Exhibit T3E(4)
FORM OF
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (this "Agreement"), dated as of ___________,
2002, is entered into by and among Southwest Royalties, Inc., a Delaware
corporation (the "Company"), Southwest Royalties Holdings, Inc. ("SRH"), a
stockholder of the Company, ▇.▇. ▇▇▇▇▇▇▇, III, the majority owner of SRH
("▇▇▇▇▇▇▇") and certain other stockholders of the Company which are listed on
Schedule A hereto (collectively, the "Holders").
RECITALS
WHEREAS, the Holders own 900,000 of the issued and outstanding shares of
the Class A Common Stock, $0.01 par value, of the Company (the "Class A Common
Stock");
WHEREAS, SRH owns 200,000 shares of Special Stock, $.01 par value per
share, of the Company (the "Special Stock") and 100,000 shares of Common Stock,
$.01 par value per share, of the Company ("Common Stock"); and
WHEREAS, the Holders, SRH and the Company desire to agree upon certain
terms and conditions that will govern the ownership and transfer of the Class A
Common Stock, Special Stock and Common Stock.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and provisions set forth in this Agreement, and intended to be legally bound
hereby, the parties agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following terms have the following
respective meanings:
"Affiliate" means, with respect to any Person, (i) any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such Person or any officer, director or employee of such
Person or such other Person, (ii) the spouse, any immediate family member or any
other relative who has the same principal residence of any Person described in
clause (i) above, and any Person, directly or indirectly, controlling or
controlled by or under direct or indirect common control with, such spouse,
family member or other relative, and (iii) any trust in which any Person
described in clause (i) or (ii), above, is a fiduciary or has a beneficial
interest.
"Agreement" has the meaning set forth in the preamble hereto.
"Board of Directors" means the Board of Directors of the Company.
"Class A Common Stock" has the meaning set forth in the recitals hereto.
"Common Stock" has the meaning set forth in the recitals hereto.
"Company" has the meaning set forth in the preamble hereto.
"Holders" has the meaning set forth in the preamble hereto.
"Notice of Intention to Sell" means the written notice specified in
Section 2.1.
"Offerors" has the meaning set forth in Section 3.1(a).
"Offered Shares" has the meaning set forth in Section 2.1.
"Participation Offer" has the meaning set forth in Section 3.1(a).
"Person" means any individual, corporation, partnership, limited
liability company, trust, unincorporated association or other entity.
"Sale" has the meaning set forth in Section 3.1(a).
"Securities Act" or the "Act" means the Securities Act of 1933, as
amended from time to time.
"Shares" means shares of Common Stock, Class A Common Stock and Special
Stock now or hereafter outstanding and any securities now or hereafter
outstanding that may be exercised, converted or exchanged for Common Stock which
are beneficially owned by the Holders or by SRH, as the case may be.
"Special Stock" has the meaning set forth in the recitals hereto.
"Subsidiary" means any Person of which at least a majority of the voting
stock or voting interests of such Person are owned, directly or indirectly, by
any other Person.
"Transfer" means sale, transfer, assignment, gift, pledge, hypothecation,
encumbrance, or other disposition, whether voluntary or involuntary, or any
contract to do any of the forgoing.
SECTION 2. RIGHT OF FIRST REFUSAL TO PURCHASE SRH'S SHARES
2.1 Intention to Sell. If SRH wishes to sell any of the Shares owned by
SRH to a bona fide third party, SRH promptly shall deliver to the Company a
Notice of Intention to Sell (the "Notice of Intention to Sell") setting forth
the number of Shares to be sold (the "Offered Shares"), the proposed purchase
price per Offered Share, the proposed purchaser (including any information
concerning such purchaser and its Affiliates as the Company may reasonably
request) and the other terms of sale.
2.2 Notice of Election to Purchase; Failure to Exercise Option to
Purchase. The Company shall, within five (5) business days of its receipt of the
Notice of Intention to Sell, give the Notice of the Intention to Sell to the
Holders by certified or registered mail or recognized overnight delivery service
(and shall notify SRH of the date on which such notice was sent to the Holders)
and the Holders will then have the right and option to elect to purchase (i) all
or a portion of such Offered Shares (if there is only one Holder electing to
purchase such Shares) or (ii) up to its pro rata share of such Offered Shares
(if there is more than one Holder electing to purchase such Shares) or (iii)
such Offered Shares in such other proportions as the Holders may mutually agree,
at the purchase price and on the terms stated in the Notice of Intention to
Sell, such election to be made by giving written notice to the Company within
twenty (20) business days after the date of receipt by the Holder of the Notice
of Intention to Sell. For purposes of this Section 2.2, the date of receipt by
the Holders of the Notice of Intention to Sell shall be deemed to be three (3)
business days if such notice is sent by certified or registered mail or one (1)
business day if such notice is sent by recognized overnight delivery service,
and such 20-business day period for all Holders shall be deemed to commence as
of the last date on which a Holder is deemed to have received such notice.
2.3 SRH's Rights upon Failure to Exercise Right to Purchase All Offered
Shares. If the Holders fail to elect to purchase all of the Offered Shares under
Sections 2.1 and 2.2, then SRH may sell all (but not less than all) of the
Offered Shares remaining to the purchaser specified in the Notice of Intention
to Sell at the price and upon the same terms set forth in the Notice of
Intention to Sell, at any time within twenty (20) business days after the last
date on which a Holder will be entitled to make any election pursuant to the
provisions of Section 2.2. Any purchaser specified in the Notice of Intention to
Sell shall not be bound by the provisions of this Agreement upon receipt of the
Shares, unless such purchaser is ▇▇▇▇▇▇▇ or an Affiliate of SRH or ▇▇▇▇▇▇▇, in
which case such purchaser shall be bound by the terms of this Agreement as if
such purchaser were SRH and shall be required to execute a joinder to this
Agreement. If the Offered Shares are not sold by SRH during such twenty (20)
business-day period, the right of SRH to sell such Offered Shares will expire
and such remaining Offered Shares again will be subject to the restrictions
contained in this Agreement and may not thereafter be Transferred except in
compliance with this Agreement.
2.4 Payment for Offered Shares. Payment by a Holder for the Offered
Shares will be made by certified or official bank check, payable to the order of
SRH against delivery by SRH of (a) a certificate or certificates representing
the Offered Shares so sold, duly endorsed for transfer to the purchasing party
or accompanied by a stock transfer power duly endorsed for transfer, with all
requisite stock transfer taxes paid and
2
stamps affixed and (b) written representations and warranties of SRH to the
effect that: (i) SRH is the record and beneficial owner of the Shares being
purchased and sold, has good and valid title to the Shares and the absolute
right to transfer the same to the purchaser, and the same, upon transfer to the
purchaser, will be free and clear of all claims, liens, pledges, restrictions
(other than restrictions imposed by this Agreement and restrictions under
federal and state securities laws) or encumbrances of any nature whatsoever;
(ii) SRH shall have full power, authority or capacity, as applicable, to perform
the terms of this Agreement relating to such purchase and sale; and (iii) any
consent or approval of any governmental authority, court or third person
required to be obtained by SRH to permit the Transfer of the Shares have been
obtained.
2.5 Closing Date. The closing of the sale and delivery of Offered Shares
being purchased and sold pursuant to this Section 2 to a Holder, and payment for
such Offered Shares, will be held at any date on or prior to the twentieth
(20th) business day after the last day upon which any Holder elects to purchase
Offered Shares pursuant to this Section 2.
2.6 Continuation in Interest. In the event SRH ceases to exist, whether
by sale, merger, liquidation or otherwise or ceases to hold the Company's
capital stock, the provisions of this Section 2 shall only apply to the Shares
beneficially owned by ▇▇▇▇▇▇▇ or his Affiliates (excluding the Company).
SECTION 3. TAG-ALONG/CO-SALE RIGHTS
3.1 Tag-Along Rights.
(a) If the Holders collectively desire to Transfer 450,001 or more
Shares (as may be adjusted in accordance with the Amended and Restated
Certificate of Incorporation) (the "Offerors"), whether by sale, merger or
otherwise (a "Sale"), then at least fifteen (15) business days prior to the
closing of such Sale, the Offerors shall make an offer in writing (the
"Participation Offer") to SRH to include in the proposed Sale a percentage of
SRH's Shares equal to a percentage of the outstanding Shares of Class A Common
Stock being Transferred by the Offerors. For purposes of this Section 3.3, the
Participation Offer shall not be deemed made until SRH has received such
Participation Offer.
(b) The Participation Offer must be in writing and describe the
terms (including purchase price) and conditions of the proposed Sale and must be
conditioned upon (i) the consummation of the transactions contemplated in the
Participation Offer, and (ii) SRH's execution and delivery of all agreements and
other documents as may be reasonably required by the acquiror in connection with
such Sale.
(c) If SRH desires to exercise its right to Transfer Shares in the
Participation Offer, SRH shall deliver notice to the Offerors within seven (7)
business days after its receipt of the Participation Offer, specifying the
number of Shares (up to the number or percentage of such Shares specified in the
Participation Offer) that SRH desires to Transfer in the Participation Offer,
whereupon SRH shall be obligated to Transfer such Shares at the closing of such
Sale, if and when it occurs. All Shares Transferred by SRH pursuant to this
Section 3.1 must be Transferred at the same price and terms (including form of
consideration) as the Shares being Transferred by the Offerors.
3.2 Co-Sale Rights.
(a) In connection with any Sale by the Offerors of 450,001 or more
Shares (as may be adjusted in accordance with the Amended and Restated
Certificate of Incorporation), and if SRH fails to exercise its tag-along rights
under Section 3.1, then the Offerors have the right to require SRH to Transfer a
percentage of SRH's Shares which equals the percentage of Shares being
Transferred by the Offerors. All Shares Transferred by SRH pursuant to this
Section 3.2 must be Transferred at the same price and terms (including form of
consideration) as the Shares being Transferred by the Offerors.
(b) The Offerors shall give the Company and SRH at least seven (7)
business days' prior written notice of any Sale as to which the Offerors intend
to exercise their rights under Section 3.2(a).
3.3 Continuation in Interest. In the event SRH ceases to exist, whether
by sale, merger, liquidation or otherwise, or ceases to hold the Company's
capital stock, the provisions of this Section 3 shall only apply to the Shares
beneficially owned by ▇▇▇▇▇▇▇ or his Affiliates (excluding the Company).
3
SECTION 4. LEGEND ON SHARE CERTIFICATES
All certificates representing Shares now or hereafter held by the Holders
and SRH, will be endorsed with the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A STOCKHOLDERS AGREEMENT DATED AS OF _____________, 2002. A
COPY OF SUCH AGREEMENT IS ON FILE AT THE COMPANY'S PRINCIPAL PLACE OF
BUSINESS AND MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER OF RECORD OF THIS CERTIFICATE TO THE CORPORATE SECRETARY OF THE
COMPANY."
SECTION 5. DURATION OF AGREEMENT
This Agreement will terminate and be of no further force and effect upon
the first to occur of (i) five (5) years from the date of this Agreement or (ii)
upon the sale, disposition or sale of all of the shares of Class A Common Stock
held by the Holders or their Affiliates.
SECTION 6. GOVERNING LAW; CONSTRUCTION
This Agreement is governed by and construed in accordance with the laws
of the State of Delaware, without regard to its conflict of law rules. The
headings or titles to sections in this Agreement are intended solely for
convenience and no provision of this Agreement is to be construed by reference
to the heading or title of any section. Unless otherwise specifically stated,
references in this Agreement to sections or schedules refer to sections and
schedules of this Agreement.
SECTION 7. CONSENT TO JURISDICTION AND SERVICE OF PROCESS
Each Holder, SRH, ▇▇▇▇▇▇▇ and the Company irrevocably consent to the
non-exclusive jurisdiction of the state and federal courts located in the State
of Delaware, agree that any action, suit or proceeding by or among the Holders
(or any of them), SRH, ▇▇▇▇▇▇▇ or the Company arising out of this Agreement may
be brought in any court in the State of Delaware, and waives any objection which
any Holder, SRH, ▇▇▇▇▇▇▇ or the Company, as the case may be, may now or
hereafter have to the choice of forum whether on personal jurisdiction, venue,
forum non conveniens or on any other ground. For purposes of actions arising out
of this Agreement, each Holder, SRH, ▇▇▇▇▇▇▇ and the Company hereby irrevocably
designate, appoint and empower the Secretary of the State of Delaware to receive
for and on behalf of such Holder, SRH, ▇▇▇▇▇▇▇ or the Company service of process
in the State of Delaware, and each Holder, SRH, ▇▇▇▇▇▇▇ and the Company
irrevocably consent to the service of process outside of the territorial
jurisdiction of said courts by mailing copies thereof by registered or certified
United States mail, postage prepaid, to such last known address of any Holder,
SRH , ▇▇▇▇▇▇▇ or the Company, as shown in the records of the Company with the
same effect as if such Holder, SRH, ▇▇▇▇▇▇▇ or the Company were a resident of
the State of Delaware and had been lawfully served in such State. Nothing in
this Agreement will affect the right to service of process in any other manner
permitted by law. Each Holder, SRH, ▇▇▇▇▇▇▇ and the Company further agree that
final judgment against it or him in any such action or proceeding will be
conclusive and may be enforced in any other jurisdiction within or outside the
State of Delaware by suit on the judgment, a certified or exemplified copy of
which will be conclusive evidence of the fact and the amount of such judgment.
SECTION 8. BENEFITS OF AGREEMENT; ASSIGNMENT
This Agreement is irrevocable and is binding upon and inures to the
benefit of the parties and their respective successors, permitted assigns,
heirs, executors, administrators, and legal representatives. Except as otherwise
provided in this Agreement, neither the Holders nor SRH may assign or delegate
any of its rights or obligations under this Agreement without the prior written
consent of the Company, except that the Holders may assign or delegate any of
their rights or obligations to their Affiliates under this Agreement without the
consent of the Company.
4
SECTION 9. NOTICES
(a) All notices, requests, consents, and other communications
required by this Agreement must be in writing, delivered in person or duly sent
by recognized overnight courier or sent by facsimile or by first-class
registered or certified mail, postage prepaid, addressed to the Company, SRH or
the applicable Holder at the addresses set forth for such Persons on Schedule A
hereto, or to such other address which has been designated by notice in writing
by such party to the others in accordance with the provisions of this Section 9.
(b) Each party will at all times have an address to which any
communications may be sent. All such notices, requests, consents and other
communications will be deemed to have been received (i) in the case of personal
delivery or facsimile, on the date of such delivery, (ii) in the case of
delivery by recognized overnight courier service, on the first business day
following delivery of such notice to the overnight courier, and (iii) in the
case of mailing, on the third (3rd) business day following such mailing.
SECTION 10. MODIFICATION AND WAIVER
Except as otherwise provided in this Agreement, neither this Agreement,
nor any provision of this Agreement, may be modified, changed, waived,
discharged or terminated except by an instrument in writing signed by the
Company, SRH and the holders of at least a majority of the Shares held by the
Holders.
SECTION 11. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement among the parties with
respect to matters or understandings involving the ownership, control or
disposition of the Shares, and supersedes in its entirety any and all prior
agreements or understandings, oral or written, among any or all of the
undersigned relating to such ownership, control or disposition.
SECTION 12. SEVERABILITY
If any provision of this Agreement, or the application of such provision
to any Person or circumstance, is adjudged or ruled to be invalid or
unenforceable, the remaining provisions of this Agreement and the application of
such provisions to other Persons or circumstances will not be affected by such
invalidity or unenforceability.
SECTION 13. REMEDIES
The parties recognize and agree that if the Company, SRH or any of the
Holders breaches its or his obligations under this Agreement, the other parties
may not have an adequate remedy at law. Such breach will cause such other
parties irreparable harm for which there may be no adequate remedy at law. If
any party institutes an action or proceeding to enforce the provisions of this
Agreement, such party will be entitled to the remedies of specific performance
and injunctive relief, and any such Person against whom such action or
proceeding is brought hereby waives any claim or defense that there is an
adequate remedy at law. The right to obtain an injunction hereunder will not be
considered a waiver of any right on the part of the non-breaching parties to
recover damages and to assert any other claims for remedies which such parties
may have at law or in equity. The non-prevailing party in any such action agrees
to bear any expenses incurred by the prevailing party, including reasonable
attorneys' fees, in enforcing its rights under this Agreement.
SECTION 14. GENDER
Whenever the context requires, pronouns of any gender will be deemed to
include and designate the feminine, masculine or neuter gender.
SECTION 15. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which
will be deemed to be an original, but all of which taken together will
constitute one and the same instrument.
[Remainder of page intentionally left blank]
5
IN WITNESS WHEREOF, the undersigned have duly executed or caused this
Agreement to be executed as of the day and year first above written.
SOUTHWEST ROYALTIES, INC.
By:___________________________
Name:_________________________
Title:________________________
Address:______________________
______________________
______________________
SOUTHWEST ROYALTIES HOLDINGS, INC.
By:___________________________
Name:_________________________
Title:________________________
Address:______________________
______________________
______________________
__________________________________
▇.▇. ▇▇▇▇▇▇▇, III
Address:__________________________
__________________________
__________________________
[other signature blocks to come]
6
Schedule A
[Name and addresses of stockholders to come]
7