<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A
(AMENDMENT NO. 2)
UNDER THE SECURITIES EXCHANGE ACT OF 1934*
BARGO ENERGY COMPANY
(NAME OF ISSUER)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
067587 10 5
(CUSIP NUMBER)
D. MARTIN PHILLIPS
ENCAP INVESTMENTS L.L.C.
1100 LOUISIANA, SUITE 3150
HOUSTON, TEXAS 77002
(713) 659-6100
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS)
MAY 14, 1999
(DATE OF EVENT WHICH REQUIRES FILING
OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 204.13d-1(g), check
the following box. [ ]
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7(b) for
other parties to whom copies are to be sent.
*The remainder of the 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> 2
CUSIP NO. 067587 10 5 SCHEDULE 13D
(1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons
(entities only)
Energy Capital Investment Company PLC
(2) Check the Appropriate Box if a Member of a Group (See Instructions)(a) [ ]
(b) [X]
(3) SEC Use Only
(4) Source of Funds (See Instructions)
OO (SEE ITEM 3)
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e) [ ]
(6) Citizenship or Place of Organization Energy Capital Investment Company
PLC ("Energy PLC") is a company formed under the laws of the country of
England
(7) Sole Voting Power
Number of 0
Shares Bene-
ficially (8) Shared Voting Power
Owned by 4,241,598(1)
Each
Reporting (9) Sole Dispositive Power
Person With 0
(10) Shared Dispositive Power
4,241,598(1)
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
4,241,598
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [ ]
(13) Percent of Class Represented by Amount in Row (11)
4.6%
(14) Type of Reporting Person (See Instructions)
PN
(1) Voting and dispositive power is shared between Energy PLC and EnCap
Investments (defined herein), by virtue of an investment agreement. See Items 5
and 6.
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CUSIP NO. 067587 10 5 SCHEDULE 13D
(1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons
(entities only)
ENCAP INVESTMENTS L.L.C.
(2) Check the Appropriate Box if a Member of a Group (See Instructions)(a) [ ]
(b) [ ]
(3) SEC Use Only
(4) Source of Funds (See Instructions)
OO (SEE ITEM 3)
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e) [ ]
(6) Citizenship or Place of Organization EnCap Investments L.L.C. ("EnCap
Investments") is a limited liability company organized under the laws of
the State of Delaware
Number of (7) Sole Voting Power
Shares Bene- 0
ficially
Owned by (8) Shared Voting Power
Each 17,839,602(1)
Reporting
Person With (9) Sole Dispositive Power
0
(10) Shared Dispositive Power
17,839,602(1)
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
17,839,602(2)
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) [ ]
(13) Percent of Class Represented by Amount in Row (11)
19.4%
(14) Type of Reporting Person (See Instructions)
OO
(1) EnCap Investments may be deemed to have voting and dispositive power
with respect to the shares of Common Stock owned by Energy PLC and EnCap LP
(defined herein), as well as certain other affiliates of EnCap Investments. See
Items 2, 5 and 6.
(2) EnCap Investments disclaims any beneficial ownership of the shares
owned by EnCap LP, Energy PLC and such other affiliates.
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CUSIP NO. 067587 10 5 SCHEDULE 13D
(1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons
(entities only)
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
(2) Check the Appropriate Box if a Member of a Group (See Instructions)(a) [ ]
(b) [X]
(3) SEC Use Only
(4) Source of Funds (See Instructions)
OO (SEE ITEM 3)
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e) [ ]
(6) Citizenship or Place of Organization EnCap Equity 1994 Limited Partnership
("EnCap LP") is a limited partnership organized under the laws of the
State of Texas
Number of (7) Sole Voting Power
Shares Bene- 2,424,973(1)
ficially
Owned by (8) Shared Voting Power
Each 0
Reporting
Person With (9) Sole Dispositive Power
2,424,973(1)
(10) Shared Dispositive Power
0
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
2,424,973
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) [ ]
(13) Percent of Class Represented by Amount in Row (11)
2.6%
(14) Type of Reporting Person (See Instructions)
PN
(1) As exercised through its general partner, EnCap Investments L.L.C.
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<PAGE> 5
ITEM 1. SECURITY AND ISSUER.
Item 1 is amended and restated in its entirety as follows:
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.
Item 2(a) - (c) is amended by adding the following:
The sole member of EnCap Investments is El Paso Field Services Company, a
Delaware corporation ("El Paso Field Services").
El Paso Field Services Company is a Delaware corporation with its
principal executive offices at 1001 Louisiana Street, Houston, Texas 77002. The
principal business of El Paso Field Services is natural gas gathering and
processing and intrastate gas transmission. Current information concerning the
controlling person and executive officers and directors of El Paso Field
Services is set forth on Schedule I hereto. The controlling person of El Paso
Field Services is El Paso Energy Corporation, a Delaware corporation ("El Paso
Energy").
El Paso Energy is a Delaware corporation with its principal executive
offices located at the El Paso Energy Building, 1001 Louisiana Street, Houston,
Texas 77002. The principal business of El Paso Energy is serving as a holding
company for its various subsidiaries, which are engaged in energy and related
businesses. Current information concerning the executive officers and directors
of El Paso Energy is set forth on Schedule I hereto.
Eugene Fiedorek has resigned as a Director of Energy PLC and as a Managing
Director of EnCap Investments. Mr. Fiedorek is no longer involved in the
operations of these entities. The new Managing Director of EnCap Investments is
D. Mark Leland, whom is a United States citizen, and Mr. Leland's business
address is 1100 Louisiana Street, Suite 3150, Houston, Texas 77002. Mr. Leland's
principal occupation is serving as a Managing Director of EnCap Investments.
Item 2(d) - (e) is amended and restated as follows:
(d) None of Energy PLC, EnCap LP, EnCap Investments or any of the
individuals identified in this Item 2 or, to the knowledge of the reporting
persons, on Schedule I has, during the last five years, been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) None of Energy PLC, EnCap LP, EnCap Investments or any of the
individuals identified in this Item 2 or, to the knowledge of the reporting
persons, on Schedule I has, during the last five years, been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and a
result of such proceeding was or is subject to a judgment, decree or final order
enjoining future
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violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
(f) Each of the individuals identified in this Item 2 is a citizen of the
United States of America, with the exception of as indicated otherwise on
Schedule I and: (i) Peter C. Tudball, C.B.E., Sir Peter G. Cazalet, Alan B.
Henderson, and William W. Vanderfelt who are all citizens of the United Kingdom,
(ii) Energy PLC which was formed under the laws of the United Kingdom, (iii) Leo
G. Deschuyteneer who is a citizen of Belguim, and (iv) James F. Ladner who is a
citizen of Switzerland.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The following is added to Item 3.
PURCHASE OF CAPITAL STOCK
On May 14, 1999, the Issuer closed a transaction pursuant to which it
issued and sold to Kayne Anderson Energy Fund, L.P. ("Kayne"), BancAmerica
Capital Investors SBIC I, L.P. ("BancAmerica"), Eos Partners, L.P., Eos Partners
SBIC, L.P., Eos Partners SBIC II, L.P. (collectively, "Eos"), Energy PLC, EnCap
Energy Capital Fund III-B, L.P., BOCP Energy Partners, L.P., EnCap Energy
Capital Fund III, L.P. (collectively, "EnCap") and SGC Partners II LLC ("SGC"
and together with Kayne, BancAmerica, Eos and EnCap, the "Investors") shares of
a newly created class of preferred stock. Pursuant to a Stock Purchase Agreement
among the Issuer and the Investors, five million shares of the Issuer's
Cumulative Redeemable Preferred Stock, Series B ("Preferred Stock") were issued
in exchange for an aggregate purchase price of $50 million paid by the
Investors. As additional consideration, the Issuer issued to the Investors an
aggregate of 43,815,810 shares of its Common Stock, representing 40% of the
outstanding Common Stock (on a fully diluted basis). If the Issuer redeems all
of the outstanding shares of Preferred Stock prior to May 14, 2001, the
Investors must sell back, for a total of $100, to the Issuer 12.5% of the shares
of Common Stock originally issued to the Investors.
Dividends on the Preferred Stock equal to 10% per annum are payable
quarterly. The dividend rate is subject to increase (but in no event to more
than 16%) or decrease (but in no event to less than 10%) based upon the Issuer's
ratio of certain assets to liabilities, which is calculated on January 1 and
July 1 of each year or at such other time as requested by the Investors. The
Preferred Stock may be redeemed at any time by the Issuer and must be redeemed
upon the occurrence of certain events, including upon the fifth anniversary of
the issue date or upon a change of control. A change of control is deemed to
occur upon any merger, reorganization, purchase or sale of more than 50% of the
Issuer's voting securities, the sale of substantially all of the assets of the
Issuer or at any time Tim Goff ceases to serve as the Issuer's Chief Executive
Officer. The Issuer is prohibited from taking certain actions, including
authorizing, creating or issuing any shares of capital stock, amending the
articles of incorporation of the Issuer and authorizing a merger or change of
control, without the consent of the holders of a majority of the outstanding
shares of Preferred Stock.
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SECOND AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT
In connection with the transaction, the Issuer, Bargo Energy Resources,
Ltd., TJG Investments, Inc., Bargo Energy Company, Tim J. Goff, Thomas Barrow,
James E. Sowell and Bargo Operating Company, Inc. (collectively, the "Bargo
Group"), B. Carl Price, Don Wm. Reynolds (Mr. Price and Mr. Reynolds are
referred to as the "Price Group"), EnCap LP and the Investors entered into a
Second Amended and Restated Shareholders' Agreement (the "New Shareholders'
Agreement"), thereby amending the Shareholders' Agreement. Under the New
Shareholders' Agreement, the holders of the Preferred Stock have the right, for
so long as the Preferred Stock is outstanding and until the occurrence of
certain other events, to appoint designated nominees to the Issuer's Board of
Directors. Accordingly, as part of these transactions, B. Carl Price, Mary
Elizabeth Vanderhider and Kimberley G. Seekely have resigned from the Issuer's
Board of Directors. Of the three vacancies on the Board of Directors, one will
be filled by a nominee to be named by Kayne, one was filled by a nominee of
BancAmerica and one was jointly filled by a nominee of Eos and SGC. Brian D.
Young was appointed to serve as the Eos/SGC nominee and J. Travis Hain was
appointed to serve as BancAmerica's nominee. The EnCap entities have the right
to appoint two nominees to the Board of Directors and the members of the Bargo
Group have the right to appoint two nominee to the Board of Directors. The Price
Group no longer has the right to appoint nominees to the Board of Directors. The
continuing members of Bargo's Board are Tim J. Goff and Thomas D. Barrow (as the
Bargo Group nominees) and Gary R. Petersen and D. Martin Phillips (as the EnCap
nominees). The New Shareholders' Agreement also sets forth certain rights of
first refusal and tag along rights among the parties thereto.
The provisions of the New Shareholders' Agreement relating to voting and
transfer of Common Stock may be deemed to form a group composed of the parties
to the New Shareholders' Agreement.
SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
The Issuer, the Investors and EnCap LP also entered into a Second
Amendment to Registration Rights Agreement dated May 14, 1999 providing for
registration rights, under the Registration Rights Agreement, for the shares of
Common Stock issued to the Investors.
AMENDMENT TO ISSUER'S BY-LAWS
In connection with the transaction, the Issuer amended its Bylaws to
provide that for so long as each of (i) EOS and SGC (jointly), (ii) Kayne, (iii)
BancAmerica, (iv) EnCap and (v) the Bargo Group (each, a "Nominee Group") is
entitled to nominate one or more persons to the Board of Directors of the Issuer
as provided in the New Shareholders' Agreement, no act shall be deemed to be an
act of the Board of Directors or to be authorized and approved by the Board of
Directors without the approval of at least three directors that are nominated by
at least three separate Nominee Groups. In addition, Article VIII of the Bylaws
providing certain voting rights to the nominee of the Bargo Group, was deleted.
ITEM 4. PURPOSE OF TRANSACTION.
Item 4 has been amended and restated in its entirety as follows:
EnCap LP and Energy PLC hold a substantial ownership position in the
Issuer in order to be able to influence the business and management of the
Issuer. EnCap LP and Energy PLC,
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through their nominees on the Board of Directors, intend to actively participate
in the business and management of the Issuer. Under the New Shareholders'
Agreement, the Investors collectively have the ability to control the Issuer
with respect to the election of directors.
Energy PLC and EnCap LP intend to monitor and evaluate their investment in
the Issuer in light of pertinent factors, including oil and gas prices, market
conditions, the Issuer's performance and prospects, the trading prices of the
Common Stock, conditions in the oil and gas industry and general economic
conditions. Energy PLC and EnCap LP may make additional purchases of Common
Stock in the future through market transactions or otherwise, maintain their
current investment or dispose of some or all of the Common Stock.
Except as set forth above, the reporting persons have no present plans or
proposals that relate to or that would result in any of the actions specified in
clauses (a) though (j) of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Item 5 has been amended and restated in its entirety as follows:
(a) The following 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 exerciseable 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.
<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 -- -- 4,241,598 4.60%
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 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>
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--------------
(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) Energy PLC. Pursuant to the Investment Agreement (as defined in
Item 6), Energy PLC shares the power to vote or direct the vote and to
dispose or direct the disposition of 4,241,598 shares of Common Stock
with EnCap Investments. In addition, all shares of Common Stock owned
by Energy PLC are subject to the voting and transfer provisions of the
New Shareholders' Agreement.
EnCap LP. EnCap LP has the sole power to vote or direct the
vote and to dispose or direct the disposition of 2,424,973 shares of
Common Stock. In addition, all shares of Common Stock owned by EnCap
LP are subject to the voting and transfer provisions of the New
Shareholders' Agreement.
EnCap Investments. EnCap Investments may be deemed to have the
power to vote and direct the vote or to dispose or direct the
disposition of 17,839,602 shares of Common Stock owned by Energy PLC
(by virtue of the Investment Agreement, as defined in Item 6), EnCap
LP (as its general partner), and certain other affiliates of EnCap
Investments. EnCap Investments disclaims beneficial ownership of any
shares of Common Stock owned by either EnCap LP, Energy PLC or such
other affiliates.
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El Paso Field Services and El Paso Energy. Each of El Paso
Field Services and El Paso Energy may be deemed to have the power to
vote and direct the vote or to dispose or direct the disposition of
the shares of Common Stock owned or deemed to be owned by EnCap
Investments (by virtue of being controlling persons of EnCap
Investments).
Executive Officers and Directors. Except as otherwise described
herein, to the knowledge of the reporting persons, no executive
officer or director of Energy PLC or managing director of EnCap
Investments or other person listed in Schedule I has the power to vote
or direct the vote or dispose or direct the disposition of any shares
of Common Stock.
(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.
(d) Except as otherwise described herein, no person other than
EnCap LP and Energy PLC has the right to receive or the power to
direct the receipt of dividends from, or the proceeds from the sale
of, the shares of Common Stock deemed to be beneficially owned by
them.
(e) It is inapplicable for the purposes herein to state the date on
which a party ceased to be the owner of more than five percent (5%) of
the shares of Common Stock.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SECURITIES OF THE ISSUER.
No Modification.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Item 7 has been amended and restated in its entirety as follows:
Exhibit 1 - Joint Filing Agreement dated May 21, 1999 among Energy PLC,
EnCap LP and EnCap Investments.*
Exhibit 4.1 - Voting Agreement dated November 25, 1997 between B. Carl Price,
Don W. Reynolds, Energy Capital Investment Company PLC and EnCap
Equity 1994 Limited Partnership.**
Exhibit 4.2 - Stock Purchase Warrant No. 1003 dated December 13, 1995 granted
to Energy Capital Investment Company PLC.**
Exhibit 4.3 - Stock Purchase Warrant No. 1005 dated April 18, 1996 granted to
Energy Capital Investment Company PLC.**
Exhibit 4.4 - Stock Purchase Warrant No. 1004 dated December 13, 1995 granted
to EnCap Equity 1994 Limited Partnership.**
Exhibit 4.5 - Stock Purchase Warrant No. 1006 dated April 18, 1996 granted to
EnCap Equity 1994 Limited Partnership.**
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Exhibit 4.6 - Investment Advisory Agreement dated February 4, 1994.**
Exhibit 4.7 - Shareholders' Agreement dated August 14, 1998 between Future
Petroleum Corporation, B. Carl Price, Don Wm. Reynolds, Energy
Capital Investment Company PLC, EnCap Equity 1994 Limited
Partnership and Bargo Energy Resources, Ltd.***
Exhibit 4.8 - Note Restructuring Agreement dated August 14, 1998 between
Future Petroleum Corporation, Energy Capital Investment Company
PLC and EnCap Equity 1994 Limited Partnership.***
Exhibit 4.9 - Registration Rights Agreement dated August 14, 1998 between
Future Petroleum Corporation, Energy Capital Investment Company
PLC and EnCap Equity 1994 Limited Partnership.***
Exhibit 4.10 - Pledge Agreement dated August 14, 1998 between Energy Capital
Investment Company PLC and Bank of America National Trust and
Savings Association.***
Exhibit 4.11 - Pledge Agreement dated August 14, 1998 between EnCap Equity 1994
Limited Partnership and Bank of America National Trust and
Savings Association.***
Exhibit 4.12 - Master Subordination Agreement dated August 14, 1998 between
Energy Capital Investment Company PLC, EnCap Equity 1994 Limited
Partnership and America National Trust and Savings
Association.***
Exhibit 4.13 - Agreement and Plan of Merger dated August 14, 1998 between Bargo
Energy Resources, Ltd, SCL-CAL Company, Future Petroleum
Corporation and Future CAL-TEX.***
Exhibit 4.14 - Agreement regarding Bylaws dated August 14, 1998 between B. Carl
Price, Energy Capital Investment Company PLC, EnCap Equity 1994
Limited Partnership and Bargo Energy Resources, Ltd.***
Exhibit 4.15 - 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 4.16 - Second Amendment to Registration Rights Agreement dated May 14,
1999 by and among Bargo Energy Company, a Texas corporation,
Energy Capital Investment Company PLC,
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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 10.1 - April 1997 Agreement dated April 28, 1997 between Future
Petroleum Corporation, Future Petroleum Corporation, a Texas
corporation, Future Acquisition 1995, Ltd, Energy Capital
Investment Company PLC and EnCap Equity 1994 Limited
Partnership.**
Exhibit 10.2 - Purchase and Sale Agreement dated November 25, 1997 by and among
Future Petroleum Corporation, Energy Capital Investment Company
PLC, EnCap Equity 1994 Limited Partnership, and Gecko Booty 1994
I Limited Partnership.**
Exhibit 10.3 - First Amended and Restated Agreement of Limited Partnership of
Future Acquisition 1995, Ltd. dated January 29, 1997 by and
among Future Petroleum Corporation, a Texas corporation, EnCap
Equity 1994 Limited Partnership and Energy Capital Investment
Company PLC, as amended by the Letter Amendment dated April 18,
1996 and the First Amended and Restated Agreement of Limited
Partnership dated as of April 28, 1997.**
Exhibit 10.4 - Agreement of Parent dated January 29, 1997 by and among Future
Petroleum Corporation, Future Acquisition 1995, Ltd., Energy
Capital Investment Company PLC and EnCap Equity 1994 Limited
Partnership.**
Exhibit 10.5 - 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.*
* Filed herewith.
** Incorporated by reference to the same titled exhibit to the
reporting persons' Schedule 13D, dated January 29, 1997.
*** Incorporated by reference to the same titled exhibit to the
reporting persons' Schedule 13D/A, dated August 14, 1998.
Page 12
<PAGE> 13
SCHEDULE I
DIRECTORS, MANAGERS, EXECUTIVE OFFICERS
OR CONTROLLING PERSONS
1. El Paso Field Services. The name, present principal occupation or
employment, and the name of any corporation or other organization in which such
employment is conducted, of each of the directors and executive officers of El
Paso Field Services is set forth below.
<TABLE>
<CAPTION>
Name and Citizenship Business Address Position/Principal Occupation
- -------------------- ---------------- -----------------------------
<S> <C> <C>
Executive Officers &
Directors:
- --------------------------------------------------------------------------------------------------------------
William A. Wise El Paso Energy Corporation Chairman of the Board of El Paso
(United States Citizen) 1001 Louisiana Street Field Services
Houston, Texas 77002
Robert G. Phillips El Paso Energy Corporation Director and President of El Paso
(United States Citizen) 1001 Louisiana Street Field Services
Houston, Texas 77002
H. Brent Austin El Paso Energy Corporation Director, Executive Vice
(United States Citizen) 1001 Louisiana Street President and Chief Financial
Houston, Texas 77002 Officer of El Paso Field Services
- --------------------------------------------------------------------------------------------------------------
Jeffrey I. Beason El Paso Energy Corporation Vice President and Controller of
(United States Citizen) 1001 Louisiana Street El Paso Field Services
Houston, Texas 77002
C. Dana Rice El Paso Energy Corporation Vice President and Treasurer of
(United States Citizen) 1001 Louisiana Street El Paso Field Services
Houston, Texas 77002
- --------------------------------------------------------------------------------------------------------------
Robert Cavnar El Paso Energy Corporation Senior Vice President and Chief
(United States Citizen) 1001 Louisiana Street Operating Officer
Houston, Texas 77002
D. Mark Leland El Paso Energy Corporation Vice President
(United States Citizen) 1001 Louisiana Street
Houston, Texas 77002
Gary R. Peterson See Part 1 above. Senior Vice President
D. Martin Phillips See Part 1 above. Senior Vice President
David B. Miller See Part 1 above. Senior Vice President
Robert L. Zorich See Part 1 above. Senior Vice President
- --------------------------------------------------------------------------------------------------------------
</TABLE>
I-1
<PAGE> 14
2. El Paso Energy. The name, present principal occupation or
employment, and the name of any corporation or other organization in which such
employment is conducted, of each of the directors and executive officers of El
Paso Energy is set forth below.
<TABLE>
<CAPTION>
Name and Citizenship Business Address Position/Principal Occupation
- -------------------- ---------------- -----------------------------
<S> <C> <C>
Executive Officers &
Directors:
William A. Wise El Paso Energy Corporation Chairman of the Board,
(United States Citizen) 1001 Louisiana Street President and Chief Executive
Houston, Texas 77002 Officer
H. Brent Austin El Paso Energy Corporation Executive Vice President and
(United States Citizen) 1001 Louisiana Street Chief Financial Officer
Houston, Texas 77002
Richard Owen Baish El Paso Energy Corporation President of El Paso Natural Gas
(United States Citizen) 1001 Louisiana Street Company
Houston, Texas 77002
John D. Hushon El Paso Energy Corporation President of El Paso Energy
(United States Citizen) 1001 Louisiana Street International Company
Houston, Texas 77002
Greg G. Jenkins El Paso Energy Corporation President of El Paso Services
(United States Citizen) 1001 Louisiana Street Holding Company
Houston, Texas 77002
Robert G. Phillips El Paso Energy Corporation President of El Paso Field
(United States Citizen) 1001 Louisiana Street Services Company
Houston, Texas 77002
John W. Somerhalder II El Paso Energy Corporation President of Tennessee Gas
(United States Citizen) 1001 Louisiana Street Pipeline Company
Houston, Texas 77002
Joel Richards III El Paso Energy Corporation Executive Vice President
(United States Citizen) 1001 Louisiana Street
Houston, Texas 77002
Mark A. Searles El Paso Energy Corporation Senior Vice President
(United States Citizen) 1001 Louisiana Street
Houston, Texas 77002
Jeffrey I. Beason El Paso Energy Corporation Vice President and Controller
(United States Citizen) 1001 Louisiana Street
Houston, Texas 77002
C. Dana Rice El Paso Energy Corporation Vice President and Treasurer
(United States Citizen) 1001 Louisiana Street
Houston, Texas 77002
Britton White Jr. El Paso Energy Corporation Executive Vice President and
(United States Citizen) 1001 Louisiana Street General Counsel
Houston, Texas 77002
</TABLE>
I-2
<PAGE> 15
<TABLE>
<S> <C> <C>
Byron Allumbaugh Ralphs Grocery Company Director of El Paso/Retired
(United States Citizen) 610 Newport Center Drive, Former Chairman, Ralphs
Suite 210 Grocery Company
Newport Beach, CA 92660
Juan Carlos Braniff Presidente Masaryk No. 8 Director of El Paso/Deputy CEO
(Mexican Citizen) 6th Floor Insurance & Pensions Sector
Col. Bosques de Grupo Financiero Bancomer
Chapultepec
Mexico, D.F. 11588
Peter T. Flawn University of Texas Director of El Paso
(United States Citizen) 23rd and San Jacinto President Emeritus, University of
Room GEO526 Texas at Austin
Austin, Texas 78705
James F. Gibbons Stanford University Director of El Paso/Former Dean
(United States Citizen) Paul G. Allen Center for of Engineering, Stanford
Integrated Systems University
Room 201, Mail Stop 4075
Stanford, CA 94305
Ben F. Love Chase Bank of Texas Director of El Paso/Investor
(United States Citizen) 600 Travis, 18th Floor Former Chairman and CEO,
Houston, Texas 77002 Texas Commerce Bancshares
Kenneth L. Smalley 5 Queensview Court Director of El Paso/Retired
(United States Citizen) Dallas, Texas 75225 Former President of Phillips 66
Natural Gas Company
Malcolm Wallop Frontiers of Freedom Director of El Paso
(United States Citizen) Western Strategy Group Chairman, Western Strategy
1100 Wilson Boulevard, Group and Frontiers of Freedom
Suite 1400
Arlington, VA 22209
</TABLE>
I-3
<PAGE> 16
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
Date: May 21, 1999 ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ Gary R. Petersen
------------------------------
Gary R. Petersen
Director
Date: May 21, 1999 ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: EnCap Investments L.L.C., General
Partner
By: /s/ D. Martin Phillips
------------------------------
D. Martin Phillips
Managing Director
Date: May 21, 1999 ENCAP INVESTMENTS L.L.C.
By: /s/ D. Martin Phillips
------------------------------
D. Martin Phillips
Managing Director
Page 13
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
Exhibit 1 - Joint Filing Agreement dated May 21, 1999 among Energy PLC,
EnCap LP and EnCap Investments.*
Exhibit 4.1 - Voting Agreement dated November 25, 1997 between B. Carl Price,
Don W. Reynolds, Energy Capital Investment Company PLC and EnCap
Equity 1994 Limited Partnership.**
Exhibit 4.2 - Stock Purchase Warrant No. 1003 dated December 13, 1995 granted
to Energy Capital Investment Company PLC.**
Exhibit 4.3 - Stock Purchase Warrant No. 1005 dated April 18, 1996 granted to
Energy Capital Investment Company PLC.**
Exhibit 4.4 - Stock Purchase Warrant No. 1004 dated December 13, 1995 granted
to EnCap Equity 1994 Limited Partnership.**
Exhibit 4.5 - Stock Purchase Warrant No. 1006 dated April 18, 1996 granted to
EnCap Equity 1994 Limited Partnership.**
</TABLE>
<PAGE> 18
<TABLE>
<S> <C>
Exhibit 4.6 - Investment Advisory Agreement dated February 4, 1994.**
Exhibit 4.7 - Shareholders' Agreement dated August 14, 1998 between Future
Petroleum Corporation, B. Carl Price, Don Wm. Reynolds, Energy
Capital Investment Company PLC, EnCap Equity 1994 Limited
Partnership and Bargo Energy Resources, Ltd.***
Exhibit 4.8 - Note Restructuring Agreement dated August 14, 1998 between
Future Petroleum Corporation, Energy Capital Investment Company
PLC and EnCap Equity 1994 Limited Partnership.***
Exhibit 4.9 - Registration Rights Agreement dated August 14, 1998 between
Future Petroleum Corporation, Energy Capital Investment Company
PLC and EnCap Equity 1994 Limited Partnership.***
Exhibit 4.10 - Pledge Agreement dated August 14, 1998 between Energy Capital
Investment Company PLC and Bank of America National Trust and
Savings Association.***
Exhibit 4.11 - Pledge Agreement dated August 14, 1998 between EnCap Equity 1994
Limited Partnership and Bank of America National Trust and
Savings Association.***
Exhibit 4.12 - Master Subordination Agreement dated August 14, 1998 between
Energy Capital Investment Company PLC, EnCap Equity 1994 Limited
Partnership and America National Trust and Savings
Association.***
Exhibit 4.13 - Agreement and Plan of Merger dated August 14, 1998 between Bargo
Energy Resources, Ltd, SCL-CAL Company, Future Petroleum
Corporation and Future CAL-TEX.***
Exhibit 4.14 - Agreement regarding Bylaws dated August 14, 1998 between B. Carl
Price, Energy Capital Investment Company PLC, EnCap Equity 1994
Limited Partnership and Bargo Energy Resources, Ltd.***
Exhibit 4.15 - 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 4.16 - Second Amendment to Registration Rights Agreement dated May 14,
1999 by and among Bargo Energy Company, a Texas corporation,
Energy Capital Investment Company PLC,
</TABLE>
<PAGE> 19
<TABLE>
<S> <C>
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 10.1 - April 1997 Agreement dated April 28, 1997 between Future
Petroleum Corporation, Future Petroleum Corporation, a Texas
corporation, Future Acquisition 1995, Ltd, Energy Capital
Investment Company PLC and EnCap Equity 1994 Limited
Partnership.**
Exhibit 10.2 - Purchase and Sale Agreement dated November 25, 1997 by and among
Future Petroleum Corporation, Energy Capital Investment Company
PLC, EnCap Equity 1994 Limited Partnership, and Gecko Booty 1994
I Limited Partnership.**
Exhibit 10.3 - First Amended and Restated Agreement of Limited Partnership of
Future Acquisition 1995, Ltd. dated January 29, 1997 by and
among Future Petroleum Corporation, a Texas corporation, EnCap
Equity 1994 Limited Partnership and Energy Capital Investment
Company PLC, as amended by the Letter Amendment dated April 18,
1996 and the First Amended and Restated Agreement of Limited
Partnership dated as of April 28, 1997.**
Exhibit 10.4 - Agreement of Parent dated January 29, 1997 by and among Future
Petroleum Corporation, Future Acquisition 1995, Ltd., Energy
Capital Investment Company PLC and EnCap Equity 1994 Limited
Partnership.**
Exhibit 10.5 - 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.*
</TABLE>
* Filed herewith.
** Incorporated by reference to the same titled exhibit to the
reporting persons' Schedule 13D, dated January 29, 1997.
*** Incorporated by reference to the same titled exhibit to the
reporting persons' Schedule 13D/A, dated August 14, 1998.
<PAGE> 1
EXHIBIT 1
AGREEMENT
The undersigned reporting persons hereby agree that the statements
filed pursuant to this Schedule 13D/A, to which this Agreement is filed as
an exhibit, are filed on behalf of each of them.
Date: May 21, 1999 ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ Gary R. Petersen
------------------------------
Gary R. Petersen
Director
Date: May 21, 1999 ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: EnCap Investments L.L.C., General
Partner
By: /s/ D. Martin Phillips
------------------------------
D. Martin Phillips
Managing Director
Date: May 21, 1999 ENCAP INVESTMENTS L.L.C.
By: /s/ D. Martin Phillips
------------------------------
D. Martin Phillips
Managing Director
<PAGE> 1
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.
<PAGE> 2
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:
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
2
<PAGE> 3
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 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
3
<PAGE> 4
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.
"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
4
<PAGE> 5
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
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,
5
<PAGE> 6
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 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
6
<PAGE> 7
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
7
<PAGE> 8
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 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
8
<PAGE> 9
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
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
9
<PAGE> 10
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
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
10
<PAGE> 11
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.
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
11
<PAGE> 12
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
12
<PAGE> 13
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
13
<PAGE> 14
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 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.
14
<PAGE> 15
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.
(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.
15
<PAGE> 16
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.
16
<PAGE> 17
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:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: EnCap Investments L.C., General
Partner
By:
-------------------------------------
D. Martin Phillips
Managing Director
ENERGY CAPITAL INVESTMENT COMPANY PLC
By:
-------------------------------------
Gary R. Petersen
Director
TJG INVESTMENTS, INC.
By:
-------------------------------------
Tim J. Goff
President
BARGO ENERGY COMPANY
By:
-------------------------------------
Tim J. Goff
Manager
<PAGE> 18
BARGO ENERGY RESOURCES, LTD.
By: Bargo Operating Company, Inc.,
General Partner
By:
-------------------------------------
Tim J. Goff
President
BARGO OPERATING COMPANY, INC.
By:
-------------------------------------
Tim J. Goff
President
-----------------------------------------
Tim J. Goff
-----------------------------------------
Thomas Barrow
-----------------------------------------
James E. Sowell
-----------------------------------------
B. Carl Price
-----------------------------------------
Don Wm. Reynolds
ENCAP ENERGY CAPITAL FUND III, L.P.
By: EnCap Investments L.C., General
Partner
By:
-------------------------------------
D. Martin Phillips
Managing Director
<PAGE> 19
ENCAP ENERGY CAPITAL FUND III-B, L.P.
By: EnCap Investments L.C., General
Partner
By:
-------------------------------------
D. Martin Phillips
Managing Director
BOCP ENERGY PARTNERS, L.P.
By: EnCap Investments L.C., Manager
By:
-------------------------------------
D. Martin Phillips
Managing Director
EOS PARTNERS, L.P.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
EOS PARTNERS SBIC, L.P.
By: Eos SBIC General, L.P., its general
partner
By: Eos SBIC, Inc., its general partner
By:
------------------------------
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:
------------------------------
Name:
-------------------------
Title:
------------------------
<PAGE> 20
SGC PARTNERS II LLC
By:
-------------------------------------
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
its sole member
By: BACM I GP, LLC, its general partner
By:
---------------------------------
J. Travis Hain
Managing Director
KAYNE ANDERSON ENERGY FUND, L.P.
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE> 21
EXHIBIT 5(a)
<TABLE>
<CAPTION>
Shareholder Number of Shares Number of
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> 22
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> 23
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
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:
<PAGE> 2
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"
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, # 1425
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
<PAGE> 3
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"
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.
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
BARGO ENERGY COMPANY
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: EnCap Investments L.C., General Partner
By:
---------------------------------------
D. Martin Phillips
Managing Director
ENERGY CAPITAL INVESTMENT COMPANY PLC
By:
---------------------------------------
Gary R. Petersen
Director
ENCAP ENERGY CAPITAL FUND III, L.P.
By: EnCap Investments L.C., General Partner
By:
---------------------------------------
D. Martin Phillips
Managing Director
ENCAP ENERGY CAPITAL FUND III-B, L.P.
By: EnCap Investments L.C., General Partner
By:
---------------------------------------
D. Martin Phillips
Managing Director
<PAGE> 5
BOCP ENERGY PARTNERS, L.P.
By: EnCap Investments L.C., Manager
By:
---------------------------------------
D. Martin Phillips
Managing Director
EOS PARTNERS, L.P.
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
EOS PARTNERS SBIC, L.P.
By: Eos SBIC General, L.P., its general
partner
By: Eos SBIC, Inc., its general partner
By:
------------------------------------
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:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
SGC PARTNERS II LLC
By:
---------------------------------------
V. Frank Pottow
Managing Director
<PAGE> 6
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 its sole member
By: BACM I GP, LLC, its general partner
By:
------------------------------------
J. Travis Hain
Managing Director
KAYNE ANDERSON ENERGY FUND, L.P.
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE> 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
- --------------------------------------------------------------------------------
<PAGE> 2
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");
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
1
<PAGE> 3
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.
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,
2
<PAGE> 4
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.
3.5 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
3
<PAGE> 5
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> 6
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> 7
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> 8
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.
7
<PAGE> 9
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 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;
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(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;
(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
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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.
(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;
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(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;
(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
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(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 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.
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(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.
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
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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.
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
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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.
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
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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.
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.
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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.
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
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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;
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(g) acquire (by merger, consolidation, or acquisition of
stock or assets or otherwise) any corporation, partnership, or other
business organization or division thereof;
(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
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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 (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
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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.
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,
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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 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
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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.
(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.
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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.
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
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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.
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.
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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.
(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.
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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 representatives to become aware of any facts relating to the
business, assets, results of operations, condition (financial or
otherwise), or prospects of the Company
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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
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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 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
31
<PAGE> 33
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 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):
32
<PAGE> 34
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
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
33
<PAGE> 35
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.
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
34
<PAGE> 36
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
35
<PAGE> 37
Agreement. All Schedules, Exhibits, and Annexes are hereby incorporated in and
made a part of this Agreement as if set forth in full herein.
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
36
<PAGE> 38
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.
(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.
37
<PAGE> 39
"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.
"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
38
<PAGE> 40
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.
"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.
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<PAGE> 41
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:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
BUYERS:
ENERGY CAPITAL INVESTMENT COMPANY PLC
By:
--------------------------------------
Gary R. Petersen
Director
ENCAP ENERGY CAPITAL FUND III, L.P.
By: EnCap Investments L.C., General
Partner
By:
--------------------------------------
D. Martin Phillips
Managing Director
ENCAP ENERGY CAPITAL FUND III-B, L.P.
By: EnCap Investments L.C., General
Partner
By:
--------------------------------------
D. Martin Phillips
Managing Director
<PAGE> 42
BOCP ENERGY PARTNERS, L.P.
By: EnCap Investments L.C., Manager
By:
--------------------------------------
D. Martin Phillips
Managing Director
EOS PARTNERS, L.P.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
EOS PARTNERS SBIC, L.P.
By: Eos SBIC General, L.P., its general
partner
By: Eos SBIC, Inc., its general partner
By:
-------------------------------
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:
-------------------------------
Name:
--------------------------
Title:
-------------------------
SGC PARTNERS II LLC
By:
--------------------------------------
V. Frank Pottow
Managing Director
<PAGE> 43
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 its sole member
By: BACM I GP, LLC, its general partner
By:
--------------------------------
J. Travis Hain
Managing Director
KAYNE ANDERSON ENERGY FUND, L.P.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
<PAGE> 44
Schedule 1.1
Investors
<TABLE>
<CAPTION>
- -------------------------------------------------------------- -------------------- --------------------
Shares of Shares of Purchase
- -------------------------------------------------------------- -------------------- --------------------
Name Preferred 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>
