CO-SALE AGREEMENT
THIS CO-SALE AGREEMENT is made as of January 20, 1998 by and among the
Principals who are signatories hereto (collectively, the "PRINCIPALS"), Matador
Petroleum Corporation (formerly named Matador Hold Co.), a Texas corporation
(the "COMPANY"), and the holders of Series A Convertible Preferred Stock of the
Company (the "PREFERRED STOCK") who are signatories hereto (the "SHAREHOLDERS").
WHEREAS, the Principals and the Shareholders were parties to that certain
Co-Sale Agreement dated as of May 30, 1996 relating to their shares of common
stock and preferred stock in Matador E&P Company (formerly named Matador
Petroleum Corporation), a Texas corporation ("OLD MATADOR") which Agreement
terminated pursuant to Section 4.1(i) thereof;
WHEREAS, pursuant to that certain Agreement and Plan of Merger dated as of
January 20, 1998 (the "PLAN OF MERGER") by and among the Company, Old Matador
and Matador Merge Co., a Texas corporation, the shares of Series A Convertible
Preferred Stock of Old Matador held by the Shareholders were converted into the
same number of shares of Preferred Stock of the Company and the shares of common
stock of Old Matador owned by the Principals were converted into the same number
of shares of common stock, $.10 par value per share of the Company (the "COMMON
STOCK") and the Co-Sale Agreement relating to the stock of Old Matador
terminated in accordance with its terms;
WHEREAS, in connection with the Plan of Merger, the Principals and
Shareholders agreed to enter into this Agreement;
WHEREAS, in connection with the Plan of Merger, the parties hereto have
entered into that certain Shareholders Agreement dated as of January 20, 1998
(the "SHAREHOLDERS AGREEMENT") pursuant to which the Company, the Principals,
the Shareholders and certain other shareholders of the Company will have certain
options to purchase shares of Common Stock of the Company upon any proposed
Disposition of such stock, as defined therein;
WHEREAS, the Principals are presently the legal or beneficial owners of
129,457 shares of Common Stock; and
WHEREAS, in consideration of the Shareholders' continuing investment in
the Company, the Principals have agreed to grant the Shareholders and their
respective successors and assigns the opportunity to participate, upon the terms
and conditions set forth in this Agreement, in subsequent sales of the shares of
Common Stock made by any of the Principals;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
ARTICLE 1
SALES BY PRINCIPAL
SECTION 1.1. NOTICE OF PURCHASE OFFERS. Should any Principal or Principals
propose to accept a letter of intent or bona fide offer (each, a "PURCHASE
OFFER"), at any time and from time to time, to purchase shares of Common Stock
(such Principal or Principals being referred to as the "PRINCIPAL SELLING GROUP"
(regardless of whether only one Principal is proposing to sell Common Stock)),
then such Principal Selling Group shall promptly notify each Shareholder of the
terms and conditions of such Purchase Offer.
SECTION 1.2. RIGHT TO PARTICIPATE. Each Shareholder shall have the right,
upon written notice to such Principal Selling Group within 10 business days
after receipt of the written notice of the Purchase Offer, to participate, upon
the terms and conditions set forth herein, in the sale of the shares of Common
Stock referred to in Section 1.1 by such Principal Selling Group on the same
terms and conditions as the sale by such Principal Selling Group. The right of
participation of each Shareholder shall also apply to any sale by a Principal
pursuant to the exercise of any options under the Shareholders Agreement except
as provided in Section 1.5(iv) hereof.
To the extent a Shareholder exercises such right of participation, the
number of shares of Common Stock which such Principal Selling Group may sell
pursuant to such Purchase Offer shall be correspondingly reduced. The right of
participation of a Shareholder shall be subject to the following terms and
conditions:
(a) In connection with each Purchase Offer, each Shareholder may
sell that number of shares of Common Stock equal to the product obtained
by multiplying (i) the aggregate number of shares of Common Stock covered
by the Purchase Offer by (ii) a fraction the numerator of which is the
number of shares of Common Stock at the time owned by the Shareholder and
the denominator of which is the combined number of shares of Common Stock
at the time owned by (A) the Principals (including any shares transferred
to Permitted Transferees (as hereinafter defined) in accordance herewith)
and (B) the Shareholders. For purposes of this Agreement, including making
computations pursuant to this Section 1.2, the Shareholders shall be
deemed to own the number of shares of Common Stock of the Company issuable
upon conversion of the Preferred Stock with respect to which such
Preferred Stock has not been converted.
(b) Each Shareholder may participate in the sale by delivering to
the purchase offeror directly, or to any member of the Principal Selling
Group for delivery to the purchase offeror, one or more certificates,
properly endorsed for transfer, which represent the number of shares of
Common Stock of the Company which such Shareholder elects to sell pursuant
to this Section 1.2 together with such other documentation required by the
proposed purchaser, which other documentation is also required to be
delivered by the Principal Selling Group.
(c) Should any Shareholder decline to participate in the proposed
sale, each other selling Shareholder shall have one opportunity to sell
all or any part of an additional number of shares of Common Stock equal to
the product obtained by multiplying (i) the aggregate number of shares of
Common Stock which each non-participating Shareholder had the right to
sell pursuant to subparagraph (a) of this Section 1.2 by (ii) a fraction
the numerator of which is the number of shares of Common Stock at the time
owned by the Shareholder wishing to sell additional shares
of Common Stock and the denominator of which is the combined number of
shares of Common Stock at the time owned by all Shareholders wishing to
sell additional shares of Common Stock. The Principal Selling Group
shall notify in writing each selling Shareholder of the number of
additional shares of Common Stock it may sell pursuant to this Section
1.2(c) and the selling Shareholders shall have five (5) business days
after receipt of such notice to notify the Principal Selling Group
whether it shall exercise its right to sell such additional shares.
(d) Should the right to sell any shares of Common Stock which any
non-participating Shareholder had the right to sell pursuant to
subparagraph (a) of this Section 1.2 not be allocated to Shareholders
desiring to sell additional shares of Common Stock after the allocation
procedure provided for in subparagraph (c) of this Section 1.2, the right
to sell such shares of Common Stock shall revert to the Principal(s).
SECTION 1.3. CONSUMMATION OF SALE. The stock certificate or certificates
which any selling Shareholder delivers to a member of the Principal Selling
Group pursuant to Section 1.2 shall be delivered by the Principal Selling Group
to the purchase offeror in consummation of the sale of the shares of Common
Stock pursuant to the terms and conditions specified in the Section 1.1 notice
to the Shareholders and the Principal Selling Group shall contemporaneously
remit to each Shareholder that portion of the sale proceeds to which such
Shareholder is entitled by reason of its participation in such sale. In the
alternative, each selling Shareholder may deliver the stock certificate or
certificates to and receive the sale proceeds directly from the purchase offeror
of shares of Common Stock.
SECTION 1.4. ONGOING RIGHTS. The exercise or non-exercise of the rights of
the Shareholders hereunder to participate in one or more sales of Common Stock
made by any of the Principals shall not adversely affect their rights to
participate in subsequent sales of shares of Common Stock by the Principals
pursuant to this Article 1. The conversion of the Preferred Stock into shares of
Common Stock of the Company by the Shareholders shall not adversely affect the
Shareholders' rights to participate in subsequent sales of shares of Common
Stock by the Principals pursuant to this Article 1.
SECTION 1.5. PERMITTED EXEMPTIONS. The participation rights of the
Shareholders pursuant to this Article I shall not apply to:
(i) any transfer to the spouse of any Principal, PROVIDED, that any
such transferee (other than ▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇ or ▇▇▇▇▇ ▇. ▇▇▇▇▇)
acknowledge and agree in writing to be bound to the terms and provisions
hereof as a Principal hereunder,
(ii) the sale by the Principals in the aggregate of not more than
25,891 shares of Common Stock (with such number of shares to be
appropriately adjusted for any stock dividend, stock split or reverse
stock split),
(iii) the pledge as security by the Principals in the aggregate of not
more than 51,783 shares of Common Stock or any foreclosure thereon or any
transfer in lieu of a
foreclosure thereon (with such number of shares to be appropriately
adjusted for any stock dividend, stock split or reverse stock split), or
(iv) the sale or transfer by the Principal of shares of Common Stock
to Union Oil Company of California ("UNOCAL") as contemplated by Section
5(b) of the Shareholders Agreement,
PROVIDED, that the aggregate number of shares of Common Stock that have been
sold, pledged or otherwise transferred by the Principals pursuant to clauses
(ii) and (iii) above during the term of this Agreement shall not exceed 64,728
shares (with such number of shares to be appropriately adjusted for any stock
dividend, stock split or reverse stock split). (The items described in clauses
(ii), (iii) and (iv) of the preceding sentence are referred to herein as "THIRD
PARTY PERMITTED TRANSFERS").
ARTICLE 2
PROHIBITED TRANSFERS
SECTION 2.1. TREATMENT OF PROHIBITED TRANSFERS. In the event that a
Principal or Principals should sell any shares of Common Stock of the Company in
contravention of the participation rights of the Shareholders under this
Agreement (a "PROHIBITED TRANSFER"), each Shareholder, in addition to such other
remedies as may be available at law, in equity or hereunder, shall have the put
option provided in Section 2.2 below, and the selling Principal or Principals
shall be bound by the applicable provisions of such put options.
SECTION 2.2. PUT OPTION. In the event of a Prohibited Transfer, each
Shareholder shall have the right to sell to the Principal or Principals
effectuating such Prohibited Transfer (collectively, the "ARTICLE 2 PRINCIPALS")
a number of shares of Common Stock equal to the number of shares each such
Shareholder would have been entitled to transfer to the purchaser in the
Prohibited Transfer pursuant to the terms hereof. Such sale shall be made on the
following terms and conditions:
(a) The price per share at which the shares are to be sold to the
Article 2 Principals shall be equal to the price per share paid by the
purchaser to the Article 2 Principals in the Prohibited Transfer. The
Article 2 Principals shall also reimburse each Shareholder for any and all
reasonable fees and expenses, including reasonable legal fees and
expenses, incurred pursuant to the exercise or the attempted exercise of
the Shareholders' rights under this Article 2.
(b) Within 45 days after the later of the dates on which each
Shareholder (i) received notice from the Article 2 Principals of the
Prohibited Transfer or (ii) otherwise became aware of the Prohibited
Transfer, each Shareholder shall, if exercising the put option created
hereby, tender for delivery to the Article 2 Principals the certificate or
certificates representing shares to be purchased, each certificate to be
properly endorsed for transfer.
(c) The Article 2 Principals shall, upon receipt of the certificate
or certificates for the shares to be sold by the Shareholder pursuant to
Section 2.2(b), pay the aggregate purchase price therefor and the amount
of reimbursable fees and expenses, as specified in Section 2.2(a), by
certified check or bank draft made payable to the order of the
Shareholder.
(d) Notwithstanding the foregoing, any attempt to transfer Common
Stock in violation of Article 1 hereof shall, to the extent enforceable by
law, be void and the Company agrees it will not effect such a transfer nor
will it treat any alleged transferee as the holder of such shares without
the written consent of the Shareholders.
ARTICLE 3
LEGENDED CERTIFICATES
SECTION 3.1. LEGEND. Each certificate representing shares of Common Stock
now or hereafter owned by the Principals shall be endorsed with the following
legend:
"THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN CO-SALE AGREEMENT DATED AS OF JANUARY 20, 1998 BY AND
AMONG THE CORPORATION AND CERTAIN SHAREHOLDERS OF THE CORPORATION.
COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO
THE SECRETARY OF THE CORPORATION."
SECTION 3.2. LEGEND REMOVAL. The Section 3.1 legend shall be removed upon
termination of this Agreement in accordance with the provisions of Section 4.1
or upon such stock otherwise not being subject to the restriction of this
Co-Sale Agreement including, but not limited to, a Third Party Permitted
Transfer.
ARTICLE 4
MISCELLANEOUS PROVISIONS
SECTION 4.1. TERMINATION OF CO-SALE RIGHTS. The rights of the Shareholders
under this Agreement and the obligations of the Principals with respect to the
Shareholders shall terminate at the earlier of (i) such time as the Shareholders
collectively shall no longer own any portion of the Preferred Stock and/or
Common Stock issued in connection with the exercise or partial exercise of said
Preferred Stock and (ii) the end of the 365 day period during which ▇▇▇▇▇▇ ▇▇▇▇▇
has not been a director, and by action of the Board of Directors of the Company,
▇▇▇▇▇▇ ▇▇▇▇▇ has not been an officer, employee, advisor or consultant of the
Company. Unless sooner terminated in accordance with the preceding sentence,
this Agreement shall terminate upon the occurrence of any one of the following
events:
(a) the liquidation, dissolution or winding up of the business
operations of the Company;
(b) the execution by the Company of a general assignment for the
benefit of creditors or the appointment of a receiver or trustee to take
possession of the property and assets of the Company;
(c) the consummation of any firmly underwritten public offering of
the Common Stock of the Company registered under the Securities Act of
1933, as amended, the net proceeds from such sale to the Company which are
at least $15,000,000; or
(d) the first date on which the Company has more than 300
shareholders and the bid and asked price quotations for shares of Common
Stock of the Company are reported by the National Association of
Securities Dealers, Inc. Automated Quotation System or by a comparable
system.
SECTION 4.2. VIOLATIONS OR REMEDIES. The parties agree that any violation
of this Agreement (other than a default in payment of money) cannot be
compensated for by damages, and any aggrieved party shall have the right, and is
hereby granted the privilege, of obtaining specific performance of this
Agreement in any court of competent jurisdiction in the event of any breach
hereunder.
SECTION 4.3. REQUIRED SALE BY HOLDERS. In the event of any proposed
Qualified Take-Along Transaction (as hereinafter defined) then subject to the
terms and conditions of this Section 4.3, the Principals shall have the right to
require the Shareholders to sell, assign or transfer, and the Shareholders
hereby agree to sell, assign and transfer, all of their respective Preferred
Stock and/or Common Stock issued pursuant to conversion of the Preferred Stock
(collectively, the "SHAREHOLDERS' INTERESTS") as hereinafter provided:
(i) The Principals shall give written notice ("TAKE-ALONG NOTICE")
to each Shareholder, at least thirty (30) days prior to the consummation
of a Qualified Take-Along Transaction, specifying (i) the identity of the
proposed purchaser of such shares, (ii) the consideration to be paid to
the Principals and any affiliate thereof in connection with the Qualified
Take-Along Transaction and the terms and conditions upon which such
consideration shall be payable and (iii) the other material terms of the
Qualified Take-Along Transaction.
(ii) Any sale of Shareholders' Interests by a Shareholder pursuant
to the provisions of this Section 4.3 shall be made concurrently with the
closing of the Qualified Take-Along Transaction on the same terms and
conditions (except that no Shareholder shall be subject to indemnities or
liabilities which are not reasonably customary), and for the same
consideration, as the sale of shares by the Principals thereunder.
(iii) For purposes of this Section 4.3, "Qualified Take-Along
Transaction" shall mean a sale, transfer or assignment of at least 90%
(exclusive of any shares held by the Shareholders or their successors or
assigns) of the Common Stock of the Company (including 100% of the Common
Stock of the Principals) for aggregate consideration
which in the opinion of a nationally recognized investment banking firm
reasonably acceptable to the Principals and the Shareholders (the cost
of which opinion shall be borne by the Company), is fair from a
financial point of view to the Company's shareholders and in any event
the price per share is at least $18.00 (adjusted as appropriate to
reflect any stock dividends, stock splits, or reverse stock splits).
SECTION 4.4. NOTICES. Any notice required or permitted to be given to a
party pursuant to the provisions of this Agreement shall be in writing and shall
be effective upon personal delivery or upon deposit in the U.S. mail, postage
prepaid and properly addressed to the party to be notified as set forth below
such party's signature or at such other address as such party may designate by
ten (10) days' advance written notice to the other parties hereto.
SECTION 4.5. SUCCESSORS AND ASSIGNS. This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon their respective successors, assigns and legal representatives.
SECTION 4.6. SEVERABILITY. In the event one or more of the provisions of
this Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or enforceable provision had
never been contained herein.
SECTION 4.7. AMENDMENTS. Any amendment or modification of this Agreement
shall be effective only if evidenced by a written instrument executed by each of
the Principals and duly authorized representatives of the Shareholders. Any
waiver by a party of its rights hereunder shall be effective only if evidenced
by a written instrument executed by a duly authorized representative of such
party. In no event shall such waiver of any rights hereunder constitute the
waiver of such rights in any future instance unless the waiver so specifies in
writing.
SECTION 4.8. DEFINITIONS. Unless otherwise defined herein, capitalized
terms shall have the meanings set forth in the Conversion Agreement.
SECTION 4.9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Texas.
SECTION 4.10. OTHER OBLIGATIONS OF COMPANY. The Company agrees to use
commercially reasonable efforts to enforce the terms of this Agreement, to
inform the Shareholders of any breach hereof and to assist the Shareholders in
the exercise of their rights and performance of their obligations under this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Co-Sale Agreement as of
the day and year first written above.
COMPANY: MATADOR PETROLEUM CORPORATION
By /s/ ▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇
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Its President, Chief Executive Officer
and Chairman of the Board
PRINCIPALS: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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SHAREHOLDERS: THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY
By Lincoln Investment Management, Inc.
Its Attorney-In-Fact
By /s/ R. ▇▇▇▇▇▇ ▇▇▇▇▇
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R. ▇▇▇▇▇▇ ▇▇▇▇▇
Its Vice President
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Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Investments-Private Placements
THE TRAVELERS INSURANCE COMPANY
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its Second Vice President
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
THE TRAVELERS INDEMNITY COMPANY
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its Second Vice President
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
THE PHOENIX INSURANCE COMPANY
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its Second Vice President
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
THE TRAVELERS LIFE AND ANNUITY
COMPANY
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its Second Vice President
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇