<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
March 31, 2000
Date of Report
(Date of earliest event reported)
BARGO ENERGY COMPANY
(Exact name of small business issuer as specified in its charter)
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Texas 0-8609 87-0239185
(State or other jurisdiction of (Commission file number) (I.R.S. Employer
incorporation or organization) Identification No.)
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700 Louisiana, Suite 3700
Houston, Texas 77002
(Address of principal executive offices, including zip code)
(713)236-9792
(Issuer's telephone number, including area code)
Not Applicable
(Former name and former address,
if changed since last report)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Not applicable
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 31, 2000 we completed the acquisition of selected producing
properties in the Permian Basin, East Texas and Mid-Continent from
Texaco for $161.1 million before adjustments. The effective date of the
purchase is January 1, 2000. Aggregate current net production from the
properties totals approximately 9,000 barrels of oil and 11 million
cubic feet of gas per day. We now have proven reserves of approximately
75 million equivalent barrels of oil.
In connection with this acquisition, we closed a $245 million senior
secured credit facility to finance the acquisition and refinance
existing bank indebtedness. The new syndicated facility is provided by
several leading energy banks with Chase Bank of Texas, NA as the
Administrative Agent. The new facility is comprised of a $200 million
revolving credit facility with a $160 million initial borrowing base and
a $45 million term portion. The $45 million in term notes matures nine
months from the closing date.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable
ITEM 5. OTHER EVENTS
Not applicable
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS
Not applicable
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
Financial statements required by this item will be filed by amendment as
soon as practicable, but no later than June 14, 2000.
(b) Pro Forma Financial Information.
Pro-forma financial statements required by this item will be filed by
amendment as soon as practicable, but no later than June 14, 2000.
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(c) Exhibits
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Exhibit
Number Title of Documents
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2. Plan of acquisition, reorganization, arrangement, liquidation of
succession
2.1 Purchase and Sale Agreement between Texaco Exploration & Production
Inc. and Bargo Petroleum Corporation.*
2.2 Asset Purchase Agreement between Four Star Oil & Gas Company and Bargo
Petroleum Corporation.*
2.3 Asset Purchase Agreement between McFarland Energy, Inc. and Bargo
Petroleum Corporation.*
10. Material Contracts
10.1 Subscription Agreement dated March 31, 2000, among Bargo Energy
Company, 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.
10.2 First Amendment to Second Amended and Restated Shareholders'
Agreement, dated March 31, 2000, among Bargo Energy Company, B. Carl
Price, Don Wm. Reynolds, Energy Capital Investment Company PLC, EnCap
Equity 1994 Limited Partnership, BER Partnership L.P., TJG
Investments, Inc., BEC Partnership, BOC Operating Corporation, Inc.,
Tim J. Goff, Thomas Barrow, James E. Sowell, 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.
10.3 Third Amendment to Registration Rights Agreement dated March 31, 2000
among Energy Capital Investment Company PLC, EnCap Equity 1994 Limited
Partnership, 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.
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10.4 First Amendment to Stock Purchase Agreement dated March 31, 2000,
among 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 and Bargo Energy
Company.
10.5 Assignment, Acknowledgment, Consent and Waiver dated March 31, 2000,
among Bargo Energy Company, 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., SGC Partners II LLC,
and Chase Bank of Texas, National Association.
10.6 Escrow Agreement dated March 31, 2000, among Bargo Energy Company,
Energy Capital Investment Company PLC, EnCap Energy Capital Fund
III-B, L.P., EnCap Equity 1994, 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., SGC Partners II LLC,
and Chase Bank of Texas, National Association.
10.7 Acknowledgment and Consent dated March 31, 2000, among Bargo Energy
Company, 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 Capital Partners II LLC.
10.8 Indemnification Agreement dated March 31, 2000, among Bargo Energy
Company, 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., SGC Partners II LLC, and Bankers Trust
Company.
10.9 Consent to Amendment to Registration Rights Agreement by TJG
Investments, Inc., BEC Partnership, BER Partnership, L.P., BOC
Operating Corporation, Tim J. Goff, Thomas Barrow, James E. Sowell, B.
Carl Price, Don Wm. Reynolds, Christie Price, Robert Price and Charles
D. Laudeman.
10.10 Credit Agreement dated March 31, 2000, among Bargo Energy Company,
Chase Bank of Texas National Association, as administrative agent,
Bankers Trust Company, as syndication agent and the other agents and
lenders signatory thereto.
* Confidential treatment has been requested.
ITEM 8. CHANGE IN FISCAL YEAR
Not applicable
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
BARGO ENERGY COMPANY
By: /s/ Jonathan M. Clarkson
--------------------------------
Jonathan M. Clarkson, President
Dated: April 17, 2000
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EXHIBIT INDEX
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Exhibit
Number Title of Documents
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2. Plan of acquisition, reorganization, arrangement, liquidation of
succession
2.1 Purchase and Sale Agreement between Texaco Exploration & Production
Inc. and Bargo Petroleum Corporation.*
2.2 Asset Purchase Agreement between Four Star Oil & Gas Company and Bargo
Petroleum Corporation.*
2.3 Asset Purchase Agreement between McFarland Energy, Inc. and Bargo
Petroleum Corporation.*
10. Material Contracts
10.1 Subscription Agreement dated March 31, 2000, among Bargo Energy
Company, 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.
10.2 First Amendment to Second Amended and Restated Shareholders'
Agreement, dated March 31, 2000, among Bargo Energy Company, B. Carl
Price, Don Wm. Reynolds, Energy Capital Investment Company PLC, EnCap
Equity 1994 Limited Partnership, BER Partnership L.P., TJG
Investments, Inc., BEC Partnership, BOC Operating Corporation, Inc.,
Tim J. Goff, Thomas Barrow, James E. Sowell, 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.
10.3 Third Amendment to Registration Rights Agreement dated March 31, 2000
among Energy Capital Investment Company PLC, EnCap Equity 1994 Limited
Partnership, 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.
10.4 First Amendment to Stock Purchase Agreement dated March 31, 2000,
among 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 and Bargo Energy
Company.
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10.5 Assignment, Acknowledgment, Consent and Waiver dated March 31, 2000,
among Bargo Energy Company, 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., SGC Partners II LLC,
and Chase Bank of Texas, National Association.
10.6 Escrow Agreement dated March 31, 2000, among Bargo Energy Company,
Energy Capital Investment Company PLC, EnCap Energy Capital Fund
III-B, L.P., EnCap Equity 1994, 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., SGC Partners II LLC,
and Chase Bank of Texas, National Association.
10.7 Acknowledgment and Consent dated March 31, 2000, among Bargo Energy
Company, 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 Capital Partners II LLC.
10.8 Indemnification Agreement dated March 31, 2000, among Bargo Energy
Company, 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., SGC Partners II LLC, and Bankers Trust
Company.
10.9 Consent to Amendment to Registration Rights Agreement by TJG
Investments, Inc., BEC Partnership, BER Partnership, L.P., BOC
Operating Corporation, Tim J. Goff, Thomas Barrow, James E. Sowell, B.
Carl Price, Don Wm. Reynolds, Christie Price, Robert Price and Charles
D. Laudeman.
10.10 Credit Agreement dated March 31, 2000, among Bargo Energy Company,
Chase Bank of Texas National Association, as administrative agent,
Bankers Trust Company, as syndication agent and the other agents and
lenders signatory thereto.
* Confidential Treatment has been requested.
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EXHIBIT 2.1
[THIS AGREEMENT HAS CONFIDENTIAL PORTIONS OMITTED, WHICH PORTIONS HAVE BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS
ARE INDICATED IN THIS AGREEMENT WITH "[TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]."
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
TEXACO EXPLORATION AND PRODUCTION INC.
AND
BARGO PETROLEUM CORPORATION
DATED FEBRUARY 22, 2000
EFFECTIVE DATE: JANUARY 1, 2000
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TABLE OF CONTENTS
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PART ONE
SUBJECT MATTER, DEFINITIONS AND RULES OF CONSTRUCTION.........................................................1
1.1 Subject Matter .....................................................................................1
1.2 Defined Terms ......................................................................................1
Affiliate................................................................................................1
Agreed Rate..............................................................................................1
Agreement................................................................................................1
Applicable Law...........................................................................................2
Assets...................................................................................................2
Assumed Obligations......................................................................................2
Beneficial Interests.....................................................................................2
Burdens..................................................................................................2
Business Day.............................................................................................2
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Closing..................................................................................................2
Closing Date.............................................................................................2
Code.....................................................................................................3
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Contemplated Transactions................................................................................3
Contracts................................................................................................3
Corporate Documents......................................................................................3
Easements................................................................................................3
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Excluded Assets..........................................................................................4
Excluded Obligations.....................................................................................6
Fee Interests............................................................................................6
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Governmental Body........................................................................................6
HSR Act..................................................................................................6
Hydrocarbons.............................................................................................7
Knowledge................................................................................................7
Leases...................................................................................................7
Losses...................................................................................................7
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Other Property...........................................................................................8
Permitted Encumbrances...................................................................................8
Person..................................................................................................10
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Properties..............................................................................................10
Taxes...................................................................................................10
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
1.3 Other Definitions in the Agreement ................................................................11
1.4 Rules of Construction .............................................................................12
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PART TWO
SALE AND PURCHASE.............................................................................................13
2.1 Purchase and Sale ...................................................................................13
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
2.5 Closing and Payment of Purchase Price ..............................................................14
2.6 Method of Payment ..................................................................................14
PART THREE
REPRESENTATIONS AND WARRANTIES............................................................................... 15
3.1 Seller .............................................................................................15
3.2 Buyer ..............................................................................................18
3.3 Disclaimer and Notifications .......................................................................19
PART FOUR
COVENANTS.....................................................................................................22
4.1 Covenants of Seller ................................................................................22
4.2 Covenants of Buyer .................................................................................23
4.3 Covenants of Seller and Buyer ......................................................................25
PART FIVE
CONDITIONS TO CLOSING.........................................................................................35
5.1 Seller's Closing Conditions ........................................................................35
5.2 Buyer's Closing Conditions .........................................................................37
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
PART SIX
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
PART SEVEN
TAXES.........................................................................................................40
7.1 Payment and Apportionment of Real Property Taxes and Personal Property Taxes .......................40
7.2 Other Taxes ........................................................................................40
7.3 Sales Taxes ........................................................................................40
7.4 Cooperation ........................................................................................41
7.5 Tax Proceedings ....................................................................................41
7.6 Purchase Price Allocation ..........................................................................41
7.7 Reservation of Section 29 Credits ..................................................................41
7.8 Reservation of Section 43 Credits ..................................................................41
PART EIGHT
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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PART NINE
MISCELLANEOUS.................................................................................................45
9.1 Successors and Assigns .............................................................................45
9.2 Waivers and Amendments .............................................................................45
9.3 Notices ............................................................................................46
9.4 Counterparts .......................................................................................47
9.5 Entire Agreement ...................................................................................47
9.6 Seller's Option to Elect a Tax Deferred Exchange ...................................................47
9.7 Severability .......................................................................................47
9.8 Applicable Law .....................................................................................48
9.9 Expenses ...........................................................................................48
9.10 Laws and Regulations ...............................................................................48
9.11 Public Announcements ...............................................................................48
9.12 Assignability ......................................................................................48
9.13 Provisions Survive Closing .........................................................................48
9.14 Dispute Resolution .................................................................................48
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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iii
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SCHEDULES AND EXHIBITS
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Schedules
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A Contracts
A-1 Mid-Continent
A-2 East Texas
A-3 Permian
B Easements
C Included Equipment
D Excluded Assets
E Leases
E-1 Mid-Continent
E-2 East Texas
E-3 Permian
F Fee Interests
F-1 Mid-Continent
F-2 East Texas
F-3 Permian
G Properties and Imbalances
G-1 Mid-Continent
G-2 East Texas
G-3 Permian
H Geophysical Data
2.4 Purchase Price Allocation
3.1(g) Litigation
3.1(h) Consents and Preferential Rights
3.1(j) Permits
3.1(k) Notices on Leases and Contract
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
3.1(n) AFE's
4.3(d) Gas Purchase Agreements to be Executed
4.3(v) Joint Use Agreements
4.3(w) Centrilift Equipment
4.3(x) Wells Requiring Mechanical Integrity Tests
9.14 Dispute Resolution
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Exhibits
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A Assignments
B-1 through B-2 Deeds
C Oil and Gas Leases
D Officer's Certificate - Buyer
E Officer's Certificate - Seller
F [intentionally left blank]
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iv
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G [intentionally left blank]
H-1 through H-2 Gas Purchase Agreements
I Transition Agreement
J Geophysical License Agreement (3D)
K Versado Gas Purchase Agreement
L Geophysical License Agreement (2D)
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v
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PURCHASE AND SALE AGREEMENT
This agreement is made and entered into this 22nd day of February, 2000, by
and between Texaco Exploration and Production Inc., a Delaware corporation
(hereinafter "Seller"), and Bargo Petroleum Corporation, a Texas corporation,
(hereinafter "Buyer"). Seller and Buyer are sometimes separately referred to
herein as a "Party" and collectively as "Parties."
PART ONE
SUBJECT MATTER, DEFINITIONS AND RULES OF CONSTRUCTION
1.1 SUBJECT MATTER. The subject matter of this Agreement is the sale by
Seller to Buyer of the Assets, the purchase of the Assets and the assumption of
the Assumed Obligations by Buyer, and the terms and conditions upon which all of
the foregoing shall take place.
1.2 DEFINED TERMS. For purposes of this Agreement, including the Exhibits
and Schedules hereto, except as otherwise expressly provided or unless the
context otherwise requires, the terms defined in this Section 1.2 have the
meanings assigned to them herein and the capitalized terms defined elsewhere in
the Agreement by inclusion in quotation marks and parentheses have the meanings
so ascribed to them.
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling or controlled by, or under common
control with, such Person. For purposes of this definition, the term
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with") as applied to any Person,
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management of such Person, whether through
ownership of voting securities, by contract or otherwise, and specifically
with respect to a corporation or partnership, means direct or indirect
ownership of fifty percent (50%) or more of the voting stock in such
corporation or of the voting interest as a partner in such partnership. In
addition, Seller's Affiliates shall include Equilon Enterprises LLC, Motiva
Enterprises LLC, Equiva Services LLC and Equiva Trading Company LLC.
"AGREED RATE" means a rate per annum calculated on a 360-day basis
which is equal to the lesser of (a) a rate which is one percent (1%) above
the prime rate of interest of Chase Manhattan Bank, New York, New York, as
announced or published by such bank from time to time (adjusted from time
to time to reflect any changes in such rate determined hereunder), or (b)
the maximum rate from time to time permitted by Applicable Law.
"AGREEMENT" means this Purchase and Sale Agreement, including the
Exhibits and Schedules.
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1
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"APPLICABLE LAW" means all laws, statutes, treaties, rules, codes,
ordinances, regulations, certificates, orders, interpretations, licenses
and permits of any Governmental Body, including the common or civil law,
(including, without limitation, those pertaining to occupational health and
safety, consumer product safety, employee benefits, the environment,
securities or zoning) and all judgments, decrees, injunctions, writs,
orders or like action of any court, arbitrator or other Governmental Body
of competent jurisdiction.
"ASSETS" means collectively the Contracts, the Easements, the Leases,
the Fee Interests, the Beneficial Interests and the Other Property, except
to the extent constituting Excluded Assets.
"ASSUMED OBLIGATIONS" means, except as constitutes Excluded
Obligations (i) all liabilities, duties, and obligations that arise from
the ownership or operation of the Assets after the Effective Date; (ii) all
liabilities and obligations with respect to Plugging and Abandonment; (iii)
all duties, liabilities and obligations under the Contracts, the Leases and
the Easements arising after and in existence as of the Effective Date; (iv)
the Environmental Obligations and (v) all other duties, liabilities, and
obligations assumed by Buyer under this Agreement.
"BENEFICIAL INTERESTS" means any and all rights, titles and interests
owned by Seller in, under or derived from all of the presently existing
pooling, unitization and communitization agreements or other operating
agreements and the units created thereby (including without limitation, all
units formed under orders, regulations, rules or other official acts of any
Governmental Body having jurisdiction) not evidenced by Seller's ownership
of lease or fee interests, including all of Seller's rights, titles and
interests to such Contracts as set forth on Schedules A-1 through A-3.
"BURDENS" means royalties (including both lessors' royalties and
nonparticipating royalty interests), overriding royalties, net profits
interests, production payments, and other similar obligations and burdens
payable out of production.
"BUSINESS DAY" means a day on which commercial banks are generally
open for regular business in Houston, Texas.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"CLOSING" means the closing of the Contemplated Transactions at 10:00
a.m. local time at Seller's offices at 1111 Bagby, Houston, Texas, on the
Closing Date or at such other time or place as the Parties may mutually
agree upon in writing.
"CLOSING DATE" means March 30, 2000, or such other date as the Parties
may agree in writing.
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2
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"CODE" means the Internal Revenue Code of 1986, as amended, or any
successor law, and regulations or rules issued under any of the foregoing.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"CONTEMPLATED TRANSACTIONS" means each and all of the transactions
contemplated by the Agreement.
"CONTRACTS" means, to the extent they are assignable, all of Seller's
right, title and interest in and to all valid and existing, farmout
agreements, unitization agreements, pooling agreements, unit declarations,
gas sales or purchase contracts, operating agreements and other contracts
attributable to the Assets, or other agreements and instruments (including
all amendments thereto and any agreements settling claims asserted
thereunder) to the extent and only to the extent that the same relate,
pertain or are incidental to the Easements, the Leases, the Fee Interests,
the Beneficial Interests or the Other Property, including, without
limitation, those listed on Schedules A-1 through A-3 hereto, but
specifically excluding the Easements and Leases.
"CORPORATE DOCUMENTS" means with respect to a Delaware corporation the
Certificate of Incorporation and By-Laws or the equivalent documents of a
corporation organized under the laws of another jurisdiction.
"EASEMENTS" means Seller's non-exclusive or exclusive, as the case may
be, rights to the use and occupancy of the surface, including, without
limitation, tenements, authorizations, variances, appurtenances, surface
leases, easements, permits, licenses, servitudes, rights-of-way and similar
rights and interests in any way appertaining, belonging, affixed or
incidental to or used in connection with the ownership or operation of the
Leases, Fee Interests, Beneficial Interests or Other Property, including,
without limitation, those listed on Schedule B hereto, except to the extent
constituting Excluded Assets.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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3
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"EXCLUDED ASSETS" means the following:
(a) all (i) trade credits, accounts receivable (other than those
specifically included in the definition of Other Property), notes
receivable and other receivables attributable to Seller's interest in
the Assets with respect to any period of time prior to the Effective
Date, (ii) deposits, cash, checks in process of collection, cash
equivalents and funds attributable to Seller's interest in the Assets
with respect to any period of time prior to the Effective Date, and
(iii) funds attributable to third Persons for production prior to the
Effective Date but suspended or impounded by Seller;
(b) all corporate, financial, and tax records of Seller;
(c) all claims and causes of action of Seller (i) arising from
acts, omissions or events, or damage to or destruction of property
occurring prior to the Effective Date, and (ii) affecting any of the
excluded assets set forth in (a) through (s) of this definition;
(d) all rights, titles, claims and interests of Seller accruing
prior to the Effective Date (i) under any policy or agreement of
insurance or indemnity, (ii) under any bond, or (iii) to any insurance
or condemnation proceeds or awards;
(e) all Hydrocarbons produced from or attributable to the Assets
with respect to all periods prior to the Effective Date including all
merchantable liquids in stock or sales tanks or associated flowlines,
together with all proceeds from or of such Hydrocarbons;
(f) claims of Seller for refund of, or loss carry forwards with
respect to income or franchise taxes or any other Taxes attributable
to: (i) any period prior to the Effective Date, or (ii) any of the
excluded assets set forth in (a) through (s) of this definition;
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<PAGE> 11
(g) all amounts due or payable to Seller as adjustments or
refunds under any contracts or agreements affecting the Assets, with
respect to periods prior to the Effective Date, specifically
including, without limitation, amounts recoverable from audits under
operating agreements;
(h) all amounts due or payable to Seller as adjustments to
insurance premiums related to the Assets with respect to any period
prior to the Effective Date;
(i) all proceeds, benefits, income or revenues accruing (and any
security or other deposits made) with respect to (i) the Assets prior
to the Effective Date; and (ii) any of the excluded assets set forth
in (a) through (s) of this definition;
(j) all legal files; attorney-client communications or attorney
work product; records and documents subject to confidentiality
provisions, claims of privilege or other restrictions (including,
without limitation, contractual obligations to third Persons) on
access; and auditor's reports;
(k) reserve information and reports; seismic, geochemical, and
geophysical information and data, or other proprietary information
relating thereto, whether owned or licensed by Seller, and any
interpretive data except for certain 3D seismic data as specifically
set forth in Schedule H and certain 2D seismic data licensed to Buyer
pursuant to the Geophysical License Agreement attached hereto as
Exhibit L;
(l) all other bids received by Seller for the Assets or any
portion thereof;
(m) all of Seller's or Seller's Affiliates' intellectual
property, including but not limited to proprietary computer software,
patents, trade secrets, copyrights, names, marks, and logos;
(n) all of Seller's vehicles, trucks (including associated
tools), boats, house trailers, tools, pulling machines, warehouse
stocks, microwave equipment, office computer equipment, remote
terminal units, equipment or material temporarily located on the
Assets, except those listed on Schedule C;
(o) any pipelines, easements, fixtures, tanks, LACT units or
equipment located on the Assets which belong to third Persons,
including lessors and Affiliates of Seller;
(p) all of Seller's interest in the equipment, facilities and
other assets as more fully described on Schedule D hereto;
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<PAGE> 12
(q) all of Seller's interest in any oil, gas or mineral leases,
mineral or surface fee or lands which (i) are not set forth on
Schedules E-1 through E-3 and Schedules F-1 through F-3 or (ii) cover
or pertain to lands or depths other than the particular lands or
depths described in the Leases and Fee Interests specifically
referenced on Schedules E-1 through E-3 and Schedules F-1 through F-3
or such depths which are specifically excepted or reserved on
Schedules E-1 through E-3 and Schedules F-1 through F-3;
(r) all of Seller's interest in any Assets which are not conveyed
to Buyer pursuant to the terms of this Agreement due to a Title
Defect, Material Environmental Condition or other condition; and
(s) all real or personal property held or owned by Seller's
Affiliates or any third Persons.
"EXCLUDED OBLIGATIONS" means, with respect to any Asset, except as
constitutes Environmental Obligations, any liabilities and obligations of
Seller (i) due, accrued or owed prior to the Effective Date; (ii) due,
accrued or owed prior to the Effective Date with respect to the payment of
Burdens and Taxes; (iii) to third Persons arising from property damage or
personal injury sustained prior to the Effective Date; (iv) arising from
any existing litigation or demands made as of the Effective Date; (v)
arising from or attributable to any Excluded Asset, and (vi) to be retained
by Seller as expressly provided in this Agreement.
"FEE INTERESTS" means all rights, titles and interests of Seller owned
as of the Effective Date and the Closing Date, or acquired pursuant to
Seller's rights as of the Effective Date and Closing Date under the terms
of an existing Contract, in all the fee and mineral fee interests described
on Schedules F-1 through F-3, insofar and only insofar as such Fee
Interests cover the lands and depths set forth in Schedules F-1 through
F-3. The Fee Interests shall include all of Seller's right, title and
interest to all depths unless specifically limited on Schedules F-1 through
F-3.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"GOVERNMENTAL BODY" means any Federal, state, tribal, county, parish,
municipal, or other federal, state or local governmental authority or
judicial or regulatory agency, board, body, department, bureau, commission,
instrumentality, court, tribunal or quasi-governmental authority in any
jurisdiction (domestic or foreign).
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvement Act of
1976, and all regulations thereunder.
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<PAGE> 13
"HYDROCARBONS" means crude oil, natural gas, casinghead gas,
condensate, sulphur, natural gas liquids, plant products and other liquid
or gaseous hydrocarbons (including without limitation, coalbed gas and
CO(2)) and shall also refer to all other minerals of every kind and
character which may be covered by or included in the Assets.
"KNOWLEDGE" means the actual knowledge of a Party's current corporate
officers and business unit managers.
"LEASES" means, except to the extent constituting Excluded Assets, any
and all rights, titles and interests of Seller owned as of the Effective
Date and the Closing Date, or acquired pursuant to Seller's rights as of
the Effective Date and the Closing Date under the terms of an existing
Contract, in all of the oil, gas or mineral leases, fees, and other
interests described on Schedules E-1 through E-3 to the Agreement, insofar
and only insofar as such Leases pertain to the lands and interests
described in said Schedules. The Leases shall include all of Seller's
right, title and interest to all depths unless specifically limited on
Schedules E-1 through E-3.
"LOSSES" means any and all losses, liabilities, claims, demands,
penalties, fines, settlements, damages, actions, or suits of whatsoever
kind and nature (but expressly excluding consequential damages), whether or
not subject to litigation, including, without limitation (i) claims or
penalties arising from products liability, negligence, statutory liability
or violation of any Applicable Law or in tort (strict, absolute or
otherwise) and (ii) loss of or damage to any property, and all reasonable
out-of-pocket costs, disbursements and expenses (including, without
limitation, legal, accounting, consulting and investigation expenses and
litigation costs).
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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7
<PAGE> 14
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"OTHER PROPERTY" means, except to the extent constituting Excluded
Assets,
(a) all of Seller's interest in all wells (including, without
limitation, all oil, gas, injection, disposal and other wells, whether
active or inactive, productive or non-productive, plugged and
abandoned or temporarily abandoned), platforms, equipment, facilities
and personal property of any kind including but not limited to tubing,
casing, wellheads, pumping units, production units, compressors,
valves, meters, flowlines, pipelines, gathering systems, tanks,
heaters, separators, dehydrators, pumps and injection units which are
located on or connected with the Leases, Fee Interests, the Beneficial
Interests or Easements and which are used solely and exclusively in
connection with the production, treatment, gathering or transportation
of Hydrocarbons from the Leases, Properties or Easements;
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(d) subject to Section 4.3(b), all rights, obligations, interests
and benefits to gas imbalances with respect to the Assets;
(e) all licenses, authorizations, permits, variances and similar
rights and interests related to the Leases, Fee Interests, Beneficial
Interests, Easements and Contracts and personal property to be
conveyed hereunder; and
(f) [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"PERMITTED ENCUMBRANCES" means:
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<PAGE> 15
(a) all Leases, operating agreements, operator liens and working
interest owner liens for obligations incurred after the Effective
Date, unit, communitization and pooling agreements, farmout
agreements, subleases and farmin agreements and other Contracts
described on Schedules A-1 through A-3 insofar as same do not operate
to increase the working interest of the Seller set forth on Schedules
G-1 through G-3 without a corresponding increase in the net revenue
interest and that do not operate to decrease the Seller's net revenue
interest set forth on Schedules G-1 through G-3;
(b) all Applicable Laws, and all rights reserved or vested in any
Governmental Body to control or regulate the Assets in any manner
including, without limitation, any adjustment to Seller's net revenue
interest or gross working interest in a particular Property, caused
by, or as the result of, any action of a Governmental Body which is
not the result of any claims for under-payment of royalties owed to
such Governmental Body nor the negligent act or omission of Seller;
(c) liens for Taxes or assessments arising after the Effective
Date not yet due and payable or not yet delinquent, or if delinquent,
that are being contested in good faith by appropriate action brought
in the normal course of business and to the extent covered by Seller's
indemnity under Sections 8.1 and 8.5 hereof;
(d) reversionary interests arising under farmout and farmin
agreements, subleases, and the non-consent provisions of applicable
operating agreements insofar as same do not operate to increase the
working interest of the Seller set forth on Schedules G-1 through G-3
without a corresponding increase in the net revenue interest and that
do not operate to decrease the Seller's net revenue interest set forth
on Schedules G-1 through G-3;
(e) liens imposed by Applicable Law, such as carriers',
warehousemen's and mechanics' liens and other similar liens arising in
the ordinary course of business which secure payment of obligations
arising after the Effective Date or that are not more than sixty (60)
days past due or which are being contested in good faith to the extent
covered by Seller's indemnity under Sections 8.1 and 8.5 hereof;
(f) defects that have been cured by possession under applicable
statutes of limitation, and
(g) other minor defects or irregularities generally waived by
prudent purchasers of oil and gas properties which (i) do not
materially interfere with the operation, value or use of any of the
Assets, (ii) do not prevent Buyer from receiving the proceeds of
production from any of the Assets, (iii) do not operate to increase
the working interest of the Seller set forth on Schedules G-1 through
G-3 without a
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<PAGE> 16
corresponding increase in the net revenue interest and (iv) do not
operate to decrease the Seller's net revenue interest set forth on
Schedules G-1 through G-3.
"PERSON" means any natural person, corporation, division of a
corporation, association, company, estate, trust, partnership, joint
venture, unincorporated organization, Governmental Body, or any other
entity.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"PROPERTIES" means an accounting unit described on Schedules G-1
through G-3 which is utilized by Seller for an allocation of revenue and
expenses from the Assets.
"PROPERTY PACKAGES" means the East Texas Properties, the Mid-Continent
Properties and the Permian Basin Properties as identified in Schedule 2.4.
"TAXES" shall mean any and all fees (including, without limitation,
documentation, license, recording, filing and registration fees), taxes
(including without limitation, production, gross receipts, ad valorem,
value added, windfall profit tax, environmental tax, turnover, sales, use,
personal property (tangible and intangible), stamp, leasing, lease, user,
leasing use, excise, franchise, transfer, heating value, fuel, excess
profits, occupational, interest equalization, lifting, oil, gas, or mineral
production or severance, and other taxes), levies, imposts, duties, charges
or withholdings of any nature whatsoever, imposed by any Governmental Body
or taxing authority thereof, domestic or foreign, together with any and all
penalties, fines, additions to tax and interest thereon, whether or not
such tax shall be existing or hereafter adopted.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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<PAGE> 17
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"TRANSITION AGREEMENT" means the transition agreement between Seller
and Buyer attached hereto as Exhibit I.
1.3 OTHER DEFINITIONS IN THE AGREEMENT. The following terms shall have the
respective meanings ascribed to them in the Sections of the Agreement set forth
below opposite such terms:
<TABLE>
<S> <C> <C>
AFEs.................................................3.1(n)
Allocated Value......................................2.4
Assignments..........................................2.5
Buyer................................................Preamble
</TABLE>
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<PAGE> 18
<TABLE>
<S> <C> <C>
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Deeds..................................2.5
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Employees..............................4.3(s)
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
</TABLE>
<TABLE>
<S> <C> <C>
Millennium Compliant ................................3.3(d)
Oil and Gas Leases...................................2.5
Party................................................Preamble
Performance Deposit..................................2.3
Permits..............................................3.1(j)
Purchase Price.......................................2.2
Real and Personal Property Taxes.....................7.1(a)
Records..............................................1.2
Rejection Notice.....................................4.3(m)(iii)
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Reserve Report.......................................3.1(o)
Seller...............................................Preamble
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
</TABLE>
1.4 RULES OF CONSTRUCTION. For purposes of this Agreement:
(a) GENERAL. Unless the context otherwise requires, (i) "or" is not
exclusive; (ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with accounting principles that are generally
accepted in the United States of America; (iii) words in the singular
include the plural and words in the plural include the singular; (iv) words
in the masculine include the feminine and words in the feminine include the
masculine; (v) any date specified for any action that is not a Business Day
shall be deemed to mean the first Business Day after such date; (vi) a
reference to a Person includes its successors and assigns; and (vii) the
use of the word "include" or "including" when following any general
statement, term or matter, shall not be construed to limit such statement,
term or matter to the specific items or matters set forth immediately
following such word or to similar items or matters, whether or not
non-limiting language (such as "without limitation" or "but not limited to"
or words of similar import) is used with
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<PAGE> 19
reference thereto, but rather shall be deemed to refer to all other items
or matters that could reasonably fall within the broadest possible scope of
such general statement, term or matter.
(b) PARTS AND SECTIONS. References to Parts and Sections are, unless
otherwise specified, to Parts and Sections of the Agreement. Neither the
captions to Parts or Sections hereof nor the Table of Contents shall be
deemed to be a part of the Agreement.
(c) EXHIBITS AND SCHEDULES. The Exhibits and Schedules form part of
this Agreement and shall have the same force and effect as if set out in
the body of this Agreement.
(d) OTHER AGREEMENTS. References herein to any agreement or other
instrument shall, unless the context otherwise requires (or the definition
thereof otherwise specifies), be deemed references to that agreement or
instrument as it may from time to time be changed, amended or extended.
PART TWO
SALE AND PURCHASE
2.1 PURCHASE AND SALE. At the Closing, Seller shall sell, assign and convey
to the Buyer and Buyer shall purchase and pay for the Assets and assume the
Assumed Obligations as provided in 4.2(a) and the Material Environmental
Conditions as set forth in Section 4.2(b).
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
EXCEPT AS PROVIDED UNDER SECTION 9.15, IF BUYER FAILS TO COMPLETE THE
TRANSACTION SET FORTH IN THIS AGREEMENT, THE PARTIES AGREE THAT SELLER
SHALL RETAIN, AS SELLER'S SOLE REMEDY, THE PERFORMANCE DEPOSIT AS
LIQUIDATED DAMAGES, WHICH THE PARTIES AGREE IS A REASONABLE SUM
CONSIDERING ALL THE CIRCUMSTANCES EXISTING ON THE DATE OF THIS
AGREEMENT, INCLUDING THE RELATIONSHIP OF THE SUM OF THE RANGE OF HARM
TO SELLER THAT REASONABLY
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<PAGE> 20
COULD BE ANTICIPATED AND THE ANTICIPATION THAT PROOF OF ACTUAL DAMAGES
WOULD BE COSTLY OR INCONVENIENT. IN PLACING THEIR INITIALS BELOW, EACH
PARTY SPECIFICALLY CONFIRMS THE ACCURACY OF THE STATEMENTS MADE ABOVE
AND THE FACT THAT EACH PARTY WAS REPRESENTED BY COUNSEL WHO EXPLAINED
THE CONSEQUENCES OF THIS LIQUIDATED DAMAGES PROVISION AT THE TIME THIS
AGREEMENT WAS MADE.
Seller Buyer
Initial___________ Initial_____________
[TEXT OMITTED -- CONFIDENTIAL TREATMENT REQUESTED]
2.5 CLOSING AND PAYMENT OF PURCHASE PRICE. Subject to the terms and
conditions contained herein, this sale and purchase shall close on the Closing
Date. At Closing, Buyer will pay Seller the remaining unpaid portion of the
Purchase Price, adjusted pursuant to the terms of this Agreement, by wire
transfer of collected funds payable to Seller as set forth below. At Closing,
Seller shall deliver to Buyer assignments and bills of sale in the form attached
hereto as Exhibit A (the "Assignments"), deeds in the forms attached hereto as
Exhibits B-1 and B-2 (the "Deeds"), oil and gas leases in the form attached
hereto as Exhibit C (the "Oil and Gas Leases") as well as such certificates or
other documents as are required to effect the transfer of the Assets, or the
subsequent operation thereof.
2.6 METHOD OF PAYMENT. Any amount payable under this Agreement shall be
payable in immediately available funds by means of a wire transfer, if to
Seller, to Seller's account at Chase Manhattan Bank, 1 Chase Plaza, New York,
New York, ABA #021000021, account number 9102582567 (with immediate telephone
notice to Luci Romano, (914) 253-6071), or to such other account number as
Seller may by written notice direct, or if to Buyer, to Buyer's account as may
be designated by Buyer.
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<PAGE> 21
PART THREE
REPRESENTATIONS AND WARRANTIES
3.1 SELLER. Seller represents and warrants to Buyer that, as of the
Effective Date:
(a) ORGANIZATION AND STANDING. Seller has been duly organized and is
validly existing in good standing under the laws of the State of Delaware,
and is duly qualified to do business and is in good standing as a foreign
corporation in all jurisdictions where the nature of its properties or
business requires it.
(b) AUTHORITY AND NO VIOLATION. The Seller has the corporate power and
authority to execute, deliver and perform its obligations under this
Agreement. The execution, delivery and performance of this Agreement (a)
has been duly authorized by all requisite corporate or shareholder action
and (b) does not conflict with or result in a violation or breach of the
Corporate Documents of the Seller or of any agreement, instrument, statute,
regulation, rule, order, writ, judgment or decree to which the Seller or
its property is directly or indirectly a party or is directly or indirectly
subject.
(c) VALIDITY OF AGREEMENT. This Agreement is a legal, valid and
binding obligation of Seller, enforceable against Seller in accordance with
the terms of the Agreement, except as enforcement may be limited by
bankruptcy, insolvency, reorganization or other similar Applicable Laws
affecting the enforcement of creditor's rights generally. The
enforceability of Seller's obligations under the Agreement is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(d) NO BANKRUPTCY. There are no bankruptcy, reorganization or
receivership proceedings pending, being contemplated by, or to the actual
Knowledge of Seller, threatened against Seller.
(e) BROKERS' FEES. Seller has not incurred any liability, contingent
or otherwise, for brokers' or finders' fees relating to the Contemplated
Transactions for which Buyer shall be liable.
(f) STATUS. Seller is not a non-resident alien, foreign corporation,
foreign partnership, foreign trust or foreign estate (as those terms are
defined in the Code and in the regulations promulgated pursuant thereto.
(g) LITIGATION. Except as set forth on Schedule 3.1(g), with respect
to those Assets operated by Seller, there are no actions, suits, or
proceedings pending [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
- --------------------------------------------------------------------------------
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<PAGE> 22
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(h) NO CONSENTS REQUIRED. Except as set forth in Section 4.3(n) and on
Schedule 3.1(h) or consents required from Governmental Bodies as part of an
ordinary course transfer, no preferential purchase rights, consents,
approvals or other action by, or filing with any Person or Governmental
Body is required in connection with the execution, delivery and performance
by Seller of the Agreement.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(j) PERMITS. Except as set forth on Schedule 3.1(j), as to those
Assets operated by Seller, Seller has obtained all material permits,
licenses, and certificates required by Applicable Law in connection with
the ownership and operation of Assets (the "Permits") and such Permits are
in full force and effect. Except as set forth on Schedule 3.1(j), to
Seller's Knowledge as to those Assets not operated by Seller, all Permits
in connection with the ownership and operation of such Assets have been
obtained and are in full force and effect. Except as set forth on Schedule
3.1(j), to Seller's Knowledge there are no outstanding violations with
respect to such Permits and no judicial, administrative or arbitral
proceeding is pending or threatened with respect to such Permits
(k) LEASES. To Seller's Knowledge, (i) all material Leases, unit
agreements, pooling agreements, communization agreements and other
Contracts creating interests comprising the Properties are in full force
and effect, (ii) except as set forth on Schedule 3.1(k) or 3.1(g), since
January 1, 1996, Seller has not received any written notice from any third
Person which is still pending claiming any material violation or
repudiation of the material Leases, unit agreements, pooling agreements,
communization agreements and other Contracts creating interests comprising
the Properties, and (iii) Seller is entitled to be paid, and is being paid,
its interests in the Properties without indemnity or guarantee
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<PAGE> 23
other than those customarily found in division orders and other similar
agreements and documents.
(l) IMBALANCES. To Seller's Knowledge and except for Lease obligations
for the delivery of gas for residential use, the only Contracts pursuant to
which Hydrocarbons produced from the Assets are being sold are described on
Schedule A-1, A-2 and A-3 and there are no (i) gas imbalances except as set
forth on Schedules G-1, G-2 and G-3 (which may be supplemented from time to
time before the Closing) and as of the date shown on Schedules G-1, G-2 and
G-3 which date shall not be more than 120 days prior to Closing, or (ii)
take-or-pay or other prepayments, failure of purchasers to pay on a current
basis or refund obligations for which Buyer would be liable that would have
a material, adverse affect on Buyer's right to market production.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(n) CURRENT COMMITMENTS. With respect to the Assets operated by
Seller, Schedule 3.1(n) contains a complete and accurate list as of the
date of this Agreement of (i) all authorities for expenditures ("AFEs") in
excess of $50,000 to drill or rework wells or for capital expenditures
pursuant to any of the Contracts that have been proposed by Seller or any
third Person on or after the Effective Date, whether or not accepted by
Seller or any other third Person, and (ii) all AFEs and commitments, other
than those which have been terminated or expired, in excess of $50,000 to
drill or rework wells or for other capital expenditures pursuant to any of
the Contacts for which all of the activities anticipated in such AFEs or
commitments have not been completed by the date of this Agreement.
[TEXT OMITTED -- CONFIDENTIAL TREATMENT REQUESTED]
(p) CONTRACTS. As to those Assets operated by Seller, there are no
Contracts, other than those Contracts set forth on Schedules A-1 through
A-3 that as of the Closing Date inhibit or preclude Buyer from realizing
the material benefits of the Assets or under which Seller or any other
party thereto is in default. To Seller's Knowledge, other than those
Contracts set forth on Schedules A-1 through A-3 as to those Assets which
are not operated by Seller, there are no material Contracts under which
Seller or any other party thereto is in default.
(q) TAXES. All ad valorem, property, production, severance and other
taxes based on or measured by the ownership of the Properties or the
production of Hydrocarbons
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<PAGE> 24
from the Properties have been properly and timely paid except those
disputed in ordinary course of business if any, for which Seller has
indemnified Buyer under Section 8.1 and 8.5 below.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(s) LIMITATION. The foregoing representations and warranties are given
by Seller to Buyer and are not intended to be given or used by any other
Person not a Party to this Agreement.
3.2 Buyer. Buyer represents and warrants to Seller that, as of the
Effective Date:
(a) ORGANIZATION AND STANDING. Buyer has been duly organized and is
validly existing in good standing under the laws of the State of Texas, and
is duly qualified to do business and is in good standing as a foreign
corporation in all jurisdictions where the nature of its properties or
business requires it.
(b) AUTHORITY AND NO VIOLATION. The Buyer has the corporate power and
authority to execute, deliver and perform its obligations under this
Agreement. The execution, delivery and performance of this Agreement (i)
has been duly authorized by all requisite corporate or shareholder action
and (ii) does not conflict with or result in a violation or breach of the
Corporate Documents of the Buyer or of any agreement, instrument, statute,
regulation, rule, order, writ, judgment or decree to which the Buyer or its
property is directly or indirectly a party or is directly or indirectly
subject.
(c) VALIDITY OF AGREEMENT. This Agreement is a legal, valid and
binding obligation of Buyer, enforceable against Buyer in accordance with
the terms of the Agreement, except as enforcement may be limited by
bankruptcy, insolvency, reorganization or other similar Applicable Laws
affecting the enforcement of creditor's rights generally. The
enforceability of Buyer's obligations under the Agreement is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(d) NO BANKRUPTCY. There are no bankruptcy, reorganization or
receivership proceedings pending, being contemplated by, or to the actual
Knowledge of Buyer, threatened against Buyer.
(e) BROKERS' FEES. Buyer has not incurred any liability, contingent or
otherwise, for brokers' or finders' fees relating to the Contemplated
Transactions for which Seller shall be liable.
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<PAGE> 25
(f) KNOWLEDGEABLE INVESTOR. Buyer is an experienced and knowledgeable
investor and operator in the oil and gas business. In making its decision
to participate in this Agreement and the Contemplated Transactions, Buyer
has relied solely on its own independent investigation, analysis and
evaluation of the Assets.
(g) SECURITIES REPRESENTATION. Buyer is acquiring the Assets for its
own account and not with a view to, or for offer of resale in connection
with, a distribution thereof, within the meaning of the Securities Act of
1933, 15 U.S.C. Section 77a et seq., or any other Applicable Laws
pertaining to the distribution of securities.
(h) FUNDING. Buyer has arranged to have available by the Closing Date
sufficient funds, to enable the Buyer to pay in full the Purchase Price as
herein provided and otherwise to perform its obligations under this
Agreement.
(i) OPERATOR STATUS. Buyer is, or will be as of the Closing, a
qualified operator in good standing with all Governmental Bodies having
jurisdiction over the Assets.
(j) GOVERNMENTAL BODY APPROVAL. To Buyer's Knowledge, there are no
facts or conditions with respect to the Assets that may cause any
Governmental Body to withhold its unconditional approval of the Assignments
or Deeds.
(k) LIMITATION. The foregoing representations and warranties are given
by Buyer to Seller and are not intended to be given or used by any other
Person not a Party to this Agreement.
3.3 DISCLAIMER AND NOTIFICATIONS. THERE ARE NO WARRANTIES, REPRESENTATIONS
OR IMPLIED COVENANTS BETWEEN THE PARTIES EXCEPT THE MATTERS EXPRESSLY PROVIDED
FOR IN THIS AGREEMENT. THE PARTIES RESPECTIVELY DISCLAIM ANY OTHER WARRANTIES OR
REPRESENTATIONS INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES AND
REPRESENTATIONS IMPLIED UNDER APPLICABLE LAW.
(a) NO IMPLIED REPRESENTATIONS. IT IS EXPRESSLY UNDERSTOOD BY THE
PARTIES HERETO THAT SELLER DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, AS TO TITLE (EVEN FOR THE RETURN OF THE PURCHASE PRICE
PAID) OR THE CONDITION OR STATE OF REPAIR OF THE ASSETS, THEIR VALUE,
QUALITY, MERCHANTABILITY, SUITABILITY OR FITNESS FOR ANY USES OR PURPOSES,
NOR AS TO THE CURRENT VOLUME, NATURE, QUALITY, CLASSIFICATION, OR VALUE OF
THE OIL, GAS OR OTHER MINERAL RESERVES THEREUNDER OR COVERED THEREBY, NOR
WITH RESPECT TO ANY APPURTENANCES THERETO BELONGING OR IN ANY WISE
APPERTAINING TO SAID ASSETS, OR OTHERWISE. Seller has advised Buyer and
Buyer has acknowledged that certain spills of Hydrocarbons, produced water
and chemicals from oil and gas exploration, development,
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production or processing have occurred, or may have occurred, upon the
Assets, which could have resulted in contamination of the soil, water,
ground water, or improvements on the Assets. Furthermore, Seller has
cautioned Buyer to thoroughly examine and inspect the Assets for any such
conditions or violations and generally as to the condition of the Assets
and its improvements, including a recommendation by Seller to Buyer that
Buyer engage an environmental consulting firm to make an environmental
survey of the Assets, and Buyer hereby acknowledges such obligations and
assumes all liabilities associated therewith.
(b) BUYER'S INSPECTION OF THE ASSETS. Further, Buyer certifies that
the Assets (including, but not limited to, any oil, gas or other mineral
reserves underlying the Assets) have been, or will be prior to Closing,
carefully inspected by Buyer; that Buyer is, or will be prior to Closing,
familiar with their condition and value thereof, and the improvements and
appurtenances (including electric wiring and machinery installed thereon)
located on the Assets, inclusive of any Hydrocarbons, other soil
contaminants or waste substances, whether similar or dissimilar, that may
be present in the soil, water and groundwater; that Buyer has engaged, or
has had the opportunity to engage prior to Closing, such contractors or
consultants as Buyer deems prudent for tests and surveys of the soil,
water, groundwater, Other Property, and improvements on the Assets; and
that Buyer assumes any and all obligations, risks and liabilities
associated therewith. Buyer acknowledges that the Assets have been or may
have been used in connection with oil, gas and other mineral exploration,
development and operations, as well as with respect to processing and
refining operations, and, as such, equipment, appurtenances, processing and
other facilities, plants, buildings, structures, improvements, abandoned
and other tanks and piping (including above ground and underground tanks
and piping), storage facilities, gathering and distribution lines, wells
and other petroleum production facilities and appurtenances which have not
been excepted and excluded from this conveyance may be located thereon.
Further, Buyer acknowledges that the Assets may also contain unplugged
wells, wellbores or buried pipelines or other equipment, whether or not of
a similar nature, the locations of which may not now be known by Seller or
be readily apparent through a physical inspection of the Assets. Buyer
further accepts the Assets (including, but not limited to, any oil, gas or
other minerals and/or mineral reserves underlying said Assets) AS IS, WHERE
IS, IN THEIR PRESENT CONDITION AND STATE OF REPAIR, AND WITHOUT ANY
REPRESENTATIONS, GUARANTIES, OR WARRANTIES, EXPRESS OR IMPLIED, AS TO THEIR
TITLE (EVEN FOR THE RETURN OF THE PURCHASE PRICE PAID), VALUE, QUALITY,
MERCHANTABILITY, OR THEIR SUITABILITY OR FITNESS FOR BUYER'S INTENDED USE,
OR FOR ANY USES OR PURPOSES WHATSOEVER, OR THAT THE ASSETS HAVE BEEN
RENDERED FREE FROM ANY DEFECTS, HAZARDS, OR DANGEROUS CONDITIONS.
FURTHERMORE, BUYER WAIVES ITS RIGHTS UNDER THE TEXAS DECEPTIVE TRADE
PRACTICES ACT - CONSUMER PROTECTION ACT, SECTION 17.41, ET SEQ., BUSINESS
AND COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF ITS OWN SELECTION,
BUYER VOLUNTARILY CONSENTS TO THIS WAIVER.
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BUYER'S SIGNATURE
By: _________________________
Its: _________________________
(c) DISCLAIMER. Without limiting the generality of the foregoing, but
in furtherance of same, SELLER DISCLAIMS ANY AND ALL LIABILITY ARISING IN
CONNECTION WITH ANY ENVIRONMENTAL MATTERS INCLUDING, WITHOUT LIMITATION,
ANY PRESENCE OF NATURALLY OCCURRING RADIOACTIVE MATERIAL (NORM) ON THE
ASSETS. IN ADDITION, THERE ARE NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR
IMPLIED, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA, INFORMATION OR
MATERIALS HERETOFORE OR HEREAFTER FURNISHED IN CONNECTION WITH THE ASSETS
OR AS TO THE QUALITY OR QUANTITY OF THE HYDROCARBONS AND ANY OTHER MINERAL
RESERVES, IF ANY, ATTRIBUTABLE TO THE INTEREST CONVEYED HEREIN OR THE
ABILITY OF THE ASSETS TO PRODUCE HYDROCARBONS OR ANY OTHER MINERALS, AND
ANY AND ALL DATA, INFORMATION AND MATERIAL FURNISHED BY SELLER IS PROVIDED
AS A CONVENIENCE ONLY AND ANY RELIANCE ON OR USE OF THE SAME IS AT BUYER'S
SOLE RISK.
(d) YEAR 2000 DISCLAIMER. THE CONTEMPLATED TRANSACTION SHALL BE
WITHOUT ANY EXPRESS OR IMPLIED WARRANTY OR REPRESENTATION THAT ANY ASSETS
EXCHANGED HEREUNDER SHALL IN ANY WAY WHATSOEVER BE MILLENNIUM COMPLIANT.
FOR PURPOSES OF THIS AGREEMENT, "MILLENNIUM COMPLIANT" MEANS THAT THE
ASSETS WILL ACCURATELY: (A) HANDLE DATA BEFORE, DURING, AND AFTER JANUARY
1, 2000, INCLUDING, BUT NOT LIMITED TO, ACCEPTING DATE INPUT, PROVIDING
DATE OUTPUT, AND PERFORMING CALCULATIONS ON DATES OR PORTIONS OF DATES; (B)
FUNCTION WITHOUT INTERRUPTION BEFORE, DURING, AND AFTER JANUARY 1, 2000,
WITHOUT ANY CHANGE IN OPERATIONS ASSOCIATED WITH THE ADVENT OF THE NEW
CENTURY (INCLUDING THE FACT THAT THE YEAR 2000 IS A LEAP YEAR); (C)
ACCOMMODATE FOUR-DIGIT YEAR INPUT OR RESPOND TO TWO-DIGIT YEAR-DATE INPUT
IN A WAY THAT RESOLVES THE AMBIGUITY AS TO CENTURY IN A DISCLOSED, DEFINED,
AND PREDETERMINED MANNER; AND (D) STORE AND PROVIDE OUTPUT OF DATE
INFORMATION IN WAYS THAT ARE UNAMBIGUOUS AS TO CENTURY.
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PART FOUR
COVENANTS
4.1 COVENANTS OF SELLER. Seller covenants with the Buyer as follows:
(a) ACCESS. From the date of execution of this Agreement until Closing
except for such of the Assets not operated by Seller, Seller shall afford
Buyer and Buyer's representatives full and reasonable access to the Assets
in the possession of Seller during normal working hours.
(b) FILES. From the date of execution of this Agreement until Closing,
Seller shall permit Buyer and its representatives at reasonable times
during normal business hours to examine, in Sellers' offices at their
actual location, all abstracts of title, title opinions, title files,
ownership maps, lease files, accounting files, assignments, division
orders, payout statements, agreements and other Contracts pertaining to the
Assets insofar as the same may now be in existence and in the possession of
Seller, except those which constitute Excluded Assets. From the date of
execution of this Agreement until Closing, Seller shall make available to
Buyer for inspection by Buyer at reasonable times during normal business
hours at their actual location, all production and engineering books,
records and data in possession of Seller which are directly related to the
Assets, and all other files, records, and data pertaining to the Assets,
except those which may constitute Excluded Assets.
(c) CONSENTS. Subject to Section 4.3(n), Seller shall use reasonable
efforts to obtain all necessary waivers, consents, approvals, permits and
authorizations and actions of third Persons to complete the Contemplated
Transactions prior to Closing.
(d) CONDUCT OF BUSINESS. From the date of execution of this Agreement
and until the Closing, Seller shall (i) operate the Assets, to the extent
Seller is the operator thereof, in substantially the same manner as
heretofore operated; (ii) maintain books of account and records with regard
to the Assets in accordance with Seller's past practices; and (iii) pay its
share of all costs and expenses attributable to the Assets in accordance
with past practices subject to its rights under the Final Recap set forth
in Section 4.3(g). Without limitation of the foregoing but subject to the
limitation set forth below, after the execution of the Agreement and prior
to Closing, Seller shall have the right to make any changes, repairs or
modifications, or incur any expenditures necessary or desirable in Seller's
reasonable opinion for the protection of the Assets, required under the
Contracts, or to comply with any Applicable Law or other legal requirement
relative to the premises or to prevent or react to an emergency or
environmental incident. Seller shall have the right to effect such
expenditure or action with or without the approval of Buyer, acting as
would any prudent operator under similar circumstances. Notwithstanding the
foregoing, Seller shall not undertake or authorize any project, activity or
expenditure in excess of $25,000 with respect to any one project without
Buyer's prior written approval except as may be
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required (i) to respond to an emergency, (ii) by any Governmental Body or
(iii) by the terms of any applicable Contract or Lease. Unless Buyer and
Seller otherwise agree, Seller shall not sell, dispose or materially alter
the Assets (other than the use of supplies and consumables) or remove any
improvements, equipment or property which comprise the Assets (other than
the use of supplies and consumables).
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
4.2 COVENANTS OF BUYER. Buyer covenants with Seller as follows:
(a) ASSUMED OBLIGATIONS. At Closing, Buyer shall assume the Assumed
Obligations.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(c) BUYER'S RESPONSIBILITIES. Except as otherwise provided for in
Section 4.3(x) and the Transition Agreement, Buyer shall be responsible for
the payment of all necessary and reasonable capital costs, Taxes, expenses
and Burdens incurred against or applicable to the operation and use of the
Assets from and after the Effective Date, whether invoiced or not. All
production of Hydrocarbons from the Assets occurring from and after the
Effective Date and all proceeds from or attributable thereto shall be the
property of and belong to Buyer as of the Effective Date.
(d) PAYMENT OF BURDENS. Except as otherwise provided in the Transition
Agreement, Buyer shall commence the payment of Burdens for all Hydrocarbons
produced beginning the first day of the month following the month in which
Seller has delivered to Buyer substantially all of the Records including
without limitations Records relating to accounting, accounts payables,
division orders and joint interest billings necessary to administer such
payments.
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(e) CONFIDENTIALITY. In the event that this Agreement is terminated
or, if not terminated, until the Closing, all information made available to
Buyer under Section 4.1 shall be maintained confidential by Buyer pursuant
to the terms of the Confidentiality Agreement. The Confidentiality
Agreement shall continue in force until Closing, or, in case of
termination, in accordance with its terms. Buyer shall take whatever
reasonable steps as may be necessary to ensure that Buyer's employees,
consultants and agents comply with the provisions of this Section 4.2(e)
and the provisions of the Confidentiality Agreement.
(f) SIGNAGE. Buyer agrees that, within thirty (30) days after the
Closing, it will remove or cause to be removed the names and marks used by
Seller and all variations and derivatives thereof and logos relating
thereto from the Assets and will not thereafter make any use whatsoever of
such names, marks and logos.
(g) COMPLIANCE WITH LAWS. Buyer hereby covenants that it will comply
with all Applicable Laws in its ownership and operation of the Assets.
Buyer specifically covenants that it will comply with all Applicable Laws
with respect to (i) all exploration, drilling, production, Plugging and
Abandonment, and (ii) the control, regulation and prevention of pollution,
including, but not limited to, saltwater discharge and contamination.
(h) RECOUPMENT OF OVERPAYMENTS. Buyer expressly agrees, at Seller's
cost and expense, to reasonably assist Seller in recouping any monies from
third Persons due to overpayments of royalties made prior to the Effective
Date.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(j) INSURANCE. Buyer covenants that all insurance obtained by
Buyer during its term of ownership of the Assets covering
environmental damage, third Person property damage, personal injury or
death shall name Seller as an additional insured to the extent of
Buyer's liability and indemnification obligations assumed herein, and
shall contain a waiver of subrogation against Seller.
(k) ACCESS. Buyer shall afford Seller the right to enter onto and
use the Assets and such other resources, including but not limited to
water and power, as are reasonably necessary for Seller to remedy any
Material Environmental Condition pursuant to Section 6.1(a).
(l) RADIO FREQUENCY. Buyer shall undertake as soon as is
reasonably practical following the Closing to obtain a new pump-off
controller radio frequencies.
4.3 COVENANTS OF SELLER AND BUYER. Buyer and Seller agree as follows:
(a) PREFERENTIAL PURCHASE RIGHTS. With respect to preferential
purchase rights:
(i) Within five (5) Business Days of Seller's receipt from Buyer
of Schedule 2.4, Seller shall send notice to the holders of
preferential purchase rights on the Assets. Seller shall keep Buyer
informed as receipt of responses from said holders are received or the
applicable exercise periods expire without exercise or response from
the holders.
(ii) To the extent any preferential purchase rights are exercised
to Seller's and Buyer's reasonable satisfaction, then the Assets
subject to such preferential purchase rights shall not be sold to
Buyer and shall be excluded from the Agreement. The Purchase Price
shall be adjusted by the portion of the Allocated Value representing
the portion of the Assets subject to such exercised preferential
right. In the event any holder of a preferential right initially
elects to exercise a particular preferential right, but subsequently
refuses or elects not to consummate the purchase under the
preferential right and such refusal occurs prior to sixty (60) days
following the Closing Date, Buyer shall purchase such interests
covered by the
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preferential rights for its Allocated Value as of the Effective Date
and the closing of such transaction shall take place on a date
mutually acceptable to Seller and Buyer not more than thirty (30) days
following Seller's notification to Buyer of such failure or refusal.
(iii) If a preferential purchase right has not been waived or the
time for exercise expired prior to Closing, the Assets subject to such
right shall be excluded from the Assets conveyed at Closing and the
Purchase Price reduced by the Allocated Value of the affected Asset.
If the time for exercise expires or a waiver is obtained by the Seller
within 60 days following the Closing, Buyer shall purchase the
affected Asset from Seller as of the Effective Date and the closing of
such transaction shall take place on a date mutually acceptable to
Seller and Buyer not more than thirty (30) days following Seller's
notification to Buyer for the Allocated Value allocated to the
affected Asset.
(iv) If the Seller has failed to offer a preferential right to
purchase and the holder of such right makes a timely and enforceable
demand upon Seller or Buyer to offer such right, Buyer shall offer the
preferential right to purchase to such holder in accordance with the
Contract creating such preferential right to purchase.
(b) PRODUCT IMBALANCES. With respect to product imbalances from the
Assets, the Parties agree as follows:
(i) UNDERPRODUCTION. The Purchase Price reflects Seller's
underproduced gas position (if any) under any Contracts or wells
included in the Assets as shown on Schedules G-1 through G-3. As of
the Effective Date, Buyer shall assume all of Seller's rights,
obligations, liabilities and responsibilities associated with Seller's
underproduced gas position, including any Taxes and royalties due or
payable on the value of Seller's underproduction and Seller shall have
no further rights or claims whatsoever with respect to the
underproduced gas. Seller and Buyer agree that the Purchase Price
shall be adjusted upward at the rate of $1.00 per mcf at Closing to
reflect the estimated value of any additional underproduction not
reflected on Schedules G-1 through G-3 or any reduction in
overproduction described in Section 4.3(b)(ii). Any additional
underproduced volumes or reduction in overproduction accrued prior to
the Effective Date and identified after Closing shall be accounted for
as provided in Section 4.3(g) at the same rate of $1.00 per mcf.
(ii) OVERPRODUCTION. The Purchase Price reflects Seller's
overproduced gas position (if any) under any Contracts or wells
included in the Assets as shown on Schedules G-1 through G-3. As of
the Effective Date, Buyer hereby agrees to and shall assume all rights
to Seller's overproduced gas position (but not including the gas
actually overproduced) including the right to recoup Taxes and
royalties associated with such overproduction, as well as all of
Seller's liabilities,
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responsibilities and obligations to third Persons associated with such
overproduced gas position and Seller shall have no further rights,
liabilities, obligations or responsibilities whatsoever with respect
to the overproduced gas. Seller and Buyer agree that the Purchase
Price shall be adjusted downward at the rate of $1.00 per mcf at
Closing to reflect the estimated value of any additional
overproduction not reflected on Schedules G-1 through G-3 or reduction
in underproduction described in 4.3(b)(i). Any additional overproduced
volumes or reductions in underproduction accrued prior to the
Effective Date and identified after Closing shall be accounted for as
provided in Section 4.3(g) at the same rate of $1.00 per mcf.
(c) OPERATORSHIP. Unless otherwise provided in the Transition
Agreement, Buyer shall assume Seller's obligations for operatorship of any
Seller-operated Assets conveyed herein at 7:00 a.m. local time on April 1,
2000, and shall perform all duties required in the course of business,
including, but not by the way of limitation, paying Burdens and Taxes,
pumping and gauging wells, working over wells, drilling new wells, filing
all necessary reports required by Applicable Law or otherwise, and
performing maintenance and/or repair work on the Assets. To the extent
required under any Contract that affects any Asset and only after Buyer has
used its commercially reasonable efforts to assume operatorship of such
Asset, Seller will continue to operate said Asset pursuant to the
Transition Agreement until the new operator can be properly selected.
Seller does not warrant or represent that Buyer shall succeed Seller as
operator of any Asset; however, Seller shall recommend to its working
interest owners that Buyer succeed as operator of such Properties operated
by Seller.
(d) PROCESSING. At Closing, Buyer shall enter into gas processing
agreements for the Properties listed on Schedule 4.3(d) in substantially
the form attached hereto as Exhibit H-1 through H-2, or Exhibit K or such
other form as to which Buyer and Versado Processors, L.L.C. shall have
mutually agreed.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(i) BUYER'S RESPONSIBILITY. In the event Seller is required to
continue to operate any of the Assets after the Closing Date pursuant
to an applicable operating agreement or the Transition Agreement,
Buyer shall be responsible for the payment of all necessary and
reasonable capital costs, Taxes, expenses and Burdens incurred against
or applicable to the operation and use of the Assets from and after
the Effective Date, whether invoiced or not. Buyer shall be
responsible for prorated estimates of ad valorem taxes in the absence
of actuals. Further, all production from the wells located on or
attributable to the Assets and all proceeds from or attributable to
production from the Assets and sale thereof shall be the property of
and belong to Buyer from and after the Effective Date.
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(j) ACCESS TO DOCUMENTS. Each Party shall provide reasonable access to
all relevant documents, data and other information which may be required by
the other Party for the purpose of preparing tax returns and responding to
any audit by any Governmental Body. Each Party shall cooperate with all
reasonable requests of the other Party made in connection with contesting
the imposition of Taxes. Notwithstanding anything to the contrary in this
Agreement, neither Party shall be required at any time to disclose to the
other Party any tax returns or other confidential tax information.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(l) FURTHER ASSURANCES. After Closing, Seller and Buyer agree to take
such further actions and to execute, acknowledge and deliver all such
further documents necessary or useful in carrying out the purposes of this
Agreement or of any document delivered pursuant hereto.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(n) CERTAIN FILINGS, CONSENTS AND PERMITS. With respect to certain
filings and consents required by any Governmental Body, the Parties agree
that Buyer and Seller shall cooperate with one another to make all filings
necessary and to obtain any necessary consents, permits, authorizations,
approvals or waivers, including but not limited to filings with the Texas
Railroad Commission, Oklahoma Corporation Commission, or such other state
agency having jurisdiction over the Assets.
Without limitation of the foregoing, Seller shall endeavor to obtain,
and Buyer shall cooperate in connection with such endeavors, each consent
set forth on Schedule 3.1(h).
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(o) CONSENTS.
(i) If the holder of the right to consent or party to a
maintenance of uniform interest provision affirmatively refuses to
consent or waive prior to Closing, such refusal shall be automatically
considered a Title Defect without the necessity of Buyer sending a
Defect Notice to Seller as required under Section 4.3(m)(i) .
(ii) Except for approvals from Governmental Bodies normally
received subsequent to assignment, if Seller believes a consent or
waiver may be obtained subsequent to Closing, the Property shall be
excluded from the Assets conveyed at Closing and the Purchase Price
reduced by the Allocated Value (or portion thereof) and held by Seller
for the benefit of Buyer after Closing and Seller shall provide Buyer
with the economic benefits thereof until such consent or waiver is
received or until sixty (60) days following Closing, if later. If
Seller obtains the consent or waiver on or before sixty (60) days
following Closing, then Seller shall deliver conveyances of the
Property to Buyer and Buyer shall pay to Seller the Allocated Value
(or portion thereof). If the consent or waiver is not obtained or is
affirmatively refused on or before sixty (60) days following Closing,
Buyer shall refund to Seller any net revenues (revenues net of costs
and Burdens) received by Buyer in connection with such affected
portion of the Property and Seller's holding for the benefit of Buyer
shall terminate, unless Buyer waives the requirement for obtaining the
consent and agrees to accept the Asset and pay the value allocated to
the Asset pursuant to Schedule 2.4 in exchange for Seller's conveyance
of the Asset.
(p) RISK OF LOSS. If, prior to the Closing Date, all or any material
portion of an Asset is damaged or destroyed by fire or other casualty, is
taken in condemnation or under the right of eminent domain or proceedings
for such purposes are pending or threatened, Buyer shall purchase such
portion of the Assets, notwithstanding any such damage, destruction, taking
or pending or threatened taking. Seller shall pay to Buyer (as an
adjustment to the Purchase Price) all sums paid to Seller by third Persons
by reason of the damage, destruction or taking of such portion of the
Assets to be assigned to Buyer or to the extent Seller is self-insured an
amount equal to the value of the damage or destruction, and shall assign,
transfer and set over to Buyer all of the right, title and interest of
Seller in and to any unpaid awards or other payments from third Persons
arising out of the damage, destruction, taking or pending or threatened
taking as to such interest. If prior to the Closing Date, the applicable
Assets are damaged or destroyed by fire or other casualty and the sums
transferred to Buyer pursuant to the foregoing sentence do not equal the
amount necessary to replace or restore the pertinent Assets to the
condition they were in prior to such fire or casualty (including, without
limitation, those circumstances in which Seller is self-insured), Seller
shall pay to Buyer, or the Purchase Price shall be reduced by the
additional amount necessary to repair or replace all damaged or destroyed
Assets or restore the Assets to their condition prior to the fire or
casualty loss. If the sums that Seller would be responsible for pursuant to
the foregoing sentence exceed fifty percent (50%) of the
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Allocated Value of the pertinent Asset, Seller may elect to remove the
Asset from the sale and reduce the Purchase Price by the allocated value of
the pertinent Asset. Seller shall not voluntarily compromise, settle or
adjust any material amounts payable by reason of any material damage,
destruction, taking or pending or threatened taking as to any Asset without
first obtaining the written consent of Buyer, which shall not be
unreasonably withheld.
(q) POST-CLOSING ACCESS. Except as otherwise expressly provided
herein, from and after the Closing Date, Buyer and Seller shall reasonably
cooperate and afford each other or cause to be afforded to their respective
officers, employees, accountants and other representatives access, upon
reasonable notice, during business hours with respect to the facility to
which access has been requested, to review and copy the books, documents,
databases or other records relating to the Assets not including the
Excluded Assets (which books, documents, databases, records, or employees
files or other information the Parties shall cooperate and assist one
another in identifying and locating), interview, depose or seek testimony
of employees with knowledge of the Assets, provide assistance in
proceedings with employees with knowledge of the Assets as witnesses or
advisors, investigate the physical premises, take photographs or
videotapes, identify employees and contractors with knowledge of any matter
which is the subject of a claim for which a Party has responsibility and
make such employees available to such Party and provide reasonable office
space to do any of the foregoing in connection with any matter affecting or
alleged to affect the Party requesting such access.
(r) FILING AND RECORDING OF ASSIGNMENTS, ETC. Buyer shall be solely
responsible for recording of the Deeds, Assignments and Oil and Gas Leases
and any other documents related to the Assets and shall promptly provide
Seller with recorded copies of same. Further, Buyer shall be responsible
for any recording or filing fees and documentary or transfer Taxes
resulting from the Contemplated Transactions.
(s) EMPLOYEE MATTERS. Buyer shall have no obligation, but shall have
the right to solicit the field employees of Seller (and any other employees
of Seller that Seller identifies in writing) who work directly on or in
connection with the Assets ("Employees"), and shall have no obligation but
shall have the right to offer employment to and hire any such Employees. If
Buyer hires any Employee, the terms of employment shall be at Buyer's
discretion. Seller is and shall be responsible for any and all employees
not hired by Buyer to the extent any of Seller's employees are affected by
the Contemplated Transactions.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(v) JOINT USE AGREEMENTS. Buyer and Seller shall, from and after the
date of this Agreement, use their reasonable best efforts to negotiate and
execute on or before the Closing in the case of items identified five (5)
days prior to Closing or as soon thereafter as reasonably practical,
mutually agreeable joint use agreements for the use and management of (i)
the facilities and other equipment identified in Schedule 4.3(v) and
incorporating, among others, the terms and conditions set forth in Schedule
4.3(v) and (ii) any other facilities and equipment used immediately prior
to the Effective Date to operate or produce both (A) assets and properties
being retained by Seller and (B) the Assets operated by Seller and which
are identified in writing by the Buyer within ninety (90) days after Buyer
assumes operations of the affected Asset.
(w) CENTRILIFT EQUIPMENT. Seller leases certain equipment, as more
particularly described on Schedule 4.3(w) in certain wells from Centrilift.
Within ten (10) days prior to the Closing, Seller shall deliver to Buyer
the payoff amounts by well for such equipment. Within five (5) days before
Closing, Buyer shall notify Seller if Buyer elects to purchase such leased
equipment. If Buyer elects to purchase such leased equipment, such
equipment shall be included in the definition of Assets and Seller will
make reasonable efforts to arrange for such sale to be consummated within
sixty days after Closing. Buyer shall reimburse Seller for any costs
incurred by Seller in furtherance of such purchase. If Buyer elects not to
purchase the leased equipment, Seller will arrange for the removal of such
leased equipment at Seller's expense as soon as is reasonably practical
following the Closing.
(x) MECHANICAL INTEGRITY TESTS. Seller shall, on or before May 1, 2000
and as required by Applicable Law, perform mechanical integrity tests on
the wells set forth on Schedule 4.3(x). Seller shall sufficiently notify
Buyer and permit Buyer's representative to observe such test and review
such data obtained in connection with such tests. In the event of any of
the wells set forth on Schedule 4.3(x) fail such test, Seller shall within
five (5) days of its receipt of such test results, recommend to Buyer
whether each such well should be repaired or plugged and abandoned. Buyer
shall have five (5) days in which to notify Seller of its desire to (i)
have Seller plug and abandon such well at Seller's costs and expense; (ii)
have Seller repair such well at Buyer's costs and expense, or (iii) take
over such well. All cost and expense of such tests associated with wells
that are repaired by Seller or taken over by Buyer shall be borne by Buyer.
All cost and expense of such tests associated with wells that are plugged
and abandoned by Seller shall be borne by Seller. Nothing contained herein
shall preclude Seller from taking such actions as may be immediately
necessary to comply with Applicable Law or to protect the environment.
(y) HSR FILINGS. Buyer and Seller shall promptly make all filings
required under the HSR Act.
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PART FIVE
CONDITIONS TO CLOSING
5.1 SELLER'S CLOSING CONDITIONS. The obligations of Seller to consummate
the Contemplated Transactions are subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties of Buyer contained in the Agreement or in
connection with the Contemplated Transactions were true and correct when
made, and shall be true and correct on and as of the Closing Date as though
such representations and warranties were made at and as of such date except
as otherwise expressly provided herein.
(b) COMPLIANCE WITH AGREEMENT. On and as of the Closing Date, Buyer
shall have performed and complied with all agreements, covenants, and
conditions required by this Agreement, the McFarland PSA and the Four Star
PSA to be performed and complied with prior to or on the Closing Date.
(c) INJUNCTION. As of the Closing Date, no suit, action or other
proceeding (excluding any such matter initiated by Seller) shall be pending
or threatened before any court or governmental agency seeking to restrain
Seller or prohibit the Closing or seeking damages against Seller as a
result of the consummation of this Agreement or the Contemplated
Transactions.
(d) CERTIFIED RESOLUTIONS AND OFFICERS' CERTIFICATE. Buyer shall have
delivered to Seller (i) a certificate dated the Closing Date signed by the
Secretary or an Assistant Secretary of Buyer with respect to the action of
the Buyer's Board of Directors authorizing the transactions contemplated by
the Agreement, and (ii) a certificate, dated the Closing Date and signed by
the President or a Vice President of Buyer certifying in such detail as
Seller may reasonably request to the fulfillment of the conditions
specified in subparagraphs (a) and (b) of this Section 5.1, in the form
attached as Exhibit D.
(e) APPROVAL OF PROCEEDINGS. All actions, proceedings, instruments and
documents required of Buyer to carry out the Agreement, or incidental
thereto, and all other related legal matters shall have been approved by
Nanette J. Crawford, Esq., as counsel for Seller, which approval shall not
be unreasonably withheld.
(f) [This section intentionally left blank].
(g) CONVEYANCE. Buyer shall execute, acknowledge and deliver to Seller
the Assignments, Deeds and Oil and Gas Leases substantially in the form of
Exhibits A, B-1, B-2 and C as well as change of operator forms required by
Applicable Laws and such other documents as may be necessary to carry out
the purposes of the Agreement.
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(h) LETTERS IN LIEU. Buyer and Seller shall execute, acknowledge and
deliver all letters in lieu as set forth in Section 4.3(f).
(i) SECURITY. Any security required by Seller of Buyer contemplated in
Section 4.2(i)(ii) shall have been obtained.
(j) GAS PROCESSING AGREEMENTS. Buyer and Seller (in its capacity as
operator of the affected gas plant) shall execute, acknowledge and deliver
all gas processing agreements as set forth in Section 4.3(d).
(k) JOINT USE AGREEMENTS. Buyer and Seller shall have executed,
acknowledge and delivered, on or before the Closing, certain joint use
agreements as described in Section 4.3(v).
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(q) BARGO GUARANTY. Buyer shall have delivered to Seller, in a form
mutually agreeable to both Buyer and Seller, the guaranty of Bargo Energy
Company guaranteeing the performance of the Buyer under this Agreement.
(r) TRANSITION AGREEMENT. Buyer and Seller shall have executed and
delivered the Transition Agreement.
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(s) HSR ACT. All necessary filings and notifications under the HSR Act
shall have been made, including any required additional information or
documents, and the waiting period referred to in such Act applicable to the
transactions contemplated hereby shall have expired or been terminated.
5.2 BUYER'S CLOSING CONDITIONS. The obligations of Buyer to consummate the
Contemplated Transactions are subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties of Seller contained in the Agreement or in
connection with the Contemplated Transactions were true and correct when
made, and shall be true and correct on and as of the Closing Date as though
such representations and warranties were made at and as of such date except
as otherwise expressly provided herein.
(b) COMPLIANCE WITH AGREEMENTS. On and as of the Closing Date, Seller
shall have performed and complied with all agreements, covenants, and
conditions required by the Agreement to be performed and complied with
prior to or on the Closing Date. McFarland Energy, Inc. and Four Star Oil &
Gas Company shall have performed and complied with all agreements,
covenants and conditions required by the Four Star PSA and the McFarland
PSA.
(c) INJUNCTION. As of the Closing Date, no suit, action or other
proceeding (excluding any such matter initiated by Buyer) shall be pending
or threatened before any court or governmental agency seeking to restrain
Buyer or prohibit the Closing or seeking damages against Buyer as a result
of the consummation of this Agreement or the Contemplated Transactions.
(d) CERTIFIED RESOLUTIONS AND OFFICERS' CERTIFICATE. Seller shall have
delivered to Buyer (i) a certificate dated the Closing Date signed by the
Secretary or an Assistant Secretary of Seller with respect to the action of
the Seller's Board of Directors authorizing the transactions contemplated
by the Agreement, and (ii) a certificate, dated the Closing Date and signed
by the President or a Vice President of Seller certifying in such detail as
Buyer may reasonably request to the fulfillment of the conditions specified
in subparagraphs (a) and (b) of this Section 5.2 in the form attached as
Exhibit E.
(e) APPROVAL OF PROCEEDINGS. All actions, proceedings, instruments and
documents required of Seller to carry out the Agreement, or incidental
thereto, and all other related legal matters shall have been approved by
Haynes and Boone, L.L.P., as counsel for Buyer, which approval shall not be
unreasonably withheld.
(f) [This section intentionally left blank].
(g) CONVEYANCE. Seller shall execute, acknowledge and deliver to Buyer
the Assignments, Deeds and Oil and Gas Leases substantially in the form of
Exhibits A, B-1, B-2
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and C, as well as change of operator forms required by Applicable Laws and
such other documents as may be necessary to carry out the purposes of the
Agreement.
(h) LETTERS IN LIEU. Buyer and Seller shall execute, acknowledge and
deliver all letters in lieu as set forth in Section 4.3(f).
(i) GAS PROCESSING AGREEMENTS. Buyer and Seller (in its capacity as
operator of the affected gas plant) shall execute, acknowledge and deliver
all gas processing agreements as set forth in Section 4.3(d).
(j) JOINT USE AGREEMENTS. Buyer and Seller shall have executed,
acknowledge and delivered, on or before the Closing, certain joint use
agreements as described in Section 4.3(v).
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(n) TRANSITION AGREEMENT. Buyer and Seller shall have executed and
delivered the Transition Agreement.
(o) HSR ACT. All necessary filings and notifications under the HSR Act
shall have been made, including any required additional information or
documents, and the waiting period referred to in such Act applicable to the
transactions contemplated hereby shall have expired or been terminated.
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
PART SIX
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PART SEVEN
TAXES
Section 7.1 PAYMENT AND APPORTIONMENT OF REAL PROPERTY TAXES AND PERSONAL
PROPERTY TAXES. With respect to Taxes:
(a) Real and Personal Property Taxes. Real property taxes and personal
property taxes ("Real and Personal Property Taxes") for the year in which
the Effective Date occurs shall be apportioned as of the Effective Date
between Seller and Buyer. Seller shall be liable for the portion of such
Real and Personal Property Taxes based upon the number of days in the year
occurring prior to the Effective Date, and Buyer shall be liable for the
portion of such taxes based upon the number of days in the year occurring
on and after the Effective Date. For any year in which an apportionment is
required, Buyer shall file all required reports and returns incident to
these taxes and shall remit to the appropriate taxing authorities all such
taxes assessed for the year in which the Effective Date occurs. Seller may
pay to Buyer, at the time of Buyer's remittance, Seller's share of such
taxes.
(b) Liability and Right to Pursue Claims. Seller shall retain
liability for all adjustments, examinations or claims relating to Taxes
that are paid by Seller and that are allocated to Seller pursuant to this
Section 7.1. Seller shall administer and defend any examination, claim or
adjustments arising in connection with Taxes to be paid by Buyer but which
are allocated to Seller pursuant to this Section 7.1.
Section 7.2 OTHER TAXES. All excise, windfall profit and other Taxes
relating to production of Hydrocarbons attributable to the Assets prior to the
Effective Date shall be allocated to Seller, and all such Taxes relating to
production on or after the Effective Date shall be apportioned to Buyer.
Section 7.3 SALES TAXES. The Purchase Price does not include any sales
Taxes or other transfer Taxes imposed in connection with the sale of the Assets.
Buyer shall pay any sales Tax
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or other transfer Tax, as well as any applicable conveyance, transfer and
recording fee, and real estate transfer stamps or taxes imposed on the transfer
of the Assets pursuant to the Agreement. If Buyer is of the opinion that it is
exempt from the payment of such sales Tax or other transfer Tax, Buyer shall
furnish to Seller the appropriate tax exemption certificate.
Section 7.4 COOPERATION. Each Party to the Agreement shall provide the
other Party with reasonable access to all relevant documents, data and other
information which may be required by the other Party for the purpose of
preparing Tax returns, establishing or defending a Tax position and responding
to any audit by any taxing jurisdiction. Each Party to the Agreement shall
cooperate with all reasonable requests of the other Party made in connection
with contesting the imposition of Taxes. Notwithstanding anything to the
contrary in the Agreement, neither Party to the Agreement shall be required at
any time to disclose to the other Party any Tax returns or other confidential or
privileged Tax information.
Section 7.5 TAX PROCEEDINGS. In the event Buyer receives notice of any
examination, claim, adjustment or other proceeding relating to the liability for
Taxes of or with respect to Seller for any period Seller is or may be liable
under the Agreement, Buyer shall within ten (10) days notify Seller in writing
thereof. As to any such Taxes for which Seller is or may be liable under the
Agreement, and Seller does not contest such liability as against Buyer, Seller
shall be entitled at Seller's expense to control or settle the contest of such
examination, claim, adjustment or other proceeding, provided Seller notifies
Buyer in writing within thirty (30) days after receipt of the notice described
in the preceding sentence that Seller desires to do so. The Parties shall
cooperate with each in the negotiations and settlement of any proceeding
described in this Section 7.5. Buyer shall provide, or cause to be provided, to
Seller necessary authorizations, including powers of attorney, to control any
proceeding which Seller is entitled to control pursuant to Part 7.
Section 7.6 PURCHASE PRICE ALLOCATION. The allocation of Purchase Price
provided for in this Agreement is intended to comply with the allocation method
required by Section 1060 of the Code. Buyer and Seller shall cooperate to comply
with all substantive and procedural requirements of Section 1060 and regulations
thereunder. Buyer and Seller agree that each will not take for income Tax
purposes, or permit any Affiliate to take, any position inconsistent with the
allocation of Purchase Price prescribed in this Agreement.
Section 7.7 RESERVATION OF SECTION 29 CREDITS. Seller retains the right, at
its option, to pursue Tax credits authorized by Section 29 of the Code, if any,
applicable to any production operations occurring prior to the Closing Date.
Buyer agrees to reasonably cooperate at Seller's cost and afford Seller and its
representatives, upon reasonable notice, during business hours, time to review
and copy any files, documents, databases, records, or other information,
necessary to establish or defend a claim for such Tax credits.
Section 7.8 RESERVATION OF SECTION 43 CREDITS. Seller retains the right, at
its option, to pursue Tax credits authorized by Section 43 of the Code, if any,
applicable to any qualified projects occurring prior to the Closing Date. Buyer
agrees to reasonably cooperate at Seller's
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cost and afford Seller and its representatives, upon reasonable notice, during
business hours, time to review and copy any files, documents, databases,
records, or other information necessary to establish or defend a claim for such
Tax credits.
PART EIGHT
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PART NINE
MISCELLANEOUS
9.1 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of the respective Parties.
9.2 WAIVERS AND AMENDMENTS. All amendments and other modifications hereof
shall be in writing and signed by each of the Parties. Any Party may by written
instrument (i) waive compliance by the other Party with, or modify any of, the
covenants or agreements made by the
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<PAGE> 52
other Party in this Agreement or (ii) waive or modify performance of any of the
obligations or other acts of the other Party. The delay or failure on the part
of any Party to insist, in any one instance or more, upon strict performance of
any of the terms or conditions of this Agreement, or to exercise any right or
privilege herein conferred shall not be construed as a waiver of any such terms,
conditions, rights or privileges but the same shall continue and remain in full
force and effect. All rights and remedies are cumulative.
9.3 NOTICES. All notices, consents and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given (a)
when delivered by hand, (b) when sent by telecopier (with receipt confirmed),
provided that a copy is promptly thereafter mailed in the USA by first class
postage prepaid mail, (c) when received by the addressee, if sent by Express
Mail, Federal Express, other express delivery service (receipt requested) or by
such other means as the Parties may agree from time to time or (d) five (5)
Business Days after being mailed in the USA, by first class postage prepaid
registered or certified mail, return receipt requested; in each case to the
appropriate address and telecopier number set forth below (or to such other
address and telecopier number as a Party may designate as to itself by notice to
the other Party):
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<PAGE> 53
(i) if to Seller:
Texaco Exploration and Production Inc.
Attn: Paula Gatens
1111 Bagby
Houston, Texas 77002
Phone: 713-752-4619
Fax: 713-752-7998
(ii) if to the Buyer:
Bargo Petroleum Corporation
Attn: Mr. Jon Clarkson
700 Louisiana, Suite 3700
Houston, Texas 77002
Phone: 713-236-9792
Fax: 713-236-9799
Each Party shall have the right upon giving ten (10) Business Days prior written
notice to the other in the manner hereinabove provided, to change its address
for purposes of notice.
9.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same document.
9.5 ENTIRE AGREEMENT. This Agreement, including the Exhibits and Schedules
hereto, contains the entire agreement between the Parties hereto with respect to
the subject matter hereof and supersedes all prior discussions, understandings,
agreements and undertakings between the Parties hereto relating to the subject
matter hereof. There are no additional terms, whether consistent or
inconsistent, oral or written which are intended to be part of the Parties'
understanding which have not been incorporated into this Agreement, including
the Exhibits and Schedules.
9.6 SELLER'S OPTION TO ELECT A TAX DEFERRED EXCHANGE. Seller retains the
right to sell its interest in the Assets to Buyer as a non-simultaneous
like-kind property exchange for cash pursuant to Section 1031 of the Internal
Revenue Code of 1986. Seller shall have the right to elect this tax-deferred
exchange at any time prior to the date of Closing. Buyer agrees to execute
additional escrow instructions, documents, agreements, or instruments to effect
the exchange, provided that Buyer shall incur no material additional costs,
expenses, fees or liabilities as a result of or in connection with the exchange.
9.7 SEVERABILITY. Every provision in this Agreement is intended to be
severable. If any term or provision hereof is held to be illegal or invalid for
any reason whatsoever, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of Contemplated Transactions is not affected in a materially
adverse manner with respect to either Party.
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9.8 APPLICABLE LAW. This Agreement shall be governed by and interpreted,
construed and enforced in accordance with the laws of the State of Texas, except
to the extent mandatorily governed by the laws of the state in which the Assets
are located
9.9 Expenses. Except as specified herein and as the Parties may otherwise
agree, each Party shall be solely responsible for all expenses incurred by it in
connection with any and all Contemplated Transactions.
9.10 LAWS AND REGULATIONS. This Agreement is subject to all Applicable
Laws.
9.11 PUBLIC ANNOUNCEMENTS. The Parties hereto agree that prior to making
any public announcement or statement with respect to the Contemplated
Transaction, the Party desiring to make such public announcement or statement
shall provide the other Party with a copy of the proposed announcement or
statement at least seven (7) Business Days prior to the intended release date of
such announcement. The other Party shall thereafter consult with the Party
desiring to make the release, and the Parties shall exercise their reasonable
best efforts to (i) agree upon the text of a joint public announcement or
statement to be made by both such Parties or (ii) in the case of a statement to
be made solely by one Party, obtain approval of the other Party hereto to the
text of a public announcement or statement. Nothing contained in this paragraph
shall be construed to require either Party to obtain approval of the other Party
hereto to disclose information with respect to the Contemplated Transaction to
any Governmental Body to the extent required by Applicable Law or necessary to
comply with disclosure requirements of the New York Stock Exchange or any other
regulated stock exchange.
9.12 ASSIGNABILITY. The rights and obligations created or assumed hereunder
shall not be assignable or delegable by either Party and any assignment thereof
shall be void ab initio.
9.13 PROVISIONS SURVIVE CLOSING. All representations and warranties
contained in the Agreement shall survive the Closing and continue with respect
to claims made on or before twelve months following the Closing Date. Except as
otherwise provided herein, the covenants, indemnities and agreements made
hereunder or pursuant hereto shall survive Closing and be and remain enforceable
and continue in full force and effect as to their terms and conditions following
Closing and shall not be deemed to have been merged into the Closing or into the
assignments or other closing documents.
9.14 DISPUTE RESOLUTION. Any and all disputes, controversies or claims
relating to or arising out of the Contemplated Transactions shall be resolved in
accordance with the dispute resolution procedures outlined in Schedule 9.14
attached hereto and made a part hereof for all intents and purposes. The Parties
further agree that neither Party will institute litigation against the other
Party, their Affiliates and each of their respective officers, directors,
shareholders, agents and representatives relating to or arising out of the
Contemplated Transactions, except as provided in the attached Schedule 9.14 and
that the terms and provisions of this Section 9.14 shall survive the termination
of this Agreement.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first above written.
SELLER:
TEXACO EXPLORATION AND
PRODUCTION INC.
-----------------------------------
NAME: J. K. Hendrickson
TITLE: Attorney-in-Fact
Tax ID: 51-0265713
BUYER:
BARGO PETROLEUM CORPORATION
-----------------------------------
NAME:
TITLE:
Tax ID: 75-2526762
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<PAGE> 1
EXHIBIT 2.2
[THIS AGREEMENT HAS CONFIDENTIAL PORTIONS OMITTED, WHICH PORTIONS HAVE BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS
ARE INDICATED IN THIS AGREEMENT WITH "[TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]."
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
FOUR STAR OIL & GAS COMPANY
AND
BARGO PETROLEUM CORPORATION
DATED: FEBRUARY 22, 2000
EFFECTIVE DATE: JANUARY 1, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART ONE
SUBJECT MATTER, DEFINITIONS AND RULES OF CONSTRUCTION..........................................................1
1.1 Subject Matter ......................................................................................1
1.2 Defined Terms .......................................................................................1
Affiliate.................................................................................................1
Agreed Rate...............................................................................................1
Agreement.................................................................................................2
Applicable Law............................................................................................2
Assets....................................................................................................2
Assumed Obligations.......................................................................................2
Beneficial Interests......................................................................................2
Burdens...................................................................................................2
Business Day..............................................................................................2
Closing...................................................................................................2
Closing Date..............................................................................................2
Code......................................................................................................3
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Contemplated Transactions.................................................................................3
Contracts.................................................................................................3
Corporate Documents.......................................................................................3
Easements.................................................................................................3
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Excluded Assets...........................................................................................4
Excluded Obligations......................................................................................6
Fee Interests.............................................................................................6
Governmental Body.........................................................................................6
HSR Act...................................................................................................6
Hydrocarbons..............................................................................................6
Knowledge.................................................................................................6
Leases....................................................................................................6
Losses....................................................................................................7
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Other Property............................................................................................7
Permitted Encumbrances....................................................................................8
Person....................................................................................................9
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Properties...............................................................................................10
Taxes....................................................................................................10
TEPI.....................................................................................................10
TEPI PSA.................................................................................................10
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1.3 Other Definitions in the Agreement .................................................................11
1.4 Rules of Construction ..............................................................................12
</TABLE>
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<TABLE>
<S> <C>
PART TWO
SALE AND PURCHASE.............................................................................................13
2.1 Purchase and Sale ..................................................................................13
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2.5 Closing and Payment of Purchase Price ..............................................................14
2.6 Method of Payment ..................................................................................14
PART THREE
REPRESENTATIONS AND WARRANTIES................................................................................14
3.1 Seller .............................................................................................14
3.2 Buyer ..............................................................................................17
3.3 Disclaimer and Notifications .......................................................................18
PART FOUR
COVENANTS.....................................................................................................21
4.1 Covenants of Seller ................................................................................21
4.2 Covenants of Buyer .................................................................................22
4.3 Covenants of Seller and Buyer ......................................................................24
PART FIVE
CONDITIONS TO CLOSING.........................................................................................33
5.1 Seller's Closing Conditions ........................................................................33
5.2 Buyer's Closing Conditions .........................................................................35
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PART SIX
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PART SEVEN
TAXES.........................................................................................................38
7.1 Payment and Apportionment of Real Property Taxes and Personal Property Taxes .......................38
7.2 Other Taxes ........................................................................................39
7.3 Sales Taxes ........................................................................................39
7.4 Cooperation ........................................................................................39
7.5 Tax Proceedings ....................................................................................39
7.6 Purchase Price Allocation ..........................................................................39
7.7 Reservation of Section 29 Credits ..................................................................39
7.8 Reservation of Section 43 Credits ..................................................................40
PART EIGHT
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</TABLE>
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<TABLE>
<S> <C>
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PART NINE
MISCELLANEOUS.................................................................................................43
9.1 Successors and Assigns .............................................................................43
9.2 Waivers and Amendments .............................................................................43
9.3 Notices ............................................................................................44
9.4 Counterparts .......................................................................................44
9.5 Entire Agreement ...................................................................................44
9.6 Seller's Option to Elect a Tax Deferred Exchange ...................................................45
9.7 Severability .......................................................................................45
9.8 Applicable Law .....................................................................................45
9.9 Expenses ...........................................................................................45
9.10 Laws and Regulations ...............................................................................45
9.11 Public Announcements ...............................................................................45
9.12 Assignability ......................................................................................45
9.13 Provisions Survive Closing .........................................................................46
9.14 Dispute Resolution .................................................................................46
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
</TABLE>
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<PAGE> 5
SCHEDULES AND EXHIBITS
SCHEDULES
A Contracts
B Easements
C Included Equipment
D Excluded Assets
E Leases
F Fee Interests
G Properties and Imbalances
2.4 Purchase Price Allocation
3.1(g) Litigation
3.1(h) Consents and Preferential Rights
3.1(j) Permits
3.1(k) Notices on Leases and Contract
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
3.1(n) AFE's
4.3(d) Gas Purchase Agreements to be Executed
4.3(v) Joint Use Agreements
4.3(w) Centrilift Equipment
9.14 Dispute Resolution
EXHIBITS
A Assignments
B-1 through B-2 Deeds
C Oil and Gas Leases
D Officer's Certificate-Buyer
E Officer's Certificate-Seller
F [intentionally left blank]
G [intentionally left blank]
H [intentionally left blank]
I [intentionally left blank]
J [intentionally left blank]
K Versado Gas Purchase Agreement
L Geophysical License Agreement (2D)
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<PAGE> 6
PURCHASE AND SALE AGREEMENT
This agreement is made and entered into this 22nd day of February, 2000, by
and between Four Star Oil & Gas Company, a Delaware corporation (hereinafter
"Seller"), and Bargo Petroleum Corporation, a Texas corporation, (hereinafter
"Buyer"). Seller and Buyer are sometimes separately referred to herein as a
"Party" and collectively as "Parties."
PART ONE
SUBJECT MATTER, DEFINITIONS AND RULES OF CONSTRUCTION
1.1 SUBJECT MATTER. The subject matter of this Agreement is the sale by
Seller to Buyer of the Assets, the purchase of the Assets and the assumption of
the Assumed Obligations by Buyer, and the terms and conditions upon which all of
the foregoing shall take place.
1.2 DEFINED TERMS. For purposes of this Agreement, including the Exhibits
and Schedules hereto, except as otherwise expressly provided or unless the
context otherwise requires, the terms defined in this Section 1.2 have the
meanings assigned to them herein and the capitalized terms defined elsewhere in
the Agreement by inclusion in quotation marks and parentheses have the meanings
so ascribed to them.
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling or controlled by, or under common
control with, such Person. For purposes of this definition, the term
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with") as applied to any Person,
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management of such Person, whether through
ownership of voting securities, by contract or otherwise, and specifically
with respect to a corporation or partnership, means direct or indirect
ownership of fifty percent (50%) or more of the voting stock in such
corporation or of the voting interest as a partner in such partnership. In
addition, Seller's Affiliates shall include Equilon Enterprises LLC, Motiva
Enterprises LLC, Equiva Services LLC and Equiva Trading Company LLC.
"AGREED RATE" means a rate per annum calculated on a 360-day basis
which is equal to the lesser of (a) a rate which is one percent (1%) above
the prime rate of interest of Chase Manhattan Bank, New York, New York, as
announced or published by such bank from time to time (adjusted from time
to time to reflect any changes in such rate determined hereunder), or (b)
the maximum rate from time to time permitted by Applicable Law.
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"AGREEMENT" means this Purchase and Sale Agreement, including the
Exhibits and Schedules.
"APPLICABLE LAW" means all laws, statutes, treaties, rules, codes,
ordinances, regulations, certificates, orders, interpretations, licenses
and permits of any Governmental Body, including the common or civil law,
(including, without limitation, those pertaining to occupational health and
safety, consumer product safety, employee benefits, the environment,
securities or zoning) and all judgments, decrees, injunctions, writs,
orders or like action of any court, arbitrator or other Governmental Body
of competent jurisdiction.
"ASSETS" means collectively the Contracts, the Easements, the Leases,
the Fee Interests, the Beneficial Interests and the Other Property, except
to the extent constituting Excluded Assets.
"ASSUMED OBLIGATIONS" means, except as constitutes Excluded
Obligations (i) all liabilities, duties, and obligations that arise from
the ownership or operation of the Assets after the Effective Date; (ii) all
liabilities and obligations with respect to Plugging and Abandonment; (iii)
all duties, liabilities and obligations under the Contracts, the Leases and
the Easements arising after and in existence as of the Effective Date; (iv)
the Environmental Obligations and (v) all other duties, liabilities, and
obligations assumed by Buyer under this Agreement.
"BENEFICIAL INTERESTS" means any and all rights, titles and interests
owned by Seller in, under or derived from all of the presently existing
pooling, unitization and communitization agreements or other operating
agreements and the units created thereby (including without limitation, all
units formed under orders, regulations, rules or other official acts of any
Governmental Body having jurisdiction) not evidenced by Seller's ownership
of lease or fee interests, including all of Seller's rights, titles and
interests to such Contracts as set forth on Schedule A.
"BURDENS" means royalties (including both lessors' royalties and
nonparticipating royalty interests), overriding royalties, net profits
interests, production payments, and other similar obligations and burdens
payable out of production.
"BUSINESS DAY" means a day on which commercial banks are generally
open for regular business in Houston, Texas.
"CLOSING" means the closing of the Contemplated Transactions at 10:00
a.m. local time at Seller's offices at 1111 Bagby, Houston, Texas, on the
Closing Date or at such other time or place as the Parties may mutually
agree upon in writing.
"CLOSING DATE" means March 30, 2000, or such other date as the Parties
may agree in writing.
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"CODE" means the Internal Revenue Code of 1986, as amended, or any
successor law, and regulations or rules issued under any of the foregoing.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"CONTEMPLATED TRANSACTIONS" means each and all of the transactions
contemplated by the Agreement.
"CONTRACTS" means, to the extent they are assignable, all of Seller's
right, title and interest in and to all valid and existing, farmout
agreements, unitization agreements, pooling agreements, unit declarations,
gas sales or purchase contracts, operating agreements and other contracts
attributable to the Assets, or other agreements and instruments (including
all amendments thereto and any agreements settling claims asserted
thereunder) to the extent and only to the extent that the same relate,
pertain or are incidental to the Easements, the Leases, the Fee Interests,
the Beneficial Interests or the Other Property, including, without
limitation, those listed on Schedule A, but specifically excluding the
Easements and Leases.
"CORPORATE DOCUMENTS" means with respect to a Delaware corporation the
Certificate of Incorporation and By-Laws or the equivalent documents of a
corporation organized under the laws of another jurisdiction.
"EASEMENTS" means Seller's non-exclusive or exclusive, as the case may
be, rights to the use and occupancy of the surface, including, without
limitation, tenements, authorizations, variances, appurtenances, surface
leases, easements, permits, licenses, servitudes, rights-of-way and similar
rights and interests in any way appertaining, belonging, affixed or
incidental to or used in connection with the ownership or operation of the
Leases, Fee Interests, Beneficial Interests or Other Property, including,
without limitation, those listed on Schedule B hereto, except to the extent
constituting Excluded Assets.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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<PAGE> 9
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"EXCLUDED ASSETS" means the following:
(a) all (i) trade credits, accounts receivable (other than those
specifically included in the definition of Other Property), notes
receivable and other receivables attributable to Seller's interest in
the Assets with respect to any period of time prior to the Effective
Date, (ii) deposits, cash, checks in process of collection, cash
equivalents and funds attributable to Seller's interest in the Assets
with respect to any period of time prior to the Effective Date, and
(iii) funds attributable to third Persons for production prior to the
Effective Date but suspended or impounded by Seller;
(b) all corporate, financial, and tax records of Seller;
(c) all claims and causes of action of Seller (i) arising from
acts, omissions or events, or damage to or destruction of property
occurring prior to the Effective Date, and (ii) affecting any of the
excluded assets set forth in (a) through (s) of this definition;
(d) all rights, titles, claims and interests of Seller accruing
prior to the Effective Date (i) under any policy or agreement of
insurance or indemnity, (ii) under any bond, or (iii) to any insurance
or condemnation proceeds or awards;
(e) all Hydrocarbons produced from or attributable to the Assets
with respect to all periods prior to the Effective Date including all
merchantable liquids in stock or sales tanks or associated flowlines,
together with all proceeds from or of such Hydrocarbons;
(f) claims of Seller for refund of, or loss carry forwards with
respect to income or franchise taxes or any other Taxes attributable
to: (i) any period prior to the Effective Date, or (ii) any of the
excluded assets set forth in (a) through (s) of this definition;
(g) all amounts due or payable to Seller as adjustments or
refunds under any contracts or agreements affecting the Assets, with
respect to periods prior to the Effective Date, specifically
including, without limitation, amounts recoverable from audits under
operating agreements;
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<PAGE> 10
(h) all amounts due or payable to Seller as adjustments to
insurance premiums related to the Assets with respect to any period
prior to the Effective Date;
(i) all proceeds, benefits, income or revenues accruing (and any
security or other deposits made) with respect to (i) the Assets prior
to the Effective Date; and (ii) any of the excluded assets set forth
in (a) through (s) of this definition;
(j) all legal files; attorney-client communications or attorney
work product; records and documents subject to confidentiality
provisions, claims of privilege or other restrictions (including,
without limitation, contractual obligations to third Persons) on
access; and auditor's reports;
(k) reserve information and reports; seismic, geochemical, and
geophysical information and data, or other proprietary information
relating thereto, whether owned or licensed by Seller, and any
interpretive data except for certain 2D seismic data licensed to Buyer
pursuant to the Geophysical License Agreement attached hereto as
Exhibit L;
(l) all other bids received by Seller for the Assets or any
portion thereof;
(m) all of Seller's or Seller's Affiliates' intellectual
property, including but not limited to proprietary computer software,
patents, trade secrets, copyrights, names, marks, and logos;
(n) all of Seller's vehicles, trucks (including associated
tools), boats, house trailers, tools, pulling machines, warehouse
stocks, microwave equipment, office computer equipment, remote
terminal units, equipment or material temporarily located on the
Assets, except those listed on Schedule C;
(o) any pipelines, easements, fixtures, tanks, LACT units or
equipment located on the Assets which belong to third Persons,
including lessors and Affiliates of Seller;
(p) all of Seller's interest in the equipment, facilities and
other assets as more fully described on Schedule D hereto;
(q) all of Seller's interest in any oil, gas or mineral leases,
mineral or surface fee or lands which (i) are not set forth on
Schedule E and Schedule F or (ii) cover or pertain to lands or depths
other than the particular lands or depths described in the Leases and
Fee Interests specifically referenced on Schedule E and Schedule F or
such depths which are specifically excepted or reserved on Schedule E
and Schedule F;
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<PAGE> 11
(r) all of Seller's interest in any Assets which are not conveyed
to Buyer pursuant to the terms of this Agreement due to a Title
Defect, Material Environmental Condition or other condition; and
(s) all real or personal property held or owned by Seller's
Affiliates or any third Persons.
"EXCLUDED OBLIGATIONS" means, with respect to any Asset, except as
constitutes Environmental Obligations, any liabilities and obligations of
Seller (i) due, accrued or owed prior to the Effective Date; (ii) due,
accrued or owed prior to the Effective Date with respect to the payment of
Burdens and Taxes; (iii) to third Persons arising from property damage or
personal injury sustained prior to the Effective Date; (iv) arising from
any existing litigation or demands made as of the Effective Date; (v)
arising from or attributable to any Excluded Asset, and (vi) to be retained
by Seller as expressly provided in this Agreement.
"FEE INTERESTS" means all rights, titles and interests of Seller owned
as of the Effective Date and the Closing Date, or acquired pursuant to
Seller's rights as of the Effective Date and Closing Date under the terms
of an existing Contract, in all the fee and mineral fee interests described
on Schedule F, insofar and only insofar as such Fee Interests cover the
lands and depths set forth in Schedule F. The Fee Interests shall include
all of Seller's right, title and interest to all depths unless specifically
limited on Schedule F.
"GOVERNMENTAL BODY" means any Federal, state, tribal, county, parish,
municipal, or other federal, state or local governmental authority or
judicial or regulatory agency, board, body, department, bureau, commission,
instrumentality, court, tribunal or quasi-governmental authority in any
jurisdiction (domestic or foreign).
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvement Act of
1976, and all regulations thereunder.
"HYDROCARBONS" means crude oil, natural gas, casinghead gas,
condensate, sulphur, natural gas liquids, plant products and other liquid
or gaseous hydrocarbons (including without limitation, coalbed gas and CO2)
and shall also refer to all other minerals of every kind and character
which may be covered by or included in the Assets.
"KNOWLEDGE" means the actual knowledge of a Party's current corporate
officers and business unit managers.
"LEASES" means, except to the extent constituting Excluded Assets, any
and all rights, titles and interests of Seller owned as of the Effective
Date and the Closing Date, or acquired pursuant to Seller's rights as of
the Effective Date and the Closing Date under the terms of an existing
Contract, in all of the oil, gas or mineral leases, fees, and other
interests
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<PAGE> 12
described on Schedule E to the Agreement, insofar and only insofar as such
Leases pertain to the lands and interests described in said Schedule. The
Leases shall include all of Seller's right, title and interest to all
depths unless specifically limited on Schedule E.
"LOSSES" means any and all losses, liabilities, claims, demands,
penalties, fines, settlements, damages, actions, or suits of whatsoever
kind and nature (but expressly excluding consequential damages), whether or
not subject to litigation, including, without limitation (i) claims or
penalties arising from products liability, negligence, statutory liability
or violation of any Applicable Law or in tort (strict, absolute or
otherwise) and (ii) loss of or damage to any property, and all reasonable
out-of-pocket costs, disbursements and expenses (including, without
limitation, legal, accounting, consulting and investigation expenses and
litigation costs).
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"OTHER PROPERTY" means, except to the extent constituting Excluded Assets,
(a) all of Seller's interest in all wells (including, without
limitation, all oil, gas, injection, disposal and other wells, whether
active or inactive, productive or non-productive, plugged and
abandoned or temporarily abandoned), platforms, equipment, facilities
and personal property of any kind including but not limited to tubing,
casing, wellheads, pumping units, production units, compressors,
valves, meters, flowlines, pipelines, gathering systems, tanks,
heaters, separators, dehydrators, pumps and injection units which are
located on or connected with the Leases, Fee Interests, the Beneficial
Interests or Easements and which are used
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<PAGE> 13
solely and exclusively in connection with the production, treatment,
gathering or transportation of Hydrocarbons from the Leases,
Properties or Easements;
(b) [intentionally left blank]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(e) subject to Section 4.3(b), all rights, obligations, interests
and benefits to gas imbalances with respect to the Assets; and
(f) all licenses, authorizations, permits, variances and similar
rights and interests related to the Leases, Fee Interests, Beneficial
Interests, Easements and Contracts and personal property to be
conveyed hereunder.
"PERMITTED ENCUMBRANCES" means:
(a) all Leases, operating agreements, operator liens and working
interest owner liens for obligations incurred after the Effective
Date, unit, communitization and pooling agreements, farmout
agreements, subleases and farmin agreements and other Contracts
described on Schedule A insofar as same do not operate to increase the
working interest of the Seller set forth on Schedule G without a
corresponding increase in the net revenue interest and that do not
operate to decrease the Seller's net revenue interest set forth on
Schedule G;
(b) all Applicable Laws, and all rights reserved or vested in any
Governmental Body to control or regulate the Assets in any manner
including, without limitation, any adjustment to Seller's net revenue
interest or gross working interest in a particular Property, caused
by, or as the result of, any action of a Governmental Body which is
not the result of any claims for under-payment of
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<PAGE> 14
royalties owed to such Governmental Body nor the negligent act or
omission of Seller;
(c) liens for Taxes or assessments arising after the Effective
Date not yet due and payable or not yet delinquent, or if delinquent,
that are being contested in good faith by appropriate action brought
in the normal course of business and to the extent covered by Seller's
indemnity under Sections 8.1 and 8.5 hereof;
(d) reversionary interests arising under farmout and farmin
agreements, subleases, and the non-consent provisions of applicable
operating agreements insofar as same do not operate to increase the
working interest of the Seller set forth on Schedule G without a
corresponding increase in the net revenue interest and that do not
operate to decrease the Seller's net revenue interest set forth on
Schedule G;
(e) liens imposed by Applicable Law, such as carriers',
warehousemen's and mechanics' liens and other similar liens arising in
the ordinary course of business which secure payment of obligations
arising after the Effective Date or that are not more than sixty (60)
days past due or which are being contested in good faith to the extent
covered by Seller's indemnity under Sections 8.1 and 8.5 hereof;
(f) defects that have been cured by possession under applicable
statutes of limitation, and
(g) other minor defects or irregularities generally waived by
prudent purchasers of oil and gas properties which (i) do not
materially interfere with the operation, value or use of any of the
Assets, (ii) do not prevent Buyer from receiving the proceeds of
production from any of the Assets, (iii) do not operate to increase
the working interest of the Seller set forth on Schedule G without a
corresponding increase in the net revenue interest and (iv) do not
operate to decrease the Seller's net revenue interest set forth on
Schedule G.
"PERSON" means any natural person, corporation, division of a
corporation, association, company, estate, trust, partnership, joint
venture, unincorporated organization, Governmental Body, or any other
entity.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"PROPERTIES" means an accounting unit described on Schedule G which is
utilized by Seller for an allocation of revenue and expenses from the
Assets.
"PROPERTY PACKAGES" means the East Texas Properties, the Mid-Continent
Properties and the Permian Basin Properties as identified in Schedule 2.4.
"TAXES" shall mean any and all fees (including, without limitation,
documentation, license, recording, filing and registration fees), taxes
(including without limitation, production, gross receipts, ad valorem,
value added, windfall profit tax, environmental tax, turnover, sales, use,
personal property (tangible and intangible), stamp, leasing, lease, user,
leasing use, excise, franchise, transfer, heating value, fuel, excess
profits, occupational, interest equalization, lifting, oil, gas, or mineral
production or severance, and other taxes), levies, imposts, duties, charges
or withholdings of any nature whatsoever, imposed by any Governmental Body
or taxing authority thereof, domestic or foreign, together with any and all
penalties, fines, additions to tax and interest thereon, whether or not
such tax shall be existing or hereafter adopted.
"TEPI" shall mean Texaco Exploration and Production Inc.
"TEPI PSA" shall mean that certain Purchase and Sale Agreement of even
date herewith by and between Buyer and TEPI.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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<PAGE> 16
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"TRANSITION AGREEMENT" means the transition agreement between TEPI and
Buyer.
1.3 OTHER DEFINITIONS IN THE AGREEMENT. The following terms shall have the
respective meanings ascribed to them in the Sections of the Agreement set forth
below opposite such terms:
<TABLE>
<S> <C>
AFEs.................................................3.1(n)
Allocated Value......................................2.4
Assignments..........................................2.5
Buyer................................................Preamble
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Deeds................................................2.5
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Employees............................................4.3(s)
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
</TABLE>
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<PAGE> 17
<TABLE>
<S> <C>
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Millennium Compliant ................................3.3(d)
Oil and Gas Leases...................................2.5
Party................................................Preamble
Performance Deposit..................................2.3
Permits..............................................3.1(j)
Purchase Price.......................................2.2
Real and Personal Property Taxes.....................7.1(a)
Records..............................................1.2
Rejection Notice.....................................4.3(m)(iii)
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Reserve Report.......................................3.1(o)
Seller...............................................Preamble
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
</TABLE>
1.4 RULES OF CONSTRUCTION. For purposes of this Agreement:
(a) GENERAL. Unless the context otherwise requires, (i) "or" is not
exclusive; (ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with accounting principles that are generally
accepted in the United States of America; (iii) words in the singular
include the plural and words in the plural include the singular; (iv) words
in the masculine include the feminine and words in the feminine include the
masculine; (v) any date specified for any action that is not a Business Day
shall be deemed to mean the first Business Day after such date; (vi) a
reference to a Person includes its successors and assigns; and (vii) the
use of the word "include" or "including" when following any general
statement, term or matter, shall not be construed to limit such statement,
term or matter to the specific items or matters set forth immediately
following such word or to similar items or matters, whether or not
non-limiting language (such as "without limitation" or "but not limited to"
or words of similar import) is used with reference thereto, but rather
shall be deemed to refer to all other items or matters that could
reasonably fall within the broadest possible scope of such general
statement, term or matter.
(b) PARTS AND SECTIONS. References to Parts and Sections are, unless
otherwise specified, to Parts and Sections of the Agreement. Neither the
captions to Parts or Sections hereof nor the Table of Contents shall be
deemed to be a part of the Agreement.
(c) EXHIBITS AND SCHEDULES. The Exhibits and Schedules form part of
this Agreement and shall have the same force and effect as if set out in
the body of this Agreement.
(d) OTHER AGREEMENTS. References herein to any agreement or other
instrument shall, unless the context otherwise requires (or the definition
thereof otherwise
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<PAGE> 18
specifies), be deemed references to that agreement or instrument as it may
from time to time be changed, amended or extended.
PART TWO
SALE AND PURCHASE
2.1 PURCHASE AND SALE. At the Closing, Seller shall sell, assign and convey
to the Buyer and Buyer shall purchase and pay for the Assets and assume the
Assumed Obligations as provided in 4.2(a) and the Material Environmental
Conditions as set forth in Section 4.2(b).
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
EXCEPT AS PROVIDED UNDER SECTION 9.15, IF BUYER FAILS TO COMPLETE THE
TRANSACTION SET FORTH IN THIS AGREEMENT, THE PARTIES AGREE THAT SELLER
SHALL RETAIN, AS SELLER'S SOLE REMEDY, THE PERFORMANCE DEPOSIT AS
LIQUIDATED DAMAGES, WHICH THE PARTIES AGREE IS A REASONABLE SUM
CONSIDERING ALL THE CIRCUMSTANCES EXISTING ON THE DATE OF THIS
AGREEMENT, INCLUDING THE RELATIONSHIP OF THE SUM OF THE RANGE OF HARM
TO SELLER THAT REASONABLY COULD BE ANTICIPATED AND THE ANTICIPATION
THAT PROOF OF ACTUAL DAMAGES WOULD BE COSTLY OR INCONVENIENT. IN
PLACING THEIR INITIALS BELOW, EACH PARTY SPECIFICALLY CONFIRMS THE
ACCURACY OF THE STATEMENTS MADE ABOVE AND THE FACT THAT EACH PARTY WAS
REPRESENTED BY COUNSEL WHO EXPLAINED THE CONSEQUENCES OF THIS
LIQUIDATED DAMAGES PROVISION AT THE TIME THIS AGREEMENT WAS MADE.
Seller Buyer
Initial Initial
----------- -------------
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<PAGE> 19
[TEXT OMITTED -- CONFIDENTIAL TREATMENT REQUESTED]
2.5 CLOSING AND PAYMENT OF PURCHASE PRICE. Subject to the terms and
conditions contained herein, this sale and purchase shall close on the Closing
Date. At Closing, Buyer will pay Seller the remaining unpaid portion of the
Purchase Price, adjusted pursuant to the terms of this Agreement, by wire
transfer of collected funds payable to Seller as set forth below. At Closing,
Seller shall deliver to Buyer assignments and bills of sale in the form attached
hereto as Exhibit A (the "Assignments"), deeds in the forms attached hereto as
Exhibits B-1 and B-2 (the "Deeds"), oil and gas leases in the form attached
hereto as Exhibit C (the "Oil and Gas Leases") as well as such certificates or
other documents as are required to effect the transfer of the Assets, or the
subsequent operation thereof.
2.6 METHOD OF PAYMENT. Any amount payable under this Agreement shall be
payable in immediately available funds by means of a wire transfer, if to
Seller, to Seller's account at Chase Manhattan Bank, 1 Chase Plaza, New York,
New York, ABA #021000021, account number 9102548782 (with immediate telephone
notice to Luci Romano, (914) 253-6071), or to such other account number as
Seller may by written notice direct, or if to Buyer, to Buyer's account as may
be designated by Buyer.
PART THREE
REPRESENTATIONS AND WARRANTIES
3.1 SELLER. Seller represents and warrants to Buyer that, as of the
Effective Date:
(a) ORGANIZATION AND STANDING. Seller has been duly organized and is
validly existing in good standing under the laws of the State of Delaware,
and is duly qualified to do business and is in good standing as a foreign
corporation in all jurisdictions where the nature of its properties or
business requires it.
(b) AUTHORITY AND NO VIOLATION. The Seller has the corporate power and
authority to execute, deliver and perform its obligations under this
Agreement. The execution, delivery and performance of this Agreement (a)
has been duly authorized by all requisite corporate or shareholder action
and (b) does not conflict with or result in a
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violation or breach of the Corporate Documents of the Seller or of any
agreement, instrument, statute, regulation, rule, order, writ, judgment or
decree to which the Seller or its property is directly or indirectly a
party or is directly or indirectly subject.
(c) VALIDITY OF AGREEMENT. This Agreement is a legal, valid and
binding obligation of Seller, enforceable against Seller in accordance with
the terms of the Agreement, except as enforcement may be limited by
bankruptcy, insolvency, reorganization or other similar Applicable Laws
affecting the enforcement of creditor's rights generally. The
enforceability of Seller's obligations under the Agreement is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(d) NO BANKRUPTCY. There are no bankruptcy, reorganization or
receivership proceedings pending, being contemplated by, or to the actual
Knowledge of Seller, threatened against Seller.
(e) BROKERS' FEES. Seller has not incurred any liability, contingent
or otherwise, for brokers' or finders' fees relating to the Contemplated
Transactions for which Buyer shall be liable.
(f) STATUS. Seller is not a non-resident alien, foreign corporation,
foreign partnership, foreign trust or foreign estate (as those terms are
defined in the Code and in the regulations promulgated pursuant thereto.
(g) LITIGATION. Except as set forth on Schedule 3.1(g), with respect
to those Assets operated by Seller, there are no actions, suits, or
proceedings pending [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(h) NO CONSENTS REQUIRED. Except as set forth in Section 4.3(n) and on
Schedule 3.1(h) or consents required from Governmental Bodies as part of an
ordinary course transfer, no preferential purchase rights, consents,
approvals or other action by, or filing with any Person or Governmental
Body is required in connection with the execution, delivery and performance
by Seller of the Agreement.
(i) [this section intentionally left blank].
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(j) PERMITS. Except as set forth on Schedule 3.1(j), as to those
Assets operated by Seller, Seller has obtained all material permits,
licenses, and certificates required by Applicable Law in connection with
the ownership and operation of Assets (the "Permits") and such Permits are
in full force and effect. Except as set forth on Schedule 3.1(j), to
Seller's Knowledge as to those Assets not operated by Seller, all Permits
in connection with the ownership and operation of such Assets have been
obtained and are in full force and effect. Except as set forth on Schedule
3.1(j), to Seller's Knowledge there are no outstanding violations with
respect to such Permits and no judicial, administrative or arbitral
proceeding is pending or threatened with respect to such Permits
(k) LEASES. To Seller's Knowledge, (i) all material Leases, unit
agreements, pooling agreements, communization agreements and other
Contracts creating interests comprising the Properties are in full force
and effect, (ii) except as set forth on Schedule 3.1(k) or 3.1(g), since
January 1, 1996, Seller has not received any written notice from any third
Person which is still pending claiming any material violation or
repudiation of the material Leases, unit agreements, pooling agreements,
communization agreements and other Contracts creating interests comprising
the Properties, and (iii) Seller is entitled to be paid, and is being paid,
its interests in the Properties without indemnity or guarantee other than
those customarily found in division orders and other similar agreements and
documents.
(l) IMBALANCES. To Seller's Knowledge and except for Lease obligations
for the delivery of gas for residential use, the only Contracts pursuant to
which Hydrocarbons produced from the Assets are being sold are described on
Schedule A and there are no (i) gas imbalances except as set forth on
Schedule G (which may be supplemented from time to time before the Closing)
and as of the date shown on Schedule G which date shall not be more than
120 days prior to Closing, or (ii) take-or-pay or other prepayments,
failure of purchasers to pay on a current basis or refund obligations for
which Buyer would be liable that would have a material, adverse affect on
Buyer's right to market production.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(n) CURRENT COMMITMENTS. With respect to the Assets operated by
Seller, Schedule 3.1(n) contains a complete and accurate list as of the
date of this Agreement of (i) all authorities for expenditures ("AFEs") in
excess of $50,000 to drill or rework wells or for capital expenditures
pursuant to any of the Contracts that have been proposed by Seller or any
third Person on or after the Effective Date, whether or not accepted by
Seller or any other third Person, and (ii) all AFEs and commitments, other
than those which have been terminated or expired, in excess of $50,000 to
drill or rework wells or for other capital
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expenditures pursuant to any of the Contacts for which all of the
activities anticipated in such AFEs or commitments have not been completed
by the date of this Agreement.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(p) CONTRACTS. As to those Assets operated by Seller, there are no
Contracts, other than those Contracts set forth on Schedule A that as of
the Closing Date inhibit or preclude Buyer from realizing the material
benefits of the Assets or under which Seller or any other party thereto is
in default. To Seller's Knowledge, other than those Contracts set forth on
Schedule A as to those Assets which are not operated by Seller, there are
no material Contracts under which Seller or any other party thereto is in
default.
(q) TAXES. All ad valorem, property, production, severance and other
taxes based on or measured by the ownership of the Properties or the
production of Hydrocarbons from the Properties have been properly and
timely paid except those disputed in ordinary course of business if any,
for which Seller has indemnified Buyer under Section 8.1 and 8.5 below.
(r) LIMITATION. The foregoing representations and warranties are given
by Seller to Buyer and are not intended to be given or used by any other
Person not a Party to this Agreement.
3.2 BUYER. Buyer represents and warrants to Seller that, as of the
Effective Date:
(a) ORGANIZATION AND STANDING. Buyer has been duly organized and is
validly existing in good standing under the laws of the State of Texas, and
is duly qualified to do business and is in good standing as a foreign
corporation in all jurisdictions where the nature of its properties or
business requires it.
(b) AUTHORITY AND NO VIOLATION. The Buyer has the corporate power and
authority to execute, deliver and perform its obligations under this
Agreement. The execution, delivery and performance of this Agreement (i)
has been duly authorized by all requisite corporate or shareholder action
and (ii) does not conflict with or result in a violation or breach of the
Corporate Documents of the Buyer or of any agreement, instrument, statute,
regulation, rule, order, writ, judgment or decree to which the Buyer or its
property is directly or indirectly a party or is directly or indirectly
subject.
(c) VALIDITY OF AGREEMENT. This Agreement is a legal, valid and
binding obligation of Buyer, enforceable against Buyer in accordance with
the terms of the Agreement, except as enforcement may be limited by
bankruptcy, insolvency,
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reorganization or other similar Applicable Laws affecting the enforcement
of creditor's rights generally. The enforceability of Buyer's obligations
under the Agreement is subject to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or
at law).
(d) NO BANKRUPTCY. There are no bankruptcy, reorganization or
receivership proceedings pending, being contemplated by, or to the actual
Knowledge of Buyer, threatened against Buyer.
(e) BROKERS' FEES. Buyer has not incurred any liability, contingent or
otherwise, for brokers' or finders' fees relating to the Contemplated
Transactions for which Seller shall be liable.
(f) KNOWLEDGEABLE INVESTOR. Buyer is an experienced and knowledgeable
investor and operator in the oil and gas business. In making its decision
to participate in this Agreement and the Contemplated Transactions, Buyer
has relied solely on its own independent investigation, analysis and
evaluation of the Assets.
(g) SECURITIES REPRESENTATION. Buyer is acquiring the Assets for its
own account and not with a view to, or for offer of resale in connection
with, a distribution thereof, within the meaning of the Securities Act of
1933, 15 U.S.C. Section 77a et seq., or any other Applicable Laws
pertaining to the distribution of securities.
(h) FUNDING. Buyer has arranged to have available by the Closing Date
sufficient funds, to enable the Buyer to pay in full the Purchase Price as
herein provided and otherwise to perform its obligations under this
Agreement.
(i) OPERATOR STATUS. Buyer is, or will be as of the Closing, a
qualified operator in good standing with all Governmental Bodies having
jurisdiction over the Assets.
(j) GOVERNMENTAL BODY APPROVAL. To Buyer's Knowledge, there are no
facts or conditions with respect to the Assets that may cause any
Governmental Body to withhold its unconditional approval of the Assignments
or Deeds.
(k) LIMITATION. The foregoing representations and warranties are given
by Buyer to Seller and are not intended to be given or used by any other
Person not a Party to this Agreement.
3.3 DISCLAIMER AND NOTIFICATIONS. THERE ARE NO WARRANTIES, REPRESENTATIONS
OR IMPLIED COVENANTS BETWEEN THE PARTIES EXCEPT THE MATTERS EXPRESSLY PROVIDED
FOR IN THIS AGREEMENT. THE PARTIES RESPECTIVELY DISCLAIM ANY OTHER WARRANTIES OR
REPRESENTATIONS INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES AND
REPRESENTATIONS IMPLIED UNDER APPLICABLE LAW.
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(a) NO IMPLIED REPRESENTATIONS. IT IS EXPRESSLY UNDERSTOOD BY THE
PARTIES HERETO THAT SELLER DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, AS TO TITLE (EVEN FOR THE RETURN OF THE PURCHASE PRICE
PAID) OR THE CONDITION OR STATE OF REPAIR OF THE ASSETS, THEIR VALUE,
QUALITY, MERCHANTABILITY, SUITABILITY OR FITNESS FOR ANY USES OR PURPOSES,
NOR AS TO THE CURRENT VOLUME, NATURE, QUALITY, CLASSIFICATION, OR VALUE OF
THE OIL, GAS OR OTHER MINERAL RESERVES THEREUNDER OR COVERED THEREBY, NOR
WITH RESPECT TO ANY APPURTENANCES THERETO BELONGING OR IN ANY WISE
APPERTAINING TO SAID ASSETS, OR OTHERWISE. Seller has advised Buyer and
Buyer has acknowledged that certain spills of Hydrocarbons, produced water
and chemicals from oil and gas exploration, development, production or
processing have occurred, or may have occurred, upon the Assets, which
could have resulted in contamination of the soil, water, ground water, or
improvements on the Assets. Furthermore, Seller has cautioned Buyer to
thoroughly examine and inspect the Assets for any such conditions or
violations and generally as to the condition of the Assets and its
improvements, including a recommendation by Seller to Buyer that Buyer
engage an environmental consulting firm to make an environmental survey of
the Assets, and Buyer hereby acknowledges such obligations and assumes all
liabilities associated therewith.
(b) BUYER'S INSPECTION OF THE ASSETS. Further, Buyer certifies that
the Assets (including, but not limited to, any oil, gas or other mineral
reserves underlying the Assets) have been, or will be prior to Closing,
carefully inspected by Buyer; that Buyer is, or will be prior to Closing,
familiar with their condition and value thereof, and the improvements and
appurtenances (including electric wiring and machinery installed thereon)
located on the Assets, inclusive of any Hydrocarbons, other soil
contaminants or waste substances, whether similar or dissimilar, that may
be present in the soil, water and groundwater; that Buyer has engaged, or
has had the opportunity to engage prior to Closing, such contractors or
consultants as Buyer deems prudent for tests and surveys of the soil,
water, groundwater, Other Property, and improvements on the Assets; and
that Buyer assumes any and all obligations, risks and liabilities
associated therewith. Buyer acknowledges that the Assets have been or may
have been used in connection with oil, gas and other mineral exploration,
development and operations, as well as with respect to processing and
refining operations, and, as such, equipment, appurtenances, processing and
other facilities, plants, buildings, structures, improvements, abandoned
and other tanks and piping (including above ground and underground tanks
and piping), storage facilities, gathering and distribution lines, wells
and other petroleum production facilities and appurtenances which have not
been excepted and excluded from this conveyance may be located thereon.
Further, Buyer acknowledges that the Assets may also contain unplugged
wells, wellbores or buried pipelines or other equipment, whether or not of
a similar nature, the locations of which may not now be known by Seller or
be readily apparent through a physical inspection of the Assets. Buyer
further accepts the Assets (including, but not limited to, any oil, gas or
other minerals and/or mineral reserves underlying said Assets) AS IS, WHERE
IS, IN THEIR PRESENT
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CONDITION AND STATE OF REPAIR, AND WITHOUT ANY REPRESENTATIONS, GUARANTIES,
OR WARRANTIES, EXPRESS OR IMPLIED, AS TO THEIR TITLE (EVEN FOR THE RETURN
OF THE PURCHASE PRICE PAID), VALUE, QUALITY, MERCHANTABILITY, OR THEIR
SUITABILITY OR FITNESS FOR BUYER'S INTENDED USE, OR FOR ANY USES OR
PURPOSES WHATSOEVER, OR THAT THE ASSETS HAVE BEEN RENDERED FREE FROM ANY
DEFECTS, HAZARDS, OR DANGEROUS CONDITIONS. FURTHERMORE, BUYER WAIVES ITS
RIGHTS UNDER THE TEXAS DECEPTIVE TRADE PRACTICES ACT - CONSUMER PROTECTION
ACT, SECTION 17.41, ET SEQ., BUSINESS AND COMMERCE CODE, A LAW THAT GIVES
CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN
ATTORNEY OF ITS OWN SELECTION, BUYER VOLUNTARILY CONSENTS TO THIS WAIVER.
BUYER'S SIGNATURE
By:
--------------------------
Its:
-------------------------
(c) DISCLAIMER. Without limiting the generality of the foregoing, but
in furtherance of same, SELLER DISCLAIMS ANY AND ALL LIABILITY ARISING IN
CONNECTION WITH ANY ENVIRONMENTAL MATTERS INCLUDING, WITHOUT LIMITATION,
ANY PRESENCE OF NATURALLY OCCURRING RADIOACTIVE MATERIAL (NORM) ON THE
ASSETS. IN ADDITION, THERE ARE NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR
IMPLIED, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA, INFORMATION OR
MATERIALS HERETOFORE OR HEREAFTER FURNISHED IN CONNECTION WITH THE ASSETS
OR AS TO THE QUALITY OR QUANTITY OF THE HYDROCARBONS AND ANY OTHER MINERAL
RESERVES, IF ANY, ATTRIBUTABLE TO THE INTEREST CONVEYED HEREIN OR THE
ABILITY OF THE ASSETS TO PRODUCE HYDROCARBONS OR ANY OTHER MINERALS, AND
ANY AND ALL DATA, INFORMATION AND MATERIAL FURNISHED BY SELLER IS PROVIDED
AS A CONVENIENCE ONLY AND ANY RELIANCE ON OR USE OF THE SAME IS AT BUYER'S
SOLE RISK.
(d) YEAR 2000 DISCLAIMER. THE CONTEMPLATED TRANSACTION SHALL BE
WITHOUT ANY EXPRESS OR IMPLIED WARRANTY OR REPRESENTATION THAT ANY ASSETS
EXCHANGED HEREUNDER SHALL IN ANY WAY WHATSOEVER BE MILLENNIUM COMPLIANT.
FOR PURPOSES OF THIS AGREEMENT, "MILLENNIUM COMPLIANT" MEANS THAT THE
ASSETS WILL ACCURATELY: (A) HANDLE DATA BEFORE, DURING, AND AFTER JANUARY
1, 2000, INCLUDING, BUT NOT LIMITED TO, ACCEPTING DATE INPUT, PROVIDING
DATE OUTPUT, AND PERFORMING CALCULATIONS ON DATES OR PORTIONS OF DATES; (B)
FUNCTION WITHOUT INTERRUPTION
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BEFORE, DURING, AND AFTER JANUARY 1, 2000, WITHOUT ANY CHANGE IN OPERATIONS
ASSOCIATED WITH THE ADVENT OF THE NEW CENTURY (INCLUDING THE FACT THAT THE
YEAR 2000 IS A LEAP YEAR); (C) ACCOMMODATE FOUR-DIGIT YEAR INPUT OR RESPOND
TO TWO-DIGIT YEAR-DATE INPUT IN A WAY THAT RESOLVES THE AMBIGUITY AS TO
CENTURY IN A DISCLOSED, DEFINED, AND PREDETERMINED MANNER; AND (D) STORE
AND PROVIDE OUTPUT OF DATE INFORMATION IN WAYS THAT ARE UNAMBIGUOUS AS TO
CENTURY.
PART FOUR
COVENANTS
4.1 COVENANTS OF SELLER. Seller covenants with the Buyer as follows:
(a) ACCESS. From the date of execution of this Agreement until Closing
except for such of the Assets not operated by Seller, Seller shall afford
Buyer and Buyer's representatives full and reasonable access to the Assets
in the possession of Seller during normal working hours.
(b) FILES. From the date of execution of this Agreement until Closing,
Seller shall permit Buyer and its representatives at reasonable times
during normal business hours to examine, in Sellers' offices at their
actual location, all abstracts of title, title opinions, title files,
ownership maps, lease files, accounting files, assignments, division
orders, payout statements, agreements and other Contracts pertaining to the
Assets insofar as the same may now be in existence and in the possession of
Seller, except those which constitute Excluded Assets. From the date of
execution of this Agreement until Closing, Seller shall make available to
Buyer for inspection by Buyer at reasonable times during normal business
hours at their actual location, all production and engineering books,
records and data in possession of Seller which are directly related to the
Assets, and all other files, records, and data pertaining to the Assets,
except those which may constitute Excluded Assets.
(c) CONSENTS. Subject to Section 4.3(n), Seller shall use reasonable
efforts to obtain all necessary waivers, consents, approvals, permits and
authorizations and actions of third Persons to complete the Contemplated
Transactions prior to Closing.
(d) CONDUCT OF BUSINESS. From the date of execution of this Agreement
and until the Closing, Seller shall (i) operate the Assets, to the extent
Seller is the operator thereof, in substantially the same manner as
heretofore operated; (ii) maintain books of account and records with regard
to the Assets in accordance with Seller's past practices; and (iii) pay its
share of all costs and expenses attributable to the Assets in accordance
with past
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practices subject to its rights under the Final Recap set forth in Section
4.3(g). Without limitation of the foregoing but subject to the limitation
set forth below, after the execution of the Agreement and prior to Closing,
Seller shall have the right to make any changes, repairs or modifications,
or incur any expenditures necessary or desirable in Seller's reasonable
opinion for the protection of the Assets, required under the Contracts, or
to comply with any Applicable Law or other legal requirement relative to
the premises or to prevent or react to an emergency or environmental
incident. Seller shall have the right to effect such expenditure or action
with or without the approval of Buyer, acting as would any prudent operator
under similar circumstances. Notwithstanding the foregoing, Seller shall
not undertake or authorize any project, activity or expenditure in excess
of $25,000 with respect to any one project without Buyer's prior written
approval except as may be required (i) to respond to an emergency, (ii) by
any Governmental Body or (iii) by the terms of any applicable Contract or
Lease. Unless Buyer and Seller otherwise agree, Seller shall not sell,
dispose or materially alter the Assets (other than the use of supplies and
consumables) or remove any improvements, equipment or property which
comprise the Assets (other than the use of supplies and consumables).
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
4.2 COVENANTS OF BUYER. Buyer covenants with Seller as follows:
(a) ASSUMED OBLIGATIONS. At Closing, Buyer shall assume the Assumed
Obligations.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(c) BUYER'S RESPONSIBILITIES. Except as otherwise provided for in
Section 4.3(x) and the Transition Agreement, Buyer shall be responsible for
the payment of all necessary and reasonable capital costs, Taxes, expenses
and Burdens incurred against or
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applicable to the operation and use of the Assets from and after the
Effective Date, whether invoiced or not. All production of Hydrocarbons
from the Assets occurring from and after the Effective Date and all
proceeds from or attributable thereto shall be the property of and belong
to Buyer as of the Effective Date.
(d) PAYMENT OF BURDENS. Except as otherwise provided in the Transition
Agreement, Buyer shall commence the payment of Burdens for all Hydrocarbons
produced beginning the first day of the month following the month in which
Seller has delivered to Buyer substantially all of the Records including
without limitations Records relating to accounting, accounts payables,
division orders and joint interest billings necessary to administer such
payments.
(e) CONFIDENTIALITY. In the event that this Agreement is terminated
or, if not terminated, until the Closing, all information made available to
Buyer under Section 4.1 shall be maintained confidential by Buyer pursuant
to the terms of the Confidentiality Agreement. The Confidentiality
Agreement shall continue in force until Closing, or, in case of
termination, in accordance with its terms. Buyer shall take whatever
reasonable steps as may be necessary to ensure that Buyer's employees,
consultants and agents comply with the provisions of this Section 4.2(e)
and the provisions of the Confidentiality Agreement.
(f) SIGNAGE. Buyer agrees that, within thirty (30) days after the
Closing, it will remove or cause to be removed the names and marks used by
Seller or TEPI and all variations and derivatives thereof and logos
relating thereto from the Assets and will not thereafter make any use
whatsoever of such names, marks and logos.
(g) COMPLIANCE WITH LAWS. Buyer hereby covenants that it will comply
with all Applicable Laws in its ownership and operation of the Assets.
Buyer specifically covenants that it will comply with all Applicable Laws
with respect to (i) all exploration, drilling, production, Plugging and
Abandonment, and (ii) the control, regulation and prevention of pollution,
including, but not limited to, saltwater discharge and contamination.
(h) RECOUPMENT OF OVERPAYMENTS. Buyer expressly agrees, at Seller's
cost and expense, to reasonably assist Seller in recouping any monies from
third Persons due to overpayments of royalties made prior to the Effective
Date.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(j) INSURANCE. Buyer covenants that all insurance obtained by Buyer
during its term of ownership of the Assets covering environmental damage,
third Person property damage, personal injury or death shall name Seller as
an additional insured to the extent of Buyer's liability and
indemnification obligations assumed herein, and shall contain a waiver of
subrogation against Seller.
(k) ACCESS. Buyer shall afford Seller the right to enter onto and use
the Assets and such other resources, including but not limited to water and
power, as are reasonably necessary for Seller to remedy any Material
Environmental Condition pursuant to Section 6.1(a).
(l) RADIO FREQUENCY. Buyer shall undertake as soon as is reasonably
practical following the Closing to obtain a new pump-off controller radio
frequencies.
4.3 COVENANTS OF SELLER AND BUYER. Buyer and Seller agree as follows:
(a) PREFERENTIAL PURCHASE RIGHTS. With respect to preferential
purchase rights:
(i) Within five (5) Business Days of Seller's receipt from Buyer
of Schedule 2.4, Seller shall send notice to the holders of
preferential purchase rights on the Assets. Seller shall keep Buyer
informed as receipt of responses from said
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<PAGE> 30
holders are received or the applicable exercise periods expire without
exercise or response from the holders.
(ii) To the extent any preferential purchase rights are exercised
to Seller's and Buyer's reasonable satisfaction, then the Assets
subject to such preferential purchase rights shall not be sold to
Buyer and shall be excluded from the Agreement. The Purchase Price
shall be adjusted by the portion of the Allocated Value representing
the portion of the Assets subject to such exercised preferential
right. In the event any holder of a preferential right initially
elects to exercise a particular preferential right, but subsequently
refuses or elects not to consummate the purchase under the
preferential right and such refusal occurs prior to sixty (60) days
following the Closing Date, Buyer shall purchase such interests
covered by the preferential rights for its Allocated Value as of the
Effective Date and the closing of such transaction shall take place on
a date mutually acceptable to Seller and Buyer not more than thirty
(30) days following Seller's notification to Buyer of such failure or
refusal.
(iii) If a preferential purchase right has not been waived or the
time for exercise expired prior to Closing, the Assets subject to such
right shall be excluded from the Assets conveyed at Closing and the
Purchase Price reduced by the Allocated Value of the affected Asset.
If the time for exercise expires or a waiver is obtained by the Seller
within 60 days following the Closing, Buyer shall purchase the
affected Asset from Seller as of the Effective Date and the closing of
such transaction shall take place on a date mutually acceptable to
Seller and Buyer not more than thirty (30) days following Seller's
notification to Buyer for the Allocated Value allocated to the
affected Asset.
(iv) If the Seller has failed to offer a preferential right to
purchase and the holder of such right makes a timely and enforceable
demand upon Seller or Buyer to offer such right, Buyer shall offer the
preferential right to purchase to such holder in accordance with the
Contract creating such preferential right to purchase.
(b) PRODUCT IMBALANCES. With respect to product imbalances from the
Assets, the Parties agree as follows:
(i) UNDERPRODUCTION. The Purchase Price reflects Seller's
underproduced gas position (if any) under any Contracts or wells
included in the Assets as shown on Schedule G. As of the Effective
Date, Buyer shall assume all of Seller's rights, obligations,
liabilities and responsibilities associated with Seller's
underproduced gas position, including any Taxes and royalties due or
payable on the value of Seller's underproduction and Seller shall have
no further rights or claims whatsoever with respect to the
underproduced gas. Seller and Buyer agree that the Purchase Price
shall be adjusted upward at the rate of $1.00 per mcf at Closing to
reflect the estimated value of any additional underproduction not
reflected on
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<PAGE> 31
Schedule G or any reduction in overproduction described in Section
4.3(b)(ii). Any additional underproduced volumes or reduction in
overproduction accrued prior to the Effective Date and identified
after Closing shall be accounted for as provided in Section 4.3(g) at
the same rate of $1.00 per mcf.
(ii) OVERPRODUCTION. The Purchase Price reflects Seller's
overproduced gas position (if any) under any Contracts or wells
included in the Assets as shown on Schedule G. As of the Effective
Date, Buyer hereby agrees to and shall assume all rights to Seller's
overproduced gas position (but not including the gas actually
overproduced) including the right to recoup Taxes and royalties
associated with such overproduction, as well as all of Seller's
liabilities, responsibilities and obligations to third Persons
associated with such overproduced gas position and Seller shall have
no further rights, liabilities, obligations or responsibilities
whatsoever with respect to the overproduced gas. Seller and Buyer
agree that the Purchase Price shall be adjusted downward at the rate
of $1.00 per mcf at Closing to reflect the estimated value of any
additional overproduction not reflected on Schedule G or reduction in
underproduction described in 4.3(b)(i). Any additional overproduced
volumes or reductions in underproduction accrued prior to the
Effective Date and identified after Closing shall be accounted for as
provided in Section 4.3(g) at the same rate of $1.00 per mcf.
(c) OPERATORSHIP. Unless otherwise provided in the Transition
Agreement, Buyer shall assume Seller's obligations for operatorship of any
Seller-operated Assets conveyed herein at 7:00 a.m. local time on April 1,
2000, and shall perform all duties required in the course of business,
including, but not by the way of limitation, paying Burdens and Taxes,
pumping and gauging wells, working over wells, drilling new wells, filing
all necessary reports required by Applicable Law or otherwise, and
performing maintenance and/or repair work on the Assets. To the extent
required under any Contract that affects any Asset and only after Buyer has
used its commercially reasonable efforts to assume operatorship of such
Asset, Seller will continue to operate said Asset pursuant to the
Transition Agreement until the new operator can be properly selected.
Seller does not warrant or represent that Buyer shall succeed Seller as
operator of any Asset; however, Seller shall recommend to its working
interest owners that Buyer succeed as operator of such Properties operated
by Seller.
(d) PROCESSING. At Closing, Buyer shall enter into gas processing
agreements for the Properties listed on Schedule 4.3(d) in substantially
the form attached hereto as Exhibit K or such other form as to which Buyer
and Versado Processors, L.L.C shall have mutually agreed.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(i) BUYER'S RESPONSIBILITY. In the event Seller is required to
continue to operate any of the Assets after the Closing Date pursuant
to an applicable operating agreement or
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<PAGE> 33
the Transition Agreement, Buyer shall be responsible for the payment
of all necessary and reasonable capital costs, Taxes, expenses and
Burdens incurred against or applicable to the operation and use of the
Assets from and after the Effective Date, whether invoiced or not.
Buyer shall be responsible for prorated estimates of ad valorem taxes
in the absence of actuals. Further, all production from the wells
located on or attributable to the Assets and all proceeds from or
attributable to production from the Assets and sale thereof shall be
the property of and belong to Buyer from and after the Effective Date.
(j) ACCESS TO DOCUMENTS. Each Party shall provide reasonable
access to all relevant documents, data and other information which may
be required by the other Party for the purpose of preparing tax
returns and responding to any audit by any Governmental Body. Each
Party shall cooperate with all reasonable requests of the other Party
made in connection with contesting the imposition of Taxes.
Notwithstanding anything to the contrary in this Agreement, neither
Party shall be required at any time to disclose to the other Party any
tax returns or other confidential tax information.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(l) FURTHER ASSURANCES. After Closing, Seller and Buyer agree to
take such further actions and to execute, acknowledge and deliver all
such further documents necessary or useful in carrying out the
purposes of this Agreement or of any document delivered pursuant
hereto.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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(n) CERTAIN FILINGS, CONSENTS AND PERMITS. With respect to
certain filings and consents required by any Governmental Body, the
Parties agree that Buyer and Seller shall cooperate with one another
to make all filings necessary and to obtain any necessary consents,
permits, authorizations, approvals or waivers, including but not
limited to filings
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with the Texas Railroad Commission, Oklahoma Corporation Commission,
or such other state agency having jurisdiction over the Assets.
Without limitation of the foregoing, Seller shall endeavor to
obtain, and Buyer shall cooperate in connection with such endeavors,
each consent set forth on Schedule 3.1(h).
(o) CONSENTS.
(i) If the holder of the right to consent or party to a
maintenance of uniform interest provision affirmatively refuses
to consent or waive prior to Closing, such refusal shall be
automatically considered a Title Defect without the necessity of
Buyer sending a Defect Notice to Seller as required under Section
4.3(m)(i).
(ii) Except for approvals from Governmental Bodies normally
received subsequent to assignment, if Seller believes a consent
or waiver may be obtained subsequent to Closing, the Property
shall be excluded from the Assets conveyed at Closing and the
Purchase Price reduced by the Allocated Value (or portion
thereof) and held by Seller for the benefit of Buyer after
Closing and Seller shall provide Buyer with the economic benefits
thereof until such consent or waiver is received or until sixty
(60) days following Closing, if later. If Seller obtains the
consent or waiver on or before sixty (60) days following Closing,
then Seller shall deliver conveyances of the Property to Buyer
and Buyer shall pay to Seller the Allocated Value (or portion
thereof). If the consent or waiver is not obtained or is
affirmatively refused on or before sixty (60) days following
Closing, Buyer shall refund to Seller any net revenues (revenues
net of costs and Burdens) received by Buyer in connection with
such affected portion of the Property and Seller's holding for
the benefit of Buyer shall terminate, unless Buyer waives the
requirement for obtaining the consent and agrees to accept the
Asset and pay the value allocated to the Asset pursuant to
Schedule 2.4 in exchange for Seller's conveyance of the Asset.
(p) RISK OF LOSS. If, prior to the Closing Date, all or any
material portion of an Asset is damaged or destroyed by fire or other
casualty, is taken in condemnation or under the right of eminent
domain or proceedings for such purposes are pending or threatened,
Buyer shall purchase such portion of the Assets, notwithstanding any
such damage, destruction, taking or pending or threatened taking.
Seller shall pay to Buyer (as an adjustment to the Purchase Price) all
sums paid to Seller by third Persons by reason of the damage,
destruction or taking of such portion of the Assets to be assigned to
Buyer or to the extent Seller is self-insured an amount equal to the
value of the damage or destruction, and shall assign, transfer and set
over to Buyer all of the right, title and interest of Seller in and to
any unpaid awards or other payments from third Persons arising out of
the damage, destruction, taking or pending or threatened taking as to
such interest. If prior to the Closing Date, the applicable Assets are
damaged or destroyed by fire or other casualty and the sums
transferred to Buyer pursuant to the foregoing sentence do not equal
the amount
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necessary to replace or restore the pertinent Assets to the condition
they were in prior to such fire or casualty (including, without
limitation, those circumstances in which Seller is self-insured),
Seller shall pay to Buyer, or the Purchase Price shall be reduced by
the additional amount necessary to repair or replace all damaged or
destroyed Assets or restore the Assets to their condition prior to the
fire or casualty loss. If the sums that Seller would be responsible
for pursuant to the foregoing sentence exceed fifty percent (50%) of
the Allocated Value of the pertinent Asset, Seller may elect to remove
the Asset from the sale and reduce the Purchase Price by the allocated
value of the pertinent Asset. Seller shall not voluntarily compromise,
settle or adjust any material amounts payable by reason of any
material damage, destruction, taking or pending or threatened taking
as to any Asset without first obtaining the written consent of Buyer,
which shall not be unreasonably withheld.
(q) POST-CLOSING ACCESS. Except as otherwise expressly provided
herein, from and after the Closing Date, Buyer and Seller shall
reasonably cooperate and afford each other or cause to be afforded to
their respective officers, employees, accountants and other
representatives access, upon reasonable notice, during business hours
with respect to the facility to which access has been requested, to
review and copy the books, documents, databases or other records
relating to the Assets not including the Excluded Assets (which books,
documents, databases, records, or employees files or other information
the Parties shall cooperate and assist one another in identifying and
locating), interview, depose or seek testimony of employees with
knowledge of the Assets, provide assistance in proceedings with
employees with knowledge of the Assets as witnesses or advisors,
investigate the physical premises, take photographs or videotapes,
identify employees and contractors with knowledge of any matter which
is the subject of a claim for which a Party has responsibility and
make such employees available to such Party and provide reasonable
office space to do any of the foregoing in connection with any matter
affecting or alleged to affect the Party requesting such access.
(r) FILING AND RECORDING OF ASSIGNMENTS, ETC. Buyer shall be
solely responsible for recording of the Deeds, Assignments and Oil and
Gas Leases and any other documents related to the Assets and shall
promptly provide Seller with recorded copies of same. Further, Buyer
shall be responsible for any recording or filing fees and documentary
or transfer Taxes resulting from the Contemplated Transactions.
(s) EMPLOYEE MATTERS. Buyer shall have no obligation, but shall
have the right to solicit the field employees of Seller (and any other
employees of Seller that Seller identifies in writing) who work
directly on or in connection with the Assets ("Employees"), and shall
have no obligation but shall have the right to offer employment to and
hire any such Employees. If Buyer hires any Employee, the terms of
employment shall be at Buyer's discretion. Seller is and shall be
responsible for any and all employees not hired by Buyer to the extent
any of Seller's employees are affected by the Contemplated
Transactions.
(t) [this section intentionally left blank].
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(u) [this section intentionally left blank].
(v) JOINT USE AGREEMENTS. Buyer and Seller shall, from and after
the date of this Agreement, use their reasonable best efforts to
negotiate and execute on or before the Closing in the case of items
identified five (5) days prior to Closing or as soon thereafter as
reasonably practical, mutually agreeable joint use agreements for the
use and management of (i) the facilities and other equipment
identified in Schedule 4.3(v) and incorporating, among others, the
terms and conditions set forth in Schedule 4.3(v) and (ii) any other
facilities and equipment used immediately prior to the Effective Date
to operate or produce both (A) assets and properties being retained by
Seller and (B) the Assets operated by Seller and which are identified
in writing by the Buyer within ninety (90) days after Buyer assumes
operations of the affected Asset.
(w) CENTRILIFT EQUIPMENT. Seller leases certain equipment, as
more particularly described on Schedule 4.3(w) in certain wells from
Centrilift. Within ten (10) days prior to the Closing, Seller shall
deliver to Buyer the payoff amounts by well for such equipment. Within
five (5) days before Closing, Buyer shall notify Seller if Buyer
elects to purchase such leased equipment. If Buyer elects to purchase
such leased equipment, such equipment shall be included in the
definition of Assets and Seller will make reasonable efforts to
arrange for such sale to be consummated within sixty days after
Closing. Buyer shall reimburse Seller for any costs incurred by Seller
in furtherance of such purchase. If Buyer elects not to purchase the
leased equipment, Seller will arrange for the removal of such leased
equipment at Seller's expense as soon as is reasonably practical
following the Closing.
(x) [this section intentionally left blank].
(y) HSR FILINGS. Buyer and Seller shall promptly make all filings
required under the HSR Act.
PART FIVE
CONDITIONS TO CLOSING
5.1 SELLER'S CLOSING CONDITIONS. The obligations of Seller to consummate
the Contemplated Transactions are subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties of Buyer contained in the Agreement or in
connection with the Contemplated Transactions were true and correct when
made, and shall be true and correct on and as of the Closing Date as though
such representations and warranties were made at and as of such date except
as otherwise expressly provided herein.
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(b) COMPLIANCE WITH AGREEMENT. On and as of the Closing Date, Buyer
shall have performed and complied with all agreements, covenants, and
conditions required by this Agreement, the McFarland PSA and the TEPI PSA
to be performed and complied with prior to or on the Closing Date.
(c) INJUNCTION. As of the Closing Date, no suit, action or other
proceeding (excluding any such matter initiated by Seller) shall be pending
or threatened before any court or governmental agency seeking to restrain
Seller or prohibit the Closing or seeking damages against Seller as a
result of the consummation of this Agreement or the Contemplated
Transactions.
(d) CERTIFIED RESOLUTIONS AND OFFICERS' CERTIFICATE. Buyer shall have
delivered to Seller (i) a certificate dated the Closing Date signed by the
Secretary or an Assistant Secretary of Buyer with respect to the action of
the Buyer's Board of Directors authorizing the transactions contemplated by
the Agreement, and (ii) a certificate, dated the Closing Date and signed by
the President or a Vice President of Buyer certifying in such detail as
Seller may reasonably request to the fulfillment of the conditions
specified in subparagraphs (a) and (b) of this Section 5.1, in the form
attached as Exhibit D.
(e) APPROVAL OF PROCEEDINGS. All actions, proceedings, instruments and
documents required of Buyer to carry out the Agreement, or incidental
thereto, and all other related legal matters shall have been approved by
Nanette J. Crawford, Esq., as counsel for Seller, which approval shall not
be unreasonably withheld.
(f) [This section intentionally left blank].
(g) CONVEYANCE. Buyer shall execute, acknowledge and deliver to Seller
the Assignments, Deeds and Oil and Gas Leases substantially in the form of
Exhibits A, B-1, B-2 and C as well as change of operator forms required by
Applicable Laws and such other documents as may be necessary to carry out
the purposes of the Agreement.
(h) LETTERS IN LIEU. Buyer and Seller shall execute, acknowledge and
deliver all letters in lieu as set forth in Section 4.3(f).
(i) SECURITY. Any security required by Seller of Buyer contemplated in
Section 4.2(i)(ii) shall have been obtained.
(j) [this section intentionally left blank].
(k) JOINT USE AGREEMENTS. Buyer and Seller shall have executed,
acknowledge and delivered, on or before the Closing, certain joint use
agreements as described in Section 4.3(v).
(l) [this section intentionally left blank].
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(p) [this section intentionally left blank].
(q) BARGO GUARANTY. Buyer shall have delivered to Seller, in a form
mutually agreeable to both Buyer and Seller, the guaranty of Bargo Energy
Company guaranteeing the performance of the Buyer under this Agreement.
(r) TRANSITION AGREEMENT. Buyer and TEPI shall have executed and
delivered the Transition Agreement.
(s) HSR ACT. All necessary filings and notifications under the HSR Act
shall have been made, including any required additional information or
documents, and the waiting period referred to in such Act applicable to the
transactions contemplated hereby shall have expired or been terminated.
5.2 BUYER'S CLOSING CONDITIONS. The obligations of Buyer to consummate the
Contemplated Transactions are subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties of Seller contained in the Agreement or in
connection with the Contemplated Transactions were true and correct when
made, and shall be true and correct on and as of the Closing Date as though
such representations and warranties were made at and as of such date except
as otherwise expressly provided herein.
(b) COMPLIANCE WITH AGREEMENTS. On and as of the Closing Date, Seller
shall have performed and complied with all agreements, covenants, and
conditions required by the Agreement to be performed and complied with
prior to or on the Closing Date. McFarland Energy, Inc. and TEPI shall have
performed and complied with all agreements, covenants and conditions
required by the TEPI PSA and the McFarland PSA.
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(c) INJUNCTION. As of the Closing Date, no suit, action or other
proceeding (excluding any such matter initiated by Buyer) shall be pending
or threatened before any court or governmental agency seeking to restrain
Buyer or prohibit the Closing or seeking damages against Buyer as a result
of the consummation of this Agreement or the Contemplated Transactions.
(d) CERTIFIED RESOLUTIONS AND OFFICERS' CERTIFICATE. Seller shall have
delivered to Buyer (i) a certificate dated the Closing Date signed by the
Secretary or an Assistant Secretary of Seller with respect to the action of
the Seller's Board of Directors authorizing the transactions contemplated
by the Agreement, and (ii) a certificate, dated the Closing Date and signed
by the President or a Vice President of Seller certifying in such detail as
Buyer may reasonably request to the fulfillment of the conditions specified
in subparagraphs (a) and (b) of this Section 5.2 in the form attached as
Exhibit E.
(e) APPROVAL OF PROCEEDINGS. All actions, proceedings, instruments and
documents required of Seller to carry out the Agreement, or incidental
thereto, and all other related legal matters shall have been approved by
Haynes and Boone, L.L.P., as counsel for Buyer, which approval shall not be
unreasonably withheld.
(f) [This section intentionally left blank].
(g) CONVEYANCE. Seller shall execute, acknowledge and deliver to Buyer
the Assignments, Deeds and Oil and Gas Leases substantially in the form of
Exhibits A, B-1, B-2 and C, as well as change of operator forms required by
Applicable Laws and such other documents as may be necessary to carry out
the purposes of the Agreement.
(h) LETTERS IN LIEU. Buyer and Seller shall execute, acknowledge and
deliver all letters in lieu as set forth in Section 4.3(f).
(i) [This section intentionally left blank].
(j) JOINT USE AGREEMENTS. Buyer and Seller shall have executed,
acknowledge and delivered, on or before the Closing, certain joint use
agreements as described in Section 4.3(v).
(k) [This section intentionally left blank].
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(m) [This section intentionally left blank].
(n) TRANSITION AGREEMENT. Buyer and TEPI shall have executed and
delivered the Transition Agreement.
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(o) HSR ACT. All necessary filings and notifications under the HSR Act
shall have been made, including any required additional information or
documents, and the waiting period referred to in such Act applicable to the
transactions contemplated hereby shall have expired or been terminated.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
PART SIX
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
PART SEVEN
TAXES
Section 7.1 PAYMENT AND APPORTIONMENT OF REAL PROPERTY TAXES AND PERSONAL
PROPERTY TAXES. With respect to Taxes:
(a) Real and Personal Property Taxes. Real property taxes and personal
property taxes ("Real and Personal Property Taxes") for the year in which the
Effective Date occurs shall be apportioned as of the Effective Date between
Seller and Buyer. Seller shall be liable for the portion of such Real and
Personal Property Taxes based upon the number of days in the year occurring
prior to the Effective Date, and Buyer shall be liable for the portion of such
taxes based upon the number of days in the year occurring on and after the
Effective Date. For any year in which an apportionment is required, Buyer shall
file all required reports and returns incident to these taxes and shall remit to
the appropriate taxing authorities all such taxes assessed for the year in which
the Effective Date occurs. Seller may pay to Buyer, at the time of Buyer's
remittance, Seller's share of such taxes.
(b) Liability and Right to Pursue Claims. Seller shall retain liability for
all adjustments, examinations or claims relating to Taxes that are paid by
Seller and that are allocated to Seller pursuant to this Section 7.1. Seller
shall administer and defend any examination, claim or adjustments arising in
connection with Taxes to be paid by Buyer but which are allocated to Seller
pursuant to this Section 7.1.
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Section 7.2 OTHER TAXES. All excise, windfall profit and other Taxes
relating to production of Hydrocarbons attributable to the Assets prior to the
Effective Date shall be allocated to Seller, and all such Taxes relating to
production on or after the Effective Date shall be apportioned to Buyer.
Section 7.3 SALES TAXES. The Purchase Price does not include any sales
Taxes or other transfer Taxes imposed in connection with the sale of the Assets.
Buyer shall pay any sales Tax or other transfer Tax, as well as any applicable
conveyance, transfer and recording fee, and real estate transfer stamps or taxes
imposed on the transfer of the Assets pursuant to the Agreement. If Buyer is of
the opinion that it is exempt from the payment of such sales Tax or other
transfer Tax, Buyer shall furnish to Seller the appropriate tax exemption
certificate.
Section 7.4 COOPERATION. Each Party to the Agreement shall provide the
other Party with reasonable access to all relevant documents, data and other
information which may be required by the other Party for the purpose of
preparing Tax returns, establishing or defending a Tax position and responding
to any audit by any taxing jurisdiction. Each Party to the Agreement shall
cooperate with all reasonable requests of the other Party made in connection
with contesting the imposition of Taxes. Notwithstanding anything to the
contrary in the Agreement, neither Party to the Agreement shall be required at
any time to disclose to the other Party any Tax returns or other confidential or
privileged Tax information.
Section 7.5 TAX PROCEEDINGS. In the event Buyer receives notice of any
examination, claim, adjustment or other proceeding relating to the liability for
Taxes of or with respect to Seller for any period Seller is or may be liable
under the Agreement, Buyer shall within ten (10) days notify Seller in writing
thereof. As to any such Taxes for which Seller is or may be liable under the
Agreement, and Seller does not contest such liability as against Buyer, Seller
shall be entitled at Seller's expense to control or settle the contest of such
examination, claim, adjustment or other proceeding, provided Seller notifies
Buyer in writing within thirty (30) days after receipt of the notice described
in the preceding sentence that Seller desires to do so. The Parties shall
cooperate with each in the negotiations and settlement of any proceeding
described in this Section 7.5. Buyer shall provide, or cause to be provided, to
Seller necessary authorizations, including powers of attorney, to control any
proceeding which Seller is entitled to control pursuant to Part 7.
Section 7.6 PURCHASE PRICE ALLOCATION. The allocation of Purchase Price
provided for in this Agreement is intended to comply with the allocation method
required by Section 1060 of the Code. Buyer and Seller shall cooperate to comply
with all substantive and procedural requirements of Section 1060 and regulations
thereunder. Buyer and Seller agree that each will not take for income Tax
purposes, or permit any Affiliate to take, any position inconsistent with the
allocation of Purchase Price prescribed in this Agreement.
Section 7.7 RESERVATION OF SECTION 29 CREDITS. Seller retains the right, at
its option, to pursue Tax credits authorized by Section 29 of the Code, if any,
applicable to any production operations occurring prior to the Closing Date.
Buyer agrees to reasonably cooperate at Seller's
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cost and afford Seller and its representatives, upon reasonable notice, during
business hours, time to review and copy any files, documents, databases,
records, or other information, necessary to establish or defend a claim for such
Tax credits.
Section 7.8 RESERVATION OF SECTION 43 CREDITS. Seller retains the right, at
its option, to pursue Tax credits authorized by Section 43 of the Code, if any,
applicable to any qualified projects occurring prior to the Closing Date. Buyer
agrees to reasonably cooperate at Seller's cost and afford Seller and its
representatives, upon reasonable notice, during business hours, time to review
and copy any files, documents, databases, records, or other information
necessary to establish or defend a claim for such Tax credits.
PART EIGHT
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
PART NINE
MISCELLANEOUS
9.1 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of the respective Parties.
9.2 WAIVERS AND AMENDMENTS. All amendments and other modifications hereof
shall be in writing and signed by each of the Parties. Any Party may by written
instrument (i) waive compliance by the other Party with, or modify any of, the
covenants or agreements made by the
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other Party in this Agreement or (ii) waive or modify performance of any of the
obligations or other acts of the other Party. The delay or failure on the part
of any Party to insist, in any one instance or more, upon strict performance of
any of the terms or conditions of this Agreement, or to exercise any right or
privilege herein conferred shall not be construed as a waiver of any such terms,
conditions, rights or privileges but the same shall continue and remain in full
force and effect. All rights and remedies are cumulative.
9.3 NOTICES. All notices, consents and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given (a)
when delivered by hand, (b) when sent by telecopier (with receipt confirmed),
provided that a copy is promptly thereafter mailed in the USA by first class
postage prepaid mail, (c) when received by the addressee, if sent by Express
Mail, Federal Express, other express delivery service (receipt requested) or by
such other means as the Parties may agree from time to time or (d) five (5)
Business Days after being mailed in the USA, by first class postage prepaid
registered or certified mail, return receipt requested; in each case to the
appropriate address and telecopier number set forth below (or to such other
address and telecopier number as a Party may designate as to itself by notice to
the other Party):
(i) if to Seller:
Four Star Oil & Gas Company
Attn: Paula Gatens
1111 Bagby
Houston, Texas 77002
Phone: 713-752-4619
Fax: 713-752-7998
(ii) if to the Buyer:
Bargo Petroleum Corporation
Attn: Mr. Jon Clarkson
700 Louisiana, Suite 3700
Houston, Texas 77002
Phone: 713-236-9792
Fax: 713-236-9799
Each Party shall have the right upon giving ten (10) Business Days prior written
notice to the other in the manner hereinabove provided, to change its address
for purposes of notice.
9.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same document.
9.5 ENTIRE AGREEMENT. This Agreement, including the Exhibits and Schedules
hereto, contains the entire agreement between the Parties hereto with respect to
the subject matter hereof and supersedes all prior discussions, understandings,
agreements and undertakings between the Parties hereto relating to the subject
matter hereof. There are no additional terms, whether
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<PAGE> 50
consistent or inconsistent, oral or written which are intended to be part of the
Parties' understanding which have not been incorporated into this Agreement,
including the Exhibits and Schedules.
9.6 SELLER'S OPTION TO ELECT A TAX DEFERRED EXCHANGE. Seller retains the
right to sell its interest in the Assets to Buyer as a non-simultaneous
like-kind property exchange for cash pursuant to Section 1031 of the Internal
Revenue Code of 1986. Seller shall have the right to elect this tax-deferred
exchange at any time prior to the date of Closing. Buyer agrees to execute
additional escrow instructions, documents, agreements, or instruments to effect
the exchange, provided that Buyer shall incur no material additional costs,
expenses, fees or liabilities as a result of or in connection with the exchange.
9.7 SEVERABILITY. Every provision in this Agreement is intended to be
severable. If any term or provision hereof is held to be illegal or invalid for
any reason whatsoever, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of Contemplated Transactions is not affected in a materially
adverse manner with respect to either Party.
9.8 APPLICABLE LAW. This Agreement shall be governed by and interpreted,
construed and enforced in accordance with the laws of the State of Texas, except
to the extent mandatorily governed by the laws of the state in which the Assets
are located
9.9 EXPENSES. Except as specified herein and as the Parties may otherwise
agree, each Party shall be solely responsible for all expenses incurred by it in
connection with any and all Contemplated Transactions.
9.10 LAWS AND REGULATIONS. This Agreement is subject to all Applicable
Laws.
9.11 PUBLIC ANNOUNCEMENTS. The Parties hereto agree that prior to making
any public announcement or statement with respect to the Contemplated
Transaction, the Party desiring to make such public announcement or statement
shall provide the other Party with a copy of the proposed announcement or
statement at least seven (7) Business Days prior to the intended release date of
such announcement. The other Party shall thereafter consult with the Party
desiring to make the release, and the Parties shall exercise their reasonable
best efforts to (i) agree upon the text of a joint public announcement or
statement to be made by both such Parties or (ii) in the case of a statement to
be made solely by one Party, obtain approval of the other Party hereto to the
text of a public announcement or statement. Nothing contained in this paragraph
shall be construed to require either Party to obtain approval of the other Party
hereto to disclose information with respect to the Contemplated Transaction to
any Governmental Body to the extent required by Applicable Law or necessary to
comply with disclosure requirements of the New York Stock Exchange or any other
regulated stock exchange.
9.12 ASSIGNABILITY. The rights and obligations created or assumed hereunder
shall not be assignable or delegable by either Party and any assignment thereof
shall be void ab initio.
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<PAGE> 51
9.13 PROVISIONS SURVIVE CLOSING. All representations and warranties
contained in the Agreement shall survive the Closing and continue with respect
to claims made on or before twelve months following the Closing Date. Except as
otherwise provided herein, the covenants, indemnities and agreements made
hereunder or pursuant hereto shall survive Closing and be and remain enforceable
and continue in full force and effect as to their terms and conditions following
Closing and shall not be deemed to have been merged into the Closing or into the
assignments or other closing documents.
9.14 DISPUTE RESOLUTION. Any and all disputes, controversies or claims
relating to or arising out of the Contemplated Transactions shall be resolved in
accordance with the dispute resolution procedures outlined in Schedule 9.14
attached hereto and made a part hereof for all intents and purposes. The Parties
further agree that neither Party will institute litigation against the other
Party, their Affiliates and each of their respective officers, directors,
shareholders, agents and representatives relating to or arising out of the
Contemplated Transactions, except as provided in the attached Schedule 9.14 and
that the terms and provisions of this Section 9.14 shall survive the termination
of this Agreement.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[CONTINUED ON THE NEXT PAGE]
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<PAGE> 52
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first above written.
SELLER:
FOUR STAR OIL & GAS COMPANY
----------------------------------------
NAME: J.K. Hendrickson
TITLE: Attorney-in-Fact
Tax ID: 51-0078813
BUYER:
BARGO PETROLEUM CORPORATION
----------------------------------------
NAME:
TITLE:
Tax ID: 75-2526762
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<PAGE> 1
EXHIBIT 2.3
[THIS AGREEMENT HAS CONFIDENTIAL PORTIONS OMITTED, WHICH PORTIONS HAVE BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS
ARE INDICATED IN THIS AGREEMENT WITH "[TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]."
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
MCFARLAND ENERGY, INC.
AND
BARGO PETROLEUM CORPORATION
DATED FEBRUARY 22, 2000
EFFECTIVE DATE: JANUARY 1, 2000
<PAGE> 2
TABLE OF CONTENTS
PART ONE
<TABLE>
<S> <C>
SUBJECT MATTER, DEFINITIONS AND RULES OF CONSTRUCTION..........................................................1
1.1 Subject Matter 1
1.2 Defined Terms 1
Affiliate.................................................................................................1
Agreed Rate...............................................................................................1
Agreement.................................................................................................2
Applicable Law............................................................................................2
Assets....................................................................................................2
Assumed Obligations.......................................................................................2
Beneficial Interests......................................................................................2
Burdens...................................................................................................2
Business Day..............................................................................................2
Closing...................................................................................................2
Closing Date..............................................................................................3
Code......................................................................................................3
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Contemplated Transactions.................................................................................3
Contracts.................................................................................................3
Corporate Documents.......................................................................................3
Easements.................................................................................................3
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Excluded Assets...........................................................................................4
Excluded Obligations......................................................................................6
Fee Interests.............................................................................................6
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Governmental Body.........................................................................................6
HSR Act...................................................................................................6
Hydrocarbons..............................................................................................6
Knowledge.................................................................................................7
Leases....................................................................................................7
Losses....................................................................................................7
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Other Property............................................................................................7
Permitted Encumbrances....................................................................................8
Person....................................................................................................9
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Properties...............................................................................................10
Taxes....................................................................................................10
TEPI.....................................................................................................10
TEPI PSA.................................................................................................10
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
1.3 Other Definitions in the Agreement 11
1.4 Rules of Construction 12
PART TWO
SALE AND PURCHASE.............................................................................................13
2.1 Purchase and Sale 13
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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i
<PAGE> 3
<TABLE>
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
<S> <C>
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
2.5 Closing and Payment of Purchase Price 14
2.6 Method of Payment 14
PART THREE
REPRESENTATIONS AND WARRANTIES................................................................................14
3.1 Seller 14
3.2 Buyer 17
3.3 Disclaimer and Notifications 18
PART FOUR
COVENANTS.....................................................................................................21
4.1 Covenants of Seller 21
4.2 Covenants of Buyer 22
4.3 Covenants of Seller and Buyer 24
PART FIVE
CONDITIONS TO CLOSING.........................................................................................33
5.1 Seller's Closing Conditions 33
5.2 Buyer's Closing Conditions 35
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
PART SIX
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
PART SEVEN
TAXES.........................................................................................................38
7.1 Payment and Apportionment of Real Property Taxes and Personal Property Taxes 38
7.2 Other Taxes 38
7.3 Sales Taxes 38
7.4 Cooperation 39
7.5 Tax Proceedings 39
7.6 Purchase Price Allocation 39
7.7 Reservation of Section 29 Credits 39
7.8 Reservation of Section 43 Credits 39
PART EIGHT
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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ii
<PAGE> 4
PART NINE
<TABLE>
<S> <C>
MISCELLANEOUS.................................................................................................43
9.1 Successors and Assigns 43
9.2 Waivers and Amendments 43
9.3 Notices 44
9.4 Counterparts 44
9.5 Entire Agreement 44
9.6 Seller's Option to Elect a Tax Deferred Exchange 45
9.7 Severability 45
9.8 Applicable Law 45
9.9 Expenses 45
9.10 Laws and Regulations 45
9.11 Public Announcements 45
9.12 Assignability 45
9.13 Provisions Survive Closing 46
9.14 Dispute Resolution 46
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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iii
<PAGE> 5
SCHEDULES AND EXHIBITS
SCHEDULES
- ---------
A Contracts
B Easements
C Included Equipment
D Excluded Assets
E Leases
F Fee Interests
G Properties and Imbalances
2.4 Purchase Price Allocation
3.1(g) Litigation
3.1(h) Consents and Preferential Rights
3.1(j) Permits
3.1(k) Notices on Leases and Contract
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
3.1(n) AFE's
4.3(v) Joint Use Agreements
9.14 Dispute Resolution
EXHIBITS
- --------
A Assignments
B-1 through B-2 Deeds
C Oil and Gas Leases
D Officer's Certificate - Buyer
E Officer's Certificate - Seller
F [intentionally left blank]
G [intentionally left blank]
H [intentionally left blank]
I [intentionally left blank]
J [intentionally left blank]
K [intentionally left blank]
L Geophysical License Agreement (2D)
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iv
<PAGE> 6
PURCHASE AND SALE AGREEMENT
This agreement is made and entered into this 22nd day of February,
2000, by and between McFarland Energy, Inc., a Delaware corporation (hereinafter
"Seller"), and Bargo Petroleum Corporation, a Texas corporation, (hereinafter
"Buyer"). Seller and Buyer are sometimes separately referred to herein as a
"Party" and collectively as "Parties."
PART ONE
SUBJECT MATTER, DEFINITIONS AND RULES OF CONSTRUCTION
1.1 SUBJECT MATTER. The subject matter of this Agreement is the sale by
Seller to Buyer of the Assets, the purchase of the Assets and the assumption of
the Assumed Obligations by Buyer, and the terms and conditions upon which all of
the foregoing shall take place.
1.2 DEFINED TERMS. For purposes of this Agreement, including the
Exhibits and Schedules hereto, except as otherwise expressly provided or unless
the context otherwise requires, the terms defined in this Section 1.2 have the
meanings assigned to them herein and the capitalized terms defined elsewhere in
the Agreement by inclusion in quotation marks and parentheses have the meanings
so ascribed to them.
"AFFILIATE" means, with respect to any Person, any other
Person directly or indirectly controlling or controlled by, or under
common control with, such Person. For purposes of this definition, the
term "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with") as
applied to any Person, means the possession, directly or indirectly, of
the power to direct or cause the direction of the management of such
Person, whether through ownership of voting securities, by contract or
otherwise, and specifically with respect to a corporation or
partnership, means direct or indirect ownership of fifty percent (50%)
or more of the voting stock in such corporation or of the voting
interest as a partner in such partnership. In addition, Seller's
Affiliates shall include Equilon Enterprises LLC, Motiva Enterprises
LLC, Equiva Services LLC and Equiva Trading Company LLC.
"AGREED RATE" means a rate per annum calculated on a 360-day
basis which is equal to the lesser of (a) a rate which is one percent
(1%) above the prime rate of interest of Chase Manhattan Bank, New
York, New York, as announced or published by such bank from time to
time (adjusted from time to time to reflect any changes in such rate
determined hereunder), or (b) the maximum rate from time to time
permitted by Applicable Law.
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1
<PAGE> 7
"AGREEMENT" means this Purchase and Sale Agreement, including
the Exhibits and Schedules.
"APPLICABLE LAW" means all laws, statutes, treaties, rules,
codes, ordinances, regulations, certificates, orders, interpretations,
licenses and permits of any Governmental Body, including the common or
civil law, (including, without limitation, those pertaining to
occupational health and safety, consumer product safety, employee
benefits, the environment, securities or zoning) and all judgments,
decrees, injunctions, writs, orders or like action of any court,
arbitrator or other Governmental Body of competent jurisdiction.
"ASSETS" means collectively the Contracts, the Easements, the
Leases, the Fee Interests, the Beneficial Interests and the Other
Property, except to the extent constituting Excluded Assets.
"ASSUMED OBLIGATIONS" means, except as constitutes Excluded
Obligations (i) all liabilities, duties, and obligations that arise
from the ownership or operation of the Assets after the Effective Date;
(ii) all liabilities and obligations with respect to Plugging and
Abandonment; (iii) all duties, liabilities and obligations under the
Contracts, the Leases and the Easements arising after and in existence
as of the Effective Date; (iv) the Environmental Obligations and (v)
all other duties, liabilities, and obligations assumed by Buyer under
this Agreement.
"BENEFICIAL INTERESTS" means any and all rights, titles and
interests owned by Seller in, under or derived from all of the
presently existing pooling, unitization and communitization agreements
or other operating agreements and the units created thereby (including
without limitation, all units formed under orders, regulations, rules
or other official acts of any Governmental Body having jurisdiction)
not evidenced by Seller's ownership of lease or fee interests,
including all of Seller's rights, titles and interests to such
Contracts as set forth on Schedule A.
"BURDENS" means royalties (including both lessors' royalties
and nonparticipating royalty interests), overriding royalties, net
profits interests, production payments, and other similar obligations
and burdens payable out of production.
"BUSINESS DAY" means a day on which commercial banks are
generally open for regular business in Houston, Texas.
"CLOSING" means the closing of the Contemplated Transactions
at 10:00 a.m. local time at Seller's offices at 1111 Bagby, Houston,
Texas, on the Closing Date or at such other time or place as the
Parties may mutually agree upon in writing.
"CLOSING DATE" means March 30, 2000 or such other date as the
Parties may agree in writing.
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<PAGE> 8
"CODE" means the Internal Revenue Code of 1986, as amended, or
any successor law, and regulations or rules issued under any of the
foregoing.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"CONTEMPLATED TRANSACTIONS" means each and all of the
transactions contemplated by the Agreement.
"CONTRACTS" means, to the extent they are assignable, all of
Seller's right, title and interest in and to all valid and existing,
farmout agreements, unitization agreements, pooling agreements, unit
declarations, gas sales or purchase contracts, operating agreements and
other contracts attributable to the Assets, or other agreements and
instruments (including all amendments thereto and any agreements
settling claims asserted thereunder) to the extent and only to the
extent that the same relate, pertain or are incidental to the
Easements, the Leases, the Fee Interests, the Beneficial Interests or
the Other Property, including, without limitation, those listed on
Schedule A, but specifically excluding the Easements and Leases.
"CORPORATE DOCUMENTS" means with respect to a Delaware
corporation the Certificate of Incorporation and By-Laws or the
equivalent documents of a corporation organized under the laws of
another jurisdiction.
"EASEMENTS" means Seller's non-exclusive or exclusive, as the
case may be, rights to the use and occupancy of the surface, including,
without limitation, tenements, authorizations, variances,
appurtenances, surface leases, easements, permits, licenses,
servitudes, rights-of-way and similar rights and interests in any way
appertaining, belonging, affixed or incidental to or used in connection
with the ownership or operation of the Leases, Fee Interests,
Beneficial Interests or Other Property, including, without limitation,
those listed on Schedule B hereto, except to the extent constituting
Excluded Assets.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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<PAGE> 9
"EXCLUDED ASSETS" means the following:
(a) all (i) trade credits, accounts receivable (other
than those specifically included in the definition of Other
Property), notes receivable and other receivables attributable
to Seller's interest in the Assets with respect to any period
of time prior to the Effective Date, (ii) deposits, cash,
checks in process of collection, cash equivalents and funds
attributable to Seller's interest in the Assets with respect
to any period of time prior to the Effective Date, and (iii)
funds attributable to third Persons for production prior to
the Effective Date but suspended or impounded by Seller;
(b) all corporate, financial, and tax records of
Seller;
(c) all claims and causes of action of Seller (i)
arising from acts, omissions or events, or damage to or
destruction of property occurring prior to the Effective Date,
and (ii) affecting any of the excluded assets set forth in (a)
through (s) of this definition;
(d) all rights, titles, claims and interests of
Seller accruing prior to the Effective Date (i) under any
policy or agreement of insurance or indemnity, (ii) under any
bond, or (iii) to any insurance or condemnation proceeds or
awards;
(e) all Hydrocarbons produced from or attributable to
the Assets with respect to all periods prior to the Effective
Date including all merchantable liquids in stock or sales
tanks or associated flowlines, together with all proceeds from
or of such Hydrocarbons;
(f) claims of Seller for refund of, or loss carry
forwards with respect to income or franchise taxes or any
other Taxes attributable to: (i) any period prior to the
Effective Date, or (ii) any of the excluded assets set forth
in (a) through (s) of this definition;
(g) all amounts due or payable to Seller as
adjustments or refunds under any contracts or agreements
affecting the Assets, with respect to periods prior to the
Effective Date, specifically including, without limitation,
amounts recoverable from audits under operating agreements;
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<PAGE> 10
(h) all amounts due or payable to Seller as
adjustments to insurance premiums related to the Assets with
respect to any period prior to the Effective Date;
(i) all proceeds, benefits, income or revenues
accruing (and any security or other deposits made) with
respect to (i) the Assets prior to the Effective Date; and
(ii) any of the excluded assets set forth in (a) through (s)
of this definition;
(j) all legal files; attorney-client communications
or attorney work product; records and documents subject to
confidentiality provisions, claims of privilege or other
restrictions (including, without limitation, contractual
obligations to third Persons) on access; and auditor's
reports;
(k) reserve information and reports; seismic,
geochemical, and geophysical information and data, or other
proprietary information relating thereto, whether owned or
licensed by Seller, and any interpretive data except for
certain 2D seismic data licensed to Buyer pursuant to the
Geophysical License Agreement attached hereto as Exhibit L;
(l) all other bids received by Seller for the Assets
or any portion thereof;
(m) all of Seller's or Seller's Affiliates'
intellectual property, including but not limited to
proprietary computer software, patents, trade secrets,
copyrights, names, marks, and logos;
(n) all of Seller's vehicles, trucks (including
associated tools), boats, house trailers, tools, pulling
machines, warehouse stocks, microwave equipment, office
computer equipment, remote terminal units, equipment or
material temporarily located on the Assets, except those
listed on Schedule C;
(o) any pipelines, easements, fixtures, tanks, LACT
units or equipment located on the Assets which belong to third
Persons, including lessors and Affiliates of Seller;
(p) all of Seller's interest in the equipment,
facilities and other assets as more fully described on
Schedule D hereto;
(q) all of Seller's interest in any oil, gas or
mineral leases, mineral or surface fee or lands which (i) are
not set forth on Schedule E and Schedule F or (ii) cover or
pertain to lands or depths other than the particular lands or
depths described in the Leases and Fee Interests specifically
referenced on Schedule E and Schedule F or such depths which
are specifically excepted or reserved on Schedule E and
Schedule F;
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<PAGE> 11
(r) all of Seller's interest in any Assets which are
not conveyed to Buyer pursuant to the terms of this Agreement
due to a Title Defect, Material Environmental Condition or
other condition; and
(s) all real or personal property held or owned by
Seller's Affiliates or any third Persons.
"EXCLUDED OBLIGATIONS" means, with respect to any Asset,
except as constitutes Environmental Obligations, any liabilities and
obligations of Seller (i) due, accrued or owed prior to the Effective
Date; (ii) due, accrued or owed prior to the Effective Date with
respect to the payment of Burdens and Taxes; (iii) to third Persons
arising from property damage or personal injury sustained prior to the
Effective Date; (iv) arising from any existing litigation or demands
made as of the Effective Date; (v) arising from or attributable to any
Excluded Asset, and (vi) to be retained by Seller as expressly provided
in this Agreement.
"FEE INTERESTS" means all rights, titles and interests of
Seller owned as of the Effective Date and the Closing Date, or acquired
pursuant to Seller's rights as of the Effective Date and Closing Date
under the terms of an existing Contract, in all the fee and mineral fee
interests described on Schedule F, insofar and only insofar as such Fee
Interests cover the lands and depths set forth in Schedule F. The Fee
Interests shall include all of Seller's right, title and interest to
all depths unless specifically limited on Schedule F.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"GOVERNMENTAL BODY" means any Federal, state, tribal, county,
parish, municipal, or other federal, state or local governmental
authority or judicial or regulatory agency, board, body, department,
bureau, commission, instrumentality, court, tribunal or
quasi-governmental authority in any jurisdiction (domestic or foreign).
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvement
Act of 1976, and all regulations thereunder.
"HYDROCARBONS" means crude oil, natural gas, casinghead gas,
condensate, sulphur, natural gas liquids, plant products and other
liquid or gaseous hydrocarbons (including without limitation, coalbed
gas and CO2) and shall also refer to all other minerals of every kind
and character which may be covered by or included in the Assets.
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<PAGE> 12
"KNOWLEDGE" means the actual knowledge of a Party's current
corporate officers and business unit managers.
"LEASES" means, except to the extent constituting Excluded
Assets, any and all rights, titles and interests of Seller owned as of
the Effective Date and the Closing Date, or acquired pursuant to
Seller's rights as of the Effective Date and the Closing Date under the
terms of an existing Contract, in all of the oil, gas or mineral
leases, fees, and other interests described on Schedule E to the
Agreement, insofar and only insofar as such Leases pertain to the lands
and interests described in said Schedule. The Leases shall include all
of Seller's right, title and interest to all depths unless specifically
limited on Schedule E.
"LOSSES" means any and all losses, liabilities, claims,
demands, penalties, fines, settlements, damages, actions, or suits of
whatsoever kind and nature (but expressly excluding consequential
damages), whether or not subject to litigation, including, without
limitation (i) claims or penalties arising from products liability,
negligence, statutory liability or violation of any Applicable Law or
in tort (strict, absolute or otherwise) and (ii) loss of or damage to
any property, and all reasonable out-of-pocket costs, disbursements and
expenses (including, without limitation, legal, accounting, consulting
and investigation expenses and litigation costs).
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"OTHER PROPERTY" means, except to the extent constituting
Excluded Assets,
(a) all of Seller's interest in all wells (including,
without limitation, all oil, gas, injection, disposal and
other wells, whether active or inactive, productive or
non-productive, plugged and abandoned or temporarily
abandoned), platforms,
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<PAGE> 13
equipment, facilities and personal property of any kind
including but not limited to tubing, casing, wellheads,
pumping units, production units, compressors, valves, meters,
flowlines, pipelines, gathering systems, tanks, heaters,
separators, dehydrators, pumps and injection units which are
located on or connected with the Leases, Fee Interests, the
Beneficial Interests or Easements and which are used solely
and exclusively in connection with the production, treatment,
gathering or transportation of Hydrocarbons from the Leases,
Properties or Easements;
(b) [intentionally left blank]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(e) subject to Section 4.3(b), all rights,
obligations, interests and benefits to gas imbalances with
respect to the Assets; and
(f) all licenses, authorizations, permits, variances
and similar rights and interests related to the Leases, Fee
Interests, Beneficial Interests, Easements and Contracts and
personal property to be conveyed hereunder.
"PERMITTED ENCUMBRANCES" means:
(a) all Leases, operating agreements, operator liens
and working interest owner liens for obligations incurred
after the Effective Date, unit, communitization and pooling
agreements, farmout agreements, subleases and farmin
agreements and other Contracts described on Schedule A insofar
as same do not operate to increase the working interest of the
Seller set forth on Schedule G without a corresponding
increase in the net revenue interest and that do not operate
to decrease the Seller's net revenue interest set forth on
Schedule G;
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<PAGE> 14
(b) all Applicable Laws, and all rights reserved or
vested in any Governmental Body to control or regulate the
Assets in any manner including, without limitation, any
adjustment to Seller's net revenue interest or gross working
interest in a particular Property, caused by, or as the result
of, any action of a Governmental Body which is not the result
of any claims for under-payment of royalties owed to such
Governmental Body nor the negligent act or omission of Seller;
(c) liens for Taxes or assessments arising after the
Effective Date not yet due and payable or not yet delinquent,
or if delinquent, that are being contested in good faith by
appropriate action brought in the normal course of business
and to the extent covered by Seller's indemnity under Sections
8.1 and 8.5 hereof;
(d) reversionary interests arising under farmout and
farmin agreements, subleases, and the non-consent provisions
of applicable operating agreements insofar as same do not
operate to increase the working interest of the Seller set
forth on Schedule G without a corresponding increase in the
net revenue interest and that do not operate to decrease the
Seller's net revenue interest set forth on Schedule G;
(e) liens imposed by Applicable Law, such as
carriers', warehousemen's and mechanics' liens and other
similar liens arising in the ordinary course of business which
secure payment of obligations arising after the Effective Date
or that are not more than sixty (60) days past due or which
are being contested in good faith to the extent covered by
Seller's indemnity under Sections 8.1 and 8.5 hereof;
(f) defects that have been cured by possession under
applicable statutes of limitation, and
(g) other minor defects or irregularities generally
waived by prudent purchasers of oil and gas properties which
(i) do not materially interfere with the operation, value or
use of any of the Assets, (ii) do not prevent Buyer from
receiving the proceeds of production from any of the Assets,
(iii) do not operate to increase the working interest of the
Seller set forth on Schedule G without a corresponding
increase in the net revenue interest and (iv) do not operate
to decrease the Seller's net revenue interest set forth on
Schedule G.
"PERSON" means any natural person, corporation, division of a
corporation, association, company, estate, trust, partnership, joint
venture, unincorporated organization, Governmental Body, or any other
entity.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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<PAGE> 15
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"PROPERTIES" means an accounting unit described on Schedule G
which is utilized by Seller for an allocation of revenue and expenses
from the Assets.
"PROPERTY PACKAGES" means the East Texas Properties, the
Mid-Continent Properties and the Permian Basin Properties as identified
in Schedule 2.4.
"TAXES" shall mean any and all fees (including, without
limitation, documentation, license, recording, filing and registration
fees), taxes (including without limitation, production, gross receipts,
ad valorem, value added, windfall profit tax, environmental tax,
turnover, sales, use, personal property (tangible and intangible),
stamp, leasing, lease, user, leasing use, excise, franchise, transfer,
heating value, fuel, excess profits, occupational, interest
equalization, lifting, oil, gas, or mineral production or severance,
and other taxes), levies, imposts, duties, charges or withholdings of
any nature whatsoever, imposed by any Governmental Body or taxing
authority thereof, domestic or foreign, together with any and all
penalties, fines, additions to tax and interest thereon, whether or not
such tax shall be existing or hereafter adopted.
"TEPI" shall mean Texaco Exploration and Production Inc.
"TEPI PSA" shall mean that certain Purchase and Sale Agreement
of even date herewith by and between Buyer and TEPI.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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<PAGE> 16
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"TRANSITION AGREEMENT" means the transition agreement between
TEPI and Buyer.
1.3 OTHER DEFINITIONS IN THE AGREEMENT.The following terms shall have
the respective meanings ascribed to them in the Sections of the Agreement set
forth below opposite such terms:
AFEs.................................................3.1(n)
Allocated Value......................................2.4
Assignments..........................................2.5
Buyer................................................Preamble
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Deeds................................................2.5
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Employees............................................4.3(s)
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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<PAGE> 17
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Millennium Compliant ................................3.3(d)
Oil and Gas Leases...................................2.5
Party................................................Preamble
Performance Deposit..................................2.3
Permits..............................................3.1(j)
Purchase Price.......................................2.2
Real and Personal Property Taxes.....................7.1(a)
Records..............................................1.2
Rejection Notice.....................................4.3(m)(iii)
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Reserve Report.......................................3.1(o)
Seller...............................................Preamble
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
1.4 RULES OF CONSTRUCTION. For purposes of this Agreement:
(a) GENERAL. Unless the context otherwise requires, (i) "or"
is not exclusive; (ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with accounting principles that
are generally accepted in the United States of America; (iii) words in
the singular include the plural and words in the plural include the
singular; (iv) words in the masculine include the feminine and words in
the feminine include the masculine; (v) any date specified for any
action that is not a Business Day shall be deemed to mean the first
Business Day after such date; (vi) a reference to a Person includes its
successors and assigns; and (vii) the use of the word "include" or
"including" when following any general statement, term or matter, shall
not be construed to limit such statement, term or matter to the
specific items or matters set forth immediately following such word or
to similar items or matters, whether or not non-limiting language (such
as "without limitation" or "but not limited to" or words of similar
import) is used with reference thereto, but rather shall be deemed to
refer to all other items or matters that could reasonably fall within
the broadest possible scope of such general statement, term or matter.
(b) PARTS AND SECTIONS. References to Parts and Sections are,
unless otherwise specified, to Parts and Sections of the Agreement.
Neither the captions to Parts or Sections hereof nor the Table of
Contents shall be deemed to be a part of the Agreement.
(c) EXHIBITS AND SCHEDULES. The Exhibits and Schedules form
part of this Agreement and shall have the same force and effect as if
set out in the body of this Agreement.
(d) OTHER AGREEMENTS. References herein to any agreement or
other instrument shall, unless the context otherwise requires (or the
definition thereof otherwise
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12
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specifies), be deemed references to that agreement or instrument as it
may from time to time be changed, amended or extended.
PART TWO
SALE AND PURCHASE
2.1 PURCHASE AND SALE. At the Closing, Seller shall sell, assign and
convey to the Buyer and Buyer shall purchase and pay for the Assets and assume
the Assumed Obligations as provided in 4.2(a) and the Material Environmental
Conditions as set forth in Section 4.2(b).
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
EXCEPT AS PROVIDED UNDER SECTION 9.15, IF BUYER FAILS TO
COMPLETE THE TRANSACTION SET FORTH IN THIS AGREEMENT, THE
PARTIES AGREE THAT SELLER SHALL RETAIN, AS SELLER'S SOLE
REMEDY, THE PERFORMANCE DEPOSIT AS LIQUIDATED DAMAGES, WHICH
THE PARTIES AGREE IS A REASONABLE SUM CONSIDERING ALL THE
CIRCUMSTANCES EXISTING ON THE DATE OF THIS AGREEMENT,
INCLUDING THE RELATIONSHIP OF THE SUM OF THE RANGE OF HARM TO
SELLER THAT REASONABLY COULD BE ANTICIPATED AND THE
ANTICIPATION THAT PROOF OF ACTUAL DAMAGES WOULD BE COSTLY OR
INCONVENIENT. IN PLACING THEIR INITIALS BELOW, EACH PARTY
SPECIFICALLY CONFIRMS THE ACCURACY OF THE STATEMENTS MADE
ABOVE AND THE FACT THAT EACH PARTY WAS REPRESENTED BY COUNSEL
WHO EXPLAINED THE CONSEQUENCES OF THIS LIQUIDATED DAMAGES
PROVISION AT THE TIME THIS AGREEMENT WAS MADE.
Seller Buyer
Initial___________ Initial_____________
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<PAGE> 19
[TEXT OMITTED -- CONFIDENTIAL TREATMENT REQUESTED]
2.5 CLOSING AND PAYMENT OF PURCHASE PRICE. Subject to the terms and
conditions contained herein, this sale and purchase shall close on the Closing
Date. At Closing, Buyer will pay Seller the remaining unpaid portion of the
Purchase Price, adjusted pursuant to the terms of this Agreement, by wire
transfer of collected funds payable to Seller as set forth below. At Closing,
Seller shall deliver to Buyer assignments and bills of sale in the form attached
hereto as Exhibit A (the "Assignments"), deeds in the forms attached hereto as
Exhibits B-1 and B-2 (the "Deeds"), oil and gas leases in the form attached
hereto as Exhibit C (the "Oil and Gas Leases") as well as such certificates or
other documents as are required to effect the transfer of the Assets, or the
subsequent operation thereof.
2.6 METHOD OF PAYMENT. Any amount payable under this Agreement shall be
payable in immediately available funds by means of a wire transfer, if to
Seller, to the care of Texaco Exploration and Production Inc. at TEPI's account
at Chase Manhattan Bank, 1 Chase Plaza, New York, New York, ABA #021000021,
account number 9102582567 (with immediate telephone notice to Luci Romano, (914)
253-6071), or to such other account number as Seller may by written notice
direct, or if to Buyer, to Buyer's account as may be designated by Buyer.
PART THREE
REPRESENTATIONS AND WARRANTIES
3.1 SELLER. Seller represents and warrants to Buyer that, as of the
Effective Date:
(a) ORGANIZATION AND STANDING. Seller has been duly organized
and is validly existing in good standing under the laws of the State of
Delaware, and is duly qualified to do business and is in good standing
as a foreign corporation in all jurisdictions where the nature of its
properties or business requires it.
(b) AUTHORITY AND NO VIOLATION. The Seller has the corporate
power and authority to execute, deliver and perform its obligations
under this Agreement. The execution, delivery and performance of this
Agreement (a) has been duly authorized by all requisite corporate or
shareholder action and (b) does not conflict with or result in a
violation or breach of the Corporate Documents of the Seller or of any
agreement,
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<PAGE> 20
instrument, statute, regulation, rule, order, writ, judgment or decree
to which the Seller or its property is directly or indirectly a party
or is directly or indirectly subject.
(c) VALIDITY OF AGREEMENT. This Agreement is a legal, valid
and binding obligation of Seller, enforceable against Seller in
accordance with the terms of the Agreement, except as enforcement may
be limited by bankruptcy, insolvency, reorganization or other similar
Applicable Laws affecting the enforcement of creditor's rights
generally. The enforceability of Seller's obligations under the
Agreement is subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or
at law).
(d) NO BANKRUPTCY. There are no bankruptcy, reorganization or
receivership proceedings pending, being contemplated by, or to the
actual Knowledge of Seller, threatened against Seller.
(e) BROKERS' FEES. Seller has not incurred any liability,
contingent or otherwise, for brokers' or finders' fees relating to the
Contemplated Transactions for which Buyer shall be liable.
(f) STATUS. Seller is not a non-resident alien, foreign
corporation, foreign partnership, foreign trust or foreign estate (as
those terms are defined in the Code and in the regulations promulgated
pursuant thereto.
(g) LITIGATION. Except as set forth on Schedule 3.1(g), with
respect to those Assets operated by Seller, there are no actions,
suits, or proceedings pending [TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]
(h) NO CONSENTS REQUIRED. Except as set forth in Section
4.3(n) and on Schedule 3.1(h) or consents required from Governmental
Bodies as part of an ordinary course transfer, no preferential purchase
rights, consents, approvals or other action by, or filing with any
Person or Governmental Body is required in connection with the
execution, delivery and performance by Seller of the Agreement.
(i) [this section intentionally left blank].
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<PAGE> 21
(j) PERMITS. Except as set forth on Schedule 3.1(j), as to
those Assets operated by Seller, Seller has obtained all material
permits, licenses, and certificates required by Applicable Law in
connection with the ownership and operation of Assets (the "Permits")
and such Permits are in full force and effect. Except as set forth on
Schedule 3.1(j), to Seller's Knowledge as to those Assets not operated
by Seller, all Permits in connection with the ownership and operation
of such Assets have been obtained and are in full force and effect.
Except as set forth on Schedule 3.1(j), to Seller's Knowledge there are
no outstanding violations with respect to such Permits and no judicial,
administrative or arbitral proceeding is pending or threatened with
respect to such Permits
(k) LEASES. To Seller's Knowledge, (i) all material Leases,
unit agreements, pooling agreements, communization agreements and other
Contracts creating interests comprising the Properties are in full
force and effect, (ii) except as set forth on Schedule 3.1(k) or
3.1(g), since January 1, 1998, Seller has not received any written
notice from any third Person which is still pending claiming any
material violation or repudiation of the material Leases, unit
agreements, pooling agreements, communization agreements and other
Contracts creating interests comprising the Properties, and (iii)
Seller is entitled to be paid, and is being paid, its interests in the
Properties without indemnity or guarantee other than those customarily
found in division orders and other similar agreements and documents.
(l) IMBALANCES. To Seller's Knowledge and except for Lease
obligations for the delivery of gas for residential use, the only
Contracts pursuant to which Hydrocarbons produced from the Assets are
being sold are described on Schedule A and there are no (i) gas
imbalances except as set forth on Schedule G (which may be supplemented
from time to time before the Closing) and as of the date shown on
Schedule G which date shall not be more than 120 days prior to Closing,
or (ii) take-or-pay or other prepayments, failure of purchasers to pay
on a current basis or refund obligations for which Buyer would be
liable that would have a material, adverse affect on Buyer's right to
market production.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(n) CURRENT COMMITMENTS. With respect to the Assets operated
by Seller, Schedule 3.1(n) contains a complete and accurate list as of
the date of this Agreement of (i) all authorities for expenditures
("AFEs") in excess of $50,000 to drill or rework wells or for capital
expenditures pursuant to any of the Contracts that have been proposed
by Seller or any third Person on or after the Effective Date, whether
or not accepted by Seller or any other third Person, and (ii) all AFEs
and commitments, other than those which have been terminated or
expired, in excess of $50,000 to drill or rework wells or for other
capital
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<PAGE> 22
expenditures pursuant to any of the Contacts for which all of the
activities anticipated in such AFEs or commitments have not been
completed by the date of this Agreement.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(p) CONTRACTS. As to those Assets operated by Seller, there
are no Contracts, other than those Contracts set forth on Schedule A
that as of the Closing Date inhibit or preclude Buyer from realizing
the material benefits of the Assets or under which Seller or any other
party thereto is in default. To Seller's Knowledge, other than those
Contracts set forth on Schedule A as to those Assets which are not
operated by Seller, there are no material Contracts under which Seller
or any other party thereto is in default.
(q) TAXES. All ad valorem, property, production, severance and
other taxes based on or measured by the ownership of the Properties or
the production of Hydrocarbons from the Properties have been properly
and timely paid except those disputed in ordinary course of business if
any, for which Seller has indemnified Buyer under Section 8.1 and 8.5
below.
(r) LIMITATION. The foregoing representations and warranties
are given by Seller to Buyer and are not intended to be given or used
by any other Person not a Party to this Agreement.
3.2 BUYER. Buyer represents and warrants to Seller that, as of the
Effective Date:
(a) ORGANIZATION AND STANDING. Buyer has been duly organized
and is validly existing in good standing under the laws of the State of
Texas, and is duly qualified to do business and is in good standing as
a foreign corporation in all jurisdictions where the nature of its
properties or business requires it.
(b) AUTHORITY AND NO VIOLATION. The Buyer has the corporate
power and authority to execute, deliver and perform its obligations
under this Agreement. The execution, delivery and performance of this
Agreement (i) has been duly authorized by all requisite corporate or
shareholder action and (ii) does not conflict with or result in a
violation or breach of the Corporate Documents of the Buyer or of any
agreement, instrument, statute, regulation, rule, order, writ, judgment
or decree to which the Buyer or its property is directly or indirectly
a party or is directly or indirectly subject.
(c) VALIDITY OF AGREEMENT. This Agreement is a legal, valid
and binding obligation of Buyer, enforceable against Buyer in
accordance with the terms of the Agreement, except as enforcement may
be limited by bankruptcy, insolvency,
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<PAGE> 23
reorganization or other similar Applicable Laws affecting the
enforcement of creditor's rights generally. The enforceability of
Buyer's obligations under the Agreement is subject to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(d) NO BANKRUPTCY. There are no bankruptcy, reorganization or
receivership proceedings pending, being contemplated by, or to the
actual Knowledge of Buyer, threatened against Buyer.
(e) BROKERS' FEES. Buyer has not incurred any liability,
contingent or otherwise, for brokers' or finders' fees relating to the
Contemplated Transactions for which Seller shall be liable.
(f) KNOWLEDGEABLE INVESTOR. Buyer is an experienced and
knowledgeable investor and operator in the oil and gas business. In
making its decision to participate in this Agreement and the
Contemplated Transactions, Buyer has relied solely on its own
independent investigation, analysis and evaluation of the Assets.
(g) SECURITIES REPRESENTATION. Buyer is acquiring the Assets
for its own account and not with a view to, or for offer of resale in
connection with, a distribution thereof, within the meaning of the
Securities Act of 1933, 15 U.S.C. Section 77a et seq., or any other
Applicable Laws pertaining to the distribution of securities.
(h) FUNDING. Buyer has arranged to have available by the
Closing Date sufficient funds, to enable the Buyer to pay in full the
Purchase Price as herein provided and otherwise to perform its
obligations under this Agreement.
(i) OPERATOR STATUS. Buyer is, or will be as of the Closing, a
qualified operator in good standing with all Governmental Bodies having
jurisdiction over the Assets.
(j) GOVERNMENTAL BODY APPROVAL. To Buyer's Knowledge, there
are no facts or conditions with respect to the Assets that may cause
any Governmental Body to withhold its unconditional approval of the
Assignments or Deeds.
(k) LIMITATION. The foregoing representations and warranties
are given by Buyer to Seller and are not intended to be given or used
by any other Person not a Party to this Agreement.
3.3 DISCLAIMER AND NOTIFICATIONS. THERE ARE NO WARRANTIES,
REPRESENTATIONS OR IMPLIED COVENANTS BETWEEN THE PARTIES EXCEPT THE MATTERS
EXPRESSLY PROVIDED FOR IN THIS AGREEMENT. THE PARTIES RESPECTIVELY DISCLAIM ANY
OTHER WARRANTIES OR REPRESENTATIONS INCLUDING, WITHOUT LIMITATION, ANY
WARRANTIES AND REPRESENTATIONS IMPLIED UNDER APPLICABLE LAW.
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<PAGE> 24
(a) NO IMPLIED REPRESENTATIONS. IT IS EXPRESSLY UNDERSTOOD BY
THE PARTIES HERETO THAT SELLER DOES NOT MAKE ANY REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, AS TO TITLE (EVEN FOR THE RETURN OF THE
PURCHASE PRICE PAID) OR THE CONDITION OR STATE OF REPAIR OF THE ASSETS,
THEIR VALUE, QUALITY, MERCHANTABILITY, SUITABILITY OR FITNESS FOR ANY
USES OR PURPOSES, NOR AS TO THE CURRENT VOLUME, NATURE, QUALITY,
CLASSIFICATION, OR VALUE OF THE OIL, GAS OR OTHER MINERAL RESERVES
THEREUNDER OR COVERED THEREBY, NOR WITH RESPECT TO ANY APPURTENANCES
THERETO BELONGING OR IN ANY WISE APPERTAINING TO SAID ASSETS, OR
OTHERWISE. Seller has advised Buyer and Buyer has acknowledged that
certain spills of Hydrocarbons, produced water and chemicals from oil
and gas exploration, development, production or processing have
occurred, or may have occurred, upon the Assets, which could have
resulted in contamination of the soil, water, ground water, or
improvements on the Assets. Furthermore, Seller has cautioned Buyer to
thoroughly examine and inspect the Assets for any such conditions or
violations and generally as to the condition of the Assets and its
improvements, including a recommendation by Seller to Buyer that Buyer
engage an environmental consulting firm to make an environmental survey
of the Assets, and Buyer hereby acknowledges such obligations and
assumes all liabilities associated therewith.
(b) BUYER'S INSPECTION OF THE ASSETS. Further, Buyer certifies
that the Assets (including, but not limited to, any oil, gas or other
mineral reserves underlying the Assets) have been, or will be prior to
Closing, carefully inspected by Buyer; that Buyer is, or will be prior
to Closing, familiar with their condition and value thereof, and the
improvements and appurtenances (including electric wiring and machinery
installed thereon) located on the Assets, inclusive of any
Hydrocarbons, other soil contaminants or waste substances, whether
similar or dissimilar, that may be present in the soil, water and
groundwater; that Buyer has engaged, or has had the opportunity to
engage prior to Closing, such contractors or consultants as Buyer deems
prudent for tests and surveys of the soil, water, groundwater, Other
Property, and improvements on the Assets; and that Buyer assumes any
and all obligations, risks and liabilities associated therewith. Buyer
acknowledges that the Assets have been or may have been used in
connection with oil, gas and other mineral exploration, development and
operations, as well as with respect to processing and refining
operations, and, as such, equipment, appurtenances, processing and
other facilities, plants, buildings, structures, improvements,
abandoned and other tanks and piping (including above ground and
underground tanks and piping), storage facilities, gathering and
distribution lines, wells and other petroleum production facilities and
appurtenances which have not been excepted and excluded from this
conveyance may be located thereon. Further, Buyer acknowledges that the
Assets may also contain unplugged wells, wellbores or buried pipelines
or other equipment, whether or not of a similar nature, the locations
of which may not now be known by Seller or be readily apparent through
a physical inspection of the Assets. Buyer further accepts the Assets
(including, but not limited to, any oil, gas or other minerals and/or
mineral reserves underlying said Assets) AS IS, WHERE IS, IN THEIR
PRESENT
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CONDITION AND STATE OF REPAIR, AND WITHOUT ANY REPRESENTATIONS,
GUARANTIES, OR WARRANTIES, EXPRESS OR IMPLIED, AS TO THEIR TITLE (EVEN
FOR THE RETURN OF THE PURCHASE PRICE PAID), VALUE, QUALITY,
MERCHANTABILITY, OR THEIR SUITABILITY OR FITNESS FOR BUYER'S INTENDED
USE, OR FOR ANY USES OR PURPOSES WHATSOEVER, OR THAT THE ASSETS HAVE
BEEN RENDERED FREE FROM ANY DEFECTS, HAZARDS, OR DANGEROUS CONDITIONS.
FURTHERMORE, BUYER WAIVES ITS RIGHTS UNDER THE TEXAS DECEPTIVE TRADE
PRACTICES ACT - CONSUMER PROTECTION ACT, SECTION 17.41, ET SEQ.,
BUSINESS AND COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS
AND PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF ITS OWN
SELECTION, BUYER VOLUNTARILY CONSENTS TO THIS WAIVER.
BUYER'S SIGNATURE
By: __________________________
Its: _________________________
(c) DISCLAIMER. Without limiting the generality of the
foregoing, but in furtherance of same, SELLER DISCLAIMS ANY AND ALL
LIABILITY ARISING IN CONNECTION WITH ANY ENVIRONMENTAL MATTERS
INCLUDING, WITHOUT LIMITATION, ANY PRESENCE OF NATURALLY OCCURRING
RADIOACTIVE MATERIAL (NORM) ON THE ASSETS. IN ADDITION, THERE ARE NO
WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, AS TO THE ACCURACY
OR COMPLETENESS OF ANY DATA, INFORMATION OR MATERIALS HERETOFORE OR
HEREAFTER FURNISHED IN CONNECTION WITH THE ASSETS OR AS TO THE QUALITY
OR QUANTITY OF THE HYDROCARBONS AND ANY OTHER MINERAL RESERVES, IF ANY,
ATTRIBUTABLE TO THE INTEREST CONVEYED HEREIN OR THE ABILITY OF THE
ASSETS TO PRODUCE HYDROCARBONS OR ANY OTHER MINERALS, AND ANY AND ALL
DATA, INFORMATION AND MATERIAL FURNISHED BY SELLER IS PROVIDED AS A
CONVENIENCE ONLY AND ANY RELIANCE ON OR USE OF THE SAME IS AT BUYER'S
SOLE RISK.
(d) YEAR 2000 DISCLAIMER. THE CONTEMPLATED TRANSACTION SHALL
BE WITHOUT ANY EXPRESS OR IMPLIED WARRANTY OR REPRESENTATION THAT ANY
ASSETS EXCHANGED HEREUNDER SHALL IN ANY WAY WHATSOEVER BE MILLENNIUM
COMPLIANT. FOR PURPOSES OF THIS AGREEMENT, "MILLENNIUM COMPLIANT" MEANS
THAT THE ASSETS WILL ACCURATELY: (A) HANDLE DATA BEFORE, DURING, AND
AFTER JANUARY 1, 2000, INCLUDING, BUT NOT LIMITED TO, ACCEPTING DATE
INPUT, PROVIDING DATE OUTPUT, AND PERFORMING CALCULATIONS ON DATES OR
PORTIONS OF DATES; (B) FUNCTION WITHOUT INTERRUPTION
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20
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BEFORE, DURING, AND AFTER JANUARY 1, 2000, WITHOUT ANY CHANGE IN
OPERATIONS ASSOCIATED WITH THE ADVENT OF THE NEW CENTURY (INCLUDING THE
FACT THAT THE YEAR 2000 IS A LEAP YEAR); (C) ACCOMMODATE FOUR-DIGIT
YEAR INPUT OR RESPOND TO TWO-DIGIT YEAR-DATE INPUT IN A WAY THAT
RESOLVES THE AMBIGUITY AS TO CENTURY IN A DISCLOSED, DEFINED, AND
PREDETERMINED MANNER; AND (D) STORE AND PROVIDE OUTPUT OF DATE
INFORMATION IN WAYS THAT ARE UNAMBIGUOUS AS TO CENTURY.
PART FOUR
COVENANTS
4.1 COVENANTS OF SELLER. Seller covenants with the Buyer as follows:
(a) ACCESS. From the date of execution of this Agreement
until Closing except for such of the Assets not operated by Seller,
Seller shall afford Buyer and Buyer's representatives full and
reasonable access to the Assets in the possession of Seller during
normal working hours.
(b) FILES. From the date of execution of this Agreement
until Closing, Seller shall permit Buyer and its representatives at
reasonable times during normal business hours to examine, in Sellers'
offices at their actual location, all abstracts of title, title
opinions, title files, ownership maps, lease files, accounting files,
assignments, division orders, payout statements, agreements and other
Contracts pertaining to the Assets insofar as the same may now be in
existence and in the possession of Seller, except those which
constitute Excluded Assets. From the date of execution of this
Agreement until Closing, Seller shall make available to Buyer for
inspection by Buyer at reasonable times during normal business hours at
their actual location, all production and engineering books, records
and data in possession of Seller which are directly related to the
Assets, and all other files, records, and data pertaining to the
Assets, except those which may constitute Excluded Assets.
(c) CONSENTS. Subject to Section 4.3(n), Seller shall
use reasonable efforts to obtain all necessary waivers, consents,
approvals, permits and authorizations and actions of third Persons to
complete the Contemplated Transactions prior to Closing.
(d) CONDUCT OF BUSINESS. From the date of execution of
this Agreement and until the Closing, Seller shall (i) operate the
Assets, to the extent Seller is the operator thereof, in substantially
the same manner as heretofore operated; (ii) maintain books of account
and records with regard to the Assets in accordance with Seller's past
practices; and (iii) pay its share of all costs and expenses
attributable to the Assets in accordance with past
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<PAGE> 27
practices subject to its rights under the Final Recap set forth in
Section 4.3(g). Without limitation of the foregoing but subject to the
limitation set forth below, after the execution of the Agreement and
prior to Closing, Seller shall have the right to make any changes,
repairs or modifications, or incur any expenditures necessary or
desirable in Seller's reasonable opinion for the protection of the
Assets, required under the Contracts, or to comply with any Applicable
Law or other legal requirement relative to the premises or to prevent
or react to an emergency or environmental incident. Seller shall have
the right to effect such expenditure or action with or without the
approval of Buyer, acting as would any prudent operator under similar
circumstances. Notwithstanding the foregoing, Seller shall not
undertake or authorize any project, activity or expenditure in excess
of $25,000 with respect to any one project without Buyer's prior
written approval except as may be required (i) to respond to an
emergency, (ii) by any Governmental Body or (iii) by the terms of any
applicable Contract or Lease. Unless Buyer and Seller otherwise agree,
Seller shall not sell, dispose or materially alter the Assets (other
than the use of supplies and consumables) or remove any improvements,
equipment or property which comprise the Assets (other than the use of
supplies and consumables).
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
4.2 COVENANTS OF BUYER. Buyer covenants with Seller as follows:
(a) ASSUMED OBLIGATIONS. At Closing, Buyer shall assume the
Assumed Obligations.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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<PAGE> 28
(c) BUYER'S RESPONSIBILITIES. Except as otherwise provided for
in Section 4.3(x) and the Transition Agreement, Buyer shall be
responsible for the payment of all necessary and reasonable capital
costs, Taxes, expenses and Burdens incurred against or applicable to
the operation and use of the Assets from and after the Effective Date,
whether invoiced or not. All production of Hydrocarbons from the Assets
occurring from and after the Effective Date and all proceeds from or
attributable thereto shall be the property of and belong to Buyer as of
the Effective Date.
(d) PAYMENT OF BURDENS. Except as otherwise provided in the
Transition Agreement, Buyer shall commence the payment of Burdens for
all Hydrocarbons produced beginning the first day of the month
following the month in which Seller has delivered to Buyer
substantially all of the Records including without limitations Records
relating to accounting, accounts payables, division orders and joint
interest billings necessary to administer such payments.
(e) CONFIDENTIALITY. In the event that this Agreement is
terminated or, if not terminated, until the Closing, all information
made available to Buyer under Section 4.1 shall be maintained
confidential by Buyer pursuant to the terms of the Confidentiality
Agreement. The Confidentiality Agreement shall continue in force until
Closing, or, in case of termination, in accordance with its terms.
Buyer shall take whatever reasonable steps as may be necessary to
ensure that Buyer's employees, consultants and agents comply with the
provisions of this Section 4.2(e) and the provisions of the
Confidentiality Agreement.
(f) SIGNAGE. Buyer agrees that, within thirty (30) days after
the Closing, it will remove or cause to be removed the names and marks
used by Seller or TEPI and all variations and derivatives thereof and
logos relating thereto from the Assets and will not thereafter make any
use whatsoever of such names, marks and logos.
(g) COMPLIANCE WITH LAWS. Buyer hereby covenants that it will
comply with all Applicable Laws in its ownership and operation of the
Assets. Buyer specifically covenants that it will comply with all
Applicable Laws with respect to (i) all exploration, drilling,
production, Plugging and Abandonment, and (ii) the control, regulation
and prevention of pollution, including, but not limited to, saltwater
discharge and contamination.
(h) RECOUPMENT OF OVERPAYMENTS. Buyer expressly agrees, at
Seller's cost and expense, to reasonably assist Seller in recouping any
monies from third Persons due to overpayments of royalties made prior
to the Effective Date.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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(j) INSURANCE. Buyer covenants that all insurance obtained by
Buyer during its term of ownership of the Assets covering environmental
damage, third Person property damage, personal injury or death shall
name Seller as an additional insured to the extent of Buyer's liability
and indemnification obligations assumed herein, and shall contain a
waiver of subrogation against Seller.
(k) ACCESS. Buyer shall afford Seller the right to enter onto
and use the Assets and such other resources, including but not limited
to water and power, as are reasonably necessary for Seller to remedy
any Material Environmental Condition pursuant to Section 6.1(a).
(l) RADIO FREQUENCY. Buyer shall undertake as soon as is
reasonably practical following the Closing to obtain a new pump-off
controller radio frequencies.
4.3 COVENANTS OF SELLER AND BUYER. Buyer and Seller agree as follows:
(a) PREFERENTIAL PURCHASE RIGHTS. With respect to preferential
purchase rights:
(i) Within five (5) Business Days of Seller's receipt
from Buyer of Schedule 2.4, Seller shall send notice to the
holders of preferential purchase rights on the Assets. Seller
shall keep Buyer informed as receipt of responses from said
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holders are received or the applicable exercise periods expire
without exercise or response from the holders.
(ii) To the extent any preferential purchase rights
are exercised to Seller's and Buyer's reasonable satisfaction,
then the Assets subject to such preferential purchase rights
shall not be sold to Buyer and shall be excluded from the
Agreement. The Purchase Price shall be adjusted by the portion
of the Allocated Value representing the portion of the Assets
subject to such exercised preferential right. In the event any
holder of a preferential right initially elects to exercise a
particular preferential right, but subsequently refuses or
elects not to consummate the purchase under the preferential
right and such refusal occurs prior to sixty (60) days
following the Closing Date, Buyer shall purchase such
interests covered by the preferential rights for its Allocated
Value as of the Effective Date and the closing of such
transaction shall take place on a date mutually acceptable to
Seller and Buyer not more than thirty (30) days following
Seller's notification to Buyer of such failure or refusal.
(iii) If a preferential purchase right has not been
waived or the time for exercise expired prior to Closing, the
Assets subject to such right shall be excluded from the Assets
conveyed at Closing and the Purchase Price reduced by the
Allocated Value of the affected Asset. If the time for
exercise expires or a waiver is obtained by the Seller within
60 days following the Closing, Buyer shall purchase the
affected Asset from Seller as of the Effective Date and the
closing of such transaction shall take place on a date
mutually acceptable to Seller and Buyer not more than thirty
(30) days following Seller's notification to Buyer for the
Allocated Value allocated to the affected Asset.
(iv) If the Seller has failed to offer a preferential
right to purchase and the holder of such right makes a timely
and enforceable demand upon Seller or Buyer to offer such
right, Buyer shall offer the preferential right to purchase to
such holder in accordance with the Contract creating such
preferential right to purchase.
(b) PRODUCT IMBALANCES. With respect to product imbalances
from the Assets, the Parties agree as follows:
(i) UNDERPRODUCTION. The Purchase Price reflects
Seller's underproduced gas position (if any) under any
Contracts or wells included in the Assets as shown on Schedule
G. As of the Effective Date, Buyer shall assume all of
Seller's rights, obligations, liabilities and responsibilities
associated with Seller's underproduced gas position, including
any Taxes and royalties due or payable on the value of
Seller's underproduction and Seller shall have no further
rights or claims whatsoever with respect to the underproduced
gas. Seller and Buyer agree that the Purchase Price shall be
adjusted upward at the rate of $1.00 per mcf at Closing to
reflect the estimated value of any additional underproduction
not reflected on
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Schedule G or any reduction in overproduction described in
Section 4.3(b)(ii). Any additional underproduced volumes or
reduction in overproduction accrued prior to the Effective
Date and identified after Closing shall be accounted for as
provided in Section 4.3(g) at the same rate of $1.00 per mcf.
(ii) OVERPRODUCTION. The Purchase Price reflects
Seller's overproduced gas position (if any) under any
Contracts or wells included in the Assets as shown on Schedule
G. As of the Effective Date, Buyer hereby agrees to and shall
assume all rights to Seller's overproduced gas position (but
not including the gas actually overproduced) including the
right to recoup Taxes and royalties associated with such
overproduction, as well as all of Seller's liabilities,
responsibilities and obligations to third Persons associated
with such overproduced gas position and Seller shall have no
further rights, liabilities, obligations or responsibilities
whatsoever with respect to the overproduced gas. Seller and
Buyer agree that the Purchase Price shall be adjusted downward
at the rate of $1.00 per mcf at Closing to reflect the
estimated value of any additional overproduction not reflected
on Schedule G or reduction in underproduction described in
4.3(b)(i). Any additional overproduced volumes or reductions
in underproduction accrued prior to the Effective Date and
identified after Closing shall be accounted for as provided in
Section 4.3(g) at the same rate of $1.00 per mcf.
(c) OPERATORSHIP. Unless otherwise provided in the Transition
Agreement, Buyer shall assume Seller's obligations for operatorship of
any Seller-operated Assets conveyed herein at 7:00 a.m. local time on
April 1, 2000, and shall perform all duties required in the course of
business, including, but not by the way of limitation, paying Burdens
and Taxes, pumping and gauging wells, working over wells, drilling new
wells, filing all necessary reports required by Applicable Law or
otherwise, and performing maintenance and/or repair work on the Assets.
To the extent required under any Contract that affects any Asset and
only after Buyer has used its commercially reasonable efforts to assume
operatorship of such Asset, Seller will continue to operate said Asset
pursuant to the Transition Agreement until the new operator can be
properly selected. Seller does not warrant or represent that Buyer
shall succeed Seller as operator of any Asset; however, Seller shall
recommend to its working interest owners that Buyer succeed as operator
of such Properties operated by Seller.
(d) [this section intentionally left blank].
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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(i) BUYER'S RESPONSIBILITY. In the event Seller is required to
continue to operate any of the Assets after the Closing Date pursuant
to an applicable operating agreement or the Transition Agreement, Buyer
shall be responsible for the payment of all necessary and reasonable
capital costs, Taxes, expenses and Burdens incurred against or
applicable to the operation and use of the Assets from and after the
Effective Date, whether invoiced or not.
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Buyer shall be responsible for prorated estimates of ad valorem taxes
in the absence of actuals. Further, all production from the wells
located on or attributable to the Assets and all proceeds from or
attributable to production from the Assets and sale thereof shall be
the property of and belong to Buyer from and after the Effective Date.
(j) ACCESS TO DOCUMENTS. Each Party shall provide reasonable
access to all relevant documents, data and other information which may
be required by the other Party for the purpose of preparing tax returns
and responding to any audit by any Governmental Body. Each Party shall
cooperate with all reasonable requests of the other Party made in
connection with contesting the imposition of Taxes. Notwithstanding
anything to the contrary in this Agreement, neither Party shall be
required at any time to disclose to the other Party any tax returns or
other confidential tax information.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(l) FURTHER ASSURANCES. After Closing, Seller and Buyer agree
to take such further actions and to execute, acknowledge and deliver
all such further documents necessary or useful in carrying out the
purposes of this Agreement or of any document delivered pursuant
hereto.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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(n) CERTAIN FILINGS, CONSENTS AND PERMITS. With respect to
certain filings and consents required by any Governmental Body, the
Parties agree that Buyer and Seller shall cooperate with one another to
make all filings necessary and to obtain any necessary consents,
permits, authorizations, approvals or waivers, including but not
limited to filings with the Texas Railroad Commission, Oklahoma
Corporation Commission, or such other state agency having jurisdiction
over the Assets.
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Without limitation of the foregoing, Seller shall endeavor to
obtain, and Buyer shall cooperate in connection with such endeavors,
each consent set forth on Schedule 3.1 (h).
(O) CONSENTS.
(i) If the holder of the right to consent or party to
a maintenance of uniform interest provision affirmatively
refuses to consent or waive prior to Closing, such refusal
shall be automatically considered a Title Defect without the
necessity of Buyer sending a Defect Notice to Seller as
required under Section 4.3 (m) (i) .
(ii) Except for approvals from Governmental Bodies
normally received subsequent to assignment, if Seller believes
a consent or waiver may be obtained subsequent to Closing, the
Property shall be excluded from the Assets conveyed at Closing
and the Purchase Price reduced by the Allocated Value (or
portion thereof) and held by Seller for the benefit of Buyer
after Closing and Seller shall provide Buyer with the economic
benefits thereof until such consent or waiver is received or
until sixty (60) days following Closing, if later. If Seller
obtains the consent or waiver on or before sixty (60) days
following Closing, then Seller shall deliver conveyances of
the Property to Buyer and Buyer shall pay to Seller the
Allocated Value (or portion thereof). If the consent or waiver
is not obtained or is affirmatively refused on or before sixty
(60) days following Closing, Buyer shall refund to Seller any
net revenues (revenues net of costs and Burdens) received by
Buyer in connection with such affected portion of the Property
and Seller's holding for the benefit of Buyer shall terminate,
unless Buyer waives the requirement for obtaining the consent
and agrees to accept the Asset and pay the value allocated to
the Asset pursuant to Schedule 2.4 in exchange for Seller's
conveyance of the Asset.
(p) RISK OF LOSS. If, prior to the Closing Date, all or any
material portion of an Asset is damaged or destroyed by fire or other
casualty, is taken in condemnation or under the right of eminent domain
or proceedings for such purposes are pending or threatened, Buyer shall
purchase such portion of the Assets, notwithstanding any such damage,
destruction, taking or pending or threatened taking. Seller shall pay
to Buyer (as an adjustment to the Purchase Price) all sums paid to
Seller by third Persons by reason of the damage, destruction or taking
of such portion of the Assets to be assigned to Buyer or to the extent
Seller is self-insured an amount equal to the value of the damage or
destruction, and shall assign, transfer and set over to Buyer all of
the right, title and interest of Seller in and to any unpaid awards or
other payments from third Persons arising out of the damage,
destruction, taking or pending or threatened taking as to such
interest. If prior to the Closing Date, the applicable Assets are
damaged or destroyed by fire or other casualty and the sums transferred
to Buyer pursuant to the foregoing sentence do not equal the amount
necessary to replace or restore the pertinent Assets to the condition
they were in prior to such fire or casualty (including, without
limitation, those circumstances in which Seller is self-insured),
Seller shall pay to Buyer, or the Purchase Price shall be reduced by
the
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additional amount necessary to repair or replace all damaged or
destroyed Assets or restore the Assets to their condition prior to the
fire or casualty loss. If the sums that Seller would be responsible for
pursuant to the foregoing sentence exceed fifty percent (50%) of the
Allocated Value of the pertinent Asset, Seller may elect to remove the
Asset from the sale and reduce the Purchase Price by the allocated
value of the pertinent Asset. Seller shall not voluntarily compromise,
settle or adjust any material amounts payable by reason of any material
damage, destruction, taking or pending or threatened taking as to any
Asset without first obtaining the written consent of Buyer, which shall
not be unreasonably withheld.
(q) POST-CLOSING ACCESS. Except as otherwise expressly
provided herein, from and after the Closing Date, Buyer and Seller
shall reasonably cooperate and afford each other or cause to be
afforded to their respective officers, employees, accountants and other
representatives access, upon reasonable notice, during business hours
with respect to the facility to which access has been requested, to
review and copy the books, documents, databases or other records
relating to the Assets not including the Excluded Assets (which books,
documents, databases, records, or employees files or other information
the Parties shall cooperate and assist one another in identifying and
locating), interview, depose or seek testimony of employees with
knowledge of the Assets, provide assistance in proceedings with
employees with knowledge of the Assets as witnesses or advisors,
investigate the physical premises, take photographs or videotapes,
identify employees and contractors with knowledge of any matter which
is the subject of a claim for which a Party has responsibility and make
such employees available to such Party and provide reasonable office
space to do any of the foregoing in connection with any matter
affecting or alleged to affect the Party requesting such access.
(r) FILING AND RECORDING OF ASSIGNMENTS, ETC. Buyer shall be
solely responsible for recording of the Deeds, Assignments and Oil and
Gas Leases and any other documents related to the Assets and shall
promptly provide Seller with recorded copies of same. Further, Buyer
shall be responsible for any recording or filing fees and documentary
or transfer Taxes resulting from the Contemplated Transactions.
(s) EMPLOYEE MATTERS. Buyer shall have no obligation, but
shall have the right to solicit the field employees of Seller (and any
other employees of Seller that Seller identifies in writing) who work
directly on or in connection with the Assets ("Employees"), and shall
have no obligation but shall have the right to offer employment to and
hire any such Employees. If Buyer hires any Employee, the terms of
employment shall be at Buyer's discretion. Seller is and shall be
responsible for any and all employees not hired by Buyer to the extent
any of Seller's employees are affected by the Contemplated
Transactions.
(t) [this section intentionally left blank].
(u) [this section intentionally left blank].
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(v) JOINT USE AGREEMENTS. Buyer and Seller shall, from and
after the date of this Agreement, use their reasonable best efforts to
negotiate and execute on or before the Closing in the case of items
identified five (5) days prior to Closing or as soon thereafter as
reasonably practical, mutually agreeable joint use agreements for the
use and management of (i) the facilities and other equipment identified
in Schedule 4.3(v) and incorporating, among others, the terms and
conditions set forth in Schedule 4.3(v) and (ii) any other facilities
and equipment used immediately prior to the Effective Date to operate
or produce both (A) assets and properties being retained by Seller and
(B) the Assets operated by Seller and which are identified in writing
by the Buyer within ninety (90) days after Buyer assumes operations of
the affected Asset.
(w) [this section intentionally left blank]
(x) [this section intentionally left blank].
(y) HSR FILINGS. Buyer and Seller shall promptly make all
filings required under the HSR Act.
PART FIVE
CONDITIONS TO CLOSING
5.1 SELLER'S CLOSING CONDITIONS. The obligations of Seller to
consummate the Contemplated Transactions are subject to the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties of Buyer contained in the Agreement or
in connection with the Contemplated Transactions were true and correct
when made, and shall be true and correct on and as of the Closing Date
as though such representations and warranties were made at and as of
such date except as otherwise expressly provided herein.
(b) COMPLIANCE WITH AGREEMENT. On and as of the Closing Date,
Buyer shall have performed and complied with all agreements, covenants,
and conditions required by this Agreement, the Four Star PSA and the
TEPI PSA to be performed and complied with prior to or on the Closing
Date.
(c) INJUNCTION. As of the Closing Date, no suit, action or
other proceeding (excluding any such matter initiated by Seller) shall
be pending or threatened before any court or governmental agency
seeking to restrain Seller or prohibit the Closing or seeking damages
against Seller as a result of the consummation of this Agreement or the
Contemplated Transactions.
(d) CERTIFIED RESOLUTIONS AND OFFICERS' CERTIFICATE. Buyer
shall have delivered to Seller (i) a certificate dated the Closing Date
signed by the Secretary or an Assistant
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<PAGE> 39
Secretary of Buyer with respect to the action of the Buyer's Board of
Directors authorizing the transactions contemplated by the Agreement,
and (ii) a certificate, dated the Closing Date and signed by the
President or a Vice President of Buyer certifying in such detail as
Seller may reasonably request to the fulfillment of the conditions
specified in subparagraphs (a) and (b) of this Section 5.1, in the form
attached as Exhibit D.
(e) APPROVAL OF PROCEEDINGS. All actions, proceedings,
instruments and documents required of Buyer to carry out the Agreement,
or incidental thereto, and all other related legal matters shall have
been approved by Nanette J. Crawford, Esq., as counsel for Seller,
which approval shall not be unreasonably withheld.
(f) [This section intentionally left blank].
(g) CONVEYANCE. Buyer shall execute, acknowledge and deliver
to Seller the Assignments, Deeds and Oil and Gas Leases substantially
in the form of Exhibits A, B-1, B-2 and C as well as change of operator
forms required by Applicable Laws and such other documents as may be
necessary to carry out the purposes of the Agreement.
(h) LETTERS IN LIEU. Buyer and Seller shall execute,
acknowledge and deliver all letters in lieu as set forth in Section
4.3(f).
(i) SECURITY. Any security required by Seller of Buyer
contemplated in Section 4.2(i)(ii) shall have been obtained.
(j) [this section intentionally left blank].
(k) JOINT USE AGREEMENTS. Buyer and Seller shall have
executed, acknowledge and delivered, on or before the Closing, certain
joint use agreements as described in Section 4.3(v).
(l) [this section intentionally left blank].
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(n) [this section intentionally left blank]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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(p) [this section intentionally left blank].
(q) BARGO GUARANTY. Buyer shall have delivered to Seller, in a
form mutually agreeable to both Buyer and Seller, the guaranty of Bargo
Energy Company guaranteeing the performance of the Buyer under this
Agreement.
(r) TRANSITION AGREEMENT. Buyer and TEPI shall have executed
and delivered the Transition Agreement.
(s) HSR ACT. All necessary filings and notifications under the
HSR Act shall have been made, including any required additional
information or documents, and the waiting period referred to in such
Act applicable to the transactions contemplated hereby shall have
expired or been terminated.
5.2 BUYER'S CLOSING CONDITIONS. The obligations of Buyer to consummate
the Contemplated Transactions are subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties of Seller contained in the Agreement or
in connection with the Contemplated Transactions were true and correct
when made, and shall be true and correct on and as of the Closing Date
as though such representations and warranties were made at and as of
such date except as otherwise expressly provided herein.
(b) COMPLIANCE WITH AGREEMENTS. On and as of the Closing Date,
Seller shall have performed and complied with all agreements,
covenants, and conditions required by the Agreement to be performed and
complied with prior to or on the Closing Date. Four Star Oil & Gas
Company and TEPI shall have performed and complied with all agreements,
covenants and conditions required by the TEPI PSA and the Four Star
PSA.
(c) INJUNCTION. As of the Closing Date, no suit, action or
other proceeding (excluding any such matter initiated by Buyer) shall
be pending or threatened before any court or governmental agency
seeking to restrain Buyer or prohibit the Closing or seeking damages
against Buyer as a result of the consummation of this Agreement or the
Contemplated Transactions.
(d) CERTIFIED RESOLUTIONS AND OFFICERS' CERTIFICATE. Seller
shall have delivered to Buyer (i) a certificate dated the Closing Date
signed by the Secretary or an Assistant Secretary of Seller with respect
to the action of the Seller's Board of Directors authorizing the
transactions contemplated by the Agreement, and (ii) a certificate,
dated the Closing Date and signed by the President or a Vice President
of Seller certifying in such detail as Buyer may reasonably request to
the fulfillment of the conditions specified in subparagraphs (a) and (b)
of this Section 5.2 in the form attached as Exhibit E.
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(e) APPROVAL OF PROCEEDINGS. All actions, proceedings,
instruments and documents required of Seller to carry out the
Agreement, or incidental thereto, and all other related legal matters
shall have been approved by Haynes and Boone, L.L.P., as counsel for
Buyer, which approval shall not be unreasonably withheld.
(f) [This section intentionally left blank].
(g) CONVEYANCE. Seller shall execute, acknowledge and deliver
to Buyer the Assignments, Deeds and Oil and Gas Leases substantially in
the form of Exhibits A, B-1, B-2 and C, as well as change of operator
forms required by Applicable Laws and such other documents as may be
necessary to carry out the purposes of the Agreement.
(h) LETTERS IN LIEU. Buyer and Seller shall execute,
acknowledge and deliver all letters in lieu as set forth in Section
4.3(f).
(i) [This section intentionally left blank].
(j) JOINT USE AGREEMENTS. Buyer and Seller shall have
executed, acknowledge and delivered, on or before the Closing, certain
joint use agreements as described in Section 4.3(v).
(k) [This section intentionally left blank].
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(m) [This section intentionally left blank].
(n) TRANSITION AGREEMENT. Buyer and TEPI shall have executed
and delivered the Transition Agreement.
(o) HSR ACT. All necessary filings and notifications under the
HSR Act shall have been made, including any required additional
information or documents, and the waiting period referred to in such
Act applicable to the transactions contemplated hereby shall have
expired or been terminated.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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PART SIX
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
PART SEVEN
TAXES
Section 7.1 PAYMENT AND APPORTIONMENT OF REAL PROPERTY TAXES AND
PERSONAL PROPERTY TAXES. With respect to Taxes:
(a) Real and Personal Property Taxes. Real property taxes and personal
property taxes ("Real and Personal Property Taxes") for the year in which the
Effective Date occurs shall be apportioned as of the Effective Date between
Seller and Buyer. Seller shall be liable for the portion of such Real and
Personal Property Taxes based upon the number of days in the year occurring
prior to the Effective Date, and Buyer shall be liable for the portion of such
taxes based upon the number of days in the year occurring on and after the
Effective Date. For any year in which an apportionment is required, Buyer shall
file all required reports and returns incident to these taxes and shall remit to
the appropriate taxing authorities all such taxes assessed for the year in which
the Effective Date occurs. Seller may pay to Buyer, at the time of Buyer's
remittance, Seller's share of such taxes.
(b) Liability and Right to Pursue Claims. Seller shall retain liability
for all adjustments, examinations or claims relating to Taxes that are paid by
Seller and that are allocated to Seller pursuant to this Section 7.1. Seller
shall administer and defend any examination, claim or adjustments arising in
connection with Taxes to be paid by Buyer but which are allocated to Seller
pursuant to this Section 7.1.
Section 7.2 OTHER TAXES. All excise, windfall profit and other Taxes
relating to production of Hydrocarbons attributable to the Assets prior to the
Effective Date shall be allocated to Seller, and all such Taxes relating to
production on or after the Effective Date shall be apportioned to Buyer.
Section 7.3 SALES TAXES. The Purchase Price does not include any sales
Taxes or other transfer Taxes imposed in connection with the sale of the Assets.
Buyer shall pay any sales Tax
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or other transfer Tax, as well as any applicable conveyance, transfer and
recording fee, and real estate transfer stamps or taxes imposed on the transfer
of the Assets pursuant to the Agreement. If Buyer is of the opinion that it is
exempt from the payment of such sales Tax or other transfer Tax, Buyer shall
furnish to Seller the appropriate tax exemption certificate.
Section 7.4 COOPERATION. Each Party to the Agreement shall provide the
other Party with reasonable access to all relevant documents, data and other
information which may be required by the other Party for the purpose of
preparing Tax returns, establishing or defending a Tax position and responding
to any audit by any taxing jurisdiction. Each Party to the Agreement shall
cooperate with all reasonable requests of the other Party made in connection
with contesting the imposition of Taxes. Notwithstanding anything to the
contrary in the Agreement, neither Party to the Agreement shall be required at
any time to disclose to the other Party any Tax returns or other confidential or
privileged Tax information.
Section 7.5 TAX PROCEEDINGS. In the event Buyer receives notice of any
examination, claim, adjustment or other proceeding relating to the liability for
Taxes of or with respect to Seller for any period Seller is or may be liable
under the Agreement, Buyer shall within ten (10) days notify Seller in writing
thereof. As to any such Taxes for which Seller is or may be liable under the
Agreement, and Seller does not contest such liability as against Buyer, Seller
shall be entitled at Seller's expense to control or settle the contest of such
examination, claim, adjustment or other proceeding, provided Seller notifies
Buyer in writing within thirty (30) days after receipt of the notice described
in the preceding sentence that Seller desires to do so. The Parties shall
cooperate with each in the negotiations and settlement of any proceeding
described in this Section 7.5. Buyer shall provide, or cause to be provided, to
Seller necessary authorizations, including powers of attorney, to control any
proceeding which Seller is entitled to control pursuant to Part 7.
Section 7.6 PURCHASE PRICE ALLOCATION. The allocation of Purchase Price
provided for in this Agreement is intended to comply with the allocation method
required by Section 1060 of the Code. Buyer and Seller shall cooperate to comply
with all substantive and procedural requirements of Section 1060 and regulations
thereunder. Buyer and Seller agree that each will not take for income Tax
purposes, or permit any Affiliate to take, any position inconsistent with the
allocation of Purchase Price prescribed in this Agreement.
Section 7.7 RESERVATION OF SECTION 29 CREDITS. Seller retains the
right, at its option, to pursue Tax credits authorized by Section 29 of the
Code, if any, applicable to any production operations occurring prior to the
Closing Date. Buyer agrees to reasonably cooperate at Seller's cost and afford
Seller and its representatives, upon reasonable notice, during business hours,
time to review and copy any files, documents, databases, records, or other
information, necessary to establish or defend a claim for such Tax credits.
Section 7.8 RESERVATION OF SECTION 43 CREDITS. Seller retains the
right, at its option, to pursue Tax credits authorized by Section 43 of the
Code, if any, applicable to any qualified projects occurring prior to the
Closing Date. Buyer agrees to reasonably cooperate at Seller's
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cost and afford Seller and its representatives, upon reasonable notice, during
business hours, time to review and copy any files, documents, databases,
records, or other information necessary to establish or defend a claim for such
Tax credits.
PART EIGHT
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
PART NINE
MISCELLANEOUS
9.1 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of the respective Parties.
9.2 WAIVERS AND AMENDMENTS. All amendments and other modifications
hereof shall be in writing and signed by each of the Parties. Any Party may by
written instrument (i) waive compliance by the other Party with, or modify any
of, the covenants or agreements made by the
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other Party in this Agreement or (ii) waive or modify performance of any of the
obligations or other acts of the other Party. The delay or failure on the part
of any Party to insist, in any one instance or more, upon strict performance of
any of the terms or conditions of this Agreement, or to exercise any right or
privilege herein conferred shall not be construed as a waiver of any such terms,
conditions, rights or privileges but the same shall continue and remain in full
force and effect. All rights and remedies are cumulative.
9.3 NOTICES. All notices, consents and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given (a)
when delivered by hand, (b) when sent by telecopier (with receipt confirmed),
provided that a copy is promptly thereafter mailed in the USA by first class
postage prepaid mail, (c) when received by the addressee, if sent by Express
Mail, Federal Express, other express delivery service (receipt requested) or by
such other means as the Parties may agree from time to time or (d) five (5)
Business Days after being mailed in the USA, by first class postage prepaid
registered or certified mail, return receipt requested; in each case to the
appropriate address and telecopier number set forth below (or to such other
address and telecopier number as a Party may designate as to itself by notice to
the other Party):
(i) if to Seller:
McFarland Energy, Inc.
Attn: Paula Gatens
1111 Bagby
Houston, Texas 77002
Phone: 713-752-4619
Fax: 713-752-7998
(ii) if to the Buyer:
Bargo Petroleum Corporation
Attn: Mr. Jon Clarkson
700 Louisiana, Suite 3700
Houston, Texas 77002
Phone: 713-236-9792
Fax: 713-236-9799
Each Party shall have the right upon giving ten (10) Business Days prior written
notice to the other in the manner hereinabove provided, to change its address
for purposes of notice.
9.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same document.
9.5 ENTIRE AGREEMENT. This Agreement, including the Exhibits and
Schedules hereto, contains the entire agreement between the Parties hereto with
respect to the subject matter hereof and supersedes all prior discussions,
understandings, agreements and undertakings between the Parties hereto relating
to the subject matter hereof. There are no additional terms, whether
- --------------------------------------------------------------------------------
44
<PAGE> 50
consistent or inconsistent, oral or written which are intended to be part of the
Parties' understanding which have not been incorporated into this Agreement,
including the Exhibits and Schedules.
9.6 SELLER'S OPTION TO ELECT A TAX DEFERRED EXCHANGE. Seller retains
the right to sell its interest in the Assets to Buyer as a non-simultaneous
like-kind property exchange for cash pursuant to Section 1031 of the Internal
Revenue Code of 1986. Seller shall have the right to elect this tax-deferred
exchange at any time prior to the date of Closing. Buyer agrees to execute
additional escrow instructions, documents, agreements, or instruments to effect
the exchange, provided that Buyer shall incur no material additional costs,
expenses, fees or liabilities as a result of or in connection with the exchange.
9.7 SEVERABILITY. Every provision in this Agreement is intended to be
severable. If any term or provision hereof is held to be illegal or invalid for
any reason whatsoever, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of Contemplated Transactions is not affected in a materially
adverse manner with respect to either Party.
9.8 APPLICABLE LAW. This Agreement shall be governed by and
interpreted, construed and enforced in accordance with the laws of the State of
Texas, except to the extent mandatorily governed by the laws of the state in
which the Assets are located
9.9 EXPENSES. Except as specified herein and as the Parties may
otherwise agree, each Party shall be solely responsible for all expenses
incurred by it in connection with any and all Contemplated Transactions.
9.10 LAWS AND REGULATIONS. This Agreement is subject to all Applicable
Laws.
9.11 PUBLIC ANNOUNCEMENTS. The Parties hereto agree that prior to
making any public announcement or statement with respect to the Contemplated
Transaction, the Party desiring to make such public announcement or statement
shall provide the other Party with a copy of the proposed announcement or
statement at least seven (7) Business Days prior to the intended release date of
such announcement. The other Party shall thereafter consult with the Party
desiring to make the release, and the Parties shall exercise their reasonable
best efforts to (i) agree upon the text of a joint public announcement or
statement to be made by both such Parties or (ii) in the case of a statement to
be made solely by one Party, obtain approval of the other Party hereto to the
text of a public announcement or statement. Nothing contained in this paragraph
shall be construed to require either Party to obtain approval of the other Party
hereto to disclose information with respect to the Contemplated Transaction to
any Governmental Body to the extent required by Applicable Law or necessary to
comply with disclosure requirements of the New York Stock Exchange or any other
regulated stock exchange.
9.12 ASSIGNABILITY. The rights and obligations created or assumed
hereunder shall not be assignable or delegable by either Party and any
assignment thereof shall be void ab initio.
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45
<PAGE> 51
9.13 PROVISIONS SURVIVE CLOSING. All representations and warranties
contained in the Agreement shall survive the Closing and continue with respect
to claims made on or before twelve months following the Closing Date. Except as
otherwise provided herein, the covenants, indemnities and agreements made
hereunder or pursuant hereto shall survive Closing and be and remain enforceable
and continue in full force and effect as to their terms and conditions following
Closing and shall not be deemed to have been merged into the Closing or into the
assignments or other closing documents.
9.14 DISPUTE RESOLUTION. Any and all disputes, controversies or claims
relating to or arising out of the Contemplated Transactions shall be resolved in
accordance with the dispute resolution procedures outlined in Schedule 9.14
attached hereto and made a part hereof for all intents and purposes. The Parties
further agree that neither Party will institute litigation against the other
Party, their Affiliates and each of their respective officers, directors,
shareholders, agents and representatives relating to or arising out of the
Contemplated Transactions, except as provided in the attached Schedule 9.14 and
that the terms and provisions of this Section 9.14 shall survive the termination
of this Agreement.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[CONTINUED ON NEXT PAGE]
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<PAGE> 52
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first above written.
SELLER:
McFARLAND ENERGY, INC.
-----------------------------------
NAME: J. K. Hendrickson
TITLE: Attorney-in-Fact
Tax ID: 95-2756635
BUYER:
BARGO PETROLEUM CORPORATION
-----------------------------------
NAME:
TITLE:
Tax ID: 75-2526762
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47
<PAGE> 1
EXHIBIT 10.1
SUBSCRIPTION AGREEMENT
BY AND AMONG
BARGO ENERGY COMPANY
AND
ENERGY CAPITAL INVESTMENT COMPANY PLC
ENCAP ENERGY CAPITAL FUND III, L.P.
ENCAP ENERGY CAPITAL FUND III-B, L.P.
BOCP ENERGY PARTNERS, L.P.
EOS PARTNERS, L.P.
EOS PARTNERS SBIC, L.P.
EOS PARTNERS SBIC II, L.P.
SGC PARTNERS II LLC
BANCAMERICA CAPITAL INVESTORS SBIC I, L.P.
AND
KAYNE ANDERSON ENERGY FUND, L.P.
DATED MARCH 31, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
ARTICLE I. CERTAIN DEFINITIONS 1
Section 1.1 Defined Terms 1
Section 1.2 Headings 5
Section 1.3. Statutory References 5
Section 1.4. Calculation of Time Period 5
Section 1.5. Extended Definitions 5
Section 1.6. Interpretation 5
Section 1.7. Schedules and Exhibits 6
ARTICLE II. SUBSCRIPTION 6
Section 2.1. Subscription; Acceptance 6
Section 2.2. Payment of Purchase Price 7
Section 2.3. Delivery of Certificates Representing Units Purchased 7
Section 2.4. Voluntary Increase in Subscription Amount by an
Equity Investor 7
Section 2.5. Election to Receive Warrants 7
Section 2.6 Election to Purchase Substituted Tranche A Term
Loan Notes; Subsequent Conversion 8
ARTICLE III. REPRESENTATIONS AND WARRANTIES 8
Section 3.1. Representations and Warranties of Equity Investors 8
Section 3.2. Representations and Warranties of Bargo 11
ARTICLE IV. COVENANTS AND AGREEMENTS 12
Section 4.1. Indemnity Agreement. 12
Section 4.2. Shareholders' Agreement 13
Section 4.3. Stock Purchase Agreement 13
Section 4.4 Registration Rights Agreement 13
Section 4.5. Amendment to Articles of Incorporation. 13
ARTICLE V. MISCELLANEOUS 13
Section 5.1. Choice of Law 13
Section 5.2. Entire Agreement 14
Section 5.3. Binding Effect 14
Section 5.4. Assignment 14
Section 5.5. Notices 14
Section 5.6. No Merger 16
Section 5.7. Expenses 16
Section 5.8. Third Party Beneficiaries 16
Section 5.9. Transmission by Facsimile 17
Section 5.10. Severability 17
Section 5.11. Waiver 17
Section 5.12. Counterparts 17
Section 5.13. Remedies 17
Section 5.14. Construction 17
</TABLE>
<PAGE> 3
SUBSCRIPTION AGREEMENT
This Subscription Agreement (this "Agreement") is entered into this
31st day of March, 2000, 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.("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, an "Equity Investor" and collectively, the "Equity
Investors") and Bargo Energy Company, a Texas corporation ("Bargo"), and
evidences the following:
NOW THEREFORE, the parties to this Agreement, intending to be legally
bound, for good and valuable consideration, the receipt and sufficiency of which
is acknowledged, hereby agree as follows:
ARTICLE I. CERTAIN DEFINITIONS
SECTION 1.1 DEFINED TERMS. The following capitalized terms used in this
Agreement have the meanings set forth below:
ACQUISITION: means the purchase, pursuant to the Acquisition Agreements, by
Bargo of oil and gas properties located in the Permian Basin, East Texas and
Mid-Continent regions.
ACQUISITION AGREEMENTS: means the following three agreements (i) Purchase
and Sale Agreement, dated February 22, 2000, between Bargo Petroleum Corporation
and Texaco Exploration and Production, Inc.; (ii) Purchase and Sale Agreement,
dated February 22, 2000, between Bargo Petroleum Corporation and McFarland
Energy, Inc.; and (iii) Purchase and Sale Agreement, dated February 22, 2000,
between Bargo Petroleum Corporation and Four Star Oil & Gas Company.
ADMINISTRATIVE AGENT: has the meaning set forth in the Assignment.
AGGREGATE PURCHASE PRICE: means an amount equal to the principal, interest
and premium, if any, outstanding on the Tranche A Term Loans and the Tranche B
Term Loans on the Notice Date; provided that the Aggregate Purchase Price shall
not exceed $45,000,000.
AMENDMENT TO STOCK PURCHASE AGREEMENT: has the meaning ascribed thereto in
Section 4.3 hereof.
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<PAGE> 4
ANCILLARY AGREEMENTS: means, collectively, the First Amendment to Second
Amended and Restated Shareholders' Agreement, the Certificate of Designation,
the Third Amendment to Registration Rights Agreement, the Amendment to Stock
Purchase Agreement, the Assignment and the Escrow 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.
ASSIGNMENT: means the Assignment, Acknowledgment, Agreement and the Waiver
in the form of Exhibit I.
BT: Bankers Trust Company, a New York banking corporation.
BUSINESS DAY: means each Monday through Friday of each calendar week,
except that a legal holiday recognized by the United States federal government
or the State of Texas shall not be a Business Day.
CERTIFICATE OF DESIGNATION: means the Certificate of Designation attached
as Exhibit B.
CLOSING DATE: means the Business Day six days following the Notice Date.
CREDIT AGREEMENT: means the Credit Agreement dated as of March 31, 2000,
among the Company, Chase Bank of Texas National Association, as Administrative
Agent, BT, as Syndication Agent, and the other agents and lenders signatory
thereto.
DESIGNATED COMMON STOCK NUMBER: means the number equal to [A-B]/C, where
"A" equals B divided by D, where "B" equals the number of shares of Bargo common
stock, par value $.01 per share, issued and outstanding (computed on a fully
diluted basis) on the date of closing the Acquisition, where "C" is the
Aggregate Purchase Price divided by 1,000 and where "D" is 1 minus the Specified
Equity Percentage. If the Company makes a dividend or other distribution on its
Common Stock payable in Common Stock, or if the outstanding Common Stock is
subdivided into a larger number or combined into a lesser number, the Board of
Directors shall proportionately increase or decrease the Designated Common Stock
Number, and shall send notice of such increase to the Equity Investors and the
Administrative Agent and Escrow Agent as defined in the Assignment and Escrow
agreement, respectively, and to BT, in the manner provided in the Credit
Agreement.
DESIGNATED PERCENTAGE: means the percentage for each Equity Investor set
forth on Exhibit G hereto.
ENCUMBRANCE: 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.
2
<PAGE> 5
ESCROW AGENT: has the meaning set forth in the Escrow Agreement.
ESCROW AGREEMENT: means the Escrow Agreement in the form of Exhibit J.
EXPIRATION DATE: means the earlier of the following dates: (i) the date
that the Tranche A Term Loans are repaid in full other than from the purchase
price of Units paid pursuant to this Agreement and (ii) December 22, 2000.
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 National Market, the Nasdaq SmallCap Market, the American Stock
Exchange, and any other exchange upon which Bargo common stock is listed from
time to time.
INCREASED DESIGNATED PERCENTAGE: means, for each Equity Investor, two times
the Designated Percentage for the Equity Investor (appropriately rounded so that
the aggregate Increased Designated Percentages total 100%), or such other
percentage in excess of the Equity Investor's Designated Percentage as the
Equity Investors may agree as contemplated by Section 2.4.
INDEMNITY AGREEMENT: means the agreement in the form of Exhibit K.
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
conditions (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.
NOTICE DATE: means the date on which the Purchase Notice is given to the
Equity Investors as provided in Section 2.1.
PARTIES: means, collectively, Bargo and the Equity Investors.
PERMITS: means licenses, permits, franchises, consents, approvals,
variances, exemptions, and other authorizations of or from Governmental
Entities.
PERSON: includes an individual, a partnership, a limited partnership, a
joint venture, a syndicate, a sole proprietorship, a company or corporation with
or without share capital, an unincorporated association, a trust, an executor,
an administrator or other legal personal representative, a regulatory body or
agency, a government or governmental agency, an authority or entity however
designated or constituted, and every other legal or business entity whatsoever.
3
<PAGE> 6
PURCHASE NOTICE: has the meaning ascribed thereto in Section 2.1.
SHARE OF UNITS: means, as to each Equity Investor, the Equity Investor's
Designated Percentage multiplied by the Total Number of Units, rounded up to the
next whole Unit.
SPECIFIED EQUITY PERCENTAGE: means a percentage equal to [X/Y]xZ, where "X"
is the Aggregate Purchase Price, where "Y" is $45,000,000, and where "Z" is 30%.
STANDBY FEE: has the meaning ascribed thereto in Section 4.4 hereof.
SUBSTITUTE TRANCHE A TERM LOAN NOTES: has the meaning given it in the
Credit Agreement.
FIRST AMENDMENT TO SECOND AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT: has
the meaning ascribed thereto in Section 4.2 hereof.
THIRD AMENDMENT TO REGISTRATION RIGHTS AGREEMENT: means the amendment
attached as Exhibit H.
TOTAL NUMBER OF UNITS: means the Aggregate Purchase Price divided by $1,000
rounded up to the next whole number.
TRANCHE A EQUITY SUBSCRIPTION DATE: has the meaning given to it in the
Credit Agreement.
TRANCHE A TERM LOANS: has the meaning given to it in the Credit Agreement.
UNIT: means one share of Bargo Series C Preferred Stock, par value $.01 per
share, and a number of shares of Bargo's common stock equal to the Designated
Common Stock Number.
WARRANTS: means the Warrant to purchase Common Stock in the form of Exhibit
E.
4
<PAGE> 7
SECTION 1.2 HEADINGS.
The division of this Agreement into Articles and Sections and the insertion
of headings are for convenient reference only, and shall not effect either the
construction or the interpretation of this Agreement.
SECTION 1.3 STATUTORY REFERENCES.
Unless expressly stated to the contrary, any references in this Agreement
to any law, by-law, rule, regulation, order or act of any Governmental Entity
shall be construed as a reference thereto as enacted either as of the date
hereof, or as such law, by-law, rule, regulation, order or act may be amended,
re-enacted, or superseded from time to time after the date hereof.
SECTION 1.4 CALCULATION OF TIME PERIOD.
When calculating the period of time within which or following which any act
is to be done or any step is to be taken pursuant to this Agreement, the date
which is the reference date in calculating such period shall be excluded. If the
last day of such period is not a Business Day, the period in question shall end
on the next Business Day. If under this Agreement any payment or calculation is
to be made or any other action is to be taken on a day which is not a Business
Day, that payment or calculation is to be made, and that other action is to be
taken, as applicable, on or as of the next day that is a Business Day.
SECTION 1.5 EXTENDED DEFINITIONS.
Unless the context otherwise requires, words importing the singular include
the plural and vice versa and words importing gender include all genders. The
term "including" as used herein to explain or elaborate upon the subject matter
preceding such term, shall mean "the inclusion of without limitation" and
"including, without limiting the foregoing." The terms "hereof," "hereunder" and
similar expressions refer to this Agreement and not to any particular part,
Article, Section or other portion hereof and include any agreement supplemental
hereto. Unless something in the subject matter or context is inconsistent
therewith, references herein to parts, Articles and Sections are to parts,
Articles and Sections of this Agreement.
SECTION 1.6 INTERPRETATION.
In the event of any inconsistencies, conflicts or contradictions between
the provisions of this Agreement and any documents created pursuant to, or as
required under, this Agreement, the provisions of this Agreement shall govern
and prevail.
5
<PAGE> 8
SECTION 1.7 SCHEDULES AND EXHIBITS.
The following Exhibits and Schedules, are attached to this Agreement
and are incorporated into this Agreement by reference:
Exhibit A - Purchase Notice
Exhibit B - Certificate of Designation
Exhibit C - Form of First Amendment to Second Amended and
Restated Shareholders' Agreement
Exhibit D - Election to receive Warrants
Exhibit E - Form of Warrant
Exhibit F - Form of Amendment to Stock Purchase Agreement
Exhibit G - Designated Percentage
Exhibit H - Form of Third Amendment to Registration Rights
Agreement
Exhibit I - Form of Assignment
Exhibit J - Form of Escrow Agreement
Exhibit K - Form of Indemnity Agreement
ARTICLE II. SUBSCRIPTION
SECTION 2.1 SUBSCRIPTION; ACCEPTANCE. Subject to the terms and conditions
set forth herein, each Equity Investor, severally and not jointly, irrevocably
subscribes for and agrees to purchase on the Closing Date, such Equity
Investor's Share of Units, at a purchase price of $1,000 per Unit. Bargo hereby
accepts such subscription subject to either (i) the Tranche A Equity
Subscription Date occurring prior to the Expiration Date or (ii) if there are
any amounts outstanding under the Tranche A Term Loan on December 1, 2000 and,
on or prior to the Expiration Date the Administrative Agent directs the Escrow
Agent to deliver a Purchase Notice to the Equity Investors. On the Tranche A
Equity Subscription Date or, after December 1, 2000, as directed by the
Administrative Agent, Bargo shall deliver, or cause to be delivered, to each
Equity Investor a Purchase Notice in the form of Exhibit A duly completed and
executed by Bargo. The Purchase Notice shall set forth the Aggregate Purchase
Price, the Total Number of Units, the Equity Investor's Share of Units, the
number of shares of Common Stock being purchased by the Equity Investor, the
Closing Date and wire transfer instructions for payment of the purchase price of
the Units on the Closing Date. If, at any time on or prior to the Expiration
Date, Bargo delivers or causes to be delivered to an Equity Investor a Purchase
Notice such Equity Investor shall, on the Closing Date, fund the purchase price
of its Units by wire transfer of immediately available funds to the account set
forth in the Purchase Notice. Notwithstanding anything else set forth herein, no
Equity Investor shall be obligated to purchase Units unless a Purchase Notice is
given to the Equity Investor on or prior to the Expiration Date. If Bargo
delivers or causes to be delivered a Purchase Notice to one Equity Investor,
Bargo shall deliver or cause to be delivered a Purchase Notice to all of the
Equity Investors.
SECTION 2.2 PAYMENT OF PURCHASE PRICE. Upon receipt of the Purchase Notice,
each Equity Investor shall be severally obligated to pay the purchase price of
such Equity Investor's
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<PAGE> 9
Share of Units on the Closing Date. The purchase price for such Equity
Investor's Share of Units shall be paid on the Closing Date in immediately
available funds by wire transfer to the account specified in the Purchase
Notice.
SECTION 2.3 DELIVERY OF CERTIFICATES REPRESENTING UNITS PURCHASED. Upon
each Equity Investor's payment of his portion of the Purchase Price, Bargo shall
deliver or cause to be delivered to each Equity Investor certificates
representing the Common Stock and Preferred Stock comprising the Units purchased
registered in the name of the Equity Investor. Fractional shares of Common Stock
shall not be issued. Each Equity Investor who would otherwise be entitled to
fractional shares will receive a certificate for shares rounded up to the next
whole share.
SECTION 2.4. VOLUNTARY INCREASE IN SUBSCRIPTION AMOUNT BY AN EQUITY
INVESTOR. At any time prior to three Business Days before the Closing Date, an
Equity Investor may increase the number of Units it agrees to purchase by
notifying the Company in writing of such increase. Each Equity Investor shall
have the right (but not the obligation) to purchase up to such Equity Investor's
Increased Designated Percentage of the Total Number of Units. Each Equity
Investor may request that the Company increase its Designated Percentage,
specifying the maximum number of Units the Equity Investor proposes to purchase,
and if one or more Equity Investors elect not to increase the number of Units it
purchases, the Company will allocate Units among the Equity Investors requesting
to purchase additional Units pro rata based on the maximum number of Units they
requested to purchase. Each Equity Investor shall pay the purchase price of
additional Units purchased at the Closing in the same manner as such Equity
Investor pays the purchase price for the Units it is required to purchase. The
proceeds of purchase of additional Units by an Equity Investor shall be used to
repay amounts outstanding under the Tranche B Term Loan.
SECTION 2.5. ELECTION TO RECEIVE WARRANTS. Each Equity Investor, in lieu of
receiving shares of Common Stock upon purchase of Units, may elect to receive
Warrants to purchase all or a portion of such shares of Common Stock. In order
to receive Warrants instead of shares of Common Stock, an Equity Investor must
deliver to the Company a completed and signed Election to Receive Warrants in
the form of Exhibit D at least three Business Days prior to the Closing Date.
Upon receipt of payment for the Units, the Company shall issue to the Equity
Investor, in lieu of the number of shares of Common Stock specified in the
Election to Receive Warrants, Warrants to purchase a like number of shares of
Common Stock.
7
<PAGE> 10
SECTION 2.6 ELECTION TO PURCHASE SUBSTITUTED TRANCHE A TERM LOAN NOTES;
SUBSEQUENT CONVERSION.
(a) If a Purchase Notice is delivered to an Equity Investor prior to the
Expiration Date or such notice is delivered on the Expiration Date and a
Conversion Nullification Event has occurred on such date, each such Equity
Investor may elect to purchase Substituted Tranche A Term Loan Notes for all or
any portion of the purchase price the Equity Investor is otherwise obligated to
pay for its Units. Such right and option may be exercised by the Equity Investor
notifying the Company at least three Business Days prior to the Closing Date.
Such notice shall specify the principal amount of Substituted Tranche A Term
Loan Notes to be purchased. If the amount of Substituted Tranche A Term Loan
Notes purchased is less than the total purchase price of the Units which such
Equity Investor is obligated or entitled to purchase, the Company shall issue
and sell and such Equity Investor shall purchase, a number of Units for $1,000
per Unit equal to the difference.
(b) If a Purchase Notice is delivered to an Equity Investor prior to the
Expiration Date or such notice is delivered on the Expiration Date and a
Conversion Nullification event occurred as of such date, each such Equity
Investor shall have the right and option (but not the obligation) to purchase on
January 2, 2001, additional Substituted Tranche A Term Loan Notes in an original
principal amount equal to the purchase price of the Increased Designated
Percentage of the Total Number of Units that such Equity Investor would have
been entitled to purchase had the Purchase Notice been delivered on the
Expiration Date, as defined in Section 2.4. Such election shall be made by the
Equity Investor delivering written notice of such election to the Company on or
prior to December 27, 2000. As provided in the Credit Agreement, the proceeds of
such additional purchase of Substituted Tranche A Term Loan Notes will be used
to repay the Tranche B Term Loan and such Substituted Tranche A Term Loan Notes
may convert into Units in the manner provided for in the Credit Agreement.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF EQUITY INVESTORS. Each Equity
Investor, only with respect to itself, represents and warrants to Bargo that:
(a) Such corporate Equity Investor 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. Such
partnership Equity Investor 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 such Equity Investor are pending or, to the best
knowledge of such Equity Investor, threatened.
(b) Such Equity Investor has full power and authority to execute, deliver,
and perform this Agreement and the Ancillary Agreements to which it is a party
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance by such
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<PAGE> 11
Equity Investor of this Agreement and the Ancillary Agreements to which such
Equity Investor is a party, and the consummation by it of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate or partnership action, as applicable, of such Equity Investor. This
Agreement has been duly executed and delivered by such Equity Investor and
constitutes, and each Ancillary Agreement executed or to be executed by such
Equity Investor has been, or when executed will be, duly executed and delivered
by such Equity Investor and constitutes, or when executed and delivered will
constitute, the valid and legally binding obligation of such Equity Investor,
enforceable against such Equity Investor in accordance with its 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.
(c) The execution, delivery, and performance by such Equity Investor of
this Agreement and the Ancillary Agreements to which such Equity Investor is
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 documents), as
applicable, of such Equity Investor, (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 such Equity Investor is a party or by which such Equity Investor or any of
its properties may be bound or any Permit held by an Equity Investor, (iii)
result in the creation or imposition of any Encumbrance upon the properties of
such Equity Investor, or (iv) violate any Applicable Law binding upon the Equity
Investor, 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 Equity Investor or on the
ability of such Equity Investor to consummate the transactions contemplated
hereby.
(d) No consent, approval, order, or authorization of, or declaration,
filing, or registration with, any Governmental Entity is required to be obtained
or made by such Equity Investor in connection with the execution, delivery, or
performance by such Equity Investor of this Agreement and the Ancillary
Agreements to which such Equity Investor is party or the consummation by it of
the transactions contemplated hereby or thereby.
(e) Such Equity Investor has, and at all times prior to the termination of
the subscription will have, access to such funds as are necessary for the
consummation by it of the transactions contemplated hereby.
(f) Such Equity Investor represents that it has had an opportunity to ask
questions of and receive answers from Bargo regarding Bargo and its business,
assets, results of operation, and financial condition and the terms and
conditions of the issuance of the Units. Such Equity Investor further represents
that it has access to all filings made by Bargo with the Securities and
9
<PAGE> 12
Exchange Commission since January 1, 1999. The foregoing, however, shall not
limit or modify the representations and warranties of Bargo in Section 3.2 and
shall not limit the disclosure requirements of applicable federal and state
securities laws.
(h) Such Equity Investor acknowledges that it can bear the economic risk of
its investment in the Units 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 Units.
(i) Such Equity Investor understands that the Units will not have been
registered pursuant to the Securities Act of 1933, as amended ("Securities
Act"), or any applicable state securities laws, that the Units will be
characterized as "restricted securities" under federal securities laws, and that
under such laws and applicable regulations the Units cannot be sold or otherwise
disposed of without registration under the Securities Act or an exemption
therefrom. In this connection, each Equity Investor 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 Bargo (or a notation may be made in the
appropriate records of Bargo) in connection with the Units.
(j) It is agreed and understood by such Equity Investor that the
certificates representing the securities issued under this Agreement 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 SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. SUCH SECURITIES 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.
(k) Such Equity Investor is an accredited investor as defined in Regulation
D under the Securities Act. Such Equity Investor is acquiring Units 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.
(l) There are no proceedings pending or, to the best knowledge of such
Equity Investor, threatened seeking to restrain, prohibit, or obtain damages or
other relief in connection with this Agreement or the transactions contemplated
hereby.
10
<PAGE> 13
(m) Such Equity Investor and its affiliates have not 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. Such Equity Investor shall indemnify and hold
harmless Bargo 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 such Equity Investor or
any of its affiliates.
(n) No representation or warranty made by such Equity Investor in this
Agreement, and no statement of such Equity Investor contained in any document,
certificate, or other writing furnished or to be furnished by Equity Investor
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.
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF BARGO. Bargo hereby
represents and warrants to each Equity Investor as follows:
(a) Bargo 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 Bargo
are pending or, to the best knowledge of Bargo, threatened.
(b) Bargo 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.
(c) Bargo has full corporate power and corporate authority to execute,
deliver, and perform this Agreement and the Ancillary Agreements to which it is
a party and to consummate the transactions contemplated hereby and thereby. The
execution, delivery, and performance by Bargo of this Agreement and the
Ancillary Agreements 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 Bargo. This Agreement has been duly executed and
delivered by Bargo and constitutes, and each Ancillary Agreements executed or to
be executed by Bargo has been, or when executed will be, duly executed and
delivered by Bargo and constitute or when executed and delivered will
constitute, valid and legally binding obligations of Bargo, enforceable against
Bargo 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.
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<PAGE> 14
(d) The execution, delivery, and performance by Bargo of this Agreement and
the Ancillary Agreements 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 articles of
incorporation or bylaws or other governing instruments of Bargo, (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 Bargo or any subsidiary is a party or by which
Bargo or any subsidiary or any of their respective properties may be bound or
any Permit held by Bargo or any subsidiary, (iii) result in the creation or
imposition of any Encumbrance upon the properties of Bargo or any subsidiary, or
(iv) violate any Applicable Law binding upon Bargo 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 Bargo, and except, in the case of clause (i) above, for the
filing of Articles of Amendment to Bargo's Articles of Incorporation as
contemplated by Section 4.5 and in the case of clause (ii) above, for 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.
(e) The proceeds from the sale of the Units, Warrants and Substituted
Tranche A Term Loan Notes to the Equity Investors contemplated hereby shall be
used to repay the Tranche A Term Loans and, to the extent provided in Section
2.4, the Tranche B Term Loan.
ARTICLE IV. COVENANTS AND AGREEMENTS
SECTION 4.1. INDEMNITY AGREEMENT. Contemporaneously with the execution of
this
Agreement, the Company, BT and the Equity Investors have executed the Indemnity
Agreement in the form of Exhibit K.
SECTION 4.2 SHAREHOLDERS' AGREEMENT. Contemporaneously with the execution
of this Agreement, Bargo, BT and the Equity Investors have entered into the
First Amendment to Second Amended and Restated Shareholders' Agreement in the
form set forth as Exhibit C.
SECTION 4.3 STOCK PURCHASE AGREEMENT. Contemporaneously with the execution
of this Agreement, the Equity Investors and Bargo have entered into the
Amendment to Stock Purchase Agreement, such amendment in the form attached
hereto as Exhibit F.
SECTION 4.4 REGISTRATION RIGHTS AGREEMENT. Contemporaneously with the
execution of this Agreement, Bargo, BT and the Equity Investors have entered
into the Third Amendment to Registration Rights Agreement.
12
<PAGE> 15
SECTION 4.5 AMENDMENT TO ARTICLES OF INCORPORATION. The Company's board of
directors, holders of all of its outstanding Series B Preferred Stock and
holders of a majority of its Common Stock have approved an amendment to the
Company's Articles of Incorporation increasing the number of authorized shares
of Common Stock and Preferred Stock. The Company has filed an Information
Statement with the Securities and Exchange Commission pursuant to Section 14(c)
of the Securities Exchange Act of 1934, as amended, with respect to such
amendment and has mailed the Information Statement to its stockholders. The
Company agrees to file the Articles of Amendment to its Articles of
Incorporation and Certificate of Designation in the form of Exhibit B on or
before April 15, 2000.
SECTION 4.6 CONDITIONS. An Equity Investor's obligations hereunder shall be
subject to only the following: (i) compliance with Section 4.5; (ii) all fees
required to be paid under the commitment letter of the Equity Investors dated
February 22, 2000 shall have been paid; (iii) no court of competent jurisdiction
shall have issued an injunction or other order prohibiting the consummation of
the transactions contemplated by this Agreement; and (iv) the Equity Investor
shall not have been advised by written opinion of counsel (a copy of which has
been delivered to the Company) that the consummation of the transactions
contemplated hereby by such Equity Investor would be illegal; provided that in
the case of paragraph (iii), the Equity Investor will cooperate in good faith
with the Company to cause the injunction or order to be lifted or terminated
and, in the case of paragraph (iv), shall at the request of the Company, cause
another entity which wholly owns the Equity Investor, which is wholly owned by
the Equity Investor or which wholly owns such Equity Investor and other entity
to satisfy such Equity Investor's obligations hereunder, if such satisfaction
would not be illegal.
ARTICLE V. MISCELLANEOUS
SECTION 5.1 CHOICE OF LAW. This Agreement shall be governed by and
construed in accordance with the laws of Texas, notwithstanding principles of
conflicts of laws.
SECTION 5.2 ENTIRE AGREEMENT. This Agreement, including all schedules and
exhibits attached hereto, constitutes the entire agreement among the Parties
hereto with respect to the subject matter hereof, and may be amended only by a
writing executed by all Parties hereto.
SECTION 5.3 BINDING EFFECT. This Agreement and the representations and
warranties contained herein shall be binding upon the heirs, executors, legal
representatives, administrators, successors and permitted assigns of the
Parties.
SECTION 5.4 ASSIGNMENT. Except as provided in this Section, this Agreement
may not be assigned by any Party hereto without the prior written consent of all
other Parties. This Agreement may be assigned pursuant to the Assignment.
SECTION 5.5 NOTICES. All notices, requests and approval required by this
Agreement (i) shall be in writing, (ii) shall be addressed to the Parties as
indicated below unless notified in writing of a change in address, and (iii)
shall be deemed to have been given either when personally delivered or, if sent
by recognized overnight courier service, the next Business Day, or if sent by
mail (in which event it shall be sent postage prepaid), upon delivery thereof,
or, if
13
<PAGE> 16
sent by telegram, telex, or facsimile upon delivery thereof (if promptly
confirmed in writing). Notwithstanding the foregoing, the Purchase Notices shall
be deemed given when sent by facsimile transmission to the Equity Investor at
the fax number set forth below. The address of the Parties are as follows:
To Bargo:
Bargo Energy Company
700 Louisiana, Suite 3700
Houston, Texas 77002
Attn: Tim J. Goff and Lee Seekely
Facsimile: 713 236 9799
To EnCap Energy Capital Fund III, L.P.
c/o EnCap Investments, L.C.
1100 Louisiana, Suite 3150
Houston, Texas 77002
Attention: D. Martin Phillips
Facsimile: 713-659-6130
To EnCap Energy Capital Fund III-B, L.P.
c/o EnCap Investments, L.C.
1100 Louisiana, Suite 3150
Houston, Texas 77002
Attention: D. Martin Phillips
Facsimile: 713-659-6130
To BOCP Energy Partners, L.P.
c/o EnCap Investments, L.C.
1100 Louisiana, Suite 3150
Houston, Texas 77002
Attention: D. Martin Phillips
Facsimile: 713-659-6130
14
<PAGE> 17
To Energy Capital Investment Co. PLC
c/o EnCap Investments, L.C.
1100 Louisiana, Suite 3150
Houston, Texas 77002
Attention: Gary R. Petersen
Facsimile: 713-659-6130
To Kayne Anderson Energy Fund, L.P.
1100 Louisiana, Suite 4550
Houston, Texas 77002
Attention: Daniel M. Weingeist
Facsimile: 713-655-7355
To BancAmerica Capital Investors SBIC, L.P.
100 North Tryon Street, 25th Floor
Charlotte, North Carolina 28255
Attention: J. Travis Hain
Facsimile: 704-386-6432
To Eos Partners SBIC, L.P.
320 Park Avenue
New York, New York 10022
Attention: Brian D. Young
Facsimile: 212-832-5815
To Eos Partners SBIC II, L.P.
320 Park Avenue
New York, New York 10022
Attention: Brian D. Young
Facsimile: 212-832-5815
15
<PAGE> 18
To Eos Partners, L.P.
320 Park Avenue
New York, New York 10022
Attention: Brian D. Young
Facsimile: 212-832-5815
To SGC Capital Partners II LLC
1221 Avenue of the Americas, 15th Floor
New York, New York 10020
Attention: V. Frank Pottow
Facsimile: 212-278-5454
SECTION 5.6 NO MERGER. The Parties agree and acknowledge that none of the
warranties, representations and covenants contained in this Agreement shall
merge upon the execution and delivery of this Agreement by the Parties and that
all such warranties, representations, and covenants shall continue in full force
and effect after the date hereof.
SECTION 5.7 EXPENSES. The Company agrees to pay the Investors' reasonable
out-of-pocket expenses (including fees and expenses of legal counsel, including
in-house counsel, accountants and other professional advisors) incurred in
connection with the negotiation and settlement of this Agreement and the
Ancillary Agreements and the completion of the transactions contemplated hereby
and thereby.
SECTION 5.8 THIRD PARTY BENEFICIARIES. Except as expressly permitted in
this Agreement, the Parties do not intend, nor shall any clause in this
Agreement be interpreted to create, for any third party an obligation to or
benefit from any of the Parties.
SECTION 5.9 TRANSMISSION BY FACSIMILE. The Parties agree that this
Agreement may be transmitted by facsimile or such similar device and that the
reproduction of signatures by facsimile or such similar device shall be treated
as binding as if originals and each Party undertakes in writing to provide each,
and every other, Party with a copy of this Agreement bearing original
signatures.
SECTION 5.10 SEVERABILITY. If any provision of this Agreement is determined
to be invalid or unenforceable by an arbitrator or a court of competent
jurisdiction, that provision shall be deemed to be severed from this Agreement
only to the extent of the facts in dispute, and where permitted by such
determination, and the remaining provisions of this Agreement shall not be
affected and shall remain valid and enforceable, provided that in the event that
any portion of this Agreement is determined to be or becomes invalid or
unenforceable (the "offending portion"), the Parties shall negotiate, in good
faith, reasonable changes to this Agreement that are consistent with industry
practice and as shall reasonably preserve the Parties' intentions, benefits and
obligations that were the subject of such offending portion.
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<PAGE> 19
SECTION 5.11 WAIVER. Each Party may only waive any right it may have
pursuant to this Agreement in writing and subject to the notice provisions
hereof. Any waiver of a right, including any right under this Agreement, by any
Party shall not constitute a waiver of any other right by such Party. Failure or
delay by any Party to enforce any term or condition of this Agreement shall not
constitute a wavier of such term or condition.
SECTION 5.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts all of which taken together will constitute one and the same
instrument.
SECTION 5.13 REMEDIES. Except as otherwise provided in this Agreement, all
remedies provided for in this Agreement shall be cumulative and in addition to
and not in lieu of any other remedies available to any Party at law, in equity
or otherwise.
SECTION 5.14 CONSTRUCTION. Each of the Parties hereto acknowledges that it
has had the benefit of legal counsel of its own choice and has been afforded an
opportunity to review this Agreement with its legal counsel and that this
Agreement shall be construed as if jointly drafted by the Parties hereto.
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<PAGE> 20
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date above first written.
ENERGY CAPITAL INVESTMENT COMPANY PLC
By:
--------------------------------------
Gary R. Petersen
Director
ENCAP ENERGY CAPITAL FUND III, L.P.
By: EnCap Investments L.L.C., General
Partner
By:
--------------------------------------
D. Martin Phillips
Managing Director
ENCAP ENERGY CAPITAL FUND III-B, L.P.
By: EnCap Investments L.L.C., General
Partner
By:
--------------------------------------
D. Martin Phillips
Managing Director
BOCP ENERGY PARTNERS, L.P.
By: EnCap Investments L.L.C., Manager
By:
--------------------------------------
D. Martin Phillips
Managing Director
SUBSCRIPTION AGREEMENT
18
<PAGE> 21
EOS PARTNERS, L.P.
By:
--------------------------------------
Brian Young
General Partner
EOS PARTNERS SBIC, L.P.
By: Eos SBIC General, L.P., its general
partner
By: Eos SBIC, Inc., its general
partner
By:
--------------------------------------
Brian Young
President
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:
--------------------------------------
Brian Young
President
SGC PARTNERS II LLC
By:
--------------------------------------
V. Frank Pottow
Managing Director
SUBSCRIPTION AGREEMENT
19
<PAGE> 22
BANCAMERICA CAPITAL INVESTORS SBIC I,
L.P.
By: BancAmerica Capital Management SBIC
I, LLC, its general partner
By: BancAmerica Capital Management I,
L.P., its sole member
By: BACM I GP, LLC, its general
partner
By:
--------------------------------------
J. Travis Hain
Managing Director
KAYNE ANDERSON ENERGY FUND, L.P.
By: Kayne Anderson Capital Advisors,
L.P., its General Partner
By: Kayne Anderson Investment
Management, Inc., its General
Partner
By:
--------------------------------------
Daniel M. Weingeist
Managing Director
BARGO ENERGY COMPANY
By:
--------------------------------------
Jonathan M. Clarkson
President
SUBSCRIPTION AGREEMENT
20
<PAGE> 1
EXHIBIT 10.2
FIRST AMENDMENT TO THE SECOND AMENDED
AND RESTATED SHAREHOLDERS' AGREEMENT
This First Amendment to the Second Amended and Restated Shareholders'
Agreement (the "Amendment") is made and entered into this 30th day of March,
2000, by and among Bargo Energy Company, a Texas corporation (the "Company"),and
Bankers Trust Company, a New York banking corporation ("BT") and each of the
following (collectively, "Existing Shareholders" and together with BT, the
"Shareholders"), 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"), BER Partnership L.P., a Texas limited
partnership ("BER"), TJG Investments, Inc., a Texas corporation ("TJG"), BEC
Partnership, a Texas general partnership ("BEC"), Tim J. Goff ("Goff"), Thomas
Barrow ("Barrow"), James E. Sowell ("Sowell"), BOC Operating Corporation, Inc.,
a Texas corporation ("BOC"), 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" together with Eos Partners and Eos SBIC, are collectively referred to as
"EOS"), SGC Partners II LLC, a Delaware limited liability company ("SGCP"), and
evidences the following:
RECITALS
A. The Company and the Existing Shareholders entered into the Second
Amended and Restated Shareholders' Agreement (the "Agreement") on May 14, 1999,
pursuant to which such parties agreed, among other things to vote their shares
in favor of the election of the Designated Nominees (as defined in the
Agreement);
B. The Company and certain of the Existing Shareholders have entered
into a Subscription Agreement dated as of even date herewith ("Subscription
Agreement"), pursuant to which such Shareholders have subscribed to purchase
Units (as defined in the Subscription Agreement);
C. The Company, BT and certain other lenders have entered into a Credit
Agreement, dated March 30, 2000, pursuant to which, under the circumstances set
forth therein, certain loans made by BT may be converted into Units;
<PAGE> 2
D. The parties to the Agreement desire to amend the Agreement as herein
provided to include the Units and to make BT a party to the Agreement;
AGREEMENT
NOW, THEREFORE, for and in consideration of the foregoing Recitals and
mutual covenants contained herein, the sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby agree
as follows:
Section 1 AMENDMENTS TO DEFINED TERMS. The following defined terms in
the Agreement are amended to read as follows:
(a) The definition of Preferred Shares in Recital B. to the Agreement
shall be deleted.
(b) The following definitions shall be added to Section 1 of the
Agreement
"PREFERRED SHARES" means collectively the Preferred Series B Shares and
the Preferred Series C Shares;
"PREFERRED SERIES B SHARES" means the Company's Cumulative Redeemable
Preferred Stock, Series B, $.01 par value.
"PREFERRED SERIES C SHARES" means the Company's Cumulative Redeemable
Preferred Stock, Series C, $.01 par value.
(c) The definition of Bargo Group shall be amended to read as follows:
"BARGO GROUP" shall mean TJG, BEC, BER, BOC, Goff, Barrow, Sowell and
any transferee of the member of the Bargo Group that executes or is required to
execute an Addendum Agreement.
(d) The definition "Shareholder" shall be amended to add BT.
Section 2 AMENDMENTS TO THE RIGHT OF FIRST REFUSAL; TAG-ALONG RIGHTS;
AND DRAG ALONG RIGHTS. The following parts of Section 4 of the Agreement are
amended to read as follows:
(a) Section 4(f) shall be amended to read as follows:
"If any Shareholder desires to make a Disposition of any
Preferred Series B 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 Series B Shareholder") shall offer such
shares (the Preferred Series B Shares proposed to be transferred being called
the "Subject Preferred Series B Shares") for sale at the Purchase Price to the
other Shareholders who then own Preferred Series B Shares ("Preferred Series B
Shareholders"), all in accordance with the following provisions of this Section
4(f).
<PAGE> 3
(i) The Selling Preferred Series B Shareholder shall
deliver a written notice ("Preferred Series B Stock Offering
Notice") to the other Preferred Series B Shareholders to sell
the Subject Preferred Series B Shares to the Preferred Series
B Shareholders pursuant to this Agreement, indicating the
number of Subject Preferred Series B Shares and the proposed
Purchase Price. Once the Preferred Series B Stock Offering
Notice is delivered, the offer by the Selling Preferred Series
B Shareholder may not be withdrawn prior to the expiration of
the options of the other Preferred Series B Shareholders, as
provided in this Section 4(f). Within 15 days from the receipt
of such Preferred Series B Stock Offering Notice, the other
Preferred Series B Shareholders may deliver to the Selling
Preferred Series B Shareholder written notice accepting the
offer in the Preferred Series B Stock Offering Notice,
pursuant to which each such other Preferred Series B
Shareholder may purchase no more than the number of shares
equal to the product of: (A) the total number of Subject
Preferred Series B Shares, multiplied by (B) the fraction
equal to the total number of Preferred Series B Shares owned
by such other Preferred Series B Shareholder divided by the
aggregate number of Preferred Series B Shares owned by all
other Preferred Series B Shareholders. Any such reply to the
Selling Preferred Series B Shareholder shall constitute an
agreement binding upon the Selling Preferred Series B
Shareholder and the Preferred Series B Shareholders delivering
such reply to sell and purchase the stated portion of the
Subject Preferred Series B 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 Series B 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 Series B Shareholders do not elect to purchase all of
the Subject Preferred Series B Shares (such Subject Preferred Series B Shares
not being purchased are referred to herein as the "Remaining Subject Preferred
Series B Shares"), then the Selling Preferred Series B Shareholder shall cause
the proposed transferee (the "Proposed Preferred Series B Purchaser") to offer
in writing (a "Preferred Series B Sale Notice"), not less than 30 nor more than
120 days prior to the consummation of any proposed Disposition, to the Preferred
Series B Shareholders other than the Selling Preferred Series B Shareholder (the
"Tag Along Preferred Series B Shareholders") to purchase from each Tag Along
Preferred Series B Shareholder a number of the Preferred Series B Shares held by
each Tag Along Preferred Series B Shareholder equal to the product of: (i) the
total number of Remaining Subject Preferred Series B Shares which a proposed
transferee has offered to purchase, multiplied by (ii) the fraction equal to the
total number of Preferred Series B Shares which a Tag Along Preferred Series B
Shareholder
<PAGE> 4
owns, divided by the aggregate number of Preferred Series B Shares then
outstanding. The Preferred Series B Sale Notice shall set forth: (i) the name of
the Selling Preferred Series B Shareholder and the number of Subject Preferred
Series B Shares proposed to be transferred, (ii) the name and address of the
Proposed Preferred Series B Purchaser, (iii) the proposed amount and form of
consideration and terms and conditions of payment offered by such Proposed
Preferred Series B Purchaser and (iv) that the Proposed Preferred Series B
Purchaser has been informed of the tag along right provided for in this Section
4(f) and has agreed to purchase Preferred Series B Shares owned by any Tag Along
Preferred Series B Shareholder in accordance with the terms hereof. The tag
along right may be exercised by any Tag Along Preferred Series B Shareholder by
delivery of a written notice to the Proposed Preferred Series B Purchaser and
Selling Preferred Series B Shareholder (the "Preferred Series B Tag Along
Notice") within 30 days following its receipt of the Preferred Series B Sale
Notice. The Preferred Series B Tag Along Notice shall state the amount of
Preferred Series B Shares (the "Tag Along Preferred Series B Shares") that such
Tag Along Preferred Series B Shareholder proposes to include in such transfer to
the Proposed Preferred Series B Purchaser. To the extent that a Tag Along
Preferred Series B Shareholder accepts such tag along offer, the number of
Preferred Series B Shares to be sold to the Proposed Preferred Series B
Purchaser by the Selling Preferred Series B Shareholder shall be reduced to the
extent necessary to comply with this Section 4(f). In the event that the
Proposed Preferred Series B Purchaser does not purchase all Tag Along Preferred
Series B Shares from the Tag Along Preferred Series B Shareholders on the same
terms and conditions as specified in the Preferred Series B Sale Notice, then
the Selling Preferred Series B Shareholder shall not be permitted to sell any
Subject Preferred Series B Shares to the Proposed Preferred Series B Purchaser
in the proposed transfer. The closing of any purchase from the Tag Along
Preferred Series B Shareholders shall occur contemporaneously with the purchase
and sale of the Subject Preferred Series B Shares (as adjusted hereunder) or at
such other time as such Tag Along Preferred Series B Shareholders and the
Proposed Preferred Series B Purchaser shall agree.
If the other Preferred Series B Shareholders do not elect to purchase
all Subject Preferred Series B Shares, the Selling Preferred Series B
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
Series B Shares to the purchaser and at the price and upon the terms stated in
the Preferred Series B Offering Notice, but only if such sale shall be completed
within a period of 90 days from the date of delivery of the Preferred Series B
Offering Notice to the other Preferred Series B Shareholders. If the Selling
Preferred Series B 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
Series B Shares owned by the Selling Preferred Series B Shareholder."
(b) The following shall be added as Section 4(g) of the Agreement:
"If any Shareholder desires to make a Disposition of any
Preferred Series C Shares owned or held by it pursuant to a bona fide offer
(other than in an Exempt Transfer), such
<PAGE> 5
Shareholder (for purposes of this Section 4(g), a "Selling Preferred Series C
Shareholder") shall offer such shares (the Preferred Series C Shares proposed to
be transferred being called the "Subject Preferred Series C Shares") for sale at
the Purchase Price to the other Shareholders who then own Preferred Series C
Shares ("Preferred Series C Shareholders"), all in accordance with the following
provisions of this Section 4(g).
(i) The Selling Preferred Series C Shareholder shall
deliver a written notice ("Preferred Series C Stock Offering
Notice") to the other Preferred Series C Shareholders to sell
the Subject Preferred Series C Shares to the Preferred Series
C Shareholders pursuant to this Agreement, indicating the
number of Subject Preferred Series C Shares and the proposed
Purchase Price. Once the Preferred Series C Stock Offering
Notice is delivered, the offer by the Selling Preferred Series
C Shareholder may not be withdrawn prior to the expiration of
the options of the other Preferred Series C Shareholders, as
provided in this Section 4(g). Within 15 days from the receipt
of such Preferred Series C Stock Offering Notice, the other
Preferred Series C Shareholders may deliver to the Selling
Preferred Series C Shareholder written notice accepting the
offer in the Preferred Series C Stock Offering Notice,
pursuant to which each such other Preferred Series C
Shareholder may purchase no more than the number of shares
equal to the product of: (A) the total number of Subject
Preferred Series C Shares, multiplied by (B) the fraction
equal to the total number of Preferred Series C Shares owned
by such other Preferred Series C Shareholder divided by the
aggregate number of Preferred Series C Shares owned by all
other Preferred Series C Shareholders. Any such reply to the
Selling Preferred Series C Shareholder shall constitute an
agreement binding upon the Selling Preferred Series C
Shareholder and the Preferred Series C Shareholders delivering
such reply to sell and purchase the stated portion of the
Subject Preferred Series C 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 Series C 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 Series C Shareholders do not elect to purchase all of
the Subject Preferred Series C Shares (such Subject Preferred Series C Shares
not being purchased are referred to herein as the "Remaining Subject Preferred
Series C Shares"), then the Selling Preferred Series C Shareholder shall cause
the proposed transferee (the "Proposed Preferred Series C Purchaser") to offer
in writing (a "Preferred Series C Sale Notice"), not less than 30 nor more than
120 days prior to the consummation of any proposed Disposition, to the Preferred
Series C Shareholders other than the Selling Preferred Series C Shareholder (the
"Tag Along Preferred
<PAGE> 6
Series C Shareholders") to purchase from each Tag Along Preferred Series C
Shareholder a number of the Preferred Series C Shares held by each Tag Along
Preferred Series C Shareholder equal to the product of: (i) the total number of
Remaining Subject Preferred Series C Shares which a proposed transferee has
offered to purchase, multiplied by (ii) the fraction equal to the total number
of Preferred Series C Shares which a Tag Along Preferred Series C Shareholder
owns, divided by the aggregate number of Preferred Series C Shares then
outstanding. The Preferred Series C Sale Notice shall set forth: (i) the name of
the Selling Preferred Series C Shareholder and the number of Subject Preferred
Series C Shares proposed to be transferred, (ii) the name and address of the
Proposed Preferred Series C Purchaser, (iii) the proposed amount and form of
consideration and terms and conditions of payment offered by such Proposed
Preferred Series C Purchaser and (iv) that the Proposed Preferred Series C
Purchaser has been informed of the tag along right provided for in this Section
4(g) and has agreed to purchase Preferred Series C Shares owned by any Tag Along
Preferred Series C Shareholder in accordance with the terms hereof. The tag
along right may be exercised by any Tag Along Preferred Series C Shareholder by
delivery of a written notice to the Proposed Preferred Series C Purchaser and
Selling Preferred Series C Shareholder (the "Preferred Series C Tag Along
Notice") within 30 days following its receipt of the Preferred Series C Sale
Notice. The Preferred Series C Tag Along Notice shall state the amount of
Preferred Series C Shares (the "Tag Along Preferred Series C Shares") that such
Tag Along Preferred Series C Shareholder proposes to include in such transfer to
the Proposed Preferred Series C Purchaser. To the extent that a Tag Along
Preferred Series C Shareholder accepts such tag along offer, the number of
Preferred Series C Shares to be sold to the Proposed Preferred Series C
Purchaser by the Selling Preferred Series C Shareholder shall be reduced to the
extent necessary to comply with this Section 4(g). In the event that the
Proposed Preferred Series C Purchaser does not purchase all Tag Along Preferred
Series C Shares from the Tag Along Preferred Series C Shareholders on the same
terms and conditions as specified in the Preferred Series C Sale Notice, then
the Selling Preferred Series C Shareholder shall not be permitted to sell any
Subject Preferred Series C Shares to the Proposed Preferred Series C Purchaser
in the proposed transfer. The closing of any purchase from the Tag Along
Preferred Series C Shareholders shall occur contemporaneously with the purchase
and sale of the Subject Preferred Series C Shares (as adjusted hereunder) or at
such other time as such Tag Along Preferred Series C Shareholders and the
Proposed Preferred Series C Purchaser shall agree.
If the other Preferred Series C Shareholders do not elect to purchase
all Subject Preferred Series C Shares, the Selling Preferred Series C
Shareholder shall, subject to the other provisions of this Section 4(g), 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
Series C Shares to the purchaser and at the price and upon the terms stated in
the Preferred Series C Offering Notice, but only if such sale shall be completed
within a period of 90 days from the date of delivery of the Preferred Series C
Offering Notice to the other Preferred Series C Shareholders. If the Selling
Preferred Series C Shareholder does not complete such sale within such 90 day
period, all the provisions of this Agreement, including the provisions of this
Section 4(g), shall apply to any future sale or offer for sale of such Preferred
Series C Shares owned by the Selling Preferred Series C Shareholder."
<PAGE> 7
Section 3 CONSENT OF PREFERRED SERIES B SHAREHOLDER. Each Preferred
Series B Shareholder consents and agrees that dividends and other distributions
may be paid with respect to the Preferred Series C Shares, and the Preferred
Series C Shares may be redeemed as follows:
(a) While the Preferred Series C Shares are outstanding, the
Corporation shall be required to redeem Preferred Series B Shares pursuant to
Section 6(b) as if the first sentence of Section 6(b) was replaced with the
following two sentences:
"Following the closing of a Qualified Public Offering, the Corporation
shall redeem for cash, in the manner provided for in subsection (a), a
number of shares of Series B Preferred calculated by dividing the
Series B Excess Offering Proceeds by the Redemption Price of the Series
B Preferred. The Series B Excess Offering Proceeds shall equal the
Excess Offering Proceeds multiplied by a fraction the numerator of
which is the Stated Value plus per share accrued and unpaid dividends
on the Series B Preferred and the denominator of which is the Stated
Value plus per share accrued and unpaid dividends on the Series C
Preferred plus the Stated Value plus per share accrued and unpaid
dividends on the Series B Preferred.
(b) While the Preferred Series C Shares are outstanding,
distributions, dividends and the definition of Excess Offering Proceeds shall
include the term "plus Parity Securities" after the words Series B Preferred in
clause (ii) thereof and repurchases of Preferred Series B Shares and Parity
Stock shall be made as if Section 3(e) of the Certificate of Designations of
Preferred Stock for the Preferred Series B Shares read as follows:
(e) So long as any shares of Series B Preferred are
outstanding, no dividend or other distribution, whether in liquidation
or otherwise, shall be declared or paid, or set apart for payment on or
in respect of, any Junior Securities, nor shall any Junior Securities
be redeemed, purchased or otherwise acquired for any consideration
prior to the stated maturity thereof (or any money be paid to a sinking
fund or otherwise set apart for the purchase or redemption of any such
Junior Securities), without the prior consent of the holders of a
majority of the outstanding shares of Series B Preferred voting
together as a separate class. So long as any shares of Series B
Preferred are outstanding and without the prior consent of the holders
of a majority of the outstanding shares of Series B Preferred voting
together as a separate class, no dividend or other distribution,
whether in liquidation or otherwise, shall be declared or paid, or set
apart for payment on or in respect of, any Parity Securities, nor shall
any Parity Securities be redeemed, purchased or otherwise acquired for
any consideration prior to the stated maturity thereof (or any money be
paid to a sinking fund or otherwise set apart for the purchase or
redemption of any such Parity Securities), unless (i) if there are any
accrued and unpaid dividends on the Series B Preferred Stock or such
Parity Stock, such dividend or distribution shall be allocated to pay
such accrued and unpaid dividends the Series B Preferred and such
Parity Stock, pro rata based on the amount of such accrued and unpaid
<PAGE> 8
dividends and (ii) if all accrued and unpaid dividends have been paid
on the Series B Preferred and such Parity Stock, such dividends and
distributions shall be allocated pro rata to the holders of the Series
B Preferred and the Parity Stock based on the respective liquidation
preferences thereof.
(c) The Shareholders agree that the Preferred Series C Shares
are Parity Securities with the Preferred Series B Shares.
Section 4 EFFECTIVE DATE; BINDING EFFECT. This Amendment shall become
effective on the day the Company issues shares of Preferred Series C Shares as
provided in the Subscription Agreement, dated of even date, to which this
Amendment is attached as Exhibit C ("Subscription Agreement"). Following
effectiveness, each Investor and the Company by execution of this Agreement
shall be bound by and subject to the terms and obligations under the Agreement,
as amended by this Amendment. If this Amendment does not become effective within
six business days following the Expiration Date (as defined in the Subscription
Agreement) it shall become null and void and shall never take effect.
Section 5 NO OTHER CHANGES. Except as explicitly amended by the
Amendment, the terms, conditions, rights and obligations under the Agreement
shall remain in full force and effect.
Section 6 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.
[Remainder of page intentionally left blank]
<PAGE> 9
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date above first written.
BARGO ENERGY COMPANY
By:
-----------------------------------
Jonathan M. Clarkson
President
--------------------------------------
B. Carl Price
--------------------------------------
Don Wm. Reynolds
ENERGY CAPITAL INVESTMENT COMPANY PLC
By:
-----------------------------------
Gary R. Petersen
Director
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By:
-----------------------------------
D. Martin Phillips
Managing Director
BER PARTNERSHIP L.P.
By: BOC Operating Company, Inc.
By:
-----------------------------------
Tim J. Goff
President
<PAGE> 10
TJG INVESTMENTS, INC.
By:
-----------------------------------
Tim J. Goff
President
BEC PARTNERSHIP
By:
-----------------------------------
Tim J. Goff
Manager
- --------------------------------------
Tim J. Goff
- --------------------------------------
Thomas Barrow
- --------------------------------------
James E. Sowell
BOC OPERATING COMPANY, INC.
By:
-----------------------------------
Tim J. Goff
President
<PAGE> 11
ENCAP ENERGY CAPITAL FUND III-B, L.P.
By: EnCap Investments L.L.C., General Partner
By:
-----------------------------------
D. Martin Phillips
Managing Director
BOCP ENERGY PARTNERS, L.P.
By: EnCap Investments L.L.C., Manager
By:
-----------------------------------
Gary R. Petersen
Managing Director
ENCAP ENERGY CAPITAL FUND III, L.P.
By:
-----------------------------------
D. Martin Phillips
Managing Director
KAYNE ANDERSON ENERGY FUND, L.P.
By: Kayne Anderson Capital Advisors, L.P., its General Partner
By: Kayne Anderson Investment Management, Inc., its General Partner
By:
-----------------------------------
Daniel M. Weingeist
Managing Director
<PAGE> 12
BANCAMERICA CAPITAL INVESTORS SBIC I, L.P.
By: BancAmerica Capital Management SBIC I, LLC, its general partner
By: BancAmerica Capital Management I, L.P., its sole member
By: BACM I GP, LLC, its general partner
By:
-----------------------------------
J. Travis Hain
Managing Director
EOS PARTNERS, L.P.
By:
-----------------------------------
Brian D. Young
General Partner
EOS PARTNERS SBIC, L.P.
By: Eos SBIC General, L.P., its general partner
By: Eos SBIC, Inc., its general partner
By:
-----------------------------------
Brian D. Young
President
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:
-----------------------------------
Brian D. Young
President
<PAGE> 13
SGC PARTNERS II LLC
By:
-----------------------------------
V. Frank Pottow
Managing Director
BANKERS TRUST COMPANY
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 1
EXHIBIT 10.3
THIRD AMENDMENT TO THE REGISTRATION RIGHTS AGREEMENT
This Third Amendment to the Registration Rights Agreement (the
"Amendment") is made and entered into this 30th day of March, 2000, 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 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"), SGC Partners II LLC, a Delaware limited liability company ("SGCP") and
Banker's Trust Company, a New York banking corporation ("BT") (each
individually, an "Investor" and collectively, the "Investors"), EnCap Equity
1994 Limited Partnership, a Texas limited partnership ("EnCap LP") and Bargo
Energy Company, a Texas corporation (the "Company"), 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 the Registration
Rights Agreement dated December 15, 1998 and as Amended by the Second Amendment
to the Registration Rights Agreement dated May 14, 1999 (as amended, the
"Agreement"), covering the shares of Common Stock issued to Energy PLC and EnCap
LP and the New Common Shares issued to the Investors;
B. The Company and the Investors (other than BT) have entered into a
Subscription Agreement dated March 30, 2000 ("Subscription Agreement"), pursuant
to which the Investors have subscribed to purchase up to _____ shares of Common
Stock ("Subscription Common Shares")
C. The Company, BT and certain other lenders have entered into a Credit
Agreement, dated March 30, 2000, pursuant to which, under the circumstances set
forth therein, certain loans made by BT may be converted into equity securities,
including up to shares of Common Stock ("Conversion Common Shares " and together
with the Subscription Common Shares, the "Additional Common Shares");
D. The parties to the Agreement desire to amend the Agreement to cover
the Additional Common Shares, to add BT as a party to the Agreement and to make
certain other changes.
<PAGE> 2
AGREEMENT
NOW, THEREFORE, for and in consideration of the foregoing Recitals and
mutual covenants contained herein, the sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby agree
as follows:
Section 1 AMENDMENTS TO THE AGREEMENT. Section 1(a) of the Agreement is
amended as follows:
(a) Clause (i) of the first line in the definition of "Registrable
Securities" shall be replaced with:
"(i) the Fund I Shares, the New Common Shares, the Subscription Common
Shares and the Conversion Common Shares and"
(b) There shall be added to Section 1(a) a definition of BT,
"Conversion Common Shares" and "Subscription Common Shares" as follows:
"BT" means Bankers Trust Company, a New York banking corporation.
"Conversion Common Shares" shall mean all of the shares of Common Stock
issued by the Company pursuant to the conversion of Tranche B Term Loans as
defined under the Credit Agreement, dated March 30, 2000, among the Company, BT
and the other lenders party thereto.
"'Subscription Common Shares' shall mean all of the shares of Common
Stock issued by the Company pursuant to that certain Subscription Agreement,
dated March 30, 2000, by and among the Company, Energy PLC, EnCap III-B, BOCP,
EnCap III, Kayne, BACI, Eos Partners, Eos SBIC,, Eos SBIC II, and SGCP."
Section 2 BINDING EFFECT. Each Investor, EnCap LP and the Company by
execution of this Agreement shall be bound by and subject to the terms and
obligations under the Agreement, as amended by this Amendment.
Section 3 BT AS A PARTY. By execution of this Agreement, BT agrees to
be bound by and subject to the terms and obligations under the Agreement, as
amended by this Agreement, as if an original party thereto, from and after the
date on which it shall acquire any BT Shares and for so long as it shall hold
the same.
Section 4 NO OTHER CHANGES. Except as explicitly amended by the
Amendment, the terms, conditions, rights and obligations under the Agreement
shall remain in full force and effect.
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.
Section 6 NOTICES. All notices given to BT under this Amendment or the
Agreement shall be given in this matter provided in the Credit Agreement.
<PAGE> 3
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date above first written.
ENERGY CAPITAL INVESTMENT COMPANY PLC
By:
-------------------------------------------
Gary R. Petersen
Director
ENCAP ENERGY CAPITAL FUND III, L.P.
By: EnCap Investments L.L.C., General Partner
By:
-------------------------------------------
D. Martin Phillips
Managing Director
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: EnCap Investments L.L.C., General Partner
By:
-------------------------------------------
D. Martin Phillips
Managing Director
ENCAP ENERGY CAPITAL FUND III-B, L.P.
By: EnCap Investments L.L.C., General Partner
By:
-------------------------------------------
D. Martin Phillips
Managing Director
<PAGE> 4
BOCP ENERGY PARTNERS, L.P.
By: EnCap Investments L.L.C., Manager
By:
-------------------------------------------
D. Martin Phillips
Managing Director
EOS PARTNERS, L.P.
By:
-------------------------------------------
Brian D. Young
General Partner
EOS PARTNERS SBIC, L.P.
By: Eos SBIC General, L.P., its general partner
By: Eos SBIC, Inc., its general partner
By:
-------------------------------------------
Brian D. Young
President
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:
-------------------------------------------
Brian D. Young
President
<PAGE> 5
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 sole member
By: BACM I GP, LLC, its general partner
By:
-------------------------------------------
J. Travis Hain
Managing Director
KAYNE ANDERSON ENERGY FUND, L.P.
By: Kayne Anderson Capital Advisors, L.P., its General Partner
By: Kayne Anderson Investment Management, Inc., its
General Partner
By:
-------------------------------------------
Daniel M. Weingeist
Managing Director
<PAGE> 6
BARGO ENERGY COMPANY
By:
-------------------------------------------
Jonathan M. Clarkson
President
BANKERS TRUST COMPANY
By:
-------------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.4
FIRST AMENDMENT TO THE STOCK PURCHASE AGREEMENT
This First Amendment to the Stock Purchase Agreement (the "Amendment")
is made and entered into this 31st day of March, 2000, 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 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") (each
individually, an "Buyer" and collectively, the "Buyers") and Bargo Energy
Company, a Texas corporation (the "Company"), and evidences the following:
RECITALS
A. The Company and the Investors entered into a Stock Purchase
Agreement ("Agreement") on May 14, 1999, pursuant to which the Investors
purchased shares of Common Stock (as defined in the Agreement) and shares of
Preferred Stock (as defined in the Agreement) from the Company;
B. The Company and the Investors have entered into a Subscription
Agreement dated even date herewith ("Subscription Agreement"), pursuant to which
the Investors have subscribed to purchase Units (as defined in the Subscription
Agreement);
C. The parties to the Agreement desire to amend the Agreement as herein
provided to release all or a portion of the Investor's Common Stock which is
subject to certain provisions of the Agreement allowing repurchase of the shares
by the Company.
AGREEMENT
NOW, THEREFORE, for and in consideration of the foregoing Recitals and
mutual covenants contained herein, the sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby agree
as follows:
Section 1 AMENDMENT TO COMMON STOCK CLAW-BACK. The first sentence of
Article X of the Agreement shall be replaced with:
<PAGE> 2
"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-sixteenth (6.25%) of the total shares of Common Stock originally
issued to such Buyer pursuant to this Agreement plus any Other Securities,
subject to adjustment as provided herein, for a total purchase price of $100
(the "Redemption Price"); provided, however, if a Buyer purchases any Series C
Redeemable Preferred Stock pursuant to the Subscription Agreement, dated March
[ ], 2000, between the Buyer and the Company, the Company's right to purchase
Common Stock from such Buyer will terminate."
Section 2 BINDING EFFECT. Each Investor and the Company by execution of
this Agreement shall be bound by and subject to the terms and obligations under
the Agreement, as amended by this Amendment.
Section 3 NO OTHER CHANGES. Except as explicitly amended by the
Amendment, the terms, conditions, rights and obligations under the Agreement
shall remain in full force and effect.
Section 4 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> 3
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date above first written.
ENERGY CAPITAL INVESTMENT COMPANY PLC
By:
------------------------------------------
Gary R. Petersen
Director
ENCAP ENERGY CAPITAL FUND III, L.P.
By: EnCap Investments L.L.C., General Partner
By:
------------------------------------------
D. Martin Phillips
Managing Director
ENCAP ENERGY CAPITAL FUND III-B, L.P.
By: EnCap Investments L.L.C., General Partner
By:
------------------------------------------
D. Martin Phillips
Managing Director
BOCP ENERGY PARTNERS, L.P.
By: EnCap Investments L.L.C., Manager
By:
------------------------------------------
D. Martin Phillips
Managing Director
<PAGE> 4
EOS PARTNERS, L.P.
By:
------------------------------------------
Brian D. Young
General Partner
EOS PARTNERS SBIC, L.P.
By: Eos SBIC General, L.P., its general partner
By: Eos SBIC, Inc., its general partner
By:
------------------------------------------
Brian D. Young
President
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:
------------------------------------------
Brian D. Young
President
SGC PARTNERS II LLC
By:
------------------------------------------
V. Frank Pottow
Managing Director
<PAGE> 5
BANCAMERICA CAPITAL INVESTORS SBIC I, L.P.
By: BancAmerica Capital Management SBIC I, LLC, its general partner
By: BancAmerica Capital Management I, L.P., its sole member
By: BACM I GP, LLC, its general partner
By:
------------------------------------------
J. Travis Hain
Managing Director
KAYNE ANDERSON ENERGY FUND, L.P.
By: Kayne Anderson Capital Advisors, L.P., its General Partner
By: Kayne Anderson Investment Management, Inc., its General Partner
By:
------------------------------------------
Daniel M. Weingeist
Managing Director
BARGO ENERGY COMPANY
By:
------------------------------------------
Jonathan M. Clarkson
President
<PAGE> 1
EXHIBIT 10.5
ASSIGNMENT, ACKNOWLEDGMENT, AGREEMENT AND WAIVER
THIS Assignment, Acknowledgment, and Waiver (this "Agreement") dated
as of the 31st day of March, 2000, is among the persons listed as equity
investors on the signature pages hereof, (each an "Equity Investor" and
collectively the "Equity Investors"); BARGO ENERGY COMPANY, a Texas corporation
("Issuer") and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as administrative
agent (in such capacity, the "Administrative Agent") for those Lenders
("Lenders") listed on Annex I attached hereto with Agent acting in such
capacity on behalf of such Lenders pursuant to the document also described on
Annex I (the Equity Investors, Issuer and Administrative Agent collectively
being hereinafter collectively called the "Parties"),
W I T N E S S E T H:
WHEREAS, the Equity Investors have severally agreed pursuant to a
Subscription Agreement dated as of March 31, 2000, between the Issuer and each
Equity Investor (as the same may from time to time be amended, renewed,
supplemented or otherwise modified, the "Subscription Agreement") to purchase
shares of Preferred Stock and, at the election of the Equity Investor, Common
Stock or Warrants (collectively, the "Securities"), from the Issuer through
payment of the Equity Investor's share of the aggregate purchase price
("Purchase Price"), as set forth in the Subscription Agreement; and
WHEREAS, in the Subscription Agreement the Equity Investors have
committed to purchase the Securities for an aggregate Purchase Price of
$22,500,000 and have the right and option to purchase up to an aggregate of
$45,000,000 of the Securities; and
WHEREAS, Issuer has borrowed $22,500,000 from the Lenders under
Tranche A Term Loans (as defined in the Credit Agreement, dated as of March 31,
2000 among Issuer, Administrative Agent and the other lenders party thereto
("Credit Agreement")), evidenced by the Tranche A Term Notes (as defined in the
Credit Agreement); and
WHEREAS, to induce the Lenders to make the Tranche A Term Loans,
Issuer has agreed to assign its rights under the Subscription Agreement to the
Administrative Agent on behalf of the Lenders, to enter into an escrow
arrangement ("Escrow") with the Administrative Agent and the Equity Investors
into which certificates and other documents representing the Securities, and
related agreements, shall be placed, with the Administrative Agent acting as
the escrow agent (in such capacity, the "Escrow Agent") as further described
below; and
WHEREAS, the Equity Investors have agreed to acknowledge and agree to
the aforementioned assignment, to enter into the Escrow with the Issuer, the
Administrative Agent and the Escrow Agent in order to fund their subscription
pursuant to the Subscription Agreement and in order to carry out the intentions
of this Agreement; and
<PAGE> 2
WHEREAS, the Equity Investors desire to waive any defenses they may
have against the Issuer with respect to the payment by them of their respective
Purchase Price other than satisfaction of the conditions to their respective
obligations set forth in Section 4.6 of the Subscription Agreement, and
recognize the Administrative Agent as a third-party beneficiary of the
Subscription Agreement;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Parties hereby agree as follows:
SECTION 1
ASSIGNMENT OF SUBSCRIPTION AGREEMENT
1.1 Assignment. Issuer, for good and valuable consideration, the
receipt of which is hereby acknowledged, hereby GRANTS, TRANSFERS and ASSIGNS
to the Agent for the benefit of the Lenders all of its rights, titles, and
interests in and to and arising from the Subscription Agreement, and any and
all other contracts or agreements, whether now or hereafter existing relating
to the purchase of the Securities by any Equity Investor, together with all
revenues, monies, proceeds, benefits, and payments due and to become due the
Issuer and accruing and to accrue unto the Issuer under and by virtue of the
Subscription Agreement, or any such other contract or agreement, and any and
all amendments and renewals thereof and supplements thereto.
SECTION 2
REPRESENTATIONS, WARRANTIES, AND COVENANTS OF ISSUER
2.1 Representations and Warranties. The Issuer represents and
warrants, now and continuing throughout the term of this Agreement (which
representations and warranties will survive the delivery of this Agreement)
that:
(a) the Issuer is the sole owner of its interests in the
Subscription Agreement;
(b) the Subscription Agreement is valid and enforceable
and has not been altered, modified or amended in any
manner whatsoever save as herein set forth;
(c) neither the Issuer nor the Equity Investors are in
default under any of the terms, covenants or
conditions thereof;
(d) the Issuer's interest under the Subscription
Agreement is assignable pursuant to the terms
hereof; and
(e) the Subscription Agreement commits the Equity
Investors to purchase Securities for an aggregate
Purchase Price of $22,500,000 and grants the
<PAGE> 3
Equity Investors the right and option to purchase
additional Securities for an aggregate Purchase
Price of $45,000,000.
2.2 Covenants and Agreements of Issuer. The Issuer covenants and
agrees with the Administrative Agent:
(a) to observe and perform all the obligations imposed
upon it under the Subscription Agreement and not to
do or permit to be done anything to impair the
security thereof;
(b) not to execute any other assignment of its interests
in the Subscription Agreement;
(c) not to alter, amend, modify or otherwise change the
terms of the Subscription Agreement without the prior
written consent of the Administrative Agent, or
cancel or terminate the Subscription Agreement or
accept a surrender thereof, or pledge, convey or
otherwise transfer or suffer or permit a pledge,
conveyance or other transfer of the Securities or of
any interest therein so as to effect directly or
indirectly, proximately or remotely, a cancellation,
termination or diminution of the obligations of the
Equity Investors thereunder;
(d) to execute and deliver, and to require the Equity
Investors to execute and deliver, at the request of
the Administrative Agent, all such further
assurances, acknowledgments and certificates for the
purposes hereof as the Administrative Agent shall
from time to time require; and
(e) that if the Issuer shall receive or become entitled
to receive any payments or other sums (whether paid
in cash or other property), distributions or payments
of any kind or description with respect to or on
account of the Subscription Agreement, to accept same
as agent for the Administrative Agent, to hold same
in trust for the Administrative Agent, and to
forthwith deliver same to the Administrative Agent in
the form received, with the endorsement of the Issuer
when necessary, to be applied by the Administrative
Agent pursuant to Section 6.
<PAGE> 4
SECTION 3
ACKNOWLEDGMENT, COVENANTS AND AGREEMENT OF EQUITY INVESTORS
3.1 Acknowledgment. Each of the Equity Investors acknowledges the
assignment by the Issuer of its rights, titles, and interests in and to the
Subscription Agreement pursuant to Section 1 above.
3.2 Covenants and Agreements of Equity Investors. Each Equity
Investor covenants and agrees with the Administrative Agent:
(a) following receipt by Equity Investor of the Purchase
Notice (as defined in the Subscription Agreement) in
accordance with the Subscription Agreement and
provided (i) the Expiration Date (as defined in the
Subscription Agreement) has not occurred and (ii) the
conditions precedent to the Equity Investor's
obligations under the Subscription Agreement set
forth in Section 4.6 have been satisfied, to pay such
Equity Investor's Purchase Price as provided in the
Subscription Agreement into the Escrow with the
Escrow Agent on or before the Closing Date;
(b) to observe and perform all the obligations imposed
upon it under its Subscription Agreement and not to
do or permit to be done anything to impair the
security thereof;
(c) not to alter, amend, modify or otherwise change the
terms of the Subscription Agreement without the prior
written consent of the Administrative Agent, or
cancel or terminate the Subscription Agreement or
accept a surrender thereof, or pledge, convey or
otherwise transfer or suffer or permit a pledge,
conveyance or other transfer of its rights in and to
the Securities or any interest therein so as to
effect, directly or indirectly, proximately or
remotely, a cancellation, termination, or diminution
of the obligations of the Issuer thereunder; and
(d) to execute and deliver at the request of the
Administrative Agent all such further assurances,
acknowledgments and certificates for the purposes
hereof as the Administrative Agent shall from time
to time reasonably require.
3.3 Notices to Administrative Agent. Each Equity Investor
acknowledges that the Administrative Agent may act for and on behalf of the
Issuer under the Subscription Agreement. Upon receipt of a Purchase Notice,
each Equity Investor will cause copies of all notices or requests required or
permitted under the Subscription Agreement, including an Election to Receive
Warrants contemplated by Section 2.5 of the Subscription Agreement, to be
delivered to the Administrative Agent at the same time as such notices or
requests are delivered to the Issuer.
<PAGE> 5
SECTION 4
AGREEMENTS OF ADMINISTRATIVE AGENT
4.1 Withdrawal from Escrow; Delivery to Equity Investors. If,
prior to the Expiration Date, the Tranche A Equity Subscription Date (as
defined in the Credit Agreement) occurs and the Tranche A Loan has not been
repaid in full, the Administrative Agent may, and, at the request of the
Company shall, deliver a certificate executed by an officer of the
Administrative Agent to the Escrow Agent as contemplated by Section 4(a) of the
Escrow Agreement stating that the Tranche A Equity Subscription Date has
occurred and that amounts remain outstanding on the Tranche A Loan, and
withdraw from Escrow the Purchase Notices. The Administrative Agent shall
complete the blanks in the Purchase Notice by filling in the aggregate Purchase
Price, the Total Number of Units, the Investor's Share of Units, the number of
shares of Common Stock to be purchased by the Equity Investor, the Closing Date
and the wire transfer instructions for payment of the Purchase Price, all in
accordance with the terms of the Subscription Agreement. The Administrative
Agent shall promptly deliver a Purchase Notice to each Equity Investor as
provided in the Subscription Agreement. Notwithstanding anything set forth
herein, no Equity Investor shall have an obligation to purchase Units if the
Purchase Notice is not delivered to the Equity Investor prior to the Expiration
Date, as defined in the Subscription Agreement.
4.2 Actions on the Closing Date. On the Closing Date (as defined
in the Subscription Agreement), the Administrative Agent shall deliver a
certificate executed by an officer of the Administrative Agent setting for the
number of shares of Preferred Stock and Common Stock or Warrants (based on
copies of the Election to Receive Warrants received by the Administrative
Agent) being purchased by each Equity Investor, and directing the Escrow Agent
to deliver such securities to the Equity Investor upon receipt of the Purchase
Price payable by the Equity Investor.
4.3 Release. Upon the earlier of payment in full of the Tranche A
Term Loan or if Purchase Notices have not been delivered to the Equity
Investors, the Expiration Date (as defined in the Subscription Agreement), the
Administrative Agent shall withdraw the Escrowed Items from the Escrow and
promptly return them to the Issuer, and shall assign any rights it may have
under the Subscription Agreement to the Issuer.
SECTION 5
ESCROW
5.1 Escrow Agreement. The parties hereto agree to enter into the
Escrow Agreement in the form thereof attached hereto as Exhibit A.
5.2 Escrow Items. Issuer has placed into Escrow and delivered to
the Escrow Agent the Escrow Items (other than the Purchase Price) as defined in
the Escrow Agreement.
5.3 No Retention. The holding of the Preferred Stock by the
Escrow Agent pursuant to the Escrow Agreement shall not be deemed a retention
by the Administrative Agent or the Lenders in satisfaction of the Indebtedness.
<PAGE> 6
SECTION 6
PAYMENT ON NOTES
6.1 Payments. The Agent hereby agrees that upon receipt of the
Purchase Price for Securities from the Escrow Agent, the Agent will apply such
funds toward repayment of the Tranche A Term Loan Notes corresponding to such
Purchase Price (and the Tranche B Term Loan Notes, under the circumstances
provided in Section 2.4 of the Subscription Agreement).
SECTION 7
RIGHTS, DUTIES AND POWERS OF ADMINISTRATIVE AGENT
7.1 Rights and Powers. The Issuer does hereby irrevocably
authorize and empower the Administrative Agent to do the following, by and on
behalf of the Issuer, in the Issuer's name, place and stead: (a) demand,
receipt for and receive all sums of money to which this Agreement relates; (b)
commence, maintain or discontinue any action, suit or other proceeding which it
deems advisable to collect or enforce the payment of the sums, monies,
benefits, revenues, proceeds and payments assigned hereby; (c) to endorse in
the name of the Issuer any checks, drafts or other instruments payable to the
Issuer or to its order, as may be issued in whole or in partial payment in
connection with the Subscription Agreement; (d) to deliver the Purchase Notice,
Preferred Stock Certificates and Warrants to the Equity Investors, to receive
the Purchase Price from the Equity Investors, to deliver the Transfer Agent
Instructions to the Issuer's transfer agent and to otherwise take such actions
as the Administrative Agent shall deem appropriate hereunder and under the
Subscription Agreement to deliver the Securities in exchange for the Purchase
Price; and (e) to fill in the blanks in the Escrow Items as provided in the
Subscription Agreement and Article 4.
7.2 Failure to Collect or Receive Money. Failure of the
Administrative Agent to collect or receive any sums of money to which it might
be entitled to hereunder, or failure to take any action to collect any sums
shall not in anywise prejudice, release or relinquish any of the rights of the
Administrative Agent hereunder.
7.3 No Duty to Act. Except as provided in Sections 4.2 and 4.3,
the Administrative Agent shall not be under any duty or obligation to take any
action, bring any suit or act in any regard in order to enforce the collection
of any or all of the monies assigned hereunder; and, although it has the right
to do so, failure on the part of the Administrative Agent to do so shall not
relieve, diminish or affect the rights hereunder given or the monies hereby
assigned.
7.4 Third-Party Beneficiary. The Issuer and each Equity Investor
hereby agree that the Administrative Agent is and shall be a third-party
beneficiary of the Subscription Agreement, and each of them hereby further
agrees and covenants to execute any and all other instruments or documents
necessary to name the Administrative Agent as a third-party beneficiary of the
Subscription Agreement.
<PAGE> 7
SECTION 8
MISCELLANEOUS
8.1 Agreement Irrevocable. This Agreement may not be revoked by
the Issuer or any Equity Investor and shall continue to be effective with
respect to debt under the Tranche A Term Loans and Tranche B Term Loan arising
or created after any attempted revocation by the Issuer and/or any Equity
Investor. This Agreement shall remain in full force and effect until the
earlier to occur of (a) full and final payment of the Tranche A Term Loans is
made and (b) if Purchase Notices have not been delivered as provided in the
Subscription Agreement, the Expiration Date. 8.2 Issuer's Obligation to Pay.
Anything herein contained shall not in anywise limit or be construed as
limiting the Administrative Agent or the Lenders to collect the Tranche A Term
Loans or any other note, item, sum, or amount secured and to be secured hereby
only out of the revenues, monies, proceeds, benefits, and payments accruing and
to accrue unto the Issuer, under and by virtue of the Subscription Agreement,
but it is expressly understood and provided that all the Indebtedness and
amounts secured and to be secured hereby do, and shall constitute absolute and
unconditional obligations upon the Issuer to pay to the Administrative Agent
and the Lenders.
8.3 Notices. The Purchase Notices shall be given as provided in
the Subscription Agreement. All notices and other communications provided for
herein (including, without limitation, any modifications of, or waivers or
consents under, this Agreement) shall be given or made by telex, telecopy,
courier or U.S. Mail or in writing and telexed, telecopied, mailed or delivered
to the intended recipient at the "Address for Notices" specified below its name
on the signature pages hereof or in the Loan Documents or, as to any party, at
such other address as shall be designated by such party in a notice to each
other party. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted, if
transmitted before 1:00 p.m. local time on a Business Day (as defined in the
Credit Agreement) (otherwise on the next succeeding Business Day) by telex or
telecopier and evidence or confirmation of receipt is obtained, or personally
delivered or, in the case of a mailed notice, three (3) Business Days after the
date deposited in the mails, postage prepaid, in each case given or addressed
as aforesaid.
8.4 Amendments, Etc. Any provision of this Agreement or the
Escrow Agreement may be amended, modified or waived with the Issuer's, the
Administrative Agent's and each Equity Investor's prior written consent.
8.5 Third-Party Beneficiaries. There shall be no third-party
beneficiaries of the Subscription Agreement other than the Administrative Agent
as provided in subsection 7.4 above.
8.6 Agreements Cumulative. Any and all other instruments executed
or to be executed in connection with or as security for the payment of the
Indebtedness mentioned herein and secured and to be secured hereby, in law or
in equity shall be cumulative one of the other and not exclusive.
<PAGE> 8
8.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas.
8.8 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
8.9 Section Headings. The words "herein," "hereof," "hereunder"
and other words of similar import when used in this Agreement refer to this
Agreement as a whole, and not to any particular section or subsection. Any
reference herein to a Section or subsection shall be deemed to refer to the
applicable Section or subsection of this Agreement unless otherwise stated
herein. Any reference herein to an annex or exhibit shall be deemed to refer to
the applicable annex or exhibit attached hereto unless otherwise stated herein.
Captions and section headings appearing herein are included solely for
convenience of reference and are not intended to affect the interpretation of
any provision of this Agreement.
8.10 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors and
permitted assigns.
8.11 Several Obligations. The respective obligations of the Equity
Investors hereunder are several and not joint. The failure of any Equity
Investor to perform any of its obligations hereunder shall not relieve the
other Equity Investors from any of their respective obligations hereunder.
<PAGE> 9
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
ISSUER:
BARGO ENERGY COMPANY
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Address for Notices:
---------------------
---------------------
---------------------
ADMINISTRATIVE AGENT:
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION, as
Administrative Agent
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Address for Notices:
---------------------
---------------------
---------------------
ENERGY CAPITAL INVESTMENT COMPANY PLC
By:
--------------------------------------
Gary R. Petersen
Director
<PAGE> 10
ENCAP ENERGY CAPITAL FUND III, L.P.
By: EnCap Investments L.L.C., General
Partner
By:
--------------------------------------
D. Martin Phillips
Managing Director
ENCAP ENERGY CAPITAL FUND III-B, L.P.
By: EnCap Investments L.L.C., General
Partner
By:
--------------------------------------
D. Martin Phillips
Managing Director
BOCP ENERGY PARTNERS, L.P.
By: EnCap Investments L.L.C., Manager
By:
--------------------------------------
D. Martin Phillips
Managing Director
EOS PARTNERS, L.P.
By:
--------------------------------------
Brian Young
General Partner
<PAGE> 11
EOS PARTNERS SBIC, L.P.
By: Eos SBIC General, L.P., its general
partner
By: Eos SBIC, Inc., its general
partner
By:
--------------------------------------
Brian Young
President
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:
--------------------------------------
Brian Young
President
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 sole member
By: BACM I GP, LLC, its general
partner
By:
--------------------------------------
J. Travis Hain
Managing Director
<PAGE> 12
KAYNE ANDERSON ENERGY FUND, L.P.
By: Kayne Anderson Capital Advisors,
L.P., its General Partner
By: Kayne Anderson Investment
Management, Inc., its General
Partner
By:
--------------------------------------
Daniel M. Weingeist
Managing Director
BARGO ENERGY COMPANY
By:
--------------------------------------
Jonathan M. Clarkson
President
<PAGE> 1
EXHIBIT 10.6
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated as of March _____, 2000 ("Escrow
Agreement"), is by and among BARGO ENERGY COMPANY, a Texas corporation
("Issuer"); the persons listed on Exhibit A hereto (each an "Equity Investor"
and collectively the "Equity Investors"); CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as administrative agent (in such capacity, the "Administrative
Agent") for each of the lenders (the "Lenders") now or hereafter party to the
hereinafter defined Credit Agreement; and CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, acting for the benefit of the Issuer, each Equity Investor and the
Administrative Agent (acting in such capacity, the "Escrow Agent").
BACKGROUND
A. Issuer, Equity Investors and Administrative Agent have entered into
that certain Assignment, Acknowledgment, Agreement and Waiver dated as of March
_____, 2000 (the "Underlying Agreement") whereby, pursuant to the terms thereof,
Issuer, Equity Investors and Administrative Agent agreed to enter into this
Escrow Agreement with the Escrow Agent.
B. In order to establish the escrow of the Escrow Items (hereinafter
defined) and to effect the provisions of the Underlying Agreement, the parties
hereto have entered into this Escrow Agreement.
STATEMENT OF AGREEMENT
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, for
themselves, their successors and assigns, hereby agree as follows:
1. DEFINITIONS. The following terms shall have the following
meanings when used herein:
COMMON STOCK means the common stock, $0.01 par value, of the
Issuer.
ESCROW ITEMS shall mean the Preferred Stock Certificates, the
Warrants, the Transfer Agent Instructions, the Purchase Notice, and the Purchase
Price deposited with Escrow Agent pursuant to this Escrow Agreement, together
with any interest and other income thereon.
PREFERRED STOCK means the Cumulative Redeemable Preferred
Stock, Series C, of the Issuer, $0.01 par value per share.
<PAGE> 2
PREFERRED STOCK CERTIFICATES means certificates representing
shares of Preferred Stock one registered in the name of each Equity Investor,
duly executed on behalf of the Issuer, with the number of shares represented by
such certificates left blank.
PURCHASE NOTICE means notices executed by the Issuer under the
Subscription Agreement accepting the subscription of the Equity Investors to
purchase shares of Preferred Stock, Common Stock or Warrants to purchase Common
Stock.
SUBSCRIPTION AGREEMENT shall mean the Subscription Agreement
dated as of March _____, 2000, between the Issuer and each Equity Investor,
relating to the purchase of shares of Preferred Stock and, at the election of
the Equity Investor, Common Stock or Warrants by such Equity Investor from the
Issuer, and any and all amendments, supplements, modifications, additions,
renewals and/or restatements thereof.
SUBSCRIPTION FUNDS shall mean the purchase price of Preferred
Stock and Common Stock or Warrants paid by each Equity Investor pursuant to the
Subscription Agreement.
TRANSFER AGENT INSTRUCTIONS means a letter addressed to the
transfer agent for the Common Stock of the Issuer instructing the transfer agent
to issue certificates representing shares of Common Stock to each Equity
Investor pursuant to the Subscription Agreement, and setting forth the number of
shares of Common Stock issued to each Equity Investor.
WARRANT AGREEMENT means the warrant agreement to purchase
shares of Common Stock of the Issuer one issued in the name of each Equity
Investor, duly executed on behalf of the Issuer, with the number of shares of
common stock issuable upon exercise of the warrants left blank.
WARRANTS means warrants, exercisable for ten years, to
purchase shares of Common Stock of the Issuer for $0.01 per share.
2. APPOINTMENT OF AND ACCEPTANCE BY ESCROW AGENT. Issuer, each
Equity Investor and Administrative Agent hereby appoint Escrow Agent to serve as
escrow agent hereunder. Escrow Agent hereby accepts such appointment and, upon
deposit of the Escrow Items in accordance with Section 3 below, agrees to hold
and disburse the Escrow Items in accordance with this Escrow Agreement.
3. DEPOSITS INTO ESCROW OF ESCROW ITEMS.
(a) Issuer has delivered the Preferred Stock
Certificates, the Warrant Agreements and the Transfer
Agent Instructions to the Escrow Agent to be held on
behalf of the Issuer.
(b) Following receipt of the Purchase Notice from the
Administrative Agent (in accordance with the
Subscription Agreement) and provided (i) the
Expiration Date did not occur prior to such delivery
and (ii) the conditions
<PAGE> 3
precedent to the Equity Investor's obligations set
forth in Section 4.5 of the Subscription Notice have
been satisfied, each Equity Investor will deposit its
Subscription Funds with the Escrow Agent to the
following account on or before the Closing Date (as
defined in the Subscription Agreement):
Chase Bank of Texas, National Association
ABA# _________________
Account#________________
ATTN: ______________________________
Re: Bargo Energy Company
4. DISBURSEMENTS FROM ESCROW. The funds and documents
deposited into Escrow pursuant hereto shall be distributed as follows:
(a) Upon receipt, prior to the Expiration Date (as defined in
the Subscription Agreement), of a certificate executed by an officer of
the Administrative Agent stating that the Tranche A Equity Subscription
Date has occurred and that amounts remain outstanding on the Tranche A
Loan, the Escrow Agent shall deliver the Purchase Notices to the
Administrative Agent. The Escrow Agent shall send copies of such
Purchase Notices and the Administrative Agent's certificate delivered
under this subsection (a) to the Issuer.
(b) Upon receipt of Subscription Funds from an Equity Investor
and a certificate executed by an officer of the Administrative Agent
which states the number of shares of Preferred Stock and Common Stock
or Warrants that the Equity Investor has purchased from the Issuer, the
Escrow Agent shall (i) deliver by wire transfer to the Administrative
Agent the amount of the Subscription Funds, (ii) complete the Preferred
Stock Certificate by filling in the number of shares of Preferred Stock
purchased by the Equity Investor (as indicated in the Administrative
Agent's certificate) and deliver to such Equity Investor the Preferred
Stock Certificate, (iii) if the Administrative Agent's certificate
states that the Equity Investor has purchased Common Stock, complete
the Transfer Agent Instructions by filling in the number of shares of
Common Stock purchased (as indicated in such the Administrative Agent's
certificate) and send to the transfer agent the Transfer Agent
Instructions instructing the transfer agent to issue certificates to
the Equity Investor representing shares of Common Stock and (iii) if
the Administrative Agent's certificate states that the Equity Investor
has purchased Warrants, complete the Warrant by filling in the number
of shares of Common Stock subject to the Warrants (as indicated in the
Administrative Agent's certificate) and send the Warrants to the Equity
Investor. The Escrow Agent shall send copies of the Preferred Stock
Certificates, Transfer Agent Instructions or Warrants sent to each
Equity Investor, as well as a copy of the Administrative Agent's
certificate delivered under this subsection (b) to the Issuer.
<PAGE> 4
(c) Upon receipt of a certificate executed by an officer of
the Administrative Agent stating that (a) the Tranche A Term Loan has
been paid in full or (b) the Expiration Date (as defined in the
Subscription Agreement) has occurred prior to Purchase Notices being
delivered to the Equity Investors, the Escrow Agent shall deliver all
Escrowed Items not previously distributed from Escrow to the Issuer.
5. SUSPENSION OF PERFORMANCE; DISBURSEMENT INTO COURT. If, at any time,
there shall exist any dispute between Issuer, any Equity Investor or the
Administrative Agent with respect to the holding or disposition of any portion
of the Escrow Items or any other obligations of Escrow Agent hereunder, or if at
any time Escrow Agent is unable to determine, to Escrow Agent's sole
satisfaction, the proper disposition of any portion of the Escrow Items or
Escrow Agent's proper actions with respect to its obligations hereunder, or if
the Administrative Agent has not within 30 days of the furnishing by Escrow
Agent of a notice of resignation pursuant to Section 6 hereof, appointed a
successor Escrow Agent to act hereunder, then Escrow Agent may, in its sole
discretion, take either or both of the following actions:
a. suspend the performance of any of its obligations
(including without limitation any disbursement obligations) under this Escrow
Agreement until such dispute or uncertainty shall be resolved to the sole
satisfaction of Escrow Agent or until a successor Escrow Agent shall have been
appointed (as the case may be).
b. petition (by means of an interpleader action or any other
appropriate method) any court of competent jurisdiction in any venue convenient
to Escrow Agent, for instructions with respect to such dispute or uncertainty,
and to the extent required by law, pay into such court, for holding and
disposition in accordance with the instructions of such court, all Escrow Items
held by it, after deduction and payment to Escrow Agent of all fees and expenses
(including court costs and attorneys' fees) payable to, incurred by, or expected
to be incurred by Escrow Agent in connection with the performance of its duties
and the exercise of its rights hereunder.
Escrow Agent shall have no liability to Issuer, any Equity Investor,
Administrative Agent or any other person with respect to any such suspension of
performance or disbursement into court, specifically including any liability or
claimed liability that may arise, or be alleged to have arisen, out of or as a
result of any delay in the disbursement of the Escrow Items held by it or any
delay in or with respect to any other action required or requested of Escrow
Agent.
6. RESIGNATION AND REMOVAL OF ESCROW AGENT. Escrow Agent may resign
from the performance of its duties hereunder at any time by giving ten (10)
days' prior written notice to the Administrative Agent or may be removed, with
or without cause, by Issuer, Equity Investors and Administrative Agent, acting
jointly, at any time by the giving of ten (10) days' prior written notice to
Escrow Agent. Such resignation or removal shall take effect upon the appointment
of a successor Escrow Agent as provided hereinbelow. Upon any such notice of
resignation or removal, the Issuer, Equity Investors and Administrative Agent,
acting jointly, shall appoint a successor Escrow Agent hereunder, which shall be
a commercial bank, trust company or other
<PAGE> 5
financial institution with a combined capital and surplus in excess of
$10,000,000. Upon the acceptance in writing of any appointment as Escrow Agent
hereunder by a successor Escrow Agent, such successor Escrow Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Escrow Agent, and the retiring Escrow Agent shall be
discharged from its duties and obligations under this Escrow Agreement, but
shall not be discharged from any liability for actions taken as Escrow Agent
hereunder prior to such succession. After any retiring Escrow Agent's
resignation or removal, the provisions of this Escrow Agreement shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Escrow Agent under this Escrow Agreement. The retiring Escrow Agent shall
transmit all records pertaining to the Escrow Items and shall deliver all Escrow
Items held by it to the successor Escrow Agent, after making copies of such
records as the retiring Escrow Agent deems advisable and after deduction and
payment to the retiring Escrow Agent of all fees and expenses (including court
costs and attorneys' fees) payable to, incurred by, or expected to be incurred
by the retiring Escrow Agent in connection with the performance of its duties
and the exercise of its rights hereunder.
7. LIABILITY OF ESCROW AGENT.
a. Escrow Agent shall have no liability or obligation with
respect to the Escrow Items except for Escrow Agent's willful misconduct or
gross negligence. Escrow Agent's sole responsibility shall be for the
safekeeping, and disbursement of the Escrow Items in accordance with the terms
of this Escrow Agreement. Escrow Agent shall have no implied duties or
obligations and shall not be charged with knowledge or notice of any fact or
circumstance not specifically set forth herein. Escrow Agent may rely upon any
instrument, not only as to its due execution, validity and effectiveness, but
also as to the truth and accuracy of any information contained therein, which
Escrow Agent shall in good faith believe to be genuine, to have been signed or
presented by the person or parties purporting to sign the same and to conform to
the provisions of this Escrow Agreement. In no event shall Escrow Agent be
liable for incidental, indirect, special, consequential or punitive damages.
Escrow Agent shall not be obligated to take any legal action or commence any
proceeding in connection with the Escrow Items, any account in which Escrow
Items are deposited, this Escrow Agreement or the Underlying Agreement, or to
appear in, prosecute or defend any such legal action or proceeding. Escrow Agent
may consult legal counsel selected by it in the event of any dispute or question
as to the construction of any of the provisions hereof or of any other agreement
or of its duties hereunder, or relating to any dispute involving any party
hereto, and shall incur no liability and shall be fully indemnified from any
liability whatsoever in acting in accordance with the opinion or instruction of
such counsel. Issuer and Equity Investors, jointly and severally, shall promptly
pay, upon demand, the reasonable fees and expenses of any such counsel.
b. The Escrow Agent is authorized, in its sole discretion, to comply
with orders issued or process entered by any court with respect to the Escrow
Items, without determination by the Escrow Agent of such court's jurisdiction in
the matter. If any portion of the Escrow Items is at any time attached,
garnished or levied upon under any court order, or in case the payment,
assignment, transfer, conveyance or delivery of any such property shall be
stayed or
<PAGE> 6
enjoined by any court order, or in case any order, judgment or decree shall be
made or entered by any court affecting such property or any part thereof, then
and in any such event, the Escrow Agent is authorized, in its sole discretion,
to rely upon and comply with any such order, writ, judgment or decree which it
is advised by legal counsel selected by it is binding upon it without the need
for appeal or other action; and if the Escrow Agent complies with any such
order, writ, judgment or decree, it shall not be liable to any of the parties
hereto or to any other person or entity by reason of such compliance even though
such order, writ, judgment or decree may be subsequently reversed, modified,
annulled, set aside or vacated.
8. INDEMNIFICATION OF ESCROW AGENT. From and at all times
after the date of this Escrow Agreement, Issuer and Equity Investors, jointly
and severally, shall, to the fullest extent permitted by law and to the extent
provided herein, indemnify and hold harmless Escrow Agent and each director (in
his or her capacity as a director of Escrow Agent), officer, employee, attorney,
agent and affiliate of Escrow Agent (collectively, the "Indemnified Parties")
against any and all actions, claims (whether or not valid), losses, damages,
liabilities, costs and expenses of any kind or nature whatsoever (including
without limitation reasonable attorneys' fees, costs and expenses) incurred by
or asserted against any of the Indemnified Parties from and after the date
hereof, whether direct, indirect or consequential, as a result of or arising
from or in any way relating to any claim, demand, suit, action or proceeding
(including any inquiry or investigation) by any person, including without
limitation Issuer or any Equity Investor, whether threatened or initiated,
asserting a claim for any legal or equitable remedy against any person under any
statute or regulation, including, but not limited to, any federal or state
securities laws, or under any common law or equitable cause or otherwise,
arising from or in connection with the negotiation, preparation, execution,
performance or failure of performance of this Escrow Agreement or any
transactions contemplated herein, whether or not any such Indemnified Party is a
party to any such action, proceeding, suit or the target of any such inquiry or
investigation; provided, however, that no Indemnified Party shall have the right
to be indemnified hereunder for any liability finally determined by a court of
competent jurisdiction, subject to no further appeal, to have resulted solely
from the gross negligence or willful misconduct of such Indemnified Party. If
any such action or claim shall be brought or asserted against any Indemnified
Party, such Indemnified Party shall promptly notify Issuer and Equity Investors
in writing, and Issuer and Equity Investors shall assume the defense thereof,
including the employment of counsel and the payment of all expenses. Such
Indemnified Party shall, in its sole discretion, have the right to employ
separate counsel (who may be selected by such Indemnified Party in its sole
discretion) in any such action and to participate in the defense thereof, and
the fees and expenses of such counsel shall be paid by such Indemnified Party,
except that Issuer and Equity Investors shall be required to pay such fees and
expenses if (a) Issuer and/or Equity Investors agree to pay such fees and
expenses, or (b) Issuer and/or Equity Investors shall fail to assume the defense
of such action or proceeding or shall fail, in the sole discretion of such
Indemnified Party, to employ counsel satisfactory to the Indemnified Party in
any such action or proceeding, (c) Issuer and/or Equity Investors is the
plaintiff in any such action or proceeding or (d) the named or potential parties
to any such action or proceeding (including any potentially impleaded parties)
include both Indemnified Party and Issuer and/or Equity Investors, and
Indemnified Party shall have been advised by counsel that there may be one or
more legal defenses available to it which are
<PAGE> 7
different from or additional to those available to Issuer and/or Equity
Investors. Issuer and/or Equity Investors shall be jointly and severally liable
to pay fees and expenses of counsel pursuant to the preceding sentence, except
that any obligation to pay under clause (a) shall apply only to the party so
agreeing. All such fees and expenses payable by Issuer and/or Equity Investors
pursuant to the foregoing sentence shall be paid from time to time as incurred,
both in advance of and after the final disposition of such action or claim. All
of the foregoing losses, damages, costs and expenses of the Indemnified Parties
shall be payable by Issuer and/or Equity Investors, jointly and severally, to
the extent of the Escrow Items upon demand by such Indemnified Party. Upon
exhaustion of the Escrow Items, the indemnification obligations of Issuer and
Equity Investors hereunder shall be borne by Issuer and Equity Investors,
jointly and severally. The obligations of Issuer and Equity Investors under this
Section 8 shall survive any termination of this Escrow Agreement, and the
resignation or removal of Escrow Agent shall be independent of any obligation of
the Escrow Agent.
The parties agree that neither the payment by Issuer or Equity
Investors of any claim by Escrow Agent for indemnification hereunder nor the
disbursement of any amounts to Escrow Agent from the Escrow Items in respect of
a claim by Escrow Agent for indemnification shall impair, limit, modify or
affect, as between Issuer and Equity Investors, the respective rights and
obligations of Issuer, on the one hand, and Equity Investors, on the other hand,
under the Underlying Agreement.
9. FEES AND EXPENSES OF ESCROW AGENT. None.
10. NOTICE. All notices required to be given hereunder shall be in
writing, shall be given by telecopier, with original to follow, and shall be
deemed given when received by telecopier at the address for notices specified
under the parties signatures on the signature pages hereof until such time as
the parties hereto designate a different or additional address or addresses.
11. AMENDMENT OR WAIVER. This Escrow Agreement may be changed, waived,
discharged or terminated only by a writing signed by the Issuer, Equity
Investors, Administrative Agent and Escrow Agent. No delay or omission by any
party in exercising any right with respect hereto shall operate as a waiver. A
waiver on any one occasion shall not be construed as a bar to, or waiver of, any
right or remedy on any future occasion.
12. SEVERABILITY. To the extent any provision of this Escrow Agreement
is prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Escrow Agreement.
13. GOVERNING LAW. This Escrow Agreement shall be construed and
interpreted in accordance with the internal laws of the State of Texas.
14. ENTIRE AGREEMENT. This Escrow Agreement [and the Underlying
Agreement] constitute(s) the entire agreement between the parties relating to
the holding and disbursement of
<PAGE> 8
the Escrow Items and sets forth in their entirety the obligations and duties of
Escrow Agent with respect to the Escrow Items.
15. BINDING EFFECT. All of the terms of this Escrow Agreement, as
amended from time to time, shall be binding upon, inure to the benefit of and be
enforceable by the respective heirs, successors and assigns of Issuer, Equity
Investors, Administrative Agent and Escrow Agent.
16. EXECUTION IN COUNTERPARTS. This Escrow Agreement may be executed in
two or more counterparts, which when so executed shall constitute one and the
same agreement or direction. This Escrow Agreement and any document in
connection herewith may be sent by facsimile transmission, which when so sent
shall be deemed an original executed document delivered for all purposes hereof.
17. TERMINATION. Upon the first to occur of the disbursement of all
Escrow Items or the disbursement of all Escrow Items into court pursuant to
Section 5 hereof, this Escrow Agreement shall terminate and Escrow Agent shall
have no further obligation or liability whatsoever with respect to this Escrow
Agreement or the Escrow Items.
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed under seal as of the date first above written.
ISSUER:
BARGO ENERGY COMPANY
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Address for Notices:
------------------------------------
------------------------------------
------------------------------------
ENERGY CAPITAL INVESTMENT CO., PLC
By:
-------------------------------------------
Gary R. Petersen
Director
ENCAP ENERGY CAPITAL FUND III, L.P.
By: EnCap Investments L.L.C., General Partner
By:
-------------------------------------------
D. Martin Phillips
Managing Director
ENCAP ENERGY CAPITAL FUND III-B L.P.
By: EnCap Investments L.L.C., General Partner
By:
-------------------------------------------
D. Martin Phillips
Managing Director
<PAGE> 10
ENCAP EQUITY 1994, L.P.
By: EnCap Investments L.L.C., General Partner
By:
-------------------------------------------
D. Martin Phillips
Managing Director
BOCP PARTNERS, L.P.
By: EnCap Investments L.L.C., Manager
By:
-------------------------------------------
D. Martin Phillips
Managing Director
EOS PARTNERS, L.P.
By: Eos SBIC General, L.P., its general partner
By: Eos SBIC, Inc., its general partner
By:
-------------------------------------------
Brian D. Young
General Partner
EOS PARTNERS SBIC, L.P.
By: Eos SBIC General, L.P., its general partner
By: Eos SBIC, Inc., its general partner
By:
-------------------------------------------
Brian D. Young
President
<PAGE> 11
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:
-------------------------------------------
Brian D. Young
President
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 sole member
By: BACM I GP, LLC, its general partner
By:
-------------------------------------------
J. Travis Hain
Managing Director
KAYNE ANDERSON ENERGY L.P.
By: Kayne Anderson Capital Advisors, L.P., its General Partner
By: Kayne Anderson Investment Management, Inc., its General Partner
By:
-------------------------------------------
Daniel M. Weingeist
Managing Director
<PAGE> 12
ADMINISTRATIVE AGENT:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Administrative Agent
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Address for Notices:
- ------------------------------------
- ------------------------------------
- ------------------------------------
ESCROW AGENT:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Escrow Agent
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Address for Notices:
- ------------------------------------
- ------------------------------------
- ------------------------------------
<PAGE> 1
EXHIBIT 10.7
March 31, 2000
ACKNOWLEDGMENT AND CONSENT
This Acknowledgment and Consent is being executed by 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 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, SGC Capital Partners II LLC, a Delaware limited liability company
and Bankers Trust Company, a New York banking corporation (each an "Equity
Investor" and collectively, the "Equity Investors") and Bargo Energy Company, a
Texas corporation ("Bargo or the "Borrower"), in accordance with Section 6.01 of
that certain Credit Agreement dated as of March 31, 2000 (together with all
amendments and other modifications, if any, from time to time thereafter made
thereto, the "Credit Agreement") among Bargo, various financial institutions
party thereto ("Lenders"), and Chase Bank of Texas, National Association, as
administrative agent for the Lenders (the "Administrative Agent"), and the other
agents a party thereto. Capitalized terms not otherwise defined herein have the
meanings assigned to such terms in the Credit Agreement.
1. Each Equity Investor hereby acknowledges and agrees, for itself,
that Bargo must obtain the written consent of the Lenders prior to taking any of
the actions not permitted by Section 9.04(a) of the Credit Agreement with
respect to Bargo's $50,000,000 Cumulative Redeemable Preferred Stock, Series B
(the "Series B Preferred") and Bargo's $45,000,000 Redeemable Preferred Stock,
Series C (the "Series C Preferred" and, together with the Series B Preferred,
the "Preferred Stock") and that the Lenders are not obligated to give such
consent; provided, however, that the Borrower may make or accrue dividends with
respect to the Preferred Stock in the form of additional shares of capital stock
of the Borrower or accruals thereof, so long as such additional shares of
capital stock of the Borrower do not entitle the holder thereof to receive
dividends payable in cash as a matter of right, or may declare dividends on the
Preferred Stock and accrue the amount of such dividends as an increase in the
stated value thereof.
2. Each Equity Investor hereby acknowledges and agrees, for itself,
that without having first obtained the written consent of the Lenders, no
redemption of the Preferred Stock shall be requested, required or exercised so
long as any of the Aggregate Commitments are outstanding or any other
obligations under the Credit Agreement and the other Loan Documents remain
unpaid or unperformed (irrespective of whether any payment of any kind is then
due to the Lenders under the Credit Agreement); provided, however, that this
section 2 shall terminate on May 13, 2004.
<PAGE> 2
3. Each Equity Investor hereby acknowledges and agrees, that (a) it has
received a copy of the Credit Agreement and understands the effect of Section
9.04(a) on Bargo's ability to pay cash dividends on the Preferred Stock, (b) it
is a condition precedent to the extension of credit under the Credit Agreement
that the Equity Investors execute and deliver this Acknowledgment and Consent,
and (c) this Acknowledgment and Consent is given for the benefit of the Lenders
and the Agents to induce them to rely upon it in extending credit to the
Borrower under the Credit Agreement.
This Acknowledgment and Consent may be executed in any number of
counterparts, each of which, when executed, shall be deemed an original. This
Acknowledgment and Consent is effective as to each Equity Investor upon the
execution and delivery by such Equity Investor of its counterpart, irrespective
of whether or when the other Equity Investors execute and deliver the same.
This Acknowledgment and Consent is binding upon and shall inure to the
benefit of each Equity Investor, Bargo, the Lenders, and their respective
successors and assigns. In the event that any Equity Investor (or any subsequent
transferee) transfers his or its interest in some or all of his or its Preferred
Stock, such Equity Investor shall deliver to the Administrative Agent, at the
time of such transfer, a counterpart of this Acknowledgment and Consent executed
by such transferee. This Acknowledgment and Consent shall be governed in
accordance with the laws of Texas.
[Signatures begin on next page]
<PAGE> 3
ENERGY CAPITAL INVESTMENT CO., PLC
By:
------------------------------------
Gary R. Petersen
Director
ENCAP ENERGY CAPITAL FUND III, L.P.
By: EnCap Investments L.L.C., General Partner
By:
------------------------------------
D. Martin Phillips
Managing Director
ENCAP ENERGY CAPITAL FUND III-B L.P.
By: EnCap Investments L.L.C., General Partner
By:
------------------------------------
D. Martin Phillips
Managing Director
ENCAP EQUITY 1994, L.P.
By: EnCap Investments L.L.C., General Partner
By:
------------------------------------
D. Martin Phillips
Managing Director
<PAGE> 4
BOCP PARTNERS, L.P.
By: EnCap Investments L.L.C., Manager
By:
------------------------------------
D. Martin Phillips
Managing Director
EOS PARTNERS, L.P.
By: Eos SBIC General, L.P., its general partner
By: Eos SBIC, Inc., its general partner
By:
------------------------------------
Brian D. Young
General Partner
EOS PARTNERS SBIC, L.P.
By: Eos SBIC General, L.P., its general partner
By: Eos SBIC, Inc., its general partner
By:
------------------------------------
Brian D. Young
President
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:
------------------------------------
Brian D. Young
President
<PAGE> 5
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 sole member
By: BACM I GP, LLC, its general partner
By:
------------------------------------
J. Travis Hain
Managing Director
KAYNE ANDERSON ENERGY L.P.
By: Kayne Anderson Capital Advisors, L.P., its General Partner
By: Kayne Anderson Investment Management, Inc., its General Partner
By:
------------------------------------
Daniel M. Weingeist
Managing Director
BANKERS TRUST COMPANY
By:
------------------------------------
Name:
Title: Managing Director
<PAGE> 1
EXHIBIT 10.8
================================================================================
INDEMNIFICATION AGREEMENT
BY AND AMONG
BARGO ENERGY COMPANY
AND
ENERGY CAPITAL INVESTMENT COMPANY PLC
ENCAP ENERGY CAPITAL FUND III, L.P.
ENCAP ENERGY CAPITAL FUND III-B, L.P.
BOCP ENERGY PARTNERS, L.P.
EOS PARTNERS, L.P.
EOS PARTNERS SBIC, L.P.
EOS PARTNERS SBIC II, L.P.
SGC PARTNERS II LLC
BANCAMERICA CAPITAL INVESTORS SBIC I, L.P.
KAYNE ANDERSON ENERGY FUND, L.P.
AND
BANKERS TRUST COMPANY
DATED MARCH 31, 2000
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
ARTICLE I. DEFINITIONS...........................................................................................1
Section 1.1 Certain Defined Terms..................................................................1
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................3
Section 2.1 Corporate Organization.................................................................3
Section 2.2 Qualification..........................................................................4
Section 2.3 Authority Relative to This Agreement...................................................4
Section 2.4 Noncontravention.......................................................................4
Section 2.5 Articles and Bylaws....................................................................4
Section 2.6 Capitalization of the Company..........................................................5
Section 2.7 Governmental Approvals.................................................................5
Section 2.8 Subsidiaries...........................................................................5
Section 2.9 Units..................................................................................6
Section 2.10 SEC Filings............................................................................6
Section 2.11 Absence of Certain Changes.............................................................7
Section 2.12 Tax Matters............................................................................7
Section 2.13 Compliance With Laws...................................................................8
Section 2.14 Legal Proceedings......................................................................8
Section 2.15 Permits................................................................................9
Section 2.16 Agreements.............................................................................9
Section 2.17 ERISA.................................................................................10
Section 2.18 Environmental Matters.................................................................11
Section 2.19 Oil and Gas Properties................................................................12
Section 2.20 Nature of Company Assets..............................................................13
Section 2.21 Marketing of Production...............................................................13
Section 2.22 Material Personal Property............................................................14
Section 2.23 Intellectual Property.................................................................14
Section 2.24 Brokerage Fees........................................................................14
Section 2.25 Disclosure............................................................................14
ARTICLE III. INDEMNIFICATION....................................................................................15
Section 3.1 Indemnification by Company............................................................15
Section 3.2 Procedure for Indemnification.........................................................15
Section 3.3 Indemnification Despite Negligence....................................................16
ARTICLE IV. EFFECT OF AGREEMENT.................................................................................16
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
ARTICLE V. MISCELLANEOUS........................................................................................16
Section 5.1. Choice of Law.........................................................................16
Section 5.2. Entire Agreement......................................................................16
Section 5.3. Binding Effect........................................................................16
Section 5.4. Assignment............................................................................16
Section 5.5. Notices...............................................................................16
Section 5.6. No Merger.............................................................................16
Section 5.7. Expenses..............................................................................16
Section 5.8. Third Party Beneficiaries.............................................................17
Section 5.9. Transmission by Facsimile.............................................................17
Section 5.10. Severability..........................................................................17
Section 5.11. Waiver................................................................................17
Section 5.12. Counterparts..........................................................................17
Section 5.13. Remedies..............................................................................17
Section 5.14. Construction..........................................................................17
</TABLE>
ii
<PAGE> 4
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (this "Agreement") is dated as of March
__, 2000 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
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"), SGC Partners II LLC, a Delaware limited
liability company ("SGCP") (each individually, an "Equity Investor," and
collectively, the "Equity Investors"), Bankers Trust Company, a New York banking
corporation ("BT"), and Bargo Energy Company, a Texas corporation ("Bargo" or
the "Company").
WHEREAS, in order to induce the Equity Investors to enter into the
Subscription Agreement by and among the Company and the Equity Investors
pursuant to which the Equity Investors will subscribe to purchase Units (as
defined in the Subscription Agreement) the Company has agreed to make the
representations, warranties and indemnities set forth herein;
WHEREAS, in order to induce BT to agree to convert the Tranche B Term
Loan into Units or Subordinated Notes as provided and under the circumstances
described in the Credit Agreement, dated March 30, 2000, the Company has agreed
to make the representations, warranties and indemnities set forth herein;
NOW, THEREFORE, in consideration of the premises contained herein and
the mutual covenants contained in the Subscription Agreement, and intending to
be legally bound hereby, the Company and Equity Investors hereby agree as
follows:
ARTICLE I. DEFINITIONS
Section 1.1 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.
<PAGE> 5
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.
CREDIT AGREEMENT: means the Credit Agreement by and among the
Company, Chase Bank of Texas, National Association, as Administrative
Agent, Bankers Trust Company, as Syndication Agent, Bank One of Texas,
N.A., as Documentation Agent, and the lenders parties thereto from time
to time.
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.
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.
2
<PAGE> 6
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.
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.
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Equity Investors and BT jointly
and severally, that:
Section 2.1 CORPORATE ORGANIZATION. Bargo 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 Bargo are pending or, to the best knowledge
of Bargo, threatened.
Section 2.2 QUALIFICATION. Bargo 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.
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Section 2.3 AUTHORITY RELATIVE TO THIS AGREEMENT. Bargo has full
corporate power and corporate authority to execute, deliver, and perform this
Agreement and the Subscription Agreement, and to consummate the transactions
contemplated hereby and thereby. The execution, delivery, and performance by
Bargo of this Agreement and the Subscription Agreement, and the consummation by
it of the transactions contemplated hereby and thereby, have been duly
authorized by all necessary corporate action of Bargo. This Agreement and the
Subscription Agreement has each been duly executed and delivered by Bargo and
constitutes valid and legally binding obligations of Bargo, enforceable against
Bargo in accordance with its 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.
Section 2.4 NONCONTRAVENTION. The execution, delivery, and performance
by Bargo of this Agreement and the Subscription Agreement 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 articles of
incorporation or bylaws or other governing instruments of Bargo, (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 Bargo or any subsidiary is a party or by which
Bargo or any subsidiary or any of their respective properties may be bound or
any Permit held by Bargo or any subsidiary, (iii) result in the creation or
imposition of any Encumbrance upon the properties of Bargo or any subsidiary, or
(iv) violate any Applicable Law binding upon Bargo 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 Bargo, and except, for the filing of Articles of Amendment to
Bargo's Articles of Incorporation as contemplated by Section 4.4 of the
Subscription Agreement and, for 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.
Section 2.5 ARTICLES AND BYLAWS. The Company has made available to
Equity Investors and BT accurate and complete copies of (i) the articles of
incorporation and bylaws of each of the Company and the Subsidiaries as
currently in effect, (ii) the stock records of each of the Company and the
Subsidiaries, and (iii) the minutes of all meetings of the respective Boards of
Directors of the Company and the Subsidiaries, any committees of such Boards,
and the shareholders of the Company and the Subsidiaries (and all consents in
lieu of such meetings). Such records, minutes, and consents accurately reflect
the stock ownership of the Company and the Subsidiaries and all actions taken by
such Boards of Directors, committees, and shareholders. Neither the Company nor
any Subsidiary is in violation of any provision of its articles of incorporation
or bylaws, other than violations which, individually or in the aggregate, do not
and will not have a Material Adverse Effect on the Company.
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Section 2.6 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, 87,932,726 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, 5,000,000
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
Cumulative Preferred Stock, Series B ("Series B Preferred Stock") constitutes
all of the outstanding shares of preferred stock. As of the date hereof, an
aggregate of 25,798,339 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 and outstanding warrants (subject to
certain anti-dilution provisions applicable thereto). Upon the amendment of the
Company's Articles of Incorporation, as contemplated by the Subscription
Agreement,37,685,454 shares of Common Stock and 45,000 shares of Preferred
Stock, Series C will be reserved for issuance pursuant to the Subscription
Agreement and the conversion of the Tranche B Term Notes as defined in the
Credit Agreement. Except as disclosed above in this Section, there are
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 Series B Preferred Stock there
are 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.
Section 2.7 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 or the Subscription Agreement or the consummation by it of the
transactions contemplated hereby or thereby.
Section 2.8 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 2.8 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. Each
Subsidiary is duly qualified or licensed
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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) 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 2.8, there are 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. Except as stated otherwise
herein, there are 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.
Section 2.9 UNITS. The Units and/or Subordinated Notes to be issued by
the Company pursuant to the provisions of the Subscription Agreement and the
Credit Agreement have been duly authorized for such issuance. When issued and
delivered by the Company in accordance with the provisions of the Subscription
Agreement and Credit Agreement, the shares of Common Stock and Series C
Preferred Stock which comprise the Units and the Subordinated Notes will be
validly issued, fully paid, and nonassessable. The issuance of the Units
pursuant to this Agreement is not subject to any preemptive or similar rights.
Section 2.10 SEC FILINGS. Since January 1, 1999, the Company has filed
on a timely basis, all periodic reports and proxy statements with the Securities
and Exchange Commission required to be filed under the Exchange Act. The
Company's Annual Report on Form-10KSB for the fiscal year ended December 31,
1999, Report on Form 8-K filed on February 28, 2000 and Information Statement on
Schedule 14C filed on March 13, 2000 (collectively, the "SEC Documents") are all
of the documents the Company was required to file with the Securities and
Exchange Commission since January 1, 2000. 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
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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.
Section 2.11 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the
SEC Documents or on Schedule 2.11, since January 1, 2000: (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;
and (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).
Section 2.12 TAX MATTERS. Except as disclosed on Schedule 2.12:
(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
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balance sheet included in the Company's Form 10-KSB for the fiscal year ended
December 31, 1999) 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.
Section 2.13 COMPLIANCE WITH LAWS. Except as disclosed on Schedule
2.13, 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.
Section 2.14 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 2.14, (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 2.14, 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.
Section 2.15 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
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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 2.15,
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.
Section 2.16 AGREEMENTS.
(a) Set forth on Schedule 2.16 is a list of all the following
agreements, arrangements, and understandings (written or oral, formal or
informal) (collectively, for purposes of this Section, "agreements") to which
the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any of their respective properties is otherwise bound:
(i) collective bargaining agreements and similar agreements
with employees as a group;
(ii) employee benefit agreements, trusts, plans, funds, or
other arrangements of any nature;
(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;
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(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 Equity Investors and BT accurate
and complete copies of the agreements listed on Schedule 2.16. Each of such
agreements is a valid and binding agreement of the Company and the Subsidiaries
(to the extent each is a party thereto) and (to the best knowledge of the
Company) the other party or parties thereto, enforceable against the Company and
the Subsidiaries (to the extent each is a party thereto) and (to the best
knowledge of the Company) such other party or parties in accordance with its
terms. Neither the Company nor any Subsidiary is in breach of or in default
under, nor has any event occurred which (with or without the giving of notice or
the passage of time or both) would constitute a default by the Company or any
Subsidiary under, any of such agreements, and neither the Company nor any
Subsidiary has received any notice from, or given any notice to, any other party
indicating that the Company or any Subsidiary is in breach of or in default
under any of such agreements, except in each case which could not be reasonably
expected to have a Material Adverse Effect. To the best knowledge of the
Company, no other party to any of such agreements is in breach of or in default
under such agreements, nor has any assertion been made by the Company or any
Subsidiary of any such breach or default.
(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.
Section 2.17 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.
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Section 2.18 ENVIRONMENTAL MATTERS.
(a) Except as disclosed on Schedule 2.18:
(i) the properties, operations, and activities of the Company
and the Subsidiaries comply with all Applicable Environmental Laws (as
defined below), except for noncompliance that could not reasonably be
expected to have a Material Adverse Effect;
(ii) the Company and the Subsidiaries and the properties,
operations, and activities of the Company and the Subsidiaries are not
subject to any existing, pending, or, to the best knowledge of the
Company, threatened Proceeding under, or to any remedial obligations
under, any Applicable Environmental Laws that could reasonably be
expected to have a Material Adverse Effect;
(iii) all Permits, if any, required to be obtained by the
Company or any Subsidiary under any Applicable Environmental Laws in
connection with any aspect of the business of the Company or the
Subsidiaries, including without limitation those relating to the
treatment, storage, disposal, or release of a hazardous material (as
defined below), have been duly obtained and are in full force and
effect, and the Company and the Subsidiaries are in compliance with the
material terms and conditions of all such Permits;
(iv) the Company and the Subsidiaries have satisfied and are
currently in compliance with all financial responsibility requirements
applicable to their respective operations and imposed by any
Governmental Entity under any Applicable Environmental Laws, and the
Company and the Subsidiaries have not received any notice of
noncompliance with any such financial responsibility requirements;
(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
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violation of any Applicable Environmental Laws, by the Company or any
Subsidiary or in connection with their respective properties,
operations, or activities that could reasonably be expected to give
rise to any claim for damages or compensation that could reasonably be
expected to have a Material Adverse Effect; and
(viii) the Company and the Subsidiaries shall make available
to Equity Investors 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.
Section 2.19 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 2.19; 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 Equity Investors and BT a copy of the
reserve report (the "Reserve Report") dated as of January 1, 2000, 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, 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.
Section 2.20 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 2.20, 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.
Section 2.21 MARKETING OF PRODUCTION. Except for contracts listed on
Schedule 2.21 (with respect to all of which contracts the Company represents
that it or its affiliates are receiving a price for all production sold
thereunder which is computed in accordance with the terms of the relevant
contract and are not having deliveries curtailed substantially below the subject
property's delivery capacity), there exist no material agreements for the sale
of production from the leasehold and other interests in oil, gas and other
mineral properties owned, or otherwise held in the name of, the Company or its
affiliates (collectively, the "Oil and Gas Properties") (including without
limitation, calls on, or other rights to purchase, production, whether or not
the same are currently being exercised) other than (i) agreements or
arrangements pertaining to the sale of production at a price equal to or greater
than a price that is the market price from time to time existing in the areas
where the Oil and Gas Properties subject to such agreement or arrangement are
located, and (ii) agreements or arrangements that are cancelable on 90 days
notice or less without penalty or detriment.
13
<PAGE> 17
Section 2.22 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.
Section 2.23 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.
Section 2.24 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 in the Subscription Agreement.
The Company shall indemnify and hold harmless Equity Investors 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.
Section 2.25 DISCLOSURE. No representation or warranty made by the
Company in this Agreement or in the Subscription Agreement, and no statement of
the Company contained in any document, certificate, or other writing furnished
or to be furnished by the Company pursuant hereto or in connection herewith,
contains or will contain, at the time of delivery, any untrue statement of a
material fact or omits or will omit, at the time of delivery, to state any
material fact necessary in order to make the statements contained therein, in
light of the circumstances under which they are made, not misleading. The
Company knows of no matter (other than matters of a general economic character,
including commodity prices, not relating solely to the Company or any Subsidiary
in any specific manner) which has not been disclosed to Equity Investors
pursuant to this Agreement or in the Subscription Agreement which has or is
reasonably likely to have a Material Adverse Effect on the Company. The Company
has delivered or made available to Equity Investors and BT accurate
14
<PAGE> 18
and complete copies of all agreements, documents, and other writings referred to
or listed in this Article II or any Schedule hereto.
ARTICLE III. INDEMNIFICATION
Section 3.1 INDEMNIFICATION BY COMPANY. Subject to the terms and
conditions of this Article III, the Company shall indemnify, defend, and hold
harmless Equity Investors and BT 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 Equity Investors or BT,
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.
Section 3.2 PROCEDURE FOR INDEMNIFICATION. Promptly after receipt by
an indemnified party under Section 3.2 of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party under such Section, give written notice to
the indemnifying party of the commencement thereof, but the failure so to notify
the indemnifying party shall not relieve it of any liability that it may have to
any indemnified party except to the extent the indemnifying party demonstrates
that the defense of such action is prejudiced thereby. In case any such action
shall be brought against an indemnified party and it shall give written notice
to the indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it may wish, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. If the indemnifying party elects to assume the defense of
such action, the indemnified party shall have the right to employ separate
counsel at its own expense and to participate in the defense thereof. If the
indemnifying party elects not to assume (or fails to assume) the defense of such
action, the indemnified party shall be entitled to assume the defense of such
action with counsel of its own choice, at the expense of the indemnifying party.
If the action is asserted against both the indemnifying party and the
indemnified party and there is a conflict of interests which renders it
inappropriate for the same counsel to represent both the indemnifying party and
the indemnified party, the indemnifying party shall be responsible for paying
for separate counsel for the indemnified 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).
Section 3.3 INDEMNIFICATION DESPITE NEGLIGENCE. IT IS THE EXPRESS
INTENTION OF THE PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED PURSUANT TO
THIS ARTICLE III SHALL BE INDEMNIFIED AND HELD HARMLESS FROM AND AGAINST ALL
DAMAGES AS TO WHICH INDEMNITY IS PROVIDED FOR UNDER THIS ARTICLE III
NOTWITHSTANDING THAT ANY SUCH DAMAGES ARISE OUT OF OR
15
<PAGE> 19
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 IV. EFFECT OF AGREEMENT
This Agreement shall not affect the obligation of the Equity Investors
to purchase securities from the Company as contemplated by or otherwise perform
under the Subscription Agreement or the conversion of BT's Tranche B Term Notes
under and pursuant to the terms of the Credit Agreement.
ARTICLE V. MISCELLANEOUS
Section 5.1. CHOICE OF LAW. This Agreement shall be governed by and
construed in accordance with the laws of Texas, notwithstanding principles of
conflicts of laws.
Section 5.2. ENTIRE AGREEMENT. This Agreement, including all schedules
attached hereto, constitutes the entire agreement among the Parties hereto with
respect to the subject matter hereof, and may be amended only by a writing
executed by all parties hereto.
Section 5.3. BINDING EFFECT. This Agreement and the representations and
warranties contained herein shall be binding upon the heirs, executors, legal
representatives, administrators, successors and permitted assigns of the
parties.
Section 5.4. ASSIGNMENT. Except as provided in this Section, this
Agreement may not be assigned by any party hereto without the prior written
consent of all other parties. This Agreement may be assigned by the Equity
Investors or BT to their respective Affiliates.
Section 5.5. NOTICES. All notices, requests and approval required by
this Agreement shall be given as provided in the Subscription Agreement in the
case of an Equity Investor or the Company and in the Credit Agreement, in the
case of BT.
Section 5.6. NO MERGER. The parties agree and acknowledge that none of
the warranties and representations contained in this Agreement shall merge upon
the execution and delivery of this Agreement by the parties and that all such
warranties and representations shall continue in full force and effect after the
date hereof.
Section 5.7. EXPENSES. The Company agrees to pay the Equity Investors'
reasonable out-of-pocket expenses (including fees and expenses of legal counsel,
including in-house counsel, accountants and other professional advisors)
incurred in connection with the negotiation and settlement of this Agreement.
16
<PAGE> 20
Section 5.8. THIRD PARTY BENEFICIARIES. Except as expressly permitted
in this Agreement, the parties do not intend, nor shall any clause in this
Agreement be interpreted to create, for any third party an obligation to or
benefit from any of the parties.
Section 5.9. TRANSMISSION BY FACSIMILE. The parties agree that this
Agreement may be transmitted by facsimile or such similar device and that the
reproduction of signatures by facsimile or such similar device shall be treated
as binding as if originals and each party undertakes in writing to provide each,
and every other, party with a copy of this Agreement bearing original
signatures.
Section 5.10. SEVERABILITY. If any provision of this Agreement is
determined to be invalid or unenforceable by an arbitrator or a court of
competent jurisdiction, that provision shall be deemed to be severed from this
Agreement only to the extent of the facts in dispute, and where permitted by
such determination, and the remaining provisions of this Agreement shall not be
affected and shall remain valid and enforceable, provided that in the event that
any portion of this Agreement is determined to be or becomes invalid or
unenforceable (the "offending portion"), the parties shall negotiate, in good
faith, reasonable changes to this Agreement that are consistent with industry
practice and as shall reasonably preserve the parties' intentions, benefits and
obligations that were the subject of such offending portion.
Section 5.11. WAIVER. Each party may only waive any right it may have
pursuant to this Agreement in writing and subject to the notice provisions
hereof. Any waiver of a right, including any right under this Agreement, by any
party shall not constitute a waiver of any other right by such party. Failure or
delay by any party to enforce any term or condition of this Agreement shall not
constitute a wavier of such term or condition.
Section 5.12. COUNTERPARTS. This Agreement may be executed in one or
more counterparts all of which taken together will constitute one and the same
instrument.
Section 5.13. REMEDIES. Except as otherwise provided in this Agreement,
all remedies provided for in this Agreement shall be cumulative and in addition
to and not in lieu of any other remedies available to any party at law, in
equity or otherwise.
Section 5.14. CONSTRUCTION. Each of the parties hereto acknowledges
that it has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement with its legal counsel and that
this Agreement shall be construed as if jointly drafted by the Parties hereto.
17
<PAGE> 21
INDEMNIFICATION AGREEMENT
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date above first written.
ENERGY CAPITAL INVESTMENT COMPANY PLC
By:
-----------------------------------------------
Gary R. Petersen
Director
ENCAP ENERGY CAPITAL FUND III, L.P.
By: EnCap Investments L.L.C., General Partner
By:
--------------------------------------
D. Martin Phillips
Managing Director
ENCAP ENERGY CAPITAL FUND III-B, L.P.
By: EnCap Investments L.L.C., General Partner
By:
--------------------------------------
D. Martin Phillips
Managing Director
BOCP ENERGY PARTNERS, L.P.
By: EnCap Investments L.L.C., Manager
By:
--------------------------------------
D. Martin Phillips
Managing Director
Idemnification Agreement
18
<PAGE> 22
EOS PARTNERS, L.P.
By:
-----------------------------------------------
Brian Young
General Partner
EOS PARTNERS SBIC, L.P.
By: Eos SBIC General, L.P., its general partner
By: Eos SBIC, Inc., its general partner
By:
-----------------------------------------------
Brian Young
President
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:
-----------------------------------------------
Brian Young
President
SGC PARTNERS II LLC
By:
-----------------------------------------------
V. Frank Pottow
Managing Director
Indemnification Agreement
<PAGE> 23
BANCAMERICA CAPITAL INVESTORS SBIC I,
L.P.
By: BancAmerica Capital Management SBIC
I, LLC, its general partner
By: BancAmerica Capital Management I,
L.P., its sole member
By: BACM I GP, LLC, its general
partner
By:
------------------------------
J. Travis Hain
Managing Director
KAYNE ANDERSON ENERGY FUND, L.P.
By: Kayne Anderson Capital Advisors,
L.P., its General Partner
By: Kayne Anderson Investment
Management, Inc., its General
Partner
By:
------------------------------
Daniel M. Weingeist
Managing Director
BARGO ENERGY COMPANY
By:
--------------------------------------
Jonathan M. Clarkson
President
Indemnification Agreement
<PAGE> 24
BANKERS TRUST COMPANY
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Indemnification Agreement
<PAGE> 25
SCHEDULE 2.8
SUBSIDIARIES
<TABLE>
<CAPTION>
Subsidiary Jurisdiction Type of Entity Authorized Outstanding %
Shares Shares Owner
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Bargo Petroleum Corporation Texas Corporation 10,000 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
Future CAL-TEX Corporation Texas Corporation 1,000,000 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Indemnification Agreement
<PAGE> 26
SCHEDULE 2.11
MATERIAL CHANGES
None.
Indemnification Agreement
<PAGE> 27
SCHEDULE 2.12
TAX MATTERS
None.
Indemnification Agreement
<PAGE> 28
SCHEDULE 2.13
COMPLIANCE WITH LAWS
Certain filings with the Securities and Exchange Commission have been
filed late.
Indemnification Agreement
<PAGE> 29
SCHEDULE 2.14
LEGAL PROCEEDINGS
None.
Indemnification Agreement
<PAGE> 30
SCHEDULE 2.15
GOVERNMENTAL PERMIT PROCEEDINGS
None.
Indemnification Agreement
<PAGE> 31
SCHEDULE 2.16
AGREEMENTS
In addition to the agreements those previously disclosed in the Company's
filings with the Securities and Exchange Commission the Company has entered into
the following material agreements:
o Approximately 50% of CURRENT oil production is hedged as
follows:
- 22,800 barrels beginning October 1999 declining each
month to 18,750 barrels in September 2000 at a floor
of $18.00 and a cap of $20.75.
- 27,400 barrels beginning October 1999 declining each
month to 23,250 barrels in September 2000 at a floor
of $18.00 and a cap of $23.08.
o For the 12 month period October 2000 - September 2001 a
straight swap is in place for approximately 25% of CURRENT
monthly oil production at $17.55 per barrel. (18,525 barrels
beginning 10/00 declining to 16,200 barrels in 9/01)
o For the 12 month period October 2000 - September 2001 a
straight swap is in place for approximately 25% of CURRENT
monthly oil production at $18.05 per barrel. ( 22,825 barrels
beginning 10/00 declining to 18,100 barrels in 9/01)
o Floors are in place for April 2000-December 2000 at a price of
$22.00 per bbl for 75% of the PROJECTED TEXACO acquisition
volume (1,791,672 bbls)
o Floors are in place for January 2001-December 2001 at a price
of $21.00 per bbl for 75% of the PROJECTED TEXACO acquisition
volume (2,197,728 bbls)
o Change of Control Agreement dated September 1, 1999 between
the Company and Tim J. Goff.
o Change of Control Agreement dated September 1, 1999 between
the Company and Jonathan M. Clarkson.
Indemnification Agreement
<PAGE> 1
EXHIBIT 10.9
CONSENT TO AMENDMENT TO THE
REGISTRATION RIGHTS AGREEMENT
Reference is hereby made to (i) that certain Registration Rights
Agreement made and entered into as of the 14th day of August, 1998, as amended
by that certain First Amendment to the Registration Rights Agreement made and
entered into as of the 15th day of December, 1998 by and among Bargo Energy
Company, a Texas corporation and successor by merger to Future Petroleum
Corporation, a Utah corporation (the "Company"), BER Partnership L.P., a Texas
limited partnership, TJG Investments, Inc., a Texas corporation, BEC
Partnership, a Texas general partnership, Tim J. Goff, Thomas Barrow, James E.
Sowell, and BOC Operating Corporation, a Texas corporation (as amended, the
"Bargo Registration Rights Agreement"), and (ii) that certain Registration
Rights Agreement made and entered into as of the 14th day of August, 1998, as
amended by that certain First Amendment to Registration Rights Agreement made
and entered into as of the 15th day of December, 1998 by and among the Company,
Carl Price, Don Wm. Reynolds, Christie Price, Robert Price and Charles D.
Laudeman (as amended, the "Price Registration Rights Agreement").
RECITALS:
A. The Company, Energy Capital Investment Company PLC, an English
investment company ("Energy PLC"), and EnCap Equity 1994 Limited Partnership, a
Texas limited partnership ("EnCap LP"), entered into a Registration Rights
Agreement on August 14, 1998, as amended by a First Amendment to the
Registration Rights Agreement dated December 15, 1998 and a Second Amendment to
the Registration Rights Agreement dated May 14, 1999 (as amended, the "EnCap
Registration Rights Agreement"), covering shares of Common Stock (as defined in
the EnCap Registration Rights Agreement") issued to Energy PLC and EnCap LP and
the New Common Shares (as defined in the EnCap Registration Rights Agreement)
issued to Energy PLC, 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 (collectively, the "Investors");
B. Bankers Trust Company, a New York banking corporation ("Bankers
Trust") is a party, along with the Company, the lenders and agents signatory
thereto, to that certain Credit Agreement dated on or about March 30, 2000, and
Tranche B Term Loan (as defined in the Credit Agreement) pursuant to which upon
conversion of the Tranche B Term Loan Bankers Trust will be issued shares of
Common Stock (the "Tranche B Common Shares");
C. The Investors are parties along with the Company to that certain
Subscription Agreement dated on or about March 30, 2000, pursuant to which the
Investors have subscribed to purchase shares of common stock ("Subscription
Common Shares");
<PAGE> 2
D. The parties to the EnCap Registration Rights Agreement desire to
amend such agreement to cover the Subscription Common Shares and the Tranche B
Common Shares upon their issuance and to make certain other changes; and
E. The parties to this Consent desire to consent to and permit such
amendments to the EnCap Registration Rights Agreement.
NOW, THEREFORE, the undersigned consent to the above-referenced
amendment to the EnCap Registration Rights Agreement, as evidenced by that
certain Third Amendment to the Registration Rights Agreement among the Company,
the Investors and Bankers Trust.
This Consent 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.
[Signature page to follow]
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Consent
effective March ___, 2000.
TJG INVESTMENTS, INC.
By:
-------------------------------------
Tim J. Goff
President
BEC PARTNERSHIP
By:
-------------------------------------
Tim J. Goff
Manager
BER PARTNERSHIP L.P.
By: Bargo Operating Company, Inc., General Partner
By:
-------------------------------------
Tim J. Goff
President
BOC OPERATING CORPORATION
By:
-------------------------------------
Tim J. Goff
President
<PAGE> 4
- ------------------------------------
Tim J. Goff
- ------------------------------------
Thomas Barrow
- ------------------------------------
James E. Sowell
- ------------------------------------
Carl Price
- ------------------------------------
Don Wm. Reynolds
- ------------------------------------
Christie Price
- ------------------------------------
Robert Price
- ------------------------------------
Charles D. Laudeman
<PAGE> 1
EXHIBIT 10.10
CREDIT AGREEMENT
Dated as of March 31, 2000
among
BARGO ENERGY COMPANY
as Borrower,
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION,
as Administrative Agent,
BANKERS TRUST COMPANY,
as Syndication Agent,
THE LENDERS SIGNATORY HERETO
CHASE SECURITIES INC.
and
DEUTSCHE BANC ALEX.BROWN,
as Arrangers
<PAGE> 2
i
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1.01 Terms Defined Above 1
Section 1.02 Certain Defined Terms 1
Section 1.03 Accounting Terms and Determinations 16
Section 1.04 Classes and Types of Loans 17
Section 2.01 Loans and Letters of Credit 17
Section 2.02 Borrowings, Continuations and Conversions,
Letters of Credit 18
Section 2.03 Changes of Revolving Credit Commitments 19
Section 2.04 Fees 20
Section 2.05 Several Obligations 20
Section 2.06 Notes 20
Section 2.07 Prepayments 21
Section 2.08 Borrowing Base 22
Section 2.09 Assumption of Risks 23
Section 2.10 Obligation to Reimburse and to Prepay 24
Section 2.11 Lending Offices 25
Section 3.01 Repayment of Loans 25
Section 3.02 Interest 26
Section 3.03 Right to Demand Equity Offering 27
Section 4.01 Payments 27
Section 4.02 Pro Rata Treatment 28
Section 4.03 Computations 28
Section 4.04 Non-receipt of Funds by the Administrative Agent 28
Section 4.05 Set-off, Sharing of Payments, Etc. 29
Section 4.06 Taxes 29
Section 4.07 Disposition of Proceeds 32
Section 4.08 Application of Funds; Priorities and Subordination 32
Section 5.01 Additional Costs 33
Section 5.02 Limitation on Eurodollar Loans 35
Section 5.03 Illegality 35
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 35
5.02 and 5.03
Section 5.05 Compensation 35
Section 5.06 Replacement Lenders. 36
Section 6.01 Initial Funding 37
Section 6.02 Initial and Subsequent Loans and Letters of Credit 40
</TABLE>
<PAGE> 3
ii
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 7.01 Existence 40
Section 7.02 Financial Condition 40
Section 7.03 Litigation 41
Section 7.04 No Breach 41
Section 7.05 Authority 41
Section 7.06 Approvals 42
Section 7.07 Use of Loans 42
Section 7.08 ERISA 42
Section 7.09 Taxes 43
Section 7.10 Titles, etc. 43
Section 7.11 No Material Misstatements 44
Section 7.12 Investment Company Act 44
Section 7.13 Public Utility Holding Company Act 44
Section 7.14 Subsidiaries 44
Section 7.15 Location of Business and Offices 44
Section 7.16 Defaults 44
Section 7.17 Environmental Matters 44
Section 7.18 Compliance with the Law 45
Section 7.19 Insurance 46
Section 7.20 Hedging Agreements 46
Section 7.21 Restriction on Liens 46
Section 7.22 Material Agreements 46
Section 7.23 Gas Imbalances 47
Section 7.24 Acquisition and Approved Securities 47
Section 7.25 Marketing of Production 47
Section 7.26 Material Personal Property 47
Section 7.27 Intellectual Property 47
Section 8.01 Reporting Requirements 48
Section 8.02 Litigation 50
Section 8.03 Maintenance, Etc. 50
Section 8.04 Environmental Matters 51
Section 8.05 Further Assurances 52
Section 8.06 Performance of Obligations 52
Section 8.07 Reserve Reports 52
Section 8.08 Title Information 53
Section 8.09 Additional Collateral 53
Section 8.10 ERISA Information and Compliance 54
Section 8.11 Hedging Agreements 55
Section 8.12 Approved Securities 55
Section 9.01 Financial Covenants 55
Section 9.02 Debt 55
Section 9.03 Liens 56
Section 9.04 Dividends, Distributions and Redemptions;
Repayment of Term Loans 56
Section 9.05 Investments, Loans and Advances 57
Section 9.06 Sales and Leasebacks 57
Section 9.07 Nature of Business 57
</TABLE>
<PAGE> 4
iii
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 9.08 Limitation on Leases 58
Section 9.09 Proceeds of Notes 58
Section 9.10 ERISA Compliance 58
Section 9.11 Sale or Discount of Receivables 59
Section 9.12 Mergers, Etc. 58
Section 9.13 Sale of Oil and Gas Properties 59
Section 9.14 Environmental Matters 59
Section 9.15 Transactions with Affiliates 60
Section 9.16 Subsidiaries 60
Section 9.17 Negative Pledge Agreements 60
Section 9.18 Gas Imbalances, Take-or-Pay or Other Prepayments 60
Section 9.19 Accounts 60
Section 9.20 Hedging Agreements 60
Section 9.22 Acquisition Documents 61
Section 10.01 Events of Default 61
Section 10.02 Remedies 63
Section 11.01 Appointment, Powers and Immunities 64
Section 11.02 Reliance by Administrative Agent 64
Section 11.03 Defaults 64
Section 11.04 Rights as a Lender 64
Section 11.05 INDEMNIFICATION 65
Section 11.06 Non-Reliance on the Agents, Arrangers and other Lenders 65
Section 11.07 Action by Administrative Agent 65
Section 11.08 Resignation or Removal of Agent 66
Section 11.09 Syndication Agent and Arrangers. 66
Section 12.01 Waiver 66
Section 12.02 Notices 66
Section 12.03 Payment of Expenses, Indemnities, etc 66
Section 12.04 Amendments, Etc. 68
Section 12.05 Successors and Assigns 69
Section 12.06 Assignments and Participations 69
Section 12.07 Invalidity 70
Section 12.08 Counterparts 70
Section 12.09 References 70
Section 12.10 Survival 70
Section 12.11 Captions 70
Section 12.12 NO ORAL AGREEMENTS 71
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION 71
Section 12.14 Interest 71
Section 12.15 Confidentiality 72
Section 12.16 EXCUPLATION PROVISIONS 73
</TABLE>
<PAGE> 5
iv
<TABLE>
<S> <C>
Annex I - List of Maximum Credit Amounts and Term Loans
Exhibit A-1 - Form of Revolving Credit Note
Exhibit A-2 - Form of Tranche A Term Loan Note
Exhibit A-3 - Form of Tranche B Term Loan Note
Exhibit B - Form of Borrowing, Continuation and Conversion Request
Exhibit C - Form of Compliance Certificate
Exhibit D-1 - Form of Legal Opinion of Haynes & Boone, L.L.P.
Exhibit D-2 - Form of Local Counsel Opinion
Exhibit E - List of Security Instruments
Exhibit F - Form of Assignment Agreement
Exhibit G - Terms of Subordination of Term Loans
Exhibit H - Form of Certificate of Designation
Schedule 7.02 - Liabilities
Schedule 7.03 - Litigation
Schedule 7.09 - Taxes
Schedule 7.10 - Titles, etc.
Schedule 7.14 - Subsidiaries and Partnerships
Schedule 7.17 - ENVIRONMENTAL MATTERS
Schedule 7.19 - Insurance
Schedule 7.20 - Hedging Agreements
Schedule 7.22 - Material Agreements
Schedule 7.23 - Gas Imbalances
Schedule 7.25 - Marketing Contracts
Schedule 9.02 - Debt
Schedule 9.03 - Liens
Schedule 9.05 - Investments, Loans and Advances
</TABLE>
<PAGE> 6
THIS CREDIT AGREEMENT dated as of March __, 2000, is among: BARGO
ENERGY COMPANY, a corporation formed under the laws of the State of Texas (the
"Borrower"); each of the lenders that is a signatory hereto or which becomes a
signatory hereto as provided in Section 12.06 (individually, together with its
successors and assigns, a "Lender" and, collectively, the "Lenders"); CHASE BANK
OF TEXAS, NATIONAL ASSOCIATION (in its individual capacity, "Chase"), as
administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Administrative Agent"); BANKERS TRUST COMPANY
(in its individual capacity, "BTC"), as syndication agent for the Lenders (in
such capacity, together with its successors in such capacity, the "Syndication
Agent"); CHASE SECURITIES, INC. and DEUTSCHE BANC ALEX.BROWN, as arrangers (as
"Arrangers").
R E C I T A L S
A. The Borrower has requested that the Lenders provide certain loans to and
extensions of credit on behalf of the Borrower; and
B. The Lenders have agreed to make such loans and extensions of credit
subject to the terms and conditions of this Agreement.
C. In consideration of the mutual covenants and agreements herein contained
and of the loans, extensions of credit and commitments hereinafter referred to,
the parties hereto agree as follows:
ARTICLE I
Definitions and Accounting Matters
Section 1.01 Terms Defined Above. As used in this Agreement, the terms
"Administrative Agent," "Borrower," "Chase," "Lender", "Lenders" and
"Syndication Agent" shall have the meanings indicated above.
Section 1.02 Certain Defined Terms. As used herein, the following terms
shall have the following meanings (all terms defined in this Article I or in
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and vice versa):
"Acquisition" shall mean purchase by BPC of the Acquisition Properties for
approximately $161,000,000 before adjustments pursuant to the Acquisition
Documents.
"Acquisition Documents" shall mean those certain Purchase and Sale
Agreements dated February 22, 2000, but effective as of January 1, 2000, between
BPC and each of Texaco Exploration & Production Inc., McFarland Energy, Inc.,
and Four Star Oil & Gas Company and any other agreements, instruments and
documents executed in connection with the Acquisition.
"Acquisition Properties" shall mean the Oil and Gas Properties and other
Properties acquired by BPC pursuant to the Acquisition Documents, referred to as
the East Texas Package, the Permian Basin Package and the Mid Continent Package.
<PAGE> 7
2
"Additional Costs" shall have the meaning assigned such term in Section
5.01(a).
"Affected Loans" shall have the meaning assigned such term in Section 5.04.
"Affiliate" of any Person shall mean (i) any Person directly or indirectly
controlled by, controlling or under common control with such first Person, (ii)
any director or officer of such first Person or of any Person referred to in
clause (i) above and (iii) if any Person in clause (i) above is an individual,
any member of the immediate family (including parents, spouse and children) of
such individual and any trust whose principal beneficiary is such individual or
one or more members of such immediate family and any Person who is controlled by
any such member or trust. For purposes of this definition, any Person that owns
directly or indirectly 10% or more of the securities having ordinary voting
power for the election of directors or other governing body of a corporation or
10% or more of the partnership or other ownership interests of any other Person
(other than as a limited partner of such other Person) will be deemed to
"control" (including, with its correlative meanings, "controlled by" and "under
common control with") such corporation or other Person.
"Agents" shall mean collectively the Administrative Agent and the
Syndication Agent; and "Agent" shall mean either the Administrative Agent or the
Syndication Agent, as the context requires.
"Aggregate Commitments" at any time shall equal the sum of the Aggregate
Revolving Credit Commitments and the Aggregate Term Commitments.
"Aggregate Maximum Credit Amounts" at any time shall equal the sum of the
Maximum Credit Amounts of the Lenders, as the same may be reduced pursuant to
Section 2.03(b).
"Aggregate Revolving Credit Commitments" at any time shall equal the amount
calculated in accordance with Section 2.03.
"Aggregate Term Commitments" at any time shall equal the sum of the Term
Commitments of the Lenders.
"Agreement" shall mean this Credit Agreement, as the same may from time to
time be amended or supplemented.
"Applicable Lending Office" shall mean, for each Lender and for each Type
and Class of Loan, the lending office of such Lender (or an Affiliate of such
Lender) designated for such Type and Class of Loan on the signature pages hereof
or such other offices of such Lender (or of an Affiliate of such Lender) as such
Lender may from time to time specify to the Administrative Agent and the
Borrower as the office by which its Loans of such Type and Class are to be made
and maintained.
"Applicable Margin" shall mean:
<PAGE> 8
3
(a) in respect of Revolving Credit Loans, the following rate per annum as
applicable based on the Borrowing Base Utilization Percentage in effect from
time to time:
<TABLE>
<CAPTION>
--------------------- ----------------- ------------------ -------------------- -------------------
Borrowing Less than Equal to or Greater than Greater than
Base 30% greater than or equal to or equal to%
Utilization 30% but less 60% or less 90%
Percentage than 60% than 90%
--------------------- ----------------- ------------------ -------------------- -------------------
<S> <C> <C> <C> <C>
Eurodollar 1.50% 1.75% 2.00% 2.25%
--------------------- ----------------- ------------------ -------------------- -------------------
Base Rate 0.00% 0.25% 0.50% 0.75%
--------------------- ----------------- ------------------ -------------------- -------------------
</TABLE>
with each change in the Applicable Margin resulting from a change in the
Borrowing Base Utilization Percentage taking effect at the time of such change
in the Borrowing Base Utilization Percentage, provided, however, that:
(i) if at any time, the Borrower fails to deliver the Reserve Reports
pursuant to Section 8.07(a) on or prior to the date required for such
delivery thereunder, then the "Applicable Margin" for each Class of Loans
shall mean 0.75% per annum with respect to Base Rate Loans and 2.25% per
annum with respect to Eurodollar Loans; and
(ii) while any amounts in respect of the Term Loans are outstanding, the
"Applicable Margin" for each all Revolving Credit Loans shall mean 1% per
annum with respect to Base Rate Loans and 2.50% per annum with respect to
Eurodollar Loans.
(b) in respect of Term Loans, the following rate per annum as applicable:
(i) prior to Tranche A Equity Subscription Date, 2.00% with respect to Base
Rate Loans and 3.50% with respect to Eurodollar Loans; and
(ii) from and after to Tranche A Equity Subscription Date until all Term
Loans are paid in full, 3.00% with respect to Base Rate Loans; and 4.50%
with respect to Eurodollar Loans.
"Approved Securities" shall mean 45,000 Units.
"Approved Securities Purchase Documents" shall mean (i) the Escrow
Agreement, (ii) the Approved Securities, (iii) the Securities Purchase Agreement
executed by each Equity Investor, and (iv) any other documents or instruments
executed in connection therewith, as each is amended from time to time subject
to Section 9.21.
"Assignment" shall have the meaning assigned such term in Section 12.06(b).
"Base Rate" shall mean, with respect to any Base Rate Loan, for any day,
the higher of (i) the Federal Funds Rate for any such day plus 1/2 of 1% or (ii)
the Prime Rate determined by the Administrative Agent
<PAGE> 9
4
from time to time. Each change in any interest rate provided for herein based
upon the Base Rate resulting from a change in the Base Rate shall take effect at
the time of such change in the Base Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates based upon
the Base Rate.
"Borrowing Base" shall mean at any time an amount equal to the amount
determined in accordance with Section 2.08.
"Borrowing Base Utilization Percentage" shall mean, as of any day, the
fraction expressed as a percentage, the numerator of which is the balance of all
Revolving Credit Loans and the LC Exposure outstanding on such day, and the
denominator of which is the Borrowing Base in effect on such day.
"BPC" shall mean Bargo Petroleum Corporation, a Texas corporation and
Wholly-Owned Subsidiary of the Borrower.
"Business Day" shall mean any day other than a day on which commercial
banks are authorized or required to close in Houston, Texas; and if such day
relates to a borrowing or continuation of, a payment or prepayment of principal
of or interest on, or a conversion of or into, or the Interest Period for, a
Eurodollar Loan or a notice by the Borrower with respect to any such borrowing
or continuation, payment, prepayment, conversion or Interest Period, any day
which is also a day on which dealings in Dollar deposits are carried out in the
London interbank market.
"Capital Leases" shall mean, in respect of any Person, all leases which
shall have been, or should have been, in accordance with GAAP, recorded as
capital leases on the balance sheet of Person liable (whether contingent or
otherwise) for the payment of rent thereunder.
"Class" shall have the meaning assigned to such term in Section 1.04.
"Closing Date" shall mean the date of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time and any successor statute.
"Commitment" shall mean, in respect of any Lender, the sum of its
obligation in respect of its Revolving Credit Commitment, if any, and its Term
Loan Commitment, if any.
"Consolidated Net Income" shall mean with respect to the Borrower and its
Consolidated Subsidiaries, for any period, the aggregate of the net income (or
loss) of the Borrower and its Consolidated Subsidiaries after allowances for
taxes for such period, determined on a consolidated basis in accordance with
GAAP; provided that there shall be excluded from such net income (to the extent
otherwise included therein) the following: (i) the net income of any Person in
which the Borrower or any Consolidated Subsidiary has an interest (which
interest does not cause
<PAGE> 10
5
the net income of such other Person to be consolidated with the net income of
the Borrower and its Consolidated Subsidiaries in accordance with GAAP), except
to the extent of the amount of dividends or distributions actually paid in such
period by such other Person to the Borrower or to a Consolidated Subsidiary, as
the case may be; (ii) the net income (but not loss) of any Consolidated
Subsidiary to the extent that the declaration or payment of dividends or similar
distributions or transfers or loans by that Consolidated Subsidiary is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument or Governmental Requirement applicable to such Consolidated
Subsidiary, or is otherwise restricted or prohibited in each case determined in
accordance with GAAP; (iii) the net income (or loss) of any Person acquired in a
pooling-of-interests transaction for any period prior to the date of such
transaction; (iv) any extraordinary gains or losses, including gains or losses
attributable to Property sales not in the ordinary course of business; and (v)
the cumulative effect of a change in accounting principles and any gains or
losses attributable to writeups or writedowns of assets; and provided further,
that for each of the first three fiscal quarters of the Borrower following the
Closing Date, "Consolidated Net Income" shall be annualized as follows: (i) for
the four quarter period ending June 30, 2000, Consolidated Net Income shall be
deemed to be an amount equal to Consolidated Net Income for the three month
period ending on June 30, 2000 multiplied by four; (ii) for the four quarter
period ending September 30, 2000, Consolidated Net Income shall be deemed to be
an amount equal to Consolidated Net Income for the six month period ending on
such date multiplied by two; and (iii) for the four quarter period ending
December 31, 2000; Consolidated Net Income shall be deemed to be an amount equal
to Consolidated Net Income for the nine month period ending on such dated
multiplied by 1.33.
"Consolidated Subsidiaries" shall mean each Subsidiary of the Borrower
(whether now existing or hereafter created or acquired) the financial statements
of which shall be (or should have been) consolidated with the financial
statements of the Borrower in accordance with GAAP.
"Debt" shall mean, for any Person the sum of the following (without
duplication): (i) all obligations of such Person for borrowed money or evidenced
by bonds, debentures, notes or other similar instruments (including principal,
interest, fees and charges); (ii) all obligations of such Person (whether
contingent or otherwise) in respect of bankers' acceptances, letters of credit,
surety or other bonds and similar instruments; (iii) all obligations of such
Person to pay the deferred purchase price of Property or services (other than
for borrowed money); (iv) all obligations under Capital Leases; (v) all
obligations under Synthetic Leases; (vi) all Debt (as described in the other
clauses of this definition) and other obligations of others secured by a Lien on
any asset of such Person, whether or not such Debt is assumed by such Person;
(vii) all Debt (as described in the other clauses of this definition) and other
obligations of others guaranteed by such Person or in which such Person
otherwise assures a creditor against loss of the debtor or obligations of
others; (viii) all obligations or undertakings of such Person to maintain or
cause to be maintained the financial position or covenants of others or to
purchase the Debt or Property of others; (ix) obligations to deliver goods or
services including
<PAGE> 11
6
Hydrocarbons in consideration of advance payments; (x) obligations to pay for
goods or services whether or not such goods or services are actually received or
utilized by such Person; (xi) any preferred or other capital stock or equity
interest of such Person in which such Person has a mandatory obligation to
redeem such stock or equity interest; (xii) any Debt of a Special Entity for
which such Person is liable either by agreement or because of a Governmental
Requirement; and (xiii) the undischarged balance of any production payment
created by such Person or for the creation of which such Person directly or
indirectly received payment.
"Default" shall mean an Event of Default or an event which with notice or
lapse of time or both would become an Event of Default.
"Dollars" and "$" shall mean lawful money of the United States of America.
"EBITDAX" shall mean, for any period, the sum of Consolidated Net Income
for such period plus the following expenses or charges to the extent deducted
from Consolidated Net Income in such period: interest, taxes, depreciation,
depletion and amortization, minus all noncash income added to Consolidated Net
Income and all exploration expenses in such period.
"EnCap Group" shall mean Energy Capital Investment Company PLC, EnCap
Energy Capital Fund III-B, L.P., BOCP Energy Partners, L.P., and EnCap Energy
Capital Fund III, L.P.
"Engineering Reports" shall have the meaning assigned such term in Section
2.08(c).
"Environmental Laws" shall mean any and all Governmental Requirements
pertaining to health or the environment in effect in any and all jurisdictions
in which the Borrower or any Subsidiary is conducting or at any time has
conducted business, or where any Property of the Borrower or any Subsidiary is
located, including without limitation, the Oil Pollution Act of 1990 ("OPA"),
the Clean Air Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
and other environmental conservation or protection laws. The term "oil" shall
have the meaning specified in OPA, the terms "hazardous substance" and "release"
(or "threatened release") have the meanings specified in CERCLA, and the terms
"solid waste" and "disposal" (or "disposed") have the meanings specified in
RCRA; provided, however, that (i) in the event either OPA, CERCLA or RCRA is
amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment and (ii)
to the extent the laws of the state in which any Property of the Borrower or any
Subsidiary is located establish a meaning for "oil," "hazardous substance,"
<PAGE> 12
7
"release," "solid waste" or "disposal" which is broader than that specified in
either OPA, CERCLA or RCRA, such broader meaning shall apply.
"Eos Group" shall mean Eos Partners, L.P., Eos Partners SBIC, L.P., and Eos
Partners SBIC II, L.P.
"Equity Investors" shall mean: (a) as to the Tranche A Term Loans and
Tranche A Term Loan Notes, the following entities on a several basis equal to
applicable percentage indicated of the Tranche A Term Loan Commitment: (i) the
EnCap Group (30%), (ii) Kayne Anderson Energy Fund, L.P. (20%), (iii)
BancAmerica Capital Investors SBIC I., L.P., (30%), (iv) the Eos Group (10%),(v)
SGC Partners (10%) and (vi) any Affiliates, successor or assigns of the
foregoing; and (b) as to the Tranche B Term Loans and the Tranche B Term Loan
Notes, BTC and its Affiliates.
"Equity Offering" shall mean a primary offering, whether public or private,
of shares of common stock or preferred stock of the Borrower or of debt
instruments convertible into any such shares; provided that the Equity
Undertakings and the transactions contemplated by the Approved Securities
Purchase Documents shall not be considered to be "Equity Offerings".
"Equity Undertakings" shall mean: (a) as to the Tranche A Term Loans and
the Tranche A Term Loan Notes, the obligation of the Equity Investors in respect
thereof to purchase on the Tranche A Equity Subscription Date Units, on a
several basis, for cash consideration equal to their applicable committed
percentage of the Tranche A Term Loans and the Tranche A Term Loan Notes, which
cash proceeds shall be applied in the manner contemplated by Section
2.07(b)(iv); and (b) as to the Tranche B Term Loans and the Tranche B Term Loan
Notes, the obligation of the Equity Investors in respect thereof to accept,
subject to the terms of Section 3.01(b)(iii), on the Tranche B Equity Conversion
Date the automatic conversion of the Tranche B Term Notes into the number of
Units equal to the outstanding principal balance of the Tranche B Term Loans as
of the Tranche B Equity Conversion Date divided by $1,000.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and any successor statute.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with the Borrower or any Subsidiary would be deemed
to be a "single employer" within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of section 414 of the Code.
"ERISA Event" shall mean (i) a "Reportable Event" described in Section 4043
of ERISA and the regulations issued thereunder, (ii) the withdrawal of the
Borrower, any Subsidiary or any ERISA Affiliate from a Plan during a plan year
in which it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA, (iii) the filing of a notice of intent to terminate a Plan or the
treatment of a Plan amendment as a termination under Section 4041 of ERISA, (iv)
the institution of proceedings to terminate a Plan by the PBGC or (v) any other
event or condition which might constitute grounds under Section 4042 of ERISA
for
<PAGE> 13
8
the termination of, or the appointment of a trustee to administer, any Plan.
"Escrow Agent" shall mean the Administrative Agent in its capacity as
escrow agent or any Person acting as a successor under the Escrow Agreement.
"Escrow Agreement" shall mean that certain Escrow Agreement dated as of
Closing Date among the Borrower, as depositor, the Escrow Agent and the Equity
Investors, as the same may be amended, modified or supplemented from time to
time.
"Eurodollar Loans" shall mean Loans the interest rates on which are
determined on the basis of rates referred to in the definition of "Eurodollar
Rate".
"Eurodollar Rate" shall mean, with respect to any Eurodollar Loan, the rate
per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) quoted by
the Administrative Agent at approximately 11:00 a.m. London time (or as soon
thereafter as practicable) two Business Days prior to the first day of the
Interest Period for such Loan for the offering by the Administrative Agent to
leading lenders in the London interbank market of Dollar deposits having a term
comparable to such Interest Period and in an amount comparable to the principal
amount of the Eurodollar Loan to be made by the Administrative Agent for such
Interest Period.
"Event of Default" shall have the meaning assigned such term in Section
10.01.
"Excepted Liens" shall mean: (i) Liens for taxes, assessments or other
governmental charges or levies not yet due or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP; (ii) Liens in connection with workmen's compensation,
unemployment insurance or other social security, old age pension or public
liability obligations not yet due or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP; (iii) operators', vendors', carriers', warehousemen's,
repairmen's, mechanics', workmen's, materialmen's, construction or other like
Liens arising by operation of law in the ordinary course of business or incident
to the exploration, development, operation and maintenance of Oil and Gas
Properties or statutory landlord's liens, each of which is in respect of
obligations that have not been outstanding more than ninety (90) days or which
are being contested in good faith by appropriate proceedings and for which
adequate reserves have been maintained in accordance with GAAP; (iv) any Liens
reserved in leases or farmout agreements for rent or royalties and for
compliance with the terms of the farmout agreements or leases in the case of
leasehold estates, to the extent that any such Lien referred to in this clause
does not materially impair the use of the Property covered by such Lien for the
purposes for which such Property is held by the Borrower or any Subsidiary or
materially impair the value of such Property subject thereto; (v) encumbrances
(other than to secure the payment of borrowed
<PAGE> 14
9
money or the deferred purchase price of Property or services), easements,
restrictions, servitudes, permits, conditions, covenants, exceptions or
reservations in any rights of way or other Property of the Borrower or any
Subsidiary for the purpose of roads, pipelines, transmission lines,
transportation lines, distribution lines for the removal of gas, oil, coal or
other minerals or timber, and other like purposes, or for the joint or common
use of real estate, rights of way, facilities and equipment, and defects,
irregularities, zoning restrictions and deficiencies in title of any rights of
way or other Property which in the aggregate do not materially impair the use of
such rights of way or other Property for the purposes of which such rights of
way and other Property are held by the Borrower or any Subsidiary or materially
impair the value of such Property subject thereto; and (vi) deposits of cash or
securities to secure the performance of bids, trade contracts, leases, statutory
obligations and other obligations of a like nature incurred in the ordinary
course of business.
"Excess Sales Proceeds" shall mean 75% of the Net Cash Proceeds of any sale
or other disposition of Oil and Gas Properties remaining after giving effect to
any prepayment resulting from such sale or disposition under Section 2.07(b).
"Existing Credit Facility" shall mean that certain Amended and Restated
Credit Agreement dated as of December 4, 1998 among the Borrower, Bank of
America, N.A. (formerly Bank of America National Trust and Savings Association),
as administrative agent, and the financial institutions parties thereto, and the
other agreements or instruments executed and delivered by the Borrower or any
other Person in connection with, or as security for the payment or performance
of the Borrower's obligations thereunder, as such agreements may be amended,
supplemented or restated from time to time.
"Federal Funds Rate" shall mean, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight federal funds transactions with a member of the
Federal Reserve System arranged by federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (i) if the date for which such rate is to be
determined is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate charged to the Administrative Agent on such day on such transactions as
determined by the Administrative Agent.
"Financial Statements" shall mean the financial statement or statements of
the Borrower and its Consolidated Subsidiaries referred to in Section 7.02.
"GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time.
<PAGE> 15
10
"Governmental Authority" shall mean, in respect of any Person, the country,
the state, county, city and political subdivisions in which such Person or such
Person's Property is located or which exercises valid jurisdiction over such
Person or such Person's Property, and any court, agency, department, commission,
board, bureau or instrumentality of any of them including monetary authorities
which exercises valid jurisdiction over such Person or such Person's Property.
Unless otherwise specified, all references to Governmental Authority herein
shall mean a Governmental Authority having jurisdiction over, where applicable,
the Borrower, the Subsidiaries or any of their Property or the Administrative
Agent, any Lender or any Applicable Lending Office.
"Governmental Requirement" shall mean any law, statute, code, ordinance,
order, determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement
(whether or not having the force of law), including, without limitation,
Environmental Laws, energy regulations and occupational, safety and health
standards or controls, of any Governmental Authority.
"Guarantor" shall mean BPC, [_________________], [__________________] and
[________________], and each Subsidiary that guarantees the Indebtedness
pursuant to Section 9.16.
"Guaranty Agreement" shall mean an agreement executed by the Guarantor in
form and substance satisfactory to the Administrative Agent guarantying,
unconditionally, payment of the Indebtedness, as the same may be amended,
modified or supplemented from time to time.
"Hedging Agreements" shall mean any commodity, interest rate or currency
swap, cap, floor, collar, forward agreement or other exchange or protection
agreements or any option with respect to any such transaction.
"Highest Lawful Rate" shall mean, with respect to each Lender, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Notes or on other
Indebtedness under laws applicable to such Lender which are presently in effect
or, to the extent allowed by law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow.
"Hydrocarbon Interests" shall mean all rights, titles, interests and
estates now or hereafter acquired in and to oil and gas leases, oil, gas and
mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee
interests, overriding royalty and royalty interests, net profit interests and
production payment interests, including any reserved or residual interests of
whatever nature.
"Hydrocarbons" shall mean oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and
all products refined or separated therefrom.
"Indebtedness" shall mean any and all amounts owing or to be owing by the
Borrower or any Guarantor (i) to the Administrative Agent, the
<PAGE> 16
11
Issuing Bank and/or Lenders under any Loan Document; (ii) to any Lender or any
Affiliate of a Lender under any Hedging Agreements entered into while such
Person (or its Affiliate) was a Lender hereunder; and (iii) all renewals,
extensions and/or rearrangements of any of the above.
"Indemnified Parties" shall have the meaning assigned such term in Section
12.03(b).
"Indemnity Matters" shall mean any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), claims, demands and
causes of action made or threatened against a Person and, in connection
therewith, all losses, liabilities, damages (including, without limitation,
consequential damages) or reasonable costs and expenses of any kind or nature
whatsoever incurred by such Person whether caused by the sole or concurrent
negligence of such Person seeking indemnification.
"Initial Funding" shall mean the funding of the initial Loans or issuance
of the initial Letters of Credit pursuant to Section 6.01.
"Initial Reserve Report" shall mean (i) the reports of Ryder Scott Company
Petroleum Consultants, L.P. dated of December 6, 1999 with respect to value of
the Acquisition Properties as of January 1, 2000, and (ii) the [preliminary]
report of T. J. Smith & Company, Inc., dated of ________________, 1999 with
respect to the value of the Oil and Gas Properties of the Borrower and its
Subsidiaries prior to giving effect to the Acquisition as of January 1, 2000, a
copy of each of which has been delivered to the Administrative Agent.
"Interest Expense" means, for any period, the sum (determined without
duplication) of the aggregate amount of interest expense accruing during such
period on Indebtedness of the Borrower and its Consolidated Subsidiaries
including the interest portion of payments under Capital Leases, any capitalized
interest and all amortization of debt discount and expense, plus all dividends
paid in cash on any preferred stock.
"Interest Period" shall mean, with respect to any Eurodollar Loan, the
period commencing on the date such Eurodollar Loan is made and ending on the
numerically corresponding day in the first, second, third or sixth calendar
month thereafter, as the Borrower may select as provided in Section 2.02, except
that each Interest Period which commences on the last Business Day of a calendar
month (or on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) no Interest Period for any Revolving
Credit Loan may commence before and end after the Revolving Credit Termination
Date; (ii) no Interest Period for any Term Loan may commence before and end
after either Tranche A Equity Subscription Date or April __, 2003; (iii) each
Interest Period which would otherwise end on a day which is not a Business Day
shall end on the next succeeding Business Day (or, if such next succeeding
Business Day falls in the next succeeding calendar month, on the next preceding
Business Day); and (iv)
<PAGE> 17
12
no Interest Period shall have a duration of less than one month and, if the
Interest Period for any Eurodollar Loans would otherwise be for a shorter
period, such Loans shall not be available hereunder.
"Issuing Bank" shall mean Chase or any Lender agreed to between the
Borrower and the Administrative Agent to issue Letters of Credit.
"LC Commitment" at any time shall mean Twenty Million Dollars
($20,000,000).
"LC Exposure" at any time shall mean the aggregate face amount of all
undrawn and uncancelled Letters of Credit and the aggregate of all amounts drawn
under all Letters of Credit and not yet reimbursed.
"Letter of Credit Agreements" shall mean the written agreements with the
Issuing Bank executed in connection with the issuance by the Issuing Bank of the
Letters of Credit, such agreements to be on the Issuing Bank's customary form
for letters of credit of comparable amount and purpose as from time to time in
effect or as otherwise agreed to by the Borrower and the Issuing Bank.
"Letters of Credit" shall mean the letters of credit issued pursuant to
Section 2.01(b) and all reimbursement obligations pertaining to any such letters
of credit, and "Letter of Credit" shall mean any one of the Letters of Credit
and the reimbursement obligations pertaining thereto.
"Lien" shall mean any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and whether such
obligation or claim is fixed or contingent, and including but not limited to (i)
the lien or security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes or (ii) production payments and the like payable
out of Oil and Gas Properties. The term "Lien" shall include reservations,
exceptions, encroachments, easements, rights of way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
Property. For the purposes of this Agreement, the Borrower or any Subsidiary
shall be deemed to be the owner of any Property which it has acquired or holds
subject to a conditional sale agreement, or leases under a financing lease or
other arrangement pursuant to which title to the Property has been retained by
or vested in some other Person in a transaction intended to create a financing.
"Loan Documents" shall mean this Agreement, the Notes and the Security
Instruments.
"Loans" shall mean, collectively, the Revolving Credit Loans and the Term
Loans, or if the context so requires, either the Revolving Credit Loans or the
Term Loans, as a Class.
"Majority Lenders" shall mean, at any time while no Loans are outstanding,
Lenders having at least sixty-six and two-thirds percent
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13
(66-2/3%) of the Aggregate Commitments and the Administrative Agent; and at any
time while Loans or Letters of Credit are outstanding, Lenders holding at least
sixty-six and two-thirds percent (66-2/3%) of the outstanding aggregate
principal amount of the Loans or participation interests in Letters of Credit
(without regard to any sale by a Lender of a participation in any Loan under
Section 12.06(c)) and the Administrative Agent.
"Majority Revolving Credit Lenders" shall mean, at any time while no
Revolving Credit Loans are outstanding, Revolving Credit Lenders having at least
sixty-six and two-thirds percent (66-2/3%) of the Aggregate Revolving Credit
Commitments and the Administrative Agent; and at any time while Revolving Credit
Loans or Letters of Credit are outstanding, Revolving Credit Lenders holding at
least sixty-six and two-thirds percent (66-2/3%) of the outstanding aggregate
principal amount of the Revolving Credit Loans or participation interests in
Letters of Credit (without regard to any sale by a Lender of a participation in
any Loan under Section 12.06(c)) and the Administrative Agent.
"Majority Tranche A Term Loan Lenders" shall mean Tranche A Term Loan
Lenders holding at least sixty-six and two-thirds percent (66-2/3%) of the
outstanding aggregate principal amount of the Tranche A Term Loans (without
regard to any sale by a Lender of a participation in any Loan under Section
12.06(c)) and the Administrative Agent.
"Material Adverse Effect" shall mean any material and adverse effect on (i)
the assets, liabilities, financial condition, business, operations or affairs of
the Borrower and its Subsidiaries taken as a whole different from those
reflected in the Financial Statements or from the facts represented or warranted
in any Loan Document or (ii) the ability of the Borrower and the Subsidiaries
taken as a whole to carry out their business as at the Closing Date or as
proposed as of the Closing Date to be conducted or meet their obligations under
the Loan Documents on a timely basis.
"Maximum Credit Amount" shall mean, as to each Lender, the amount set forth
opposite such Lender's name on Annex I under the caption "Maximum Credit
Amounts", as the same may be reduced pursuant to Section 2.03(b) pro rata to
each Lender based on its Percentage Share of the Aggregate Maximum Credit
Amounts or modified from time to time to reflect any assignments permitted by
Section 12.06(b).
"Mortgaged Property" shall mean the Property owned by the Borrower or any
Subsidiary and which is subject to the Liens existing and to exist under the
terms of the Security Instruments.
"Multiemployer Plan" shall mean a Plan defined as such in Section 3(37) or
4001(a)(3) of ERISA.
"Net Cash Proceeds" shall mean: (a) in respect of any Equity Offering, the
cash proceeds received by the Borrower from such Equity Offering net of
attorneys' fees, investment banking fees, accountants' fees, underwriting
discounts and commission and other customary fees and
<PAGE> 19
14
expenses actually incurred in connection with such Equity Offering; and (b) in
respect of any sale or other disposition of Property, the cash proceeds and
other non-cash proceeds received by way of deferred payment or purchase price
adjustment (but then only as and when received), net of attorneys' fees,
accountants' fees, broker's or finder's fees, amounts required to be applied to
the repayment of any Debt secured by a Lien on such Property, other customary
fees and expenses actually incurred in connection with such sale or other
disposition and taxes paid or reasonably estimated to be payable as a result
thereof (after taking into account any available tax credits or deduction or
sharing arrangements).
"Notes" shall mean the Revolving Credit Notes and the Term Notes.
"Oil and Gas Properties" shall mean Hydrocarbon Interests; the Properties
now or hereafter pooled or unitized with Hydrocarbon Interests; all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including without limitation all units
created under orders, regulations and rules of any Governmental Authority) which
may affect all or any portion of the Hydrocarbon Interests; all operating
agreements, contracts and other agreements which relate to any of the
Hydrocarbon Interests or the production, sale, purchase, exchange or processing
of Hydrocarbons from or attributable to such Hydrocarbon Interests; all
Hydrocarbons in and under and which may be produced and saved or attributable to
the Hydrocarbon Interests, including all oil in tanks, the lands covered thereby
and all rents, issues, profits, proceeds, products, revenues and other incomes
from or attributable to the Hydrocarbon Interests; all tenements, hereditaments,
appurtenances and Properties in any manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests; and all Properties, rights, titles,
interests and estates described or referred to above, including any and all
Property, real or personal, now owned or hereinafter acquired and situated upon,
used, held for use or useful in connection with the operating, working or
development of any of such Hydrocarbon Interests or Property (excluding drilling
rigs, automotive equipment or other personal property which may be on such
premises for the purpose of drilling a well or for other similar temporary uses)
and including any and all oil wells, gas wells, injection wells or other wells,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.
"Other Taxes" shall have the meaning assigned such term in Section 4.06(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions.
"Percentage Share" shall mean, (i) with respect to the Aggregate Maximum
Credit Amounts and the Revolving Credit Loans, the percentage of
<PAGE> 20
15
the Aggregate Maximum Credit Amounts to be provided by a Revolving Credit Lender
under this Agreement as indicated on Annex I hereto, as modified from time to
time to reflect any assignments permitted by Section 12.06(b); and (ii) with
respect to the Aggregate Term Commitments, the percentage of the Aggregate Term
Commitments to be provided by a Term Lender under this Agreement as indicated on
Annex I hereto, as modified from time to time to reflect any assignments
permitted by Section 12.06(b).
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government or any agency, instrumentality or political subdivision thereof, or
any other form of entity.
"Plan" shall mean any employee pension benefit plan, as defined in Section
3(2) of ERISA, which (i) is currently or hereafter sponsored, maintained or
contributed to by the Borrower, any Subsidiary or an ERISA Affiliate or (ii) was
at any time during the preceding six calendar years sponsored, maintained or
contributed to, by the Borrower, any Subsidiary or an ERISA Affiliate.
"Post-Default Rate" shall mean, in respect of any principal of any Loan or
any other amount payable by the Borrower under this Agreement or any other Loan
Document, a rate per annum during the period commencing on the date of
occurrence of an Event of Default until such amount is paid in full or all
Events of Default are cured or waived equal to 2% per annum above the Base Rate
as in effect from time to time plus the Applicable Margin (if any), but in no
event to exceed the Highest Lawful Rate; provided, however, for a Eurodollar
Loan, the "Post-Default Rate" for such principal shall be, for the period
commencing on the date of occurrence of an Event of Default and ending on the
earlier to occur of the last day of the Interest Period therefor or the date all
Events of Default are cured or waived, 2% per annum above the interest rate for
such Loan as provided in Section 3.02(a)(ii), but in no event to exceed the
Highest Lawful Rate.
"Prime Rate" shall mean the rate of interest from time to time announced
publicly by the Administrative Agent at the Principal Office as its prime
commercial lending rate. Such rate is set by the Administrative Agent as a
general reference rate of interest, taking into account such factors as the
Administrative Agent may deem appropriate, it being understood that many of the
Administrative Agent's commercial or other loans are priced in relation to such
rate, that it is not necessarily the lowest or best rate actually charged to any
customer and that the Administrative Agent may make various commercial or other
loans at rates of interest having no relationship to such rate.
"Principal Office" shall mean the principal office of the Administrative
Agent, presently located at 715 Main Street, Houston, Texas 77002 or such other
location as designated by the Administrative Agent from time to time.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
<PAGE> 21
16
"Quarterly Dates" shall mean the last day of each March, June, September
and December, in each year, the first of which shall be June 30, 2000; provided,
however, that if any such day is not a Business Day, such Quarterly Date shall
be the next succeeding Business Day.
"Redetermination Date" shall mean the date that the redetermined Borrowing
Base becomes effective subject to the notice requirements specified in Section
2.08(b) both for scheduled redeterminations and unscheduled redeterminations.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"Regulatory Change" shall mean, with respect to any Lender, any change
after the Closing Date in any Governmental Requirement (including Regulation D)
or the adoption or making after such date of any interpretations, directives or
requests applying to a class of lenders (including such Lender or its Applicable
Lending Office) of or under any Governmental Requirement (whether or not having
the force of law) by any Governmental Authority charged with the interpretation
or administration thereof.
"Required Lenders" shall mean, at any time while no Revolving Credit Loans
or Letters of Credit are outstanding, Revolving Credit Lenders having at least
seventy-five percent (75%) of the Aggregate Maximum Credit Amounts and the
Administrative Agent; and at any time while Revolving Credit Loans or Letters of
Credit are outstanding, Revolving Credit Lenders holding at least seventy-five
percent (75%) of the outstanding aggregate principal amount of the Loans or
participation interests in such Letters of Credit (without regard to any sale by
a Lender of a participation in any Loan under Section 12.06(c)) and the
Administrative Agent.
"Required Payment" shall have the meaning assigned such term in Section
4.04.
"Reserve Report" shall mean a report, in form and substance satisfactory to
the Administrative Agent, setting forth, as of each January 1 or July 1 (or such
other date in the event of an unscheduled redetermination); (i) the oil and gas
reserves attributable to the Oil and Gas Properties of the Borrower and the
Guarantors, together with a projection of the rate of production and future net
income, taxes, operating expenses and capital expenditures with respect thereto
as of such date, based upon the pricing assumptions consistent with SEC
reporting requirements at the time, and (ii) such other information as the
Administrative Agent may reasonably request. The term "Reserve Report" shall
also include the information to be provided by the Borrower of each year
pursuant to Section 8.07(c) and (d).
"Responsible Officer" shall mean, as to any Person, the Chief Executive
Officer, the President or any Vice President of such Person and, with respect to
financial matters, the term "Responsible Officer"
<PAGE> 22
17
shall include the Chief Financial Officer of such Person. Unless otherwise
specified, all references to a Responsible Officer herein shall mean a
Responsible Officer of the Borrower.
"Revolving Credit Commitment" shall mean, for any Lender, its obligation to
(i) make Revolving Credit Loans up to the lesser of such Lender's Maximum
Revolving Credit Amount or the Lender's Percentage Share of the then effective
Borrowing Base and (ii) participate in the issuance of Letters of Credit as
provided in Section 2.01(b).
"Revolving Credit Loans" shall mean Loans made pursuant to Section 2.01(a).
"Revolving Credit Notes" shall mean the promissory notes of the Borrower
described in Section 2.06(a) and being in the form of Exhibit A-1 hereto,
together with all amendments, modifications, replacements, extensions and
rearrangements thereof.
"Revolving Credit Period" shall mean the period from the Closing Date to
and ending on the Revolving Credit Termination Date.
"Revolving Credit Termination Date" shall mean, unless the Revolving Credit
Commitments are sooner terminated pursuant to Sections 2.03(b) or 10.02, March
___, 2003.
"Scheduled Redetermination Date" shall mean the March 15th and September
15th of each year on which the Borrowing Base is scheduled for redetermination
under Section 2.08, commencing October 1, 2000.
"SEC" shall mean the Securities and Exchange Commission or any successor
Governmental Authority.
"Security Instruments" shall mean the Letters of Credit, the Letter of
Credit Agreements, the agreements or instruments described or referred to in
Exhibit E, and any and all other agreements or instruments now or hereafter
executed and delivered by the Borrower or any other Person (other than
participation or similar agreements between any Lender and any other lender or
creditor with respect to any Indebtedness pursuant to this Agreement) in
connection with, or as security for the payment or performance of the Notes,
this Agreement, or reimbursement obligations under the Letters of Credit, as
such agreements may be amended, supplemented or restated from time to time.
"SGC Partners" shall mean SGC Partners II LLC.
"Special Entity" shall mean any joint venture, limited liability company or
partnership, general or limited partnership or any other type of partnership or
company, other than a corporation, in which the Borrower or one or more of its
other Subsidiaries is a member, owner, partner or joint venturer and owns,
directly or indirectly, at least a majority of the equity of such entity or
controls such entity, but excluding any tax partnerships that are not classified
as partnerships under state law. For purposes of this definition, any Person
which owns directly or indirectly an equity investment in another Person which
<PAGE> 23
18
allows the first Person to manage or elect managers who manage the normal
activities of such second Person will be deemed to "control" such second Person
(e.g. a sole general partner controls a limited partnership).
"Subsidiary" shall mean (i) any corporation of which at least a majority of
the outstanding shares of stock having by the terms thereof ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned or
controlled by the Borrower or one or more of its Subsidiaries or by the Borrower
and one or more of its Subsidiaries and (ii) any Special Entity. Unless
otherwise indicated herein, each reference to the term "Subsidiary" shall mean a
Subsidiary of the Borrower.
"Synthetic Leases" shall mean, in respect of any Person, all leases which
shall have been, or should have been, in accordance with GAAP, treated as
operating leases on the balance sheet of Person liable (whether contingent or
otherwise) for the payment of rent thereunder.
"Tangible Net Worth" shall mean, as at any date, the sum of the following
for the Borrower and its Consolidated Subsidiaries determined (without
duplication) in accordance with GAAP:
(i) the amount of preferred stock and common stock at par plus the amount
of surplus of the Borrower, plus
(ii) the retained earnings (or, in the case of retained earnings deficit,
minus the amount of such deficit), minus
(iii) the sum of the following: cost of treasury shares and the book value
of all assets of the Borrower and its Consolidated Subsidiaries which
should be classified as intangibles (without duplication of deductions in
respect of items already deducted in arriving at surplus and retained
earnings) but in any event including as such intangibles the following:
goodwill, research and development costs, trademarks, trade names,
copyrights, patents and franchises, unamortized debt discount and expense,
all reserves and any writeup in the book value of assets resulting from a
revaluation thereof or resulting from any changes in GAAP subsequent to
December 31, 1999.
"Taxes" shall have the meaning assigned such term in Section 4.06(a).
"Term Commitment" shall mean the Tranche A Term Loan Commitments and the
Tranche B Term Loan Commitments.
"Term Lenders" shall mean the Tranche A Term Loan Lenders and the Tranche B
Term Loan Lender.
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"Term Loans" shall mean collectively, the Tranche A Term Loans and the
Tranche B Term Loans.
"Term Notes" shall mean the Tranche A Term Loan Notes and the Tranche B
Term Loan Notes.
"Total Debt" shall mean, at any date, all Debt of the Borrower and its
Subsidiaries on a consolidated basis other than Debt described under clauses
(ii), (iii), (vii), (viii), (x) and (xi) of the definition "Debt".
"Tranche A Equity Subscription Date" shall mean the earlier of (i) the date
on which the Tranche A Term Loans shall have been accelerated pursuant to
Section 10.02 or (ii) January __, 2001.
"Tranche A Term Loans" shall mean the term loans made pursuant to Section
2.01(b)(i).
"Tranche A Term Loan Commitment" shall mean, as to each Tranche A Term Loan
Lender, its obligation to make a Tranche A Term Loan in the amount set forth
opposite such Lender's name under "Tranche A Term Loans" on Annex I, as the same
may be modified from time to time to reflect any assignment permitted by Section
12.06(b). After the Closing Date, as of any date of determination, the Tranche A
Term Loan Commitment of each Tranche A Term Loan Lender shall be the amount of
the Tranche A Term Loan of such Lender outstanding as of such date of
determination.
"Tranche A Term Loan Lender" shall mean each Lender that has a Tranche A
Term Loan Commitment or that holds a Tranche A Term Loan Note.
"Tranche A Term Loan Note" the promissory notes of the Borrower described
in Section 2.06(b) and being in the form of Exhibit A-2 hereto, together with
all amendments, modifications, replacements, extensions and rearrangements
thereof.
"Tranche B Equity Conversion Date" shall mean the earlier of (i) the date
on which the Tranche B Term Loans shall have been accelerated pursuant to
Section 10.02 or (ii) January __, 2001.
"Tranche B Term Loans" shall mean the term loans made pursuant to Section
2.01(b)(ii).
"Tranche B Term Loan Commitment" shall mean, as to the Tranche B Term Loan
Lender, its obligation to make a Tranche B Term Loan in the amount set forth
opposite its name under "Tranche B Term Loans" on Annex I. After the Closing
Date, as of any date of determination, the Tranche B Term Loan Commitment of the
Tranche B Term Loan Lender shall be the amount of the Tranche B Term Loan of
such Lender outstanding as of such date of determination.
"Tranche B Term Loan Lender" shall mean BTC.
"Tranche B Term Loan Note" the promissory notes of the Borrower described
in Section 2.06(c) and being in the form of Exhibit A-3 hereto,
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together with all amendments, modifications, replacements, extensions and
rearrangements thereof.
"Type" shall have the meaning assigned such term in Section 1.04.
"Unavailable Commitments" shall mean the Aggregate Maximum Credit Amounts
minus the Aggregate Revolving Credit Commitments.
"Unit" shall mean collectively (i) one share of the Borrower's 12%
Redeemable Preferred Stock, Series C, which have a scheduled redemption date of
no earlier than six (6) years from the Closing Date and a payment-in-kind
feature permitting the Borrower to pay dividends, without default, by the
delivery of additional shares of such preferred stock; and (ii) rights, warrants
or options with respect to a number of shares of the Borrower's common stock, or
the actual number of such shares, in each case as calculated in accordance with
the Approved Securities Purchase Documents.
"Unused Amount of the Aggregate Revolving Credit Commitments" shall mean
the Aggregate Revolving Credit Commitments minus the sum of the outstanding
Revolving Credit Loans and the LC Exposure.
"Wholly-Owned Subsidiary" shall mean, as to the Borrower, any Subsidiary of
which all of the outstanding shares of capital stock or other equity interests,
on a fully-diluted basis, are owned by the Borrower or one or more of the
Wholly-Owned Subsidiaries or by the Borrower and one or more of the Wholly-Owned
Subsidiaries.
Section 1.03 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Administrative Agent or the Lenders hereunder
shall be prepared, in accordance with GAAP, applied on a basis consistent with
the audited financial statements of the Borrower referred to in Section 7.02
(except for changes concurred with by the Borrower's independent public
accountants).
Section 1.04 Classes and Types of Loans. Loans hereunder are distinguished
by "Class" and by "Type". The "Class" of a Loan (or of a Commitment to make such
a Loan) refers to the determination whether such Loan is a Term Loan or a
Revolving Credit Loan, each of which constitutes a Class. The "Type" of a Loan
refers to the determination whether such Loan is a Eurodollar Loan or a Base
Rate Loan. Identification of a Loan by both Class and Type (e.g., a "Eurodollar
Revolving Credit Loan") indicates that such Loan is both a Eurodollar Loan and a
Revolving Credit Loan.
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ARTICLE II
Commitments
Section 2.01 Loans and Letters of Credit.
(a) Revolving Credit Loans. Each Lender severally agrees, on the terms of
this Agreement, to make revolving credit loans to the Borrower during the period
from and including (i) the Closing Date or (ii) such later date that such Lender
becomes a party to this Agreement as provided in Section 12.06(b), to but
excluding, the Revolving Credit Termination Date in an aggregate principal
amount at any one time outstanding up to but not exceeding the amount of such
Lender's Revolving Credit Commitment as then in effect; provided, however, that
the aggregate principal amount of all such Loans by all Lenders hereunder at any
one time outstanding together with the LC Exposure shall not exceed the
Aggregate Revolving Credit Commitments. Subject to the terms of this Agreement,
during the Revolving Credit Period, the Borrower may borrow, repay and reborrow
the amount of the Aggregate Revolving Credit Commitments.
(b) Term Loans.
(i) Tranche A. Each Tranche A Term Loan Lender severally agrees, subject to
the terms and conditions of this Agreement, to make a Tranche A Term Loan
to the Borrower on the Closing Date in an amount specified by the Borrower
under Section 2.02 not to exceed its respective Tranche A Term Loan
Commitment.
(ii) Tranche B. The Tranche B Term Loan Lender severally agrees, subject to
the terms and conditions of this Agreement, to make a Tranche B Term Loan
to the Borrower on the Closing Date in an amount specified by the Borrower
under Section 2.02 not to exceed its Tranche B Term Loan Commitment.
(iii) Generally. Borrowings under the Tranche A Term Loan Commitments and
the Tranche B Term Loan Commitments shall be pro rata. The Term Commitments
are not revolving in nature, and amounts repaid or prepaid may not be
reborrowed. Any portion of each Lender's Term Commitment not utilized by
such borrowing on the Closing Date shall be permanently canceled.
(c) Letters of Credit. During the Revolving Credit Period, the Issuing Bank
agrees to extend credit for the account of the Borrower and its Subsidiaries at
any time and from time to time by issuing renewing, extending or reissuing
Letters of Credit; provided, however, the LC Exposure at any one time
outstanding shall not exceed the lesser of (i) the LC Commitment or (ii) the
Aggregate Revolving Credit Commitments, as then in effect, minus the aggregate
principal amount of all Loans then outstanding. The Lenders shall participate in
such Letters of Credit according to their respective Percentage Share of the
Aggregate Maximum Credit Amounts. Each of the Letters of Credit shall (i) be
issued by the Issuing Bank, (ii) contain such terms and provisions as are
reasonably required by the Issuing Bank and the Administrative Agent, (iii) be
for the account of the Borrower or one of its Subsidiaries and (iv) expire not
later than the earlier of one (1) year from the date of issuance, renewal,
extension or reissuance or the Revolving Credit Termination Date.
<PAGE> 27
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(d) Limitation on Types of Loans. Subject to the other terms and provisions
of this Agreement, at the option of the Borrower, the Loans may be Base Rate
Loans or Eurodollar Loans; provided that, without the prior written consent of
the Majority Lenders, no more than five (5) Revolving Credit Eurodollar Loans
may be outstanding at any time to any Lender and no more than one (1) Term
Eurodollar Loan may be outstanding at any time to any Lender.
Section 2.02 Borrowings, Continuations and Conversions, Letters of Credit.
(a) Borrowings.
(i) Revolving Credit Loan Borrowings. The Borrower shall give the
Administrative Agent (which shall promptly notify the Lenders) advance
notice as hereinafter provided of each borrowing of Revolving Credit Loans
hereunder, which shall specify the aggregate amount of such Revolving
Credit borrowing, the Type and the date (which shall be a Business Day) of
the Loans to be borrowed and (in the case of Eurodollar Loans) the duration
of the Interest Period therefor.
(ii) Term Loan Borrowings. Subject to the other terms of this Agreement, on
the Closing Date, the Borrower shall give the Administrative Agent (which
shall promptly notify the Lenders) notice as hereinafter provided of the
Term Loan borrowing hereunder, which shall specify the aggregate amount of
such Term borrowing, the Type and (in the case of Eurodollar Loans) the
duration of the Interest Period therefor.
(b) Minimum Amounts. All Base Rate Loan borrowings of either Class shall be
in amounts of at least $1,000,000 or the remaining balance of the Aggregate
Revolving Credit Commitments, if less, or any whole multiple of $ 1,000,000 in
excess thereof, and all Eurodollar Loans of either Class shall be in amounts of
at least $5,000,000 or any whole multiple of $1,000,000 in excess thereof.
(c) Notices. All borrowings, continuations and conversions shall require
advance written notice to the Administrative Agent (which shall promptly notify
the Lenders) in the form of Exhibit B hereto (or telephonic notice promptly
confirmed by such a written notice), which in each case shall be irrevocable,
from the Borrower to be received by the Administrative Agent not later than
10:00 a.m. Houston, Texas time on the date of each Base Rate Loan borrowing and
not later than 11:00 a.m. three (3) Business Days prior to the date of each
Eurodollar Loan borrowing, continuation or conversion. Without in any way
limiting the Borrower's obligation to confirm in writing any telephonic notice,
the Administrative Agent may act without liability upon the basis of telephonic
notice believed by the Administrative Agent in good faith to be from the
Borrower prior to receipt of written confirmation. In each such case, the
Borrower hereby waives the right to dispute the
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23
Administrative Agent's record of the terms of such telephonic notice except in
the case of gross negligence or willful misconduct by the Administrative Agent.
(d) Continuation Options. Subject to the provisions made in this Section
2.02(d), the Borrower may elect to continue all or any part of any Eurodollar
Loan beyond the expiration of the then current Interest Period relating thereto
by giving advance notice as provided in Section 2.02(c) to the Administrative
Agent (which shall promptly notify the Lenders) of such election, specifying the
amount of such Loan to be continued and the Interest Period therefor. In the
absence of such a timely and proper election, the Borrower shall be deemed to
have elected to convert such Eurodollar Loan to a Base Rate Loan pursuant to
Section 2.02(e). All or any part of any Eurodollar Loan may be continued as
provided herein, provided that (i) any continuation of any such Loan shall be
(as to each Loan as continued for an applicable Interest Period) in amounts of
at least $5,000,000 or any whole multiple of $1,000,000 in excess thereof and
(ii) no Default shall have occurred and be continuing. If a Default shall have
occurred and be continuing, each Eurodollar Loan shall be converted to a Base
Rate Loan on the last day of the Interest Period applicable thereto.
(e) Conversion Options. The Borrower may elect to convert all or any part
of any Eurodollar Loan on the last day of the then current Interest Period
relating thereto to a Base Rate Loan by giving advance notice to the
Administrative Agent (which shall promptly notify the Lenders) of such election.
Subject to the provisions made in this Section 2.02(e), the Borrower may elect
to convert all or any part of any Base Rate Loan at any time and from time to
time to a Eurodollar Loan by giving advance notice as provided in Section
2.02(c) to the Administrative Agent (which shall promptly notify the Lenders) of
such election. All or any part of any outstanding Loan may be converted as
provided herein, provided that (i) any conversion of any Base Rate Loan into a
Eurodollar Loan shall be (as to each such Loan into which there is a conversion
for an applicable Interest Period) in amounts of at least $5,000,000 or any
whole multiple of $1,000,000 in excess thereof and (ii) no Default shall have
occurred and be continuing. If a Default shall have occurred and be continuing,
no Base Rate Loan may be converted into a Eurodollar Loan.
(f) Advances. Not later than 1:00 p.m. Houston, Texas time on the date
specified for each borrowing hereunder, each Lender shall make available the
amount of the Loan to be made by it on such date to the Administrative Agent, to
an account which the Administrative Agent shall specify, in immediately
available funds, for the account of the Borrower. The amounts so received by the
Administrative Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Borrower by depositing the same, in
immediately available funds, in an account of the Borrower, designated by the
Borrower and maintained at the Principal Office.
(g) Letters of Credit. The Borrower shall give the Issuing Bank (which
shall promptly notify the Lenders of such request) advance notice to be received
by the Issuing Bank not later than 11:00 a.m. Houston,
<PAGE> 29
24
Texas time not less than three (3) Business Days prior thereto of each request
for the issuance and at least thirty (30) Business Days prior to the date of the
renewal or extension of a Letter of Credit hereunder which request shall specify
the amount of such Letter of Credit, the date (which shall be a Business Day)
such Letter of Credit is to be issued, renewed or extended, the duration
thereof, the name and address of the beneficiary thereof, the form of the Letter
of Credit and such other information as the Administrative Agent may reasonably
request all of which shall be reasonably satisfactory to the Administrative
Agent. Subject to the terms and conditions of this Agreement, on the date
specified for the issuance, renewal or extension of a Letter of Credit, the
Administrative Agent shall issue such Letter of Credit to the beneficiary
thereof.
In conjunction with the issuance of each Letter of Credit, the Borrower,
shall execute a Letter of Credit Agreement in form and substance reasonably
satisfactory to the Issuing Bank. In the event of any conflict between any
provision of a Letter of Credit Agreement and this Agreement, the Borrower, the
Issuing Bank, the Administrative Agent and the Lenders hereby agree that the
provisions of this Agreement shall govern.
The Issuing Bank will send to the Borrower and each Lender, upon issuance
of any Letter of Credit, or an amendment thereto, a true and complete copy of
such Letter of Credit, or such amendment thereto.
Section 2.03 Changes of Revolving Credit Commitments.
(a) Maximum Credit Amounts. The Aggregate Revolving Credit Commitments
shall at all times be equal to the lesser of (i) the Aggregate Maximum Credit
Amounts after adjustments resulting from reductions pursuant to Section 2.03(b)
or (ii) the Borrowing Base as determined from time to time.
(b) Voluntary Reduction/Termination. The Borrower shall have the right to
terminate in whole or to reduce in part the amount of the Aggregate Maximum
Credit Amounts at any time or from time to time upon not less than three (3)
Business Days' prior notice to the Administrative Agent (which shall promptly
notify the Lenders) of each such termination or reduction, which notice shall
specify the effective date thereof and the amount of any such reduction (which
shall not be less than $5,000,000 or any whole multiple of $1,000,000 in excess
thereof) and shall be irrevocable and effective only upon receipt by the
Administrative Agent.
(c) Reinstatement. The Aggregate Maximum Credit Amounts once terminated or
reduced may not be reinstated.
Section 2.04 Fees.
(a) Commitment Fees. The Borrower shall pay to the Administrative Agent for
the account of each Lender a commitment fee on the Unused Amount of the
Aggregate Revolving Credit Commitments equal to 0.50% per annum and on the
Unavailable Commitments equal to 0.125% per annum. Accrued commitment fees shall
be payable quarterly in arrears on each
<PAGE> 30
25
Quarterly Date and on the earlier of the date the Aggregate Commitments are
terminated or the Revolving Credit Termination Date.
(b) Letter of Credit Fees.
(i) The Borrower agrees to pay the Administrative Agent, for the account of
each Lender, a quarterly letter of credit fee in respect of all Letters of
Credit outstanding during such quarter, at a per annum rate equal to the
Applicable Margin then in effect from time to time during such quarter for
Revolving Credit Eurodollar Loans, on such Lender's Percentage Share of the
daily average aggregate stated amount of such Letters of Credit, payable in
arrears on each Quarterly Date and on the later of the Revolving Credit
Termination Date and the date of termination of the last outstanding Letter
of Credit.
(ii) The Borrower agrees to pay the Administrative Agent, for the benefit
of the Issuing Bank, with respect to each Letter of Credit a quarterly
facing fee in respect of all Letters of Credit outstanding during such
quarter, at a per annum rate of 0.25% on the daily average aggregate stated
amount of such Letters of Credit payable in arrears on each Quarterly Date
and on the later of the Termination Date and the date of termination of the
last outstanding Letter of Credit.
Section 2.05 Several Obligations. The failure of any Lender to make any
Loan to be made by it or to provide funds for disbursements or reimbursements
under Letters of Credit on the date specified therefor shall not relieve any
other Lender of its obligation to make its Loan or provide funds on such date,
but no Lender shall be responsible for the failure of any other Lender to make a
Loan to be made by such other Lender or to provide funds to be provided by such
other Lender.
Section 2.06 Notes.
(a) Revolving Credit Notes. The Revolving Credit Loans made by each Lender
shall be evidenced by a single promissory note of the Borrower in substantially
the form of Exhibit A-1 hereto, dated (i) the Closing Date or (ii) the effective
date of an Assignment pursuant to Section 12.06(b), payable to the order of such
Lender in a principal amount equal to its Maximum Credit Amount as in effect and
otherwise duly completed.
(b) Tranche A Term Loan Notes. The Tranche A Term Loans made by each
Tranche A Term Loan Lender shall be evidenced by a single promissory note of the
Borrower in substantially the form of Exhibit A-2 hereto, dated as of (i) the
Closing Date or (ii) the effective date of an Assignment pursuant to Section
12.06(b), payable to the order of such Lender in a principal amount equal to
such Lender's Tranche A Term Loan Commitment and otherwise duly completed.
(c) Tranche B Term Loan Notes. The Tranche B Term Loans made by the Tranche
B Term Loan Lender shall be evidenced by two promissory notes of the Borrower in
substantially the form of Exhibit A-3 hereto, dated as
<PAGE> 31
26
of the Closing Date, payable to the order of such Lender in an aggregate
principal amount equal to such Lender's Tranche B Term Loan Commitment and
otherwise duly completed. The first of such Notes shall be in an amount equal to
$15,750,000 and the second of such Notes shall be in an amount equal to
$6,750,000.
(d) Notations, etc. The date, amount, Type, interest rate and Interest
Period of each Loan made by each Lender, and all payments made on account of the
principal thereof, shall be recorded by such Lender on its books for its Notes,
and, prior to any transfer, may be endorsed by such Lender on a schedule
attached to such Notes or any continuation thereof or on any separate record
maintained by such Lender. Failure to make any such notation or to attach a
schedule shall not affect any Lender's or the Borrower's rights or obligations
in respect of such Loans or affect the validity of such transfer by any Lender
of its Notes.
Section 2.07 Prepayments.
(a) Voluntary Prepayments. Subject to the terms of Section 9.04(b), the
Borrower may prepay the Base Rate Loans of either Class upon not less than one
(1) Business Day's prior notice to the Administrative Agent (which shall
promptly notify the Lenders), which notice shall specify the prepayment date
(which shall be a Business Day), the Class of Loan being repaid and the amount
of the prepayment (which shall be at least $5,000,000 or the remaining aggregate
principal balance outstanding on the Base Rate Loans with respect to a Class, if
less) and shall be irrevocable and effective only upon receipt by the
Administrative Agent, provided that interest on the principal prepaid, accrued
to the prepayment date, shall be paid on the prepayment date. Subject to the
terms of Section 9.04(b), the Borrower may prepay Eurodollar Loans of either
Class on the same condition as for Base Rate Loans; provided that such
prepayments of Eurodollar Loans shall be subject to the terms of Section 5.05.
(b) Mandatory Prepayments.
(i) If, after giving effect to any termination or reduction of the
Aggregate Maximum Credit Amounts pursuant to Section 2.03(b), the
outstanding aggregate principal amount of the Revolving Credit Loans plus
the LC Exposure exceeds the Aggregate Maximum Credit Amounts, the Borrower
shall (i) prepay the Revolving Credit Loans on the date of such termination
or reduction in an aggregate principal amount equal to the excess, together
with interest on the principal amount paid accrued to the date of such
prepayment and (ii) if any excess remains after prepaying all of the
Revolving Credit Loans, pay to the Administrative Agent on behalf of the
Lenders an amount equal to the excess to be held as cash collateral as
provided in Section 2.10(b).
(ii) Upon any redetermination of the amount of the Borrowing Base in
accordance with Section 2.08, 8.08(c) or 9.13, if the redetermined or
adjusted Borrowing Base is less than the aggregate outstanding principal
amount of the Revolving Credit Loans plus the LC Exposure, then the
Borrower shall within forty-five (45) days of
<PAGE> 32
27
receipt of written notice thereof: (i) prepay the Revolving Credit Loans in
an aggregate principal amount equal to such excess, together with interest
on the principal amount paid accrued to the date of such prepayment and
(ii) if a Borrowing Base deficiency remains after prepaying all of the
Revolving Credit Loans as a result of an LC Exposure, the Borrower shall
pay to the Administrative Agent on behalf of the Lenders an amount equal to
such Borrowing Base deficiency to be held as cash collateral as provided in
Section 2.10(b).
(iii) If, on any date, the Borrower shall receive Net Cash Proceeds from
any Equity Offering, then 100% of the amount of such Net Cash Proceeds
shall be applied on the date of receipt toward the prepayment of the Term
Loans, until the Term Loans and all accrued and unpaid interest thereon
have been paid in full.
(iv) If, prior to Tranche A Equity Subscription Date, the Borrower shall
direct the Escrow Agent to issue Approved Securities pursuant to the
Approved Securities Purchase Documents, or the Escrow Agent shall, in
accordance with exercising the terms of the Escrow Agreement, receive any
proceeds from the sale of the Approved Securities, the recipient of such
proceeds shall forward such funds to the Administrative Agent on the date
of receipt to be applied toward the prepayment of the Tranche A Term Loans
until such Term Loans and all accrued and unpaid interest thereon have been
paid in full. Any such prepayment shall be applied to all Tranche A Term
Loans on a pro rata basis.
(c) Generally. Prepayments permitted or required under this Section 2.07
shall be without premium or penalty, except as required under Section 5.05 for
prepayment of Eurodollar Loans. Any prepayments on the Revolving Credit Loans
may be reborrowed subject to the then effective Aggregate Revolving Credit
Commitments. Any prepayments on the Term Loans may not be reborrowed.
Section 2.08 Borrowing Base.
(a) Amount. For the period from and including the Closing Date to but not
including the first Redetermination Date, the amount of the Borrowing Base shall
be $160,000,000, subject to adjustments under either Section 6.01(j), Section
8.08(c) or Section 9.13. The Borrowing Base may not exceed the Aggregate Maximum
Credit Amounts. So long as any of the Revolving Credit Commitments are in effect
or any LC Exposure or Revolving Credit Loans are outstanding hereunder, the
revolving credit facility shall be governed by the then effective Borrowing
Base.
(b) Redetermination. On or before March 1st and September 1st of each year,
commencing September 1, 2000, the Administrative Agent shall propose in writing
to the Company and the Lenders a new Borrowing Base in accordance with Section
2.08(c) (assuming receipt by the Administrative Agent of the Engineering Reports
in a timely and complete manner). After having received notice of such proposal
by the Administrative Agent, each Lender shall have fifteen (15) days to agree
with such proposal or disagree by proposing an alternate Borrowing Base. If at
the end of such
<PAGE> 33
28
fifteen (15) days, any Lender has not communicated its approval or disapproval,
such silence shall be deemed to be an approval. If, however, at the end of such
15-day period, the Required Lenders have not approved or deemed to have
approved, as aforesaid, the proposed Borrowing Base, then the Borrowing Base
shall be determined in accordance with Section 2.08(d). After such redetermined
Borrowing Base is approved by the Required Lenders or is otherwise determined as
provided in Section 2.08(d), it shall become effective and applicable to the
Company, the Agents and the Lenders as of the next succeeding March 15th or
September 15th, as applicable; provided that no redetermination of the Borrowing
Base shall be effective until such written notice is received by the Borrower.
(c) Engineering Reports. Upon receipt of the Reserve Reports and such other
reports, data, and supplemental information as may, from time to time, be
reasonably requested by the Required Lenders (the "Engineering Reports"), the
Administrative Agent will evaluate such information. The Administrative Agent,
with the approval or deemed approval of the Required Lenders as set forth in
Section 2.08(b), but subject to the terms of Section 2.08(d), shall redetermine
the Borrowing Base based upon such information and such other information
(including, without limitation, the Indebtedness) as the Administrative Agent
deems appropriate and consistent with their normal oil and gas lending criteria
as it exists at the particular time (including, without limitation, the status
of title information with respect to Properties in the Engineering Reports and
the existence of any other Debt). Such redetermination shall be accomplished not
later than and effective as of the first (1st) day of each April and October of
each calendar year, assuming that the Company shall have furnished the
Engineering Reports in a timely and complete manner.
(d) Consensus and Failure of Consensus. Except as hereinafter provided, the
decision of the Required Lenders with respect to any Borrowing Base
determination shall control; however, if the Required Lenders have not approved
or are not deemed to have approved the Borrowing Base as of the date such a
determination is called for in Section 2.08(b), the Administrative Agent shall
poll the Lenders to ascertain the highest Borrowing Base then acceptable to a
number of Lenders sufficient to constitute the Required Lenders for purposes of
this Section 2.08 and such amounts shall then become the Borrowing Base for the
next Redetermination Period. Notwithstanding the foregoing, however, any
increase in the Borrowing Base shall require the consent of all the Lenders.
(e) Interim Redeterminations. The Company may, at its option one time
during a 12-month period, initiate an interim redetermination of the Borrowing
Base. The Administrative Agent (at the direction of the Required Lenders, in
their option) may, one time during any 12-month period, initiate an interim
redetermination of the Borrowing Base.
Section 2.09 Assumption of Risks. The Borrower assumes all risks of the
acts or omissions of any beneficiary of any Letter of Credit or any transferee
thereof with respect to its use of such Letter of Credit. Neither the Issuing
Bank (except in the case of willful misconduct or bad faith on the part of the
Issuing Bank or any of its employees), its
<PAGE> 34
29
correspondents nor any Lender shall be responsible for the validity, sufficiency
or genuineness of certificates or other documents or any endorsements thereon,
even if such certificates or other documents should in fact prove to be invalid,
insufficient, fraudulent or forged; for errors, omissions, interruptions or
delays in transmissions or delivery of any messages by mail, telex, or
otherwise, whether or not they be in code; for errors in translation or for
errors in interpretation of technical terms; the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reason;
the failure of any beneficiary or any transferee of any Letter of Credit to
comply fully with conditions required in order to draw upon any Letter of
Credit; or for any other consequences arising from causes beyond the Issuing
Bank's control or the control of the Issuing Bank's correspondents. In addition,
neither the Issuing Bank, the Administrative Agent nor any Lender shall be
responsible for any error, neglect, or default of any of the Issuing Bank's
correspondents; and none of the above shall affect, impair or prevent the
vesting of any of the Issuing Bank's, the Administrative Agent's or any Lender's
rights or powers hereunder or under the Letter of Credit Agreements, all of
which rights shall be cumulative. The Issuing Bank and its correspondents may
accept certificates or other documents that appear on their face to be in order,
without responsibility for further investigation of any matter contained therein
regardless of any notice or information to the contrary. In furtherance and not
in limitation of the foregoing provisions, the Borrower agrees that any action,
inaction or omission taken or not taken by the Issuing Bank or by any
correspondent for the Issuing Bank in good faith in connection with any Letter
of Credit, or any related drafts, certificates, documents or instruments, shall
be binding on the Borrower and shall not put the Issuing Bank or its
correspondents under any resulting liability to the Borrower.
Section 2.10 Obligation to Reimburse and to Prepay.
(a) If a disbursement by the Issuing Bank is made under any Letter of
Credit, the Borrower shall pay to the Administrative Agent within two (2)
Business Days after notice of any such disbursement is received by the Borrower,
the amount of each such disbursement made by the Issuing Bank under the Letter
of Credit (if such payment is not sooner effected as may be required under this
Section 2.10 or under other provisions of the Letter of Credit), together with
interest on the amount disbursed from and including the date of disbursement
until payment in full of such disbursed amount at a varying rate per annum equal
to (i) the then applicable interest rate for Base Rate Loans through the second
Business Day after notice of such disbursement is received by the Borrower and
(ii) thereafter, the Post-Default Rate for Base Rate Loans (but in no event to
exceed the Highest Lawful Rate) for the period from and including the third
(3rd) Business Day following the date of such disbursement to and including the
date of repayment in full of such disbursed amount. The obligations of the
Borrower under this Agreement with respect to each Letter of Credit shall be
absolute, unconditional and irrevocable and shall be paid or performed strictly
in accordance with the terms of this Agreement under all circumstances
whatsoever,
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30
including, without limitation, but only to the fullest extent permitted by
applicable law, the following circumstances: (i) any lack of validity or
enforceability of this Agreement, any Letter of Credit or any of the Security
Instruments; (ii) any amendment or waiver of (including any default), or any
consent to departure from this Agreement (except to the extent permitted by any
amendment or waiver), any Letter of Credit or any of the Security Instruments;
(iii) the existence of any claim, set-off, defense or other rights which the
Borrower may have at any time against the beneficiary of any Letter of Credit or
any transferee of any Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), the Issuing Bank, the
Administrative Agent, any Lender or any other Person, whether in connection with
this Agreement, any Letter of Credit, the Security Instruments, the transactions
contemplated hereby or any unrelated transaction; (iv) any statement,
certificate, draft, notice or any other document presented under any Letter of
Credit proves to have been forged, fraudulent, insufficient or invalid in any
respect or any statement therein proves to have been untrue or inaccurate in any
respect whatsoever; (v) payment by the Issuing Bank under any Letter of Credit
against presentation of a draft or certificate which appears on its face to
comply, but does not comply, with the terms of such Letter of Credit; and (vi)
any other circumstance or happening whatsoever, whether or not similar to any of
the foregoing.
Notwithstanding anything in this Agreement to the contrary, the Borrower
will not be liable for payment or performance that results from the gross
negligence or willful misconduct of the Issuing Bank, except (i) where the
Borrower or any Subsidiary actually recovers the proceeds for itself or the
Issuing Bank of any payment made by the Issuing Bank in connection with such
gross negligence or willful misconduct or (ii) in cases where the Administrative
Agent makes payment to the named beneficiary of a Letter of Credit.
(b) In the event of the occurrence of any Event of Default, a payment or
prepayment pursuant to Section 2.07(b) or the maturity of the Revolving Credit
Notes, whether by acceleration or otherwise, an amount equal to the LC Exposure
(or the excess in the case of Section 2.07(b)) shall be deemed to be forthwith
due and owing by the Borrower to the Issuing Bank, the Administrative Agent and
the Lenders as of the date of any such occurrence; and the Borrower's obligation
to pay such amount shall be absolute and unconditional, without regard to
whether any beneficiary of any such Letter of Credit has attempted to draw down
all or a portion of such amount under the terms of a Letter of Credit, and, to
the fullest extent permitted by applicable law, shall not be subject to any
defense or be affected by a right of set-off, counterclaim or recoupment which
the Borrower may now or hereafter have against any such beneficiary, the Issuing
Bank, the Administrative Agent, the Lenders or any other Person for any reason
whatsoever. Such payments shall be held by the Issuing Bank on behalf of the
Lenders as cash collateral securing the LC Exposure in an account or accounts at
the Principal Office; and the Borrower hereby grants to and by its deposit with
the Administrative Agent grants to the Administrative Agent a security interest
in such cash collateral. In the event of any such payment by the Borrower of
amounts contingently owing under outstanding Letters of Credit and in the event
<PAGE> 36
31
that thereafter drafts or other demands for payment complying with the terms of
such Letters of Credit are not made prior to the respective expiration dates
thereof, the Administrative Agent agrees, if no Event of Default has occurred
and is continuing or if no other amounts are outstanding under this Agreement,
the Notes or the Security Instruments, to remit to the Borrower amounts for
which the contingent obligations evidenced by the Letters of Credit have ceased.
(c) Each Lender severally and unconditionally agrees that it shall promptly
reimburse the Issuing Bank an amount equal to such Lender's Percentage Share of
the Aggregate Maximum Credit Amounts of any disbursement made by the Issuing
Bank under any Letter of Credit that is not reimbursed according to this Section
2.10.
Section 2.11 Lending Offices. The Loans of each Type and Class made by each
Lender shall be made and maintained at such Lender's Applicable Lending Office
for Loans of such Type and Class.
ARTICLE III
Payments of Principal and Interest
Section 3.01 Repayment of Loans.
(a) Revolving Credit Loans. On the Revolving Credit Termination Date, the
Borrower shall repay the then outstanding aggregate principal and accrued and
unpaid interest under the Revolving Credit Notes.
(b) Term Loans. The Borrower shall repay the then outstanding aggregate
principal and accrued and unpaid interest under the Term Notes as follows:
(i) on the Tranche A Equity Subscription Date, the cash proceeds of the
sale of the Units to the Equity Investors in respect of the Tranche A Term
Loans shall be used to repay the Tranche A Term Loans (and any accrued and
unpaid interest to the extent cash proceeds are available); provided that
if on Tranche A Equity Subscription Date, all principal on the Tranche A
Term Loans have not be repaid in full, then the Borrower and the Tranche A
Term Loan Lenders agree that the principal of the Tranche A Term Loans
remaining unpaid as of such date shall thereafter be due and payable in
full on the earlier of (i) the date the aggregate principal amount of the
Revolving Credit Loans plus all accrued and unpaid interest thereon are
paid in full or (ii) April __, 2003. The foregoing shall not permit the
Borrower to defer payment of interest on the Tranche A Term Loans which had
accrued and was unpaid as of Tranche A Equity Subscription Date.
(ii) subject to the terms of clause (iii) of this Section 3.01(b), on
Tranche B Equity Conversion Date (unless the Tranche B Term Loan Lender
shall have earlier elected to convert), the Tranche B Term Loans (and any
accrued and unpaid interest to the extent the aggregate amount of Loans and
interest so converted does not exceed $22,500,000) will automatically
convert into a number of Units equal to the outstanding principal balance
of the Tranche B Term Loans as
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of the Tranche B Equity Conversion Date divided by $1,000 and the then
outstanding principal amount of all such Tranche B Term Loans shall have
been paid in full; provided that the foregoing conversion shall not affect
the obligation of the Borrower to pay interest on the Tranche B Term Loans
which had accrued and was unpaid as of the Tranche B Equity Conversion
Date. Upon conversion, whether or not on the Tranche B Equity Conversion
Date, the Tranche B Term Loan Note will represent the Units into which the
Tranche B Term Loans have been converted until such time as physical shares
evidencing the Units have been delivered by the Borrower.
(iii) If, on or prior to the Tranche B Equity Conversion Date, none of the
Equity Investors (provided that for this purpose, performance or
nonperformance by the Eos Group and the SGC Partners are not considered) in
respect of the Tranche A Term Loans has satisfied its obligation to
purchase and pay the cash consideration for the Units it is committed to
purchase as contemplated by the Approved Securities Purchase Documents,
then the Tranche B Term Loan Lender may elect to defer its obligation to
convert the all of Tranche B Term Loans into Units as contemplated by
clause (ii) of this Section 3.01(b) in full until such time as one or more
of such Equity Investors (provided that for this purpose, performance or
nonperformance by the Eos Group and the SGC Partners are not considered)
has so performed. The Tranche B Term Loan Lender shall give the
Administrative Agent (who shall notify the other Lenders) written notice of
its election. If, on the Tranche B Equity Conversion Date, Tranche B Term
Loans are outstanding and only one of the Equity Investors (provided that
for this purpose, performance or nonperformance by the Eos Group and SGC
Partners are not considered) in respect of the Tranche A Term Loans has, on
or prior to such date, satisfied its obligation to purchase and pay the
cash consideration for the Units it is committed to purchase as
contemplated by the Approved Securities Purchase Documents, then the
Tranche B Term Loan Lender may elect to defer its obligation to convert the
all of Tranche B Term Loans into Units as contemplated by clause (ii) of
this Section 3.01(b) and shall be deemed to have simultaneously converted
only the $15,750,000 Tranche B Term Loan Note. The Tranche B Term Loan
Lender shall give the Administrative Agent (who shall notify the other
Lenders) written notice of its election. Thereafter, if any other Equity
Investors (provided that for this purpose, performance or nonperformance by
the Eos Group and SGC Partners are not considered) in respect of the
Tranche A Term Loans satisfies its obligation to purchase and pay the cash
consideration for the Units it is committed to purchase as contemplated by
the Approved Securities Purchase Documents, then the Tranche B Term Loan
Lender shall be obligated to simultaneously convert the remaining
$6,750,000 Tranche B Term Loan Note into Units as contemplated by clause
(ii) of this Section 3.01(b).
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Section 3.02 Interest.
(a) Interest Rates. The Borrower will pay to the Administrative Agent,
for the account of each Lender, interest on the unpaid principal amount of each
Loan made by such Lender for the period commencing on the date such Loan is made
to but excluding the date such Loan shall be paid in full, at the following
rates per annum:
(i) if such a Loan is a Base Rate Loan of either Class , the Base Rate
(as in effect from time to time) plus the Applicable Margin (as in
effect from time to time) in respect of such Class, but in no event to
exceed the Highest Lawful Rate; and
(ii) if such a Loan is a Eurodollar Loan of either Class, for each
Interest Period relating thereto, the Eurodollar Rate for such Loan
plus the Applicable Margin (as in effect from time to time) in respect
of such Class, but in no event to exceed the Highest Lawful Rate.
(b) Post-Default Rate. Notwithstanding the foregoing, the Borrower will
pay to the Administrative Agent, for the account of each Lender interest at the
applicable Post-Default Rate on any principal of any Loan made by such Lender,
and (to the fullest extent permitted by law) on any other amount payable by the
Borrower hereunder, under any Loan Document or under any Note held by such
Lender to or for account of such Lender, for the period commencing on the date
of an Event of Default until the same is paid in full or all Events of Default
are cured or waived.
(c) Due Dates. Accrued interest on Base Rate Loans shall be payable on
each Quarterly Date commencing on June 30, 2000, and accrued interest on each
Eurodollar Loan shall be payable on the last day of the Interest Period therefor
and, if such Interest Period is longer than three months at three-month
intervals following the first day of such Interest Period, except that interest
payable at the Post-Default Rate shall be payable from time to time on demand
and interest on any Eurodollar Loan that is converted into a Base Rate Loan
(pursuant to Section 5.04) shall be payable on the date of conversion (but only
to the extent so converted).
(d) Determination of Rates. Promptly after the determination of any
interest rate provided for herein or any change therein, the Administrative
Agent shall notify the Lenders to which such interest is payable and the
Borrower thereof. Each determination by the Administrative Agent of an interest
rate or fee hereunder shall, except in cases of manifest error, be final,
conclusive and binding on the parties.
Section 3.03 Right to Demand Equity Offering. If none of the Equity
Investors in respect of the Tranche A Term Loans purchase and pay the cash
consideration for the Units they are committed to purchase as contemplated by
the Approved Securities Purchase Documents, the Term Lenders holding not less
than 50% of the then outstanding Term Loans shall have the right to require the
Borrower to issue in a bona fide
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34
capital markets execution to third parties up to $150,000,000 of senior or
subordinated debt and/or equity securities, which shall be in form and substance
reasonably satisfactory to the Agents, including with respect to matters of
tenor, term, rights of acceleration and terms of subordination, if applicable;
provided that any such action requested or required herein is subject to the
terms, conditions and covenants of this Agreement and may require the consent of
the Revolving Credit Lenders or the Majority Revolving Credit Lenders; and
provided further that the Term Lenders shall have no such right to require such
an offering if (i) the effective yield, excluding any warrants or options to
purchase shares of common stock of the Borrower or any of its Subsidiaries, on
such offered securities would exceed 18% per annum, or (ii) after giving effect
to such offering, any Term Loans remain outstanding and the blended effective
yield, excluding any warrants or options to purchase shares of common stock of
the Borrower or any of its Subsidiaries, on such securities and the remaining
Term Loans would (or would on a pro forma basis utilizing the Eurodollar Rate as
of the date of such offering as a fixed rate for the remaining period of the
Term Loans) exceed 18% per annum. Any Net Cash Proceeds from an offering of the
type described in this Section 3.03 shall be applied to prepay the Term Notes as
contemplated in Section 2.07.
ARTICLE IV
Payments; Pro Rata Treatment; Computations; Etc.
Section 4.01 Payments. Except to the extent otherwise provided
herein, all payments of principal, interest and other amounts to be made by the
Borrower or any Guarantor under the Loan Documents shall be made in Dollars, in
immediately available funds, to the Administrative Agent at such account as the
Administrative Agent shall specify by notice to the Borrower from time to time,
not later than 11:00 a.m. Houston, Texas time on the date on which such payments
shall become due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day). Such payments
shall be made without (to the fullest extent permitted by applicable law)
defense, set-off or counterclaim. Each payment received by the Administrative
Agent under this Agreement or any Note for account of a Lender shall be paid
promptly to such Lender in immediately available funds. Except as provided in
clause (iii) of the definition of "Interest Period", if the due date of any
payment under this Agreement or any Note would otherwise fall on a day which is
not a Business Day such date shall be extended to the next succeeding Business
Day and interest shall be payable for any principal so extended for the period
of such extension. At the time of each payment to the Administrative Agent of
any principal of or interest on any borrowing, the Borrower shall notify the
Administrative Agent of the Type and Class of Loans to which such payment shall
apply. In the absence of such notice, the Administrative Agent may specify the
Type and Class of Loans to which such payment shall apply, but to the extent
possible such payment or prepayment will be applied first to the Revolving
Credit Loans comprised of Base Rate Loans.
Section 4.02 Pro Rata Treatment. Except to the extent otherwise
provided herein, each Lender agrees that: (a) each borrowing from the Lenders
under Section 2.01 and each continuation and conversion under
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Section 2.02 shall be made from the Lenders pro rata in accordance with their
Percentage Share of the relevant Class of Loan being so borrowed, continued or
converted, each payment of commitment fee or Letter of Credit (other than the
facing fee) fees under Section 2.04(b)(ii) shall be made for account of the
Lenders pro rata in accordance with their Percentage Share of the Aggregate
Maximum Credit Amounts, and each termination or reduction of the amount of the
Aggregate Maximum Credit Amounts under Section 2.03(b) shall be applied to the
Maximum Credit Amount of each Lender, pro rata in accordance with its Percentage
Share of the Aggregate Maximum Credit Amounts; (b) each payment of principal of
Loans of the relevant Class by the Borrower shall be made for account of the
Lenders pro rata in accordance with the respective unpaid principal amount of
the Loans of such Class held by all Lenders holding Loans of such Class;
provided that (i) repayments or prepayments of the Tranche A Term Loans from the
cash proceeds of the Equity Undertakings shall be applied pro rata only to the
Tranche A Term Loans, and (ii) repayments or prepayments of the Tranche B Term
Loans pursuant to the Equity Undertakings shall be in the cashless conversion of
all or any portion, as necessary, of such Tranche B Term Loans into the Units;
(c) each payment of interest of Loans of the relevant Class by the Borrower
shall be made for account of the Lenders pro rata in accordance with the amounts
of interest due and payable to the Lenders of such Class; and (d) each
reimbursement by the Borrower of disbursements under Letters of Credit shall be
made for account of the Issuing Bank or, if funded by the Lenders, pro rata for
the account of the Lenders, in accordance with the amounts of reimbursement
obligations due and payable to each respective Lender.
Section 4.03 Computations. Interest on Eurodollar Loans and fees
shall be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) occurring in the period for
which such interest is payable, unless such calculation would exceed the Highest
Lawful Rate, in which case interest shall be calculated on the per annum basis
of a year of 365 or 366 days, as the case may be. Interest on Base Rate Loans
shall be computed on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed (including the first day but excluding the last day)
occurring in the period for which such interest is payable.
Section 4.04 Non-receipt of Funds by the Administrative Agent.
Unless the Administrative Agent shall have been notified by a Lender or the
Borrower prior to the date on which such notifying party is scheduled to make
payment to the Administrative Agent (in the case of a Lender) of the proceeds of
a Loan or a payment under a Letter of Credit to be made by it hereunder or (in
the case of the Borrower) a payment to the Administrative Agent for account of
one or more of the Lenders hereunder (such payment being herein called the
"Required Payment"), which notice shall be effective upon receipt, that it does
not intend to make the Required Payment to the Administrative Agent, the
Administrative Agent may assume that the Required Payment has been made and may,
in reliance upon such assumption (but shall not be required to), make the amount
thereof available to the intended recipient(s) on such date and, if such Lender
or the Borrower (as the case may be) has not in fact made the Required Payment
to the Administrative Agent, the recipient(s) of such
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36
payment shall, on demand, repay to the Administrative Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the
Administrative Agent until but excluding the date the Administrative Agent
recovers such amount at a rate per annum which, for any Lender as recipient,
will be equal to the Federal Funds Rate, and for the Borrower as recipient, will
be equal to the Base Rate plus the Applicable Margin.
Section 4.05 Set-off, Sharing of Payments, Etc.
(a) Right of Set-off. The Borrower agrees that, in addition to (and
without limitation of) any right of set-off, bankers' lien or counterclaim a
Lender may otherwise have, each Lender shall have the right and be entitled
(after consultation with the Administrative Agent), at its option, to offset (i)
balances held by it or by any of its Affiliates for account of the Borrower or
any Subsidiary at any of its offices, in Dollars or in any other currency, and
(ii) amounts due to such Lender (or any Affiliate of such Lender) under any
Hedging Agreement, against any principal of or interest on any of such Lender's
Loans, or any other amount payable to such Lender hereunder, which is not paid
when due (regardless of whether such balances are then due to the Borrower), in
which case it shall promptly notify the Borrower and the Administrative Agent
thereof, provided that such Lender's failure to give such notice shall not
affect the validity thereof.
(b) Sharing. If any Lender shall obtain payment of any principal of or
interest on any Loan made by it to the Borrower under this Agreement (or
reimbursement as to any Letter of Credit) through the exercise of any right of
set-off, banker's lien or counterclaim or similar right or otherwise, and, as a
result of such payment, such Lender shall have received a greater percentage of
the principal or interest (or reimbursement) then due hereunder by the Borrower
to such Lender than the percentage received by any other Lenders of the same
Class, it shall promptly (i) notify the Administrative Agent and each other
Lender thereof and (ii) either (A) if such action is because such Lender was a
Term Lender and Term Lenders, as a Class, were not entitled to a distribution
under Section 4.08, disgorge such payment to the Administrative Agent for
application in the manner set forth in Section 4.08 or (B) purchase from such
other Lenders of the same Class as such Lender participations in (or, if and to
the extent specified by such Lender, direct interests in) the Loans (or
participations in Letters of Credit) made by such other Lenders (or in interest
due thereon, as the case may be) in such amounts, and make such other
adjustments from time to time as shall be equitable, to the end that all the
Lenders shall share the benefit of such excess payment (net of any expenses
which may be incurred by such Lender in obtaining or preserving such excess
payment) pro rata in accordance with the unpaid principal and/or interest on the
Loans held by each of the Lenders (or reimbursements of Letters of Credit). To
such end all the Lenders shall make appropriate adjustments among themselves (by
the resale of participations sold or otherwise) if such payment is rescinded or
must otherwise be restored. The Borrower agrees that any Lender so purchasing a
participation (or direct interest) in the Loans made by other Lenders (or in
interest due thereon, as the
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37
case may be) may exercise all rights of set-off, banker's lien, counterclaim or
similar rights with respect to such participation as fully as if such Lender
were a direct holder of Loans (or Letters of Credit) in the amount of such
participation. Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of the Borrower. If under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a set-off to
which this Section 4.05 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this Section 4.05 to share the benefits
of any recovery on such secured claim.
Section 4.06 Taxes.
(a) Payments Free and Clear. Any and all payments by the Borrower
hereunder shall be made, in accordance with Section 4.01, free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Lender, the Issuing Bank and the Administrative
Agent, taxes imposed on its income, and franchise or similar taxes imposed on
it, by (i) any jurisdiction (or political subdivision thereof) of which the
Administrative Agent, the Issuing Bank or such Lender, as the case may be, is a
citizen or resident or in which such Lender has an Applicable Lending Office,
(ii) the jurisdiction (or any political subdivision thereof) in which the
Administrative Agent, the Issuing Bank or such Lender is organized, or (iii) any
jurisdiction (or political subdivision thereof) in which such Lender, the
Issuing Bank or the Administrative Agent is presently doing business in which
taxes are imposed solely as a result of doing business in such jurisdiction (all
such non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to the Lenders, the Issuing Bank or the Administrative Agent (i) the
sum payable shall be increased by the amount necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 4.06) such Lender, the Issuing Bank or the Administrative
Agent (as the case may be) shall receive an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower shall make
such deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant taxing authority or other Governmental Authority in accordance with
applicable law.
(b) Other Taxes. In addition, to the fullest extent permitted by
applicable law, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, any
Assignment or any other Loan Document (hereinafter referred to as "Other
Taxes").
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(c) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
THE BORROWER WILL INDEMNIFY EACH LENDER, THE ISSUING BANK AND THE AGENTS FOR THE
FULL AMOUNT OF TAXES AND OTHER TAXES (INCLUDING, BUT NOT LIMITED TO, ANY TAXES
OR OTHER TAXES IMPOSED BY ANY GOVERNMENTAL AUTHORITY ON AMOUNTS PAYABLE UNDER
THIS SECTION 4.06) PAID BY SUCH LENDER, THE ISSUING BANK OR EITHER AGENT (ON
THEIR BEHALF OR ON BEHALF OF ANY LENDER), AS THE CASE MAY BE, AND ANY LIABILITY
(INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT
THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY
ASSERTED UNLESS THE PAYMENT OF SUCH TAXES WAS NOT CORRECTLY OR LEGALLY ASSERTED
AND SUCH LENDER'S PAYMENT OF SUCH TAXES OR OTHER TAXES WAS THE RESULT OF ITS
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ANY PAYMENT PURSUANT TO SUCH
INDEMNIFICATION SHALL BE MADE WITHIN THIRTY (30) DAYS AFTER THE DATE ANY LENDER,
THE ISSUING BANK OR THE RELEVANT AGENT, AS THE CASE MAY BE, MAKES WRITTEN DEMAND
THEREFOR. IF ANY LENDER OR AGENT RECEIVES A REFUND OR CREDIT IN RESPECT OF ANY
TAXES OR OTHER TAXES FOR WHICH SUCH LENDER, THE ISSUING BANK OR AGENT HAS
RECEIVED PAYMENT FROM THE BORROWER IT SHALL PROMPTLY NOTIFY THE BORROWER OF SUCH
REFUND OR CREDIT AND SHALL, IF NO DEFAULT HAS OCCURRED AND IS CONTINUING, WITHIN
THIRTY (30) DAYS AFTER RECEIPT OF A REQUEST BY THE BORROWER (OR PROMPTLY UPON
RECEIPT, IF THE BORROWER HAS REQUESTED APPLICATION FOR SUCH REFUND OR CREDIT
PURSUANT HERETO), PAY AN AMOUNT EQUAL TO SUCH REFUND OR CREDIT TO THE BORROWER
WITHOUT INTEREST (BUT WITH ANY INTEREST SO REFUNDED OR CREDITED), PROVIDED THAT
THE BORROWER, UPON THE REQUEST OF SUCH LENDER, THE ISSUING BANK OR SUCH AGENT,
AGREES TO RETURN SUCH REFUND OR CREDIT (PLUS PENALTIES, INTEREST OR OTHER
CHARGES) TO SUCH LENDER OR THE ADMINISTRATIVE AGENT IN THE EVENT SUCH LENDER OR
AGENT IS REQUIRED TO REPAY SUCH REFUND OR CREDIT.
(d) Lender Representations.
(i) Each Lender represents that it is either (1) a corporation or
banking association organized under the laws of the United States of
America or any state thereof or (2) it is entitled to complete
exemption from United States withholding tax imposed on or with
respect to any payments, including fees, to be made to it pursuant to
this Agreement (A) under an applicable provision of a tax convention
to which the United States of America is a party or (B) because it is
acting through a branch, agency or office in the United States of
America and any payment to be received by it hereunder is effectively
connected with a trade or business in the United States of America.
Each Lender that is not a corporation or banking association organized
under the laws of the United States of America or any state thereof
agrees to provide to the Borrower and the Administrative Agent on the
Closing Date, or on the date of its delivery of the Assignment
pursuant to which it becomes a Lender, and at such other times as
required by United States law or as the Borrower or the Administrative
Agent shall reasonably request, two accurate and complete original
signed copies of either (A) Internal Revenue Service Form W-8 ECI (or
successor form) certifying that all payments to be made to it
hereunder will be effectively connected to a United States trade or
business (the "Form W-8 ECI Certification") or (B) Internal Revenue
Service Form W-8 BEN (or successor form) certifying that it is
entitled to the benefit of a provision of a tax convention to which
the United States of America is a party which completely exempts from
United States withholding tax all payments to be made to it hereunder
(the "Form W-8 BEN Certification"). In addition, each Lender agrees
that if it previously filed a Form W-8 ECI Certification, it will
deliver to
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the Borrower and the Administrative Agent a new Form W-8 ECI
Certification prior to the first payment date occurring in each of its
subsequent taxable years; and if it previously filed a Form W-8 BEN
Certification, it will deliver to the Borrower and the Administrative
Agent a new certification prior to the first payment date falling in
the third year following the previous filing of such certification.
Each Lender also agrees to deliver to the Borrower and the
Administrative Agent such other or supplemental forms as may at any
time be required as a result of changes in applicable law or
regulation in order to confirm or maintain in effect its entitlement
to exemption from United States withholding tax on any payments
hereunder, provided that the circumstances of such Lender at the
relevant time and applicable laws permit it to do so. If a Lender
determines, as a result of any change in either (i) a Governmental
Requirement or (ii) its circumstances, that it is unable to submit any
form or certificate that it is obligated to submit pursuant to this
Section 4.06, or that it is required to withdraw or cancel any such
form or certificate previously submitted, it shall promptly notify the
Borrower and the Administrative Agent of such fact. If a Lender is
organized under the laws of a jurisdiction outside the United States
of America, unless the Borrower and the Administrative Agent have
received a Form W-8 BEN Certification or Form W-8 ECI Certification
satisfactory to them indicating that all payments to be made to such
Lender hereunder are not subject to United States withholding tax, the
Borrower shall withhold taxes from such payments at the applicable
statutory rate. Each Lender agrees to indemnify and hold harmless the
Borrower or Administrative Agent, as applicable, from any United
States taxes, penalties, interest and other expenses, costs and losses
incurred or payable by (i) the Administrative Agent as a result of
such Lender's failure to submit any form or certificate that it is
required to provide pursuant to this Section 4.06 or (ii) the Borrower
or the Administrative Agent as a result of their reliance on any such
form or certificate which such Lender has provided to them pursuant to
this Section 4.06.
(ii) For any period with respect to which a Lender has failed to
provide the Borrower with the form required pursuant to this Section
4.06, if any, (other than if such failure is due to a change in a
Governmental Requirement occurring subsequent to the date on which a
form originally was required to be provided), such Lender shall not be
entitled to indemnification under Section 4.06 with respect to taxes
imposed by the United States which taxes would not have been imposed
but for such failure to provide such forms; provided, however, that
should a Lender, which is otherwise exempt from or subject to a
reduced rate of withholding tax becomes subject to taxes because of
its failure to deliver a form required hereunder, the Borrower shall
take such steps as such Lender shall reasonably request to assist such
Lender to recover such taxes.
(iii) Any Lender claiming any additional amounts payable pursuant to
this Section 4.06 shall use reasonable efforts (consistent with legal
and regulatory restrictions) to file any certificate or document
requested by the Borrower or the Administrative Agent or to change the
jurisdiction of its Applicable Lending Office or to
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contest any tax imposed if the making of such a filing or change or
contesting such tax would avoid the need for or reduce the amount of
any such additional amounts that may thereafter accrue and would
not, in the sole determination of such Lender, be otherwise
disadvantageous to such Lender.
Section 4.07 Disposition of Proceeds. The Security Instruments contain
an assignment by the Borrower unto and in favor of the Administrative Agent for
the benefit of the Lenders of all production and all proceeds attributable
thereto which may be produced from or allocated to the Mortgaged Property, and
the Security Instruments further provide in general for the application of such
proceeds to the satisfaction of the Indebtedness and other obligations described
therein and secured thereby. Notwithstanding the assignment contained in such
Security Instruments, until the occurrence of an Event of Default, the Lenders
agree that they will neither notify the purchaser or purchasers of such
production nor take any other action to cause such proceeds to be remitted to
the Lenders, but the Lenders will instead permit such proceeds to be paid to the
Borrower.
Section 4.08 Application of Funds; Priorities and Subordination.
(a) Unless the Notes have been accelerated pursuant to Section 10.02
(in which event Section 4.08(b) shall be applicable), on any date on which a
payment (including a prepayment) is due under this Agreement, all proceeds
received by the Administrative Agent shall be applied in the manner and in the
order of priority as follows:
(i) First, any amount then due and payable under the Loan Documents to
the Administrative Agent, plus any accrued and unpaid interest
thereon;
(ii) Second, the amount of any and all accrued and unpaid interest and
fees then due on the Revolving Credit Loans;
(iii) Third, the amount of any and all accrued and unpaid interest and
fees then due on the Term Loans;
(iv) Fourth, the amount of any and all principal then due and payable
on the Revolving Credit Loans;
(v) Fifth, the amount of any and all principal then due and payable on
the Term Loans; and
(vi) Sixth, any excess as otherwise directed by the Borrower or in the
absence of any direction in the manner set forth in Section 4.01.
(b) If the Notes have been accelerated pursuant to Section 10.02, all
proceeds received by the Administrative Agent on account of the Indebtedness
shall be applied in the manner and in the order of priority as follows:
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(i) First, any amount then due and payable under the Loan Documents to
the Administrative Agent, plus any accrued and unpaid interest thereon,
and to costs of indemnities, enforcement and collection incurred by the
Administrative Agent and/or any Lender;
(ii) Second, the amount of any and all accrued and unpaid interest and
fees then due on the Revolving Credit Loans;
(iii) Third, on a pro rata basis, the amounts of any and all principal
then due and payable on the Revolving Credit Loans and the aggregate
amount of the settlement amounts, unpaid amounts and any accrued and
unpaid interest on such amounts owed under each Hedging Agreement
between the Borrower and any Lender (or any Affiliate of such Lender)
to the extent such Hedging Agreement was entered into while such Person
(or its Affiliate) was a Lender hereunder;
(iii) Fourth, the amount of any and all accrued and unpaid interest
and fees then due on the Term Loans;
(v) Fifth, the amounts of any and all principal then due and payable
on the Term Loans; and
(vi) Sixth, any excess to the Borrower or as otherwise directed by any
Governmental Authority of competent jurisdiction.
(c) Subordination of Term Loans. The Term Loans are hereby subordinated
in the manner and to the extent set forth in Exhibit G. Without limitation of
the terms of Exhibit G, the Term Lenders acknowledge and agree that, in their
capacity as Term Lenders, solely as between themselves and the Revolving Credit
Lenders, unless all of the Revolving Credit Lenders shall have agreed otherwise
in writing or the Revolving Credit Loans have been paid in full and the
Revolving Credit Commitments terminated: (i) the Term Lenders have no, and
hereby waive any, right or ability to initiate any enforcement of their rights
and remedies hereunder and under the other Loan Documents (other than the right
to set-off under Section 4.05), including the ability to terminate the Revolving
Credit Commitments or accelerate the Loans; (ii) the Administrative Agent and
the Revolving Credit Lenders have the sole and exclusive right to determine when
and if the Revolving Credit Commitments should be terminated and/or whether the
Loans should be accelerated and/or whether other remedies should then be
undertaken; (iii) that the Administrative Agent and the Revolving Credit
Lenders, individually or as a Class, owe no duty, and shall have no liability,
to the Term Lenders, individually or as a Class, with respect to making any such
decisions; and (iv) the rights of the Term Lenders with respect to the
collateral and the proceeds thereof are limited to their right to participate in
distributions to the extent set forth in Section 4.08. The terms of Exhibit G
and this Section 4.08(c) are solely for the benefit of the Lenders and nothing
in Exhibit G or this Section 4.08(c) shall have any effect on the rights and
remedies of the Term Lenders as between the Term Lenders and the Borrower or the
Equity Investors.
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ARTICLE V
Additional Costs and Capital Adequacy
Section 5.01 Additional Costs.
(a) Eurodollar Regulations, etc. The Borrower shall pay directly to
each Lender from time to time such amounts as such Lender may determine to be
necessary to compensate such Lender for any costs which it determines are
attributable to its making or maintaining of any Eurodollar Loans or its
obligation to make any Eurodollar Loans hereunder, or any reduction in any
amount receivable by such Lender hereunder in respect of any of such Eurodollar
Loans or such obligation (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), resulting from any
Regulatory Change which: (i) changes the basis of taxation of any amounts
payable to such Lender under this Agreement or any Note in respect of any of
such Eurodollar Loans (other than taxes imposed on the overall net income of
such Lender or of its Applicable Lending Office for any of such Eurodollar Loans
by the jurisdiction in which such Lender has its principal office or Applicable
Lending Office); or (ii) imposes or modifies any reserve, special deposit,
minimum capital, capital ratio or similar requirements relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of such Lender, or any portion of the Aggregate Commitments or Loans
of such Lender or the Eurodollar interbank market; or (iii) imposes any other
condition affecting this Agreement or any Note (or any of such extensions of
credit or liabilities) or such Lender's Commitments or Loans. Each Lender will
notify the Administrative Agent and the Borrower of any event occurring after
the Closing Date which will entitle such Lender to compensation pursuant to this
Section 5.01(a) as promptly as practicable after it obtains knowledge thereof
and determines to request such compensation, and will designate a different
Applicable Lending Office for the Loans of such Lender affected by such event if
such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender, provided that such Lender shall have no
obligation to so designate an Applicable Lending Office located in the United
States. If any Lender requests compensation from the Borrower under this Section
5.01(a), the Borrower may, by notice to such Lender, suspend the obligation of
such Lender to make additional Eurodollar Loans until the Regulatory Change
giving rise to such request ceases to be in effect (in which case the provisions
of Section 5.04 shall be applicable).
(b) Regulatory Change. Without limiting the effect of the provisions of
Section 5.01(a), in the event that, by reason of any Regulatory Change or any
other circumstances arising after the Closing Date affecting such Lender, the
Eurodollar interbank market or such Lender's position in such market, any Lender
either (i) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities of
such Lender which includes deposits by reference to which the interest rate on
Eurodollar Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Lender which includes Eurodollar
Loans or (ii) becomes subject to restrictions on the
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amount of such a category of liabilities or assets which it may hold, then, if
such Lender so elects by notice to the Borrower, the obligation of such Lender
to make additional Eurodollar Loans shall be suspended until such Regulatory
Change or other circumstances ceases to be in effect (in which case the
provisions of Section 5.04 shall be applicable).
(c) Capital Adequacy. Without limiting the effect of the foregoing
provisions of this Section 5.01 (but without duplication), the Borrower shall
pay directly to any Lender from time to time on request such amounts as such
Lender may reasonably determine to be necessary to compensate such Lender or its
parent or holding company for any costs which it determines are attributable to
the maintenance by such Lender or its parent or holding company (or any
Applicable Lending Office), pursuant to any Governmental Requirement following
any Regulatory Change, of capital in respect of its Commitments, its Notes, its
Loans or any interest held by it in any Letter of Credit, such compensation to
include, without limitation, an amount equal to any reduction of the rate of
return on assets or equity of such Lender or its parent or holding company (or
any Applicable Lending Office) to a level below that which such Lender or its
parent or holding company (or any Applicable Lending Office) could have achieved
but for such Governmental Requirement. Such Lender will notify the Borrower that
it is entitled to compensation pursuant to this Section 5.01(c) as promptly as
practicable after it determines to request such compensation.
(d) Compensation Procedure. Any Lender notifying the Borrower of the
incurrence of additional costs under this Section 5.01 shall in such notice to
the Borrower and the Administrative Agent set forth in reasonable detail the
basis and amount of its request for compensation. Determinations and allocations
by each Lender for purposes of this Section 5.01 of the effect of any Regulatory
Change pursuant to Section 5.01(a) or (b), or of the effect of capital
maintained pursuant to Section 5.01(c), on its costs or rate of return of
maintaining Loans or its obligation to make Loans or issue Letters of Credit, or
on amounts receivable by it in respect of Loans or Letters of Credit, and of the
amounts required to compensate such Lender under this Section 5.01, shall be
conclusive and binding for all purposes, provided that such determinations and
allocations are made on a reasonable basis. Any request for additional
compensation under this Section 5.01 shall be paid by the Borrower within thirty
(30) days of the receipt by the Borrower of the notice described in this Section
5.01(d).
Section 5.02 Limitation on Eurodollar Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any Eurodollar
Rate for any Interest Period:
(a) the Administrative Agent determines (which determination shall be
conclusive, absent manifest error) that quotations of interest rates for the
relevant deposits referred to in the definition of "Eurodollar Rate" in Section
1.02 are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for Eurodollar Loans as
provided herein; or
<PAGE> 49
44
(b) the Administrative Agent determines (which determination shall be
conclusive, absent manifest error) that the relevant rates of interest referred
to in the definition of "Eurodollar Rate" in Section 1.02 upon the basis of
which the rate of interest for Eurodollar Loans for such Interest Period is to
be determined are not sufficient to adequately cover the cost to the Lenders of
making or maintaining Eurodollar Loans;
then the Administrative Agent shall give the Borrower prompt notice thereof, and
so long as such condition remains in effect, the Lenders shall be under no
obligation to make additional Eurodollar Loans.
Section 5.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain Eurodollar
Loans hereunder, then such Lender shall promptly notify the Borrower thereof and
such Lender's obligation to make Eurodollar Loans shall be suspended until such
time as such Lender may again make and maintain Eurodollar Loans (in which case
the provisions of Section 5.04 shall be applicable).
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03.
If the obligation of any Lender to make Eurodollar Loans shall be suspended
pursuant to Sections 5.01, 5.02 or 5.03 ("Affected Loans"), all Affected Loans
which would otherwise be made by such Lender shall be made instead as Base Rate
Loans (and, if an event referred to in Section 5.01(b) or Section 5.03 has
occurred and such Lender so requests by notice to the Borrower, all Affected
Loans of such Lender then outstanding shall be automatically converted into Base
Rate Loans on the date specified by such Lender in such notice) and, to the
extent that Affected Loans are so made as (or converted into) Base Rate Loans,
all payments of principal which would otherwise be applied to such Lender's
Affected Loans shall be applied instead to its Base Rate Loans.
Section 5.05 Compensation. The Borrower shall pay to each Lender
within thirty (30) days of receipt of written request of such Lender (which
request shall set forth, in reasonable detail, the basis for requesting such
amounts and which shall be conclusive and binding for all purposes, provided
that such determinations are made on a reasonable basis), such amount or amounts
as shall compensate it for any loss, cost, expense or liability which such
Lender determines are attributable to:
(i) any payment, prepayment or conversion of a Eurodollar Loan
properly made by such Lender or the Borrower for any reason
(including, without limitation, the acceleration of the Loans pursuant
to Section 10.02) on a date other than the last day of the Interest
Period for such Loan; or
(ii) any failure by the Borrower for any reason (including but not
limited to, the failure of any of the conditions precedent specified in
Article VI to be satisfied) to borrow, continue or convert a Eurodollar
Loan from such Lender on the date for such borrowing, continuation or
conversion specified in the relevant notice given pursuant to Section
2.02(c).
<PAGE> 50
45
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the principal amount so paid, prepaid or converted
or not borrowed for the period from the date of such payment, prepayment or
conversion or failure to borrow to the last day of the Interest Period for such
Loan (or, in the case of a failure to borrow, the Interest Period for such Loan
which would have commenced on the date specified for such borrowing) at the
applicable rate of interest for such Loan provided for herein over (ii) the
interest component of the amount such Lender would have bid in the London
interbank market for Dollar deposits of leading banks in amounts comparable to
such principal amount and with maturities comparable to such period (as
reasonably determined by such Lender).
Section 5.06 Replacement Lenders.
(a) Terminated Lenders. If any Lender has notified the Borrower and the
Administrative Agent of its incurring additional costs under Section 5.01 or has
required the Borrower to make payments for Taxes under Section 4.06, then the
Borrower may, unless such Lender has notified the Borrower and the
Administrative Agent that the circumstances giving rise to such notice no longer
apply, terminate, in whole but not in part, the Commitment of any Lender (other
than the Administrative Agent)(the "Terminated Lender") at any time upon five
(5) Business Days' prior written notice to the Terminated Lender and the
Administrative Agent (such notice referred to herein as a "Notice of
Termination").
(b) Replacement Lenders. In order to effect the termination of the
Commitments of the Terminated Lender, the Borrower shall: (i) obtain an
agreement with one or more Lenders to increase their Commitment or Commitments
and/or (ii) request any one or more other banking institutions to become parties
to this Agreement in place and instead of such Terminated Lender and agree to
accept a Commitment or Commitments; provided, however, that such one or more
other banking institutions are reasonably acceptable to the Administrative Agent
and become parties by executing an Assignment (the Lenders or other banking
institutions that agree to accept in whole or in part the Commitments of the
Terminated Lender being referred to herein as the "Replacement Lenders"), such
that the aggregate increased and/or accepted Commitments of the Replacement
Lenders under clauses (i) and (ii) above equal the Commitment of the Terminated
Lender.
(c) Content of Notice of Termination. The Notice of Termination shall
include the name of the Terminated Lender, the date the termination will occur
(the "Termination Date"), and the Replacement Lender or Replacement Lenders to
which the Terminated Lender will assign its Commitment and, if there will be
more than one Replacement Lender, the portion of the Terminated Lender's
Commitment to be assigned to each Replacement Lender.
(d) Effecting Termination. On the Termination Date, (i) the Terminated
Lender shall by execution and delivery of an Assignment assign its Commitment to
the Replacement Lender or Replacement Lenders (pro rata, if there is more than
one Replacement Lender, in proportion to the
<PAGE> 51
46
portion of the Terminated Lender's Commitment to be assigned to each Replacement
Lender) indicated in the Notice of Termination and shall assign to the
Replacement Lender or Replacement Lenders each of its Loans (if any) then
outstanding and participation interests in Letters of Credit (if any) then
outstanding pro rata as aforesaid), (ii) the Terminated Lender shall endorse its
Notes, payable without recourse, representation or warranty to the order of the
Replacement Lender or Replacement Lenders (pro rata as aforesaid), (iii) the
Replacement Lender or Replacement Lenders shall purchase the Notes held by the
Terminated Lender (pro rata as aforesaid) at a price equal to the unpaid
principal amount thereof plus interest and facility and other fees accrued and
unpaid to the Termination Date, and (iv) the Replacement Lender or Replacement
Lenders will thereupon (pro rata as aforesaid) succeed to and be substituted in
all respects for the Terminated Lender with like effect as if becoming a Lender
pursuant to the terms of Section 12.06(b), and the Terminated Lender will have
the rights and benefits of an assignor under Section 12.06(b). To the extent not
in conflict, the terms of Section 12.06(b) shall supplement the provisions of
this Section 5.06(d). For each assignment made under this Section 5.06, the
Replacement Lender shall pay to the Administrative Agent the processing fee
provided for in Section 12.06(b). The Borrower will be responsible for the
payment of any breakage costs associated with termination of the Terminated
Lender, as set forth in Section 5.05.
ARTICLE VI
Conditions Precedent
Section 6.01 Initial Funding. The obligation of the Lenders to make the
Initial Funding and the Term Loans is subject to the receipt by the
Administrative Agent and the Lenders of all fees payable pursuant to Section
2.04 on or before the Closing Date or otherwise agreed to in writing among the
Borrower, the Agents and the Arrangers and the receipt by the Administrative
Agent of the following documents and satisfaction of the other conditions
provided in this Section 6.01, each of which shall be satisfactory to the
Administrative Agent in form and substance:
(a) a certificate of the Secretary or an Assistant Secretary of each of
the Borrower and each Guarantor setting forth (i) resolutions of its board of
directors with respect to the authorization of the Borrower or such Guarantor to
execute and deliver the Loan Documents to which it is a party and to enter into
the transactions contemplated in those documents, (ii) the officers of the
Borrower (y) who are authorized to sign the Loan Documents to which Borrower or
such Guarantor is a party and (z) who will, until replaced by another officer or
officers duly authorized for that purpose, act as its representative for the
purposes of signing documents and giving notices and other communications in
connection with this Agreement and the transactions contemplated hereby, (iii)
specimen signatures of the authorized officers, and (iv) the articles or
certificate of incorporation and bylaws of the Borrower and such Guarantor,
certified as being true and complete. The Administrative Agent and the Lenders
may conclusively rely on such certificate until the Administrative Agent
receives notice in writing from the Borrower to the contrary.
<PAGE> 52
47
(b) certificates of the appropriate state agencies with respect to the
existence, qualification and good standing of the Borrower and Guarantor.
(c) a compliance certificate which shall be substantially in the form
of Exhibit C, duly and properly executed by a Responsible Officer and dated as
of the Closing Date.
(d) the Notes, duly completed and executed.
(e) the Security Instruments, including those described on Exhibit E,
duly completed and executed in sufficient number of counterparts for recording,
if necessary. In connection with the execution and delivery of the Security
Instruments, (i) the Administrative Agent shall be reasonably satisfied that the
Security Instruments create first priority, perfected Liens (subject only to
Excepted Liens) on at least 85% of the total value of all of the Oil and Gas
Properties evaluated in the Initial Reserve Report and (ii) the Borrower will
assign its rights under the Approved Securities Purchase Documents to the
Administrative Agent and the Lenders.
(f) an opinion of (i) Haynes & Boone, L.L.P., special Texas counsel to
the Borrower, substantially in the form of Exhibit D-1 hereto, and (ii) local
counsel in each of the following states: [Louisiana, New Mexico, Oklahoma,
California and Kansas], substantially in the form of Exhibit D-2.
(g) a certificate of insurance coverage of the Borrower evidencing that
the Borrower is carrying insurance in accordance with Section 7.19.
(h) title information as the Administrative Agent may require from
attorneys satisfactory to the Administrative Agent setting forth the status of
title to at least 85% of the value of the Oil and Gas Properties included in the
Initial Reserve Report(1).
(i) the Administrative Agent's reasonable satisfaction with the
environmental condition of the Oil and Gas Properties of the Borrower and its
Subsidiaries.
(j) (i) a certificate of an authorized officer of the Borrower
certifying that: (A) BPC is concurrently consummating the Acquisition in
accordance with the terms of the Acquisition Documents (which all of the
conditions precedent for closing being satisfied) and acquiring substantially
all of the Oil and Gas Properties contained in each of the three packages
contemplated by the Acquisition Documents and the final purchase price for each
such package after giving effect to all adjustments as of Closing Date
contemplated by the Acquisition Documents and specifying, by category, the
amount of such adjustment, (B) attached thereto is a true and complete list of
the Oil and Gas Properties which
- ----------
(1) What is the status of the rollup? What about the existing liens to EnCap for
which BOA required subordination?
<PAGE> 53
48
have been excluded from the Acquisition pursuant to the terms of the Acquisition
Documents, specifying with respect thereto the basis of exclusion as (1) title
defect, (2) preferential purchase right or (3) environmental, (C) attached
thereto is a true and complete list of all Oil and Gas Properties which any
seller has made a "title indemnity payment" (as defined in the Acquisition
Documents) and the amount of such payment, and (D) attached thereto is a true
and complete list of all Oil and Gas Properties which have title defects that
BPC has asserted or which have "interest additions" that any seller has
asserted, but which are being contested either as to amount or existence; (ii) a
true and complete executed copy of each of the Acquisition Documents, each such
agreement being in form and substance reasonably satisfactory to the
Administrative Agent, (iii) original counterparts of the assignments for all of
the Acquisition Properties, in sufficient number for recordation, and (iv) such
other related documents and information as the Administrative Agent shall have
reasonably requested. The Borrower recognizes and agrees that the Borrowing Base
may be adjusted downward to reflect the exclusion of Oil and Gas Properties from
the Acquisition Properties or the payment of indemnities under the Acquisition
Documents.
(k) a certificate of a Responsible Officer of the Borrower certifying
that the Borrower has received all consents and approvals of third parties and
Governmental Authorities and all permits necessary to consummate the
Acquisition.
(l) evidence that the Borrower has obtained one or more plugging and
abandonment surety bonds issued by sureties and in amounts reasonably
satisfactory to the Administrative Agent, and that such bonds have been paid in
full for a period of not less than ____ months.
(m) receipt from the holders of [a majority of] the Borrower's existing
$50,000,000 Cumulative Redeemable Preferred Stock, Series B of a consent to each
of the transactions contemplated hereby, including the issuance of the Term
Loans and the Approved Securities and the amendment to the Borrower's Articles
of Incorporation.
(n) evidence that the obligations of the Borrower and its Subsidiaries
under the Existing Credit Facility have been paid in full, that the commitments
to lend thereunder have been terminated and that all Liens securing the Existing
Credit Facility have been released or terminated.
(o) the terms and conditions of the Approved Security Purchase
Documents and the Approved Securities shall be in form and substance
satisfactory to the Lenders and the Administrative Agent, and after completion
of reasonable due diligence, including review of various corporate documents and
financial information of the Equity Investors, the Administrative Agent and
Lenders shall be reasonably satisfied that Equity Investors meet the following
criteria:
(i) possess sufficient credit-worthiness to purchase the Approved
Securities and perform the Equity Undertakings;
<PAGE> 54
49
(ii) possess sufficient authority to enter into the Approved Securities
Purchase Documents and perform the Equity Undertakings and consummate
the transactions contemplated thereby and hereby; and
(iii) possess identifiable sources of funding to consummate the
transactions contemplated by the Equity Undertakings and this
Agreement.
(p) the Approved Securities Purchase Documents shall contain
representations, warranties and covenants from each Equity Investor, in form and
substance satisfactory to the Administrative Agent, certifying as to the
criteria listed in Section 6.01(o) and such other representations, warranties
and covenants as may be reasonably requested by the Administrative Agent.
(q) on or prior to the Closing Date, the Borrower shall have delivered
evidence that it (i) has obtained all necessary board of director and
shareholder authorizations to issue the Approved Securities; (ii) has filed with
the Texas Secretary of State the Certificate of Designation for the Approved
Securities in substantially the form of Exhibit H hereto and made all other
filings with the Texas Secretary of State reasonably necessary to issue the
Approved Securities; (iii) has reserved the appropriate number of Approved
Securities for issuance upon conversion in accordance with the Approved
Securities Purchase Documents; (iv) had adopted by its Board of Directors and
approved by its shareholders any changes to its certificate of incorporation and
by-laws necessary to reflect the issuance of the Approved Securities, and (v)
has all other necessary approvals required by applicable law (other than those
specified in Section 8.12) associated therewith.
(r) on or prior to the Closing Date, the Equity Investors shall have
executed the Approved Securities Purchase Documents providing that the Equity
Investors (in accordance with each Equity Investor's respective Equity
Undertaking) will, upon not less than three (3) Business Day's prior notice
acquire the Approved Securities for cash or convert their Tranche B Term Loan
Note as set forth in Section 3.01(b).
(s) the Escrow Agreement, in form and substance satisfactory to the
Administrative Agent, shall have been executed by the parties thereto.
(t) a consent and agreement from each Equity Investor, in form and
substance satisfactory to the Administrative Agent, acknowledging and consenting
to the assignment of the Approved Securities Purchase Documents to the
Administrative Agent and Lenders.
(u) appropriate UCC search certificates reflecting no prior liens or
security interests encumbering the Mortgaged Properties for each of the
following jurisdictions: Texas, Louisiana, New Mexico, Oklahoma, California,
Kansas and Mississippi.
(v) [the El Paso Comfort Letter regarding the performance of Encap.]
<PAGE> 55
50
(w) such other documents as the Administrative Agent or any Lender or
special counsel to the Administrative Agent may reasonably request.
Section 6.02 Initial and Subsequent Loans and Letters of Credit. The
obligation of the Lenders to make Loans to the Borrower upon the occasion of
each borrowing hereunder (including the Initial Funding) and to issue, renew,
extend or reissue Letters of Credit for the account of the Borrower is subject
to the further conditions precedent that, as of the date of such Loans or such
issuance, renewal, extension or reissuance and after giving effect thereto: (a)
no Default shall have occurred and be continuing; (b) no Material Adverse Effect
shall have occurred; (c) the representations and warranties made by the Borrower
and the Guarantors in Article VII and in the Security Instruments shall be true
on and as of the date of the making of such Loans or issuance, renewal,
extension or reissuance of a Letter of Credit with the same force and effect as
if made on and as of such date and following such new borrowing, except to the
extent such representations and warranties are expressly limited to an earlier
date; and (d) the making such Loan or extension of credit would not conflict
with, or cause any Lender to, exceed any applicable Governmental Requirements.
Each request for a borrowing or issuance, renewal, extension or reissuance of a
Letter of Credit by the Borrower hereunder shall constitute a certification by
the Borrower to the effect set forth in the preceding sentence (both as of the
date of such notice and, unless the Borrower otherwise notifies the
Administrative Agent prior to the date of and immediately following such
borrowing or issuance, renewal, extension or reissuance of a Letter of Credit as
of the date thereof).
ARTICLE VII
Representations and Warranties
The Borrower represents and warrants to the Administrative Agent and
the Lenders that (each representation and warranty herein is given as of the
Closing Date and shall be deemed repeated and reaffirmed on the dates of each
borrowing and issuance, renewal, extension or reissuance of a Letter of Credit
as provided in Section 6.02):
Section 7.01 Existence. The Borrower and each Subsidiary: (i) is duly
organized or formed, legally existing and in good standing, if applicable, under
the laws of the jurisdiction of its formation; (ii) has all requisite power, and
has all material governmental licenses, authorizations, consents and approvals
necessary to own its assets and carry on its business as now being or as
proposed to be conducted; and (iii) is qualified to do business in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify could reasonably be
expected to have a Material Adverse Effect.
Section 7.02 Financial Condition. The audited consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as at December 31, 1998
and the related consolidated statement of income, stockholders' equity and cash
flow of the Borrower and its Consolidated Subsidiaries for the fiscal year ended
on said date, with the opinion thereon of _________________ heretofore furnished
to each of the Lenders
<PAGE> 56
51
and the unaudited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as at September 30, 1999 and their related
consolidated statements of income, stockholders' equity and cash flow of the
Borrower and its Consolidated Subsidiaries for the nine-month period ended on
such date heretofore furnished to the Administrative Agent, are complete and
correct and fairly present the consolidated financial condition of the Borrower
and its Consolidated Subsidiaries as at said dates and the results of its
operations for the fiscal year and the nine-period on said dates, all in
accordance with GAAP, as applied on a consistent basis (subject, in the case of
the interim financial statements, to normal year-end adjustments). Neither the
Borrower nor any Subsidiary has on the Closing Date any material Debt,
contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in the Financial
Statements or in Schedule 7.02. Since the date of the Financial Statements, (a)
neither the business nor the Properties of the Borrower or any Subsidiary have
been materially and adversely affected as a result of any fire, explosion,
earthquake, flood, drought, windstorm, accident, strike or other labor
disturbance, embargo, requisition or taking of Property or cancellation of
contracts, permits or concessions by any Governmental Authority, riot,
activities of armed forces or acts of God or of any public enemy, (b) there has
been no material adverse change in or affecting the business, assets,
operations, prospects or condition, financial or otherwise, of the Borrower and
its Subsidiaries, taken as a whole (exclusive of changes resulting solely from
changes in the price of oil), and (c) the business of the Borrower and its
Subsidiaries has been conducted only in the ordinary course consistent with past
business practices.
Section 7.03 Litigation. Except as disclosed to the Lenders in
Schedule 7.03 hereto, at the Closing Date there is no litigation, legal,
administrative or arbitral proceeding, investigation or other action of any
nature pending or, to the knowledge of the Borrower, threatened against or
affecting the Borrower or any Subsidiary which involves the possibility of any
judgment or liability against the Borrower or any Subsidiary (a) not fully
covered by insurance (except for normal deductibles) and which alleges a
liability in excess of $500,000 or more, (b) impair the consummation of the
Acquisition on the time and in the manner contemplated by the Acquisition
Documents and the conveyance to BPC of the Acquisition Properties or (c) impair
the issuance and sale of the Approved Securities as contemplated by the Approved
Securities Purchase Documents.
Section 7.04 No Breach. Neither the execution and delivery of the Loan
Documents, the Acquisition Documents, the Approved Securities nor Approved
Securities Purchase Documents, nor compliance with the terms and provisions
hereof will conflict with or result in a breach of, or require any consent which
has not been obtained as of the Closing Date under, the respective charter or
by-laws of the Borrower or any Subsidiary, or any Governmental Requirement or
any agreement or instrument to which the Borrower or any Subsidiary is a party
or by which it is bound or to which it or its Properties are subject, or
constitute a default under any such agreement or instrument, or result in the
creation or imposition of any
<PAGE> 57
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Lien upon any of the revenues or assets of the Borrower or any Subsidiary
pursuant to the terms of any such agreement or instrument other than the Liens
created by the Loan Documents.
Section 7.05 Authority. The Borrower and each Subsidiary have all
necessary power and authority to execute, deliver and perform its obligations
under the Loan Documents, the Acquisition Documents and the Approved Securities
Purchase Documents to which it is a party, including, without limitation,
approval of the Board of Directors and shareholders of the Borrower to issue the
Approved Securities as contemplated hereby and by the Approved Securities
Purchase Documents. The Board of Directors of the Borrower has reserved the
appropriate number of shares of common and preferred stock to ensure the
Borrower's ability to comply with its obligations under the Approved Securities
Purchase Documents. The execution, delivery and performance by the Borrower and
each Subsidiary of the Loan Documents, the Acquisition Documents, the Approved
Securities and the Approved Security Purchase Documents to which it is a party
have been duly authorized by all necessary action on its part and the Loan
Documents, the Acquisition Documents, the Approved Securities, and the Approved
Security Purchase Documents constitute the legal, valid and binding obligations
of the Borrower and each Subsidiary party thereto, enforceable in accordance
with their terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and general principles of equity.
Section 7.06 Approvals. No authorizations, approvals or consents of,
and no filings or registrations with, any Governmental Authority are necessary
for the execution, delivery or performance by the Borrower or any Subsidiary of
the Loan Documents, the Acquisition Documents, the Approved Securities or the
Approved Securities Purchase Documents or for the validity or enforceability
thereof, except for the recording and filing of the Security Instruments as
required by this Agreement and filings with the exchange on which shares of its
common stock are traded and the SEC associated with the issuance and sale of the
Approved Securities.
Section 7.07 Use of Loans. The proceeds of the Loans shall be used to
provide working capital for exploration and production operations, and to
provide funding in connection with the Acquisition and for general corporate
purposes. The Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose, whether
immediate, incidental or ultimate, of buying or carrying margin stock (within
the meaning of Regulation T, U or X of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan hereunder will be used
to buy or carry any margin stock.
Section 7.08 ERISA.
(a) The Borrower, each Subsidiary and each ERISA Affiliate have
complied in all material respects with ERISA and, where applicable, the Code
regarding each Plan.
<PAGE> 58
53
(b) Each Plan is, and has been, maintained in substantial compliance
with ERISA and, where applicable, the Code.
(c) No act, omission or transaction has occurred which could result in
imposition on the Borrower, any Subsidiary or any ERISA Affiliate (whether
directly or indirectly) of (i) either a civil penalty assessed pursuant to
section 502(c), (i) or (l) of ERISA or a tax imposed pursuant to Chapter 43 of
Subtitle D of the Code or (ii) breach of fiduciary duty liability damages under
section 409 of ERISA.
(d) No Plan (other than a defined contribution plan) or any trust
created under any such Plan has been terminated since September 2, 1974. No
liability to the PBGC (other than for the payment of current premiums which are
not past due) by the Borrower, any Subsidiary or any ERISA Affiliate has been or
is expected by the Borrower, any Subsidiary or any ERISA Affiliate to be
incurred with respect to any Plan. No ERISA Event with respect to any Plan has
occurred.
(e) Full payment when due has been made of all amounts which the
Borrower, any Subsidiary or any ERISA Affiliate is required under the terms of
each Plan or applicable law to have paid as contributions to such Plan, and no
accumulated funding deficiency (as defined in section 302 of ERISA and section
412 of the Code), whether or not waived, exists with respect to any Plan.
(f) The actuarial present value of the benefit liabilities under each
Plan which is subject to Title IV of ERISA does not, as of the end of the
Borrower's most recently ended fiscal year, exceed the current value of the
assets (computed on a plan termination basis in accordance with Title IV of
ERISA) of such Plan allocable to such benefit liabilities. The term "actuarial
present value of the benefit liabilities" shall have the meaning specified in
section 4041 of ERISA.
(g) None of the Borrower, any Subsidiary or any ERISA Affiliate
sponsors, maintains, or contributes to an employee welfare benefit plan, as
defined in section 3(1) of ERISA, including, without limitation, any such plan
maintained to provide benefits to former employees of such entities, that may
not be terminated by the Borrower, a Subsidiary or any ERISA Affiliate in its
sole discretion at any time without any material liability.
(h) None of the Borrower, any Subsidiary or any ERISA Affiliate
sponsors, maintains or contributes to, or has at any time in the preceding six
calendar years, sponsored, maintained or contributed to, any Multiemployer Plan.
(i) None of the Borrower, any Subsidiary or any ERISA Affiliate is
required to provide security under section 401(a)(29) of the Code due to a Plan
amendment that results in an increase in current liability for the Plan.
Section 7.09 Taxes. Except as set out in Schedule 7.09, each of the
Borrower and the Subsidiaries has filed all United States Federal income tax
returns and all other tax returns which are required to be
<PAGE> 59
54
filed by them and have paid all material taxes due pursuant to such returns or
pursuant to any assessment received by the Borrower or any Subsidiary. The
charges, accruals and reserves on the books of the Borrower and the Subsidiaries
in respect of taxes and other governmental charges are, in the opinion of the
Borrower, adequate. No tax lien has been filed and, to the knowledge of the
Borrower, no claim is being asserted with respect to any such tax, fee or other
charge.
Section 7.10 Titles, etc.
(a) Except as set out in Schedule 7.10, each of the Borrower and the
Subsidiaries has good and marketable title to its material (individually or in
the aggregate) Properties, free and clear of all Liens except Liens permitted by
Section 9.03. Except as set forth in Schedule 7.10, after giving full effect to
the Excepted Liens, the Borrower owns the net interests in production
attributable to the Hydrocarbon Interests reflected in the most recently
delivered Reserve Report and the ownership of such Properties shall not in any
material respect obligate the Borrower to bear the costs and expenses relating
to the maintenance, development and operations of each such Property in an
amount in excess of the working interest of each Property set forth in the most
recently delivered Reserve Report.
(b) All leases and agreements necessary for the conduct of the business
of the Borrower and the Subsidiaries are valid and subsisting, in full force and
effect and there exists no default or event or circumstance which with the
giving of notice or the passage of time or both would give rise to a default
under any such lease or leases, which would affect in any material respect the
conduct of the business of the Borrower and the Subsidiaries.
(c) The rights, Properties and other assets presently owned, leased or
licensed by the Borrower and the Subsidiaries including, without limitation, all
easements and rights of way, include all rights, Properties and other assets
necessary to permit the Borrower and the Subsidiaries to conduct their business
in all material respects in the same manner as its business has been conducted
prior to the Closing Date.
(d) All of the assets and Properties of the Borrower and the
Subsidiaries which are reasonably necessary for the operation of its business
are in good working condition and are maintained in accordance with prudent
business standards.
Section 7.11 No Material Misstatements. No written information,
statement, exhibit, certificate, document or report furnished to the
Administrative Agent and the Lenders (or any of them) by the Borrower or any
Subsidiary or any of their Affiliates in connection with the negotiation of this
Agreement contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statement contained therein not
materially misleading in the light of the circumstances in which made and with
respect to the Borrower and the Subsidiaries taken as a whole. There is no fact
peculiar to the Borrower or any Subsidiary which has a Material Adverse Effect
or in the future is reasonably likely to have (so far as the Borrower can now
foresee) a
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55
Material Adverse Effect and which has not been set forth in this Agreement or
the other documents, certificates and statements furnished to the Administrative
Agent by or on behalf of the Borrower or any Subsidiary prior to, or on, the
Closing Date in connection with the transactions contemplated hereby. To the
best knowledge of Borrower, there are no statements or conclusions in any
Reserve Report which are based upon or include misleading information or fail to
take into account material information regarding the matters reported therein,
it being understood that each Reserve Report is necessarily based upon
professional opinions, estimates and projections and that Borrower does not
warrant that such opinions, estimates and projections will ultimately prove to
have been accurate.
Section 7.12 Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
Section 7.13 Public Utility Holding Company Act. Neither the Borrower
nor any Subsidiary is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," or a "public utility" within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
Section 7.14 Subsidiaries. Except as set forth on Schedule 7.14, the
Borrower has no Subsidiaries.
Section 7.15 Location of Business and Offices. The Borrower's
principal place of business and chief executive offices are located at the
address stated on the signature page of this Agreement. The principal place of
business and chief executive office of each Subsidiary are located at the
addresses stated on Schedule 7.14.
Section 7.16 Defaults. Neither the Borrower nor any Subsidiary is in
default nor has any event or circumstance occurred which, but for the expiration
of any applicable grace period or the giving of notice, or both, would
constitute a default under any material agreement or instrument to which the
Borrower or any Subsidiary is a party or by which the Borrower or any Subsidiary
is bound which default could reasonably be expected to have a Material Adverse
Effect. No Default hereunder has occurred and is continuing.
Section 7.17 Environmental Matters. Except (i) as provided in Schedule
7.17 or (ii) as could not be reasonably expected to have a Material Adverse
Effect (or with respect to (c), (d) and (e) below, where the failure to take
such actions could not be reasonably expected to have a Material Adverse
Effect):
(a) neither any Property of the Borrower or any Subsidiary nor the
operations conducted thereon violate any order or requirement of any court or
Governmental Authority or any Environmental Laws;
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56
(b) without limitation of Section 7.17(a), no Property of the Borrower
or any Subsidiary nor the operations currently conducted thereon or, to the best
knowledge of the Borrower, by any prior owner or operator of such Property or
operation, are in violation of or subject to any existing, pending or threatened
action, suit, investigation, inquiry or proceeding by or before any court or
Governmental Authority or to any remedial obligations under Environmental Laws;
(c) all notices, permits, licenses or similar authorizations, if any,
required to be obtained or filed in connection with the operation or use of any
and all Property of the Borrower and each Subsidiary, including without
limitation past or present treatment, storage, disposal or release of a
hazardous substance or solid waste into the environment, have been duly obtained
or filed, and the Borrower and each Subsidiary are in compliance with the terms
and conditions of all such notices, permits, licenses and similar
authorizations;
(d) all hazardous substances, solid waste, and oil and gas exploration
and production wastes, if any, generated at any and all Property of the Borrower
or any Subsidiary have in the past been transported, treated and disposed of in
accordance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the environment, and, to
the best knowledge of the Borrower, all such transport carriers and treatment
and disposal facilities have been and are operating in compliance with
Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or welfare or the environment, and are not the
subject of any existing, pending or threatened action, investigation or inquiry
by any Governmental Authority in connection with any Environmental Laws;
(e) the Borrower has taken all steps reasonably necessary to determine
and has determined that no hazardous substances, solid waste, or oil and gas
exploration and production wastes, have been disposed of or otherwise released
and there has been no threatened release of any hazardous substances on or to
any Property of the Borrower or any Subsidiary except in compliance with
Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or welfare or the environment;
(f) to the extent applicable, all Property of the Borrower and each
Subsidiary currently satisfies all design, operation, and equipment requirements
imposed by the OPA or scheduled as of the Closing Date to be imposed by OPA
during the term of this Agreement, and the Borrower does not have any reason to
believe that such Property, to the extent subject to OPA, will not be able to
maintain compliance with the OPA requirements during the term of this Agreement;
and
(g) neither the Borrower nor any Subsidiary has any known contingent
liability in connection with any release or threatened release of any oil,
hazardous substance or solid waste into the environment.
Section 7.18 Compliance with the Law. Neither the Borrower nor any
Subsidiary has violated any Governmental Requirement or failed to obtain any
license, permit, franchise or other governmental authorization
<PAGE> 62
57
necessary for the ownership of any of its Properties or the conduct of its
business, which violation or failure would have (in the event such violation or
failure were asserted by any Person through appropriate action) a Material
Adverse Effect. Except for such acts or failures to act as could not be
reasonably expected to have a Material Adverse Effect, the Oil and Gas
Properties (and properties unitized therewith) have been maintained, operated
and developed in a good and workmanlike manner and in conformity with all
applicable laws and all rules, regulations and orders of all duly constituted
authorities having jurisdiction and in conformity with the provisions of all
leases, subleases or other contracts comprising a part of the Hydrocarbon
Interests and other contracts and agreements forming a part of the Oil and Gas
Properties; specifically in this connection, (i) after the Closing Date, no Oil
and Gas Property is subject to having allowable production reduced below the
full and regular allowable (including the maximum permissible tolerance) because
of any overproduction (whether or not the same was permissible at the time)
prior to the Closing Date and (ii) none of the wells comprising a part of the
Oil and Gas Properties (or properties unitized therewith) are deviated from the
vertical more than the maximum permitted by applicable laws, regulations, rules
and orders, and such wells are, in fact, bottomed under and are producing from,
and the well bores are wholly within, the Oil and Gas Properties (or in the case
of wells located on properties unitized therewith, such unitized properties).
Section 7.19 Insurance. Schedule 7.19 attached hereto contains an
accurate and complete description of all material policies of fire, liability,
workmen's compensation and other forms of insurance owned or held by the
Borrower and each Subsidiary. All such policies are in full force and effect,
all premiums with respect thereto covering all periods up to and including the
date of the closing have been paid, and no notice of cancellation or termination
has been received with respect to any such policy. Such policies are sufficient
for compliance with all requirements of law and of all agreements to which the
Borrower or any Subsidiary is a party; are valid, outstanding and enforceable
policies; provide adequate insurance coverage in at least such amounts and
against at least such risks (but including in any event public liability) as are
usually insured against in the same general area by companies engaged in the
same or a similar business for the assets and operations of the Borrower and
each Subsidiary; will remain in full force and effect through the respective
dates set forth in Schedule 7.19 without the payment of additional premiums; and
will not in any way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement. Schedule 7.19 identifies all
material risks, if any, which the Borrower and the Subsidiaries and their
respective Board of Directors or officers have designated as being self insured.
Neither the Borrower nor any Subsidiary has been refused any insurance with
respect to its assets or operations, nor has its coverage been limited below
usual and customary policy limits, by an insurance carrier to which it has
applied for any such insurance or with which it has carried insurance during the
last three years. The Agents and the Lenders have been named as additional
insureds in respect of such liability insurance policies.
<PAGE> 63
58
Section 7.20 Hedging Agreements. Schedule 7.20 sets forth, as of the
Closing Date, a true and complete list of all Hedging Agreements (including
commodity price swap agreements, forward agreements or contracts of sale which
provide for prepayment for deferred shipment or delivery of oil, gas or other
commodities) of the Borrower and each Subsidiary, the material terms thereof
(including the type, term, effective date, termination date and notional amounts
or volumes), the net mark to market value thereof, all credit support agreements
relating thereto (including any margin required or supplied), and the
counterparty to each such agreement.
Section 7.21 Restriction on Liens. Neither the Borrower nor any of the
Subsidiaries is a party to any agreement or arrangement (other than this
Agreement and the Security Instruments), or subject to any order, judgment, writ
or decree, which either restricts or purports to restrict its ability to grant
Liens to other Persons on or in respect of their respective assets of
Properties.
Section 7.22 Material Agreements. Set forth on Schedule 7.22 hereto is
a complete and correct list of all material agreements, leases, indentures,
purchase agreements, obligations in respect of letters of credit, guarantees,
joint venture agreements, and other instruments in effect or to be in effect as
of the Closing Date (other than Hedging Agreements) providing for, evidencing,
securing or otherwise relating to any Debt of the Borrower or any of the
Subsidiaries, and all obligations of the Borrower or any of the Subsidiaries to
issuers of surety or appeal bonds issued for account of the Borrower or any such
Subsidiary, and such list correctly sets forth the names of the debtor or lessee
and creditor or lessor with respect to the Debt or lease obligations outstanding
or to be outstanding and the property subject to any Lien securing such Debt or
lease obligation. Also set forth on Schedule 7.22 hereto is a complete and
correct list of all material agreements and other instruments of the Borrower
and the Subsidiaries relating to the purchase, transportation by pipeline, gas
processing, marketing, sale and supply of natural gas and other Hydrocarbons,
but in any event, any such agreement or other instrument that will account for
more than ___% of the sales of the Borrower and the Subsidiaries during the
Borrower's current fiscal year.
Section 7.23 Gas Imbalances. As of the Closing Date, except as set
forth on Schedule 7.23 or on the most recent certificate delivered pursuant to
Section 8.07(c), on a net basis there are no gas imbalances, take or pay or
other prepayments with respect to the Borrower's Oil and Gas Properties which
would require the Borrower to deliver Hydrocarbons produced from the Oil and Gas
Properties at some future time without then or thereafter receiving full payment
therefor exceeding ________ cubic feet of gas in the aggregate.
Section 7.24 Acquisition and Approved Securities.
(a) The copies of the Acquisition Documents previously delivered by the
Borrower to the Lender are complete and accurate copies thereof and have not
been amended or modified in any manner. No party to an Acquisition Document is
in default thereunder. Immediately after the Acquisition, BPC shall own all of
the Acquisition Properties evaluated by
<PAGE> 64
59
the Initial Reserve Report, and the representations in Sections 7.10 and 7.17
shall be true and correct as to the Acquisition Properties.
(b) The copies of the Approved Securities Purchase Documents previously
delivered by the Borrower to the Lender are complete and accurate copies thereof
and have not been amended or modified in any manner. No party to such Approved
Securities Purchase Document is in default thereunder.
Section 7.25 Marketing of Production. Except for contracts listed on
Schedule 7.25 (with respect to all of which contracts the Borrower represents
that it or its Subsidiaries 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 Borrower's or its Subsidiaries' Hydrocarbons (including
without limitation, calls on, or other rights to purchase, production, whether
or not the same are currently being exercised) other than (a) agreements or
arrangements pertaining to the sale of production at a price equal to or greater
than a price that is the market price from time to time existing in the areas
where the Oil and Gas Properties subject to such agreement or arrangement are
located, and (b) agreements or arrangements that are cancelable on 90 days
notice or less without penalty or detriment.
Section 7.26 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 Borrower or any of its Subsidiaries
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 Borrower or any of its Subsidiaries, in a manner
consistent with the Borrower's or its Subsidiaries' past practices.
Section 7.27 Intellectual Property. The Borrower and its Subsidiaries
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
Hydrocarbons, with such exceptions as could not reasonably be expected to have a
Material Adverse Effect. 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 could not reasonably be expected to have a Material Adverse Effect. The
Borrower and its Subsidiaries are in compliance in all material respects with
such licenses and agreements and there are no pending or, to the best knowledge
of the Borrower, threatened proceedings challenging or questioning the validity
or effectiveness of any license
<PAGE> 65
60
or agreement relating to such property or the right of the Borrower or any
Subsidiaries to use, copy, modify or distribute the same.
ARTICLE VIII
Affirmative Covenants
The Borrower covenants and agrees that, so long as any of the Aggregate
Commitments are in effect and until payment in full of all Indebtedness
hereunder, all interest thereon and all other amounts payable by the Borrower
hereunder:
Section 8.01 Reporting Requirements. The Borrower shall deliver, or
shall cause to be delivered, to the Administrative Agent with sufficient copies
of each for the Lenders:
(a) Annual Financial Statements. As soon as available and in any event
within ninety (90) days after the end of each fiscal year of the Borrower, the
audited consolidated and unaudited consolidating statements of income,
stockholders' equity, changes in financial position and cash flow of the
Borrower and its Consolidated Subsidiaries for such fiscal year, and the related
consolidated and consolidating balance sheets of the Borrower and its
Consolidated Subsidiaries as at the end of such fiscal year, and setting forth
in each case in comparative form the corresponding figures for the preceding
fiscal year, and accompanied by the related opinion of independent public
accountants of recognized national standing acceptable to the Administrative
Agent which opinion shall state that said financial statements fairly present
the consolidated and consolidating financial condition and results of operations
of the Borrower and its Consolidated Subsidiaries as at the end of, and for,
such fiscal year and that such financial statements have been prepared in
accordance with GAAP except for such changes in such principles with which the
independent public accountants shall have concurred and such opinion shall not
contain a "going concern" or like qualification or exception, and a certificate
of such accountants stating that, in making the examination necessary for their
opinion, they obtained no knowledge, except as specifically stated, of any
Default.
(b) Quarterly Financial Statements. As soon as available and in any
event within forty five (45) days after the end of each of the first three
fiscal quarterly periods of each fiscal year of the Borrower, consolidated and
consolidating statements of income, stockholders' equity, changes in financial
position and cash flow of the Borrower and its Consolidated Subsidiaries for
such period and for the period from the beginning of the respective fiscal year
to the end of such period, and the related consolidated and consolidating
balance sheets as at the end of such period, and setting forth in each case in
comparative form the corresponding figures for the corresponding period in the
preceding fiscal year, accompanied by the certificate of a Responsible Officer,
which certificate shall state that said financial statements fairly present the
consolidated and consolidating financial condition and results of operations of
the Borrower and its Consolidated Subsidiaries in accordance with GAAP, as at
the end of, and for, such period (subject to normal year-end audit adjustments).
<PAGE> 66
61
(c) Notice of Default, Etc. Promptly after the Borrower knows that any
Default or any Material Adverse Effect has occurred, a notice of such Default or
Material Adverse Effect, describing the same in reasonable detail and the action
the Borrower proposes to take with respect thereto.
(d) Other Accounting Reports. Promptly upon receipt thereof, a copy of
each other report or letter submitted to the Borrower or any Subsidiary by
independent accountants in connection with any annual, interim or special audit
made by them of the books of the Borrower and the Subsidiaries, and a copy of
any response by the Borrower or any Subsidiary of the Borrower, or the Board of
Directors of the Borrower or any Subsidiary of the Borrower, to such letter or
report.
(e) SEC Filings, Etc. Promptly upon its becoming available, each
financial statement, report, notice or proxy statement sent by the Borrower to
stockholders generally and each regular or periodic report and any registration
statement, prospectus or written communication (other than transmittal letters)
in respect thereof filed by the Borrower with or received by the Borrower in
connection therewith from any securities exchange or the SEC or any successor
agency.
(f) Notices Under Preferred Stock Designations; Other Material
Instruments. Promptly after the furnishing thereof, copies of any statement,
report or notice furnished to or any Person pursuant to the terms of any
preferred stock designation, indenture, loan or credit or other similar
agreement, other than this Agreement and not otherwise required to be furnished
to the Lenders pursuant to any other provision of this Section 8.01. In the
event that after the Closing Date: (i) BPC is required to purchase any of the
Acquisition Properties which had been excluded from the Properties purchased by
BPC on the Closing Date in accordance with the terms of the Acquisition
Documents, (ii) BPC is required to honor any preferential purchase right in
respect of any Acquisition Property which had not been waived, (iii) any matter
being disputed in accordance with the terms of the Acquisition Documents is
resolved, or (iv) BPC and the sellers calculate and agree upon the "final recap"
or "final transition statement" as contemplated by the Acquisition Documents,
then, in each such case, the Borrower shall promptly give the Administrative
Agent notice in reasonable detail of such circumstances. Following completion of
the mechanical integrity testing contemplated by the Acquisition Documents, the
Borrower will furnish a listing of each well being abandoned and an assessment
of how such action affects the value assigned such well in the Initial Reserve
Report.
(g) Hedging Agreements. As soon as available and in any event within
ten (10) Business Days after the last day of each calendar quarter, a report, in
form and substance satisfactory to the Administrative Agent, setting forth as of
the last Business Day of such calendar quarter, a true and complete list of all
Hedging Agreements (including commodity price swap agreements, forward
agreements or contracts of sale which provide for prepayment for deferred
shipment or delivery of oil, gas or other commodities) of the Borrower and each
Subsidiary, the material terms thereof (including the type, term,
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effective date, termination date and notional amounts or volumes), the net mark
to market value therefor, any new credit support agreements relating thereto not
listed on Schedule 7.20, any margin required or supplied under any credit
support document, and the counterparty to each such agreement.
(h) Compliance Certificates. The Borrower will furnish to the
Administrative Agent, at the time it furnishes each set of financial statements
pursuant to paragraph (a) or (b) above, a certificate substantially in the form
of Exhibit C hereto executed by a Responsible Officer (i) certifying as to the
matters set forth therein and stating that no Default has occurred and is
continuing (or, if any Default has occurred and is continuing, describing the
same in reasonable detail), and (ii) setting forth in reasonable detail the
computations necessary to determine whether the Borrower is in compliance with
Section 9.01 as of the end of the respective fiscal quarter or fiscal year.
(i) Other Matters. From time to time, such other information regarding
the business, affairs or financial condition of the Borrower or any Subsidiary
(including, without limitation, any Plan or Multiemployer Plan and any reports
or other information required to be filed under ERISA) as any Lender or the
Administrative Agent may reasonably request.
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Section 8.02 Litigation. The Borrower shall promptly give to the
Administrative Agent notice of all legal or arbitral proceedings, and of all
proceedings before any Governmental Authority affecting the Borrower or any
Subsidiary, except proceedings which, if adversely determined, could not
reasonably be expected to have a Material Adverse Effect.
Section 8.03 Maintenance, Etc.
(a) The Borrower shall and shall cause each Subsidiary to: (i) preserve and
maintain its existence and all of its material rights, privileges and franchises
and maintain, if necessary, its qualification to do business in each other
jurisdiction in which its Oil and Gas Properties is located or the ownership of
its Properties requires such qualification; (ii) keep books of record and
account in which full, true and correct entries will be made of all dealings or
transactions in relation to its business and activities; (iii) comply with all
Governmental Requirements if failure to comply with such requirements could
reasonably be expected to have a Material Adverse Effect; (iv) pay and discharge
all taxes, assessments and governmental charges or levies imposed on it or on
its income or profits or on any of its Property prior to the date on which
penalties attach thereto, except for any such tax, assessment, charge or levy
the payment of which is being contested in good faith and by proper proceedings
and against which adequate reserves are being maintained; (v) upon reasonable
notice, permit representatives of the Administrative Agent or any Lender, during
normal business hours, to examine, copy and make extracts from its books and
records, to inspect its Properties, and to discuss its business and affairs with
its officers, all to the extent reasonably requested by such Lender or the
Administrative Agent (as the case may be); and (vi) keep, or cause to be kept,
insured by financially sound and reputable insurers all Property of a character
usually insured by Persons engaged in the same or similar business similarly
situated against loss or damage of the kinds and in the amounts customarily
insured against by such Persons and carry such other insurance as is usually
carried by such Persons including, without limitation, environmental risk
insurance to the extent reasonably available. If requested by the Administrative
Agent, the loss payable clauses or provisions in said insurance policy or
policies shall be endorsed in favor of and made payable to the Administrative
Agent as its interests may appear.
(b) Contemporaneously with the delivery of the financial statements
required by Section 8.01(a) to be delivered for each year, the Borrower will
furnish or cause to be furnished to the Administrative Agent and the Lenders a
certificate of insurance coverage from the insurer in form and substance
satisfactory to the Administrative Agent and, if requested, will furnish the
Administrative Agent and the Lenders copies of the applicable policies.
<PAGE> 69
(c) The Borrower will and will cause each Subsidiary to operate its
Properties or cause such Properties to be operated in a careful and efficient
manner in accordance with the practices of the industry and in compliance with
all applicable contracts and agreements and in compliance in all material
respects with all Governmental Requirements, including applicable pro ration and
Environmental Laws and all applicable laws, rules and regulations of every other
Governmental Authority from time to time constituted to regulate the development
and operation of its Oil and Gas Properties and the production and sale of
Hydrocarbons and other minerals therefrom.
(d) The Borrower, at its own expense, will and will cause each Subsidiary
to do or cause to be done all things reasonably necessary to preserve and keep
in good repair, working order and efficiency all of its Oil and Gas Properties
and other material Properties including, without limitation, all equipment,
machinery and facilities, and from time to time will make all the reasonably
necessary repairs, renewals and replacements so that at all times the state and
condition of its Oil and Gas Properties and other material Properties will be
fully preserved and maintained, except to the extent a portion of such
Properties is no longer capable of producing Hydrocarbons in economically
reasonable amounts. The Borrower will and will cause each Subsidiary to
promptly: (i) pay and discharge, or make reasonable and customary efforts to
cause to be paid and discharged, all delay rentals, royalties, expenses and
indebtedness accruing under the leases or other agreements affecting or
pertaining to its Oil and Gas Properties and will do all other things necessary
to keep unimpaired their rights with respect thereto and prevent any forfeiture
thereof or default thereunder, (ii) perform or make reasonable and customary
efforts to cause to be performed, in accordance with industry standards, the
obligations required by each and all of the assignments, deeds, leases,
sub-leases, contracts and agreements affecting its interests in its Oil and Gas
Properties and other material Properties, (iii) will and will cause each
Subsidiary to do all other things necessary to keep unimpaired, except for Liens
described in Section 9.03, its rights with respect to its Oil and Gas Properties
and other material Properties and prevent any forfeiture thereof or a default
thereunder, except to the extent a portion of such Properties is no longer
capable of producing Hydrocarbons in economically reasonable amounts and except
for dispositions permitted by Section 9.13. The Borrower will and will cause
each Subsidiary to operate its Oil and Gas Properties and other material
Properties or cause or make reasonable and customary efforts to cause such Oil
and Gas Properties and other material Properties to be operated in a careful and
efficient manner in accordance with the practices of the industry and in
compliance with all applicable contracts and agreements and in compliance in all
material respects with all Governmental Requirements. The
<PAGE> 70
Borrower shall, and shall cause its Subsidiaries to, do or cause to be done such
development work as may be reasonably necessary to the prudent and economical
operation of its Oil and Gas Properties in accordance with the most approved
practices of operators in the industry, including all to be done that may be
appropriate to protect from diminution the productive capacity of its Oil and
Gas Properties and each producing well thereon including, without limitation,
cleaning out and reconditioning each well from time to time, plugging and
completing at a different level each such well, drilling a substitute well to
conform to changed spacing regulations and to protect its Oil and Gas Properties
against drainage whenever and as often as is necessary.
Section 8.04 Environmental Matters.
(a) The Borrower will and will cause each Subsidiary to establish and
implement such procedures as may be reasonably necessary to continuously
determine and assure that any failure of the following could not reasonably be
expected to have a Material Adverse Effect: (i) all Property of the Borrower and
the Subsidiaries and the operations conducted thereon and other activities of
the Borrower and the Subsidiaries are in compliance with and do not violate the
requirements of any Environmental Laws, (ii) no oil, hazardous substances or
solid wastes are disposed of or otherwise released on or to any Property owned
by any such party except in compliance with Environmental Laws, (iii) no
hazardous substance will be released on or to any such Property in a quantity
equal to or exceeding that quantity which requires reporting pursuant to Section
103 of CERCLA, and (iv) no oil, oil and gas exploration and production wastes or
hazardous substance is released on or to any such Property so as to pose an
imminent and substantial endangerment to public health or welfare or the
environment.
(b) The Borrower will promptly notify the Administrative Agent and the
Lenders in writing of any threatened action, investigation or inquiry by any
Governmental Authority of which the Borrower has knowledge in connection with
any Environmental Laws, excluding routine testing and corrective action.
(c) The Borrower will and will cause each Subsidiary to provide
environmental audits and tests in accordance with American Society for Testing
and Materials standards as reasonably requested by the Administrative Agent and
the Lenders (or as otherwise required to be obtained by the Administrative Agent
or the Lenders by any Governmental Authority) in connection with any future
acquisitions of Oil and Gas Properties or other material Properties.
<PAGE> 71
Section 8.05 Further Assurances. The Borrower will and will cause each
Subsidiary to cure promptly any defects in the creation and issuance of the
Notes and the execution and delivery of the Security Instruments and this
Agreement. The Borrower at its expense will and will cause each Subsidiary to
promptly execute and deliver to the Administrative Agent upon request all such
other documents, agreements and instruments to comply with or accomplish the
covenants and agreements of the Borrower or any Subsidiary, as the case may be,
in the Security Instruments and this Agreement, or to further evidence and more
fully describe the collateral intended as security for the Notes, or to correct
any omissions in the Security Instruments, or to state more fully the security
obligations set out herein or in any of the Security Instruments, or to perfect,
protect or preserve any Liens created pursuant to any of the Security
Instruments, or to make any recordings, to file any notices or obtain any
consents, all as may be necessary or appropriate in connection therewith.
Section 8.06 Performance of Obligations. The Borrower will pay the Notes
according to the reading, tenor and effect thereof, and the Borrower will and
will cause each Subsidiary to do and perform every act and discharge all of the
obligations to be performed and discharged by them under the Security
Instruments and this Agreement, at the time or times and in the manner
specified.
Section 8.07 Reserve Reports.
(a) On or before February 15 and August 15 of each year, commencing August
15, 2000, the Borrower shall furnish to the Administrative Agent and the Lenders
a Reserve Report. The Reserve Report as of January 1 of each year shall be
prepared by T. J. Smith & Company, Inc. or such other nationally recognized
consulting engineer mutually acceptable to the Borrower and the Administrative
Agent, and the July 1 Reserve Report of each year shall be prepared by or under
the supervision of the chief engineer of the Borrower who shall certify such
Reserve Report to be true and accurate and to have been prepared in accordance
with the procedures used in the immediately proceeding January 1 Reserve Report.
(b) In the event of an unscheduled redetermination, the Borrower shall
furnish to the Administrative Agent and the Lenders a Reserve Report prepared by
or under the supervision of the chief engineer of the Borrower who shall certify
such Reserve Report to be true and accurate and to have been prepared in
accordance with the procedures used in the immediately preceding Reserve Report.
For any unscheduled redetermination requested by the Required Lenders or the
Borrower pursuant to Section 2.08(e), the Borrower shall provide such Reserve
Report with an "as of" date as required by the Required Lenders as soon as
<PAGE> 72
possible, but in any event no later than 30 days following the receipt of such
request.
(c) With the delivery of each Reserve Report, the Borrower shall provide to
the Administrative Agent and the Lenders, a certificate from a Responsible
Officer certifying that, to the best of his knowledge and in all material
respects: (i) the information contained in the Reserve Report and any other
information delivered in connection therewith is true and correct, (ii) the
Borrower owns good and marketable title to the Oil and Gas Properties evaluated
in such Reserve Report and such Properties are free of all Liens except for
Liens permitted by Section 9.03, (iii) except as set forth on an exhibit to the
certificate, on a net basis there are no gas imbalances, take or pay or other
prepayments with respect to its Oil and Gas Properties evaluated in such Reserve
Report which would require the Borrower to deliver Hydrocarbons produced from
such Oil and Gas Properties at some future time without then or thereafter
receiving full payment therefor, (iv) none of its Oil and Gas Properties have
been sold since the date of the last Borrowing Base determination except as set
forth on an exhibit to the certificate, which certificate shall list all of its
Oil and Gas Properties sold and in such detail as reasonably required by the
Majority Lenders, (v) attached to the certificate is a list of its Oil and Gas
Properties added to and deleted from the immediately prior Reserve Report and a
list showing any change in working interest or net revenue interest in its Oil
and Gas Properties occurring and the reason for such change, (vi) attached to
the certificate is a list of all Persons disbursing proceeds to the Borrower
from its Oil and Gas Properties and (vii) except as set forth on a schedule
attached to the certificate all of the Oil and Gas Properties evaluated by such
Reserve Report are Mortgaged Property.
(d) As soon as available and in any event within 30 days after the end of
each month, the Borrower shall provide production reports and general and
administrative cost summaries by lease for its Oil and Gas Properties, which
reports shall include quantities or volume of production, revenue, realized
product prices, operating expenses, taxes, capital expenditures and lease
operating costs which have accrued to the Borrower's accounts in such period,
and such other information with respect thereto as the Administrative Agent may
require.
Section 8.08 Title Information.
(a) On or before the delivery to the Administrative Agent and the Lenders
of each Reserve Report required by Section 8.07(a), the Borrower will deliver
title information in form and substance acceptable to the Administrative Agent
covering enough of the Oil and Gas Properties evaluated by such Reserve Report
<PAGE> 73
that were not included in the immediately preceding Reserve Report, so that the
Administrative Agent shall have received together with title information
previously delivered to the Administrative Agent, satisfactory title information
on at least 85% of the value of the Oil and Gas Properties evaluated by such
Reserve Report.
(b) The Borrower shall cure any title defects or exceptions which are not
Excepted Liens raised by such information, or substitute acceptable Mortgaged
Properties with no title defects or exceptions except for Excepted Liens
covering Mortgaged Properties of an equivalent value, within 60 days after a
request by the Administrative Agent or the Lenders to cure such defects or
exceptions.
(c) If the Borrower is unable to cure any title defect requested by the
Administrative Agent or the Lenders to be cured within the 60-day period or the
Borrower does not comply with the requirements to provide acceptable title
information covering 85% of the value of the Oil and Gas Properties evaluated in
the most recent Reserve Report, such default shall not be a Default or an Event
of Default, but instead the Administrative Agent and the Lenders shall have the
right to exercise the following remedy in their sole discretion from time to
time, and any failure to so exercise this remedy at any time shall not be a
waiver as to future exercise of the remedy by the Administrative Agent or the
Lenders. To the extent that the Administrative Agent or the Lenders are not
satisfied with title to any Mortgaged Property after the time period in Section
8.08(b) has elapsed, such unacceptable Mortgaged Property shall not count
towards the 85% requirement, and the Administrative Agent may send a notice to
the Borrower and the Lenders that the then outstanding Borrowing Base shall be
reduced by an amount as determined by all of the Lenders to cause the Borrower
to be in compliance with the requirement to provide acceptable title information
on 85% of the value of the Oil and Gas Properties. This new Borrowing Base shall
become effective immediately after receipt of such notice.
Section 8.09 Additional Collateral.
(a) If, during any 12-month period, the Borrower or any of its Subsidiaries
shall acquire any additional Oil and Gas Properties or engage in successful
drilling activities which result in the recharacterization of acreage or
reservoirs as "proved reserves" (as defined in the Definitions for Oil and Gas
reserves promulgated by the Society of Petroleum Engineers), which in any such
case, individually or in the aggregate have a net present value in excess of
$1,000,000, the Borrower will, or will cause such Subsidiary to, grant to the
Administrative Agent as security for the Indebtedness a first-priority Lien
interest (subject only to Excepted Liens) on the Borrower's or such Subsidiary's
interest in any Oil and Gas Properties not already
<PAGE> 74
subject to a Lien of the Security Instruments, which Lien will be created and
perfected by and in accordance with the provisions of deeds of trust, security
agreements and financing statements, or other Security Instruments, all in form
and substance satisfactory to the Administrative Agent in its sole discretion
and in sufficient executed (and acknowledged where necessary or appropriate)
counterparts for recording purposes.
(b) In connection with each scheduled redetermination of the Borrowing Base
and at any other time reasonably requested in writing by the Administrative
Agent, the Borrower shall review the Reserve Report and the list of current
Mortgaged Properties to ascertain whether the Mortgaged Properties represent at
least 85% of the total value of the Oil and Gas Properties evaluated in the most
recently completed Reserve Report after giving effect to exploration and
production activities, acquisitions, dispositions and production. In the event
that the Mortgaged Properties do not represent at least 85% of such total value,
then the Borrower shall, and shall cause its Subsidiaries to, grant to the
Administrative Agent as security for the Indebtedness a first-priority Lien
interest (subject only to Excepted Liens) on additional Oil and Gas Properties
not already subject to a Lien of the Security Instruments such that affecting
giving effect thereto, the Mortgaged Properties will represent at least 85% of
such value. All such Liens will be created and perfected by and in accordance
with the provisions of deeds of trust, security agreements and financing
statements, or other Security Instruments, all in form and substance
satisfactory to the Administrative Agent in its sole discretion and in
sufficient executed (and acknowledged where necessary or appropriate)
counterparts for recording purposes.
(c) Concurrently with the granting of the Lien or other action referred to
in Section 8.07(a) or (b) above, the Borrower will, or will cause such
Subsidiary to, provide to the Administrative Agent title information in form and
substance satisfactory to the Administrative Agent in its sole discretion with
respect to the Borrower's or such Subsidiary's interests in such Oil and Gas
Properties.
Section 8.10 ERISA Information and Compliance. The Borrower will promptly
furnish and will cause the Subsidiaries and any ERISA Affiliate to promptly
furnish to the Administrative Agent with sufficient copies to the Lenders (i)
promptly after the filing thereof with the United States Secretary of Labor, the
Internal Revenue Service or the PBGC, copies of each annual and other report
with respect to each Plan or any trust created thereunder, (ii) immediately upon
becoming aware of the occurrence of any ERISA Event or of any "prohibited
transaction," as described in section 406 of ERISA or in section 4975 of the
Code, in connection with any Plan or any trust
<PAGE> 75
created thereunder, a written notice signed by a Responsible Officer specifying
the nature thereof, what action the Borrower, the Subsidiary or the ERISA
Affiliate is taking or proposes to take with respect thereto, and, when known,
any action taken or proposed by the Internal Revenue Service, the Department of
Labor or the PBGC with respect thereto, and (iii) immediately upon receipt
thereof, copies of any notice of the PBGC's intention to terminate or to have a
trustee appointed to administer any Plan. With respect to each Plan (other than
a Multiemployer Plan), the Borrower will, and will cause each Subsidiary and
ERISA Affiliate to, (i) satisfy in full and in a timely manner, without
incurring any late payment or underpayment charge or penalty and without giving
rise to any lien, all of the contribution and funding requirements of section
412 of the Code (determined without regard to subsections (d), (e), (f) and (k)
thereof) and of section 302 of ERISA (determined without regard to sections 303,
304 and 306 of ERISA), and (ii) pay, or cause to be paid, to the PBGC in a
timely manner, without incurring any late payment or underpayment charge or
penalty, all premiums required pursuant to sections 4006 and 4007 of ERISA.
Section 8.11 Hedging Agreements. The Borrower shall, within 15 days
following the Closing Date, have purchased one or more commodity price floors or
collars with (a) with one or more counterparties whose long term senior debt
rating is A/A2 or higher, (b) a floor strike price of not less than $21 per
barrel, (c) have aggregate notional volumes of not less than 75% of the
projected production from proved, developing, producing Oil and Gas Properties
[as evidenced by the Initial Reserve Report] for each year during the period
commencing with the date of purchase to December 31, 2001. The Borrower shall
furnish the Administrative Agent with copies of any transaction statements
relating to such purchases and shall neither sell, assign or terminate any such
Hedging Agreements nor sell any Hedging Agreements which would have the effect
of canceling its positions under such Hedging Agreements required hereby.
Section 8.12 Approved Securities. Within [60] days after the Closing Date,
the Borrower will make the appropriate filings with the any exchange on which
shares of its common stock are listed and trading and the SEC so as to be able
to perform its obligations under the Approved Securities Purchase Documents,
cause each such filing to become effective, and maintain its effectiveness for
so long as necessary to ensure its ability to satisfy its obligations hereunder
and the Approved Securities Purchase Documents.
<PAGE> 76
ARTICLE IX
NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of the Aggregate
Commitments are in effect and until payment in full of Loans hereunder, all
interest thereon and all other amounts payable by the Borrower hereunder,
without the prior written consent of the Majority Lenders:
Section 9.01 Financial Covenants.
(a) Interest Coverage Ratio. The Borrower will not, as of the last day of
any fiscal quarter, permit its ratio of EBITDAX for the period of four fiscal
quarters then ending to Interest Expense for such period be less than [2.5] to
1.0.
(b) Ratio of Total Debt to EBITDAX. The Borrower will not, as of any date
of determination, permit its ratio of Total Debt as of such date of
determination to EBITDAX for the four fiscal quarters ending on the last day of
the fiscal quarter immediately preceding the date of determination for which
financial statements are available to be greater than [3.5] to 1.0.
(c) Current Ratio. The Borrower will not permit at any time its ratio of
(i) consolidated current assets to (ii) consolidated current liabilities
(excluding current maturities of the Notes) to be less than 1.0 to 1.0.
Section 9.02 Debt. Neither the Borrower nor any Subsidiary will incur,
create, assume or suffer to exist any Debt, except:
(a) the Notes or other Indebtedness arising under the Loan Documents or any
guaranty of or suretyship arrangement for the Notes or other Indebtedness
arising under the Loan Documents;
(b) Debt of the Borrower existing on the Closing Date that is reflected in
the Financial Statements or is disclosed in Schedule 9.02, and any renewals or
extensions (but not increases) thereof;
(c) accounts payable (for the deferred purchase price of Property or
services) from time to time incurred in the ordinary course of business which,
if greater than ninety (90) days past the invoice or billing date, are being
contested in good faith by appropriate proceedings if reserves adequate under
GAAP shall have been established therefor;
<PAGE> 77
(d) Debt under Capital Leases (as required to be reported on the financial
statements of the Borrower pursuant to GAAP) not to exceed $_________________;
(e) Debt associated with bonds or surety obligations required by
Governmental Requirements in connection with the operation of the Oil and Gas
Properties;
(f) Debt in connection with (i) the $50,000,000 Cumulative Preferred Stock,
Series B and (ii) the Approved Securities, including in each case any increases
in the amount thereof as the result of the accrual of unpaid dividends;
(g) intercompany Debt between the Borrower and any Subsidiary; provided
that such Debt is subordinated to the Indebtedness on terms reasonably
satisfactory to the Administrative Agent; and
(h) Other Debt not to exceed $________ in the aggregate at any one time
outstanding.
Section 9.03 Liens. Neither the Borrower nor any Subsidiary will create,
incur, assume or permit to exist any Lien on any of its Properties (now owned or
hereafter acquired), except:
(a) Liens securing the payment of any Indebtedness;
(b) Excepted Liens;
(c) Liens securing leases allowed under Section 9.02(d) but only on the
Property under lease;
(d) Liens disclosed on Schedule 9.03; and
(e) Liens on cash or securities having an aggregate value of not in excess
of $_________ securing Hedging Agreements permitted by Section 9.20.
Section 9.04 Dividends, Distributions and Redemptions; Repayment of Term
Loans.
(a) Dividends, etc. The Borrower will not declare or pay any dividend,
purchase, redeem or otherwise acquire for value any of its common or preferred
stock now or hereafter outstanding, return any capital to its stockholders or
make any distribution of its assets to its stockholders, provided that (i) the
Borrower may declare and pay dividends in either shares of its common or
preferred stock, and (ii) the after the repayment in full of all Term Loans and
all accrued interest thereon, cash dividends on the Borrower's $50,000,000
Cumulative Redeemable Preferred Stock,
<PAGE> 78
Series B and the Borrower's $45,000,000 12% Redeemable Preferred Stock, Series C
may be paid if (A) pro forma Borrowing Base Utilization Percentage is less than
or equal to 80% and (b) no Default or Event of Default has occurred and is
continuing.
(b) Repayment of Term Loans. The Borrower will not, prior to the Revolving
Credit Termination Date, repay or prepay the Term Loans except that the Borrower
may: (i) prepay Term Loans on a pro rata basis with the Net Cash Proceeds of an
Equity Offering, (ii) prepay the Tranche A Term Loans the with the cash proceeds
of the Equity Undertakings, (iii) convert the Tranche B Term Loans into Units,
(iv) prepay the Term Loans with Excess Cash Proceeds and (v) after completion of
the September 15, 2000 Borrowing Base redetermination, repay or prepay the Term
Loans if (A) no Default or Event of Default has occurred and is continuing and
(B) pro forma Borrowing Base Utilization Percentage is less than or equal to
80%.
Section 9.05 Investments, Loans and Advances. Neither the Borrower nor any
Subsidiary will make or permit to remain outstanding any loans or advances to or
investments in any Person, except that the foregoing restriction shall not apply
to:
(a) investments, loans or advances reflected in the Financial Statements or
which are disclosed to the Lenders in Schedule 9.05;
(b) accounts receivable arising in the ordinary course of business;
(c) direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof, in each case
maturing within one year from the date of creation thereof;
(d) commercial paper maturing within one year from the date of creation
thereof rated in the highest grade by Standard & Poors Ratings Service or
Moody's Investors Service, Inc.;
(e) deposits maturing within one year from the date of creation thereof
with, including certificates of deposit issued by, any Lender or any office
located in the United States of any other bank or trust company which is
organized under the laws of the United States or any state thereof, has capital,
surplus and undivided profits aggregating at least $100,000,000 (as of the date
of such Lender's or bank or trust company's most recent financial reports) and
has a short term deposit rating of no lower than A2 or P2, as such rating is set
forth from time to time, by Standard & Poors Ratings Services or Moody's
Investors Service, Inc., respectively;
<PAGE> 79
(f) deposits in money market funds investing exclusively in investments
described in Section 9.05(c), 9.05(d) or 9.05(e);
(g) investments, loans or advances (i) made by the Borrower in or to the
Guarantors or any by any Guarantor in the Borrower or any other Guarantor, and
(ii) made by the Borrower or any Guarantor in any other Subsidiaries in an
aggregate amount at any one time outstanding not to exceed $_____________;
(h) Investments under Hedging Agreements to the extent permitted by Section
9.20;
(i) investments by the Borrower or any Subsidiary in direct ownership
interests in additional Oil and Gas Properties and gas gathering systems related
thereto; and
(j) other investments, loans or advances not to exceed $______________ in
the aggregate at any time.
Section 9.06 Sales and Leasebacks. Neither the Borrower nor any Subsidiary
will enter into any arrangement, directly or indirectly, with any Person whereby
the Borrower or any Subsidiary shall sell or transfer any of its Property,
whether now owned or hereafter acquired, and whereby the Borrower or any
Subsidiary shall then or thereafter rent or lease as lessee such Property or any
part thereof or other Property which the Borrower or any Subsidiary intends to
use for substantially the same purpose or purposes as the Property sold or
transferred.
Section 9.07 Nature of Business. Neither the Borrower nor any Subsidiary
will allow any material change to be made in the character of its business as an
independent oil and gas exploration and production company.
Section 9.08 Limitation on Leases. Neither the Borrower nor any Subsidiary
will create, incur, assume or suffer to exist any obligation for the payment of
rent or hire of Property of any kind whatsoever (real or personal including
Capital Leases but excluding leases of Hydrocarbon Interests), under leases or
lease agreements which would cause the aggregate amount of all payments made by
the Borrower and the Subsidiaries pursuant to all such leases or lease
agreements, including any residual payments at the end of any lease, to exceed
$________________ in any period of twelve consecutive calendar months during the
life of such leases.
Section 9.09 Proceeds of Notes. The Borrower will not permit the proceeds
of the Notes to be used for any purpose other than those permitted by Section
7.07; provided that in no event shall the proceeds of the Loans be used to
redeem, purchase or retire either the Borrower's $50,000,000 Cumulative
Redeemable
<PAGE> 80
Preferred Stock, Series B or the Borrower's $45,000,000 12% Cumulative
Redeemable Preferred Stock, Series C; and provided further that in no event
shall the proceeds of the Revolving Credit Loans be used to repay, prepay,
purchase or retire the Term Loans, except to the extent permitted by Section
9.04(b). Neither the Borrower nor any Person acting on behalf of the Borrower
has taken or will take any action which might cause any of the Loan Documents to
violate Regulation T, U or X or any other regulation of the Board of Governors
of the Federal Reserve System or to violate Section 7 of the Securities Exchange
Act of 1934 or any rule or regulation thereunder, in each case as now in effect
or as the same may hereinafter be in effect.
Section 9.10 ERISA Compliance. The Borrower will not at any time:
(a) Engage in, or permit any Subsidiary or ERISA Affiliate to engage in,
any transaction in connection with which the Borrower, any Subsidiary or any
ERISA Affiliate could be subjected to either a civil penalty assessed pursuant
to section 502(c), (i) or (l) of ERISA or a tax imposed by Chapter 43 of
Subtitle D of the Code;
(b) Terminate, or permit any Subsidiary or ERISA Affiliate to terminate,
any Plan in a manner, or take any other action with respect to any Plan, which
could result in any liability to the Borrower, any Subsidiary or any ERISA
Affiliate to the PBGC;
(c) Fail to make, or permit any Subsidiary or ERISA Affiliate to fail to
make, full payment when due of all amounts which, under the provisions of any
Plan, agreement relating thereto or applicable law, the Borrower, a Subsidiary
or any ERISA Affiliate is required to pay as contributions thereto;
(d) Permit to exist, or allow any Subsidiary or ERISA Affiliate to permit
to exist, any accumulated funding deficiency within the meaning of Section 302
of ERISA or section 412 of the Code, whether or not waived, with respect to any
Plan;
(e) Permit, or allow any Subsidiary or ERISA Affiliate to permit, the
actuarial present value of the benefit liabilities under any Plan maintained by
the Borrower, any Subsidiary or any ERISA Affiliate which is regulated under
Title IV of ERISA to exceed the current value of the assets (computed on a plan
termination basis in accordance with Title IV of ERISA) of such Plan allocable
to such benefit liabilities. The term "actuarial present value of the benefit
liabilities" shall have the meaning specified in section 4041 of ERISA;
<PAGE> 81
(f) Contribute to or assume an obligation to contribute to, or permit any
Subsidiary or ERISA Affiliate to contribute to or assume an obligation to
contribute to, any Multiemployer Plan;
(g) Acquire, or permit any Subsidiary or ERISA Affiliate to acquire, an
interest in any Person that causes such Person to become an ERISA Affiliate with
respect to the Borrower, any Subsidiary or any ERISA Affiliate if such Person
sponsors, maintains or contributes to, or at any time in the six-year period
preceding such acquisition has sponsored, maintained, or contributed to, (1) any
Multiemployer Plan, or (2) any other Plan that is subject to Title IV of ERISA
under which the actuarial present value of the benefit liabilities under such
Plan exceeds the current value of the assets (computed on a plan termination
basis in accordance with Title IV of ERISA) of such Plan allocable to such
benefit liabilities;
(h) Incur, or permit any Subsidiary or ERISA Affiliate to incur, a
liability to or on account of a Plan under sections 515, 4062, 4063, 4064, 4201
or 4204 of ERISA;
(i) Contribute to or assume an obligation to contribute to, or permit any
Subsidiary or ERISA Affiliate to contribute to or assume an obligation to
contribute to, any employee welfare benefit plan, as defined in section 3(1) of
ERISA, including, without limitation, any such plan maintained to provide
benefits to former employees of such entities, that may not be terminated by
such entities in their sole discretion at any time without any material
liability; or
(j) Amend or permit any Subsidiary or ERISA Affiliate to amend, a Plan
resulting in an increase in current liability such that the Borrower, any
Subsidiary or any ERISA Affiliate is required to provide security to such Plan
under section 401(a)(29) of the Code.
Section 9.11 Sale or Discount of Receivables. Neither the Borrower nor any
Subsidiary will discount or sell (with or without recourse) any of its notes
receivable or accounts receivable.
Section 9.12 Mergers, Etc. Neither the Borrower nor any Subsidiary will
merge into or with or consolidate with any other Person, or sell, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its Property or assets to any other Person; provided
that (i) the Borrower may merge or consolidate with any of its Wholly-Owned
Subsidiaries so long as the Borrower is the surviving Person, and (ii) any
Wholly-Owned Subsidiary of the Borrower may merge or consolidate with any other
Wholly-Owned Subsidiary.
<PAGE> 82
Section 9.13 Sale of Oil and Gas Properties. The Borrower will not, and
will not permit any Subsidiary to, sell, assign, farm-out, convey or otherwise
transfer any Oil and Gas Property or any interest in any Oil and Gas Property
except for (i) the sale of Hydrocarbons in the ordinary course of business; (ii)
farmouts of undeveloped acreage and assignments in connection with such
farmouts; (iii) the sale or transfer of equipment that is no longer necessary
for the business of the Borrower or such Subsidiary or is replaced by equipment
of at least comparable value and use; and (iv) sales or other dispositions of
Oil and Gas Properties; provided that (A) the aggregate amount of all such sales
or other dispositions under this clause (iv) shall not exceed $50,000,000; and
(B) sales or other dispositions during any period between two successive
Scheduled Redetermination Dates exceeding $5,000,000, individually or in the
aggregate, shall result in an automatic adjustment to the Borrowing Base in an
amount equal to the value, if any, assigned such Property or asset in the most
recently delivered Reserve Report.
Section 9.14 Environmental Matters. Neither the Borrower nor any
Subsidiary will cause or permit any of its Property to be in violation of, or do
anything or permit anything to be done which will subject any such Property to
any remedial obligations under any Environmental Laws, assuming disclosure to
the applicable Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to such Property where such violations or
remedial obligations could reasonably be expected to have a Material Adverse
Effect.
Section 9.15 Transactions with Affiliates. Neither the Borrower nor any
Subsidiary will enter into any transaction, including, without limitation, any
purchase, sale, lease or exchange of Property or the rendering of any service,
with any Affiliate unless such transactions are otherwise permitted under this
Agreement, are in the ordinary course of its business and are upon fair and
reasonable terms no less favorable to it than it would obtain in a comparable
arm's length transaction with a Person not an Affiliate.
Section 9.16 Subsidiaries. The Borrower shall not, and shall not permit any
Subsidiary to, create or acquire any additional Subsidiaries which own assets
having a value in excess of $250,000 unless such Subsidiary guarantees the
Indebtedness pursuant to the Guaranty Agreement. In connection with such
guaranty, the Borrower shall, or shall cause such Subsidiary to, (a) execute and
deliver a supplement to the Guaranty Agreement executed by such new Subsidiary,
(b) execute and deliver such supplemental or additional Security Instruments as
are necessary to convey a Lien on such Subsidiary's Oil and Gas Properties so as
to ensure pro forma compliance with Section 8.09(b) as of the date of creation
or acquisition of such Subsidiary, (c) pledge
<PAGE> 83
all of the capital stock of such new Subsidiary (including, without limitation,
delivery of original stock certificates evidencing the capital stock of such new
Subsidiary, together with an appropriate undated stock power for each
certificate duly executed in blank by the registered owner thereof), and (d)
execute and deliver such other additional closing documents and certificates as
shall reasonably be requested by the Administrative Agent.
Section 9.17 Negative Pledge Agreements. Neither the Borrower nor any
Subsidiary will create, incur, assume or suffer to exist any contract, agreement
or understanding (other than this Agreement and the Security Instruments) which
in any way prohibits or restricts the granting, conveying, creation or
imposition of any Lien on any of its Property in favor of the Administrative
Agent and the Lenders or restricts any Subsidiary from paying dividends to the
Borrower, or which requires the consent of or notice to other Persons in
connection therewith.
Section 9.18 Gas Imbalances, Take-or-Pay or Other Prepayments. The Borrower
will not allow gas imbalances, take-or-pay or other prepayments with respect to
the Oil and Gas Properties of the Borrower would require the Borrower to deliver
Hydrocarbons produced on Oil and Gas Properties at some future time without then
or thereafter receiving full payment therefor to exceed
_________________________ feet of gas in the aggregate on a net basis for the
Borrower.
Section 9.19 Accounts. Neither the Borrower nor any Subsidiary will
maintain checking, savings or deposit accounts with financial institutions other
than Chase.
Section 9.20 Hedging Agreements. The Borrower will not enter into any
Hedging Agreements with any Person other than (a) Hedging Agreements required
under Section 8.11, (b) Hedging Agreements in respect of commodities (i) with a
counterparty whose long term senior debt rating is A/A2 or higher and (ii) the
notional volumes for which (when aggregated with other Hedging Agreements then
in effect) do not exceed 80% of the projected production from proved,
developing, producing Oil and Gas Properties [as evidenced by the most current
Reserve Report] for the period during which such Hedging Agreement is in effect
and (c) Hedging Agreements in respect of interest rates (i) with a counterparty
whose long term senior debt rating is A/A2 or higher and (ii) the notional
amounts of which (when aggregated with other Hedging Agreements then in effect)
do not exceed ____% of principal amount of the Borrower's floating rate Debt in
respect of borrowed money.
Section 9.21 Organizational Documents; Issuance of Capital Stock. The
Borrower will not amend, modify or supplement is
<PAGE> 84
articles or certificate of incorporation, including the certificates of
designation of the $50,000,000 Cumulative Preferred Stock, Series B or the
Approved Securities, or its by-laws in any manner which would adversely affect
either the rights of holders of the Approved Securities or the ability of the
Escrow Agent to sell the Approved Securities as contemplated by the Approved
Securities Purchase Documents. The Borrower will not issue, sell or otherwise
dispose of any class or series of capital stock which is either (a) be senior in
right of payment or liquidation to the Approved Securities or (b) have a
scheduled maturity or redemption on or before June _, 2003.
Section 9.22 Acquisition Documents. The Borrower will not, and will not
permit any of its Subsidiaries to, amend, modify or supplement any of the
Acquisition Documents. [Enforcement]
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default. One or more of the following events shall
constitute an "Event of Default":
(a) the Borrower shall default in the payment or prepayment when due of any
principal of or interest on any Loan, or any reimbursement obligation for a
disbursement made under any Letter of Credit, or any fees or other amount
payable by it hereunder or under any Security Instrument and such default, other
than a default of a payment or prepayment of principal (which shall have no cure
period), shall continue unremedied for a period of three (3) Business Days;
(b) (i) the Borrower or any Subsidiary shall default in the payment when
due of any principal of or interest on any of its other Debt aggregating
$500,000 or more, or any event specified in any note, agreement, indenture or
other document evidencing or relating to any such Debt shall occur if the effect
of such event is to cause, or (with the giving of any notice or the lapse of
time or both) to permit the holder or holders of such Debt (or a trustee or
agent on behalf of such holder or holders) to cause, such Debt to become due
prior to its stated maturity or (ii) a default or early termination event shall
occur and be continuing under any Hedging Agreement between the Borrower or any
of its Subsidiaries and any Lender;
(c) any representation, warranty or certification made or deemed made
herein or in any Security Instrument by the Borrower or any Subsidiary, or any
certificate furnished to any Lender or the Administrative Agent pursuant to the
provisions hereof or any Security Instrument, shall prove to have been false or
misleading as of the time made or furnished in any material respect;
<PAGE> 85
(d) (i) the Borrower or any Subsidiary shall default in the performance of
any of its obligations under this Agreement other than under Article VIII or
(ii) the Borrower or any Subsidiary shall default in the performance of any of
its obligations under Article VIII or any Security Instrument (other than the
payment of amounts due which shall be governed by Section 10.01(a)) and such
default shall continue unremedied for a period of thirty (30) days after the
earlier to occur of (A) notice thereof to the Borrower by the Administrative
Agent or any Lender (through the Administrative Agent) or (B) the Borrower or
such Subsidiary otherwise becoming aware of such default;
(e) the Borrower or any Subsidiary shall admit in writing its inability to,
or be generally unable to, pay its debts as such debts become due;
(f) the Borrower shall (i) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a voluntary case
under the Federal Bankruptcy Code (as now or hereafter in effect), (iv) file a
petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up, liquidation or composition or
readjustment of debts, (v) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against it in an
involuntary case under the Federal Bankruptcy Code, or (vi) take any action for
the purpose of effecting any of the foregoing;
(g) a proceeding or case shall be commenced, without the application or
consent of the Borrower or any Subsidiary, in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution or
winding-up, or the composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of such
Person of all or any substantial part of its assets, or (iii) similar relief in
respect of such Person under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or decree
approving or ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of 60 days; or (iv) an order for relief
against such Person shall be entered in an involuntary case under the Federal
Bankruptcy Code;
(h) a judgment or judgments for the payment of money in excess of
$1,000,000 in the aggregate less any amount payable because of insurance shall
be rendered by a court against the Borrower or any Subsidiary and the same shall
not be discharged
<PAGE> 86
(or provision shall not be made for such discharge), or a stay of execution
thereof shall not be procured, within thirty (30) days from the date of entry
thereof and the Borrower or such Subsidiary shall not, within said period of
thirty (30) days, or such longer period during which execution of the same shall
have been stayed, appeal in good faith therefrom and cause the execution thereof
to be stayed during such appeal;
(i) the Security Instruments after delivery thereof shall for any reason,
except to the extent permitted by the terms thereof, cease to be in full force
and effect and valid, binding and enforceable in accordance with their terms, or
cease to create a valid and perfected Lien of the priority required thereby on
any of the collateral purported to be covered thereby, except to the extent
permitted by the terms of this Agreement, or the Borrower or any Subsidiary or
any of their Affiliates shall so state in writing;
(j) any Letter of Credit becomes the subject matter of any order, judgment,
injunction or any other such determination, or if the Borrower or any other
Person shall petition or apply for or obtain any order restricting payment by
the Administrative Agent under any Letter of Credit or extending the Lenders'
liability under any Letter of Credit beyond the expiration date stated therein
or otherwise agreed to by the Administrative Agent; or
(k) any Person or two or more Persons (other than the Equity Investors or
their controlling Persons thereof, in each case on the Closing Date) acting as a
group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934)
shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of
the SEC under the Securities Exchange Act of 1934) of [30]% or more of the
outstanding shares of voting stock of the Borrower; or individuals who, as of
the date hereof, constitute the Board of Directors of the Borrower (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board of Directors of the Borrower; provided, however, that any individual
becoming a director of the Borrower subsequent to the date hereof whose
election, or nomination for election by the Borrower's shareholders, was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board, shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Securities Exchange Act of 1934) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board of Directors of the Borrower; or, except as permitted in Section
9.12, the Borrower shall cease to directly
<PAGE> 87
or indirectly own 100% of each class of stock of each Subsidiary (except
directors' qualifying shares); or
(l) Tim J. Goff shall cease to serve as the Chief Executive Officer of the
Company.
Section 10.02 Remedies.
(a) In the case of an Event of Default other than one referred to in
Section 10.01 (e), (f) or (g), the Administrative Agent may or, upon request of
the Majority Revolving Credit Lenders, shall, by notice to the Borrower, cancel
the Revolving Credit Commitments and/or declare the principal amount then
outstanding of, and the accrued interest on, the Revolving Credit Loans, the
Term Loans and all other amounts payable by the Borrower hereunder and under the
Notes (including without limitation the payment of cash collateral to secure the
LC Exposure as provided in Section 2.10(b)) to be forthwith due and payable,
whereupon such amounts shall be immediately due and payable without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or other
formalities of any kind, all of which are hereby expressly waived by the
Borrower.
(b) In the case of the occurrence of an Event of Default referred to in
Section 10.01 (e), (f) or (g), the Revolving Credit Commitments shall be
automatically canceled and the principal amount then outstanding of, and the
accrued interest on, the Revolving Credit Loans, the Term Loans and all other
amounts payable by the Borrower hereunder and under the Notes (including without
limitation the payment of cash collateral to secure the LC Exposure as provided
in Section 2.10(b)) shall become automatically immediately due and payable
without presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other formalities of any kind, all of which are hereby expressly
waived by the Borrower.
(c) Notwithstanding the forgoing, but subject to the terms of Section
4.08(c), in the case of an Event of Default other than one referred to in
Section 10.01 (e), (f) or (g),
(i) the Administrative Agent may or, upon request of the Majority Tranche A
Term Loan Lenders, shall, by notice to the Borrower, declare the principal
amount then outstanding of, and the accrued interest on, the Tranche A Term
Loans and all other amounts payable by the Borrower under the Tranche A
Term Loan Notes to be forthwith due and payable, whereupon such amounts
shall be immediately due and payable without presentment, demand, protest,
notice of intent to accelerate, notice of acceleration or other formalities
of any kind, all of which are hereby expressly waived by the Borrower; and
<PAGE> 88
(ii) the Administrative Agent may or, upon request of the Tranche B Term
Loan Lender, shall, by notice to the Borrower, declare the principal amount
then outstanding of, and the accrued interest on, the Tranche B Term Loans
and all other amounts payable by the Borrower under the Tranche B Term Loan
Notes to be forthwith due and payable, whereupon such amounts shall be
immediately due and payable without presentment, demand, protest, notice of
intent to accelerate, notice of acceleration or other formalities of any
kind, all of which are hereby expressly waived by the Borrower.
(iii) In the event of an acceleration of either the Tranche A Tem Loan
Notes or the Tranche B Term Loan Notes, all Term Notes of the other tranche
shall also automatically be accelerated.
(d) All proceeds received after maturity of the Notes, whether by
acceleration or otherwise shall be applied in the manner set forth in Section
4.08.
ARTICLE XI
THE AGENTS
Section 11.01 Appointment, Powers and Immunities. Each Lender hereby
irrevocably appoints and authorizes Chase to act as its administrative agent
hereunder and under the Security Instruments with such powers as are
specifically delegated to the Administrative Agent by the terms of this
Agreement and the Security Instruments, together with such other powers as are
reasonably incidental thereto. Each Lender hereby irrevocably appoints BTC to be
its syndication agent hereunder. Neither the Administrative Agent, the
Syndication Agent nor the Arrangers (which term as used in this sentence and in
Section 11.05 and the first sentence of Section 11.06 shall include reference to
each of their Affiliates and its and its Affiliates' officers, directors,
employees, attorneys, accountants, experts and agents): (i) shall have any
duties or responsibilities except those expressly set forth in the Loan
Documents, and shall not by reason of the Loan Documents be a trustee or
fiduciary for any Lender; (ii) makes any representation or warranty to any
Lender and shall not be responsible to the Lenders for any recitals, statements,
representations or warranties contained in this Agreement, or in any certificate
or other document referred to or provided for herein, or received by any of them
under, this Agreement, or for the value, validity, effectiveness, genuineness,
execution, effectiveness, legality, enforceability or sufficiency of this
Agreement, any Note or any other document referred to or provided for herein or
for any failure by the Borrower or any other Person (other than itself) to
perform any
<PAGE> 89
of its obligations hereunder or thereunder or for the existence, value,
perfection or priority of any collateral security or the financial or other
condition of the Borrower, the Subsidiaries or any other obligor or guarantor;
(iii) except pursuant to Section 11.07, shall be required to initiate or conduct
any litigation or collection proceedings hereunder; and (iv) shall be
responsible for any action taken or omitted to be taken by it hereunder or under
any other document or instrument referred to or provided for herein or in
connection herewith including its own ordinary negligence, except for its own
gross negligence or willful misconduct. The Administrative Agent may employ
agents, accountants, attorneys and experts and shall not be responsible for the
negligence or misconduct of any such agents, accountants, attorneys or experts
selected by it in good faith or any action taken or omitted to be taken in good
faith by it in accordance with the advice of such agents, accountants, attorneys
or experts. The Administrative Agent may deem and treat the payee of any Note as
the holder thereof for all purposes hereof unless and until a written notice of
the assignment or transfer thereof permitted hereunder shall have been filed
with the Administrative Agent. The Administrative Agent is authorized to release
any collateral that is permitted to be sold or released pursuant to the terms of
the Loan Documents.
Section 11.02 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telex, telecopier, telegram or cable)
believed by it to be genuine and correct and to have been signed or sent by or
on behalf of the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants and other experts selected by the
Administrative Agent.
Section 11.03 Defaults. The Administrative Agent shall not be deemed to
have knowledge of the occurrence of a Default (other than the non-payment of
principal of or interest on Loans or of fees or failure to reimburse for Letter
of Credit drawings) unless the Administrative Agent has received notice from a
Lender or the Borrower specifying such Default and stating that such notice is a
"Notice of Default." In the event that the Administrative Agent receives such a
notice of the occurrence of a Default, the Administrative Agent shall give
prompt notice thereof to the Lenders. In the event of a payment Default, the
Administrative Agent shall give each Lender prompt notice of each such payment
Default.
Section 11.04 Rights as a Lender. With respect to its Commitments and the
Loans made by it and its participation in the issuance of Letters of Credit,
Chase (and any successor acting as Administrative Agent) and BTC, in each's
respective capacity as a Lender hereunder shall have the same rights and powers
hereunder
<PAGE> 90
as any other Lender and may exercise the same as though it were not acting as an
Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include each Agent in its individual capacity. Chase and BTC (and any
successor acting as an Agent) and their respective Affiliates may (without
having to account therefor to any Lender) accept deposits from, lend money to
and generally engage in any kind of banking, trust or other business with the
Borrower (and any of its Affiliates) as if it were not acting as an Agent, and
Chase and BTC and their respective Affiliates may accept fees and other
consideration from the Borrower for services in connection with this Agreement
or otherwise without having to account for the same to the Lenders.
Section 11.05 INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY THE AGENTS,
THE ARRANGERS AND THE ISSUING BANK RATABLY FOR THE INDEMNITY MATTERS AS
DESCRIBED IN SECTION 12.03 TO THE EXTENT NOT INDEMNIFIED OR REIMBURSED BY THE
BORROWER UNDER SECTION 12.03, BUT WITHOUT LIMITING THE OBLIGATIONS OF THE
BORROWER UNDER SAID SECTION 12.03 AND FOR ANY AND ALL OTHER LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES OR DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER WHICH MAY BE IMPOSED
ON, INCURRED BY OR ASSERTED AGAINST THE AGENTS, THE ARRANGERS OR ANY ISSUING
BANK IN ANY WAY RELATING TO OR ARISING OUT OF: (I) THIS AGREEMENT, THE LOAN
DOCUMENTS OR ANY OTHER DOCUMENTS CONTEMPLATED BY OR REFERRED TO HEREIN OR THE
TRANSACTIONS CONTEMPLATED HEREBY, BUT EXCLUDING, UNLESS A DEFAULT HAS OCCURRED
AND IS CONTINUING, NORMAL ADMINISTRATIVE COSTS AND EXPENSES INCIDENT TO THE
PERFORMANCE OF THEIR AGENCY DUTIES HEREUNDER OR (II) THE ENFORCEMENT OF ANY OF
THE TERMS OF THIS AGREEMENT, ANY LOAN DOCUMENT OR OF ANY SUCH OTHER DOCUMENTS;
WHETHER OR NOT ANY OF THE FOREGOING SPECIFIED IN THIS SECTION 11.05 ARISES FROM
THE SOLE OR CONCURRENT NEGLIGENCE OF THE AGENTS, THE ARRANGERS OR THE ISSUING
BANK, PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY OF THE FOREGOING TO THE
EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PERSON
SEEKING SUCH INDEMNIFICATION.
Section 11.06 Non-Reliance on the Agents, Arrangers and other Lenders.
Each Lender acknowledges and agrees that it has, independently and without
reliance on the Agents, the Arrangers or any other Lender, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis of the Borrower and its Subsidiaries and its own decision to enter into
this Agreement, and that each Lender will, independently and without reliance
upon the Agents, the Arrangers or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under this Agreement.
The Agents and the Arrangers shall not be required to keep themselves informed
as to the performance or observance by the Borrower or any of its Subsidiaries
of this Agreement, the Notes, the Security Instruments or any other document
referred to or provided for herein or to inspect the properties or books of the
Borrower or its Subsidiaries. Except for notices, reports
<PAGE> 91
and other documents and information expressly required to be furnished to the
Lenders by the Administrative Agent hereunder, no Agent or Arranger shall have
any duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition or business of the
Borrower (or any of its Affiliates) which may come into the possession of such
Agent or any of its Affiliates. In this regard, each Lender acknowledges that
Vinson & Elkins L.L.P. is acting in this transaction as special counsel to the
Administrative Agent only, except to the extent otherwise expressly stated in
any legal opinion or any Loan Document. Each other party hereto will consult
with its own legal counsel to the extent that it deems necessary in connection
with the Loan Documents and the matters contemplated therein.
Section 11.07 Action by Administrative Agent. Except for action or other
matters expressly required of the Administrative Agent hereunder, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder unless it shall (i) receive written instructions from
the Majority Lenders, the Majority Tranche A Term Loan Lenders, the Majority
Revolving Credit Lenders or the Required Lenders, as applicable, (or all of the
Lenders as expressly required by Section 12.04) specifying the action to be
taken, and (ii) be indemnified to its satisfaction by the Lenders against any
and all liability and expenses which may be incurred by it by reason of taking
or continuing to take any such action. The instructions as aforesaid and any
action taken or failure to act pursuant thereto by the Administrative Agent
shall be binding on all of the Lenders. If a Default has occurred and is
continuing, the Administrative Agent shall take such action with respect to such
Default as shall be directed by the requisite Lenders in the written
instructions (with indemnities) described in this Section 11.07, provided that,
unless and until the Administrative Agent shall have received such directions,
the Administrative Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default as it shall
deem advisable in the best interests of the Lenders of each Class. In no event,
however, shall the Administrative Agent be required to take any action which
exposes the Administrative Agent to personal liability or which is contrary to
this Agreement, the Security Instruments or applicable law.
Section 11.08 Resignation or Removal of Agent. Subject to the appointment
and acceptance of a successor Agent as provided below, any Agent may resign at
any time by giving notice thereof to the Lenders and the Borrower, and any Agent
may be removed at any time with or without cause by the Majority Lenders. Upon
any such resignation or removal, the Majority Lenders shall have the right to
appoint a successor Agent. If no successor Agent shall have been so appointed by
the Majority Lenders and shall have
<PAGE> 92
accepted such appointment within thirty (30) days after the retiring Agent's
giving of notice of resignation or the Majority Lenders' removal of the retiring
Agent, then the retiring Agent may, on behalf of the Lenders, appoint its
successor. Upon the acceptance of such appointment hereunder by a successor,
such successor shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent, and the retiring Agent
shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation or removal hereunder as Administrative Agent, the
provisions of this Article XI and Section 12.03 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as such Agent.
Section 11.09 Syndication Agent and Arrangers. Neither the Syndication
Agent nor the Arrangers shall any duties, responsibilities or liabilities under
this Agreement and the Loan Documents.
ARTICLE XII
MISCELLANEOUS
Section 12.01 Waiver. No failure on the part of the Administrative Agent or
any Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under any of the Loan Documents shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under any of the Loan Documents preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
Section 12.02 Notices. All notices and other communications provided for
herein and in the other Loan Documents (including, without limitation, any
modifications of, or waivers or consents under, this Agreement or the other Loan
Documents) shall be given or made by telex, telecopy, courier or U.S. Mail or in
writing and telexed, telecopied, mailed or delivered to the intended recipient
at the "Address for Notices" specified below its name on the signature pages
hereof or in the Loan Documents or, as to any party, at such other address as
shall be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement or in the other Loan Documents, all such
communications shall be deemed to have been duly given when transmitted, if
transmitted before 1:00 p.m. local time on a Business Day (otherwise on the next
succeeding Business Day) by telex or telecopier and evidence or confirmation of
receipt is obtained, or personally delivered or, in the case of a mailed notice,
three (3) Business Days after the date
<PAGE> 93
deposited in the mails, postage prepaid, in each case given or addressed as
aforesaid.
Section 12.03 Payment of Expenses, Indemnities, etc. The Borrower agrees:
(a) whether or not the transactions hereby contemplated are consummated,
pay all reasonable expenses of the Administrative Agent in the administration
(both before and after the execution hereof and including advice of counsel as
to the rights and duties of the Administrative Agent and the Lenders with
respect thereto) of, and in connection with the negotiation, syndication,
investigation, preparation, execution and delivery of, recording or filing of,
preservation of rights under, enforcement of, and refinancing, renegotiation or
restructuring of, the Loan Documents and any amendment, waiver or consent
relating thereto (including, without limitation, travel, photocopy, mailing,
courier, telephone and other similar expenses of the Administrative Agent, the
cost of environmental audits, surveys and appraisals at reasonable intervals,
the reasonable fees and disbursements of counsel and other outside consultants
for the Administrative Agent and, in the case of enforcement, the reasonable
fees and disbursements of counsel for the Administrative Agent and any of the
Lenders); and promptly reimburse the Administrative Agent for all amounts
expended, advanced or incurred by the Administrative Agent or the Lenders to
satisfy any obligation of the Borrower under this Agreement or any Security
Instrument, including without limitation, all costs and expenses of foreclosure;
(b) TO INDEMNIFY THE AGENTS, THE ARRANGERS AND EACH LENDER AND EACH OF
THEIR AFFILIATES AND EACH OF THEIR OFFICERS, DIRECTORS, EMPLOYEES,
REPRESENTATIVES, AGENTS, ATTORNEYS, ACCOUNTANTS AND EXPERTS ("INDEMNIFIED
PARTIES") FROM, HOLD EACH OF THEM HARMLESS AGAINST AND PROMPTLY UPON DEMAND PAY
OR REIMBURSE EACH OF THEM FOR, THE INDEMNITY MATTERS WHICH MAY BE INCURRED BY OR
ASSERTED AGAINST OR INVOLVE ANY OF THEM (WHETHER OR NOT ANY OF THEM IS
DESIGNATED A PARTY THERETO) AS A RESULT OF, ARISING OUT OF OR IN ANY WAY RELATED
TO (I) ANY ACTUAL OR PROPOSED USE BY THE BORROWER OR ANY OF ITS SUBSIDIARIES OF
THE PROCEEDS OF ANY OF THE LOANS OR LETTERS OF CREDIT, (II) THE EXECUTION,
DELIVERY AND PERFORMANCE OF THE LOAN DOCUMENTS, (III) THE OPERATIONS OF THE
BUSINESS OF THE BORROWER AND THE SUBSIDIARIES, (IV) THE FAILURE OF THE BORROWER
OR ANY SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY SECURITY INSTRUMENT OR THIS
AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (V) ANY INACCURACY OF ANY
REPRESENTATION OR ANY BREACH OF ANY WARRANTY OF THE BORROWER OR ANY GUARANTOR
SET FORTH IN ANY OF THE LOAN DOCUMENTS, (VI) THE ISSUANCE, EXECUTION AND
DELIVERY OR TRANSFER OF OR PAYMENT OR FAILURE TO PAY UNDER ANY LETTER OF CREDIT,
(VII) THE PAYMENT OF A DRAWING UNDER ANY LETTER OF CREDIT NOTWITHSTANDING THE
NON-COMPLIANCE, NON-DELIVERY OR OTHER IMPROPER PRESENTATION OF THE MANUALLY
EXECUTED DRAFT(S) AND CERTIFICATION(S), (VIII) ANY ASSERTION THAT THE LENDERS
WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY
INSTRUMENTS OR (IX) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, INCLUDING, WITHOUT
LIMITATION, THE
<PAGE> 94
REASONABLE FEES AND DISBURSEMENTS OF COUNSEL AND ALL OTHER EXPENSES INCURRED IN
CONNECTION WITH INVESTIGATING, DEFENDING OR PREPARING TO DEFEND ANY SUCH ACTION,
SUIT, PROCEEDING (INCLUDING ANY INVESTIGATIONS, LITIGATION OR INQUIRIES) OR
CLAIM AND INCLUDING ALL INDEMNITY MATTERS ARISING BY REASON OF THE ORDINARY
NEGLIGENCE OF ANY INDEMNIFIED PARTY, BUT EXCLUDING ALL INDEMNITY MATTERS ARISING
SOLELY BY REASON OF CLAIMS BETWEEN THE LENDERS OR ANY LENDER AND THE
ADMINISTRATIVE AGENT OR A LENDER'S SHAREHOLDERS AGAINST THE ADMINISTRATIVE AGENT
OR LENDER OR BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART
OF THE INDEMNIFIED PARTY; AND
(c) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE INDEMNIFIED PARTY
FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST RECOVERY ACTIONS,
ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND LIABILITIES TO WHICH ANY SUCH
PERSON MAY BECOME SUBJECT (I) UNDER ANY ENVIRONMENTAL LAW APPLICABLE TO THE
BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES, INCLUDING WITHOUT
LIMITATION, THE TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON ANY OF THEIR
PROPERTIES, (II) AS A RESULT OF THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR
ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY
SUBSIDIARY, (III) DUE TO PAST OWNERSHIP BY THE BORROWER OR ANY SUBSIDIARY OF ANY
OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH
LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY,
(IV) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT OR DISPOSAL OF HAZARDOUS
SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR
ANY SUBSIDIARY, OR (V) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN
CONNECTION WITH THE LOAN DOCUMENTS, PROVIDED, HOWEVER, NO INDEMNITY SHALL BE
AFFORDED UNDER THIS SECTION 12.03(c) IN RESPECT OF ANY PROPERTY FOR ANY
OCCURRENCE ARISING FROM THE ACTS OR OMISSIONS OF THE ADMINISTRATIVE AGENT OR ANY
LENDER DURING THE PERIOD AFTER WHICH SUCH PERSON, ITS SUCCESSORS OR ASSIGNS
SHALL HAVE OBTAINED POSSESSION OF SUCH PROPERTY (WHETHER BY FORECLOSURE OR DEED
IN LIEU OF FORECLOSURE, AS MORTGAGEE-IN-POSSESSION OR OTHERWISE).
(d) No Indemnified Party may settle any claim to be indemnified without the
consent of the indemnitor, such consent not to be unreasonably withheld;
provided, that the indemnitor may not reasonably withhold consent to any
settlement that an Indemnified Party proposes, if the indemnitor does not have
the financial ability to pay all its obligations outstanding and asserted
against the indemnitor at that time, including the maximum potential claims
against the Indemnified Party to be indemnified pursuant to this Section 12.03.
(e) In the case of any indemnification hereunder, the Administrative Agent
or Lender, as appropriate shall give notice to the Borrower of any such claim or
demand being made against the Indemnified Party and the Borrower shall have the
non-exclusive right to join in the defense against any such claim or demand,
provided that if the Borrower provides a defense, the Indemnified Party shall
bear its own cost of defense unless there is a conflict between the Borrower and
such Indemnified Party.
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(f) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED PARTIES
NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER
WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN
OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT
IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE
INDEMNIFIED PARTIES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON
ANY ONE OR MORE OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN INDEMNIFIED
PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL CONTINUE BUT
SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED TO HAVE OCCURRED BY
REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE
INDEMNIFIED PARTY.
(g) The Borrower's obligations under this Section 12.03 shall survive any
termination of this Agreement and the payment of the Notes and shall continue
thereafter in full force and effect.
(h) The Borrower shall pay any amounts due under this Section 12.03 within
thirty (30) days of the receipt by the Borrower of notice of the amount due.
Section 12.04 Amendments, Etc. Any provision of this Agreement or any
Security Instrument may be amended, modified or waived with the Borrower's and
the Majority Lenders' prior written consent; provided that (i) no amendment,
modification or waiver which extends the Revolving Credit Termination Date or
the then scheduled maturity of the Term Loans, increases the Aggregate Maximum
Credit Amounts, modifies the Borrowing Base, forgives the principal amount of
any Indebtedness outstanding under this Agreement or any other Loan Document,
releases any Guarantor or releases all or substantially all of the collateral,
reduces the interest rate applicable to the Loans or the fees payable to the
Lenders generally, affects Section 2.03(a), Section 9.16, this Section 12.04 or
Section 12.06(a) or modifies the definitions of "Majority Lenders", "Majority
Revolving Credit Lenders", "Majority Tranche A Term Loan Lenders" or "Required
Lenders" shall be effective without consent of all Lenders; (ii) no amendment,
modification or waiver which increases the Maximum Credit Amount or the Term
Commitment of any Lender shall be effective without the consent of such Lender;
and (iii) no amendment, modification or waiver which modifies the rights, duties
or obligations of any Agent shall be effective without the consent of such
Agent.
Section 12.05 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
<PAGE> 96
Section 12.06 Assignments and Participations.
(a) The Borrower may not assign its rights or obligations hereunder or
under the Notes or any Letters of Credit without the prior consent of all of the
Lenders and the Administrative Agent.
(b) Any Lender may, upon the written consent of the Administrative Agent
and the Borrower (which consent will not be unreasonably withheld or delayed),
assign to one or more assignees all or a portion of its rights and obligations
under this Agreement pursuant to an Assignment Agreement substantially in the
form of Exhibit F (an "Assignment") provided, however, that (i) any such
assignment shall be in the amount of at least $5,000,000 or such lesser amount
to which the Borrower has consented, (ii) any such assignment need not be pro
rata among the Revolving Credit Commitment and Term Commitment of such assigning
Lender, (iii) in no event may the Tranche B Term Loan Lender assign any portion
of the Tranche B Term Loan Commitments, the Tranche B Term Loans or the Tranche
B Term Loan Notes held by it, and (iv) the assignee or assignor shall pay to the
Administrative Agent a processing and recordation fee of $3,500 for each
assignment. Any such assignment will become effective upon the execution and
delivery to the Administrative Agent of the Assignment and the consent of the
Administrative Agent. Promptly after receipt of an executed Assignment, the
Administrative Agent shall send to the Borrower a copy of such executed
Assignment. Upon receipt of such executed Assignment, the Borrower, will, at its
own expense, execute and deliver new Notes to the assignor and/or assignee, as
appropriate, in accordance with their respective interests as they appear. Upon
the effectiveness of any assignment pursuant to this Section 12.06(b), the
assignee will become a "Lender," if not already a "Lender," for all purposes of
this Agreement and the Security Instruments. The assignor shall be relieved of
its obligations hereunder to the extent of such assignment (and if the assigning
Lender no longer holds any rights or obligations under this Agreement, such
assigning Lender shall cease to be a "Lender" hereunder except that its rights
under Sections 4.06, 5.01, 5.05 and 12.03 shall not be affected). The
Administrative Agent will prepare on the last Business Day of each month during
which an assignment has become effective pursuant to this Section 12.06(b), a
new Annex I giving effect to all such assignments effected during such month,
and will promptly provide the same to the Borrower and each of the Lenders.
(c) Each Lender may transfer, grant or assign participations in all or any
part of such Lender's interests hereunder pursuant to this Section 12.06(c) to
any Person, provided that: (i) such Lender shall remain a "Lender" for all
purposes of this Agreement and the transferee of such participation shall not
constitute a "Lender" hereunder; and
<PAGE> 97
(ii) no participant under any such participation shall have rights to approve
any amendment to or waiver of any of the Loan Documents except to the extent
such amendment or waiver would (x) forgive any principal owing on any
Indebtedness or extend the final maturity of the Loans, (y) reduce the interest
rate or fees applicable to any of the Revolving Credit Commitments or the Loans
(of either Class) or Letters of Credit in which such participant is
participating, or postpone the payment of any thereof, or (z) release any
guarantor of the Indebtedness or release all or substantially all of the
collateral (except as provided in the Loan Documents) supporting any of the
Aggregate Commitments or Loans or Letters of Credit in which such participant is
participating. In the case of any such participation, the participant shall not
have any rights under this Agreement or any of the Security Instruments (the
participant's rights against the granting Lender in respect of such
participation to be those set forth in the agreement with such Lender creating
such participation), and all amounts payable by the Borrower hereunder shall be
determined as if such Lender had not sold such participation, provided that such
participant shall be entitled to receive additional amounts under Article V on
the same basis as if it were a Lender and be indemnified under Section 12.03 as
if it were a Lender. In addition, each agreement creating any participation must
include an agreement by the participant to be bound by the provisions of Section
12.15.
(d) The Lenders may furnish any information concerning the Borrower in the
possession of the Lenders from time to time to assignees and participants
(including prospective assignees and participants); provided that, such Persons
agree to be bound by the provisions of Section 12.15.
(e) Notwithstanding anything in this Section 12.06 to the contrary, any
Lender may assign and pledge all or any of its Notes to any Federal Reserve Bank
or the United States Treasury as collateral security pursuant to Regulation A of
the Board of Governors of the Federal Reserve System and any operating circular
issued by such Federal Reserve System and/or such Federal Reserve Bank. No such
assignment and/or pledge shall release the assigning and/or pledging Lender from
its obligations hereunder.
(f) Notwithstanding any other provisions of this Section 12.06, no transfer
or assignment of the interests or obligations of any Lender or any grant of
participations therein shall be permitted if such transfer, assignment or grant
would require the Borrower to file a registration statement with the SEC or to
qualify the Loans under the "Blue Sky" laws of any state.
Section 12.07 Invalidity. In the event that any one or more of the
provisions contained in any of the Loan Documents or
<PAGE> 98
the Letters of Credit, the Letter of Credit Agreements shall, for any reason, be
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of the
Notes, this Agreement or any Security Instrument.
Section 12.08 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
Section 12.09 References. The words "herein," "hereof," "hereunder" and
other words of similar import when used in this Agreement refer to this
Agreement as a whole, and not to any particular article, section or subsection.
Any reference herein to a Section shall be deemed to refer to the applicable
Section of this Agreement unless otherwise stated herein. Any reference herein
to an exhibit or schedule shall be deemed to refer to the applicable exhibit or
schedule attached hereto unless otherwise stated herein.
Section 12.10 Survival. The obligations of the parties under Section 4.06,
Article V, and Sections 11.05 and 12.03 shall survive the repayment of the Loans
and the termination of the Aggregate Commitments. To the extent that any
payments on the Indebtedness or proceeds of any collateral are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession, receiver or other Person under any
bankruptcy law, common law or equitable cause, then to such extent, the
Indebtedness so satisfied shall be revived and continue as if such payment or
proceeds had not been received and the Administrative Agent's and the Lenders'
Liens, security interests, rights, powers and remedies under this Agreement and
each Security Instrument shall continue in full force and effect. In such event,
each Security Instrument shall be automatically reinstated and the Borrower
shall take such action as may be reasonably requested by the Administrative
Agent and the Lenders to effect such reinstatement.
Section 12.11 Captions. Captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
Section 12.12 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER
AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR
<PAGE> 99
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS EXCEPT TO THE EXTENT THAT UNITED
STATES FEDERAL LAW PERMITS ANY LENDER TO CONTRACT FOR, CHARGE, RECEIVE, RESERVE
OR TAKE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH LENDER
IS LOCATED. CHAPTER 346 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN
REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT APPLY
TO THIS AGREEMENT OR THE NOTES.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS SHALL
BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND, BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT
PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES NOT
PRECLUDE THE ADMINISTRATIVE AGENT OR ANY LENDER FROM OBTAINING JURISDICTION OVER
THE BORROWER IN ANY COURT OTHERWISE HAVING JURISDICTION.
(c) THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER
AT THE ADDRESS SPECIFIED ON ITS SIGNATURE PAGE OF THIS AGREEMENT, SUCH SERVICE
TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY LENDER OR ANY HOLDER OF A
NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER JURISDICTION.
(d) THE BORROWER AND EACH LENDER HEREBY (I) IRREVOCABLY AND UNCONDITIONALLY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN; (II) IRREVOCABLY WAIVE, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (III) CERTIFY THAT NO PARTY
HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (IV)
ACKNOWLEDGE THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.13.
Section 12.14 Interest. It is the intention of the parties hereto that
each Lender shall conform strictly to usury
<PAGE> 100
laws applicable to it. Accordingly, if the transactions contemplated hereby
would be usurious as to any Lender under laws applicable to it (including the
laws of the United States of America and the State of Texas or any other
jurisdiction whose laws may be mandatorily applicable to such Lender
notwithstanding the other provisions of this Agreement), then, in that event,
notwithstanding anything to the contrary in any of the Loan Documents or any
agreement entered into in connection with or as security for the Notes, it is
agreed as follows: (i) the aggregate of all consideration which constitutes
interest under law applicable to any Lender that is contracted for, taken,
reserved, charged or received by such Lender under any of the Loan Documents or
agreements or otherwise in connection with the Notes shall under no
circumstances exceed the maximum amount allowed by such applicable law, and any
excess shall be canceled automatically and if theretofore paid shall be credited
by such Lender on the principal amount of the Indebtedness (or, to the extent
that the principal amount of the Indebtedness shall have been or would thereby
be paid in full, refunded by such Lender to the Borrower); and (ii) in the event
that the maturity of the Notes is accelerated by reason of an election of the
holder thereof resulting from any Event of Default under this Agreement or
otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest under law applicable to any Lender may
never include more than the maximum amount allowed by such applicable law, and
excess interest, if any, provided for in this Agreement or otherwise shall be
canceled automatically by such Lender as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited by such Lender on the
principal amount of the Indebtedness (or, to the extent that the principal
amount of the Indebtedness shall have been or would thereby be paid in full,
refunded by such Lender to the Borrower). All sums paid or agreed to be paid to
any Lender for the use, forbearance or detention of sums due hereunder shall, to
the extent permitted by law applicable to such Lender, be amortized, prorated,
allocated and spread throughout the stated term of the Loans evidenced by the
Notes until payment in full so that the rate or amount of interest on account of
any Loans hereunder does not exceed the maximum amount allowed by such
applicable law. If at any time and from time to time (i) the amount of interest
payable to any Lender on any date shall be computed at the Highest Lawful Rate
applicable to such Lender pursuant to this Section 12.14 and (ii) in respect of
any subsequent interest computation period the amount of interest otherwise
payable to such Lender would be less than the amount of interest payable to such
Lender computed at the Highest Lawful Rate applicable to such Lender, then the
amount of interest payable to such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Lender until the total amount of interest payable to such
Lender shall
