’s Revolving Credit Exposure hereunder, as such commitment may be (a) modified from time to time pursuant to Section 2.06 and (b) modified from time to time pursuant to assignments by or to such Lender pursuant to Section 12.04(b). The amount representing each Lender’s Commitment shall at any time be the lesser of such Lender’s Maximum Credit Amount and such Lender’s Applicable Percentage of the then effective Borrowing Base.

Commitment Fee Rate” has the meaning set forth in the definition of “Applicable Margin”.

Commodity Account” has the meaning assigned to such term in UCC.

Communications” means, collectively, any notice, demand, communication, information, document or other material provided by or on behalf of any Loan Party pursuant to any Loan Document or the transactions contemplated therein which is distributed by the Administrative Agent, any Lender or any Issuing Bank by means of electronic communications pursuant to Section 12.01(e), including through an Approved Electronic Platform.

 

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Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

Consolidated Net Income” means with respect to the Borrower and the Consolidated Subsidiaries, for any period, the aggregate of the net income (or loss) of the Borrower and the Consolidated Subsidiaries determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein) the following: (a) the net income of any Person in which the Borrower or any Consolidated Subsidiary has an interest (which interest does not cause the net income of such other Person to be consolidated with the net income of the Borrower and the Consolidated Subsidiaries in accordance with GAAP), except to the extent of the amount of dividends or distributions actually paid in cash during such period by such other Person to the Borrower or to a Consolidated Subsidiary, as the case may be; (b) the net income (but not loss) during such period of any Consolidated Subsidiary to the extent that the declaration or payment of dividends or similar distributions or transfers or loans by that Consolidated Subsidiary is not at the time permitted by operation of the terms of its charter or any agreement, instrument or Governmental Requirement applicable to such Consolidated Subsidiary or is otherwise restricted or prohibited, in each case determined in accordance with GAAP; (c) the net income (or deficit) of any Person accrued prior to the date it becomes a Consolidated Subsidiary or is merged into or consolidated with the Borrower or any of its Consolidated Subsidiaries; (d) any extraordinary gains or losses during such period; (e) any gains or losses attributable to writeups or writedowns of assets; and (f) any non-cash gains or losses or positive or negative adjustments under FASB ASC 815 as a result of changes in the fair market value of derivatives.

Consolidated Subsidiaries” means each Subsidiary of the Borrower (whether now existing or hereafter created or acquired) the financial statements of which shall be (or should have been) consolidated with the financial statements of the Borrower in accordance with GAAP.

Consolidated Total Assets” means the total assets of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP, as shown on the most recent consolidated balance sheet of the Borrower.

Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. For the purposes of this definition, and without limiting the generality of the foregoing, any Person that owns directly or indirectly 20% or more of the Equity Interests having ordinary voting power for the election of the directors or other governing body of a Person (other than as a limited partner of such other Person) will be deemed to “control” such other Person. “Controlling” and “Controlled” have meanings correlative thereto.

Control Agreement” means a control agreement, in form and substance reasonably satisfactory to the Administrative Agent, providing for the Administrative Agent’s exclusive control of a Deposit Account or Securities Account, after notice, executed and delivered by the Borrower or a Subsidiary, as applicable, and the applicable securities intermediary (with respect to a Securities Account) or bank (with respect to a Deposit Account), in each case at which such relevant account is maintained.

 

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Control Agreement Delivery Date” has the meaning assigned to such term in Section 8.17.

Covered Entity” means any of the following:

 

  (a)

a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);

 

  (b)

a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or

 

  (c)

a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).

Covered Party” has the meaning assigned to it in Section 12.20.

Credit Party” means the Administrative Agent, the Issuing Bank, the Swingline Lender or any other Lender.

Debt” means, for any Person, the sum of the following (without duplication): (a) all obligations of such Person for borrowed money or evidenced by bonds, bankers’ acceptances, debentures, notes or other similar instruments; (b) all obligations of such Person (whether contingent or otherwise) in respect of letters of credit, surety or other bonds and similar instruments; (c) all accounts payable and all accrued expenses, liabilities or other obligations of such Person to pay the deferred purchase price of Property or services (excluding accounts payable and accrued expenses, liabilities or other obligations of such Person to pay the deferred purchase price of Property or services from time to time incurred in the ordinary course of business which are not greater than sixty (60) days past the date of invoice or delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP); (d) all obligations under Capital Leases; (e) all obligations under Synthetic Leases; (f) all Debt (as defined in the other clauses of this definition) of others secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) a Lien on any Property of such Person, whether or not such Debt is assumed by such Person; (g) all Debt (as defined in the other clauses of this definition) of others guaranteed by such Person or in which such Person otherwise assures a creditor against loss of the Debt (howsoever such assurance shall be made) to the extent of the lesser of the amount of such Debt and the maximum stated amount of such guarantee or assurance against loss; (h) all obligations or undertakings of such Person to maintain or cause to be maintained the financial position or covenants of others or to purchase the Debt or Property of others; (i) obligations to deliver commodities, goods or services, including, without limitation, Hydrocarbons, in consideration of one or more advance payments, other than gas balancing arrangements in the ordinary course of business; (j) obligations to pay for goods or services even if such goods or services are not actually received or utilized by such Person; (k) any Debt of a partnership for which such Person is liable either by agreement, by operation of law or by a Governmental Requirement but only to the extent of such liability; (l) Disqualified Capital Stock; and (m) the

 

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undischarged balance of any production payment created by such Person or for the creation of which such Person directly or indirectly received payment. The Debt of any Person shall include all obligations of such Person of the character described above to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is not included as a liability of such Person under GAAP.

Decommissioning Financial Responsibility” means a surety bond, guaranty, or other form of financial security required under OSCLA for Outer Continental Shelf facilities to demonstrate financial ability to pay for decommissioning activities to remove all facilities and restore the site to its pre-lease state.

Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.

Defaulting Lender” means any Lender that (a) has failed, within two Business Days of the date required to be funded or paid, to (i) fund any portion of its Loans, (ii) fund any portion of its participations in Letters of Credit or Swingline Loans or (iii) pay over to any Credit Party any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Lender notifies the Administrative Agent in writing that such failure is the result of such Lender’s good faith determination that a condition precedent to funding (specifically identified and including the particular default, if any) has not been satisfied, (b) has notified the Borrower or any Credit Party in writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Lender’s good faith determination that a condition precedent (specifically identified and including the particular default, if any) to funding a loan under this Agreement cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has failed, within three Business Days after request by a Credit Party, acting in good faith, to provide a certification in writing from an authorized officer of such Lender that it will comply with its obligations (and is financially able to meet such obligations as of the date of certification) to fund prospective Loans and participations in then outstanding Letters of Credit and Swingline Loans under this Agreement; provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon such Credit Party’s receipt of such certification in form and substance satisfactory to it and the Administrative Agent, or (d) has, or whose Lender Parent has, become the subject of (i) a Bankruptcy Event or (ii) a Bail-In Action.

Deposit Account” has the meaning assigned to such term in the UCC.

Disposition” means any conveyance, sale, lease, sale and leaseback, assignment, farm-out, transfer or other disposition of any Property, and includes, for the avoidance of doubt, any Casualty Event. “Dispose” has a correlative meaning thereto.

 

9


Disqualified Capital Stock” means any Equity Interest that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event, matures or is mandatorily redeemable for any consideration other than other Equity Interests (which would not constitute Disqualified Capital Stock), pursuant to a sinking fund obligation or otherwise, or is convertible or exchangeable for Debt or redeemable for any consideration other than other Equity Interests (which would not constitute Disqualified Capital Stock) at the option of the holder thereof, in whole or in part, on or prior to the date that is one year after the earlier of (a) the Maturity Date and (b) the date on which there are no Loans, LC Exposure or other obligations hereunder outstanding and all of the Commitments are terminated.

Dollars” or “$” refers to lawful money of the United States of America.

Domestic Subsidiary” means any Subsidiary that is organized under the laws of the United States of America or any state thereof or the District of Columbia.

EBITDAX” means, for any period, the sum of (a) Consolidated Net Income for such period plus (b) the following expenses or charges to the extent deducted from Consolidated Net Income in such period: (i) interest expense, (ii) income tax expense, (iii) depreciation, depletion, amortization, exploration expenses and other similar noncash charges and (iv) losses on asset Dispositions, disposals and abandonments, minus (c) to the extent included in the statement of Consolidated Net Income for such period, the sum of (1) interest income, (2) income tax credits (to the extent not netted from income tax expense), (3) all noncash income added to Consolidated Net Income, (4) any cash payments made during such period in respect of items described in clause (b)(iii) above subsequent to the fiscal quarter in which the relevant non-cash expenses or charges were reflected as a charge in the statement of Consolidated Net Income and (5) gains on asset Dispositions, disposals and abandonments. For the purposes of calculating EBITDAX for any period of four consecutive fiscal quarters (each, a “Reference Period”), (i) if during such Reference Period the Borrower or any Subsidiary shall have made a Material Disposition, EBITDAX for such Reference Period shall be calculated on a pro forma basis as if such Material Disposition occurred on the first day of such Reference Period, and (ii) if during such Reference Period the Borrower or any Subsidiary shall have made a Material Acquisition, EBITDAX for such Reference Period shall be calculated on a pro forma basis as if such Material Acquisition occurred on the first day of such Reference Period.

EEA Financial Institution” means (a) any institution established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.

EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

EEA Resolution Authority” means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

 

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Effective Date” means the date on which the conditions specified in Section 6.01 are satisfied (or waived in accordance with Section 12.02).

Electronic Signature” means an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a Person with the intent to sign, authenticate or accept such contract or record.

Engineering Reports” has the meaning assigned to such term in Section 2.07(c)(i).

Environmental Financial Responsibility” means Decommissioning Financial Responsibility and Oil Spill Financial Responsibility.

Environmental Laws” means any and all Governmental Requirements pertaining in any way to health, safety, the environment, the preservation or reclamation of natural resources, or the management, Release or threatened Release of any Hazardous Materials, in effect in any and all jurisdictions in which the Borrower or any Subsidiary is conducting, or at any time has conducted business, or where any Property of the Borrower or any Subsidiary is located, including the Oil Pollution Act of 1990 (“OPA”), as amended, the Outer Continental Shelf Lands Act (“OCSLA”), as amended, the Clean Air Act, as amended, the Comprehensive Environmental, Response, Compensation, and Liability Act of 1980 (“CERCLA”), as amended, the Federal Water Pollution Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the Resource Conservation and Recovery Act of 1976 (“RCRA”), as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Law, as amended, and other environmental conservation or protection Governmental Requirements.

Environmental Permit” means any permit, registration, license, notice, approval, consent, exemption, variance, or other authorization required under or issued pursuant to applicable Environmental Laws.

Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such Equity Interest.

ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder, and any successor statute.

ERISA Affiliate” means each trade or business (whether or not incorporated) which together with the Borrower or a Subsidiary would be deemed to be a “single employer” within the meaning of section 4001(b) (1) of ERISA or subsections (b), (c), (m) or (o) of section 414 of the Code.

 

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ERISA Event” means any of the following: (a) a reportable event described in Section 4043(b) of ERISA (or, unless the 30-day notice requirement has been duly waived under the applicable regulations, Section 4043(c) of ERISA) with respect to a Plan; (b) the withdrawal of the Borrower, any Subsidiary or any ERISA Affiliate from a Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the incurrence by the Borrower, any Subsidiary or any ERISA Affiliate of liability due to the complete or partial withdrawal from any Multiemployer Plan; (d) with respect to any Multiemployer Plan, the receipt by the Borrower or any Subsidiary of a notice of insolvency or termination under Section 4041A of ERISA; (e) the receipt by the Borrower or any Subsidiary of a notice of intent to terminate a Plan under Section 4041 of ERISA; (f) the receipt by the Borrower or any Subsidiary of any notice of the institution of proceedings to terminate a Plan by the PBGC; (g) the failure by the Borrower or any Subsidiary or ERISA Affiliate to make by its due date any required contribution under Section 430(j) of the Code to any Plan; (h) the imposition of a Lien (other than an Excepted Lien) under Section 412 or 430(k) of the Code or Section 303 or 4068 of ERISA on any property (or rights to property, whether real or personal) of the Borrower or any Subsidiary.

EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor Person), as in effect from time to time.

Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.

Event of Default” has the meaning assigned to such term in Section 10.01.

Excepted Liens” means: (a) Liens for Taxes, assessments or other governmental charges or levies which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (b) Liens in connection with workers’ compensation, unemployment insurance or other social security, old age pension or public liability obligations which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (c) statutory landlord’s liens, operators’, vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’, workers’, materialmen’s, construction or other like Liens arising by operation of law in the ordinary course of business or incident to the exploration, development, operation and maintenance of Oil and Gas Properties each of which is in respect of obligations that are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (d) contractual Liens which arise in the ordinary course of business under operating agreements, joint venture agreements, oil and gas partnership agreements, oil and gas leases, farm-out agreements, division orders, contracts for the sale, transportation or exchange of oil and natural gas, unitization and pooling declarations and agreements, area of mutual interest agreements, overriding royalty agreements, marketing agreements, processing agreements, net profits agreements, development agreements, gas balancing or deferred production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or other geophysical permits or agreements, and other agreements which are usual and customary in the oil and gas business and are for claims which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; provided that any such Lien

 

12


referred to in this clause does not materially impair the use of the Property covered by such Lien for the purposes for which such Property is held by the Borrower or any Subsidiary or materially impair the value of such Property subject thereto; (e) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies and burdening only deposit accounts or other funds maintained with a creditor depository institution; provided that no such deposit account is a dedicated cash collateral account or is subject to restrictions against access by the depositor in excess of those set forth by regulations promulgated by the Federal Reserve Board and no such deposit account is intended by the Borrower or any of the Subsidiaries to provide collateral to the depository institution; (f) easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations in any Property of the Borrower or any Subsidiary for the purpose of roads, pipelines, transmission lines, transportation lines, distribution lines for the removal of gas, oil, coal or other minerals or timber, and other like purposes, or for the joint or common use of real estate, rights of way, facilities and equipment, that do not secure any monetary obligations and which in the aggregate do not materially impair the use of such Property for the purposes of which such Property is held by the Borrower or any Subsidiary or materially impair the value of such Property subject thereto; (g) Liens on cash or securities pledged to secure performance of tenders, surety and appeal bonds, government contracts, performance and return of money bonds, bids, trade contracts, leases, statutory obligations, regulatory obligations and other obligations of a like nature incurred in the ordinary course of business; and (h) judgment and attachment Liens not giving rise to an Event of Default; provided that any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceeding may be initiated shall not have expired and no action to enforce such Lien has been commenced; provided, further, that (x) Liens described in clauses (a) through (e) shall remain “Excepted Liens” only for so long as no action to enforce such Lien has been commenced (and not stayed) and no intention to subordinate the first priority Lien granted in favor of the Administrative Agent and the Lenders is to be hereby implied or expressed by the permitted existence of such Excepted Liens; and (y) in no event shall “Excepted Liens” secure Debt for borrowed money.

Excluded Accounts” means (a) each account for which all of the deposits consist of amounts utilized to fund payroll, employee benefit or tax obligations of the Borrower and its Subsidiaries in the ordinary course of business, (b) fiduciary accounts that are contractually obligated to be segregated from the other assets of any Loan Party for the benefit of unaffiliated third parties, (c) “zero balance” accounts, (d) royalty suspense accounts for which all of the deposits consist of amounts due and owing to unaffiliated third parties in connection with the Borrower’s and the Subsidiaries’ royalty, overriding royalty or net profits interest payment obligations owing to such third parties and (e) other accounts so long as the aggregate daily balance in any such other account does not at any time exceed $100,000; provided that, the aggregate daily maximum balance for all such bank accounts excluded pursuant to this clause (e) on any day shall not exceed $250,000.

Excluded Swap Obligations” has the meaning assigned to such term in the Guarantee and Collateral Agreement.

 

13


Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan, Letter of Credit or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan, Letter of Credit or Commitment (other than pursuant to an assignment request by the Borrower under Section 5.04(b)) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 5.03, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender acquired the applicable interest in a Loan, Letter of Credit or Commitment or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section 5.03(e), and (d) any withholding Taxes imposed under FATCA.

Existing Credit Agreement” means that certain Credit Agreement, dated as of October 1, 2013, among the Borrower, the lenders party thereto and Royal Bank of Canada, as administrative agent, as amended, restated, supplemented or otherwise modified from time to time prior to the Effective Date.

Existing Letter of Credit” means that certain Irrevocable Standby Letter of Credit No. 1185/S25311 issued by Royal Bank of Canada, as Issuing Bank, for the benefit of Apache Corporation, in an aggregate face amount equal to $1,881,876.00.

FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Code.

Federal Funds Effective Rate” means, for any day, the rate calculated by the NYFRB based on such day’s federal funds transactions by depositary institutions, as determined in such manner as the NYFRB shall set forth on its public website from time to time, and published on the next succeeding Business Day by the NYFRB as the effective federal funds rate; provided that if the Federal Funds Effective Rate as so determined would be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement.

Federal Reserve Board” means the Board of Governors of the Federal Reserve System of the United States of America.

Fee Letter” means that certain Fee Letter, dated as of September 6, 2019, between the Borrower and JPMorgan, related to the payment of certain fees by the Borrower.

 

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Financial Officer” means, for any Person, the chief financial officer, principal accounting officer, treasurer or controller of such Person (or in the case of any Person that is a partnership, of such Person’s general partner). Unless otherwise specified, all references herein to a Financial Officer means a Financial Officer of the Borrower.

Financial Statements” means the financial statement or statements of the Borrower and the Consolidated Subsidiaries referred to in Section 7.04(a).

Foreign Lender” means a Lender that is not a U.S. Person.

Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

GAAP” means generally accepted accounting principles in the United States of America as in effect from time to time subject to the terms and conditions set forth in Section 1.05.

Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

Governmental Requirement” means any law, statute, code, ordinance, order, determination, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, rules of common law, authorization or other directive or requirement, whether now or hereinafter in effect, of any Governmental Authority.

Guarantors” means each Subsidiary that is a party to the Guarantee and Collateral Agreement as a “Guarantor” and “Grantor” (as such terms are defined in the Guarantee and Collateral Agreement) and guarantees the Obligations (including pursuant to Section 6.01 and Section 8.14(b)). On the Effective Date, the following Subsidiaries are Guarantors: Crimson Exploration Inc., a Delaware corporation, Crimson Exploration Operating, Inc., a Delaware corporation, Contango Energy Company, a Delaware corporation, Contango Rocky Mountain Inc., a Delaware corporation, Contango Operators, Inc., a Delaware corporation, Contango Mining Company, a Delaware corporation, Conterra Company, a Delaware corporation, Contaro Company, a Delaware corporation, Contango Alta Investments, Inc., a Delaware corporation, and Contango Venture Capital Corporation, a Delaware corporation.

Guarantee and Collateral Agreement” means the Guarantee and Collateral Agreement executed by the Borrower and the Guarantors in substantially the form attached hereto as Exhibit F, as the same may be amended, modified or supplemented from time to time.

Hazardous Material” means any substance regulated or as to which liability might arise under any applicable Environmental Law including: (a) any chemical, compound, material, product, byproduct, substance or waste defined as or included in the definition or meaning of “hazardous substance,” “hazardous material,” “hazardous waste,” “solid waste,” “toxic waste,” “extremely hazardous substance,” “toxic substance,” “contaminant,” “pollutant,” or words of similar meaning or import found in any applicable Environmental Law; (b) Hydrocarbons, petroleum products, petroleum substances, natural gas, oil, oil and gas waste, crude oil, and any components, fractions, or derivatives thereof; and (c) radioactive materials, explosives, asbestos or asbestos containing materials, polychlorinated biphenyls, radon, infectious or medical wastes.

 

15


Highest Lawful Rate” means, with respect to each Lender, the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the Notes or on other Obligations under laws applicable to such Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws allow as of the date hereof.

Hydrocarbon Interests” means all rights, titles, interests and estates now or hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding royalty and royalty interests, net profit interests and production payment interests, including any reserved or residual interests of whatever nature. Unless otherwise indicated herein, each reference to the term “Hydrocarbon Interests” shall mean Hydrocarbon Interests of the Borrower and/or the Subsidiaries, as the context requires.

Hydrocarbons” means oil, gas, casinghead gas, drip gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined or separated therefrom.

IBA” has the meaning assigned to such term in Section 1.06.

Immaterial Subsidiary” means any Subsidiary that is not a Material Subsidiary.

Impacted Interest Period” has the meaning assigned to it in the definition of “LIBO Rate.”

Ineligible Institution” has the meaning assigned to it in Section 12.04(b).

Information” has the meaning assigned to it in Section 12.11.

Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Borrower or any Guarantor under any Loan Document and (b) to the extent not otherwise described in clause (a) hereof, Other Taxes.

Initial Reserve Report” means the Reserve Report prepared by or under the supervision of the chief engineer of the Borrower evaluating the Oil and Gas Properties of the Borrower and the Guarantors as of June 30, 2019.

Interest Election Request” means a request by the Borrower to convert or continue a Revolving Borrowing in accordance with Section 2.04, which shall be substantially in the form of Exhibit C or any other form approved by the Administrative Agent.

 

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Interest Payment Date” means (a) with respect to any ABR Loan (other than a Swingline Loan), the last day of each March, June, September and December and the Termination Date, (b) with respect to any Eurodollar Loan, the last day of each Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period, and the Termination Date and (c) with respect to any Swingline Loan, the day that such Loan is required to be repaid and the Termination Date.

Interest Period” means with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months (or, with the consent of each Lender, twelve months) thereafter, as the Borrower may elect; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period pertaining to a Eurodollar Borrowing that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

Interim Redetermination” has the meaning assigned to such term in Section 2.07(b).

Interim Redetermination Date” means the date on which a Borrowing Base that has been redetermined pursuant to an Interim Redetermination becomes effective as provided in Section 2.07(d).

Interpolated Rate means, at any time, for any Interest Period, the rate per annum (rounded to the same number of decimal places as the LIBO Screen Rate) determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the LIBO Screen Rate for the longest period (for which the LIBO Screen Rate is available) that is shorter than the Impacted Interest Period; and (b) the LIBO Screen Rate for the shortest period (for which that LIBO Screen Rate is available) that exceeds the Impacted Interest Period, in each case, at such time.

Investment” means, for any Person: (a) the acquisition (whether for cash, Property, services or securities or otherwise) of Equity Interests of any other Person or any agreement to make any such acquisition (including, without limitation, any “short sale” or any sale of any securities at a time when such securities are not owned by the Person entering into such short sale); (b) the making of any deposit with, or advance, loan or capital contribution to, assumption of Debt of, purchase or other acquisition of any other Debt or equity participation or interest in, or other extension of credit to, any other Person (including the purchase of Property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such Property to such Person, but excluding any such advance, loan or extension of credit having a term not exceeding ninety (90) days representing the purchase price of inventory or supplies sold by such Person in the ordinary course of business); (c) the purchase or acquisition (in one or a series of

 

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transactions) of Property of another Person that constitutes a business unit; or (d) the entering into of any guarantee of, or other contingent obligation (including the deposit of any Equity Interests to be sold) with respect to, Debt or other liability of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person.

IRS” means the United States Internal Revenue Service.

Issuing Bank” means (a) solely with respect to the Existing Letter of Credit, Royal Bank of Canada it its capacity as the issuer of the Existing Letter of Credit and (b) JPMorgan, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.08(i). The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate. Each reference herein to the “Issuing Bank” in connection with a Letter of Credit or other matter shall be deemed to be a reference to the relevant Issuing Bank with respect thereto.

LC Commitment” means the commitment of the Issuing Bank to issue Letters of Credit hereunder. The amount of the LC Commitment is $10,000,000. The LC Commitment may be modified from time to time by agreement between the Issuing Bank and the Borrower, and notified to the Administrative Agent.

LC Disbursement” means a payment made by the Issuing Bank pursuant to a Letter of Credit.

LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time, plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender at any time shall be its Applicable Percentage of the LC Exposure at such time. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Article 29(a) of the Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce Publication No. 600 (or such later version thereof as may be in effect at the applicable time) or Rule 3.13 or Rule 3.14 of the International Standby Practices, International Chamber of Commerce Publication No. 590 (or such later version thereof as may be in effect at the applicable time) or similar terms of the Letter of Credit itself, or if compliant documents have been presented but not yet honored, such Letter of Credit shall be deemed to be “outstanding” and “undrawn” in the amount so remaining available to be paid, and the obligations of the Borrower and each Lender shall remain in full force and effect until the Issuing Bank and the Lenders shall have no further obligations to make any payments or disbursements under any circumstances with respect to any Letter of Credit.

Lender Parent” means, with respect to any Lender, any Person as to which such Lender is, directly or indirectly, a subsidiary.

Lenders” means the Persons listed on Annex I and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption or otherwise, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption or otherwise. Unless the context otherwise requires, the term “Lenders” includes the Swingline Lender and the Issuing Bank.

 

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Letter of Credit” means any letter of credit issued pursuant to this Agreement and shall include the Existing Letter of Credit.

Letter of Credit Agreement” has the meaning assigned to it in Section 2.08(b).

Leverage Ratio” has the meaning assigned to such term in Section 9.01(a).

LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, the LIBO Screen Rate at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period; provided that if the LIBO Screen Rate shall not be available at such time for such Interest Period (an “Impacted Interest Period”) then the LIBO Rate shall be the Interpolated Rate.

LIBO Screen Rate” means, for any day and time, with respect to any Eurodollar Borrowing for any Interest Period, the London interbank offered rate as administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate for U.S. Dollars for a period equal in length to such Interest Period as displayed on such day and time on pages LIBOR01 or LIBOR02 of the Reuters screen that displays such rate (or, in the event such rate does not appear on a Reuters page or screen, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion); provided that if the LIBO Screen Rate as so determined would be less than zero, such rate shall be deemed to zero for the purposes of this Agreement.

Lien” means any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or contract, and whether such obligation or claim is fixed or contingent, and including but not limited to (a) the lien or security interest arising from a deed of trust, mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes or (b) production payments and the like payable out of Oil and Gas Properties. The term “Lien” shall include easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations. For the purposes of this Agreement, the Borrower and the Subsidiaries shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional sale agreement, or leases under a financing lease or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person in a transaction intended to create a financing.

Liquidate” means, with respect to any Swap Agreement, the sale, assignment, novation, unwind or early termination of all or any part of such Swap Agreement or the creation of an offsetting position against all or any part of such Swap Agreement. The terms “Liquidated” and “Liquidation” have correlative meanings thereto.

Loan Documents” means this Agreement, the Notes, the Letter of Credit Agreements, the Letters of Credit, the Security Instruments, the Fee Letter, the Will BB Increase Fee Letter and any certificate required to be delivered under this Agreement by or on behalf of the Borrower or any Subsidiary.

 

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Loan Parties” means the collective reference to the Borrower and each Guarantor.

Loans” means the loans made by the Lenders to the Borrower pursuant to this Agreement.

Majority Lenders” means, at any time while no Loans or LC Exposure is outstanding, Non-Defaulting Lenders having more than fifty percent (50%) of the Aggregate Maximum Credit Amounts of all Non-Defaulting Lenders; and at any time while any Loans or LC Exposure is outstanding, Non-Defaulting Lenders holding more than fifty percent (50%) of the outstanding aggregate principal amount of the Loans, participation interests in Letters of Credit and Swingline Exposure of all Non-Defaulting Lenders (without regard to any sale by a Lender of a participation in any Loan under Section 12.04(c)). For purposes of the foregoing, the Revolving Credit Exposure of any Lender that is the Swingline Lender shall be deemed to exclude any amount of its Swingline Exposure in excess of its Applicable Percentage of all outstanding Swingline Loans, adjusted to give effect to any reallocation under Section 4.03(c) of the Swingline Exposures of Defaulting Lenders in effect at such time.

Material Acquisition” means any acquisition of Property or series of related acquisitions of Property that involves the payment of consideration by the Borrower and its Subsidiaries in excess of 10% of the Borrowing Base then in effect.

Material Adverse Effect” means a material adverse change in, or material adverse effect on (a) the business, Property, operations or condition (financial or otherwise) of the Borrower and the Subsidiaries taken as a whole, (b) the ability of the Borrower or any Guarantor to perform any of its obligations under any Loan Document, (c) the validity or enforceability of any Loan Document or (d) the rights and remedies of or benefits available to the Administrative Agent, the Issuing Bank or any Lender under any Loan Document.

Material Debt” means Debt (other than the Loans and Letters of Credit), or obligations in respect of one or more Swap Agreements, of any one or more of the Borrower and the Subsidiaries in an aggregate principal amount exceeding $5,000,000. For purposes of determining Material Debt, the “principal amount” of the obligations of the Borrower or any Subsidiary in respect of any Swap Agreement at any time shall be the Swap Termination Value of such Swap Agreement.

Material Disposition” means any Disposition of Property or series of related Dispositions of Property that yields gross proceeds to the Borrower or any of its Subsidiaries (valued at the initial principal amount thereof in the case of non-cash proceeds consisting of notes or other debt securities and valued at fair market value in the case of other non-cash proceeds) in excess of 10% of the Borrowing Base then in effect.

Material Subsidiary” means, as of any date: (a) any Subsidiary that owns, or has an interest in, any Borrowing Base Property, as determined by the Administrative Agent; (b) any Subsidiary that incurs or guarantees any Debt for borrowed money (including any Permitted Additional Debt) in excess of $1,000,000; (c) any Wholly-Owned Subsidiary, which,

 

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individually, or together with its subsidiaries, as of the most recent fiscal quarter of the Borrower, for the period of four consecutive fiscal quarters then ended for which financial statements have been delivered pursuant to Section 8.01(a) or Section 8.01(b), contributed greater than (i) two and one-half percent (2.5%) of EBITDAX for such period or (ii) two and one-half percent (2.5%) of Consolidated Total Assets as of the last day of such period; provided that, if at any time the aggregate amount of EBITDAX or Consolidated Total Assets attributable to all Immaterial Subsidiaries, taken together, exceeds five percent (5%) of EBITDAX for any such period or five percent (5%) of Consolidated Total Assets as of the end of any such fiscal quarter, then the Borrower shall designate in the compliance certificate required to be delivered pursuant to Section 8.01(c) for such fiscal quarter or fiscal year, as applicable, one or more Immaterial Subsidiaries as “Material Subsidiaries” as may be necessary to eliminate such excess, and upon the delivery of such compliance certificate to the Administrative Agent, such designated Subsidiaries shall for all purposes of this Agreement constitute Material Subsidiaries, and the Borrower shall cause such designated Material Subsidiaries to comply with Section 8.14(b). In the event the Borrower fails to so designate sufficient additional Subsidiaries as “Material Subsidiaries” in the compliance certificate as aforesaid, the Administrative Agent may, by written notice to the Borrower, designate sufficient additional Subsidiaries as “Material Subsidiaries” on the Borrower’s behalf, whereupon such Subsidiaries, effective as of the date of such designation, shall constitute “Material Subsidiaries” for all purposes of this Agreement.

Maturity Date” means September 17, 2024.

Maximum Credit Amount” means, as to each Lender, the amount set forth opposite such Lender’s name on Annex I under the caption “Maximum Credit Amounts”, as the same may be (a) reduced or terminated from time to time in connection with a reduction or termination of the Aggregate Maximum Credit Amounts pursuant to Section 2.06(b) or (b) modified from time to time pursuant to any assignment permitted by Section 12.04(b).

Moody’s” means Moody’s Investors Service, Inc.

Mortgaged Property” means any Property owned by the Borrower or any Guarantor which is subject to the Liens existing and to exist under the terms of the Security Instruments.

Multiemployer Plan” means any multiemployer plan, as defined in Section 3(37) or 4001(a)(3) of ERISA, which (a) is currently or hereafter contributed to by the Borrower, a Subsidiary or an ERISA Affiliate or (b) was at any time during the six calendar years preceding the date hereof contributed to by the Borrower, a Subsidiary or an ERISA Affiliate.

New Borrowing Base Notice” has the meaning assigned to such term in Section 2.07(d).

Non-Consenting Lender” means any Lender that does not approve any consent, waiver or amendment to any provision of this Agreement or any other Loan Document requested by the Borrower (excluding, for the avoidance of doubt, any Borrowing Base increase) that (i) requires the approval of all Lenders or all affected Lenders in accordance with the terms of Section 12.02(b) and (ii) has been approved by the Majority Lenders.

Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting Lender at such time.

 

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Notes” means the promissory notes of the Borrower described in Section 2.02(e) and being substantially in the form of Exhibit A, together with all amendments, modifications, replacements, extensions and rearrangements thereof.

NYFRB” means the Federal Reserve Bank of New York.

NYFRB Rate” means, for any day, the greater of (a) the Federal Funds Effective Rate in effect on such day and (b) the Overnight Bank Funding Rate in effect on such day (or for any day that is not a Business Day, for the immediately preceding Business Day); provided that if none of such rates are published for any day that is a Business Day, the term “NYFRB Rate” means the rate for a federal funds transaction quoted at 11:00 a.m. on such day received by the Administrative Agent from a federal funds broker of recognized standing selected by it; provided, further, that if any of the aforesaid rates as so determined be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

Obligations” means (a) any and all amounts owing or to be owing by the Borrower or any Guarantor (whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising) to the Administrative Agent, any other Agent, the Arrangers, the Issuing Bank, any Lender or any Related Party of any of the foregoing under any Loan Document; (b) all Secured Swap Obligations; (c) all Secured Cash Management Obligations; and (d) all renewals, extensions and/or rearrangements of any of the above. Without limitation of the foregoing, the term “Obligations” shall include the unpaid principal of and interest on the Loans and LC Exposure (including, without limitation, interest accruing at the then applicable rate provided in this Agreement after the maturity of the Loans and LC Exposure and interest accruing at the then applicable rate provided in this Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, any of its Subsidiaries or any Guarantor, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), reimbursement obligations (including, without limitation, to reimburse LC Disbursements), obligations to post cash collateral in respect of Letters of Credit, payments in respect of an early termination of Secured Swap Obligations and unpaid amounts, fees, expenses, indemnities, costs, and all other obligations and liabilities of every nature of the Borrower, any Subsidiary or any Guarantor, whether absolute or contingent, due or to become due, now existing or hereafter arising under this Agreement, the other Loan Documents, any Secured Swap Agreement or any Secured Cash Management Agreement; provided that the Obligations of any Loan Party shall not include any Excluded Swap Obligations of such Loan Party.

OFAC” means the U.S. Department of the Treasury Office of Foreign Assets Control.

Oil and Gas Properties” means (a) Hydrocarbon Interests; (b) the Properties now or hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently existing or future unitization agreements, pooling agreements and declarations of pooled units and the units created thereby (including without limitation all units created under orders, regulations and rules of any Governmental Authority) which may affect all or any portion of the Hydrocarbon Interests; (d) all operating agreements, contracts and other agreements, including production sharing contracts and agreements, which relate to any of the Hydrocarbon Interests or the production, sale, purchase, exchange or processing of Hydrocarbons from or attributable to such

 

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Hydrocarbon Interests; (e) all Hydrocarbons in and under and which may be produced and saved or attributable to the Hydrocarbon Interests, including all oil in tanks, and all rents, issues, profits, proceeds, products, revenues and other incomes from or attributable to the Hydrocarbon Interests; (f) all tenements, hereditaments, appurtenances and Properties in any manner appertaining, belonging, affixed or incidental to the Hydrocarbon Interests and (g) all Properties, rights, titles, interests and estates described or referred to above, including any and all Property, real or personal, now owned or hereinafter acquired and situated upon, used, held for use or useful in connection with the operating, working or development of any of such Hydrocarbon Interests or Property (excluding drilling rigs, automotive equipment, rental equipment or other personal Property which may be on such premises for the purpose of drilling a well or for other similar temporary uses) and including any and all oil wells, gas wells, injection wells or other wells, structures, fuel separators, liquid extraction plants, plant compressors, pumps, pumping units, field gathering systems, tanks and tank batteries, fixtures, valves, fittings, machinery and parts, engines, boilers, meters, apparatus, equipment, appliances, tools, implements, cables, wires, towers, casing, tubing and rods, surface leases, rights-of-way, easements and servitudes together with all additions, substitutions, replacements, accessions and attachments to any and all of the foregoing. Unless otherwise indicated herein, each reference to the term “Oil and Gas Properties” shall mean Oil and Gas Properties of the Borrower and/or the Subsidiaries, as the context requires.

Oil Spill Financial Responsibility” means an indemnity, insurance policy, or surety bond required by OPA for covered off shore facilities to demonstrate financial ability to pay for cleanup and damages that could be caused by oil discharges from the facility.

Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan, Letter of Credit or Loan Document).

Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 5.04).

Overnight Bank Funding Rate” means, for any day, the rate comprised of both overnight federal funds and overnight Eurodollar borrowings by U.S.-managed banking offices of depository institutions, as such composite rate shall be determined by the NYFRB as set forth on its public website from time to time, and published on the next succeeding Business Day by the NYFRB as an overnight bank funding rate.

Participant” has the meaning assigned to such term in Section 12.04(c).

 

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Participant Register” has the meaning assigned to such term in Section 12.04(c).

PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

Permitted Additional Debt” means unsecured senior notes or unsecured senior subordinated notes of the Borrower incurred after the Effective Date under Section 9.02(g).

Permitted Additional Debt Documents” means any credit agreement, notes, indenture, agreement, instrument or other definitive document governing, evidencing or related to, or securing, guaranteeing or otherwise providing credit support for, any Permitted Additional Debt, as the same may be amended, modified or supplemented to the extent permitted by Section 9.21.

Permitted Existing Secured Swap Agreements” means the commodity transactions entered into between Crimson Exploration Inc. (“Crimson”) and Citibank, N.A. evidenced by the Confirmations identified on Schedule 1.02, and entered into under that certain 2002 ISDA Master Agreement, dated as of December 23, 2013, between Citibank, N.A. and Crimson, as amended by that certain First Amendment to 2002 ISDA Master Agreement dated as of March 7, 2014, in each case as such transactions are in effect on the Effective Date, without giving effect to any amendments, modifications or supplements thereto entered into after the Effective Date and, for the avoidance of doubt, excluding any other Swap Agreements or other transactions entered into between the Borrower or any Subsidiary and Citibank, N.A.

Permitted Holders” means, individually or collectively, (a) John C. Goff, (b) any immediate family member of John C. Goff, (c) the estate or legal representative of the estate of John C. Goff and/or any of his immediate family members (acting in the capacity of such legal representative) and (d) trusts, partnerships, limited liability companies, corporations or other entities that are Controlled by one or more Persons in clauses (a), (b) and/or (c) of this definition.

Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

Petroleum Industry Standards” shall mean the Definitions for Oil and Gas Reserves promulgated by the Society of Petroleum Engineers (or any generally recognized successor) as in effect at the time in question.

Plan” means any employee pension benefit plan, as defined in section 3(2) of ERISA subject to Section 412 of the Code or Section 302 or Title IV of ERISA (other than a Multiemployer Plan), which (a) is currently or hereafter sponsored, maintained or contributed to by the Borrower, a Subsidiary or an ERISA Affiliate or (b) was at any time during the six calendar years preceding the date hereof, sponsored, maintained or contributed to by the Borrower, a Subsidiary or an ERISA Affiliate.

Plan Asset Regulations” means 29 CFR § 2510.3-101 et seq., as modified by Section 3(42) of ERISA, as amended from time to time.

 

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Prime Rate” means the rate of interest last quoted by The Wall Street Journal as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Administrative Agent) or any similar release by the Federal Reserve Board (as determined by the Administrative Agent). Each change in the Prime Rate shall be effective from and including the date such change is publicly announced or quoted as being effective.

Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including, without limitation, cash, securities, accounts and contract rights.

Proposed Borrowing Base” has the meaning assigned to such term in Section 2.07(c)(i).

Proposed Borrowing Base Notice” has the meaning assigned to such term in Section 2.07(c)(ii).

PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.

Public-Sider” means a Lender whose representatives may trade in securities of the Borrower or its Controlling person or any of its Subsidiaries while in possession of the financial statements provided by the Borrower under the terms of this Agreement.

QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).

QFC Credit Support” has the meaning assigned to it in Section 12.20.

Qualified ECP Counterparty” means, in respect of any Swap Agreement, the Borrower and each Subsidiary and each Guarantor that (a) has total assets exceeding $10,000,000 at the time any guarantee of obligations under such Swap Agreement or grant of the relevant security interest to secure such Swap Agreement becomes effective or (b) otherwise constitutes an “eligible contract participant” under the Commodity Exchange Act and can cause another Person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

Recipient” means (a) the Administrative Agent, (b) any Lender and (c) the Issuing Bank, as applicable.

Redemption” means with respect to any Debt, the repurchase, redemption, prepayment, repayment, defeasance or any other acquisition or retirement for value (or the segregation of funds with respect to any of the foregoing) of such Debt. “Redeem” has the correlative meaning thereto.

Redetermination Date” means, with respect to any Scheduled Redetermination or any Interim Redetermination, the date that the redetermined Borrowing Base related thereto becomes effective pursuant to Section 2.07(d).

 

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Reference Period” has the meaning assigned to such term in the definition of EBITDAX.

Register” has the meaning assigned to such term in Section 12.04(b)(iv).

Regulation D” means Regulation D of the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.

Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors (including attorneys, accountants and experts) of such Person and such Person’s Affiliates.

Release” means any depositing, spilling, leaking, pumping, pouring, placing, emitting, discarding, abandoning, emptying, discharging, migrating, injecting, escaping, leaching, dumping, or disposing.

Remedial Work” has the meaning assigned to such term in Section 8.10(a).

Required Lenders” means, at any time while no Loans or LC Exposure is outstanding, Non-Defaulting Lenders having at least sixty-six and two-thirds percent (66-2/3%) of the Aggregate Maximum Credit Amounts of all Non-Defaulting Lenders; and at any time while any Loans or LC Exposure is outstanding, Non-Defaulting Lenders holding at least sixty-six and two-thirds percent (66-2/3%) of the outstanding aggregate principal amount of the Loans, participation interests in Letters of Credit and Swingline Exposure of all Non-Defaulting Lenders (without regard to any sale by a Lender of a participation in any Loan under Section 12.04(c)). For purposes of the foregoing, the Revolving Credit Exposure of any Lender that is the Swingline Lender shall be deemed to exclude any amount of its Swingline Exposure in excess of its Applicable Percentage of all outstanding Swingline Loans, adjusted to give effect to any reallocation under Section 4.03(c) of the Swingline Exposures of Defaulting Lenders in effect at such time.

Reserve Report” means a report, in form and substance reasonably satisfactory to the Administrative Agent, setting forth, as of each January 1st or July 1st (or such other date in the event of an Interim Redetermination) the oil and gas reserves attributable to the Oil and Gas Properties of the Borrower and the Subsidiaries, together with a projection of the rate of production and future net income, Taxes, operating expenses and capital expenditures with respect thereto as of such date, based upon the pricing assumptions consistent with the Administrative Agent’s lending requirements at the time.

Responsible Officer” means, as to any Person, the Chief Executive Officer, the President, any Financial Officer or any Vice President of such Person or of such Person’s manager, managing member, general partner or such other Person having authority to bind that Person (or in the case of any Person that is a partnership, of such Person’s general partner). Unless otherwise specified, all references to a Responsible Officer herein means a Responsible Officer of the Borrower.

 

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Restricted Payment” means any dividend or other distribution (whether in cash, securities or other Property) with respect to any Equity Interests in the Borrower or any of its Subsidiaries, or any payment (whether in cash, securities or other Property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests in the Borrower or any of its Subsidiaries or any option, warrant or other right to acquire any such Equity Interests in the Borrower or any of its Subsidiaries.

Revolving Credit Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s Revolving Loans, its LC Exposure and its Swingline Exposure at such time.

Revolving Loan” means a Loan made pursuant to Section 2.03.

S&P” means Standard & Poor’s Rating Services, a Standard & Poor’s Financial Services LLC business.

Sanctioned Country” means, at any time, a country, region or territory which is itself the subject or target of any Sanctions (at the time of this Agreement, Crimea, Cuba, Iran, North Korea and Syria).

Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC, the U.S. Department of State, the United Nations Security Council, the European Union, any European Union member state, Her Majesty’s Treasury of the United Kingdom or other relevant sanctions authority, (b) any Person operating, organized or resident in a Sanctioned Country, (c) any Person owned or controlled by any such Person or Persons described in the foregoing clauses (a) or (b) or (d) any Person otherwise the subject of any Sanctions.

Sanctions” means all economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State or (b) the United Nations Security Council, the European Union, any European Union member state, Her Majesty’s Treasury of the United Kingdom or other relevant sanctions authority.

Scheduled Redetermination” has the meaning assigned to such term in Section 2.07(b).

Scheduled Redetermination Date” means the date on which a Borrowing Base that has been redetermined pursuant to a Scheduled Redetermination becomes effective as provided in Section 2.07(d).

SEC” means the Securities and Exchange Commission of the United States of America or any successor Governmental Authority.

Secured Cash Management Agreement” means a Cash Management Agreement between (a) the Borrower or any Subsidiary and (b) a Secured Cash Management Provider.

Secured Cash Management Obligations” means any and all amounts and other obligations owing by the Borrower or any Subsidiary to any Secured Cash Management Provider under any Secured Cash Management Agreement.

 

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Secured Cash Management Provider” means a Lender, an Affiliate of a Lender, the Administrative Agent or an Affiliate of the Administrative Agent.

Secured Parties” means the Administrative Agent, each Lender, the Issuing Bank, the Swingline Lender, each Secured Cash Management Provider and each Secured Swap Party, and “Secured Party” shall mean any one of them.

Secured Swap Agreement” means (a) any Swap Agreement between the Borrower or any Subsidiary and any Person that is entered into prior to the time, or during the time, that such Person was, a Lender or an Affiliate of a Lender (including any such Swap Agreement in existence prior to the date hereof), even if such Person subsequently ceases to be a Lender (or an Affiliate of a Lender) for any reason (any such Person, a “Secured Swap Party”); provided that, the term “Secured Swap Agreement” shall not include any Swap Agreement or transactions under any Swap Agreement entered into after the time that such Secured Swap Party ceases to be a Lender or an Affiliate of a Lender and (b) any Permitted Existing Secured Swap Agreement.

Secured Swap Obligations” means all amounts and other obligations, owing to any Secured Swap Party under any Secured Swap Agreement (other than Excluded Swap Obligations).

Secured Swap Party” has the meaning assigned to such term in the definition of Secured Swap Agreement; provided that, notwithstanding the foregoing, Citibank, N.A. shall also be a “Secured Swap Party” solely with respect to the Permitted Existing Secured Swap Agreements.

Securities Account” has the meaning assigned to such term in the UCC.

Security Instruments” means the Guarantee and Collateral Agreement, mortgages, deeds of trust, Control Agreements and other agreements, instruments or certificates described or referred to in Exhibit E, and any and all other agreements, instruments, consents or certificates now or hereafter executed and delivered by the Borrower or any other Person (other than Secured Swap Agreements or participation or similar agreements between any Lender and any other lender or creditor with respect to any Obligations pursuant to this Agreement) in connection with, or as security for the payment or performance of the Obligations, the Notes, this Agreement, or reimbursement obligations under the Letters of Credit, as such agreements may be amended, modified, supplemented or restated from time to time.

Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Federal Reserve Board to which the Administrative Agent is subject with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as “Eurocurrency liabilities” in Regulation D). Such reserve percentages shall include those imposed pursuant to Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

 

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subsidiary” means, with respect to any Person (the “parent”) at any date, any other Person the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other Person (a) of which Equity Interests representing more than 50% of the equity or more than 50% of the ordinary voting power (irrespective of whether or not at the time Equity Interests of any other class or classes of such Person shall have or might have voting power by reason of the happening of any contingency) or, in the case of a partnership, any general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

Subsidiary” means any subsidiary of the Borrower.

Supported QFC” has the meaning assigned to it in Section 12.20.

Swap Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement, whether exchange traded, “over-the-counter” or otherwise, involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or the Subsidiaries shall be a Swap Agreement.

Swap Termination Value” means, in respect of any one or more Swap Agreements, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Agreements, (a) for any date on or after the date such Swap Agreements have been closed out and termination value(s) determined in accordance therewith, such termination value(s) payable by the Borrower or any Subsidiary, as applicable, and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Agreements, with respect to which the Borrower or any Subsidiary, as applicable, is “out-of-the-money”, as determined by the counterparties to such Swap Agreements (including, without duplication, any unpaid amounts due on the date of calculation).

Swingline Commitment” means, as to the Swingline Lender, $10,000,000.

Swingline Exposure” means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Lender at any time shall be the sum of (a) its Applicable Percentage of the aggregate principal amount of all Swingline Loans outstanding at such time (excluding, in the case of any Lender that is the Swingline Lender, Swingline Loans made by it that are outstanding at such time to the extent that the other Lenders shall not have funded their participations in such Swingline Loans), adjusted to give effect to any reallocation under Section 4.03 of the Swingline Exposure of Defaulting Lenders in effect at such time, and (b) in the case of any Lender that is the Swingline Lender, the aggregate principal amount of all Swingline Loans made by such Lender outstanding at such time, less the amount of participations funded by the other Lenders in such Swingline Loans.

 

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Swingline Lender” means JPMorgan, in its capacity as a lender of Swingline Loans hereunder, together with its successors in such capacity.

Swingline Loan” means a Loan made pursuant to Section 2.09.

Synthetic Leases” means, in respect of any Person, all leases which shall have been, or should have been, in accordance with GAAP, treated as operating leases on the financial statements of the Person liable (whether contingently or otherwise) for the payment of rent thereunder and which were properly treated as indebtedness for borrowed money for purposes of U.S. federal income Taxes, if the lessee in respect thereof is obligated to either purchase for an amount in excess of, or pay upon early termination an amount in excess of, 80% of the residual value of the Property subject to such operating lease upon expiration or early termination of such lease.

Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), value added taxes, or any other goods and services, use or sales taxes, assessments, fees or other charges imposed by any Governmental Authority including any interest, additions to tax or penalties applicable thereto.

Termination Date” means the earlier of the Maturity Date and the date of termination of the Commitments.

Total Debt” means, at any date, all Debt of the Borrower and the Consolidated Subsidiaries on a consolidated basis, excluding non-cash obligations under FASB ASC 815.

Transactions” means, (a) with respect to (i) the Borrower, the execution, delivery and performance by the Borrower of this Agreement and each other Loan Document to which it is a party, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder, and the grant of Liens by the Borrower on Mortgaged Properties and other Properties pursuant to the Security Instruments and (ii) each Guarantor, the execution, delivery and performance by such Guarantor of each Loan Document to which it is a party, the guaranteeing of the Obligations and the other obligations under the Guarantee and Collateral Agreement by such Guarantor, and the grant of Liens by such Guarantor on Mortgaged Properties pursuant to the Security Instruments and (b) the payment of fees and expenses in connection with the foregoing.

Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Alternate Base Rate or the Adjusted LIBO Rate.

U.S. Person” means a “United States person” within the meaning of Section 7701(a)(30) of the Code.

U.S. Special Resolution Regime” has the meaning assigned to it in Section 12.20.

 

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U.S. Tax Compliance Certificate” has the meaning assigned to such term in Section 5.03(e)(ii)(B)(3).

UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York.

USA PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. 107-56), as amended.

Will Acquisition” means the acquisition by the Borrower of certain Oil and Gas Properties from Will Energy pursuant to the Will Acquisition Agreement.

Will Acquisition Agreement” means that certain Contribution and Purchase Agreement by and between Will Energy, as seller, and the Borrower, as buyer, dated September 12, 2019.

Will Acquisition Documents” means (a) the Will Acquisition Agreement and (b) all bills of sale, assignments, agreements, instruments and documents executed and delivered in connection therewith, as amended.

Will BB Increase Fee Letter” has the meaning assigned to such term in Section 2.07(g)(vii).

Will Energy” means Will Energy Corporation, a Texas corporation.

Wholly-Owned Subsidiary” means any Subsidiary of which all of the outstanding Equity Interests (other than any directors’ qualifying shares mandated by applicable law), on a fully-diluted basis, are owned by the Borrower or one or more of the Wholly-Owned Subsidiaries or are owned by the Borrower and one or more of the Wholly-Owned Subsidiaries.

Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.

Section 1.03 Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a “Revolving Loan”) or by Type (e.g., a “Eurodollar Loan”) or by Class and Type (e.g., a “ABR Revolving Loan”). Borrowings also may be classified and referred to by Class (e.g., a “Revolving Borrowing”) or by Type (e.g., a “Eurodollar Borrowing”) or by Class and Type (e.g., a “ABR Revolving Borrowing”).

Section 1.04 Terms Generally; Rules of Construction. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” as used in this Agreement shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be

 

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construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth in the Loan Documents), (b) any reference herein to any law shall be construed as referring to such law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time, (c) any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to the restrictions contained in the Loan Documents), (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (e) with respect to the determination of any time period, the word “from” means “from and including” and the word “to” means “to and including” and (f) any reference herein to Articles, Sections, Annexes, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Annexes, Exhibits and Schedules to, this Agreement. No provision of this Agreement or any other Loan Document shall be interpreted or construed against any Person solely because such Person or its legal representative drafted such provision.

Section 1.05 Accounting Terms and Determinations; GAAP. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to financial matters required to be furnished to the Administrative Agent or the Lenders hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent with the Financial Statements except for changes in which the Borrower’s independent certified public accountants concur and which are disclosed to the Administrative Agent on the next date on which financial statements are required to be delivered to the Lenders pursuant to Section 8.01(a); provided that, unless the Borrower and the Majority Lenders shall otherwise agree in writing, no such change shall modify or affect the manner in which compliance with the covenants set forth in Section 9.01 are computed such that all such computations shall be conducted utilizing financial information presented consistently with prior periods. Notwithstanding anything to the contrary contained herein, (a) all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to (i) any election under Financial Accounting Standards Board Accounting Standards Codification 825 (or any other Financial Accounting Standard having a similar result or effect) to value any Debt or other liabilities of the Borrower or any Subsidiary at “fair value”, as defined therein and (ii) any treatment of Debt under Accounting Standards Codification 470-20 or 2015-03 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Debt in a reduced or bifurcated manner as described therein, and such Debt shall at all times be valued at the full stated principal amount thereof; and (b) in the event that the Borrower adopts ASC 842 (requiring all leases to be capitalized), only those leases (assuming for purposes hereof that such leases were in existence prior to the date of the Borrower’s adoption of ASC 842) that would constitute Capital Leases prior to the date of the Borrower’s adoption of ASC 842 shall be considered Capital Leases and all calculations and deliverables under this Agreement or any other Loan Document shall be made or delivered, as applicable, in accordance therewith.

 

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Section 1.06 Interest Rates; LIBOR Notification. The interest rate on Eurodollar Loans is determined by reference to the LIBO Rate, which is derived from the London interbank offered rate. The London interbank offered rate is intended to represent the rate at which contributing banks may obtain short-term borrowings from each other in the London interbank market. In July 2017, the U.K. Financial Conduct Authority announced that, after the end of 2021, it would no longer persuade or compel contributing banks to make rate submissions to the ICE Benchmark Administration (together with any successor to the ICE Benchmark Administrator, the “IBA”) for purposes of the IBA setting the London interbank offered rate. As a result, it is possible that commencing in 2022, the London interbank offered rate may no longer be available or may no longer be deemed an appropriate reference rate upon which to determine the interest rate on Eurodollar Loans. In light of this eventuality, public and private sector industry initiatives are currently underway to identify new or alternative reference rates to be used in place of the London interbank offered rate. In the event that the London interbank offered rate is no longer available or in certain other circumstances as set forth in Section 3.03(b) of this Agreement, such Section 3.03(b) provides a mechanism for determining an alternative rate of interest. The Administrative Agent will notify the Borrower, pursuant to Section 3.03, in advance of any change to the reference rate upon which the interest rate on Eurodollar Loans is based. However, the Administrative Agent does not warrant or accept any responsibility for, and shall not have any liability with respect to, the administration, submission or any other matter related to the London interbank offered rate or other rates in the definition of “LIBO Rate” or with respect to any alternative or successor rate thereto, or replacement rate thereof, including without limitation, whether the composition or characteristics of any such alternative, successor or replacement reference rate, as it may or may not be adjusted pursuant to Section 3.03(b), will be similar to, or produce the same value or economic equivalence of, the LIBO Rate or have the same volume or liquidity as did the London interbank offered rate prior to its discontinuance or unavailability.

Section 1.07 Letter of Credit Amounts. Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the amount of such Letter of Credit available to be drawn at such time; provided that with respect to any Letter of Credit that, by its terms or the terms of any Letter of Credit Agreement related thereto, provides for one or more automatic increases in the available amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum amount is available to be drawn at such time.

Section 1.08 Divisions. For all purposes under the Loan Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized and acquired on the first date of its existence by the holders of its Equity Interests at such time.

ARTICLE II

THE CREDITS

Section 2.01 Commitments. Subject to the terms and conditions set forth herein, each Lender agrees to make Revolving Loans to the Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in (a) such Lender’s Revolving Credit Exposure exceeding such Lender’s Commitment or (b) the total Revolving Credit Exposures exceeding the total Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans.

 

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Section 2.02 Loans and Borrowings.

(a) Borrowings; Several Obligations. Each Revolving Loan shall be made as part of a Borrowing consisting of Revolving Loans made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required.

(b) Types of Loans. Subject to Section 3.03, each Revolving Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each Swingline Loan shall be an ABR Loan. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.

(c) Minimum Amounts; Limitation on Number of Borrowings. At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $100,000 and not less than $500,000. At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $100,000 and not less than $500,000; provided that, notwithstanding the foregoing, an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.08(e). Each Swingline Loan shall be in an amount that is an integral multiple of $100,000 and not less than $500,000. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of ten (10) Eurodollar Borrowings outstanding.

(d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.

(e) Notes. Any Lender may request that Loans made by it be evidenced by a single promissory note of the Borrower in substantially the form of Exhibit A, dated, in the case of (i) any Lender party hereto as of the date of this Agreement, as of the date of this Agreement, or (ii) any Lender that becomes a party hereto pursuant to an Assignment and Assumption, as of the effective date of the Assignment and Assumption, payable to such Lender in a principal amount equal to its Maximum Credit Amount as in effect on such date, and otherwise duly completed. In the event that any Lender’s Maximum Credit Amount increases or decreases for any reason (whether pursuant to Section 2.06, Section 12.04(b) or otherwise), upon the request of such Lender, the Borrower shall deliver or cause to be delivered on the effective date of such increase or decrease, a new Note payable to such Lender in a principal amount equal to its Maximum Credit Amount after giving effect to such increase or decrease, and otherwise duly

 

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completed and, upon request by the Borrower, such Lender shall promptly return to the Borrower the previously issued Note held by such Lender. The date, amount, Type, interest rate and, if applicable, Interest Period of each Loan made by each Lender, and all payments made on account of the principal thereof, shall be recorded by such Lender on its books for its Note, and, prior to any transfer, may be endorsed by such Lender on a schedule attached to such Note or any continuation thereof or on any separate record maintained by such Lender. Failure to make any such notation or to attach a schedule shall not affect any Lender’s or the Borrower’s rights or obligations in respect of such Loans or affect the validity of such transfer by any Lender of its Note.

Section 2.03 Requests for Revolving Borrowings. To request a Revolving Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 noon, Houston, Texas time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Revolving Borrowing, not later than 12:00 noon, Houston, Texas time, one Business Day before the date of the proposed Borrowing; provided that no such notice shall be required for any deemed request of an ABR Revolving Borrowing to finance the reimbursement of an LC Disbursement as provided in Section 2.08(e). Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery, facsimile or electronic communication to the Administrative Agent of a written Borrowing Request signed by a Responsible Officer of the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:

(i) the aggregate amount of the requested Borrowing;

(ii) the date of such Borrowing, which shall be a Business Day;

(iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

(iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”;

(v) the amount of the then effective Borrowing Base, the current total Revolving Credit Exposures (without regard to the requested Borrowing) and the pro forma total Revolving Credit Exposures (giving effect to the requested Borrowing); and

(vi) the location and number of the Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.05.

If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. Each Borrowing Request shall constitute a representation that the amount of the requested Borrowing shall not cause the total Revolving Credit Exposures to exceed the total Commitments (i.e., the lesser of the Aggregate Maximum Credit Amounts and the then effective Borrowing Base).

 

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Promptly following receipt of a Borrowing Request in accordance with this Section 2.03, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.

Section 2.04 Interest Elections.

(a) Conversion and Continuance. Each Revolving Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section 2.04. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Swingline Borrowings, which may not be converted or continued.

(b) Interest Election Requests. To make an election pursuant to this Section 2.04, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery, facsimile or electronic communication to the Administrative Agent of a written Interest Election Request signed by a Responsible Officer of the Borrower.

(c) Information in Interest Election Requests. Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:

(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to Section 2.04(c)(iii) and (iv) shall be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.

 

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(d) Notice to Lenders by the Administrative Agent. Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

(e) Effect of Failure to Deliver Timely Interest Election Request and Events of Default on Interest Election. If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing: (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing (and any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective) and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

Section 2.05 Funding of Borrowings.

(a) Funding by Lenders. Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 1:00 p.m., Houston, Texas time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders; provided that Swingline Loans shall be made as provided in Section 2.09. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent subject, from and after the Control Agreement Delivery Date, to a Control Agreement and designated by the Borrower in the applicable Borrowing Request; provided that ABR Revolving Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.08(e) shall be remitted by the Administrative Agent to the Issuing Bank. Nothing herein shall be deemed to obligate any Lender to obtain the funds for its Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for its Loan in any particular place or manner.

(b) Presumption of Funding by the Lenders. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.05(a) and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the NYFRB Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing.

 

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Section 2.06 Termination and Reduction of Aggregate Maximum Credit Amounts.

(a) Scheduled Termination of Commitments. Unless previously terminated, the Commitments shall terminate on the Maturity Date. If at any time the Aggregate Maximum Credit Amounts or the Borrowing Base is terminated or reduced to zero, then the Commitments shall terminate on the effective date of such termination or reduction.

(b) Optional Termination and Reduction of Aggregate Credit Amounts.

(i) The Borrower may at any time terminate, or from time to time reduce, the Aggregate Maximum Credit Amounts; provided that (A) each such partial reduction of the Aggregate Maximum Credit Amounts shall be in an amount that is an integral multiple of $500,000 and not less than $1,000,000 and (B) the Borrower shall not terminate or reduce the Aggregate Maximum Credit Amounts if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 3.04(c)(i), the total Revolving Credit Exposures would exceed the total Commitments.

(ii) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Aggregate Maximum Credit Amounts under Section 2.06(b)(i) at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section 2.06(b)(ii) shall be irrevocable; provided that such a notice may state that it is conditioned upon the occurrence of one or more specified events (including the effectiveness of other credit facilities), in which case such notice may be revoked by the Borrower (by at least one (1) Business Days’ notice to the Administrative Agent on or prior to the specified effective date) if such specified event(s) do not occur. Any termination or reduction of the Aggregate Maximum Credit Amounts shall be permanent and may not be reinstated. Each reduction of the Aggregate Maximum Credit Amounts shall be made ratably among the Lenders in accordance with each Lender’s Applicable Percentage.

Section 2.07 Borrowing Base.

(a) Borrowing Base. For the period from and including the Effective Date to but excluding the first Redetermination Date, the amount of the Borrowing Base shall be $65,000,000. Notwithstanding the foregoing, the Borrowing Base may be subject to further adjustments from time to time pursuant to Section 2.07(e), Section 2.07(f), Section 2.07(g) or Section 8.13(c).

(b) Scheduled and Interim Redeterminations. The Borrowing Base shall be redetermined on or about December 1, 2019 (the “December 2019 Redetermination” and such date, the “December 2019 Redetermination Date”), and thereafter, semi-annually in accordance with this Section 2.07 (each such scheduled redetermination, a “Scheduled Redetermination”), and, subject to Section 2.07(d), such redetermined Borrowing Base shall become effective and applicable to the Borrower, the Administrative Agent, the Issuing Bank and the Lenders on May 1st and November 1st of each year, commencing May 1, 2020 (and, in the case of the December 2019 Redetermination, on the December 2019 Redetermination Date). In addition, (i) the

 

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Borrower may, by notifying the Administrative Agent thereof, one time between successive Scheduled Redeterminations and (ii) the Administrative Agent may, at the direction of the Required Lenders, by notifying the Borrower thereof, one time between successive Scheduled Redeterminations, each elect to cause the Borrowing Base to be redetermined (an “Interim Redetermination”) in accordance with this Section 2.07.

(c) Scheduled and Interim Redetermination Procedure.

(i) Each Scheduled Redetermination and each Interim Redetermination shall be effectuated as follows: upon receipt by the Administrative Agent of (A) the Reserve Report and the certificate required to be delivered by the Borrower to the Administrative Agent, in the case of a Scheduled Redetermination, pursuant to Section 8.12(a) and (c), and, in the case of an Interim Redetermination, pursuant to Section 8.12(b) and (c), and (B) such other reports, data and supplemental information, including, without limitation, the information provided pursuant to Section 8.12(c), as may, from time to time, be reasonably requested by the Majority Lenders (the Reserve Report, such certificate and such other reports, data and supplemental information being the “Engineering Reports”), the Administrative Agent shall evaluate the information contained in the Engineering Reports and shall, in good faith, propose a new Borrowing Base (the “Proposed Borrowing Base”) based upon such information and such other information (including, without limitation, the status of title information with respect to the Oil and Gas Properties as described in the Engineering Reports and the existence of any other Debt) as the Administrative Agent deems appropriate in its sole discretion and consistent with its normal oil and gas lending criteria as they exist at the particular time.

(ii) The Administrative Agent shall notify the Borrower and the Lenders of the Proposed Borrowing Base (the “Proposed Borrowing Base Notice”):

(A) in the case of a Scheduled Redetermination (1) if the Administrative Agent shall have received the Engineering Reports required to be delivered by the Borrower pursuant to Section 8.12(a) and (c) in a timely and complete manner, then on or before April 15th and October 15th of such year following the date of delivery (or, in the case of the December 2019 Redetermination, on or before November 15, 2019) or (2) if the Administrative Agent shall not have received the Engineering Reports required to be delivered by the Borrower pursuant to Section 8.12(a) and (c) in a timely and complete manner, then promptly after the Administrative Agent has received complete Engineering Reports from the Borrower and has had a reasonable opportunity to determine the Proposed Borrowing Base in accordance with Section 2.07(c)(i); and

(B) in the case of an Interim Redetermination, promptly, and in any event, within fifteen (15) days after the Administrative Agent has received the required Engineering Reports.

(iii) Any Proposed Borrowing Base that would increase the Borrowing Base then in effect must be approved by all of the Lenders as provided in this Section 2.07(c)(iii); and any Proposed Borrowing Base that would decrease or maintain the Borrowing Base then in effect must be approved or be deemed to have been approved by the Required Lenders as provided in this Section 2.07(c)(iii). All decisions regarding the Borrowing Base

 

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hereunder shall be made by each Lender in good faith based upon such information as such Lender deems appropriate in its sole discretion and consistent with such Lender’s normal oil and gas lending criteria as they exist at the particular time. Upon receipt of the Proposed Borrowing Base Notice, each Lender shall have fifteen (15) days to agree with the Proposed Borrowing Base or disagree with the Proposed Borrowing Base by proposing an alternate Borrowing Base. If at the end of such fifteen (15) days, any Lender has not communicated its approval or disapproval in writing to the Administrative Agent, such silence shall be deemed to be (A) in the case of a Proposed Borrowing Base that would increase the Borrowing Base then in effect, a disapproval of the Proposed Borrowing Base or (B) in the case of a Proposed Borrowing Base that would decrease or maintain the Borrowing Base then in effect, an approval of the Proposed Borrowing Base. If, at the end of such 15-day period, all of the Lenders, in the case of a Proposed Borrowing Base that would increase the Borrowing Base then in effect, or the Required Lenders, in the case of a Proposed Borrowing Base that would decrease or maintain the Borrowing Base then in effect, have approved or deemed to have approved, as aforesaid, then the Proposed Borrowing Base shall become the new Borrowing Base, effective on the date specified in Section 2.07(d). If, however, at the end of such 15-day period, all of the Lenders or the Required Lenders, as applicable, have not approved or been deemed to have approved the Proposed Borrowing Base, then the Administrative Agent shall poll the Lenders to ascertain the highest Borrowing Base then acceptable to (x) in the case of a decrease or reaffirmation, a number of Lenders sufficient to constitute the Required Lenders or (y) in the case of an increase, all of the Lenders, and such amount shall become the new Borrowing Base, effective on the date specified in Section 2.07(d).

(d) Effectiveness of a Redetermined Borrowing Base. After a redetermined Borrowing Base is approved or is deemed to have been approved by all of the Lenders or the Required Lenders, as applicable, pursuant to Section 2.07(c)(iii), the Administrative Agent shall notify the Borrower and the Lenders of the amount of the redetermined Borrowing Base (the “New Borrowing Base Notice”), and such amount shall become the new Borrowing Base, effective and applicable to the Borrower, the Administrative Agent, the Issuing Bank and the Lenders:

(i) in the case of a Scheduled Redetermination, (A) if the Administrative Agent shall have received the Engineering Reports required to be delivered by the Borrower pursuant to Sections 8.12(a) and (c) in a timely and complete manner, then on May 1st or November 1st, as applicable, following such notice (or, in the case of the December 2019 Redetermination, on the December 2019 Redetermination Date, following such notice), or (B) if the Administrative Agent shall not have received the Engineering Reports required to be delivered by the Borrower pursuant to Sections 8.12(a) and (c) in a timely and complete manner, then on the Business Day next succeeding delivery of such notice; and

(ii) in the case of an Interim Redetermination, on the Business Day next succeeding delivery of such notice.

Such amount shall then become the Borrowing Base until the next Scheduled Redetermination Date, the next Interim Redetermination Date or the next adjustment to the Borrowing Base under Section 2.07(e), Section 2.07(f), Section 2.07(g) or Section 8.13(c), whichever occurs first. Notwithstanding the foregoing, no Scheduled Redetermination or Interim Redetermination shall become effective until the New Borrowing Base Notice related thereto is received by the Borrower.

 

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(e) Reduction of Borrowing Base Related to Dispositions of Oil and Gas Properties and/or Liquidation of Swap Agreements. If (i) any Swap Agreement in respect of commodities to which the Borrower or any Subsidiary is a party is Liquidated or (ii) the Borrower or any Subsidiary Disposes of any Borrowing Base Property or Equity Interests in any Subsidiary owning Borrowing Base Properties, and the Borrowing Base value assigned to the Liquidated portion of such Swap Agreement (after giving effect to any other Swap Agreements executed by the Borrower or any Guarantor contemporaneously with the Liquidation of such Swap Agreements or subsequent to the most recent Scheduled Redetermination Date) or the fair market value of such Borrowing Base Property (or in the case of any Disposition of Equity Interests in any Subsidiary owning Borrowing Base Properties, the fair market value of the Borrowing Base Properties owned by such Subsidiary), as applicable, in each case as determined by the Administrative Agent, when combined with the sum of (A) the fair market value of all other Borrowing Base Properties Disposed of (including, in the case of any Disposition of Equity Interests in any Subsidiary owning Borrowing Base Properties, the fair market value of such Borrowing Base Properties owned by such Subsidiary), in each case since the most recent Scheduled Redetermination Date and (B) the Borrowing Base value of the Liquidated portion of other Swap Agreements Liquidated since the most recent Scheduled Redetermination Date, exceeds five percent (5%) of the Borrowing Base as then in effect (as determined by the Administrative Agent), individually or in the aggregate, then the Borrowing Base then in effect shall be reduced by an amount equal to the Borrowing Base value, if any, assigned to the Liquidated portion of such Swap Agreement or such Disposed Borrowing Base Property in the then effective Borrowing Base, as the case may be, in each case as determined by the Administrative Agent and approved by the Required Lenders. The Borrowing Base as so reduced shall become the new Borrowing Base immediately upon the date of such Disposition or Liquidation, as the case may be, effective and applicable to the Borrower, the Administrative Agent, the Issuing Bank and the Lenders on such date until the next redetermination or adjustment thereof hereunder. For purposes of this Section 2.07(e), until the first Scheduled Redetermination Date occurs hereunder, the phrase “the most recent Scheduled Redetermination Date” shall mean “the Effective Date”.

(f) Reduction of Borrowing Base Upon Incurrence of Permitted Additional Debt. If the Borrower incurs any Permitted Additional Debt in accordance with Section 9.02(g) (other than any Permitted Additional Debt incurred to refinance then-outstanding Permitted Additional Debt, but only to the extent that the aggregate principal amount of the new Permitted Additional Debt incurred to refinance such outstanding Permitted Additional Debt does not result in an increase in the principal amount thereof), the Borrowing Base then in effect shall be reduced by an amount equal to the product of 0.25 multiplied by the stated principal amount of such Permitted Additional Debt (for the avoidance of doubt, without regard to any original issue discount). The Borrowing Base as so reduced shall become the new Borrowing Base immediately upon the date of such incurrence, effective and applicable to the Borrower, the Administrative Agent, the Issuing Banks and the Lenders on such date until the next redetermination or adjustment thereof hereunder.

 

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(g) Automatic Increase of Borrowing Base Upon Will Acquisition. If the Will Acquisition is consummated on or before November 30, 2019, then, subject to the conditions set forth in this Section 2.07(g), the Borrowing Base then in effect shall be automatically increased by an amount equal to $15,000,000 (the “Will BB Increase”) without any further action by the Borrower, the Administrative Agent or the Lenders, effective and applicable to the Borrower, the Administrative Agent, the Issuing Bank and the Lenders on the Business Day on which each of the following conditions is satisfied (or waived in accordance with Section 12.02(b)):

(i) The Administrative Agent shall have received (A) true and correct fully-executed copies of the Will Acquisition Documents, which shall be in form and substance satisfactory to the Administrative Agent and (B) lease operating statements and production reports with respect to the Oil and Gas Properties of Will Energy and its subsidiaries evaluated in the reserve report dated July 12, 2019 and prepared by Haas Petroleum Engineering Services, Inc. (the “Will Acquisition Reserve Report”), in form and substance reasonably satisfactory to the Administrative Agent, for the fiscal year ended December 31, 2018 and for each fiscal quarter thereafter ending at least 45 days prior to the date of the Will BB Increase.

(ii) The Will Acquisition shall have been (or contemporaneously with the Will BB Increase shall be) consummated in accordance with the terms of the Will Acquisition Agreement, and in connection therewith the Borrower (or its Subsidiaries) shall have acquired at least 95% of the total value of the proved Oil and Gas Properties evaluated in the Will Acquisition Reserve Report.

(iii) The Administrative Agent shall have received an officer’s certificate from the Borrower, certifying that (A) the Will Acquisition has been consummated in accordance with applicable law and the terms described in the Will Acquisition Agreement without giving effect to any waiver, modification or consent thereunder that is materially adverse to the interests of the Lenders (in their capacities as such), and in connection therewith, the Borrower (or one or more of its Subsidiaries) has acquired the Oil and Gas Properties evaluated in the Will Acquisition Reserve Report, (B) as to the adjustments to the purchase price and the final purchase price for the Will Acquisition after giving effect to all adjustments as of the closing date contemplated by the Will Acquisition Agreement; (C) that attached thereto is a true and complete list of the Oil and Gas Properties which have been excluded from the Will Acquisition; (D) that attached thereto is a true and complete list of the Oil and Gas Properties for which Will Energy has elected to cure a title defect; (E) that attached thereto is a true and complete list of the Oil and Gas Properties for which Will Energy has elected to remediate an adverse environmental condition; (F) that attached thereto is a true and complete list of the Oil and Gas Properties which are currently pending final decision by a third party regarding purchase of such property in accordance with any preferential right or consent right; (G) that attached thereto is a true and complete executed copy of the Will Acquisition Agreement, which shall be in form and substance satisfactory to the Administrative Agent and the Lenders, and the closing settlement statement; and (H) that true and complete executed copies of all other Will Acquisition Documents have been delivered to the Administrative Agent.

 

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(iv) The Administrative Agent shall have received title information reasonably satisfactory to the Administrative Agent setting forth the status of title to not less than 85% of the total value of the proved Oil and Gas Properties evaluated in the Will Acquisition Reserve Report.

(v) The Administrative Agent shall have received from the Loan Parties fully executed mortgages and/or deeds of trust creating first priority Liens on at least 85% of the total value of the proved Oil and Gas Properties evaluated in the Will Acquisition Reserve Report.

(vi) No Default or Event of Default shall have occurred and be continuing on the date of the Will BB Increase.

(vii) The Administrative Agent shall have received all fees due and payable in connection with the Will BB Increase as set forth in that certain fee letter, dated as of the date hereof, between the Borrower and JPMorgan (the “Will BB Increase Fee Letter”).

(viii) After giving effect to the Will BB Increase and any extension of credit hereunder on the date thereof, the unused Commitments shall be greater than or equal to $15,000,000.

Section 2.08 Letters of Credit.

(a) General. Subject to the terms and conditions set forth herein, the Borrower may request the issuance of Letters of Credit as the applicant thereof for the support of its or its Subsidiaries’ obligations, in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time during the period from and including the Effective Date until the day which is five (5) Business Days prior to the Termination Date; provided that the Borrower may not request the issuance, amendment, renewal or extension of Letters of Credit hereunder if a Borrowing Base Deficiency exists at such time or would exist as a result thereof.

(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or facsimile (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension, but in any event no less than three Business Days (or such shorter time as such Issuing Bank may agree in a particular instance in its sole discretion)) a notice:

(i) requesting the issuance of a Letter of Credit or identifying the Letter of Credit to be amended, renewed or extended;

(ii) specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day);

(iii) specifying the date on which such Letter of Credit is to expire (which shall comply with Section 2.08(c));

 

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(iv) specifying the amount of such Letter of Credit;

(v) specifying the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit; and

(vi) specifying the amount of the then effective Borrowing Base and whether a Borrowing Base Deficiency exists at such time, the current total Revolving Credit Exposures (without regard to the requested Letter of Credit or the requested amendment, renewal or extension of an outstanding Letter of Credit) and the pro forma total Revolving Credit Exposures (giving effect to the requested Letter of Credit or the requested amendment, renewal or extension of an outstanding Letter of Credit).

In addition, as a condition to any such Letter of Credit issuance, the Borrower shall have entered into a continuing agreement (or other letter of credit agreement) for the issuance of letters of credit and/or shall submit a letter of credit application, in each case, as required by the Issuing Bank and using the Issuing Bank’s standard form (each, a “Letter of Credit Agreement”). In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any Letter of Credit Agreement, the terms and conditions of this Agreement shall control.

A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to the requested issuance, amendment, renewal or extension, as applicable, (i) the LC Exposure shall not exceed the LC Commitment, (ii) no Lender’s Revolving Credit Exposure shall exceed its Commitment and (iii) the total Revolving Credit Exposures shall not exceed the total Commitments (i.e., the lesser of the Aggregate Maximum Credit Amounts and the then effective Borrowing Base). The Borrower may, at any time and from time to time, reduce the LC Commitment with the consent of the Issuing Bank; provided that the Borrower shall not reduce the LC Commitment if, after giving effect of such reduction, the conditions set forth in clauses (i) through (iii) above shall not be satisfied.

The Issuing Bank shall not be under any obligation to issue any Letter of Credit if: (i) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Issuing Bank from issuing such Letter of Credit, or any law applicable to the Issuing Bank shall prohibit, or require that the Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which such Issuing Bank is not otherwise compensated hereunder) not in effect on the Effective Date, or shall impose upon the Issuing Bank any unreimbursed loss, cost or expense that was not applicable on the Effective Date and that the Issuing Bank in good faith deems material to it; or (ii) the issuance of such Letter of Credit would violate one or more policies of the Issuing Bank applicable to letters of credit generally.

 

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(c) Expiration Date. Each Letter of Credit shall expire (or be subject to termination by notice from the Issuing Bank to the beneficiary thereof) at or prior to the close of business on the earlier of (i) the date fifteen months after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension of the expiration date thereof, fifteen months after such renewal or extension) and (ii) the date that is five (5) Business Days prior to the Maturity Date (or such later date as consented to by the Issuing Bank in its sole discretion and provided that such Letter of Credit is cash collateralized or backstopped in such amounts and pursuant to such arrangements as are satisfactory to the Issuing Bank in its sole discretion).

(d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the date due as provided in Section 2.08(e), or of any reimbursement payment required to be refunded to the Borrower for any reason, including after the Maturity Date. Each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this Section 2.08(d) in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default, the existence of a Borrowing Base Deficiency or reduction or termination of the Commitments.

(e) Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, Houston, Texas time, on the date that such LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 10:00 a.m., Houston, Texas time, on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 12:00 noon, Houston, Texas time, on the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the day of receipt; provided that the Borrower shall, subject to the conditions to Borrowing set forth herein, be deemed to have requested, and the Borrower does hereby request under such circumstances, that such payment be financed with an ABR Revolving Borrowing or Swingline Loan in an equivalent amount and, to the extent so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving Borrowing or Swingline Loan. If the Borrower fails to make such payment when due, the Administrative Agent shall notify each Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Lender’s Applicable Percentage thereof. Promptly following receipt of such notice, each Lender shall pay to the Administrative Agent its Applicable Percentage of the payment then due from the Borrower, in the same manner as provided in Section 2.05 with respect to Loans made by such Lender (and Section 2.05 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this Section 2.08(e), the Administrative Agent shall distribute such payment to the

 

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Issuing Bank or, to the extent that Lenders have made payments pursuant to this Section 2.08(e) to reimburse the Issuing Bank, then to such Lenders and the Issuing Bank as their interests may appear. Any payment made by a Lender pursuant to this Section 2.08(e) to reimburse the Issuing Bank for any LC Disbursement (other than the funding of ABR Revolving Loans or a Swingline Loan as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.

(f) Obligations Absolute. The Borrower’s obligation to reimburse LC Disbursements as provided in Section 2.08(e) shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit, any Letter of Credit Agreement or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit or any Letter of Credit Agreement, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.08(f), constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their Related Parties shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms, any error in translation or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to special, indirect, consequential or punitive damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence, or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised all requisite care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

(g) Disbursement Procedures. The Issuing Bank shall, within the time allowed by applicable law or the specific terms of the Letter of Credit following its receipt thereof, examine all documents purporting to represent a demand for payment under such Letter of Credit. The Issuing Bank shall promptly after such examination notify the Administrative

 

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Agent and the Borrower by telephone (confirmed by facsimile or electronic communication) of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Lenders with respect to any such LC Disbursement.

(h) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the reimbursement is due and payable at the rate per annum then applicable to ABR Revolving Loans and such interest shall be due and payable on the date when such reimbursement is payable; provided that, if the Borrower fails to reimburse such LC Disbursement when due pursuant to Section 2.08(e), then Section 3.02(c) shall apply. Interest accrued pursuant to this Section 2.08(h) shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant to Section 2.08(e) to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment.

(i) Replacement and Resignation of the Issuing Bank.

(i) The Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 3.05(b). From and after the effective date of any such replacement, (A) the successor Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued by it thereafter and (B) references herein to the term “Issuing Bank” shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Bank, as the context shall require. After the replacement of the Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit or extend or otherwise amend any existing Letter of Credit.

(ii) Subject to the appointment and acceptance of a successor Issuing Bank, the Issuing Bank may resign as the Issuing Bank at any time upon thirty days’ prior written notice to the Administrative Agent, the Borrower and the Lenders, in which case, the resigning Issuing Bank shall be replaced in accordance with Section 2.08(i)(i) above.

(j) Cash Collateralization. If (i) any Event of Default shall occur and be continuing, on any Business Day that the Borrower receives notice from the Administrative Agent or the Majority Lenders demanding that the Borrower cash collateralize the outstanding LC Exposure, (ii) the Borrower is required to cash collateralize the excess attributable to an LC Exposure in connection with any prepayment pursuant to Section 3.04(c), or (iii) the Borrower is required to cash collateralize a Defaulting Lender’s LC Exposure pursuant to Section 4.03(d)(ii), then the Borrower shall pledge and deposit in an account with the Administrative Agent in the

 

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name of the Administrative Agent and for the benefit of the Lenders (as a first priority, perfected security interest), at a location and pursuant to documentation in form and substance satisfactory to the Administrative Agent, an amount in cash in dollars equal to 105% of such LC Exposure or excess attributable to such LC Exposure, as the case may be, as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default described in Section 10.01(h) or Section 10.01(i). The Borrower hereby grants to the Administrative Agent an exclusive first priority and continuing perfected security interest in and Lien on such account and all cash, checks, drafts, certificates and instruments, if any, from time to time deposited or held in such account, all deposits or wire transfers made thereto, any and all investments purchased with funds deposited in such account, all interest, dividends, cash, instruments, financial assets and other Property from time to time received, receivable or otherwise payable in respect of, or in exchange for, any or all of the foregoing, and all proceeds, products, accessions, rents, profits, income and benefits therefrom, and any substitutions and replacements therefor. The Borrower’s obligation to deposit amounts pursuant to this Section 2.08(j) shall be absolute and unconditional, without regard to whether any beneficiary of any Letter of Credit has attempted to draw down all or a portion of such amount under the terms of a Letter of Credit, and, to the fullest extent permitted by applicable law, shall not be subject to any defense or be affected by a right of set-off, counterclaim or recoupment which the Borrower or any Subsidiary may now or hereafter have against any such beneficiary, the Issuing Bank, the Administrative Agent, the Lenders or any other Person for any reason whatsoever. Such deposit shall be held by the Administrative Agent as collateral securing the payment and performance of the Borrower’s and the Guarantors’ obligations under this Agreement and the other Loan Documents. In addition, and without limiting the foregoing or Section 2.08(c), if any LC Exposure remain outstanding after the expiration date specified in Section 2.08(c), the Borrower shall immediately deposit into such account an amount in cash equal to 105% of such LC Exposure as of such date plus any accrued and unpaid interest thereon. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower’s risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed, together with related fees, costs and customary processing charges, and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated, be applied to satisfy other obligations of the Borrower and the Guarantors under this Agreement and the other Loan Documents.    If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default or pursuant to Section 4.03(d)(ii) as a result of a Defaulting Lender, and the Borrower is not otherwise required to cash collateralize the excess attributable to an LC Exposure in connection with any prepayment pursuant to Section 3.04(c), then such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived or the events giving rise to such cash collateralization pursuant to Section 4.03(d)(ii) have been satisfied or resolved.

 

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(k) Letters of Credit Issued for Account of Subsidiaries. Notwithstanding that a Letter of Credit issued or outstanding hereunder supports any obligations of, or is for the account of, a Subsidiary, or states that a Subsidiary is the “account party,” “applicant,” “customer,” “instructing party,” or the like of or for such Letter of Credit, and without derogating from any rights of the Issuing Bank (whether arising by contract, at law, in equity or otherwise) against such Subsidiary in respect of such Letter of Credit, the Borrower (i) shall reimburse, indemnify and compensate the Issuing Bank hereunder for such Letter of Credit (including to reimburse any and all drawings thereunder) as if such Letter of Credit had been issued solely for the account of the Borrower and (ii) irrevocably waives any and all defenses that might otherwise be available to it as a guarantor or surety of any or all of the obligations of such Subsidiary in respect of such Letter of Credit. The Borrower hereby acknowledges that the issuance of such Letters of Credit for its Subsidiaries inures to the benefit of the Borrower, and that the Borrower’s business derives substantial benefits from the businesses of such Subsidiaries.

(l) Existing Letter of Credit. On the Effective Date, the Existing Letter of Credit shall be deemed to have been issued as a Letter of Credit under this Agreement by Royal Bank of Canada in its capacity as an Issuing Bank, without payment of any fees otherwise due upon the issuance of a Letter of Credit, and such Issuing Bank shall be deemed, without further action by any party hereto, to have sold to each Lender, and each Lender shall be deemed, without further action by any party hereto, to have purchased from such Issuing Bank, a participation, to the extent of such Lender’s Applicable Percentage, in such Letter of Credit. For the avoidance of doubt, the terms and provisions of the Existing Credit Agreement shall have no force or effect with respect to the Existing Letter of Credit.

Section 2.09 Swingline Loans.

(a) Subject to the terms and conditions set forth herein, from time to time during the Availability Period, the Swingline Lender agrees to make Swingline Loans to the Borrower in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans made by the Swingline Lender exceeding the Swingline Commitment, (ii) any Lender’s Revolving Credit Exposure exceeding its Commitment, or (iii) the sum of the total Revolving Credit Exposures exceeding the total Commitments (i.e., the lesser of the Aggregate Maximum Credit Amounts and the then effective Borrowing Base); provided that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swingline Loans.

(b) To request a Swingline Loan, the Borrower shall submit a written notice to the Administrative Agent by telecopy or electronic mail not later than 1:00 p.m., Houston, Texas time, on the day of a proposed Swingline Loan. Each such notice shall be in a form approved by the Administrative Agent, shall be irrevocable and shall specify the requested date (which shall be a Business Day) and amount of the requested Swingline Loan. The Administrative Agent will promptly advise the Swingline Lender of any such notice received from the Borrower. The Swingline Lender shall make the requested Swingline Loan available to the Borrower by means of a credit to an account of the Borrower with the Administrative Agent designated for such purpose (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.08(e), by remittance to the Issuing Bank) by 4:00 p.m., Houston, Texas time, on the requested date of such Swingline Loan.

 

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(c) The Swingline Lender may by written notice given to the Administrative Agent require the Lenders to acquire participations in all or a portion of the Swingline Loans outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each Lender, specifying in such notice such Lender’s Applicable Percentage of such Swingline Loans. Each Lender hereby absolutely and unconditionally agrees, promptly upon receipt of such notice from the Administrative Agent (and in any event, if such notice is received by 1:00 p.m., Houston, Texas time, on a Business Day no later than 4:00 p.m. Houston, Texas time on such Business Day and if received after 1:00 p.m., Houston, Texas time, on a Business Day no later than 9:00 a.m., Houston, Texas time on the immediately succeeding Business Day), to pay to the Administrative Agent, for the account of the Swingline Lender, such Lender’s Applicable Percentage of such Swingline Loans. Each Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.05 with respect to Loans made by such Lender (and Section 2.05 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the Lenders. The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender. Any amounts received by the Swingline Lender from the Borrower (or other party on behalf of the Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Lenders that shall have made their payments pursuant to this paragraph and to the Swingline Lender, as their interests may appear; provided that any such payment so remitted shall be repaid to the Swingline Lender or to the Administrative Agent, as applicable, if and to the extent such payment is required to be refunded to the Borrower for any reason. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any default in the payment thereof.

(d) The Swingline Lender may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Swingline Lender and the successor Swingline Lender. The Administrative Agent shall notify the Lenders of any such replacement of the Swingline Lender. At the time any such replacement shall become effective, the Borrower shall pay all unpaid interest accrued for the account of the replaced Swingline Lender pursuant to Section 3.02(a). From and after the effective date of any such replacement, (x) the successor Swingline Lender shall have all the rights and obligations of the replaced Swingline Lender under this Agreement with respect to Swingline Loans made thereafter and (y) references herein

 

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to the term “Swingline Lender” shall be deemed to refer to such successor or to any previous Swingline Lender, or to such successor and all previous Swingline Lenders, as the context shall require. After the replacement of the Swingline Lender hereunder, the replaced Swingline Lender shall remain a party hereto and shall continue to have all the rights and obligations of a Swingline Lender under this Agreement with respect to Swingline Loans made by it prior to its replacement, but shall not be required to make additional Swingline Loans.

(e) Subject to the appointment and acceptance of a successor Swingline Lender, the Swingline Lender may resign as Swingline Lender at any time upon thirty days’ prior written notice to the Administrative Agent, the Borrower and the Lenders, in which case, the Swingline Lender shall be replaced in accordance with Section 2.09(d) above.

ARTICLE III

PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

Section 3.01 Repayment of Loans. The Borrower hereby unconditionally promises to pay to the Administrative Agent (a) for the account of each Lender the then unpaid principal amount of each Revolving Loan on the Termination Date and (b) for the account of the Swingline Lender the then unpaid principal amount of each Swingline Loan on the earlier of the Termination Date and the fifth Business Day after such Swingline Loan is made; provided that on each date that a Revolving Borrowing is made, the Borrower shall repay all Swingline Loans then outstanding and the proceeds of any such Borrowing shall be applied by the Administrative Agent to repay any Swingline Loans outstanding.

Section 3.02 Interest.

(a) ABR Loans. The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear interest at the Alternate Base Rate plus the Applicable Margin, but in no event to exceed the Highest Lawful Rate.

(b) Eurodollar Loans. The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin, but in no event to exceed the Highest Lawful Rate.

(c) Post-Default Rate. Notwithstanding the foregoing, (i)(A) automatically, if an Event of Default under Section 10.01(h) or Section 10.01(i) has occurred and is continuing, or if any principal of or interest on any Loan or any fee or other amount payable by the Borrower or any Guarantor hereunder or under any other Loan Document is not paid when due, whether at stated maturity, upon acceleration or otherwise, and to the extent that such failure to pay constitutes an Event of Default under Section 10.01(a) or Section 10.01(b), and (B) upon the election of the Majority Lenders, if any Event of Default (other than an Event of Default under Section 10.01(a), Section 10.01(b), Section 10.01(h) or Section 10.01(i)) has occurred and is continuing, then in each case of the foregoing clauses (A) and (B), (x) all Loans outstanding shall bear interest, after as well as before judgment, at a rate per annum equal to two percent (2%) plus the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section 3.02, and (y) and such overdue amount, in the case of a failure to pay amounts when due, shall bear interest, after as well as before judgment, at a rate per annum equal to two percent

 

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(2%) plus the rate applicable to ABR Loans as provided in Section 3.02(a), but in no event to exceed the Highest Lawful Rate and (ii) during any Borrowing Base Deficiency, Loans outstanding in an amount equal to the positive difference between (x) the aggregate principal amount of Loans outstanding and (y) the then-effective Borrowing Base shall bear interest, after as well as before judgment, at a rate per annum equal to two percent (2%) plus the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section 3.02, but in no event to exceed the Highest Lawful Rate..

(d) Interest Payment Dates. Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and on the Termination Date; provided that (i) interest accrued pursuant to Section 3.02(c) shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than an optional prepayment of an ABR Revolving Loan prior to the Termination Date), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment, and (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

(e) Interest Rate Computations. All interest hereunder shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year), except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error, and shall be binding upon the parties hereto.

Section 3.03 Alternate Rate of Interest.

(a) If prior to the commencement of any Interest Period for a Eurodollar Borrowing:

(i) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable (including because the LIBO Screen Rate is not available or published on a current basis), for such Interest Period; or

(ii) the Administrative Agent is advised by the Majority Lenders that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone, facsimile or electronic communication as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Revolving Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing.

 

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(b) If at any time the Administrative Agent determines (which determination shall be conclusive absent manifest error) that (i) the circumstances set forth in clause (a)(i) have arisen and such circumstances are unlikely to be temporary or (ii) the circumstances set forth in clause (a)(i) have not arisen but either (w) the supervisor for the administrator of the LIBO Screen Rate has made a public statement that the administrator of the LIBO Screen Rate is insolvent (and there is no successor administrator that will continue publication of the LIBO Screen Rate), (x) the administrator of the LIBO Screen Rate has made a public statement identifying a specific date after which the LIBO Screen Rate will permanently or indefinitely cease to be published by it (and there is no successor administrator that will continue publication of the LIBO Screen Rate), (y) the supervisor for the administrator of the LIBO Screen Rate has made a public statement identifying a specific date after which the LIBO Screen Rate will permanently or indefinitely cease to be published or (z) the supervisor for the administrator of the LIBO Screen Rate or a Governmental Authority having jurisdiction over the Administrative Agent has made a public statement identifying a specific date after which the LIBO Screen Rate may no longer be used for determining interest rates for loans, then the Administrative Agent and the Borrower shall endeavor to establish an alternate rate of interest to the LIBO Rate that gives due consideration to the then prevailing market convention for determining a rate of interest for syndicated loans in the United States at such time, and shall enter into an amendment to this Agreement to reflect such alternate rate of interest and such other related changes to this Agreement as may be applicable (but for the avoidance of doubt, such related changes shall not include a reduction of the Applicable Margin); provided that, if such alternate rate of interest as so determined would be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement. Notwithstanding anything to the contrary in Section 12.02(b), such amendment shall become effective without any further action or consent of any other party to this Agreement so long as the Administrative Agent shall not have received, within five Business Days of the date notice of such alternate rate of interest is provided to the Lenders, a written notice from the Majority Lenders stating that such Majority Lenders object to such amendment. Until an alternate rate of interest shall be determined in accordance with this Section 3.03(b) (but, in the case of the circumstances described in clause (ii)(w), clause (ii)(x) or clause (ii)(y) of the first sentence of this Section 3.03(b), only to the extent the LIBO Screen Rate for such Interest Period is not available or published at such time on a current basis), (x) any Interest Election Request that requests the conversion of any Revolving Borrowing to, or continuation of any Revolving Borrowing as, a Eurodollar Borrowing shall be ineffective and (y) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing.

Section 3.04 Prepayments.

(a) Optional Prepayments. The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with Section 3.04(b).

 

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(b) Notice and Terms of Optional Prepayment. The Borrower shall notify the Administrative Agent (and, in the case of prepayment of Swingline Loans, the Swingline Lender) by telephone (confirmed by facsimile or electronic communication) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 10:00 a.m., Houston, Texas time, three Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Revolving Borrowing, not later than 11:00 a.m., Houston, Texas time, on the date of prepayment and (iii) in the case of prepayment of a Swingline Loan, not later than 11:00 a.m., Houston, Texas time, on the date of prepayment. Each such notice shall be confirmed promptly by hand delivery or email to the Administrative Agent of a written notice of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Aggregate Maximum Credit Amounts as contemplated by Section 2.06(b), then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.06(b). Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Revolving Borrowing shall be in an amount that would be permitted in the case of an advance of a Revolving Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Revolving Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 3.02 and any payments to the extent required by Section 5.02.

(c) Mandatory Prepayments.

(i) If, after giving effect to any termination or reduction of the Aggregate Maximum Credit Amounts pursuant to Section 2.06(b), the total Revolving Credit Exposures exceeds the total Commitments, then the Borrower shall (A) prepay the Borrowings on the date of such termination or reduction in an aggregate principal amount equal to such excess, and (B) if any excess remains after prepaying all of the Borrowings as a result of an LC Exposure, cash collateralize such excess as provided in Section 2.08(j).

(ii) Upon any redetermination or adjustment to the amount of the Borrowing Base in accordance with Section 2.07 (other than pursuant to Section 2.07(e) or Section 2.07(f)) or Section 8.13(c), if the total Revolving Credit Exposures exceeds the redetermined or adjusted Borrowing Base, then after receiving a New Borrowing Base Notice in accordance with Section 2.07(d) or a notice of adjustment pursuant to Section 8.13(c), as the case may be (the date of receipt of any such notice, the “Deficiency Notification Date”), the Borrower shall (i) at its option take one of the following actions: (A) prepay the Borrowings in an aggregate principal amount equal to such Borrowing Base Deficiency (and to the extent that any excess remains after prepaying all of the Borrowings as a result of an LC Exposure, cash collateralize such excess as provided in Section 2.08(j)) within thirty (30) days following the Deficiency Notification Date; (B) prepay the Borrowings in six consecutive equal monthly installments, the first installment being due and payable on the 30th day after the Deficiency Notification Date and each subsequent installment being due and payable on the same day in each of the subsequent calendar months, with each payment being equal to one-sixth (1/6th) of such Borrowing Base Deficiency, so that the Borrowing Base Deficiency is reduced to zero within six months of the Deficiency Notification Date; (C) grant, within thirty (30) days following the Deficiency Notification Date, to the Administrative Agent as security for the Obligations a first-priority Lien on additional Oil and Gas Properties acceptable to the Required

 

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Lenders in their sole discretion not evaluated in the most recently delivered Reserve Report (and not already subject to a Lien of the Security Instruments) pursuant to Security Instruments acceptable to the Administrative Agent with sufficient Borrowing Base value (as determined by the Required Lenders) to cure the Borrowing Base Deficiency; or (D) deliver, within 10 days after the Deficiency Notification Date, written notice to the Administrative Agent indicating the Borrower’s election to combine the options provided in clauses (A), (B) and/or (C) above, and also indicating the amount to be prepaid and the amount to be provided as additional Collateral, and (ii) make such payment and deliver such additional Collateral within the time required under clauses (A), (B) and/or (C) above; provided that, notwithstanding the options set forth above, in all cases, the Borrowing Base Deficiency must be eliminated on or prior to the Termination Date. The Borrower shall provide to the Administrative Agent, within ten (10) days following its receipt of the New Borrowing Base Notice in accordance with Section 2.07(d) or the date the adjustment occurs pursuant to Section 8.13(c), as applicable, an irrevocable written notice indicating which of the options specified in clauses (A), (B), (C) or (D) the Borrower elects to take in order to eliminate the Borrowing Base Deficiency. Such notice shall be irrevocable and, in the event the Borrower fails to provide such written notice to the Administrative Agent within the ten (10) day period referred to above, the Borrower shall be deemed to have irrevocably elected the option set forth in clause (A) above. The failure of the Borrower to comply with any of the options elected (including any deemed election) pursuant to the provisions of this Section 3.04(c)(ii) and specified in such notice (or relating to such deemed election) shall constitute an Event of Default.

(iii) Upon any adjustment to the Borrowing Base pursuant to Section 2.07(e) or Section 2.07(f) (each such adjustment, a “Specified Adjustment”), if the total Revolving Credit Exposures exceeds the Borrowing Base as adjusted, then the Borrower shall (A) prepay the Borrowings in an aggregate principal amount equal to (1) if a Borrowing Base Deficiency existed immediately prior to the occurrence of such Specified Adjustment, the positive difference, if any, between (x) the aggregate amount of such Borrowing Base Deficiency immediately after giving effect to such Specified Adjustment minus (y) the aggregate amount of such Borrowing Base Deficiency immediately prior to such Specified Adjustment or (2) if no Borrowing Base Deficiency existed immediately prior to such Specified Adjustment, the aggregate amount of such Borrowing Base Deficiency (the applicable amount from clause (1) or (2), the “Specified Borrowing Base Deficiency”), and (B) if any Specified Borrowing Base Deficiency remains after prepaying all of the Borrowings as a result of an LC Exposure, cash collateralize such excess as provided in Section 2.08(j). The Borrower shall be obligated to make such prepayment and/or cash collateralize such excess within one Business Day after the date the adjustment occurs; provided that all payments required to be made pursuant to this Section 3.04(c)(iii) must be made on or prior to the Termination Date. For the avoidance of doubt, nothing in this Section 3.04(c)(iii) shall prejudice the Borrower’s right to utilize the options described in Section 3.04(c)(ii) with respect to any portion of a Borrowing Base Deficiency existing prior to the occurrence of a Specified Adjustment.

(iv) Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be applied, first, ratably to any Swingline Loans then outstanding, second, ratably to any ABR Revolving Borrowings then outstanding, and, third, to any Eurodollar Borrowings then outstanding, and if more than one Eurodollar Borrowing is then outstanding, to each such Eurodollar Borrowing in order of priority beginning with the Eurodollar Borrowing with the least number of days remaining in the Interest Period applicable thereto and ending with the Eurodollar Borrowing with the most number of days remaining in the Interest Period applicable thereto.

 

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(v) Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be applied ratably to the Loans included in the prepaid Borrowings. Prepayments pursuant to this Section 3.04(c) shall be accompanied by accrued interest to the extent required by Section 3.02.

(d) No Premium or Penalty. Prepayments permitted or required under this Section 3.04 shall be without premium or penalty, except as required under Section 5.02.

Section 3.05 Fees.

(a) Commitment Fees. The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue at the applicable Commitment Fee Rate on the average daily amount of the unused amount of the Commitment of such Lender during the period from and including the Effective Date to but excluding the Termination Date. Accrued commitment fees shall be payable in arrears on the last day of March, June, September and December of each year and on the Termination Date, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case such commitment fees shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(b) Letter of Credit Fees. The Borrower agrees to pay (i) to the Administrative Agent for the account of each Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at the same Applicable Margin used to determine the interest rate applicable to Eurodollar Loans on the average daily amount of such Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which such Lender’s Commitment terminates and the date on which such Lender ceases to have any LC Exposure, (ii) to the Issuing Bank a fronting fee, which shall accrue at the rate of 0.25% per annum on the average daily amount of the LC Exposure with respect to Letters of Credit issued by it (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date of termination of the Commitments and the date on which there ceases to be any LC Exposure; provided that in no event shall such fee be less than $500 during any quarter, and (iii) to the Issuing Bank, for its own account, its standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including the last day of March, June, September and December of each year shall be payable on the third Business Day following such last day, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on the Termination Date and any such fees accruing after the Termination Date shall be payable on demand. During the continuation of an Event of Default, the fees payable pursuant to this Section 3.05(b) shall increase by 2.00% per annum over the then-applicable rate. Any other fees

 

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payable to the Issuing Bank pursuant to this Section 3.05(b) shall be payable within 10 days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case such fees shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(c) Administrative Agent Fees. The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times set forth in the Fee Letter.

(d) Borrowing Base Increase Fees. The Borrower agrees to pay to the Administrative Agent, for the account of each Lender then party to this Agreement, ratably in accordance with its Applicable Percentage, a Borrowing Base increase fee in an amount to be agreed by the Lenders and the Borrower, in respect of any increase to the Borrowing Base, payable on the effective date of any such increase.

ARTICLE IV

PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS

Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

(a) Payments by the Borrower. The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 5.01, Section 5.02, Section 5.03 or otherwise) prior to 12:00 noon, Houston, Texas time, on the date when due, in immediately available funds, without defense, deduction, recoupment, set-off or counterclaim. Fees, once paid, shall be fully earned and shall not be refundable under any circumstances absent manifest error. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such pay