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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )*
BARGO ENERGY COMPANY
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(Name of Issuer)
COMMON STOCK
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(Title of Class of Securities)
067587105
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(CUSIP Number)
DAVID J. SHLADOVSKY, C/O KAIM NON-TRADITIONAL, L.P.
1800 AVENUE OF THE STARS, SECOND FLOOR, LOS ANGELES, CA 90067 (310) 556-2721
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
05/14/99
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(Date of Event which Requires Piling of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-l(b) (3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [ ]. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-l(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
PAGE 1 OF 8
<PAGE> 2
SCHEDULE 13D
CUSIP No. 726540503 PAGE 2 OF 8 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
(A) KAIM NON-TRADITIONAL, L.P. - 95-4486379
(B) RICHARD A. KAYNE - ###-##-####
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
(A) IS A CALIFORNIA LIMITED PARTNERSHIP
(B) IS A U.S. CITIZEN
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
(A) 0
(B) 0
NUMBER OF ----------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY (A) 8,763,162
OWNED BY (B) 8,763,162
EACH ----------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON (A) 0
WITH (B) 0
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
(A) 8,763,162
(B) 8,763,162
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
(A) 8,763,162
(B) 8,763,162
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
(A) 9.51%
(B) 9.51%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
(A) IA
(B) IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
PAGE 2 OF 8
<PAGE> 3
SCHEDULE 13D
CUSIP No. 726540503 PAGE 3 OF 8 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
KAYNE ANDERSON ENERGY FUND, L.P. - 95-4669026
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
A CALIFORNIA LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ----------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 8,763,162
EACH ----------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 0
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
8,763,162
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
8,763,162
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
9.51%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
PAGE 3 OF 8
<PAGE> 4
United States
Securities and Exchange Commission
SCHEDULE 13D
*********************
ITEM 1. SECURITY AND ISSUER
The class of equity securities to which this statement relates is common stock,
par value $.01 per share (the "Common Stock"), of Bargo Energy Company, a Texas
corporation and successor by merger to Future Petroleum Corporation, a Utah
corporation (the "Issuer"). The address of the principal executive offices of
the Issuer is 700 Louisiana, Suite 3700, Houston, Texas 77002.
ITEM 2. IDENTITY AND BACKGROUND
a. KAYNE ANDERSON INVESTMENT MANAGEMENT, INC.
Kayne Anderson Investment Management, Inc. (KAIM, Inc.), a Nevada
corporation, serves as general partner of KAIM Non-Traditional, L.P.
(KAIM N-T, LP), a California limited partnership. KAIM N-T, LP is an
investment adviser registered under the Investment Advisers Act. It
serves as general partner of and investment adviser to an investment
fund named Kayne Anderson Energy Fund, L.P. (the "Fund"), a Delaware
limited partnership. The principal business address of KAIM, Inc., KAIM
N-T, LP and the investment limited partnership is 1800 Avenue of the
Stars, Second Floor, Los Angeles, California 90067.
During the past five years, none of KAIM, Inc., KAIM N-T, LP, or the
investment limited partnership has been convicted in a criminal
proceeding nor has any of them been a party to a civil proceeding of a
judicial or administrative body or the subject of any judgments, decrees
or final orders from the regulatory bodies.
b. RICHARD A. KAYNE
Mr. Kayne, a U.S. citizen, is President, Chief Executive Officer and
Director of KAIM, Inc. He also serves as Manager of Kayne Anderson
Investment Management, LLC, a California limited liability company
(KAIM, LLC), and President and Director of KA Associates, Inc., a Nevada
corporation (KA). KAIM, LLC is a registered investment adviser. KA is a
registered broker/dealer. The principal business address of KAIM, LLC
and KA is 1800 Avenue of the Stars, 2nd Floor, Los Angeles, CA 90067.
Mr. Kayne is the controlling shareholder of KAIM, Inc., KAIM, LLC and
KA.
During the past five years, none of Mr. Kayne, KAIM, LLC, or KA has been
convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors), nor has any of them been a party to a civil
proceeding of a judicial or administrative body or the subject of any
judgments, decrees or final orders from the regulatory bodies.
PAGE 4 OF 8
<PAGE> 5
c. The following persons (in addition to Mr. Kayne) are officers and/or
directors of one or more of KAIM, Inc. and KAIM, LLC. Each such person
is a U.S. citizen whose address is 1800 Avenue of the Stars, Second
Floor, Los Angeles, California 90067. During the past five years, none
of such persons has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors), nor has any of them been a
party to a civil proceeding of a judicial or administrative body or the
subject of any judgments, decrees or final orders from the regulatory
bodies.
JOHN E. ANDERSON. Chairman of Topa Equities, Ltd., a diversified
investment company located at 1800 Avenue of the Stars, Suite 1400, Los
Angeles, California 90067. Mr. Anderson is also Director of KAIM, Inc.
and KA.
WILLIAM T. MILLER. Chief Financial Officer of KAIM, Inc. and KA.
ALLAN M. RUDNICK. Manager of KAIM, LLC.
HOWARD M. ZELIKOW. Vice President and Director of KAIM, Inc.
ROBERT V. SINNOTT. Vice President of KAIM, Inc.
JERRY R. WELCH. Vice President of KAIM, Inc.
DAVID J. SHLADOVSKY. General Counsel and Secretary of KAIM, Inc. and KA.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Investment partnership funds were derived by cash contributions to the Fund by
the limited partners of the Fund.
ITEM 4. PURPOSE OF TRANSACTION
The shares of the issuer were purchased for investment purposes. Richard A.
Kayne and KAIM N-T, on behalf the Fund, may consider making further sales or
purchases of the shares.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
a. Richard A. Kayne, KAIM N-T, LP and the Fund report ownership of
8,763,162 shares, representing 9.51% of the shares outstanding, respectively.
The following table describes the number of shares of Common Stock,
including shares of Common Stock issuable upon exercise or conversion of
derivative securities and the percent of outstanding Common Stock owned by the
reporting persons and the other parties to the New Shareholders' Agreement and
their officers, directors, partners and control persons ("Related Parties"),
other than those Related Parties that own no shares of Common Stock or
securities convertible into or exercisable for shares of Common Stock. All
percentages are based on 48,357,784 shares of Common Stock issued and
outstanding on May 14, 1999, as represented by the issuer in the Stock Purchase
Agreement dated May 14, 1999 among Bargo and the investors, plus the 43,815,810
shares of Common Stock issued to the investors on May 14, 1999.
PAGE 5 OF 8
<PAGE> 6
<TABLE>
<CAPTION>
SHARES OUTSTANDING DERIVATIVE SECURITIES TOTAL
---------------------------------------------- --------------------
NAME SOLE SHARED SOLE SHARED NUMBER %(1)
- ----------------------------------------------- ----------------------- ---------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Bargo Energy Company -- 7,078,333 -- -- 7,078,333 7.68%
Bargo Energy Resources, Ltd. -- 4,694,859 -- 250,000(2) 4,944,859 5.35%
Bargo Operating Company, Inc. -- 4,954,859 -- 250,000(2) 5,204,859 5.63%
Tim J. Goff 8,406,667 13,288,192 -- 250,000(2) 21,944,859 23.74%
TJG Investments, Inc. -- 1,255,000 -- -- 1,255,000 1.36%
Thomas D. Barrow 8,666,667 -- -- -- 8,666,667 9.40%
James E. Sowell 8,666,666 -- -- -- 8,666,666 9.40%
Energy Capital Investment Company
PLC -- -- -- 4,241,598 4.60%
4,241,598
EnCap Equity 1994 Limited
Partnership 2,424,973 -- -- -- 2,424,973 2.63%
EnCap Energy Capital Fund III, L.P.
5,583,755 -- -- -- 5,583,755 6.06%
EnCap Energy Capital Fund III-B,
L.P. 4,222,999 -- -- -- 4,222,999 4.58%
BOCP Energy Partners, L.P. -- 1,366,277 -- -- 1,366,277 1.48%
EnCap Investments, L.L.C. -- 17,839,602 -- -- 17,839,602 19.35%
B. Carl Price 1,126,869 -- -- 613,131(3) 1,740,000 1.88%
Don Wm. Reynolds 753,362 -- -- -- 753,362 0.82%
Kayne Anderson Energy Fund, L.P. 8,763,162 -- -- -- 8,763,162 9.51%
BancAmerica 13,144,743 -- -- -- 13,144,743 14.26%
SGC Partners II LLC 4,381,581 -- -- -- 4,381,581 4.75%
Eos Partners, L.P. 328,619 -- -- -- 328,619 0.36%
Eos Partners SBIC, L.P. 3,417,633 -- -- -- 3,417,633 3.71%
Eos Partners SBIC II, L.P. 635,329 -- -- -- 635,329 0.69%
</TABLE>
- --------------
(1) In accordance with SEC regulations under Section 13(d) of the Act, the
percent shown in this column for each stockholder represents the number of
shares of Common Stock owned by the stockholder plus the derivative
securities (on an as converted basis) owned by such stockholder divided by
the number of shares outstanding plus the number of derivative securities
(on an as converted basis) owned by such stockholder.
(2) Represents warrants to purchase Common Stock.
(3) Includes 550,000 shares of Common Stock that may be acquired pursuant to
employee stock options which may be exercised immediately. Also includes
63,131 shares of Common Stock, the maximum number of shares which Mr. Price
has the right to acquire during the 60 days following May 14, 1999 under an
employment agreement with Bargo. Under this agreement, Mr. Price may elect
to receive all or a portion of his salary in shares of Common Stock at a
price per share of $0.33 per share until December 31, 1999. From January 1,
2000 and until the employment agreement terminates, the purchase price per
share is the average midpoint between the bid and asked price of the Common
Stock on the OTC Bulletin Board for the last five days of the calendar year
prior to the year the compensation is earned. The 63,131 shares included in
the foregoing table represents the maximum number of shares which Mr. Price
could acquire during the 60 day period following May 14, 1999 if he
converted all of his salary into shares of Common Stock.
b. Richard A. Kayne and KAIM N-T, LP have shared voting and dispositive power
over its 8,763,162 shares, representing 9.51% of the outstanding shares of the
common stock of the issuer.
The shares over which Mr. Kayne and KAIM N-T, LP have shared voting and
dispositive power are held by the Fund, for which KAIM N-T, LP serves as
investment adviser and general partner.
KAIM N-T, LP disclaims beneficial ownership of the shares reported, except
those shares attributable to it by virtue of its general partner interests in
the limited partnership holding such shares. Mr. Kayne disclaims beneficial
ownership of the shares reported, except those shares attributable to him by
virtue of his limited partner interest in the Fund and by virtue of his indirect
interest in the interest of KAIM N-T, LP in the Fund.
c. Except as otherwise described herein or in any Exhibit filed herewith, to
the knowledge of the reporting persons, none of the persons named in response to
paragraph (a) above has effected any transaction in shares of the Common Stock
during the past 60 days.
PAGE 6 OF 8
<PAGE> 7
d. Not applicable
e. Not applicable
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Not applicable
Item 7. Material to Be Filed as Exhibits.
Exhibit I Joint Filing Agreement among Richard A. Kayne, KAIM N-T, L.P. and
the Fund.
Exhibit 4.1 Registration Rights Agreement dated August 14, 1998 between
Future Petroleum Corporation, Energy Capital Investment Company
PLC and EnCap Equity 1994 Limited Partnership.
Exhibit 4.2 Second Amendment to Registration Rights Agreement dated May 14,
1999 by and among Bargo Energy Company, a Texas corporation,
Energy Capital Investment Company PLC, an English investment
company, EnCap Equity 1994 Limited Partnership, a Texas limited
partnership, EnCap Energy Capital Fund III-B, L.P., a Texas
limited partnership, BOCP Energy Partners, L.P., a Texas limited
partnership, EnCap Energy Capital Fund III, L.P., a Texas limited
partnership, Kayne Anderson Energy Fund, L.P., a Delaware limited
partnership, BancAmerica Capital Investors SBIC I, L.P., a
Delaware limited partnership, Eos Partners, L.P., a Delaware
limited partnership, Eos Partners SBIC, L.P., a Delaware limited
partnership, Eos Partners SBIC II, L.P., a Delaware limited
partnership, and SGC Partners II LLC, a Delaware limited
liability company.
Exhibit 4.3 Second Amended and Restated Shareholders' Agreement dated May 14,
1999 by and among Bargo Energy Company, a Texas corporation, B.
Carl Price, a Texas resident, Don Wm. Reynolds, a Texas resident,
Energy Capital Investment Company PLC, an English investment
company, EnCap Equity 1994 Limited Partnership, a Texas limited
partnership, Bargo Energy Resources, Ltd., a Texas limited
partnership, TJG Investments, Inc., a Texas corporation, Bargo
Energy Company, a Texas general partnership, Tim J. Goff, Thomas
Barrow, James E. Sowell, Bargo Operating Company, Inc., a Texas
corporation, EnCap Energy Capital Fund III-B, L.P., a Texas
limited partnership, BOCP Energy Partners, L.P., a Texas limited
partnership, EnCap Energy Capital Fund III, L.P., a Texas limited
partnership, Kayne Anderson Energy Fund, L.P., a Delaware limited
partnership, BancAmerica Capital Investors SBIC I, L.P., a
Delaware limited partnership, Eos Partners, L.P., a Delaware
limited partnership, Eos Partners SBIC, L.P., a Delaware limited
partnership, Eos Partners SBIC II, L.P., a Delaware limited
partnership, and SGC Partners II LLC, a Delaware limited
liability company.
Exhibit 10.1 Stock Purchase Agreement dated May 14, 1999 by and among Energy
Capital Investment Company PLC, an English investment company,
EnCap Energy Capital Fund III-B, L.P., a Texas limited
partnership, BOCP Energy Partners, L.P., a Texas limited
partnership, EnCap Energy Capital Fund III, L.P., a Texas limited
partnership, Kayne Anderson Energy Fund, L.P., a Delaware limited
partnership, BancAmerica Capital Investors SBIC I, L.P., a
limited partnership, Eos Partners, L.P., a Delaware limited
partnership, Eos Partners SBIC, L.P., a Delaware limited
partnership, Eos Partners SBIC II, L.P., a Delaware limited
partnership, SGC Partners II LLC, a Delaware limited liability
company and Bargo Energy Company, a Texas corporation.
PAGE 7 OF 8
<PAGE> 8
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
May 18, 1999
- ------------------------------------------------
Date
/s/
- ------------------------------------------------
Richard A. Kayne
KAIM NON-TRADITIONAL, L.P.
By: Kayne Anderson Investment Management, Inc.,
general partner
By: /s/
-------------------------------------
David J. Shladovsky, Secretary
Kayne Anderson Energy Fund, L.P.
By: Kaim Non-Traditional, L.P., general partner
By: Kayne Anderson Investment Management, Inc.,
general partner
By: /s/
--------------------------------
David J. Shladovsky, Secretary
PAGE 8 OF 8
<PAGE> 9
EXHIBIT I
TO SCHEDULE 13D OF FILING CONCERNING
BARGO ENERGY COMPANY
JOINT FILING AGREEMENT PURSUANT TO RULE 13d-1(f)(1)
This agreement is made pursuant to Rule 13d-1(f)(1) under the Securities
Exchange Act of 1934 (the "Act") by and between the parties listed below, each
referred to herein as a "Joint Filer." The Joint Filers agree that a statement
of beneficial ownership as required by Section 13(d) of the Act and the Rules
thereunder may be filed on each of their behalf on Schedule 13D or Schedule 13G,
as appropriate, and that said joint filing may thereafter be amended by further
joint filings. The Joint Filers state that they each satisfy the requirements
for making a joint filing under Rule 13d-1.
/s/
- --------------------------------------------
Richard A. Kayne
KAIM NON-TRADITIONAL, L.P.
By: Kayne Anderson Investment Management, Inc.,
general partner
By: /s/
-----------------------------------
David J. Shladovsky, Secretary
Kayne Anderson Energy Fund, L.P.
By: Kaim Non-Traditional, L.P., general partner
By: Kayne Anderson Investment Management, Inc.,
general partner
By: /s/
-----------------------------------
David J. Shladovsky, Secretary
<PAGE> 1
EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into
as of this 14th day of August, 1998, by and among Future Petroleum Corporation,
a Utah corporation (the "Company"), Energy Capital Investment Company PLC, an
English investment company ("Energy PLC"), and EnCap Equity 1994 Limited
Partnership, a Texas limited partnership ("EnCap LP").
RECITALS:
A. Reference is herein made to that certain Agreement and Plan of Merger
dated as of August 14, 1998 (the "Merger Agreement"), by and among the
Company, Future CAL-TEX Corporation, a Texas corporation, Bargo Energy
Resources, Ltd., a Texas limited partnership, and SCL-CAL Company, a Texas
corporation.
B. Energy PLC and EnCap LP are the current record and beneficial owners of an
aggregate 1,850,000 shares of Common Stock (the "Fund I Current Shares").
In connection with the transaction contemplated by the Merger Agreement,
Energy PLC and EnCap LP have agreed to subordinate certain indebtedness
owed to them by the Company. As part of the consideration for such
agreement, the Company will issue to Energy PLC and EnCap LP an aggregate
of 2,844,859 shares of Common Stock (the "Fund I Additional Shares").
C. In order to induce Energy PLC and EnCap LP to subordinate the indebtedness
referenced in the immediately preceding paragraph (and recognizing that
they would not be willing to take the above described actions in the
absence of this Agreement), the Company has agreed to provide Energy PLC
and EnCap LP with the registration rights set forth herein.
AGREEMENT:
NOW, THEREFORE, for and in consideration of the foregoing Recitals and the
mutual covenants contained herein, the sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby agree
as follows:
Section 1. Definitions and References.
(a) When used in this Agreement, the following terms shall have the respective
meanings assigned to them in this Section 1 or in the sections,
subsections or other subdivisions referred to below:
"Agreement" shall mean this Agreement, as hereafter changed, modified or amended
in accordance with the terms hereof."Bargo Agreement" shall have the meaning
assigned to it in Section 11(b).
"Bargo Holders" shall mean "Holders," as such term is defined in the Bargo
Agreement.
"Bargo Securities" shall mean "Registrable Securities," as such term is defined
in the Bargo Agreement.
"Commission" shall mean the Securities and Exchange Commission (or any successor
body thereto).
"Company" shall have the meaning assigned to it in the introductory paragraph
hereof.
1
<PAGE> 2
"Common Stock" shall mean the common stock of the Company, $0.01 par value per
share.
"Demand Registration" shall have the meaning assigned to it in Section 2(a).
"EnCap LP" shall have the meaning assigned to it in the introductory paragraph
hereof.
"Energy PLC" shall have the meaning assigned to it in the introductory paragraph
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and
all rules and regulations promulgated under such Act.
"Fund I Additional Shares" shall have the meaning assigned to such term in
Paragraph B of the Recitals hereto.
"Fund I Current Shares" shall have the meaning assigned to such term in
Paragraph B of the Recitals hereto.
"Fund I Shares" shall mean the Fund I Current Shares and the Fund I Additional
Shares.
"Holder" shall mean any Person that holds Registrable Securities.
"Holder Indemnified Parties" shall have the meaning assigned to it in Section
6(a).
"Merger Agreement" shall have the meaning assigned to it in Paragraph A of the
Recitals hereto.
"Person" shall mean any individual, corporation, partnership, joint venture,
limited partnership, limited liability company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Piggyback Registration" shall have the meaning assigned to it in Section 3.
"Registrable Securities" shall mean (i) the Fund I Shares and (ii) any
securities issued or issuable with respect to any of the shares described in
clause (i) above by way of a stock dividend or other distribution or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization; provided, that a share of Common Stock or
security described in clauses (i) and (ii) shall cease to be a Registrable
Security for purposes of this Agreement at such time as either (A) counsel to
the Company renders an opinion to the Holder of such share or security to the
effect that such share or security can be freely transferred without
registration under the Securities Act (which counsel and opinion shall be
reasonably acceptable to such Holder), (B) counsel to a Holder of such share or
security renders an opinion to the Company to the effect that such share or
security can be freely transferred without registration under the Securities Act
(which counsel and opinion shall be reasonably acceptable to the Company), (C)
securities for which a registration statement with respect to the sale of such
securities has become effective under the Securities Act and such securities
shall have been disposed of in accordance with such registration statement, (D)
such securities have been sold as permitted by Rule 144 (or any successor
provision) under the Securities Act and the purchaser thereof does not receive
"restricted securities" as defined in Rule 144, or (E) such securities shall
have ceased to be outstanding.
"Registration Expenses" shall mean all expenses incident to the Company's
performance of or compliance with the registration rights granted hereunder,
including (without limitation) all registration, filing, listing and NASD fees,
fees and expenses of compliance with securities and blue sky laws, all
2
<PAGE> 3
word processing, duplicating, printing and engraving expenses, messenger,
telephone and delivery expenses, and fees and disbursements of counsel for the
Company, of its independent certified public accountants and any of its
independent reserve engineers, including the expenses of any special audits or
"cold comfort" letters required by or incident to such performance and
compliance, premiums and other costs of policies of insurance against
liabilities arising out of the public offering of the Registrable Securities
being registered, and fees and disbursements of underwriters (excluding
discounts and commissions); provided, that Registration Expenses shall not
include any Selling Expenses. Without limiting the generality of any other
provision hereof, no holder of Registrable Securities shall be responsible for
any allocation of general and administrative (including all employee and
compensation expenses) expenses incurred by the Company in connection with an
offering.
"Securities Act" shall mean the Securities Act of 1933, as amended, and all
rules and regulations under such Act.
"Selling Expenses" shall mean underwriting discounts or commissions, any selling
commissions and stock transfer taxes attributable to sales of Registrable
Securities and the fees and expenses of counsel for any Holder.
(b) All references in this Agreement to sections, subsections and other
subdivisions refer to corresponding sections, subsections and other subdivisions
of this Agreement unless expressly provided otherwise. Titles appearing at the
beginning of any of such subdivisions are for convenience only and shall not
constitute part of such subdivisions and shall be disregarded in construing the
language contained herein. The words "this Agreement", "this instrument",
"herein", "hereof", "hereby", "hereunder" and words of similar import refer to
this Agreement as a whole and not to any particular subdivision unless expressly
so limited. Words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires. Pronouns in masculine,
feminine and neuter genders shall be construed to include any other gender.
Section 2. Demand Registration Rights.
(a) One or more Holders of not less than 20% of the Registrable Securities
("Initiating Holders") then outstanding may request at any time after the
expiration of the one-year period commencing as of the date hereof a
registration by the Company under the Securities Act of all or a part its
Registrable Securities (a "Demand Registration").
(b) Notwithstanding subsection (a) above or anything else herein to the
contrary, the Company shall not be obligated to effect more than two
registrations pursuant to this Section 2; provided, however, that any
registration requested pursuant to this Section 2 will not be deemed to have
been effected (i) unless it has become effective and remained effective for the
lesser of (1) the period necessary to complete the sale or disposition of the
Registrable Securities covered by such registration statement, or (2) 180 days
after the effective date of such registration statement, except with respect to
any registration statement filed pursuant to Rule 415 under the Securities Act,
in which case the Company shall use its best efforts to keep such registration
statement effective until such time as all of the Registrable Securities cease
to be Registrable Securities; (ii) if, after it has become effective, such
registration is interfered with by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court for any
reason not attributable to the selling Holders and has not thereafter become
effective, or (iii) if the conditions to closing specified in the underwriting
agreement, if any, entered into in connection with such registration are not
satisfied or waived, other than solely by reason of a failure on the part of the
selling Holders; provided, further, that any such registration which does not
become effective after the
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Company has filed a registration statement in accordance with the provisions of
this Section 2 solely by reason of the refusal to proceed of the Holder or
Holders that have requested the Demand Registration pursuant to subsection (a)
above, including failure to comply with the provisions of this Agreement (other
than any refusal to proceed based upon the advice of counsel to such Holder or
Holders that the registration statement, or the prospectus contained therein,
contains an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, or that such
registration statement or such prospectus, or the distribution contemplated
thereby, otherwise violates or would, if such distribution using such prospectus
took place, violate any applicable state or federal securities law) shall be
deemed to have been effected by the Company at the request of such Holder or
Holders.
(c) Notwithstanding subsection (a) above or anything else herein to the
contrary, it is hereby agreed that a Demand Registration must cover no less than
50% of the Registrable Securities then outstanding. In the event a Holder
requests that the Company effect a Demand Registration pursuant to this Section
2, the Company will (i) promptly give notice of the proposed registration to all
other Holders and (ii) use its reasonable best efforts to effect the
registration of the Registrable Securities specified in the request, together
with the Registrable Securities of any other Holder joining in such request as
are specified in a written request received by the Company within 20 days after
receipt of the notice referred to in clause (i) above.
(d) If the managing underwriter in any registration effected under this Section
2 advises the Company that, in its reasonable opinion, the number of securities
requested to be included in such registration exceeds the number that can be
sold in such offering within a price range acceptable to the Holders of 66 2/3%
of the Registrable Securities requested to be included in such registration, the
Company, except as provided in the following sentence, will include in such
registration, to the extent of the number and type that the Company is so
advised can be sold in such offering, Registrable Securities requested to be
included in such registration, pro rata among the Holders requesting such
registration on the basis of the estimated gross proceeds from the sale thereof.
If the total number of Registrable Securities requested to be included in such
registration cannot be included as provided in the preceding sentence, holders
of Registrable Securities requesting registration thereof pursuant to this
Section 2, representing not less than 33-1/3% of the Registrable Securities with
respect to which registration has been requested and constituting not less than
66 2/3% of the initiating Holders, shall have the right to withdraw the request
for registration by giving written notice to the Company within 20 days after
receipt of such notice by the Company and, in the event of such withdrawal, such
request shall not be counted for purposes of the requests for registration to
which holders of Registrable Securities are entitled pursuant to this Section 2.
Section 3. Piggyback Registration Rights.
If the Company proposes to register any of its securities under the Securities
Act other than (a) under employee compensation or benefit programs, (b) an
exchange offer or an offering of securities solely to the existing stockholders
or employees of the Company, or (c) securities to be issued in a transaction
described in Rule 145(a) promulgated under the Securities Act, whether or not
for sale for its own account, and the registration form to be used may be used
for the registration of Registrable Securities, the Company will give prompt
written notice to Holders of Registrable Securities of its intention to effect
such a registration and will include in such registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within 15 days after the receipt of the Company's notice (a
"Piggyback Registration"). The Company shall use its reasonable best efforts to
cause the managing underwriters of a proposed
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<PAGE> 5
underwritten offering to permit the Registrable Securities requested to be
included in the registration statement (or registration statements) for such
offering to be included therein on the same terms and conditions as any similar
securities of the Company included therein. Notwithstanding the foregoing, if
the Company gives notice of such a proposed registration, the total number of
Registrable Securities which shall be included in such registration shall be
reduced pro rata (on the basis of the estimated proceeds from the sale thereof)
to such number, if any, as in the reasonable opinion of the managing
underwriters of such offering would not adversely affect the marketability or
offering price of all of the securities proposed to be offered by the Company in
such offering; provided however, that (i) if such Piggyback Registration is
incident to a primary registration on behalf of the Company, the securities to
be included in the registration statement (or registration statements) for any
Person other than the Holders, the Bargo Holders (if the Bargo Holders have
exercised their rights under Section 3 of the Bargo Agreement) and the Company
shall be first reduced prior to any such pro rata reduction and (ii) if such
Piggyback Registration is incident to a secondary registration on behalf of
holders of securities of the Company, the securities to be included in the
registration statement (or registration statements) for any Person not
exercising "demand" registration rights other than the Holders and the Bargo
Holders (if the Bargo Holders have exercised their rights under Section 3 of the
Bargo Agreement) shall be first reduced prior to any such pro rata reduction;
provided, further, that if (1) the Holders have made a request under this
Section 3 and the Bargo Holders have made a request under Section 3 of the Bargo
Agreement and (2) all of the Registrable Securities of the Holders and all of
the Bargo Securities of the Bargo Holders cannot be included in the registration
statement(s) under the terms of such sections, the total number of Registrable
Securities of the Holders and the Bargo Securities of the Bargo Holders which
shall be included in such registration shall be reduced pro rata to such number,
if any, as in the reasonable opinion of the managing underwriters of such
offering would not adversely affect the marketability or offering price of all
of the securities proposed to be offered by the Company in such offering.
Subject to any applicable underwriting agreement, any Holder of Registrable
Securities may withdraw at any time any Registrable Securities registered under
this Section 3. No registration effected under this Section 3 shall relieve the
Company of its obligation to effect any registration upon request under Section
2.
Section 4. Registration Procedures.
(a) Whenever the Holders have requested that any Registrable Securities be
registered pursuant to Section 2 or Section 3, the Company will as expeditiously
as possible:
(i) prepare and file with the Commission a registration statement on the
appropriate form with respect to such Registrable Securities, and use its
reasonable best efforts to cause such registration statement to become and
remain effective as soon as reasonably practicable after the filing thereof
(provided, that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company will furnish copies of all such
documents proposed to be filed to any Holder covered by such registration
statement);
(ii) prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective until the earlier
of (1)such time as all of such Registrable Securities covered by such
registration statement have been sold (but not before the expiration of the
applicable prospectus delivery period) or (2) 180 days after the effective date
of such registration statement, except with respect to any registration
statement filed pursuant to Rule 415 under the Securities Act, in which case the
Company shall use its best efforts to keep such registration statement effective
until such time as all of the Registrable Securities covered thereby cease to be
Registrable Securities; and comply with the provisions of the
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<PAGE> 6
Securities Act with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such registration
statement;
(iii) notify each Holder of Registrable Securities covered by the registration
statement ("Seller") promptly after the Company shall receive notice thereof of
the time when such registration statement has been filed;
(iv) furnish to each seller of Registrable Securities such number of copies of
such registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including, without
limitation, each preliminary prospectus) and such other documents as such Seller
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such seller (it being understood that the Company consents
to the use of the prospectus and any amendment or supplement thereto by each
Seller and the underwriter or underwriters, if any, in connection with the
offering and sale of Registrable Securities covered by the prospectus or any
amendment or supplement thereto);
(v) use its reasonable best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions
within the United States as any Seller reasonably requests, to keep such
registration or qualifications in effect for so long as such registration
statement remains in effect, and do any and all other acts and things which may
be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
Seller (provided that the Company will not be required to qualify generally to
do business or subject itself to any general service of process in any
jurisdiction where it is otherwise not then so subject);
(vi) notify each Seller of such Registrable Securities, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event (including those set forth in clauses (1)
through (6) of paragraph (vii) below) which requires the making of any change in
the prospectus included in such registration statement so that such document
will not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and, at the request of any such Seller, the Company will
promptly prepare and furnish to such Seller and each underwriter, if any, a
reasonable number of copies of a supplement or amendment to such prospectus so
that such prospectus will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading;
(vii) The Company will also notify each Seller promptly, and (if requested by a
Seller) confirm such notice in writing, (1) when a prospectus or any prospectus
supplement or post-effective amendment has been filed and, with respect to a
registration statement or any post-effective amendment, when the same has become
effective under the Securities Act and each applicable state law, (2) of any
request by the Commission or any other federal or state governmental authority
for amendments or supplements to a registration statement or related prospectus
or for additional information, (3) of the issuance by the Commission of any stop
order suspending the effectiveness of a registration statement or the initiation
of any proceedings for that purpose, (4) if at any time the representations or
warranties of the Company or any subsidiary contained in any agreement
(including any underwriting agreement) contemplated hereby cease to be true and
correct in any material respect, (5) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, or (6) of the Company's
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<PAGE> 7
reasonable determination that a post-effective amendment to a registration
statement would be appropriate;
(viii) use its reasonable best efforts to cause all such Registrable Securities
to be listed on each securities exchange or exchanges, automated quotation
system or over-the-counter market upon which securities of the Company of the
same class are then listed;
(ix) enter into such customary agreements (including, without limitation,
underwriting agreements in customary form, substance and scope) and take all
such other action as the Holders of a majority of the Registrable Securities
being sold or the underwriters, if any, reasonably request in order to expedite
or facilitate the disposition of such Registrable Securities;
(x) otherwise use its reasonable best efforts to comply with all applicable
rules and regulations of the Commission and applicable state securities
authorities;
(xi) in the event of the issuance of any stop order suspending the effectiveness
of a registration statement, or of any order suspending or preventing the use of
any related prospectus or suspending the qualification of any Registrable
Securities included in such registration statement for sale in any jurisdiction,
the Company will use its reasonable best efforts promptly to obtain the
withdrawal of such order;
(xii) use its reasonable best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
Sellers thereof to consummate the disposition of such Registrable Securities;
(xiii) in connection with an underwritten public offering of securities, use its
reasonable best efforts to obtain a signed counterpart of a comfort letter from
the Company's public accountants in customary form and covering such matters of
the type customarily covered by comfort letters with respect to offerings of the
type being made pursuant to the registration statement as the Sellers reasonably
request and an opinion of counsel for the Company covering such matters with
respect to such registration statement as are customarily covered in opinions of
issuer's counsel and delivered to the underwriters in underwritten public
offerings of securities;
(xiv) the Company shall make available for inspection by the sellers of such
Registrable Securities, any underwriter participating in any distribution
pursuant to such registration statement and any attorney, accountant or other
professional retained by the Holder or underwriter (in this paragraph
collectively referred to as "inspectors"), all financial and other records,
pertinent corporate documents and properties of the Company as shall be
reasonable necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such inspectors in connection
with such registration statement;
(xv) cause representatives of the Company to participate in any "road show" or
"road shows" reasonably requested by any underwriter of an underwritten or "best
efforts" offering of any Registrable Securities; and
(xvi) provide and cause to be maintained a transfer agent and registrar (which,
in each case, may be the Company) for all Registrable Securities covered by such
registration agreement from and after a date not later than the effective date
of such registration.
(b) Whenever the Holders of Registrable Securities have requested that any
Registrable Securities be registered pursuant to Section 2 or Section 3, each
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<PAGE> 8
Holder of Registrable Securities (including Registrable Securities in any
registration statement filed pursuant to this Agreement) will be deemed to have
agreed as follows:
(i) upon receipt of notice from the Company of the happening of any event of the
kind described in Section 4(a)(vi), the Holders of Registrable Securities
covered by such registration statement will forthwith discontinue disposition of
any such Registrable Securities until the Holders of Registrable Securities
receive copies of the supplemented or amended prospectus contemplated by Section
4(a)(vi), or until they are advised in writing by the Company that the use of
the applicable prospectus may be resumed, and they have received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such prospectus (it being the agreement of the
parties hereto, however, that the obligation of the Company with respect to
maintaining the subject registration statement current and effective shall be
extended by a period of days equal to the period the Holders of Registrable
Securities are required by this Section 4(b)(i) to discontinue disposition of
such Registrable Securities); and
(ii) furnish to the Company such information regarding each Seller, the
Registrable Securities held by such Seller, and the intended method of
disposition thereof as the Company shall reasonably request and as shall be
reasonably required in connection with the preparation of the applicable
registration statement and other actions taken by the Company under this
Agreement, and it shall be a condition precedent to the obligation of the
Company to take any action pursuant to this Agreement in respect of the
Registrable Securities owned by a Seller that such information has been
furnished to the Company by such Seller.
Section 5. Expenses of Registration.
The Company shall pay all Registration Expenses in connection with each
registration effected pursuant to Sections 2 and 3. All Selling Expenses
incurred by a Seller in connection with a registration effected pursuant to the
terms hereof shall be borne by such Seller.
Section 6. Indemnification.
(a) The Company shall indemnify and hold harmless, with respect to any
registration statement filed by it, to the full extent permitted by law, each
Holder of Registrable Securities covered by such registration statement, its
directors, officers, partners, agents, employees and each other Person, if any,
who controls such Holder within the meaning of Section 15 of the Securities Act
(collectively, "Holder Indemnified Parties") against all losses, claims,
damages, liabilities and expenses (including reasonable costs of investigation),
joint or several, to which any such Holder Indemnified Party may become subject
under the Securities Act, the Exchange Act, at common law or otherwise, insofar
as such losses, claims, damages, liabilities or expenses (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in any registration statement in which such Registrable
Securities were included as contemplated hereby or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary, final or summary prospectus, together with the documents
incorporated by reference therein (as amended or supplemented if the Company
shall have filed with the Commission any amendment thereof or supplement
thereto), or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or (iii) any violation by the Company of any federal, state or
common law rule or regulation applicable to the Company and relating to action
of or inaction by the Company in connection with any such registration;
provided, that each such Seller's liability under such
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<PAGE> 9
indemnification shall be limited to the sales proceeds from the sale of the
Company's securities owned by the sellers pursuant to such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement, and in each such case, the Company shall reimburse each
such Holder Indemnified Party for any reasonable legal or other expenses
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability, expense, action or proceeding; provided,
however, that the Company shall not be liable to any such Holder Indemnified
Party in any such case to the extent, that any such loss, claim, damage,
liability or expense (or action or proceeding, whether commenced or threatened,
in respect thereof) arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement or amendment thereof or supplement thereto or in any such
preliminary, final or summary prospectus in reliance upon and in conformity with
written information furnished to the Company by or on behalf of any such Holder
Indemnified Party for use in the preparation thereof. Such indemnity and
reimbursement of expenses and other obligations shall remain in full force and
effect regardless of any investigation made by or on behalf of the Holder
Indemnified Parties and shall survive the transfer of such securities by such
Holder Indemnified Parties.
(b) Each Holder of Registrable Securities participating in any registration
hereunder shall severally (and not jointly or jointly and severally) indemnify
and hold harmless, to the fullest extent permitted by law, the Company, its
directors, officers, employees and agents, and each Person who controls the
Company (within the meaning of Section 15 of the Securities Act) (collectively,
"Company Indemnified Parties") against all losses, claims, damages, liabilities
and expenses to which any Company Indemnified Party may become subject under the
Securities Act, the Exchange Act, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of a material fact
contained in any registration statement in which such Holder's Registrable
Securities were included or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) any untrue statement or alleged untrue statement of
a material fact contained in any preliminary, final or summary prospectus,
together with the documents incorporated by reference therein (as amended or
supplemented if the Company shall have filed with the Commission any amendment
thereof or supplement thereto), or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading to the extent in the cases described in clauses (i)
and (ii), that such untrue statement or omission was furnished in writing by
such Holder for use in the preparation thereof, or (iii) any violation by such
Holder of any federal, state or common law rule or regulation applicable to such
Holder and relating to action of or inaction by such Holder in connection with
any such registration; provided, that each such Seller's liability under such
indemnification shall be limited to the sales proceeds from the sale of the
Company's securities owned by the sellers pursuant to such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement, and in each such case, such Holder shall reimburse each
such Company Indemnified Party for any reasonable legal or other expenses
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability, expense, action or proceeding. Such indemnity
obligation shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company Indemnified Parties (except as provided
above) and shall survive the transfer of such securities by such Holder.
(c) Promptly after receipt by an indemnified party under subsection (a) or (b)
of written notice of the commencement of any action, suit, proceeding,
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<PAGE> 10
investigation or threat thereof made in writing with respect to which a claim
for indemnification may be made pursuant to this Section 6, such indemnified
party shall, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the indemnifying party of the threat or
commencement thereof; provided, however, that the failure to so notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. If any such claim or action
referred to under subsection (a) or (b) is brought against any indemnified party
and it then notifies the indemnifying party of the threat or commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it wishes, jointly with any other indemnifying party similarly
notified, to assume the defense thereof with counsel reasonably satisfactory to
such indemnified party. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense of any such claim or
action, the indemnifying party shall not be liable to such indemnified party
under this Section 6 for any legal expenses of counsel or any other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation unless the indemnifying
party has failed to assume the defense of such claim or action or to employ
counsel reasonably satisfactory to such indemnified party. Under no
circumstances will the indemnifying party be obligated to pay the fees and
expenses of more than one law firm for all indemnified parties. The indemnifying
party shall not be required to indemnify the indemnified party with respect to
any amounts paid in settlement of any action, proceeding or investigation
entered into without the written consent of the indemnifying party, which
consent shall not be unreasonably withheld. No indemnifying party shall consent
to the entry of any judgment or enter into any settlement without the consent of
the indemnified party unless (i) such judgment or settlement does not impose any
obligation or liability upon the indemnified party other than the execution,
delivery or approval thereof, and (ii) such judgment or settlement includes as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a full release and discharge from all liability in respect
of such claim for all Persons that may be entitled to or obligated to provide
indemnification or contribution under this Section 6.
(d) Indemnification similar to that specified in the preceding subsections of
this Section 6 (with appropriate modifications) shall be given by the Company
and each Seller with respect to any required registration or qualification of
securities under any state securities or blue sky laws.
(e) If the indemnification provided for in this Section 6 is unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) or (b),
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of the losses, claims, damages, liabilities
or expenses (or actions or proceedings in respect thereof) referred to in
subsection (a) or (b) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and the indemnified
party on the other in connection with the statements, omissions, actions or
inactions which resulted in such losses, claims, damages, liabilities or
expenses as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and the indemnified party 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
relates to information supplied by the indemnifying party or the indemnified
party, any action or inaction by any such party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement, omission, action or inaction. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities or
expenses (or actions or proceedings in respect thereof) pursuant to this
subsection (e) shall be deemed to include, without limitation, any reasonable
legal or other
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expenses incurred by such indemnified party in connection with investigating or
defending any such action or claim (which shall be limited as provided in
subsection (c) if the indemnifying party has assumed the defense of any such
action in accordance with the provisions thereof) which is the subject of this
subsection (e). 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 was not guilty of such fraudulent
misrepresentation. Promptly after receipt by an indemnified party under this
subsection (e) of written notice of the commencement of any action, suit,
proceeding, investigation or threat thereof made in writing with respect to
which a claim for contribution may be made against an indemnifying party under
this subsection (e), such indemnified party shall, if a claim for contribution
in respect thereof is to be made against an indemnifying party, give written
notice to the indemnifying party in writing of the commencement thereof (if the
notice specified in subsection (c) has not been given with respect to such
action); provided, however, that the failure to so notify the indemnifying party
shall not relieve it from any obligation to provide contribution which it may
have to any indemnified party under this subsection (e) except to the extent
that the indemnifying party is actually prejudiced by the failure to give
notice.
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this paragraph were determined by pro rata allocation or by any
other method of allocation which does not take account the equitable
considerations referred to in the immediately preceding paragraph.
If indemnification is available under this Section 6, the indemnifying parties
shall indemnify each indemnified party to the fullest extent provided in
subsections (a) and (b), without regard to the relative fault of said
indemnifying party or any other equitable consideration provided for in this
subsection. The provisions of this subsection shall be in addition to any other
rights to indemnification or contribution which any indemnified party may have
pursuant to law or contract, shall remain in full force and effect regardless of
any investigation made by or on behalf of any indemnified party, and shall
survive the transfer of securities by any such party.
(f) In connection with any underwritten offering contemplated by this Agreement
which includes Registrable Securities, the Company and Seller shall be required
to enter into a customary underwriting agreement with the underwriter.
Section 7. Selection of Underwriters.
If a registration effected pursuant to Section 2 is an underwritten offering or
a best efforts underwritten offering, the investment bankers or investment
bankers and manager or managers that will administer the offering shall be
selected by the Holders of a majority of the Registrable Securities to be
registered in such registration; provided, however, that such investment bankers
and managers must be reasonably satisfactory to the Company.
Section 8. Rule 144.
The Company covenants to each Holder that, to the extent that the Company shall
be required to do so under the Exchange Act, the Company shall (a) timely file
the reports required to be filed by it under the Exchange Act or the Securities
Act (including, but not limited to, the reports under Section 13 and 15(d) of
the Exchange Act referred to in subparagraph (c) (1) of Rule 144 adopted by the
Commission under the Securities Act) and the rules and regulations adopted by
the Commission thereunder, and (b) take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the Securities
Act within the limitations of the exemption provided by Rule 144 under the
Securities Act, as such Rule may be amended
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from time to time, or any similar rule or regulation hereafter adopted by the
Commission. Upon the request of any Holder, the Company shall deliver to such
Holder a written statement as to whether it has complied with such requirements.
Section 9. Market Standoff Agreement.
(a) In order to facilitate the possibility of future public offerings of Common
Stock, the Holders agree that in connection with an underwritten public offering
for cash by the Company of its Common Stock or securities convertible into or
exercisable or exchangeable for its Common Stock, each such Holder (regardless
of whether such Holder is participating in the offering) will execute a
customary agreement with the underwriters of such offering in substantially the
form executed by directors and senior executive management of the Company in
which the Holder agrees not to sell Registrable Securities owned by it for a
period of up to 90 days following the effective date of the registration
statement for such offering. Holders agree that during the above restricted
period they will not directly or indirectly sell, offer to sell, contract to
sell (including without limitation any short sale), grant an option to purchase
or otherwise transfer of dispose of (other than donees who agree to be similarly
bound) shares of Registrable Securities at any time during such period except
securities included in such registration. In order to enforce the foregoing
covenant, the Company may impose stop-order instructions with respect to such
shares of Registrable Securities held by each Holder, which shall be binding
upon any assignee or successor of such Holder (and the shares or securities of
every other Person subject to the foregoing restriction), until the end of the
restricted period.
(b) During a period commencing on the filing by the Company of a registration
statement which includes Registrable Securities (other than pursuant to Rule
415), the Company agrees not to effect any public sale or distribution
(including by registering securities held by others) of any securities the same
as or similar to those being registered by such registration statement, or any
securities convertible into or exchangeable or exercisable for such securities,
unless such sale or distribution is pursuant to such registration statement.
Section 10. Existing Fund I Registration Rights.
The Company, Energy PLC and EnCap LP agree that effective immediately upon the
execution and delivery of this Agreement by the parties hereto: (i) that certain
Registration Rights Agreement dated as of November 25, 1997, by and among the
Company, Energy PLC and EnCap LP, as amended by that certain Amendment No. 1 to
Registration Rights Agreement dated as of May 1, 1998, shall be terminated and
be of no further force and effect whatsoever; and (ii) that the registration
rights accorded Energy PLC and EnCap LP under that certain April 1997 Agreement
dated as of April 28, 1997, by and among the Company, Future Acquisition 1995,
Ltd., Energy PLC and EnCap LP shall be terminated and of no further force and
effect whatsoever.
Section 11. Other Existing or Subsequent Registration Rights.
(a) The Company represents and warrants to Energy PLC and EnCap LP that other
than the registration rights referenced in Section 10 (which rights are being
terminated as provided in such Section), the registration rights granted under
this Agreement and the registration rights granted under the Bargo Agreement,
the Company is not currently a party to any other agreement whereby it accords
any Person any demand or piggy-back registration rights with respect to such
Person's Common Stock.
(b) Contemporaneously with executing and delivering this Agreement, the Company
is executing and delivering that certain (i) Registration Rights Agreement dated
as of even date herewith by and between the Company and Bargo
12
<PAGE> 13
Energy Resources, Ltd. (the "Bargo Agreement") and (ii) Registration Rights
Agreement dated as of even date herewith by and between the Company, Carl Price,
et al. (the "Price Agreement"). The Company represents and warrants that it has
provided Energy PLC and EnCap LP with a true, complete and accurate copy of the
Bargo Agreement and the Price Agreement and agrees that it will not agree to any
amendment or other modification to the Bargo Agreement or the Price Agreement
without having first received the written consent of the Holders of a majority
of the Registrable Securities then outstanding.
(c) The Company agrees that it will not hereafter grant to any Person demand
registration rights without the prior written consent of the Holders of a
majority of the number of Registrable Securities then outstanding. The Company
agrees that it will not hereafter grant to any Person any piggy-back
registration rights that are inconsistent with or violates the rights granted to
the Holders of Registrable Securities under this Agreement.
Section 12. Miscellaneous.
(a) Energy PLC and EnCap LP agree, and each other Holder of Registrable
Securities (including Registrable Securities in any registration statement filed
pursuant to this Agreement) will be deemed to have agreed, as follows:
(i) if any Registrable Securities are being registered in any registration
pursuant to this Agreement, the Holder thereof will comply with all
anti-stabilization, manipulation and similar provisions of Section 10 of the
Exchange Act, as amended, and any rules promulgated thereunder by the Commission
and, at the request of the Company, will execute and deliver to the Company and
to any underwriter participating in such offering, an appropriate agreement to
such effect; and
(ii) at the end of any period during which the Company is obligated to keep a
registration statement current and effective as described herein, the Holders of
Registrable Securities included in the registration statement shall discontinue
sales thereof pursuant to such registration statement.
(b) All questions concerning the construction, validity and interpretation of
this Agreement shall be governed by the internal law, and not the law of
conflicts, of the State of Texas.
(c) All covenants and agreements in this Agreement by or on behalf of any of the
parties hereto will bind and inure to the benefit of the respective successors
and assigns of the parties hereto. In addition, the rights and obligations under
this Agreement shall automatically be transferred to and binding on any
transferee or assignee of the Registrable Securities; provided, that (i) the
Company is, within a reasonable time after such transfer, furnished with written
notice of the name and address of such transferee or assignee and the
Registrable Securities with respect to which such registration rights are being
transferred or assigned, (ii) such transferee or assignee agrees in writing to
be bound by and subject to the terms and conditions of this Agreement and (iii)
the transfer and assignment of the subject Registrable Securities is in
compliance with the Securities Act and applicable state securities laws or an
exemption from the registration requirements of the Securities Act and
applicable state securities laws. (d) This Agreement is 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 herein contained. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to the registration rights granted by the Company to the
Holders of the Registrable Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
13
<PAGE> 14
(e) All notices, demands or other communications to be given or delivered under
or by reason of the provisions of this Agreement shall be in writing and shall
be deemed to have been given when delivered personally or sent by reputable
express courier service (charges prepaid), or mailed to the recipient by
certified or registered mail, return receipt requested and postage prepaid, or
sent by telefax, to the parties at the following address (or to such other
address or to the attention of such other person as the recipient party has
specified by prior like notice to the sending party):
If to the Company:
Future Petroleum Corporation
2351 West Northwest Highway
Dallas, Texas 75220
Telecopier No.: (214) 350-8382
Attention: Carl Price
If to Energy PLC or EnCap LP:
c/o EnCap Investments L.C.
1100 Louisiana, Suite 3150
Houston, Texas 77002
Telecopier No.: (713) 659-6130
Attention: Gary R. Petersen, Managing Director
(f) If any provision of this Agreement is held to be unenforceable, this
Agreement shall be considered divisible and such provision shall be deemed
inoperative to the extent it is deemed unenforceable, and in all other respects
this Agreement shall remain in full force and effect; provided, however, that if
any such provision may be made enforceable by limitation thereof, then such
provision shall be deemed to be so limited and shall be enforceable to the
maximum extent permitted by applicable law.
(g) This Agreement may be executed by the parties hereto in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same agreement. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all, the
parties hereto.
(h) Each Holder of Registrable Securities, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of breach by it of the provisions of this Agreement and
hereby agrees to waive (to the extent permitted by law) the defense in any
action for specific performance that a remedy of law would be adequate.
(i) In any action or proceeding brought to enforce any provision of this
Agreement, or where any provision hereof is validly asserted as a defense, the
successful party shall be entitled to recover reasonable attorneys' fees in
addition to any other available remedy.
(j) The Company agrees to remove any stop transfer orders and similar
instructions and any legends on certificates representing Registrable Securities
describing transfer restrictions applicable to such securities upon the sale of
such securities (i) pursuant to an effective Registration Statement under the
Securities Act or (ii) in accordance with the provisions of Rule 144 under the
Securities Act.
(k) This Agreement may be amended, modified, supplemented, restated or
discharged (and provisions hereof may be waived) only by an instrument in
14
<PAGE> 15
writing signed by the Company and the Holders of not less than 95% of the number
of Registrable Securities then outstanding.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
FUTURE PETROLEUM CORPORATION, a Utah corporation
By: /s/ Carl Price
Name: Carl Price
Title: President
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ Gary R. Petersen
Name: Gary R. Petersen
Title : Director
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: EnCap Investments L.C., General Partner
By: /s/ Gary R. Petersen
Name: Gary R. Petersen
Title: Managing Director
15
<PAGE> 1
EXHIBIT 4.2
SECOND AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
This SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT ("Amendment") is
made and entered into this 14th day of May, 1999, by and among Bargo Energy
Company, a Texas corporation (the "Company"), Energy Capital Investment Company
PLC, an English investment company ("Energy PLC"), EnCap Equity 1994 Limited
Partnership, a Texas limited partnership ("EnCap LP"), EnCap Energy Capital Fund
III-B, L.P., a Texas limited partnership ("EnCap III-B"), BOCP Energy Partners,
L.P., a Texas limited partnership ("BOCP"), EnCap Energy Capital Fund III, L.P.,
a Texas limited partnership ("EnCap III"), Kayne Anderson Energy Fund, L.P., a
Delaware limited partnership ("Kayne"), BancAmerica Capital Investors SBIC I,
L.P., a Delaware limited partnership ("BACI"), Eos Partners, L.P., a Delaware
limited partnership ("Eos Partners"), Eos Partners SBIC, L.P., a Delaware
limited partnership ("Eos SBIC"), Eos Partners SBIC II, L.P., a Delaware limited
partnership ("Eos SBIC II" and together with Eos Partners and Eos SBIC,
collectively referred to as "EOS"), and SGC Partners II LLC, a Delaware limited
liability company ("SGCP"), and evidences the following:
RECITALS:
A. The Company (as successor by merger to Future Petroleum Corporation,
a Utah corporation), Energy PLC and EnCap LP entered into a Registration Rights
Agreement on August 14, 1998, as amended by a First Amendment to Registration
Rights Agreement dated December 15, 1998 (as amended, the "Agreement"), covering
shares of Common Stock (as defined in the Agreement) issued to Energy PLC and
EnCap LP;
B. Energy PLC, EnCap III-B, BOCP, EnCap III, Kayne, BACI, EOS and SGCP
(collectively, the "Investors") are parties, along with the Company, to that
certain Stock Purchase Agreement dated May 14, 1999 ("Purchase Agreement"),
pursuant to which the Investors will be issued 43,815,810 shares of Common Stock
(the "New Common Shares");
C. The parties to the Agreement desire to amend the Agreement to cover
the New Common Shares and to make certain other changes.
AGREEMENT:
NOW, THEREFORE, for and in consideration of the foregoing Recitals and
the mutual covenants contained herein, the sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby agree
as follows:
Section 1. Amendments to the Agreement.
(a) Section 1(a) of the Agreement is amended as follows:
Clause (i) of the first line in the definition of
"Registrable Securities" shall be replaced with:
"(i) the Fund I Shares and the New Common Shares and"
1
<PAGE> 2
There shall be added to Section 1(a) a definition of "New
Common Shares" as follows:
" `New Common Shares' shall mean all the shares of Common
Stock issued by the Company pursuant to that certain Stock
Purchase Agreement dated May 14, 1999 by and among the
Company, Energy Capital Investment Company PLC, an English
investment company ("Energy PLC"), EnCap Energy Capital
Fund III-B, L.P., a Texas limited partnership ("EnCap
III-B"), BOCP Energy Partners, L.P., a Texas limited
partnership ("BOCP"), EnCap Energy Capital Fund III, L.P.,
a Texas limited partnership ("EnCap III"), Kayne Anderson
Energy Fund, L.P., a Delaware limited partnership
("Kayne"), BancAmerica Capital Investors SBIC I, L.P., a
Delaware limited partnership ("BACI"), Eos Partners, L.P.,
a Delaware limited partnership ("Eos Partners"), Eos
Partners SBIC, L.P., a Delaware limited partnership ("Eos
SBIC"), Eos Partners SBIC II, L.P., a Delaware limited
partnership ("Eos SBIC II" and together with Eos Partners
and Eos SBIC, collectively referred to as "EOS"), and SGC
Partners II LLC, a Delaware limited liability company
("SGCP")."
(b) In Section 12(e), "If to Energy PLC or EnCap LP:" shall be replaced
with:
"If to Energy PLC, EnCap LP, EnCap III-B, BOCP or EnCap
III:"
(c) There shall be added to Section 12(e) the following:
"If to Kayne:
Kayne Anderson Investment Management
1800 Ave. of the Stars, Second Floor
Los Angeles, California 90067
Telecopier No.: 310-284-6490
Attention: Robert B. Sinnott
If to BACI:
Bank of America Capital Investors
100 North Tryon Street, 25th Floor
Charlotte, North Carolina 28255
Telecopier No.: 704-386-6432
Attention: J. Travis Hain
If to EOS:
EOS Partners, L.P.
320 Park Avenue
New York, New York 10022
Telecopier No.: 212-832-5815
Attention: Brian D. Young
If to SGCP:
SGC Partners II LLC
c/o SG Capital Partners, LLC
1221 Avenue of the Americas, 15th Floor
New York, NY 10020
Attention: V. Frank Pottow
Fax No.: 212-278-5454"
2
<PAGE> 3
Section 2. Binding Effect. Each of EnCap III-B, BOCP, EnCap III, Kayne,
BACI, EOS and SGCP by execution of this Amendment shall be bound by and subject
to the terms and conditions of the Agreement, as amended by this Amendment.
Section 3. No Other Changes. Except as explicitly amended by this
Amendment, the terms, conditions, rights and obligations under the Agreement
shall remain in full force and effect.
Section 4. Consents. The Company represents and warrants that no
consent, approval, order, or authorization of, or declaration, filing, or
registration with, any party is required to be obtained or made in connection
with the execution, delivery, or performance by the Company of the Agreement, as
amended by this Amendment, or the consummation by it of the transactions
contemplated hereby or thereby, other than those consents that have been
received by the Company as of the date hereof and requisite filings and
registrations with, and orders of, the Commission.
Section 5. Counterparts. This Amendment may be executed by the parties
hereto in any number of counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same agreement.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
BARGO ENERGY COMPANY
By: /s/
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: EnCap Investments L.C.,
General Partner
By: /s/
-------------------------------------
D. Martin Phillips
Managing Director
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/
-------------------------------------
Gary R. Petersen
Director
ENCAP ENERGY CAPITAL FUND III, L.P.
By: EnCap Investments L.C.,
General Partner
By: /s/
-------------------------------------
D. Martin Phillips
Managing Director
ENCAP ENERGY CAPITAL FUND III-B, L.P.
By: EnCap Investments L.C.,
General Partner
By: /s/
-------------------------------------
D. Martin Phillips
Managing Director
BOCP ENERGY PARTNERS, L.P.
By: EnCap Investments L.C., Manager
By: /s/
-------------------------------------
D. Martin Phillips
Managing Director
EOS PARTNERS, L.P.
By: /s/
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
EOS PARTNERS SBIC, L.P.
By: Eos SBIC General, L.P.,
its general partner
By: Eos SBIC, Inc., its general partner
By: /s/
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
4
<PAGE> 5
EOS PARTNERS SBIC II, L.P.
By: Eos SBIC General II, L.P.,
its general partner
By: Eos SBIC II, Inc.,
its general partner
By: /s/
--------------------------------
Name:
---------------------------
Title:
--------------------------
SGC PARTNERS II LLC
By: /s/
-----------------------------------------
V. Frank Pottow
Managing Director
BANCAMERICA CAPITAL INVESTORS SBIC I, L.P.
By: BancAmerica Capital Management
SBIC I, LLC, its general partner
By: BancAmerica Capital Management
I, L.P., its sole member
By: BACM I GP, LLC,
its general partner
By: /s/
------------------------------
J. Travis Hain
Managing Director
Kayne Anderson Energy Fund, L.P.
By: Kaim Non-Traditional, L.P.,
general partner
By: Kayne Anderson Investment
Management, Inc., general partner
By: /s/
-------------------------------
Robert V. Sinnott
Managing Director
5
<PAGE> 1
EXHIBIT 4.3
SECOND AMENDED AND RESTATED
SHAREHOLDERS' AGREEMENT
THIS SECOND AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT (this
"Agreement") is made and entered into this 14th day of May, 1999, by and among
Bargo Energy Company, a Texas corporation ("Company"), B. Carl Price, a Texas
resident ("Price"), Don Wm. Reynolds, a Texas resident ("Reynolds"), Energy
Capital Investment Company PLC, an English investment company ("Energy PLC"),
EnCap Equity 1994 Limited Partnership, a Texas limited partnership ("EnCap LP"),
Bargo Energy Resources, Ltd., a Texas limited partnership ("Resources"), TJG
Investments, Inc., a Texas corporation ("TJG"), Bargo Energy Company, a Texas
general partnership ("BEC"), Tim J. Goff ("Goff"), Thomas Barrow ("Barrow"),
James E. Sowell ("Sowell"), Bargo Operating Company, Inc., a Texas corporation
("Operating"), EnCap Energy Capital Fund III-B, L.P., a Texas limited
partnership ("EnCap III-B"), BOCP Energy Partners, L.P., a Texas limited
partnership ("BOCP"), EnCap Energy Capital Fund III, L.P., a Texas limited
partnership ("EnCap III"), Kayne Anderson Energy Fund, L.P., a Delaware limited
partnership ("Kayne"), BancAmerica Capital Investors SBIC I, L.P., a Delaware
limited partnership ("BACI"), Eos Partners, L.P., a Delaware limited partnership
("Eos Partners"), Eos Partners SBIC, L.P., a Delaware limited partnership ("Eos
SBIC"), Eos Partners SBIC II, L.P., a Delaware limited partnership ("Eos SBIC
II" and together with Eos Partners and Eos SBIC, collectively referred to as
"EOS"), and SGC Partners II LLC, a Delaware limited liability company ("SGCP").
RECITALS:
A. Company (as successor by merger to Future Petroleum Corporation, a
Utah corporation), Price, Reynolds, Energy PLC, EnCap LP, Resources, TJG, BEC,
Goff, Barrow, Sowell and Operating are currently parties to that certain Amended
and Restated Shareholder's Agreement dated December 15, 1998 ("Original
Agreement"), pursuant to which such parties agreed, among other things, to vote
their shares in favor of the election of the Designated Nominees (as defined by
and more specifically provided in the Original Agreement) named from time to
time by the parties, including the designation by Energy PLC and EnCap LP of two
of the seven directors on Company's Board.
B. EnCap III-B, Energy PLC, BOCP, EnCap III, Kayne, BACI, EOS and SGCP
(the "Investors") are parties, along with Company, to that certain Stock
Purchase Agreement dated May 14, 1999 ("Purchase Agreement"), pursuant to which
the Investors will be issued shares of Company's common stock, $0.01 par value
("Common Stock") and Company's Cumulative Redeemable Preferred Stock, Series B
(the "Preferred Shares").
C. The parties hereto deem it in their mutual best interests to make the
agreements contained herein, including providing Company Board of Directors
representation to those Investors making their initial investment in Company.
AGREEMENT:
NOW, THEREFORE, for and in consideration of the foregoing Recitals and
the mutual agreements contained herein, the sufficiency of which is hereby
acknowledged and confirmed, the parties hereto, intending to be legally bound
hereby, amend and restate the Original Agreement to read in its entirety as
follows:
1
<PAGE> 2
Section 1. Definitions.
(a) The following defined terms shall have the respective meanings
assigned to them below:
"Affiliate" shall mean, with respect to any person, (i) any
person directly or indirectly controlling, controlled by or under common
control with, such other person, or (ii) any account over which such
person has management authority in such a manner that the person has the
power to control the voting and disposition of the securities in such
account. For purposes of this definition, the term "control," when used
with respect to any person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of such person, whether through the ownership of
voting securities, by contract or otherwise; and the terms "controlling"
and "controlled" shall have meanings correlative to the foregoing.
"Bargo Group" shall mean TJG, BEC, Resources, Operating, Goff,
Barrow and Sowell and any transferee of a member of the Bargo Group that
executes or is required to execute an Addendum Agreement.
"Designated Nominee" shall mean a person designated as a nominee
for election to Company's Board of Directors pursuant to this Agreement.
"EnCap" shall mean EnCap LP, Energy PLC, EnCap III-B, BOCP, EnCap
III and any transferee of a member of EnCap that executes or is required
to execute an Addendum Agreement.
"Exempt Transfer" shall mean any sale, disposition or transfer
effected (i) through a registration under the Securities Act of 1933, as
amended (the "Securities Act"), (ii) pursuant to and in compliance with
Rule 144 promulgated by the Securities and Exchange Commission pursuant
to the Securities Act, provided that such sale does not involve a sale
of Stock to any person who has beneficial ownership of, or who is a
member of a "group," as defined under Section 13(d) and corresponding
rules of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), which has beneficial ownership of, more than 5% of the
outstanding Common Stock, (iii) transfers by a Shareholder to any person
who is a partner or equity holder of such Shareholder, a successor of,
or an entity all of the equity interests of which are directly or
indirectly owned by, the selling Shareholder or an Affiliate of the
selling Shareholder, provided that no transfer pursuant to this clause
(iii) shall be an Exempt Transfer unless the transferee agrees in
writing to be bound by this Agreement and executes an Addendum Agreement
hereto, (iv) by any member of the Bargo Group to any person who as of
the date hereof is an employee of the Company, or (v) any bona fide
charge, pledge or mortgage by any Shareholder of any shares of Stock or
Preferred Shares owned or held by it or its rights under this Agreement,
provided that any disposition of any such shares of Stock or Preferred
Shares after foreclosure of such charge, pledge or mortgage shall be
governed by the provisions of this Agreement, and the purchaser or
purchasers of the shares shall have entered into an Addendum Agreement
with Company and the other Shareholders.
"Investor Group" shall mean the Investors and any transferee of
an Investor that executes or is required to execute an Addendum
Agreement.
"Investors" has the meaning provided in the Recitals hereto.
"Market Price" shall mean the average closing prices of the
Common Stock for the ten trading days preceding an Offering Notice under
Section 4(e) over the principal securities exchange in which the Common
2
<PAGE> 3
Stock is traded or, if not traded on an exchange, the average closing
price for ten trading days preceding such Offering Notice as reported on
the Nasdaq NMS, or if not traded on an exchange or the Nasdaq NMS, the
average of the closing bid and asked prices of the Common Stock for such
ten day period.
"Original Agreement" has the meaning provided in the Recitals
hereto.
"Price Group" shall mean Price, Reynolds and any transferee of a
member of the Price Group that executes or is required to execute an
Addendum Agreement.
"Proportionate Share" shall mean the number of shares of Stock
equal to the product of: (i) the total number of Remaining Subject
Shares which a proposed transferee has offered to purchase, multiplied
by (ii) the fraction equal to the total number of shares of Stock which
a Tag Along Shareholder or Drag Along Shareholder, as the case may be,
owns, divided by the aggregate number of shares of Stock then
outstanding.
"Purchase Price" shall mean, for purposes of Section 4, an amount
stated in dollars equal to the total value of a bona fide written offer
from a person to purchase shares from a Shareholder determined as
follows: (i) cash payable at closing shall be valued at the amount
thereof, (ii) a security trading on a public market and for which
published trading prices are readily available shall be valued at its
closing sales price (or if a sales price is not available, at the
average of its closing bid and asked prices) on the last business day
preceding the date of the first Offering Notice with respect to such
offer, and (iii) a security not described in clause (ii) or other
property, including cash payable in one or more installments after
closing, shall be valued at its fair market value on the last business
day preceding the date of the first Offering Notice with respect to such
offer as determined at the option of the Selling Shareholder or Selling
Preferred Shareholder (both as defined in Section 4) either (a) by a
qualified independent third party appraiser (the expense of which shall
be paid by the Company) or (b) in good faith by the Board of Directors
of the Company (excluding any member of the Board who is a director,
officer or shareholder of the Selling Shareholder (or Selling Preferred
Shareholder, as applicable) or who has the right to purchase a portion
of such shares under this Agreement) but only if all of such Board
members agree to accept the assignment to make such determination.
"Same Group Shareholders" shall mean with respect to any Selling
Shareholder, those other members, if any, of the same Shareholder Group
of which such Selling Shareholder is a member.
"Shareholder Group" shall mean the Bargo Group, the Investor
Group or the Price Group, as applicable.
"Shareholders" shall mean the parties to this Agreement and any
person who executes or is required to execute an Addendum Agreement
(attached hereto as Exhibit "A").
"Stock" shall mean all shares of Common Stock owned or to be
owned by the Shareholders, whether issued and outstanding at the time of
the execution of this Agreement or issued subsequent thereto.
"Total Voting Power" shall mean the aggregate number of votes
which may be cast by holders of outstanding Voting Securities.
3
<PAGE> 4
"Voting Securities" shall mean Common Stock and any other
securities of Company entitled to vote generally for the election of
directors of Company.
Section 2. Agreement Regarding Board Representation and Option Plan.
(a) For so long as any of the Preferred Shares remain outstanding: each
of (i) EOS and SGCP (jointly), (ii) Kayne and (iii) BACI (or the successor or
transferee of any such party), shall be entitled to name one (1) Designated
Nominee for Class III of Company's Board of Directors; the Bargo Group
(including successors and transferees of its members) shall be entitled to name
two (2) Designated Nominees for Class II of Company's Board of Directors; and
EnCap (including successors and transferees of its members) shall be entitled to
name two (2) Designated Nominees for Class I of Company's Board of Directors. In
the event no Preferred Shares are outstanding, then for so long as the Investors
shall beneficially own in the aggregate at least 20% of the issued and
outstanding shares of capital stock of Company (excluding any shares held by the
Bargo Group), on a fully-diluted basis reflecting all shares issuable upon the
exercise of all outstanding rights to acquire shares of Company's capital stock,
then the three members of the Investors owning the most shares of Common Stock
shall be entitled from time to time to name (determined by any two of such three
parties) the smallest whole number of Designated Nominees necessary to
constitute at least 40% of the total members of Company's Board of Directors.
For purposes of this Agreement, "beneficial ownership" or "beneficially own"
shall be determined in accordance with Rule 13d-3 under the Exchange Act).
Notwithstanding the foregoing provisions of this Section 2(a), at the
earlier of (i) two years following the final redemption of all Preferred Shares
and (ii) 6 years following the date hereof, the Shareholders shall regain the
rights regarding Designated Nominees provided by the first sentence of this
Section 2(a), unless at such time the aggregate market value of the Common
Stock, that is held by non-affiliates (excluding, without limitation, the
Shareholders) and included for listing by The Nasdaq Stock Market or the New
York Stock Exchange, is at least $100,000,000.
(b) Each Shareholder agrees (i) to use its reasonable best efforts to
cause Company's Board of Directors to be composed of seven members, (ii) to use
its reasonable best efforts to cause Company to nominate or cause to be
nominated to Company's Board of Directors all Designated Nominees and (iii) to
vote or cause to be voted all Voting Securities beneficially owned by such
Shareholder in favor of the election of the Designated Nominees to Company's
Board of Directors.
(c) In the event of the death, incapacity, resignation or removal of a
Designated Nominee preventing his or her serving on Company's Board of
Directors, each Shareholder will promptly cause the election or appointment of
another Designated Nominee of such Shareholder or Shareholder Group, as
applicable, to fill the vacancy created thereby.
(d) Each Shareholder agrees to cause a designee of the Bargo Group to be
elected Chairman of the Board of Directors of Company. Tim J. Goff shall serve
as the Bargo Group's initial designee. In the event Mr. Goff no longer serves as
the Bargo Group's designee, the Bargo Group agrees that all of its subsequent
replacement designees as Chairman of the Board of Directors shall be subject to
the prior approval of a majority of the Board of Directors of Company, which
approval shall not be unreasonably withheld, and if a replacement designee is
not so approved, the Bargo Group shall designate another designee acceptable to
Company's Board of Directors.
(e) Each Shareholder agrees to vote all Voting Securities beneficially
owned by such Shareholder for approval of Company's 1999 Stock Incentive Plan
4
<PAGE> 5
contemplated by the Purchase Agreement. In addition, for so long as Tim Goff
serves as Chief Executive Officer of Company, each Shareholder will cause its
Designated Nominee(s) to approve and authorize the grant of stock option awards
as recommended by Mr. Goff pursuant to Section 1.2(a) of Company's 1999 Stock
Incentive Plan.
(f) For so long as SGCP owns any shares of Series B Preferred, Company
shall invite a representative designated by SGCP to attend all meetings of
Company's Board of Directors in a non-voting capacity and, in this respect,
shall give such representative copies of all notices, minutes, consents and
other materials that Company provides to its directors; provided, however, that
such SGCP representative shall hold in confidence and trust, and to act in a
fiduciary manner regarding, all information so provided by Company; and provided
further, that Company reserves the right to exclude such SGCP representative
from any meeting or portion thereof at which attendance by such representative
could adversely affect the attorney-client privilege between Company and its
legal counsel.
Section 3. General Restrictions on Transfer.
The Shareholders agree that, other than an Exempt Transfer, they will
not in any way sell, transfer, assign or otherwise dispose of any shares of
Stock, or any right or interest therein, whether voluntarily or involuntarily or
by operation of law (each of the foregoing transactions is hereinafter referred
to as a "Disposition"), except in accordance with the terms of this Agreement.
Aside from an Exempt Transfer, any purported Disposition in violation of any
provision of this Agreement will be void and will not operate to transfer any
interest or title in such shares to the purported transferee, and will give the
other Shareholders an option and preferential right to purchase such shares in
the manner and on the terms and conditions provided in this Agreement.
Section 4. Right of First Refusal; Tag-Along Rights; and Drag-Along Rights.
(a) If any Shareholder desires to make a Disposition of any shares of
Stock owned or held by it pursuant to a bona fide offer (other than in an Exempt
Transfer or pursuant to Section 4(e) hereof), such Shareholder (for purposes of
this Section 4, a "Selling Shareholder") shall offer such shares (the shares of
Stock proposed to be transferred being called the "Subject Shares") for sale at
the Purchase Price to the other Shareholders, all in accordance with the
following provisions of this Section 4.
(i) The Selling Shareholder shall deliver a written notice ("Offering
Notice") to the other Shareholders to sell the Subject Shares to the
Shareholders pursuant to this Agreement, indicating the number of
Subject Shares and the proposed Purchase Price. Once the Offering Notice
is delivered, the offer by the Selling Shareholder may not be withdrawn
prior to the expiration of the options of the other Shareholders, as
provided in this Section 4. Within 15 days from the receipt of such
Offering Notice, the Same Group Shareholders of the Selling Shareholder
may deliver to the Selling Shareholder written notice accepting the
offer in the Offering Notice ("Reply Notice"), pursuant to which each
such Same Group Shareholder may purchase no more than the number of
shares equal to the product of: (A) the total number of Subject Shares,
multiplied by (B) the fraction equal to the total number of shares of
Stock owned by such Same Group Shareholder, divided by the aggregate
number of shares of Stock owned by all Same Group Shareholders. If the
Selling Shareholder's Same Group Shareholders do not timely elect to
exercise their option to purchase all of the Subject Shares, then all
the other Shareholders outside of such group may, within the subsequent
15 days, deliver a Reply Notice, pursuant to which each such other
Shareholder may purchase no more than the number of shares equal to the
product of: (A) the total number of Subject Shares
5
<PAGE> 6
remaining available for purchase, multiplied by (B) the fraction equal
to the total number of shares of Stock owned by such other Shareholder,
divided by the aggregate number of shares of Stock owned by all other
Shareholders (who are not members of the Selling Shareholder's
Shareholder Group). Any such Reply Notice shall constitute an agreement
binding upon the Selling Shareholder and the Shareholders delivering the
Reply Notice to sell and purchase the stated portion of the Subject
Shares at the Purchase Price.
(ii) Any dispute concerning the calculation of the Purchase Price
shall be resolved by the Board of Directors of the Company, excluding
any member of the Board who is, or is a director, officer, partner or
stockholder of, the Selling Shareholder or who has a right to purchase
stock from the Selling Shareholder in the transaction for which the
Purchase Price is being determined; provided that if all directors are
excluded pursuant to the foregoing, such disputes shall be submitted to
binding arbitration as provided in Exhibit B. The Purchase Price shall
be paid in cash at the closing.
(b) If the Shareholders do not elect to purchase all of the Subject
Shares (such Subject Shares not being purchased are referred to herein as the
"Remaining Subject Shares"), then the Selling Shareholder shall cause the
proposed transferee (the "Proposed Purchaser") to offer in writing (a "Sale
Notice"), not less than 30 nor more than 120 days prior to the consummation of
any proposed Disposition, to the Shareholders other than the Selling Shareholder
(the "Tag Along Shareholders") to purchase a Proportionate Share of the shares
held by each Tag Along Shareholder. The Sale Notice shall set forth: (i) the
name of the Selling Shareholder and the number of Subject Shares proposed to be
transferred, (ii) the name and address of the Proposed Purchaser, (iii) the
proposed amount and form of consideration and terms and conditions of payment
offered by such Proposed Purchaser and (iv) that the Proposed Purchaser has been
informed of the tag along right provided for in this Section 4(b) and has agreed
to purchase shares of Stock owned by any Tag Along Shareholder in accordance
with the terms hereof. The tag along right may be exercised by any Tag Along
Shareholder by delivery of a written notice to the Proposed Purchaser and
Selling Shareholder (the "Tag Along Notice") within 30 days following its
receipt of the Sale Notice. The Tag Along Notice shall state the amount of
shares of Stock (the "Tag Along Shares") that such Tag Along Shareholder
proposes to include in such transfer to the Proposed Purchaser. To the extent
that a Tag Along Shareholder accepts such tag along offer, the number of shares
of Stock to be sold to the Proposed Purchaser by the Selling Shareholder shall
be reduced to the extent necessary to comply with this Section 4(b). In the
event that the Proposed Purchaser does not purchase all Tag Along Shares from
the Tag Along Shareholders on the same terms and conditions as specified in the
Sale Notice, then the Selling Shareholder shall not be permitted to sell any
Subject Shares to the Proposed Purchaser in the proposed transfer. The closing
of any purchase from the Tag Along Shareholders shall occur contemporaneously
with the purchase and sale of the Subject Shares (as adjusted hereunder) or at
such other time as such Tag Along Shareholders and the Proposed Purchaser shall
agree.
(c) In the event that (i) any Tag Along Shareholder elects not to
exercise his/its tag-along rights described in Section 4(b) (a "Drag Along
Shareholder"), and (ii) the total shares sought to be purchased by the Proposed
Purchaser constitute at least 50% of the shares of Common Stock outstanding on
the date of the Sale Notice, and (iii) Company's Board of Directors approves
such transaction, then each Selling Shareholder shall have the right (a "Drag
Along Right"), beginning on the date that is the first day after such tag-along
right has either expired or been rejected and ending 20 days thereafter, to
require each Drag Along Owner to sell a Proportionate Share owned by such Drag
Along Owner to the Proposed Purchaser. All such sales shall be on the same terms
and conditions as, and occur simultaneously
6
<PAGE> 7
with, the sale of shares to such Proposed Purchaser by such Selling Shareholder.
(d) If the other Shareholders do not elect to purchase all Subject
Shares, the Selling Shareholder shall, subject to Sections 4(b) and 4(c) hereof,
be freed and discharged, except as herein stated, from all obligations under the
terms of this Agreement other than to sell the remaining Subject Shares to the
purchaser and at the price and upon the terms stated in the Offering Notice, but
only if such sale shall be completed within a period of 90 days from the date of
delivery of the Offering Notice to the other Shareholders. If the Selling
Shareholder does not complete such sale within such 90 day period, all the
provisions of this Agreement, including the provisions of this Section 4, shall
apply to any future sale or offer for sale of such shares of Stock owned by the
Selling Shareholder.
(e) Upon any involuntary Disposition of a Shareholder's shares of
Stock, such Shareholder or its representative shall send notice thereof,
disclosing in full to the Company and the other Shareholders the nature and
details of such involuntary Disposition and offer such shares for sale at the
Market Price to the other Shareholders, all in accordance with the following
provisions of this Section 4(e). As used in this Section 4(e), the term "Selling
Shareholder" shall mean such Shareholder or its representative, as the case may
be.
(i) The Selling Shareholder shall deliver an Offering Notice to
the other Shareholders. Each of the other Shareholders shall have 30
days from the receipt of their respective Offering Notice to deliver a
Reply Notice to the Selling Shareholder. If by their Reply Notice the
other Shareholders accept the offer of the Selling Shareholder, such
Reply Notice shall constitute an agreement binding upon the Selling
Shareholder and the other Shareholders to sell and purchase the offered
shares at the price and upon the terms stated in the Offering Notice of
the Selling Shareholder.
(ii) In connection with any purchase and sale of shares of Stock
pursuant to paragraph (i) of this Section 4(e), the purchaser or
purchasers shall pay the purchase price for the shares in cash at the
closing.
(iii) If the Shareholders do not accept the offer of the Selling
Shareholder pursuant to the foregoing provisions of this Section 4(e),
the Selling Shareholder shall be freed and discharged from all
obligations under the terms of this Agreement except to dispose of the
offered shares by involuntary Disposition but only if the transferee
under any such Disposition shall have entered into and Addendum
Agreement with the Company and the other Shareholders. If such
involuntary Disposition is not effected, all the provisions of this
Agreement, including the provisions of this Section 4, shall apply to
any future involuntary Disposition of such shares of Stock owned by the
Selling Shareholder.
(f) If any Shareholder desires to make a Disposition of any Preferred
Shares owned or held by it pursuant to a bona fide offer (other than in an
Exempt Transfer), such Shareholder (for purposes of this Section 4(f), a
"Selling Preferred Shareholder") shall offer such shares (the Preferred Shares
proposed to be transferred being called the "Subject Preferred Shares") for sale
at the Purchase Price to the other Shareholders who then own Preferred Shares
("Preferred Shareholders"), all in accordance with the following provisions of
this Section 4(f).
(i) The Selling Preferred Shareholder shall deliver a written
notice ("Preferred Stock Offering Notice") to the other Preferred
Shareholders to sell the Subject Preferred Shares to the Preferred
7
<PAGE> 8
Shareholders pursuant to this Agreement, indicating the number of
Subject Preferred Shares and the proposed Purchase Price. Once the
Preferred Stock Offering Notice is delivered, the offer by the Selling
Preferred Shareholder may not be withdrawn prior to the expiration of
the options of the other Preferred Shareholders, as provided in this
Section 4(f). Within 15 days from the receipt of such Preferred Stock
Offering Notice, the other Preferred Shareholders may deliver to the
Selling Preferred Shareholder written notice accepting the offer in the
Preferred Stock Offering Notice, pursuant to which each such other
Preferred Shareholder may purchase no more than the number of shares
equal to the product of: (A) the total number of Subject Preferred
Shares, multiplied by (B) the fraction equal to the total number of
Preferred Shares owned by such other Preferred Shareholder, divided by
the aggregate number of Preferred Shares owned by all other Preferred
Shareholders. Any such reply to the Selling Preferred Shareholder shall
constitute an agreement binding upon the Selling Preferred Shareholder
and the Preferred Shareholders delivering such reply to sell and
purchase the stated portion of the Subject Preferred Shares at the
Purchase Price.
(ii) Any dispute concerning the calculation of the Purchase Price
shall be resolved by the Board of Directors of the Company, excluding
any member of the Board who is, or is a director, officer, partner or
stockholder of, the Selling Preferred Shareholder or who has a right to
purchase Preferred Shares from the Selling Preferred Shareholder in the
transaction for which the Purchase Price is being determined; provided
that if all directors are excluded pursuant to the foregoing, such
disputes shall be submitted to binding arbitration as provided in
Exhibit B. The Purchase Price shall be paid in cash at the closing.
If the Preferred Shareholders do not elect to purchase all of the
Subject Preferred Shares (such Subject Preferred Shares not being purchased are
referred to herein as the "Remaining Subject Preferred Shares"), then the
Selling Preferred Shareholder shall cause the proposed transferee (the "Proposed
Preferred Purchaser") to offer in writing (a "Preferred Sale Notice"), not less
than 30 nor more than 120 days prior to the consummation of any proposed
Disposition, to the Preferred Shareholders other than the Selling Preferred
Shareholder (the "Tag Along Preferred Shareholders") to purchase from each Tag
Along Preferred Shareholder a number of the Preferred Shares held by each Tag
Along Preferred Shareholder equal to the product of: (i) the total number of
Remaining Subject Preferred Shares which a proposed transferee has offered to
purchase, multiplied by (ii) the fraction equal to the total number of Preferred
Shares which a Tag Along Preferred Shareholder owns, divided by the aggregate
number of Preferred Shares then outstanding. The Preferred Sale Notice shall set
forth: (i) the name of the Selling Preferred Shareholder and the number of
Subject Preferred Shares proposed to be transferred, (ii) the name and address
of the Proposed Preferred Purchaser, (iii) the proposed amount and form of
consideration and terms and conditions of payment offered by such Proposed
Preferred Purchaser and (iv) that the Proposed Preferred Purchaser has been
informed of the tag along right provided for in this Section 4(f) and has agreed
to purchase Preferred Shares owned by any Tag Along Preferred Shareholder in
accordance with the terms hereof. The tag along right may be exercised by any
Tag Along Preferred Shareholder by delivery of a written notice to the Proposed
Preferred Purchaser and Selling Preferred Shareholder (the "Preferred Tag Along
Notice") within 30 days following its receipt of the Preferred Sale Notice. The
Preferred Tag Along Notice shall state the amount of Preferred Shares (the "Tag
Along Preferred Shares") that such Tag Along Preferred Shareholder proposes to
include in such transfer to the Proposed Preferred Purchaser. To the extent that
a Tag Along Preferred Shareholder accepts such tag along offer, the number of
Preferred Shares to be sold to the Proposed Preferred Purchaser by the Selling
Preferred Shareholder shall be reduced to the extent necessary to comply with
this Section 4(f). In the event that the Proposed Preferred Purchaser does not
8
<PAGE> 9
purchase all Tag Along Preferred Shares from the Tag Along Preferred
Shareholders on the same terms and conditions as specified in the Preferred Sale
Notice, then the Selling Preferred Shareholder shall not be permitted to sell
any Subject Preferred Shares to the Proposed Preferred Purchaser in the proposed
transfer. The closing of any purchase from the Tag Along Preferred Shareholders
shall occur contemporaneously with the purchase and sale of the Subject
Preferred Shares (as adjusted hereunder) or at such other time as such Tag Along
Preferred Shareholders and the Proposed Preferred Purchaser shall agree.
If the other Preferred Shareholders do not elect to purchase all Subject
Preferred Shares, the Selling Preferred Shareholder shall, subject to the other
provisions of this Section 4(f), be freed and discharged, except as herein
stated, from all obligations under the terms of this Agreement other than to
sell the remaining Subject Preferred Shares to the purchaser and at the price
and upon the terms stated in the Preferred Offering Notice, but only if such
sale shall be completed within a period of 90 days from the date of delivery of
the Preferred Offering Notice to the other Preferred Shareholders. If the
Selling Preferred Shareholder does not complete such sale within such 90 day
period, all the provisions of this Agreement, including the provisions of this
Section 4(f), shall apply to any future sale or offer for sale of such Preferred
Shares owned by the Selling Preferred Shareholder.
Section 5. Representations and Warranties of Shareholders.
Each Shareholder hereby represents and warrants to the other
Shareholders as follows:
(a) As of the date hereof, such Shareholder is the record and beneficial
owner of the number of shares of Stock and Preferred Shares, as set forth
opposite its name in the attached Exhibit 5(a).
(b) Such Shareholder, if not a natural person, is duly formed, validly
existing and in good standing under the laws of the jurisdiction of its
formation.
(c) Such Shareholder has full power and authority to execute, deliver,
and perform this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by such Shareholder
and constitutes a valid and legally binding obligation of such Shareholder,
enforceable against such Shareholder in accordance with its terms.
(d) The execution, delivery, and performance by such Shareholder of this
Agreement do not and will not (i) if not a natural person, contravene or violate
any provision of its charter or other governing documents, as amended to the
date hereof, (ii) conflict with or result in a violation of any provision of, or
constitute (with or without the giving of notice or the passage of time or both)
a default under, or give rise (with or without the giving of notice or the
passage of time or both) to any right of termination, cancellation, or
acceleration under, any bond, debenture, note, mortgage, indenture, lease,
contract, agreement, or other instrument or obligation to which such Shareholder
is a party or by which such Shareholder or any of its properties may be bound or
(iii) violate any applicable law, rule or regulation binding upon such
Shareholder.
(e) No consent, approval, order, or authorization of, or declaration,
filing, or registration with, any court or governmental agency or of any third
party is required to be obtained or made by such Shareholder in connection with
the execution, delivery, or performance by such Shareholder of this Agreement.
Section 6. Survival of Provisions.
9
<PAGE> 10
All representations, warranties and covenants made by each party hereto
in this Agreement or any other document contemplated hereby shall be considered
to have been relied upon by the other parties hereto and shall survive the
execution and delivery of this Agreement or such other document, regardless of
any investigation made by or on behalf of any such party.
Section 7. Entire Agreement.
This Agreement and the other documents contemplated hereunder contain
the entire understanding of the parties hereto with respect to the subject
matter hereof and supersede all prior agreements, understandings, negotiations,
and discussions among the parties with respect to such subject matter,
including, without limitation that certain Voting Agreement dated November 25,
1997, by and between Company, Energy PLC, EnCap LP, Carl Price and Don Wm.
Reynolds, that certain Purchase and Sale Agreement dated November 25, 1997, by
and among Company, Energy PLC, EnCap LP and Gecko Booty 1994 I Limited
Partnership, and the Original Agreement. Neither Company nor any Shareholder
shall be a party to any agreement regarding the voting or Disposition of capital
stock of Company, as such, unless Company and all such Shareholders are also
parties to that agreement, except with the written consent of Company and all
such Shareholders who are not parties to such an agreement.
Section 8. Amendments.
This Agreement may be amended, modified, supplemented, restated or
discharged only by an instrument approved in writing by the members in each
Shareholder Group owning at least two-thirds of the shares owned by such entire
group.
Section 9. Notices.
All notices and other communications required under this Agreement shall
(unless otherwise specifically provided herein) be in writing and be delivered
personally, by recognized commercial courier or delivery service (which provides
a receipt), by telecopier (with receipt acknowledged), or by registered or
certified mail (postage prepaid), at the following addresses:
If to a member of the Bargo Group, other than Sowell:
c/o Bargo Energy Company
700 Louisiana, Suite 3700
Houston, Texas 77002
Attention: Tim J. Goff
Fax No.: 713-236-9799
If to Sowell: James E. Sowell
3131 McKinney Avenue, Suite 200
Dallas, Texas 75204
If to B. Carl Price or Don Wm. Reynolds:
c/o Bargo Energy Company
700 Louisiana, Suite 3700
Houston, Texas 77002
Attention: Carl Price
Fax No.: 713-236-9799
10
<PAGE> 11
If to EnCap:
c/o EnCap Investments, L.C.
1100 Louisiana, Suite 3150
Houston, Texas 77002
Attention: D. Martin Phillips
Fax No.: 713-659-6130
If to Kayne:
Kayne Anderson Investment Management
1800 Ave. of the Stars, # 1425
Los Angeles, California 90067
Attention: Robert B. Sinnott
Fax No.: 310-284-6490
If to BACI:
Bank of America Capital Investors
100 North Tryon Street, 25th Floor
Charlotte, North Carolina 28255
Attention: J. Travis Hain
Fax No.: 704-386-6432
If to EOS:
EOS Partners, L.P.
320 Park Avenue
New York, New York 10022
Attention: Brian D. Young
Fax No.: 212-832-5815
If to SGCP:
SGC Partners II LLC
c/o SG Capital Partners LLC
1221 Avenue of the Americas, 15th Floor
New York, NY 10020
Attention: V. Frank Pottow
Fax No.: 212-278-5454
and shall be considered delivered on the date of receipt. A Shareholder may
specify as its proper address any other post office address within the
continental limits of the United States by giving notice to the other
Shareholders, in the manner provided in this Section, at least ten (10) days
prior to the effective date of such change of address.
Any party hereto may designate a different address by notice to the
other parties.
Section 10. Termination.
This Agreement shall terminate upon the earlier of (i) the written
consent of each of the Shareholders, (ii) when the Shareholders collectively
hold an aggregate of less than 20% (or when, with respect to a Shareholder
Group, such Shareholder Group owns less than 5% (or when, with respect to a
Shareholder, such Shareholder owns less than 0.5%) of the issued and outstanding
shares of Common Stock (and this Agreement shall be terminated solely with
respect to such Shareholder Group or Shareholder, as applicable, but shall
remain in effect as to those Shareholder Groups owning 5% (and those
Shareholders owning 0.5%) or more of the issued and outstanding shares of Common
Stock)), or (iii) the closing of a public offering of the Common Stock, pursuant
to an effective registration statement filed with the Securities and
11
<PAGE> 12
Exchange Commission, resulting in gross proceeds (before deduction of fees and
commissions) to the Company of at least $100,000,000.
Section 11. Power of Attorney.
For the purpose of executing an Addendum Agreement, all the Shareholders
hereby appoint Company as their agent and attorney to execute such Addendum
Agreement on their behalf and expressly bind themselves to the Addendum
Agreement by Company's execution of that Agreement without further action on
their part.
Section 12. No Waiver.
The failure of any party hereto to insist upon strict performance of a
covenant hereunder or of any obligation hereunder, irrespective of the length of
time for which such failure continues, shall not be a waiver of such party's
right to demand strict compliance in the future. No consent or waiver, express
or implied, to or of any breach or default in the performance of any obligation
hereunder shall constitute a consent or waiver to or of any other breach or
default in the performance of the same or any other obligation hereunder.
Section 13. Choice of Law.
This Agreement shall be governed by the internal laws of the State of
Texas, without regard to principles of conflicts of law.
Section 14. Successors and Assigns.
This Agreement shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns.
Section 15. References and Construction.
(a) The provisions of Sections 3 and 4 hereof shall not apply to
transactions between members of the same Shareholder Group. The parties hereto
consent to the pledge of shares pursuant to those certain Pledge Agreements
(stock) by Resources, Energy PLC and EnCap LP, Price, TJG, BEC, Goff, Barrow,
Sowell and Operating, respectively, in favor of Bank of America National Trust
and Savings Association and agree that Sections 3 and 4 hereof shall not be
applicable to such pledges or any foreclosures or resales thereunder.
(b) All references in this Agreement to articles, sections, subsections
and other subdivisions refer to corresponding articles, sections, subsections
and other subdivisions of this Agreement unless expressly provided otherwise.
(c) Titles appearing at the beginning of any of such subdivisions are
for convenience only and shall not constitute part of such subdivisions and
shall be disregarded in construing the language contained in such subdivisions.
(d) The words "this Agreement", "this instrument", "herein", "hereof",
"hereby", "hereunder" and words of similar import refer to this Agreement as a
whole and not to any particular subdivision unless expressly so limited.
(e) Words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires.
12
<PAGE> 13
(f) Unless the context otherwise requires or unless otherwise provided
herein, the terms defined in this Agreement which refer to a particular
agreement, instrument or document also refer to and include all renewals,
extensions, modifications, amendments or restatements of such agreement,
instrument or document, provided that nothing contained in this subsection shall
be construed to authorize such renewal, extension, modification, amendment or
restatement.
(g) Examples shall not be construed to limit, expressly or by
implication, the matter they illustrate.
(h) The word "or" is not exclusive and the word "includes" and its
derivatives means "includes, but is not limited to" and corresponding derivative
expressions.
(i) No consideration shall be given to the fact or presumption that one
party had a greater or lesser hand in drafting this Agreement.
(j) All references herein to "$" or "dollars" shall refer to U.S.
Dollars.
Section 16. Legends.
The certificate or certificates representing the Stock now owned or
hereafter acquired by the Shareholders shall have conspicuously stamped,
printed, or typed on the face or back thereof a legend substantially in the
following form:
"The shares represented hereby are subject to that certain Second
Amended and Restated Shareholders' Agreement, dated as of May 14, 1999,
by and among the Company, and certain stockholders of the Company. A
copy of such shareholders' agreement and all applicable amendments
thereto will be furnished by the Company to the holder hereof without
charge upon written request to the Company at its principal place of
business or registered office."
Section 17. Specific Performance.
Each of the parties hereto recognizes that any breach of the terms of
this Agreement may give rise to irreparable harm for which money damages would
not be an adequate remedy, and accordingly agree that, in addition to other
remedies, any nonbreaching party shall be entitled to enforce the terms of this
Agreement by a decree of specific performance without the necessity of proving
the inadequacy as a remedy of money damages.
Section 18. Counterparts.
This Agreement may be executed in multiple counterparts, with each such
counterpart constituting an original and all of such counterparts constituting
but one and the same agreement.
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<PAGE> 14
IN WITNESS WHEREOF, this Second Amended and Restated Shareholder's
Agreement has been executed as of the date above first written.
BARGO ENERGY COMPANY
By: /s/
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: EnCap Investments L.C.,
General Partner
By: /s/
-------------------------------------
D. Martin Phillips
Managing Director
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/
-------------------------------------
Gary R. Petersen
Director
TJG INVESTMENTS, INC.
By: /s/
-------------------------------------
Tim J. Goff
President
BARGO ENERGY COMPANY
By: /s/
-------------------------------------
Tim J. Goff
Manager
BARGO ENERGY RESOURCES, LTD.
By: Bargo Operating Company, Inc.,
General Partner
By: /s/
-------------------------------------
Tim J. Goff
President
BARGO OPERATING COMPANY, INC.
By: /s/
-------------------------------------
Tim J. Goff
President
14
<PAGE> 15
/s/
-------------------------------------
Tim J. Goff
/s/
-------------------------------------
Thomas Barrow
/s/
-------------------------------------
James E. Sowell
/s/
-------------------------------------
B. Carl Price
/s/
-------------------------------------
Don Wm. Reynolds
ENCAP ENERGY CAPITAL FUND III, L.P.
By: EnCap Investments L.C.,
General Partner
By: /s/
------------------------------------
D. Martin Phillips
Managing Director
ENCAP ENERGY CAPITAL FUND III-B, L.P.
By: EnCap Investments L.C.,
General Partner
By: /s/
------------------------------------
D. Martin Phillips
Managing Director
BOCP ENERGY PARTNERS, L.P.
By: EnCap Investments L.C., Manager
By: /s/
------------------------------------
D. Martin Phillips
Managing Director
EOS PARTNERS, L.P.
By: /s/
------------------------------------
Name:
-------------------------------
Title:
------------------------------
15
<PAGE> 16
EOS PARTNERS SBIC, L.P.
By: Eos SBIC General, L.P.,
its general partner
By: Eos SBIC, Inc., its general partner
By: /s/
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
EOS PARTNERS SBIC II, L.P.
By: Eos SBIC General II, L.P.,
its general partner
By: Eos SBIC II, Inc.,
its general partner
By: /s/
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
SGC PARTNERS II LLC
By: /s/
----------------------------------------
V. Frank Pottow
Managing Director
BANCAMERICA CAPITAL INVESTORS SBIC I, L.P.
By: BancAmerica Capital Management
SBIC I, LLC, its general partner
By: BancAmerica Capital Management
I, L.P., its sole member
By: BACM I GP, LLC,
its general partner
By:/s/
-------------------------------------
J. Travis Hain
Managing Director
Kayne Anderson Energy Fund, L.P.
By: Kaim Non-Traditional, L.P., general partner
By: Kayne Anderson Investment
Management, Inc., general partner
By:/s/
-----------------------------------
Robert V. Sinnott
Managing Director
16
<PAGE> 17
EXHIBIT 5(a)
<TABLE>
<CAPTION>
Number of Shares Number of
Shareholder of Stock Preferred Shares
- -----------------------------------------------------------------------------------------
<S> <C> <C>
B. Carl Price 1,126,869 0
Don Wm. Reynolds 753,362 0
Energy Capital Investment Company PLC 4,241,598 0
EnCap Equity 1994 Limited Partnership 2,424,973 0
TJG Investments, Inc. 1,255,000 0
Bargo Energy Company 7,078,333 0
Tim J. Goff 8,406,667 0
Thomas Barrow 8,666,667 0
James E. Sowell 8,666,666 0
Bargo Operating Company 260,000 0
Bargo Energy Resources, Ltd. 4,694,859 0
EnCap Energy Capital Fund III-B, L.P. 4,222,999 481,904
BOCP Energy Partners, L.P. 1,366,277 155,911
EnCap Energy Capital Fund III, L.P. 5,583,755 637,185
Kayne Anderson Energy Fund, L.P. 8,763,162 1,000,000
BancAmerica Capital Investors SBIC I, L.P. 13,144,743 1,500,000
Eos Partners, L.P. 328,619 37,500
Eos Partners SBIC, L.P. 3,417,633 390,000
Eos Partners SBIC II, L.P. 635,329 72,500
SGC Partners II LLC 4,381,581 500,000
</TABLE>
<PAGE> 18
EXHIBIT A
ADDENDUM AGREEMENT
Addendum Agreement made this ____ day of ________, ____, by and between
____________________________________________ (the "New Shareholder") and Bargo
Energy Company, a Texas corporation (the "Company"), and the other shareholders
(the "Shareholders") of the Company, who are parties to that certain Second
Amended and Restated Shareholders' Agreement dated May 14, 1999 (the
"Agreement"), between the Company and the
Shareholders.
W I T N E S E T H:
WHEREAS, the Company and the Shareholders entered into the Agreement to
impose certain restrictions and obligations upon themselves and the shares of
Common Stock, $0.01 par value, and Preferred Stock of the Company held by them
(the "Shares");
WHEREAS, the New Shareholder is desirous of becoming a shareholder of
the Company; and
WHEREAS, the Company and the Shareholders have required in the Agreement
that in certain circumstances certain persons being offered Shares must enter
into an Addendum Agreement binding the New Shareholder to the Agreement to the
same extent as if it was an original party thereto, so as to promote the mutual
interests of the Company, the Shareholders and the New Shareholders by imposing
the same restrictions and obligations on the New Shareholder and the shares of
Common Stock and/or Preferred Stock, as applicable, to be acquired by it as were
imposed upon the Shareholders under the Agreement;
NOW, THEREFORE, in consideration of the mutual promises of the parties,
and as a condition of the purchase of the shares of Common Stock in the Company,
the New Shareholder acknowledges that it has read the Agreement. The New
Shareholder shall be bound by, and shall have the benefit of, all the terms and
conditions set out in the Agreement to the same extent as if it was a
"Shareholder" as defined in the Agreement. This Addendum Agreement shall be
attached to and become a part of the Agreement.
New Shareholder
By____________________________
Address for notices under
Section 9 of Agreement:_____________
<PAGE> 19
EXHIBIT B
ARBITRATION
In the event that a dispute or controversy as described in Section 4(a)
or 4(f) should arise, such dispute or controversy shall be settled in
arbitration in Houston, Texas and for this purpose each of the parties hereby
expressly consents to such arbitration in such place. In the event the parties
cannot mutually agree upon an arbitrator to settle their dispute or controversy,
each party to the dispute shall select one arbitrator. In the event that there
are only two parties to the dispute, the arbitrators selected by each party
shall select a third arbitrator. The decision of said arbitrators shall be
binding upon the parties for all purposes. If any party fails to select an
arbitrator within 15 days after written demand from the other party or parties
to do so, or if, in the event that there are only two parties to the dispute,
the two arbitrators selected fail to select a third arbitrator within 15 days
after the last of such selected arbitrators is appointed, such other arbitrator
or arbitrators shall be selected pursuant to the then existing rules and
regulations of the American Arbitration Association. Such arbitration shall be
conducted in accordance with the then existing rules and regulations of the
American Arbitration Association to the extent such rules and regulations are
not inconsistent with this Agreement. The expense of each arbitrator shall be
borne by the party selecting the arbitrator. The expense of any third arbitrator
shall be borne equally by the two parties to the dispute or controversy. For
purposes hereof, in the case of a dispute or controversy where the Offering
Notice or Preferred Offering Notice, as applicable, was submitted by, or the
transaction otherwise involves, more than one Selling Shareholder or Selling
Preferred Shareholder, all such selling Shareholders shall collectively
constitute a single party. Likewise, where the transaction involves more than
one purchasing Shareholder, all such purchasing Shareholders shall constitute a
single party.
<PAGE> 1
EXHIBIT 10.1
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
by and among
Bargo Energy Company
and
Energy Capital Investment Company PLC,
EnCap Energy Capital Fund III-B, L.P.,
BOCP Energy Partners, L.P.,
EnCap Energy Capital Fund III, L.P.,
Kayne Anderson Energy Fund, L.P.,
BancAmerica Capital Investors SBIC I, L.P.,
Eos Partners, L.P.,
Eos Partners SBIC, L.P.,
Eos Partners SBIC II, L.P., and
SGC Partners II LLC
May 14, 1999
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of May 14,
1999 by and among Energy Capital Investment Company PLC, an English investment
company ("Energy PLC"), EnCap Energy Capital Fund III-B, L.P., a Texas limited
partnership ("EnCap III-B"), BOCP Energy Partners, L.P., a Texas limited
partnership ("BOCP"), EnCap Energy Capital Fund III, L.P., a Texas limited
partnership ("EnCap III"), Kayne Anderson Energy Fund, L.P., a Delaware limited
partnership ("Kayne"), BancAmerica Capital Investors SBIC I, L.P., a limited
partnership ("BACI"), Eos Partners, L.P., a Delaware limited partnership ("Eos
Partners"), Eos Partners SBIC, L.P., a Delaware limited partnership ("Eos
SBIC"), Eos Partners SBIC II, L.P., a Delaware limited partnership ("Eos SBIC
II" and together with Eos Partners and Eos SBIC, collectively referred to as
"EOS"), and SGC Partners II LLC, a Delaware limited liability company ("SGCP")
(each individually, a "Buyer," and collectively, the "Buyers") and Bargo Energy
Company, a Texas corporation.
WHEREAS, the Company (defined below) desires to issue to Buyers, and
Buyers desire to purchase, certain shares of the Company's Cumulative Redeemable
Preferred Stock, Series B, par value $.01 per share (the "Preferred Stock"), and
certain shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock");
1
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Company and Buyers hereby agree as follows:
ARTICLE I.
TERMS OF THE TRANSACTION
1.1 Agreement to Issue Shares. At the Closing, and on the terms and
subject to the conditions set forth in this Agreement, the Company shall sell
and deliver to each Buyer, and each Buyer (severally) shall purchase and accept
from the Company as set forth beside its name on Schedule 1.1, the number of
shares of Preferred Stock and the number of shares of Common Stock (as issued to
all Buyers, collectively, the "Shares").
1.2 Purchase Price and Payment. In consideration of the sale of the
Shares, each Buyer shall pay to the Company at the Closing the purchase price
set forth beside its name on Schedule 1.1, the aggregate of which shall be the
"Purchase Price." Each Buyer shall pay its portion of the Purchase Price to the
Company in immediately available funds by confirmed wire transfer to a bank
account to be designated by the Company (such designation to occur no later than
the third business day prior to the Closing Date) or in the form of a certified
or bank cashier's check payable to the order of the Company.
ARTICLE II.
CLOSING
The closing of the transactions contemplated hereby (the "Closing")
shall take place (i) at the offices of Thompson & Knight, P.C., 1700 Chase
Tower, 600 Travis, Houston, TX 77002 at 10:00 a.m., local time, on May 14, 1999,
or (ii) at such other time or place or on such other date as the parties hereto
shall agree. The date on which the Closing is required to take place is herein
referred to as the "Closing Date." All Closing transactions shall be deemed to
have occurred simultaneously.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyers that:
3.1 Corporate Organization. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of Texas and has all
requisite corporate power and corporate authority to own, lease, and operate its
properties and to carry on its business as now being conducted. No actions or
proceedings to dissolve the Company are pending or, to the best knowledge of the
Company, threatened.
2
<PAGE> 3
3.2 Qualification. The Company is duly qualified or licensed to do
business as a foreign corporation and is in good standing in each of the
jurisdictions set forth on Schedule 3.2, which are all the jurisdictions in
which it owns, leases, or operates property or in which such qualification or
licensing is required for the conduct of its business.
3.3 Charter and Bylaws. The Company has made available to Buyers
accurate and complete copies of (i) the charter and bylaws of each of the
Company and the Subsidiaries as currently in effect, (ii) the stock records of
each of the Company and the Subsidiaries, and (iii) the minutes of all meetings
of the respective Boards of Directors of the Company and the Subsidiaries, any
committees of such Boards, and the shareholders of the Company and the
Subsidiaries (and all consents in lieu of such meetings). Such records, minutes,
and consents accurately reflect the stock ownership of the Company and the
Subsidiaries and all actions taken by such Boards of Directors, committees, and
shareholders. Neither the Company nor any Subsidiary is in violation of any
provision of its charter or bylaws, other than violations which, individually or
in the aggregate, do not and will not have a Material Adverse Effect on the
Company.
3.4 Capitalization of the Company. The authorized capital stock of the
Company consists of (i) 120,000,000 shares of Common Stock, of which, as of the
date hereof, 48,357,786 shares are outstanding and no shares are held in the
Company's treasury, and (ii) 5,000,000 shares of preferred stock, par value $.01
per share, of which, as of the date hereof, no shares are outstanding and no
such shares are held in the Company's treasury. All outstanding shares of
capital stock of the Company have been validly issued and are fully paid and
nonassessable, and no shares of capital stock of the Company are subject to, nor
have any been issued in violation of, preemptive or similar rights. All
issuances, sales, and repurchases by the Company of shares of its capital stock
have been effected in compliance with all Applicable Laws, including without
limitation applicable federal and state securities laws. The Preferred Stock
constitutes (and at the Closing will constitute) all the outstanding shares of
preferred stock of the Company. As of the date hereof, an aggregate of 660,000
shares of Common Stock of the Company are reserved for issuance and are issuable
upon the exercise of outstanding stock options granted under the Company's stock
option plans; furthermore, an aggregate of 275,000 shares of Common Stock of the
Company are reserved for issuance and are issuable upon the exercise of
outstanding warrants (subject to certain anti-dilution provisions applicable
thereto). Except as disclosed above in this Section and in connection with the
transactions contemplated by this Agreement, there are (and as of the Closing
Date there will be) outstanding (i) no shares of capital stock or other voting
securities of the Company, (ii) no securities of the Company convertible into or
exchangeable for shares of capital stock or other voting securities of the
Company, (iii) no options or other rights to acquire from the Company, and no
obligation of the Company to issue or sell, any shares of capital stock or other
voting securities of the Company or any securities of the Company convertible
into or exchangeable for such capital stock or voting securities, and (iv) no
equity equivalents, interests in the ownership or earnings, or other similar
rights of or with respect to the Company. Other than regarding the Shares or as
disclosed on Schedule 3.4, there are (and as of the Closing Date there will be)
no outstanding obligations of the Company or any Subsidiary to repurchase,
redeem, or otherwise acquire any of the foregoing shares, securities, options,
equity equivalents, interests, or rights.
3
<PAGE> 4
3.5 Authority Relative to This Agreement. The Company has full corporate
power and corporate authority to execute, deliver, and perform this Agreement
and the Ancillary Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution, delivery, and
performance by the Company of this Agreement and the Ancillary Documents to
which it is a party, and the consummation by it of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary corporate action
of the Company. This Agreement has been duly executed and delivered by the
Company and constitutes, and each Ancillary Document executed or to be executed
by the Company has been, or when executed will be, duly executed and delivered
by the Company and constitute, or when executed and delivered will constitute,
valid and legally binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except that such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws affecting creditors' rights
generally and (ii) equitable principles which may limit the availability of
certain equitable remedies (such as specific performance) in certain instances.
3.6 Noncontravention. The execution, delivery, and performance by the
Company of this Agreement and the Ancillary Documents to which it is a party and
the consummation by it of the transactions contemplated hereby and thereby do
not and will not (i) conflict with or result in a violation of any provision of
the charter or bylaws or other governing instruments of the Company or any
Subsidiary, (ii) conflict with or result in a violation of any provision of, or
constitute (with or without the giving of notice or the passage of time or both)
a default under, or give rise (with or without the giving of notice or the
passage of time or both) to any right of termination, cancellation, or
acceleration under, or require any consent, approval, authorization or waiver
of, or notice to, any party to, any bond, debenture, note, mortgage, indenture,
lease, contract, agreement, or other instrument or obligation to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
or any of their respective properties may be bound or any Permit held by the
Company or any Subsidiary, (iii) result in the creation or imposition of any
Encumbrance upon the properties of the Company or any Subsidiary, or (iv)
assuming compliance with the matters referred to in Section 3.7, violate any
Applicable Law binding upon the Company or any Subsidiary, except, in the case
of clauses (ii), (iii) and (iv) above, for any such conflicts, violations,
defaults, terminations, cancellations, accelerations, or Encumbrances which
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company, and except, in the case of clause (ii) above, for (A) such
consents, approvals, authorizations, and waivers that have been obtained and are
unconditional and in full force and effect and such notices that have been duly
given and (B) such consents, approvals, authorizations, waivers, and notices
that are disclosed on Schedule 3.6 or otherwise expressly contemplated by the
Ancillary Documents.
3.7 Governmental Approvals. No consent, approval, order, or
authorization of, or declaration, filing, or registration with, any Governmental
Entity is required to be obtained or made by the Company or any Subsidiary in
connection with the execution, delivery, or performance by the Company of this
Agreement and the Ancillary Documents to which it is a party or the consummation
by it of the transactions contemplated hereby or thereby, other than as set
forth on Schedule 3.7.
4
<PAGE> 5
3.8 Subsidiaries.
(a) The Company does not own, directly or indirectly, any capital stock
of, or other equity interest in, any corporation or have any direct or indirect
equity or ownership interest in any other person, other than the Subsidiaries.
Schedule 3.8 lists each Subsidiary, the jurisdiction of incorporation of each
Subsidiary, and the authorized and outstanding capital stock of each Subsidiary.
Each Subsidiary is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation. As detailed on
Schedule 3.8, each Subsidiary is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each of the jurisdictions in
which it owns, leases, or operates property or in which such qualification or
licensing is required for the conduct of its business. Each Subsidiary has all
requisite corporate power and corporate authority to own, lease, and operate its
properties and to carry on its business as now being conducted. No actions or
proceedings to dissolve any Subsidiary are pending, or to the knowledge of the
Company, threatened.
(b) Except as otherwise indicated on Schedule 3.8, all the outstanding
capital stock or other equity interests of each Subsidiary are owned directly or
indirectly by the Company, free and clear of all Encumbrances. All outstanding
shares of capital stock of each Subsidiary have been validly issued and are
fully paid and nonassessable. No shares of capital stock or other equity
interests of any Subsidiary are subject to, nor have any been issued in
violation of, preemptive or similar rights.
(c) Except as set forth on Schedule 3.8, there are (and as of the
Closing Date there will be) outstanding (i) no shares of capital stock or other
voting securities of any Subsidiary, (ii) no securities of the Company or any
Subsidiary convertible into or exchangeable for shares of capital stock or other
voting securities of any Subsidiary, (iii) no options or other rights to acquire
from the Company or any Subsidiary, and no obligation of the Company or any
Subsidiary to issue or sell, any shares of capital stock or other voting
securities of any Subsidiary or any securities convertible into or exchangeable
for such capital stock or voting securities, and (iv) no equity equivalents,
interests in the ownership or earnings, or other similar rights of or with
respect to any Subsidiary. There are (and as of the Closing Date there will be)
no outstanding obligations of the Company or any Subsidiary to repurchase,
redeem, or otherwise acquire any of the foregoing shares, securities, options,
equity equivalents, interests, or rights.
3.9 Shares. The Shares to be issued by the Company at the Closing have
been duly authorized for such issuance. When issued and delivered by the Company
in accordance with the provisions of this Agreement, the Shares will be validly
issued, fully paid, and nonassessable. The issuance of the Shares pursuant to
this Agreement is not subject to any preemptive or similar rights. When issued,
the shares of Common Stock listed on Schedule 1.1 will in the aggregate
represent 40% of the issued and outstanding shares of capital stock of the
Company, on a fully-diluted basis reflecting all shares issuable upon the
exercise of all outstanding rights to acquire shares of the Company's capital
stock (including after giving effect to the transactions contemplated hereby).
5
<PAGE> 6
3.10 SEC Filings. Except as previously disclosed to Buyers, the Company
is current in its obligations to file all periodic reports and proxy statements
with the Securities and Exchange Commission required to be filed under the
Exchange Act. Except as previously disclosed to Buyers, the Company's Annual
Report on Form-10KSB for the fiscal year ended December 31, 1998, Report on Form
8-K filed on February 26, 1999, Information Statement on Schedule 14C filed on
March 9, 1999 and Report on Form 8-K/A filed on May 3, 1999 (collectively, the
"SEC Documents") are all of the documents the Company was required to file with
the Securities and Exchange Commission since January 1, 1999. As of their
respective dates, the SEC Documents complied as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations of the
Securities and Exchange Commission thereunder applicable to such SEC Documents.
The SEC Documents do 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 light of circumstances then existing. The
audited consolidated financial statements and unaudited consolidated interim
financial statements, if any, of the Company included in the SEC Documents
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the Securities and
Exchange Commission with respect thereto; present fairly in all material
respects, in conformity with GAAP applied on a consistent basis, the
consolidated financial position of the Company as of the dates thereof and its
consolidated results of operations and changes in financial position for the
periods then ended (subject to normal year-end adjustments in the case of any
unaudited interim financial statements and the fact that certain information and
notes have been condensed or omitted in accordance with the Exchange Act and the
rules promulgated thereunder); and are in all material respects in accordance
with the books of account and records of the Company and the Subsidiaries. There
are no material liabilities of the Company or any Subsidiary (contingent or
otherwise), other than as disclosed in the SEC Documents and the financial
statements included therein.
3.11 Absence of Certain Changes. Except as disclosed in the SEC
Documents or on Schedule 3.11, since January 1, 1999: (i) there has not been any
change, development, or effect, individually or in the aggregate, that has had,
or might reasonably be expected to have, a Material Adverse Effect on the
Company or a Subsidiary; (ii) the businesses of the Company and the Subsidiaries
have been conducted only in the ordinary course consistent with past practice;
(iii) neither the Company nor any Subsidiary has incurred any material
liability, engaged in any material transaction, or entered into any material
agreement outside the ordinary course of business consistent with past practice;
(iv) neither the Company nor any Subsidiary has suffered any material loss,
damage, destruction, or other casualty to any of its assets (whether or not
covered by insurance); and (v) neither the Company nor any Subsidiary has taken
any of the actions set forth in Section 5.2 except as permitted thereunder.
6
<PAGE> 7
3.12 Tax Matters. Except as disclosed on Schedule 3.12:
(a) except in each case as could not be reasonably expected to have a
Material Adverse Effect, all Tax Returns have been or will be timely filed by
the Company and the Subsidiaries when due in accordance with all applicable
laws; all Taxes shown on such Tax Returns have been or will be timely paid when
due; such Tax Returns have been properly completed in compliance with all
applicable laws and regulations and completely and accurately reflect the facts
regarding the income, expenses, properties, business and operations required to
be shown thereon; such Tax Returns are not subject to penalties under Section
6662 of the Code (or any corresponding provision of state, local or foreign tax
law);
(b) the Company and the Subsidiaries have paid all Taxes required to be
paid by them in all material respects (whether or not shown on a Tax Return) or
for which they could be liable (provided that it shall not be considered a
breach of this representation if it is ultimately determined that additional Tax
payments are due but such assessment is based on an adjustment to a return or
position, if such party has a reasonable basis for the position taken with
respect to such Taxes), whether to taxing authorities or to other persons under
Tax allocation agreements or otherwise, and the charges, accruals, and reserves
for Taxes due, or accrued but not yet due, relating to their income, properties,
transactions or operations as reflected on their books (including, without
limitation, the balance sheet included in the Company's Form 10-KSB for the
fiscal year ended December 31, 1998) are adequate to cover such Taxes;
(c) there are no agreements or consents currently in effect for the
extension or waiver of the time (i) to file any Tax Return or (ii) for
assessment or collection of any Taxes relating to the income, properties or
operations of the Company or the Subsidiaries, nor has the Company or a
Subsidiary been requested to enter into any such agreement or consent; and
(d) there are no liens for Taxes (other than for current Taxes not yet
due and payable) upon the assets of the Company or the Subsidiaries.
3.13 Compliance With Laws. Except as disclosed on Schedule 3.13, the
Company and the Subsidiaries have complied in all material respects with all
Applicable Laws (including without limitation Applicable Laws relating to
securities, properties, business products and services, manufacturing processes,
advertising and sales practices, employment practices, terms and conditions of
employment, wages and hours, safety, occupational safety, health, environmental
protection, product safety, and civil rights). Neither the Company nor any
Subsidiary has received any written notice, which has not been dismissed or
otherwise disposed of, that the Company or any Subsidiary has not so complied.
Neither the Company nor any Subsidiary is charged or, to the best knowledge of
the Company, threatened with, or, to the best knowledge of the Company, under
investigation with respect to, any violation of any Applicable Law relating to
any aspect of the business of the Company or any Subsidiary.
3.14 Legal Proceedings. There are no Proceedings pending or, to the best
knowledge of the Company, threatened against or involving the Company or any
Subsidiary (or any of their respective directors or officers in connection with
the business or affairs of the Company or any Subsidiary) or any
7
<PAGE> 8
properties or rights of the Company or any Subsidiary, except (i) as disclosed
on Schedule 3.14, (ii) for any Proceedings that pertain to routine claims by
persons other than Governmental Entities that are fully covered by insurance
(subject to applicable insurance deductibles), (iii) for minor product or
service warranty claims arising in the usual and ordinary course of business
which in the aggregate may be satisfied at nominal cost to the Company, and (iv)
for Proceedings which, individually or in the aggregate, if prosecuted to
judgment, would not have a Material Adverse Effect on the Company. Except as
disclosed on Schedule 3.14, any and all potential liability of the Company and
the Subsidiaries under such Proceedings is adequately covered (except for
standard deductible amounts) by the existing insurance maintained by the Company
and the Subsidiaries. Neither the Company nor any Subsidiary is subject to any
judgment, order, writ, injunction, or decree of any Governmental Entity which
has had or is reasonably likely to have a Material Adverse Effect on the
Company. There are no Proceedings pending or, to the best knowledge of the
Company, threatened seeking to restrain, prohibit, or obtain damages or other
relief in connection with this Agreement or the transactions contemplated
hereby.
3.15 Permits. The Company and the Subsidiaries hold all Permits
necessary or required for the conduct of the business of the Company and the
Subsidiaries as currently conducted, except where the failure to hold such
Permits could not reasonably be expected to have a Material Adverse Effect. Each
of such Permits is in full force and effect, the Company or such Subsidiary is
in compliance with all its obligations with respect thereto, and, to the best
knowledge of the Company, no event has occurred which permits, or with or
without the giving of notice or the passage of time or both would permit, the
revocation or termination of any thereof. Except as disclosed on Schedule 3.15,
no notice has been issued by any Governmental Entity and no Proceeding is
pending or, to the best knowledge of the Company, threatened with respect to any
alleged failure by the Company or a Subsidiary to have any Permit the absence of
which would have a Material Adverse Effect on the Company.
3.16 Agreements.
(a) Set forth on Schedule 3.16 is a list of all the following
agreements, arrangements, and understandings (written or oral, formal or
informal) (collectively, for purposes of this Section, "agreements") to which
the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any of their respective properties is otherwise bound:
(i) collective bargaining agreements and similar agreements with
employees as a group;
(ii) employee benefit agreements, trusts, plans, funds, or other
arrangements of any nature, including those referred to in Section
5.2(e)(i);
(iii) agreements with any current or former shareholder,
director, officer, employee, consultant, or advisor or any affiliate of
any such person;
(iv) agreements between or among the Company and any of the
Subsidiaries;
8
<PAGE> 9
(v) indentures, mortgages, security agreements, notes, loan or
credit agreements, or other agreements relating to the borrowing of
money by the Company or any Subsidiary or to the direct or indirect
guarantee or assumption by the Company or any Subsidiary of any
obligation of others, including any agreement (other than trade payables
incurred in the ordinary course of business) that has the economic
effect although not the legal form of any of the foregoing;
(vi) agreements relating to the acquisition or disposition of
assets, other than those entered into in the ordinary course of business
consistent with past practice;
(vii) agreements relating to the acquisition or disposition of
any interest in any business enterprise;
(viii) agreements containing any covenant limiting the freedom of
the Company or any Subsidiary to engage in any line of business or
compete with any other person in any geographic area or during any
period of time;
(ix) joint venture agreements;
(x) contracts and other agreements under which the Company or any
Subsidiary agrees to indemnify any party; and
(xi) other agreements, whether or not made in the ordinary course
of business, that are material to the business, assets, results of
operations, condition (financial or otherwise), or prospects of the
Company and the Subsidiaries considered as a whole.
(b) The Company has made available to Buyers accurate and complete
copies of the agreements listed on Schedule 3.16. Each of such agreements is a
valid and binding agreement of the Company and the Subsidiaries (to the extent
each is a party thereto) and (to the best knowledge of the Company) the other
party or parties thereto, enforceable against the Company and the Subsidiaries
(to the extent each is a party thereto) and (to the best knowledge of the
Company) such other party or parties in accordance with its terms. Neither the
Company nor any Subsidiary is in breach of or in default under, nor has any
event occurred which (with or without the giving of notice or the passage of
time or both) would constitute a default by the Company or any Subsidiary under,
any of such agreements, and neither the Company nor any Subsidiary has received
any notice from, or given any notice to, any other party indicating that the
Company or any Subsidiary is in breach of or in default under any of such
agreements, except in each case which could not be reasonably expected to have a
Material Adverse Effect. To the best knowledge of the Company, no other party to
any of such agreements is in breach of or in default under such agreements, nor
has any assertion been made by the Company or any Subsidiary of any such breach
or default.
9
<PAGE> 10
(c) Neither the Company nor any Subsidiary has received notice of any
plan or intention of any other party to any material agreement to exercise any
right of offset with respect to, or any right to cancel or terminate, any
material agreement. Neither the Company nor any Subsidiary currently
contemplates, or has reason to believe any other person currently contemplates,
any amendment or change to any agreement, which amendment or change could have a
Material Adverse Effect on the Company.
3.17 ERISA. Other than a group health plan and a 401(k) plan, there is
no "employee benefit plan", as defined in Section 3(3) of ERISA, (i) which is
subject to any provision of ERISA, (ii) which is, or is required to be,
maintained, administered, or contributed to by the Company or any affiliate of
the Company, and (iii) which covers any employee or former employee of the
Company or any affiliate of the Company or under which the Company or any
affiliate of the Company has any liability. For purposes of this Section only,
an "affiliate" of any person means any other person which, together with such
person, would be treated as a single employer under Section 414 of the Code.
3.18 Environmental Matters.
(a) Except as disclosed on Schedule 3.18:
(i) the properties, operations, and activities of the
Company and the Subsidiaries comply with all Applicable Environmental
Laws (as defined below), except for noncompliance that could not
reasonably be expected to have a Material Adverse Effect;
(ii) the Company and the Subsidiaries and the properties,
operations, and activities of the Company and the Subsidiaries are not
subject to any existing, pending, or, to the best knowledge of the
Company, threatened Proceeding under, or to any remedial obligations
under, any Applicable Environmental Laws that could reasonably be
expected to have a Material Adverse Effect;
(iii) all Permits, if any, required to be obtained by the
Company or any Subsidiary under any Applicable Environmental Laws in
connection with any aspect of the business of the Company or the
Subsidiaries, including without limitation those relating to the
treatment, storage, disposal, or release of a hazardous material (as
defined below), have been duly obtained and are in full force and
effect, and the Company and the Subsidiaries are in compliance with the
material terms and conditions of all such Permits;
(iv) the Company and the Subsidiaries have satisfied and are
currently in compliance with all financial responsibility requirements
applicable to their respective operations and imposed by any
Governmental Entity under any Applicable Environmental Laws, and the
Company and the Subsidiaries have not received any notice of
noncompliance with any such financial responsibility requirements;
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(v) to the best knowledge of the Company, there are no physical
or environmental conditions existing on any property owned or leased by
the Company or any Subsidiary or resulting from the Company's or any
Subsidiary's operations or activities, past or present, at any location,
that would give rise to any on-site or off-site remedial obligations
under any Applicable Environmental Laws, other than normal and ordinary
remedial work associated with plugging and abandoning of oil and gas
facilities;
(vi) to the best knowledge of the Company, since the effective
date of the relative requirements of Applicable Environmental Laws, all
hazardous materials generated by the Company or any Subsidiary or used
in connection with their respective properties, operations, or
activities have been transported only by carriers authorized under
Applicable Environmental Laws to transport such materials, and have been
disposed of only at treatment, storage, and disposal facilities
authorized under Applicable Environmental Laws to treat, store, or
dispose of such materials, and, to the best knowledge of the Company,
such carriers and facilities, at the time of such transportation or
disposal, were operating in compliance with such authorizations and were
not the subject of any existing, pending, or threatened Proceeding in
connection with any Applicable Environmental Laws;
(vii) since the effective date of the relative requirements of
Applicable Environmental Laws, there has been no exposure of any person
or property to hazardous materials, nor has there been any release of
hazardous materials into the environment in violation of any Applicable
Environmental Laws, by the Company or any Subsidiary or in connection
with their respective properties, operations, or activities that could
reasonably be expected to give rise to any claim for damages or
compensation that could reasonably be expected to have a Material
Adverse Effect; and
(viii) the Company and the Subsidiaries shall make available to
Buyers all internal and external environmental audits and studies and
all correspondence on substantial environmental matters in the
possession of the Company and the Subsidiaries relating to any of the
current or former properties, operations, or activities of the Company
and the Subsidiaries, provided that the Company and the Subsidiaries
shall not be required to make available any such audits, studies, or
correspondence that may be subject to the attorney-client privilege or
similar privilege.
(b) For purposes of this Agreement, "Applicable Environmental Laws"
means any and all Applicable Laws pertaining to health, safety, or the
environment in effect (currently or hereafter) in any and all jurisdictions in
which the Company or the Subsidiaries have conducted operations or activities or
owned or leased property, including, without limitation, the Clean Air Act, as
amended, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, the Rivers and Harbors Act of 1899, 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, 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
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Transportation Act, as amended, the Texas Water Code, the Texas Solid Waste
Disposal Act, and other environmental conservation or protection laws. For
purposes of this Agreement, the term "hazardous material" means any substance
which is listed or defined as a hazardous substance, hazardous constituent, or
solid waste pursuant to any Applicable Environmental Laws.
(c) The representations and warranties contained in this Section
would continue to be true and correct following disclosure to the applicable
Governmental Entities of all relevant facts, conditions, and circumstances known
to the Company, if any, pertaining to the properties, operations, and activities
of the Company and the Subsidiaries.
3.19 Oil and Gas Properties.
(a) Each of the Company and the Subsidiaries has good and marketable
title to all of its material oil and gas properties and assets, free and clear
of all liens other than as disclosed in Schedule 3.19; provided, that no
representation or warranty is made with respect to any oil, gas or mineral
property or interest to which no proved oil or gas reserves are properly
attributed. All proceeds from the sale of each the Company's and the
Subsidiaries' share of the hydrocarbons being produced from its oil and gas
properties are currently being paid in full to such party by the purchasers
thereof on a timely basis and none of such proceeds are currently being held in
suspense by such purchaser or any other party.
(b) The Company has delivered to Buyers a copy of the reserve report
(the "Reserve Report") dated as of January 1, 1999, prepared by T.J. Smith and
Company, Inc., independent reserve engineers (the "Reserve Engineers"), relating
to the oil and gas reserves of the Company and the Subsidiaries. The factual
information underlying the estimates of the reserves of the Company and the
Subsidiaries, which was supplied by the Company to the Reserve Engineers for the
purpose of preparing the Reserve Report, including, without limitation,
production, volumes, sales prices for production, contractual pricing provisions
under oil or gas sales or marketing contracts under hedging arrangements, costs
of operations and development, and working interest and net revenue information
relating to the Company's and the Subsidiaries' ownership interests in
properties, was true and correct in all material respects on the date of such
Reserve Report; the estimates of future capital expenditures and other future
exploration and development costs supplied to the Reserve Engineers were
prepared in good faith and with a reasonable basis; the information provided to
the Reserve Engineers for purposes of preparing the Reserve Report was prepared
in accordance with customary industry practices; the Reserve Engineers were, as
of the date of the Reserve Report prepared by it, and are, as of the date
hereof, independent petroleum engineers with respect to the Company and the
Subsidiaries; other than normal production of the reserves and intervening oil
and gas price fluctuations, the Company is not as of the date hereof and as of
the Closing Date will not be, aware of any facts or circumstances that would
result in a materially adverse change in the reserves in the aggregate, or the
aggregate present value of future net cash flows therefrom, as described in the
Reserve Report; estimates of such reserves and the present value of the future
net cash flows therefrom in the Reserve Report comply in all material respects
to the applicable requirements of Regulation S-X and Industry Guide 2 under the
Securities Act.
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3.20 Nature of Company Assets. The assets of the Company and of the
Subsidiaries consist solely of (i) reserves of oil, rights to reserves of oil
and associated exploration and production assets with a fair market value not
exceeding $500 million and (ii) other assets with a fair market value not
exceeding $15 million. For purposes of this Section 3.20, the term "associated
exploration and production assets" shall have the meaning ascribed thereto in
Section 802.3 of the Rules promulgated pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976.
3.21 Marketing of Production. Except for contracts listed on Schedule
3.21 (with respect to all of which contracts the Company represents that it or
its affiliates are receiving a price for all production sold thereunder which is
computed in accordance with the terms of the relevant contract and are not
having deliveries curtailed substantially below the subject property's delivery
capacity), there exist no material agreements for the sale of production from
the leasehold and other interests in oil, gas and other mineral properties
owned, or otherwise held in the name of, the Company or its affiliates
(collectively, the "Oil and Gas Properties") (including without limitation,
calls on, or other rights to purchase, production, whether or not the same are
currently being exercised) other than (i) agreements or arrangements pertaining
to the sale of production at a price equal to or greater than a price that is
the market price from time to time existing in the areas where the Oil and Gas
Properties subject to such agreement or arrangement are located, and (ii)
agreements or arrangements that are cancelable on 90 days notice or less without
penalty or detriment.
3.22 Material Personal Property. All pipelines, wells, gas processing
plants, platforms and other material improvements, fixtures and equipment owned
in whole or in part by the Company or any of its affiliates that are necessary
to conduct normal operations are being maintained in a state adequate to conduct
normal operations, and with respect to such of the foregoing which are operated
by the Company or any of its affiliates, in a manner consistent with the
Company's or its affiliates' past practices.
3.23 Intellectual Property. The Company and its affiliates either own or
have valid licenses or other rights to use all patents, copyrights, trademarks,
software, databases, geological data, geophysical data, engineering data, maps,
interpretations and other technical information used in their businesses as
presently conducted, subject to the limitations contained in the agreements
governing the use of the same, which limitations are customary for companies
engaged in the business of the exploration and production of oil, gas,
condensate and other hydrocarbons, with such exceptions as would not result in a
Material Adverse Effect on the Company. There are no limitations contained in
the agreements of the type described in the immediately preceding sentence
which, upon consummation of the transactions contemplated by this Agreement,
will alter or impair any such rights, breach any such agreement with any third
party vendor, or require payments of additional sums thereunder, except any such
limitations that would not have a Material Adverse Effect on the Company. The
Company and its affiliates are in compliance in all material respects with such
licenses and agreements and there are no pending or, to the best knowledge of
the Company, threatened Proceedings challenging or questioning the validity or
effectiveness of any license or agreement relating to such property or the right
of the Company or any affiliate to use, copy, modify or distribute the same.
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3.24 Brokerage Fees. Neither the Company nor any of its affiliates has
retained any financial advisor, broker, agent, or finder or paid or agreed to
pay any financial advisor, broker, agent, or finder on account of this Agreement
or any transaction contemplated hereby. The Company shall indemnify and hold
harmless Buyers from and against any and all losses, claims, damages, and
liabilities (including legal and other expenses reasonably incurred in
connection with investigating or defending any claims or actions) with respect
to any finder's fee, brokerage commission, or similar payment in connection with
any transaction contemplated hereby asserted by any person on the basis of any
act or statement made or alleged to have been made by the Company or any of its
affiliates.
3.25 Disclosure. No representation or warranty made by the Company in
this Agreement, and no statement of the Company contained in any document,
certificate, or other writing furnished or to be furnished by the Company
pursuant hereto or in connection herewith, contains or will contain, at the time
of delivery, any untrue statement of a material fact or omits or will omit, at
the time of delivery, to state any material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they are
made, not misleading. The Company knows of no matter (other than matters of a
general economic character, including commodity prices, not relating solely to
the Company or any Subsidiary in any specific manner) which has not been
disclosed to Buyers pursuant to this Agreement which has or is reasonably likely
to have a Material Adverse Effect on the Company. The Company has delivered or
made available to Buyers accurate and complete copies of all agreements,
documents, and other writings referred to or listed in this Article III or any
Schedule hereto.
3.26 Representations and Warranties on Closing Date. The representations
and warranties made in this Article III will be true and correct in all material
respects on and as of the Closing Date with the same force and effect as if such
representations and warranties had been made on and as of the Closing Date,
except that any such representations and warranties which expressly relate only
to an earlier date shall be true and correct on the Closing Date as of such
earlier date.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYERS
Each Buyer, only with respect to itself, represents and warrants to the
Company that:
4.1 Organization and Formation. Each corporate Buyer is duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and corporate authority to
own, lease, and operate its properties and to carry on its business as now being
conducted. Each partnership Buyer is duly formed and is in good standing (as
applicable) under the laws of the jurisdiction of its formation. No actions or
proceedings to dissolve any Buyer are pending or, to the best knowledge of
Buyers, threatened.
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4.2 Authority Relative to This Agreement. Each Buyer has full power and
authority to execute, deliver, and perform this Agreement and the Ancillary
Documents to which it is a party and to consummate the transactions contemplated
hereby and thereby. The execution, delivery, and performance by Buyers of this
Agreement and the Ancillary Documents to which they are parties, and the
consummation by them of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary corporate or partnership action, as
applicable, of Buyers. This Agreement has been duly executed and delivered by
Buyers and constitutes, and each Ancillary Document executed or to be executed
by Buyers has been, or when executed will be, duly executed and delivered by
each Buyer and constitute, or when executed and delivered will constitute, valid
and legally binding obligations of each Buyer, enforceable against each Buyer in
accordance with their respective terms, except that such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium,
and similar laws affecting creditors' rights generally and (ii) equitable
principles which may limit the availability of certain equitable remedies (such
as specific performance) in certain instances.
4.3 Noncontravention. The execution, delivery, and performance by Buyers
of this Agreement and the Ancillary Documents to which they are parties and the
consummation by them of the transactions contemplated hereby and thereby do not
and will not (i) conflict with or result in a violation of any provision of the
charter or bylaws (or other governing documents), as applicable, of Buyers, (ii)
conflict with or result in a violation of any provision of, or constitute (with
or without the giving of notice or the passage of time or both) a default under,
or give rise (with or without the giving of notice or the passage of time or
both) to any right of termination, cancellation, or acceleration under, or
require any consent, approval, authorization, or waiver of any party to, any
bond, debenture, note, mortgage, indenture, lease, contract, agreement, or other
instrument or obligation to which any Buyer is a party or by which any Buyer or
any of its properties may be bound or any Permit held by a Buyer, (iii) result
in the creation or imposition of any Encumbrance upon the properties of Buyers,
or (iv) violate any Applicable Law binding upon Buyers, except, in the case of
clauses (ii), (iii), and (iv) above, for any such conflicts, violations,
defaults, terminations, cancellations, accelerations, or Encumbrances which
would not, individually or in the aggregate, have a Material Adverse Effect on
such Buyer or on the ability of such Buyer to consummate the transactions
contemplated hereby.
4.4 Governmental Approvals. No consent, approval, order, or
authorization of, or declaration, filing, or registration with, any Governmental
Entity is required to be obtained or made by any Buyer in connection with the
execution, delivery, or performance by Buyers of this Agreement and the
Ancillary Documents to which they are parties or the consummation by them of the
transactions contemplated hereby or thereby, other than as set forth on Schedule
4.4 or in the Small Business Sideletter (defined in Section 6.17 hereof).
4.5 Financing. Each Buyer has, and at the Closing will have, such funds
as are necessary for the consummation by it of the transactions contemplated
hereby.
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4.6 Disclosure of Information. Buyers represent that they have had an
opportunity to ask questions of and receive answers from the Company regarding
the Company and its business, assets, results of operation, and financial
condition and the terms and conditions of the issuance of the Shares. Each Buyer
further represents that it has access to all filings duly made by the Company
with the Securities and Exchange Commission since January 1, 1998. The
foregoing, however, shall not limit or modify the representations and warranties
of the Company in Article III, shall not limit the rights of Buyers prior to and
in anticipation of any issuance of the Shares pursuant hereto, and shall not
limit the disclosure requirements of applicable federal and state securities
laws.
4.7 Investment Experience. Each Buyer acknowledges that it can bear the
economic risk of its investment in the Shares, and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in the Shares.
4.8 Restricted Securities. Each Buyer understands that the Shares will
not have been registered pursuant to the Securities Act or any applicable state
securities laws, that the Shares will be characterized as "restricted
securities" under federal securities laws, and that under such laws and
applicable regulations the Shares cannot be sold or otherwise disposed of
without registration under the Securities Act or an exemption therefrom. In this
connection, each Buyer represents that it is familiar with Rule 144 promulgated
under the Securities Act, as currently in effect, and understands the resale
limitations imposed thereby and by the Securities Act. Appropriate stop transfer
instructions may be issued to the transfer agent for securities of the Company
(or a notation may be made in the appropriate records of the Company) in
connection with the Shares.
4.9 Legend. It is agreed and understood by Buyers that the certificates
representing the Shares shall each conspicuously set forth on the face or back
thereof, in addition to any legends required by Applicable Law or other
agreement, a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
UNLESS THEY ARE FIRST REGISTERED PURSUANT TO THAT ACT AND APPLICABLE
STATE SECURITIES LAWS OR UNLESS THE CORPORATION RECEIVES A WRITTEN
OPINION OF COUNSEL, WHICH OPINION AND COUNSEL ARE SATISFACTORY TO THE
CORPORATION, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
4.10 Accredited Investor; Investment Intent. Each Buyer is an accredited
investor as defined in Regulation D under the Securities Act. Each Buyer is
acquiring its portion of the Shares for its own account for investment and not
with a view to, or for sale or other disposition in connection with, any
distribution of all or any part thereof, except in compliance with applicable
federal and state securities laws.
4.11 Legal Proceedings. There are no Proceedings pending or, to the best
knowledge of Buyers, threatened seeking to restrain, prohibit, or obtain damages
or other relief in connection with this Agreement or the transactions
contemplated hereby.
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4.12 Brokerage Fees. No Buyer nor any of Buyers' affiliates has retained
any financial advisor, broker, agent, or finder or paid or agreed to pay any
financial advisor, broker, agent, or finder on account of this Agreement or any
transaction contemplated hereby. Buyers shall indemnify and hold harmless the
Company from and against any and all losses, claims, damages, and liabilities
(including legal and other expenses reasonably incurred in connection with
investigating or defending any claims or actions) with respect to any finder's
fee, brokerage commission, or similar payment in connection with any transaction
contemplated hereby asserted by any person on the basis of any act or statement
made or alleged to have been made by Buyers or any of their affiliates.
4.13 Disclosure. No representation or warranty made by Buyers in this
Agreement, and no statement of Buyers contained in any document, certificate, or
other writing furnished or to be furnished by Buyers pursuant hereto or in
connection herewith, contains or will contain, at the time of delivery, any
untrue statement of a material fact or omits, or will omit, at the time of
delivery, to state any material fact necessary in order to make the statements
contained therein, in the light of the circumstances under which they are made,
not misleading.
4.14 Representations and Warranties on Closing Date. The representations
and warranties made in this Article IV will be true and correct in all material
respects on and as of the Closing Date with the same force and effect as if such
representations and warranties had been made on and as of the Closing Date,
except that any such representations and warranties which expressly relate only
to an earlier date shall be true and correct on the Closing Date as of such
earlier date.
ARTICLE V.
CONDUCT OF COMPANY PENDING CLOSING
The Company hereby covenants and agrees with Buyers as follows:
5.1 Conduct and Preservation of Business. Except as expressly provided
in this Agreement, during the period from the date hereof to the Closing, the
Company and the Subsidiaries (i) shall each conduct its operations according to
its ordinary course of business consistent with past practice and in compliance
with all Applicable Laws; (ii) shall each use its reasonable best efforts to
preserve, maintain, and protect its properties; and (iii) shall each use its
reasonable best efforts to preserve intact its business organization, to keep
available the services of its officers and employees, and to maintain existing
relationships with licensors, licensees, suppliers, contractors, distributors,
customers, and others having business relationships with it.
5.2 Restrictions on Certain Actions. Without limiting the generality of
the foregoing, and except as otherwise expressly provided in this Agreement,
prior to the Closing, neither the Company nor any Subsidiary shall, without the
prior written consent of Buyer:
(a) amend its charter or bylaws;
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(b) (i) issue, sell, or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to
purchase, or otherwise) any shares of its capital stock of any class or
any other securities or equity equivalents; or (ii) amend in any respect
any of the terms of any such securities outstanding as of the date
hereof;
(c) (i) split, combine, or reclassify any shares of its capital
stock; (ii) declare, set aside, or pay any dividend or other
distribution (whether in cash, stock, or property or any combination
thereof) in respect of its capital stock; (iii) repurchase, redeem, or
otherwise acquire any of its securities or any securities of any
Subsidiary; or (iv) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing a liquidation, dissolution,
merger, consolidation, conversion, restructuring, recapitalization, or
other reorganization of the Company or any Subsidiary;
(d) (i) except in the ordinary course of business consistent with
past practice, create, incur, guarantee, or assume any indebtedness for
borrowed money or otherwise become liable or responsible for the
obligations of any other person; (ii) make any loans, advances, or
capital contributions to, or investments in, any other person (other
than to wholly owned Subsidiaries); (iii) pledge or otherwise encumber
shares of capital stock of the Company or any Subsidiary; or (iv) except
in the ordinary course of business consistent with past practice,
mortgage or pledge any of its assets, tangible or intangible, or create
or suffer to exist any lien thereupon; provided, however, that in no
event shall the Company and the Subsidiaries (A) incur incremental
indebtedness in excess of $100,000 in the aggregate or (B) incur
incremental indebtedness which is not prepayable at any time without
penalty or premium;
(e) (i) enter into, adopt, or (except as may be required by law)
amend or terminate any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
performance unit, stock equivalent, stock purchase, pension, retirement,
deferred compensation, employment, severance, or other employee benefit
agreement, trust, plan, fund, or other arrangement for the benefit or
welfare of any director, officer, or employee; (ii) except for normal
increases in the ordinary course of business consistent with past
practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to the Company, increase in any manner
the compensation or fringe benefits of any director, officer, or
employee; or (iii) pay to any director, officer, or employee any benefit
not required by any employee benefit agreement, trust, plan, fund, or
other arrangement as in effect on the date hereof;
(f) acquire, sell, lease, transfer, or otherwise dispose of,
directly or indirectly, any assets outside the ordinary course of
business consistent with past practice or any assets that in the
aggregate are material to the Company and the Subsidiaries considered as
a whole;
(g) acquire (by merger, consolidation, or acquisition of stock or
assets or otherwise) any corporation, partnership, or other business
organization or division thereof;
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(h) make any capital expenditure or expenditures which,
individually, is in excess of $100,000 or, in the aggregate, are in
excess of $250,000
(i) amend any Tax Return or make any Tax election or settle or
compromise any federal, state, local, or foreign Tax liability material
to the Company and the Subsidiaries considered as a whole;
(j) pay, discharge, or satisfy any claims, liabilities, or
obligations (whether accrued, absolute, contingent, unliquidated, or
otherwise, and whether asserted or unasserted), other than the payment,
discharge, or satisfaction in the ordinary course of business consistent
with past practice, or in accordance with their terms, of liabilities
reflected or reserved against in the Financial Statements or incurred
since January 1, 1999 in the ordinary course of business consistent with
past practice; provided, however, that in no event shall the Company or
any Subsidiary repay any long-term indebtedness except to the extent
required by the terms thereof;
(k) enter into any lease, contract, agreement, commitment,
arrangement, or transaction outside the ordinary course of business
consistent with past practice;
(l) amend, modify, or change in any material respect any existing
lease, contract, or agreement, other than in the ordinary course of
business consistent with past practice;
(m) waive, release, grant, or transfer any rights of value, other
than in the ordinary course of business consistent with past practice;
(n) change any of the accounting principles or practices used by
it, except for any change required by reason of a concurrent change in
generally accepted accounting principles and notice of which is given in
writing by the Company to Buyers;
(o) take any action which would or might make any of the
representations or warranties of the Company contained in this Agreement
untrue or inaccurate as of any time from the date of this Agreement to
the Closing or would or might result in any of the conditions set forth
in this Agreement not being satisfied; or
(p) authorize or propose, or agree in writing or otherwise to
take, any of the actions described in this Section.
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ARTICLE VI.
ADDITIONAL AGREEMENTS
6.1 Access to Information; Confidentiality.
(a) Between the date hereof and the Closing, the Company: (i) shall give
Buyers and their authorized representatives reasonable access to all employees,
all plants, offices, warehouses, and other facilities, and all books and
records, including work papers and other materials prepared by the Company's
independent public accountants, of the Company and the Subsidiaries, (ii) shall
permit Buyers and their authorized representatives to make inspections as they
may reasonably require, and (iii) shall cause the Company's officers and those
of the Subsidiaries to furnish Buyers and their authorized representatives with
such financial and operating data and other information with respect to the
Company and the Subsidiaries as Buyers may from time to time reasonably request;
provided, however, that no investigation pursuant to this Section shall affect
any representation or warranty of the Company contained in this Agreement or in
any agreement, instrument, or document delivered pursuant hereto or in
connection herewith; and provided further that the Company shall have the right
to have a representative present at all times of any such inspections,
interviews, and examinations conducted at or on the offices or other facilities
or properties of the Company or its affiliates or representatives.
From time to time following the Closing the Company shall, after
receiving not less than two (2) business days' notice from a Buyer, allow such
Buyer and its authorized representatives (i) access to all books and records,
including work papers and other materials prepared by the Company's independent
public accountants, of the Company and the Subsidiaries, (ii) to make
inspections of the facilities and assets of the Company and the Subsidiaries,
and (iii) to receive other financial and operating data and other information
with respect to the Company and the Subsidiaries as such Buyer may from time to
time reasonably request. The Company shall have no obligations to a Buyer under
the immediately preceding sentence in the event that such Buyer has sold at
least fifty percent (50%) of the shares of Common Stock purchased by such Buyer
on the Closing Date.
(b) Buyers agree that all Confidential Information (as defined below)
shall be kept confidential by Buyers and shall not be disclosed by Buyers in any
manner whatsoever; provided, however, that (i) any of such Confidential
Information may be disclosed to such directors, officers, employees, and
authorized representatives (including without limitation attorneys, accountants,
consultants, bankers, and financial advisors) of Buyers (collectively, for
purposes of this Section, "Buyer Representatives") as need to know such
information for the purpose of evaluating the transactions contemplated hereby,
(ii) any disclosure of Confidential Information may be made to the extent to
which the Company consents in writing, and (iii) Confidential Information may be
disclosed by a Buyer or any Buyer Representative to the extent that a Buyer or
Buyer Representative is legally compelled to do so, provided that, prior to
making such disclosure, such Buyer or Buyer Representative, as the case may be,
advises and consults with the Company regarding such disclosure and provided
further that such Buyer or Buyer Representative, as the case may be, discloses
only that portion of the Confidential Information as is legally required. Buyers
agree that none of the Confidential Information will be used for any purpose
other than in connection with the transactions contemplated hereby. The term
"Confidential Information," as used herein, means all information
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(irrespective of the form of communication) obtained by or on behalf of Buyers
from the Company or their representatives pursuant to this Section and all
similar information obtained from the Company or their representatives by or on
behalf of Buyers prior to the date of this Agreement, other than information
which (i) was or becomes generally available to the public other than as a
result of disclosure by Buyers or any Buyer Representative, (ii) was or becomes
available to Buyers on a nonconfidential basis from a person other than the
Company or its representatives prior to disclosure to Buyers by the Company or
its representatives, or (iii) was or becomes available to Buyers from a source
other than the Company and its representatives, provided that such source is not
known by Buyers to be bound by a confidentiality agreement with the Company.
6.2 Mandatory Redemption. At the time, if any, that Tim Goff ceases to
serve (for a period of 30 consecutive days or more) as the Chief Executive
Officer of the Company while any shares of Preferred Stock are held by a Buyer,
there shall be a mandatory redemption of the outstanding shares of Preferred
Stock held by all Buyers, in accordance with Section 6(a) (or a successor
thereto) of the Certificate of Designations establishing the Preferred Stock.
6.3 Third Party Consents. The Company shall use its reasonable best
efforts to obtain all consents, approvals, orders, authorizations, and waivers
of, and to effect all declarations, filings, and registrations with, all third
parties (including Governmental Entities) that are necessary, required, or
deemed by Buyers to be desirable to enable the Company to issue the Shares to
Buyers as contemplated by this Agreement and to otherwise consummate the
transactions contemplated hereby. All costs and expenses of obtaining or
effecting any and all of the consents, approvals, orders, authorizations,
waivers, declarations, filings, and registrations referred to in this Section
shall be borne by the Company.
6.4 Reasonable Best Efforts. Each party hereto agrees that it will not
voluntarily undertake any course of action inconsistent with the provisions or
intent of this Agreement and will use its reasonable best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
reasonably necessary, proper, or advisable under Applicable Laws to consummate
the transactions contemplated by this Agreement, including, without limitation,
(i) cooperation in determining whether any consents, approvals, orders,
authorizations, waivers, declarations, filings, or registrations of or with any
Governmental Entity or third party are required in connection with the
consummation of the transactions contemplated hereby; (ii) reasonable best
efforts to obtain any such consents, approvals, orders, authorizations, and
waivers and to effect any such declarations, filings, and registrations; (iii)
reasonable best efforts to cause to be lifted or rescinded any injunction or
restraining order or other order adversely affecting the ability of the parties
to consummate the transactions contemplated hereby; (iv) reasonable best efforts
to defend, and cooperation in defending, all lawsuits or other legal proceedings
challenging this Agreement or the consummation of the transactions contemplated
hereby; and (v) the execution of any additional instruments necessary to
consummate the transactions contemplated hereby.
6.5 Registration Rights Agreement. The Company and Buyers shall enter
into an amended and restated registration rights agreement (the "Registration
Agreement") at (and subject to the occurrence of) the Closing pursuant to which
the Company shall agree to register under the Securities Act securities owned by
Buyers. The Registration Agreement shall be in substantially the form set forth
as Exhibit 6.5.
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6.6 Shareholders' Agreement. The Company and Buyers shall enter into an
amended and restated shareholders' agreement (the "Shareholders' Agreement") at
(and subject to the occurrence of) the Closing, substantially in the form set
forth as Exhibit 6.6.
6.7 Option Plan. The Company shall adopt an option plan (the "Option
Plan") at (and subject to the occurrence of) the Closing, providing for option
grants thereunder to each individual listed on Schedule 6.7(a). The Option Plan
shall be in substantially the form set forth as Exhibit 6.7(b). The Company
shall submit the Option Plan to its shareholders for approval at its next annual
meeting of shareholders.
6.8 Public Announcements. Except as may be required by Applicable Law or
this Section 6.8, no Buyer, on the one hand, or the Company, on the other, shall
issue any press release or otherwise make any public statement with respect to
this Agreement or the transactions contemplated hereby without the prior written
consent of the other parties (which consent shall not be unreasonably withheld).
Any such press release or public statement required by Applicable Law shall only
be made after reasonable notice to the other parties. Upon execution of this
Agreement, the Company shall make a press release in the form of Exhibit 6.8 and
promptly file a report on Form 8-K with the Securities and Exchange Commission.
6.9 Notice of Litigation. Until the Closing, (i) Buyers, upon learning
of the same, shall promptly notify the Company of any Proceeding which is
commenced or threatened against a Buyer and which affects this Agreement or the
transactions contemplated hereby and (ii) the Company, upon learning of the
same, shall promptly notify Buyers of any Proceeding which is commenced or
threatened against the Company and which affects this Agreement or the
transactions contemplated hereby and any Proceeding which is commenced or
threatened against the Company or any Subsidiary and which would have been
listed on Schedule 3.14 if such Proceeding had arisen prior to the date hereof.
6.10 Notification of Certain Matters. The Company shall give prompt
notice to Buyers of: (i) the occurrence or nonoccurrence of any event the
occurrence or nonoccurrence of which would be likely to cause any representation
or warranty contained in Article III to be untrue or inaccurate at or prior to
the Closing, (ii) any failure of the Company to comply with or satisfy any
covenant, condition, or agreement to be complied with or satisfied by the
Company hereunder, and (iii) any notice or other communication from any person
alleging that the consent or approval of such person is or may be required in
connection with the transactions contemplated by this Agreement (other than
those consents and approvals indicated as required on Schedule 3.6). Buyers
shall give prompt notice to the Company of: (i) the occurrence or nonoccurrence
of any event the occurrence or nonoccurrence of which would be likely to cause
any representation or warranty contained in Article IV to be untrue or
inaccurate at or prior to the Closing, and (ii) any failure of Buyers to comply
with or satisfy any covenant, condition, or agreement to be complied with or
satisfied by such person hereunder. The delivery of any notice pursuant to this
Section shall not be deemed to: (i) modify the representations or warranties
hereunder of the party delivering such notice, (ii) modify the conditions set
forth in Articles VII and VIII, or (iii) limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
6.11 Amendment of Schedules. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Closing
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to supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules. For all purposes of this Agreement, including without limitation for
purposes of determining whether the conditions set forth in Sections 7.1 and 8.1
have been fulfilled, the Schedules hereto shall be deemed to include only that
information contained therein on the date of this Agreement and shall be deemed
to exclude all information contained in any supplement or amendment thereto.
6.12 Fees and Expenses.
(a) The Company shall, promptly after receiving a billing statement
regarding same but no earlier than at the closing, pay all reasonable fees and
expenses (including without limitation for legal counsel and accounting fees) of
Buyers as incurred in connection with the negotiation and preparation of this
Agreement and the Ancillary Documents and in connection with the transactions
contemplated hereby and thereby.
(b) The Company shall be responsible for the payment of all of the
Company's fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby.
(c) In addition to the foregoing, at (and conditioned upon) the Closing,
the Company shall pay in cash to Buyers a financing fee of One Million Five
Hundred Thousand Dollars ($1,500,000), which shall be allocated among the Buyers
pro rata in accordance with the number of shares of Preferred Stock purchased
hereunder.
6.13 Transfer Taxes. All sales, transfer, filing, recordation,
registration, stamp, and similar Taxes and fees arising from or associated with
the sale and transfer of the Shares as contemplated hereunder, whether levied on
Buyers or the Company, shall be borne by the Company and the Company shall file
all necessary documentation with respect to, and make all payments of, such
Taxes and fees on a timely basis.
6.14 Certificate of Designations. No later than the Closing, the Company
shall file with the Texas Secretary of State a Certificate of Designations in
the form of Exhibit 6.14.
6.15 Bylaw Amendment. No later than the Closing, the Company shall duly
adopt an amendment to its Bylaws regarding requisite approval of Directors, in
the form of Exhibit 6.15.
6.16 Noncompetition Agreement. The Company and Tim J. Goff shall enter
into a Confidentiality and Non-Compete Agreement (the "Non-Compete Agreement")
at (and subject to the occurrence of) the Closing, substantially in the form set
forth as Exhibit 6.16.
6.17 Certain Regulatory Matters.
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(a) Each Buyer agrees to cooperate with the Company in all reasonable
respects in complying with the terms and provisions of the letter agreement
between the Company and EOS, BACI and SGCP, a copy of which is attached hereto
as Exhibit 6.17, regarding small business matters (the "Small Business
Sideletter"), including without limitation, voting to approve amending the
Company's Articles of Incorporation, the Company's by-laws or this Agreement in
a manner reasonably acceptable to the Buyers or any "Regulated Holder" (as
defined in the Small Business Sideletter) entitled to make such request pursuant
to the Small Business Sideletter in order to remedy a "Regulatory Problem" (as
defined in the Small Business Sideletter). Anything contained in this Section
6.17 to the contrary notwithstanding, no Buyer shall be required under this
Section 6.17 to take any action that would adversely affect in any material
respect such Buyer's rights under this Agreement, the Ancillary Documents, or
otherwise as a shareholder of the Company.
(b) The Company and each Buyer agree not to amend or waive the voting or
other provisions of the Company's Articles of Incorporation, the Company's
by-laws or this Agreement if such amendment or waiver would cause any "Regulated
Holder" to have a "Regulatory Problem" (as such terms are defined in the Small
Business Sideletter). Each of EOS, BACI and SGCP agrees to notify the Company as
to whether or not it would have any such Regulatory Problem promptly after such
party has notice of such amendment or waiver.
6.18 Survival of Covenants. Except for any covenant or agreement which
by its terms expressly terminates as of a specific date or event, the covenants
and agreements of the parties hereto contained in this Agreement shall survive
the Closing without contractual limitation.
ARTICLE VII.
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment on or prior
to the Closing Date of each of the following conditions:
7.1 Representations and Warranties True. All the representations and
warranties of Buyers contained in this Agreement, and in any agreement,
instrument, or document delivered pursuant hereto or in connection herewith on
or prior to the Closing Date, shall be true and correct in all material respects
as of the date made and (having been deemed to have been made again on and as of
the Closing Date in the same language) shall be true and correct in all material
respects on and as of the Closing Date, except as affected by transactions
permitted by this Agreement and except to the extent that any such
representation or warranty is made as of a specified date, in which case such
representation or warranty shall have been true and correct in all material
respects as of such specified date.
7.2 Covenants and Agreements Performed. Buyers shall have performed and
complied with in all material respects all covenants and agreements required by
this Agreement to be performed or complied with by them on or prior to the
Closing Date.
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7.3 Certificate. The Company shall have received a certificate executed
by each Buyer dated the Closing Date, representing and certifying, in such
detail as the Company may reasonably request, that the conditions set forth in
Sections 7.1 and 7.2 have been fulfilled and that such Buyer is not in breach of
any provision of this Agreement.
7.4 Legal Proceedings. No Proceeding shall, on the Closing Date, be
pending or threatened seeking to restrain, prohibit, or obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby.
ARTICLE VIII.
CONDITIONS TO OBLIGATIONS OF BUYERS
The obligations of Buyers to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment on or prior to the Closing
Date of each of the following conditions:
8.1 Representations and Warranties True. All the representations and
warranties of the Company contained in this Agreement, and in any agreement,
instrument, or document delivered pursuant hereto or in connection herewith on
or prior to the Closing Date, shall be true and correct in all material respects
as of the date made and (having been deemed to have been made again on and as of
the Closing Date in the same language) shall be true and correct in all material
respects on and as of the Closing Date, except as affected by transactions
permitted by this Agreement and except to the extent that any such
representation or warranty is made as of a specified date, in which case such
representation or warranty shall have been true and correct in all material
respects as of such specified date.
8.2 Covenants and Agreements Performed. The Company shall have performed
and complied with in all material respects all covenants and agreements required
by this Agreement to be performed or complied with by it on or prior to the
Closing Date.
8.3 Certificate. Buyers shall have received a certificate executed on
behalf of the Company by the chief executive officer and by the chief financial
officer of the Company, dated the Closing Date, representing and certifying, in
such detail as Buyers may reasonably request, that the conditions set forth in
Sections 8.1 and 8.2 have been fulfilled and that the Company is not in breach
of any provision of this Agreement.
8.4 Opinion of Counsel. Buyers shall have received an opinion of Butler
& Binion, L.L.P., legal counsel to the Company, dated the Closing Date,
substantially in the form of Exhibit 8.4. In rendering such opinion, such
counsel may rely as to factual matters upon certificates or other documents
furnished by directors and officers of the Company and by government officials
and upon such other documents and data as such counsel deems appropriate as a
basis for such opinion.
8.5 Legal Proceedings. No Proceeding shall, on the Closing Date, be
pending or threatened seeking to restrain, prohibit, or obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby.
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8.6 Consents.
(a) There shall have been obtained any and all material permits,
consents, and approvals of Governmental Entities that reasonably may be deemed
necessary so that the consummation of the transactions contemplated hereby will
be in compliance with Applicable Law, the failure to comply with which would
have a Material Adverse Effect on the Company.
(b) All consents and approvals of private persons, (i) the granting of
which is necessary for the consummation of the transactions contemplated hereby
and (ii) the non-receipt of which would have a Material Adverse Effect on the
Company, shall have been obtained.
8.7 No Material Adverse Change. Since the date of this Agreement, there
shall not have been any material adverse change in the business, assets, results
of operations, condition (financial or otherwise), or prospects of the Company
and the Subsidiaries considered as a whole.
8.8 Due Diligence. The due diligence conducted by Buyers and their
representatives in connection with the proposed transactions contemplated hereby
shall not have caused Buyers or their representatives to become aware of any
facts relating to the business, assets, results of operations, condition
(financial or otherwise), or prospects of the Company or any Subsidiary which,
in the good faith judgment of Buyers, make it inadvisable for Buyers to proceed
with the consummation of the transactions contemplated hereby.
8.9 Other Documents. Buyers shall have received the certificates,
instruments, and documents listed below:
(a) In accordance with the denominations designated in
Schedule 1.1, stock certificates in definitive form and duly executed on
behalf of the Company, representing the portion of the Shares registered
in the name of each Buyer.
(b) A copy of the resolutions of the Board of Directors of the
Company authorizing the execution, delivery, and performance by the
Company of this Agreement, certified by the secretary or an assistant
secretary of the Company.
(c) Certificates from the Secretary of State of Texas and the
Comptroller of Public Accounts of the State of Texas, each dated not
more than ten days prior to the Closing Date, as to the legal existence
and good standing, respectively, of the Company and the Subsidiaries
under the laws of such state.
(d) Certificates from the Secretaries of State of the states
listed on Schedule 3.2, as to the due qualification or licensing of the
Company and the Subsidiaries, as applicable, to do business in such
states, dated not more than ten days prior to the Closing Date.
(e) An original Shareholders' Agreement, Registration
Agreement and Non-Compete Agreement, each duly signed by an authorized
officer of the Company and all other parties thereto.
(f) A file-stamped copy of the Certificate of Designations
required by Section 6.14 hereof and showing acceptance by the Texas
Secretary of State.
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(g) Such other certificates, instruments, and documents as may
be reasonably requested by Buyers to carry out the intent and purposes
of this Agreement.
8.10 Conversion of Outstanding Preferred Stock. Any and all shares of
preferred stock of the Company outstanding on the date hereof shall have been
fully converted into Common Stock in accordance with the existing terms of such
preferred stock on the date hereof.
ARTICLE IX.
TERMINATION, AMENDMENT, AND WAIVER
9.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing in the following
manner:
(a) by mutual written consent of the Company and Buyers; or
(b) by either the Company or Buyers, if:
(i) the Closing shall not have occurred on or before May
15, 1999 unless such failure to close shall be due to a breach
of this Agreement by the party seeking to terminate this
Agreement pursuant to this clause (i); or
(ii) there shall be any statute, rule, or regulation that
makes consummation of the transactions contemplated hereby
illegal or otherwise prohibited or a Governmental Entity shall
have issued an order, decree, or ruling or taken any other
action permanently restraining, enjoining, or otherwise
prohibiting the consummation of the transactions contemplated
hereby, and such order, decree, ruling, or other action shall
have become final and nonappealable; or
(c) by the Company, if (i) any of the representations and
warranties of Buyers contained in this Agreement shall not be true and
correct in any respect which is material to Buyers or the ability of
Buyers to consummate the transactions contemplated hereby, or (ii)
Buyers shall have failed to fulfill in any material respect any of their
obligations under this Agreement, and, in the case of each of clauses
(i) and (ii), such misrepresentation, breach of warranty, or failure
(provided it can be cured) has not been cured within ten days after
written notice thereof from the Company to Buyers; or
(d) by Buyers, if (i) any of the representations and
warranties of the Company contained in this Agreement shall not be true
and correct in any respect which is material to the Company and the
Subsidiaries considered as a whole or the ability of the Company to
consummate the transactions contemplated hereby, (ii) the Company shall
have failed to fulfill in any material respect any of its obligations
under this Agreement, and, in the case of each of clauses (i) and (ii),
such misrepresentation, breach of warranty, or failure (provided it can
be cured) has not been cured within ten days after written notice
thereof from Buyers to the Company, or (iii) the due diligence conducted
by Buyers and their representatives in connection with the proposed
transactions contemplated hereby shall have caused Buyers or their
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representatives to become aware of any facts relating to the business,
assets, results of operations, condition (financial or otherwise), or
prospects of the Company or any Subsidiary which, in the good faith
judgment of Buyers, make it inadvisable for Buyers to proceed with the
consummation of the transactions contemplated hereby.
9.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 9.1 by the Company, on the one hand, or Buyer, on
the other, written notice thereof shall forthwith be given to the other party
specifying the provision hereof pursuant to which such termination is made, and
this Agreement shall become void and have no effect, except that the agreements
contained in this Section and in Sections 6.1(b), 6.8, 6.12, 11.1, 11.5, and
11.14 and in Article XI shall survive the termination hereof. Nothing contained
in this Section shall relieve any party from liability for damages actually
incurred as a result of any breach of this Agreement.
9.3 Amendment. This Agreement may not be amended except by an instrument
in writing signed by or on behalf of all the parties hereto.
9.4 Waiver. The Company, on the one hand, or Buyers, on the other, may:
(i) waive any inaccuracies in the representations and warranties of the other
contained herein or in any document, certificate, or writing delivered pursuant
hereto, or (ii) waive compliance by the other with any of the other's agreements
or fulfillment of any conditions to its own obligations contained herein. Any
agreement on the part of a party hereto to any such waiver shall be valid only
if set forth in an instrument in writing signed by or on behalf of such party.
No failure or delay by a party hereto in exercising any right, power, or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power, or privilege.
9.5 Remedies Not Exclusive. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
The rights and remedies of any party based upon, arising out of, or otherwise in
respect of any inaccuracy in or breach of any representation, warranty,
covenant, or agreement contained in this Agreement shall in no way be limited by
the fact that the act, omission, occurrence, or other state of facts upon which
any claim of any such inaccuracy or breach is based may also be the subject
matter of any other representation, warranty, covenant, or agreement contained
in this Agreement (or in any other agreement between the parties) as to which
there is no inaccuracy or breach.
ARTICLE X.
COMMON STOCK CLAW-BACK
In the event that, and only if, the Company, prior to the second
anniversary of the Closing Date, fully redeems all shares of Preferred Stock
issued to Buyers pursuant to this Agreement (the "Preferred Redemption"), then
the Company shall simultaneously purchase, and each Buyer shall sell, assign and
transfer, one-eighth (12.5%) of the total shares of Common Stock originally
issued to such Buyer pursuant to this Agreement plus any Other Securities,
subject to adjustment as provided herein, for a total purchase price of $100
(the "Redemption Price"). On the date of the Preferred Redemption, each Buyer
shall surrender a certificate or certificates for such shares to the Company and
shall thereupon be entitled to receive payment of its pro rata share of the
Redemption Price. If the Company effects a split or combination of the Common
Stock, including a dividend payable in shares of
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Common Stock, the number of shares of Common Stock subject to purchase in
connection with the Preferred Redemption shall be proportionately adjusted.
ARTICLE XI.
SURVIVAL OF REPRESENTATIONS;
INDEMNIFICATION
11.1 Survival. The representations and warranties of the parties hereto
contained in this Agreement or in any certificate, instrument, or document
delivered pursuant hereto shall survive the Closing without contractual
limitation, regardless of any investigation made by or on behalf of any party.
11.2 Indemnification by Company. Subject to the terms and conditions of
this Article XI, the Company shall indemnify, defend, and hold harmless Buyers
from and against any and all claims, actions, causes of action, demands,
assessments, losses, damages, liabilities, judgments, settlements, penalties,
costs, and expenses (including reasonable attorneys' fees and expenses), of any
nature whatsoever (collectively, "Damages"), asserted against, resulting to,
imposed upon, or incurred by Buyers, directly or indirectly, by reason of or
resulting from any breach by the Company of any of its representations,
warranties, covenants, or agreements contained in this Agreement or in any
certificate, instrument, or document delivered pursuant hereto.
11.3 Indemnification by Buyers. Subject to the terms and conditions of
this Article XI, each Buyer (severally and not jointly) shall indemnify, defend,
and hold harmless the Company from and against any and all Damages asserted
against, resulting to, imposed upon, or incurred by the Company, directly or
indirectly, by reason of or resulting from any breach by such Buyer of any of
its representations, warranties, covenants, or agreements contained in this
Agreement or in any certificate, instrument, or document delivered pursuant
hereto.
11.4 Procedure for Indemnification. Promptly after receipt by an
indemnified party under Section 11.2 or 11.3 of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party under such Section, give written notice to
the indemnifying party of the commencement thereof, but the failure so to notify
the indemnifying party shall not relieve it of any liability that it may have to
any indemnified party except to the extent the indemnifying party demonstrates
that the defense of such action is prejudiced thereby. In case any such action
shall be brought against an indemnified party and it shall give written notice
to the indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it may wish, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. If the indemnifying party elects to assume the defense of
such action, the indemnified party shall have the right to employ separate
counsel at its own expense and to participate in the defense thereof. If the
indemnifying party elects not to assume (or fails to assume) the defense of such
action, the indemnified party shall be entitled to assume the defense of such
action with counsel of its own choice, at the expense of the indemnifying party.
If the action is asserted against both the indemnifying party and the
indemnified party and there is a conflict of interests which renders it
inappropriate for the same counsel to represent both the indemnifying party and
the indemnified party, the indemnifying party shall be responsible for paying
for separate counsel for the indemnified
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party; provided, however, that if there is more than one indemnified party, the
indemnifying party shall not be responsible for paying for more than one
separate firm of attorneys to represent the indemnified parties, regardless of
the number of indemnified parties. If the indemnifying party elects to assume
the defense of such action, (a) no compromise or settlement thereof may be
effected by the indemnifying party without the indemnified party's written
consent (which shall not be unreasonably withheld) unless the sole relief
provided is monetary damages that are paid in full by the indemnifying party and
(b) the indemnifying party shall have no liability with respect to any
compromise or settlement thereof effected without its written consent (which
shall not be unreasonably withheld).
11.5 Indemnification Despite Negligence. IT IS THE EXPRESS INTENTION OF
THE PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED PURSUANT TO THIS ARTICLE
XI SHALL BE INDEMNIFIED AND HELD HARMLESS FROM AND AGAINST ALL DAMAGES AS TO
WHICH INDEMNITY IS PROVIDED FOR UNDER THIS ARTICLE XI NOTWITHSTANDING THAT ANY
SUCH DAMAGES ARISE OUT OF OR RESULT FROM THE ORDINARY, STRICT, SOLE, OR
CONTRIBUTORY NEGLIGENCE OF SUCH PERSON AND REGARDLESS OF WHETHER ANY OTHER
PERSON (INCLUDING THE OTHER PARTIES TO THIS AGREEMENT) IS OR IS NOT ALSO
NEGLIGENT.
ARTICLE XII.
MISCELLANEOUS
12.1 Notices. All notices, requests, demands, and other communications
required or permitted to be given or made hereunder by any party hereto shall be
in writing and shall be deemed to have been duly given or made if (i) delivered
personally, (ii) transmitted by first class registered or certified mail,
postage prepaid, return receipt requested, (iii) sent by prepaid overnight
courier service, or (iv) sent by telecopy or facsimile transmission, answer back
requested, to the parties at the following addresses (or at such other addresses
as shall be specified by the parties by like notice):
If to Energy PLC, EnCap III-B, BOCP or Fund III:
c/o EnCap Investments, L.C.
1100 Louisiana, Suite 3150
Houston, Texas 77002
Attention: D. Martin Phillips
Fax No.: 713-659-6130
with a copy to:
Thompson & Knight, P.C.
1700 Chase Tower, 600 Travis
Houston, TX 77002
Attention: Michael K. Pierce, Esq.
Telefax: 713-217-2828
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If to Kayne:
Kayne Anderson Investment Management
1800 Ave. of the Stars, Second Floor
Los Angeles, California 90067
Attention: Robert B. Sinnott
Fax No.: 310-284-6490
If to BACI:
Bank of America Capital Investors
100 North Tryon Street, 25th Floor
Charlotte, North Carolina 28255
Attention: J. Travis Hain
Fax No.: 704-386-6432
If to EOS:
EOS Partners, L.P.
320 Park Avenue
New York, New York 10022
Attention: Brian D. Young
Fax No.: 212-832-5815
If to SGCP:
SGC Partners II LLC
c/o SG Capital Partners, LLC
1221 Avenue of the Americas, 15th Floor
New York, NY 10020
Attention: V. Frank Pottow
Fax No.: 212-278-5454
If to the Company:
Bargo Energy Company
700 Louisiana, Suite 3700
Houston, Texas 77002
Attention: Tim J. Goff and Lee Seekely
Telefax: (713) 236-9799
with, a copy to:
Butler & Binion, L.L.P.
1000 Louisiana, Suite 1600
Houston, TX 77002
Attention: George G. Young, Esq.
Telefax: 713-237-3202
Such notices, requests, demands, and other communications shall be effective (i)
if delivered personally or sent by courier service, upon actual receipt by the
intended recipient, (ii) if mailed, upon the earlier of five days after deposit
in the mail or the date of delivery as shown by the return receipt therefor, or
(iii) if sent by telecopy or facsimile transmission, when the answer back is
received.
12.2 Entire Agreement. This Agreement, together with the Schedules,
Exhibits, Annexes, and other writings referred to herein or delivered pursuant
hereto, constitute the entire agreement between the parties hereto with respect
to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.
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<PAGE> 32
12.3 Binding Effect; Assignment; No Third Party Benefit. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors, and permitted assigns.
Except as otherwise expressly provided in this Agreement, neither this Agreement
nor any of the rights, interests, or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties, except that a Buyer may assign to any affiliate of such Buyer any of
such Buyer's rights, interests, or obligations hereunder, upon notice to the
other party or parties, provided that (i) no such assignment shall relieve such
Buyer of its obligations hereunder and (ii) the transferee makes the
representations in Sections 4.6 through 4.11 hereof. Except as provided in
Article XI, nothing in this Agreement, express or implied, is intended to or
shall confer upon any person other than the parties hereto, and their respective
heirs, legal representatives, successors, and permitted assigns, any rights,
benefits, or remedies of any nature whatsoever under or by reason of this
Agreement.
12.4 Severability. If any provision of this Agreement is held to be
unenforceable, this Agreement shall be considered divisible and such provision
shall be deemed inoperative to the extent it is deemed unenforceable, and in all
other respects this Agreement shall remain in full force and effect; provided,
however, that if any such provision may be made enforceable by limitation
thereof, then such provision shall be deemed to be so limited and shall be
enforceable to the maximum extent permitted by Applicable Law.
12.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
12.6 Further Assurances. From time to time following the Closing, at the
request of any party hereto and without further consideration, the other party
or parties hereto shall execute and deliver to such requesting party such
instruments and documents and take such other action (but without incurring any
material financial obligation) as such requesting party may reasonably request
in order to consummate more fully and effectively the transactions contemplated
hereby.
12.7 Descriptive Headings. The descriptive headings herein are inserted
for convenience of reference only, do not constitute a part of this Agreement,
and shall not affect in any manner the meaning or interpretation of this
Agreement.
12.8 Gender. Pronouns in masculine, feminine, and neuter genders shall
be construed to include any other gender, and words in the singular form shall
be construed to include the plural and vice versa, unless the context otherwise
requires.
12.9 References. All references in this Agreement to Articles, Sections,
and other subdivisions refer to the Articles, Sections, and other subdivisions
of this Agreement unless expressly provided otherwise. The words "this
Agreement", "herein", "hereof", "hereby", "hereunder", and words of similar
import refer to this Agreement as a whole and not to any particular subdivision
unless expressly so limited. Whenever the words "include", "includes", and
"including" are used in this Agreement, such words shall be deemed to be
followed by the words "without limitation". Each reference herein to a Schedule,
Exhibit, or Annex refers to the item identified separately in writing by the
parties hereto as the described Schedule, Exhibit, or Annex to this Agreement.
All Schedules, Exhibits, and Annexes are hereby incorporated in and made a part
of this Agreement as if set forth in full herein.
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<PAGE> 33
12.10 Counterparts. This Agreement may be executed by the parties hereto
in any number of counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same agreement. Each counterpart may
consist of a number of copies hereof each signed by less than all, but together
signed by all, the parties hereto.
12.11 Injunctive Relief. The parties hereto acknowledge and agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement, and shall be entitled to enforce specifically the provisions of this
Agreement, in any court of the United States or any state thereof having
jurisdiction, in addition to any other remedy to which the parties may be
entitled under this Agreement or at law or in equity.
12.12 Schedules (Disclosure). Each of the Schedules to this Agreement
shall be deemed to include and incorporate all disclosures made on the other
Schedules to this Agreement. It is understood and agreed that the specification
of any dollar amount in the representations and warranties contained in this
Agreement or the inclusion of any specific item in the Schedules is not intended
to imply that such amounts or higher or lower amounts, or the items so included
or other items, are or are not material, and no party shall use the fact of the
setting of such amounts or the fact of the inclusion of any such item in the
Schedules in any dispute or controversy between the parties as to whether any
obligation, item, or matter not described herein or included in a Schedule is or
is not material for purposes of this Agreement.
12.13 Schedules (Construction). In the event of any inconsistency
between the statements in the body of this Agreement and those in the Schedules
(other than an exception expressly set forth as such in the Schedules in
relation to a specifically identified representation or warranty), those in this
Agreement shall control.
12.14 Consent to Jurisdiction; Waiver of Jury Trial.
(a) The parties hereto hereby irrevocably submit to the jurisdiction of
the courts of the State of Texas and the federal courts of the United States of
America located in Houston, Texas, and appropriate appellate courts therefrom,
over any dispute arising out of or relating to this Agreement or any of the
transactions contemplated hereby, and each party hereby irrevocably agrees that
all claims in respect of such dispute or proceeding may be heard and determined
in such courts. 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 dispute arising out of or relating to this
Agreement or any of the transactions contemplated hereby 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. This consent to jurisdiction is being given solely for purposes of this
Agreement and is not intended to, and shall not, confer consent to jurisdiction
with respect to any other dispute in which a party to this Agreement may become
involved.
(b) Each of the parties hereto hereby consents to process being served
by any party to this Agreement in any suit, action, or proceeding of the nature
specified in subsection (a) above by the mailing of a copy thereof in the manner
specified by the provisions of Section 11.1.
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(c) FURTHERMORE, ALL PARTIES HERETO WAIVE ANY AND ALL RIGHTS TO HAVE A
JURY RESOLVE OR OTHERWISE PRESIDE, IN WHOLE OR IN PART, OVER ANY DISPUTE OR
PROCEEDING INVOLVING ANY OF THE PARTIES HERETO AND REGARDING (I) THIS AGREEMENT,
(II) THE DOCUMENTS REQUIRED HEREBY, OR (III) ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
12.15 Liability of Buyers. The liability of each Buyer with respect to
the agreements, covenants, representations and warranties of Buyers contained in
this Agreement or in any certificate, instrument, or document delivered pursuant
hereto shall be to the extent such agreements, covenants, representations or
warranties applies to himself, herself, or itself and not with respect to any
other Buyer.
12.16 Consent to Certain Stock Issuances. By its execution hereof, each
Buyer hereby consents to the issuance of Common Stock upon exercise of warrants
and options to purchase Common Stock outstanding as of the date hereof and upon
exercise of options to purchase Common Stock granted as set forth on Schedule
6.7(a) hereof.
ARTICLE XIII.
DEFINITIONS
13.1 Certain Defined Terms. As used in this Agreement, each of the
following terms has the meaning given it below:
"affiliate" means, with respect to any person, any other
person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such
person. For the purposes of this definition, "control" when used with
respect to any person means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of such person, whether through the ownership of voting
securities, by contract, or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Ancillary Documents" means each agreement, instrument, and
document (other than this Agreement) executed or to be executed in
connection with the transactions contemplated by this Agreement.
"Applicable Law" means any statute, law, rule, or regulation
or any judgment, order, writ, injunction, or decree of any Governmental
Entity to which a specified person or property is subject.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Bargo Energy Company, a Texas corporation,
and, unless the context otherwise requires, includes the Company's
predecessor, Future Petroleum Corporation, a Utah corporation.
"Encumbrances" means liens, charges, pledges, options,
mortgages, deeds of trust, security interests, claims, restrictions
(whether on voting, sale, transfer, disposition, or otherwise),
easements, and other encumbrances of every type and description, whether
imposed by law, agreement, understanding, or otherwise.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
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<PAGE> 35
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles in the
United States of America from time to time.
"Governmental Entity" means any court or tribunal in any
jurisdiction (domestic or foreign) or any federal, state, municipal, or
other governmental body, agency, authority, department, commission,
board, bureau, or instrumentality (domestic or foreign), as well as the
New York Stock Exchange, The Nasdaq Stock Market, and any exchange upon
which the Common Stock is listed from time to time.
"Material Adverse Effect" means any change, development, or
effect (individually or in the aggregate) which is, or is reasonably
likely to be, materially adverse (i) to the business, assets, results of
operations or condition (financial or otherwise) of a party, or (ii) to
the ability of a party to perform on a timely basis any material
obligation under this Agreement or any agreement, instrument, or
document entered into or delivered in connection herewith.
"Other Securities" means any stock (other than Common Stock),
bond, note or other securities issued to a holder of Common Stock (on
account of Common Stock issued pursuant to this Agreement) pursuant to
any merger, consolidation, reorganization, recapitalization, dividend or
other distribution.
"Permits" means licenses, permits, franchises, consents,
approvals, variances, exemptions, and other authorizations of or from
Governmental Entities.
"person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, enterprise,
unincorporated organization, or Governmental Entity.
"Proceedings" means all proceedings, actions, claims, suits,
investigations, and inquiries by or before any arbitrator or
Governmental Entity.
"reasonable best efforts" means a party's reasonable best
efforts in accordance with reasonable commercial practice and without
the incurrence of unreasonable expense.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means any corporation more than 50% of whose
outstanding voting securities, or any general partnership, joint
venture, or similar entity more than 50% of whose total equity
interests, is owned, directly or indirectly, by the Company, or any
limited partnership of which the Company or any Subsidiary is a general
partner.
"Taxes" means any income taxes or similar assessments or any
sales, excise, occupation, use, ad valorem, property, production,
severance, transportation, employment, payroll, franchise, or other tax
imposed by any United States federal, state, or local (or any foreign or
provincial) taxing authority, including any interest, penalties, or
additions attributable thereto.
"Tax Return" means any return or report, including any related
or supporting information, with respect to Taxes.
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<PAGE> 36
"to the best knowledge" of a specified person (or similar
references to a person's knowledge) means all information to be
attributed to such person actually or constructively known to (a) such
person in the case of an individual or (b) in the case of a corporation
or other entity, an executive officer or employee who devoted
substantive attention to matters of such nature during the ordinary
course of his employment by such person. A person has "constructive
knowledge" of those matters which the individual involved could
reasonably be expected to have as a result of undertaking an
investigation of such a scope and extent as a reasonably prudent man
would undertake concerning the particular subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement, or caused
this Agreement to be executed by their duly authorized representatives, all as
of the day and year first above written.
THE COMPANY:
BARGO ENERGY COMPANY
By: /s/
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
BUYERS:
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/
-------------------------------------
Gary R. Petersen
Director
ENCAP ENERGY CAPITAL FUND III, L.P.
By: EnCap Investments L.C.,
General Partner
By: /s/
--------------------------------
D. Martin Phillips
Managing Director
ENCAP ENERGY CAPITAL FUND III-B, L.P.
By: EnCap Investments L.C.,
General Partner
By: /s/
-------------------------------------
D. Martin Phillips
Managing Director
BOCP ENERGY PARTNERS, L.P.
By: EnCap Investments L.C., Manager
By: /s/
-------------------------------------
D. Martin Phillips
Managing Director
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<PAGE> 37
EOS PARTNERS, L.P.
By: /s/
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
EOS PARTNERS SBIC, L.P.
By: Eos SBIC General, L.P.,
its general partner
By: Eos SBIC, Inc., its general partner
By: /s/
----------------------------------------
Name:
--------------------------------
Title:
-------------------------------
EOS PARTNERS SBIC II, L.P.
By: Eos SBIC General II, L.P.,
its general partner
By: Eos SBIC II, Inc.,
its general partner
By: /s/
----------------------------------------
Name:
--------------------------------
Title:
-------------------------------
SGC PARTNERS II LLC
By: /s/
---------------------------------
V. Frank Pottow
Managing Director
BANCAMERICA CAPITAL INVESTORS SBIC
I, L.P.
By: BancAmerica Capital Management
SBIC I, LLC, its general partner
By: BancAmerica Capital
Management I, L.P., its sole member
By: BACM I GP, LLC,
its general partner
By: /s/
----------------------------------------
J. Travis Hain
Managing Director
Kayne Anderson Energy Fund, L.P.
By: Kaim Non-Traditional, L.P., general partner
By: Kayne Anderson Investment
Management, Inc., general partner
By: /s/
------------------------------------
Robert V. Sinnott
Managing Director
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Schedule 1.1
Investors
<TABLE>
<CAPTION>
Shares of
Preferred Shares of Purchase
Name Stock Common Stock Price
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EnCap Energy Capital Fund III L. P. 637,185 5,583,755 $6,371,850
EnCap Energy Capital Fund III-B L. P. 481,904 4,222,999 4,819,040
BOCP Energy Partners, L. P. 155,911 1,366,277 1,559,110
Energy Capital Investment Co. PLC 225,000 1,971,712 2,250,000
Kayne Anderson Energy, L. P. 1,000,000 8,763,162 10,000,000
BancAmerica Capital Investors SBIC I, L.P. 1,500,000 13,144,743 15,000,000
Eos Partners SBIC, L. P. 390,000 3,417,633 3,900,000
Eos Partners SBIC II, L. P. 72,500 635,329 725,000
Eos Partners L. P. 37,500 328,619 375,000
SG Capital Partners II LLC 500,000 4,381,581 5,000,000
Total 5,000,000 43,815,810 $50,000,000
</TABLE>
38
